Form 20-F o
|
Form 40-F þ |
Yes o
|
No þ |
1. | 2008 Annual Report to Shareholders. |
NORTH AMERICAN ENERGY PARTNERS INC. |
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By: | /s/ Peter Dodd | |||
Name: | Peter Dodd | |||
Title: | Chief Financial Officer | |||
| Achieved record revenue of $626.6 million, a 32 per cent improvement over fiscal 2007 | |
| Achieved record segment profit of $105.4 million, 48 per cent better than in fiscal 2007 | |
| Expanded haul truck fleet with the addition of 24 new trucks | |
| Commissioned a Bucyrus electric cable shovel at Canadian Naturals Horizon Mine | |
| Completed Albian aerodrome project in 39 weeks from mobilization to demobilization | |
| Completed a three-year contract with De Beers at the Victor Project diamond mine in northern Ontario | |
| Completed the fourth year of our 10-year, $1.2 billion overburden removal contract at Canadian Naturals Horizon Mine | |
| Provided site services under our multi-year, master services agreements with Syncrude and Albian | |
| Selected as primary contractor to manage all site preparation, underground utilities and piling construction at Suncors Millennium Naphtha Unit and Voyageur sites under a five-year site services contract | |
| Selected to provide early clearing, site preparation and construction services at Petro-Canadas new Fort Hills project | |
| Selected for one-year overburden removal contract at Syncrudes Aurora mine | |
| Executed 12 projects under our joint venture agreement with Fort McKay First Nations |
North America Energy Partners was responsible for all aspects of the design and construction of the Albian Sands aerodrome, which included an airstrip capable of landing an Airbus 319. |
| Achieved record revenue of $162.4 million, 49 per cent higher than in 2007 | |
| Achieved record segment profit of $45.4 million, 32 per cent better than in 2007 | |
| Installed 8,000 piles at Shells Scotford Upgrader Expansion in Edmonton, part of a 10,000 pile contract | |
| Installed 2,500 piles at Suncors Voyageur Upgrader site, part of an 8,000 pile contract | |
| Installed 3,200 piles at Suncors Millenium site | |
| Benefited from continued strong commercial construction markets in Western Canada | |
| Grew market share in the Saskatchewan market | |
| Continued to build market acceptance for Continuous Flight Auger technology |
Three years ago, North American became the first company in Western Canada to introduce an innovative European piling technology that installs piles with no vibration and scarcely any noise. Called Continuous Flight Augering (CFA), this drill-based method has been winning over clients and their engineering firms because it works every bit as well as traditional methods, while dramatically reducing construction noise and impact. With the markets only purpose-built CFA equipment and three years of experience, North American is ideally positioned to respond to the growing demand for this excellent new technology. |
Piling Services |
· Driven piles |
· Drilled piles |
· Screw piles |
· Micropiles |
· Continuous Flight Auger |
· Caissons |
· Earth retention |
· Soil densification |
| Led the company in revenue and profit growth in fiscal 2008 | |
| Achieved record revenue of $200.7 million, 327 per cent higher than in fiscal 2007 | |
| Achieved record segment profit of $25.5 million, compared to a loss of $10.5 million in 2007 | |
| Completed legacy fixed-price contracts | |
| Successfully refocused bidding strategy to reduce reliance on fixed-price contracts | |
| Completed a significant portion of the work on the TMX Anchor Loop Project pipeline contract with Kinder Morgan |
| Capitalize on growth opportunities in the Canadian oil sands: We intend to build on our market leadership position and successful track record with our customers to benefit from any continued growth in this market. We intend to increase our fleet size to be ready to meet the challenges from projected growth in the oil sands. | |
| Leverage our complementary services: Our complementary service segments, including site preparation, pipeline installation, piling and other mining services allow us to compete for many different forms of business. We intend to build on our first-in position to cross-sell our other services and pursue selective acquisition opportunities that expand our complementary service offerings. |
* | This paragraph contains forward-looking statements. Please refer to Forward-Looking Information and Risk Factors for a discussion on the risks and uncertainties related to such information. |
| Increase our recurring revenue base: We provide services both during the construction phase and once the project is in operation. These mining services include overburden removal, reclamation, road construction and maintenance and mining services. | |
| Leverage our long-term relationships with customers: Several of our oil sands customers have announced their intentions to increase their production capacity by expanding the infrastructure at their sites. We intend to continue to build on our relationships with these and other existing oil sands customers to win a substantial share of the heavy construction and mining, piling and pipeline services outsourced in connection with these projects. | |
| Increase our presence outside the oil sands: We intend to increase our presence outside the oil sands and extend our services to other resource industries across Canada. Canada has significant natural resources and we believe that we have the equipment and the experience to assist those companies as they develop natural resources. | |
| Enhance operating efficiencies to improve revenues and margins: We aim to increase the availability and efficiency of our equipment through enhanced maintenance, providing the opportunity for improved revenue, margins and profitability. |
Year Ended March 31, | ||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
(dollars in thousands) | 2008 | Total | 2007 | Total | 2006 | Total | ||||||||||||||||||
Revenue by operating segment: |
||||||||||||||||||||||||
Heavy Construction and Mining |
$626,582 | 63.3% | $473,179 | 75.2% | $366,721 | 74.5% | ||||||||||||||||||
Piling |
162,397 | 16.4% | 109,266 | 17.4% | 91,434 | 18.6% | ||||||||||||||||||
Pipeline |
200,717 | 20.3% | 47,001 | 7.5% | 34,082 | 6.9% | ||||||||||||||||||
Total |
$989,696 | 100.0% | $629,446 | 100.0% | $492,237 | 100.0% | ||||||||||||||||||
Year Ended March 31, | ||||||||||||||||||||||||
(dollars in thousands, | % of | % of | % of | |||||||||||||||||||||
except per share information) | 2008 | Revenue | 2007 | Revenue | 2006 | Revenue | ||||||||||||||||||
Revenue |
$989,696 | 100.0% | $629,446 | 100.0% | $492,237 | 100.0% | ||||||||||||||||||
Project costs |
592,458 | 59.9% | 363,930 | 57.8% | 308,949 | 62.8% | ||||||||||||||||||
Equipment costs |
174,873 | 17.7% | 122,306 | 19.4% | 64,832 | 13.2% | ||||||||||||||||||
Equipment operating lease expense |
22,319 | 2.3% | 19,740 | 3.1% | 16,405 | 3.3% | ||||||||||||||||||
Depreciation |
36,729 | 3.7% | 31,034 | 4.9% | 21,725 | 4.4% | ||||||||||||||||||
Gross profit |
163,317 | 16.5% | 92,436 | 14.7% | 80,326 | 16.3% | ||||||||||||||||||
General & administrative costs |
69,670 | 7.0% | 39,769 | 6.3% | 30,903 | 6.3% | ||||||||||||||||||
Operating income |
92,397 | 9.3% | 51,126 | 8.1% | 49,426 | 10.0% | ||||||||||||||||||
Net income (loss) |
39,784 | 4.0% | 21,079 | 3.3% | (21,941 | ) | -4.5% | |||||||||||||||||
Per share information |
||||||||||||||||||||||||
Net income (loss) basic |
$ 1.11 | $ 0.87 | $ (1.18 | ) | ||||||||||||||||||||
Net income (loss) diluted |
1.08 | 0.83 | (1.18 | ) | ||||||||||||||||||||
EBITDA(1) |
$121,982 | 12.3% | $ 87,351 | 13.9% | $ 70,027 | 14.2% | ||||||||||||||||||
Consolidated EBITDA per bank (1) |
135,094 | 13.7% | 90,235 | 14.3% | 72,422 | 14.7% | ||||||||||||||||||
| do not reflect our cash expenditures or requirements for capital expenditures or capital commitments; | |
| do not reflect changes in, or cash requirements for, our working capital needs; | |
| do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; | |
| exclude tax payments that represent a reduction in cash available to us; and | |
| do not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future. |
Year Ended March 31, | ||||||||||||
(dollars in thousands) | 2008 | 2007 | 2006 | |||||||||
Net income (loss) |
$ 39,784 | $21,079 | $(21,941 | ) | ||||||||
Adjustments: |
||||||||||||
Interest expense |
27,019 | 37,249 | 68,776 | |||||||||
Income taxes |
17,379 | (2,593 | ) | 737 | ||||||||
Depreciation |
36,729 | 31,034 | 21,725 | |||||||||
Amortization of intangible assets |
1,071 | 582 | 730 | |||||||||
EBITDA |
$121,982 | $87,351 | $ 70,027 | |||||||||
Adjustments: |
||||||||||||
Unrealized foreign exchange loss (gain) on senior notes |
(24,788 | ) | (5,017 | ) | (14,258 | ) | ||||||
Realized and unrealized loss (gain) on derivative financial instruments |
34,075 | (196 | ) | 14,689 | ||||||||
Loss (gain) on disposal of plant and equipment and assets held for sale |
179 | 959 | (733 | ) | ||||||||
Stock-based compensation |
1,991 | 2,101 | 923 | |||||||||
Director deferred stock unit expense |
(190 | ) | | | ||||||||
Write-off of deferred financing costs |
| 4,342 | 1,774 | |||||||||
Write-down of other assets to replacement cost |
1,845 | 695 | | |||||||||
Consolidated EBITDA per bank |
$135,094 | $90,235 | $ 72,422 | |||||||||
Three Months Ended March 31, | ||||||||||||||||
% of | % of | |||||||||||||||
(dollars in thousands, except per share information) | 2008 | Revenue | 2007 | Revenue | ||||||||||||
Revenue |
$323,600 | 100.0% | $205,422 | 100.0% | ||||||||||||
Project costs |
195,196 | 60.3% | 131,815 | 64.2% | ||||||||||||
Equipment costs |
43,291 | 13.4% | 43,529 | 21.2% | ||||||||||||
Equipment operating lease expense |
9,990 | 3.1% | 4,083 | 2.0% | ||||||||||||
Depreciation |
12,550 | 3.9% | 12,369 | 6.0% | ||||||||||||
Gross profit |
62,573 | 19.3% | 13,626 | 6.6% | ||||||||||||
General & administrative costs |
20,674 | 6.4% | 8,875 | 4.3% | ||||||||||||
Operating income |
42,581 | 13.2% | 4,541 | 2.2% | ||||||||||||
Net income (loss) |
22,662 | 7.0% | 1,303 | 0.6% | ||||||||||||
Per share information |
||||||||||||||||
Net income (loss) basic |
$0.63 | $0.04 | ||||||||||||||
Net income (loss) diluted |
0.62 | 0.04 | ||||||||||||||
EBITDA(1) |
$53,500 | 16.5% | $18,283 | 8.9% | ||||||||||||
Consolidated EBITDA per bank (1) |
55,754 | 17.2% | 22,656 | 11.0% | ||||||||||||
(1) | Non GAAP Financial measures see footnote on page 22 |
Three Months Ended March 31, | ||||||||
(dollars in thousands) | 2008 | 2007 | ||||||
Net income (loss) |
$22,662 | $1,303 | ||||||
Adjustments: |
||||||||
Interest expense |
6,686 | 7,463 | ||||||
Income taxes |
11,297 | (2,942 | ) | |||||
Depreciation |
12,550 | 12,369 | ||||||
Amortization of intangible assets |
305 | 90 | ||||||
EBITDA |
$53,500 | $18,283 | ||||||
Adjustments: |
||||||||
(Gain) loss on disposal of plant and equipment |
(671 | ) | 120 | |||||
Unrealized foreign exchange loss (gain) on senior notes |
7,838 | (2,480 | ) | |||||
Stock-based compensation |
968 | 359 | ||||||
Director deferred stock unit expense |
(190 | ) | | |||||
Write-down of other assets to replacement cost |
| 695 | ||||||
Write-off financing costs |
| 4,342 | ||||||
Realized and unrealized loss (gain) on derivative financial instruments |
(5,691 | ) | 1,337 | |||||
Consolidated EBITDA per bank |
$55,754 | $22,656 | ||||||
Year Ended March 31, | ||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
(dollars in thousands) | 2008 | Revenue | 2007 | Revenue | 2006 | Revenue | ||||||||||||||||||
Segment revenue |
$626,582 | $473,179 | $366,721 | |||||||||||||||||||||
Segment profit: |
$105,378 | 16.8% | $71,062 | 15.0% | $50,730 | 13.8% | ||||||||||||||||||
Year Ended March 31, | ||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
(dollars in thousands) | 2008 | Revenue | 2007 | Revenue | 2006 | Revenue | ||||||||||||||||||
Segment revenue |
$162,397 | $109,266 | $91,434 | |||||||||||||||||||||
Segment profit: |
$45,362 | 27.9% | $34,395 | 31.5% | $22,586 | 24.7% | ||||||||||||||||||
Year Ended March 31, | ||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
(dollars in thousands) | 2008 | Revenue | 2007 | Revenue | 2006 | Revenue | ||||||||||||||||||
Segment revenue |
$200,717 | $47,001 | $34,082 | |||||||||||||||||||||
Segment profit: |
$25,465 | 12.7% | $(10,539 | ) | -22.4% | $8,996 | 26.4% | |||||||||||||||||
Year Ended March 31, | ||||||||||||||||
% of | % of | |||||||||||||||
(dollars in thousands) | 2008 | Revenue | 2007 | Revenue | ||||||||||||
Segment revenue |
$195,442 | $150,131 | ||||||||||||||
Segment profit: |
$36,747 | 18.8% | $23,512 | 15.7% | ||||||||||||
Year Ended March 31, | ||||||||||||||||
% of | % of | |||||||||||||||
(dollars in thousands) | 2008 | Revenue | 2007 | Revenue | ||||||||||||
Segment revenue |
$40,699 | $29,872 | ||||||||||||||
Segment profit: |
$13,637 | 33.5% | $8,822 | 29.5% | ||||||||||||
Year Ended March 31, | ||||||||||||||||
% of | % of | |||||||||||||||
(dollars in thousands) | 2008 | Revenue | 2007 | Revenue | ||||||||||||
Segment revenue |
$87,459 | $25,419 | ||||||||||||||
Segment profit: |
$11,311 | 12.9 | % | $(9,829 | ) | -38.7% | ||||||||||
Three Months Ended March 31, | Year Ended March 31, | |||||||||||||||||||
(dollars in thousands) | 2008 | 2007 | 2008 | 2007 | 2006 | |||||||||||||||
Interest expense interest on senior debt |
$5,835 | $5,835 | $23,338 | $27,417 | $28,838 | |||||||||||||||
Interest on revolving credit facility and other interest |
399 | 635 | 2,063 | 1,157 | 1,421 | |||||||||||||||
Interest on capital lease obligations |
283 | 245 | 780 | 725 | 457 | |||||||||||||||
Interest on NACG Preferred Corp.
Series A preferred shares |
| | | 1,400 | | |||||||||||||||
Accretion and change in redemption value of
mandatorily redeemable preferred shares |
| | | 3,114 | 34,722 | |||||||||||||||
Amortization of deferred bond issue costs |
169 | | 838 | | | |||||||||||||||
Amortization of deferred financing costs |
| 748 | | 3,436 | 3,338 | |||||||||||||||
Total Interest expense |
$6,686 | $7,463 | $27,019 | $37,249 | $68,776 | |||||||||||||||
Foreign exchange (gain) loss on senior notes |
$7,694 | $(2,547 | ) | $(25,442 | ) | $(5,044 | ) | $(13,953 | ) | |||||||||||
Realized and unrealized (gain) loss on derivative
financial instruments |
(5,691 | ) | 1,337 | 34,075 | (196 | ) | 14,689 | |||||||||||||
Gain on repurchase of NACG Preferred Corp.
Series A preferred shares |
| | | (9,400 | ) | | ||||||||||||||
Loss on extinguishment of debt |
| 7 | | 10,935 | 2,095 | |||||||||||||||
Other income |
(67 | ) | (80 | ) | (418 | ) | (904 | ) | (977 | ) | ||||||||||
Income tax (recovery) expense |
11,297 | (2,942 | ) | 17,379 | (2,593 | ) | 737 | |||||||||||||
| Our 8 3/4% senior notes include certain embedded derivatives, notably optional redemption and change of control redemption rights. These embedded derivatives met the criteria for separation from the debt contract and separate measurement at fair value. Upon adoption of Section 3855, we recorded a reduction in the carrying amount of our 8 3/4% senior notes of $8.5 million together with related impacts on retained earnings and future income taxes on April 1, 2007. The change in the fair value of these embedded derivatives resulted in a pre-tax increase to earnings of $0.3 million in the fourth quarter and a change to earnings of $4.2 million in fiscal 2008. | |
| A long-term construction contract contains a price escalation feature that represents an embedded foreign currency and price index derivative that meets the criteria for separation from the host contract and separate measurement at fair value. Upon adoption of Section 3855, we recorded a liability of $7.2 million together with related impacts on retained earnings and future income taxes on April 1, 2007. The change in the fair value of the liability resulted in a pre-tax benefit to earnings of $1.4 million in the fourth quarter and a pre-tax charge to earnings of $7.6 million for fiscal 2008. | |
| We identified an additional embedded derivative that is not closely related to the host contract in the fourth quarter of 2008 with respect to a price escalation feature in a supplier contract. The embedded derivative has been measured at fair value. Upon adoption of Section 3855, we recorded a liability of $2.5 million together with related impacts on retained earnings and future income taxes on April 1, 2007. The change in the fair value of the liability resulted in a pre-tax gain of $1.2 million in the fourth quarter and a pre-tax gain of $1.2 million for fiscal 2008. |
(in thousands) | March 31, 2008 | March 31, 2007 | % Change | |||||||||
Current assets |
$291,086 | $229,061 | 27.1% | |||||||||
Current liabilities |
(183,353 | ) | (151,458 | ) | 21.1% | |||||||
Net working capital |
107,733 | 77,603 | 38.8% | |||||||||
Plant and equipment |
281,039 | 255,963 | 9.8% | |||||||||
Total assets |
793,598 | 710,736 | 11.7% | |||||||||
Capital lease obligations (including current portion) |
14,776 | 9,709 | 55.7% | |||||||||
Total long-term financial liabilities (1) |
(301,497 | ) | (295,288 | ) | 2.1% | |||||||
(1) | Total long-term financial liabilities exclude the current portions of capital lease obligations, current portions of derivative financial instruments, both current and non-current future income taxes balances, and deferred leasehold inducement. |
| Client requirements, specifications and design; | |
| Materials and work schedules; and | |
| Changes in ground and weather conditions. |
Fiscal 2008 | Fiscal 2007 | |||||||||||||||||||||||||||||||
(dollars in millions, | ||||||||||||||||||||||||||||||||
except per share amounts) | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||
Revenue |
$323.6 | $274.9 | $223.6 | $167.6 | $205.3 | $155.9 | $130.1 | $138.1 | ||||||||||||||||||||||||
Gross profit |
62.6 | 50.6 | 35.2 | 14.9 | 13.6 | 26.0 | 20.2 | 32.6 | ||||||||||||||||||||||||
Operating income (loss) |
42.6 | 33.2 | 17.1 | (0.4 | ) | 4.5 | 13.8 | 9.7 | 23.1 | |||||||||||||||||||||||
Net income (loss) |
22.7 | 25.4 | 2.1 | (10.3 | ) | 1.3 | 6.6 | (4.6 | ) | 17.9 | ||||||||||||||||||||||
EPS Basic (1) |
$ 0.63 | $ 0.71 | $ 0.06 | $(0.29 | ) | $ 0.04 | $ 0.27 | $(0.26 | ) | $ 0.96 | ||||||||||||||||||||||
EPS Diluted (1) |
0.61 | 0.69 | 0.06 | (0.29 | ) | 0.04 | 0.26 | (0.26 | ) | 0.71 | ||||||||||||||||||||||
March 31, | ||||||||
By Segment | 2008 | 2007 | ||||||
Heavy Construction & Mining |
$896.3 | $732.0 | ||||||
Piling |
20.5 | 40.0 | ||||||
Pipeline |
65.5 | 16.0 | ||||||
Total |
$982.3 | $788.0 | ||||||
March 31, | ||||||||
By Contract Type | 2008 | 2007 | ||||||
Unit-Price |
$905.2 | $778.0 | ||||||
Lump-Sum |
11.6 | 10.0 | ||||||
Time-and-Material, Cost-Plus |
65.5 | - | ||||||
Total |
$982.3 | $788.0 | ||||||
* | This paragraph contains forward-looking statements. Please
refer to Forward-Looking Information and Risk Factors for a discussion on the risks and uncertainties related to such information. |
* | This paragraph contains forward-looking statements. Please
refer to Forward-Looking Information and Risk Factors for a discussion on the risks and uncertainties related to such information. |
* | This paragraph contains forward-looking statements. Please refer to Forward-Looking Information and Risk Factors for a discussion on the risks and uncertainties related to such information. |
| permitting and licensing requirements applicable to contractors in their respective trades; | |
| building and similar codes and zoning ordinances; | |
| laws and regulations relating to consumer protection; and | |
| laws and regulations relating to worker safety and protection of human health. |
* | This paragraph contains forward-looking statements. Please refer to Forward-Looking Information and Risk Factors for a discussion on the risks and uncertainties related to such information. |
Three Months Ended March 31, | Year Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||
Cash provided by operating
activities |
$36,183 | $7,392 | $17,152 | $97,600 | $2,130 | $33,701 | ||||||||||||||||||
Cash (used in) investing activities |
(2,746 | ) | (10,901 | ) | (5,814 | ) | (48,632 | ) | (100,050 | ) | (22,005 | ) | ||||||||||||
Cash (used in) provided by
financing activities |
(21,809 | ) | 4,297 | (332 | ) | (23,992 | ) | 63,011 | 13,184 | |||||||||||||||
Net increase (decrease) in cash
and cash equivalents |
$11,628 | $788 | $11,006 | $24,976 | $(34,909 | ) | $24,880 | |||||||||||||||||
Payments due by fiscal year | ||||||||||||||||||||||||
2013 and | ||||||||||||||||||||||||
(in millions) | Total | 2009 | 2010 | 2011 | 2012 | after | ||||||||||||||||||
Senior notes (1) |
$263.0 | $ | $ | $ | $263.0 | $ | ||||||||||||||||||
Capital leases (including interest) |
16.4 | 5.5 | 4.7 | 3.3 | 2.7 | 0.2 | ||||||||||||||||||
Operating leases |
96.0 | 31.1 | 26.0 | 16.5 | 10.9 | 11.5 | ||||||||||||||||||
Supplier contracts |
36.6 | 5.3 | 6.0 | 8.2 | 9.8 | 7.3 | ||||||||||||||||||
Total contractual obligations |
$412.0 | $41.9 | $36.7 | $28.0 | $286.4 | $19.0 | ||||||||||||||||||
(1) | We have entered into cross-currency and interest rate swaps, which represent an economic hedge of the 8 3/4% senior notes. At maturity, we will be required to pay $263.0 million in order to retire these senior notes and the swaps. This amount reflects the fixed exchange rate of C$1.315=US$1.00 established as of November 26, 2003, the inception of the swap contracts. At March 31, 2008 the carrying value of these derivative financial instruments was $81.6 million, inclusive of the interest components. |
* | This paragraph contains forward-looking statements. Please refer to Forward-Looking Information and Risk Factors for a discussion on the risks and uncertainties related to such information. |
| Specific to complex and non-routine transactions and period-end controls: There was a lack of sufficient accounting and finance personnel with an appropriate level of technical accounting knowledge and training commensurate with the complexity of the Companys financial accounting and reporting requirements. Complex and non-routine financial reporting matters that would be affected by this deficiency include the identification of embedded derivatives and preparation of our US GAAP reconciliation note. Additionally, we did not adequately perform period-end controls related to the review and approval of account analysis, verification of inputs and reconciliations. The accounts that would be affected by these deficiencies are cash, senior notes, contributed surplus, stock-based compensation expense, foreign exchange gain and related financial statement disclosures. | |
| Specific to revenue recognition: A formal process to track claims and unapproved change orders and sufficient monitoring controls over the completeness and accuracy of forecasts, including the consideration of project changes subsequent to the end of each reporting period, were not effectively implemented. The accounts that would be affected by these deficiencies are revenue, project costs, unbilled revenue and billings in excess of costs incurred and estimated earnings on uncompleted contracts. | |
| Specific to accounts payable and procurement: We did not have an effectively implemented procurement process to track purchase commitments, reconcile vendor accounts and accurately accrue costs not invoiced by vendors at each reporting date. The accounts that would be affected by these deficiencies are accounts payable, accrued liabilities, unbilled revenue, billings in excess of costs incurred and estimated earnings on uncompleted contracts, revenue, project costs, equipment costs, general and administrative costs and other expenses. |
| We have taken steps to rectify the complex and non-routine transactions and period-end control weaknesses by reorganizing the corporate accounting group and recruiting new staff with the appropriate levels of experience and technical skills to prevent a reoccurrence of these issues. | |
| We implemented new processes over revenue recognition in the last quarter of fiscal 2008. These processes have not been in place long enough to fully evaluate the effectiveness of the controls. We are evaluating the results of the implementation over the next two quarters to ensure that the new controls adequately address our ability to recognize revenue in the correct period. |
| During the last quarter of fiscal 2008 we developed new procurement processes and started a redesign of our ERP system to address the internal control deficiencies. During this redesign and implementation phase, we implemented monitoring and detective controls to address our deficiencies. We are evaluating the results of the implementation over the next two quarters to ensure that these mitigating controls adequately address our ability to identify our costs in a timely manner. |
| Income taxes there was a lack of review and monitoring controls as well as a lack of segregation of duties of the income tax function. New review processes, together with increased technical support from third party experts have improved the review and monitoring controls and addressed the segregation of duties issues in the income tax function. | |
| IT General Controls (ITGCs) A number of deficiencies in ITGCs were identified, including appropriate controls around spreadsheets and end-user computing, controls over access to and the accuracy of one of our systems, as well as general maintenance of access rights and nominal program change controls. When aggregated, these deficiencies represented a material weakness in ICFR. Improvements to access rights and program change controls were implemented in fiscal 2008 to address certain of the deficiencies identified in fiscal 2007. |
| site conditions that differ from those assumed in the original bid, to the extent that contract remedies are unavailable; | |
| identification and evaluation of scope modifications during the execution of the project; | |
| the availability and cost of skilled workers in the geographic location of the project; |
| the availability and proximity of materials; | |
| unfavorable weather conditions hindering productivity; | |
| equipment productivity and timing differences resulting from project construction not starting on time; and | |
| general coordination of work inherent in all large projects we undertake. |
Increase | ||||||||
(decrease) | ||||||||
Deferred financing costs |
$(11,356 | ) | ||||||
Intangible assets |
1,622 | |||||||
Long-term future income tax asset |
3,293 | |||||||
Senior notes |
(12,634 | ) | ||||||
Derivative financial instruments |
9,720 | |||||||
Long-term future income tax liability |
18 | |||||||
Opening deficit |
3,545 |
Three Months | Twelve Months | |||||||
Ended March 31, | Ended March 31, | |||||||
2008 | 2008 | |||||||
Decrease in interest expense due to change in method of amortizing
deferred financing costs and discounts (premiums), net |
$(353 | ) | $(1,250 | ) | ||||
(Increase) decrease in unrealized foreign exchange gain on senior notes |
(121 | ) | 212 | |||||
Increase (decrease) in unrealized loss on derivative financial instruments |
(490 | ) | 4,530 | |||||
Decrease (increase) in income before income taxes |
$(964 | ) | $3,492 | |||||
(a) | the limited risk that royalty changes will cause our customers to cancel, delay or reduce the scope of any significant mining developments presently underway; | |
(b) | the expected continued rapid growth of operators in the oil sands business, their planned projects and our intention to pursue business opportunities from these projects; | |
(c) | our intention to increase our fleet size to be ready to meet the challenges from the projected growth in oil sands; |
(d) | that acquisition opportunities will materialize that will allow us to expand our complementary service offerings which we will be able to cross-sell with our existing services; | |
(e) | our intention to increase our presence outside the oil sands and extend our services to other resource industries across Canada; | |
(f) | the success of the enhancements to maintenance practices resulting in improved availability through reduced repair time and increased utilization of our equipment with a consequent improvement in our revenue, margins and profitability; | |
(g) | the amount of our backlog expected to be performed and realized in the 12 months ending March 31, 2009 (such estimates assist us in planning our activity level and may not be suitable for other purposes); | |
(h) | the expected growth in master services Agreements through 2009; | |
(i) | the arrival of new projects and our required participation in the bidding process for work on such projects; | |
(j) | the continued development of the oil sands and the expectation that it will drive a significant portion of our 2009 revenue; | |
(k) | our commencement of work in the latter half of fiscal 2009 at Imperial Oils upcoming Kearl project; | |
(l) | the anticipated increased demand for our services at Petro-Canadas Fort Hills site; | |
(m) | our expected increased involvement with Baffinland Iron Mines Corp.; | |
(n) | the demand for our piling services remaining strong in fiscal 2009; | |
(o) | the anticipated temporary slowdown in our pipeline activity once the TMX project concludes in October 2008 and significant long-term opportunities for this division; and | |
(p) | our expected generation of a net cash surplus in fiscal 2009. |
| anticipated major projects in the oil sands may not materialize; | |
| demand for our services may be adversely impacted by regulations affecting the energy industry; | |
| failure by our customers to obtain required permits and licenses may affect the demand for our services; | |
| changes in our customers perception of oil prices over the long term could cause our customers to defer, reduce or stop their investment in oil sands projects, which would, in turn, reduce our revenue from those customers; | |
| insufficient pipeline, upgrading and refining capacity or lack of sufficient governmental infrastructure to support growth in the oil sands region could cause our customers to delay, reduce or cancel plans to construct new oil sands projects or expand existing projects, which would, in turn, reduce our revenue from those customers; | |
| a change in strategy by our customers to reduce outsourcing could adversely affect our results; | |
| cost overruns by our customers on their projects may cause our customers to terminate future projects or expansions which could adversely affect the amount of work we receive from those customers; | |
| because most of our customers are Canadian energy companies, a downturn in the Canadian energy industry could result in a decrease in the demand for our services; | |
| shortages of qualified personnel or significant labour disputes could adversely affect our business; and | |
| unanticipated short-term shutdowns of our customers operating facilities may result in temporary cessation or cancellation of projects in which we are participating. |
| our ability to grow our operations in the future may be hampered by our inability to obtain long lead time equipment and tires, which are currently in limited supply; | |
| if we are unable to obtain surety bonds or letters of credit required by some of our customers, our business could be impaired; | |
| we are dependent on our ability to lease equipment, and a tightening of this form of credit could adversely affect our ability to bid for new work and/or supply some of our existing contracts; | |
| our business is highly competitive and competitors may outbid us on major projects that are awarded based on bid proposals; | |
| our customer base is concentrated, and the loss of or a significant reduction in business from a major customer could adversely impact our financial condition; | |
| lump-sum and unit-price contracts expose us to losses when our estimates of project costs are lower than actual costs; | |
| our operations are subject to weather-related factors that may cause delays in our project work; | |
| environmental laws and regulations may expose us to liability arising out of our operations or the operations of our customers; and | |
| many of our senior officers have either recently joined the Company or have just been promoted and have only worked together as a management team for a short period of time. |
| changes in the perception of the economic viability of these projects; | |
| shortage of pipeline capacity to transport production to major markets; | |
| lack of sufficient governmental infrastructure to support growth; | |
| delays in issuing environmental permits or refusal to grant such permits; | |
| shortage of skilled workers in this remote region of Canada; and | |
| cost overruns on announced projects. |
| site conditions differing from those assumed in the original bid; | |
| scope modifications during the execution of the project; | |
| the availability and cost of skilled workers; | |
| the availability and proximity of materials; | |
| unfavorable weather conditions hindering productivity; | |
| inability or failure of our customers to perform their contractual commitments; | |
| equipment availability and productivity and timing differences resulting from project construction not starting on time; and | |
| the general coordination of work inherent in all large projects we undertake. |
| limiting our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, potential growth or other purposes; | |
| limiting our ability to use operating cash flow in other areas of our business; | |
| limiting our ability to post surety bonds required by some of our customers; | |
| placing us at a competitive disadvantage compared to competitors with less debt; | |
| increasing our vulnerability to, and reducing our flexibility in planning for, adverse changes in economic, industry and competitive conditions; and | |
| increasing our vulnerability to increases in interest rates because borrowings under our revolving credit facility and payments under some of our equipment leases are subject to variable interest rates. |
| incur or guarantee additional debt, issue certain equity securities or enter into sale and leaseback transactions; | |
| pay dividends or distributions on our shares or repurchase our shares, redeem subordinated debt or make other restricted payments; | |
| incur dividend or other payment restrictions affecting certain of our subsidiaries; | |
| issue equity securities of subsidiaries; | |
| make certain investments or acquisitions; | |
| create liens on our assets; | |
| enter into transactions with affiliates; | |
| consolidate, merge or transfer all or substantially all of our assets; and | |
| transfer or sell assets, including shares of our subsidiaries. |
| Accounting policies, including choices among policies permitted under IFRS, and implementation decisions, such as whether certain changes will be applied on a retrospective or a prospective basis | |
| Information technology and data systems | |
| Internal controls over financial reporting | |
| Disclosure controls and procedures, including investor relations and external communications plans | |
| Sufficiency of financial reporting expertise, including training requirements | |
| Business activities that may be influenced by GAAP measures, such as foreign currency, hedging, debt covenants, capital requirements, and compensation arrangements. |
Rodney J. Ruston
|
Peter Dodd | |
President & Chief Executive Officer
|
Chief Financial Officer | |
June 20, 2008
|
June 20, 2008 |
| There was a lack of sufficient accounting and finance personnel with an appropriate level of technical accounting knowledge and training to properly account for complex and non-routine transactions and to properly perform review and approval controls within the period-end financial reporting process; | |
| A formal process to track claims and unapproved change orders and sufficient monitoring controls over the completeness and accuracy of forecasts, including the consideration of project changes subsequent to the end of each reporting period were not effectively implemented; and | |
| Controls were not effective in the procurement process to track purchase commitments, reconcile vendor accounts and accurately accrue costs not invoiced by vendors at each reporting date. |
2008 | 2007 | ||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$32,871 | $7,895 | |||||||
Accounts receivable (note 5) |
166,002 | 107,344 | |||||||
Unbilled revenue (note 6) |
70,883 | 68,709 | |||||||
Inventory |
110 | 156 | |||||||
Prepaid expenses and deposits (note 7) |
9,300 | 11,932 | |||||||
Asset held for sale (note 8) |
| 8,268 | |||||||
Other assets |
3,703 | 10,164 | |||||||
Future income taxes (notes 3(q)(i) and 17) |
8,217 | 14,593 | |||||||
291,086 | 229,061 | ||||||||
Future income taxes (note 17) |
18,199 | 14,364 | |||||||
Assets held for sale (note 8) |
1,074 | | |||||||
Plant and equipment (note 9) |
281,039 | 255,963 | |||||||
Goodwill |
200,072 | 199,392 | |||||||
Intangible assets, net of accumulated amortization of $2,105
(March 31, 2007 $17,608) (notes 3(q)(i) and 10) |
2,128 | 600 | |||||||
Deferred financing costs, net of accumulated amortization of $nil
(March 31, 2007 $7,595) (notes 3(q)(i) and 11) |
| 11,356 | |||||||
$793,598 | $710,736 | ||||||||
Liabilities and Shareholders Equity |
|||||||||
Current liabilities: |
|||||||||
Current portion of revolving credit facility (note 12) |
$ | $20,500 | |||||||
Accounts payable |
113,143 | 94,548 | |||||||
Accrued liabilities (note 14) |
45,078 | 23,393 | |||||||
Billings in excess of costs incurred and estimated earnings
on uncompleted contracts (note 6) |
4,772 | 2,999 | |||||||
Current portion of capital lease obligations (note 15) |
4,733 | 3,195 | |||||||
Current portion of derivative financial instruments (notes 20 and 25(b)(i)) |
4,720 | 2,669 | |||||||
Future income taxes (notes 3(q)(i) and 17) |
10,907 | 4,154 | |||||||
183,353 | 151,458 | ||||||||
Deferred lease inducements (note 13) |
941 | | |||||||
Capital lease obligations (note 15) |
10,043 | 6,514 | |||||||
Senior notes (notes 3(q)(i) and 16) |
198,245 | 230,580 | |||||||
Director deferred stock unit liability (note 28) |
190 | | |||||||
Derivative financial instruments (notes 3(q)(i) and 20 and 25(b)(i)) |
93,019 | 58,194 | |||||||
Future income taxes (notes 3(q)(i) and 17) |
24,443 | 19,712 | |||||||
$510,234 | 466,458 | ||||||||
Shareholders equity: |
|||||||||
Common shares (authorized unlimited number of voting and
non-voting common shares; issued and outstanding March 31, 2008
35,929,476 voting common shares (March 31, 2007 35,192,260 voting
common shares and 412,400 non-voting common shares)) (note 18(b)) |
298,436 | 296,198 | |||||||
Contributed surplus (note 18(c)) |
4,215 | 3,606 | |||||||
Deficit |
(19,287 | ) | (55,526 | ) | |||||
$283,364 | 244,278 | ||||||||
Guarantee (note 23) |
|||||||||
Commitments (note 26) |
|||||||||
Canadian and United States accounting policy differences (note 30) |
|||||||||
Subsequent event (note 31) |
|||||||||
$793,598 | $710,736 | ||||||||
Ronald A. McIntosh, Director
|
Allen R. Sello, Director |
2008 | 2007 | 2006 | ||||||||||
Revenue |
$989,696 | $629,446 | $492,237 | |||||||||
Project costs |
592,458 | 363,930 | 308,949 | |||||||||
Equipment costs |
174,873 | 122,306 | 64,832 | |||||||||
Equipment operating lease expense |
22,319 | 19,740 | 16,405 | |||||||||
Depreciation |
36,729 | 31,034 | 21,725 | |||||||||
Gross profit |
163,317 | 92,436 | 80,326 | |||||||||
General and administrative costs (note 24) |
69,670 | 39,769 | 30,903 | |||||||||
Loss (gain) on disposal of plant and equipment |
179 | 959 | (733 | ) | ||||||||
Amortization of intangible assets (note 10) |
1,071 | 582 | 730 | |||||||||
Operating income before the undernoted |
92,397 | 51,126 | 49,426 | |||||||||
Interest expense (note 19) |
27,019 | 37,249 | 68,776 | |||||||||
Foreign exchange gain |
(25,442 | ) | (5,044 | ) | (13,953 | ) | ||||||
Realized and unrealized loss (gain) on derivative financial instruments
(note 20(a)) |
34,075 | (196 | ) | 14,689 | ||||||||
Gain on repurchase of NACG Preferred Corp. Series A preferred shares
(notes 2 and 18(a)) |
| (9,400 | ) | | ||||||||
Loss on extinguishment of debt (notes 2 and 16) |
| 10,935 | 2,095 | |||||||||
Other income |
(418 | ) | (904 | ) | (977 | ) | ||||||
Income (loss) before income taxes |
57,163 | 18,486 | (21,204 | ) | ||||||||
Income taxes (note 17): |
||||||||||||
Current income taxes |
80 | (2,975 | ) | 737 | ||||||||
Future income taxes |
17,299 | 382 | | |||||||||
Net income (loss) and comprehensive income (loss) for the year |
39,784 | 21,079 | (21,941 | ) | ||||||||
Deficit, beginning of year as previously stated |
(55,526 | ) | (76,546 | ) | (54,605 | ) | ||||||
Change in accounting policy related to financial instruments (note
3(q)(i)) |
(3,545 | ) | | | ||||||||
Premium on repurchase of common shares (note 18(b)) |
| (59 | ) | | ||||||||
Deficit, end of year |
$(19,287 | ) | $(55,526 | ) | $(76,546 | ) | ||||||
Net income (loss) per share basic (note 18(d)) |
$1.11 | $0.87 | $(1.18 | ) | ||||||||
Net income (loss) per share diluted (note 18(d)) |
$1.08 | $0.83 | $(1.18 | ) | ||||||||
2008 | 2007 | 2006 | ||||||||||
Cash provided by (used in): |
||||||||||||
Operating activities: |
||||||||||||
Net income (loss) for the period |
$39,784 | $21,079 | $(21,941 | ) | ||||||||
Items not affecting cash: |
||||||||||||
Depreciation |
36,729 | 31,034 | 21,725 | |||||||||
Write-down of other assets to replacement cost (note 3(g)) |
1,845 | 695 | | |||||||||
Amortization of intangible assets |
1,071 | 582 | 730 | |||||||||
Amortization of deferred lease inducements |
(104 | ) | | | ||||||||
Amortization of bond issue costs, premiums and financing costs
(notes 3(q)(i) and 19) |
838 | 3,436 | 3,338 | |||||||||
Loss (gain) on disposal of plant and equipment |
179 | 959 | (733 | ) | ||||||||
Unrealized foreign exchange gain on senior notes |
(24,788 | ) | (5,017 | ) | (14,258 | ) | ||||||
Unrealized (gain) loss on derivative financial instruments |
31,406 | (2,748 | ) | 11,888 | ||||||||
Stock-based compensation expense (note 28) |
1,991 | 2,101 | 923 | |||||||||
Gain on repurchase of NACG Preferred Corp. Series A preferred shares
(notes 2 and 18(a)) |
| (8,000 | ) | | ||||||||
Loss on extinguishment of debt (notes 2 and 16) |
| 10,680 | 2,095 | |||||||||
Change in redemption value and accretion of redeemable preferred
shares |
| 3,114 | 34,722 | |||||||||
Future income taxes |
17,299 | 382 | | |||||||||
Net changes in non-cash working capital (note 21(b)) |
(8,650 | ) | (56,167 | ) | (4,788 | ) | ||||||
97,600 | 2,130 | 33,701 | ||||||||||
Investing activities: |
||||||||||||
Acquisition, net of cash acquired (note 4) |
(1,581 | ) | (1,517 | ) | | |||||||
Purchase of plant and equipment |
(57,779 | ) | (110,019 | ) | (28,852 | ) | ||||||
Additions to assets held for sale |
(3,499 | ) | | | ||||||||
Proceeds on disposal of plant and equipment |
6,862 | 3,564 | 5,456 | |||||||||
Proceeds of disposal of assets held for sale |
10,200 | | | |||||||||
Net changes in non-cash working capital (note 21(b)) |
(2,835 | ) | 7,922 | 1,391 | ||||||||
(48,632 | ) | (100,050 | ) | (22,005 | ) | |||||||
Financing activities: |
||||||||||||
(Decrease) increase in revolving credit facility |
(20,500 | ) | 20,500 | | ||||||||
Issue of 9% senior secured notes (note 16) |
| | 76,345 | |||||||||
Repayment of 9% senior secured notes (note 16) |
| (74,748 | ) | | ||||||||
Repayment of senior secured credit facility |
| | (61,257 | ) | ||||||||
Issue of Series B preferred shares (note 18(a)(iii)) |
| | 8,376 | |||||||||
Repurchase of Series B preferred shares (notes 2 and 18(a)(iii)) |
| | (851 | ) | ||||||||
Repurchase of NAEPI Series A preferred shares (notes 2 and 18(a)(ii)) |
| (1,000 | ) | | ||||||||
Repurchase of NACG Preferred Corp. Series A preferred shares
(notes 2 and 18(a)(ii))
|
| (27,000 | ) | | ||||||||
Cash settlement of stock options (note 18(c)) |
(581 | ) | | | ||||||||
Financing costs (notes 10 and 11) |
(776 | ) | (1,346 | ) | (7,546 | ) | ||||||
Repayment of capital lease obligations |
(3,762 | ) | (6,033 | ) | (2,183 | ) | ||||||
Issue of common shares (note 2 and 18(b)) |
1,627 | 171,304 | 300 | |||||||||
Share issue costs (notes 2 and 18(b)) |
| (18,582 | ) | | ||||||||
Repurchase of common shares for cancellation (note 18(b)) |
| (84 | ) | | ||||||||
(23,992 | ) | 63,011 | 13,184 | |||||||||
Increase (decrease) in cash and cash equivalents |
24,976 | (34,909 | ) | 24,880 | ||||||||
Cash and cash equivalents, beginning of year |
7,895 | 42,804 | 17,924 | |||||||||
Cash and cash equivalents, end of year |
$32,871 | $7,895 | $42,804 | |||||||||
| repurchase all of the Companys outstanding 9% senior secured notes due 2010 for $74,748 plus accrued interest of $3,027. The notes were redeemed at a premium of 109.26% resulting in a loss on extinguishment of $6,338. The loss on extinguishment, along with the write-off of deferred financing fees of $4,342 and other costs of $255, was recorded as a loss on extinguishment of debt in the consolidated statement of operations; | |
| repay the promissory note in respect of the repurchase of the NACG Preferred Corp. Series A preferred shares for $27,000 as described above; | |
| purchase certain equipment leased under operating leases for $44,623; | |
| cancel the consulting and advisory services agreement with the Sponsors for $2,000; and | |
| for general corporate purposes. |
| North American Caisson Ltd. | |
| North American Construction Ltd. | |
| North American Engineering Ltd. | |
| North American Enterprises Ltd. | |
| North American Industries Inc. | |
| North American Mining Inc. | |
| North American Maintenance Ltd. | |
| North American Pipeline Inc. | |
| North American Road Inc. | |
| North American Services Inc. | |
| North American Site Development Ltd. | |
| North American Site Services Inc. | |
| North American Pile Driving Inc. |
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
| a bona fide addition to contract value; and | |
| revenues can be reliably estimated. |
| the contract or other evidence provides a legal basis for the claim or a legal opinion is obtained providing a reasonable basis to support the claim; | |
| additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in the Companys performance; | |
| costs associated with the claim are identifiable and reasonable in view of work performed; and | |
| evidence supporting the claim is objective and verifiable. |
Asset
|
Basis | Rate | ||||
Heavy equipment
|
Straight-line | Operating hours | ||||
Major component parts in use
|
Straight-line | Operating hours | ||||
Other equipment
|
Straight-line | 5 10 years | ||||
Licensed motor vehicles
|
Declining balance | 30% | ||||
Office and computer equipment
|
Straight-line | 4 years | ||||
Buildings
|
Straight-line | 10 years | ||||
Leasehold improvements
|
Straight-line | Over shorter of estimated useful life and lease term | ||||
Assets under capital lease
|
Declining balance | Over life of lease |
| customer contracts in process and related relationships, which are being amortized based on the net present value of the estimated period cash flows over the remaining lives of the related contracts and relationships; | |
| trade names, which are being amortized on a straight-line basis over their estimated useful life of 10 years; | |
| non-competition agreements, which are being amortized on a straight-line basis between the three and five-year terms of the respective agreements; | |
| financing costs related to the revolving credit facility are amortized on a straight-line basis over the term of the agreement; and | |
| employee arrangements, which are being amortized on a straight-line basis over the three-year term of the arrangements. |
| managements commitment to a plan to sell the assets; | |
| the assets are available for immediate sale in their present condition; | |
| an active program to locate buyers and other actions to sell the assets have been initiated; | |
| the sale of the assets is probable and their transfer is expected to qualify for recognition as a completed sale within one year; |
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
| the assets are being actively marketed at reasonable prices in relation to their fair value; and | |
| it is unlikely that significant changes will be made to the plan to sell the assets or that the plan will be withdrawn. |
| Financial assets are classified as loans and receivables, held-to-maturity, held-for-trading or available-for-sale. Loans and receivables are initially recorded at fair value and subsequent to initial recognition are accounted for at amortized cost using the effective interest method. Held-to-maturity classification is restricted to fixed maturity instruments that the Company intends and is able to hold to maturity and is accounted for on initial recognition at fair value and subsequent to initial recognition at amortized cost using the effective interest method. Held-for-trading instruments are recorded at fair value with changes in fair value reported in net income. The remaining financial assets are classified as available-for-sale. These are recorded at fair value with changes in fair value reported in other comprehensive income until the investment is derecognized or impaired at which time the amounts would be recorded in net income. On adoption of the standard, the Company has classified its cash and cash equivalents as held for trading and accounts receivable and unbilled revenue as loans and receivables. The Company did not hold any financial assets that were available-for-sale or held-to-maturity; | |
| Financial liabilities are classified as either held-for-trading or other financial liabilities. Held-for-trading instruments are recorded at fair value with changes in fair value reported in net income. Other financial liabilities are accounted for on initial recognition at fair value and subsequent to initial recognition at amortized cost using the effective interest method with gains and losses reported in net income in the period that the liability is derecognized. The Company has classified its revolving credit facility, accounts payable, accrued liabilities, and senior notes as other financial liabilities; | |
| Derivative financial instruments, including non-financial derivatives, are classified as held-for-trading and measured at fair value unless exempted from derivative treatment as a normal purchase or sale. Certain derivatives embedded in other contracts are also measured at fair value. | |
| Section 3865 specifies circumstances under which hedge accounting is permissible and how hedge accounting is performed. For the periods presented, the Company did not apply hedge accounting. | |
| The Company elected April 1, 2003 as the transition date for identifying contracts with embedded derivatives. Transaction costs that are directly attributable to the acquisition or issue of financial assets or liabilities are accounted for as a part of the respective asset or liabilitys carrying value at inception. |
Increase (decrease) | ||||
Deferred financing costs |
$(11,356 | ) | ||
Intangible assets |
1,622 | |||
Long-term future income tax asset |
3,293 | |||
Senior notes |
(12,634 | ) | ||
Derivative financial instruments |
9,720 | |||
Long-term future income tax liability |
18 | |||
Opening deficit |
3,545 | |||
| Deferred financing costs related to the issue of the senior notes that were previously presented as a separate asset on the consolidated balance sheet are now included in the carrying value of the senior notes and are being amortized using the effective interest method over the remaining term of the debt. Prior to April 1, 2007, these deferred financing costs were amortized on a straight line basis over the term of the debt. As a result of the change in method of accounting, financing costs were re-measured on April 1, 2007 using the effective interest method. This re-measurement resulted in a $9,734 decrease in deferred financing costs, a decrease of $9,815 in senior notes, a decrease of $63 in opening deficit and an increase of $18 in the future income tax liability. |
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
| Transaction costs incurred in connection with the Companys revolving credit facility of $1,622 were reclassified from deferred financing costs to intangible assets on April 1, 2007 and these costs continue to be amortized on a straight-line basis over the term of the facility. | |
| The Company determined that the issuers early prepayment option included in the senior notes should be bifurcated from the host contract, along with a contingent embedded derivative in the senior notes that provide for accelerated redemption by the holders in certain instances. These embedded derivatives were measured at fair value at the inception of the senior notes and the residual amount of the proceeds was allocated to the debt. Changes in fair value of the embedded derivatives are recognized in net income and the carrying amount of the senior notes is accreted to par value over the term of the notes using the effective interest method and is recognized as interest expense. At transition on April 1, 2007, the Company recorded the fair value of $8,519 related to these embedded derivatives and a corresponding decrease in opening deficit of $7,305, net of future income taxes of $1,214. The impact of the bifurcation of these embedded derivatives at issuance of the senior notes resulted in an increase of senior notes of $5,700 and an increase in opening deficit of $3,963, net of income taxes of $1,737 after applying the effective interest method to the premium resulting from the bifurcation of these embedded derivatives on April 1, 2007. | |
| The Company determined that a price escalation feature in a revenue construction contract is an embedded derivative that is not closely related to the host contract. The embedded derivative has been measured at fair value and included in derivative financial instruments on the consolidated balance sheet, with changes in the fair value recognized in net income. The Company recorded the fair value of $7,246 related to this embedded derivative on April 1, 2007, with a corresponding increase in opening deficit of $5,181, net of future income taxes of $2,065. | |
| The Company identified an additional embedded derivative that is not closely related to the host contract in the fourth quarter of 2008 with respect to price escalation features in a supplier contract. The embedded derivative has been measured at fair value and included in derivative financial instruments on the consolidated balance sheet, with changes in fair value recognized in net income. The Company has amended its original transition adjustment disclosed in the first quarter and recorded the fair value of $2,474 related to this embedded derivative on April 1, 2007, with corresponding increase in opening deficit of $1,769, net of future income taxes of $705. |
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Preliminary | Final | |||||||
Net assets acquired at assigned values: |
||||||||
Plant and equipment |
$700 | $700 | ||||||
Intangible assets |
217 | 201 | ||||||
Goodwill (assigned to the piling segment) |
664 | 680 | ||||||
$1,581 | $1,581 | |||||||
Net assets acquired at assigned values: |
||||
Working capital (including cash of $129) |
$170 | |||
Plant and equipment |
554 | |||
Intangible assets |
410 | |||
Goodwill (assigned to the piling segment) |
843 | |||
Future income tax liability |
(194 | ) | ||
Capital lease obligations |
(137 | ) | ||
$1,646 | ||||
March 31, | March 31, | |||||||
2008 | 2007 | |||||||
Accounts receivable trade |
$122,241 | $83,444 | ||||||
Accounts receivable holdbacks |
34,996 | 19,496 | ||||||
Income and other taxes receivable |
2,734 | 3,034 | ||||||
Accounts receivable other |
6,773 | 1,458 | ||||||
Allowance for doubtful accounts |
(742 | ) | (88 | ) | ||||
$166,002 | $107,344 | |||||||
March 31, | March 31, | |||||||
2008 | 2007 | |||||||
Costs incurred and estimated earnings on uncompleted contracts |
$1,037,273 | $742,186 | ||||||
Less: billings to date |
(971,162 | ) | (676,476 | ) | ||||
$66,111 | $65,710 | |||||||
March 31, | March 31, | |||||||
2008 | 2007 | |||||||
Unbilled revenue |
$70,883 | $68,709 | ||||||
Billings in excess of costs incurred and estimated earnings on uncompleted contracts |
(4,772 | ) | (2,999 | ) | ||||
$66,111 | $65,710 | |||||||
March 31, | March 31, | |||||||
2008 | 2007 | |||||||
Prepaid insurance and property taxes |
$1,065 | $916 | ||||||
Prepaid lease payments |
6,606 | 3,934 | ||||||
Deposits on other assets |
1,629 | 7,082 | ||||||
$9,300 | $11,932 | |||||||
Accumulated | Net | |||||||||||
March 31, 2008 | Cost | depreciation | book value | |||||||||
Heavy equipment |
$281,975 | $62,539 | $219,436 | |||||||||
Major component parts in use |
12,291 | 4,797 | 7,494 | |||||||||
Other equipment |
17,086 | 6,232 | 10,854 | |||||||||
Licensed motor vehicles |
8,981 | 6,110 | 2,871 | |||||||||
Office and computer equipment |
9,016 | 3,479 | 5,537 | |||||||||
Buildings |
19,530 | 3,443 | 16,087 | |||||||||
Leasehold improvements |
6,272 | 1,107 | 5,165 | |||||||||
Assets under capital lease |
23,271 | 9,676 | 13,595 | |||||||||
$378,422 | $97,383 | $281,039 | ||||||||||
Accumulated | Net | |||||||||||
March 31, 2007 | Cost | depreciation | book value | |||||||||
Heavy equipment |
$254,643 | $46,609 | $208,034 | |||||||||
Major component parts in use |
7,884 | 2,489 | 5,395 | |||||||||
Other equipment |
16,244 | 5,641 | 10,603 | |||||||||
Licensed motor vehicles |
7,998 | 4,829 | 3,169 | |||||||||
Office and computer equipment |
4,836 | 2,249 | 2,587 | |||||||||
Buildings |
16,443 | 716 | 15,727 | |||||||||
Leasehold improvements |
2,992 | 664 | 2,328 | |||||||||
Assets under capital lease |
15,422 | 7,302 | 8,120 | |||||||||
$326,462 | $70,499 | $255,963 | ||||||||||
North American Energy Partners
Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Accumulated | Net | |||||||||||
March 31, 2008 | Cost | depreciation | book value | |||||||||
Customer contracts in progress and related relationships |
$340 | $160 | $180 | |||||||||
Financing costs |
3,017 | 1,601 | 1,416 | |||||||||
Other intangible assets |
876 | 344 | 532 | |||||||||
$4,233 | $2,105 | $2,128 | ||||||||||
Accumulated | Net | |||||||||||
March 31, 2007 | Cost | depreciation | book value | |||||||||
Customer contracts in progress and related relationships |
$15,533 | $15,360 | $173 | |||||||||
Other intangible assets |
2,675 | 2,248 | 427 | |||||||||
$18,208 | $17,608 | $600 | ||||||||||
For the year ending March 31, | ||||||||||||
2009 |
$1,088 | |||||||||||
2010 |
862 | |||||||||||
2011 |
55 | |||||||||||
2012 |
48 | |||||||||||
2013 and thereafter |
75 | |||||||||||
$2,128 | ||||||||||||
March 31, | March 31, | |||||||
2008 | 2007 | |||||||
Accrued interest payable |
$8,693 | $8,669 | ||||||
Payroll liabilities |
19,564 | 7,484 | ||||||
Liabilities related to equipment leases |
14,617 | 7,039 | ||||||
Income and other taxes payable |
2,204 | 201 | ||||||
$45,078 | $23,393 | |||||||
2009 |
$5,537 | |||||||
2010 |
4,697 | |||||||
2011 |
3,335 | |||||||
2012 |
2,702 | |||||||
2013 |
239 | |||||||
16,510 | ||||||||
Less: amount representing interest weighted
average rate of 10.50% |
1,734 | |||||||
Present value of minimum lease payments |
14,776 | |||||||
Less: current portion |
4,733 | |||||||
$10,043 | ||||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
March 31, | March 31, | |||||||||||
2008 | 2007 | |||||||||||
8 3/4% senior unsecured notes due 2011 ($US) |
$200,000 | $200,000 | ||||||||||
Unrealized foreign exchange |
5,574 | 30,580 | ||||||||||
Unamortized financing costs and premiums, net |
(3,059 | ) | | |||||||||
Fair value of embedded prepayment and early
redemption options (note 20(a)) |
(4,270 | ) | | |||||||||
$198,245 | $230,580 | |||||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Income (loss) before income taxes |
$57,163 | $18,486 | $(21,204 | ) | ||||||||
Statutory tax rate |
31.47% | 32.12% | 33.62% | |||||||||
Expected provision (recovery) at statutory tax rate |
$17,989 | $5,938 | $(7,129 | ) | ||||||||
Increase (decrease) related to: |
||||||||||||
Impact of enacted future statutory income tax rates |
(1,287 | ) | (2,106 | ) | | |||||||
Change in redemption value and accretion of
redeemable preferred shares |
| 1,000 | 11,674 | |||||||||
Change in future income tax liability, resulting from
valuation allowance |
| (5,858 | ) | (4,097 | ) | |||||||
Non-taxable gain on repurchase of NACG Preferred Corp. |
||||||||||||
Series A preferred shares |
| (3,019 | ) | | ||||||||
Non-deductible financing transactions |
| 1,196 | | |||||||||
Large corporations tax |
| (136 | ) | 716 | ||||||||
Other |
677 | 392 | (427 | ) | ||||||||
Income tax provision (recovery) |
$17,379 | $(2,593 | ) | $737 | ||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current income taxes |
$80 | $(2,975 | ) | $737 | ||||||||
Future income taxes |
17,299 | 382 | | |||||||||
$17,379 | $(2,593 | ) | $737 |
March 31, | March 31, | |||||||||||
2008 | 2007 | |||||||||||
Future income tax assets: |
||||||||||||
Non-capital losses carried forward |
$19,985 | $23,875 | ||||||||||
Deferred share issue costs |
3,312 | 4,547 | ||||||||||
Deferred premium on senior notes |
1,002 | 1,614 | ||||||||||
Derivative financial instruments |
8,448 | 4,787 | ||||||||||
Unrealized foreign exchange loss on senior notes |
1,805 | 1,730 | ||||||||||
Billings in excess of costs on uncompleted contracts |
1,402 | 963 | ||||||||||
Capital lease obligations |
3,594 | 1,713 | ||||||||||
Intangible assets |
1,560 | | ||||||||||
Deferred lease inducements |
244 | | ||||||||||
41,352 | 39,229 | |||||||||||
Future income tax liabilities: |
||||||||||||
Unbilled revenue and uncertified revenue included in
accounts receivable |
8,978 | 3,751 | ||||||||||
Asset held for sale |
316 | 1,878 | ||||||||||
Accounts receivable holdbacks |
10,239 | 6,262 | ||||||||||
Plant and equipment |
27,009 | 20,897 | ||||||||||
Deferred financing costs |
| 1,176 | ||||||||||
Intangible assets |
568 | 174 | ||||||||||
Embedded derivatives and financing costs on senior notes |
3,176 | | ||||||||||
50,286 | 34,138 | |||||||||||
Net future income taxes |
$(8,934 | ) | $5,091 | |||||||||
March 31, | March 31, | |||||||||||
2008 | 2007 | |||||||||||
Current asset |
$8,217 | $14,593 | ||||||||||
Long-term asset |
18,199 | 14,364 | ||||||||||
Current liability |
(10,907 | ) | (4,154 | ) | ||||||||
Long-term liability |
(24,443 | ) | (19,712 | ) | ||||||||
$(8,934 | ) | $5,091 | ||||||||||
2015 |
$50,891 | |||||||||||
2026 |
9,000 | |||||||||||
2027 |
8,772 | |||||||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Number of | ||||||||
Shares | Amount | |||||||
Issued and outstanding March 31, 2005 |
35,000 | $35,000 | ||||||
Issued and outstanding March 31, 2006 |
35,000 | 35,000 | ||||||
Repurchased and cancelled |
(35,000 | ) | (35,000 | ) | ||||
Issued and outstanding March 31, 2007 and 2008 |
| $ | ||||||
Number of | ||||||||
Shares | Amount | |||||||
Issued and outstanding March 31, 2005 |
| $ | ||||||
Issued |
1,000 | 321 | ||||||
Accretion |
| 54 | ||||||
Issued and outstanding March 31, 2006 |
1,000 | 375 | ||||||
Accretion |
| 625 | ||||||
Repurchase and cancellation |
(1,000 | ) | (1,000 | ) | ||||
Issued and outstanding March 31, 2007 and 2008 |
| $ | ||||||
Number of | ||||||||
Shares | Amount | |||||||
Issued and outstanding March 31, 2005 |
| $ | ||||||
Issued |
83,462 | 8,376 | ||||||
Repurchased |
(8,218 | ) | (851 | ) | ||||
Change in redemption amount |
| 34,668 | ||||||
Issued and outstanding March 31, 2006 |
75,244 | 42,193 | ||||||
Accretion |
| 2,489 | ||||||
Repurchase and cancellation |
(75,244 | ) | (44,682 | ) | ||||
Issued and outstanding March 31, 2007 and 2008 |
| $ | ||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Number of | ||||||||
Shares(1) | Amount | |||||||
Common voting shares |
||||||||
Issued and outstanding at March 31, 2005 |
18,147,600 | 90,738 | ||||||
Issued |
60,000 | 300 | ||||||
Issued and outstanding at March 31, 2006 |
18,207,600 | 91,038 | ||||||
Issued upon exercise of stock options |
27,760 | 139 | ||||||
Transferred from contributed surplus on exercise of stock options |
| 52 | ||||||
Repurchased and cancelled prior to initial public offering |
(5,000 | ) | (25 | ) | ||||
Conversion of NAEPI Series B preferred shares |
7,524,400 | 44,682 | ||||||
Initial public offering (note 2) |
9,437,500 | 171,165 | ||||||
Share issue costs (net of future income tax recovery of $5,667) |
| (12,915 | ) | |||||
Issued and outstanding at March 31, 2007 |
35,192,260 | 294,136 | ||||||
Issued upon exercise of stock options |
324,816 | 1,627 | ||||||
Transferred from contributed surplus on exercise of stock options |
| 611 | ||||||
Conversion of common non-voting shares |
412,400 | 2,062 | ||||||
Issued and outstanding at March 31, 2008 |
35,929,476 | $298,436 | ||||||
Common non-voting shares |
||||||||
Issued and outstanding at March 31, 2007, 2006 and 2005 |
412,400 | $2,062 | ||||||
Conversion to common voting shares |
(412,400 | ) | (2,062 | ) | ||||
Outstanding at March 31, 2008 |
| | ||||||
Total common shares at March 31, 2008 |
35,929,476 | $298,436 | ||||||
(1) | The issued and outstanding common shares have been retroactively adjusted to reflect the 20-for-1 share split effected on November 3, 2006. |
Balance, March 31, 2005 |
634 | |||
Stock-based compensation (note 28) |
923 | |||
Balance, March 31, 2006 |
1,557 | |||
Stock-based compensation (note 28) |
2,101 | |||
Transferred to common shares on exercise of stock options |
(52 | ) | ||
Balance, March 31, 2007 |
$3,606 | |||
Stock-based compensation (note 28) |
1,801 | |||
Transferred to common shares on exercise of stock options |
(611 | ) | ||
Cash settlement of stock options |
(581 | ) | ||
Balance, March 31, 2008 |
$4,215 | |||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Basic net income (loss) per share
Net income (loss) available to common shareholders |
$39,784 | $21,079 | $(21,941 | ) | ||||||||
Weighted average number of common shares |
35,788,776 | 24,352,156 | 18,574,800 | |||||||||
Basic net income (loss) per share |
$1.11 | $0.87 | $(1.18 | ) | ||||||||
Diluted net income (loss) per share |
||||||||||||
Net income (loss) available to common shareholders |
$39,784 | $21,079 | $(21,941 | ) | ||||||||
Weighted average number of common shares |
35,788,776 | 24,352,156 | 18,574,800 | |||||||||
Dilutive effect of: |
||||||||||||
Stock options |
1,126,859 | 1,091,751 | | |||||||||
Weighted average number of diluted common shares |
36,915,635 | 25,443,907 | 18,574,800 | |||||||||
Diluted net income (loss) per share |
$1.08 | $0.83 | $(1.18 | ) | ||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Interest on senior notes |
$23,338 | $27,417 | $28,838 | |||||||||
Interest on capital lease obligations |
780 | 725 | 457 | |||||||||
Interest on senior secured/revolving credit facility |
769 | 346 | 564 | |||||||||
Interest on NACG Preferred Corp. Series A preferred shares |
| 1,400 | | |||||||||
Accretion and change in redemption value of NAEPI Series
B preferred shares |
| 2,489 | 34,668 | |||||||||
Accretion of NAEPI Series A preferred shares |
| 625 | 54 | |||||||||
Interest on long-term debt |
24,887 | 33,002 | 64,581 | |||||||||
Amortization of deferred financing costs |
| 3,436 | 3,338 | |||||||||
Amortization of bond issue costs and premiums |
838 | | | |||||||||
Other interest |
1,294 | 811 | 857 | |||||||||
$27,019 | $37,249 | $68,776 | ||||||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Realized and unrealized (gain) loss on cross-currency and interest
rate swaps |
$23,456 | $(196 | ) | $14,689 | ||||||||
Unrealized loss on embedded price escalation features in a long-term
revenue construction contract |
7,575 | | | |||||||||
Unrealized (gain) on embedded price escalation features in a long-term
supplier contract |
(1,205 | ) | | | ||||||||
Unrealized loss on embedded pre-payment and early redemption options
on senior notes |
4,249 | | | |||||||||
$34,075 | $(196 | ) | $14,689 | |||||||||
Derivative | ||||||||||||
financial | ||||||||||||
March 31, 2008 | instruments | Senior notes | ||||||||||
Cross-currency and interest rate swaps |
$81,649 | $ | ||||||||||
Embedded price escalation features in a long-term revenue
construction contract |
14,821 | | ||||||||||
Embedded price escalation features in a long-term supplier contract |
1,269 | | ||||||||||
Embedded pre-payment and early redemption options on senior notes |
| (4,270 | ) | |||||||||
Total fair value of derivative financial instruments |
97,739 | (4,270 | ) | |||||||||
Less: current portion |
4,720 | | ||||||||||
$93,019 | $(4,270 | ) | ||||||||||
Derivative | ||||||||||||
financial | ||||||||||||
April 1, 2007 | instruments | Senior notes | ||||||||||
Cross-currency and interest rate swaps |
$60,863 | $ | ||||||||||
Embedded price escalation features in a long-term revenue
construction contract |
7,246 | | ||||||||||
Embedded price escalation features in a long-term supplier contract |
2,474 | | ||||||||||
Embedded pre-payment and early redemption options on senior notes |
| (8,519 | ) | |||||||||
Total fair value of derivative financial instruments |
70,583 | (8,519 | ) | |||||||||
Less: current portion |
(2,669 | ) | | |||||||||
$67,914 | $(8,519 | ) | ||||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash paid during the year for: |
||||||||||||
Interest |
$29,658 | $34,061 | $29,978 | |||||||||
Income taxes |
80 | 342 | 617 | |||||||||
Cash received during the year for: |
||||||||||||
Interest |
345 | 1,156 | 530 | |||||||||
Income taxes |
300 | 160 | 2 | |||||||||
Non-cash transactions: |
||||||||||||
Acquisition of plant and equipment by means of capital leases |
8,829 | 4,653 | 5,910 | |||||||||
Lease inducements |
1,045 | | | |||||||||
Issue of Series A preferred shares |
| | 321 | |||||||||
Year ended March 31, | ||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||
Operating activities: |
||||||||||||||||
Accounts receivable |
$(59,312 | ) | $(25,278 | ) | $(9,396 | ) | ||||||||||
Allowance for doubtful accounts |
654 | 18 | (94 | ) | ||||||||||||
Unbilled revenue |
(2,174 | ) | (39,339 | ) | (2,083 | ) | ||||||||||
Inventory |
46 | (99 | ) | 77 | ||||||||||||
Prepaid expenses and deposits |
2,632 | (10,133 | ) | 66 | ||||||||||||
Other assets |
4,616 | (9,855 | ) | (163 | ) | |||||||||||
Accounts payable |
21,430 | 32,073 | (6,396 | ) | ||||||||||||
Accrued liabilities |
21,685 | (1,429 | ) | 9,402 | ||||||||||||
Billings in excess of costs incurred and estimated
earnings on uncompleted contracts |
1,773 | (2,125 | ) | 3,799 | ||||||||||||
(8,650 | ) | (56,167 | ) | (4,788 | ) | |||||||||||
Investing activities: |
||||||||||||||||
Accounts payable |
$(2,835 | ) | $7,922 | $1,391 | ||||||||||||
(2,835 | ) | 7,922 | 1,391 | |||||||||||||
| Heavy Construction and Mining: | |
The Heavy Construction and Mining segment provides mining and site preparation services, including overburden removal and reclamation services, project management and underground utility construction, to a variety of customers throughout Canada. | ||
| Piling: | |
The Piling segment provides deep foundation construction and design build services to a variety of industrial and commercial customers throughout Western Canada. | ||
| Pipeline: | |
The Pipeline segment provides both small and large diameter pipeline construction and installation services to energy and industrial clients throughout Western Canada. |
Heavy | ||||||||||||||||
For the year ended | Construction | |||||||||||||||
March 31, 2008 | and Mining | Piling | Pipeline | Total | ||||||||||||
Revenues from external customers |
$626,582 | $162,397 | $200,717 | $989,696 | ||||||||||||
Depreciation of plant and equipment |
23,761 | 3,340 | 969 | 28,070 | ||||||||||||
Segment profits |
105,378 | 45,362 | 25,465 | 176,205 | ||||||||||||
Segment assets |
500,535 | 110,288 | 88,143 | 698,966 | ||||||||||||
Expenditures for segment plant and equipment |
37,916 | 12,945 | 5,229 | 56,090 | ||||||||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Heavy | ||||||||||||||||
For the year ended | Construction | |||||||||||||||
March 31, 2007 | and Mining | Piling | Pipeline | Total | ||||||||||||
Revenues from external customers |
$473,179 | $109,266 | $47,001 | $629,446 | ||||||||||||
Depreciation of plant and equipment |
21,885 | 2,949 | 946 | 25,780 | ||||||||||||
Segment profits |
71,062 | 34,395 | (10,539 | ) | 94,918 | |||||||||||
Segment assets |
467,315 | 93,703 | 66,118 | 627,136 | ||||||||||||
Expenditures for segment plant and equipment |
95,829 | 8,940 | 1,918 | 106,687 | ||||||||||||
Heavy | ||||||||||||||||
For the year ended | Construction | |||||||||||||||
March 31, 2006 | and Mining | Piling | Pipeline | Total | ||||||||||||
Revenues from external customers |
$366,721 | $91,434 | $34,082 | $492,237 | ||||||||||||
Depreciation of plant and equipment |
10,118 | 2,543 | 1,352 | 14,013 | ||||||||||||
Segment profits |
50,730 | 22,586 | 8,996 | 82,312 | ||||||||||||
Segment assets |
327,850 | 84,117 | 48,804 | 460,771 | ||||||||||||
Expenditures for segment plant and equipment |
25,090 | 880 | 82 | 26,052 | ||||||||||||
Year ended March 31, | ||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||
Total profit for reportable segments |
$176,205 | $94,918 | $82,312 | |||||||||||||
Unallocated corporate expenses: |
||||||||||||||||
General and administrative expense |
(69,670 | ) | (39,769 | ) | (30,903 | ) | ||||||||||
Loss (gain) on disposal of plant and equipment |
(179 | ) | (959 | ) | 733 | |||||||||||
Amortization of intangibles |
(1,071 | ) | (582 | ) | (730 | ) | ||||||||||
Interest expense |
(27,019 | ) | (37,249 | ) | (68,776 | ) | ||||||||||
Foreign exchange gain |
25,442 | 5,044 | 13,953 | |||||||||||||
Realized and unrealized loss (gain) on derivative
financial instruments |
(34,075 | ) | 196 | (14,689 | ) | |||||||||||
Gain on repurchase of NACG Preferred Corp.
preferred shares |
| 9,400 | | |||||||||||||
Loss on extinguishment of debt |
| (10,935 | ) | (2,095 | ) | |||||||||||
Other income |
418 | 904 | 977 | |||||||||||||
Unallocated equipment costs (1) |
(12,888 | ) | (2,482 | ) | (1,986 | ) | ||||||||||
Income (loss) before income taxes |
$57,163 | $18,486 | $(21,204 | ) | ||||||||||||
(1) | Unallocated equipment costs represent actual equipment costs, including non-cash items such as depreciation, which have not been allocated to reportable segments. |
March 31, | March 31, | |||||||||||||||
2008 | 2007 | |||||||||||||||
Total assets for
reportable segments |
$698,966 | $621,636 | ||||||||||||||
Corporate assets: |
||||||||||||||||
Cash |
32,871 | 7,895 | ||||||||||||||
Plant & equipment |
26,785 | 18,794 | ||||||||||||||
Future income taxes |
26,416 | 28,957 | ||||||||||||||
Other |
8,560 | 33,454 | ||||||||||||||
Total corporate assets |
94,632 | 89,100 | ||||||||||||||
Total assets |
$793,598 | $710,736 | ||||||||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Total depreciation for reportable segments |
$28,070 | $25,780 | $14,013 | |||||||||
Depreciation for corporate assets |
8,659 | 5,254 | 7,712 | |||||||||
Total depreciation |
$36,729 | $31,034 | $21,725 | |||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Total capital expenditures for reportable segments |
$56,090 | $106,687 | $26,052 | |||||||||
Capital expenditures for corporate assets |
1,689 | 3,332 | 2,800 | |||||||||
Total capital expenditures |
$57,779 | $110,019 | $28,852 | |||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Customer A |
23% | 16% | 5% | |||||||||
Customer B |
19% | 0% | 0% | |||||||||
Customer C |
13% | 17% | 32% | |||||||||
Customer D |
13% | 12% | 16% | |||||||||
Customer E |
13% | 10% | 6% | |||||||||
Customer F |
4% | 10% | 2% | |||||||||
Customer G |
0% | 4% | 10% | |||||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
March 31, | March 31, | |||||||
2008 | 2007 | |||||||
Customer A |
19% | 10% | ||||||
Customer B |
18% | 0% | ||||||
Customer C |
11% | 7% | ||||||
Customer D |
11% | 0% | ||||||
Customer E |
9% | 9% | ||||||
For the year ending March 31, | ||||
2009 |
$31,090 | |||
2010 |
26,040 | |||
2011 |
16,527 | |||
2012 |
10,871 | |||
2013 and thereafter |
11,510 | |||
$96,038 | ||||
Weighted | ||||||||
average | ||||||||
Number of | exercise price | |||||||
options (1) | $ per share (1) | |||||||
Outstanding at March 31, 2005 |
1,524,840 | $5.00 | ||||||
Granted |
745,520 | 5.00 | ||||||
Exercised |
| | ||||||
Forfeited |
(204,000 | ) | (5.00 | ) | ||||
Outstanding at March 31, 2006 |
2,066,360 | 5.00 | ||||||
Granted |
315,520 | 11.99 | ||||||
Exercised |
(27,760 | ) | (5.00 | ) | ||||
Forfeited |
(207,280 | ) | (5.00 | ) | ||||
Outstanding at March 31, 2007 |
2,146,840 | 6.03 | ||||||
Granted |
481,600 | 13.80 | ||||||
Exercised |
(324,816 | ) | (5.00 | ) | ||||
Cancelled (2) |
(62,760 | ) | (5.00 | ) | ||||
Forfeited |
(204,500 | ) | (11.56 | ) | ||||
Outstanding at March 31, 2008 |
2,036,364 | $7.54 | ||||||
(1) | The number of options and the weighted average exercise price per share have been retroactively adjusted to reflect the impact of the 20-for-1 share split disclosed in note 18(b). | |
(2) | Options settled for cash. |
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
Options outstanding | Options exercisable | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Weighted | average | average | ||||||||||||||||||
average | exercise | exercise | ||||||||||||||||||
Exercise price | Number | remaining life | price ($) | Number | price ($) | |||||||||||||||
$5.00 |
1,478,704 | 7.3 years | $5.00 | 784,640 | $5.00 | |||||||||||||||
$16.75 |
87,760 | 9.0 years | $16.75 | 17,552 | $16.75 | |||||||||||||||
$13.50 |
305,400 | 8.5 years | $13.50 | 2,000 | $13.50 | |||||||||||||||
$15.37 |
89,500 | 9.7 years | $15.37 | | $ | |||||||||||||||
$13.21 |
75,000 | 9.8 years | $13.21 | | $ | |||||||||||||||
2,036,364 | 7.9 years | $7.54 | 804,192 | $5.30 | ||||||||||||||||
Year ended March 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Number of options granted (1) |
481,600 | 315,520 | 745,520 | |||||||||
Weighted average fair value per option granted ($) (1) |
4.92 | 9.91 | 3.41 | |||||||||
Weighted average assumptions |
||||||||||||
Dividend yield |
nil% | nil% | nil% | |||||||||
Expected volatility |
38.80% | 24.73% | nil% | |||||||||
Risk-free interest rate |
4.25% | 4.30% | 4.13% | |||||||||
Expected life (years) |
6.5 | 6.4 | 10 | |||||||||
(1) | The number of options and the weighted average fair value per option granted have been retroactively adjusted to reflect the impact of the 20-for-1 share split disclosed in note 18(b). |
Year ended March 31, | ||||||||||||
(restated note 30(d)) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net income (loss) as reported under Canadian GAAP |
$39,784 | $21,079 | $(21,941 | ) | ||||||||
Capitalized interest on assets held for construction (a) |
| 249 | 847 | |||||||||
Depreciation of capitalized interest (a) |
(131 | ) | (143 | ) | | |||||||
Differences in accounting for financing costs, discounts and premiums (b) |
(1,049 | ) | 1,246 | 590 | ||||||||
Difference in fair value of stock options under US GAAP (c) |
(136 | ) | | | ||||||||
Unrealized (loss) gain on embedded price escalation features in a
long-term
revenue construction contract and supplier contract (d) |
| 526 | (3,449 | ) | ||||||||
Unrealized (loss) gain on embedded redemption rights on senior notes (d) |
4,000 | 348 | (484 | ) | ||||||||
Difference between accretion of NAEPI Series B preferred shares
under |
||||||||||||
Canadian GAAP and U.S. GAAP (e) |
| 249 | | |||||||||
Income (loss) before income taxes |
42,468 | 23,554 | (24,437 | ) | ||||||||
Income taxes: |
||||||||||||
Deferred income taxes (f) |
(119 | ) | 1,816 | | ||||||||
Net income (loss) U.S. GAAP |
$42,349 | $25,370 | $(24,437 | ) | ||||||||
Net income (loss) per share basic U.S. GAAP (1) |
$1.18 | $1.04 | $(1.32 | ) | ||||||||
Net income (loss) per share diluted U.S. GAAP (1) |
$1.15 | $1.00 | $(1.32 | ) | ||||||||
(1) | Basic net income (loss) per share U.S. GAAP and diluted net income (loss) per share U.S. GAAP have been retroactively adjusted to reflect the Companys 20-for-1 share split effected on November 3, 2006 (see note 18(a)). |
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |
(Restated note 30(d)) | ||||||||||||
March 31, | March 31, | March 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Shareholders equity (as reported) Canadian GAAP |
$283,364 | $244,278 | $18,111 | |||||||||
Capitalized interest (a) |
1,096 | 1,096 | 847 | |||||||||
Depreciation of capitalized interest (a) |
(274 | ) | (143 | ) | | |||||||
Difference in accounting for finance costs, discounts and premiums
(b) |
6,217 | 1,836 | 590 | |||||||||
Unrealized loss on embedded price escalation features in a long-term
revenue construction contract and supplier contract (d) |
| (9,720 | ) | (10,246 | ) | |||||||
Unrealized loss on embedded redemption rights on senior notes (d) |
(4,655 | ) | (136 | ) | (484 | ) | ||||||
Excess of fair value of amended NAEPI Series B preferred shares over
carrying value of original NAEPI Series B preferred shares (e) |
| | (3,707 | ) | ||||||||
Deferred income taxes (f) |
(1,389 | ) | 1,816 | | ||||||||
Shareholders equity U.S. GAAP |
$284,359 | $239,027 | $5,111 | |||||||||
Common | Contributed | |||||||||||||||
shares | surplus | Deficit | Total | |||||||||||||
March 31, 2005, as previously reported |
$92,800 | $634 | $(54,605 | ) | $38,829 | |||||||||||
Restatement to record liability for embedded price
escalation
features in a long-term revenue construction contract and
supplier contract (d) |
| | (6,797 | ) | (6,797 | ) | ||||||||||
March 31, 2005, as restated |
$92,800 | $634 | $(61,402 | ) | $32,032 | |||||||||||
Net loss, as restated |
| | (24,437 | ) | (24,437 | ) | ||||||||||
Stock based compensation |
| 923 | | 923 | ||||||||||||
Share issue |
300 | | | 300 | ||||||||||||
Excess of fair value of amended NAEPI Series B preferred
shares over carrying value of original NAEPI Series B
preferred shares (e) |
| | (3,707 | ) | (3,707 | ) | ||||||||||
March 31, 2006 |
$93,100 | $1,557 | $(89,546 | ) | $5,111 | |||||||||||
Net income, as restated |
| | 25,370 | 25,370 | ||||||||||||
Stock based compensation |
| 2,101 | | 2,101 | ||||||||||||
Issued upon exercise of stock options |
139 | | | 139 | ||||||||||||
Share issues |
171,165 | | | 171,165 | ||||||||||||
Share issue costs |
(12,915 | ) | | | (12,915 | ) | ||||||||||
Repurchase of common shares |
(25 | ) | | (59 | ) | (84 | ) | |||||||||
Conversion of NAEPI Series B preferred shares (e) |
48,140 | | | 48,140 | ||||||||||||
Reclassification on exercise of stock options |
52 | (52 | ) | | | |||||||||||
March 31, 2007 U.S. GAAP |
$299,656 | $3,606 | $(64,235 | ) | $239,027 | |||||||||||
Net income |
| | 42,349 | 42,349 | ||||||||||||
Stock based compensation (c) |
| 1,937 | | 1,937 | ||||||||||||
Reclassification on exercise of stock options |
611 | (611 | ) | | | |||||||||||
Cash settlement of stock options |
| (581 | ) | | (581 | ) | ||||||||||
Issued upon the exercise of stock options |
1,627 | | | 1,627 | ||||||||||||
March 31, 2008 U.S. GAAP |
$301,894 | $4,351 | $(21,886 | ) | $284,359 | |||||||||||
North American Energy Partners Notes to Consolidated Financial Statements For the years ended March 31, 2008, 2007 and 2006 (Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified) |