Westshore Terminals Income Fund - 2009 third quarter report
Westshore Terminals Income Fund
Third Quarter Report
For the nine months ended September 30, 2009
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The earnings and distributable cash of Westshore Terminals Income Fund (the "Fund") are wholly dependent on the results of Westshore Terminals Limited Partnership ("Westshore"). Westshore's results are determined largely by the volume of coal shipped by its coal mine customers for sale in the export market, the U.S. dollar denominated price received by Westshore's customers for coal, the Canadian-U.S. dollar exchange rate and Westshore's costs. Westshore's throughput charges for a portion of the coal it handles are calculated at present by reference to coal prices. For 2009 as a whole, Westshore estimates the portion of coal handled at fully variable rates will be approximately 45% of its throughput. Higher prices for hard coking coal resulted in Teck Resources Limited ("Teck"), which is Westshore's principal customer, achieving higher average settlement prices for the 2008/09 coal year (ended
Westshore Terminals Income Fund
Management's Discussion and Analysis of Financial Condition
and Results of Operations
This management's discussion and analysis refers to certain measures other than those prescribed by Canadian Generally Accepted Accounting Principles ("GAAP"). These measures do not have standardized meanings and may not be comparable to similar measures presented by other trusts or corporations. They are however determined by reference to the Fund's financial statements. These non-GAAP measures are discussed because the Fund believes that they provide investors with valuable information in understanding the results of the Fund's operations and financial position. The unaudited financial results along with management's discussion and analysis contained in this report should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Fund's Annual Report for the year ended
The following table sets out selected consolidated financial information for the Fund for the quarters ended
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(In thousands of dollars Three Months Ended Three Months Ended
except per unit amounts) September 30, 2009 September 30, 2008
$ $
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REVENUE
Coal loading 46,460 73,764
Other 833 1,055
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47,293 74,819
EXPENSES
Operating 19,323 20,470
Administrative 1,862 7,228
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21,185 27,698
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Earnings before the undernoted 26,108 47,121
Interest income 74 530
Depreciation (5,281) (5,572)
Foreign exchange gain (loss) (219) (1,047)
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Earnings before income taxes 20,682 41,032
Provision for income taxes 446 870
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Net earnings 20,236 40,162
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Net earnings per unit(1) 0.273 0.541
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Cash Distributions declared(2) 23,760 38,610
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Cash Distributions per unit 0.320 0.520
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Distributions of units in lieu of cash - 3.913
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Distribution of units in lieu of cash
per unit - 0.053
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(1) Weighted average units outstanding for the quarter ended September
30, 2009 were 74,250,016 (September 30, 2008 - 74,250,016)
(2) Refer to page 6 for a comparison of cash distributions to
Standardized Distributable Cash.
The following tables set out selected consolidated financial information
for the Fund on a quarterly basis for the last eight quarters.
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(In thousands of dollars Three Months Ended
except per unit amounts) ----------------------------------------------
Sept 30, June 30, Mar 31, Dec 31,
2009 2009 2009 2008
$ $ $ $
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Revenue
Coal loading 46,460 57,375 53,647 88,425
Other 833 939 1,050 1,946
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47,293 58,314 54,697 90,371
Expenses
Operating 19,323 16,593 17,624 18,471
Administration 1,862 1,290 2,324 8,076
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21,185 17,883 19,948 26,547
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Earnings before the
undernoted 26,108 40,431 34,749 63,824
Interest income 74 73 155 339
Depreciation (5,281) (5,281) (5,401) (5,573)
Foreign exchange gain (loss) (219) 8,704 (3,002) (16,495)
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Earnings before income
taxes 20,682 43,927 26,501 42,095
Provision for income taxes 446 1,121 827 613
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Net earnings 20,236 42,806 25,674 41,482
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Net earnings per unit 0.273 0.577 0.346 0.559
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Cash Distributions
declared(1) 23,760 20,790 17,820 39,353
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Cash Distributions per unit 0.320 0.280 0.240 0.530
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Distribution of units in
lieu of cash - - - 3,988
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Distribution of units in
lieu of cash per unit - - - 0.054
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(1) Refer to page 7 for a comparison of cash distributions to
Standardized Distributable Cash.
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(In thousands of dollars Three Months Ended
except per unit amounts) ----------------------------------------------
Sept 30, June 30, Mar 31, Dec 31,
2008 2008 2008 2007
$ $ $ $
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Revenue
Coal loading 73,764 62,762 35,145 37,437
Other 1,055 1,036 968 2,444
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74,819 63,798 36,113 39,881
Expenses
Operating 20,470 19,534 18,521 18,660
Administration 7,228 6,982 1,874 2,982
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27,698 26,516 20,395 21,642
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Earnings before the
undernoted 47,121 37,282 15,718 18,239
Interest income 530 434 610 697
Depreciation (5,572) (5,572) (5,572) (5,646)
Foreign exchange gain
(loss) (1,047) (66) 858 540
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Earnings before income
taxes 41,032 32,078 11,614 13,830
Provision for (recovery of)
income taxes 870 190 281 (264)
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Net earnings 40,162 31,888 11,333 14,094
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Net earnings per unit 0.541 0.429 0.153 0.190
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Cash Distributions
declared(1) 38,610 34,897 20,790 26,730
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Cash Distribution per unit 0.520 0.470 0.280 0.360
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Distribution of units in
lieu of cash 3,913 3,536 2,107 -
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Distribution of units in
lieu of cash per unit 0.053 0.047 0.028 -
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(1) Refer to page 6 for a comparison of cash distributions to
Standardized Distributable Cash.
Results of Operations
In the third quarter of 2009, Westshore shipped 5.4 million tonnes of coal, compared with 5.3 million tonnes shipped during the same period in 2008, an increase of 2.6%. Based on information currently available, Westshore is anticipating coal volumes of approximately 20 million tonnes in 2009 as a whole compared to 21.1 million tonnes in 2008, at a lower average loading rate.
Coal loading revenue decreased by 37% to
Other income decreased slightly compared to that of the third quarter of 2008 and consists mostly of wharfage income. Operating expenses decreased from
Foreign exchange, which includes both realized gains/losses and changes in the mark-to-market adjustment for unrealized gains/losses, decreased to a
Earnings before depreciation, interest, foreign exchange and income taxes were lower in the third quarter of 2009, at
Contract Rate Review and Renewal
In
The agreement with Teck that covers coal from the Elkview Mine expires
Equipment Upgrade Project
The previously announced equipment upgrade is nearing completion. The cost of the upgrade remains on budget at approximately
Taxation on Trusts in
Distributions declared by the Fund after
The Fund has not provided for current income taxes in 2009 as the income of the Fund is distributed to and taxed in the hands of unitholders. The future taxation of distributions makes relevant for accounting purposes the timing differences between the recognition of certain assets and liabilities for tax and accounting purposes. A non-cash expense of
On
Distribution Reinvestment Plan
On
Currency Fluctuations
Westshore expects that in 2009, the loading rates for approximately 45% of the coal loaded at Westshore will be at fully variable rates and depend on the Canadian dollar price realized for coal by its customers. Coal sales by Westshore's customers are priced on an annual basis in U.S. dollars, with the result that the Canadian dollar price received fluctuates within the year because of exchange rate movements. To mitigate the resulting risk, Westshore has engaged in periodic hedging activities. Westshore has adopted a policy under which it expects to hedge by
In the financial statements, currency fluctuations are shown as affecting coal loading revenues before taking into account hedging activities, the financial effect of which is accounted for as foreign exchange. As Westshore's hedging transactions do not qualify for "hedge accounting" treatment, the value of Westshore's outstanding foreign exchange contracts must be "marked to market" at each period end.
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3 months ended Sept 30 9 months ended Sept 30
2009 2008 2009 2008
$ $ $ $
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Realized foreign
exchange gains (losses) (468) (88) (9,261) (20)
Unrealized foreign
exchange gains (losses) 249 (959) 14,744 (168)
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Net foreign exchange
gains (losses) (219) (1,047) 5,483 (188)
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The current year unrealized foreign exchange gains have resulted from the reversal of unrealized foreign exchange losses that existed at
Liquidity and Capital Resources
The Fund is obliged to distribute to Unitholders its income (net of administrative costs of the Fund and any amounts which may be paid in connection with any cash redemption of units). The Fund has no fixed distribution requirements, distributions being solely a function of amounts received by the Fund from Westshore. It is not anticipated that the Fund will require significant capital resources to maintain its investment in Westshore on an ongoing basis. Westshore's facility is a mature facility which does not require significant ongoing replacement of equipment. The cost of ongoing maintenance and refurbishment of the equipment is well within Westshore's financial capacity based solely on revenues less expenses without any need for financing. The current equipment addition and upgrade is being funded primarily from funds raised from issuing equity, which will assist in avoiding any liquidity concerns with debt service. As a result, the Fund does not anticipate any liquidity concerns with the ongoing operations of Westshore.
During Q1 2009, Westshore extended the term (to
Westshore has obligations under its pension plan and other post-retirement benefit plans which it is required to fund each year. As a result of the downturn in financial markets, Westshore's funding requirements have increased and Westshore expects to contribute
Obligations under operating leases for the years ending
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(In thousands of dollars) Terminal
lease Other Total
$ $ $
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2009 11,701 457 12,158
2010 11,701 457 12,158
2011 11,701 - 11,665
2012 11,701 - 11,665
2013 11,701 - 11,665
Thereafter to 2026 152,113 - 152,113
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Westshore has commitments of approximately
The Fund does not have any long-term debt, material capital lease obligations, or other long-term obligations.
Quarterly Distributions
On
Standardized Distributable Cash
References to "Standardized Distributable Cash" are to cash from operating activities less capital expenditures, both measures recognized under GAAP. Standardized Distributable Cash is a financial measure that indicates the Fund's ability to make distributions. It is a measure that has been recommended by the CICA's Canadian Performance Reporting Board for use by income funds in
The Standardized Distributable Cash of the Fund is substantially comprised of distributions from Westshore which are impacted by the operating results of Westshore. The following table sets out the Standardized Distributable Cash calculation for the three and nine month periods ended
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3 months ended Sept 30 9 months ended Sept 30
2009 2008 2009 2008
$ $ $ $
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Cash flows from operating
activities 33,189 36,996 104,925 88,774
Less: Capital expenditures (2,203) (2,430) (11,472) (4,685)
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Standardized Distributable
Cash 30,986 34,566 93,453 84,089
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Cash Distributions declared 23,760 38,610 62,370 94,298
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Basic and diluted
Standardized Distributable
Cash per unit 0.417 0.466 1.259 1.132
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Cash Distributions per unit 0.320 0.520 0.840 1.270
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The Fund plans its quarterly distributions based on anticipated annual results for the year in question and budgets for fairly even distributions over the four quarters of the year. Any particular quarterly distribution may therefore vary from Standardized Distributable Cash flow for that quarter. For the three months ended
Because the Fund's investments consist of substantially all the limited partnership units of Westshore, virtually all of the taxable income of Westshore for any year is automatically allocated to the Fund. While the Fund usually attempts both to estimate its taxable income for the year and to make distributions for the year as close as possible to that taxable income, it is normal for there to be some discrepancy between the taxable income of the Fund and cash distributions by the Fund. In order to deal with the situation where the taxable income of the Fund exceeds cash distributions, the Declaration of Trust provides that an amount equal to the excess will be distributed to unitholders in the form of additional trust units, which are then consolidated. This results in an increase to the cost base of the units equal to the amount of any such distributions.
Change in Accounting Policies
Inventories
On
The adoption of this standard did not have a material impact on the consolidated financial statements of the Fund.
Financial Instruments
On
Capital Disclosures
On
Goodwill and Intangible Assets
On
Credit Risk and the Fair Value of Financial Assets and Liabilities
On
International Financial Reporting Standards (IFRS)
The use of IFRS for financial reporting in
The Fund has completed the Scoping phase and identified the following standards which could have a material impact on recognition, measurement and disclosure: income taxes; property, plant and equipment; employee benefits; provisions and contingencies; and impairment of assets. The Fund is unable to quantify the impact of the new accounting standards at this time.
IFRS 1 contains several optional elections that allow a company upon first-time adoption of IFRS to avoid retrospective application of certain standards, particularly in cases where the cost of preparing retrospective information exceeds the benefits to users of financial statements. The Fund has considered the available elections under IFRS 1 but will not formally adopt them until more progress has been made in the Analysis phase of the project.
The following table highlights some of the key activities in the transition plan and what has been accomplished as of
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Key Activity Milestones Status
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Financial statement Identification of Identification of major
preparation major differences and differences completed
accounting policy
- Identification choices made by the Priority and
of significant end of 2009 difficulties assigned
accounting to each new accounting
differences Quantification and standards
- Selection of development of
accounting policy disclosure to occur Detailed analysis
choices through 2010 required for individual
- Selection of choices accounting standards
available under
IFRS 1 (first-time Further analysis of
adoption) IFRS 1 elections to
- Financial statement determine which
format elections will be
- Changes in disclosure adopted
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Infrastructure Major knowledge Formal course training
training completed completed
- Development of by end of 2009;
knowledge and new developments IASB activity being
resources monitored monitored on ongoing
- IT impact assessment throughout 2010 basis
and conversion
IT systems ready to IT assessment being
process information done in conjunction
in parallel in 2010 with detailed analysis
of accounting standards
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Control Environment Processes and Impact assessment being
documentation to be done in conjunction
- Assessment of impact complete by end of with detailed analysis
on ICFR and DC&P 2010 of accounting standards
- Changes in processes
to accommodate IFRS
- Documentation
requirements
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Business Policy Assessment to be Impact assessment being
complete by mid-2010 done in conjunction
- Assessment of impact with detailed analysis
on financial of accounting standards
covenants
- Assessment of impact
on capital adequacy
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Outlook
The Fund's cash inflows are entirely dependent on Westshore's operating results and are significantly influenced by four variables: the volume of coal shipped through the Terminal; the US dollar denominated price received by Westshore's customers for that coal; the Canadian-US dollar exchange rate; and Westshore's operating and administrative costs. In view of differences in loading rates between its various contracts, Westshore cannot provide a reliable indication of the effect of changes in pricing, exchange rates and tonnage on distributions, which will depend in part on which mines ship the tonnage. Accordingly, Westshore is not providing a discussion of sensitivities.
Critical to Westshore's ongoing success will be the ability of its customers, including Teck in particular, to maintain and increase their coal export volumes while competing with other suppliers for sales worldwide. Based on information currently available, Westshore anticipates 2009 throughput volumes of approximately 20 million tonnes, compared to 2008 levels of 21.1 million tonnes, and at a lower average loading rate than in 2008, with the average loading rates in the last six months of 2009 being significantly lower than in the first six months. Actual volumes may change depending on coal demand. To date, Westshore has experienced no material impact to throughput volumes from the equipment upgrade.
Teck has indicated that it has achieved settlement prices of US$128 per tonne for its highest quality products, and that the average selling price for the 2009/10 coal year will reflect a range of hard coking coal products of various qualities as well as thermal and PCI coal, which normally comprise about 10% of its coal sales volumes. The highest price of US$128 per tonne for the 2009/10 coal year can be compared to the average price of US$204 realized by Teck in the first quarter of 2009.
For 2009 and based on current tonnage estimates as of the date of this report, tonnages shipped at fixed rates are expected to account for approximately 25% of the Terminal's throughput; tonnages shipped at variable rates but subject to a cap, in effect for this year, are expected to account for approximately 30% of throughput; and finally, tonnages shipped at full variable rates are expected to account for approximately 45% of throughput at the Terminal.
The third quarter distribution was
Forward-looking Statements
The foregoing statements concerning tonnages, coal prices, exchange rates, loading rates and variability of distributions are forward-looking statements but reflect the current expectations of the Fund and Westshore with respect to future events and performance. Wherever used, the words ''may,'' ''will,'' ''anticipate,'' ''intend,'' ''expect,'' ''plan,'' ''believe,'' and similar expressions identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at which, such performance or results will be achieved.
Forward-looking statements are based on information available at the time they are made, assumptions made by management, and management's good faith belief with respect to future events, and will be impacted by and are subject to the risks and uncertainties outlined in the Fund's Annual Information Form that could cause actual performance or results to differ materially from those reflected in the forward-looking statements, historical results or current expectations.
Additional Information
Additional information relating to the Fund, including the Fund's latest Annual Report and Annual Information Form, are available on SEDAR at www.sedar.com and on Westshore's website at www.westshore.com.
On behalf of the Trustees,
William W. Stinson,
Chairman
November 5, 2009
The enclosed financial statements have not been reviewed by the Fund's
auditors.
Consolidated Statements of Earnings, Comprehensive Earnings and
Cumulative Earnings
(in thousands of Three months ended Nine months ended
dollars, except per September 30 September 30
unit amounts) $ $
2009 2008 2009 2008
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUE
Coal loading 46,460 73,764 157,482 171,671
Other 833 1,055 2,822 1,499
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47,293 74,819 160,304 173,170
EXPENSES
Operating 19,323 20,470 53,540 57,052
Administrative 1,862 7,228 5,476 16,064
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21,185 27,698 59,016 73,116
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Earnings before the
undernoted 26,108 47,121 101,288 100,054
Interest income 74 530 302 1,574
Depreciation (5,281) (5,572) (15,963) (16,716)
Foreign exchange gain (loss) (219) (1,047) 5,483 (188)
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Earnings before income
taxes 20,682 41,032 91,110 84,724
Provision for income taxes 446 870 2,394 1,341
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Net earnings and
comprehensive earnings
for the period 20,236 40,162 88,716 83,383
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Cumulative earnings -
Beginning of period 687,730 537,606 619,250 494,385
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Cumulative earnings -
End of period 707,966 577,768 707,966 577,768
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Basic and diluted earnings
per trust unit 0.273 0.541 1.195 1.123
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Weighted average number of
trust units outstanding 74,250,016 74,250,016 74,250,016 74,250,016
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Consolidated Statements of Cash Flows
(in thousands of dollars) Three months ended Nine months ended
September 30 September 30
$ $
2009 2008 2009 2008
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from
operating activities
Net earnings for the period 20,236 40,162 88,716 83,383
Items not affecting cash
Change in unrealized
gains and losses on
forward exchange
contracts (249) 959 (14,744) 168
Depreciation 5,281 5,572 15,963 16,716
Future income tax
provision 446 870 2,394 1,341
Increase (decrease)
in employee future
benefits costs 944 575 (2,471) 45
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26,658 48,138 89,858 101,653
Decrease (increase) in
non-cash working capital 6,531 (11,142) 15,068 (12,879)
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33,189 36,996 104,926 88,774
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Cash flows from financing
activities
Distributions paid to
unitholders (20,790) (34,898) (77,963) (82,418)
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(20,790) (34,898) (77,963) (82,418)
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Cash flows from investing
activities
Additions to plant and
equipment (2,203) (2,430) (11,472) (4,685)
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(2,203) (2,430) (11,472) (4,685)
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Increase in cash and cash
equivalents 10,196 (332) 15,491 1,671
Cash and cash equivalents -
Beginning of period 80,329 74,745 75,034 72,742
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Cash and cash equivalents -
End of period 90,525 74,413 90,525 74,413
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Supplemental cash flow
information
Cash received for interest 74 530 302 1,574
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Consolidated Balance Sheets
(in thousands of dollars) September 30, December 31,
2009 2008
$ $
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(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents 90,525 75,034
Accounts receivable 9,772 29,313
Inventories 6,054 6,478
Prepaid expenses 4,658 672
Other assets 2,154 -
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113,163 111,497
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Plant and equipment
At cost 512,325 500,881
Accumulated depreciation (402,264) (386,329)
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110,061 114,552
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Employee future benefits 23,081 23,303
Goodwill 365,541 365,541
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611,846 614,893
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LIABILITIES & UNITHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 15,382 16,293
Distribution payable to unitholders 23,760 39,353
Other liabilities - 12,590
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39,142 68,236
Employee future benefits 18,415 21,108
Future income taxes 11,086 8,692
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68,643 98,036
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Unitholders' equity
Capital contributions 704,032 704,032
Cumulative earnings 707,966 619,250
Cumulative distributions declared (868,795) (806,425)
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543,203 516,857
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611,846 614,893
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Notes to Financial Statements
1. Basis of presentation
These interim financial statements do not contain all the information
required for annual financial statements and should be read in
conjunction with the financial statements and notes included in the
Fund's Annual Report for the year ended December 31, 2008. These
interim financial statements have not been audited or reviewed by
external auditors.
2. Significant accounting policies
These interim financial statements have been prepared in accordance
with Canadian generally accepted accounting principles and follow the
same accounting principles and methods of application as set out in
Note 2 of the Fund's annual financial statements for the year ended
December 31, 2008.
3. New accounting pronouncements
On January 1, 2008, the Fund adopted the new requirements of CICA
Handbook Section 3031 for inventories. The standard provides more
comprehensive guidance on the determination of costs and the cost
formulas that are used to assign costs to inventories. Inventories
are required to be valued at the lower of cost and net realizable
value. The adoption of this standard did not have a material impact
on the consolidated financial statements of the Fund.
On January 1, 2008, the Fund adopted the new requirements of the CICA
Handbook Section 3862 and 3863 for financial instruments. The
standard requires additional disclosure on the Fund's risks with
respect to financial instruments and how the Fund manages these
risks. This information is presented in Note 4 to the accompanying
financial statements.
On January 1, 2008, the Fund adopted the new requirements of the CICA
Handbook Section 1535 for capital disclosures. The standard requires
additional disclosure about the Fund's capital and how it is managed
along with external requirements or restrictions on that capital.
This information is provided in Note 5 to the accompanying
consolidated financial statements.
On January 1, 2009, the Fund adopted the new requirements of the CICA
Handbook Section 3064, Goodwill and Other Intangible Assets. Section
3064 expands on the standards for recognition, measurement, and
disclosure of goodwill and intangible assets. The adoption of this
new standard did not have any impact on the consolidated financial
statements of the Fund.
4. Financial Instruments
The Fund's financial instruments include cash and cash equivalents,
accounts receivable, accounts payable and distributions payable to
unitholders. The carrying amounts of these financial instruments
recorded on the consolidated balance sheet are reasonable estimates
of their fair values due to the relatively short periods to maturity
and commercial terms of these instruments.
Cash and cash equivalents are classified as financial assets held for
trading and are recorded at fair value on the consolidated balance
sheet. Accounts receivable are classified as loans and receivables
and are recorded at amortized cost. Accounts payable and
distributions payable to unitholders are classified as other
financial liabilities and are recorded at amortized cost.
The Fund's financial instruments also include foreign exchange
forward contracts, which are derivative financial instruments that
are classified as held-for-trading and are recorded at fair value.
Fair value is measured using the quoted market rate for forward
contracts of a similar maturity date.
Financial risk management and exposure
The Fund is exposed to various risks associated with its financial
instruments, which include credit risk, liquidity risk and market
risk.
Credit Risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet its
contractual obligations. Credit risk arises primarily from accounts
receivable and cash and cash equivalents.
The Company's exposure to credit risk is influenced by the
profitability of coal mining companies, which is heavily impacted by
the price of the coal. The accounts receivable are concentrated with
one customer, Teck, as this customer represented approximately 90% of
Westshore's revenues in 2008. Westshore does not have any collateral
or security for its receivables. Westshore monitors the financial
health of its customers and regularly reviews its accounts receivable
for impairment. As at September 30, 2009, there were no trade
accounts receivable past due which were considered uncollectible and
no reserve in respect of doubtful accounts was set up.
The Fund limits its exposure to credit risk arising from cash
equivalents by only investing in money market funds with a major
Canadian financial institution. The Fund does not expect any credit
losses in the event of non-performance by counter parties to its
foreign exchange forward contracts as the counter parties are major
Canadian financial institutions.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk is:
2009
Cash and cash equivalents 90,525
Accounts receivable 9,772
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100,297
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Liquidity Risk
Liquidity risk is the risk that the Fund will not be able to meet its
obligations as they fall due. The Fund continually monitors its
financial position to ensure that it has sufficient liquidity to
discharge its obligations when due. The Fund's distribution
obligation to unitholders is funded from operating income and the
current equipment upgrade has been funded with additional equity and
from cash reserves, which will avoid liquidity concerns with debt
service.
The financial liabilities of the Fund, which include accounts payable
and accrued liabilities, have a contractual maturity of less than 1
year.
Westshore also maintains a $1 million operating facility that can be
drawn down to meet short term financing needs. No amounts were
outstanding on this facility at September 30, 2009.
Market Risk
The significant market risk exposures affecting the financial
instruments held by the Fund are those related to foreign currency
exchange rates and interest rates.
Foreign currency exchange rates
The Fund is exposed to foreign currency exchange rate risk on its
foreign currency forward contracts. The value of these financial
instruments fluctuates with changes in the CDN/US dollar exchange
rate. A $0.01 increase in the US/Canadian exchange rate at
September 30, 2009, would have reduced the value of the US dollar
foreign exchange contracts by approximately $427,000. The impact
would have resulted in a reduction in net earnings and comprehensive
earnings of $427,000. From the beginning of the year to September 30,
2009, the US dollar has weakened by approximately 12.4% against the
Canadian dollar and the fair market value of the Fund's foreign
currency forward contracts has increased by $14.8 million.
Interest rates
The Fund has limited exposure to interest rate risk on the cash
equivalents (short-term investments). Money market fund returns are
correlated with Canadian T-bills and Bankers' Acceptances of major
Canadian financial institutions. Based on the cash balance at
September 30, 2009, a 1% change in interest rates would have impacted
net earnings and comprehensive earnings for the year to date by
approximately $679,000.
5. Capital Disclosures
The capital of the Fund consists solely of unitholders' equity which
includes issued trust units and cumulative earnings less cumulative
distributions.
The objective of the Fund is to maintain a stable capital base and
ensure that the capital structure does not interfere with the Fund's
ability to meet its distribution requirements on the trust units. In
2009, the Fund expects that its quarterly distributions to
unitholders will be funded by earnings and operating cash flows.
The trust units are governed by the Second Amended and Restated
Declaration of Trust dated September 29, 2005, which provides that
non-residents of Canada may not own more than 49% of the trust units
at any time. The Fund continually monitors the non-resident ownership
levels to the best of its ability given the practical limitations
regarding beneficial ownership interest. The Fund believes that it
has always had substantially less than 49% non-Canadian ownership.
The Fund's trust units are not subject to externally imposed capital
requirements. There have been no changes in how the Fund manages its
capital during the period ended September 30, 2009.
6. Employee future benefits
The total benefit cost of the Company's defined benefit and other
retirement and post employment benefit plans was a recovery of
$2,471,000 for the nine months ended September 30, 2009 (expense of
$45,000 for the nine months ended September 30, 2008).
Corporate Office
Westshore Terminals Income Fund
1800 - 1067 West Cordova Street
Vancouver, British Columbia V6C 1C7
Telephone: 604.488.5295 Facsimile: 604.687.2601
www.westshore.com
For further information: Nick Desmarais, Secretary, (604) 488-5214
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