Fording's first quarter results provide strong start to 2005 Net
Income Up Substantially in the First Quarter of 2005 CALGARY, April
25 /PRNewswire-FirstCall/ -- Fording Canadian Coal Trust (TSX:
FDG.UN, NYSE: FDG) today announced strong first quarter results.
Net income was $65 million in the first quarter, up from $11
million in 2004, largely due to higher metallurgical coal sales
prices. Net income before unusual items and future income taxes was
$60 million in the first quarter of 2005 compared with $4 million
in 2004. Cash available for distribution for the first quarter of
2005 was $72 million ($1.46 per unit) while total distributions
declared were $64 million ($1.30 per unit). "We're pleased with the
results of the first quarter," said Jim Popowich, President of
Fording Canadian Coal Trust. "Robust coal markets provided higher
sales prices for metallurgical coal and contributed to improved
income from operations. We look forward to providing improved
returns to our unitholders as new coal year prices come into effect
in the second quarter and sales volumes increase as expansion plans
are completed." Highlights for the First Quarter: - The Trust
announced its intention to seek unitholder approval of a
reorganization that would result in a flow-through structure which
would preserve the efficiency of the structure put in place with
the 2003 arrangement. Through this structure, distributions
received from Elk Valley Coal and NYCO would continue to be taxed
at the unitholder level. The reorganization will not proceed unless
approved by unitholders and a favourable advance tax ruling is
obtained from the Canada Revenue Agency. Full details of the
proposed reorganization and risks associated with the transaction
are disclosed in the Trust's Management Information Circular dated
April 2, 2005, which was mailed to unitholders and filed on
http://www.sedar.com/. - In early April, Elk Valley Coal and
Canadian Pacific Railway Company entered a new five-year agreement
for the transportation of coal from the Elk Valley to the Vancouver
area ports. The agreement provides more certainty in rail rates and
includes a commitment from CPR to move a base volume of coal
sufficient for Elk Valley Coal's current expansion plans, a
framework to move additional tonnes above the base volume in the
last three years of the contract. - Revenues were $295 million, up
20% from 2004 mainly on the strength of higher coal sales prices,
partially offset by a higher Canadian dollar. - Cost of product
sold decreased 7% to $104 million from $112 million due mainly to
the reduction in the Trust's interest in Elk Valley Coal. -
Transportation costs increased 5% to $104 million from $99 million
in 2004 largely on higher rail and port rates for Elk Valley Coal.
------------------------------------------- Conference Call and
Webcast A conference call to discuss these results will be held
Tuesday, April 26 at 8:00 a.m. Mountain time, 10:00 a.m. Eastern
time. To participate in the conference call, please dial
1-800-814-4859 or 416-850-1243 approximately 10 minutes prior to
the call. A live and archived audio webcast of the conference call
will also be available on the Trust's website
http://www.fording.ca/. About Fording Fording Canadian Coal Trust
is an open-ended mutual fund trust. Through investments in
metallurgical coal and industrial minerals mining and processing
operations, the Trust makes quarterly cash distributions to
unitholders. The Trust, through its wholly owned subsidiary,
Fording Inc., holds a 60% interest in the Elk Valley Coal
Partnership and is the world's largest producer of the industrial
mineral wollastonite. Elk Valley Coal, comprised of Canada's senior
metallurgical coal mining properties, is the world's second largest
exporter of metallurgical coal, and expects to supply approximately
27 million tonnes of high-quality coal products to the
international steel industry in 2005. The Trust's shares are traded
on the Toronto Stock Exchange under the ticker symbol FDG.UN and on
the New York Stock Exchange under the symbol FDG. Management's
Discussion and Analysis April 25, 2005
-------------------------------------------------------------------------
This management's discussion and analysis should be read in
conjunction with our unaudited consolidated financial statements
and the notes thereto for the quarter ended March 31, 2005,
management's discussion and analysis and consolidated financial
statements for the year ended December 31, 2004, and other public
disclosure documents of the Fording Canadian Coal Trust (the
Trust). Fording Canadian Coal Trust ---------------------------
Fording Canadian Coal Trust is an open-ended mutual fund trust
created pursuant to a declaration of trust and governed by the laws
of Alberta. The Trust does not carry on any active business.
Through its wholly owned operating subsidiary, Fording Inc., the
Trust consolidates a 60% interest in the metallurgical coal
operations owned by Elk Valley Coal Partnership and a 100% interest
in the industrial mineral operations owned by the NYCO companies.
The Trust uses the cash it receives from its investments to make
quarterly distributions to its unitholders. References to "we" and
"our" in management's discussion and analysis are to the Trust and
Fording Inc., and their consolidated interest in Elk Valley Coal
and NYCO as the context requires. Elk Valley Coal ---------------
Elk Valley Coal is the second largest supplier of seaborne hard
coking coal in the world, with approximately 21% of the global
market in 2005. Hard coking coal is a premium coal used primarily
for making coke by integrated steel mills, which account for
approximately 60% of worldwide steel production. The seaborne hard
coking coal market is characterized by the global nature of
international steel-making, the relative concentration of quality
metallurgical coal deposits in Australia, Canada and the United
States and the comparatively low cost of seaborne transportation.
Elk Valley Coal has six operating mines. The Fording River, Coal
Mountain, Elkview and Line Creek mines and the Greenhills mine
(which is operated by a joint venture in which Elk Valley Coal has
an 80% interest) are located in the Elk Valley region of southeast
British Columbia. The Cardinal River mine operates in west central
Alberta. Elk Valley Coal also owns numerous other properties,
including the coal preparation plant and coal resources at the
former Quintette mine and other coal resources in British Columbia
as well as a 46% interest in Neptune Terminals in Vancouver,
British Columbia. The Trust's results pertaining to Elk Valley Coal
consist of our proportionate interest in the operations of the six
mines as well as corporate costs related to these operations. Also
included are hedging gains and losses, and mineral taxes that are
recorded in Fording Inc. but attributable to Elk Valley Coal's
earnings. NYCO ---- NYCO consists of the subsidiaries of Fording
Inc. that operate wollastonite mining operations in New York State
and Mexico and a tripoli mining operation in Missouri. NYCO is the
world's leading producer of wollastonite. Wollastonite is an
industrial mineral that is used in the manufacture of automotive
composites, adhesives and sealants, metallurgical fluxes, friction
material, paints and corrosion-resistant coatings, fire-resistant
construction wallboard, cement-based products and ceramics. Tripoli
is an industrial mineral that is used primarily in buffing and
polishing applications. Important Information Regarding Comparative
Financial Statements
----------------------------------------------------------------
When the Elk Valley Coal Partnership was formed in February 2003,
the Trust had a 65% interest with the remainder being held by Teck
Cominco, the managing partner. The partnership agreement permitted
Teck Cominco to increase its interest in Elk Valley Coal by
achieving a certain level of synergies through its management of
the partnership assets. Teck Cominco achieved the synergy
objectives and the partners agreed that the Trust's interest would
be reduced to 62% effective April 1, 2004, 61% on April 1, 2005,
and to 60% on April 1, 2006. The financial results and other
information presented in this report reflect the Trust's 65%
interest in Elk Valley Coal from January 1, 2004 to March 31, 2004,
and 60% interest commencing with the second quarter of 2004.
Readers are cautioned that certain information included in this
news release for prior periods may not be directly comparable due
to the reduction of the Trust's interest in Elk Valley Coal
effective April 1, 2004. The Trust accounted for the entire 5%
reduction in its interest in Elk Valley Coal in its financial
results in the second quarter of 2004. The additional distribution
entitlement of 2% for the twelve month period ended March 31, 2005
was included in cash available for distribution over the period
ending March 31, 2005. Similarly, the estimated additional
distribution entitlement of 1% for the twelve month period ended
March 31, 2006 will be included in cash available for distribution
over the period ending March 31, 2006. All financial information in
this management's discussion and analysis and financial statements
is unaudited. The Trust reports its financial information in
Canadian dollars and all monetary amounts set forth herein are
expressed in Canadian dollars unless otherwise stated. Non-GAAP
Financial Measures --------------------------- This management's
discussion and analysis refers to certain financial measures that
are not determined in accordance with GAAP in Canada or the United
States. Financial measures such as cash available for distribution,
distributable cash and net income before unusual items and future
income taxes are not measures recognized under GAAP and do not have
standardized meanings prescribed by GAAP. We discuss these
measures, which have been derived from our financial statements and
applied on a consistent basis, because we believe that they
facilitate the understanding of the results of our operations and
financial position and are relevant measures of the ability of the
Trust to earn and distribute cash returns to unitholders. These
measures may differ from those made by other issuers and
accordingly, may not be comparable to such measures as reported by
other trusts or corporations. Caution on Forward-looking
Information -------------------------------------- Certain
information included in this document is of a forward-looking
nature. Forward-looking information is subject to known and unknown
risks, as well as uncertainties and other factors. Accordingly,
actual results may differ materially from those expressed or
implied in forward-looking information. Some of the risks,
uncertainties and other factors affecting Fording Canadian Coal
Trust are discussed in our public filings with the securities
regulatory authorities in Canada and the United States. Copies of
Fording Canadian Coal Trust's Canadian filings, including our most
recent management information circular, annual information form,
annual report, quarterly reports, material change reports and news
releases, are available online at http://www.sedar.com/, and copies
of our U.S. filings, including our most recent annual report on
Form 40-F as supplemented by submissions under Form 6-K, are
available at http://www.sec.gov/. Information in this document is
presented as of April 25, 2005 and is subject to change after this
date. However, Fording Canadian Coal Trust disclaims any intention
or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Overview The table below summarizes our financial results and some
of our key operating statistics on a consolidated basis. Three
months ended March 31 (millions of Canadian dollars,
----------------- except as noted) 2005 2004
-------------------------------------------------------------------------
Revenue $ 294.9 $ 245.2 Income from operations $ 67.6 $ 9.0 Net
income $ 65.3 $ 10.7 Income before unusual items and future income
taxes $ 60.4 $ 4.0 Basic and diluted earnings per unit: Net income
$ 1.33 $ 0.23 Net income before unusual items and future income
taxes $ 1.23 $ 0.09 Metallurgical Coal Statistics: Coal sales
(million tonnes) 3.4 3.6 Average sales price U.S.$/tonne $ 61.30 $
44.90 CDN$/tonne $ 83.30 $ 63.80 Operating expenses Cost of product
sold (CDN$/tonne) $ 28.30 $ 28.80 Transportation (CDN$/tonne) $
30.00 $ 26.60 Industrial Minerals Statistics (Wollastonite): Sales
(thousands of tonnes) 22 21 Average sales price (U.S.$/tonne) $ 395
$ 446 Proposed Trust Re-Organization Partially as a result of
increasing metallurgical coal prices, Elk Valley Coal has generated
strong cash flows from its production and sale of coal. This in
turn has resulted in increased distributions to the partners of Elk
Valley coal including Fording Inc. and, indirectly through its
ownership of Fording Inc., to the Trust. The current organizational
structure of the Trust creates the potential for corporate income
taxation at the Fording Inc. level, which would reduce the cash
available for distribution to unitholders. The Trustees believe
that reorganizing the Trust's structure as announced in March 2005
will address this potential reduction in cash available for
distribution to unitholders. This would result in the units being a
more competitive currency comparable to other flow-through
structures should the Trust decide to issue units for future
acquisitions, expansions or other opportunities. The proposed
reorganization is intended to create a flow-through structure that
effectively results in distributions received from Elk Valley Coal
and NYCO not being taxed at the Fording Inc. level. Instead,
distributions received by Fording Inc., and indirectly by the
Trust, would be taxed at the unitholder level when distributions
are paid to the unitholder. If it proceeds, the reorganization
takes the current structure from a "trust on corporation on
partnership" structure to a "trust on partnership on partnership"
structure. The reorganization is contingent on the following: a
favourable advance tax ruling from the Canadian Revenue Agency
(CRA); approval by 66 2/3% of votes cast by unitholders at the
Annual and Special Meeting of unitholders to be held on May 4,
2005; and certain other judicial, regulatory and third- party
approvals. In addition, the Trustees may decide, at their
discretion, not to proceed with the reorganization should factors
or events occur that, in the opinion of the Trustees, would reduce
or eliminate the expected benefits of the reorganization. Such
conditions, factors and events as well as information regarding the
reorganization are described in detail in the Trust's Management
Information Circular dated April 2, 2005. The reorganization is not
expected to have a material impact on the manner in which the
Trust's distributable cash is calculated and distributed to
unitholders. It is anticipated that unitholders should not
recognize any income, gain or loss as a result of the
reorganization for Canadian and/or U.S. income tax purposes. Cash
Available for Distribution Cash available for distribution in the
first quarter of 2005 generally reflects higher sales prices and
earnings from Elk Valley Coal's metallurgical coal operations.
Distributions declared in the first quarter were $1.30 per unit.
Three months ended March 31 (millions of Canadian dollars,
----------------- except as noted) 2005 2004
-------------------------------------------------------------------------
Cash available for distribution $ 71.5 $ 19.4 Distributions
declared $ 63.7 $ 47.0 Weighted average number of units outstanding
(in millions) 49.0 47.0 Per unit amounts: Cash available for
distribution $ 1.46 $ 0.41 Distributions declared $ 1.30 $ 1.00 In
2004, the difference between cash available for distribution and
distributions declared and paid was due mainly to the carry over of
the balance of available cash from the fourth quarter of 2003. The
reconciliation from net income to net income before unusual items
and future income taxes, which is a non-GAAP measure, is provided
in the following table: Three months ended March 31
----------------- (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Net income per financial statements $ 65.3 $ 10.7 Add (deduct):
Reduction of interest in Elk Valley Coal (9.5) - Income from change
in inventory valuation - (10.8) Future income tax expense 4.6 4.1
----------------- Net income before unusual items and future income
taxes $ 60.4 $ 4.0 ----------------- INCOME FROM OPERATIONS Elk
Valley Coal Three months ended March 31 (millions of Canadian
dollars, ----------------- except as noted) 2005 2004
-------------------------------------------------------------------------
Statistics Coal production (millions of tonnes) 4.0 3.9 Coal sales
(millions of tonnes) 3.4 3.6 Average sales price U.S.$ per tonne $
61.30 $ 44.90 CDN$ per tonne $ 83.30 $ 63.80 Operating expenses
Cost of product sold (per tonne) $ 28.30 $ 28.80 Transportation
(per tonne) $ 30.00 $ 26.60 Income from operations Revenue $ 283.9
$ 232.0 Cost of product sold 96.5 104.8 Transportation 102.2 96.9
Selling, general and administration 3.1 7.6 Depreciation and
depletion 11.5 14.2 ----------------- Income from operations $ 70.6
$ 8.5 ----------------- Sales volumes decreased in the first
quarter of 2005 compared with 2004 mainly as a result of the 5%
reduction in the Trust's interest in Elk Valley Coal. Elk Valley
Coal also scheduled vessel arrivals over the first quarter to
lessen the potential for high demurrage costs during the normally
difficult winter railing period. This contributed to the lower
sales and a build-up of clean coal inventories at the port. First
quarter revenues benefited from higher U.S. dollar prices for the
2004 coal year, slightly offset by a higher effective U.S./Canadian
dollar exchange rate. The mines continued to operate at high levels
of productivity throughout the first quarter of 2005. Unit cost of
product sold decreased slightly from high 2004 levels. Unit costs
in 2005 reflect higher diesel costs and operating issues related to
an early spring break-up as well as slightly higher start-up costs
at Cardinal River. High costs in the comparable period of 2004
resulted from difficulties with rail shipments which resulted in
lower production and unplanned maintenance shutdowns. The most
significant cost impact to income from operations was the increase
in transportation costs in the first quarter of 2005 due to higher
rail and port rates. Rail rates increased due to the new rail
contract outlined below, but were offset by a $6 million reduction
for an adjustment to the estimated rail expense accrued prior to
reaching the new agreement. Port rates were impacted by higher coal
prices. These costs were up 5% to $102 million in the first quarter
from the same period in 2004. Demurrage charges decreased to
approximately $2 million in the first quarter of 2005, compared
with $9 million for the same period in 2004. Transportation costs
include the cost of rail service, port charges, ocean freight costs
on shipments where Elk Valley Coal, rather than the customer, pays
for the expense and other costs such as coal testing fees and
demurrage charges for vessel waiting times. In April 2005, Elk
Valley Coal and Canadian Pacific Railway Company (CPR) resolved a
contract dispute over rail rates and reached a new five-year
agreement retroactive to April 1, 2004 for the transportation of
metallurgical coal from Elk Valley Coal's mines in southeastern
British Columbia to Vancouver area ports. In this agreement, CPR
has committed to transport coal in an amount that meets Elk Valley
Coal's current planned capacity increases as well as provided a
framework to transport additional tonnes above the base volume
during the 2006 to 2008 coal years at a premium rate. This provides
Elk Valley Coal confidence that its rail needs will be met for
current expansion plans. Elk Valley Coal and CPR have also agreed
to discontinue all legal and regulatory proceedings relating to
their previous contract dispute. Selling, general and
administration costs decreased 59% in the first quarter of 2005. In
the first quarter of 2004, costs incurred pursuant to change in
control agreements with certain former senior executives
contributed to higher selling, general and administration costs.
Lower depletion expense at Cardinal River and the build-up of
inventory were the main contributors to the 19% decrease in
depreciation and depletion expense in the first quarter of 2005
compared with 2004. Elk Valley Coal is continuing with the
negotiation of agreements to complete the transaction with POSCO
and Nippon Steel Corporation announced in December that provides
for 10-year sales contracts covering an aggregate of 4.9 million
tonnes per annum of coal for 2005, increasing to 6.3 million tonnes
per annum for the 2007 coal year onwards. In addition, each company
will acquire a 2.5% equity investment in a new entity that will own
and operate the Elkview mine. The completion of the transaction is
expected to result in a pre-tax gain for the Trust of approximately
$25 million on the sale of the 5% interest in the Elkview mine,
which will be included in earnings in the period in which the
transaction closes. Expansion Projects ------------------ Expansion
work continued in the quarter to support Elk Valley Coal's plans.
In 2005, Elk Valley Coal is focused on increasing its annualized
productive capacity to 28 million tonnes per year by the end of the
year, while achieving its sales target of approximately 27 million
tonnes. Development of the Cheviot Creek pit at the Cardinal River
operations is progressing. However, Elk Valley Coal is experiencing
delays in deliveries of equipment from manufacturers. In addition,
lower than expected sales volumes were transported by Canadian
National Railway Company (CN) in the first quarter due to limited
train availability. Cardinal River's 2005 sales volumes are
expected to be lower than planned. It is anticipated that the full
annualized production rate of 2.8 million tonnes per year will be
achieved at the mine at the end of the third quarter of 2005, but
total 2005 sales volume from Cardinal River will be subject to CN's
ability to transport the coal. Total cost for the Cardinal River
project is expected to be approximately 10% higher than previously
forecast due to rising mining costs and the deferral of costs
incurred during the start-up period. Work to increase the capacity
of the Fording River plant and mine from 9.5 million tonnes to 10.5
million tonnes per year is continuing although it has also
encountered delays in equipment delivery. The Trust's share of
capital spending was approximately $7 million in the first quarter
of 2005. It is anticipated that work will be completed as planned
in the third quarter of 2005 during a scheduled plant shutdown. The
Trust's share of equipment purchased at Elkview in the quarter was
approximately $4 million. The new equipment will facilitate the
increase in Elkview's annual capacity from six to seven million
tonnes of coal by the end of 2007, of which our share will be
approximately four million tonnes. NYCO Three months ended March 31
(millions of Canadian dollars, ----------------- except as noted)
2005 2004
-------------------------------------------------------------------------
Statistics - Wollastonite Sales (thousands of tonnes) 22 21 Average
sales price (U.S.$ per tonne) $ 395 $ 446 Income from operations
Revenue $ 11.0 $ 13.2 Cost of product sold 7.7 7.0 Transportation
1.8 1.8 Selling, general and administration 1.0 0.9 Depreciation
and depletion 1.1 1.3 ----------------- Income from operations $
(0.6) $ 2.2 ----------------- Income from NYCO's operations
decreased approximately $3 million in the first quarter of 2005
from the comparable quarter in 2004, primarily due to lower sales
prices and the impact of a higher U.S. / Canadian exchange rate.
Higher cost of product sold was primarily due to earlier than
planned waste mining and ore release, which increased direct mining
costs. CORPORATE Three months ended March 31 -----------------
(millions of dollars) 2005 2004
-------------------------------------------------------------------------
Selling, general and administration 2.1 1.0 Depreciation, depletion
$ 0.3 $ 0.7 ----------------- Loss from operations $ 2.4 $ 1.7
----------------- Corporate costs include general and
administration expenses not allocated to specific business
segments, and depreciation on corporate assets. Selling, general
and administration expenses were higher in the first quarter of
2005 as compared with the first quarter of 2004, primarily due to
additional professional services and the timing of discretional
expenditures. OTHER INCOME AND EXPENSES Three months ended March 31
----------------- (millions of dollars) 2005 2004
-------------------------------------------------------------------------
Other income (expense), net Interest expense $ (2.7) $ (4.9) Other
income (expense), net (0.7) 13.5 Reduction of interest in Elk
Valley Coal 9.5 - ----------------- $ 6.1 $ 8.6 -----------------
The decrease in interest expense is mainly due to lower average
debt levels and a lower interest rate on the new loan facility put
in place in mid-February 2005. Other income and expenses includes
interest and investment income as well as miscellaneous income and
expenses. Included in the first quarter of 2005 was a non-cash
foreign exchange translation gain on U.S. dollar denominated bank
debt, a write-off of unamortized costs related to the prior bank
facility that was refinanced in the quarter and additional costs
associated with the proposed reorganization of the Trust. The first
quarter of 2004 included unusual income of $11 million from the
adoption of a change in accounting practice related to the
inclusion of depreciation and depletion in the valuation of product
inventories on hand at the start of 2004. The loss on the reduction
of the Trust's interest in Elk Valley Coal that was recorded in the
second quarter of 2004 was offset by an estimate of cash to be
received for the additional distribution entitlements of 2% for the
year ended March 31, 2005 and 1% for the year ended March 31, 2006.
During the first quarter of 2005, the estimate of cash to be
received for the additional distribution entitlement of 1% for the
twelve months ended March 31, 2006 was revised, resulting in a
favourable $9.5 million non-recurring pre-tax adjustment to the
reduction of interest in Elk Valley Coal. Income taxes Income tax
expense consists primarily of British Columbia mineral taxes and
Alberta Crown royalties assessed on the cash flows of Elk Valley
Coal, corporate income taxes and, to a lesser extent, foreign
income tax related to NYCO. In the first quarter of 2005 increases
in mineral taxes and Crown royalties were offset by lower foreign
income taxes and a credit to future income taxes resulting from
lower Canadian statutory income tax rates. In the quarter, Fording
Inc. was able to offset taxable income with interest on debt owed
to the Trust and available loss carry forwards. Three months ended
March 31 ----------------- (millions of dollars) 2005 2004
-------------------------------------------------------------------------
Current income taxes: Canadian corporate income taxes $ 0.4 $ -
Provincial mineral taxes and Crown royalties 3.3 1.9 Foreign income
taxes 0.1 0.9 ----------------- 3.8 2.8 Future income tax expense
Canadian corporate income taxes $ 3.1 3.7 Provincial mineral taxes
and Crown royalties 1.5 0.4 ----------------- 4.6 4.1
----------------- Total income tax expense $ 8.4 $ 6.9
----------------- LIQUIDITY AND CAPITAL RESOURCES Three months
ended March 31 ----------------- (millions of dollars) 2005 2004
-------------------------------------------------------------------------
Summary of Cash Flows Operating activities $ 61.0 $ 47.1 Investing
activities (29.6) (3.8) Financing activities, excluding
distributions 17.8 (0.4) ----------------- Increase in cash before
distributions 49.2 42.9 Distributions to unitholders (63.7) (46.9)
----------------- Decrease in cash (14.5) (4.0) Cash - beginning of
period 64.5 52.5 ----------------- Cash - end of period $ 50.0 $
48.5 ----------------- ----------------- Cash flows from operating
activities are largely influenced by the results of Elk Valley
Coal. Cash flows from operating activities increased substantially
in the first quarter of 2005 as compared with 2004 due to the $55
million increase in income, driven primarily by higher coal sales
prices. Cash flows from operations include changes in working
capital that can fluctuate from period to period. In the first
quarter of 2005, accounts receivable decreased due to the
adjustment to the Trust's distribution entitlement from Elk Valley
Coal. Inventories increased from the build-up of clean coal
inventories at the port. Investing activities during the first
quarter included capital expenditures of approximately $22 million
related to the Cheviot Creek pit at Cardinal River operations and
ongoing expansion at the Fording River and Elkview operations. The
remaining spending was on sustaining projects, which was $1 million
higher than the $6 million spent in 2004. In February 2005, Fording
Inc. and Elk Valley Coal refinanced their bank credit facilities
with five-year revolving, floating rate, annually extendible
facilities. Fording Inc.'s new credit facility provides for
borrowings of up to $400 million and Elk Valley Coal's facility is
for $150 million, both of which are available for general business
purposes and can be drawn in Canadian dollars or the U.S. dollar
equivalent thereof. During the first quarter of 2005, Fording Inc.
borrowed $220 million under the new facility to repay $201 million
owing under the previously existing term debt facility and $19
million for expansion capital. Prior to March 31, Fording converted
$202 million of these borrowings to U.S. denominated debt of
U.S.$167 million. Elk Valley Coal had utilized $71 million of its
facility for the issuance of letters of credit and guarantee.
Adequate credit facilities are available to fund working capital,
expected capital spending requirements for expansion plans and
other requirements. We anticipate that Elk Valley Coal and NYCO
have the ability to generate sufficient funds from operating and
financing activities to maintain their productive capacity and to
fund planned growth and development activities. OUTLOOK ------- Due
to continued strong demand from the global steel industry, the
current tight markets for metallurgical coal are expected to
continue into 2006. Contracted coal prices have risen significantly
from 2004 levels and sales and production of coal are expected to
increase and be at or near capacity. Elk Valley Coal is progressing
with its plans to increase annualized capacity to 28 million tonnes
by the end of 2005. Elk Valley Coal expects sales volumes to
increase in the second quarter, contributing to a coal sales volume
of approximately 27 million tonnes in the year. The Trust's share
of this sales target is approximately 16 million tonnes. The
results from Elk Valley Coal's expansion plans combined with the
robust coal markets are expected to provide strong returns in 2005.
However, we expect better results in the last half of the year as
the first half of 2005 will include 2004 coal year prices until
approximately mid-May. Cash Available for Distribution Our
financial results, and therefore the amount of cash available for
distribution to unitholders, are highly dependent on key variables
such as coal prices, forward contracts, coal production and sales
volumes, the U.S./Canadian dollar exchange rate, production and
transportation costs, sustaining capital expenditures and other
financial and legal requirements. Changes in any of these factors
could have a material impact on our results and cash available for
distribution to unitholders. Coal Markets Hard coking coal markets
continue to be very tight as producers are not able to bring new
metallurgical coal production to the market quickly enough to fully
meet demand of steel producers. Demand for seaborne hard coking
coal is expected to grow at above historical rates through to 2010,
driven by demand from China, India and Brazil. Global demand and
production of steel has continued to grow in early 2005, following
strong annual growth in world crude steel production in 2004. This
strong demand is resulting in high levels of steel production in
many geographic areas, which in turn supports demand for hard
coking coal from producers such as Elk Valley Coal. Certain
European steelmakers are moderating production in view of rising
steel inventories. However, many of these producers have announced
plans to increase steel production over the next few years,
indicating they still see a strong market for steel. Due to the
robust steel market and past variability in Chinese coke exports,
steel plants around the world are announcing plans to construct or
expand coke-making capacity for the first time in over a decade.
With coal in short supply, some steel producers have signed
long-term contracts or purchased interests in coal producers in
order to secure additional supplies of hard coking coal to meet
their future needs. Higher coal prices are serving to attract new
supply to the market from Canada and Australia. However,
significant near-term growth in hard coking coal production has not
yet materialised, primarily due to a lack of sufficient
infrastructure capacity and difficulties in advancing mine
development. The infrastructure supporting transportation of
metallurgical coal from mines is at or near capacity in most parts
of the world. Australia's rail and port capacity is constrained,
which is illustrated by vessel congestion and long waits at
Dalrymple Bay, located in Australia. In the United States and
Canada, the rail systems are near capacity and require investment
to increase capacity for all of their customers. The global
increase in mining activity has led to substantial lead times of up
to 18 months for delivery of large mining equipment. The
availability of tires and other parts is also limited, constraining
equipment availability, all of which affects mine production. In
addition, there is a shortage of skilled services that could delay
the pace at which mines can be developed or expanded. The combined
impact of these supply constraints indicate that significant new
greenfield mines are not expected to come on stream until at least
2007. Should supply problems occur, it may take longer for
metallurgical coal markets to return to balance. Due to the
cyclical nature of the metallurgical coal industry and the
expectation that new supply will influence market dynamics,
expansion must be managed with an understanding of future
variability in sales prices. Elk Valley Coal has other properties
that have the potential to provide additional metallurgical coal
volumes in the future if market conditions warrant their
development. Cost of Product Sold Elk Valley Coal is focused on
managing key operating variables, such as mine and plant
productivities, yields, strip ratios and haul distances, which
directly influence mining costs, in order to maximize cash flows
over the long-term. Mining and processing input costs such as fuel,
steel, tires, labour and maintenance parts and supplies can also
have a significant impact to the cost of producing metallurgical
coal. Increases in prices for petroleum products and for
commodities in general have resulted in continuing cost pressures
that we expect throughout 2005. In addition, the growth in global
mining activities has created a demand for equipment and supplies
that outpaces supply. Recently, the risk of a shortage of tires has
increased substantially. In order to mitigate any potential
negative impact, Elk Valley Coal is monitoring tire availability
and undertaking steps to extend existing tire life. Future
operations could be impacted if Elk Valley Coal experiences
difficulties obtaining equipment and supplies, particularly tires,
on a timely basis. Lastly, costs have increased as the growth in
the mining industry has created demand and competition for certain
skilled services. These factors could affect production,
productivity and costs at Elk Valley Coal's operations, and have a
material adverse effect on cash available for distribution to
unitholders. Taking this into account, Elk Valley Coal's cost of
product sold is anticipated to be between $29 and $30 per tonne in
2005, slightly higher than that incurred in 2004. Collective
Agreements Collective agreements covering production and
maintenance employees at three of Elk Valley Coal's operations will
expire prior to the end of 2005. The collective agreement at the
Coal Mountain operation expired on December 31, 2004, and
negotiations are ongoing. Agreements at Line Creek and Elkview
operations expire at the end of May and October 2005, respectively.
The agreement at Fording River operations expires in 2006 while
Cardinal River's agreement expires in 2007. Should an agreement not
be reached at one or more of these operations, work stoppages could
occur that may have a material adverse effect on cash available for
distribution to unitholders. Cardinal River Operations All licenses
and approvals have been received for the Cheviot Creek pit and the
haulroad at the Cardinal River operations. A number of
environmental organizations have applied to the Federal Court
seeking a further environmental assessment of the project and
challenging certain federal authorizations that the project has
received. The Federal Court is expected to hear the applications in
June 2005. In addition, Alberta Environment received appeals
regarding certain approvals in connection with the project from
local individuals. The Environmental Assessment Board issued a
decision in April related to one appeal, which is not expected to
have a material impact on operations. While unanticipated, negative
decisions related to these legal issues could impact future
operations at the site. Elk Valley Coal continues to monitor
progress on these legal issues. Rail Service The rail systems
servicing Elk Valley Coal's mines are being pressed to meet the
current capacity requirements of all industries shipping westbound
to Vancouver. In early 2005, rail service was below Elk Valley
Coal's expectations. Taking into account the new rail contract with
CP, service levels are expected to be sufficient to move Elk Valley
Coal's planned production volumes. However, rail capacity issues,
prolonged labour stoppages, availability of trains, weather
problems or other factors that prevent CPR or CN from providing
their services could seriously impact Elk Valley Coal's sales
volumes and financial results. Foreign Exchange Hedging To help
manage exposure to currency fluctuations, foreign exchange forward
contracts are used to fix the rate at which certain future
anticipated flows of U.S. dollars are exchanged into Canadian
dollars. Foreign exchange hedging activities take into account the
existing foreign exchange forward contracts of Fording Inc. and Elk
Valley Coal. Our hedging policy has no minimum limits. In the first
quarter of 2005, outstanding hedges increased by $758 million. Our
outstanding foreign exchange forward contracts are disclosed in
note 9 to the Consolidated Financial Statements. Guidance The
following table outlines the Trust's current expectations for the
2005 calendar year, except for the 2005 coal year prices. These
estimates are based on management's judgement, which are subject to
known and unknown risks as well as uncertainties and other factors.
Accordingly, actual results may differ materially from the
estimated amounts disclosed in the table. Trust at 60%
-------------------------------------------------------------------------
Coal sales (million tonnes) 16 Coal prices (U.S.$/tonne) 2005 coal
year $ 122 2005 calendar year $ 100 Cost of product sold, coal
(CDN$/tonne) $ 29 - 30 Transportation, coal (CDN$/tonne) $ 37 - 38
Capital expenditures (CDN$ millions) Sustaining expenditures $ 35
Expansion expenditures $ 65 Sensitivities The table that follows
outlines the approximate sensitivity in 2005 of cash available for
distribution per unit based on changes in certain key variables
throughout the balance of the year. These sensitivities are
calculated before any cash reserve and include our distribution
entitlement in Elk Valley Coal, take into account our current
foreign currency hedges, exclude any potential impact from the
proposed reorganization and are based on the weighted average
number of units expected to be outstanding throughout the balance
of the year prior to the proposed three-for-one unit split, if
approved (see below). $/ Variable Change unit --------
----------------- -------- Cost of coal product sold CDN$1.00/tonne
$ 0.19 Price of coal U.S.$1.00/tonne $ 0.21 Elk Valley Coal's sales
1 million tonnes $ 0.40 U.S./Canadian dollar exchange rate U.S. 1
cent $ 0.07 Capital expenditures of the Trust CDN$1 million $ 0.02
Number of Units Outstanding There were approximately 49 million
trust units outstanding on March 31 and April 25, 2005.
Approximately 38,000 options were outstanding under the exchange
option plan as of March 31, 2005 and 37,250 options as of April 25,
2005. Unitholders will be asked to approve a three-for-one split of
the Trust's units at the Annual and Special Meeting on May 4, 2005.
It is anticipated that the unit split will result in a
corresponding reduction in the market price per unit making them
more affordable for the average investor. Risk Factors Unitholders
should refer to the 'Risk Factors' in the 2004 annual report and in
the management information circular dated April 2, 2005 for other
factors that could potentially impact the Trust's financial
performance and its ability to meet its targets.
------------------------------------------- CONSOLIDATED STATEMENTS
OF INCOME (unaudited) Three months ended March 31 (millions of
Canadian dollars, ----------------- except per unit amounts) 2005
2004 -----------------------------------------------
----------------- Revenues $ 294.9 $ 245.2 Expenses Cost of product
sold 104.2 111.8 Transportation 104.0 98.7 Selling, general and
administration 6.2 9.5 Depreciation and depletion 12.9 16.2
----------------- 227.3 236.2 ----------------- Income from
operations 67.6 9.0 Other income (expense) Interest expense (2.7)
(4.9) Other income (expense), net (note 3) (0.7) 13.5 Reduction of
interest in EVCP (note 4) 9.5 - ----------------- Income before
taxes 73.7 17.6 Income tax expense (note 5) 8.4 6.9
----------------- Net income $ 65.3 $ 10.7 -----------------
----------------- Weighted average number of units outstanding
(millions) (note 10) 49.0 47.0 Basic and diluted earnings per unit
(note 10) $ 1.33 $ 0.23 CONSOLIDATED STATEMENTS OF ACCUMULATED
EARNINGS (unaudited) Three months ended March 31 -----------------
(millions of Canadian dollars) 2005 2004
----------------------------------------------- -----------------
Balance - beginning of period $ 340.6 $ 190.4 Net income for the
period 65.3 10.7 ----------------- Balance - end of period $ 405.9
$ 201.1 ----------------- ----------------- The accompanying notes
to the unaudited consolidated financial statements are an integral
part of these statements. CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Three months ended March 31 ----------------- (millions
of Canadian dollars) 2005 2004
----------------------------------------------- -----------------
Operating activities Net income $ 65.3 $ 10.7 Items not using
(providing) cash: Depreciation and depletion 14.4 16.4 Reduction of
interest in EVCP (9.5) - Provision for asset retirement
obligations, net 1.0 0.9 Future income taxes 4.6 4.1 Income from
change in inventory valuation - (10.8) Loss on disposal of assets -
0.1 Other items, net 0.8 0.7 ----------------- 76.6 22.1 Decrease
(increase) in non-cash working capital (15.6) 25.0
----------------- Cash from operating activities 61.0 47.1
----------------- Investing activities Additions to capital assets
(29.1) (5.7) Proceeds on disposal of assets 0.1 0.3 Other investing
activities, net (0.6) 1.6 ----------------- Cash used in investing
activities (29.6) (3.8) ----------------- Financing activities
Increase (decrease) in long-term debt 17.7 (0.6) Issuance of units,
net 0.1 0.3 Other financing activities, net - (0.1)
----------------- Financing activities, before distributions 17.8
(0.4) ----------------- Distributions declared (63.7) (47.0)
Increase in distributions payable - 0.1 ----------------- Financing
activities related to distributions (63.7) (46.9) -----------------
Cash used in financing activities (45.9) (47.3) -----------------
Decrease in cash and equivalents (14.5) (4.0) Cash and cash
equivalents - beginning of period 64.5 52.5 ----------------- Cash
and cash equivalents - end of period $ 50.0 $ 48.5
----------------- ----------------- The accompanying notes to the
unaudited consolidated financial statements are an integral part of
these statements. CONSOLIDATED BALANCE SHEETS (unaudited) March
December 31 31 (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Assets Current assets Cash and cash equivalents $ 50.0 $ 64.5
Accounts receivable 79.3 86.8 Inventory 141.1 113.0 Prepaid
expenses 4.6 2.6 ----------------- 275.0 266.9 Capital assets 646.2
635.8 Goodwill 44.4 44.4 Other assets 20.6 21.1 ----------------- $
986.2 $ 968.2 ----------------- ----------------- Liabilities
Current liabilities Accounts payable and accrued liabilities $
125.5 $ 132.6 Income taxes payable 13.4 10.7 Distribution payable
63.7 63.7 Current portion of long-term debt (note 7) 1.3 1.7
----------------- 203.9 208.7 Long-term debt (note 7) 223.4 205.2
Other long-term liabilities (note 8) 89.6 91.9 Future income taxes
(note 5) 185.0 180.4 Commitments and contingencies (note 9)
----------------- 701.9 686.2 ----------------- Unitholders' equity
(note 10) Trust units 357.8 357.7 Accumulated earnings 405.9 340.6
Accumulated cash distributions (487.4) (423.8) Foreign currency
translation adjustments 8.0 7.5 ----------------- 284.3 282.0
----------------- $ 986.2 $ 968.2 -----------------
----------------- The accompanying notes to the unaudited
consolidated financial statements are an integral part of these
statements. Notes to Consolidated Financial Statements (unaudited)
-------------------------------------------------------------------------
1. STRUCTURE OF FORDING CANADIAN COAL TRUST AND NATURE OF
OPERATIONS Fording Canadian Coal Trust (the Trust) is an open-ended
mutual fund trust existing under the laws of the Province of
Alberta. It was created pursuant to a Declaration of Trust in
connection with a plan of arrangement effective February 28, 2003
(the Arrangement). These consolidated financial statements reflect
the financial position, results of operations and cash flows as if
the Trust had always carried on the businesses formerly carried on
by its predecessor company, Fording Inc., being the public company
existing prior to the Arrangement (Old Fording). All assets and
liabilities are recorded at historical cost. The Trust holds all of
the shares and subordinated notes of its operating subsidiary
company, Fording Inc. Through Fording Inc., at March 31, 2005 the
Trust held a 62% interest in the metallurgical coal operations
owned by Elk Valley Coal Partnership (EVCP), and a 100% interest in
the industrial mineral operations owned by Nyco Minerals, Inc. and
Minera Nyco SA de CV (collectively NYCO). EVCP and NYCO are
separate reportable segments within the Trust. EVCP mines and
processes metallurgical coal from six mines located in British
Columbia and Alberta, Canada. NYCO mines and processes wollastonite
and other industrial minerals from two operations in the United
States and one operation in Mexico. Each segment is a distinct
strategic business unit that offers different products and services
and is managed separately due to different operational and
marketing strategies. At February 28, 2003, Fording Inc. held a 65%
interest in EVCP and the remaining 35% interest in EVCP was held by
Teck Cominco and its affiliates. The agreement governing EVCP
provided for an increase in Teck Cominco's interest to a maximum of
40% to the extent that synergies from the combination of various
metallurgical coal assets contributed to EVCP exceed certain target
levels. At April 1, 2005, the Trust's interest decreased to 61%
while Teck Cominco's interest increased to 39%, as discussed in
note 4. These consolidated financial statements should be read in
conjunction with the annual consolidated financial statements and
notes thereto included in the Trust's Annual Report for 2004 and
other public disclosure documents of the Trust and Old Fording. The
preparation of these consolidated financial statements requires
management to make certain estimates and assumptions that affect
amounts reported and disclosed in the consolidated financial
statements and related notes. Actual amounts could differ from
those estimates. A discussion of the accounting estimates that are
significant in determining the Trust's financial results is
contained in the Management's Discussion and Analysis in its 2004
Annual Report. 2. SIGNIFICANT ACCOUNTING POLICIES These
consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles and follow
the same accounting principles and methods of application as
described in the Trust's annual financial statements for 2004.
Certain comparative figures have been reclassified to conform to
the presentation adopted in 2005. 3. OTHER INCOME (EXPENSE), NET
Three months ended March 31 ----------------- (millions of Canadian
dollars) 2005 2004
-------------------------------------------------------------------------
Interest and investment income $ 0.2 $ 1.0 Change in inventory
valuation - 10.8 Other (0.9) 1.7 ----------------- $ (0.7) $ 13.5
----------------- 4. REDUCTION OF INTEREST IN EVCP EVCP was
initially owned 65% by the Trust and 35% by Teck Cominco, the
managing partner. The agreement governing EVCP provided for an
increase in Teck Cominco's interest to a maximum of 40% to the
extent that synergies from the combination of various metallurgical
coal assets contributed to EVCP exceed certain target levels. The
report of an independent expert engaged by the partners concluded
that sufficient synergies had been realized to increase Teck
Cominco's interest to 40%. The Trust and Teck Cominco agreed that
substantial synergies have been achieved. As a result, the partners
agreed that the Trust's distribution entitlement was reduced to 62%
effective April 1, 2004 and to 61% on April 1, 2005, and will be
reduced to 60% on April 1, 2006, as the benefits of synergies flow
through to unitholders. Teck Cominco's entitlements will increase
correspondingly over the same period. A $37.5 million non-cash
charge to earnings, reflecting the entire 5% reduction in the
Trust's interest in EVCP was recorded in the second quarter of
2004. This charge was reduced by an estimate of cash to be received
for the additional distribution entitlements of 2% for the year
ended March 31, 2005 and 1% for the year ended March 31, 2006.
During the first quarter of 2005, the estimate of cash to be
received for the additional distribution entitlement of 1% for the
twelve months ended March 31, 2006 was revised. This resulted in a
favourable $9.5 million pre-tax adjustment to the reduction of
interest in EVCP, which has been included in other income for the
first quarter of 2005. Results of operations commencing with the
second quarter of 2004 reflect the Trust's 60% interest in EVCP,
while results for the first quarter of 2004 include the Trust's 65%
interest. 5. INCOME TAXES Income tax expense is made up of the
following components: Three months ended March 31 -----------------
(millions of dollars) 2005 2004
-------------------------------------------------------------------------
Current income taxes: Canadian corporate income taxes $ 0.4 $ -
Provincial mineral taxes and Crown royalties 3.3 1.9 Foreign income
taxes 0.1 0.9 ----------------- 3.8 2.8 Future income tax expense
Canadian corporate income taxes $ 3.1 3.7 Provincial mineral taxes
and Crown royalties 1.5 0.4 ----------------- 4.6 4.1
----------------- Total income tax expense $ 8.4 $ 6.9
----------------- Future income taxes consist of the following:
March 31 December 31 (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Canadian corporate income taxes $ 127.9 $ 124.8 Provincial mineral
taxes and Crown royalties 46.3 44.8 Foreign corporate income taxes
and other 10.8 10.8 ------------------------- $ 185.0 $ 180.4
------------------------- 6. DISTRIBUTABLE CASH Distributable cash
is a term defined in the Declaration of Trust and generally refers
to the net cash received by the Trust that is available for payment
to unitholders on a quarterly basis. Available cash generated by
Fording Inc. is the principal contributor to distributable cash of
the Trust. Fording Inc. distributes its available cash to the Trust
in a quarter, which is derived from results for the quarter and
takes into account other considerations such as expected future
performance, variations in levels of quarterly operating and
capital activities and other financial or legal requirements.
Future distributions of available cash will take into account these
factors and any amounts paid in prior periods that were greater or
less than the actual distributable cash for those prior periods.
Available cash generated by Fording Inc. and paid to the Trust is
the principal source of distributable cash paid to unitholders.
Distributions declared and payable in 2004 included $18.5 million
of cash available for distribution carried over from 2003. Three
months ended March 31 ----------------- (millions of Canadian
dollars) 2005 2004
-------------------------------------------------------------------------
Cash Available for Distribution Cash flows from operating
activities $ 61.0 $ 47.1 Add (deduct): Increase (decrease) in
non-cash working capital 15.6 (25.0) Sustaining capital
expenditures, net (5.9) (2.4) Capital lease payments (0.7) (0.4)
Other 1.5 0.1 Cash reserve - - ----------------- Cash available for
distribution $ 71.5 $ 19.4 ----------------- Distributions Declared
and Payable $ 63.7 $ 47.0 ----------------- Distributable cash and
cash available for distribution have no standardized meaning and
are not defined by generally accepted accounting principles in
Canada. Accordingly, distributable cash and cash available for
distribution as it is presented above may not be comparable to
similarly named measures presented by other trusts. 7. LONG-TERM
DEBT, BANKING FACILITIES AND FINANCIAL INSTRUMENTS March December
31 31 (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Long-term debt Bank debt Extendable revolving variable rate term
loans: U.S.$167 million with interest at rates varying from 3.5% to
3.7% $ 202.0 $ - Canadian dollar loans bearing interest at 4.3%
17.5 - Term loan with interest at varying rates from 5.6% to 6.3% -
$ 201.0 -------- -------- 219.5 201.0 Other debt Equipment
financing due 2009 bearing interest at 5.1% 5.0 5.2 Capital lease
obligations expiring in 2005 with interest rates varying from 5.0%
to 7.1% 0.3 0.7 ----------------- 224.8 206.9 Less current portion
(1.3) (1.7) ----------------- $ 223.4 $ 205.2 -----------------
Fording Inc.'s bank credit facilities provide for a floating rate,
five- year, annually extendable $400 million facility and are
supported by an unsecured guarantee by EVCP, limited in recourse to
any partner's interest in EVCP (other than Fording Inc.) and a
general security agreement over the assets of Fording Inc.
including its interest in EVCP. The EVCP facility provides for a
floating rate, five-year, annually extendable, $150 million
revolving facility, which is to be secured by a general security
interest over the assets of EVCP. Funds available under both
facilities may be drawn in either Canadian or U.S. currency subject
to the Canadian dollar limit of each facility. At March 31, 2005,
the Trust's share of other uses of bank facilities in the form of
issued and outstanding letters of credit and guarantee was $42.5
million. The Trust's share of unused bank facilities at March 31,
2005 was $228.0 million. 8. OTHER LONG-TERM LIABILITIES March
December 31 31 (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Asset retirement obligations $ 67.1 $ 68.9 Pension and other
post-retirement benefits 20.9 21.4 Other, net 1.6 1.6
----------------- $ 89.6 $ 91.9 ----------------- Pension and other
post-retirement benefits Substantially all employees participate in
either a defined benefit or defined contribution plan. The pension
expense for the first quarter of 2005 was $2.5 million (2004 - $2.3
million). 9. COMMITMENTS AND CONTINGENCIES Foreign exchange forward
contracts To help manage exposure to currency fluctuations, foreign
exchange forward contracts are used to fix the rate at which
certain future anticipated flows of U.S. dollars are exchanged into
Canadian dollars. The foreign exchange hedging activities of the
Trust take into account the existing foreign exchange forward
contracts of EVCP and Fording Inc. The following table summarizes
the Trust's outstanding hedged positions at March 31, 2005. Amount
Hedged (millions of U.S.$) -----------------------------------
Average Exchange Rates EVCP (U.S.$1 (CDN$1 -----------------
Fording Trust's equals equals Year 100% 60% Inc. Total CDN$) U.S.$)
-------------------------------------------------------------------------
2005 $ 265 $ 159 $ 763 $ 922 1.28 0.78 2006 95 57 318 375 1.29 0.77
2007 - - 16 16 1.46 0.69 ----------------------------------- $ 360
$ 216 $ 1,097 $ 1,313 ----------------------------------- At March
31, 2005, the Trust's portion of unrealized gains on foreign
exchange forward contracts was $104.7 million based on the
U.S./Canadian dollar exchange rate of U.S. $0.83. The Trust's
realized gain on foreign exchange forward contracts included in
revenues for the first quarter of 2005 was $27.8 million (2004 -
$15.9 million). Neptune Terminals guarantee EVCP's proportionate
share of its guarantee of the outstanding bank indebtedness of
Neptune Terminals was $17.7 million at the end of the first quarter
of 2005. The Trust's share of this guarantee was $10.6 million.
Other EVCP and CPR reached an agreement with respect to westbound
rail rates in April 2005, which settled the dispute outstanding at
December 31, 2004. There are no material changes to other
commitments and contingencies from those reported in the annual
consolidated financial statements included in the Trust's Annual
Report for 2004. 10. UNITHOLDERS' EQUITY Authorized The Trust has
an unlimited number of units authorized for issuance pursuant to
the Declaration of Trust. The units represent a beneficial interest
in the Trust. All units share equally in all distributions from the
Trust and carry equal voting rights. No conversion, retraction or
pre-emptive rights are attached to the units. Trust units are
redeemable at the option of the unitholder at a price that is the
lesser of 90% of the average closing price of the units on the
principal trading market for the previous 10 trading days and the
closing market price on the date of tender for redemption, subject
to restrictions on the amount to be redeemed each quarter. Units
issued and outstanding Three months ended March 31, 2005
----------------- (in millions of units and Canadian dollars) Units
Amount -----------------------------------------------
----------------- Balance, beginning of period 49.0 $ 357.7 Issued
on exercise of options - 0.1 ----------------- Balance, end of
period 49.0 $ 357.8 ----------------- Under the Arrangement, all
options to purchase common shares of Old Fording were exchanged for
options to purchase units of the Trust under the exchange option
plan. The Trust has not granted any options since its formation. At
March 31, 2005, there were approximately 38,000 options outstanding
to purchase units, all of which are fully vested and exercisable at
any time. The options have a weighted average exercise price of
$14.44 per unit and the remaining weighted average contractual life
is 4.1 years. Certain exchange options also have accompanying unit
appreciation rights. Accumulated Distributions to Unitholders Three
months ended March 31 ----------------- (millions of Canadian
dollars) 2005 2004
-------------------------------------------------------------------------
Opening accumulated cash distributions $ 423.8 $ 210.3
Distributions declared and payable (note 6) 63.7 47.0
----------------- Closing accumulated cash distributions $ 487.4 $
257.3 ----------------- Earnings per unit For the periods
presented, in calculating diluted earnings per unit, net income
remains unchanged from the basic earnings per unit calculation and
the number of units outstanding is increased for the dilutive
effect of outstanding unit options. The treasury stock method is
used to determine the dilutive effect of unit options and other
dilutive instruments. The weighted average number of units
outstanding for purposes of calculating earnings per unit on both a
basic and fully diluted basis was 49 million units for the quarter
ended March 31, 2005 and 47 million units for the quarter ended
March 31, 2004. 11. UNIT-BASED COMPENSATION Three months ended
March 31 ----------------- (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Employee unit purchase plan $ 0.1 $ 0.1 Unit equivalent plan 0.7
0.4 ----------------- $ 0.8 $ 0.5 ----------------- The total
number of units purchased on behalf of the employees pursuant to
the employee unit purchase plan, including the employer's
contributions, was 4,353 units for the first quarter of 2005 (2004
- 8,398). A unit equivalent plan is in place for Trustees and
Directors. Trustees and Directors receive a portion of their
compensation in unit equivalents. The unit equivalents when granted
are valued using the five-day weighted average trading price of a
unit immediately preceding the award date and are subsequently
revalued each quarter at fair market value. The total charge to
income for Unit Equivalent Plan includes the cost of vested unit
equivalents and any changes in the fair value of the units during
the year. 12. SEGMENT INFORMATION Three months ended March 31
----------------- (millions of Canadian dollars) 2005 2004
-------------------------------------------------------------------------
Elk Valley Coal Revenues $ 283.9 $ 232.0 Cost of product sold
(96.5) (104.8) Transportation (102.2) (96.9) Selling, general and
administration (3.1) (7.6) Depreciation and depletion (11.5) (14.2)
----------------- Income from operations 70.6 8.5 Interest expense
(0.1) (0.2) Other income (expense) 0.4 10.4 Income tax (expense)
(8.2) (6.0) ----------------- Income 62.7 12.7 -----------------
NYCO Revenues 11.0 13.2 Cost of product sold (7.7) (7.0)
Transportation (1.8) (1.8) Selling, general and administration
(1.0) (0.9) Depreciation and depletion (1.1) (1.3)
----------------- Income (loss) from operations (0.6) 2.2 Interest
expense - - Other income (expense) - 0.5 Income tax (expense) (0.2)
(0.9) ----------------- Income (loss) (0.8) 1.8 -----------------
Corporate Selling, general and administration (2.1) (1.0)
Depreciation and depletion (0.3) (0.7) ----------------- Loss from
operations (2.4) (1.7) Interest expense (2.6) (4.9) Other income
(expense) (1.1) 2.8 Reduction of interest in EVCP 9.5 -
----------------- Income (loss) 3.4 (3.8) -----------------
Consolidated Revenues 294.9 245.2 Cost of product sold (104.2)
(111.8) Transportation (104.0) (98.7) Selling, general and
administration (6.2) (9.5) Depreciation and depletion (12.9) (16.2)
----------------- Income from operations 67.6 9.0 Interest expense
(2.7) (4.9) Other income (expense) (0.7) 13.5 Reduction of interest
in EVCP 9.5 - Net income tax expense (8.4) (6.9) -----------------
Net income $ 65.3 10.7 ----------------- -----------------
DATASOURCE: Fording Canadian Coal Trust CONTACT: Susan J.
Soprovich, Director, Investor Relations, Ph: (403) 260-9834, E: ;
Catherine Hart, Coordinator, Investor Relations, (403) 260-9817, E:
; Website: http://www.fording.ca/
Copyright