Exhibit 13.2
Consolidated Income
(unaudited) | Three months ended March 31 | |||||||
(millions of dollars except per share amounts) | 2008 | 2007 | ||||||
Revenues | 2,133 | 2,244 | ||||||
Operating Expenses | ||||||||
Plant operating costs and other | 698 | 732 | ||||||
Commodity purchases resold | 410 | 571 | ||||||
Depreciation | 296 | 290 | ||||||
1,404 | 1,593 | |||||||
729 | 651 | |||||||
Other Expenses/(Income) | ||||||||
Financial charges | 218 | 237 | ||||||
Financial charges of joint ventures | 16 | 21 | ||||||
Interest income and other | (39 | ) | (31 | ) | ||||
Calpine bankruptcy settlements | (279 | ) | - | |||||
Writedown of Broadwater LNG project costs | 41 | - | ||||||
(43 | ) | 227 | ||||||
Income before Income Taxes and Non-Controlling Interests | 772 | 424 | ||||||
Income Taxes | ||||||||
Current | 247 | 168 | ||||||
Future | 5 | (37 | ) | |||||
252 | 131 | |||||||
Non-Controlling Interests | ||||||||
Preferred share dividends of subsidiary | 6 | 6 | ||||||
Non-controlling interest in PipeLines LP | 21 | 17 | ||||||
Other | 44 | 5 | ||||||
71 | 28 | |||||||
Net Income | 449 | 265 | ||||||
Net Income Per Share | ||||||||
Basic | $ | 0.83 | $ | 0.52 | ||||
Diluted | $ | 0.83 | $ | 0.52 | ||||
Average Shares Outstanding - Basic (millions) | 541 | 508 | ||||||
Average Shares Outstanding - Diluted (millions) | 543 | 511 | ||||||
See accompanying notes to the consolidated financial statements. |
TRANSCANADA [23
FIRST QUARTER REPORT 2008
Consolidated Cash Flows
(unaudited) | Three months ended March 31 | |||||||
(millions of dollars) | 2008 | 2007 | ||||||
Cash Generated From Operations | ||||||||
Net income | 449 | 265 | ||||||
Depreciation | 296 | 290 | ||||||
Future income taxes | 5 | (37 | ) | |||||
Non-controlling interests | 71 | 28 | ||||||
Employee future benefits funding lower than expense | 20 | 12 | ||||||
Writedown of Broadwater LNG project costs | 41 | - | ||||||
Other | 40 | 24 | ||||||
922 | 582 | |||||||
Decrease in operating working capital | 6 | 36 | ||||||
Net cash provided by operations | 928 | 618 | ||||||
Investing Activities | ||||||||
Capital expenditures | (460 | ) | (306 | ) | ||||
Acquisitions, net of cash acquired | (2 | ) | (4,265 | ) | ||||
Deferred amounts and other | 112 | (61 | ) | |||||
Net cash used in investing activities | (350 | ) | (4,632 | ) | ||||
Financing Activities | ||||||||
Dividends on common shares | (130 | ) | (156 | ) | ||||
Distributions paid to non-controlling interests | (21 | ) | (16 | ) | ||||
Notes payable (repaid)/issued, net | (30 | ) | 1,065 | |||||
Long-term debt issued | 112 | 1,362 | ||||||
Reduction of long-term debt | (394 | ) | (325 | ) | ||||
Long-term debt of joint ventures issued | 17 | 12 | ||||||
Reduction of long-term debt of joint ventures | (29 | ) | (12 | ) | ||||
Common shares issued, net of issue costs | 9 | 1,690 | ||||||
Partnership units of subsidiary issued | - | 348 | ||||||
Net cash (used in)/ provided by financing activities | (466 | ) | 3,968 | |||||
Effect of Foreign Exchange Rate Changes on Cash | ||||||||
and Cash Equivalents | 23 | (3 | ) | |||||
Increase /(Decrease) in Cash and Cash Equivalents | 135 | (49 | ) | |||||
Cash and Cash Equivalents | ||||||||
Beginning of period | 504 | 399 | ||||||
Cash and Cash Equivalents | ||||||||
End of period | 639 | 350 | ||||||
Supplementary Cash Flow Information | ||||||||
Income taxes paid | 167 | 87 | ||||||
Interest paid | 204 | 273 | ||||||
See accompanying notes to the consolidated financial statements. |
TRANSCANADA [24
FIRST QUARTER REPORT 2008
Consolidated Balance Sheet
(unaudited) | March 31, | December 31, | ||||||
(millions of dollars) | 2008 | 2007 | ||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | 639 | 504 | ||||||
Accounts receivable | 964 | 1,116 | ||||||
Inventories | 503 | 497 | ||||||
Other | 268 | 188 | ||||||
2,374 | 2,305 | |||||||
Plant, Property and Equipment | 23,877 | 23,452 | ||||||
Goodwill | 2,839 | 2,633 | ||||||
Other Assets | 1,782 | 1,940 | ||||||
30,872 | 30,330 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Notes payable | 373 | 421 | ||||||
Accounts payable and accrued liabilities | 1,702 | 1,767 | ||||||
Accrued interest | 303 | 261 | ||||||
Current portion of long-term debt | 895 | 556 | ||||||
Current portion of long-term debt of joint ventures | 28 | 30 | ||||||
3,301 | 3,035 | |||||||
Deferred Amounts | 1,221 | 1,107 | ||||||
Future Income Taxes | 1,171 | 1,179 | ||||||
Long-Term Debt | 12,037 | 12,377 | ||||||
Long-Term Debt of Joint Ventures | 900 | 873 | ||||||
Junior Subordinated Notes | 1,015 | 975 | ||||||
19,645 | 19,546 | |||||||
Non-Controlling Interests | ||||||||
Non-controlling interest in PipeLines LP | 619 | 539 | ||||||
Preferred shares of subsidiary | 389 | 389 | ||||||
Other | 119 | 71 | ||||||
1,127 | 999 | |||||||
Shareholders' Equity | 10,100 | 9,785 | ||||||
30,872 | 30,330 | |||||||
See accompanying notes to the consolidated financial statements. |
TRANSCANADA [25
FIRST QUARTER REPORT 2008
Consolidated Comprehensive Income
(unaudited) | Three months ended March 31 | |||||||
(millions of dollars) | 2008 | 2007 | ||||||
Net Income | 449 | 265 | ||||||
Other Comprehensive Income/(Loss), Net of Income Taxes | ||||||||
Change in foreign currency translation gains and losses on | ||||||||
investments in foreign operations (1) | 53 | (37 | ) | |||||
Change in gains and losses on hedges of investments | ||||||||
in foreign operations (2) | (41 | ) | 9 | |||||
Change in gains and losses on derivative instruments | ||||||||
designated as cash flow hedges (3) | 4 | (1 | ) | |||||
Reclassification to net income of gains and losses on derivative | ||||||||
instruments designated as cash flow hedges pertaining to | ||||||||
prior periods (4) | (19 | ) | (3 | ) | ||||
Other Comprehensive Income/(Loss) | (3 | ) | (32 | ) | ||||
Comprehensive Income | 446 | 233 | ||||||
(1) Net of income tax recovery of $25 million for the three months ended March 31, 2008 (2007 - $5 million expense). | ||||||||
(2) Net of income tax recovery of $22 million for the three months ended March 31, 2008 (2007 - $5 million expense). | ||||||||
(3) Net of income tax expense of $12 million for the three months ended March 31, 2008 (2007 - $5 million recovery). | ||||||||
(4) Net of income tax recovery of $9 million for the three months ended March 31, 2008 (2007 - $2 million recovery). | ||||||||
See accompanying notes to the consolidated financial statements. |
TRANSCANADA [26
FIRST QUARTER REPORT 2008
Consolidated Accumulated Other Comprehensive Income
(unaudited) (millions of dollars) | Currency Translation Adjustment | Cash Flow Hedges | Total | |||||||||
Balance at December 31, 2007 | (361 | ) | (12 | ) | (373 | ) | ||||||
Change in foreign currency translation gains and losses on investments in | ||||||||||||
foreign operations (1) | 53 | - | 53 | |||||||||
Change in gains and losses on hedge of investments in foreign operations (2) | (41 | ) | - | (41 | ) | |||||||
Change in gains and losses on derivative instruments designated as cash flow | ||||||||||||
hedges (3) | - | 4 | 4 | |||||||||
Reclassification to net income of gains and losses on derivative instruments | ||||||||||||
designated as cash flow hedges pertaining to prior periods (4)(5) | - | (19 | ) | (19 | ) | |||||||
Balance at March 31, 2008 | (349 | ) | (27 | ) | (376 | ) | ||||||
Balance at December 31, 2006 | (90 | ) | - | (90 | ) | |||||||
Transition adjustment resulting from adopting new financial instruments standards (6) | - | (96 | ) | (96 | ) | |||||||
Change in foreign currency translation gains and losses on investments in | ||||||||||||
foreign operations (1) | (37 | ) | - | (37 | ) | |||||||
Change in gains and losses on hedge of investments in foreign operations (2) | 9 | - | 9 | |||||||||
Change in gains and losses on derivative instruments designated as cash flow | ||||||||||||
hedges (3) | - | (1 | ) | (1 | ) | |||||||
Reclassification to net income of gains and losses on derivative instruments | ||||||||||||
designated as cash flow hedges pertaining to prior periods (4) | - | (3 | ) | (3 | ) | |||||||
Balance at March 31, 2007 | (118 | ) | (100 | ) | (218 | ) | ||||||
(1) Net of income tax recovery of $25 million for the three months ended March 31, 2008 (2007 - $5 million expense). | ||||||||||||
(2) Net of income tax recovery of $22 million for the three months ended March 31, 2008 (2007 - $5 million expense). | ||||||||||||
(3) Net of income tax expense of $12 million for the three months ended March 31, 2008 (2007 - $5 million recovery). | ||||||||||||
(4) Net of income tax recovery of $9 million for the three months ended March 31, 2008 (2007 - $2 million recovery). |
(5) The amount of gains and losses related to cash flow hedges reported in accumulated other comprehensive income that will be reclassified to net income in the next 12 months is expected to be $12 million ($15 million net of tax) of net losses.
(6) Net of income tax expense of $44 million. | ||||||||||||
See accompanying notes to the consolidated financial statements. |
TRANSCANADA [27
FIRST QUARTER REPORT 2008
Consolidated Shareholders’ Equity
(unaudited) | Three months ended March 31 | |||||||
(millions of dollars) | 2008 | 2007 | ||||||
Common Shares | ||||||||
Balance at beginning of period | 6,662 | 4,794 | ||||||
Shares issued under dividend reinvestment plan | 54 | - | ||||||
Proceeds from shares issued on exercise of stock options | 9 | 8 | ||||||
Proceeds from shares issued under public offering (1) | - | 1,682 | ||||||
Balance at end of period | 6,725 | 6,484 | ||||||
Contributed Surplus | ||||||||
Balance at beginning of period | 276 | 273 | ||||||
Issuance of stock options | 1 | 1 | ||||||
Balance at end of period | 277 | 274 | ||||||
Retained Earnings | ||||||||
Balance at beginning of period | 3,220 | 2,724 | ||||||
Transition adjustment resulting from adopting new financial | ||||||||
instruments accounting standards | - | 4 | ||||||
Net income | 449 | 265 | ||||||
Common share dividends | (195 | ) | (182 | ) | ||||
Balance at end of period | 3,474 | 2,811 | ||||||
Accumulated Other Comprehensive Income | ||||||||
Balance at beginning of period | (373 | ) | (90 | ) | ||||
Transition adjustment resulting from adopting new financial instruments | ||||||||
accounting standards | - | (96 | ) | |||||
Other comprehensive income | (3 | ) | (32 | ) | ||||
Balance at end of period | (376 | ) | (218 | ) | ||||
Total Shareholders' Equity | 10,100 | 9,351 | ||||||
(1) Net of underwriting commissions and future income taxes. | ||||||||
See accompanying notes to the consolidated financial statements. |
TRANSCANADA [28
FIRST QUARTER REPORT 2008
Notes to Consolidated Financial Statements
(Unaudited)
1. | Significant Accounting Policies |
The consolidated financial statements of TransCanada Corporation (TransCanada or the Company) have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). The accounting policies applied are consistent with those outlined in TransCanada's annual audited Consolidated Financial Statements for the year ended December 31, 2007. These Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods. These Consolidated Financial Statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the 2007 audited Consolidated Financial Statements included in TransCanada’s 2007 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated.
In Pipelines, which consists primarily of the Company's investments in regulated pipelines and regulated natural gas storage facilities, annual revenues and net earnings fluctuate over the long term based on regulators' decisions and negotiated settlements with shippers. Generally, quarter-over-quarter revenues and net earnings during any particular fiscal year remain relatively stable with fluctuations resulting from adjustments being recorded due to regulatory decisions and negotiated settlements with shippers, seasonal fluctuations in short-term throughput on U.S. pipelines, acquisitions and divestitures, and developments outside of the normal course of operations.
In Energy, which consists primarily of the Company’s investments in electrical power generation plants and non-regulated natural gas storage facilities, quarter-over-quarter revenues and net earnings are affected by seasonal weather conditions, customer demand, market prices, planned and unplanned plant outages, acquisitions and divestitures, and developments outside of the normal course of operations.
In preparing these financial statements, TransCanada is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgement in making these estimates. In the opinion of management, these consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies.
TRANSCANADA [29
FIRST QUARTER REPORT 2008
2. | Segmented Information |
Three months ended March 31 | Pipelines | Energy | Corporate | Total | ||||||||||||
(unaudited - millions of dollars) | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||
Revenues | 1,176 | 1,124 | 957 | 1,120 | - | - | 2,133 | 2,244 | ||||||||
Plant operating costs and other | (399) | (383) | (298) | (347) | (1) | (2) | (698) | (732) | ||||||||
Commodity purchases resold | - | - | (410) | (571) | - | - | (410) | (571) | ||||||||
Depreciation | (254) | (251) | (42) | (39) | - | - | (296) | (290) | ||||||||
523 | 490 | 207 | 163 | (1) | (2) | 729 | 651 | |||||||||
Financial charges and non-controlling interests | (235) | (217) | - | 1 | (54) | (49) | (289) | (265) | ||||||||
Financial charges of joint ventures | (11) | (16) | (5) | (5) | - | - | (16) | (21) | ||||||||
Interest income and other | 32 | 13 | 1 | 3 | 6 | 15 | 39 | 31 | ||||||||
Calpine bankruptcy settlements | 279 | - | - | - | - | - | 279 | - | ||||||||
Writedown of Broadwater LNG project costs | - | - | (41) | - | - | - | (41) | - | ||||||||
Income taxes | (227) | (115) | (52) | (56) | 27 | 40 | (252) | (131) | ||||||||
Net Income | 361 | 155 | 110 | 106 | (22) | 4 | 449 | 265 |
Total Assets | ||||||||
(unaudited - millions of dollars) | March 31, 2008 | December 31, 2007 | ||||||
Pipelines | 22,429 | 22,024 | ||||||
Energy | 7,171 | 7,037 | ||||||
Corporate | 1,272 | 1,269 | ||||||
30,872 | 30,330 |
3. | Share Capital |
In the three months ended March 31, 2008, TransCanada issued 1.4 million common shares under its Dividend Reinvestment and Share Purchase Plan (DRP). In accordance with the DRP, dividends were paid with common shares issued from treasury instead of cash dividend payments totalling $54 million.
4. | Financial Instruments and Risk Management |
Natural Gas Inventory
At March 31, 2008, $207 million of proprietary natural gas storage inventory was included in Inventories (December 31, 2007 - $190 million). Effective April 1, 2007, TransCanada began valuing its proprietary natural gas storage inventory at fair value, as measured by the one-month forward price for natural gas. The Company did not have any proprietary natural gas inventory prior to April 1, 2007. The change in fair value of proprietary natural gas inventory in the three months ended March 31, 2008 resulted in a gain of $59 million, which was recorded as an increase to Revenues and Inventory. The net change in fair value of natural gas forward purchase and sales contracts in first-quarter 2008 was a loss of $76 million (three months ended March 31, 2007 – loss of $3 million), which was recorded in Revenues.
TRANSCANADA [30
FIRST QUARTER REPORT 2008
Derivative Financial Instruments
Derivatives Hedging Net Investment in Foreign Operations
Asset/(Liability) | ||||||||||
(unaudited) | ||||||||||
(millions of dollars) | March 31, 2008 | December 31, 2007 | ||||||||
Notional or | Notional or | |||||||||
Fair | Principal | Fair | Principal | |||||||
Value(1) | Amount | Value(1) | Amount | |||||||
Derivative financial Instruments in hedging relationships | ||||||||||
U.S. dollar cross-currency swaps | ||||||||||
(maturing 2009 to 2014) | 62 | U.S. 450 | 77 | U.S. 350 | ||||||
U.S. dollar forward foreign exchange contracts | ||||||||||
(maturing 2008 ) | (36 | ) | U.S. 1,440 | (4 | ) | U.S. 150 | ||||
U.S. dollar options | ||||||||||
(maturing 2008 ) | (1 | ) | U.S. 50 | 3 | U.S. 600 | |||||
25 | U.S. 1,940 | 76 | U.S. 1,100 | |||||||
(1) Fair values are equal to carrying values. |
Derivative Financial Instruments Summary
Significant changes from December 31, 2007 for the Company’s derivative financial instruments are as follow:
Natural Gas | ||||||||
(unaudited) | March 31, 2008 | December 31, 2007 | ||||||
Derivative Financial Instruments Held for Trading | ||||||||
Fair Values(1) | ||||||||
Assets | $ | 98 | $ | 43 | ||||
Liabilities | $ | (149 | ) | $ | (19 | ) | ||
Volumes(2) | ||||||||
Purchases | 55 | 47 | ||||||
Sales | 74 | 64 | ||||||
(1) | Fair value is equal to the carrying value of these derivatives. Amounts are in millions of dollars. |
(2) Volumes for natural gas derivatives are in billion cubic feet. |
TRANSCANADA [31
FIRST QUARTER REPORT 2008
5. | Employee Future Benefits |
The net benefit plan expense for the Company’s defined benefit pension plans and other post-employment benefit plans for the three months ended March 31, 2008 is as follows.
Three months ended March 31 | Pension Benefit Plans | Other Benefit Plans | |||||||||
(unaudited - millions of dollars) | 2008 | 2007 | 2008 | 2007 | |||||||
Current service cost | 13 | 11 | - | - | |||||||
Interest cost | 19 | 17 | 2 | 1 | |||||||
Expected return on plan assets | (23) | (19) | - | - | |||||||
Amortization of transitional obligation related to | |||||||||||
regulated business | - | - | - | 1 | |||||||
Amortization of net actuarial loss | 4 | 6 | - | 1 | |||||||
Amortization of past service costs | 1 | 1 | - | - | |||||||
Net benefit cost recognized | 14 | 16 | 2 | 3 |
6. | Calpine Bankruptcy Settlements |
Certain subsidiaries of Calpine Corporation (Calpine) filed for bankruptcy protection in both Canada and the U.S. in 2005. Gas Transmission Northwest Corporation (GTNC) and Portland reached agreements with Calpine for allowed unsecured claims in the Calpine bankruptcy. In February 2008, GTNC and Portland received initial distributions of 9.4 million shares and 6.1 million shares, respectively, which represented approximately 85 per cent of their agreed-for claims. These shares were subsequently sold into the open market for total pre-tax income of $279 million.
7. | Writedown of Development Costs |
On March 24, 2008, the U.S. Federal Energy Regulatory Committee authorized the construction and operation of the Broadwater liquefied natural gas (LNG) project, subject to the conditions reflected in the authorization. On April 10, 2008, the New York State Department of State rejected a proposal to construct the Broadwater facility. As a result of this unfavourable decision, TransCanada wrote down $27 million after tax ($41 million pre-tax) of costs that had been previously capitalized for the Broadwater LNG project to March 31, 2008.
8. | Commitments |
On March 31, 2008, TransCanada entered into an agreement with National Grid plc to acquire, for US$2.8 billion, 100 per cent of KeySpan–Ravenswood, LLC, which owns the Ravenswood Generating Facility in Queens, New York. The acquisition is expected to be financed in a manner that is consistent with TransCanada’s current capital structure.
TransCanada welcomes questions from shareholders and potential investors. Please telephone:
Investor Relations, at 1-800-361-6522 (Canada and U.S. Mainland) or direct dial David Moneta/Myles Dougan/Terry Hook at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Cecily Dobson/Shela Shapiro at (403) 920-7859 or 1-800-608-7859.
Visit the TransCanada website at: http://www.transcanada.com