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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-05083
XANSER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 74-1191271
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2435 North Central Expressway
Richardson, Texas 75080
(Address of principal executive offices, including zip code)
(972) 699-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at August 5, 2005
- --------------------- -----------------------------
No par value 34,112,203 shares
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XANSER CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2005
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Page No.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income - Three and
Six Months Ended June 30, 2005 and 2004 1
Condensed Consolidated Balance Sheets - June 30, 2005
and December 31, 2004 2
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2005 and 2004 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk 20
Item 4. Controls and Procedures 20
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits 21
XANSER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands - Except Per Share Amounts)
(Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- --------------
Revenues:
Services $ 38,842 $ 34,315 $ 73,233 $ 66,156
Products 4,627 1,341 5,407 1,664
------------- ------------- ------------- --------------
Total revenues 43,469 35,656 78,640 67,820
------------- ------------- ------------- --------------
Costs and expenses:
Operating costs 37,221 31,612 72,015 61,574
Cost of products sold 5,271 744 5,843 925
Depreciation and amortization 851 891 1,829 1,770
General and administrative 646 792 1,437 1,544
------------- ------------- ------------- --------------
Total costs and expenses 43,989 34,039 81,124 65,813
------------- ------------- ------------- --------------
Operating income (loss) (520) 1,617 (2,484) 2,007
Interest income 178 31 274 65
Interest expense (254) (238) (536) (477)
------------- ------------- ------------- --------------
Income (loss) before income taxes (596) 1,410 (2,746) 1,595
Income tax (expense) (1,107) (541) (1,262) (616)
------------- ------------- ------------- --------------
Net income (loss) $ (1,703) $ 869 $ (4,008) $ 979
============= ============= ============= ==============
Earnings (loss) per common share - Basic
and diluted $ (.05) $ .03 $ (.12) $ .03
============ ============= ============= ==============
See notes to condensed consolidated financial statements.
1
XANSER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
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June 30, December 31,
2005 2004
--------------- ------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 13,218 $ 21,598
Accounts receivable, trade 42,130 35,470
Receivable from businesses distributed to common
stockholders 6,481 6,699
Inventories 11,572 9,131
Prepaid expenses and other 3,666 5,283
-------------- -------------
Total current assets 77,067 78,181
-------------- -------------
Property and equipment 42,877 46,571
Less accumulated depreciation and amortization 29,111 32,933
-------------- -------------
Net property and equipment 13,766 13,638
-------------- -------------
Excess of cost over fair value of net assets of
acquired businesses 13,802 13,802
Deferred income taxes and other assets 5,618 6,299
-------------- -------------
$ 110,253 $ 111,920
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 470 $ 524
Accounts payable 8,934 5,416
Accrued expenses 24,174 23,416
Accrued income taxes 7,603 7,609
-------------- -------------
Total current liabilities 41,181 36,965
-------------- -------------
Long-term debt, less current portion:
Technical services 12,178 12,250
Information technology services 248 248
Parent company 5,000 5,000
-------------- -------------
Total long-term debt, less current portion 17,426 17,498
-------------- -------------
Other liabilities 1,101 1,567
Commitments and contingencies
Stockholders' equity:
Common stock, without par value 4,341 4,335
Additional paid-in capital 127,053 126,550
Treasury stock, at cost (25,877) (26,180)
Retained earnings (accumulated deficit) (50,307) (46,299)
Accumulated other comprehensive income (loss) (4,665) (2,516)
-------------- -------------
Total stockholders' equity 50,545 55,890
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$ 110,253 $ 111,920
============== =============
See notes to condensed consolidated financial statements.
2
XANSER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
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Six Months Ended
June 30,
---------------------------------
2005 2004
------------- --------------
Operating activities:
Net income (loss) $ (4,008) $ 979
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,829 1,770
Deferred income taxes 375 (981)
Other 149 118
Changes in working capital components (3,156) (1,456)
------------- --------------
Net cash provided by (used in) operating activities (4,811) 430
------------- --------------
Investing activities:
Capital expenditures (2,678) (2,099)
Other (839) 178
------------- --------------
Net cash used in investing activities (3,517) (1,921)
------------- --------------
Financing activities:
Issuance of debt 346 1,225
Payments on debt (472) (1,390)
Common stock issued and other 139 58
Increase (decrease) in receivable from businesses
distributed to common stockholders 218 (42)
------------- --------------
Net cash provided by (used in) financing activities 231 (149)
------------- --------------
Effect of exchange rate changes on cash (283) (114)
------------- --------------
Decrease in cash and cash equivalents (8,380) (1,754)
------------- --------------
Cash and cash equivalents at beginning of period 21,598 21,240
------------- --------------
Cash and cash equivalents at end of period $ 13,218 $ 19,486
============= ==============
Supplemental cash flow information:
Cash paid for interest $ 512 $ 458
============= ==============
Cash paid for income taxes $ 1,126 $ 1,630
============= ==============
See notes to condensed consolidated financial statements.
3
XANSER CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements include the accounts of
Xanser Corporation ("Parent Company") and its subsidiaries (collectively,
the "Company"). All significant intercompany transactions and balances are
eliminated in consolidation. The unaudited condensed consolidated financial
statements of the Company for the three and six month periods ended June
30, 2005 and 2004 have been prepared in accordance with accounting
principles generally accepted in the United States of America. Significant
accounting policies followed by the Company are disclosed in the notes to
the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2004. In the opinion of
the Company's management, the accompanying condensed consolidated financial
statements contain all of the adjustments, consisting of normal recurring
accruals, necessary to present fairly the consolidated financial position
of the Company at June 30, 2005, and the consolidated results of income and
cash flows for the periods ended June 30, 2005 and 2004. Operating results
for the three and six months ended June 30, 2005 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2005.
On November 27, 2000, the Board of Directors of the Company authorized the
distribution of its pipeline, terminaling and product marketing businesses
(the "Distribution") to its stockholders in the form of a new limited
liability company, Kaneb Services LLC ("KSL"). On June 29, 2001, the
Distribution was completed, with each shareholder of the Company receiving
one common share of KSL for each three shares of the Company's common stock
held on June 20, 2001, the record date for the Distribution, resulting in
the distribution of 10.85 million KSL common shares. Pursuant to the
Distribution, the Company entered into an agreement (the "Distribution
Agreement") with KSL, whereby, KSL is obligated to pay the Company amounts
equal to certain expenses and tax liabilities incurred by the Company in
connection with the Distribution. The Distribution Agreement also requires
KSL to pay the Company an amount calculated based on any income tax
liability of the Company that, in the sole judgment of the Company, (i) is
attributable to increases in income tax from past years arising out of
adjustments required by federal and state tax authorities, to the extent
that such increases are properly allocable to the businesses that became
part of KSL, or (ii) is attributable to the distribution of KSL's common
shares and the operations of KSL's businesses prior to the Distribution
date. In the event of an examination of the Company by federal or state tax
authorities, the Company will have unfettered control over the examination,
administrative appeal, settlement or litigation that may be involved,
notwithstanding that KSL has agreed to pay any additional tax. At June 30,
2005, $6.5 million was recorded as receivable from businesses distributed
to common stockholders pursuant to the provisions of the Distribution
Agreement. On July 1, 2005, KSL was purchased by Valero L.P., and Valero
L.P. affirmatively assumed the obligations of KSL under the Distribution
Agreement.
In December of 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment" ("SFAS No. 123R"), which addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for equity instruments of the enterprise, or
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity
instruments. SFAS No. 123R eliminates the ability to account for
share-based compensation transactions using the intrinsic value method
under Accounting Principles Board Opinion 25, "Accounting for Stock Issued
to Employees" ("APB Opinion 25"), and generally requires that such
transactions be accounted for using a fair-value-based method. The Company
is currently evaluating the provisions of SFAS No. 123R to determine which
fair-value-based model and transitional provision to follow upon adoption.
The alternatives for transition include either the modified prospective or
the modified retrospective methods. The modified prospective method
requires that compensation expense be recorded for all unvested stock
options and restricted stock as the requisite service is rendered beginning
with the first quarter of adoption. The modified retrospective method
requires recording compensation expense for stock options and restricted
stock beginning with the first period restated. Under the modified
retrospective method, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. SFAS No.
123R will be effective for the Company beginning in the first quarter of
2006. The impact of adoption on the Company's consolidated financial
statements is still being evaluated.
In accordance with the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company applies APB Opinion 25 and related
interpretations in accounting for its stock option plans and, accordingly,
does not recognize compensation cost based on the fair value of the options
granted at grant date as prescribed by SFAS No. 123. The Company also
applies the disclosure provisions of SFAS No. 123, as amended by SFAS No.
148, "Accounting for Stock-based Compensation - Transition and Disclosure"
as if the fair-value-based method had been applied in measuring
compensation expense. The Black-Scholes option pricing model has been used
to estimate the value of stock options issued.
Effective June 3, 2005, the Company vested all outstanding options. The
impact of early vesting of the options on net income was not significant.
The following illustrates the effect on net income (loss) and basic and
diluted earnings (loss) per share if the fair value based method had been
applied:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- --------------
(in thousands - except per share amounts)
Reported net income (loss) $ (1,703) $ 869 $ (4,008) $ 979
Stock-based employee compensation
expense determined under the fair
value based method, net of income
taxes (426) (21) (460) (36)
------------- ------------- ------------- --------------
Pro forma net income (loss) $ (2,129) $ 848 $ (4,468) $ 943
============= ============= ============= ==============
Earnings (loss) per share:
As reported - basic and diluted $ (.05) $ .03 $ (.12) $ .03
============ ============= ============= ==============
Pro forma - basic and diluted $ (.06) $ .03 $ (.13) $ .03
============ ============= ============= ==============
2. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for the three and six months ended June 30,
2005 and 2004 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- --------------
(in thousands)
Net income (loss) $ (1,703) $ 869 $ (4,008) $ 979
Foreign currency translation
adjustment (1,444) (157) (2,149) (495)
------------- ------------- ------------- --------------
Comprehensive income (loss) $ (3,147) $ 712 $ (6,157) $ 484
============= ============= ============= ==============
At June 30, 2005 and December 31, 2004, accumulated other comprehensive
loss consisted of cumulative losses from foreign currency translation
adjustments of $(0.8) million and $(2.9) million, respectively, and
cumulative losses from minimum pension liability adjustments for
subsidiaries of $5.4 million and $5.4 million, respectively.
3. EARNINGS (LOSS) PER SHARE
The following is a reconciliation of basic and diluted earnings (loss) per
share (in thousands, except for per share amounts):
Weighted
Average
Common Per-Share
Net Income (Loss) Shares Amount
------------------ ------------- ----------------
Three Months Ended June 30, 2005
--------------------------------
Basic earnings (loss) per share -
Net income (loss) $ (1,703) 32,430 $ (0.05)
===============
Effect of dilutive securities - -
--------------- ---------------
Diluted earnings (loss) per share -
Net income (loss) $ (1,703) 32,430 $ (0.05)
=============== =============== ===============
Three Months Ended June 30, 2004
--------------------------------
Basic earnings per share -
Net income $ 869 32,035 $ .03
================
Effect of dilutive securities - 1,096
--------------- ---------------
Diluted earnings per share -
Net income $ 869 33,131 $ .03
=============== =============== ================
Six Months Ended June 30, 2005
------------------------------
Basic earnings (loss) per share -
Net income (loss) $ (4,008) 32,394 $ (0.12)
===============
Effect of dilutive securities - -
--------------- ---------------
Diluted earnings (loss) per share -
Net income (loss) $ (4,008) 32,394 $ (0.12)
=============== =============== ===============
Six Months Ended June 30, 2004
------------------------------
Basic earnings per share -
Net income $ 979 32,026 $ .03
================
Effect of dilutive securities - 1,076
--------------- ---------------
Diluted earnings per share -
Net income $ 979 33,102 $ .03
=============== =============== ================
As a result of the net loss for the three months and six months ended June
30, 2005, 3,106,000 and 3,173,000 stock options at a weighted net average
price of $1.89 and $1.88, respectively, were excluded from the computation
of diluted earnings per share because the effect would be anti-dilutive.
Options to purchase 160,000 and 29,000 shares of common stock at a weighted
average price of $2.76 and $3.05, respectively, were outstanding for the
three and six month periods ended June 30, 2005, but were not included in
the computation of diluted earnings per share because the options' exercise
prices were greater than the average market prices of the common stock.
Options to purchase 76,000 shares of common stock at a weighted average
price of $2.68 were outstanding for the three and six month periods ended
June 30, 2004, but were not included in the computation of diluted earnings
per share because the options' exercise prices were greater than the
average market prices of the common stock. The Company's 8.75% convertible
subordinated debentures were excluded from the computation of diluted
earnings per share for the three and six month periods ended June 30, 2005
and 2004, because the effects of assumed conversion would be anti-dilutive.
4. RETIREMENT PLAN
One of the Company's foreign subsidiaries has a defined benefit pension
plan covering substantially all of its United Kingdom employees (the "U.K.
Plan"). Net pension cost for the U.K. Plan included the following
components:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- --------------
(in thousands)
Net periodic pension cost:
Service cost $ 122 $ 116 $ 248 $ 232
Interest cost 908 861 1,850 1,722
Expected return on plan assets (983) (892) (2,003) (1,784)
Amortization of prior service cost (28) (27) (57) (55)
Recognized net gain 134 183 274 366
------------- ------------- ------------- --------------
Net periodic pension cost $ 153 $ 241 $ 312 $ 481
============= ============= ============= ==============
5. CONTINGENCIES
The Company has contingent liabilities resulting from litigation, claims
and commitments incident to the ordinary course of business. Management
believes, after consulting with counsel, that the ultimate resolution of
such contingencies will not have a materially adverse effect on the
financial position or results of operations or liquidity of the Company.
6. BUSINESS SEGMENT DATA
The Company provides technical services to an international client base
that includes refineries, chemical plants, pipelines, offshore drilling and
production platforms, steel mills, food and drink processing facilities,
power generation, and other process industries. Additionally, the Company's
information technology services segment provides consulting services,
hardware sales and other related information management and processing
services to healthcare and other institutions.
The Company measures segment profit as operating income. Segment operating
results are reported on the basis that is used internally for evaluating
segment performance and deciding how to allocate resources to segments.
General corporate includes compensation and benefits paid to corporate
officers and employees, certain insurance, legal, tax, financial reporting
and other administrative costs, including costs of maintaining a public
company, which are not related to specific business segments.
Segment assets are those assets, including excess of cost over fair value
of net assets of acquired businesses, controlled by each reportable
segment. General corporate assets include corporate cash balances, deferred
taxes and other assets not related to specific segments. Business segment
data is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- --------------
(in thousands)
Business segment revenues:
Technical services $ 34,849 $ 29,758 $ 65,508 $ 56,740
Information technology services 8,620 5,898 13,132 11,080
------------- ------------- ------------- --------------
$ 43,469 $ 35,656 $ 78,640 $ 67,820
============= ============= ============= ==============
Technical services segment revenues:
Underpressure services $ 12,333 $ 11,266 $ 25,275 $ 22,751
Turnaround services 16,677 15,474 29,298 28,348
Other services 5,839 3,018 10,935 5,641
------------- ------------- ------------- --------------
$ 34,849 $ 29,758 $ 65,508 $ 56,740
============= ============= ============= ==============
Business segment profit (loss):
Technical services $ 2,913 $ 2,115 $ 4,444 $ 3,255
Information technology services (2,788) 294 (5,492) 296
General corporate (645) (792) (1,436) (1,544)
------------- ------------- ------------- --------------
Operating income (loss) (520) 1,617 (2,484) 2,007
Interest income 178 31 274 65
Interest expense (254) (238) (536) (477)
------------- ------------- ------------- --------------
Income (loss) before income taxes $ (596) $ 1,410 $ (2,746) $ 1,595
============= ============= ============= ==============
June 30, December 31,
2005 2004
------------- -----------------
(in thousands)
Total assets:
Technical services $ 69,356 $ 69,962
Information technology services 22,131 16,720
General corporate 18,866 25,238
------------- --------------
$ 110,353 $ 111,920
============= ==============
XANSER CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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This discussion should be read in conjunction with the condensed
consolidated financial statements of Xanser Corporation (the "Company") and
notes thereto included elsewhere in this report.
Overview
The Company conducts its principal businesses in two industry segments:
technical services and information technology services.
The Company's technical services business, which is conducted through its
Furmanite group of subsidiaries, offers specialized technical services to
an international base of clients located in the United States, Europe and
Asia-Pacific regions. The technical services business provides on-line
repairs of leaks in valves, pipes and other components of piping systems
and related equipment, typically in the flow-process industries. Other
services provided include on-site machining, bolting and valve testing and
repair on such systems and equipment. In addition, the division provides
hot tapping, fugitive emissions monitoring, passive fire protection,
concrete repair and heat exchanger repair.
The Company's information technology services business, Xtria, provides
services and related products to the healthcare industry and various
governmental agencies. The segment's primary business is information
technology services, including application software, hardware, web hosted
data processing, networking, consulting and support services.
Consolidated Results of Operations
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2005 2004 2005 2004
------------- -------------- ------------- ---------------
(in thousands - except per share amounts)
Revenues $ 43,469 $ 35,656 $ 78,640 $ 67,820
============= ============== ============= ===============
Operating income (loss) $ (520) $ 1,617 $ (2,484) $ 2,007
============= ============== ============= ===============
Net income (loss) $ (1,703) $ 869 $ (4,008) $ 979
============= ============== ============= ===============
Earnings (loss) per common share
- basic and diluted $ (.05) $ .03 $ (.12) $ .03
============= ============= ============= ==============
Capital expenditures $ 1,351 $ 1,122 $ 2,678 $ 2,099
============= ============== ============= ===============
For the three months ended June 30, 2005, consolidated revenues increased
by $7.8 million, or 22%, when compared to the same 2004 period, due to a
$5.1 million increase in revenues from the technical services business (see
"Technical Services" below), and a $2.7 million increase in revenues from
the information technology services business (see "Information Technology
Services" below). Consolidated operating income for the three months ended
June 30, 2005 decreased by $2.1 million, when compared to the second
quarter of 2004, due to a $3.1 million decrease in operating income from
the information technology services business, partially offset by a $0.8
million increase in operating income from the technical services business.
Second quarter 2005 net income decreased by $2.6 million, compared to the
same 2004 period, primarily due to the decrease in operating income from
the information technology services business.
For the six months ended June 30, 2005, consolidated revenues increased by
$10.8 million, or 16%, when compared to the same 2004 period, due to an
$8.8 million increase in revenues from the technical services business (see
"Technical Services" below) and a $2.0 million increase in revenues from
the information technology services business (see "Information Technology
Services" below). Consolidated operating income for the six months ended
June 30, 2005 decreased by $4.5 million when compared to the same 2004
period, primarily due to a $5.8 million decrease in operating income from
the information technology services business, partially offset by a $1.2
million increase in technical services operating income. Net income for the
six months ended June 30, 2005 decreased by $5.0 million when compared to
the same 2004 period, as the operating loss from the information technology
services and higher foreign income tax expense more than offset the
increase in operating income from the technical services business.
Technical Services
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ------------------------------
2005 2004 2005 2004
----------- ----------- ------------- --------------
(in thousands)
Revenues:
United States $ 7,215 $ 6,945 $ 14,323 $ 14,152
Europe 21,550 18,301 39,905 34,191
Asia-Pacific 6,084 4,512 11,280 8,397
----------- ----------- ------------- --------------
Total Revenues $ 34,849 $ 29,758 $ 65,508 $ 56,740
=========== =========== ============= ==============
Operating income:
United States $ 55 $ (121) $ (8) $ (14)
Europe 2,651 2,071 4,285 3,098
Asia-Pacific 1,080 689 1,820 1,213
Headquarters (873) (524) (1,653) (1,042)
----------- ----------- ------------- --------------
Total operating income $ 2,913 $ 2,115 $ 4,444 $ 3,255
=========== =========== ============= ==============
Capital expenditures $ 730 $ 690 $ 1,511 $ 1,537
=========== =========== ============= ==============
For the three months ended June 30, 2005, revenues for the technical
services business increased by $5.1 million, or 17%, when compared to the
same 2004 period. In the United States, revenues increased by $0.3 million,
or 4%, when compared to the second quarter of 2004, due to increases in
underpressure and other process plant services, offset by a slight decrease
in turnaround services. In Europe, revenues increased by $3.2 million, or
18%, when compared to the second quarter of 2004, due to solid increases in
underpressure and other process plant services. In Asia-Pacific, revenues
increased by $1.6 million, or 35% when compared to the second quarter of
2004, primarily due to increases in turnaround services. The impact of
foreign currency exchange rate increases was $0.6 million in Europe and
$0.3 million in Asia-Pacific when compared to 2004 foreign currency
exchange rates.
For the three months ended June 30, 2005, technical services operating
income increased by $0.8 million, or 38%, when compared to the same 2004
period. In the United States, operating income increased by $0.2 million,
when compared to the same period in 2004, due primarily to higher revenues
and operating margins. In Europe, operating income increased by $0.6
million, or 28%, when compared to the same 2004 period, due to overall
higher revenues and higher operating margins. In Asia-Pacific, operating
income increased by $0.4 million, or 57%, when compared to the same 2004
period, due to higher revenues and operating margins. The impact of foreign
currency exchange rates on second quarter 2005 operating income was not
significant.
For the six months ended June 30, 2005, revenues for the technical services
business increased by $8.8 million, or 15%, when compared to the same 2004
period. In the United States, revenues increased by $0.2 million, when
compared to the first six months of 2004, as increases in underpressure and
other process plant services were partially offset by decreases in
turnaround services. In Europe, revenues increased by $5.7 million, or 17%,
when compared to the first six months of 2004, due to solid increases in
underpressure and other process plant services. In Asia-Pacific, revenues
increased by $2.9 million, or 34%, when compared to the first six months of
2004, primarily due to increases in turnaround and other process plant
services. The impact of foreign currency exchange rate increases was $1.5
million in Europe and $0.4 million in Asia-Pacific when compared to 2004
foreign currency exchange rates.
For the six months ended June 30, 2005, technical services operating income
increased by $1.2 million, or 37%, when compared to the same 2004 period.
In the United States, operating income was about the same, when compared to
the same period in 2004. In Europe, operating income increased by $1.2
million, or 38%, when compared to the same 2004 period, due to overall
higher revenues and higher operating margins. In Asia-Pacific, operating
income increased by $0.6 million, or 50%, when compared to the same 2004
period, due also to higher revenues and operating margins. The technical
services headquarters costs increased by $0.6 million when compared to the
same 2004 period. The impact of foreign currency exchange rates on the
first and second quarter 2005 operating income was not significant.
Information Technology Services
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ------------------------------
2005 2004 2005 2004
----------- ----------- ------------- --------------
(in thousands)
Revenues $ 8,620 $ 5,898 $ 13,132 $ 11,080
=========== =========== ============= =============
Operating income (loss) $ (2,788) $ 294 $ (5,492) $ 296
=========== =========== ============= =============
Capital expenditures $ 621 $ 432 $ 1,167 $ 562
=========== =========== ============= ==============
For the three and six month periods ended June 30, 2005, information
technology services revenues increased by $2.7 million, or 46%, and $2.1
million, or 19%, respectively, when compared to the three and six months
ended June 30, 2004, primarily due to increases in healthcare services
equipment revenues, partially offset by decreases in other services
revenues.
For the three and six month periods ended June 30, 2005, information
technology services operating income decreased by $3.1 million and $5.8
million, respectively, when compared to the three and six months ended June
30, 2004, primarily due to substantially higher operating and general and
administrative cost levels that resulted from a focus on lower margin
equipment sales with little services work. Revenue efforts have been
refocused on higher margin service offerings.
Income Taxes
The Company maintains a valuation allowance to adjust the basis of net
deferred tax assets in accordance with the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". As a
result, all domestic federal and state income taxes recorded for the three
and six month periods ended June 30, 2005 and 2004 are fully offset by a
corresponding change in valuation allowance.
Income tax expense differs from the expected tax at statutory rates due
primarily to the change in valuation allowance for deferred tax assets and
different tax rates in the various foreign jurisdictions.
Liquidity and Capital Resources
Cash provided by (used in) operating activities was $(4.8) million and $0.4
million for the six month periods ended June 30, 2005 and 2004,
respectively. The 2005 decrease, when compared to the same 2004 period, was
due primarily to the decreases in information technology operating income
and overall higher working capital requirements. During the six months
ended June 30, 2005, the Company's working capital requirements for
operations and capital expenditures were funded through the use of
internally generated funds and existing cash balances.
Capital expenditures were $2.7 million and $2.1 million for the six month
periods ended June 30, 2005 and 2004, respectively. Consolidated capital
expenditures for the year 2005 have been budgeted at $3 million to $5
million, depending on the economic environment and the needs of the
business. Future capital expenditures, however, will depend on many factors
beyond the Company's control, including demand for services in the
technical services and information technology services businesses, and
local, state and federal government regulations. No assurance can be given
that required capital expenditures will not exceed anticipated amounts
during 2005 or thereafter. Capital expenditures (excluding acquisitions)
during the year are expected to be funded from existing cash and
anticipated cash flows from operations.
At June 30, 2005, $11.5 million was outstanding under a $25 million bank
loan agreement that provides working capital for the technical services
segment and is without recourse to the Parent Company. Borrowings under the
loan agreement bear interest at the option of the borrower at variable
rates (3.95% at June 30, 2005), based on either the LIBOR rate or prime
rate and have a commitment fee on the unused portion of the facility. The
loan agreement also contains certain financial and operational covenants
with respect to the technical services group, including percentage of
tangible assets and revenues related to certain geographical areas, ratios
of debt to cash flow, as defined in the loan agreement, and cash flow to
fixed charges and capital expenditures. At June 30, 2005, the Company was
in compliance with all covenants. The loan agreement matures in January
2009 and is secured by substantially all of the tangible assets of the
technical services group.
The Parent Company's 8.75% subordinated debentures ($5.0 million
outstanding at June 30, 2005) are convertible into shares of the Company's
common stock at the conversion price of $5.26 per share.
The following schedule sets forth, by period, the Company's debt repayment
obligations and material contractual commitments at December 31, 2004.
There were no material changes to the Company's schedule of debt repayment
obligations and material contractual commitments from December 31, 2004 to
June 30, 2005.
Less than After
Total 1 year 1-3 years 4-5 years 5 years
---------- --------- ---------- ---------- -----------
(in thousands)
Debt:
Technical services credit
facility $ 11,532 $ - $ - $ 11,532 $ -
Parent company convertible
subordinated debentures 5,000 - - 5,000 -
---------- --------- ---------- ---------- ----------
16,532 - - 16,532 -
Capital leases 1,490 524 822 142 2
---------- --------- ---------- ---------- ----------
Debt subtotal 18,022 524 822 16,674 2
---------- --------- ---------- ---------- ----------
Interest on debt 3,521 982 1,857 682 -
---------- --------- ---------- ---------- ----------
Debt and interest total 21,543 1,506 2,679 17,356 2
---------- --------- ---------- ---------- ----------
Other contractual commitments:
Pension plan contributions 9,400 940 1,880 1,880 4,700
Operating leases 14,490 4,289 6,255 2,231 1,715
---------- --------- ---------- ---------- ----------
Total $ 45,433 $ 6,735 $ 10,814 $ 21,467 $ 6,417
========== ========= ========== ========== ==========
Interest on debt is calculated based on outstanding balances, using
interest rates in effect at December 31, 2004. Estimated annual pension
plan contributions are assumed to be consistent with current expected
contribution levels.
Additional information related to the sources and uses of cash is presented
in the condensed consolidated financial statements included in this report.
Off-Balance Sheet Transactions
The Company was not a party to any off-balance sheet transactions at June
30, 2005, or for the three and six month periods ended June 30, 2005 and
2004.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant policies are
presented in the Notes to the Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2004.
Critical accounting policies are those that are most important to the
portrayal of our financial position and results of operations. These
policies require management's most difficult, subjective or complex
judgments, often employing the use of estimates about the effect of matters
that are inherently uncertain. Our most critical accounting policies
pertain to revenue recognition, allowance for doubtful accounts, the
impairment of excess of cost over fair value of net assets of acquired
businesses and income taxes. Critical accounting policies are discussed
regularly (at least quarterly) with the Company's Audit Committee.
The technical services segment's revenues are based primarily on time and
materials and are generally short term in nature. Revenues are recognized
when services to customers have been rendered or when products are shipped
and risk of ownership is passed to the customer. The technical services
business provides limited warranties to customers, depending upon the
service performed. Warranty claim costs were not material during the three
and six month periods ended June 30, 2005 and 2004.
The Company's information technology services segment includes revenue
recognized under multiple element arrangements with its customers, which
requires the use of significant judgments and estimates by management. The
accounting policies for revenue recognition in the information technology
services segment comply with Emerging Issues Task Force ("EITF") Issue No.
00-21, "Revenue Arrangements with Multiple Deliverables" and with AICPA
Statement of Position ("SOP") No. 97-2 "Software Revenue Recognition". ETIF
No. 00-21 provides guidance on how to account for arrangements that involve
the delivery or performance of multiple products, services and/or rights to
use assets. SOP No. 97-2 requires revenue to be recognized only after
software is delivered, all significant obligations of the Company are
fulfilled, and all significant uncertainties regarding customer acceptance
have expired. In addition, the information technology services segment's
revenues under long-term service contracts are accounted for using a
proportional performance method or on a straight-line basis in accordance
with the Securities and Exchange Commission's Staff Accounting Bulletin
("SAB") No. 101 "Revenue Recognition in Financial Statements", as amended
by SAB No. 104.
The Company's technical services and information technology services
businesses evaluate and adjust allowances for doubtful accounts receivable
through a continuous process of assessing accounts receivable balances on
individual customers and on an overall basis. This process consists of,
among other tasks, a review of historical collection experience, current
aging status and financial condition of customers. As this process involves
a significant amount of judgment and estimation, and sometimes involves
significant dollar amounts, actual write-offs could differ from estimated
amounts, which could have a material effect on the results of operations of
the Company.
The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 142, which eliminated the amortization for goodwill
(excess of cost over fair value of net assets of acquired businesses) and
other intangible assets with indefinite lives. Under SFAS No. 142,
intangible assets with lives restricted by contractual, legal or other
means will continue to be amortized over their useful lives. As of June 30,
2005, the Company had no intangible assets subject to amortization under
SFAS No. 142. Goodwill and other intangible assets not subject to
amortization are tested for impairment annually or more frequently if
events or changes in circumstances indicate that the assets might be
impaired. SFAS No. 142 requires a two-step process for testing impairment.
First, the fair value of each reporting unit is compared to its carrying
value to determine whether an indication of impairment exists. If an
impairment is indicated, then second, the implied fair value of the
reporting unit's goodwill is determined by allocating the unit's fair value
to its assets and liabilities (including any unrecognized intangible
assets) as if the reporting unit had been acquired in a business
combination. The amount of impairment for goodwill and other intangible
assets is measured as the excess of its carrying value over its implied
fair value. Based on valuations and analysis performed by the Company at
December 31, 2004, no impairment charge was required. Future evaluations of
the fair value of goodwill and other intangible assets are dependent on
many factors, several of which are out of the Company's control, including
the demand for services provided. To the extent that such factors or
conditions change, it is possible that future impairments could occur (up
to the current goodwill carrying value of $13.8 million), which could have
a material effect on the results of operations of the Company.
At June 30, 2005, the Company had a significant amount of net deferred tax
assets, which consisted principally of net operating loss carryforwards,
alternative minimum tax credit carryforwards and temporary differences
resulting from differences in the tax and book basis of certain assets and
liabilities. The net operating loss carryforwards available as of December
31, 2004 expire, if unused, as follows: $1.2 million in 2006; $3.0 million
in 2007; $13.4 million in 2022; $10.9 million in 2023; and $1.2 million in
2024. The alternative minimum tax credit carryforwards have no expiration
date. Based on evaluations performed by the Company pursuant to SFAS No.
109 in the fourth quarter of 2003, a non-cash valuation allowance of $12.1
million was provided with respect to the Company's federal and state net
deferred tax assets. The utilization of net operating loss carryforwards
and alternative minimum tax credit carryforwards could be subject to
limitation in the event of a change in ownership, as defined in the tax
laws. To the extent that factors or conditions change, it is possible that
reductions in the non-cash valuation allowance could occur, which could
have a material effect on the results of operating of the Company.
Recent Accounting Pronouncement
In December of 2004, the Financial Accounting Standards Board issued SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), which
addresses the accounting for share-based payment transactions in which an
enterprise receives employee services in exchange for equity instruments of
the enterprise, or liabilities that are based on the fair value of the
enterprise's equity instruments or that may be settled by the issuance of
such equity instruments. SFAS No. 123R eliminates the ability to account
for share-based compensation transactions using the intrinsic value method
under Accounting Principles Board Opinion 25, "Accounting for Stock Issued
to Employees", and generally requires that such transactions be accounted
for using a fair-value-based method. The Company is currently evaluating
the provisions of SFAS No. 123R to determine which fair-value-based model
and transitional provision to follow upon adoption. The alternatives for
transition include either the modified prospective or the modified
retrospective methods. The modified prospective method requires that
compensation expense be recorded for all unvested stock options and
restricted stock as the requisite service is rendered beginning with the
first quarter of adoption. The modified retrospective method requires
recording compensation expense for stock options and restricted stock
beginning with the first period restated. Under the modified retrospective
method, prior periods may be restated either as of the beginning of the
year of adoption or for all periods presented. SFAS No. 123R will be
effective for the Company beginning in the first quarter of 2006. The
impact of adoption on the Company's consolidated financial statements is
still being evaluated.
XANSER CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The principal market risks pursuant to this Item (i.e., the risk of loss arising
from the adverse changes in market rates and prices) to which the Company is
exposed are interest rates on the Company's debt and investment portfolios and
fluctuations in foreign currency.
The Company centrally manages its debt and investment portfolios considering
investment opportunities and risks, tax consequences and overall financing
strategies. The Company's investment portfolio consists of cash equivalents;
accordingly, the carrying amounts approximate fair value. The Company's
investments are not material to the financial position or performance of the
Company. Assuming variable rate debt of $11.5 million at June 30, 2005, a one
percent increase in interest rates would increase annual interest expense by
approximately $0.1 million.
A significant portion of the technical services business is exposed to
fluctuations in foreign currency exchange rates. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Technical
Services." Based on annual 2004 foreign currency-based revenues and operating
income of $90.6 million and $10.6 million, respectively, a one percent
fluctuation of all applicable foreign currencies would result in an annual
change in revenues and operating income of $0.9 million and $0.1 million,
respectively.
Item 4. Controls and Procedures
The Company's principal executive officer and principal financial officer, after
evaluating, as of June 30, 2005, the effectiveness of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934), have concluded that, as of such date, the
Company's disclosure controls and procedures are adequate and effective to
ensure that material information relating to the Company and its consolidated
subsidiaries would be made known to them by others within those entities.
During the quarter ended June 30, 2005, there have been no changes in the
Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, those internal controls
subsequent to the date of the evaluation. As a result, no corrective actions
were required or undertaken.
XANSER CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the Company stockholders was held on June 22, 2005 for the
purpose of electing the Board of Directors. Proxies for the meeting were
solicited pursuant to Section 14(a) of the Securities and Exchange Act of 1934,
and there was no solicitation in opposition to management's solicitations. All
of the Company's nominees were elected. Stockholder votes with respect to the
election of director at the annual meeting were as follows:
Number of Shares
------------------------------------------
Votes For Votes Withheld/Against
------------- -----------------------
Sangwoo Ahn 28,789,868 908,063
John R. Barnes 28,790,869 907,062
Charles R. Cox 28,798,748 899,183
Hans Kessler 28,797,890 900,041
Mr. James R. Whatley, a nominee for director, passed away prior to the annual
meeting and the size of the Board of Directors was reduced to four members.
Item 6. Exhibits
(a) Exhibits.
3.1 Restated Certificate of Incorporation of the Registrant, dated
September 26, 1979, filed as Exhibit 3.1 of the exhibits to the
Registrant's Registration Statement on Form S-16, which exhibit
is hereby incorporated by reference.
3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Registrant, dated April 30, 1981, filed as
Exhibit 3.2 of the exhibits to the Registrant's Annual Report on
Form 10-K ("Form 10-K") for the year ended December 31, 1981,
which exhibit is hereby incorporated by reference.
3.3 Certificate of Amendment to the Restated Certificate of
Incorporation of the Registrant, dated May 28, 1985, filed as
Exhibit 4.1 of the exhibits to the Registrant's Quarterly Report
on Form 10-Q ("Form 10-Q") for the quarter ended June 30, 1985,
which exhibit is hereby incorporated by reference.
3.4 Certificate of Amendment to the Restated Certificate of
Incorporation of the Registrant, dated September 17, 1985, filed
as Exhibit 4.1 of the exhibits to the Registrant's Form 10-Q for
the quarter ended September 30, 1985, which exhibit is hereby
incorporated by reference.
3.5 Certificate of Amendment to the Restated Certificate of
Incorporation of the Registrant, dated July 10, 1990, filed as
Exhibit 3.5 of the exhibits to the Registrant's Form 10-K for the
year ended December 31, 1990, which exhibit is hereby
incorporated by reference.
3.6 Certificate of Amendment to the Restated Certificate of
Incorporation of the Registrant, dated September 21, 1990, filed
as Exhibit 3.5 of the exhibits to the Registrant's Form 10-Q for
the quarter ended September 30, 1990, which exhibit is hereby
incorporated by reference.
3.7 Certificate of Amendment to the Restated Certificate of
Incorporation of the Registrant, dated August 8, 2001, filed as
Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed
on August 22, 2001, which exhibit is hereby incorporated by
reference.
3.8 By-laws of the Registrant, as amended and restated March 10,
2005, filed as exhibit 3.8 to Registrant's Form 10-K for the year
ended December 31, 2004, which exhibit is hereby incorporated by
reference.
4.1 Certificate of Designation related to the Registrant's Adjustable
Rate Cumulative Class A Preferred Stock, filed as Exhibit 4 of
the exhibits to the Registrant's Form 10-Q for the quarter ended
September 30, 1983, which exhibit is hereby incorporated by
reference.
4.2 Certificate of Designation, Preferences and Rights related to the
Registrant's Series B Junior Participating Preferred Stock, filed
as Exhibit 4.2 to the Registrant's 10-K for the year ended
December 31, 1998, which exhibit is incorporated herein by
reference.
4.3 Certificate of Designation related to the Registrant's Adjustable
Rate Cumulative Class A Preferred Stock, Series C, dated April
23, 1991, filed as Exhibit 4.4 of the exhibits to Registrant's
Form 10-K for the year ended December 31, 1991, which exhibit is
hereby incorporated by reference.
4.4 Certificate of Designation related to the Registrant's Adjustable
Rate Cumulative Class A Preferred Stock, Series F, dated June 12,
1997, filed as Exhibit 4.4 of the Exhibits to Registrant's Form
10-K for the year ended December 31, 1997, which exhibit is
hereby incorporated by reference.
4.5 Indenture between Moran Energy Inc. ("Moran") and First City
National Bank of Houston ("First City"), dated January 15, 1984,
under which Moran issued the 8 3/4% Convertible Subordinated
Debentures due 2008, filed as Exhibit 4.1 to Moran's Registration
Statement on Form S-3 (SEC File No. 2-81227), which exhibit is
hereby incorporated by reference.
4.6 First Supplemental Indenture between the Registrant and First
City, dated as of March 20, 1984, under which the Registrant
assumed obligations under the Indenture listed as Exhibit 4.5
above, filed as Exhibit 4.7 of the Registrant's Form 10-K for the
year ended December 31, 1983, which exhibit is hereby
incorporated by reference.
31.1 Certification of Chief Executive Officer, Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, dated August 15, 2005.
31.2 Certification of Chief Financial Officer, Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, dated August 15, 2005.
32.1 Certification of Chief Executive Officer, Pursuant to Section
906(a) of the Sarbanes-Oxley Act of 2002, dated August 15, 2005.
32.2 Certification of Chief Financial Officer, Pursuant to Section
906(a) of the Sarbanes-Oxley Act of 2002, dated August 15, 2005.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
XANSER CORPORATION
(Registrant)
Date: August 15, 2005 //s// HOWARD C. WADSWORTH
---------------------------------------
Howard C. Wadsworth
Chief Accounting Officer
(Duly Authorized Officer)
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John R. Barnes, Chief Executive Officer of Xanser Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q of Xanser Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) [intentionally omitted pursuant to SEC Release No. 34-47986];
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period cover by this quarterly report, based on such
evaluation; and
d) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 15, 2005
//s// JOHN R. BARNES
--------------------------------------------
John R. Barnes
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Howard C. Wadsworth, Chief Financial Officer of Xanser Corporation certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Xanser Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) [intentionally omitted pursuant to SEC Release No. 34-47986];
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period cover by this quarterly report, based on such
evaluation; and
d) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 15, 2005
//s// HOWARD C. WADSWORTH
---------------------------------------
Howard C. Wadsworth
Vice President, Treasurer and Secretary
(Chief Financial Officer)
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906(A) OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, being the Chief Executive Officer of Xanser Corporation
(the "Company") hereby certifies that, to his knowledge, the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2005, filed with the
United States Securities and Exchange Commission pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Quarterly Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
This written statement is being furnished to the Securities and Exchange
Commission as an exhibit to such Form 10-Q. A signed original of this written
statement required by Section 906 has been provided to Xanser Corporation and
will be retained by Xanser Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
Date: August 15, 2005
//s// JOHN R. BARNES
-------------------------------------
John R. Barnes
President and Chief Executive Officer
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906(A) OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, being the Chief Financial Officer of Xanser Corporation
(the "Company") hereby certifies that, to his knowledge, the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2005, filed with the
United States Securities and Exchange Commission pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Quarterly Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
This written statement is being furnished to the Securities and Exchange
Commission as an exhibit to such Form 10-Q. A signed original of this written
statement required by Section 906 has been provided to Xanser Corporation and
will be retained by Xanser Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
Date: August 15, 2005
//s// HOWARD C. WADSWORTH
---------------------------------------
Howard C. Wadsworth
Vice President, Treasurer and Secretary
(Chief Financial Officer)