CALGARY, ALBERTA--May 3, 2002--Enbridge Inc. today announced
earnings applicable to common shareholders for the first quarter
of 2002 of $113.1 million, or $0.71 per share, compared with $83.5
million, or $0.53 per share, for the same period in 2001. The
strong results reflect higher contributions from Energy
Transportation operations, equity earnings from the acquisition of
CLH, a dilution gain resulting from the issuance of units by the
Enbridge Energy Partnership in which the Company did not
participate, and a gain on sale of securities. These positive
factors are partially offset by lower earnings from Energy
Distribution resulting from weather that was significantly warmer
than normal.
"First quarter earnings validate our growth prospects and confirm
management's commitment to deliver superior returns to
shareholders," stated President & Chief Executive Officer Patrick
D. Daniel. "We once again delivered solid earnings growth which
we expect will continue for the remainder of the year. In the
longer term, our liquids transportation systems position Enbridge
to capitalize on the expected increasing supply of crude oil from
western Canada. In particular, our Athabasca pipeline will
continue to provide a competitive advantage in transporting
additional production from new oil sands projects. We are also
working with producers in assessing potential new projects to
ensure an expanded market outlet for oil sands supply beyond
2005."
Mr. Daniel concluded by saying, "We are encouraged by the
potential for further growth from both our core platform and new
opportunities. This should allow Enbridge to continue its track
record of superior earnings per share growth. Finally, we will
continue to maintain our disciplined approach to capital
investment and our focus on operational excellence. The sale of
the energy services business, which will be completed in the
second quarter, illustrates our intention to focus on asset
management."
The Enbridge Board of Directors today also declared quarterly
dividends of $0.38 per common share and $0.34375 per Series A
Preferred Share. Both dividends are payable on June 1, 2002, to
shareholders of record on May 17, 2002.
RECENT DEVELOPMENTS
Energy Transportation North
The NEB approved the facilities application for construction of
Terrace Phase III in April 2002. Construction has already
commenced in the U.S., as the shippers have requested that Phase
III be in service by 2003. Phase II, placed in service in 2002,
and Phase III of the Terrace Expansion Project were requested by
shippers to handle anticipated increases in oil sands and heavy
oil volumes in the next few years.
Construction is proceeding on schedule for both the MacKay River
project for Petro-Canada and the Christina Lake project for
EnCana. Both projects are expected to be placed in service in the
last half of 2002.
Energy Transportation South
In March, Enbridge closed the acquisition of natural gas gathering
and processing facilities in northeast Texas (Northeast Texas
assets) from Sulphur River Gathering L.P. for approximately $290
million. The Northeast Texas assets consist of 1,100 miles of
natural gas pipelines which gather 210 million cubic feet per day,
and gas treating and processing plants. The Northeast Texas
assets are contiguous with assets in East Texas recently acquired
by the Enbridge Energy Partnership and are complementary with
Enbridge Midcoast's asset base in the Gulf Coast region. This
acquisition expands Enbridge's North American footprint, in line
with strategic objectives. It also increases the portfolio of
assets available for potential sale to the Partnership.
Gas gathering, treating and processing is conducted under various
fee arrangements. Some of these arrangements expose the Company
to fluctuations in the price of natural gas and natural gas
liquids. Various hedging strategies have been implemented to
reduce commodity price risk. The assets are expected to be
accretive to Enbridge earnings in 2002.
International
The acquisition of a 25% equity interest in CLH was completed in
the first quarter of 2002. CLH is Spain's largest refined
products transportation and storage business.
FINANCIAL RESULTS
Earnings from continuing operations for the three months ended
March 31, 2002 were $105.0 million or $0.66 per share, compared
with $79.8 million, or $0.51 per share, for the three months ended
March 31, 2001. The increased earnings from continuing operations
reflect positive results from all businesses, except for the
results from Energy Distribution which were negatively affected by
significantly warmer weather than normal.
Energy Transportation North
First quarter earnings were $57.4 million, compared with $42.8
million in the first quarter of 2001. The Enbridge and Enbridge
Athabasca Systems contributed higher earnings during the quarter.
The multiphase Terrace expansion project contributed to increased
earnings on the Enbridge System. Higher earnings from the
Enbridge Athabasca System resulted from a higher investment base
for pipeline, tankage and terminal facilities. Aux Sable operated
at near break-even during the quarter, whereas the prior period's
results reflected a more unfavourable differential between natural
gas and natural gas liquids prices.
Energy Transportation South
Earnings were $14.2 million for the three months ended March 31,
2002, compared with $5.0 million for 2001. The higher earnings
consist of a dilution gain on the Company's investment in the
Enbridge Energy Partnership, improved equity earnings from the
Partnership, and earnings from Enbridge Midcoast, acquired in May
2001. The acquisitions by the Partnership of the North Dakota and
East Texas Systems resulted in increased earnings, partially
offset by reduced throughput on the Lakehead System. The results
of Enbridge Midcoast were less than expected during the quarter as
they include adjustments related to the prior period.
Energy Distribution
Earnings from Energy Distribution were $16.3 million in the first
quarter of 2002, a decrease of $24.3 million compared with the
same period in 2001, reflecting warmer weather patterns in eastern
Canada. Due to the seasonal nature of energy distribution
operations, quarterly earnings are not indicative of full year
results.
The earnings from Enbridge Consumers Gas reflect lower
distribution volumes resulting from warmer than normal weather.
The weather was warmer by 26% compared with the same period last
year and was 20% warmer than normal. New customer additions for
Enbridge Consumers Gas continued at expected rates. Results from
other Energy Distribution operations approximated last year.
International
Earnings increased by $7.1 million to $16.5 million in the first
quarter of 2002, resulting from the investment in CLH. The 25%
equity investment in CLH was acquired for approximately $425
million, including acquisition costs, with future payments
totalling approximately $125 million, contingent on CLH achieving
certain volume targets during 2002 to 2005.
Corporate
Corporate recoveries of $0.6 million were recorded for the three
months ended March 31, 2002, compared with total costs of $18.0
million in 2001. The current period recovery reflects a gain on
sale of securities of Westcoast Energy Inc. of $17.8 million.
Other corporate costs were slightly higher during the first
quarter of 2002 reflecting increased financing costs commensurate
with higher debt levels to finance recent acquisitions. The prior
period included losses on foreign currency contracts that were
speculative for accounting purposes.
Discontinued Operations
The sale of the Company's business operations that provide energy
products and services to retail and commercial customers is
expected to close in the second quarter of 2002. Earnings from
discontinued operations for the three months ended March 31, 2002
were $8.1 million, compared with $3.7 million in 2001. The higher
earnings reflect the growth of the business throughout 2001.
Liquidity and Capital Resources
The Company expects cash from operations will be sufficient to
satisfy liquidity requirements for current operations and planned
capital expenditures in the near term. The Company also expects
to receive $1 billion of proceeds on the disposition of the energy
services business in the second quarter of 2002. The use of these
funds will be dependent on corporate activities but in the short
term the funds will be used to reduce debt levels.
The statement of financial position reflects the acquisition of
the Northeast Texas assets and the 25% equity investment in CLH,
increasing property, plant and equipment and long-term investments
respectively. Other capital expenditures of $148.7 million
included core maintenance and expansion of the Enbridge Consumers
Gas distribution system, as well as asset additions at Enbridge
Midcoast and other operating entities. These transactions
represent the majority of the cash used for investing activities.
The inclusion of Enbridge Midcoast's capital expenditures in 2002
increased additions to property, plant and equipment in the
current period. The proceeds on the sale of securities are a
source of cash from investing activities.
The Company's net investing activities were financed through a
combination of cash from operating and financing activities.
Increased cash from operations reflects the lower value of gas in
storage due to the lower commodity cost of gas and decreased
accounts receivable due to the repayment of a loan by an
affiliated company. Financing activities included the issue of
$200 million preferred securities and the issue of additional
long-term debt.
Cash flows for the three months ended March 31, 2001 reflect lower
levels of investing and financing activity, when compared with
2002. Debt issues were used to finance core maintenance and
expansion of the Enbridge Consumers Gas distribution system and
other planned capital expenditures. The higher net operating
asset balance reduced cash from operating activities in 2001.
This was primarily due to higher distribution volumes and the
increasing commodity cost of gas which increased accounts
receivable at Enbridge Consumers Gas.
There are no material changes to the planned capital expenditures
disclosed in the 2001 MD&A included in the Annual Report.
OUTLOOK
Energy Distribution
The franchise area of Enbridge Consumers Gas continued to
experience significantly warmer than normal weather during the
second quarter of its fiscal year. This will continue to
negatively impact financial performance.
Enbridge Consumers Gas is in the final year of its targeted
performance-based regulation plan. The Ontario Energy Board
("OEB") expects it to develop, in consultation with stakeholders,
a comprehensive incentive regulation plan by the end of the term
of the current plan. The Company has provided a proposal for an
incentive regulation plan to stakeholders for the purposes of
discussion. For fiscal 2003, Enbridge Consumers Gas is proposing
cost-of-service rates be used to establish the base-year rates for
the incentive regulation term. The proposal involves a form of
incentive regulation that adjusts rates annually, according to a
formula, for a five-year term commencing in fiscal 2004. Rates
would be adjusted annually by a consumer price index and utility
earnings above or below the OEB-approved return on common equity
would be shared equally between ratepayers and Enbridge's
shareholders. Certain costs, such as gas commodity costs and
capital expenditures for the safe operation and maintenance of the
distribution system, would be passed to ratepayers outside of the
calculated rates. Discussions are underway with stakeholders
which may result in changes to the proposal. The plan will be
presented to the OEB following the discussions.
Enbridge will hold a conference call at 2:15 p.m. Mountain time
(4:15 p.m. Eastern time) today to discuss the first quarter
results. The call will be broadcast live on the Internet at
www.enbridge.com/investor. A replay will be available shortly
thereafter.
Enbridge Inc. is a leader in energy transportation and
distribution in North America and internationally. As a
transporter of energy, Enbridge operates, in Canada and the U.S.,
the world's longest crude oil and liquids transportation system.
The Company also has international operations and a growing
involvement in the natural gas transmission and midstream
businesses. As a distributor of energy, Enbridge owns and
operates Canada's largest natural gas distribution company, which
provides distribution services in Ontario, Quebec and New York
State; and is developing a gas distribution system for the
province of New Brunswick. The Company employs approximately
6,000 people, primarily in Canada, the U.S. and South America.
Enbridge common shares trade on The Toronto Stock Exchange in
Canada and on the New York Stock Exchange in the U.S. under the
symbol ENB. Information about Enbridge is available on the
Company's web site at www.enbridge.com.
When used in this news release, the words "anticipate", "expect",
"project", "believe", "estimate", "forecast" and similar
expressions are intended to identify forward-looking statements,
which include statements relating to pending and proposed
projects. Such statements are subject to certain risks,
uncertainties and assumptions pertaining to operating performance,
regulatory parameters, weather and economic conditions and, in the
case of pending and proposed projects, risks relating to design
and construction, regulatory processes, obtaining financing and
performance of other parties, including partners, contractors and
suppliers.
ENBRIDGE INC.HIGHLIGHTS(1) Three months ended March 31,(unaudited; millions of Canadian dollars, except per share amounts) 2002 2001FINANCIALEarnings Applicable to Common Shareholders Energy Transportation North 57.4 42.8 Energy Transportation South 14.2 5.0 Energy Distribution 16.3 40.6 International 16.5 9.4 Corporate 0.6 (18.0) ----------------------- Continuing operations 105.0 79.8 Discontinued operations 8.1 3.7 ----------------------- 113.1 83.5 ----------------------- -----------------------Cash Provided By/(Used In) Operating Activities Earnings plus charges/(credits) not affecting cash 172.0 171.1 Changes in operating assets and liabilities 154.7 (62.2) Cash provided by/(used in) operating activities of discontinued operations 15.7 (77.0) ----------------------- 342.4 31.9 ----------------------- -----------------------Common Share Dividends 62.0 56.7Per Common Share Amounts Earnings from continuing operations 0.66 0.51 Earnings from discontinued operations 0.05 0.02 ----------------------- 0.71 0.53 ----------------------- -----------------------Dividends 0.38 0.35 ----------------------- -----------------------Weighted Average Common Shares Outstanding (millions) 158.2 156.9 ----------------------- -----------------------OPERATINGEnergy Transportation(2) Deliveries (thousands of barrels per day) 2,185 2,212 Barrel miles (billions) 180 179 Average haul (miles) 915 899Energy Distribution(3) Volumes (billion cubic feet) 95 113 Number of active customers (thousands) 1,586 1,538 Degree day deficiency(4) Actual 817 1,105 Forecast based on normal weather 1,020 1,0221. Highlights of Energy Distribution reflect the results of Enbridge Consumers Gas and other gas distribution operations on a one quarter lag basis for the three months ended December 31, 2001 and 2000.2. Energy Transportation operating highlights includes the statistics of the 12.9% owned Lakehead System and other wholly-owned liquid pipeline operations.3. Energy Distribution volumes and the number of active customers are derived from the aggregate system supply and direct purchase gas supply arrangements.4. Degree-day deficiency is a measure of coldness. It is calculated by accumulating for each day in the period the total number of degrees each day by which the daily mean temperature falls below 18 degrees Celsius. The figures given are those accumulated in the Toronto area.ENBRIDGE INC.CONSOLIDATED STATEMENT OF EARNINGS Three months ended March 31,(unaudited; millions of Canadian dollars, except per share amounts) 2002 2001Revenues Gas sales 690.2 469.7 Transportation 324.7 258.7 Energy services 66.7 40.4 ----------------------- 1,081.6 768.8 -----------------------Expenses Gas costs 616.8 354.9 Operating and administrative 210.1 160.2 Depreciation 105.6 90.8 ----------------------- 932.5 605.9 -----------------------Operating Income 149.1 162.9Investment and Other Income 99.0 40.7Interest Expense (110.8) (98.0) -----------------------Earnings from Continuing Operations Before Income Taxes 137.3 105.6Income Tax Expense (24.9) (19.9) -----------------------Earnings from Continuing Operations 112.4 85.7Earnings from Discontinued Operations 8.1 3.7 -----------------------Earnings 120.5 89.4Preferred Security Distributions (5.7) (4.2)Preferred Share Dividends (1.7) (1.7) -----------------------Earnings Applicable to Common Shareholders 113.1 83.5 ----------------------- -----------------------Earnings Applicable to Common Shareholders Continuing Operations 105.0 79.8 Discontinued Operations 8.1 3.7 ----------------------- 113.1 83.5 ----------------------- -----------------------Earnings Per Common Share Continuing Operations 0.66 0.51 Discontinued Operations 0.05 0.02 ----------------------- 0.71 0.53 ----------------------- -----------------------Diluted Earnings Per Common Share Continuing Operations 0.65 0.50 Discontinued Operations 0.05 0.02 ----------------------- 0.70 0.52 ----------------------- -----------------------See accompanying notes to the unaudited consolidated financialstatements.ENBRIDGE INC.CONSOLIDATED STATEMENT OF RETAINED EARNINGS Three months ended March 31,(unaudited; millions of Canadian dollars) 2002 2001Retained Earnings at Beginning of Period 812.3 581.3Earnings Applicable to Common Shareholders 113.1 83.5Common Share Dividends (62.0) (56.7)Preferred Security Issue Costs (3.9) -Effect of Change in Accounting for Stock-based Compensation (5.4) - -----------------------Retained Earnings at End of Period 854.1 608.1 ----------------------- -----------------------See accompanying notes to the unaudited consolidated financialstatements.ENBRIDGE INC.CONSOLIDATED STATEMENT OF CASH FLOWS Three months ended March 31,(unaudited; millions of Canadian dollars) 2002 2001Cash Provided By Operating Activities Earnings from continuing operations 112.4 85.7 Charges/(credits) not affecting cash Depreciation 105.6 90.8 Equity earnings in excess of cash distributions (10.3) (9.9) Gain on reduction of ownership interest (9.7) - Gain on sale of securities (21.4) - Loss on foreign exchange contracts - 4.5 Future income taxes 4.3 11.5 Other (8.9) (11.5) Changes in operating assets and liabilities 154.7 (62.2) Cash provided by/(used in) operating activities of discontinued operations 15.7 (77.0) ----------------------- 342.4 31.9 -----------------------Investing Activities Long-term investments (428.2) (17.8) Asset acquisition (289.3) - Additions to property, plant and equipment (148.7) (96.2) Proceeds of sale of securities 110.5 - Changes in construction payable (23.0) (26.4) Other (0.4) (8.9) ----------------------- (779.1) (149.3) -----------------------Financing Activities Net change in short-term borrowing and short-term debt 34.6 193.3 Long-term debt issues 247.4 295.6 Long-term debt repayments - (310.1) Non-controlling interests (0.7) (1.2) Preferred securities issued 193.5 - Common shares issued 15.8 4.6 Preferred security distributions (5.7) (4.2) Preferred share dividends (1.7) (1.7) Common share dividends (62.0) (56.7) ----------------------- 421.2 119.6 -----------------------Increase/(Decrease) in Cash (15.5) 2.2Cash at Beginning of Period 74.0 67.0 -----------------------Cash at End of Period 58.5 69.2 ----------------------- -----------------------See accompanying notes to the unaudited consolidated financialstatements.ENBRIDGE INC.CONSOLIDATED STATEMENT OF FINANCIAL POSITION March 31, December 31,(millions of Canadian dollars) 2002 2001 (unaudited) (audited)AssetsCurrent Assets Cash 58.5 74.0 Accounts receivable and other 1,282.1 1,419.1 Gas in storage 524.5 665.6 Current assets of discontinued operations 122.7 123.0 ----------------------- 1,987.8 2,281.7Property, Plant and Equipment, net 7,834.7 7,546.8Long-Term Investments 2,231.4 1,772.8Deferred Amounts 279.1 254.0Future Income Taxes 169.1 142.0Goodwill 378.4 330.4Long-Term Assets of Discontinued Operations 796.9 800.0 ----------------------- 13,677.4 13,127.7 ----------------------- -----------------------Liabilities and Shareholders' EquityCurrent Liabilities Short-term borrowings 419.1 410.9 Accounts payable and other 793.2 805.2 Interest payable 96.5 100.2 Current maturities and short-term debt 1,715.3 1,810.2 Current liabilities of discontinued operations 62.2 73.8 ----------------------- 3,086.3 3,200.3Long-Term Debt 6,298.9 5,922.8Future Income Taxes 756.9 722.8Non-Controlling Interests 131.7 131.1Long-Term Liabilities of Discontinued Operations 117.6 118.6 ----------------------- 10,391.4 10,095.6Shareholders' Equity Share capital Preferred securities 534.6 339.7 Preferred shares 125.0 125.0 Common shares 1,891.7 1,875.9 Retained earnings 854.1 812.3 Foreign currency translation adjustment 8.8 7.4 Reciprocal shareholding (128.2) (128.2) ----------------------- 3,286.0 3,032.1 ----------------------- Contingency (Note 7) 13,677.4 13,127.7 ----------------------- -----------------------See accompanying notes to the unaudited consolidated financialstatements.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles and should be read in conjunction with the consolidated
financial statements and notes thereto included in Enbridge Inc.'s
2001 Annual Report. These interim financial statements are
prepared on a consistent basis with those included in the 2001
Annual Report and follow the same accounting policies and methods
of application, except as described in Note 1.
Earnings for interim periods may not be indicative of results for
the fiscal year due to weather and other factors. Certain
reclassifications have been made to the prior period financial
statements to conform to the current year's presentation.
1. CHANGE IN ACCOUNTING POLICIES
Effective January 1, 2002, the Company adopted the new accounting
standard for stock-based compensation. The standard requires an
expense to be recognized for certain awards of stock-based
compensation. The standard, which requires retroactive
application for certain of the Company's awards as a charge to
opening retained earnings without restatement of prior periods,
resulted in a charge to opening retained earnings of $5.4 million.
Effective January 1, 2002, the Company adopted the new accounting
standard for goodwill and other intangible assets. The standard
requires, among other things, that goodwill no longer be amortized
but be tested for impairment at least annually. The standard is
being applied prospectively. Goodwill arising from the
acquisition of Midcoast Energy Resources, Inc. in May 2001,
included in Energy Transportation South, was being amortized over
30 years prior to adoption of the new standard.
2. SEGMENTED INFORMATION(millions of Canadian dollars)Three months ended March 31, 2002 (unaudited)--------------------------------------------------------------------- Energy Energy Transportation Distri- Inter- Consol- North South bution national Corporate idated---------------------------------------------------------------------Revenues 296.6 316.0 462.4 4.8 1.8 1,081.6Gas costs (113.4) (258.0) (245.4) - - (616.8)Operating and administration (64.6) (33.3) (105.1) (2.9) (4.2) (210.1)Depreciation (35.1) (9.3) (56.1) (0.7) (4.4) (105.6) -----------------------------------------------------Operating income/(loss) 83.5 15.4 55.8 1.2 (6.8) 149.1Investment and other income 16.1 15.2 8.8 15.5 43.4 99.0Interest and preferred equity charges (24.0) (7.5) (39.8) - (46.9) (118.2)Income taxes (18.2) (8.9) (8.5) (0.2) 10.9 (24.9) -----------------------------------------------------Earnings from continuing operations 57.4 14.2 16.3 16.5 0.6 105.0 ------------------------------------------ ------------------------------------------Earnings from discontinued operations 8.1 -----------Earnings applicable to common shareholders 113.1------------------------------------------------------------------------------------------------------------------------------------------Three months ended March 31, 2001 (unaudited)--------------------------------------------------------------------- Energy Energy Transportation Distri- Inter- Consol- North South bution national Corporate idated---------------------------------------------------------------------Revenues 166.8 7.8 587.5 6.7 - 768.8Gas costs - - (354.9) - - (354.9)Operating and administration (61.2) (5.7) (84.3) (4.4) (4.6) (160.2)Depreciation (34.0) (1.9) (53.6) (0.3) (1.0) (90.8) -----------------------------------------------------Operating income/(loss) 71.6 0.2 94.7 2.0 (5.6) 162.9Investment and other income 12.2 7.9 13.7 7.4 (0.5) 40.7Interest and preferred equity charges (27.2) (0.4) (42.2) (0.1) (34.0) (103.9)Income taxes (13.8) (2.7) (25.6) 0.1 22.1 (19.9) -----------------------------------------------------Earnings/(loss) from continuing operations 42.8 5.0 40.6 9.4 (18.0) 79.8 ------------------------------------------ ------------------------------------------Earnings from discontinued operations 3.7 -----------Earnings applicable to common shareholders 83.5------------------------------------------------------------------------------------------------------------------------------------------
3. ACQUISITION
In March 2002, the Company acquired natural gas gathering and
processing facilities in northeast Texas from Sulphur River
Gathering L.P. for cash consideration of $289.3 million. The
facilities are complementary to Enbridge Midcoast's existing
assets.
The results of operations have been included in the consolidated
statement of earnings from the date of acquisition. The goodwill
is recorded in Energy Transportation South. All of the goodwill
is expected to be deductible for tax purposes.
(unaudited; millions of Canadian dollars)Fair Value of Assets Acquired: Property, plant and equipment 242.3 Goodwill 47.8 Working capital deficiency (0.8) ------ 289.3 ------ ------Purchase Price: Cash 288.2 Transaction costs 1.1 ------ 289.3 ------ ------
4. DISCONTINUED OPERATIONS
The sale of the Company's business operations that provide energy
products and services to retail and commercial customers,
including the water heater rental program, is expected to close in
the second quarter of 2002.
Selected financial information related to discontinued operations
is as follows.
Financial Position March 31, December 31,(unaudited; millions of Canadian dollars) 2002 2001Assets Current assets 122.7 123.0 Property, plant and equipment 582.4 584.2 Other assets 214.5 215.8 -------------------- 919.6 923.0 --------------------Liabilities Current liabilities 62.2 73.8 Future income taxes 117.6 118.6 --------------------Net Assets of Discontinued Operations 739.8 730.6 -------------------- --------------------Earnings Three months ended(unaudited; millions of Canadian dollars) March 31, 2002 2001Revenues 128.3 104.5Income tax expense 6.5 3.4Allocated interest expense 6.9 10.5
5. PREFERRED SECURITIES
In February 2002, the Company completed a public offering of $200
million, 7.8% Preferred Securities for net proceeds of $193.5
million. The Preferred Securities may be redeemed at the
Company's option in whole or in part after the fifth anniversary
date of the issue. The Company has the right to defer, subject to
certain conditions, payments of distributions on the securities
for a period of up to 20 consecutive quarterly periods. Deferred
and regular distribution amounts are payable in cash or, at the
option of the Company, in common shares of the Company. Since the
distributions may be settled through the issuance of common shares
at the Company's option, the Preferred Securities are classified
into their respective debt and equity components. The equity
component of the Preferred Securities was $195.0 million at March
31, 2002.
6. STOCK-BASED COMPENSATION
The Company uses the intrinsic method to calculate stock-based
compensation expense. If the Company had used the fair value
method to account for stock-based compensation, earnings from
continuing operations would have been $102.0 million, total
earnings applicable to common shareholders would have been $110.1
million, earnings per share from continuing operations would have
been $0.64 and total earnings per share would have been $0.69. A
binomial model was used to calculate fair value. Significant
assumptions included a risk-free interest rate of 5.332%, expected
volatility of 25%, expected life of ten years, and expected
dividend yield of 2.71%. The weighted average grant-date fair
value of options granted during the period was $12.25. Pro forma
earnings and earnings per share do not reflect awards granted
prior to the adoption of the new standard.
7. CONTINGENCY
The Canadian Alliance of Pipeline Landowners' Associations and two
individual landowners have commenced an action, which they will be
applying to certify as a class action, against the Company and
TransCanada PipeLines Limited. The claim relates to restrictions
in the National Energy Board Act on the landowners' use of land
within a 30-metre control zone on either side of the pipeline
easements. The Company believes it has a sound defence and
intends to vigorously defend the claim. Since the outcome is
indeterminable, the Company has made no provision for any
potential liability.
Supplementary Financial Information Number of SharesCommon Shares - issued and outstanding 163,514,377 (voting equity shares)Preference Shares, Series A 5,000,000 (non-voting equity shares)Total issued and outstanding stock options 7,007,430 (3,387,824 vested)
The Company has a Shareholder Rights plan designed to encourage
the fair treatment of shareholders in connection with any takeover
offer for the Company. Rights issued under the plan become
exercisable when a person, and any related parties, acquires or
announces its intention to acquire 20% or more of the Company's
outstanding common shares without complying with certain
provisions set out in the plan or without approval of the Board of
Directors of the Company. Should such an acquisition or
announcement occur, each rights holder, other than the acquiring
person and related parties, will have the right to purchase common
shares of the Company at a 50% discount to the market price at
that time.
Supplementary information as at April 22, 2002.
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