Exhibit No. | Description | Page No. | ||
1.
|
Original Press Release dated February 6, 2008. | |||
2.
|
Unaudited Financial Statements and notes for the quarter ending December 31, 2007. |
Date: February 6, 2008 | Cameco Corporation |
|||
By: | /s/ Gary M.S. Chad | |||
Gary M.S. Chad, Q.C. | ||||
Senior Vice-President, Governance, Law and Corporate Secretary |
||||
TSX: CCO NYSE: CCJ |
website: cameco.com currency: Cdn |
Three months ended | Year ended | Yr/Yr | ||||||||||||||||||
December 31 | December 31 | Change | ||||||||||||||||||
Financial Highlights | 2007 | 2006 | 2007 | 2006 | % | |||||||||||||||
Revenue ($ millions) |
494 | 512 | 2,310 | 1,832 | 26 | |||||||||||||||
Net earnings ($ millions) |
61 | 40 | 416 | 376 | 11 | |||||||||||||||
Earnings per share (EPS) basic ($) |
0.18 | 0.11 | 1.18 | 1.07 | 10 | |||||||||||||||
EPS diluted ($) |
0.17 | 0.11 | 1.13 | 1.02 | 11 | |||||||||||||||
Adjusted net earnings ($ millions)1 |
64 | 40 | 603 | 274 | 120 | |||||||||||||||
EPS adjusted and diluted ($)1 |
0.18 | 0.11 | 1.63 | 0.75 | 117 | |||||||||||||||
Cash provided by operations 2
($ millions) |
57 | 13 | 801 | 418 | 92 |
1 | Net earnings for the quarters and years ended December 31, 2006 and 2007 have been adjusted to exclude a number of items. Adjusted net earnings is a non-GAAP measure. For a description see Use of Non-GAAP Financial Measures in this document. | |
2 | After working capital changes. |
-1-
Three months ended | Year ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenue ($ millions) |
219 | 242 | 1,269 | 803 | ||||||||||||
Earnings before taxes ($
millions) |
63 | 49 | 572 | 181 | ||||||||||||
Average realized price |
||||||||||||||||
($US/lb) |
38.92 | 22.35 | 37.47 | 20.62 | ||||||||||||
($Cdn/lb) |
39.64 | 26.62 | 41.68 | 24.72 | ||||||||||||
Sales volume (million lbs)1 |
5.5 | 9.0 | 30.2 | 32.1 | ||||||||||||
Production volume (million lbs) |
5.6 | 5.4 | 19.8 | 20.9 |
1 | Revenue on 2.6 million pounds previously deferred due to standby product loans was recognized in 2007 as a result of the cancellation of two of the product loan agreements. |
Camecos share of | Three months ended | Year ended | ||||||||||||||
production (million lbs | December 31 | December 31 | ||||||||||||||
U3O8 | 2007 | 2006 | 2007 | 2006 | ||||||||||||
McArthur River/Key Lake |
3.9 | 3.2 | 13.1 | 13.1 | ||||||||||||
Rabbit Lake |
1.0 | 1.4 | 4.0 | 5.1 | ||||||||||||
Smith Ranch/ Highland |
0.5 | 0.6 | 2.0 | 2.0 | ||||||||||||
Crow Butte |
0.2 | 0.2 | 0.7 | 0.7 | ||||||||||||
Total1 |
5.6 | 5.4 | 19.8 | 20.9 |
1 | These quantities do not include Inkai production, as the mine is not yet in commercial operation. |
-2-
Three months ended | Year ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenue ($ millions) |
77 | 83 | 239 | 224 | ||||||||||||
Earnings before taxes ($ millions) |
(36 | ) | 11 | (27 | ) | 22 | ||||||||||
Sales volume (million kgU)1 |
6.4 | 6.7 | 17.0 | 18.5 | ||||||||||||
Production volume (million kgU)
2 |
1.7 | 5.2 | 12.9 | 15.4 |
1 | Kilograms of uranium (kgU) | |
2 | Production volume includes UF6, UO2, fuel fabrication, and UF6 supply from Springfields Fuels Ltd. (SFL). |
-3-
Three months ended | Year ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenue ($ millions) |
88 | 100 | 405 | 414 | ||||||||||||
Realized price (US$/ounce) |
789 | 604 | 691 | 597 | ||||||||||||
Sales volume (ounces) |
113,000 | 146,000 | 541,000 | 610,000 | ||||||||||||
Gold production (ounces) 1 |
133,000 | 142,000 | 555,000 | 586,000 |
1 | Represents 100% of production from the Kumtor and Boroo gold mines. |
-4-
-5-
Capital Expenditures | ||||||||
(Cameco's share in $ millions) | 2008 Plan | 2007 Actual | ||||||
Growth Capital
|
||||||||
Cigar Lake |
$ | 108 | $ | 69 | ||||
Inkai |
27 | 31 | ||||||
Rabbit Lake |
19 | | ||||||
Fuel Services |
12 | | ||||||
Total Growth |
$ | 166 | $ | 100 | ||||
Sustaining Capital
|
||||||||
McArthur River/Key Lake |
$ | 164 | $ | 77 | ||||
US ISR |
53 | 28 | ||||||
Rabbit Lake |
33 | 34 | ||||||
Fuel Services |
56 | 26 | ||||||
Other |
23 | 6 | ||||||
Total Sustaining |
$ | 329 | $ | 171 | ||||
Capitalized interest |
39 | 31 | ||||||
Total Uranium & Fuel Services |
$ | 534 | $ | 302 | ||||
Bruce Power (BPLP)1 |
$ | 39 | $ | 31 | ||||
Gold2 |
$ | 68 | $ | 132 | ||||
1 | Reflects Camecos 31.6% share of expenditures and expected to be funded by BPLP | |
2 | Represents 100% of Centerras expenditures and expected to be funded by Centerra |
-6-
-7-
$ | 20 | $ | 40 | $ | 60 | $ | 80 | $ | 100 | $ | 120 | $ | 140 | |||||||||||||||
2008 |
$ | 28 | $ | 33 | $ | 38 | $ | 42 | $ | 47 | $ | 51 | $ | 55 | ||||||||||||||
2009 |
$ | 27 | $ | 33 | $ | 39 | $ | 43 | $ | 48 | $ | 53 | $ | 58 | ||||||||||||||
2010 |
$ | 33 | $ | 39 | $ | 47 | $ | 53 | $ | 60 | $ | 67 | $ | 74 | ||||||||||||||
2011 |
$ | 38 | $ | 42 | $ | 50 | $ | 56 | $ | 63 | $ | 69 | $ | 76 | ||||||||||||||
2012 |
$ | 39 | $ | 42 | $ | 51 | $ | 59 | $ | 67 | $ | 76 | $ | 85 | ||||||||||||||
| sales volume of 33 million pounds for 2008 (which has been adjusted for the accounting requirements of the loan agreements) and a sales volume of about 30 million pounds for each year thereafter. Variations in our actual sales volume could lead to materially different results; | |
| utilities take the maximum quantities allowed under their contracts, which is subject to the risk that they take lower quantities resulting in materially different realized prices; | |
| Cameco defers a portion of deliveries under contract for 2009 through 2011 as a result of exercising its rights under supply interruption provisions. No significant changes to the above estimate of average realized prices can be expected as a result of this decision; | |
| all volumes for which there are no existing sales commitments are assumed to be delivered at the spot price assumed for each scenario, which is subject to the risk that sales are at prices other than spot prices which could result in materially different realized prices; | |
| the average long-term price indicator in a given year is assumed to be equal to the average spot price for that entire year. Fluctuations in the spot price or the long-term price, during the course of a year could lead to materially different results; and | |
| an inflation rate of 2.5%; variations in the inflation rate could have a material impact on actual results. |
Current Forecast | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||
McArthur River/Key Lake 2 |
13.1 | 13.1 | 13.1 | 13.1 | 13.1 | |||||||||||||||
Rabbit Lake 3 |
3.6 | 3.2 | 1.8 | 3.1 | 2.4 | |||||||||||||||
US ISR4 |
2.7 | 2.8 | 3.6 | 4.8 | 4.8 | |||||||||||||||
Inkai |
1.2 | 2.9 | 3.0 | 3.0 | 3.0 | |||||||||||||||
Total* |
20.6 | 22.0 | 21.5 | 24.0 | 23.3 | |||||||||||||||
* | While a single estimate has been included for each year of the production outlook, actual production may differ from estimates as forecasting production is inherently uncertain. | |
1 | A revised production forecast for Cigar Lake will be provided after the mine has been dewatered and the condition of the underground development has been assessed. | |
2 | Cameco has applied to increase its licensed capacity from 18.7 million pounds to 22 million pounds (Camecos share 70%), but is awaiting regulatory approval. Until approval has been received, the production forecast has been left at the current licensed capacity. Once approval has been received, it is expected to take about two years |
-8-
to rampup production to a sustained higher level. (See discussion in the Uranium Operations Update section of the third quarter MD&A under the heading McArthur River/Key Lake). | ||
3 | The Rabbit Lake production forecast is based on proven and probable reserves as well as blending lower-grade material. We are optimistic that some of the existing resources will be reclassified as reserves and add to production in the latter years. In addition, ongoing mine planning will focus on identifying means of smoothing the production profile in future years. | |
4 | Refers to Camecos Smith Ranch-Highland and Crow Butte ISR operations in the US. |
| the companys forecast production for each operation is achieved; | |
| the companys schedule for the development and rampup of production from Inkai is achieved, which requires, among other things, resolution of the issues surrounding acid availability required for mining; | |
| the successful transition between zones at McArthur River beginning in 2009; | |
| the company is able to obtain or maintain the necessary permits and approvals from government authorities to achieve the forecast production; | |
| there is no disruption in production due to natural phenomena, labour disputes or other development and operation risks; and | |
| the HEU supplier complies with its delivery commitments. |
-9-
-10-
| we have assumed the success and timely completion of our dewatering and remediation efforts (including favourable results of geotechnical assessments), which are subject to the risk that they do not succeed as anticipated or take longer to complete than anticipated; | |
| our ability to obtain and comply with the terms of, and the timing of, various regulatory approvals, which are subject to the risk of taking longer to obtain than anticipated, or our inability to comply with their terms; and | |
| our expectation regarding the condition of the existing underground workings is correct, which is subject to the risk that actual conditions prove to be worse. |
-11-
Qualified Persons | Properties | |
David Bronkhorst, general manager,
McArthur River operation, Cameco
|
McArthur River/Key Lake | |
Les Yesnik, general manager, Key Lake operation, Cameco |
||
C. Scott Bishop, chief mine engineer,
Cigar Lake project, Cameco
|
Cigar Lake | |
Ian Atkinson, vice-president,
exploration, Centerra Gold Inc.
|
Kumtor |
Three months ended | Year ended | |||||||||||||||
($ millions) | December 31 | December 31 | ||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net earnings (per GAAP) |
$ | 61 | $ | 40 | $ | 416 | $ | 376 | ||||||||
Adjustments |
||||||||||||||||
Agreement with Kyrgyzstan |
28 | | 153 | | ||||||||||||
Stock option plan amendment |
| | 59 | | ||||||||||||
Change in income tax rates |
(25 | ) | | (25 | ) | (73 | ) | |||||||||
Gain on sale of interest in Fort à la Corne |
| | | (29 | ) | |||||||||||
Adjusted net earnings |
$ | 64 | $ | 40 | $ | 603 | $ | 274 | ||||||||
-12-
-13-
| on our website, cameco.com, shortly after the call, and | |
| on post view until midnight, Eastern time, Thursday, March 6, 2008 by calling (416) 695-5800 or (800) 408-3053 (passcode 3248042 #). |
Investor & media inquiries:
|
Alice Wong (306) 956-6337 | |
Investor inquiries:
|
Bob Lillie (306) 956-6639 | |
Media inquiries:
|
Lyle Krahn (306) 956-6316 |
-14-
Three Months Ended | Year Ended | |||||||||||||||
Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | |||||||||||||
Financial (in millions) |
||||||||||||||||
Revenue |
$ | 494 | $ | 512 | $ | 2,310 | $ | 1,832 | ||||||||
Earnings from operations |
68 | 36 | 475 | 335 | ||||||||||||
Net earnings |
61 | 40 | 416 | 376 | ||||||||||||
Adjusted net earnings(i) |
64 | 40 | 603 | 274 | ||||||||||||
Cash provided by operations |
57 | 13 | 801 | 418 | ||||||||||||
Working capital (end of period) |
607 | 853 | ||||||||||||||
Net debt to capitalization |
18 | % | 12 | % | ||||||||||||
Per common share |
||||||||||||||||
Net earnings Basic |
$ | 0.18 | $ | 0.11 | $ | 1.18 | $ | 1.07 | ||||||||
- Diluted |
0.17 | 0.11 | 1.13 | 1.02 | ||||||||||||
- Diluted, adjusted (i) |
0.18 | 0.11 | 1.63 | 0.75 | ||||||||||||
Dividend |
0.05 | 0.04 | 0.20 | 0.16 | ||||||||||||
Weighted average number of paid common
shares outstanding (in thousands) |
345,550 | 352,172 | 351,175 | 351,224 | ||||||||||||
Average uranium spot price for the period (US$/lb) |
$ | 90.00 | $ | 65.21 | $ | 99.29 | $ | 49.60 | ||||||||
Sales volumes |
||||||||||||||||
Uranium (in thousands lbs U3O8) |
5,477 | 9,021 | 30,186 | 32,073 | ||||||||||||
Fuel services (tU) |
6,360 | 6,676 | 16,958 | 18,539 | ||||||||||||
Gold (troy ounces) |
113,000 | 146,000 | 541,000 | 610,000 | ||||||||||||
Electricity (TWh) |
2.1 | 2.0 | 8.0 | 8.2 |
Cameco's | Three Months Ended | Year Ended | ||||||||||||||||||
Cameco Production | Share | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | |||||||||||||||
Uranium production (in thousands lbs U3O8) |
||||||||||||||||||||
McArthur River |
69.8 | % | 3,869 | 3,194 | 13,064 | 13,066 | ||||||||||||||
Rabbit Lake |
100.0 | % | 980 | 1,393 | 4,013 | 5,127 | ||||||||||||||
Crow Butte |
100.0 | % | 176 | 186 | 729 | 729 | ||||||||||||||
Smith Ranch Highland |
100.0 | % | 485 | 618 | 1,984 | 2,044 | ||||||||||||||
Total |
5,510 | 5,391 | 19,790 | 20,966 | ||||||||||||||||
Fuel services (tU)(ii) |
100.0 | % | 1,727 | 5,227 | 12,901 | 15,408 | ||||||||||||||
Gold (troy ounces) |
||||||||||||||||||||
Kumtor |
100.0 | % | 74,000 | 62,000 | 301,000 | 303,000 | ||||||||||||||
Boroo |
100.0 | % | 59,000 | 80,000 | 254,000 | 283,000 | ||||||||||||||
Total |
133,000 | 142,000 | 555,000 | 586,000 | ||||||||||||||||
(i) | Net earnings for the year ended December 31, 2007, have been adjusted to exclude charges of $59 million ($0.16 per share diluted) related to the stock compensation transition to cash settlement and $153 million ($0.41 per share diluted) related to the restructuring of Centerra as well as a $25 million ($0.07 per share diluted) recovery of taxes due to tax legislation changes enacted by the federal government. Net earnings for the year ended December 31, 2006, have been adjusted to exclude $73 million ($0.19 per share diluted) in net earnings related to the recovery of taxes due to tax legislation changes enacted by the provincial and federal governments as well as $29 million ($0.08 per share diluted) in net earnings related to a gain on sale of our interest in the Fort a la Corne Joint Venture. Adjusted net earnings is a non-GAAP measure. Cameco believes the exclusion of these items provides a more meaningful basis for period-to-period comparisons of the companys financial results. | |
(ii) | Includes toll conversion supplied by Springfields Fuels Ltd. |
Three Months Ended | Year Ended | |||||||||||||||
Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | |||||||||||||
Revenue from |
||||||||||||||||
Products and services |
$ | 493,918 | $ | 512,069 | $ | 2,309,741 | $ | 1,831,690 | ||||||||
Expenses |
||||||||||||||||
Products and services sold |
325,015 | 334,984 | 1,211,664 | 1,127,772 | ||||||||||||
Depreciation, depletion and reclamation |
56,672 | 58,642 | 225,539 | 199,665 | ||||||||||||
Administration |
15,333 | 43,813 | 127,229 | 143,014 | ||||||||||||
Exploration |
17,067 | 14,686 | 66,813 | 58,152 | ||||||||||||
Research and development |
841 | 799 | 3,609 | 2,682 | ||||||||||||
Interest and other [note 8] |
(2,319 | ) | 2,576 | (32,673 | ) | (3,708 | ) | |||||||||
Cigar Lake remediation |
6,094 | 20,559 | 29,403 | 20,559 | ||||||||||||
Restructuring of gold business [note 16] |
8,000 | | 113,000 | | ||||||||||||
Stock option plan amendment [note 13] |
| | 94,175 | | ||||||||||||
Loss (gain) on sale of assets [note 9] |
(927 | ) | 458 | (4,028 | ) | (51,826 | ) | |||||||||
425,776 | 476,517 | 1,834,731 | 1,496,310 | |||||||||||||
Earnings from operations |
68,142 | 35,552 | 475,010 | 335,380 | ||||||||||||
Other income (expense) [note 10] |
(973 | ) | (744 | ) | (9,078 | ) | 10,046 | |||||||||
Earnings before income taxes and minority interest |
67,169 | 34,808 | 465,932 | 345,426 | ||||||||||||
Income tax expense (recovery) [note 11] |
(1,724 | ) | (8,540 | ) | 29,468 | (68,843 | ) | |||||||||
Minority interest |
7,395 | 3,008 | 20,352 | 38,554 | ||||||||||||
Net earnings |
$ | 61,498 | $ | 40,340 | $ | 416,112 | $ | 375,715 | ||||||||
Basic earnings per common share [note 12] |
$ | 0.18 | $ | 0.11 | $ | 1.18 | $ | 1.07 | ||||||||
Diluted earnings per common share [note 12] |
$ | 0.17 | $ | 0.11 | $ | 1.13 | $ | 1.02 | ||||||||
As At | ||||||||
Dec 31/07 | Dec 31/06 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 131,932 | $ | 334,089 | ||||
Accounts receivable |
347,097 | 402,847 | ||||||
Inventories |
437,487 | 416,479 | ||||||
Supplies and prepaid expenses |
210,464 | 191,831 | ||||||
Current portion of long-term receivables, investments and other [note 4] |
164,164 | 9,178 | ||||||
1,291,144 | 1,354,424 | |||||||
Property, plant and equipment |
3,546,162 | 3,312,152 | ||||||
Long-term receivables, investments and other [note 4] |
387,304 | 293,714 | ||||||
Goodwill |
146,772 | 180,139 | ||||||
4,080,238 | 3,786,005 | |||||||
Total assets |
$ | 5,371,382 | $ | 5,140,429 | ||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 541,283 | $ | 392,679 | ||||
Dividends payable |
17,220 | 14,092 | ||||||
Current portion of long-term debt |
8,816 | 7,900 | ||||||
Current portion of other liabilities [note 5] |
32,492 | 40,737 | ||||||
Future income taxes |
84,653 | 46,289 | ||||||
684,464 | 501,697 | |||||||
Long-term debt [note 6] |
717,130 | 696,691 | ||||||
Provision for reclamation |
284,673 | 228,496 | ||||||
Other liabilities [note 5] |
258,511 | 232,641 | ||||||
Future income taxes |
246,936 | 339,451 | ||||||
2,191,714 | 1,998,976 | |||||||
Minority interest |
435,807 | 400,071 | ||||||
Shareholders equity |
||||||||
Share capital |
819,268 | 812,769 | ||||||
Contributed surplus |
119,531 | 540,173 | ||||||
Retained earnings |
1,779,629 | 1,428,206 | ||||||
Accumulated other comprehensive income (loss) |
25,433 | (39,766 | ) | |||||
2,743,861 | 2,741,382 | |||||||
Total liabilities and shareholders equity |
$ | 5,371,382 | $ | 5,140,429 | ||||
Year Ended | ||||||||
Dec 31/07 | Dec 31/06 | |||||||
Share capital |
||||||||
Balance at beginning of period |
$ | 812,769 | $ | 779,420 | ||||
Shares repurchased [note 7] |
(22,750 | ) | | |||||
Stock option plan |
29,249 | 33,285 | ||||||
Debenture conversions |
| 64 | ||||||
Balance at end of period |
$ | 819,268 | $ | 812,769 | ||||
Contributed surplus |
||||||||
Balance at beginning of period |
$ | 540,173 | $ | 529,245 | ||||
Shares repurchased [note 7] |
(406,577 | ) | | |||||
Stock option plan amendment [note 13] |
(21,875 | ) | | |||||
Stock-based compensation |
13,770 | 17,549 | ||||||
Options exercised |
(5,960 | ) | (6,612 | ) | ||||
Debenture conversions |
| (9 | ) | |||||
Balance at end of period |
$ | 119,531 | $ | 540,173 | ||||
Retained earnings |
||||||||
Balance at beginning of period |
$ | 1,428,206 | $ | 1,108,748 | ||||
Transition adjustment financial instruments [note 1] |
5,343 | | ||||||
Net earnings |
416,112 | 375,715 | ||||||
Dividends on common shares |
(70,032 | ) | (56,257 | ) | ||||
Balance at end of period |
$ | 1,779,629 | $ | 1,428,206 | ||||
Accumulated other comprehensive income (loss) |
||||||||
Balance at beginning of period [note 1] |
$ | (39,766 | ) | $ | (53,397 | ) | ||
Transition adjustment financial instruments [note 1] |
38,839 | | ||||||
Other comprehensive income |
26,360 | 13,631 | ||||||
Balance at end of period |
$ | 25,433 | $ | (39,766 | ) | |||
Total retained earnings and accumulated other comprehensive income |
$ | 1,805,062 | $ | 1,388,440 | ||||
Shareholders equity at end of period |
$ | 2,743,861 | $ | 2,741,382 | ||||
Accumulated other comprehensive income (loss) |
||||||||
Balance at end of period consists of: |
||||||||
Unrealized foreign currency translation losses |
$ | (150,935 | ) | $ | (39,766 | ) | ||
Gains on derivatives designated as cash flow hedges |
182,734 | | ||||||
Unrealized loss on available-for-sale securities |
(6,366 | ) | | |||||
Balance at end of period |
$ | 25,433 | $ | (39,766 | ) | |||
Three Months Ended | Year Ended | |||||||||||||||
Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | |||||||||||||
Net earnings |
$ | 61,498 | $ | 40,340 | $ | 416,112 | $ | 375,715 | ||||||||
Other comprehensive income (loss), net of taxes [note 11] |
||||||||||||||||
Unrealized foreign currency translation gains (losses) |
9,658 | 37,780 | (111,169 | ) | 13,631 | |||||||||||
Gains on derivatives designated as cash flow hedges |
9,815 | | 206,215 | | ||||||||||||
Gains on derivatives designated as cash flow hedges
transferred to net earnings |
(23,135 | ) | | (62,320 | ) | | ||||||||||
Unrealized losses on assets available-for-sale |
(773 | ) | | (6,366 | ) | | ||||||||||
Other comprehensive income (loss) |
(4,435 | ) | 37,780 | 26,360 | 13,631 | |||||||||||
Total comprehensive income |
$ | 57,063 | $ | 78,120 | $ | 442,472 | $ | 389,346 | ||||||||
Three Months Ended | Year Ended | |||||||||||||||
Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | |||||||||||||
Operating activities |
||||||||||||||||
Net earnings |
$ | 61,498 | $ | 40,340 | $ | 416,112 | $ | 375,715 | ||||||||
Items not requiring (providing) cash: |
||||||||||||||||
Depreciation, depletion and reclamation |
56,672 | 58,642 | 225,539 | 199,665 | ||||||||||||
Provision for future taxes [note 11] |
(25,950 | ) | (49,330 | ) | (134,129 | ) | (184,639 | ) | ||||||||
Deferred charges (gains) |
13,505 | (3,793 | ) | (18,441 | ) | (43,449 | ) | |||||||||
Unrealized losses (gains) on derivatives |
1,487 | 9,702 | (50,032 | ) | 10,400 | |||||||||||
Stock-based compensation [note 13] |
5,567 | 2,995 | 13,770 | 17,549 | ||||||||||||
Stock option plan amendment [note 13] |
| | 94,175 | | ||||||||||||
Loss (gain) on sale of assets [note 9] |
(927 | ) | 458 | (4,028 | ) | (51,826 | ) | |||||||||
Equity in loss of associated companies [note 10] |
973 | 744 | 6,439 | 5,320 | ||||||||||||
Restructuring of gold business [note 16] |
8,000 | | 113,000 | | ||||||||||||
Cigar Lake remediation |
| 15,356 | | 15,356 | ||||||||||||
Minority interest |
7,395 | 3,008 | 20,352 | 38,554 | ||||||||||||
Other operating items [note 15] |
(71,176 | ) | (64,810 | ) | 117,969 | 35,375 | ||||||||||
Cash provided by operations |
57,044 | 13,312 | 800,726 | 418,020 | ||||||||||||
Investing activities |
||||||||||||||||
Acquisition of net business assets, net of cash acquired |
| | | (83,856 | ) | |||||||||||
Additions to property, plant and equipment |
(135,461 | ) | (148,576 | ) | (494,473 | ) | (459,559 | ) | ||||||||
Increase in long-term receivables, investments and other |
2,322 | (2,562 | ) | (38,167 | ) | (29,687 | ) | |||||||||
Proceeds on sale of property, plant and equipment |
926 | 46 | 5,824 | 46,404 | ||||||||||||
Cash used in investing |
(132,213 | ) | (151,092 | ) | (526,816 | ) | (526,698 | ) | ||||||||
Financing activities |
||||||||||||||||
Shares repurchased [note 7] |
(205,356 | ) | | (429,327 | ) | | ||||||||||
Decrease in debt |
(2,050 | ) | (1,700 | ) | (7,900 | ) | (156,700 | ) | ||||||||
Increase in debt |
28,126 | | 43,815 | | ||||||||||||
Issue of shares |
215 | 1,882 | 23,289 | 27,058 | ||||||||||||
Dividends |
(17,447 | ) | (14,084 | ) | (66,906 | ) | (52,660 | ) | ||||||||
Cash used in financing |
(196,512 | ) | (13,902 | ) | (437,029 | ) | (182,302 | ) | ||||||||
Decrease in cash during the period |
(271,681 | ) | (151,682 | ) | (163,119 | ) | (290,980 | ) | ||||||||
Exchange rate changes on foreign currency cash balances |
296 | 12,642 | (39,038 | ) | 1,876 | |||||||||||
Cash and cash equivalents at beginning of period |
403,317 | 473,129 | 334,089 | 623,193 | ||||||||||||
Cash and cash equivalents at end of period* |
$ | 131,932 | $ | 334,089 | $ | 131,932 | $ | 334,089 | ||||||||
Supplemental cash flow disclosure |
||||||||||||||||
Interest paid |
$ | 11,287 | $ | 11,334 | $ | 47,691 | $ | 53,551 | ||||||||
Income taxes paid |
$ | 21,377 | $ | 22,659 | $ | 154,748 | $ | 115,352 | ||||||||
* | As at December 31, 2007, our cash and cash equivalents balance consisted of $89,438 in cash and $42,494 in cash equivalents (primarily treasury bills). As at December 31, 2006 $73,159 in cash and $260,930 in cash equivalents (primarily commercial paper). |
1. | Accounting Policies |
|
These consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (GAAP) and follow the same accounting principles
and methods of application as the most recent annual consolidated financial statements
except for the recent accounting standards adopted described in (a). Since the interim
financial statements do not include all disclosures required by GAAP, they should be read in
conjunction with Camecos annual consolidated financial statements included in the 2006
annual financial review. Certain comparative figures for the prior period have been
reclassified to conform to the current periods presentation. |
(a) | Financial Instruments Recognition and Measurement, Hedges and Comprehensive
Income |
||
On January 1, 2007, Cameco adopted the standards issued by the Canadian Institute of
Chartered Accountants (CICA) relating to financial instruments, hedges and other
comprehensive income, as described in note 3(a) of the consolidated financial statements
for the year ended December 31, 2006. In accordance with the new standards, prior
periods have not been restated except for the new accounting policies affecting the
cumulative translation account (note 1(a)(iv)). |
|||
On January 1, 2007, Cameco recognized all of its financial assets and liabilities in the
consolidated balance sheets according to their classification. Any adjustment made to a
previous carrying amount was recognized as an adjustment to the balance of retained
earnings at that date or as the opening balance of accumulated other comprehensive
income (AOCI), net of income taxes. Cameco has added two new statements to the
consolidated financial statements entitled Consolidated Statements of Shareholders
Equity and Consolidated Statements of Comprehensive Income. |
(i) | Financial Assets and Financial Liabilities |
||
All financial assets and liabilities will be carried at fair value in the
consolidated balance sheets, except for items classified in the following categories,
which will be carried at amortized cost: loans and receivables, held-to-maturity
securities and financial liabilities not held for trading. Realized and unrealized
gains and losses on financial assets and liabilities that are held for trading will
be recorded in the consolidated statements of earnings. Unrealized gains and losses
on financial assets that are available for sale will be reported in other
comprehensive income (OCI) until realized, at which time they will be recorded in the
consolidated statements of earnings. On transition, there was no impact to Cameco as
the accounting was either unchanged or the area was not applicable at January 1,
2007. |
|||
Other significant accounting implications arising upon the adoption of the financial
instrument standards includes the use of the effective interest method of
amortization for any transaction costs or fees, premiums or discounts earned or
incurred for financial instruments measured at amortized cost. On transition, there
was no impact to Cameco on the amortization of these fees although applicable issue
costs, which were previously recognized as deferred charges, were reclassified to
their related financial liabilities. As a result, on transition Cameco recorded a net
decrease in long-term receivables, investments and other of $7,372,000 and a decrease
in long-term debt of $7,372,000. |
|||
Except as otherwise disclosed, the fair market value of Camecos financial assets and
liabilities approximates the carrying amount as a result of the short-term nature of
the instruments, or the variable interest rate associated with the instruments, or
the fixed interest rate of the instruments being similar to market rates. |
(ii) | Financial Instruments Risk Management |
||
The majority of revenues at Cameco are derived from the sale of uranium products,
electricity through its investment in Bruce Power L.P. (BPLP), and gold through its
investment in Centerra Gold Inc. (Centerra). Camecos uranium product financial
results are closely related to the long and short-term market price of uranium sales
and conversion services. Prices fluctuate and can be affected by demand for nuclear
power, worldwide production and uranium inventory levels, and political and economic
conditions in uranium producing and consuming countries. BPLPs revenue from
electricity is affected by changes in electricity prices associated with an open spot
market for electricity in Ontario. Centerras gold revenue is largely dependent on
the market price of gold, which can be affected by political and economic factors,
industry activity and the policies of central banks with respect to their level of
gold held as reserves. Financial results for Cameco are also impacted by changes in
foreign currency exchange rates and other operating risks. Finally, certain financial
assets are subject to credit risks including cash and securities, accounts
receivable, and commodity and currency instruments. |
|||
To mitigate risks associated with the fluctuations in the market price for uranium
products, Cameco seeks to maintain a portfolio of uranium product sales contracts
with a variety of delivery dates and pricing mechanisms that provide a degree of
protection from price volatility. To mitigate risks associated with the fluctuations
in the market price for electricity, BPLP enters into various energy and sales
related contracts that qualify as cash flow hedges as disclosed in note 1(a)(iii) and
note 3, derivatives. |
|||
To mitigate risks associated with foreign currency on its sale of uranium products,
Cameco enters into forward sales contracts to establish a price for future delivery
of the foreign currency. The majority of the contracts qualify as a cash flow hedge
as disclosed in note 1(a)(iii) and note 3, derivatives. |
|||
To mitigate risks associated with certain financial assets, Cameco will hold
positions with a variety of large creditworthy institutions. Sales of uranium
products, with short payment terms, are made to customers that management believes
are creditworthy. |
|||
(iii) | Hedge Accounting and Derivatives |
||
The purpose of hedging transactions is to modify Camecos exposure to one or more
risks by creating an offset between changes in the fair value of, or the cash flows
attributable to, the hedged item and the hedging item. Hedge accounting ensures that
the offsetting gains, losses, revenues and expenses are recognized to net earnings in
the same period or periods. When hedge accounting is appropriate, the hedging
relationship will be designated as a fair value hedge, a cash flow hedge, or a
foreign currency risk hedge related to a net investment in a self-sustaining foreign
operation. |
|||
At the inception of a hedging relationship, Cameco formally documents all
relationships between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various hedge transactions. The
process includes linking all derivatives to specific assets and liabilities on the
balance sheet or to specific firm commitments or forecasted transactions. Cameco also
formally assesses, both at the inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items. |
|||
For fair value hedges, changes in the fair value of the derivatives and corresponding
changes in fair value of the hedged items attributed to the risk being hedged will be
recognized in the consolidated statements of earnings. For cash flow hedges, the
effective portion of the changes in the fair values of the derivative instruments
will be recorded in OCI until the hedged items are recognized in the consolidated
statements of earnings. |
|||
At January 1, 2007, Cameco did not have any fair value hedges or hedges of net
investments in self-sustaining foreign operations. Upon adoption of the new
standards, Cameco measured its cash flow hedges at fair value, which resulted in a
decrease in other liabilities of $1,444,000 and an increase in AOCI of $1,444,000
pre-tax. Cameco also recognized an increase in long-term receivables, investments and
other of $54,567,000 and an increase of $54,567,000 in AOCI pre-tax for BPLPs
various energy and sales related cash flow hedges. |
Derivatives may be embedded in other financial instruments (the host instrument).
Prior to the adoption of the new standards, most embedded derivatives were not
accounted for separately from the host instrument except in cases such as Camecos
unsecured convertible debentures where the fair value of the option component was
reflected separately in contributed surplus. Under the new standards, embedded
derivatives are treated as separate derivatives when their economic characteristics
and risks are not clearly and closely related to those of the host instrument, the
terms of the embedded derivative are the same as those of a stand-alone derivative,
and the combined contract is not held for trading or designated at fair value. These
embedded derivatives are measured at fair value with subsequent changes recognized in
gains or losses on derivatives within interest and other on the consolidated
statements of earnings. |
|||
Upon adoption of the new standards, Cameco recognized embedded foreign currency
derivatives on certain of its uranium products sales contracts. As a result, Cameco
recorded a net increase in long-term receivables, investments and other of $8,348,000
and an increase of $8,348,000 in retained earnings pre-tax. |
|||
(iv) | Cumulative Translation Account |
||
Prior to the adoption of the financial instrument standards at January 1, 2007,
exchange gains and losses arising from the translation of the financial statements of
a self-sustaining foreign operation were recorded in the cumulative translation
account as a separate component of shareholders equity. Upon adoption of the new
standards, the exchange gains and losses are to be recognized in a separate component
of other comprehensive income with restatement of prior periods. The effect of the
change in policy is to adjust the opening balance of AOCI by $53,397,000 and
eliminate the cumulative translation account. |
The following table summarizes the opening adjustments, gross and net of future income
taxes, required to adopt the new standards: |
Retained Earnings | AOCI | |||||||||||||||
(thousands) | Gross | Net | Gross | Net | ||||||||||||
Cash flow hedges |
$ | | $ | | $ | 56,011 | $ | 38,839 | ||||||||
Recognition of embedded derivatives on
sales contracts |
8,348 | 5,343 | | | ||||||||||||
Net |
$ | 8,348 | $ | 5,343 | $ | 56,011 | $ | 38,839 | ||||||||
2. | Future Changes in Accounting Policy |
(a) | Inventories |
||
Effective January 1, 2008, Cameco will adopt the new Canadian standard, Handbook Section
3031, Inventories, which supersedes Handbook Section 3030 and converges with the
International Accounting Standard Boards recently amended standard IAS 2, Inventories. |
|||
The standard introduces significant changes to the measurement and disclosure of
inventory. The measurement changes include: the elimination of the last in first out
method (LIFO), the requirement to measure inventories at the lower of cost and net
realizable value, the allocation of overhead based on normal capacity, the use of the
specific cost method for inventories that are not ordinarily interchangeable or goods
and services produced for specific purposes, the requirement for an entity to use a
consistent cost formula for inventory of a similar nature and use, and the reversal of
previous write-downs to net realizable value when there is a subsequent increase in the
value of inventories. Disclosures of inventories have also been enhanced. Inventory
policies, carrying amounts, amounts recognized as an expense, write-downs and the
reversals of write-downs are required to be disclosed. |
|||
The adoption of this new standard is not expected to have a material impact on Camecos
consolidated financial statements. |
(b) | Financial Instruments Disclosure and Presentation |
||
Effective January 1, 2008, Cameco will adopt two new Canadian standards: Handbook
Section 3862, Financial Instruments Disclosures and Handbook Section 3863, Financial
Instruments Presentation. These sections replace Handbook Section 3861, Financial
Instruments Disclosures and Presentation, and enhance the users ability to evaluate
the significance of financial instruments to an entity, related exposures and the
management of these risks. |
|||
(c) | Capital Disclosures |
||
Effective January 1, 2008, Cameco will adopt the new Canadian standard, Handbook Section
1535, Capital Disclosures. This section establishes standards for disclosure of both
qualitative and quantitative information that enable users to evaluate the companys
objectives, policies and processes for managing capital. |
3. | Derivatives |
|
The following table summarizes the fair value of derivatives and classification on the
December 31, 2007, balance sheet: |
(thousands) | Cameco | BPLP | Total | |||||||||
Non-hedge derivatives: |
||||||||||||
Embedded derivatives sales contracts |
$ | 7,318 | $ | 7,185 | $ | 14,503 | ||||||
Foreign currency contracts |
14,834 | | 14,834 | |||||||||
Cash flow hedges: |
||||||||||||
Foreign currency contracts |
124,870 | | 124,870 | |||||||||
Energy and sales contracts |
| 67,546 | 67,546 | |||||||||
Net |
$ | 147,022 | $ | 74,731 | $ | 221,753 | ||||||
Classification: |
||||||||||||
Current portion of long-term receivables, investments
and other [note 4] |
$ | 125,101 | $ | 35,839 | $ | 160,940 | ||||||
Long-term receivables, investments and other [note 4] |
43,540 | 39,949 | 83,489 | |||||||||
Current portion of other liabilities [note 5] |
(17,213 | ) | (448 | ) | (17,661 | ) | ||||||
Other liabilities [note 5] |
(4,406 | ) | (609 | ) | (5,015 | ) | ||||||
Net |
$ | 147,022 | $ | 74,731 | $ | 221,753 | ||||||
The following tables summarize different components of the (gains) and losses on derivatives: |
|||
For the three months ended December 31, 2007 |
(thousands) | Cameco | BPLP | Total | |||||||||
Non-hedge derivatives: |
||||||||||||
Embedded derivatives sales contracts |
$ | 2,922 | $ | | $ | 2,922 | ||||||
Foreign currency contracts |
(3,139 | ) | | (3,139 | ) | |||||||
Energy and sales contracts |
| (1,241 | ) | (1,241 | ) | |||||||
Cash flow hedges: |
||||||||||||
Energy and sales contracts |
| (2,149 | ) | (2,149 | ) | |||||||
Ongoing hedge inefficiency |
1,676 | | 1,676 | |||||||||
Ineligible for hedge accounting |
(2,459 | ) | | (2,459 | ) | |||||||
Net |
$ | (1,000 | ) | $ | (3,390 | ) | $ | (4,390 | ) | |||
For the year ended December 31, 2007 | ||||||||||||
(thousands) | Cameco | BPLP | Total | |||||||||
Non-hedge derivatives: |
||||||||||||
Embedded derivatives sales contracts |
$ | (634 | ) | $ | | $ | (634 | ) | ||||
Foreign currency contracts |
(14,107 | ) | | (14,107 | ) | |||||||
Energy and sales contracts |
| (7,183 | ) | (7,183 | ) | |||||||
Cash flow hedges: |
||||||||||||
Energy and sales contracts |
| (7,616 | ) | (7,616 | ) | |||||||
Ongoing hedge inefficiency |
(6,252 | ) | | (6,252 | ) | |||||||
Ineligible for hedge accounting |
(17,814 | ) | | (17,814 | ) | |||||||
Net $ |
$ | (38,807 | ) | $ | (14,799 | ) | $ | (53,606 | ) | |||
Over the next twelve months, based on current exchange rates, Cameco expects an estimated
$89,300,000 of pre-tax gains from the foreign currency cash flow hedges to be reclassified
through other comprehensive income to net earnings. The maximum length of time Cameco hedges
its exposure to the variability in future cash flows related to foreign currency on
anticipated transactions is five years. |
|||
Over the next twelve months, based on current prices, Cameco expects an estimated
$33,200,000 of pre-tax gains from BPLPs various energy and sales related cash flow hedges
to be reclassified through other comprehensive income to net earnings. The maximum length of
time BPLP is hedging its exposure to the variability in future cash flows related to
electricity prices on anticipated transactions is five years. |
4. | Long-Term Receivables, Investments and Other
|
As At | ||||||||
(thousands) | Dec 31/07 | Dec 31/06 | ||||||
BPLP |
||||||||
Capital lease receivable from Bruce A L.P. |
$ | 97,328 | $ | 97,518 | ||||
Derivatives [note 3] |
75,788 | | ||||||
Receivable from Ontario Power Generation |
2,907 | 11,281 | ||||||
Accrued pension benefit asset |
5,864 | 11,992 | ||||||
Kumtor Gold Company |
||||||||
Reclamation trust fund |
4,795 | 6,999 | ||||||
Equity accounted investments |
||||||||
UNOR Inc. (market value $5,527) |
7,790 | 8,893 | ||||||
UEX Corporation (market value $258,223) |
14,153 | 19,151 | ||||||
Huron Wind (privately held) |
2,174 | 2,340 | ||||||
Minergia S.A.C. (privately held) |
683 | | ||||||
Available-for-sale securities |
||||||||
Western Uranium Corporation |
13,351 | | ||||||
Cue Capital Corp. |
6,751 | | ||||||
Derivatives [note 3] |
168,641 | 433 | ||||||
Deferred charges |
||||||||
Cost of sales |
54,943 | 75,854 | ||||||
Debt issue costs [note 1] |
| 7,372 | ||||||
Gold hedges |
| 593 | ||||||
Advances receivable |
57,739 | 46,094 | ||||||
Asset-backed commercial paper in default |
8,000 | | ||||||
Accrued pension benefit asset |
5,874 | 7,889 | ||||||
Other |
24,687 | 6,483 | ||||||
551,468 | 302,892 | |||||||
Less current portion |
(164,164 | ) | (9,178 | ) | ||||
Net |
$ | 387,304 | $ | 293,714 | ||||
5. | Other Liabilities
|
As At | ||||||||
(thousands) | Dec 31/07 | Dec 31/06 | ||||||
Deferred sales |
$ | 113,461 | $107,330 | |||||
Derivatives [note 3] |
21,619 | 10,127 | ||||||
Deferred currency hedges [note 1] |
| 26,333 | ||||||
Accrued post-retirement benefit liability |
13,143 | 12,166 | ||||||
Zircatec acquisition holdback |
10,000 | 20,000 | ||||||
BPLP |
||||||||
Accrued post-retirement benefit liability |
104,046 | 86,856 | ||||||
Derivatives [note 3] |
1,057 | | ||||||
Deferred revenue electricity contracts |
| 856 | ||||||
Other |
27,677 | 9,710 | ||||||
291,003 | 273,378 | |||||||
Less current portion |
(32,492 | ) | (40,737 | ) | ||||
Net |
$ | $258,511 | $ | $232,641 | ||||
6. | Long-Term Debt The fair value of the outstanding convertible debentures, based on the quoted market price of the debentures at December 31, 2007, was approximately $837,616,700. | |
Cameco has arranged for a standby product loan facility with one of its customers. The arrangement, which was finalized in 2006, allows Cameco to borrow up to 2,600,000 pounds U3O8 equivalent over the period 2006 to 2008 with repayment in 2008 and 2009. Of this material, up to 1,000,000 kilograms of uranium can be borrowed in the form of UF6. Under the loan facility, standby fees of 2.25% are payable based on the market value of the facility, and interest is payable on the market value of any amounts drawn at a rate of 4.0%. Any borrowings will be secured by letters of credit and are payable in kind. | ||
The market value of the available facility is based on the quoted market price of the products at December 31, 2007 and was approximately $242,600,000 (US). As at December 31, 2007, the company did not have any loan amounts outstanding under the facility. | ||
On January 29, 2008, Cameco gave notice of termination to the counterparty of the product loan arrangement. The loan facility will be terminated on April 1, 2008 and the associated letter of credit facilities were cancelled on January 31, 2008. Cameco will recognize previously deferred revenues and costs in its earnings for the first quarter of 2008. | ||
Previously, Cameco had two other product loan arrangements with another one of its customers. These arrangements had allowed Cameco to borrow up to 2,960,000 pounds U3O8 equivalent. Of this material, up to 400,000 kilograms of uranium could be borrowed in the form of UF6. During 2007, Cameco terminated these two arrangements and cancelled the related letter of credit facilities. | ||
7. | Share Capital |
(a) | At December 31, 2007, there were 344,398,698 common shares outstanding. | ||
(b) | Options in respect of 6,422,592 shares are outstanding under the stock option plan and are exercisable up to 2017. Upon exercise of certain existing options, additional options in respect of 15,300 shares would be granted. For the quarter ended December 31, 2007, 23,640 options were exercised (2006 189,740). For the year ended December 31, 2007, 1,681,366 options were exercised (2006 2,716,679). | ||
(c) | On September 6, 2007, Cameco announced an open market share repurchase program for cancellation of up to 17,700,000 of its common shares, representing 5% of its common shares then outstanding. This repurchase program is authorized to be in effect until September 10, 2008. As at December 31, 2007, 9,575,300 shares had been repurchased under this program at a cost of $429,327,000 at an average share price of $44.84. The excess of the repurchase cost of these shares over their book value, amounting to $406,577,000, has been charged to contributed surplus. |
8. | Interest and Other |
Three Months Ended | Year Ended | |||||||||||||||
(thousands) | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | ||||||||||||
Interest on long-term debt |
$ | 12,076 | $ | 9,671 | $ | 42,743 | $ | 43,223 | ||||||||
Other interest and financing charges |
(278 | ) | 2,206 | 8,922 | 4,642 | |||||||||||
Write-down of investment in commercial paper |
3,000 | | 5,000 | | ||||||||||||
Interest income |
(3,600 | ) | (12,506 | ) | (25,960 | ) | (32,348 | ) | ||||||||
Foreign exchange losses |
(1,290 | ) | 1,139 | 20,955 | 1,413 | |||||||||||
Losses (gains) on derivatives |
(4,390 | ) | 9,702 | (53,606 | ) | 10,400 | ||||||||||
Capitalized interest |
(7,837 | ) | (7,636 | ) | (30,727 | ) | (31,038 | ) | ||||||||
Net |
$ | (2,319 | ) | $ | 2,576 | $ | (32,673 | ) | $ | (3,708 | ) | |||||
Three Months Ended | Year Ended | |||||||||||||||
(thousands) | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | ||||||||||||
Sale of geological data |
$ | (927 | ) | $ | | $ | (5,317 | ) | $ | | ||||||
Interest in Fort a la Corne Joint Venture |
| | | (44,782 | ) | |||||||||||
Voting rights in Fort a la Corne Joint Venture |
| | | (5,889 | ) | |||||||||||
Other |
| 458 | 1,289 | (1,155 | ) | |||||||||||
Net |
$ | (927 | ) | $ | 458 | $ | (4,028 | ) | $ | (51,826 | ) | |||||
Three Months Ended | Year Ended | |||||||||||||||
(thousands) | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | ||||||||||||
Equity in loss of associated companies |
$ | (973 | ) | $ | (744 | ) | $ | (6,439 | ) | $ | (5,320 | ) | ||||
Claim settlement [note 17(b)] |
| | (3,175 | ) | | |||||||||||
Insurance settlement (Kumtor) |
| | | 15,366 | ||||||||||||
Other |
| | 536 | | ||||||||||||
Net |
$ | (973 | ) | $ | (744 | ) | $ | (9,078 | ) | $ | 10,046 | |||||
Three Months Ended | Year Ended | |||||||||||||||
(thousands) | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | ||||||||||||
Earnings before income taxes and
minority interest |
||||||||||||||||
Canada |
$ | (19,554 | ) | $ | (60,773 | ) | $ | (297,519 | ) | $ | (17,703 | ) | ||||
Foreign |
86,723 | 95,583 | 763,451 | 363,129 | ||||||||||||
$ | 67,169 | $ | 34,810 | $ | 465,932 | $ | 345,426 | |||||||||
Current income taxes |
||||||||||||||||
Canada |
$ | 21,558 | $ | 28,820 | $ | 99,066 | $ | 91,730 | ||||||||
Foreign |
2,668 | 11,970 | 64,531 | 24,066 | ||||||||||||
$ | 24,226 | $ | 40,790 | $ | 163,597 | $ | 115,796 | |||||||||
Future income taxes |
||||||||||||||||
Canada |
$ | (22,938 | ) | $ | (37,157 | ) | $ | (126,303 | ) | $ | (167,189 | ) | ||||
Foreign |
(3,012 | ) | (12,173 | ) | (7,826 | ) | (17,450 | ) | ||||||||
$ | (25,950 | ) | $ | (49,330 | ) | $ | (134,129 | ) | $ | (184,639 | ) | |||||
Income tax expense (recovery) |
$ | (1,724 | ) | $ | (8,540 | ) | $ | 29,468 | $ | (68,843 | ) | |||||
Three | ||||||||
Months | ||||||||
Ended | Year Ended | |||||||
(thousands) | Dec 31/07 | Dec 31/07 | ||||||
Gains on derivatives designated as cash flow hedges |
$ | (5,868 | ) | $ | 92,860 | |||
Gains on derivatives designated as cash flow hedges transferred
to net earnings |
(9,544 | ) | (28,104 | ) | ||||
Unrealized losses on assets available-for-sale |
(140 | ) | (1,152 | ) | ||||
Total income tax expense included in OCI |
$ | (15,552 | ) | $ | 63,604 | |||
Three Months Ended | Year Ended | |||||||||||||||
(thousands) | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | ||||||||||||
Basic earnings per share computation |
||||||||||||||||
Net earnings |
$ | 61,496 | $ | 40,340 | $ | 416,112 | $ | 375,715 | ||||||||
Weighted average common shares
outstanding |
345,550 | 352,172 | 351,175 | 351,224 | ||||||||||||
Basic earnings per common share |
$ | 0.18 | $ | 0.11 | $ | 1.18 | $ | 1.07 | ||||||||
Diluted earnings per share computation |
||||||||||||||||
Net earnings |
$ | 61,496 | $ | 40,340 | $ | 416,112 | $ | 375,715 | ||||||||
Dilutive effect of: |
||||||||||||||||
Convertible debentures |
2,429 | 2,268 | 9,624 | 8,992 | ||||||||||||
Net earnings, assuming dilution |
$ | 63,925 | $ | 42,608 | $ | 425,736 | $ | 384,707 | ||||||||
Weighted average common shares outstanding |
345,550 | 352,172 | 351,175 | 351,224 | ||||||||||||
Dilutive effect of: |
||||||||||||||||
Convertible debentures |
21,209 | 21,209 | 21,209 | 21,209 | ||||||||||||
Stock options |
2,569 | 3,927 | 4,487 | 4,402 | ||||||||||||
Weighted average common shares
outstanding, assuming dilution |
369,328 | 377,308 | 376,871 | 376,835 | ||||||||||||
Diluted earnings per common share |
$ | 0.17 | $ | 0.11 | $ | 1.13 | $ | 1.02 | ||||||||
13. | Stock-Based Compensation |
Stock Option Plan | ||
Cameco has established a stock option plan under which options to purchase common shares may be granted to officers and other employees of Cameco. The options vest over three years and expire eight years from the date granted. Options granted prior to 1999 expire 10 years from the date of the grant of the option. | ||
The aggregate number of common shares that may be issued pursuant to the Cameco stock option plan shall not exceed 43,017,198, of which 24,011,079 shares have been issued. | ||
On July 27, 2007, Camecos board of directors approved an amendment to the stock option program introducing a cash settlement feature for the exercise of employee stock options. The cash settlement feature allows option holders to elect to receive an amount in cash equal to the intrinsic value, being the excess market price of the common share over the exercise price of the option, instead of exercising the option and acquiring common shares. All outstanding stock options are now classified as liabilities and are carried at their intrinsic value. The intrinsic value of the liability is marked to market each period. The intrinsic value is amortized to expense over the shorter of, the period to eligible retirement, or the vesting period. Previously, all stock options were classified as equity and were accounted for using the fair value method. Under this method, the compensation cost of options granted was measured at estimated fair value at the grant date and recognized over the shorter of, the period to eligible retirement, or the vesting period. The impact of the reclassification of the stock options at July 27, 2007, was an increase in liabilities of $116,050,000, a decrease in contributed surplus of $21,875,000 and a decrease to earnings of $94,175,000. In addition, a future tax recovery of $35,225,000 was recorded. | ||
For the quarter ended December 31, 2007, the amount recorded for stock compensation was a net recovery of $23,931,000 (2006 expense $2,995,000). For the year ended December 31, 2007, the amount recorded was a net recovery of $4,868,000 (2006 expense $17,549,000). These amounts are exclusive of the expense recorded upon adoption of the cash settlement feature on July 27, 2007. | ||
The fair value of the options granted prior to July 27, 2007, was determined using the Black-Scholes option-pricing model with the following assumptions: |
Year Ended | ||||||||
Dec 31/07 | Dec 31/06 | |||||||
Number of options granted |
973,475 | 1,528,130 | ||||||
Average strike price |
$ | 46.82 | $ | 41.04 | ||||
Expected dividend |
$ | 0.20 | $ | 0.16 | ||||
Expected volatility |
36 | % | 35 | % | ||||
Risk-free interest rate |
4.0 | % | 4.0 | % | ||||
Expected life of option |
3.5 years | 4 years | ||||||
Expected forfeitures |
15 | % | 15 | % | ||||
Weighted average grant date fair values |
14.30 | $ | 13.19 | |||||
14. | Goodwill |
Cameco tests goodwill for possible impairment on an annual basis and at any other time if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the third quarter of 2007, Cameco completed the goodwill impairment test for all reporting units. The results of this test have indicated there is no impairment. |
15. | Statements of Cash Flows | |
Other Operating Items |
Three Months Ended | Year Ended | |||||||||||||||
(thousands) | Dec 31/07 | Dec 31/06 | Dec 31/07 | Dec 31/06 | ||||||||||||
Inventories |
$ | (49,755 | ) | $ | 34,768 | $ | (61,810 | ) | $ | (63,623 | ) | |||||
Accounts receivable |
(92,903 | ) | (192,081 | ) | 103,118 | 36,180 | ||||||||||
Accounts payable and accrued liabilities |
25,237 | 101,611 | 27,677 | 58,258 | ||||||||||||
Other |
46,245 | (9,108 | ) | 48,984 | 4,560 | |||||||||||
Total |
$ | (71,176 | ) | $ | (64,810 | ) | $ | 117,969 | $ | 35,375 | ||||||
16. | Restructuring of the Gold Business |
During the first quarter of 2007, the Parliament of the Kyrgyz Republic accepted in the first reading and returned to committee for further deliberation draft legislation that, among other things, challenges the legal validity of Kumtor Gold Company (Kumtor) agreements with the Kyrgyz Republic, proposes recovery of additional taxes on amounts relating to past activities, and provides for the transfer of gold deposits (including Kumtor) to a state-owned entity. If the law is enacted, there would be a substantial risk of harm to Centerras rights and therefore the value of Camecos investment in Centerra. | ||
As a result, Cameco and Centerra entered into discussions with the Kyrgyz Government. These discussions resulted in the signing of two agreements, both dated August 30, 2007, between the Government of the Kyrgyz Republic and, respectively, Cameco and Centerra. Under the terms of the agreements, the Kyrgyz Government and Kyrgyzaltyn JSC, a joint stock company owned by the Kyrgyz Government, agree to support Centerras continuing long-term development of the Kumtor project and agree to facilitate eventual divestiture of Camecos interest in Centerra. In return, the Kyrgyz Government will receive 32,305,238 shares (22,305,238 net from Cameco and 10,000,000 treasury shares from Centerra) upon closing of the definitive legal agreements. Of these, 15,000,000 shares will be received immediately and 17,305,238 shares will be held in escrow to be released within four years subject to a number of conditions, including the approval by the Parliament of the Kyrgyz Republic. | ||
These agreements were originally to expire on October 31, 2007, but the parties have agreed to extend the deadline for closing the transactions to February 15, 2008. The conditions that gave rise to these agreements still exist and Cameco believes the number of Centerra shares that would have been transferred to the Kyrgyz Government is indicative of the ultimate cost to remedy those conditions. Thus, Cameco has recorded a charge of $113,000,000 ($153,000,000 after a net tax expense of $40,000,000). |
17. | Commitments and Contingencies |
The following represent the material legal claims against the company and its subsidiaries. |
(a) | On February 12, 2004, Cameco, Cameco Bruce Holdings II Inc., BPC Generation Infrastructure Trust and TransCanada Pipelines Limited (collectively, the Consortium) sent a letter to British Energy Limited and British Energy International Holdings Limited (collectively, BE) requesting, amongst other things, indemnification for breach of a representation and warranty contained in the February 14, 2003, Amended and Restated Master Purchase Agreement. The alleged breach is that the Unit 8 steam generators were not in good condition, repair and proper working order, having regard to their use and age. This defect was discovered during a planned outage conducted just after closing. As a result of this defect, the planned outage had to be significantly extended. The Consortium has claimed damages in the amount of $64,558,200 being 79.8% of the $80,900,000 of damages actually incurred, plus an unspecified amount to take into account the reduced operating life of the steam generators. The parties have agreed that the arbitration should be before a single arbitrator. |
In anticipation of this claim, BE issued on February 10, 2006 and then served on Ontario Power Generation Inc. and Bruce Power LP a Statement of Claim. This Statement of Claim seeks damages for any amounts that BE is found liable to pay to the Consortium in connection with the Unit 8 steam generator arbitration described above, damages in the amount of $500,000,000, costs and pre and post judgment interest amongst other things. This action is in abeyance pending further developments on the Unit 8 steam generator arbitration. | |||
Management is of the opinion, after review of the facts with counsel, that this action against Bruce Power LP will not have a material financial impact on Camecos financial position, results of operations and liquidity. |
(b) | Pursuant to an agreement between Centerra Gold Mongolia Limited (CGM) and Gatsuurt LLC, an unrelated Mongolian company, under which CGM acquired the Gatsuurt licenses, CGM agreed to transfer the principal license covering the Gatsuurt property to Gatsuurt LLC if CGM did not complete a feasibility study by December 31, 2005. CGM completed a feasibility study in December 2005. Gatsuurt LLC informed Centerra that it does not believe that CGM complied with its obligation and began proceedings in the Mongolian National Arbitration Court (MNAC) alleging non-compliance by CGM and seeking the return of the principal license for the Gatsuurt property. CGM believes that the Gatsuurt LLC claim is without merit and on July 10, 2007, filed a petition with Mongolias District Court contesting the jurisdiction of the MNAC. On July 25, 2007, the Mongolian District Court returned CGMs petition, without a decision on the jurisdictional issue, to permit CGM to supplement its submissions. All proceedings were suspended in August 2007 pending the outcome of settlement discussions. CGM and Gatsuurt LLC have reached an agreement in principle to suspend, and upon signing a definitive agreement, to terminate the arbitration proceedings between CGM and Gatsuurt LLC. In anticipation of a settlement, CGM has recorded a $3,000,000 (US) charge as an estimate of the cost to settle the matter. |
(c) | Cameco, as a partner in BPLP, has provided the following financial assurances, with varying terms to 2018: |
(i) | Licensing assurances to Canadian Nuclear Safety Commission of up to $133,300,000. At December 31, 2007, Camecos actual exposure under these assurances was $23,700,000. | ||
(ii) | Guarantees to customers under power sale agreements of up to $47,000,000. Cameco did not have any actual exposure under these guarantees at December 31, 2007. | ||
(iii) | Termination payments to Ontario Power Generation Inc. pursuant to the lease agreement of $58,300,000. | ||
The fair value of these guarantees is nominal. |
18. | Port Hope Conversion Facility |
On July 13, 2007, Cameco discovered uranium and other production-associated chemicals in the soil beneath its Port Hope uranium hexafluoride (UF6) conversion plant. As a result, production of UF6 has been suspended until Cameco is able to remove the contaminated soil and implement necessary corrective measures. Current estimates indicate that the clean up of the contaminated area will cost approximately $15,000,000 to $20,000,000 and a total of $17,000,000 was recognized in earnings for 2007. |
19. | Segmented Information |
For the three months ended December 31, 2007 |
Fuel | Inter- | |||||||||||||||||||||||
Uranium | Services | Electricity | Gold | Segment | Total | |||||||||||||||||||
Revenue |
$ | 218,881 | $ | 76,522 | $ | 113,785 | $ | 87,799 | $ | (3,069 | ) | $ | 493,918 | |||||||||||
Expenses |
||||||||||||||||||||||||
Products and services sold |
114,479 | 102,119 | 55,730 | 55,917 | (3,230 | ) | 325,015 | |||||||||||||||||
Depreciation, depletion and reclamation |
23,649 | 10,135 | 11,740 | 11,148 | | 56,672 | ||||||||||||||||||
Exploration |
11,469 | | | 5,598 | | 17,067 | ||||||||||||||||||
Research and development |
231 | 610 | | | | 841 | ||||||||||||||||||
Other expense |
977 | | | | | 977 | ||||||||||||||||||
Cigar Lake remediation |
6,094 | | | | | 6,094 | ||||||||||||||||||
Restructuring costs [note 16] |
| | | 8,000 | | 8,000 | ||||||||||||||||||
Loss on sale of assets |
(927 | ) | | | | | (927 | ) | ||||||||||||||||
Non-segmented expenses |
13,010 | |||||||||||||||||||||||
Earnings (loss) before income taxes
and minority interest |
62,909 | (36,342 | ) | 46,315 | 7,136 | 161 | 67,169 | |||||||||||||||||
Income tax expense [note 11] |
(1,724 | ) | ||||||||||||||||||||||
Minority interest |
7,395 | |||||||||||||||||||||||
Net earnings |
$ | 61,498 | ||||||||||||||||||||||
For the three months ended December 31, 2006 |
Fuel | Inter- | |||||||||||||||||||||||
Uranium | Services | Electricity | Gold | Segment | Total | |||||||||||||||||||
Revenue |
$ | 242,227 | $ | 83,496 | $ | 91,488 | $ | 99,811 | $ | (4,953 | ) | $ | 512,069 | |||||||||||
Expenses |
||||||||||||||||||||||||
Products and services sold |
138,342 | 63,214 | 63,462 | 75,209 | (5,243 | ) | 334,984 | |||||||||||||||||
Depreciation, depletion and reclamation |
26,620 | 8,088 | 10,817 | 13,321 | (204 | ) | 58,642 | |||||||||||||||||
Exploration |
7,196 | | | 7,490 | | 14,686 | ||||||||||||||||||
Research and development |
| 799 | | | | 799 | ||||||||||||||||||
Other expense |
753 | | | | | 753 | ||||||||||||||||||
Cigar Lake remediation |
20,559 | | | | | 20,559 | ||||||||||||||||||
Loss on sale of assets |
(51 | ) | 509 | | | | 458 | |||||||||||||||||
Non-segmented expenses |
46,380 | |||||||||||||||||||||||
Earnings (loss) before income taxes
and minority interest |
48,808 | 10,886 | 17,209 | 3,791 | 494 | 34,808 | ||||||||||||||||||
Income tax expense [note 11] |
(8,540 | ) | ||||||||||||||||||||||
Minority interest |
3,008 | |||||||||||||||||||||||
Net earnings |
$ | 40,340 | ||||||||||||||||||||||
For the year ended December 31, 2007 |
Fuel | Inter- | |||||||||||||||||||||||
Uranium | Services | Electricity | Gold | Segment | Total | |||||||||||||||||||
Revenue |
$ | 1,269,386 | $ | 238,620 | $ | 417,818 | $ | 404,881 | $ | (20,964 | ) | $ | 2,309,741 | |||||||||||
Expenses
|
||||||||||||||||||||||||
Products and services sold |
516,256 | 237,846 | 233,000 | 245,992 | (21,430 | ) | 1,211,664 | |||||||||||||||||
Depreciation, depletion and reclamation |
104,665 | 24,089 | 45,842 | 50,943 | | 225,539 | ||||||||||||||||||
Exploration |
46,044 | | | 20,769 | | 66,813 | ||||||||||||||||||
Research and development |
231 | 3,378 | | | | 3,609 | ||||||||||||||||||
Other expense |
6,425 | | | 3,175 | | 9,600 | ||||||||||||||||||
Cigar Lake remediation |
29,403 | | | | | 29,403 | ||||||||||||||||||
Restructuring costs [note 16] |
| | | 113,000 | | 113,000 | ||||||||||||||||||
Loss (gain) on sale of assets |
(5,829 | ) | | 1,801 | | | (4,028 | ) | ||||||||||||||||
Non-segmented expenses |
188,209 | |||||||||||||||||||||||
Earnings (loss) before income taxes
and minority interest |
572,191 | (26,693 | ) | 137,175 | (28,998 | ) | 466 | 465,932 | ||||||||||||||||
Income tax expense [note 11] |
29,468 | |||||||||||||||||||||||
Minority interest |
20,352 | |||||||||||||||||||||||
Net earnings |
$ | 416,112 | ||||||||||||||||||||||
For the year ended December 31, 2006 |
Fuel | Inter- | |||||||||||||||||||||||
Uranium | Services | Electricity | Gold | Segment | Total | |||||||||||||||||||
Revenue |
$ | 803,287 | $ | 224,044 | $ | 407,569 | $ | 414,150 | $ | (17,360 | ) | $ | 1,831,690 | |||||||||||
Expenses |
||||||||||||||||||||||||
Products and services sold |
472,103 | 180,177 | 221,036 | 268,366 | (13,910 | ) | 1,127,772 | |||||||||||||||||
Depreciation, depletion and reclamation |
94,179 | 19,084 | 43,490 | 44,379 | (1,467 | ) | 199,665 | |||||||||||||||||
Exploration |
31,743 | | | 26,409 | | 58,152 | ||||||||||||||||||
Research and development |
| 2,682 | | | | 2,682 | ||||||||||||||||||
Other expense |
4,154 | | | (15,366 | ) | | (11,212 | ) | ||||||||||||||||
Cigar Lake remediation |
20,559 | | | | | 20,559 | ||||||||||||||||||
Gain on sale of assets |
(347 | ) | 509 | | (1,317 | ) | | (1,155 | ) | |||||||||||||||
Non-segmented expenses |
89,801 | |||||||||||||||||||||||
Earnings before income taxes and
minority interest |
180,896 | 21,592 | 143,043 | 91,679 | (1,983 | ) | 345,426 | |||||||||||||||||
Income tax recovery [note 11] |
(68,843 | ) | ||||||||||||||||||||||
Minority interest |
38,554 | |||||||||||||||||||||||
Net earnings |
$ | 375,715 | ||||||||||||||||||||||