CALGARY, Jan. 29 /PRNewswire-FirstCall/ -- CE FRANKLIN LTD.
(TSX.CFT, AMEX.CFK) reported record net income of $8.8 million or
$0.48 per share (basic) for the fourth quarter ended December 31,
2008, an increase of 267% over the $2.4 million or $0.13 per share
earned in the fourth quarter ended December 31, 2007. For 2008, net
income was $21.7 million or $1.19 per share (basic), an increase of
60% over the $13.6 million or $0.74 per share of net income earned
in 2007. Financial Highlights -------------------- (millions of
Cdn.$ except Three Months Ended Year Ended per share data) December
31 December 31 ----------------------- ----------------------- 2008
2007 2008 2007 ----------- ----------- ----------- -----------
(unaudited) (unaudited) Sales $ 161.2 $ 112.3 $ 547.4 $ 466.3 Gross
profit 33.9 20.4 107.7 84.6 Gross profit - % of sales 21.0% 18.2%
19.7% 18.1% EBITDA(1) 14.3 5.1 35.8 25.7 EBITDA(1) % of sales 8.9%
4.5% 6.5% 5.5% Net income $ 8.8 $ 2.4 $ 21.7 $ 13.6 Per share -
basic $ 0.48 $ 0.13 $ 1.19 $ 0.74 - diluted $ 0.47 $ 0.13 $ 1.17 $
0.72 Net working capital(2) $ 142.8 $ 134.7 Bank operating loan(2)
$ 34.9 $ 44.3 "2008 was the second most profitable year in the
Company's history. CE Franklin is entering a challenging business
environment in 2009 with a strong balance sheet and attractive
strategies to strengthen its distribution network, product lines
and end use markets," said Michael West, President and CEO. Net
income for the fourth quarter of 2008 was a record $8.8 million, up
$6.4 million from the fourth quarter of 2007. Sales reached $161.2
million, an increase of $48.9 million (44%) from the fourth quarter
of 2007. Capital project business comprised 60% of sales, and
increased $34.6 million (55%) over the prior year period, driven by
a 39% increase in well completions over the comparable period.
Continued growth of oil sands revenues and increased tubular steel
sales also contributed to increased capital project sales.
Extremely tight tubular steel supply conditions during 2008 have
resulted in product cost increases in excess of 50%, and
contributed to the increase in sales. The acquisition of JEN Supply
Inc. ("JEN Supply") in the fourth quarter of 2007 contributed to
the increase in Maintenance, Repair and Operating supplies ("MRO")
sales. Gross profit increased by $13.5 million (66%) over the prior
year period due to the increase in sales and gross profit margins.
Gross profit margins for the fourth quarter were 21.0% up from the
prior year period at 18.2%. Selling, general and administrative
expenses increased by $4.1 million to $19.4 million for the quarter
due to increased variable compensation driven by the increase in
earnings, increased facility costs with the opening of the new
Edmonton Distribution Centre during the second quarter, and the
addition of the JEN Supply operating costs. Lower interest expense
was associated with reduced average debt levels and lower floating
interest rates in the fourth quarter of 2008 as compared to the
same period in 2007. Income taxes increased by $3.2 million in the
fourth quarter compared to the prior year period due to higher
pre-tax earnings offset slightly by a reduction in income tax
rates. The weighted average number of shares outstanding during the
fourth quarter was down slightly from the prior year period. Net
income per share (basic) was $0.48 in the fourth quarter of 2008,
an increase of 269% over the $0.13 earned in the fourth quarter of
2007, consistent with the increase in net earnings. Net income for
the year ended December 31, 2008 was $21.7 million, up $8.1 million
(60%) from the year ended December 31, 2007. Sales reached $547.4
million, up $81.2 million (17%) compared to the prior year. The
increase in sales was attributable to increased tubular product
prices, the acquisitions of JEN Supply and Full Tilt Field Services
Limited ("Full Tilt") and increased oil sands and conventional
oilfield market share and industry activity. Average rig count
increased by 8% and well completions increased by 2% from prior
year levels. Gross profit increased by $23.1 million (27%) over the
prior year to a record $107.7 million, due to increased sales and
gross profit margins. Increased supplier rebates associated with
higher purchasing levels, and increased tubular margins were the
principal reasons for the improvement in margins. Selling, general
and administrative expenses increased by $13.5 million (23%) in
2008 to $71.6 million due to the addition of operating expenses
associated with the JEN Supply and Full Tilt acquisitions,
increased variable compensation expense driven by the increase in
earnings, and increased facility costs associated with the opening
of the new Distribution Centre in the second quarter of 2008.
Interest expense declined due to reduced average debt levels and
floating interest rates in 2008. Income taxes increased by $3.4
million in 2008 due to higher pre-tax earnings offset slightly by a
reduction in income tax rates. The weighted average number of
shares outstanding during the year was down slightly compared to
the prior year. Net income per share (basic) was $1.19 for the
year, an increase of 61%, consistent with the increase in net
income. Business Outlook The recent upheaval in global credit
markets has contributed to significant capital market volatility,
resulting in deleveraging, repricing of risk and ultimately the
retrenchment of consumption. Oil and gas markets have experienced
similar upheaval. Our customers continue to assess the impact of
these changes on their businesses and capital expenditure plans in
2009. We expect oil and gas well completions will decline sharply
in 2009 to levels not seen since 2002. Approximately 60% of the
Company's sales are driven by our customers' capital project
expenditures. The Company expects these conditions will contribute
to increased consolidation of oil and gas customers, stable to
deflationary product costs and improved labour availability. We
enter 2009 with a strong balance sheet and are positioned to pursue
our strategies to increase market share in both the conventional
oilfield and oil sands markets. Over the medium to longer term, the
Company is confident that it can continue to strengthen and improve
the profitability of its distribution network by expanding its
product lines, supplier relationships and capability to service
additional oil and gas and industrial end use markets. (1) EBITDA
represents net income before interest, taxes, depreciation and
amortization. EBITDA is a supplemental non-GAAP financial measure
used by management, as well as industry analysts, to evaluate
operations. Management believes that EBITDA, as presented,
represents a useful means of assessing the performance of the
Company's ongoing operating activities, as it reflects the
Company's earnings trends without showing the impact of certain
charges. The Company is also presenting EBITDA and EBITDA as a
percentage of sales because it is used by management as
supplemental measures of profitability. The use of EBITDA by the
Company has certain material limitations because it excludes the
recurring expenditures of interest, income tax, and amortization
expenses. Interest expense is a necessary component of the
Company's expenses because the Company borrows money to finance its
working capital and capital expenditures. Income tax expense is a
necessary component of the Company's expenses because the Company
is required to pay cash income taxes. Amortization expense is a
necessary component of the Company's expenses because the Company
uses property and equipment to generate sales. Management
compensates for these limitations to the use of EBITDA by using
EBITDA as only a supplementary measure of profitability. EBITDA is
not used by management as an alternative to net income, as an
indicator of the Company's operating performance, as an alternative
to any other measure of performance in conformity with generally
accepted accounting principles or as an alternative to cash flow
from operating activities as a measure of liquidity. A
reconciliation of EBITDA to Net income is provided within the table
on page 4 of this press release. Not all companies calculate EBITDA
in the same manner and EBITDA does not have a standardized meaning
prescribed by GAAP. Accordingly, EBITDA, as the term is used
herein, is unlikely to be comparable to EBITDA as reported by other
entities. (2) Net working capital is defined as current assets less
accounts payable and accrued liabilities, income taxes payable and
other current liabilities. Net working capital and Bank operating
loan are as at quarter end. Overview CE Franklin is a leading
distributor of pipe, valves, flanges, fittings, production
equipment, tubular products and other general industrial supplies
primarily to the oil and gas industry in Canada through its 44
branches situated in towns and cities that serve oil and gas fields
of the western Canadian sedimentary basin. In addition, the Company
distributes similar products to the oil sands, refining, and
petrochemical industries and non-oilfield related industries such
as forestry and mining. The Company's branch operations service
over 3,000 customers by providing the right materials where and
when they are needed, and for the best value. Our branches,
supported by our centralized distribution centre in Edmonton,
Alberta, stock over 25,000 stock keeping units. This infrastructure
enables us to provide our customers with the products they need on
a same day or over night basis. Our centralized inventory and
procurement capabilities allow us to leverage our scale to enable
industry leading hub and spoke purchasing and logistics
capabilities. The branches are also supported by services provided
by the Company's corporate office in Calgary, Alberta including
sales, marketing, product expertise, logistics, invoicing, credit
and collection and other business services. The Company's shares
trade on the TSX ("CFT") and AMEX ("CFK") stock exchanges. Smith
International Inc., a major oilfield service company based in the
United States, owns 54% of the Company's shares. Business and
Operating Strategy The Company is pursuing the following strategies
to grow its business profitably: - Expand the reach and market
share serviced by our distribution network. We are focusing our
sales efforts and product offering on servicing complex, multi-site
needs of large and emerging customers in the energy sector. In 2008
we continued to invest in our distribution network by opening a
branch operation in Red Earth, Alberta and by expanding our
facilities at five existing branch operations. Last spring, we
successfully completed the move to our new 151,000 square foot
Distribution Centre and nine acre pipe yard located in Edmonton,
Alberta which positions us to service our growing distribution
network. Organic growth is expected to be complemented by selected
acquisitions such as the December 2007 acquisition of JEN Supply
which increased our market share in two existing markets and
expanded our presence in two additional markets. - Expand our
production equipment service capability to capture more of the
product life cycle requirements for the equipment we sell such as
down hole pump repair, oilfield engine maintenance, well
optimization and on site project management. This will
differentiate our service offering from our competitors and deepen
our relationship with customers. In the first quarter of 2009, we
plan to open a valve actuation centre at our Distribution Centre,
to service our customers' valve automation requirements. The
acquisition of Full Tilt in July 2007 provided us with the
capability to service oilfield engines and parts that we were
previously selling, and, by doing so; position us to attract new
customers to our core oilfield equipment distribution business. -
Focus on the oil sands and industrial project and MRO business by
leveraging our existing supply chain infrastructure, product and
project expertise. The Company is expanding its product line and
supplier relationships and expertise to provide the automation,
instrumentation and other specialty products that these customers
require. Fourth Quarter Operating Results The following table
summarizes CE Franklin's results of operations: (in millions of
Cdn. dollars except per share data) Three Months Ended December 31
----------------------------------------------- 2008 2007
----------------------- ----------------------- Sales $ 161.2
100.0% $ 112.3 100.0% Cost of sales (127.3) (79.0)% (91.9) (81.8)%
----------- ----------- ----------- ----------- Gross profit 33.9
21.0% 20.4 18.2% Selling, general and administrative expenses
(19.5) (12.1)% (15.3) (13.6)% Foreign exchange loss (0.1) - - 0.0%
----------- ----------- ----------- ----------- EBITDA 14.3 8.9%
5.1 4.5% Amortization (0.6) (0.4)% (0.7) (0.6)% Interest (0.2)
(0.1)% (0.5) (0.4)% ----------- ----------- ----------- -----------
Income before taxes 13.5 8.4% 3.9 3.5% Income tax expense (4.7)
(2.9)% (1.5) (1.3)% ----------- ----------- ----------- -----------
Net income 8.8 5.5% 2.4 2.1% ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- Net
income per share Basic $ 0.48 $ 0.13 Diluted $ 0.47 $ 0.13 Weighted
average number of shares outstanding (000's) Basic 18,149 18,393
Diluted 18,392 18,863 (in millions of Cdn. dollars except per share
data) Year Ended December 31
----------------------------------------------- 2008 2007
----------------------- ----------------------- Sales $ 547.4
100.0% $466.3 100.0% Cost of sales (439.7) (80.3)% (381.7) (81.9)%
----------- ----------- ----------- ----------- Gross profit 107.7
19.7% 84.6 18.1% Selling, general and administrative expenses
(71.6) (13.1)% (58.1) (12.4)% Foreign exchange loss (0.2) (0.0)%
(0.8) (0.2)% ----------- ----------- ----------- ----------- EBITDA
35.8 6.5% 25.7 5.5% Amortization (2.4) (0.4)% (2.8) (0.6)% Interest
(1.0) (0.2)% (2.0) (0.4)% ----------- ----------- -----------
----------- Income before taxes 32.4 6.0% 20.9 4.5% Income tax
expense (10.7) (2.0)% (7.3) (1.6)% ----------- -----------
----------- ----------- Net income 21.7 4.0% 13.6 2.9% -----------
----------- ----------- ----------- ----------- -----------
----------- ----------- Net income per share Basic $ 1.19 $ 0.74
Diluted $ 1.17 $ 0.72 Weighted average number of shares outstanding
(000's) Basic 18,255 18,337 Diluted 18,561 18,807 Sales Sales for
the quarter ended December 31, 2008 were $161.2 million, up 44%
from the quarter ended December 31, 2007, as detailed above in the
"Financial Highlights" discussion. (in millions of Cdn. $) Three
months ended Dec 31 Year ended Dec 31 -------------------------
------------------------- 2008 2007 2008 2007 ------------
------------ ------------ ------------ End use sales demand $ % $ %
$ % $ % Capital projects 97.3 60 62.7 56 314.0 57 269.6 58
Maintenance, repair and operating supplies (MRO) 63.9 40 49.6 44
233.4 43 196.7 42 ------------ ------------ ------------
------------ Total sales 161.2 100 112.3 100 547.4 100 466.3 100
Note: Capital project end use sales are defined by the Company as
consisting of tubulars and 80% of pipe, flanges and fittings; and
valves and accessories product sales respectively; MRO Sales are
defined by the Company as consisting of pumps and production
equipment, production services; general product and 20% of pipes,
flanges and fittings; and valves and accessory product sales
respectively. The Company uses oil and gas well completions and
average rig counts as industry activity measures to assess demand
for oilfield equipment used in capital projects. Oil and gas well
completions require the products sold by the Company to complete a
well and bring production on stream and are a good general
indicator of energy industry activity levels. Average drilling rig
counts are also used by management to assess industry activity
levels as the number of rigs in use ultimately drives well
completion requirements. The relative level of oil and gas
commodity prices are a key driver of industry capital project
activity as product prices directly impact the economic returns
realized by oil and gas companies. Well completion, rig count and
commodity price information for the fourth quarter and years 2008
and 2007 are provided in the table below. Q4 Average Year Average
--------------- % --------------- % 2008 2007 change 2008 2007
change ------- ------- --------------- ------- ------- Gas - Cdn.
$/gj (AECO spot) $6.76 $6.16 10% $8.18 $6.47 26% Oil - Cdn. $/bbl
(Synthetic Crude) $65.19 $85.70 (24%) $103.03 $76.48 35% Average
rig count 387 386 0% 398 367 8% Well completions: Oil 2,160 1,480
46% 6,223 5,443 14% Gas 4,811 3,546 36% 12,342 12,717 (3%) -------
------- --------------- ------- ------- Total well completions
6,971 5,026 39% 18,565 18,160 2% Average statistics are shown
except for well completions. Sources: Oil and Gas prices - First
Energy Capital Corp.; Rig count data - Hughes Christensen; Well
completion data - Daily Oil Bulletin Sales of capital project
related products were $97.3 million in the fourth quarter of 2008,
up 55% ($34.6 million) from the fourth quarter of 2007. Total well
completions increased by 39% to 6,971 in the fourth quarter of 2008
while the average working rig count was comparable to the prior
year period at 387 rigs. Gas wells comprised 69% of the total wells
completed in western Canada in the fourth quarter of 2008 compared
to 71% in the fourth quarter of 2007. Oil and gas capital
expenditure activity began to recover in the second and third
quarters of 2008 and continued through the fourth quarter resulting
in part from emerging gas exploration plays in northeast British
Columbia and oil pool development in southeast Saskatchewan
combined with strong oil and gas prices earlier in the year. Spot
gas and oil prices ended the fourth quarter at $6.63 per GJ (AECO)
and $34.61 per bbl (Synthetic Crude), a decrease of 2% and 47%,
respectively, from fourth quarter average prices. This, in
combination with the volatility experienced across global capital
markets, is expected to result in reduced industry cash flow,
access to capital and capital expenditure economics, which in turn
is expected to decrease demand for the Company's products in 2009.
MRO product sales are related to overall oil and gas industry
production levels and tend to be more stable than capital project
sales. MRO product sales for the quarter ended December 31, 2008
increased by $14.3 million (29%) to $63.9 million compared to the
quarter ended December 31, 2007 and comprised 40% of the Company's
total sales. The acquisition of JEN Supply in December 2007
contributed incremental sales of $6.4 million. The Company's
strategy is to grow profitability by focusing on its core western
Canadian oilfield equipment service business, complemented by an
increase in the product life cycle services provided to its
customers, and the focus on the emerging oil sands capital project
and MRO sales opportunities. Revenue results of these initiatives
to date are provided below: Q4 2008 Q4 2007 2008 2007 ------------
------------ ------------ ------------ Sales ($millions) $ % $ % $
% $ % Oilfield 141.9 88 107.1 95 491.3 90 431.4 93 Oil sands 14.5 9
2.9 3 39.4 7 23.7 5 Production services 4.8 3 2.3 2 16.7 3 11.2 2
------------ ------------ ------------ ------------ Total sales
161.2 100 112.3 100 547.4 100 466.3 100 Sales of oilfield products
to conventional western Canada oil and gas end use applications
were $141.9 million for the fourth quarter of 2008, up 32% from the
fourth quarter of 2007. Over half of this increase was comprised of
incremental sales from the acquisition of JEN Supply and the
increased sale of tubular steel products with the remaining
increase driven by the 39% increase in well completions compared to
the prior year period. Sales to oil sands end use applications
increased to $14.5 million in the fourth quarter compared to $2.9
million in the fourth quarter of 2007. The Company continues to
position its sales focus and Distribution Centre and Fort McMurray
branch to penetrate this emerging market for capital project and
MRO products. Production service sales were $4.8 million in the
fourth quarter of 2008 compared to $2.3 million in the fourth
quarter of 2007. Full Tilt was acquired at the end of the second
quarter of 2007, which provides oilfield engine maintenance and
crane equipment services based in Lloydminster. Gross Profit Q4
2008 Q4 2007 2008 2007 ----------- ----------- -----------
----------- Gross profit (millions) $ 33.9 $ 20.4 $107.7 $ 84.6
Gross profit margin as a % of sales 21.0% 18.2% 19.7% 18.1% Gross
profit composition by product sales category: Tubulars 15% 9% 13%
8% Pipe, flanges and fittings 32% 29% 31% 32% Valves and
accessories 15% 18% 17% 18% Pumps, production equipment and
services 13% 17% 15% 17% General 25% 27% 24% 25% -----------
----------- ----------- ----------- Total gross profit 100% 100%
100% 100% Gross profit reached a record $33.9 million in the fourth
quarter of 2008, up $13.5 million (66%) from the fourth quarter of
2007 due to the 44% increase in sales and improved gross profit
margins due to increased supplier rebates associated with higher
purchasing levels and improved tubular margins reflecting tight
product supply conditions. Gross profit composition in the fourth
quarter of 2008 remained fairly consistent with the prior year
period with the exception of tubulars, where sales and gross profit
increased due in part to the product cost inflation of steel and
tight product supply conditions. Selling, General and
Administrative ("SG&A") Costs Q4 2008 Q4 2007 2008 2007
------------- ------------- ------------- ------------- ($millions)
$ % $ % $ % $ % People costs 11.4 59 8.6 56 41.3 58 32.8 57 Selling
costs 3.2 16 2.4 16 10.2 14 7.8 13 Facility and office costs 3.3 17
2.4 16 12.8 18 9.7 17 Other 1.6 8 2.0 12 7.3 10 7.8 13
------------- ------------- ------------- ------------- SG&A
costs 19.5 100 15.4 100 71.6 100 58.1 100 SG&A costs as % of
sales 12% 14% 13% 12% SG&A costs increased $4.1 million (27%)
in the fourth quarter of 2008 from the prior year period and
represented 12% of sales compared to 14% in the prior year period.
The increase in people costs of $2.8 million reflects increased
variable compensation due to the increase in earnings and a 13%
increase in the number of employees. Selling costs were up $0.8
million compared to the prior year period due to increased sales
commissions and accounts receivable bad debt allowances. Facility
and office costs have increased in the fourth quarter of 2008 as
the Company moved into a new, larger distribution centre in
Edmonton in the second quarter. The addition of the JEN Supply
facilities and continued occupancy cost pressure in western Canada
contributed the remaining increase in cost. The Company leases 34
of its 44 branch locations as well as its corporate office in
Calgary and Distribution Centre. Five branch locations are owned
and five are operated by agents. The Company mitigates the cyclical
nature of industry activity levels by adjusting its variable and
fixed (primarily salaries and benefits) SG&A costs as activity
levels change. Amortization Expense Amortization expense of $0.6
million in the fourth quarter of 2008 was comparable to the fourth
quarter of 2007. Interest Expense Interest expense was $0.2 million
in the fourth quarter of 2008, down $0.3 million (53%) from the
fourth quarter of 2007 due to lower average borrowing levels and a
decline in average floating interest rates. Foreign Exchange Loss
Foreign exchange losses were nominal at $0.1 million, despite
significantly increased exchange rate volatility in the fourth
quarter of 2008, and amounts were consistent with the fourth
quarter of 2007. Losses reflect the impact of the weakening
Canadian dollar on United States dollar denominated product
purchases and net working capital liabilities. Income Tax Expense
The Company's effective tax rate for the fourth quarter of 2008 was
35.0%, compared to 38.3% in the fourth quarter of 2007. This
decrease was due principally to a reduction in statutory tax rates.
Substantially all of the Company's tax provision is currently
payable. Summary of Quarterly Financial Data The selected quarterly
financial data presented below is presented in Canadian dollars and
in accordance with Canadian GAAP. This information is derived from
the Company's unaudited quarterly financial statements. (in
millions of Cdn. dollars except per share data) Unaudited Q1 Q2 Q3
Q4 Q1 Q2 Q3 Q4 2007 2007 2007 2007 2008 2008 2008 2008 -------
----- ------ ------ ------- ----- ------ ------- Sales $154.3 $82.9
$116.8 $112.3 $140.6 $96.4 $149.3 $161.2 Gross profit 26.3 16.8
21.0 20.4 27.1 19.0 27.8 33.9 Gross profit % 17.0% 20.3% 18.0%
18.2% 19.3% 19.7% 18.6% 21.0% EBITDA 11.0 2.2 7.4 5.1 10.2 2.3 9.1
14.3 EBITDA as a % of sales 7.1% 2.7% 6.4% 4.5% 7.2% 2.4% 6.1% 8.9%
Net income 6.4 0.6 4.1 2.4 6.3 1.0 5.7 8.8 Net income as a % of
sales 4.1% 0.7% 3.6% 2.1% 4.5% 1.0% 3.8% 5.5% Net income per share
Basic $0.35 $0.03 $0.22 $0.13 $0.34 $0.05 $0.31 $0.48 Diluted $0.34
$0.03 $0.22 $0.13 $0.34 $0.05 $0.31 $0.47 Net working capital(1)
124.0 127.0 128.7 134.7 117.4 114.9 123.1 142.8 Bank operating
loan(1) 33.6 36.0 35.4 44.3 21.8 18.4 20.9 34.9 Total well
completions 6,200 3,057 3,877 5,026 4,595 2,607 4,392 6,971 (1) Net
working capital and bank operating loan amounts are as at quarter
end. The Company's sales levels are affected by weather conditions.
As warm weather returns in the spring each year the winter's frost
comes out of the ground rendering many secondary roads incapable of
supporting the weight of heavy equipment until they have dried out.
In addition, many exploration and production areas in northern
Canada are accessible only in the winter months when the ground is
frozen. As a result, the first and fourth quarters typically
represent the busiest time for oil and gas industry activity and
the highest sales activity for the Company. Sales levels drop
dramatically during the second quarter until such time as roads
have dried and road bans have been lifted. This typically results
in a significant reduction in earnings during the second quarter,
as the Company does not reduce its SG&A expenses during the
second quarter to offset the reduction in sales. Net working
capital (defined as current assets less accounts payable and
accrued liabilities, income taxes payable and other current
liabilities) and bank operating loan borrowing levels follow
similar seasonal patterns as sales. Liquidity and Capital Resources
The Company's primary internal source of liquidity is cash flow
from operating activities before net changes in non-cash working
capital balances. Cash flow from operating activities and the
Company's 364-day bank operating facility are used to finance the
Company's net working capital, capital expenditures required to
maintain its operations and growth capital expenditures. As at
December 31, 2008, borrowings under the Company's bank operating
loan were $34.9 million, a decrease of $9.4 million from December
31, 2007. Borrowing levels have decreased due to the Company
generating $25.8 million in cash flow from operating activities,
before net changes in non-cash working capital balances. This was
offset by an $8.3 million increase in net working capital, $5.2
million in capital and other expenditures, $0.9 million in
repayments of long term debt and capital lease obligations and $2.0
million for the purchase of shares to resource stock compensation
obligations. As at December 31, 2007, borrowings under the
Company's bank operating loan were $44.3 million, an increase of
$10.3 million from December 31, 2006. Borrowing levels increased as
business acquisitions of $18.0 million and net investments of $2.0
million to maintain property and equipment have been funded
principally by bank borrowings and cash flow from operations of
$9.8 million. Net working capital was $142.8 million at December
31, 2008, an increase of $8.1 million from December 31, 2007.
Accounts receivable increased by $11.2 million (13%) to $100.5
million at December 31, 2008 from December 31, 2007, due to
increased sales in the fourth quarter offset by a 18% improvement
in days sales outstanding in accounts receivable ("DSO") in the
fourth quarter of 2008 to 51 days compared to 62 days in the fourth
quarter of 2007. The improvement in DSO performance during the
fourth quarter of 2008 was due in part to a more efficient
invoicing process implemented in the first quarter of 2008 and a
general improvement in collections performance. DSO is calculated
using average sales per day for the quarter compared to the period
end accounts receivable balance. Inventory increased by $33.0
million (38%) at December 31, 2008 from December 31, 2007 in order
to resource a similar increase in sales levels. Inventory turns for
the fourth quarter of 2008 remained consistent at 4.2 times
compared to 4.3 times in the fourth quarter of 2007. Inventory
turns are calculated using cost of goods sold for the quarter on an
annualized basis compared to the period end inventory balance. The
company will adjust its investment in inventory to align with
anticipated lower industry activity levels and compressed supplier
lead times in 2009 in order to improve inventory turnover
efficiency. Accounts payable and accrued liabilities increased by
$38.4 million (86%) to $83.2 million at December 31, 2008 from
December 31, 2007 due mainly to an increase in purchasing to
resource higher sales levels. Capital expenditures in 2008 were
$5.6 million, an increase of $3.6 million and $2.5 million over
2007 and 2006 expenditures respectively. The increase in
expenditures were directed towards the new Distribution Centre
which increased capacity by approximately 75% over the previous
facility and the purchase of a new Fort St. John branch location
which will more than double the Company's capacity in the growing
north east British Columbia market. The Company has a 364 day bank
operating loan facility in the amount of $60.0 million arranged
with a syndicate of three banks that matures in July 2009. The loan
facility bears interest based on floating interest rates and is
secured by a general security agreement covering all assets of the
Company. The maximum amount available under the facility is subject
to a borrowing base formula applied to accounts receivable and
inventories, and a covenant restricting the Company's average debt
to 2.25 times trailing twelve month EBITDA. As at December 31,
2008, the Company's average debt to EBITDA ratio was 0.7 times
(December 31, 2007 - 1.7 times) which provides a maximum borrowing
ability of $60 million under the facility. As at December 31, 2008,
the ratio of the Company's debt to total capitalization (debt plus
equity) was 20% (December 31, 2007 - 28%). Contractual Obligations
There have been no material changes in off-balance sheet
contractual commitments since December 31, 2007. Capital Stock The
weighted average number of shares outstanding during the fourth
quarter 2008 was 18.1 million, a decrease of 0.2 million shares
over the prior year's fourth quarter due principally to the
purchase of common shares to resource restricted share unit
obligations. The diluted weighted average number of shares
outstanding was 18.4 million, a decrease of 0.5 million shares from
the prior year's fourth quarter. As at December 31, 2008 and 2007,
the following shares and securities convertible into shares were
outstanding: (millions) December 31, 2008 December 31, 2007 Shares
Shares ------------------- ------------------- Shares outstanding
18.1 18.4 Stock options 1.3 1.3 Restricted share units 0.2 0.2
------------------- ------------------- Shares outstanding and
issuable 19.6 19.9 The Company has established an independent trust
to purchase common shares of the Company on the open market to
resource restricted share unit obligations. During the three and
twelve month periods ended December 31, 2008, 100,000 and 300,095
common shares were acquired by the trust at an average cost per
share of $4.13 and $6.86 respectively (2007 - 25,000 for the three
month period and 40,200 common shares for the twelve month period
and at an average cost per share of $6.08 and $8.08 respectively).
As at December 31, 2008, the trust held 343,892 shares (2007 -
54,551 shares). On January 6, 2009, the Company announced a normal
course issuer bid to purchase for cancellation, up to 900,000
common shares representing approximately 5% of its outstanding
common shares. Risk Factors The Company is exposed to certain
business and market risks including risks arising from transactions
that are entered into the normal course of business, which are
primarily related to interest rate changes and fluctuations in
foreign exchange rates. During the reporting period, no events or
transactions have occurred that would materially change the
information disclosed in the Company Form 20F. Forward Looking
Statements The information in this press release may contain
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of
historical facts, that address activities, events, outcomes and
other matters that CE Franklin plans, expects, intends, assumes,
believes, budgets, predicts, forecasts, projects, estimates or
anticipates (and other similar expressions) will, should or may
occur in the future are forward-looking statements. These
forward-looking statements are based on management's current
belief, based on currently available information, as to the outcome
and timing of future events. When considering forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements in this press release, including those in
under the caption "Risk factors". Forward-looking statements appear
in a number of places and include statements with respect to, among
other things: - forecasted oil and gas industry activity levels in
2009; - planned capital expenditures and working capital and
availability of capital resources to fund capital expenditures and
working capital; - the Company's future financial condition or
results of operations and future revenues and expenses; - the
Company's business strategy and other plans and objectives for
future operations; - fluctuations in worldwide prices and demand
for oil and gas; - fluctuations in the demand for the Company's
products and services. Should one or more of the risks or
uncertainties described above or elsewhere in this press release
occur, or should underlying assumptions prove incorrect, the
Company's actual results and plans could differ materially from
those expressed in any forward-looking statements. All
forward-looking statements expressed or implied, included in this
press release and attributable to CE Franklin are qualified in
their entirety by this cautionary statement. This cautionary
statement should also be considered in connection with any
subsequent written or oral forward-looking statements that CE
Franklin or persons acting on its behalf might issue. CE Franklin
does not undertake any obligation to update any forward-looking
statements to reflect events or circumstances after the date of
filing this press release, except as required by law. Additional
Information ---------------------- Additional information relating
to CE Franklin, including its annual and quarterly 2008 Management
Discussion and Analysis and interim consolidated financial
statements and its Form 20-F / Annual Information Form, is
available under the Company's profile on the SEDAR website at
http://www.sedar.com/ and at http://www.cefranklin.com/. Conference
Call and Webcast Information
--------------------------------------- A conference call to review
the 2008 fourth quarter results, which is open to the public, will
be held on Friday, January 30, 2009 at 11:00 a.m. Eastern Time
(9:00 a.m. Mountain Time). Participants may join the call by
dialing 1-416-644-3414 in Toronto or dialing 1-800-733-7571 at the
scheduled time of 11:00 a.m. Eastern Time. For those unable to
listen to the live conference call, a replay will be available at
approximately 1:00 p.m. Eastern Time on the same day by calling
1-416-640-1917 in Toronto or dialing 1-877-289-8525 and entering
the Passcode of 21294300 followed by the pound sign and may be
accessed until midnight Monday, February 9, 2009. The call will
also be webcast live at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2518340 and
will be available on the Company's website at
http://www.cefranklin.com/. Michael West, President and Chief
Executive Officer will lead the discussion and will be accompanied
by Mark Schweitzer, Vice President and Chief Financial Officer. The
discussion will be followed by a question and answer period. CE
Franklin Ltd. Interim Consolidated Balance Sheets - (Unaudited)
-------------------------------------------------------------------------
December 31 December 31 (in thousands of Canadian dollars) 2008
2007
-------------------------------------------------------------------------
Assets Current assets Accounts receivable 100,513 89,305
Inventories 119,459 86,414 Other 9,529 3,781
-------------------------------------------------------------------------
229,501 179,500 Property and equipment 9,528 6,398 Goodwill 20,570
20,523 Future income taxes (note 2) 1,186 1,403 Other 649 891
-------------------------------------------------------------------------
261,434 208,715
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities Current liabilities Bank operating loan 34,948 44,301
Accounts payable and accrued liabilities 83,249 44,807 Income taxes
payable 3,405 - Current portion of long term debt and capital lease
obligations 9 805
-------------------------------------------------------------------------
121,611 89,913 Long term debt and capital lease obligations 500 582
-------------------------------------------------------------------------
122,111 90,495
-------------------------------------------------------------------------
Shareholders' equity Capital stock 22,498 24,306 Contributed
surplus 18,835 17,671 Retained earnings 97,990 76,243
-------------------------------------------------------------------------
139,323 118,220
-------------------------------------------------------------------------
261,434 208,715
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CE Franklin Ltd. Interim Consolidated Statements of Operations -
Unaudited
-------------------------------------------------------------------------
Three months Twelve months ------------ ------------- ended ended
(in thousands of Canadian ----- ----- dollars except shares and
December 31 December 31 per share amounts) 2008 2007 2008 2007
-------------------------------------------------------------------------
Sales 161,196 112,263 547,429 466,275 Cost of sales 127,337 91,871
439,760 381,694
-------------------------------------------------------------------------
Gross profit 33,859 20,392 107,669 84,581
-------------------------------------------------------------------------
Other expenses Selling, general and administrative expenses 19,443
15,352 71,587 58,053 Amortization 570 656 2,367 2,795 Interest
expense 226 482 1,031 2,031 Foreign exchange (gain) loss 133 (35)
242 837
-------------------------------------------------------------------------
20,372 16,455 75,227 63,716
-------------------------------------------------------------------------
Income before income taxes 13,487 3,937 32,442 20,865 Income tax
expense (recovery) (note 3) Current 4,343 1,442 10,474 7,541 Future
376 68 221 (243)
-------------------------------------------------------------------------
4,719 1,510 10,695 7,298
-------------------------------------------------------------------------
Net and comprehensive income for the period 8,768 2,427 21,747
13,567
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income per share Basic 0.48 0.13 1.19 0.74 Diluted 0.47 0.13
1.17 0.72
-------------------------------------------------------------------------
Weighted average number of shares outstanding (000's) Basic 18,149
18,393 18,255 18,337 Diluted (note 2c) 18,392 18,863 18,561 18,807
-------------------------------------------------------------------------
See accompanying notes to these interim consolidated financial
statements. CE Franklin Ltd. Interim Consolidated Statements of
Changes in Shareholders' Equity - Unaudited
-------------------------------------------------------------------------
Three months ended Twelve months ended ------------------
------------------- (in thousands of December 31 December 31
December 31 December 31 Canadian dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash flows from operating activities Net income for the period
8,768 2,427 21,747 13,567 Items not affecting cash - Amortization
570 656 2,367 2,795 Future income tax (recovery) expense 376 68 221
(243) Loss on disposal of capital assets 74 - 74 - Stock based
compensation expense 217 450 1,365 1,924
---------------------------------------------
--------------------------- 10,005 3,601 25,774 18,043 Net change
in non-cash operating working capital balances Accounts receivable
701 4,748 (10,997) 5,633 Inventories (32,667) 1,502 (33,138) 12,974
Other current assets (1,836) (1,206) (6,619) 79 Accounts payable
and accured liabilities 10,140 (4,395) 38,128 (25,214) Income taxes
payable 3,929 (721) 4,253 (1,667)
-------------------------------------------------------------------------
(9,728) 3,529 17,401 9,848
-------------------------------------------------------------------------
Cash flows from (used in) financing activities Increase (Decrease)
in bank operating loan 14,046 8,911 (9,353) 10,293 Decrease in long
term debt and capital lease obligations (119) (40) (878) (476)
Issuance of capital stock - 10 49 579 Purchase of capital stock in
trust for RSU Plans (416) (152) (2,058) (325)
-------------------------------------------------------------------------
13,511 8,729 (12,240) 10,071
-------------------------------------------------------------------------
Cash flows used in investing activities Purchase of property and
equipment (3,783) (119) (5,602) (1,956) Business acquisitions -
(12,139) 441 (17,963)
-------------------------------------------------------------------------
(3,783) (12,258) (5,161) (19,919)
-------------------------------------------------------------------------
Change in cash and cash equivalents during the period - - - - Cash
and cash equivalents- Beginning and end of period - - - -
-------------------------------------------------------------------------
Cash paid during the period for: Interest on bank operating loan
223 474 1,001 1,999 Interest on capital lease obligations and long
term debt 3 8 30 32 Income taxes 415 2,163 6,594 9,375
-------------------------------------------------------------------------
See accompanying notes to these interim consolidated financial
statements. CE Franklin Ltd. Interim Consolidated Statements of
Changes in Shareholders' Equity - Unaudited
-------------------------------------------------------------------------
(in thousands of Canadian dollars and number of shares) Capital
Stock ---------------------- Number of Contributed Retained
Shareholders' Shares $ Surplus Earnings Equity
-------------------------------------------------------------------------
Balance - December 31, 2006 18,223 23,586 16,213 62,676 102,475
Stock options excercised 177 838 (259) - 579 Restricted share units
(RSU's) exercised 10 207 (207) - - Stock based compensation expense
- - 1,924 - 1,924 Purchase of shares in trust for RSU plans (40)
(325) - - (325) Net income - - - 13,567 13,567
-------------------------------------------------------------------------
Balance - December 31, 2007 18,370 24,306 17,671 76,243 118,220
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Stock options exercised 13 69 (20) - 49 Restricted share units
(RSU's) exercised 11 181 (181) - - Stock based compensation expense
- - 1,365 - 1,365 Purchase of shares in trust for RSU Plans (300)
(2,058) - - (2,058) Net income - - - 21,747 21,747
-------------------------------------------------------------------------
Balance - December 31, 2008 18,094 22,498 18,835 97,990 139,323
-------------------------------------------------------------------------
See accompanying notes to these interim consolidated financial
statements. Note 1 - Accounting policies These interim consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in Canada applied on a
consistent basis with CE Franklin Ltd.'s (the "Company") annual
consolidated financial statements for the year ended December 31,
2007, with the exception of policies relating to financial
instruments, capital disclosures and inventories as noted below.
The disclosures provided below are incremental to those included in
the annual consolidated financial statements. These interim
consolidated financial statements should be read in conjunction
with the annual consolidated financial statements and the notes
thereto for the year ended December 31, 2007. Effective January 1,
2008 the Company adopted Section 1400 - Assessing Going Concern.
The Standard was amended to include requirements for management to
assess and disclose an entity's ability to continue as a going
concern. Management has reviewed the guidance in section 1400 and
determined that no material uncertainties exist with respect to the
Company's ability to continue as a going concern. Effective January
1, 2008, the Company adopted Section 1535 - Capital Disclosures,
Section 3862 - Financial Instruments - Disclosures and Section 3863
- Financial Instruments - Presentation. The standards establish
presentation guidelines for financial instruments and deal with
their classification, as well as providing readers of the financial
statements with information pertinent to the Company's objectives,
policies and processes for managing capital. Effective January 1,
2008, the Company adopted Section 3031 - Inventories. The standard
establishes the accounting treatment for inventories and provides
guidance on the determination of cost and subsequent recognition of
expenses. The adoption of Section 3031 did not impact the
determination of inventory costs and expense recorded by the
Company. Inventories consisting primarily of goods purchased for
resale are valued at the lower of average cost or net realizable
value. Inventory obsolescence expense was charged to cost of sales
in the year ending December 31, 2008 of $1,366,000 (2007 -
$575,000; 2006 - $312,000). The reversal of any write down of
inventory arising from an increase in net realizable value, shall
be recognized as a reduction in the amount of obsolescence expense
in the period in which the reversal occurred. As at December 31,
2008 and December 31, 2007, the Company had recorded reserves for
inventory obsolescence of $2.8 million and $1.8 million
respectively. These unaudited interim consolidated financial
statements reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for
the interim periods presented; all such adjustments are of a normal
recurring nature. The Company's sales typically peak in the first
quarter when drilling activity is at its highest levels. They then
decline through the second and third quarters, rising again in the
fourth quarter when preparation for the new winter drilling season
commences. Similarly, net working capital levels are typically at
seasonally high levels at the end of the first quarter, declining
in the second and third quarters, and then rising again in the
fourth quarter. Note 2 - Capital stock At December 31, 2008, the
Company had 18.1 million common shares and 1.3 million options
outstanding to acquire common shares at a weighted average exercise
price of $5.80 per common share, of which 822,000 options were
vested and exercisable at a weighted average exercise price of
$4.88 per common share. a) Stock options Option activity for each
of the twelve month periods ended December 31 was as follows: 000's
2008 2007
-------------------------------------------------------------------------
Outstanding at January 1 1,262 804 Granted 75 647 Exercised (13)
(177) Forfeited (30) (12)
-------------------------------------------------------------------------
Outstanding at December 31 1,294 1,262
-------------------------------------------------------------------------
-------------------------------------------------------------------------
There were no options granted during the three month period ended
December 31, 2008. A total of 428,808 share options were granted at
a weighted average strike price of $6.50 in the three month period
ended December 31, 2007 for a fair value of $1,215,000. The fair
value of the options granted during the twelve month period ended
December 31, 2008 was $274,000 (December 31, 2007- $2,242,000) and
were estimated as at the grant date using the Black-Scholes option
pricing model, using the following assumptions: 2008 2007 ---- ----
Dividend yield Nil Nil Risk-free interest rate 3.88% 3.93% Expected
life 5 years 5 years Expected volatility 50% 50% Stock Option
compensation expense recorded in the three and twelve month periods
ended December 31, 2008 was $324,000 (2007 - $149,000) and $843,000
(2007- $528,000) respectively. b) Restricted share units The
Company has Restricted Share Unit ("RSU") and Deferred Share Unit
("DSU") plans (collectively the "RSU Plans"), where by RSU's and
DSU's are granted entitling the participant, at the Company's
option, to receive either a common share or cash equivalent value
in exchange for a vested unit. The vesting period for RSU's is
three years from the grant date. DSU's vest on the date of grant.
Compensation expense related to the units granted is recognized
over the vesting period based on the fair value of the units at the
date of the grant and is recorded to compensation expense and
contributed surplus. The contributed surplus balance is reduced as
the vested units are exchanged for either common shares or cash.
RSU activity for the twelve month periods ended December 31 was as
follows: 000's 2008 2007
-------------------------------------------------------------------------
RSU DSU RSU DSU Outstanding at January 1 178 37 120 12 Granted 1 33
78 25 Exercised (11) - (10) - Forfeited (7) - (10) -
-------------------------------------------------------------------------
Outstanding at December 31 161 70 178 37
-------------------------------------------------------------------------
-------------------------------------------------------------------------
RSU plan compensation expense recorded in the three and twelve
month periods ended December 31, 2008 was $107,000 recovery (2007-
$269,000) and $521,000 (2007- $1,396,000) respectively. The Company
purchases its common shares on the open market to satisfy
restricted share unit obligations through an independent trust. The
trust is considered to be a variable interest entity and is
consolidated in the Company's financial statements with the number
and cost of shares held in trust, reported as a reduction of
capital stock. During the three and twelve month periods ended
December 31, 2008, 100,000 and 300,095 common shares were acquired
respectively by the trust (2007 - 25,000 and 40,200 common shares
respectively) at a cost of $416,000 and $2,058,000 for the three
and twelve month periods respectively (2007 - $152,000 and $325,000
respectively). c) Reconciliation of weighted average number of
diluted common shares outstanding (in 000's) The following table
summarizes the common shares in calculating net earnings per share:
Three Months Ended Twelve Months Ended -------------------
-------------------- December December December December 31 31 31
31 2008 2007 2008 2007
-------------------------------------------------------------------------
Weighted average common shares outstanding- basic 18,149 18,393
18,255 18,337 Effect of Stock options and RSU Plans 243 470 306 470
-------------------------------------------------------------------------
Weighted average common shares outstanding- diluted 18,392 18,863
18,561 18,807
-------------------------------------------------------------------------
Note 3 - Income taxes a) The difference between the income tax
provision recorded and the provision obtained by applying the
combined federal and provincial statutory rates is as follows:
Three Months Ended ---------------------------------- December 31
2008 % 2007 %
-------------------------------------------------------------------------
Income before income taxes 13,487 3,937
-------------------------------------------------------------------------
Income taxes calculated at expected rates 4,033 29.9 1,285 32.6
Non-deductible items 580 4.3 92 2.3 Capital taxes 21 0.2 22 0.6
Adjustments on filing returns & other 85 0.6 111 2.8
-------------------------------------------------------------------------
4,719 35.0 1,510 38.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Twelve Months Ended ---------------------------------- December 31
2008 % 2007 %
-------------------------------------------------------------------------
Income before income taxes 32,442 20,865
-------------------------------------------------------------------------
Income taxes calculated at expected rates 9,700 29.9 6,807 32.6
Non-deductible items 899 2.8 434 2.1 Capital taxes 56 0.2 44 0.2
Adjustments on filing returns & other 40 0.1 13 0.1
-------------------------------------------------------------------------
10,695 33.0 7,298 35.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at December 31, 2007, income taxes receivable of $848,000 were
included in other current assets. b) Future income taxes reflect
the net effects of temporary difference between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purpose. Significant components
of future income tax assets and liabilities are as follows: As at
December 31 2008 2007
-------------------------------------------------------------------------
Assets Property and equipment 855 874 RSU expense 289 648 Other 395
241
-------------------------------------------------------------------------
1,539 1,763 Liabilities Goodwill and other 353 360
-------------------------------------------------------------------------
Net future income tax asset 1,186 1,403
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company believes it is more likely than not that all future
income tax assets will be realized. Note 4 - Capital management The
Company's primary source of capital is its shareholders equity and
cash flow from operating activities before net changes in non-cash
working capital balances. The Company augments these capital
sources with a $60 million, 364 day bank operating loan facility
which is used to finance its net working capital and general
corporate requirements. The bank operating facility is arranged
through a syndicate of three banks and matures in July 2009. The
maximum amount available to borrow under this facility is subject
to a borrowing base formula applied to accounts receivable and
inventories, and a covenant restricting the Company's average
guaranteed debt to 2.25 times trailing 12 month earnings before
interest, amortization and taxes. As at December 31, 2008, this
ratio was 0.7 times (December 31, 2007 - 1.7 times) and the maximum
amount available to be borrowed under the facility was $60 million.
In management's opinion, the Company's available borrowing capacity
under its bank operating facility and ongoing cash flow from
operations, are sufficient to resource its anticipated contractual
commitments. The facility contains certain other restrictive
covenants, which the Company was in compliance with as at December
31, 2008. Note 5 - Financial instruments and risk management a)
Fair values The Company's financial instruments recognized on the
consolidated balance sheet consist of accounts receivable, accounts
payable and accrued liabilities, bank operating loan, long term
debt and obligations under capital leases. The fair values of these
financial instruments, excluding the bank operating loan, long term
debt and obligations under capital leases, approximate their
carrying amounts due to their short- term maturity. At December 31,
2008, the fair value of the bank operating loan, long term debt and
obligations under capital leases approximated their carrying values
due to their floating interest rate nature and short term maturity.
b) Credit risk A substantial portion of the Company's accounts
receivable balance is with customers in the oil and gas industry
and is subject to normal industry credit risks. c) Market risk The
Company is exposed to market risk from changes in the Canadian
prime interest rate which can impact its borrowing costs. The
Company purchases certain products in US dollars and sells such
products to its customer typically priced in Canadian dollars. As a
result, fluctuations in the value of the Canadian dollar relative
to the US dollar can result in foreign exchange gains and losses.
d) Risk management From time to time the Company enters into
foreign exchange forward contracts to manage its foreign exchange
market risk by fixing the value of its liabilities and future
purchase commitments. As at December 31, 2008, the Company had
contracted to purchase US$2.0 million at fixed exchange rates with
terms not exceeding six months. The fair market value of the
contracts was nominal. Note 6 - Related party transactions Smith
International Inc. ("Smith") owns approximately 54% of the
Company's outstanding shares. The Company is the exclusive
distributor in Canada of down hole pump production equipment
manufactured by Wilson Supply, a division of Smith. Purchase of
such equipment conducted in the normal course on commercial terms
were as follows: December December 31 31 2008 2007
-------------------------------------------------------------------------
Cost of sales for the three months ended 2,749 2,371 Cost of sales
for the twelve months ended 10,680 9,253 Inventory 4,549 4,295
Accounts payable and accrued liabilities 759 313 Note 7 - Segmented
reporting The Company distributes oilfield products principally
through its network of 44 branches located in western Canada to oil
and gas industry customers. Accordingly, the Company has determined
that it operated through a single operating segment and geographic
jurisdiction. DATASOURCE: CE Franklin Ltd. CONTACT: Investor
Relations, 1-800-345-2858, (403) 531-5604,
Copyright