Methanex Corporation (TSX: MX)(NASDAQ: MEOH)(SANTIAGO: Methanex) -
For the third quarter of 2009, Methanex reported Adjusted
EBITDA(1) of $31.0 million and a net loss of $0.8 million ($0.01
per share on a diluted basis). This compares with Adjusted EBITDA
of $24.8 million and a net loss of $5.7 million ($0.06 per share on
a diluted basis) for the second quarter of 2009.
Bruce Aitken, President and CEO of Methanex, commented, "It is
pleasing to see the beginning of recovery in our numbers for the
quarter. Sales volumes are up 13% from Q2 2009 and realized
methanol prices rose about 16%. These results translated into
improved EBITDA, cash generation and earnings. However, the quarter
was negatively impacted by a number of mostly one-off costs such as
stock-based compensation and unplanned outages at our plants in
Chile and Trinidad."
Mr. Aitken added, "During the third quarter, methanol demand
increased in all regions globally and industry supply was impacted
by many planned and unplanned outages. These factors have led to a
recent strong recovery in methanol prices which provides upward
momentum to our earnings in the fourth quarter. And with increases
in production expected from our Chile operations and our new
project in Egypt over the next year, there is significantly more
upside potential to our earnings."
Mr. Aitken concluded, "With US$197 million of cash on hand at
the end of the quarter, a strong balance sheet, no near term
refinancing requirements, and an undrawn credit facility, we are
well positioned to continue to invest to grow the Company."
A conference call is scheduled for October 28, 2009 at 11:00 am
ET (8:00 am PT) to review these third quarter results. To access
the call, dial the Conferencing operator ten minutes prior to the
start of the call at (416) 340-8018, or toll free at (866)
223-7781. A playback version of the conference call will be
available for fourteen days at (416) 695-5800, or toll free at
(800) 408-3053. The security passcode for the playback version is
6704266. There will be a simultaneous audio-only webcast of the
conference call, which can be accessed from our website at
www.methanex.com. In addition, an audio recording of the conference
call can be downloaded from our website for three weeks after the
call.
Methanex is a Vancouver-based, publicly traded company and is
the world's largest supplier of methanol to major international
markets. Methanex shares are listed for trading on the Toronto
Stock Exchange in Canada under the trading symbol "MX", on the
NASDAQ Global Market in the United States under the trading symbol
"MEOH", and on the foreign securities market of the Santiago Stock
Exchange in Chile under the trading symbol "Methanex". Methanex can
be visited online at www.methanex.com.
FORWARD-LOOKING INFORMATION WARNING
This Third Quarter 2009 press release contains forward-looking
statements with respect to us and the chemical industry. Refer to
Forward-Looking Information Warning in the attached Third Quarter
2009 Management's Discussion and Analysis for more information.
(1) Adjusted EBITDA is a non-GAAP measure that does not have any
standardized meaning prescribed by Canadian generally accepted
accounting principles (GAAP) and therefore is unlikely to be
comparable to similar measures presented by other companies. Refer
to Additional Information - Supplemental Non-GAAP Measures in the
attached Third Quarter 2009 Management's Discussion and Analysis
for a description of each supplemental non-GAAP measure and a
reconciliation to the most comparable GAAP measure.
Interim Report For the Three Months Ended September 30, 2009
At October 27, 2009 the Company had 92,108,242 common shares issued and
outstanding and stock options exercisable for 2,680,636 additional common
shares.
Share Information
Methanex Corporation's common shares are listed for trading on the Toronto
Stock Exchange under the symbol MX, on the Nasdaq Global Market under the
symbol MEOH and on the foreign securities market of the Santiago Stock
Exchange in Chile under the trading symbol Methanex.
Transfer Agents & Registrars
CIBC Mellon Trust Company
320 Bay Street
Toronto, Ontario, Canada M5H 4A6
Toll free in North America:
1-800-387-0825
Investor Information
All financial reports, news releases and corporate information can be
accessed on our website at www.methanex.com.
Contact Information
Methanex Investor Relations
1800 - 200 Burrard Street
Vancouver, BC Canada V6C 3M1
E-mail: invest@methanex.com
Methanex Toll-Free: 1-800-661-8851
THIRD QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS
Except where otherwise noted, all currency amounts are stated in
United States dollars.
This Third Quarter 2009 Management's Discussion and Analysis
dated October 27, 2009 should be read in conjunction with the 2008
Annual Consolidated Financial Statements and the Management's
Discussion and Analysis included in the Methanex 2008 Annual
Report. The Methanex 2008 Annual Report and additional information
relating to Methanex is available on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov.
Three Months Ended Nine Months Ended
--------------------------- ------------------
($ millions, except Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
where noted) 2009 2009 2008 2009 2008
------------------------------------------------------- ------------------
Sales volumes (thousands
of tonnes)
Produced methanol 943 941 946 2,884 2,534
Purchased methanol 480 329 429 1,079 1,639
Commission sales (1) 194 161 172 486 483
------------------------------------------------------- ------------------
Total sales volumes 1,617 1,431 1,547 4,449 4,656
Methanex average
non-discounted posted
price ($ per tonne) (2) 251 211 499 227 564
Average realized price
($ per tonne) (3) 222 192 413 205 455
Adjusted EBITDA (4) 31.0 24.8 139.5 68.9 343.7
Cash flows from
operating activities 1.4 14.0 127.6 83.3 269.5
Cash flows from
operating activities
before changes in
non-cash working
capital (4) 36.3 17.7 103.5 58.8 271.4
Operating income
(loss) (4) 3.1 (4.0) 108.3 (16.7) 263.0
Net income (loss) (0.8) (5.7) 70.0 (25.0) 172.7
Basic net income (loss)
per common share (0.01) (0.06) 0.75 (0.27) 1.81
Diluted net income (loss)
per common share (0.01) (0.06) 0.74 (0.27) 1.81
Common share information
(millions of shares):
Weighted average
number of common
shares 92.1 92.0 93.9 92.0 95.2
Diluted weighted
average number of
common shares 92.1 92.0 94.3 92.0 95.7
Number of common
shares outstanding,
end of period 92.1 92.0 93.4 92.1 93.4
------------------------------------------------------- ------------------
(1) Commission sales represent volumes marketed on a commission basis.
Commission income is included in revenue when earned.
(2) Methanex average non-discounted posted price represents the average of
our non-discounted posted prices in North America, Europe and Asia
Pacific weighted by sales volume. Current and historical pricing
information is available at www.methanex.com.
(3) Average realized price is calculated as revenue, net of commissions
earned, divided by the total sales volumes of produced and purchased
methanol.
(4) These items are non-GAAP measures that do not have any standardized
meaning prescribed by Canadian generally accepted accounting principles
(GAAP) and therefore are unlikely to be comparable to similar measures
presented by other companies. Refer to Additional Information -
Supplemental Non-GAAP Measures for a description of each non-GAAP
measure and a reconciliation to the most comparable GAAP measure.
PRODUCTION SUMMARY
YTD YTD
(thousands Q3 2009 Q2 2009 Q3 2008 Q3 2009 Q3 2008
of Capacity Product- Product- Product- Product- Product-
tonnes) (1) ion ion ion ion ion
--------------------------------------------------------------------------
Chile I, II,
III and IV 960 197 252 246 677 816
Titan 213 188 165 200 576 646
Atlas (63.1%
interest) 268 257 275 284 736 865
New Zealand (2) 350 202 203 126 599 370
--------------------------------------------------------------------------
1,791 844 895 856 2,588 2,697
--------------------------------------------------------------------------
(1) The production capacities for our Trinidad plants are stated at
original nameplate capacity. These facilities are able to operate above
original nameplate capacity as a result of efficiencies gained through
improvements and experience at these plants. The production capacity
for our facilities in Chile and New Zealand may be higher than original
nameplate capacity as, over time, these figures have been adjusted to
reflect ongoing operating efficiencies at these facilities.
(2) In October 2008, we restarted one of our two idled 900,000 tonne per
year facilities at our Motunui site in New Zealand and we idled our
530,000 tonne per year Waitara Valley facility. We have the flexibility
to operate the Motunui plant or the Waitara Valley plant or both
depending on methanol supply and demand dynamics and the availability
of natural gas on commercially acceptable terms and accordingly, we
have included both of these facilities in the production capacity for
New Zealand. We have excluded the second Motunui facility from
production capacity in New Zealand as we currently do not intend to
restart this facility.
Chile
Our methanol facilities in Chile produced 197,000 tonnes during
the third quarter of 2009 compared with 252,000 tonnes during the
second quarter of 2009. Production from our Chile facilities for
the third quarter of 2009 was lower compared with the second
quarter of 2009 primarily due to plant mechanical issues that led
to unplanned outages in the third quarter of 2009 which resulted in
lost production of approximately 65,000 tonnes.
We are currently operating our methanol facilities in Chile at
approximately 25 to 30% of capacity primarily due to curtailments
of our natural gas supply from Argentina - refer to the
Management's Discussion and Analysis included in our 2008 Annual
Report for more information.
Our goal is ultimately to return to operating all four of our
plants in Chile with natural gas from suppliers in Chile. We are
pursuing investment opportunities with the state-owned energy
company Empresa Nacional del Petroleo (ENAP), GeoPark Chile Limited
(GeoPark) and others to help accelerate natural gas exploration and
development in southern Chile. During 2007, we signed an agreement
with GeoPark under which we provided $40 million in financing to
support and accelerate GeoPark's natural gas exploration and
development activities in the Fell block in southern Chile and we
have recently signed an agreement to provide a further $18 million
in financing to support GeoPark's natural gas exploration and
development activities in southern Chile. GeoPark has agreed to
supply us with all natural gas sourced from the Fell block under a
ten-year exclusive supply arrangement. In May 2008, we signed an
agreement with ENAP to accelerate natural gas exploration and
development in the Dorado Riquelme exploration block in southern
Chile and to supply natural gas to our production facilities in
Chile. Final government approvals were received in the third
quarter of 2009. Under the arrangement, we fund a 50% participation
in the block and as at September 30, 2009, we had contributed
approximately $60 million. For the third quarter of 2009
approximately 50% of total production at our Chilean facilities was
produced with natural gas supplied from the Fell and Dorado
Riquelme blocks. We expect natural gas supply from these blocks to
further increase during 2009 and we expect that we will be able to
startup a second plant at our Chile site later in 2009. We believe
the increased natural gas supply and the startup of a second plant
will result in more than 20% higher production from our Chile site
over the next year.
There continues to be other investment activities supporting the
acceleration of natural gas exploration and development in areas of
southern Chile. In late 2007, the government of Chile completed an
international bidding round to assign oil and natural gas
exploration areas that lie close to our production facilities and
announced the participation of five international oil and gas
companies. Under the terms of the agreements from the bidding round
there are minimum investment commitments. Planning and exploration
activities have commenced. In July 2008, we announced that under
the international bidding round, the Otway exploration block in
southern Chile was awarded to a consortium that includes
Wintershall, GeoPark, and Methanex. Wintershall and GeoPark each
own a 42% interest in the consortium and we own a 16% interest.
Exploration work is expected to commence during the fourth quarter
of 2009. The minimum exploration investment committed in the Otway
block by the consortium for the first phase is $11 million over the
next three years.
We cannot provide assurance that ENAP, GeoPark or others will be
successful in the exploration and development of natural gas or
that we will obtain any additional natural gas from suppliers in
Chile on commercially acceptable terms.
Trinidad
Our Atlas and Titan methanol facilities in Trinidad represent
over 2.0 million tonnes of competitive cost annual capacity. Our
methanol facilities in Trinidad produced a total of 445,000 tonnes
during the third quarter of 2009 compared with 440,000 tonnes
during the second quarter of 2009. We completed planned turnaround
activities for the Titan facility in June and early July 2009 and
we also had an unplanned outage at our Atlas facility during the
third quarter of 2009.
New Zealand
Our New Zealand facilities produced 202,000 tonnes during the
third quarter of 2009 compared with 203,000 tonnes during second
quarter of 2009.
In October 2008, we restarted one of our two idled 900,000 tonne
per year facilities at our Motunui site in New Zealand and we idled
our smaller scale 530,000 tonne Waitara Valley facility. We have
the flexibility to operate the Motunui plant or the Waitara Valley
plant or both depending on methanol supply and demand dynamics and
the availability of natural gas on commercially acceptable
terms.
EARNINGS ANALYSIS
Our operations consist of a single operating segment - the
production and sale of methanol. In addition to the methanol that
we produce at our facilities, we also purchase and re-sell methanol
produced by others and we sell methanol on a commission basis. We
analyze the results of all methanol sales together. The key drivers
of changes in our Adjusted EBITDA for methanol sales are average
realized price, sales volume and cash costs.
For a further discussion of the definitions and calculations
used in our Adjusted EBITDA analysis, refer to How We Analyze Our
Business.
For the third quarter of 2009, we recorded Adjusted EBITDA of
$31.0 million and a net loss of $0.8 million ($0.01 per share on a
diluted basis). This compares with Adjusted EBITDA of $24.8 million
and a net loss of $5.7 million ($0.06 per share on a diluted basis)
for the second quarter of 2009 and Adjusted EBITDA of $139.5
million and net income of $70.0 million ($0.74 per share on a
diluted basis) for the third quarter of 2008.
For the nine months ended September 30, 2009, we recorded
Adjusted EBITDA of $68.9 million and a net loss of $25.0 million
($0.27 per share on a diluted basis). This compares with Adjusted
EBITDA of $343.7 million and net income of $172.7 million ($1.81
per share on a diluted basis) during the same period in 2008.
Adjusted EBITDA
The increase (decrease) in Adjusted EBITDA resulted from changes
in the following:
Q3 2009 Q3 2009 YTD Q3 2009
compared with compared with compared with
($ millions) Q2 2009 Q3 2008 YTD Q3 2008
--------------------------------------------------------------------------
Average realized price $ 42 $ (272) $ (993)
Sales volumes 7 6 (21)
Total cash costs (43) 157 739
--------------------------------------------------------------------------
$ 6 $ (109) $ (275)
--------------------------------------------------------------------------
Average realized price
Three Months Ended Nine Months Ended
-------------------------- ------------------
($ per tonne, except Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
where noted) 2009 2009 2008 2009 2008
------------------------------------------------------ ------------------
Methanex average
non-discounted
posted price (1) 251 211 499 227 564
Methanex average
realized price 222 192 413 205 455
Average discount 12% 9% 17% 10% 19%
------------------------------------------------------ ------------------
(1) Methanex average non-discounted posted price represents the average of
our non-discounted posted prices in North America, Europe and Asia
Pacific weighted by sales volume. Current and historical pricing
information is available at www.methanex.com.
The global economic slowdown in the latter part of 2008 led to a
sudden and significant reduction in global methanol demand and an
increase in global inventories. This resulted in a decrease in
contract methanol pricing during the fourth quarter of 2008 and
into 2009. During 2009, global methanol demand has improved and as
a result of this improvement in demand and some planned and
unplanned plant outages across the industry, methanol prices have
increased recently - refer to Supply/Demand Fundamentals section
below for more information. Our average non-discounted posted price
for the third quarter of 2009 was $251 per tonne compared with $211
per tonne for the second quarter of 2009 and $499 per tonne for the
third quarter of 2008. Our average realized price for the third
quarter of 2009 was $222 per tonne compared with $192 per tonne for
the second quarter of 2009 and $413 per tonne for the third quarter
of 2008. The changes in our average realized price for the third
quarter of 2009 increased Adjusted EBITDA by $42 million compared
with the second quarter of 2009 and decreased Adjusted EBITDA by
$272 million compared with third quarter of 2008. Our average
realized price for the nine months ended September 30, 2009 was
$205 per tonne compared with $455 per tonne for the same period in
2008 and this decreased our Adjusted EBITDA by $993 million.
For the third quarter of 2009 our average realized price was
approximately 12% lower than our average non-discounted posted
price. This compares with approximately 9% lower for the second
quarter of 2009 and 17% lower for the third quarter of 2008. We
have entered into long-term contracts for a portion of our
production volume with certain global customers where prices are
either fixed or linked to our costs plus a margin and accordingly,
we expect the discount from our average non-discounted posted
prices to widen during periods of higher methanol pricing.
Sales volumes
Total methanol sales volumes excluding commission sales volumes
for the third quarter of 2009 were higher than the second quarter
of 2009 and the third quarter of 2008 by 153,000 tonnes and 48,000
tonnes, respectively. This resulted in higher Adjusted EBITDA of $7
million and $6 million, respectively. Total methanol sales volumes
excluding commission sales volumes for the nine months ended
September 30, 2009 were lower compared with the same period in 2008
by 209,000 tonnes and this resulted in lower Adjusted EBITDA of $21
million.
Total cash costs
The primary driver of changes in our total cash costs are
changes in the cost of methanol we produce at our facilities and
changes in the cost of methanol we purchase from others. Our
production facilities are underpinned by natural gas purchase
agreements with pricing terms that include base and variable price
components. The variable component is adjusted in relation to
changes in methanol prices above pre-determined prices at the time
of production. We supplement our production with methanol produced
by others through methanol offtake contracts and on the spot market
to meet customer needs and support our marketing efforts within the
major global markets. We have adopted the first-in, first-out
method of accounting for inventories and it generally takes between
30 and 60 days to sell the methanol we produce or purchase.
Accordingly, the changes in Adjusted EBITDA as a result of changes
in natural gas costs and purchased methanol costs will depend on
changes in methanol pricing and the timing of inventory flows.
Total cash costs for the third quarter of 2009 were higher
compared with the second quarter of 2009 by $43 million. Natural
gas costs on sales of produced methanol were higher during the
third quarter of 2009 compared with the second quarter of 2009 by
$9 million primarily as a result of the impact of higher methanol
pricing. Purchased methanol costs were higher as a result of the
impact of higher methanol pricing during the third quarter of 2009
compared with the second quarter of 2009 and this resulted in
higher cash costs by $18 million. Purchased methanol represented a
higher proportion of our overall sales volumes during the third
quarter of 2009 compared with second quarter of 2009 and this
resulted in higher cash costs by $6 million. Selling, general and
administrative expenses were also higher for the third quarter of
2009 compared with the second quarter of 2009 by $3 million
primarily due to higher stock-based compensation expense as a
result of the impact of changes in our share price. During the
third quarter of 2009, we had unplanned outages at our Chile and
Trinidad facilities and this resulted in higher unabsorbed fixed
costs for the third quarter of 2009 compared with the second
quarter of 2009 by $3 million. Ocean freight costs were higher
during the third quarter of 2009 compared with the second quarter
of 2009 by $4 million primarily as a result of lower backhaul
margins and higher fuel costs.
Total cash costs for the third quarter of 2009 and nine months
ended September 30, 2009 were lower than comparable periods in 2008
by $157 million and $739 million, respectively. Natural gas costs
on sales of produced methanol and other costs were lower during the
third quarter of 2009 and nine months ended September 30, 2009 than
comparable periods in 2008 by $65 million and $218 million,
respectively, primarily as a result of the impact of lower methanol
pricing. Purchased methanol costs were lower as a result of the
impact of lower methanol pricing for the third quarter of 2009 and
nine months ended September 30, 2009 compared with the same periods
in 2008 and this resulted in lower cash costs by $99 million and
$366 million, respectively. Purchased methanol represented a lower
proportion of our overall sales volumes for the nine months ended
September 30, 2009 compared with the same period in 2008 and this
resulted in lower cash costs by approximately $146 million.
Stock-based compensation costs were higher for the third quarter of
2009 and nine months ended September 30, 2009 compared with the
same periods in 2008 by $11 million and $4 million, respectively,
primarily as a result of a significant recovery of stock-based
compensation expense during the third quarter of 2008 as a result a
decrease in our share price in that period. Other selling, general
and administrative costs were lower for the third quarter of 2009
and nine months ended September 30, 2009 compared with the same
periods in 2008 by $4 million and $13 million, respectively
primarily as a result of cost reduction initiatives during
2009.
Depreciation and Amortization
Depreciation and amortization was $28 million for the third
quarter of 2009 compared with $29 million for the second quarter of
2009 and $31 million for the third quarter of 2008.
Interest Expense
Three Months Ended Nine Months Ended
-------------------------- ------------------
Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
($ millions) 2009 2009 2008 2009 2008
------------------------------------------------------ ------------------
Interest expense before
capitalized interest $ 13 $ 12 $ 13 $ 39 $ 40
Less capitalized interest (6) (5) (4) (18) (10)
------------------------------------------------------ ------------------
Interest expense $ 7 $ 7 $ 9 $ 21 $ 30
------------------------------------------------------ ------------------
Interest expense before capitalized interest for the third
quarter of 2009 was $13 million compared with $12 million for the
second quarter of 2009 and $13 million for the third quarter of
2008. We have limited recourse debt for our joint venture project
to construct a 1.3 million tonne per year methanol facility in
Egypt. Interest costs related to this project are capitalized.
Interest and Other Income
Three Months Ended Nine Months Ended
-------------------------- ------------------
Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
($ millions) 2009 2009 2008 2009 2008
------------------------------------------------------ ------------------
Interest and other income $ 1 $ 2 $ 1 $ - $ 12
------------------------------------------------------ ------------------
Interest and other income for the third quarter of 2009 was
income of $1 million compared with $2 million for the second
quarter of 2009 and $1 million for the third quarter of 2008. The
decrease in interest and other income during the third quarter of
2009 compared with the second quarter of 2009 was primarily due to
the impact of changes in foreign exchange rates. Interest and other
income for the nine months ended September 30, 2009 compared with
the same period in 2008 was lower by $12 million primarily as a
result of lower interest income earned on cash balances in 2009 and
a $5 million gain on sale of ammonia production assets during
2008.
Income Taxes
We recorded an income tax recovery for the third quarter of 2009
of $1.4 million compared with a recovery of $3.3 million for the
second quarter of 2009. The effective tax rate for the nine months
ended September 30, 2009 was 35% compared with 30% for the same
period in 2008.
The statutory tax rate in Chile and Trinidad, where we earn a
substantial portion of our pre-tax earnings, is 35%. Our Atlas
facility in Trinidad has partial relief from corporation income tax
until 2014. In Chile the tax rate consists of a first tier tax that
is payable when income is earned and a second tier tax that is due
when earnings are distributed from Chile. The second tier tax is
initially recorded as future income tax expense and is subsequently
reclassified to current income tax expense when earnings are
distributed.
SUPPLY/DEMAND FUNDAMENTALS
During the fourth quarter of 2008, the global financial crisis
and weak economic environment led to a sharp reduction in global
demand for most traditional methanol derivatives (which represent
approximately 70% of global methanol demand) while demand for
methanol into energy related applications remained relatively
stable. Methanol blending into gasoline in China has been
particularly strong and we believe that future growth in this
application is supported by recent regulatory changes in that
country. Overall, we estimate global methanol demand declined by
about 15% in the fourth quarter of 2008 to approximately 36 million
tonnes measured on an annualized basis compared with the third
quarter of 2008. In reaction to this decrease in demand, many high
cost methanol plants operated at lower rates or were shut down,
particularly in China, where we estimate approximately 6 million
tonnes of high cost methanol production capacity shut down during
the fourth quarter of 2008 and net imports into China increased
significantly to replace domestic production that had shut down. In
reaction to this decrease in global demand, there was a significant
decrease in spot and contract methanol pricing during the fourth
quarter of 2008 and this lower pricing environment persisted
through most of the first half of 2009.
Methanex Non-Discounted Regional Posted Prices (1)
Oct Sep Aug Jul
(US$ per tonne) 2009 2009 2009 2009
----------------------------------------------------
United States 316 279 239 226
Europe (2) 328 224 224 224
Asia 300 280 265 250
----------------------------------------------------
(1) Discounts from our posted prices are offered to
customers based on various factors.
(2) EUR 223 for Q4 2009 (Q3 2009 - EUR 159)
converted to United States dollars.
During 2009, global methanol demand has partially recovered to
the current level of approximately 40 million tonnes measured on an
annualized basis. Demand recovery in the first half of 2009 was
mainly focused in Asia (particularly in China), while more recently
we have also seen some recovery in demand in other regions
including Europe and North America. As a result of the improvement
in demand and significant industry supply challenges methanol
prices have increased recently. There have been a number of planned
and unplanned plant outages across the industry and we understand
that two new world scale methanol plants that commenced operations
in the last twelve months have been operating at reduced rates. Our
average non-discounted posted price in October is approximately
$315 per tonne compared to a price of $251 per tonne and $211 per
tonne in the third quarter of 2009 and second quarter of 2009,
respectively.
In response to increased demand and higher methanol prices some
high cost production, particularly in China, has recently
restarted. The next increments of world scale capacity outside of
China are four plants with capacity totaling 4.0 million tonnes
under construction and are scheduled to start up operations in
2010, including our own 1.3 million tonne per year plant in Egypt
which is expected to commence operations in the first half of
2010.
Methanol demand into traditional derivatives is correlated to
industrial production and we believe that methanol demand into
traditional derivatives should improve further when the macro
economic environment improves. Over the past two years, high energy
prices have driven demand for methanol into energy applications
such as gasoline blending and DME, primarily in China. Recent
regulatory changes have improved the demand outlook for methanol
gasoline blending in China and we believe demand potential into
these energy derivatives will be stronger in a higher energy price
environment.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities before changes in working
capital in the third quarter of 2009 were $36 million compared with
$18 million for the second quarter of 2009 and $103 million for the
third quarter of 2008. The change in cash flows for the third
quarter of 2009 compared with these periods is primarily a result
of the change in earnings levels.
During the third quarter of 2009, we paid a quarterly dividend
of US$0.155 per share, or $14 million.
We are constructing a 1.3 million tonne per year methanol
facility in Egypt. We expect the methanol facility to begin
operations in the first half of 2010. We own 60% of Egyptian
Methanex Methanol Company S.A.E. ("EMethanex") which is the company
that is developing the project and we will sell 100% of the
methanol produced from the facility. We account for our investment
in EMethanex using consolidation accounting. This results in 100%
of the assets and liabilities of EMethanex being included in our
financial statements. The other investors' interest in the project
is presented as "non-controlling interest". During the third
quarter of 2009, total plant and equipment construction costs
related to our project in Egypt were $47 million. EMethanex has
limited recourse debt facilities of $530 million. As at September
30, 2009, a total of $458 million of this limited recourse debt has
been drawn with $32 million being drawn during the third quarter of
2009. The total estimated future costs to complete the project,
excluding financing costs and working capital, are expected to be
approximately $108 million. Our 60% share of future equity
contributions, excluding financing costs and working capital, is
estimated to be approximately $22 million and we expect to fund
these expenditures from cash generated from operations and cash on
hand.
We have an agreement with ENAP to accelerate natural gas
exploration and development in the Dorado Riquelme hydrocarbon
exploration block in southern Chile. Under the arrangement, we fund
a 50% participation in the block and have contributed $60 million
to date. We expect to make further contributions over the next
three years to fully realize the potential of the block. These
contributions will be based on annual budgets established by ENAP
and Methanex in accordance with the Joint Operating Agreement that
governs this development.
We also have an agreement with GeoPark under which we have
provided $40 million in financing, of which GeoPark has repaid $8
million to date, to support and accelerate GeoPark's natural gas
exploration and development activities in the Fell block in
southern Chile. We have recently entered into an agreement to
provide a further $18 million in financing to support GeoPark's
natural gas exploration and development activities in southern
Chile. This financing is expected to be provided later in 2009 and
into 2010.
In August 2009, we entered into a $200 million unsecured
revolving credit facility to replace the credit facility that was
scheduled to expire in mid-2010. The new credit facility is
provided by highly rated financial institutions and expires in
mid-2012.
We operate in a highly competitive commodity industry and
believe it is appropriate to maintain a conservative balance sheet
and to retain financial flexibility. Our cash balance at September
30, 2009 was $197 million and we have a strong balance sheet, no
near term re-financing requirements, and an undrawn $200 million
credit facility provided by highly rated financial institutions
that expires in mid-2012. We invest our cash only in highly rated
instruments that have maturities of three months or less to ensure
preservation of capital and appropriate liquidity. Our planned
capital maintenance expenditure program directed towards major
maintenance, turnarounds and catalyst changes for existing
operations, is currently estimated to total approximately $80
million for the period to the end of 2011.
We believe we are well positioned to meet our financial
commitments and continue to invest to grow the Company.
The credit ratings for our unsecured notes at
September 30, 2009 were as follows:
---------------------------------------------------------
Standard & Poor's Rating Services BBB- (negative)
Moody's Investor Services Ba1 (stable)
Fitch Ratings BBB- (stable)
Credit ratings are not recommendations to purchase, hold
or sell securities and do not comment on market price or
suitability for a particular investor. There is no
assurance that any rating will remain in effect for any
given period of time or that any rating will not be
revised or withdrawn entirely by a rating agency in the
future.
---------------------------------------------------------
SHORT-TERM OUTLOOK
As a result of improvement in demand and some planned and
unplanned plant outages across the industry, methanol prices have
increased recently.
Although the recovery in methanol demand has been strong there
continues to be uncertainty caused by the difficult global economic
environment. The methanol price will ultimately depend on industry
operating rates, global energy prices, the rate of industry
restructuring and the strength of global demand. We believe that
our financial position and financial flexibility, outstanding
global supply network and low cost position will provide a sound
basis for Methanex to continue to be the leader in the methanol
industry and invest to grow the Company.
CONTROLS AND PROCEDURES
For the three months ended September 30, 2009, no changes were
made in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
CHANGES IN ACCOUNTING POLICIES
On January 1, 2009, we adopted CICA Handbook Section 3064,
Goodwill and Intangible Assets. This new accounting standard,
replaces Section 3062, Goodwill and Other Intangible Assets.
Section 3064 expands on the standards for recognition, measurement
and disclosure of intangible assets. The impact of the retroactive
adoption of this standard on our consolidated financial statements
at January 1, 2009 is approximately $13 million recorded as a
reduction to opening retained earnings and property plant and
equipment. The amount relates to certain pre-operating expenditures
that have been capitalized to property, plant and equipment at
December 31, 2008 that would have been required to be expensed
under this new standard. The impact for the three and nine month
periods ended September 30, 2009 was an increase to selling,
general and administrative expenses of approximately $0.7 million
(2008 - $0.9 million) and $3.3 million (2008 - $2.7 million),
respectively.
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS)
In February 2008, the Canadian Accounting Standards Board
confirmed January 1, 2011 as the changeover date for Canadian
publicly accountable enterprises to start using International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB). IFRS uses a conceptual framework
similar to Canadian GAAP, but there are significant differences in
recognition, measurement and disclosures.
As a result of the IFRS transition, changes in accounting
policies are likely and may materially impact our consolidated
financial statements. The IASB will also continue to issue new
accounting standards during the conversion period, and as a result,
the final impact of IFRS on our consolidated financial statements
will only be measured once all the IFRS applicable at the
conversion date are known.
We have established a working team to manage the transition to
IFRS. Additionally, we have established an IFRS steering committee
to monitor progress and review and approve recommendations from the
working team for the transition to IFRS. The working team provides
regular updates to the IFRS steering committee and to the Audit,
Finance & Risk Committee of the Board.
We have developed a plan to convert our consolidated financial
statements to IFRS at the changeover date of January 1, 2011 with
comparative financial results for 2010. The IFRS transition plan
addresses the impact of IFRS on accounting policies and
implementation decisions, infrastructure, business activities, and
control activities.
During the latter half of 2008 we commenced the accounting
policy selection phase and are addressing, on a priority basis,
those areas which we believe may cause the most significant impact
to our consolidated financial statements. In conjunction with the
accounting policy selection phase, we are identifying the impact of
IFRS on infrastructure (including financial reporting expertise and
information technology and data systems), business activities
(including financial covenants and compensation arrangements), and
control activities (including internal control over financial
reporting and disclosure controls and procedures). During the third
quarter of 2009, we have continued to focus our efforts in
researching and documenting significant impact areas and continue
to progress the accounting policy selection phase. We have begun to
review our selection of IFRS accounting policies with our auditors
to ensure consistent interpretation of IFRS guidance in key
areas.
We will continue to provide updates on the status of the project
and its impact on financial reporting in our quarterly and annual
Management's Discussion and Analysis throughout the convergence
period to January 1, 2011.
ADDITIONAL INFORMATION - SUPPLEMENTAL NON-GAAP MEASURES
In addition to providing measures prepared in accordance with
Canadian generally accepted accounting principles (GAAP), we
present certain supplemental non-GAAP measures. These are Adjusted
EBITDA, operating income and cash flows from operating activities
before changes in non-cash working capital. These measures do not
have any standardized meaning prescribed by Canadian GAAP and
therefore are unlikely to be comparable to similar measures
presented by other companies. We believe these measures are useful
in evaluating the operating performance and liquidity of the
Company's ongoing business. These measures should be considered in
addition to, and not as a substitute for, net income, cash flows
and other measures of financial performance and liquidity reported
in accordance with Canadian GAAP.
Adjusted EBITDA
This supplemental non-GAAP measure is provided to assist readers
in determining our ability to generate cash from operations. We
believe this measure is useful in assessing performance and
highlighting trends on an overall basis. We also believe Adjusted
EBITDA is frequently used by securities analysts and investors when
comparing our results with those of other companies. Adjusted
EBITDA differs from the most comparable GAAP measure, cash flows
from operating activities, primarily because it does not include
changes in non-cash working capital, other cash payments related to
operating activities, stock-based compensation expense, other
non-cash items, interest expense, interest and other income
(expense), and current income taxes.
The following table shows a reconciliation of cash flows from
operating activities to Adjusted EBITDA:
Three Months Ended Nine Months Ended
-------------------------- ------------------
Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
($ thousands) 2009 2009 2008 2009 2008
------------------------------------------------------ ------------------
Cash flows from
operating activities $ 1,434 $ 14,037 $ 127,645 $ 83,324 $ 269,544
Add (deduct):
Changes in non-cash
working capital 34,825 3,685 (24,183) (24,526) 1,844
Other cash payments (16) 4,477 435 5,751 2,556
Stock-based
compensation expense (4,602) (1,453) 5,870 (7,929) (3,965)
Other non-cash items (1,226) (2,169) (117) (5,544) (4,030)
Interest expense 6,622 6,972 9,444 21,153 29,764
Interest and other
income (expense) (1,256) (1,903) (615) 422 (12,449)
Current income taxes (4,751) 1,135 21,050 (3,711) 60,451
------------------------------------------------------ ------------------
Adjusted EBITDA $ 31,030 $ 24,781 $ 139,529 $ 68,940 $ 343,715
------------------------------------------------------ ------------------
Operating Income and Cash Flows from Operating Activities before
Non-Cash Working Capital
Operating income and cash flows from operating activities before
changes in non-cash working capital are reconciled to Canadian GAAP
measures in our consolidated statements of income and consolidated
statements of cash flows, respectively.
QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected financial information for the prior eight
quarters is as follows:
Three Months Ended
---------------------------------------------
($ thousands, except Sep 30 Jun 30 Mar 31 Dec 31
per share amounts) 2009 2009 2009 2008
--------------------------------------------------------------------------
Revenue $ 316,932 $ 245,501 $ 254,007 $ 408,384
Net income (loss) (831) (5,743) (18,406) (3,949)
Basic net income (loss)
per common share (0.01) (0.06) (0.20) (0.04)
Diluted net income (loss)
per common share (0.01) (0.06) (0.20) (0.04)
--------------------------------------------------------------------------
Three Months Ended
---------------------------------------------
($ thousands, except Sep 30 Jun 30 Mar 31 Dec 31
per share amounts) 2008 2008 2008 2007
--------------------------------------------------------------------------
Revenue $ 569,876 $ 600,025 $ 735,934 $ 731,057
Net income 70,045 38,059 64,598 171,697
Basic net income per
common share 0.75 0.40 0.66 1.74
Diluted net income per
common share 0.74 0.40 0.66 1.72
--------------------------------------------------------------------------
FORWARD-LOOKING INFORMATION WARNING
This Third Quarter 2009 Management's Discussion and Analysis
("MD&A") contains forward-looking statements with respect to us
and the chemical industry. Statements that include the words
"believes", "expects", "may", "will", "should", "seeks", "intends",
"plans", "estimates", "anticipates", or the negative version of
those words or other comparable terminology and similar statements
of a future or forward-looking nature identify forward-looking
statements.
More particularly and without limitation, any statements
regarding the following are forward looking statements:
- expected demand for methanol and its derivatives,
- expected new methanol supply and timing for start-up of
same,
- expected shut downs (either temporary or permanent) or
re-starts of existing methanol supply (including our own
facilities), including, without limitation, timing of planned
maintenance outages,
- expected prices of methanol,
- anticipated production rates of our plants, including timing
of the start-up of a second plant in Chile,
- expected levels of natural gas supply to our plants,
- capital committed by third parties towards future natural gas
exploration in Chile, anticipated results of natural gas
exploration in Chile and timing of same,
- expected operating costs, including natural gas feedstock
costs and logistics costs,
- expected capital expenditures and future sources of funding
for such capital expenditures,
- expected tax rates,
- expected cash flows and earnings capability,
- anticipated completion date of, and cost to complete, our
methanol project in Egypt,
- availability of committed credit facilities and other
financing,
- shareholder distribution strategy and anticipated
distributions to shareholders,
- commercial viability of, or ability to execute, future
projects or capacity expansions,
- financial strength and ability to meet future financial
commitments,
- expected global or regional economic activity (including
industrial production levels) and expected timing for recovery from
the current economic recession, and
- expected actions of third parties, including governments, gas
suppliers, courts and tribunals.
We believe that we have a reasonable basis for making such
forward-looking statements. The forward-looking statements in this
document are based on our experience, our perception of trends,
current conditions and expected future developments as well as
other factors. Certain material factors or assumptions were applied
in drawing the conclusions or making the forecasts or projections
that are included in these forward-looking statements, including,
without limitation, future expectations and assumptions concerning
the following:
- supply of, demand for, and price of, methanol, methanol
derivatives, natural gas, oil and oil derivatives,
- production rates of our facilities,
- success of natural gas exploration in Chile and New
Zealand,
- receipt of third party consents or approvals, including
without limitation, governmental approvals related to natural gas
exploration rights, rights to purchase natural gas, and other
rights and projects,
- operating costs including natural gas feedstock and logistics
costs, capital costs, tax rates, cash flows, foreign exchange rates
and interest rates,
- completion date and cost of our methanol project in Egypt,
- availability of committed credit facilities and other
financing,
- global and regional economic activity (including industrial
production levels),
- absence of a material negative impact from major natural
disasters or global pandemics,
- absence of a material negative impact from changes in laws or
regulations, and
- performance of contractual obligations by customers, suppliers
and other third parties.
However, forward-looking statements, by their nature, involve
risks and uncertainties that could cause actual results to differ
materially from those contemplated by the forward-looking
statements. The risks and uncertainties primarily include those
attendant with producing and marketing methanol and successfully
carrying out major capital expenditure projects in various
jurisdictions, including without limitation:
- conditions in the methanol and other industries, including
fluctuations in supply, demand and price for methanol and its
derivatives, including demand for methanol for energy uses,
- the price of natural gas, oil and oil derivatives,
- the success of natural gas exploration and development
activities in southern Chile and New Zealand and our ability to
obtain any additional gas in those regions or other regions on
commercially acceptable terms,
- the timing of start-up and cost to complete our new methanol
joint venture project in Egypt,
- the ability to successfully carry out corporate initiatives
and strategies,
- actions of competitors and suppliers,
- actions of governments and governmental authorities including
implementation of policies or other measures by the Chinese
government or other governments that could impact the demand for
methanol,
- changes in laws or regulations,
- import or export restrictions, anti-dumping measures,
increases in duties, taxes and government royalties, and other
actions by governments that may adversely affect our
operations,
- world-wide economic conditions, and
- other risks described in our 2008 Management's Discussion and
Analysis and this Third Quarter 2009 Management's Discussion and
Analysis.
In addition to the foregoing risk factors, the current uncertain
economic environment and its impact on global economies has added
additional risks and uncertainties including changes in capital
markets and corresponding effects on the company's investments, our
ability to access existing or future credit and defaults by
customers, suppliers or insurers.
Having in mind these and other factors, investors and other
readers are cautioned not to place undue reliance on
forward-looking statements. They are not a substitute for the
exercise of one's own due diligence and judgment. The outcomes
anticipated in forward-looking statements may not occur and we do
not undertake to update forward-looking statements except as
required by applicable securities laws.
HOW WE ANALYZE OUR BUSINESS
Our operations consist of a single operating segment - the
production and sale of methanol. We review our results of
operations by analyzing changes in the components of our Adjusted
EBITDA (refer to Supplemental Non-GAAP Measures for a
reconciliation to the most comparable GAAP measure), depreciation
and amortization, interest expense, interest and other income, and
income taxes. In addition to the methanol that we produce at our
facilities, we also purchase and re-sell methanol produced by
others and we sell methanol on a commission basis. We analyze the
results of all methanol sales together. The key drivers of changes
in our Adjusted EBITDA for methanol sales are average realized
price, sales volume and cash costs. The price, cash cost and volume
variances included in our Adjusted EBITDA analysis are defined and
calculated as follows:
PRICE
The change in Adjusted EBITDA as a result of changes in average
realized price is calculated as the difference from period to
period in the selling price of methanol multiplied by the current
period total methanol sales volume excluding commission sales
volume plus the difference from period to period in commission
revenue.
COST
The change in our Adjusted EBITDA as a result of changes in cash
costs is calculated as the difference from period to period in cash
costs per tonne multiplied by the current period total methanol
sales volume excluding commission sales volume in the current
period plus the change in unabsorbed fixed cash costs, the change
in consolidated selling, general and administrative expenses and
the change in fixed storage and handling costs.
VOLUME
The change in Adjusted EBITDA as a result of changes in sales
volumes is calculated as the difference from period to period in
total methanol sales volume excluding commission sales volume
multiplied by the margin per tonne for the prior period. The margin
per tonne is calculated as the selling price per tonne of methanol
less absorbed fixed cash costs per tonne and variable cash costs
per tonne.
Methanex Corporation
Consolidated Statements of Income (Loss) (unaudited)
(thousands of U.S. dollars, except number of common shares and per share
amounts)
Three Months Ended Nine Months Ended
----------------------- -----------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
--------------------------------------------------------------------------
(As adjusted (As adjusted
- note 2) - note 2)
Revenue $ 316,932 $ 569,876 $ 816,440 $ 1,905,836
Cost of sales and
operating expenses 285,902 430,347 747,500 1,562,121
Depreciation and
amortization 27,924 31,251 85,597 80,760
--------------------------------------------------------------------------
Operating income
(loss) before
undernoted items 3,106 108,278 (16,657) 262,955
Interest expense
(note 7) (6,622) (9,444) (21,153) (29,764)
Interest and other
income (expense) 1,256 615 (422) 12,449
--------------------------------------------------------------------------
Income (loss)
before income taxes (2,260) 99,449 (38,232) 245,640
Income tax (expense)
recovery:
Current 4,751 (21,050) 3,711 (60,451)
Future (3,322) (8,354) 9,541 (12,487)
--------------------------------------------------------------------------
1,429 (29,404) 13,252 (72,938)
--------------------------------------------------------------------------
Net income (loss) $ (831) $ 70,045 $ (24,980) $ 172,702
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income (loss)
per common
share:
Basic $ (0.01) $ 0.75 $ (0.27) $ 1.81
Diluted $ (0.01) $ 0.74 $ (0.27) $ 1.81
Weighted average
number of common
shares outstanding:
Basic 92,069,764 93,870,876 92,048,250 95,177,219
Diluted 92,069,764 94,328,208 92,048,250 95,665,831
Number of common
shares outstanding
at period end 92,108,242 93,396,142 92,108,242 93,396,142
See accompanying notes to consolidated financial statements.
Methanex Corporation
Consolidated Balance Sheets (unaudited)
(thousands of U.S. dollars)
Sep 30 Dec 31
2009 2008
--------------------------------------------------------------------------
(As adjusted
- note 2)
ASSETS
Current assets:
Cash and cash equivalents $ 197,436 $ 328,430
Receivables 242,758 213,419
Inventories 116,617 177,637
Prepaid expenses 22,263 16,840
--------------------------------------------------------------------------
579,074 736,326
Property, plant and equipment (note 4) 2,155,632 1,899,059
Other assets 116,931 168,988
--------------------------------------------------------------------------
$ 2,851,637 $ 2,804,373
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 194,645 $ 235,369
Current maturities on long-term debt (note 6) 28,333 15,282
Current maturities on other long-term
liabilities 8,707 8,048
--------------------------------------------------------------------------
231,685 258,699
Long-term debt (note 6) 889,321 772,021
Other long-term liabilities 90,665 97,441
Future income tax liabilities 289,651 299,192
Non-controlling interest 126,728 88,604
Shareholders' equity:
Capital stock 427,792 427,265
Contributed surplus 26,296 22,669
Retained earnings 794,717 862,507
Accumulated other comprehensive loss (25,218) (24,025)
--------------------------------------------------------------------------
1,223,587 1,288,416
--------------------------------------------------------------------------
$ 2,851,637 $ 2,804,373
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Methanex Corporation
Consolidated Statements of Shareholders' Equity (unaudited)
(thousands of U.S. dollars, except number of common shares)
Accumu-
lated
Other Total
Number of Contri- Compre- Share-
Common Capital buted Retained hensive holders'
Shares Stock Surplus Earnings Loss Equity
---------------------------------------------------------------------------
Balance,
December
31, 2007,
as
previously
reported 98,310,254 $ 451,640 $ 16,021 $ 876,348 $ (8,655) $1,335,354
Adjustments
for
retroactive
adoption
of new
accounting
policies:
Goodwill
and
intangibles
3064 (note 2) - - - (7,790) - (7,790)
Non-controlling
interest
proportionate
share
(note 2) - - - 1,858 3,462 5,320
---------------------------------------------------------------------------
Balance,
December
31, 2007,
as
adjusted 98,310,254 451,640 16,021 870,416 (5,193) 1,332,884
Net income
and other
comprehensive
loss, as
previously
reported - - - 172,298 (31,363) 140,935
Adjustments
for
retroactive
adoption
of new
accounting
policies:
Goodwill
and
intangibles
3064 (note 2) - - - (5,818) - (5,818)
Non-controlling
interest
proportionate
share
(note 2) - - - 2,273 12,531 14,804
------- ------- -------
Net income
and other
comprehensive
loss, as
adjusted 168,753 (18,832) 149,921
Compensation
expense
recorded
for stock
options - - 8,225 - - 8,225
Issue of
shares on
exercise
of stock
options 224,016 4,075 - - - 4,075
Reclassifi-
cation of
grant date
fair value
on exercise
of stock
options - 1,577 (1,577) - - -
Payments
for shares
repurchased (6,502,878) (30,027) - (119,829) - (149,856)
Dividend
payments - - - (56,833) - (56,833)
---------------------------------------------------------------------------
Balance,
December
31, 2008 92,031,392 427,265 22,669 862,507 (24,025) 1,288,416
Net loss - - - (24,149) - (24,149)
Compensation
expense
recorded
for stock
options - - 3,018 - - 3,018
Issue of
shares on
exercise
of stock
options 9,850 54 - - - 54
Reclassifi-
cation of
grant date
fair value
on exercise
of stock
options - 47 (47) - - -
Dividend
payments - - - (28,533) - (28,533)
Other
comprehensive
income - - - - 3,930 3,930
---------------------------------------------------------------------------
Balance,
June 30,
2009 92,041,242 427,366 25,640 809,825 (20,095) 1,242,736
Net loss - - - (831) - (831)
Compensation
expense
recorded
for stock
options - - 711 - - 711
Issue of
shares on
exercise
of stock
options 67,000 371 - - - 371
Reclassifi-
cation of
grant date
fair value
on exercise
of stock
options - 55 (55) - - -
Dividend
payments - - - (14,277) - (14,277)
Other
comprehensive
income - - - - (5,123) (5,123)
---------------------------------------------------------------------------
Balance,
September 30,
2009 92,108,242 $ 427,792 $ 26,296 $ 794,717 $(25,218) $1,223,587
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income (Loss) (unaudited)
(thousands of U.S. dollars)
Three Months Ended Nine Months Ended
----------------------- -----------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
--------------------------------------------------------------------------
Net income (loss) $ (831) $ 70,045 $ (24,980) $ 172,702
Other comprehensive
income (loss), net
of tax:
Change in fair value
of forward exchange
contracts (note 13) 96 (16) (82) 44
Change in fair value
of interest rate swap
contracts (note 13) (5,219) (5,231) (1,111) (5,155)
--------------------------------------------------------------------------
(5,123) (5,247) (1,193) (5,111)
--------------------------------------------------------------------------
Comprehensive income
(loss) $ (5,954) $ 64,798 $ (26,173) $ 167,591
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Methanex Corporation
Consolidated Statements of Cash Flows (unaudited)
(thousands of U.S. dollars)
Three Months Ended Nine Months Ended
----------------------- -----------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
--------------------------------------------------------------------------
(As adjusted (As adjusted
- note 2) - note 2)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) $ (831) $ 70,045 $ (24,980) $ 172,702
Add (deduct) non-cash
items:
Depreciation and
amortization 27,924 31,251 85,597 80,760
Future income taxes 3,322 8,354 (9,541) 12,487
Stock-based compensation
expense (recovery) 4,602 (5,870) 7,929 3,965
Other 1,226 117 5,544 4,030
Other cash payments,
including stock-based
compensation 16 (435) (5,751) (2,556)
--------------------------------------------------------------------------
Cash flows from operating
activities before
undernoted 36,259 103,462 58,798 271,388
Changes in non-cash
working capital (note 11) (34,825) 24,183 24,526 (1,844)
--------------------------------------------------------------------------
1,434 127,645 83,324 269,544
--------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividend payments (14,277) (14,521) (42,810) (42,568)
Proceeds from limited
recourse debt (note 6) 32,379 48,000 137,378 136,000
Financing costs (1,732) - (1,732) -
Equity contribution by
non-controlling interest 10,575 19,369 41,038 48,866
Repayment of limited
recourse debt (312) (312) (7,953) (7,952)
Payments for shares
repurchased - (15,314) - (132,879)
Proceeds on issue of
shares on exercise
of stock options 371 82 425 3,982
Repayment of other
long-term liabilities (6,281) (3,028) (15,192) (9,115)
--------------------------------------------------------------------------
20,723 34,276 111,154 (3,666)
--------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant
and equipment (18,766) (40,048) (50,193) (78,302)
Egypt plant under
construction (47,346) (97,189) (224,205) (274,632)
Oil and gas assets
(note 14) (6,358) (5,478) (17,558) (38,328)
GeoPark financing - (8,000) - (19,390)
Changes in project
debt reserve accounts - - 5,044 (1,995)
Other assets - (13) (2,454) 129
Changes in non-cash
working capital
(note 11) (29,851) 2,283 (36,106) 16,417
--------------------------------------------------------------------------
(102,321) (148,445) (325,472) (396,101)
--------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents (80,164) 13,476 (130,994) (130,223)
Cash and cash
equivalents,
beginning of
period 277,600 344,525 328,430 488,224
--------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 197,436 $ 358,001 $ 197,436 $ 358,001
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SUPPLEMENTARY CASH
FLOW INFORMATION
Interest paid $ 18,418 $ 16,665 $ 43,081 $ 40,567
Income taxes paid,
net of amounts
refunded $ 1,369 $ 9,309 $ 9,088 $ 72,392
See accompanying notes to consolidated financial statements.
Methanex Corporation
Notes to Consolidated Financial Statements (unaudited)
Except where otherwise noted, tabular dollar amounts are stated
in thousands of U.S. dollars.
1. Basis of presentation:
These interim consolidated financial statements are prepared in
accordance with generally accepted accounting principles in Canada
on a basis consistent with those followed in the most recent annual
consolidated financial statements, except as described in Note 2
below. These accounting principles are different in some respects
from those generally accepted in the United States and the
significant differences are described and reconciled in Note 15.
These interim consolidated financial statements do not include all
note disclosures required by Canadian generally accepted accounting
principles for annual financial statements, and therefore should be
read in conjunction with the annual consolidated financial
statements included in the Methanex Corporation 2008 Annual Report.
Certain prior period comparatives have been reclassified to conform
with the current year presentation.
2. Changes to Canadian generally accepted accounting principles
and reclassifications:
On January 1, 2009, the Company adopted CICA Handbook Section
3064, Goodwill and Intangible Assets. This new accounting standard,
replaces Section 3062, Goodwill and Other Intangible Assets.
Section 3064 expands on the standards for recognition, measurement
and disclosure of intangible assets. The impact of the retroactive
adoption of this standard on the Company's consolidated balance
sheet at January 1, 2009 is approximately $13 million recorded as a
reduction to opening retained earnings and property plant and
equipment. The amount relates to certain pre-operating expenditures
that have been capitalized to property, plant and equipment at
December 31, 2008 that would have been required to be expensed
under this new standard. The impact for the three and nine month
periods ended September 30, 2009 was an increase to selling,
general and administrative expenses of approximately $0.7 million
(2008 - $0.9 million) and $3.3 million (2008 - $2.7 million),
respectively.
As a portion of these pre-operating expenditures were incurred
in a non-wholly-owned subsidiary, the Company has also adjusted the
opening non-controlling interest (NCI) and retained earnings
balances at December 31, 2008 for the NCI's proportionate share of
approximately $4 million. In addition, the Company has
retrospectively reclassified approximately $16 million from
accumulated other comprehensive loss to NCI, representing the NCI's
share of accumulated other comprehensive loss to December 31,
2008.
3. Inventories:
Inventories are valued at the lower of cost, determined on a
first-in first-out basis, and estimated net realizable value. The
amount of inventories included in cost of sales and operating
expense and depreciation and amortization during the three and nine
month periods ended September 30, 2009 was $263 million (2008 -
$421 million) and $702 million (2008 - $1,488 million),
respectively.
4. Property, plant and equipment:
Accumulated Net Book
Cost Depreciation Value
--------------------------------------------------------------------------
September 30, 2009
Plant and equipment $ 2,578,956 $ 1,359,038 $ 1,219,918
Egypt plant under construction 814,790 - 814,790
Oil and gas assets (note 14) 59,724 1,014 58,710
Other 128,320 66,106 62,214
--------------------------------------------------------------------------
$ 3,581,790 $ 1,426,158 $ 2,155,632
--------------------------------------------------------------------------
December 31, 2008
Plant and equipment $ 2,544,163 $ 1,299,296 $ 1,244,867
Egypt plant under construction 590,585 - 590,585
Other 127,731 64,124 63,607
--------------------------------------------------------------------------
$ 3,262,479 $ 1,363,420 $ 1,899,059
--------------------------------------------------------------------------
5. Interest in Atlas joint venture:
The Company has a 63.1% joint venture interest in Atlas Methanol
Company (Atlas). Atlas owns a 1.7 million tonne per year methanol
production facility in Trinidad. Included in the consolidated
financial statements are the following amounts representing the
Company's proportionate interest in Atlas:
Sep 30 Dec 31
Consolidated Balance Sheets 2009 2008
--------------------------------------------------------------------------
Cash and cash equivalents $ 17,033 $ 35,749
Other current assets 57,366 57,374
Property, plant and equipment 244,682 249,609
Other assets 13,105 18,149
Accounts payable and accrued liabilities 24,826 19,927
Long-term debt, including current maturities (note 6) 100,033 106,592
Future income tax liabilities 15,158 17,942
--------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------- --------------------
Consolidated Sep 30 Sep 30 Sep 30 Sep 30
Statements of Income 2009 2008 2009 2008
---------------------------------------------------- --------------------
Revenue $ 57,909 $ 75,017 $ 139,009 $ 233,549
Expenses (42,239) (69,958) (114,274) (216,693)
---------------------------------------------------- --------------------
Income before income taxes 15,670 5,059 24,735 16,856
Income tax expense (1,433) (1,183) (2,923) (4,134)
---------------------------------------------------- --------------------
Net Income $ 14,237 $ 3,876 $ 21,812 $ 12,722
---------------------------------------------------- --------------------
Three Months Ended Nine Months Ended
---------------------- --------------------
Consolidated Sep 30 Sep 30 Sep 30 Sep 30
Statements of Cash Flows 2009 2008 2009 2008
---------------------------------------------------- --------------------
Cash inflows from
operating activities $ 5,949 $ 8,524 $ 38,116 $ 22,612
Cash outflows from
financing activities - - (7,016) (9,010)
Cash outflows from
investing activities (473) (446) (3,753) (1,056)
---------------------------------------------------- --------------------
6. Long-term debt:
Sep 30 Dec 31
2009 2008
--------------------------------------------------------------------------
Unsecured notes
8.75% due August 15, 2012 $ 198,512 $ 198,182
6.00% due August 15, 2015 148,657 148,518
--------------------------------------------------------------------------
347,169 346,700
Atlas limited recourse debt facilities 100,033 106,592
Egypt limited recourse debt facilities 457,952 320,574
Other limited recourse debt facilities 12,500 13,437
--------------------------------------------------------------------------
917,654 787,303
Less current maturities (28,333) (15,282)
--------------------------------------------------------------------------
$ 889,321 $ 772,021
--------------------------------------------------------------------------
7. Interest expense:
Three Months Ended Nine Months Ended
---------------------- --------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
---------------------------------------------------- --------------------
Interest expense before
capitalized interest $ 12,595 $ 13,393 $ 38,712 $ 39,695
Less: capitalized interest
related to Egypt project (5,973) (3,949) (17,559) (9,931)
---------------------------------------------------- --------------------
Interest expense $ 6,622 $ 9,444 $ 21,153 $ 29,764
---------------------------------------------------- --------------------
The Company has limited recourse debt facilities of $530 million
for its joint venture project to construct a 1.3 million tonne per
year methanol facility in Egypt. For the three and nine month
periods ended September 30, 2009, interest costs related to this
project of $6.0 million (2008 - $3.9 million) and $17.6 million
(2008 - $9.9 million) were capitalized, respectively.
8. Net income (loss) per common share:
A reconciliation of the weighted average number of common shares
outstanding is as follows:
Three Months Ended Nine Months Ended
----------------------- ---------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
---------------------------------------------------- ---------------------
Denominator for basic net
income per common share 92,069,764 93,870,876 92,048,250 95,177,219
Effect of dilutive stock
options - 457,332 - 488,612
---------------------------------------------------- ---------------------
Denominator for diluted net
income per common share 92,069,764 94,328,208 92,048,250 95,665,831
---------------------------------------------------- ---------------------
9. Stock-based compensation:
a) Stock options:
(i) Incentive stock options:
Common shares reserved for outstanding incentive stock options
at September 30, 2009:
Options Options
Denominated in CAD Denominated in USD
------------------- ---------------------
Number Weighted Number Weighted
of Average of Average
Stock Exercise Stock Exercise
Options Price Options Price
----------------------------------------------------- ---------------------
Outstanding at
December 31, 2008 76,450 $ 6.95 3,743,117 $ 23.27
Granted - - 1,361,130 6.33
Exercised (8,100) 5.85 (1,750) 9.23
Cancelled (1,000) 5.85 (31,430) 22.77
----------------------------------------------------- ---------------------
Outstanding at June 30, 2009 67,350 $ 7.09 5,071,067 $ 18.73
Granted - - - -
Exercised (12,000) 4.86 (20,000) 8.67
Cancelled - - (40,000) 20.21
----------------------------------------------------- ---------------------
Outstanding at
September 30, 2009 55,350 $ 7.58 5,011,067 $ 18.76
----------------------------------------------------- ---------------------
Information regarding the incentive stock options outstanding at
September 30, 2009 is as follows:
Options Outstanding at Options Exercisable at
September 30, 2009 September 30, 2009
----------------------------------- ----------------------
Weighted
Average
Remaining Number of Weighted Number of Weighted
Contractual Stock Average Stock Average
Range of Life Options Exercise Options Exercise
Exercise Prices (Years) Outstanding Price Exercisable Price
---------------------------------------------------- ----------------------
Options denominated
in CAD
$3.29 to 9.56 1.1 55,350 $ 7.58 55,350 $ 7.58
---------------------------------------------------- ----------------------
Options denominated
in USD
$6.33 to 11.56 6.1 1,511,630 $ 6.57 165,800 $ 8.55
$17.85 to 22.52 3.2 1,458,650 20.27 1,458,650 20.27
$23.92 to 28.43 4.9 2,040,787 26.72 1,004,586 26.15
---------------------------------------------------- ----------------------
4.8 5,011,067 $ 18.76 2,629,036 $ 21.77
---------------------------------------------------- ----------------------
(ii) Performance stock options:
As at September 30, 2009, there were no shares (December 31,
2008 - 35,000 shares) reserved for performance stock options.
(iii) Compensation expense related to stock options:
For the three and nine month periods ended September 30, 2009,
compensation expense related to stock options included in cost of
sales and operating expenses was $0.7 million (2008 - $1.8 million)
and $3.7 million (2008 - $6.4 million), respectively. The fair
value of the 2009 stock option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions:
2009
--------------------------------------------------------------------------
Risk-free interest rate 1.8%
Dividend yield 2%
Expected life 5 years
Volatility 44%
Forfeiture rate 5%
Weighted average fair value of options granted (USD per share) $ 2.06
--------------------------------------------------------------------------
b) Deferred, restricted and performance share units:
Deferred, restricted and performance share units outstanding at
September 30, 2009 are as follows:
Number of Number of Number of
Deferred Share Restricted Share Performance
Units Units Share Units
---------------------------------------------------------------------------
Outstanding at
December 31, 2008 411,395 12,523 1,057,648
Granted 116,860 15,200 396,470
Granted in-lieu
of dividends 16,280 945 35,691
Redeemed (56,620) - (395,420)
Cancelled - - (13,671)
---------------------------------------------------------------------------
Outstanding at
June 30, 2009 487,915 28,668 1,080,718
Granted 4,921 - -
Granted in-lieu
of dividends 4,340 235 8,719
Redeemed - - -
Cancelled - - (12,957)
---------------------------------------------------------------------------
Outstanding at
September 30, 2009 497,176 28,903 1,076,480
---------------------------------------------------------------------------
Compensation expense for deferred, restricted and performance
share units is initially measured at fair value based on the market
value of the Company's common shares and is recognized over the
related service period. Changes in fair value are recognized in
earnings for the proportion of the service that has been rendered
at each reporting date. The fair value of deferred, restricted and
performance share units at September 30, 2009 was $22.5 million
compared with the recorded liability of $17.8 million. The
difference between the fair value and the recorded liability of
$4.7 million will be recognized over the weighted average remaining
service period of approximately 1.9 years.
For the three and nine month periods ended September 30, 2009,
compensation expense related to deferred, restricted and
performance share units included in cost of sales and operating
expenses was $3.9 million (2008 - recovery of $7.7 million) and
$4.2 million (2008 - recovery of $2.5 million), respectively. This
included an expense of $2.5 million (2008 - recovery of $10.4
million) and a recovery of $1.5 million (2008 - recovery of $11.2
million), respectively, related to the effect of the change in the
Company's share price.
10. Retirement plans:
Total net pension expense for the Company's defined benefit and
defined contribution pension plans during the three and nine month
periods ended September 30, 2009 was $2.0 million (2008 - $1.7
million) and $7.5 million (2008 - $5.5 million), respectively.
11. Changes in non-cash working capital:
The change in cash flows related to changes in non-cash working
capital for the three and nine month periods ended September 30,
2009 were as follows:
Three Months Ended Nine Months Ended
---------------------- --------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
---------------------------------------------------- --------------------
Decrease (increase) in
non-cash working capital:
Receivables $ (60,200) $ 11,228 $ (29,339) $ 110,526
Inventories (13,664) 505 61,020 65,881
Prepaid expenses 1,977 2,258 (5,423) (12,211)
Accounts payable and
accrued liabilities 3,057 10,487 (40,724) (160,461)
---------------------------------------------------- --------------------
(68,830) 24,478 (14,466) 3,735
Adjustments for items
not having a cash effect 4,154 1,988 2,886 10,838
---------------------------------------------------- --------------------
Changes in non-cash
working capital having
a cash effect $ (64,676) $ 26,466 $ (11,580) $ 14,573
---------------------------------------------------- --------------------
These changes relate to
the following activities:
Operating $ (34,825) $ 24,183 $ 24,526 $ (1,844)
Investing (29,851) 2,283 (36,106) 16,417
---------------------------------------------------- --------------------
Changes in non-cash
working capital $ (64,676) $ 26,466 $ (11,580) $ 14,573
---------------------------------------------------- --------------------
12. Capital disclosures:
In August 2009, the Company entered into a $200 million
unsecured revolving credit facility expiring in May 2012, to
replace its $250 million credit facility that was set to expire in
mid-2010. The undrawn credit facility is provided by highly rated
financial institutions and is subject to certain financial
covenants including an EBITDA to interest coverage ratio and a debt
to capitalization ratio.
13. Financial instruments:
The following table provides the carrying value of each category
of financial assets and liabilities and the related balance sheet
item:
Sep 30 Dec 31
2009 2008
--------------------------------------------------------------------------
Financial assets:
Held for trading financial assets:
Cash and cash equivalents $ 197,436 $ 328,430
Project debt reserve accounts included
in other assets 13,105 18,149
Loans and receivables:
Receivables 235,688 207,419
Dorado Riquelme investment (note 14) - 42,123
GeoPark financing, including current portion 32,463 36,616
--------------------------------------------------------------------------
$ 478,692 $ 632,737
--------------------------------------------------------------------------
Financial liabilities:
Other financial liabilities:
Accounts payable and accrued liabilities $ 194,645 $ 235,369
Long-term debt, including current portion 917,654 787,303
Capital lease obligation included in other
long-term liabilities, including
current portion 17,170 20,742
Held for trading financial liabilities:
Derivative instruments designated as cash
flow hedges 33,862 38,100
Derivative instruments 379 1,771
--------------------------------------------------------------------------
$ 1,163,710 $ 1,083,285
--------------------------------------------------------------------------
At September 30, 2009, all of the Company's financial
instruments are recorded on the balance sheet at amortized cost
with the exception of cash and cash equivalents, derivative
financial instruments and reserve accounts included in other assets
which are recorded at fair value.
The Egypt limited recourse debt facilities bear interest at
LIBOR plus a spread. The Company has entered into interest rate
swap contracts to swap the LIBOR-based interest payments for an
average aggregated fixed rate of 4.8% plus a spread on
approximately 75% of the Egypt limited recourse debt facilities for
the period September 28, 2007 to March 31, 2015.
The Company has designated as cash flow hedges these interest
rate swap contracts to swap the variable-based interest payments
for a fixed rate. These interest rate swaps had outstanding
notional amounts of $351 million as at September 30, 2009. Under
the interest rate swap contracts the maximum notional amount during
the term is $368 million. The notional amount increases over the
period of expected draw-downs on the Egypt limited recourse debt
and decreases over the expected repayment period. At September 30,
2009, these interest rate swap contracts had a negative fair value
of $33.6 million (December 31, 2008 - negative $38.1 million)
recorded in other long-term liabilities. The fair value of these
interest rate swap contracts will fluctuate until maturity. The
Company also designates as cash flow hedges forward exchange
contracts to sell euro at a fixed USD exchange rate. At September
30, 2009, the Company had outstanding forward exchange contracts
designated as cash flow hedges to sell a notional amount of 4.4
million euro in exchange for US dollars and these euro contracts
had a negative fair value of $0.3 million (December 31, 2008 - fair
value of nil). Changes in fair value of derivative financial
instruments designated as cash flow hedges have been recorded in
other comprehensive income.
At September 30, 2009, the Company's derivative financial
instruments that have not been designated as cash flow hedges
include a floating-for-fixed interest rate swap contract with a
negative fair value of $0.4 million (December 31, 2008 - $0.6
million) recorded in other long-term liabilities. For the three and
nine month periods ended September 30, 2009, the total change in
fair value of this derivative financial instrument was nil (2008 -
nil) and a positive $0.3 million (2008 - positive $0.1 million),
respectively.
14. Dorado Riquelme investment:
On August 24, 2009, the Company received final government
approval of the agreement signed on May 5, 2008 with Empresa
Nacional del Petroleo (ENAP), the Chilean state-owned oil and gas
company. The agreement with ENAP is to accelerate gas exploration
and development in the Dorado Riquelme exploration block and supply
new Chilean-sourced natural gas to the Company's production
facilities in Chile. Under the arrangement we fund a 50%
participation in the block and as at September 30, 2009 we had
contributed approximately $59.7 million to date.
Upon receiving final government approval of the agreement, the
Company adopted the full cost methodology for accounting for oil
and gas exploration and development costs and reclassified the
cumulative oil and gas expenditures of $58.7 million from other
assets to property, plant and equipment. As of September 30, 2009
we have contributed $59.7 million (December 31, 2008 - $42.1
million) for the Dorado Riquelme investment and this amount has
been recorded in property, plant and equipment net of depletion
charges of $1.0 million that are recorded in inventory.
15. United States generally accepted accounting principles:
The Company follows generally accepted accounting principles in
Canada ("Canadian GAAP") which are different in some respects from
those applicable in the United States and from practices prescribed
by the United States Securities and Exchange Commission ("U.S.
GAAP").
The significant differences between Canadian GAAP and U.S. GAAP
with respect to the Company's consolidated statements of income
(loss) for the three and nine month periods ended September 30,
2009 and 2008 are as follows:
Three Months Ended Nine Months Ended
---------------------- --------------------
Sep 30 Sep 30 Sep 30 Sep 30
2009 2008 2009 2008
---------------------------------------------------- --------------------
---------------------------------------------------- --------------------
Net income (loss) in
accordance with Canadian
GAAP $ (831) $ 70,045 $ (24,980) $ 172,702
Add (deduct) adjustments
for:
Depreciation and
amortization(a) (478) (478) (1,433) (1,433)
Stock-based compensation(b) (70) 175 (93) 147
Uncertainty in income taxes(c) (1,189) (2,582) (1,795) (3,346)
Income tax effect of above
adjustments(d) 167 167 501 501
---------------------------------------------------- --------------------
Net income (loss) in
accordance with U.S. GAAP $ (2,401) $ 67,327 $ (27,800) $ 168,571
---------------------------------------------------- --------------------
Per share information in
accordance with U.S. GAAP:
Basic net income (loss)
per share $ (0.03) $ 0.72 $ (0.30) $ 1.77
Diluted net income (loss)
per share $ (0.03) $ 0.71 $ (0.30) $ 1.76
---------------------------------------------------- --------------------
The significant differences between Canadian GAAP and U.S. GAAP
with respect to the Company's consolidated statements of
comprehensive income (loss) for the three and nine month periods
ended September 30, 2009 and 2008 are as follows:
Three Months Ended
----------------------------------------------------
September 30, 2009 Sep 30, 2008
------------------------------------- ------------
Canadian
GAAP Adjustments U.S. GAAP U.S. GAAP
----------------------------------------------------------- ------------
----------------------------------------------------------- ------------
Net income (loss) $ (831) $ (1,570) $ (2,401) $ 67,327
Change in fair
value of forward
exchange contracts,
net of tax 96 - 96 (16)
Change in fair value
of interest rate swap,
net of tax (5,219) - (5,219) (5,231)
Change related to
pension, net
of tax(e) - 399 399 236
----------------------------------------------------------- ------------
Comprehensive
income (loss) $ (5,954) $ (1,171) $ (7,125) $ 62,316
----------------------------------------------------------- ------------
Nine Months Ended
----------------------------------------------------
September 30, 2009 Sep 30, 2008
------------------------------------- ------------
Canadian
GAAP Adjustments U.S. GAAP U.S. GAAP
----------------------------------------------------------- ------------
----------------------------------------------------------- ------------
Net income (loss) $ (24,980) $ (2,820) $ (27,800) $ 168,571
Change in fair
value of forward
exchange contracts,
net of tax (82) - (82) 44
Change in fair value
of interest rate swap,
net of tax (1,111) - (1,111) (5,155)
Change related to
pension, net
of tax(e) - 1,129 1,129 477
----------------------------------------------------------- ------------
Comprehensive
income (loss) $ (26,173) $ (1,691) (27,864) $ 163,937
----------------------------------------------------------- ------------
a) Business combination:
Effective January 1, 1993, the Company combined its business
with a methanol business located in New Zealand and Chile. Under
Canadian GAAP, the business combination was accounted for using the
pooling-of-interest method. Under U.S. GAAP, the business
combination would have been accounted for as a purchase with the
Company identified as the acquirer. In accordance with U.S. GAAP,
an increase to depreciation expense by $0.5 million (2008 - $0.5
million) and $1.4 million (2008 - $1.4 million), was recorded for
the three and nine month periods ended September 30, 2009,
respectively.
b) Stock-based compensation:
The Company has 19,350 stock options that are accounted for as
variable plan options under U.S. GAAP because the exercise price of
the stock options is denominated in a currency other than the
Company's functional currency or the currency in which the optionee
is normally compensated. For Canadian GAAP purposes, no
compensation expense has been recorded as these options were
granted in 2001 which is prior to the effective implementation date
for fair value accounting under Canadian GAAP.
c) Accounting for uncertainty in income taxes:
Effective January 1, 2007, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - An Interpretation of FASB
Statement No. 109 (FIN 48), as codified in FASB ASC topic 740,
Income Taxes (ASC 740). ASC 740 prescribes a recognition threshold
and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in
a tax return. In accordance with ASC 740, an income tax expense of
$1.2 million (2008 - $2.6 million) and $1.8 million (2008 - $3.3
million) was recorded for the three and nine month periods ended
September 30, 2009, respectively.
d) Income tax accounting:
The income tax differences include the income tax effect of the
adjustments related to accounting differences between Canadian and
U.S. GAAP. In accordance with U.S. GAAP, an increase to net income
of $0.2 million (2008 - $0.2 million) and $0.5 million (2008 - $0.5
million) was recorded for the three and nine month periods ended
September 30, 2009, respectively.
e) Defined benefit pension plans:
Effective January 1, 2006, U.S. GAAP requires the Company to
measure the funded status of a defined benefit pension plan at its
balance sheet reporting date and recognize the unrecorded
overfunded or underfunded status as an asset or liability with the
change in that unrecorded funded status recorded to other
comprehensive income. Under U.S. GAAP, all deferred pension amounts
from Canadian GAAP are reclassified to accumulated other
comprehensive income. In accordance with U.S. GAAP, an increase to
other comprehensive income of $0.4 million (2008 - $0.2 million)
and $1.1 million (2008 - $0.5 million) was recorded for the three
and nine month periods ended September 30, 2009, respectively.
f) Interest in Atlas joint venture:
U.S. GAAP requires interests in joint ventures to be accounted
for using the equity method. Canadian GAAP requires proportionate
consolidation of interests in joint ventures. The Company has not
made an adjustment in this reconciliation for this difference in
accounting principles because the impact of applying the equity
method of accounting does not result in any change to net income or
shareholders' equity. This departure from U.S. GAAP is acceptable
for foreign private issuers under the practices prescribed by the
United States Securities and Exchange Commission.
g) Non-controlling interests:
Effective January 1, 2009, the FASB issued FAS No. 160,
Non-controlling Interests in Consolidated Financial Statements-an
amendment of ARB No. 51, as codified in FASB ASC topic 810,
Consolidation (ASC 810). FAS No. 160 requires the ownership
interests in subsidiaries held by parties other than the parent be
clearly identified, labelled, and presented in the consolidated
statement of financial position within equity, but separate from
the parent's equity. Under this standard, the Company would be
required to reclassify non-controlling interest on the consolidated
balance sheet into shareholders' equity. The Company has not made
an adjustment in this reconciliation for this difference in
accounting principles because it results in a balance sheet
reclassification and does not impact net income or comprehensive
income as disclosed in the reconciliation.
Methanex Corporation
Quarterly History (unaudited)
YTD
2009 Q3 Q2 Q1
--------------------------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced 2,884 943 941 1,000
Purchased methanol 1,079 480 329 270
Commission sales(1) 486 194 161 131
--------------------------------------------------------------------------
4,449 1,617 1,431 1,401
--------------------------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
Chile 677 197 252 228
Titan, Trinidad 576 188 165 223
Atlas, Trinidad (63.1%) 736 257 275 204
New Zealand 599 202 203 194
--------------------------------------------------------------------------
2,588 844 895 849
--------------------------------------------------------------------------
AVERAGE REALIZED METHANOL PRICE(2)
($/tonne) 205 222 192 199
($/gallon) 0.62 0.67 0.58 0.60
PER SHARE INFORMATION ($ per share)
Basic net income (loss) $ (0.27) (0.01) (0.06) (0.20)
Diluted net income (loss) $ (0.27) (0.01) (0.06) (0.20)
2008 Q4 Q3 Q2 Q1
--------------------------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced 3,363 829 946 910 678
Purchased methanol 2,074 435 429 541 669
Commission sales(1) 617 134 172 168 143
--------------------------------------------------------------------------
6,054 1,398 1,547 1,619 1,490
--------------------------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
Chile 1,088 272 246 261 309
Titan, Trinidad 871 225 200 229 217
Atlas, Trinidad (63.1%) 1,134 269 284 288 293
New Zealand 570 200 126 124 120
--------------------------------------------------------------------------
3,663 966 856 902 939
--------------------------------------------------------------------------
AVERAGE REALIZED METHANOL PRICE(2)
($/tonne) 424 321 413 412 545
($/gallon) 1.28 0.97 1.24 1.24 1.64
PER SHARE INFORMATION ($ per share)
Basic net income (loss) 1.79 (0.04) 0.75 0.40 0.66
Diluted net income (loss) 1.78 (0.04) 0.74 0.40 0.66
2007 Q4 Q3 Q2 Q1
--------------------------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced 4,569 997 1,073 1,360 1,139
Purchased methanol 1,453 421 387 269 376
Commission sales(1) 590 195 168 89 138
--------------------------------------------------------------------------
6,612 1,613 1,628 1,718 1,653
--------------------------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
Chile 1,841 288 233 569 751
Titan, Trinidad 861 220 191 225 225
Atlas, Trinidad (63.1%) 982 278 290 234 180
New Zealand 435 75 122 120 118
--------------------------------------------------------------------------
4,119 861 836 1,148 1,274
--------------------------------------------------------------------------
AVERAGE REALIZED METHANOL PRICE(2)
($/tonne) 375 514 270 286 444
($/gallon) 1.13 1.55 0.81 0.86 1.34
PER SHARE INFORMATION ($ per share)
Basic net income (loss) 3.69 1.74 0.24 0.35 1.38
Diluted net income (loss) 3.68 1.72 0.24 0.35 1.37
--------------------------------------------------------------------------
(1) Commission sales represent volumes marketed on a commission basis.
Commission income is included in revenue when earned.
(2) Average realized price is calculated as revenue, net of commissions
earned, divided by the total sales volumes of produced and purchased
methanol.
Contacts: Jason Chesko Director, Investor Relations Methanex
Corporation 604.661.2600 www.methanex.com
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