2004 Crown Investments Corporation of Saskatchewan Annual Report

MANAGEMENT’S DISCUSSION AND ANALYSISCIC Non-Consolidated: Analysis of Financial Results (continued)Operating, Investing and Financing ActivitiesCash from operations was $290.4 million (2003 - $157.0million). The $133.4 million increase was primarily dueto increased dividend revenue.Cash used in investing activities was $0.1 million (2003- $11.1 million). The primary reason for the $11.0million change was the reorganization of CIC IndustrialInterests Inc. into Investment Saskatchewan Inc.$ MillionsCash Flow Highlights 2004 2003Cash from operationsCash used in investing activitiesDebt repaid to the GRFDebt transferredDividend paid$ 290.4(0.1)--(205.0)Restated$ 157.0(11.1)(9.9)(15.4)(300.0)Cash used in financing activities was $205.0 million(2003 - $325.3 million), all of which was the dividendIncrease (Decrease) in Cash$ 85.3 $ (179.4)payment to the GRF. In 2003, CIC repaid $9.9 million in debt due to the GRF (net of sinking fund redemptions),transferred $15.4 million in debt (net of sinking funds) to Investment Saskatchewan Inc. and paid a $300.0million dividend to the GRF.During 2003, Cabinet approved the restructuring of CIC’s share capital subsidiary, CIC Industrial Interests Inc.,and renamed the corporation Investment Saskatchewan Inc. As part of the restructuring, CIC transferred itsremaining long-term debt and associated sinking funds to Investment Saskatchewan as partial repayment onnon-interest bearing advances from CIC. As a result of the transfer of these investments, CIC no longer holdsdebt.Key Factors Affecting Financial PerformanceEarnings of Crown CorporationsThe key factor affecting CIC’s earnings is the level of dividends from commercial subsidiary Crowncorporations.Factors affecting the level of dividends from subsidiary Crowns include the level of profits and theapplication of CIC’s subsidiary dividend policy. The CIC Board determines dividends from a subsidiary afterallocating cash for reinvestment within the Crown to and for debt reduction, if necessary. CIC expectsaggregate dividends declared by its commercial subsidiaries in 2005 to be lower than in 2004.Earnings of NewGradeDividends from NewGrade are determined by NewGrade’s Board of Directors. NewGrade’s Board of Directorswill consider the project’s profitability, agreements between the shareholders, lenders and loan guarantors,and capital requirements of the corporation before declaring the dividend.Public Policy CostsIn 2003, the government adopted a policy to ensure that Saskatchewan families will receive the packageof basic utilities including home electricity, home natural gas, basic telephone rates, and auto insurance ata total annual cost that is lower than the same package in any other province in Canada. CIC analyzes thecosts of this policy and is responsible for providing rebates, if necessary. The cost, if any, of the lowest bundlepackage for 2005 cannot be determined in advance as it is dependant on future events.Investment ValuesCIC regularly assesses the appropriateness of the carrying value for its investments, and writes down aninvestment if it judges there to be a permanent impairment in carrying value.C I C46