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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-5083
 XANSER CORPORATION
  Delaware
    
    74-1191271(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)2435 North Central ExpresswayRichardson, Texas
    
    75080(Address of principal executive offices)
    
    (zip code)
   Title of each class
    
    Name of each exchange on which registeredCommon Stock, Without Par Value
    
    New York Stock Exchange8 3/4% Convertible Subordinated
    
    New York Stock ExchangeDebentures due 2008
 None
 o þ
 o þ
 þ o
 þ o
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for the Registrants Common Equity and Related Stockholder MattersItem 6. Summary Historical Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7a. Quantitative and Qualitative Disclosure About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9a. Controls and ProceduresPART IIIPART IVItem 15.Exhibits and Financial Statement SchedulesSIGNATURESAmended and Restated By-lawsSubsidiariesConsent of Grant Thornton LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906    Table of Contents  
 PART I
 
 Item 1. Business
 GENERAL
      2




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OPERATING SEGMENTS
  TECHNICAL SERVICES
  Products and Services
 Ò
 .
 3




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Customers and Markets
    Safety, Environmental and Other Regulatory Matters
  4




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GOVERNMENT AND OTHER SERVICES
  Government Services
  Other Services
  ENVIRONMENTAL MATTERS
  5




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EMPLOYEES
  AVAILABLE INFORMATION
   RISK FACTORS
 
 Item 1A. Risk Factors.
  Weakness in the refining and chemical industries could adversely affect demand for our
technical services.
  6




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##### Table of Contents



Our government and other services group is affected by levels of expenditures of federal,
state and local governments and of health care organizations.
  Political conditions in foreign countries in which we operate could adversely affect us.
  
    
    risks of economic instability;
    
    potential adverse changes in taxation policies;
    
    disruptions from labor and political disturbances;
    
    adverse changes in tariffs or import or export restrictions;
    
    war or insurrections; and
    
    other adverse changes in the laws or regulations of the host country.
 We may be adversely affected by fluctuations in foreign currency exchange rates and foreign
exchange restrictions.
  The competitive position of our technical services group depends in part on its ability to
protect its intellectual property.
  Our products and services are offered in highly competitive markets, which limit our profit
margins and our ability to increase market shares.
  7




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##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  8




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PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters
  Quoted Stock Pricesfor XNRCalendar Year
    
    High
    
    Low2005:First Quarter
    
    $
    3.65
    
    
    $
    2.72Second Quarter
    
    
    3.26
    
    
    
    1.80Third Quarter
    
    
    3.25
    
    
    
    2.26Fourth Quarter
    
    
    3.24
    
    
    
    2.822006:First Quarter
    
    $
    4.93
    
    
    $
    3.02Second Quarter
    
    
    5.89
    
    
    
    3.85Third Quarter
    
    
    6.00
    
    
    
    4.57Fourth Quarter
    
    
    6.29
    
    
    
    4.682007:First Quarter
    
    $
    6.24
    
    
    $
    4.68(through
March 30, 2007)
  9




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##### Table of Contents



Item 6. Summary Historical Financial Data
  Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Income Statement Data:Revenues
    
    $
    246,388
    
    
    $
    153,881
    
    
    $
    145,687
    
    
    $
    135,720
    
    
    $
    131,436Operating income (loss)
    
    $
    1,900
    
    
    $
    (891
    )
    
    $
    4,959
    
    
    $
    (3,367
    )
    
    $
    (4,207
    )Income (loss) from continuing
operations before income taxes
and cumulative effect of change
in accounting principle
    
    $
    (41
    )
    
    $
    (1,271
    )
    
    $
    4,144
    
    
    $
    (4,380
    )
    
    $
    (5,511
    )Income tax benefit (expense)
    
    
    (3,391
    )
    
    
    (2,995
    )
    
    
    (1,748
    )
    
    
    (8,725
    )(a)
    
    
    3,269Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle
    
    
    (3,432
    )
    
    
    (4,266
    )
    
    
    2,396
    
    
    
    (13,105
    )
    
    
    (2,242
    )Cumulative effect of change in
accounting principleadoption
of new accounting standard for
goodwill, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,269
    )Net income (loss)
    
    $
    (3,432
    )
    
    $
    (4,266
    )
    
    $
    2,396
    
    
    $
    (13,105
    )
    
    $
    (47,511
    )
 
 (a)
    
    Includes a $12.1 million non-cash deferred income tax expense resulting from a change
in the valuation allowance for deferred tax assets arising from prior year tax losses that
are available to offset future taxable income (see Note 3 to Consolidated Financial
Statements). 10




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Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Per Share Data:Earnings (loss) per common share:Basic:Continuing operations:Before cumulative effect
of change in accounting
principle
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
    
    
    $
    (0.41
    )
    
    $
    (0.07
    )Cumulative effect of
change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.38
    )Earnings (loss) per common share
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
    
    
    $
    (0.41
    )
    
    $
    (1.45
    )Diluted:Continuing operations:Before cumulative effect
of change in accounting
principle
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
    
    
    $
    (0.41
    )
    
    $
    (0.07
    )Cumulative effect of
change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.38
    )Earnings (loss) per common share
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
    
    
    $
    (0.41
    )
    
    $
    (1.45
    )
 December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Balance Sheet Data:Cash and cash equivalents
    
    $
    23,937
    
    
    $
    21,526
    
    
    $
    21,598
    
    
    $
    21,240
    
    
    $
    25,624Working capital
    
    
    69,114
    
    
    
    57,154
    
    
    
    47,075
    
    
    
    44,103
    
    
    
    47,055Total assets
    
    
    156,297
    
    
    
    136,478
    
    
    
    111,920
    
    
    
    104,790
    
    
    
    127,647Long-term debt, less current portion
    
    
    48,721
    
    
    
    31,739
    
    
    
    17,498
    
    
    
    20,457
    
    
    
    28,409Stockholders equity
    
    
    60,605
    
    
    
    51,304
    
    
    
    55,890
    
    
    
    52,452
    
    
    
    61,549
 11




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  OVERVIEW
    CONSOLIDATED RESULTS OF OPERATIONS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(in thousands, except per share amounts)Revenues
    
    $
    246,388
    
    
    $
    153,881
    
    
    $
    145,687Operating income (loss)
    
    $
    1,900
    
    
    $
    (891
    )
    
    $
    4,959Income (loss) before income taxes
    
    $
    (41
    )
    
    $
    (1,271
    )
    
    $
    4,144Net income (loss)
    
    $
    (3,432
    )
    
    $
    (4,266
    )
    
    $
    2,396Earnings (loss) per common share:Basic:
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07Diluted:
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07Capital expenditures (excluding acquisition)
    
    $
    7,205
    
    
    $
    4,215
    
    
    $
    4,533
  12




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.
    SELLING,
GENERAL AND ADMINISTRATIVE EXPENSE
  13




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INTEREST EXPENSE
   INCOME TAXES
    14




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TECHNICAL SERVICES
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(in thousands)Revenues:United States
    
    $
    97,147
    
    
    $
    29,415
    
    
    $
    27,769Europe
    
    
    113,374
    
    
    
    79,767
    
    
    
    73,069Asia-Pacific
    
    
    24,701
    
    
    
    22,639
    
    
    
    17,577$
    235,222
    
    
    $
    131,821
    
    
    $
    118,415Operating income (loss):United States
    
    $
    (3,678
    )
    
    $
    509
    
    
    $
    (459
    )Europe
    
    
    14,740
    
    
    
    9,646
    
    
    
    8,152Asia-Pacific
    
    
    5,323
    
    
    
    3,211
    
    
    
    2,480Headquarters
    
    
    (4,470
    )
    
    
    (3,252
    )
    
    
    (2,294
    )$
    11,915
    
    
    $
    10,114
    
    
    $
    7,879Capital expenditures (excluding acquisition)
    
    $
    6,736
    
    
    $
    2,851
    
    
    $
    2,927
     15




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GOVERNMENT AND OTHER SERVICES


Year Ended December 31,2006
    
    
    2005
    
    
    2004(in thousands)Revenues
    
    $
    11,166
    
    
    $
    22,060
    
    
    $
    27,272Operating income (loss)
    
    $
    (5,033
    )
    
    $
    (7,747
    )
    
    $
    342Capital expenditures
    
    $
    111
    
    
    $
    1,364
    
    
    $
    1,606












16




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LIQUIDITY AND CAPITAL RESOURCES
       17




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Less thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    After 5 years(in thousands)Debt:Technical services credit facility
    
    $
    42,590
    
    
    $
    
    
    
    $
    
    
    
    $
    42,590
    
    
    $
    Parent company convertible
subordinated debentures
    
    
    5,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    47,590
    
    
    
    
    
    
    
    5,000
    
    
    
    42,590
    
    
    
    Capital leases
    
    
    1,918
    
    
    
    787
    
    
    
    885
    
    
    
    246
    
    
    
    Debt subtotal
    
    
    49,508
    
    
    
    787
    
    
    
    5,885
    
    
    
    42,836
    
    
    
    Interest on debt
    
    
    7,861
    
    
    
    2,860
    
    
    
    5,001
    
    
    
    
    
    
    
    Debt and interest total
    
    
    57,369
    
    
    
    3,647
    
    
    
    10,886
    
    
    
    42,836
    
    
    
    Other contractual commitments:Pension plan contributions
    
    
    9,647
    
    
    
    877
    
    
    
    2,631
    
    
    
    1,754
    
    
    
    4,385Operating leases
    
    
    16,298
    
    
    
    5,330
    
    
    
    6,031
    
    
    
    2,744
    
    
    
    2,193Total other contractual
commitments
    
    
    25,945
    
    
    
    6,207
    
    
    
    8,662
    
    
    
    4,498
    
    
    
    6,578Total
    
    $
    83,314
    
    
    $
    9,854
    
    
    $
    19,548
    
    
    $
    47,334
    
    
    $
    6,578
  OFF-BALANCE SHEET TRANSACTIONS
  INFLATION AND CHANGING PRICES
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   19




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NEW ACCOUNTING PRONOUNCEMENTS AND INTERPRETATIONS
    21




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Item 7a. Quantitative and Qualitative Disclosure About Market Risk
 (i.e.
   
 Item 8. Financial Statements and Supplementary Data
  22




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9a. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
 et seq.
 Managements Annual Report on Internal Control over Financial Reporting
  Internal
Control  Integrated Framework
  Changes in Internal Controls Over Financial Reporting
  
 PART III
  23




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 BeginningPage(a
    ) (1)
    
    Financial StatementsSet forth below are financial statements appearing in this report.Xanser Corporation and Subsidiaries Financial Statements:Report of
Independent Registered Public Accounting Firm
    
    
    F - 1Report of Independent Registered Public Accounting Firm
    
    
    F - 2Consolidated Statements of Operations  Three Years Ended
December 31, 2006, 2005 and 2004
    
    
    F - 3Consolidated Balance Sheets  December 31, 2006 and 2005
    
    
    F - 4Consolidated Statements of Cash Flows  Three Years Ended
December 31, 2006, 2005 and 2004
    
    
    F - 5Consolidated Statement of Changes in Stockholders
Equity  Three Years Ended December 31, 2006, 2005 and 2004
    
    
    F - 6Notes to Consolidated Financial Statements
    
    
    F - 7(a
    ) (2)
    
    Financial Statement SchedulesSet forth are the financial statement schedules appearing in this report.Schedule I  Xanser Corporation (Parent Company) Condensed Financial Statements:Statements of Operations  Three Years Ended December 31, 2006, 2005 and 2004
    
    
    F - 31Balance Sheets  December 31, 2006 and 2005
    
    
    F - 32Statements of Cash Flows  Three Years Ended
December 31, 2006, 2005 and 2004
    
    
    F - 33Schedule II  Xanser Corporation Valuation and Qualifying Accounts 
Three Years Ended December 31, 2006, 2005 and 2004
    
    
    F - 34
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(a)(3)
    
    List of Exhibits2.1
    
    Asset Purchase Agreement, dated December 31, 2005, among Flowserve US Inc., IPSCO (UK)
Limited, Flowserve Repair & Services B.V., Flowserve Management Company, Flowserve Belgium
N.V., Furmanite US GSG LLC, Furmanite GSG Limited, Furmanite GSG BVBA, Furmanite Worldwide,
Inc. and Furmanite GSG B.V., filed as Exhibit 2.1 of the exhibits to the Registrants Current
Report on Form 8-K filed on January 6, 2006, which exhibit is hereby incorporated by
reference.3.1
    
    Restated Certificate of Incorporation of the Registrant, dated September 26, 1979, filed as
Exhibit 3.1 of the exhibits to the Registrants Registration Statement on Form S-16, which
exhibit is hereby incorporated by reference.3.2
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant,
dated April 30, 1981, filed as Exhibit 3.2 of the exhibits to the Registrants Annual Report
on Form 10-K (Form 10-K) for the year ended December 31, 1981, which exhibit is hereby
incorporated by reference.3.3
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant,
dated May 28, 1985, filed as Exhibit 4.1 of the exhibits to the Registrants Quarterly Report
on Form 10-Q (Form 10-Q) for the quarter ended June 30, 1985, which exhibit is hereby
incorporated by reference.3.4
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant,
dated September 17, 1985, filed as Exhibit 4.1 of the exhibits to the Registrants Form 10-Q
for the quarter ended September 30, 1985, which exhibit is hereby incorporated by reference.3.5
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant,
dated July 10, 1990, filed as Exhibit 3.5 of the exhibits to the Registrants Form 10-K for
the year ended December 31, 1990, which exhibit is hereby incorporated by reference.3.6
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant,
dated September 21, 1990, filed as Exhibit 3.5 of the exhibits to the Registrants Form 10-Q
for the quarter ended September 30, 1990, which exhibit is hereby incorporated by reference.3.7
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant,
dated August 8, 2001, filed as Exhibit 3.1 to the Registrants Current Report on Form 8-K
filed on August 22, 2001, which exhibit is hereby incorporated by reference.3.8
    
    By-laws of the Registrant, as amended and restated September 14, 2006, which exhibit is filed
herewith.4.1
    
    Certificate of Designation, Preferences and Rights related to the Registrants Series B
Junior Participating Preferred Stock, filed as Exhibit 4.2 to the Registrants 10-K for the
year ended December 31, 1998, which exhibit is incorporated herein by reference.4.2
    
    Indenture between Moran Energy Inc. (Moran) and First City National Bank of Houston (First
City), dated January 15, 1984, under which Moran issued the 8 3/4% Convertible Subordinated
Debentures due 2008, filed as Exhibit 4.1 to Morans Registration Statement on Form S-3 (SEC
File No. 2-81227), which exhibit is hereby incorporated by reference.4.3
    
    First Supplemental Indenture between the Registrant and First City, dated as of March 20,
1984, under which the Registrant assumed obligations under the Indenture listed as Exhibit 4.2
above, filed as Exhibit 4.7 of the Registrants Form 10-K for the year ended December 31,
1983, which exhibit is hereby incorporated by reference.
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10.1*
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.1 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.2*
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.2 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.3*
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.3 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.4*
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.4 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.5*
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.5 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.6*
    
    Xanser Corporation (formerly Kaneb Services, Inc.) Savings Investment Plan, as amended,
filed as Exhibit 4.10 of the exhibits to the Registrants Registration Statement on Form S-8
(Form S-8) (S.E.C. File No. 33-41295) as Exhibit 4.1 to the exhibits of the Registrants
Form S-8 (S.E.C. File No. 333-14067), and as Exhibit 4.9 to the exhibits of the Registrants
Form S-8 (S.E.C. File No. 333-83968), which exhibits are hereby incorporated by reference.10.7*
    
    Xanser Corporation (formerly Kaneb Services, Inc.) 1994 Stock Incentive Plan, filed as
Exhibit 4.12 to the exhibits of the Registrants Form S-8 (S.E.C. File No. 33-54027), as
Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on August 22, 2001, and as
Exhibit 10.1 to the exhibits of the Registrants Form 10-Q for the period ended June 30, 2003,
which exhibits are hereby incorporated by reference.10.8*
    
    Kaneb Services, Inc. $1.63 Director Stock Options, filed as Exhibit 4.1 to the exhibits of
the Registrants Form S-8 (S.E.C. File No. 33-58981), which exhibit is hereby incorporated by
reference.10.9*
    
    Kaneb Services, Inc. Directors Stock Options I, filed as Exhibit 4.1 to the exhibits of the
Registrants Form S-8 (S.E.C. File No. 333-14069), which exhibit is hereby incorporated by
reference.10.10*
    
    Kaneb Services, Inc. 1996 Directors Stock Incentive Plan, as amended, filed as Exhibit 4.1
to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-14071) and as Exhibit 4.1 to
the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-22109), and as supplemented,
filed as Exhibit 4.2 to the Exhibits of the Registrants Form S-8 (S.E.C. File No. 333-60195),
and as Exhibit 10.1 to the Exhibits of the Registrants Form 8-K, which exhibits are hereby
incorporated by reference.10.11*
    
    Kaneb Services, Inc. 1994 Stock Option Agreements, filed as Exhibits 10.1, 10.2, 10.3 and
10.4 to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-34489), which exhibits
are hereby incorporated by reference.10.12*
    
    Form of Termination Agreement, filed as Exhibit 10.10 to the exhibits of the Registrants
Form 10-K for the year ended December 31, 1996, which exhibit is hereby incorporated by
reference.10.13*
    
    Form of Indemnification Agreement, filed as Exhibit 10.11 to the Registrants Form 10-K for
the year ended December 31, 1999, which exhibit is hereby incorporated by reference.10.14
    
    Amended and Restated Loan Agreement between Furmanite PLC, Bank of Scotland and certain
other Lenders, dated May 1, 1991, as amended, filed as Exhibit 10.8 of the exhibits to the
Registrants Form 10-K for the year ended December 31, 1994; Exhibit 10.12 of the exhibits to
the Registrants Form 10-K for the year ended December 31, 1996; Exhibit 10.12 of the
Registrants Form 10-K for the year ended
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December 31, 1997; and, Exhibit 10.13 of the Registrants Form 10-K for the year ended
December 31, 1999, which exhibits are hereby incorporated by reference.10.15
    
    Second Amendment, dated as of December 31, 2005, to the Amended and Restated Loan Agreement
dated as of August 13, 2002 among Furmanite Limited, Furmanite Worldwide, Inc., the financial
institutions from time to time party thereto and Bank of Scotland, as Agent, filed as Exhibit
10.1 of the exhibits to the Registrants Current Report on Form 8-K filed on January 6, 2006,
which exhibit is hereby incorporated by reference.21
    
    List of subsidiaries of the Registrant, filed herewith.23.1
    
    Consent of Grant Thornton LLP, filed herewith.31.1
    
    Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated as of March 30, 2007.31.2
    
    Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated as of March 30, 2007.32.1
    
    Certification of Chief Executive Officer, Pursuant to Section 906(a) of the Sarbanes-Oxley
Act of 2002, dated as of March 30, 2007.32.2
    
    Certification of Chief Financial Officer, Pursuant to Section 906(a) of the Sarbanes-Oxley
Act of 2002, dated as of March 30, 2007.
 
 *
    
    Denotes management contracts. 27




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    Internal Control 
Integrated Framework Internal Control  Integrated
Framework
   
 F - 1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Share-Based
Payment, , Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements,
  Internal ControlIntegrated
Framework
  
 F - 2




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Revenues:Services
    
    $
    245,850,000
    
    
    $
    146,975,000
    
    
    $
    138,697,000Products
    
    
    538,000
    
    
    
    6,906,000
    
    
    
    6,990,000Total revenues
    
    
    246,388,000
    
    
    
    153,881,000
    
    
    
    145,687,000Costs and expenses:Operating costs
    
    
    160,476,000
    
    
    
    92,805,000
    
    
    
    83,536,000Cost of products sold
    
    
    275,000
    
    
    
    7,459,000
    
    
    
    4,856,000Depreciation and amortization
    
    
    3,772,000
    
    
    
    3,514,000
    
    
    
    3,552,000General and administrative
    
    
    79,044,000
    
    
    
    51,763,000
    
    
    
    48,784,000Write-off of goodwill
    
    
    654,000
    
    
    
    
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    (2,102,000
    )
    
    
    Provision for lease termination costs
    
    
    267,000
    
    
    
    1,333,000
    
    
    
    Total costs and expenses
    
    
    244,488,000
    
    
    
    154,772,000
    
    
    
    140,728,000Operating income (loss)
    
    
    1,900,000
    
    
    
    (891,000
    )
    
    
    4,959,000Interest income
    
    
    866,000
    
    
    
    660,000
    
    
    
    174,000Interest expense
    
    
    (2,807,000
    )
    
    
    (1,040,000
    )
    
    
    (989,000
    )Income (loss) before income taxes
    
    
    (41,000
    )
    
    
    (1,271,000
    )
    
    
    4,144,000Income tax expense
    
    
    (3,391,000
    )
    
    
    (2,995,000
    )
    
    
    (1,748,000
    )Net income (loss)
    
    $
    (3,432,000
    )
    
    $
    (4,266,000
    )
    
    $
    2,396,000Earnings (loss) per common share  basic and diluted:
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
  F - 3




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,937,000
    
    
    $
    21,526,000Accounts receivable, trade (net of allowance for doubtful
accounts of $3,341,000 in 2006 and $1,493,000 in 2005)
    
    
    59,323,000
    
    
    
    50,396,000Receivable from businesses distributed to common stockholders
    
    
    1,445,000
    
    
    
    6,484,000Inventories
    
    
    21,411,000
    
    
    
    17,290,000Prepaid expenses and other current assets
    
    
    5,046,000
    
    
    
    5,513,000Total current assets
    
    
    111,162,000
    
    
    
    101,209,000Property and equipment
    
    
    51,523,000
    
    
    
    41,748,000Less accumulated depreciation and amortization
    
    
    25,554,000
    
    
    
    24,628,000Net property and equipment
    
    
    25,969,000
    
    
    
    17,120,000Goodwill
    
    
    13,148,000
    
    
    
    13,802,000Deferred income taxes and other assets
    
    
    6,018,000
    
    
    
    4,347,000Total assets
    
    $
    156,297,000
    
    
    $
    136,478,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    787,000
    
    
    $
    478,000Accounts payable
    
    
    14,702,000
    
    
    
    14,670,000Accrued expenses and other current liabilities
    
    
    22,425,000
    
    
    
    20,773,000Accrued income taxes
    
    
    2,581,000
    
    
    
    7,232,000Bank overdrafts
    
    
    1,553,000
    
    
    
    2,000Current portion of pension liability
    
    
    
    
    
    
    900,000Total current liabilities
    
    
    42,048,000
    
    
    
    44,055,000Long-term debt, less current portion:Technical services
    
    
    43,619,000
    
    
    
    26,561,000Government and other services
    
    
    102,000
    
    
    
    178,000Parent company
    
    
    5,000,000
    
    
    
    5,000,000Total long-term debt, less current portion
    
    
    48,721,000
    
    
    
    31,739,000Pension liability
    
    
    3,042,000
    
    
    
    7,382,000Other liabilities
    
    
    1,881,000
    
    
    
    1,998,000Total liabilities
    
    
    95,692,000
    
    
    
    85,174,000Commitments and contingent liabilities (Note 9)Stockholders equity:Common stock, without par value. Authorized, 60,000,000
shares; issued, 39,258,025 in 2006 and 38,805,695 in 2005
    
    
    4,558,000
    
    
    
    4,507,000Additional paid-in capital
    
    
    124,884,000
    
    
    
    124,481,000Treasury stock, at cost
    
    
    (18,320,000
    )
    
    
    (20,028,000
    )Retained earnings (accumulated deficit)
    
    
    (53,438,000
    )
    
    
    (50,565,000
    )Accumulated other comprehensive income (loss)
    
    
    2,921,000
    
    
    
    (7,091,000
    )Total stockholders equity
    
    
    60,605,000
    
    
    
    51,304,000Total liabilities and stockholders equity
    
    $
    156,297,000
    
    
    $
    136,478,000
  F - 4




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Operating activities:Net income (loss)
    
    $
    (3,432,000
    )
    
    $
    (4,266,000
    )
    
    $
    2,396,000Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    3,772,000
    
    
    
    3,514,000
    
    
    
    3,552,000Provision for doubtful accounts
    
    
    1,836,000
    
    
    
    1,050,000
    
    
    
    285,000Gain on sale of assets
    
    
    
    
    
    
    (2,102,000
    )
    
    
    Provision for lease termination costs
    
    
    267,000
    
    
    
    1,333,000
    
    
    
    Deferred income taxes
    
    
    (473,000
    )
    
    
    (80,000
    )
    
    
    (1,061,000
    )Stock-based compensation expense
    
    
    1,155,000
    
    
    
    
    
    
    
    Write-down of inventories
    
    
    
    
    
    
    
    
    
    
    206,000Write-off of goodwill
    
    
    654,000
    
    
    
    
    
    
    
    Changes in operating assets and
liabilities net of business acquisition:Accounts receivable
    
    
    (5,725,000
    )
    
    
    309,000
    
    
    
    (3,853,000
    )Inventories
    
    
    (4,121,000
    )
    
    
    (1,513,000
    )
    
    
    (640,000
    )Prepaid expenses and other
    
    
    467,000
    
    
    
    234,000
    
    
    
    (1,101,000
    )Accounts payable and accrued expenses
    
    
    (503,000
    )
    
    
    2,036,000
    
    
    
    7,062,000Other, net
    
    
    32,000
    
    
    
    (92,000
    )
    
    
    (832,000
    )Net cash provided by (used in) operating activities
    
    
    (6,071,000
    )
    
    
    423,000
    
    
    
    6,014,000Investing activities:Capital expenditures
    
    
    (7,205,000
    )
    
    
    (4,215,000
    )
    
    
    (4,533,000
    )Acquisition, net of cash received
    
    
    (3,003,000
    )
    
    
    (18,793,000
    )
    
    
    Proceeds from sale of assets
    
    
    
    
    
    
    5,400,000
    
    
    
    Other, net
    
    
    2,810,000
    
    
    
    (415,000
    )
    
    
    1,214,000Net cash used in investing activities
    
    
    (7,398,000
    )
    
    
    (18,023,000
    )
    
    
    (3,319,000
    )Financing activities:Issuance of debt
    
    
    18,583,000
    
    
    
    17,056,000
    
    
    
    1,836,000Payments on debt
    
    
    (2,770,000
    )
    
    
    (1,948,000
    )
    
    
    (5,421,000
    )Common stock issued
    
    
    1,007,000
    
    
    
    2,770,000
    
    
    
    78,000Decrease in receivable from businesses distributed to
common stockholders
    
    
    
    
    
    
    215,000
    
    
    
    865,000Bank overdrafts
    
    
    (1,553,000
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    15,267,000
    
    
    
    18,093,000
    
    
    
    (2,642,000
    )Effect of exchange rate changes on cash
    
    
    613,000
    
    
    
    (565,000
    )
    
    
    305,000Increase (decrease) in cash and cash equivalents
    
    
    2,411,000
    
    
    
    (72,000
    )
    
    
    358,000Cash and cash equivalents at beginning of year
    
    
    21,526,000
    
    
    
    21,598,000
    
    
    
    21,240,000Cash and cash equivalents at end of year
    
    $
    23,937,000
    
    
    $
    21,526,000
    
    
    $
    21,598,000Supplemental cash flow information:Cash paid for interest
    
    $
    2,501,000
    
    
    $
    987,000
    
    
    $
    952,000Cash paid for income taxes
    
    $
    2,765,000
    
    
    $
    1,953,000
    
    
    $
    2,546,000
  F - 5




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 Retained
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    Earnings
    
    
    OtherCommon
    
    
    Paid in
    
    
    Treasury
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Stock
    
    
    Deficit)
    
    
    Income (Loss)
    
    
    Income (Loss)Balance at January 1, 2004
    
    $
    4,333,000
    
    
    $
    126,561,000
    
    
    $
    (26,267,000
    )
    
    $
    (48,695,000
    )
    
    $
    (3,480,000
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,396,000
    
    
    
    
    
    
    $
    2,396,000Common stock issued
    
    
    2,000
    
    
    
    (50,000
    )
    
    
    87,000
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock units, vested
    
    
    
    
    
    
    39,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability adjustment for
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (445,000
    )
    
    
    (445,000
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,409,000
    
    
    
    1,409,000Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,360,000Balance at December 31, 2004
    
    
    4,335,000
    
    
    
    126,550,000
    
    
    
    (26,180,000
    )
    
    
    (46,299,000
    )
    
    
    (2,516,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,266,000
    )
    
    
    
    
    
    
    (4,266,000
    )Common stock issued
    
    
    172,000
    
    
    
    507,000
    
    
    
    3,050,000
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock units, distributed
    
    
    
    
    
    
    (2,576,000
    )
    
    
    3,102,000
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability adjustment for
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,183,000
    )
    
    
    (1,183,000
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,392,000
    )
    
    
    (3,392,000
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (8,841,000
    )Balance at December 31, 2005
    
    
    4,507,000
    
    
    
    124,481,000
    
    
    
    (20,028,000
    )
    
    
    (50,565,000
    )
    
    
    (7,091,000
    )Staff Accounting Bulletin No. 108 adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    997,000
    
    
    
    Revised Balance at December 31, 2005
    
    
    4,507,000
    
    
    
    124,481,000
    
    
    
    (20,028,000
    )
    
    
    (49,568,000
    )
    
    
    (7,091,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,432,000
    )
    
    
    
    
    
    
    (3,432,000
    )Stock-based compensation
    
    
    51,000
    
    
    
    403,000
    
    
    
    1,708,000
    
    
    
    
    
    
    
    
    
    
    
    Minimum
pension liability adjustment for subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,750,000
    
    
    
    2,750,000Adjustment to initially apply FASB Statement No. 158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,129,000
    
    
    
    Adjustment to previously provided tax
exposures related to business distributed to
common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (438,000
    )
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,133,000
    
    
    
    5,133,000Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,451,000Balance at December 31, 2006
    
    $
    4,558,000
    
    
    $
    124,884,000
    
    
    $
    (18,320,000
    )
    
    $
    (53,438,000
    )
    
    $
    2,921,000
  F - 6




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations and Basis of Presentation
    Cash and Cash Equivalents
  F - 7




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Accounts Receivable
   Allowance for doubtful accounts receivable at January 1, 2004
    
    $
    1,183,000Charged to costs and expenses
    
    
    285,000Charged to other accounts
    
    
    17,000Write-offs, net of recoveries
    
    
    (818,000
    )Allowance for doubtful accounts receivable at December 31, 2004
    
    
    667,000Charged to costs and expenses
    
    
    1,050,000Write-offs, net of recoveries
    
    
    (224,000
    )Allowance for doubtful accounts receivable at December 31, 2005
    
    
    1,493,000Charged to costs and expenses
    
    
    1,836,000Charged to other accounts
    
    
    54,000Write-offs, net of recoveries
    
    
    (42,000
    )Allowance for doubtful accounts receivable at December 31, 2006
    
    $
    3,341,000
 Inventories
  2006
    
    
    2005Raw materials and supplies
    
    $
    12,633,000
    
    
    $
    14,882,000Work-in-process
    
    
    6,970,000
    
    
    
    1,422,000Finished goods
    
    
    1,808,000
    
    
    
    986,000Total inventories
    
    $
    21,411,000
    
    
    $
    17,290,000
  F - 8




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Property and Equipment
   Revenue Recognition
     F - 9




---



##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Foreign Currency Translation
  Comprehensive Income (Loss)
  Goodwill
  Stock-Based Compensation
  F - 10




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       F - 11




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2006
    
    2005
    
    2004Expected volatility
    
    34.1% to 38.6%
    
    35.6% to 38.2%
    
    35.5% to 35.8%Risk-free interest rate
    
    4.1% to 5.1%
    
    3.9% to 4.2%
    
    3.3% to 3.5%Expected dividends
    
    
    0%
    
    
    
    0%
    
    
    
    0%Expected term in years
    
    
    3.5
    
    
    
    3.5
    
    
    
 3.5
  December 31, 2005
    
    
    December 31, 2004Pro forma
    
    
    Pro formaNet income (loss)
    
    $
    (4,266,000
    )
    
    $
    2,396,000Stock-based employee compensation expense
determined under the fair value based
method (1)
    
    
    (506,000
    )
    
    
    (381,000
    )Pro forma net income (loss)
    
    $
    (4,772,000
    )
    
    $
    2,015,000Earnings (loss) per share:Basic and diluted, as reported
    
    $
    (0.13
    )
    
    $
    0.07Basic and diluted, pro forma (2)
    
    $
    (0.14
    )
    
    $
    0.06
 
 (1)
    
    Stock-based compensation expense for periods prior to year 2006 was calculated
based on the pro forma application of SFAS No. 123.(2)
    
    Earnings per share for periods prior to year 2006 represent pro forma information
based on SFAS No. 123.  F - 12




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted Average
Exercise PriceOptions
    
    per OptionOutstanding at January 1, 2004
    
    
    3,008,711
    
    
    $
    1.80Granted
    
    
    725,161
    
    
    $
    2.50Exercised
    
    
    (17,579
    )
    
    $
    1.53Forfeited
    
    
    (382,119
    )
    
    $
    2.50Outstanding at December 31, 2004
    
    
    3,334,174
    
    
    $
    1.87Granted
    
    
    605,000
    
    
    $
    3.06Exercised
    
    
    (2,088,741
    )
    
    $
    1.68Forfeited
    
    
    (238,739
    )
    
    $
    1.75Outstanding at December 31, 2005
    
    
    1,611,694
    
    
    $
    2.47Granted
    
    
    125,000
    
    
    $
    4.84Exercised
    
    
    (512,019
    )
    
    $
    2.18Forfeited
    
    
    (211,000
    )
    
    $
    2.83Outstanding at December 31, 2006
    
    
    1,013,675
    
    
    $
    2.84
 Weighted AverageGrant Date FairOutstanding
    
    ValueOptions
    
    Per OptionNonvested at December 31, 2005
    
    
    525,000
    
    
    $
    0.96Granted
    
    
    125,000
    
    
    $
    1.59Vested
    
    
    (90,000
    )
    
    $
    1.04Forfeited
    
    
    (115,000
    )
    
    $
    1.04Nonvested at December 31, 2006
    
    
    445,000
    
    
    $
    1.19
  F - 13




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Average
    
    AverageOutstanding
    
    ExercisableAverage Price per
    
    Remaining
    
    RemainingRange of Exercise
    
    Options
    
    Outstanding
    
    Exercisable
    
    Contractual
    
    ContractualPrice
    
    Outstanding
    
    Exercisable
    
    Option
    
    Option
    
    Life (years)
    
    Life (years)$1.15 - $2.29
    
    
    181,428
    
    
    
    181,428
    
    
    $
    1.55
    
    
    $
    1.55
    
    
    
    2.2
    
    
    
    2.2$2.30 - $3.13
    
    
    344,747
    
    
    
    344,747
    
    
    $
    2.46
    
    
    $
    2.46
    
    
    
    6.7
    
    
    
    6.7$3.14 - $5.40
    
    
    487,500
    
    
    
    42,500
    
    
    $
    3.58
    
    
    $
    3.23
    
    
    
    4.3
    
    
    
    5.21,013,675
    
    
    
    568,675
    
    
    $
    2.84
    
    
    $
    2.23
    
    
    
    4.7
    
    
    
    5.2
 Environmental Costs
   Change in Presentation
  New Accounting Pronouncements and Interpretations
   F - 14




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Estimates
  F - 15




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2. ACQUISITION
    Cash consideration paid to seller
    
    $
    17,247,000Transaction costs and other
    
    
    4,549,000Fair value of net assets acquired
    
    $
    21,796,000Accounts receivable
    
    $
    14,670,000Inventories
    
    
    6,243,000Other current assets
    
    
    464,000Property and equipment
    
    
    9,788,000Accounts payable
    
    
    (6,515,000
    )Accrued expenses
    
    
    (974,000
    )Long-term liabilities
    
    
    (1,880,000
    )Net assets acquired
    
    $
    21,796,000
  F - 16




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. INCOME TAXES
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Domestic operations
    
    $
    (13,809,000
    )
    
    $
    (10,038,000
    )
    
    $
    (1,101,000
    )Foreign operations
    
    
    13,768,000
    
    
    
    8,767,000
    
    
    
    5,245,000Income (loss) before income taxes
    
    $
    (41,000
    )
    
    $
    (1,271,000
    )
    
    $
    4,144,000
  Year EndedDecember 31,
    
    Federal
    
    
    Foreign
    
    
    State
    
    
    Total2006:Current
    
    $
    
    
    
    $
    4,004,000
    
    
    $
    (140,000
    )
    
    $
    3,864,000Deferred
    
    
    
    
    
    
    (473,000)
    
    
    
    
    
    
    
    (473,000)$
    
    
    
    $
    3,531,000
    
    
    $
    (140,000
    )
    
    $
    3,391,0002005:Current
    
    $
    
    
    
    $
    3,057,000
    
    
    $
    18,000
    
    
    $
    3,075,000Deferred
    
    
    
    
    
    
    (80,000
    )
    
    
    
    
    
    
    (80,000
    )$
    
    
    
    $
    2,977,000
    
    
    $
    18,000
    
    
    $
    2,995,0002004:Current
    
    $
    
    
    
    $
    2,809,000
    
    
    $
    
    
    
    $
    2,809,000Deferred
    
    
    
    
    
    
    (1,061,000
    )
    
    
    
    
    
    
    (1,061,000
    )$
    
    
    
    $
    1,748,000
    
    
    $
    
    
    
    $
    1,748,000
 F - 17




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Expected tax expense (benefit)
at statutory rates
    
    $
    (14,000
    )
    
    $
    (432,000
    )
    
    $
    1,409,000Increase (decrease) in taxes
resulting from:Change in valuation allowance
    
    
    4,028,000
    
    
    
    4,291,000
    
    
    
    589,000State income taxes, net
    
    
    (220,000
    )
    
    
    (431,000
    )
    
    
    (102,000
    )Foreign tax rate differences
    
    
    (1,161,000
    )
    
    
    (136,000
    )
    
    
    (35,000
    )Permanent differences
    
    
    (88,000
    )
    
    
    (270,000
    )
    
    
    279,000Resolution of state and foreign
tax issues
    
    
    49,000
    
    
    
    (80,000
    )
    
    
    (387,000
    )Prior year adjustment to NOL
    
    
    1,042,000
    
    
    
    
    
    
    
    Other
    
    
    (245,000
    )
    
    
    53,000
    
    
    
    (5,000
    )$
    3,391,000
    
    
    $
    2,995,000
    
    
    $
    1,748,000
   December 31,2006
    
    
    2005Deferred tax assets:Federal net operating loss carryforwards
    
    $
    17,001,000
    
    
    $
    14,799,000Alternative minimum tax credit carryforwards
    
    
    2,504,000
    
    
    
    2,504,000State income net operating loss carryforwards
    
    
    1,700,000
    
    
    
    1,480,000Accrued liabilities
    
    
    2,321,000
    
    
    
    960,000Intangibles
    
    
    1,259,000
    
    
    
    1,149,000Foreign subsidiaries, primarily accrued liabilities
    
    
    3,978,000
    
    
    
    2,202,000Other
    
    
    660,000
    
    
    
    407,000Total gross deferred tax assets
    
    
    29,423,000
    
    
    
    23,501,000Deferred tax liabilities:Plant and equipment, principally due to differences in depreciation
    
    
    (291,000
    )
    
    
    (173,000
    )Foreign deferred tax liabilities
    
    
    (299,000
    )
    
    
    (206,000
    )Net deferred tax asset before valuation allowance
    
    
    28,833,000
    
    
    
    23,122,000Less valuation allowance
    
    
    (25,154,000
    )
    
    
    (21,126,000
    )Net deferred tax asset
    
    $
    3,679,000
    
    
    $
    1,996,000
  F - 18




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4. RETIREMENT PLANS
    Year Ended December 31,2006
    
    
    2005
    
    
    2004Net periodic pension cost:Service cost
    
    $
    638,000
    
    
    $
    518,000
    
    
    $
    466,000Interest cost
    
    
    3,828,000
    
    
    
    3,605,000
    
    
    
    3,461,000Expected return on plan assets
    
    
    (4,396,000
    )
    
    
    (3,896,000
    )
    
    
    (3,587,000
    )Amortization of prior service cost
    
    
    (113,000
    )
    
    
    (111,000
    )
    
    
    (112,000
    )Recognized net loss
    
    
    815,000
    
    
    
    709,000
    
    
    
    737,000Net periodic pension cost
    
    $
    772,000
    
    
    $
    825,000
    
    
    $
    965,000
  December 31,2006
    
    2005Discount rate
    
    
    5.3
    %
    
    
    5.4
    %Expected long-term return on plan assets
    
    
    7.4
    %
    
    
    7.5
    %Rate of compensation increase
    
    
    3.5
    %
    
    
    3.4
    %
  F - 19




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  December 31,2006
    
    
    2005Projected benefit obligation:Beginning of year
    
    $
    66,487,000
    
    
    $
    65,605,000Service cost
    
    
    638,000
    
    
    
    518,000Interest cost
    
    
    3,828,000
    
    
    
    3,605,000Participants contributions
    
    
    366,000
    
    
    
    328,000Actuarial loss
    
    
    (5,698,000
    )
    
    
    5,665,000Benefits paid
    
    
    (2,490,000
    )
    
    
    (2,065,000
    )Foreign currency translation adjustment and other
    
    
    9,582,000
    
    
    
    (7,169,000
    )End of year
    
    
    72,713,000
    
    
    
    66,487,000Fair value of plan assets:Beginning of year
    
    
    54,983,000
    
    
    
    54,824,000Actual gain on plan assets
    
    
    8,258,000
    
    
    
    6,930,000Employer contributions
    
    
    848,000
    
    
    
    764,000Participants contributions
    
    
    366,000
    
    
    
    328,000Benefits paid
    
    
    (2,490,000
    )
    
    
    (2,065,000
    )Foreign currency translation adjustment and other
    
    
    7,706,000
    
    
    
    (5,798,000
    )End of year
    
    
    69,671,000
    
    
    
    54,983,000Excess projected obligation over fair value at end of year
    
    $
    (3,042,000
    )
    
    
    (11,504,000
    )Unrecognized net actuarial loss
    
    
    
    
    
    
    14,981,000Unamortized prior service cost
    
    
    
    
    
    
    (1,149,000
    )Net pension prepaid asset
    
    
    
    
    
    
    2,328,000Additional minimum liability
    
    
    
    
    
    
    (10,477,000
    )Net pension liability
    
    
    
    
    
    $
    (8,149,000
    )
    F - 20




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  December 31,2006
    
    2005Equity securities
    
    
    50.7
    %
    
    
    55.4
    %Debt securities
    
    
    40.9
    %
    
    
    39.1
    %Real estate
    
    
    0.7
    %
    
    
    0.7
    %Cash and other
    
    
    7.7
    %
    
    
    4.8
    %100.0
    %
    
    
    100.0
    %
   Year ending December 31,2007
    
    $
    2,562,0002008
    
    
    2,638,0002009
    
    
    2,719,0002010
    
    
    2,801,0002011
    
    
    2,883,0002012-2016
    
    
    15,768,000Total
    
    $
    29,371,000
 5. PROPERTY AND EQUIPMENT
  EstimatedUsefulLife
    
    
    December 31,(Years)
    
    
    2006
    
    
    2005Technical services:Machinery and equipment
    
    
    5  10
    
    
    $
    23,129,000
    
    
    $
    21,251,000Furniture, fixtures, and vehicles
    
    
    3  5
    
    
    
    11,875,000
    
    
    
    10,765,000Buildings
    
    
    40
    
    
    
    5,534,000
    
    
    
    3,111,000Construction in progress
    
    
    
    
    
    
    1,721,000
    
    
    
    Land
    
    
    
    
    
    
    1,305,000
    
    
    
    Other
    
    
    2  5
    
    
    
    3,543,000
    
    
    
    1,852,000Total
    
    
    
    
    
    
    47,107,000
    
    
    
    36,979,000Government and other services
(furniture, fixtures and vehicles)
    
    
    3  7
    
    
    
    3,373,000
    
    
    
    4,069,000General corporate (furniture, fixtures
and vehicles)
    
    
    3  10
    
    
    
    1,043,000
    
    
    
    700,000Total property and equipment
    
    
    
    
    
    
    51,523,000
    
    
    
    41,748,000Less accumulated depreciation
and amortization
    
    
    
    
    
    
    25,554,000
    
    
    
    24,628,000Net property and equipment
    
    
    
    
    
    $
    25,969,000
    
    
    $
    17,120,000
 F - 21




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  December 31,2006
    
    
    2005Equipment
    
    $
    4,108,000
    
    
    $
    2,834,000Less accumulated depreciation and amortization
    
    
    2,177,000
    
    
    
    1,759,000Net equipment acquired under capital leases
    
    $
    1,931,000
    
    
    $
    1,075,000
 6. LONG-TERM DEBT
  December 31,2006
    
    
    2005Technical services credit facility due in January 2010
    
    $
    42,590,000
    
    
    $
    26,126,000Capital leases
    
    
    1,918,000
    
    
    
    1,091,000Parent company 8.75% convertible subordinated
debentures due in January 2008
    
    
    5,000,000
    
    
    
    5,000,000Total long-term debt
    
    
    49,508,000
    
    
    
    32,217,000Less current portion
    
    
    787,000
    
    
    
    478,000Total long-term debt, less current portion
    
    $
    48,721,000
    
    
    $
    31,739,000
    F - 22




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    7. CAPITAL STOCK
  Common StockIssued
    
    Held in Treasury
    
    OutstandingBalance at January 1, 2004
    
    
    37,336,176
    
    
    
    5,755,650
    
    
    
    31,580,526Common shares issued
    
    
    17,579
    
    
    
    (19,149
    )
    
    
    36,728Balance at December 31, 2004
    
    
    37,353,755
    
    
    
    5,736,501
    
    
    
    31,617,254Common shares issued
    
    
    1,451,940
    
    
    
    (1,338,489
    )
    
    
    2,790,429Balance at December 31, 2005
    
    
    38,805,695
    
    
    
    4,398,012
    
    
    
    34,407,683Common shares issued
    
    
    452,330
    
    
    
    (321,049
    )
    
    
    773,379Balance at December 31, 2006
    
    
    39,258,025
    
    
    
    4,076,963
    
    
    
    35,181,062
 Series B Preferred Stock
  F - 23




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock Option Plans
  Deferred Stock Unit Plans
    F - 24




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8. EARNINGS PER SHARE
  WeightedAverageNet
    
    
    Common
    
    
    Per-ShareIncome (Loss)
    
    
    Shares
    
    
    AmountYear Ended December 31, 2006Basic EPS -Net loss
    
    $
    (3,432,000
    )
    
    
    34,743,000
    
    
    $
    (0.10
    )Effect of dilutive securities
    
    
    
    
    
    
    Diluted EPS -Net loss
    
    $
    (3,432,000
    )
    
    
    34,743,000
    
    
    $
    (0.10
    )Year Ended December 31, 2005Basic EPS -Net loss
    
    $
    (4,266,000
    )
    
    
    32,911,000
    
    
    $
    (0.13
    )Effect of dilutive securities
    
    
    
    
    
    
    Diluted EPS -Net loss
    
    $
    (4,266,000
    )
    
    
    32,911,000
    
    
    $
    (0.13
    )Year Ended December 31, 2004Basic EPS -Net income
    
    $
    2,396,000
    
    
    
    32,035,000
    
    
    $
    0.07Effect of dilutive securities
    
    
    
    
    
    
    1,173,000Diluted EPS -Net income
    
    $
    2,396,000
    
    
    
    33,208,000
    
    
    $
    0.07
  9. COMMITMENTS AND CONTINGENCIES
  F - 25




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Capital
    
    
    OperatingLeases
    
    
    Leases2007
    
    $
    800,000
    
    
    $
    5,330,0002008
    
    
    550,000
    
    
    
    3,604,0002009
    
    
    340,000
    
    
    
    2,427,0002010
    
    
    180,000
    
    
    
    1,562,0002011
    
    
    66,000
    
    
    
    1,182,000Thereafter
    
    
    
    
    
    
    2,193,000Total
minimum lease payments
    
    $
    1,936,000
    
    
    $
    16,298,000Less amounts
representing interest
    
    
    18,000Present value of net minimum lease payments
    
    $
    1,918,000
  10. BUSINESS SEGMENT DATA
     F - 26




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Business segment revenues:Technical services
    
    $
    235,222,000
    
    
    $
    131,821,000
    
    
    $
    118,415,000Information technology and
government services
    
    
    11,166,000
    
    
    
    22,060,000
    
    
    
    27,272,000$
    246,388,000
    
    
    $
    153,881,000
    
    
    $
    145,687,000Technical services segment revenues:Under pressure services
    
    $
    80,506,000
    
    
    $
    51,089,000
    
    
    $
    50,308,000Turnaround services
    
    
    117,983,000
    
    
    
    59,907,000
    
    
    
    56,212,000Other services
    
    
    36,733,000
    
    
    
    20,825,000
    
    
    
    11,895,000$
    235,222,000
    
    
    $
    131,821,000
    
    
    $
    118,415,000Business segment profit (loss):Technical services
    
    $
    11,915,000
    
    
    $
    10,114,000
    
    
    $
    7,879,000Government and other services
    
    
    (5,033,000
    )
    
    
    (7,747,000
    )
    
    
    342,000General corporate
    
    
    (4,982,000
    )
    
    
    (3,258,000
    )
    
    
    (3,262,000
    )Operating income (loss)
    
    
    1,900,000
    
    
    
    (891,000
    )
    
    
    4,959,000Interest income
    
    
    866,000
    
    
    
    660,000
    
    
    
    174,000Interest expense
    
    
    (2,807,000
    )
    
    
    (1,040,000
    )
    
    
    (989,000
    )Income (loss) before income taxes
    
    $
    (41,000
    )
    
    $
    (1,271,000
    )
    
    $
    4,144,000Business segment assets:Depreciation and amortization:Technical services (excluding
acquisitions)
    
    $
    3,286,000
    
    
    $
    2,574,000
    
    
    $
    2,582,000Government and other services
    
    
    486,000
    
    
    
    940,000
    
    
    
    970,000$
    3,772,000
    
    
    $
    3,514,000
    
    
    $
    3,552,000Capital expenditures:Technical services (excluding
acquisitions)
    
    $
    6,736,000
    
    
    $
    2,851,000
    
    
    $
    2,927,000Government and other services
    
    
    111,000
    
    
    
    1,364,000
    
    
    
    1,606,000General corporate
    
    
    358,000
    
    
    
    
    
    
    
    $
    7,205,000
    
    
    $
    4,215,000
    
    
    $
    4,533,000
 F - 27




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31,2006
    
    
    2005
    
    
    2004Total assets:Technical services
    
    $
    131,269,000
    
    
    $
    100,299,000
    
    
    $
    69,962,000Information technology
and government services
    
    
    7,756,000
    
    
    
    16,506,000
    
    
    
    16,720,000General corporate
    
    
    17,272,000
    
    
    
    19,673,000
    
    
    
    25,238,000$
    156,297,000
    
    
    $
    136,478,000
    
    
    $
    111,920,000
    Year Ended December 31,2006
    
    
    2005
    
    
    2004Geographical area revenues:United States
    
    $
    108,313,000
    
    
    $
    51,475,000
    
    
    $
    55,041,000Europe
    
    
    113,374,000
    
    
    
    79,767,000
    
    
    
    73,069,000Asia-Pacific
    
    
    24,701,000
    
    
    
    22,639,000
    
    
    
    17,577,000$
    246,388,000
    
    
    $
    153,881,000
    
    
    $
    145,687,000Geographical area operating income (loss):United States
    
    $
    (18,163,000
    )
    
    $
    (13,748,000
    )
    
    $
    (5,673,000
    )Europe
    
    
    14,740,000
    
    
    
    9,646,000
    
    
    
    8,152,000Asia-Pacific
    
    
    5,323,000
    
    
    
    3,211,000
    
    
    
    2,480,000$
    1,900,000
    
    
    $
    (891,000
    )
    
    $
    4,959,000December 31,2006
    
    
    2005
    
    
    2004Geographical area property and equipment, net:United States
    
    $
    14,763,000
    
    
    $
    8,478,000
    
    
    $
    5,145,000Europe
    
    
    9,624,000
    
    
    
    6,984,000
    
    
    
    6,930,000Asia-Pacific
    
    
    1,582,000
    
    
    
    1,658,000
    
    
    
    1,563,000$
    25,969,000
    
    
    $
    17,120,000
    
    
    $
    13,638,000
  F - 28




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31,2006
    
    
    2005Accrued compensation and benefits
    
    $
    7,099,000
    
    
    $
    5,647,000Accrued acquisition transaction costs
    
    
    
    
    
    
    2,315,000Accrued asset and equipment cost of sales
    
    
    1,197,000
    
    
    
    3,260,000Accrued VAT payable
    
    
    1,563,000
    
    
    
    1,006,000Unearned income
    
    
    
    
    
    
    1,271,000Accrued closing costs of leased facilities
    
    
    
    
    
    
    1,002,000Accrued taxes other than income
    
    
    1,251,000
    
    
    
    766,000Accrued interest
    
    
    477,000
    
    
    
    201,000Accrued environmental liability from GSG
    
    
    1,880,000
    
    
    
    Other
    
    
    8,958,000
    
    
    
    5,305,000$
    22,425,000
    
    
    $
    20,773,000
 12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
   F - 29




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XANSER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13. QUARTERLY FINANCIAL DATA (UNAUDITED)
  Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2006:Revenues
    
    $
    54,794,000
    
    
    $
    64,544,000
    
    
    $
    60,260,000
    
    
    $
    66,790,000Operating income (loss)
    
    $
    1,005,000
    
    
    $
    2,361,000
    
    
    $
    (1,944,000
    )
    
    $
    478,000Net income (loss)
    
    $
    (36,000
    )
    
    $
    756,000
    
    
    $
    (3,308,000
    )
    
    $
    (844,000
    )Earnings (loss) per common share 
basic and diluted
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.10
    )
    
    $
    (0.02
    )2005:Revenues
    
    $
    35,171,000
    
    
    $
    43,469,000
    
    
    $
    40,401,000
    
    
    $
    34,840,000Operating income (loss)
    
    $
    (1,964,000
    )
    
    $
    (520,000
    )
    
    $
    1,379,000
    
    
    $
    214,000Net income (loss)
    
    $
    (2,305,000
    )
    
    $
    (1,703,000
    )
    
    $
    41,000
    
    
    $
    (299,000
    )Loss per common share 
basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.05
    )
    
    $
    
    
    
    $
    (0.01
    )
 F - 30




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##### Table of Contents



XANSER
CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
 Schedule I
 Year Ended December 31,2006
    
    
    2005
    
    
    2004General and administrative expenses
    
    $
    (4,967,000
    )
    
    $
    (3,258,000
    )
    
    $
    (3,262,000
    )Interest expense
    
    
    (477,000
    )
    
    
    (477,000
    )
    
    
    (477,000
    )Interest and other income
    
    
    493,000
    
    
    
    246,000
    
    
    
    69,000Equity in income (loss) of subsidiaries
    
    
    1,769,000
    
    
    
    (751,000
    )
    
    
    6,066,000Income (loss) before income taxes
    
    
    (3,182,000
    )
    
    
    (4,240,000
    )
    
    
    2,396,000Income tax expense
    
    
    (250,000
    )
    
    
    (26,000
    )
    
    
    Net income (loss)
    
    $
    (3,432,000
    )
    
    $
    (4,266,000
    )
    
    $
    2,396,000Earnings (loss) per common share  basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
 
 F - 31




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##### Table of Contents



Schedule I
(Continued)
 XANSER
CORPORATION (PARENT COMPANY)
CONDENSED BALANCE SHEETS
 December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,770,000
    
    
    $
    11,092,000Receivable from businesses distributed to common stockholders
    
    
    1,445,000
    
    
    
    6,484,000Prepaid expenses and other
    
    
    95,000
    
    
    
    85,000Total current assets
    
    
    13,310,000
    
    
    
    17,661,000Property and equipment
    
    
    685,000
    
    
    
    700,000Less accumulated depreciation and amortization
    
    
    666,000
    
    
    
    662,000Net property and equipment
    
    
    19,000
    
    
    
    38,000Investments in, advances to and notes receivable
from subsidiaries
    
    
    54,425,000
    
    
    
    46,112,000Total assets
    
    $
    67,754,000
    
    
    $
    63,811,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    2,148,000
    
    
    $
    7,389,000Total current liabilities
    
    
    2,148,000
    
    
    
    7,389,000Long-term debt, less current portion
    
    
    5,000,000
    
    
    
    5,000,000Other liabilities
    
    
    1,000
    
    
    
    118,000Stockholders equity:Common stock, without par value
    
    
    4,558,000
    
    
    
    4,507,000Additional paid-in capital
    
    
    124,884,000
    
    
    
    124,481,000Treasury stock, at cost
    
    
    (18,320,000
    )
    
    
    (20,028,000
    )Accumulated deficit
    
    
    (53,438,000
    )
    
    
    (50,565,000
    )Accumulated comprehensive income (loss)
    
    
    2,921,000
    
    
    
    (7,091,000
    )Total stockholders equity
    
    
    60,605,000
    
    
    
    51,304,000Total liabilities and stockholders equity
    
    $
    67,754,000
    
    
    $
    63,811,000
 
 F - 32




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##### Table of Contents



Schedule I
(Continued)
 XANSER
CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Operating activities:Net income (loss)
    
    $
    (3,432,000
    )
    
    $
    (4,266,000
    )
    
    $
    2,396,000Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in income of subsidiaries, net of
dividends
    
    
    1,420,000
    
    
    
    (3,205,000
    )
    
    
    (2,627,000
    )Other, net
    
    
    352,000
    
    
    
    
    
    
    
    393,000Changes in current assets and liabilities:Prepaid expenses and other current assets
    
    
    (10,000
    )
    
    
    (22,000
    )
    
    
    898,000Accounts payable and accrued expenses
    
    
    166,000
    
    
    
    521,000
    
    
    
    (100,000
    )Net cash provided by (used in) operating
activities
    
    
    (1,504,000
    )
    
    
    (6,972,000
    )
    
    
    960,000Investing activities:Change in other assets, net
    
    
    19,000
    
    
    
    19,000
    
    
    
    48,000Net cash provided by investing activities
    
    
    19,000
    
    
    
    19,000
    
    
    
    48,000Financing activities:Common stock issued and other
    
    
    2,162,000
    
    
    
    2,770,000
    
    
    
    78,000Increase (decrease) in receivable from businesses
distributed to common stockholders
    
    
    1,000
    
    
    
    215,000
    
    
    
    865,000Net cash provided by financing activities
    
    
    2,163,000
    
    
    
    2,985,000
    
    
    
    943,000Increase (decrease) in cash and cash equivalents
    
    
    678,000
    
    
    
    (3,968,000
    )
    
    
    1,951,000Cash and cash equivalents at beginning of year
    
    
    11,092,000
    
    
    
    15,060,000
    
    
    
    13,109,000Cash and cash equivalents at end of year
    
    $
    11,770,000
    
    
    $
    11,092,000
    
    
    $
    15,060,000
 
 F - 33




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##### Table of Contents



Schedule II
 XANSER CORPORATION 
VALUATION AND QUALIFYING ACCOUNTS(in thousands)
 AdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    End ofDescriptions
    
    Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    PeriodYear Ended December 31, 2006:For doubtful receivables
classified as current assets(a)
    
    $
    1,493
    
    
    $
    1,836
    
    
    $
    54
    
    
    $
    (42
    ) (c)
    
    $
    3,341For deferred tax asset valuation allowance
classified as non-current assets (a)
    
    $
    21,126
    
    
    $
    4,028
    
    
    $
    
    
    
    $
    
    
    
    $
    25,154Year Ended December 31, 2005:For doubtful receivables
classified as current assets(a)
    
    $
    667
    
    
    $
    1,050
    
    
    $
    
    
    
    $
    (224
    ) (c)
    
    $
    1,493For deferred tax asset valuation
allowance classified as non-current
assets (a)
    
    $
    16,835
    
    
    $
    4,291
    
    
    $
    
    
    
    $
    
    
    
    $
    21,126Year Ended December 31, 2004:For doubtful receivables
classified as current assets(a)
    
    $
    1,183
    
    
    $
    285
    
    
    $
    17
    (b)
    
    $
    (818
    ) (c)
    
    $
    667For deferred tax asset valuation
allowance classified as non-current
assets (a)
    
    $
    16,246
    
    
    $
    589
    
    
    $
    
    
    
    $
    
    
    
    $
    16,835
 Notes:(a)
    
    Allowance deducted from assets to which they apply.(b)
    
    Foreign currency translation adjustments.(c)
    
    Receivable write-offs and reclassifications, net of recoveries. F - 34




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XANSER CORPORATIONBy:
    
    /s/ MICHAEL L. ROSE

             PresidentDate:
    
    March 30, 2007
  Signature
    
    Title
    
    DatePrincipal Executive Officer/s/ JOHN R. BARNES
    
    Chief Executive Officer Director
    
    March 30, 2007Principal Accounting Officer/s/ HOWARD C. WADSWORTH
    
    Senior Vice President, Treasurer
    
    March 30, 2007and SecretaryDirectors/s/ SANGWOO AHN
    
    Director
    
    March 30, 2007/s/ CHARLES R. COX
    
    Director
    
    March 30, 2007/s/ HANS KESSLER
    
    Director
    
    March 30, 2007