##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  to
 Commission File Number 001-05083
 
 XANSER CORPORATION
  Delaware
    
    74-1191271(State or other jurisdiction of 
Incorporation or organization)
    
    (I.R.S. Employer Identification No.)2435 North Central Expressway 
Suite 700
Richardson, Texas
    
    75080(Address of principal executive offices)
    
    (Zip Code)
 (972) 699-4000
 Not Applicable
 
 þ o
 o þ o
 o þ




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##### 



XANSER CORPORATION AND SUBSIDIARIES
 INDEX
 PageNumberPART I.
    
    Financial Information
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2007 (unaudited) and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    4Condensed Consolidated Statements of Stockholders Equity for the three months ended March 31, 2007 (unaudited) and the year ended December 31, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    6Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    20Item 4.
    
    Controls and Procedures
    
    
    20PART II.
    
    Other Information
    
    
    21Item 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    

Risk
Factors
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21Item 6.
    
    Exhibits
    
    
    21Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 XANSER CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share data)
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    22,626
    
    
    $
    23,937Accounts receivable, trade (net of allowance for doubtful accounts of $3,438
and $3,341 as of March 31, 2007 and December 31, 2006, respectively)
    
    
    59,977
    
    
    
    59,323Receivable from businesses distributed to common stockholders
    
    
    1,448
    
    
    
    1,445Inventories:Raw materials and supplies
    
    
    12,320
    
    
    
    12,633Work-in-process
    
    
    8,210
    
    
    
    6,970Finished goods
    
    
    2,169
    
    
    
    1,808Prepaid and other current assets
    
    
    4,649
    
    
    
    5,046Total current assets
    
    
    111,399
    
    
    
    111,162Property and equipment
    
    
    53,383
    
    
    
    51,523Less accumulated depreciation and amortization
    
    
    26,722
    
    
    
    25,554Property and equipment, net
    
    
    26,661
    
    
    
    25,969Goodwill
    
    
    13,148
    
    
    
    13,148Other assets
    
    
    6,640
    
    
    
    6,018Total assets
    
    $
    157,848
    
    
    $
    156,297Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    14,482
    
    
    $
    14,702Accrued expenses and other current liabilities
    
    
    23,353
    
    
    
    22,425Accrued income taxes
    
    
    2,098
    
    
    
    2,581Bank overdraft
    
    
    834
    
    
    
    1,553Current portion of long-term debt
    
    
    5,703
    
    
    
    787Total current liabilities
    
    
    46,470
    
    
    
    42,048Long-term debt, less current portion
    
    
    43,590
    
    
    
    48,721Pension liability
    
    
    3,047
    
    
    
    3,042Other liabilities
    
    
    1,881
    
    
    
    1,881Stockholders equity:Common stock, no par value; 60,000,000 shares authorized; 39,277,395
and 39,258,025 shares issued as of March 31, 2007 and December 31,
2006, respectively
    
    
    4,561
    
    
    
    4,558Additional paid-in capital
    
    
    124,885
    
    
    
    124,884Retained earnings (accumulated deficit)
    
    
    (51,832
    )
    
    
    (53,438
    )Accumulated other comprehensive income
    
    
    3,440
    
    
    
    2,921Treasury stock
    
    
    (18,194
    )
    
    
    (18,320
    )Total stockholders equity
    
    
    62,860
    
    
    
    60,605Total liabilities and stockholders equity
    
    $
    157,848
    
    
    $
    156,297
  3




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XANSER CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
 (Unaudited)
 For the Three MonthsEnded March 31,2007
    
    
    2006Revenues
    
    $
    68,445
    
    
    $
    54,794Costs and expenses:Operating costs
    
    
    45,123
    
    
    
    35,626Depreciation and amortization
    
    
    1,071
    
    
    
    885Selling, general and administrative
    
    
    19,151
    
    
    
    17,278Total costs and expenses
    
    
    65,345
    
    
    
    53,789Operating income
    
    
    3,100
    
    
    
    1,005Interest and
other income, net
    
    
    176
    
    
    
    219Interest expense
    
    
    (852
    )
    
    
    (557
    )Income before income taxes
    
    
    2,424
    
    
    
    667Income tax expense
    
    
    (818
    )
    
    
    (703
    )Net income (loss)
    
    $
    1,606
    
    
    $
    (36
    )Earnings per common share:Basic
    
    $
    0.05
    
    
    $
    0.00Diluted
    
    $
    0.04
    
    
    $
    0.00Weighted-average number of common and common equivalent shares used in
computing net income (loss) per common share:Basic
    
    
    35,201
    
    
    
    34,426Diluted
    
    
    35,973
    
    
    
    34,426
  4




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XANSER CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Three Months Ended March 31, 2007 (Unaudited) and Year Ended December 31, 2006
 (in thousands, except share data)
 AccumulatedRetained
    
    OtherAdditional
    
    Earnings
    
    ComprehensiveCommon Shares
    
    Common
    
    Paid-In
    
    (Accumulated
    
    Income
    
    TreasuryIssued
    
    Treasury
    
    Stock
    
    Capital
    
    Deficit)
    
    (Loss)
    
    Stock
    
    TotalBalance at January 1, 2006
    
    
    38,805,695
    
    
    
    4,398,012
    
    
    $
    4,507
    
    
    $
    124,481
    
    
    $
    (50,565
    )
    
    $
    (7,091
    )
    
    $
    (20,028
    )
    
    $
    51,304Staff Accounting Bulletin No. 108
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    997
    
    
    
    
    
    
    
    
    
    
    
    997Revised Balance at January 1, 2006
    
    
    38,805,695
    
    
    
    4,398,012
    
    
    
    4,507
    
    
    
    124,481
    
    
    
    (49,568
    )
    
    
    (7,091
    )
    
    
    (20,028
    )
    
    
    52,301Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,432
    )
    
    
    
    
    
    
    
    
    
    
    (3,432
    )Stock based compensation
    
    
    452,330
    
    
    
    (321,049
    )
    
    
    51
    
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    1,708
    
    
    
    2,162Minimum pension liability adjustment
for subsidiary, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,750
    
    
    
    
    
    
    
    2,750Adjustment to initially apply FASB
Statement No. 158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,129
    
    
    
    
    
    
    
    2,129Adjustment to previously provided tax
exposures related to business
distributed to common
stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (438
    )
    
    
    
    
    
    
    
    
    
    
    (438
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,133
    
    
    
    
    
    
    
    5,133Balance at December 31, 2006
    
    
    39,258,025
    
    
    
    4,076,963
    
    
    
    4,558
    
    
    
    124,884
    
    
    
    (53,438
    )
    
    
    2,921
    
    
    
    (18,320
    )
    
    
    60,605Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,606
    
    
    
    
    
    
    
    
    
    
    
    1,606Stock-based compensation
    
    
    19,370
    
    
    
    (28,000
    )
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    130Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519
    
    
    
    
    
    
    
    519Balance at March 31, 2007
    
    
    39,277,395
    
    
    
    4,048,963
    
    
    $
    4,561
    
    
    $
    124,885
    
    
    $
    (51,832
    )
    
    $
    3,440
    
    
    $
    (18,194
    )
    
    $
    62,860
  5




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XANSER CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (Unaudited)
 For the Three MonthsEnded March 31,2007
    
    
    2006Operating activities:Net income (loss)
    
    $
    1,606
    
    
    $
    (36
    )Reconciliation of net income (loss) to net cash used in operating activities:Depreciation and amortization
    
    
    1,071
    
    
    
    885Stock-based compensation expense
    
    
    45
    
    
    
    58Provision for doubtful accounts
    
    
    59
    
    
    
    79Deferred income taxes
    
    
    (10
    )
    
    
    (221
    )Changes in operating assets and liabilities  net of business acquisition:Accounts receivable
    
    
    (713
    )
    
    
    (500
    )Inventories
    
    
    (1,288
    )
    
    
    (1,873
    )Prepaid expenses and other current assets
    
    
    397
    
    
    
    (47
    )Accounts payable, accrued expenses and other
    
    
    (1,214
    )
    
    
    812Net cash used in operating activities
    
    
    (47
    )
    
    
    (843
    )Investing activities:Capital expenditures
    
    
    (1,636
    )
    
    
    (1,371
    )Other, net
    
    
    (316
    )
    
    
    Net cash used in investing activities
    
    
    (1,952
    )
    
    
    (1,371
    )Financing activities:Borrowings
    
    
    
    
    
    
    5,000Payments on debt
    
    
    (214
    )
    
    
    (158
    )Issuance of common stock
    
    
    85
    
    
    
    372Increase in receivable from businesses distributed to common stockholders
    
    
    (3
    )
    
    
    (3
    )Bank overdraft
    
    
    719
    
    
    
    Net cash provided by financing activities
    
    
    587
    
    
    
    5,211Effect of exchange rate changes on cash
    
    
    101
    
    
    
    (454
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,311
    )
    
    
    2,543Cash and cash equivalents at beginning of period
    
    
    23,937
    
    
    
    21,526Cash and cash equivalents at end of period
    
    $
    22,626
    
    
    $
    24,069
  6




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XANSER CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (in thousands)
 (Unaudited)
 For the Three MonthsEnded March 31,2007
    
    
    2006Net income (loss)
    
    $
    1,606
    
    
    $
    (36
    )Other comprehensive income (loss):Foreign
currency translation adjustments, net of tax
    
    
    519
    
    
    
    871Total other comprehensive income
    
    
    519
    
    
    
    871Comprehensive income
    
    $
    2,125
    
    
    $
    835
  7




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XANSER CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 (Unaudited)
 1. General and Summary of Significant Accounting Policies
    Change in Presentation
  8




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XANSER CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 (Unaudited)
 Effect of Adopting New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109
  Accounting
for Income Taxes
  Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
  Fair Value Measurement
 The Fair Value Option for Financial Assets and
Financial Liabilities
 9




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XANSER CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 (Unaudited)
 2. Earnings Per Share
  For the Three MonthsEnded March 31,2007
    
    2006Net income (loss)
    
    $
    1,606
    
    
    $
    (36
    )Basic weighted-average common shares outstanding
    
    
    35,201
    
    
    
    34,426Dilutive effect of common stock equivalents
    
    
    772
    
    
    
    Diluted weighted-average common shares outstanding
    
    
    35,973
    
    
    
    34,426Income per share:Basic
    
    $
    0.05
    
    
    $
    0.00Dilutive
    
    $
    0.04
    
    
    $
    0.00
  3. Accrued Expenses
  March 31,
    
    
    December 31,2007
    
    
    2006Compensation and benefits
    
    $
    9,166
    
    
    $
    7,099Asset and equipment costs of sales
    
    
    1,397
    
    
    
    1,197Value added tax payable
    
    
    1,619
    
    
    
    1,563Taxes other than income
    
    
    1,364
    
    
    
    1,251Interest
    
    
    367
    
    
    
    477Environmental liability
    
    
    1,880
    
    
    
    1,880Other
    
    
    7,560
    
    
    
    8,958$
    23,353
    
    
    $
    22,425
 10




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XANSER CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 (Unaudited)
 4. Long-Term Debt
  March 31,
    
    
    December 31,2007
    
    
    2006Borrowings under $50,000 revolving bank facility (the $50.0 million facility)
    
    $
    27,590
    
    
    $
    27,590Borrowings under $15,000 revolving bank facility (the $15.0 million facility)
    
    
    15,000
    
    
    
    15,0008.75% convertible subordinated debentures due in 2008
    
    
    5,000
    
    
    
    5,000Capital leases
    
    
    1,703
    
    
    
    1,918Total long-term debt
    
    
    49,293
    
    
    
    49,508Less current portion of long-term debt
    
    
    5,703
    
    
    
    787$
    43,590
    
    
    $
    48,721
     11




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XANSER CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 (Unaudited)
 5. Retirement Plan
  Three Months EndedMarch 31,2007
    
    
    2006Service cost
    
    $
    159
    
    
    $
    130Interest cost
    
    
    957
    
    
    
    901Expected return on plan assets
    
    
    (1,099
    )
    
    
    (974
    )Amortization of prior service cost
    
    
    (28
    )
    
    
    (28
    )Recognized net loss
    
    
    204
    
    
    
    177Net periodic pension cost
    
    $
    193
    
    
    $
    206
 Employers Accounting for Defined Benefit Pension
and Other Post Retirement Plans
  6. Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to
Employees
  12




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XANSER CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2007
 (Unaudited)
 7. Financial Instruments
  8. Commitments and Contingencies
   9. Business Segment Data
   United
    
    
    
    
    
    
    Asia-States
    
    
    Europe
    
    
    Pacific
    
    
    TotalThree Months Ended March 31, 2007:Revenues
    
    $
    32,518
    
    
    $
    28,927
    
    
    $
    7,000
    
    
    $
    68,445Operating income (loss)
    
    $
    (586
    )
    
    $
    2,433
    
    
    $
    1,253
    
    
    $
    3,100Three Months Ended March 31, 2006:Revenues
    
    $
    25,770
    
    
    $
    23,803
    
    
    $
    5,221
    
    
    $
    54,794Operating income (loss)
    
    $
    (1,844
    )
    
    $
    2,020
    
    
    $
    829
    
    
    $
    1,005
 13




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XANSER CORPORATION AND SUBSIDIARIES
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
    Financial Overview
  14




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XANSER CORPORATION AND SUBSIDIARIES
 Results of Operations
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands, except per share data)Revenues
    
    $
    68,445
    
    
    $
    54,794Costs and expenses:Operating costs
    
    
    45,123
    
    
    
    35,626Selling, general and administrative
    
    
    19,151
    
    
    
    17,278Depreciation and amortization
    
    
    1,071
    
    
    
    885Total costs and expenses
    
    
    65,345
    
    
    
    53,789Operating income
    
    
    3,100
    
    
    
    1,005Interest income
    
    
    176
    
    
    
    219Interest expense
    
    
    (852
    )
    
    
    (557
    )Income before income taxes
    
    
    2,424
    
    
    
    667Income tax expense
    
    
    (818
    )
    
    
    (703
    )Net income (loss)
    
    $
    1,606
    
    
    $
    (36
    )Earnings per share:Basic
    
    $
    0.05
    
    
    $
    0.00Diluted
    
    $
    0.04
    
    
    $
    0.00
 Revenues
 Operating Costs
 Selling, General and Administrative
 15




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XANSER CORPORATION AND SUBSIDIARIES
  Depreciation and Amortization
 Interest Expense
 Income Taxes  Accounting
for Income Taxes
  Accounting for Uncertainty in Income Taxes
 Liquidity and Capital Resources
    16




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XANSER CORPORATION AND SUBSIDIARIES
       17




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XANSER CORPORATION AND SUBSIDIARIES
  Critical Accounting Policies and Estimates
   Accounting for Income Taxes
 New Accounting Pronouncement
 Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109
  Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 18




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XANSER CORPORATION AND SUBSIDIARIES
   Fair Value Measurement
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Off-Balance Sheet Transactions
  19




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XANSER CORPORATION AND SUBSIDIARIES
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 i.e.
   
 Item 4. Controls and Procedures
 et seq
  20




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XANSER CORPORATION AND SUBSIDIARIES
 Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
 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, filed as
Exhibit 3.8 to Registrants Form 10-K for the year ended December 31, 2006, which
exhibit is hereby incorporated by reference.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
Form 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
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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Exhibit 4.7 of the Registrants Form 10-K for the year ended December 31, 1983, which
exhibit is hereby incorporated by reference.31.1
    
    Certification of Chief Executive Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, dated May 10, 2007.31.2
    
    Certification of Chief Financial Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, dated May 10, 2007.32.1
    
    Certification of Chief Executive Officer, Pursuant to Section 906(a) of the
Sarbanes-Oxley Act of 2002, dated May 10, 2007.32.2
    
    Certification of Chief Financial Officer, Pursuant to Section 906(a) of the
Sarbanes-Oxley Act of 2002, dated May 10, 2007.
 Signature
  XANSER CORPORATION
(Registrant)/s/ HOWARD C. WADSWORTHHoward C. WadsworthSr. Vice President, Treasurer and Secretary

(Duly Authorized Officer)  22