Contrans Announces First Quarter Results


WOODSTOCK, ON, April 28, 2014 /CNW/ -

Financial Highlights

For the three months ended March 31



($CAD millions except share and per share amounts)

Continuing operations


- total





- fuel surcharges



Revenue - services







Direct operating expenses - net of fuel surcharges(1)





Gross margin





General and administration expenses





Gain on sale of equipment





Net financing costs





Earnings before income taxes





Income tax expense





Net earnings and comprehensive income from continuing operations







Discontinued operations



Net earnings and comprehensive income for the period





Earnings per share:











Weighted average shares outstanding (000s):







Dividends declared per share





Depreciation - continuing operations





Amortization of intangibles - continuing operations





(1) Referred to  as "direct operating expenses" hereafter. See "Use of Non-GAAP Financial Measures" below.

(2) 2013 comparative figures have been restated to reflect the Waste Segment as a discontinued operation.

"Much of North America was gripped by some of the worst winter weather conditions that we have experienced in decades," stated Contrans Group Inc.'s Chairman and Chief Executive Officer, Stan G. Dunford. "The effects were widespread and had a crippling effect on all modes of commercial traffic. For Canadian truckers, the poor weather was directly responsible for many lost revenue days due to highway closures and poor visibility. In addition, prolonged frigid temperatures caused fuel consumption to increase and maintenance costs to rise. Contrans' resiliency in challenging market conditions is reflected in the Company's first quarter results that showed a marked improvement over 2013's first quarter results."

"In response to an interest expressed by a potential buyer of Contrans' waste collection segment, management has carried out a strategic review of this segment," continued Mr. Dunford. "The North American waste industry is dominated by a very few, large, vertically-integrated companies that operate waste collection vehicles, transfer stations and landfill sites coast to coast. Compared to smaller market participants like Contrans, these large companies have operating advantages as well as unique opportunities to realize synergies when competing for acquisition targets. Accordingly, in our view it would therefore be difficult for Contrans to achieve additional, accretive growth of any significance in the waste industry. Moreover, being a smaller player in the market, we frankly do not have enough talented managers to achieve significant growth in the waste industry.. In contrast, Contrans does have a wealth of talent and experience in its freight transportation segment. The expertise of these managers has been fundamental to the Company's long record of success and they are capable of achieving further growth. Accordingly, management has concluded that it would be in the best interests of Contrans' shareholders to sell the Company's waste collection segment and to focus on enhancing its core business of freight transportation."

"As Contrans operates on a highly decentralized basis, the sale of its waste collection segment will not affect the way in which the Company operates its other business units in any way," added Mr. Dunford. "The Company will continue to operate in the same intelligent manner that has made it the pre-eminent freight transportation company in Canada. We will continue to seek to add to the quality and diversity of our customer base to add to the sustainability of our profitability. Management will remain very committed to enhancing long-term value for Contrans' shareholders."

Contrans has experienced internal growth including contract awards to transport waste from Calgary, Alberta to Coronation, Alberta and to transport metallurgical coke from Hamilton, Ontario to Nanticoke, Ontario. These contracts contributed $4.5 million of additional service revenue ("revenue") in the first quarter of 2014 ("2014 Q1") compared to the same period in 2013 ("2013 Q1"). In addition, the acquisition of the Best Transfer assets, completed late in 2013, contributed approximately $2.7 million of incremental revenue in 2014 Q1.

This year's unusually harsh winter resulted in road closures and more lost working days than usual. However, this was mitigated by increased shipments of road salt which contributed $2.9 million of additional revenue in 2014 Q1 compared to 2013 Q1. In addition, some shippers of bulk materials resorted to truck transportation due to disruptions to rail service caused by the poor weather. Furthermore, shipping on the Great Lakes was shut down longer than normal due to an unusually early freeze up and a late thaw.  This also resulted in increased shipments by truck.

Direct operating expenses
Contrans' direct operating expenses increased in 2014 commensurate with increased revenue. Direct operating expenses were also adversely affected by prolonged and unusually cold temperatures.  The poor weather resulted in increased maintenance and fuel costs. Fuel costs were also negatively impacted by the lag between the Company's fuel surcharge programs and fuel prices that increased steadily in 2014 Q1. Typically, this negative impact has reversed when fuel prices stop increasing. The poor weather also resulted in lost working days which negatively impacted equipment utilization.  Accident claim costs were $0.7 million higher in 2014 Q1 than 2013 Q1.

General and administration expenses
The harsh winter increased yard maintenance and utility costs by approximately $0.3 million in 2014 Q1 compared to 2013 Q1. Contrans' share-based, cash-settled compensation expense was $0.6 million lower in 2014 Q1 compared to 2013 Q1. The Company's shares appreciated by over 20% in 2013 Q1 compared to a 1% decline in 2014 Q1.

Net financing costs
Net financing costs decreased by $0.2 million in 2014 Q1 compared to 2013 Q1. This decrease resulted from the Company's repayment of a $31.9 million term loan in December 2013.

Income tax expense
The Company's effective tax rate remained unchanged in 2014 Q1 compared to 2013 Q1.

Contrans incurred capital expenditures of $10.6 million in 2014 Q1.  Of this amount, $6.0 million was incurred to support growth initiatives in 2014 Q1. These amounts include capital expenditures that were funded through finance leases.

Contrans has received regulatory approval to proceed with a normal course issuer bid ("NCIB") to purchase up to 1.7 million of its outstanding Class A shares for cancellation between March 17, 2014 and March 16, 2015.  There have been no purchases made under this NCIB to date. There were no purchases under Contrans' previous NCIB, which lapsed on March 14, 2014.

Contrans' Board of Directors ("Board") has declared the following dividends in 2014:

Declaration Date

Paid or Payable on

Per share amount


January 15, 2014

February 14, 2014


$4.2 million

April 15, 2014

May 15, 2014


$5.1 million

The payment of dividends is subject to the discretion of Contrans' Board. Prior to declaring a dividend, the Board considers many factors, including Contrans' overall financial condition, its expected future financial performance, its anticipated capital requirements as well as its debt repayment obligations and the covenants that are contained in Contrans' loan agreements.


Management has included a non-GAAP financial measure, "Direct operating expenses – net of fuel surcharges", in this press release. Management believes that it is important to isolate the effects of fuel surcharges, a volatile source of revenue and direct operating expenses, when analyzing operating results. Management regards revenue from services as the most relevant indicator of business level activity. Accordingly, the percentages in the Financial Highlights and Results from Operations tables were calculated using revenue from services alone as the base. In addition, direct operating expenses are stated after netting fuel surcharges against fuel expenses in the Financial Highlights and Results from Operations tables. Management believes that this facilitates a better comparison of operating costs between periods. 

This non-GAAP financial measure does not have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures employed by other issuers. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. 


Management's discussion and analysis contains certain forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements relate to future events or future performance and include, but are not limited to, changes in government regulations regarding weights and dimensions of highway equipment, the age and condition of the transportation fleet and the growth of Contrans' business. Often, but not always, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. Such statements reflect the current views and estimates of management with respect to future events, as of the date such statements are made, and they involve known and unknown risks and uncertainties which may cause actual events or results to differ materially from those expressed or implied by forward-looking statements. In evaluating these statements, readers should specifically consider factors such as the risks outlined under "Risk Factors" in Contrans' Annual Information Form, which is available at Although Contrans has attempted to identify important factors that could cause actual events, actions or results to differ materially from those described in the forward-looking statements, there may be other factors that cause such events, actions or results to differ. Contrans is under no obligation (and expressly disclaims any such obligation) to update forward-looking statements if circumstances or management's views or estimates change. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements.

SOURCE: Contrans Group Inc.

For further information: Stan G. Dunford, Chairman and Chief Executive Officer, or Gregory W. Rumble, President and Chief Operating Officer, Phone: 519-421?4600, E-mail:, Web site:


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