Contrans Group Inc. Announces Fourth Quarter Results

WOODSTOCK, ON, Feb. 25 /CNW/ - (TSX: CSS)

    
    Financial Highlights
    Periods ended December 31
    (Unaudited)                         Three months          Twelve months
    (in millions except
     per share amounts)                2009       2008       2009       2008
    -------------------------------------------------------------------------
    Revenue - as stated           $    99.2  $   109.6  $   373.6  $   488.8
            - fuel surcharges(1)       (9.3)     (12.7)     (30.4)     (79.2)
    -------------------------------------------------------------------------
    Revenue - transportation
     services(1)                  $    89.9  $    96.9  $   343.2  $   409.6
    -------------------------------------------------------------------------
    Operating expenses - net of
     fuel surcharges                   69.2       73.5      266.6      310.5
    Selling, general and
     administration expenses            8.1       10.4       34.1       43.0
    Foreign exchange loss (gain)        0.1        4.5       (1.2)       4.0
    -------------------------------------------------------------------------
    Earnings before amortization,
     interest and income taxes
     (EBITDA)                          12.5        8.5       43.7       52.1
    Amortization of property
     and equipment                      3.0        3.0       12.0       12.3
    Amortization of intangible
     assets                             1.0        1.0        3.8        3.8
    Net interest expense                1.4        1.6        5.7        5.7
    -------------------------------------------------------------------------
    Earnings before income
     taxes (EBT)                        7.1        3.1       22.2       30.3
    -------------------------------------------------------------------------
    Income tax provision
     (recovery)
      Current                          (1.0)       0.2        0.5        0.7
      Future                           (0.4)      (0.1)      (1.3)       0.1
    -------------------------------------------------------------------------
                                  $    (1.4) $     0.1  $    (0.8) $     0.8
    -------------------------------------------------------------------------
    Net earnings and
     comprehensive income         $     8.5  $     3.0  $    23.0  $    29.5
    -------------------------------------------------------------------------
    Earnings per share - basic
     and diluted                  $    0.29  $    0.10  $    0.77  $    1.01
    -------------------------------------------------------------------------
    Total assets                                        $   275.4  $   274.6
    Long-term debt and capital
     lease obligations                                       94.4       93.0
    Cash and retricted cash                                  37.6       28.8
    Distributions declared per share                    $     0.80  $    1.25
    -------------------------------------------------------------------------

    (1) See "Use of non-GAAP Financial Measures" below.
    

"Contrans distinguished itself in 2009," stated Contrans Income Fund's Chairman and Chief Executive Officer, Stan G. Dunford. "However, the 2009 business environment was as difficult as any that we have ever encountered. It has been reported that economic conditions in 2009 were the worst that they have been since the Great Depression. Plant closures and curtailed manufacturing production resulted in an overcapacity of trucks as well as greatly reduced shipping volumes. These factors had a profound, adverse effect on the transportation industry and were reflected in Contrans' revenues which were significantly lower in 2009 than in 2008. Management had to make many tough decisions as a result and did so without hesitation."

"New sources of revenue were pursued aggressively and successfully despite the adverse market conditions," added Mr. Dunford. "Staff cuts were necessary, wages were rolled back and the executive incentive program was eliminated for 2009. Fleet sizes were adjusted appropriately while discretionary and capital spending were scrutinized very closely. All of our employees were challenged to come up with new ways to cut costs and they responded with many innovative ideas. These prompt, decisive actions allowed Contrans' 2009 profit margin, measured as a percentage of revenue, to remain within its relatively narrow band that has been maintained by Contrans since the early 1990s. This was an outstanding accomplishment."

"Management also adjusted both the timing and the amount of distributions in 2009 in response to the poor business conditions," continued Mr. Dunford. "However, Contrans' unitholders still received distributions of $0.80 cents per unit for the year. Niches in specialized markets, diverse operations, a flexible cost structure and a strong balance sheet have left Contrans far less vulnerable to economic cycles than many businesses, both inside and outside of the transportation industry. Indeed, Contrans' performance in 2009 is evidence that investing in the right transportation company is not necessarily the high-risk proposition as suggested by conventional wisdom. When considered in conjunction with the risk-mitigating factors noted above, Contrans' bright future makes it a terrific opportunity for value-seeking investors."

"Contrans completed its conversion to a corporation on December 1, 2009 marking the end of its era as an income trust," stated Mr. Dunford. "In retrospect, being an income trust was good for many reasons, not the least of which was becoming aware of just how much demand there is for dividend-yielding products. Accordingly, we intend to pay dividends to Contrans' shareholders to the extent that sound financial management will permit."

"Besides possessing a skilled and experienced management team, Contrans' success has been based on adherence to some simple management principles," added Mr. Dunford. "Management is committed to operating in a disciplined fashion that differentiates Contrans from its competitors. In addition, management has never been, nor will it be, under any undue compulsion to grow rapidly. This has helped to keep Contrans' balance sheet strong. Several high-profile financial collapses occurred in 2009 and demonstrated once again the significance of financial stability as well as the dangers of unbridled growth and excessive leverage. Our goal is to be the best, not the biggest. However, we also expect that there will be plentiful opportunities to grow steadily, profitably and at a manageable pace. By remaining faithful to our principles, we are confident that Contrans will continue to provide great long-term value to its shareholders."

MANAGEMENT'S DISCUSSION AND ANALYSIS

On December 1, 2009, under a plan of arrangement, Contrans Income Fund ("the Fund") was effectively converted into a corporation, Contrans Group Inc. ("the Group"). This conversion has been recorded using the continuity of interest method of accounting. Accordingly, the consolidated financial statements contained in this annual report, which have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and reported in Canadian funds, detail the performance and financial position of the Group and the Fund for the years ended December 31, 2009 and 2008 as if the Group had always carried on the business carried on by the Fund. Accordingly, the use of "Contrans" hereafter is intended to be understood as a reference to the business carried on by the Fund and, after December 1, 2009, the Group. The financial statements should be read in conjunction with the analysis that follows. A cautionary note regarding non-GAAP measures and forward-looking statements follows this Management's Discussion and Analysis of Operations and Financial Condition.

RESULTS FROM OPERATIONS

Revenue

The current recession significantly affected the North American trucking industry in 2009. Contrans' year over year revenues and profit performance declined across all service lines compared to 2008. However, while fourth quarter revenue was lower than last year, revenues have continued an upward trend when compared to the first half of the year. Part of this improvement came from a project involving the transportation of environmentally-sensitive material that generated $9.0 million in revenue primarily in the second half of the year ($4.4 million in the fourth quarter). In addition, Contrans secured work from several new customers and also benefitted from increased volumes from some of its existing customers. Fuel surcharge revenue was lower in 2009 compared to 2008 due to lower fuel prices as well as lower overall volumes.

Operating expenses

Overcapacity persists in the freight transportation industry and has adversely affected equipment utilization as well as freight rates. Contrans' operating expenses, measured as a percentage of revenue, have increased in 2009 as a result. Increased demand in the second half and reductions in Contrans' fleet size have favourably impacted equipment utilization. However, pricing pressure continues to persist. Although accident costs increased in the fourth quarter of 2009 by $0.2 million compared to the fourth quarter of 2008, total accident costs fell $1.4 million in 2009 compared to 2008.

Selling, general and administration expenses

Cost cutting initiatives undertaken by management have reduced Contrans' selling, general and administration ("SG&A") expenses in 2009 compared to 2008. Reductions in the management incentive program and lower staff levels together resulted in compensation expenses being $1.9 million less in the fourth quarter of 2009 compared to the fourth quarter of 2008 ($5.8 million less year-to-date). Furthermore, discretionary spending continues to be closely scrutinized in an effort to rationalize costs wherever practical. These efforts have reduced fourth quarter SG&A expenses by $0.5 million in 2009 compared to 2008 ($3.0 million reduction year-to-date).

In 2009, Contrans incurred the following SG&A expenses that are not expected to recur:

    
    -   $0.5 million in the fourth quarter ($0.8 million year-to-date) that
        related to Contrans' conversion to a corporation.
    -   $0.3 million in the third quarter that related to the write down in
        the value of property located in Vermont. The property is no longer
        in use and has been listed for sale.
    -   $0.2 million in the third quarter ($0.8 million year-to-date) that
        related to the recognition of increased credit risk associated with a
        note receivable.
    

In 2008, Contrans realigned its east coast operations. As a consequence, approximately $1.0 million of costs were incurred over the first nine months of that year relating to severance and for early lease termination penalties. These costs were recorded as SG&A expenses.

Foreign exchange loss (gain)

Foreign exchange gains in 2009 of $1.2 million (2008 - losses of $4.0 million) resulted primarily from mark-to-market adjustments to Contrans' foreign exchange contracts (see "Financial Instruments" below). Approximately 15% to 20% of Contrans' revenues were billed in US dollars in 2009 (2008 - 20% to 25%) thereby exposing Contrans to fluctuating foreign exchange rates. Although Contrans has some natural hedges in the form of US dollar expenses, the majority of Contrans' expenses are incurred in Canadian funds.

Net interest expense

While net debt levels fell in 2009, net interest expense has remained relatively unchanged due to declining rates of interest earned on its cash balances. Contrans has not used its operating line during 2009 other than for letters of credit.

SUMMARY OF QUARTERLY RESULTS

(Unaudited)

    
    (in millions       First Quarter      Second Quarter       Third Quarter
     except per
     share amounts)   2009      2008      2009      2008      2009      2008
    -------------------------------------------------------------------------
    Revenue - as
     stated       $   88.0  $  120.5  $   87.4  $  129.7  $   99.0  $  128.9
            - fuel
     surcharges(1)    (7.1)    (18.2)     (6.0)    (23.9)     (8.0)    (24.3)
    -------------------------------------------------------------------------
    Revenue -
     transportation
     services(1)  $   80.9  $  102.3  $   81.4  $  105.8  $   91.0  $  104.6
    -------------------------------------------------------------------------
    Net earnings  $    1.5  $    5.0  $    6.2  $   10.2  $    6.8  $   11.4
    -------------------------------------------------------------------------
    Earnings per
     share - basic
     and diluted  $   0.05  $   0.17  $   0.20  $   0.35  $   0.23  $   0.39
    -------------------------------------------------------------------------


                      Fourth Quarter

                      2009      2008
    ----------------------------------
    Revenue - as
     stated       $   99.2  $  109.6
    Revenue - fuel
     surcharges(1)    (9.3)    (12.7)
    ----------------------------------
    Revenue -
     transportation
     services(1)  $   89.9  $   96.9
    ----------------------------------
    Net earnings  $    8.5  $    3.0
    ----------------------------------
    Earnings per
     share - basic
     and diluted  $   0.29  $    0.10
    ----------------------------------

    (1) See "Use of non-GAAP Financial Measures" below.
    

CASH FLOW

Cash flow from continuing operating activities (before changes in non-cash working capital balances) amounted to $33.2 million in 2009 compared to $51.3 million in 2008. This decline was primarily due to decreased earnings. Non-cash working capital items decreased in 2009 compared to 2008 due to reduced fourth quarter business activity compared to 2008. In addition, management closely monitored its receivables and payables during 2009 and reduced its net investment in working capital as at December 31, 2009.

Proceeds from the sale of property and equipment in 2009 were $4.4 million (2008 - $3.3 million). Contrans has continued to rationalize its fleet during the economic downturn resulting in the sale of more equipment than in 2008. In addition, Contrans sold a terminal, located in Perth, Ontario, for proceeds of $0.6 million.

In May 2009, Contrans' distribution reinvestment plan ("DRIP") was terminated. The DRIP provided $1.5 million in 2009 (2008 - $6.5 million).

Contrans' Board of Trustees suspended distributions in March 2009 in response to recessionary pressures. In the fourth quarter of 2009, after considering improved operating results and the strengthening financial condition of Contrans, the Board of Trustees declared two distributions with a total value of $0.59 per unit. These distributions were paid on October 30, 2009 ($13.2 million) and on January 15, 2010 ($4.5 million).

Due to the achievement of certain performance objectives, a final payment of $3 million was paid out of restricted cash in January, 2009 to the former owners of Tripar Transportation Inc., a company acquired in 2006. Contingent consideration of $75,000 was also paid to the former owners of Narum Transport Ltd., an operation acquired in 2007.

Accrued liabilities have decreased by $4.9 million in 2009 due to the settlement of foreign exchange contracts that were on hand at December 31, 2008.

Management expects that Contrans' average annual capital expenditure on rolling stock, net of proceeds from the sale of retired equipment, will approximate $10 million over the next ten years. The actual amount that will be expended in a year will vary depending on factors that include, but are not necessarily limited to, the age and condition of the fleet, growth and changes in government regulations regarding the weights and dimensions of highway equipment. See also "Forward-Looking Statements".

    
    CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
    (in thousands except for per unit amounts)             2009       2008
    Years ended December 31                            (Unaudited)  (Audited)
    -------------------------------------------------------------------------
    Revenue                                             $ 373,587  $ 488,832
    Operating expenses                                    297,011    389,737
    Selling, general and administration expenses           34,060     42,973
    Foreign exchange loss (gain)                           (1,184)     3,950
    Amortization of property and equipment                 12,045     12,342
    Amortization of intangible assets                       3,770      3,778
    -------------------------------------------------------------------------
                                                           27,885     36,052
    Net interest expense (income) - long-term               5,862      6,281
                                  - short-term               (179)      (531)
    -------------------------------------------------------------------------
    Earnings before Income Taxes                           22,202     30,302
    -------------------------------------------------------------------------
    Income Tax Provision (Recovery) (Note 11):
      Current                                                 491        677
      Future                                               (1,242)       113
    -------------------------------------------------------------------------
                                                             (751)       790
    -------------------------------------------------------------------------
    Net Earnings and Comprehensive Income               $  22,953  $  29,512
    -------------------------------------------------------------------------
    Earnings per share - basic and diluted              $    0.77  $    1.01
    Weighted average number of shares outstanding
     - basic and diluted                                   29,897     29,122
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    (in thousands)                                         2009       2008
    Years ended December 31                            (Unaudited)  (Audited)
    -------------------------------------------------------------------------
    Retained Earnings - Beginning of Year               $     435  $   7,380
    Net earnings                                           22,953     29,512
    Distributions declared                                (23,866)   (36,457)
    -------------------------------------------------------------------------
    Retained Earnings (Deficit) - End of Year           $    (478) $     435
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these statements.



    CONSOLIDATED BALANCE SHEETS
    (in thousands)                                         2009       2008
    As at December 31                                  (Unaudited)  (Audited)
    -------------------------------------------------------------------------
    Assets
    Current Assets
      Cash and cash equivalents                         $  30,193  $  18,451
      Accounts receivable                                  48,909     49,089
      Income taxes recoverable                                495        538
      Other current assets                                  5,089      6,167
    -------------------------------------------------------------------------
                                                           84,686     74,245
    Restricted Cash (Note 5)                                7,375     10,375
    Note Receivable (Note 6)                                   88        538
    Property and Equipment (Note 7)                       104,381    106,551
    Intangible Assets (Note 8)                             15,135     18,905
    Goodwill                                               63,764     63,978
    -------------------------------------------------------------------------
                                                        $ 275,429  $ 274,592
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current Liabilities
      Accounts payable and accrued liabilities          $  32,057  $  33,215
      Distributions payable                                 4,491      3,087
      Current portion of capital lease obligations
       (Note 9)                                             1,921      1,823
    Current portion of long-term debt (Note 10)               339          -
    -------------------------------------------------------------------------
                                                           38,808     38,125
    Capital Lease Obligations (Note 9)                      6,978      7,518
    Long-term Debt (Note 10)                               85,193     83,686
    Asset Retirement Obligations                              720      1,036
    Future Income Taxes (Note 11)                          14,531     15,773
    -------------------------------------------------------------------------
                                                          146,230    146,138
    -------------------------------------------------------------------------

    Shareholders' Equity (Note 12)
      Contributed surplus                                     961        834
      Share Capital                                       128,716    127,185
      Retained earnings (deficit)                            (478)       435
    -------------------------------------------------------------------------
                                                          129,199    128,454
    -------------------------------------------------------------------------
                                                        $ 275,429  $ 274,592
    -------------------------------------------------------------------------
    Contingencies and commitments (Notes 13 and 14 (v))
    Subsequent Event (Note 19)
    The accompanying notes are an integral part of these statements.

    Signed on behalf of the Board of Directors


        Stan G. Dunford, Director           Archie M. Leach, C.A., Director



    CONSOLIDATED STATEMENTS OF CASH FLOW
    (in thousands)                                         2009       2008
    Years ended December 31                            (Unaudited)  (Audited)
    -------------------------------------------------------------------------
    Cash Provided by (Used in):
    Operating Activities
    Net earnings                                        $  22,953  $  29,512
    Items not affecting cash:
      Change in unrealized loss (gain) on foreign
       exchange                                            (5,072)     5,131
      Unit-based compensation expense (Note 12)               127         90
      Long-term debt - accretion                               79        128
      Loss (gain) on sale of business units (Note 6)          (23)        79
      Fair value adjustment to notes receivable (Note 6)      767        226
      Asset retirement obligations - accretion                 38         50
      Amortization of property and equipment               12,045     12,342
      Amortization of intangible assets                     3,770      3,778
      Future income taxes                                  (1,242)       113
      Gain on sale of equipment                              (248)      (139)
    -------------------------------------------------------------------------
                                                           33,194     51,310
    Change in non-cash working capital (Note 16)            5,804       (836)
    -------------------------------------------------------------------------
                                                           38,998     50,474
    -------------------------------------------------------------------------
    Investing Activities
      Expended on acquisitions (Note 4)                    (3,075)         -
      Asset retirement obligations - settlements             (354)      (212)
      Proceeds on disposal of plant services operation
       (Note 6)                                               100      2,107
      Proceeds from note receivable                            84          -
      Proceeds on sale of equipment                         4,444      3,332
      Purchase of property and equipment                  (10,435)    (7,620)
    -------------------------------------------------------------------------
                                                           (9,236)    (2,393)
    -------------------------------------------------------------------------
    Financing Activities
      Distributions paid                                  (22,462)   (36,366)
      Proceeds from restricted cash                         3,000          -
      Proceeds from long-term debt                          2,276     32,020
      Repayment of long-term debt                            (509)   (37,941)
      Repayment of capital lease obligations               (1,856)    (1,794)
      Issuance of trust units (Note 12)                     1,531      6,525
    -------------------------------------------------------------------------
                                                          (18,020)   (37,556)
    -------------------------------------------------------------------------
    Increase in Cash and Cash Equivalents                  11,742     10,525
    Cash and Cash Equivalents - Beginning of Year          18,451      7,926
    -------------------------------------------------------------------------
    Cash and Cash Equivalents - End of Year             $  30,193  $  18,451
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these statements.


    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    For the years ended December 31, 2009 and 2008
    (Unaudited)
    (tabular amounts in thousands except per share amounts)
    -------------------------------------------------------------------------
    

1. Organization

Contrans Group Inc. ("the Group") was incorporated on October 15, 2009 under the laws of the province of Ontario. On December 1, 2009, under a plan of arrangement, trust units of its predecessor entity, Contrans Income Fund and limited partnership units of three controlled limited partnerships (collectively "the Fund") were exchanged for shares of the Group. The exchange resulted in the conversion of the Fund from an open-ended income trust to a corporation and was recorded using the continuity of interest method of accounting. Accordingly, the consolidated financial statements, which have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and reported in Canadian funds, detail the performance and financial position of the Group and the Fund for the years ended December 31, 2009 and 2008 as if the Group had always carried on the business formerly carried on by the Fund. Transaction costs relating to the conversion were recognized as expenses in 2009. The use of "Contrans" herein refers to both the Group and the Fund. References made to distributions declared, distributions payable, distributions paid and distribution reinvestment plan reflect business of the Fund prior to the plan of arrangement.

Contrans is based in Canada and operates in a single industry segment, freight transportation.

2. Changes in Accounting Policies

Effective January 1, 2009, the Fund adopted the Canadian Institute of Chartered Accountants ("CICA") revised Handbook Section 3064 - Goodwill and Intangible Assets. This section establishes new standards for the recognition and measurement of intangible assets, but does not affect accounting for goodwill. Adoption of this revised section had no impact on the Fund's financial statements.

Effective January 20, 2009, the Fund adopted the Emerging Issues Committee ("EIC") abstract EIC 173 - Credit Risks and the Fair Value of Financial Assets and Liabilities. This abstract provides further guidance on CICA Handbook Section 3855 Financial Instruments - Recognition and Measurement and concludes that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities. Adoption of EIC 173 had no significant impact on the Fund's financial statements.

In June 2009, the CICA amended Section 3862, "Financial Instruments - Disclosures" to include additional disclosure requirements about fair value measurement of financial instruments and liquidity risk disclosures. These amendments require a three-level hierarchy that reflects the significance of the inputs used in making the fair value measurements. Fair value of assets and liabilities included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities. Assets and liabilities in Level 2 include valuations using inputs other than the quoted prices for which all significant inputs are based on observable market data, either directly or indirectly. Level 3 valuations are based on inputs that are not based on observable market data. The amendments to Section 3862 apply for annual financial statements relating to fiscal years ending after September 30, 2009. The application of this amended Section did not have an impact on Contrans' consolidated financial statements

3. Significant Accounting Policies

These financial statements are prepared in accordance with accounting principles generally accepted in Canada. Significant accounting policies are as follows:

PRINCIPLES OF CONSOLIDATION

The purchase method of accounting for business combinations has been used and the accounts of all subsidiaries have been consolidated with those of Contrans. Intercompany balances and transactions have been eliminated upon consolidation.

FINANCIAL ASSETS AND FINANCIAL LIABILITIES

CICA Handbook Section 3855 establishes standards for recognizing and measuring financial assets and financial liabilities. It requires that financial assets and liabilities be recognized on the balance sheet when Contrans becomes a party to the contractual provisions of a financial instrument. Under this standard, all financial instruments are required to be measured at fair value on initial recognition except for certain related party transactions. Measurement in subsequent periods depends on whether the financial instrument has been classified as held for trading, loans and receivables, held to maturity, available for sale or financial liabilities. Management determines the classification of financial assets and liabilities at initial recognition.

Contrans designated its cash and cash equivalents, restricted cash and derivative financial instruments, which have not been designated in a hedging relationship, as held for trading, with gains and losses arising from changes in fair value of these instruments recorded in the consolidated statement of earnings and comprehensive income.

Accounts receivable and note receivable are classified as loans and receivables which are measured at amortized cost using the effective interest method. Accounts payable and accrued liabilities, distribution payable and long term debt are classified as other liabilities which are also measured at amortized cost using the effective interest method.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on deposit and short-term interest-bearing securities with maturities at purchase date of three months or less.

PROPERTY AND EQUIPMENT

Property and equipment are valued at acquisition cost less accumulated amortization. Amortization is provided over the estimated service lives of the assets as follows:

    
    Buildings - Straight-line over 15 to 40 years
    Rolling Stock - Tractors - 25% declining balance
                    Trailers - Straight-line over 10 to 25 years
    Service Vehicles and Other Equipment - 20% to 30% declining balance
    

Management periodically reviews the estimated service lives of these assets and adjusts amortization accordingly.

GOODWILL AND INTANGIBLE ASSETS

Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the amounts allocated to the assets acquired, net of liabilities assumed, based on fair values. Goodwill is tested for impairment on an annual basis or more frequently, if events or changes in circumstances indicate that the asset might be impaired. Management periodically reviews the estimated lives of intangible assets and adjusts amortization accordingly. Intangible assets, with finite lives, are amortized on a straight-line basis over a period of up to 10 years.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, including property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be amortized. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

ASSET RETIREMENT OBLIGATIONS

Contrans recognizes the fair value of a future asset retirement obligation as a liability in the period in which it enters into operating leases. The fair value of the asset retirement obligation is determined using the discounted expected cash flow approach and accordingly the change in the obligation due to the passage of time is recognised in income as an operating expense. Any change in the obligation due to changes in estimated cash flow is recognized as an adjustment to the carrying amount of the obligation. Contrans concurrently recognizes a corresponding change in the carrying amount of the related long-lived asset. This asset is amortized over the term of the operating lease agreement.

REVENUE RECOGNITION

Revenue is recognized upon delivery of goods to customers.

INCOME TAXES

The liability method is used to account for future income taxes. Under this method, future income tax assets and liabilities are recognized for the estimated income tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effects of changes in income tax rates are reflected in future income tax assets and liabilities in the period that the rate changes are substantively enacted.

FOREIGN CURRENCY

Assets and liabilities denominated in foreign currencies are translated to Canadian dollars at exchange rates in effect at the balance sheet dates and non-monetary items are translated at rates of exchange in effect when the assets were acquired or obligations incurred. Revenues and expenses denominated in foreign currencies are translated at monthly average rates of exchange during the year. Foreign exchange gains and losses are included in earnings and comprehensive income.

SHARE-BASED COMPENSATION

Contrans applies the fair value-based method to account for awards made under its long-term incentive plan. The fair value of the options at the date of granting is recognized as share-based compensation expense over the vesting period and is credited to contributed surplus. Consideration received upon exercise of the options, together with the amount previously credited to contributed surplus, is recorded as share capital.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings by the weighted average shares outstanding during the year. Diluted earnings per share is similarly computed except that the weighted average shares outstanding are increased to include additional shares from an assumed exercise of share options, if dilutive. The number of additional shares is calculated by assuming that outstanding share options were exercised and that the proceeds from such exercises were used to acquire shares at average market prices.

MEASUREMENT UNCERTAINTY

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts at the date of, and for the period of, the financial statements. Actual results could differ from those estimates. Estimates are reviewed on a regular basis and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. The assets and liabilities which require management to make significant estimates and assumptions in determining carrying values include accounts receivable, note receivable, property and equipment, goodwill, intangible assets, accounts payable and accrued liabilities, future income taxes and asset retirement obligations.

4. Acquisitions

Due to the achievement of certain performance objectives, additional consideration of $3 million was paid, in January, 2009, out of restricted cash to the former owners of Tripar Transportation Inc., a company acquired by Contrans in 2006. This additional consideration was accrued and allocated to goodwill in the financial statements at December 31, 2008. Also, due to the achievement of certain performance objectives, additional consideration of $75,000 was paid to the former owners of Narum Transport Ltd., an operation acquired by Contrans in 2007. This additional consideration was allocated to goodwill in the current year.

5. Restricted Cash

Under the terms of Contrans' long-term debt facility, restricted cash may only be used to repay senior secured notes and to fund growth opportunities.

6. Disposal of Business Units

    
                                                        ---------------------
                                                                       Plant
                                                        Veritrans   Services
                                                           March- September-
    Date of disposal                                           09         08

    Net book value of assets disposed:
    -------------------------------------------------------------------------
      Property and Equipment                            $      53  $   2,885
      Intangible assets                                         -        222
      Goodwill                                                289        500
      Other current assets                                     10          -
      Accounts receivable                                      31          -
      Deferred income                                           -       (427)
      Accounts payable and accrued liabilities                 (6)         -
    -------------------------------------------------------------------------
                                                        $     377  $   3,180
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration received:
      Cash                                              $     100  $   2,107
      Note receivable (fair value):
        Current                                               137        307
        Long-term                                             163        687
    -------------------------------------------------------------------------
                                                        $     400  $   3,101
    -------------------------------------------------------------------------
    Loss (gain) on sale of business unit                $     (23) $      79
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Notes receivable (fair value)              Current  Long-term      Total
    -------------------------------------------------------------------------
    Note received as part consideration for
     Plant Services                          $     307  $     687  $     994
    Fair value adjustment - 2008                   (77)      (149)      (226)
    -------------------------------------------------------------------------
    As at December 31, 2008                  $     230  $     538  $     768
    Note received as part consideration for
     Veritrans                                     137        163        300
    Cash received                                  (84)         -        (84)
    Transfer from long-term to current              75        (75)         -
    Fair value adjustment - 2009                  (229)      (538)      (767)
    -------------------------------------------------------------------------
    As at December 31, 2009                  $     129  $      88  $     217
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

In March 2009, Contrans disposed of its fuel tax reporting and driver log checking operation (Veritrans). Principal payments on the note receivable taken as part consideration are based on revenues generated and are payable monthly. The note matures in April 2013.

In September 2008, Contrans recognized the disposal of its plant services operation, located in Hamilton, Ontario.

The current portion of the notes receivable is included in accounts receivable. The fair value adjustments to the notes receivable were made to reflect increased credit risk.

7. Property and Equipment

    
                                                      Accumulated
                                                        amortiza-
    2009                                          Cost       tion        Net
    -------------------------------------------------------------------------
    Land                                     $   8,374  $       -  $   8,374
    Buildings                                   25,960      9,765     16,195
    Rolling stock and other - owned            125,211     56,251     68,960
    Rolling stock - capital leases              12,727      1,875     10,852
    -------------------------------------------------------------------------
                                             $ 172,272  $  67,891  $ 104,381
    -------------------------------------------------------------------------


                                                      Accumulated
                                                        amortiza-
    2008                                          Cost       tion        Net
    -------------------------------------------------------------------------
    Land                                     $   8,474  $       -  $   8,474
    Buildings                                   26,125      8,866     17,259
    Rolling stock and other - owned            123,393     52,883     70,510
    Rolling stock - capital leases              11,128        820     10,308
    -------------------------------------------------------------------------
                                             $ 169,120  $  62,569  $ 106,551
    -------------------------------------------------------------------------
    

8. Intangible Assets

    
                                                      Accumulated
                                                        amortiza-
    2009                                          Cost       tion        Net
    -------------------------------------------------------------------------
    Customer relationships                   $  22,565  $  10,369  $  12,196
    Non-competition agreements                   8,994      6,055      2,939
    -------------------------------------------------------------------------
                                             $  31,559  $  16,424  $  15,135
    -------------------------------------------------------------------------


                                                      Accumulated
                                                        amortiza-
    2008                                          Cost       tion        Net
    -------------------------------------------------------------------------
    Customer relationships                   $  22,565  $   8,159  $  14,406
    Non-competition agreements                   8,994      4,495      4,499
    -------------------------------------------------------------------------
                                             $  31,559  $  12,654  $  18,905
    -------------------------------------------------------------------------
    

9. Capital Lease Obligations

    
    -------------------------------------------------------------------------
    As at December 31                                        2009       2008
    -------------------------------------------------------------------------
    2010 and prior                                      $   2,407  $   4,402
    2011                                                    2,294      1,968
    2012                                                    2,037      1,707
    2013                                                    1,638      1,294
    2014                                                    1,373      1,119
    Thereafter                                                506        511
    -------------------------------------------------------------------------
    Minimum lease payments                                 10,255     11,001
    Less amount representing interest at rates ranging
     from 4.8% to 8.9% (2008 - 4.8% to 8.9%)               (1,356)    (1,660)
    -------------------------------------------------------------------------
    Present value of net minimum capital lease payments     8,899      9,341
    Less current portion                                   (1,921)    (1,823)
    -------------------------------------------------------------------------
                                                        $   6,978  $   7,518
    -------------------------------------------------------------------------
    

Interest of $0.5 million (2008 - $0.4 million) relating to capital lease obligations has been included in interest expense - long-term. Contrans has an unrealized gain on its US dollar denominated capital lease obligations of $0.1 million as at December 31, 2009 (2008 - loss of $0.2 million).

10. Long-term Debt

    
                                                             2009       2008
    -------------------------------------------------------------------------
    Senior secured notes payable with fixed interest
     rates between 5.9% and 6.5% (2008 - 5.9% and
     6.5%)                                              $  81,443  $  81,374
    Conditional sale agreements with fixed interest
     rates between 6.5% and 6.9%                            1,951          -
    Other unsecured loans with varying interest rates
     and due dates                                          2,138      2,312
    -------------------------------------------------------------------------
    Long-term debt                                         85,532     83,686
    Less current portion                                     (339)         -
    -------------------------------------------------------------------------
                                                        $  85,193  $  83,686
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The senior secured notes payable are stated net of unamortized financing transaction costs of $0.4 million (2008 - $0.5 million) and provide for monthly payments of interest only. The principal repayments are due on December 15, 2013 ($31.9 million) and October 15, 2016 ($50 million). Liens on rolling stock with a net book value of approximately $61 million (2008 - $68 million) have been provided as security for the senior secured notes. The lender also holds a second floating charge over receivables and a general security interest in the remaining assets of Contrans. Liens on rolling stock with a net book value of approximately $2.5 million have been provided as security for the holders of the conditional sales agreements.

As at December 31, 2009 and 2008, there were no restrictions preventing Contrans from making dividend payments to shareholders.

Aggregate minimum principal payments required on long-term debt in each of the next five years are as follows:

    
    -------------------------------------------------------------------------
    As at December 31                                        2009       2008
    -------------------------------------------------------------------------
    2010                                                $     339  $       -
    2011                                                      363          -
    2012                                                      387          -
    2013                                                   32,289     31,875
    2014                                                      326          -
    Thereafter                                             52,260     52,312
    -------------------------------------------------------------------------
    Minimum principal payments                             85,964     84,187
    Less unamortized financing transaction costs             (432)      (501)
    -------------------------------------------------------------------------
    Long-term debt                                      $  85,532  $  83,686
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

11. Income Taxes

The following table reconciles the provision for income taxes recorded in the statement of earnings and comprehensive income with a statutory income tax rate of 32.5% (2008 - 33.0%):

    
                                                             2009       2008
    -------------------------------------------------------------------------
    Earnings before income taxes                        $  22,202  $  30,302
    -------------------------------------------------------------------------
    Computed income tax expense at Canadian statutory
     rate                                                   7,207     10,000
    Reduction of taxes due to taxable income allocated
     to unitholders                                        (6,824)   (10,097)
    U.S. state taxes                                          586        606
    Change to future Canadian statutory tax rate           (1,622)         -
    Impact of SIFT rules                                        -        175
    Reduction of taxes on reorganization                     (108)         -
    Other                                                      10        106
    -------------------------------------------------------------------------
    Income tax provision                                $    (751) $     790
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The tax effects of temporary differences that give rise to future tax assets and liabilities are presented below:

    
                                                             2009       2008
    -------------------------------------------------------------------------
    Future tax assets
      Deductible reserves                               $    (567) $    (488)
      Issue costs and financing fees                         (183)        (7)
      Other                                                  (141)      (575)
    Future tax liabilities
      Property, equipment and intangible assets            12,195     13,984
      Impact of off-calendar year end of corporate
       subsidiary                                           3,227      2,859
    -------------------------------------------------------------------------
    Net future income tax liability                     $  14,531  $  15,773
    -------------------------------------------------------------------------
    

Contrans recognizes future income tax liabilities and assets where the recovery or settlement of the carrying amount of the liability or asset would result in a future income tax outflow or income tax reduction.

Certain of Contrans' subsidiaries are currently subject to income taxation and provide for income tax obligations based upon statutory corporate tax rates.

12. Shareholders' equity

SHARES

AUTHORIZED

An unlimited number of Class A Subordinate Voting Shares and 1,467,724 Class B Multiple Voting Shares.

ISSUED AND FULLY PAID

    
                       Class A               Class B
                     Subordinate             Multiple
    Shares          Voting Shares         Voting Shares          Total
    -------------------------------------------------------------------------
    Shares
     issued, on
     Dec. 1, 2009,
     in exchange
     for:           Shares    Amount    Shares    Amount    Shares    Amount
    -------------------------------------------------------------------------
    Trust Units     23,799  $121,019         -  $      -    23,799  $121,019
    Class A LP
     Units           4,671     6,399         -         -     4,671     6,399
    Class B LP
     Units               -         -     1,468     1,298     1,468     1,298
    -------------------------------------------------------------------------
    Balance at
     December 31,
     2009           28,470  $127,418     1,468  $1,298      29,938  $128,716
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Trust Units       Trust Units      Class A LP Units    Class B LP Units
    -------------------------------------------------------------------------
                     Units    Amount     Units    Amount     Units    Amount
    -------------------------------------------------------------------------
    Balance at
     December 31,
     2007           22,471  $112,772     4,810  $  6,590     1,468  $  1,298
    Distribution
     reinvestment
     plan              870     6,525         -         -         -         -
    -------------------------------------------------------------------------
    Balance at
     December 31,
     2008           23,341  $119,297     4,810  $  6,590     1,468  $  1,298
    Distribution
     reinvestment
     plan              319     1,531         -         -         -         -
    Exchanges          139       191      (139)     (191)        -         -
    Exchanged for
     shares        (23,799) (121,019)   (4,671)   (6,399)   (1,468)   (1,298)
    -------------------------------------------------------------------------
    Balance at
     December 31,
     2009                -  $      -         -  $      -         -  $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Trust Units          Total
    ---------------------------------
                    Units    Amount
    ---------------------------------
    Balance at
     December 31,
     2007           28,749  $120,660
    Distribution
     reinvestment
     plan              870     6,525
    ---------------------------------
    Balance at
     December 31,
     2008           29,619  $127,185
    Distribution
     reinvestment
     plan              319     1,531
    Exchanges            -         -
    Exchanged for
     shares        (29,938) (128,716)
    ---------------------------------
    Balance at
     December 31,
     2009                -  $      -
    ---------------------------------
    ---------------------------------
    

Voting, Dividend and Exchange Rights and Obligations

The Class A Subordinate Voting Shares are entitled to one vote each. The Class B Multiple Voting Shares are entitled to ten votes each.

Any dividends that are declared are to be paid equally on a pro rata basis between the two classes of shares.

The holders of Class B Multiple Voting Shares are entitled to convert any or all of the Class B Multiple Voting Shares held at any time into Class A Subordinate Voting Shares on the basis of one Multiple Voting Share for each Subordinate Voting Share held upon written notice to the Corporation. The holders of Class B Multiple Voting Shares are obligated to convert all Class B Multiple Voting Shares held into Class A Subordinate Voting Shares on the basis of one Class A Subordinate Voting Share for each Class B Multiple Voting Share held upon the happening of certain events or circumstances, including but not limited to:

(i) if at any time the aggregate number of Class B Multiple Voting Shares outstanding is less than 698,351

(ii) in the event that an offer, bid, or similar process, is made to, and accepted by, holders of 90% or more of the aggregate number of Class A Subordinate Voting Shares and Class B Multiple Voting Shares at the time then outstanding

(iii) in the event that the holder, or any pledgee of the holder, purports to transfer or assign the Class B Multiple Voting Shares (unless otherwise permitted by the Articles of the Corporation), including any transfer to a pledgee or any person by a pledgee exercising its rights under such pledge

(iv) in the event that Contrans' CEO, Stanley G. Dunford together with his spouse and any spousal trust of Stanley G. Dunford, cease to beneficially own, directly or indirectly, a number of Class A Subordinate Voting Shares and Class B Multiple Voting Shares which are entitled to vote at least 33% of the aggregate voting rights attached to all Class A Subordinate Voting Shares and Class B Multiple Voting Shares.

(v) on July 23, 2022

The Class B Multiple Voting Shares may be transferred by an individual to a spouse, or to a spousal trust (as defined in the Income Tax Act (Canada)) but may not otherwise be transferred.

SHARE-BASED COMPENSATION PLAN

    
    Years ended December 31                2009                  2008
    -------------------------------------------------------------------------
                                              Weighted              Weighted
                                               Average               Average
                                              Exercise              Exercise
                                      Units      Price      Units      Price
    -------------------------------------------------------------------------
    Unit options outstanding -
     beginning of year                2,019  $   12.22      2,029  $   12.23
    Terminated                       (2,014)     12.22          -          -
    Cancelled                            (5)     11.50        (10)     14.90
    -------------------------------------------------------------------------
    Unit options outstanding - end
     of year                              -  $       -      2,019  $   12.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Unit options exercisable - end
     of year                              -  $       -      1,646  $   12.03
    

All outstanding unit options were returned by employees during 2009 and cancelled by Contrans. Vesting was considered to be accelerated in accordance with generally accepted accounting principles resulting in unit-based compensation expense of $127,000 (2008 - $90,000).

SHAREHOLDERS EQUITY

    
                     Contributed      Trust      Share   Retained
                         Surplus      Units    Capital   Earnings      Total
    -------------------------------------------------------------------------
    Balance at December
     31, 2007          $     744  $ 120,660  $       -  $   7,380  $ 128,784
    Unit-based
     compensation
     expense                  90          -          -          -         90
    Distribution
     reinvestment plan         -      6,525          -          -      6,525
    Net earnings               -          -          -     29,512     29,512
    Distributions
     declared                  -          -          -    (36,457)   (36,457)
    -------------------------------------------------------------------------
    Balance at December
     31, 2008          $     834  $ 127,185  $       -  $     435  $ 128,454
    Unit-based
     compensation
     expense                 127          -          -          -        127
    Distribution
     reinvestment plan         -      1,531          -          -      1,531
    Conversion to
     corporation               -   (128,716)   128,716          -          -
    Net earnings               -          -          -     22,953     22,953
    Distributions
     declared                  -          -          -    (23,866)   (23,866)
    -------------------------------------------------------------------------
    Balance at December
     31, 2009          $     961  $       -  $ 128,716  $    (478) $ 129,199
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Capital Management

Contrans' objectives in managing capital are to ensure sufficient liquidity exists to pursue its strategy of growth, both internally and through accretive acquisitions, and to provide returns to its shareholders.

Management defines capital as shareholders' equity and net debt. Net debt is defined as all interest-bearing debt less cash and cash equivalents.

Capital under management

    
    As at December 31                                      2009        2008
    -------------------------------------------------------------------------
    Long-term debt                                     $  85,532   $  83,686
    Capital lease obligations                              8,899       9,341
    Cash and cash equivalents                            (30,193)    (18,451)
    Restricted cash                                       (7,375)    (10,375)
    -------------------------------------------------------------------------
    Net debt                                              56,863      64,201

    Shareholders' equity                                 129,199     128,454
    -------------------------------------------------------------------------
    Total capital                                      $ 186,062   $ 192,655
    -------------------------------------------------------------------------
    

The Board of Directors approves dividend payments, annual operating plans and business acquisitions.

Contrans' debt covenants are based on cash flow, leverage and asset coverage ratios. If Contrans breaches any of these covenants, the lenders have remedies including restricting Contrans from paying dividends. Management monitors covenant compliance and the factors affecting their calculation. At December 31, 2009, Contrans was in compliance with all its covenants. Contrans' lenders have a security interest in all of the assets of Contrans.

13. Contingencies

In the ordinary course of business, Contrans had issued letters of credit amounting to $2.5 million at December 31, 2009 (2008 - $0.9 million). These letters of credit expire at various dates from January 2010 to November 2010.

14. Financial Instruments

a) Fair values

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities and distributions payable approximate their fair values due to the relatively short period to maturity of these instruments.

Long-term debt with a carrying value of $85.5 million (December 31, 2008 - $83.7 million) has a fair value of $89.8 million at December 31, 2009 (December 31, 2008 - $88.1 million). At December 31, 2009, the fair value of capital lease obligations was $8.7 million (2008 - $9.2 million). The fair values are calculated using discounted cash flows at year-end market rates.

The fair value of the notes receivable is $0.2 million (2008 - $0.8 million) based on the expected future payments discounted at year-end market rates.

b) Risk management

Contrans has exposure to the following risks from its use of financial instruments:

(i) Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to meet their payment obligations and arises primarily from Contrans' accounts and notes receivables. Management controls this risk through a diverse customer base, by monitoring the aging of its accounts receivable and by carrying out credit checks on new customers. General provisions for doubtful accounts are based upon past experience and specific provisions are made against trade receivables for any customer that is known to be in poor financial condition. The bad debt expense for 2009 was $0.4 million (2008 - $0.3 million).

The movement in the provision for doubtful accounts is as follows:

    

    -------------------------------------------------------------------------
    Provision as at December 31, 2008                              $   2,321
    Accounts written off                                                (303)
    Movement in general provision                                       (434)
    Bad debt expense                                                     402
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Provision as at December 31, 2009                              $   1,986
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Contrans has specifically provided for $1.3 million of accounts receivable that were considered to be impaired as at December 31, 2009. Management considers the financial health of the customer as well as the aging of the account when considering whether an account is impaired. At December 31, 2009, approximately $15.4 million of receivables are overdue but are not considered impaired.

A provision for doubtful accounts of $2.0 million (December 31, 2008 - $2.3 million) is netted against accounts receivable on the consolidated balance sheets. In addition, the deferred income on disposal of the plant services operation was reclassified as an allowance for note receivable impairment and the total allowance of $1.5 million was applied to reduce the face value of the note receivable to its estimated fair value of $Nil as at December 31, 2009. Bad debt expenses and provision for note receivable impairment are included in selling, general and administration expenses in the consolidated statements of earnings and comprehensive income.

(ii) Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in foreign exchange rates. Approximately 15% - 20% of Contrans' revenue is billed in US dollars and, accordingly, Contrans is subject to foreign exchange risk. Management manages this risk through foreign exchange contracts, denominating certain of its equipment leases in US dollars and through customer negotiations. The impact of a 1% strengthening/weakening of the Canadian dollar against the US dollar would result in a decrease/increase in net earnings of $0.1 million as at December 31, 2009, all other things being equal.

Contrans operates in both Canada and the United States. However, due to the nature of the operations and inherent system limitations, it is impracticable to split the results from operations between the two countries.

(iii) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will change with market interest rates. Changes in interest rates affect both interest paid on floating rate debt and interest received on surplus cash and cash equivalents, restricted cash and notes receivable. As at December 31, 2009, approximately 97% of Contrans' long-term debt had fixed interest rates. A 1% change in the interest rate on the floating rate debt, cash and cash equivalents and note receivable would only have a nominal impact on net earnings.

(iv) Liquidity risk

Liquidity risk is the risk that Contrans will not be able to meet its obligations as they fall due. Contrans has systems in place to ensure that it has sufficient cash or credit lines to meet these obligations. Contrans has a demand operating line of $30 million to meet seasonal fluctuations in working capital requirements, for letters of credit and to fund growth opportunities. At December 31, 2009, Contrans had $2.5 million of letters of credit outstanding (December 31, 2008 - $0.9 million).

(v) Contractual obligations

Contrans has contractual obligations, including interest payments, to extinguish financial liabilities as follows:

    
                                                              There-
    (in millions)       2010    2011    2012    2013    2014   after   Total
    -------------------------------------------------------------------------
    Senior secured
     notes payable    $  5.1  $  5.1  $  5.1  $ 36.9  $  3.3  $ 58.2  $113.7
    Conditional sales
     agreements          0.5     0.5     0.5     0.5     0.3     0.1     2.4
    Capital leases       2.4     2.3     2.0     1.6     1.4     0.5    10.2
    Operating leases     7.3     2.3     0.7     0.2     0.1       -    10.6
    Accounts payable
     and accrued
     liabilities        32.1       -       -       -       -       -    32.1
    Distributions to
     shareholders        4.5       -       -       -       -       -     4.5
    Equipment purchase
     commitments         4.0       -       -       -       -       -     4.0
    -------------------------------------------------------------------------
    Total             $ 55.9  $ 10.2  $  8.3  $ 39.2  $  5.1  $ 58.8  $177.5
    -------------------------------------------------------------------------
    

15. Related Party Transactions

Contrans had business transactions with and had balances owing to and from companies controlled by the Chairman of Contrans as follows:

    
    As at December 31                                      2009        2008
    -------------------------------------------------------------------------
    Accounts payable                                   $     395   $     115
    Accounts receivable                                        4          38
    -------------------------------------------------------------------------


    For the years ended December 31                        2009        2008
    -------------------------------------------------------------------------
    Repairs, maintenance and leases                    $   6,335   $   6,129
    Rental income                                            190         192
    -------------------------------------------------------------------------
    

These transactions were carried out in the normal course of business and recorded at exchange amounts, which approximates an arm's length arrangement.

16. Cash Flow

Change in non-cash working capital:

    
                                                            2009        2008
    -------------------------------------------------------------------------
    Decrease in accounts receivable                    $      48   $   6,167
    Decrease (increase) in other current assets            1,068        (146)
    Increase (decrease) in accounts payable and
     accrued liabilities                                   4,645      (5,902)
    Increase (decrease) in income taxes payable               43        (955)
    -------------------------------------------------------------------------
    Net change in non-cash working capital             $   5,804   $    (836)
    -------------------------------------------------------------------------
    Cash paid in respect of:
      Interest                                         $   5,862   $   6,309
      Income taxes                                           545       1,729
    Non-cash transactions
      Value of equipment financed through capital
       leases                                          $   1,561   $  10,050
      Accrued value of equipment acquired late in
       the year                                            2,128           -
    -------------------------------------------------------------------------
    

17. Comparative Figures

Certain comparative figures have been restated to conform to the current year's basis of presentation.

18. Future Accounting Changes

International Financial Reporting Standards (IFRS)

In February 2008 the Accounting Standards Board announced that publicly-listed companies would, for fiscal years beginning on or after January 1, 2011, be required to report their results under IFRS. IFRS allows for different accounting treatments on first implementation. Contrans has completed its initial assessment of the possible impacts of implementing IFRS and the standards which may have the most significant impact on Contrans, upon first adoption of IFRS include IAS 16 - Property, Plant and Equipment, IAS 36 - Impairment of Assets, and IFRS 1 - First-time Adoption of International Financial Reporting Standards.

19. Subsequent Events

On January 29, 2010 Contrans acquired certain customers and rolling stock of Truboy Freight International Inc., a flatbed company based in Ontario. The purchase price consists of a cash payment of $0.4 million, the assumption of debt of $0.7 million and deferred consideration of $0.6 million. The payment of the deferred consideration is contingent upon the achievement of certain financial objectives and, if earned, becomes payable in three annual instalments.

SOURCE Contrans Group Inc.

For further information: 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: info@contrans.ca, Web site: www.contrans.ca

Organization Profile

Contrans Group Inc.

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