Contrans Group Inc. announces first quarter results

(TSX:CSS)

WOODSTOCK, ON, May 13, 2013 /CNW/

Financial Highlights

"After our record-setting year of 2012, we are off to a solid start in 2013," stated Contrans Group Inc.'s Chairman and Chief Executive Officer, Stan Dunford. "The businesses that we acquired in 2012 are contributing positively and the rest of the Company has continued to grow internally. We are particularly pleased with the start up of our residential waste contract in Edmonton. This contract will contribute $4 million annually to the Company's top line and will add to Contrans' portfolio of non-cyclical clientele."

"The first quarter was not, however, without its challenges," added Mr. Dunford. "Unlike the winter of 2012, we lost some days this year to severe winter weather conditions. In addition, there has been a lingering weakness in the economy that has affected parts of our customer base. It is in tougher times, however, that the value of Contrans' diverse customer base and flexible cost structure is perhaps the most apparent to the Company's shareholders."

Results from Operations

Revenue
Contrans acquired several businesses after the first quarter ended in 2012 ("acquisitions"). These acquisitions contributed approximately $5.8 million of revenue from transportation services ("revenue") in the first quarter of 2013 ("2013 Q1"). Contrans commenced work on its residential waste collection contract in Edmonton, Alberta that added $0.7 million of revenue in 2013 Q1. This contract is expected to generate $4.0 million of revenue annually. Additional internal growth resulted from contract awards from new customers. These revenue increases were partially offset by reduced shipments from some customers in the construction industry in 2013 Q1 compared to 2012 Q1. Contrans' management expects shipments from these customers to increase in the second quarter of 2013. Contrans' revenue in 2013 Q1 was also adversely affected by harsher winter weather than that which the Company experienced in 2012 Q1. Fuel surcharges have increased in 2013 compared to 2012 due to increased revenue and fuel prices.

Direct operating expenses
Acquisitions added approximately $3.8 million in 2013 Q1 to direct operating expenses. Winter weather conditions were more severe in 2013 Q1 than in 2012 Q1. This resulted in increased fuel and maintenance costs as well as decreased asset utilization. Depreciation of tractors and trailers was $0.6 million higher in 2013 Q1 than in 2012 Q1. In addition, Contrans relied more on the services of partner carriers in 2013 Q1 than in 2012 Q1 resulting in lower margins.

General and administration expenses
Acquisitions added approximately $0.4 million of general and administration expenses in 2013 Q1 compared to 2012 Q1. Contrans' share price increased in 2013 Q1 resulting in a $0.6 million increase in share-based, cash-settled compensation expense in 2013 Q1 compared to 2012 Q1.  Professional fees were $0.3 million lower in 2013 Q1 compared to 2012 Q1 primarily as a result of fewer acquisitions being made.

Net financing costs
Net financing costs increased by $0.2 million in 2013 Q1 compared to 2012 Q1 due to an increase in debt. Contrans' financing income decreased in 2013 Q1 compared to 2012 Q1 commensurate with Contrans' lower average cash and short-term investment balances.

Cash Flow
Contrans invested $12.8 million in property and equipment in 2013 Q1 including capital expenditures funded through finance leases. Contrans invested $2.4 million in trucks and trailers to support internal growth initiatives in 2013 Q1. The Company has invested $1.5 million and $3.0 million in 2013 Q1 and April 2013 respectively on new trucks resulting from the contract award from the city of Edmonton, Alberta for residential waste collection. Contrans also invested $4.4 million in the purchase of a warehouse facility near Montreal, Quebec in 2013 Q1. This facility has enabled the Company to expand its service to the resource sector in that region. The purchase of the warehouse facility was partially financed with a $3.0 million mortgage.

On March 13, 2013, Contrans received regulatory approval to proceed with a normal course issuer bid ("NCIB") to purchase up to 1.6 million of its outstanding Class A shares for cancellation between March 15, 2013 and March 14, 2014.  There have been no purchases made under this NCIB to date.

Contrans' Board of Directors has declared the following dividends in 2013:

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.

Construction commenced in late 2012 on a new terminal in Edmonton, Alberta to replace leased premises for the Company's waste collection business.  Costs to complete the plans are expected to approximate $5.5 million.

Use of Non-GAAP Financial Measures
Management has included a non-GAAP financial measure, "Direct operating expenses - net of fuel surcharges", as a supplement to the financial information contained herein. This non-GAAP financial measure does not have any 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 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. Accordingly, the percentages in the Financial Highlights table were calculated using revenue from transportation services alone as the base. In addition, direct operating expenses are stated after netting fuel surcharges against fuel expenses in the Financial Highlights table. Management believes that this facilitates a better comparison of operating costs between periods.

Forward-looking Statements
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 www.sedar.com. 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.