Contrans Group Inc. Announces Third Quarter Results

TSX:CSS

WOODSTOCK, ON, Nov. 12, 2012 /CNW/ -

Financial Highlights

"I am very pleased to announce that Contrans enjoyed one of its best third quarters" stated Stan G. Dunford, Contrans Group Inc.'s Chairman and Chief Executive Officer. "Our operations have been quite active to start the fourth quarter and 2012 is therefore shaping up to be one of the best years in Contrans' history. This is truly remarkable considering the current market conditions are much weaker than they were prior to the recession when Contrans established a string of record-setting financial performances."

"Internal growth and acquisitions have both contributed to Contrans' success this year" continued Mr. Dunford. "I am particularly proud of how well this growth has been managed. The operating challenges posed by our growth have been met with the tireless efforts and determination of our employees who have effected smooth transitions and integration of our newly acquired business units. I applaud them for their ongoing dedication and professionalism as Contrans continues to expand."

"Contrans' balance sheet remains strong" added Mr. Dunford. "Management is executing its growth strategy with patience.  Backed by financial strength, however, management can also act quickly and aggressively when suitable opportunities arise. We welcome the challenge of rewriting Company financial records and adding long-term value for Contrans' shareholders."

RESULTS FROM OPERATIONS

Revenue

Businesses acquired in 2012 ("acquisitions") contributed approximately $9.3 million of revenue from transportation services ("revenue") in the third quarter of 2012 ("2012 Q3") and $29.2 million in the nine month period ended September 30, 2012 ("YTD").  Contrans' YTD revenue has also increased as a result of contract awards from new customers and from being awarded new lanes from existing customers. Fuel surcharges have increased in 2012 compared to 2011 due to increased revenue and higher average fuel prices.

Direct operating expenses

Acquisitions added approximately $7.7 million in 2012 Q3 to direct operating expenses ($24.1 million YTD). Excluding the impact of acquisitions, provisions for insurance claims were $1.0 million higher in 2012 YTD than in 2011 YTD (no material change in 2012 Q3 compared to 2011 Q3).  Depreciation of tractors and trailers was $0.7 million higher in 2012 Q3 than in 2011 Q3 ($2.7 million higher YTD). The impact of these increased costs was mitigated by improved equipment utilization.

General and administration expenses

Acquisitions added approximately $0.9 million of general and administration expenses in 2012 Q3 ($2.3 million YTD).  Improved profit performance in 2012 compared to 2011 has resulted in an increase in the provision for management incentive plans by $0.5 million in 2012 Q3 compared to 2011 Q3 ($1.4 million increase 2012 YTD compared to 2011 YTD). This was partially offset by a $0.1 million reduction in compensation expense in 2012 Q3 compared to 2011 Q3 ($0.5 million reduction in 2012 YTD compared to 2011 YTD) due to the graded recognition of stock option expenses. Stock options were issued in 2011 Q2.  In 2012 Contrans experienced an improvement in worker safety and as a result, provisions for the Ontario Workplace Safety and Insurance Board's New Experimental Experience Rating program were $0.4 million lower in 2012 Q3 compared to 2011 Q3 ($0.7 million YTD).  The provision for doubtful accounts was reduced by $0.4 million in 2011 Q1 but this provision has not changed significantly in 2012.  Professional fees of $0.6 million were incurred in the first half of 2012 relating to management's proposal to Contrans' shareholders to eliminate the Company's dual class share structure.

Net financing costs

Net financing costs have increased by $0.3 million in 2012 Q3 compared to 2011 Q3 ($1.1 million YTD). Financing costs increased in 2012 as a result of new equipment financing debt.  Contrans' financing income has decreased in 2012 as the Company used cash and short-term investments to pay for three acquisitions and to purchase its own shares for cancellation under a normal course issuer bid ("NCIB") that has been completed.

CASH FLOW

Contrans has made three acquisitions to date in 2012 for cash consideration of $20.1 million. Details of these acquisitions can be found in note 6 of the attached interim financial statements.

Contrans has invested $23.3 million in total capital expenditures to date in 2012 including $4.8 million of expenditures that have been funded through finance leases. Contrans had invested $4.9 million in tractors and trailers for internal growth initiatives.

Contrans has purchased 1.6 million Class A shares for cancellation for consideration of $13.7 million in 2012 under its NCIB. The NCIB was initiated in November 2011 and was completed on April 4, 2012. The bid resulted in a total of 2.1 million Class A shares being purchased for cancellation at an average cost of $8.42 for total consideration of $17.7 million.

SEASONALITY

Generally, the second quarter is Contrans' strongest period. Volumes from customers in the construction industry typically increase in the spring, peak in the fall and then decline with the onset of winter. Some manufacturing customers close their plants during the summer and many customers either shut down their production facilities or otherwise reduce shipments during the Christmas holiday season.

USE OF NON-GAAP FINANCIAL MEASURES

Management has included a non-GAAP financial measure, "Direct operating expenses - net of fuel surcharges", to supplement its interim financial statements. This non-GAAP financial measure does not have any standardized meaning prescribed under IFRS and therefore it 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 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, 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 expenses and profit margins 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.