Mr. Stan Dunford reports

CONTRANS ANNOUNCES SECOND QUARTER RESULTS

Contrans Group Inc. has released its results for the second quarter ended June 30, 2014.

                                   FINANCIAL HIGHLIGHTS
                   (in millions of dollars, except for per-share amounts)  

                                                 Three months ended            Six months ended          
                                              June 30,      June 30,      June 30,      June 30,
                                                 2014          2013          2014          2013   
                                                       (restated)(2)               (restated)(2)
Continuing operations
Revenue -- total                             $  153.7     $   132.6       $ 302.0     $   261.7
Revenue -- fuel surcharges                      (24.3)        (20.3)        (49.4)        (41.5)
Revenue -- services                             129.4         112.3         252.6         220.2
Direct operating expenses
-- net of fuel surcharges (1)                   102.7          89.2         204.8         178.3
Gross margin                                     26.7          23.1          47.8          41.9
General and administration expenses              12.9          11.5          24.7          23.3
Gain on sale of equipment                        (0.5)         (0.3)         (0.7)         (0.5)
Net financing costs                               1.4           1.7           3.0           3.5
Earnings before income taxes                     12.9          10.2          20.8          15.6
Income tax expense                                2.9           2.8           5.1           4.3
Net earnings and comprehensive
income from continuing operations                10.0           7.4          15.7          11.3
Gain on sale of waste
collection segment -- net of tax                 26.3             -          26.3             -
Discontinued operations                           0.5           0.7           0.8           1.5
Net earnings and comprehensive
income for the period                        $   36.8     $     8.1       $  42.8     $    12.8
Earnings per share
-- continuing operations
Basic                                        $   0.29     $    0.22       $  0.46     $    0.34
Diluted                                      $   0.29     $    0.21       $  0.46     $    0.33
Earnings per share -- total
Basic                                        $   1.08     $    0.24       $  1.26     $    0.38
Diluted                                      $   1.07     $    0.24       $  1.25     $    0.38
Dividends declared per share                 $   0.15     $    0.10       $ 0.275     $   0.225
Depreciation -- continuing operations        $    6.5     $     5.7       $  12.9     $    11.6
Amortization of intangibles
-- continuing operations                     $    0.8     $     0.9       $   1.7     $     1.8

(1) This is referred to as "direct operating expenses" hereafter. 
    See "Use of Non-GAAP Financial Measures."                                
(2) Comparative information has been restated to disclose results 
    from discontinued operations separately.                                                                                              

"I am very pleased with Contrans's second quarter results," stated Contrans Group's chairman and chief executive officer, Stan Dunford. "The company recorded strong earnings, a reflection of continuing good management of our operations and improved business conditions. Contrans also sold its waste collection segment during the second quarter. This sale generated over $70-million in proceeds and contributed an after-tax gain of $26.3-million (76-cent diluted earnings per share).

"TransForce has announced its intention to submit to Contrans's shareholders a formal offer to acquire their shares," continued Mr. Dunford. "Contrans's board of directors has stated that it supports this proposal for reasons that will be set out in detail in a directors circular that will be sent out to shareholders. TransForce is a strategic player with greater potential for realizing operating synergies than would a financial investor. Accordingly, Contrans's board of directors believes this has resulted in a higher offer price.

"I am proud of everything that Contrans's management has been able to accomplish over the past 25 years," added Mr. Dunford. "The company's success is attributable to a dedicated group of individuals whose talents are unsurpassed in our industry. I am truly grateful for all of their efforts and enthusiasm. I look forward to seeing this group continue to flourish."

Results from continuing operations

Revenue

Major contracts previously awarded to Contrans that did not take effect until the second half of 2013 contributed $4.5-million of service revenue in the second quarter of 2014 and $9-million in the first half of 2014. These contracts are for the transportation of waste from Calgary, Alta., to Coronation, Alta., and for the transportation of metallurgical coke from Hamilton, Ont., to Nanticoke, Ont. Revenue resulting from the December, 2013, acquisition of the Best Transfer assets amounted to $2.2-million in the second quarter of 2014 ($4.9-million in 2014 year to date). Contrans's Ontario waste transportation operation has also received awards of new work from an existing customer that contributed $1.2-million of additional revenue in the second quarter of 2014 ($1.6-million in 2014 year to date). Contrans recently entered into another waste hauling agreement in the second quarter of 2014, which is expected to generate $3.5-million annually. Work on this agreement is expected to commence in September, 2014.

Revenue from the company's customers in the construction industry also contributed to the increase in revenue over 2014 year to date. Last year, an unusually wet spring and a construction strike in Quebec adversely affected shipments of construction materials. Revenue from customers in this industry were $4.7-million greater in the second quarter of 2014 compared with the second quarter of 2013 (2014: $7.9-million greater year to date).

Revenue in 2014 year to date was negatively impacted by unusually harsh winter conditions in the first quarter. This was mitigated, however, by increased shipments of road salt, which added $4.3-million in additional revenue in 2014 year to date compared with 2013 year to date. In addition, some shippers of bulk materials resorted to truck transportation due to disruptions to rail service and due to an unusually early freeze-up and a late thaw of the Great Lakes.

Direct operating expenses

Fuel costs were positively impacted by a decrease in fuel prices in the second quarter of 2014. Lower fuel prices also reversed the effects of the lag between the company's fuel surcharge programs and fuel prices. This lag adversely affected direct operating expenses in the first quarter of 2014 when prices steadily increased. Accident claim costs were $800,000 higher in the second quarter of 2014, compared with the second quarter of 2013 (2014: $1.5-million higher year to date). Direct operating expenses in 2014 year to date were adversely affected by prolonged and unusually cold temperatures during the first quarter that resulted in increased maintenance costs and fuel consumption. The poor weather also resulted in lost working days which negatively impacted equipment utilization.

General and administration expenses

Contrans's share-based, cash-settled compensation expense was $600,000 higher in the second quarter of 2014 compared with the second quarter of 2013. The trading value of the company's shares appreciated by 14 per cent in the second quarter of 2014, whereas the trading value declined by 8 per cent in the second quarter of 2013 (appreciation of 9.5 per cent in 2014 year to date; appreciation of 10.3 per cent in 2013 year to date). An amount of $1-million was provided in the second quarter of 2014 for property restoration costs. General and administration expenses were reduced in the second quarter of 2014 due to the $500,000 recovery of a note receivable, against which a 100-per-cent provision had been taken in 2009. The note was part of the consideration received for the disposal of the company's plant services operation in 2008.

Net financing costs

Net financing costs decreased by $200,000 in the second quarter of 2014 compared with the second quarter of 2013 (2014: $400,000 decrease year to date). This decrease resulted primarily from the company's repayment of a $31.9-million term loan in December, 2013, and from the receipt of proceeds from the sale of the waste collection segment on May 1, 2014.

Cash flow

Contrans incurred capital expenditures of $16.9-million in the second quarter of 2014 ($27.5-million in 2014 year to date). Of this amount, $9.6-million was incurred to support growth initiatives in the second quarter of 2014 ($15.6-million in 2014 year to date). The majority of this expenditure was used to acquire equipment to service work awarded to Contrans's waste transportation operations. These amounts include capital expenditures that were financed through finance leases.

Contrans has received regulatory approval to proceed with a normal course issuer bid 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 normal course issuer bid to date. There were no purchases under Contrans's previous normal course issuer bid, which lapsed on March 14, 2014.

Dividends

Contrans's board of directors has declared dividends in 2014 as shown in the attached table.

Declaration date   Paid or payable on   Per-share amount             Total  
     
Jan. 15, 2014           Feb. 14, 2014             $0.125      $4.2-million
April 15, 2014           May 15, 2014              $0.15      $5.1-million
July 15, 2014           Aug. 15, 2014              $0.15      $5.1-million

The payment of dividends is subject to the discretion of Contrans's board. Prior to declaring a dividend, the board considers many factors, including Contrans's 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's loan agreements.

Proposed transaction

On July 23, 2014, Contrans, TransForce Inc. and a subsidiary of TransForce entered into a support agreement, pursuant to which TransForce will make an offer to shareholders of Contrans to acquire 100 per cent of Contrans's outstanding subordinate voting and multiple voting shares for cash consideration of $14.60 per share. The agreement also provides for the payment by Contrans of a special dividend of 40 cents per share prior to closing. The offer is subject to a number of conditions, including regulatory approvals.

Circulation of documents to shareholders relating to this bid is expected to take place in August, 2014.

We seek Safe Harbor.