(TSX:CSS)
WOODSTOCK, ON, July 29, 2014 /CNW/ -
Financial Highlights
For the periods ended June 30
| Three Months | Six Months |
($CAD millions except for share and per share amounts) | | 2014 | | 2013 Restated (2) | | 2014 | 2013 Restated (2) |
Continuing operations
| | | | | | | | | | | | | | | | |
Revenue - total
|
$
|
153.7
|
|
|
$
|
132.6
|
|
|
$
|
302.0
|
|
|
$
|
261.7
|
|
|
- fuel surcharges
|
|
(24.3)
|
|
|
|
(20.3)
|
|
|
|
(49.4)
|
|
|
|
(41.5)
|
|
|
Revenue - services
|
|
129.4
|
100.0
|
%
|
|
112.3
|
100.0
|
%
|
|
252.6
|
100.0
|
%
|
|
220.2
|
100.0
|
%
|
Direct operating expenses - net of fuel surcharges (1) |
|
102.7
|
79.4
|
|
|
89.2
|
79.4
|
|
|
204.8
|
81.1
|
|
|
178.3
|
81.0
|
|
Gross margin
|
|
26.7
|
20.6
|
|
|
23.1
|
20.6
|
|
|
47.8
|
18.9
|
|
|
41.9
|
19.0
|
|
General and administration expenses
|
|
12.9
|
10.0
|
|
|
11.5
|
10.2
|
|
|
24.7
|
9.8
|
|
|
23.3
|
10.6
|
|
Gain on sale of equipment
|
|
(0.5)
|
(0.4)
|
|
|
(0.3)
|
(0.3)
|
|
|
(0.7)
|
(0.3)
|
|
|
(0.5)
|
(0.2)
|
|
Net financing costs
|
|
1.4
|
1.1
|
|
|
1.7
|
1.5
|
|
|
3.0
|
1.2
|
|
|
3.5
|
1.6
|
|
Earnings before income taxes
|
|
12.9
|
9.9
|
|
|
10.2
|
9.2
|
|
|
20.8
|
8.2
|
|
|
15.6
|
7.0
|
|
Income tax expense
|
|
2.9
|
2.2
|
|
|
2.8
|
2.5
|
|
|
5.1
|
2.0
|
|
|
4.3
|
2.0
|
|
Net earnings and comprehensive income from continuing operations
|
|
10.0
|
7.7
|
%
|
|
7.4
|
6.7
|
%
|
|
15.7
|
6.2
|
%
|
|
11.3
|
5.0
|
%
|
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
| | |
Weighted average shares outstanding (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
| | |
|
Basic
|
|
33,951
|
|
|
|
33,808
|
|
|
|
33,912
|
|
|
|
33,761
|
|
|
Diluted
|
|
34,443
|
|
|
|
34,130
|
|
|
|
34,370
|
|
|
|
34,053
|
|
|
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) Referred to as "direct operating expenses" hereafter. See "Use of
Non-GAAP Financial Measures" below.
|
|
|
|
|
|
|
|
|
(2) Comparative information has been restated to disclose results from
discontinued operations separately.
|
|
"I am very pleased with Contrans' second quarter results," stated
Contrans Group Inc.'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 ($0.76 diluted earnings
per share)."
"TransForce has announced its intention to submit to Contrans'
shareholders a formal offer to acquire their shares," continued Mr.
Dunford. "Contrans' 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' Board
of Directors believes this has resulted in a higher offer price."
"I am proud of everything that Contrans' 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 ("revenue") in the second quarter of 2014 ("2014 Q2") and $9.0
million in the first half of 2014 ("2014 YTD"). These contracts are for
the transportation of waste from Calgary, Alberta to Coronation,
Alberta and for the transportation of metallurgical coke from Hamilton,
Ontario to Nanticoke, Ontario. Revenue resulting from the December
2013 acquisition of the Best Transfer assets amounted to $2.2 million
in 2014 Q2 ($4.9 million 2014 YTD). Contrans' Ontario waste
transportation operation has also received awards of new work from an
existing customer that contributed $1.2 million of additional revenue
in 2014 Q2 ($1.6 million 2014 YTD). Contrans recently entered into
another waste hauling agreement in 2014 Q2 that 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 2013 YTD. 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 2014 Q2 compared to 2013 Q2
(2014 - $7.9 million greater YTD).
Revenue in 2014 YTD 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 YTD compared to 2013 YTD. 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 2014
Q2. 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 2014 Q1 when prices steadily
increased. Accident claim costs were $0.8 million higher in 2014 Q2
compared to 2013 Q2 (2014 - $1.5 million higher YTD). Direct operating
expenses in 2014 YTD 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 ("G&A")
Contrans' share-based, cash-settled compensation expense was $0.6
million higher in 2014 Q2 compared to 2013 Q2. The trading value of the
Company's shares appreciated by 14% in 2014 Q2 whereas the trading
value declined by 8% in 2013 Q2 (appreciation of 9.5% in 2014 YTD,
10.3% appreciation in 2013 YTD). An amount of $1.0 million was
provided in 2014 Q2 for property restoration costs. G&A expenses were
reduced in 2014 Q2 due to the $0.5 million recovery of a note
receivable against which a 100% 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 $0.2 million in 2014 Q2 compared to
2013 Q2 (2014 - $0.4 million decrease YTD). 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 2014 Q2
($27.5 million 2014 YTD). Of this amount, $9.6 million was incurred to
support growth initiatives in 2014 Q2 ($15.6 million 2014 YTD). The
majority of this expenditure was used to acquire equipment to service
work awarded to Contrans' waste transportation operations. These
amounts include capital expenditures that were funded through finance
leases.
Contrans has received regulatory approval to proceed with a normal
course issuer bid ("NCIB") to purchase up to 1.7 million of its
outstanding Class A shares for cancellation between March 17, 2014 and
March 16, 2015. There have been no purchases made under this NCIB to
date. There were no purchases under Contrans' previous NCIB, which
lapsed on March 14, 2014.
Dividends
Contrans' Board of Directors ("Board") has declared the following
dividends in 2014:
Declaration Date
|
|
|
|
Paid or Payable on
|
Per share amount
|
|
|
|
Total
|
January 15, 2014
|
|
|
|
February 14, 2014
|
$0.125
|
|
|
|
$4.2 million
|
April 15, 2014
|
|
|
|
May 15, 2014
|
$0.15
|
|
|
|
$5.1 million
|
July 15, 2014
|
|
|
|
August 15, 2014
|
$0.15
|
|
|
|
$5.1 million
|
The payment of dividends is subject to the discretion of Contrans'
Board. Prior to declaring a dividend, the Board considers many factors,
including Contrans' overall financial condition, its expected future
financial performance, its anticipated capital requirements as well as
its debt repayment obligations and the covenants that are contained in
Contrans' loan agreements.
Proposed Transaction
On July 23, 2014, Contrans, TransForce Inc. ("TransForce") 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% of Contrans' 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
$0.40 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.
Use of Non-GAAP Financial Measures
Management has included a non-GAAP financial measure, "Direct operating
expenses - net of fuel surcharges", in this press release. Management
believes that it is important to isolate the effects of fuel
surcharges, a volatile source of revenue and direct operating expenses,
when analyzing operating results. Management regards revenue from
services as the most relevant indicator of business level activity.
Accordingly, the percentages in the Financial Highlights and Results
from Operations tables were calculated using revenue from services
alone as the base. In addition, direct operating expenses are stated
after netting fuel surcharges against fuel expenses in the Financial
Highlights and Results from Operations tables. Management believes that
this facilitates a better comparison of operating costs between
periods.
This non-GAAP financial measure does not have a standardized meaning
prescribed under IFRS and therefore may not be comparable to similar
measures employed by other issuers. The data is intended to provide
additional information and should not be considered in isolation or as
a substitute for measures of performance prepared in accordance with
IFRS.
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.