(TSX:CSS)

WOODSTOCK, ON, July 29, 2014 /CNW/ -

Financial Highlights

"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:

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.