Item 1: Financial Statements
VITRAN CORPORATION INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
(In thousands of United States dollars except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
Ended
Sept 30, 2013
|
|
|
Three months
Ended
Sept 30, 2012
|
|
|
Nine months
Ended
Sept 30, 2013
|
|
|
Nine months
Ended
Sept 30, 2012
|
|
Revenue
|
|
$
|
49,373
|
|
|
$
|
49,626
|
|
|
$
|
146,036
|
|
|
$
|
143,504
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and other employee benefits
|
|
|
6,637
|
|
|
|
6,396
|
|
|
|
21,446
|
|
|
|
18,693
|
|
Purchased transportation
|
|
|
17,018
|
|
|
|
17,814
|
|
|
|
50,659
|
|
|
|
52,004
|
|
Depreciation and amortization
|
|
|
769
|
|
|
|
784
|
|
|
|
2,372
|
|
|
|
2,331
|
|
Maintenance
|
|
|
1,898
|
|
|
|
2,241
|
|
|
|
6,078
|
|
|
|
7,640
|
|
Rents and leases
|
|
|
636
|
|
|
|
694
|
|
|
|
1,950
|
|
|
|
2,084
|
|
Owner operators
|
|
|
12,882
|
|
|
|
12,506
|
|
|
|
37,856
|
|
|
|
35,684
|
|
Fuel and fuel-related expenses
|
|
|
5,372
|
|
|
|
5,075
|
|
|
|
16,222
|
|
|
|
16,320
|
|
Other operating expenses
|
|
|
2,052
|
|
|
|
2,177
|
|
|
|
7,260
|
|
|
|
5,917
|
|
Other income
|
|
|
(78
|
)
|
|
|
(30
|
)
|
|
|
(262
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
47,186
|
|
|
$
|
47,657
|
|
|
$
|
143,581
|
|
|
$
|
140,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before the undernoted
|
|
|
2,187
|
|
|
|
1,969
|
|
|
|
2,455
|
|
|
|
2,872
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(655
|
)
|
|
|
(750
|
)
|
|
|
(2,536
|
)
|
|
|
(2,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
1,532
|
|
|
|
1,219
|
|
|
|
(81
|
)
|
|
|
630
|
|
|
|
|
|
|
Income tax expense
|
|
|
134
|
|
|
|
482
|
|
|
|
51
|
|
|
|
677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
1,398
|
|
|
|
737
|
|
|
|
(132
|
)
|
|
|
(47
|
)
|
|
|
|
|
|
Discontinued operations, net of income taxes (note 3)
|
|
|
(74,092
|
)
|
|
|
(10,837
|
)
|
|
|
(21,863
|
)
|
|
|
(20,032
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(72,694
|
)
|
|
$
|
(10,100
|
)
|
|
$
|
(21,995
|
)
|
|
$
|
(20,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted:
Income (loss) from continuing operations
Discontinued operations loss
Net loss
|
|
$
|
0.09
(4.51
(4.42
|
)
)
|
|
$
|
0.04
(0.66
(0.62
|
)
)
|
|
$
|
(0.01
(1.33
(1.34
|
)
)
)
|
|
$
|
(1.23
(1.23
|
)
)
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,432,241
|
|
|
|
16,399,241
|
|
|
|
16,422,208
|
|
|
|
16,388,569
|
|
Diluted
|
|
|
16,432,241
|
|
|
|
16,399,241
|
|
|
|
16,422,208
|
|
|
|
16,388,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
3
VITRAN CORPORATION INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands of United States dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
Ended
Sept 30, 2013
|
|
|
Three months
Ended
Sept 30, 2012
|
|
|
Nine months
Ended
Sept 30, 2013
|
|
|
Nine months
Ended
Sept 30, 2012
|
|
Net loss
|
|
$
|
(72,694
|
)
|
|
$
|
(10,100
|
)
|
|
$
|
(21,995
|
)
|
|
$
|
(20,079
|
)
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in foreign currency translation adjustment (net of income tax expense (recovery) of nil and $48 for the three and nine months
ended September 30, 2013; 2012 - $1 and ($4))
|
|
|
868
|
|
|
|
133
|
|
|
|
(1,069
|
)
|
|
|
84
|
|
Foreign currency translation reclassified from
accumulated other comprehensive income (note 3)
|
|
|
|
|
|
|
|
|
|
|
1,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
868
|
|
|
$
|
133
|
|
|
$
|
796
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(71,826
|
)
|
|
$
|
(9,967
|
)
|
|
$
|
(21,199
|
)
|
|
$
|
(19,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
4
VITRAN CORPORATION INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of United States dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
2013
|
|
|
Dec 31,
2012
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
25,904
|
|
|
$
|
233
|
|
Accounts receivable
|
|
|
21,406
|
|
|
|
17,988
|
|
Inventory, deposits and prepaid expenses
|
|
|
2,921
|
|
|
|
3,505
|
|
Income taxes recoverable
|
|
|
323
|
|
|
|
|
|
Current assets of discontinued operations
|
|
|
75,563
|
|
|
|
65,402
|
|
Deferred income taxes
|
|
|
89
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
126,206
|
|
|
|
87,220
|
|
|
|
|
Property and equipment
|
|
|
49,835
|
|
|
|
53,365
|
|
Goodwill
|
|
|
5,388
|
|
|
|
5,579
|
|
Long-term assets of discontinued operations
|
|
|
|
|
|
|
92,370
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
181,429
|
|
|
$
|
238,534
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
26,947
|
|
|
$
|
24,008
|
|
Income taxes payable
|
|
|
|
|
|
|
554
|
|
Current liabilities of discontinued operations
|
|
|
75,563
|
|
|
|
59,810
|
|
Current portion of long-term debt
|
|
|
1,333
|
|
|
|
1,333
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
103,843
|
|
|
|
85,705
|
|
|
|
|
Long-term debt
|
|
|
47,730
|
|
|
|
58,969
|
|
Deferred income taxes
|
|
|
999
|
|
|
|
1,175
|
|
Long-term liabilities of discontinued operations
|
|
|
|
|
|
|
43,028
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common shares, no par value, unlimited authorized, 16,432,241 and 16,399,241 issued and outstanding at September 30, 2013 and
December 31, 2012, respectively
|
|
|
100,204
|
|
|
|
99,954
|
|
Additional paid-in capital
|
|
|
5,857
|
|
|
|
5,708
|
|
Accumulated deficit
|
|
|
(82,884
|
)
|
|
|
(60,889
|
)
|
Accumulated other comprehensive income
|
|
|
5,680
|
|
|
|
4,884
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
28,857
|
|
|
|
49,657
|
|
|
|
|
Contingent liabilities (note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
181,429
|
|
|
$
|
238,534
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
5
VITRAN CORPORATION INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited)
(In thousands of United States dollars, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common Shares
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity
|
|
December 31, 2012
|
|
|
16,399,241
|
|
|
$
|
99,954
|
|
|
$
|
5,708
|
|
|
$
|
(60,889
|
)
|
|
$
|
4,884
|
|
|
$
|
49,657
|
|
Shares issued upon exercise of employee stock options
|
|
|
33,000
|
|
|
|
250
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
170
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,995
|
)
|
|
|
|
|
|
|
(21,995
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
796
|
|
|
|
796
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
16,432,241
|
|
|
$
|
100,204
|
|
|
$
|
5,857
|
|
|
$
|
(82,884
|
)
|
|
$
|
5,680
|
|
|
$
|
28,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common Shares
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity
|
|
December 31, 2011
|
|
|
16,331,241
|
|
|
$
|
99,746
|
|
|
$
|
5,334
|
|
|
$
|
(24,914
|
)
|
|
$
|
4,807
|
|
|
$
|
84,973
|
|
Shares issued upon exercise of employee stock options
|
|
|
68,000
|
|
|
|
208
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
151
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,079
|
)
|
|
|
|
|
|
|
(20,079
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
84
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
16,399,241
|
|
|
$
|
99,954
|
|
|
$
|
5,606
|
|
|
$
|
(44,993
|
)
|
|
$
|
4,891
|
|
|
$
|
65,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
6
VITRAN CORPORATION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of United States dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
Ended
Sept 30, 2013
|
|
|
Three months
Ended
Sept 30, 2012
|
|
|
Nine months
Ended
Sept 30, 2013
|
|
|
Nine months
Ended
Sept 30, 2012
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(72,694
|
)
|
|
$
|
(10,100
|
)
|
|
$
|
(21,995
|
)
|
|
$
|
(20,079
|
)
|
Items not involving cash from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
769
|
|
|
|
784
|
|
|
|
2,372
|
|
|
|
2,331
|
|
Deferred income taxes
|
|
|
|
|
|
|
7
|
|
|
|
(178
|
)
|
|
|
(38
|
)
|
Gain on sale of property and equipment
|
|
|
(78
|
)
|
|
|
(30
|
)
|
|
|
(262
|
)
|
|
|
(41
|
)
|
Share-based compensation expense
|
|
|
42
|
|
|
|
102
|
|
|
|
229
|
|
|
|
329
|
|
Loss from discontinued operations (note 3)
|
|
|
74,092
|
|
|
|
10,837
|
|
|
|
21,863
|
|
|
|
20,032
|
|
Change in non-cash working capital components
|
|
|
146
|
|
|
|
(125
|
)
|
|
|
(1,001
|
)
|
|
|
(1,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
2,277
|
|
|
|
1,475
|
|
|
|
1,028
|
|
|
|
563
|
|
Discontinued operations
|
|
|
(18,205
|
)
|
|
|
(4,915
|
)
|
|
|
(49,179
|
)
|
|
|
(6,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,928
|
)
|
|
|
(3,440
|
)
|
|
|
(48,151
|
)
|
|
|
(5,949
|
)
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance on sale of business (note 3)
|
|
|
400
|
|
|
|
|
|
|
|
400
|
|
|
|
|
|
Proceeds from sale of business, net of cash divested
|
|
|
|
|
|
|
|
|
|
|
94,102
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(118
|
)
|
|
|
(2,347
|
)
|
|
|
(661
|
)
|
|
|
(5,656
|
)
|
Proceeds on sale of property and equipment
|
|
|
78
|
|
|
|
33
|
|
|
|
262
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
360
|
|
|
|
(2,314
|
)
|
|
|
94,103
|
|
|
|
(5,579
|
)
|
Discontinued operations
|
|
|
1,490
|
|
|
|
(3,600
|
)
|
|
|
1,181
|
|
|
|
(6,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,850
|
|
|
|
(5,914
|
)
|
|
|
95,284
|
|
|
|
(11,890
|
)
|
Financing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in revolving credit facility and bank overdraft
|
|
|
|
|
|
|
2,021
|
|
|
|
(8,500
|
)
|
|
|
2,121
|
|
Repayment of long-term debt
|
|
|
(274
|
)
|
|
|
(243
|
)
|
|
|
(843
|
)
|
|
|
(726
|
)
|
Repayment of capital leases
|
|
|
(41
|
)
|
|
|
(41
|
)
|
|
|
(123
|
)
|
|
|
(126
|
)
|
Financing costs
|
|
|
|
|
|
|
|
|
|
|
(121
|
)
|
|
|
|
|
Issue of common shares upon exercise of employee stock options
|
|
|
|
|
|
|
|
|
|
|
170
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(315
|
)
|
|
|
1,737
|
|
|
|
(9,417
|
)
|
|
|
1,420
|
|
Discontinued operations
|
|
|
(1,674
|
)
|
|
|
6,507
|
|
|
|
(12,492
|
)
|
|
|
15,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,989
|
)
|
|
|
8,244
|
|
|
|
(21,909
|
)
|
|
|
16,855
|
|
Effect of foreign exchange translation on cash
|
|
|
736
|
|
|
|
(201
|
)
|
|
|
447
|
|
|
|
(220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(15,331
|
)
|
|
|
(1,311
|
)
|
|
|
25,671
|
|
|
|
(1,204
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
41,235
|
|
|
|
1,311
|
|
|
|
233
|
|
|
|
1,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
25,904
|
|
|
$
|
|
|
|
$
|
25,904
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in non-cash working capital components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(728
|
)
|
|
$
|
(2,183
|
)
|
|
$
|
(3,368
|
)
|
|
$
|
(4,914
|
)
|
Inventory, deposits and prepaid expenses
|
|
|
(208
|
)
|
|
|
(174
|
)
|
|
|
705
|
|
|
|
196
|
|
Income taxes recoverable/payable
|
|
|
(58
|
)
|
|
|
58
|
|
|
|
(877
|
)
|
|
|
(497
|
)
|
Accounts payable and accrued liabilities
|
|
|
1,140
|
|
|
|
2,174
|
|
|
|
2,539
|
|
|
|
3,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
146
|
|
|
$
|
(125
|
)
|
|
$
|
(1,001
|
)
|
|
$
|
(1,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease additions
|
|
|
|
|
|
|
4,099
|
|
|
|
|
|
|
|
5,745
|
|
See accompanying notes to consolidated financial statements
7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In
thousands of United States dollars except for per share amounts)
1. Accounting Policies
The accompanying interim consolidated financial statements include the accounts of Vitran Corporation Inc. and its wholly-owned subsidiaries
(together, Vitran or the Company). All material intercompany transactions and balances have been eliminated on consolidation.
The
interim consolidated financial statements have been prepared in accordance with the rules prescribed for filing interim financial statements and accordingly, do not contain all the disclosures that may be necessary for complete financial statements
prepared in accordance with United States generally accepted accounting principles (GAAP). The interim consolidated financial statements have been prepared in accordance with instructions to Quarterly Report on Form 10-Q. The interim
consolidated financial statements should be read in conjunction with the Companys 2012 Annual Report on Form 10-K. The interim consolidated financial statements follow the same accounting principles and methods of application as the most
recent annual consolidated financial statements, except as noted in Note 2.
These interim consolidated financial statements reflect all adjustments which
are, in the opinion of Management, necessary for a fair presentation of the results of the interim period presented. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results of
operations that may be expected for the year ending December 31, 2013.
2. New Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standard Update (ASU) No. 2013-02 Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive Income requires expanded disclosures for amounts reclassified out of accumulated other comprehensive income by component. The guidance requires the presentation of amounts
reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other
amounts that are not required under GAAP to be reclassified in their entirety to net income, a cross-reference to other disclosures that provide additional detail about those amounts is required. The guidance is to be applied prospectively for
reporting periods beginning after December 15, 2012. ASU No. 2013-02 was adopted by the Company on January 1, 2013. The new guidance affects disclosures only and did not have an impact on the Companys results of operations or
financial position.
3. Discontinued Operations
On March 4, 2013, the Company completed the sale of its Supply Chain Operation business unit (SCO), which was previously a
reportable segment. The proceeds from the transaction were $97.0 million, plus an adjustment of $1.8 million on account of working capital. As of September 30, 2013, the Company has received net cash proceeds of $94.1 million, net of cash
divested of $0.4 million, direct selling costs of $2.9 million and income taxes of $1.4 million. The Company used the proceeds to reduce its outstanding debt under its revolving credit facility. The operating results and gain on sale of SCO have
been recorded as a discontinued operation.
On September 23, 2013, the Company entered into an agreement to sell the shares of its U.S.
Less-Than-Truckload business unit (U.S. LTL) to Data Processing LLC, a company owned by Matthew Moroun, for cash consideration of $2.0 million and the assumption of $32.8 million of real estate and capital lease debt by the purchaser. In
addition, the purchaser agreed to fund cash deficits incurred by U.S. LTL from September 23, 2013 through to the date of closing of the transaction. The transaction closed on October 7, 2013 and the purchaser has funded $1.4 million of
cash deficits incurred by U.S. LTL between September 23, 2013 and October 7, 2013. As of September 30, 2013, the Company had received funding of $0.4 million for cash deficits incurred between September 23, 2013 and
September 30, 2013. Prior to closing the sale, the Company agreed to capitalize U.S. LTL with cash of $5.0 million.
8
At September 30, 2013, the financial results of U.S. LTL have been recorded as a discontinued operation. As
required by U.S. GAAP, the Company compared the fair value less costs to sell of the net assets of U.S. LTL to its carrying value. As a result of the comparison, the Company recorded a $49.7 million non-cash write-down in discontinued operations to
write-down the U.S. LTL net assets to zero. The write-down was recorded as a reduction in property and equipment within current assets of discontinued operations on the consolidated balance sheet.
The following table summarizes the operations for all periods presented to classify U.S. LTL and SCO operations as discontinued operations for the three and
nine months ended September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
Ended
Sept 30, 2013
|
|
|
Three months
Ended
Sept 30, 2012
|
|
|
Nine months
Ended
Sept 30, 2013
|
|
|
Nine months
Ended
Sept 30, 2012
|
|
Revenue
|
|
$
|
101,663
|
|
|
$
|
156,594
|
|
|
$
|
350,241
|
|
|
$
|
483,561
|
|
Loss from discontinued operations
|
|
|
(24,225
|
)
|
|
|
(10,477
|
)
|
|
|
(56,144
|
)
|
|
|
(18,881
|
)
|
Income tax expense
|
|
|
(180
|
)
|
|
|
(360
|
)
|
|
|
(653
|
)
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income tax
|
|
|
(24,405
|
)
|
|
|
(10,837
|
)
|
|
|
(56,797
|
)
|
|
|
(20,032
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of SCO
|
|
|
|
|
|
|
|
|
|
|
87,892
|
|
|
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
(19,019
|
)
|
|
|
|
|
Utilization of net operating loss carry-forwards
|
|
|
|
|
|
|
|
|
|
|
17,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,486
|
|
|
|
|
|
Reclassification of foreign currency translation from accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
(1,865
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on sale of SCO
|
|
|
|
|
|
|
|
|
|
|
84,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-down of U.S. LTL net assets
|
|
|
(49,687
|
)
|
|
|
|
|
|
|
(49,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations
|
|
$
|
(74,092
|
)
|
|
$
|
(10,837
|
)
|
|
$
|
(21,863
|
)
|
|
$
|
(20,032
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the assets and liabilities of discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
Sept 30, 2013
|
|
|
Dec 31, 2012
|
|
Accounts receivable
|
|
$
|
45,946
|
|
|
$
|
57,587
|
|
Income taxes recoverable
|
|
|
|
|
|
|
157
|
|
Inventory, deposits and prepaid expenses
|
|
|
8,419
|
|
|
|
7,658
|
|
Property and equipment
|
|
|
19,790
|
|
|
|
79,910
|
|
Intangible assets
|
|
|
1,408
|
|
|
|
3,457
|
|
Goodwill
|
|
|
|
|
|
|
8,872
|
|
Deferred income taxes
|
|
|
61,895
|
|
|
|
64,048
|
|
Deferred income taxes valuation allowance
|
|
|
(61,895
|
)
|
|
|
(63,917
|
)
|
|
|
|
|
|
|
|
|
|
Total assets from discontinued operations
|
|
$
|
75,563
|
|
|
$
|
157,772
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
42,616
|
|
|
$
|
57,804
|
|
Income taxes payable
|
|
|
11
|
|
|
|
|
|
Real estate debt and capital leases
|
|
|
32,936
|
|
|
|
45,034
|
|
|
|
|
|
|
|
|
|
|
Total liabilities from discontinued operations
|
|
$
|
75,563
|
|
|
$
|
102,838
|
|
|
|
|
|
|
|
|
|
|
9
4. Computation of Income (Loss) per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
Ended
Sept 30, 2013
|
|
|
Three months
Ended
Sept 30, 2012
|
|
|
Nine months
Ended
Sept 30, 2013
|
|
|
Nine months
Ended
Sept 30, 2012
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
1,398
|
|
|
$
|
737
|
|
|
$
|
(132
|
)
|
|
$
|
(47
|
)
|
Net loss from discontinued operations
|
|
|
(74,092
|
)
|
|
|
(10,837
|
)
|
|
|
(21,863
|
)
|
|
|
(20,032
|
)
|
Net loss
|
|
|
(72,694
|
)
|
|
|
(10,100
|
)
|
|
|
(21,995
|
)
|
|
|
(20,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
|
|
16,432,241
|
|
|
|
16,399,241
|
|
|
|
16,422,208
|
|
|
|
16,388,569
|
|
Dilutive weighted-average shares outstanding
|
|
|
16,432,241
|
|
|
|
16,399,241
|
|
|
|
16,422,208
|
|
|
|
16,388,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per share from continuing operations
|
|
$
|
0.09
|
|
|
$
|
0.04
|
|
|
$
|
(0.01
|
)
|
|
$
|
|
|
Basic and diluted loss per share from discontinued operations
|
|
|
(4.51
|
)
|
|
|
(0.66
|
)
|
|
|
(1.33
|
)
|
|
|
(1.23
|
)
|
Basic and diluted loss per share
|
|
|
(4.42
|
)
|
|
|
(0.62
|
)
|
|
|
(1.34
|
)
|
|
|
(1.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Contingent Liabilities
The Company is subject to legal proceedings that arise in the ordinary course of business. In the opinion of Management, the aggregate
liability, if any, with respect to these actions, will not have a material adverse effect on the Companys consolidated financial position, results of operations or cash flows. Legal costs are expensed as incurred.
6. Long-Term Debt
On March 4, 2013, in conjunction with the sale of SCO, the Company amended its senior asset based revolving credit facility. The
amended credit facility provides up to $50.0 million, compared to $85.0 million previously. As a result of the amendment, the Company wrote off $0.4 million of previously capitalized financing fees. This non-cash expense was recorded
in interest expense in the first quarter of 2013 on the consolidated statements of income (loss).
On October 7, 2013, in conjunction with the sale
of U.S. LTL, the Company further amended its senior asset based revolving credit facility. Refer to Note 8 Subsequent Events.
7. Fair Value Measurements
The fair values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying
values because of the short-term nature of these financial instruments. The fair value of the Companys long-term debt, determined based on the future cash flows associated with each debt instrument discounted using an estimate of the
Companys current borrowing rate for similar debt instruments of comparable maturity, is approximately equal to their carrying value at September 30, 2013 and December 31, 2012.
FASB ASC 820-10-05 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value of the Companys cash and cash equivalents
and long-term debt are classified as Level 1 and Level 2 measurements, respectively. The fair values of accounts receivable and accounts payable and accrued liabilities are classified as Level 2 measurements.
8. Subsequent Events
On September 23, 2013, the Company reached an agreement to sell the shares of its U.S. LTL business unit to Data Processing LLC, a
company owned by Matthew Moroun. The sale was completed on October 7, 2013. The operating results of U.S. LTL have been recorded as a discontinued operation. Refer to Note 3 Discontinued Operations.
10
On October 7, 2013, in conjunction with the sale of U.S. LTL, the Company amended its senior asset based
revolving credit facility. The amended credit facility provides $26.3 million of availability, which is the amount of the letters of credit outstanding for the U.S. LTL business unit as of October 7, 2013. As part of the sale transaction, the
obligations under the letters of credit remain guaranteed by the Company. However, the purchaser has agreed to reduce such letters of credit to zero within 90 days from the date of closing of the sale. The maturity date of the credit facility
is also amended to January 6, 2014 and the Company may not draw any additional funds or request the issuance of any additional letters of credit. In addition, the Company is required to maintain $8.0 million in cash over the next
90 days from the date of sale, which may be transferred to the lending group as cash collateral if the combined calculated availability of the Company and U.S. LTL under the credit agreement is equal to or less than $25.0 million or the
total cash on hand of the Company is less than $12.0 million. Should a triggering event occur requiring the $8.0 million to be transferred to the lending group as cash collateral, the funds would be returned to the Company, in whole or in
part, upon the letters of credit outstanding being reduced below $8.0 million.
11
Item 2.
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Managements Discussion and Analysis of Financial Condition and Results of Operations
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The following discussion is intended to help the reader understand the results of operations and financial condition of our Company. It is provided as a
supplement to, and should be read in conjunction with, our unaudited consolidated interim financial statements for the three and nine months ended September 30, 2013 and the notes thereto as included in Item 1 of this Quarterly Report on
Form 10-Q,
as well as our Annual Report on Form 10-K for the year ended December 31, 2012.
Forward-Looking Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934, and applicable Canadian securities laws concerning Vitrans business, operations, and financial performance and condition.
Forward-looking statements may be generally identifiable by use of the words believe, anticipate, intend,
estimate, expect, project, may, plans, continue, will, focus, should, endeavor or the negative of these words or other variation
on these words or comparable terminology. These forward-looking statements are based on current expectations and are subject to uncertainty and changes in circumstances that may cause actual results to differ materially from those expressed or
implied by such forward-looking statements.
This Quarterly Report on Form 10-Q contains forward-looking statements regarding, but not limited to,
the following:
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the Companys expectation that revenue per hundredweight will increase in upcoming quarters until market conditions change;
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the Companys expectation that it will be able to reduce maintenance expense as a percentage of revenue;
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the Companys expectation that activity levels will continue to increase;
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the Companys ability to maintain days sales outstanding (DSO) below 40 days;
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the Companys intention to purchase a specified level of property and equipment and to finance such acquisitions with cash flow from operations, capital and operating leases and, if necessary, from the
Companys cash;
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the Companys ability to generate future operating cash flows from profitability and managing working capital to fund operating and capital requirements as well as service contractual obligations;
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the Companys operational plan will improve density and efficiencies leading to improved financial results; and
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the Companys ability to benefit from an improvement in the economic and pricing environment.
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Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Vitrans actual results, performance
or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that may cause such differences include but are not limited to technological change, increase
in fuel costs, regulatory change, changes in tax legislation, the general health of the economy, changes in labor relations, geographic expansion, capital requirements, availability of financing, foreign currency fluctuations, claims and insurance
costs, environmental hazards, availability of qualified drivers and competitive factors. More detailed information about these and other factors is included in Item 1A Risk Factors in the Companys 2012 Annual Report on Form 10-K.
Many of these factors are beyond the Companys control; therefore, future events may vary substantially from what the Company currently foresees. You should not place undue reliance on such forward-looking statements. Vitran Corporation Inc.
does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events, except as may be required under applicable securities
laws.
Unless otherwise indicated all dollar references herein are in U.S. dollars. The Companys Annual Report on Form 10-K, as well as all
the Companys other required filings, may be obtained from the Company at
www.vitran.com
or from
www.sedar.com
or from
www.sec.gov
.
12
CONSOLIDATED RESULTS
The following table summarizes the Consolidated Statements of Income (Loss) for the three and nine months ended September 30:
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For the three months ended Sept 30,
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For the nine months ended Sept 30,
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(in thousands)
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2013
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2012
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2013 vs 2012
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2013
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2012
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2013 vs 2012
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Revenue
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$
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49,373
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$
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49,626
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(0.5%
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)
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$
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146,036
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$
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143,504
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1.8%
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|
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Salaries, wages and other employee benefits
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6,637
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6,396
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3.8%
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21,446
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18,693
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14.7%
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Purchased transportation
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17,018
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17,814
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(4.5%
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)
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50,659
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52,004
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(2.6%
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)
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Depreciation and amortization
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769
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784
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(1.9%
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)
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2,372
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2,331
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1.8%
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Maintenance
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1,898
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2,241
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(15.3%
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)
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6,078
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7,640
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(20.4%
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)
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Rents and leases
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636
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694
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(8.4%
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)
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1,950
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2,084
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(6.4%
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)
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Owner operators
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12,882
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12,506
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3.0%
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37,856
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35,684
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6.1%
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Fuel and fuel-related expenses
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5,372
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5,075
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5.9%
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16,222
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|
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16,320
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(0.6%
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)
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Other operating expenses
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2,052
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2,177
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(5.7%
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)
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7,260
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5,917
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22.7%
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Other income
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(78
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)
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(30
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)
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160.0%
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(262
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)
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(41
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)
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539.0%
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Total operating expenses
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47,186
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47,657
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(1.0%
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)
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143,581
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140,632
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2.1%
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Income from continuing operations
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2,187
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1,969
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11.1%
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2,455
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2,872
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(14.5%
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)
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Interest expense, net
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655
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750
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(12.7%
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)
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2,536
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2,242
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13.1%
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Income tax expense
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134
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482
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(72.2%
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)
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51
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677
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(92.5%
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)
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Net income (loss) from continuing operations
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1,398
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737
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89.7%
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(132
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)
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(47
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)
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180.9%
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Discontinued operations, net of income taxes
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(74,092
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)
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(10,837
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)
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583.7%
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(21,863
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)
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(20,032
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)
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9.1%
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Net loss
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$
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(72,694
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)
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$
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(10,100
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)
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619.7%
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$
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(21,995
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)
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$
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(20,079
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)
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9.5%
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Income (loss) per share:
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Basic and diluted continuing operations
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$
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0.09
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$
|
0.04
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$
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(0.01
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)
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$
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Basic and diluted net loss
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$
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(4.42
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)
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$
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(0.62
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)
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$
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(1.34
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)
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$
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(1.23
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)
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Operating Ratio
(1)
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95.6%
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96.0%
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98.3%
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98.0%
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Discontinued Operations
On September 23, 2013, Vitran entered into an agreement to sell the shares of its U.S. Less-Than-Truckload business unit (U.S. LTL) to Data
Processing LLC, a company owned by industry veteran Matthew Moroun for cash consideration of $2.0 million and the assumption of $32.8 million of real estate and capital lease debt by the purchaser. In addition, the purchaser agreed to fund cash
deficits incurred by U.S. LTL from September 23, 2013 through to the date of closing of the transaction. The transaction closed on October 7, 2013 and the purchaser has funded $1.4 million of cash deficits incurred by U.S. LTL between
September 23, 2013 and October 7, 2013. As of September 30, 2013, the Company had received funding of $0.4 million for cash deficits incurred between September 23, 2013 and September 30, 2013. Prior to closing the sale, the
Company agreed to capitalize U.S. LTL with cash of $5.0 million. At September 30, 2013, the financial results of U.S. LTL have been recorded as a discontinued operation. As required by U.S. GAAP, the Company compared the fair value less costs
to sell of the net assets of U.S. LTL to its carrying value. As a result of the comparison, Vitran recorded a $49.7 million non-cash write-down in discontinued operations to write-down the U.S. LTL net assets to zero. The write-down was recorded as
a reduction in property and equipment within current assets of discontinued operations on the consolidated balance sheet.
On
February 12, 2013, Vitran signed an agreement to sell its Supply Chain Operation (SCO) services business to Legacy SCO Inc. (Legacy), an affiliate of Legacy Supply Chain, for $97.0 million in cash, subject to working
capital adjustments. On March 4, 2013, the Company completed the sale of SCO for $97.0 million in cash, and a portion of the proceeds was used to fully reduce Vitrans debt under its revolving credit facility. The Company received an
additional $1.8 million in proceeds in the second quarter of 2013 upon final determination of the aforementioned working capital adjustments. The Company recorded a gain of $85.3 million on the sale of its SCO business. The operating results and
divestiture of the SCO segment have been recorded as a discontinued operation.
13
Financial Overview
Revenue decreased 0.5% to $49.4 million for the third quarter of 2013 compared to $49.6 million in the third quarter of 2012. Revenue for the third quarter of
2013 was negatively impacted by a weaker Canadian dollar and was partially offset by an increase in fuel surcharge revenue, resulting in a reduction of $0.2 million in revenue. Excluding the impact of fuel surcharge revenue and a weaker Canadian
dollar, revenue improved 2.5%. For the nine months ended September 30, 2013, revenue increased 1.8% to $146.0 million compared to $143.5 million for the nine-month period ended September 30, 2012. Revenue for the comparable nine-month
period was also impacted by a weaker Canadian dollar and increase in fuel surcharge revenue. Excluding the impact of fuel surcharge revenue and a weaker Canadian dollar, revenue improved 7.4%.
Salaries, wages and other employee benefits increased 3.8% and 14.7% for the third quarter of 2013 and nine-months ended September 30, 2013,
respectively, compared to the same periods a year ago. This is due to an increase in shipment activity and 2.5% wage increase on February 1, 2013. The nine-month period includes $1.7 million in severance to the previous President and Chief
Executive Officer of Vitran, recorded in the second quarter of 2013.
Purchased transportation decreased 4.5% for the three-month period ended
September 30, 2013 compared to the same period in 2012. For the nine-month period ended September 30, 2013, purchased transportation decreased 2.6% compared to the same nine-month period a year-ago. The Company has been focused on
operating efficiencies within its intermodal business, which includes optimizing load factors and taking advantage of lower cost schedules on the rail. These efficiency and cost control initiatives resulted in a decrease in purchased transportation
costs as a percentage of revenue of 1.4% and 1.5%, for the three and nine month periods ended September 30, 2013, respectively, compared to the same periods a year ago.
Depreciation and amortization expense decreased 1.9% for the third quarter of 2013 compared to the same period in 2012. Depreciation and amortization expense
increased 1.8% for the nine-month period ended September 30, 2013 compared to the same period in 2012, and is primarily attributable to the completion of the Companys Winnipeg facility in the fourth quarter of 2012.
Maintenance expense decreased 15.3% and 20.4% for the three-month and nine-month periods ended September 30, 2013 compared to the same periods in 2012,
respectively. Maintenance expense has significantly decreased as a result of older equipment being sold. The Company purchased 77 new trailers, 30 new chassis and 82 new containers which will be delivered in the fourth quarter of 2013. As the new
trailing equipment is delivered, it is managements expectation that the Company will continue to reduce its maintenance expense as a percentage of revenue.
Rents and leases expense decreased 8.4% and 6.4% for the three-month and nine-month periods ended September 30, 2013 compared to the same periods in
2012, respectively. This is attributable to moving operations from the previously leased facility in Winnipeg into the new company-owned facility in the fourth quarter of 2012.
Owner operator expense increased in the third quarter of 2013 and nine-month period ended September 30, 2013 compared to the same periods in 2012. This
is attributable to the 4.9% increase in shipment activity in the Canadian LTL business unit for the nine-month period ended September 30, 2013 compared to the same period in 2012.
Fuel and fuel-related expenses increased 5.9% for the three month period ended September 30, 2013 and was essentially flat for the nine-month period
ended September 30, 2013, compared to the same periods a year ago. The Company utilizes intermodal and over-the-road moves to complete its linehaul function. Fuel surcharges charged to the Company by the rail and owner operators are included in
fuel and fuel-related expenses. Contributing to the increase in fuel and fuel-related expenses is a 3.8% increase in shipment activity, and an increase in the average fuel surcharge paid to the Companys transportation service providers in the
third quarter of 2013 compared to the same period a year ago. For the nine months ended September 30, 2013, the average fuel surcharge paid decreased compared to the same period a year ago, offset by an increase in shipment activity.
14
The Company incurred interest expense of $0.7 million in the third quarter of 2013 compared to interest expense
of $0.8 million for the same quarter a year ago. The Companys total balance sheet debt net of cash at September 30, 2013 is $23.2 million.
In
accordance with Financial Accounting Standard Board (FASB) Accounting Standard Codification (ASC) 740-10, the Company had recorded a valuation allowance for all U.S. deferred tax assets. The sale of SCO resulted in a taxable
gain in the United States, which the Company was able to offset with the utilization of its available net operating loss carry forwards from previous years. The Company recorded a consolidated tax expense of $0.1 million for the first nine months of
2013 compared to a consolidated tax expense of $0.7 million for the first nine months of 2012.
Net income from continuing operations for the 2013 third
quarter was $1.4 million compared to net income of $0.7 million for the same quarter in 2012. This resulted in a basic and diluted income per share from continuing operations of $0.09 for the third quarter of 2013 compared to a basic and diluted
income per share from continuing operations of $0.04 for the third quarter of 2012. The weighted average number of shares for the current quarter was 16.4 million basic and diluted shares, consistent with the basic and diluted shares in the
third quarter of 2012. For the nine months ended September 30, 2013, the Company posted a net loss from continuing operations of $0.1 million compared to a net loss of $0.1 million in the same nine-month period a year ago. This resulted in a
loss per share from continuing operations of $0.01 compared to a nominal loss per share for the 2012 nine-month period. The weighted average number of shares for the nine-month period of 2013 was 16.4 million basic and diluted shares,
consistent with the basic and diluted shares in the nine-month period of 2012. Loss from discontinued operations, including the gain from the sale of the SCO segment and the loss on U.S. LTL net assets, was $21.9 million for the nine months ended
September 30, 2013 compared to $20.0 million in the same nine-month period of 2012. As a result, the Company posted a net loss of $22.0 million or $1.34 basic and diluted loss per share compared to a net loss of $20.1 million or $1.23 basic and
diluted loss per share in the comparable nine-month period of 2012.
Operations Overview
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For the three months ended Sept 30,
|
|
|
For the nine months ended Sept 30,
|
|
(in thousands)
|
|
2013
|
|
|
2012
|
|
|
2013 vs 2012
|
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|
2013
|
|
|
2012
|
|
|
2013 vs 2012
|
|
Number of shipments
(2)
|
|
|
230,826
|
|
|
|
222,356
|
|
|
|
3.8%
|
|
|
|
675,917
|
|
|
|
644,187
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|
|
|
4.9%
|
|
Weight (000s of lbs)
(3)
|
|
|
424,393
|
|
|
|
435,186
|
|
|
|
(2.5%
|
)
|
|
|
1,280,234
|
|
|
|
1,256,185
|
|
|
|
1.9%
|
|
Revenue per shipment
(4)
|
|
$
|
213.90
|
|
|
$
|
223.18
|
|
|
|
(4.2%
|
)
|
|
$
|
216.06
|
|
|
$
|
222.77
|
|
|
|
(3.0%
|
)
|
Revenue per hundredweight
(5)
|
|
$
|
11.63
|
|
|
$
|
11.40
|
|
|
|
2.0%
|
|
|
$
|
11.41
|
|
|
$
|
11.42
|
|
|
|
(0.1%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipments increased 3.8% compared to the third quarter of 2012. This is attributable to the Canadian LTL management team
executing on its sales plan and leveraging Vitrans status as a high quality LTL transportation provider in the Canadian market place. The pricing environment continues to remain a challenge and although Vitran had success increasing revenue
per hundredweight in the third quarter of 2013 compared to the third quarter of 2012, this is mostly due to a change in business mix. Revenue per hundredweight remained flat for the nine months ended September 30, 2013 compared to the same
period in 2012. Management expects revenue per hundredweight to increase slightly in the upcoming quarters until market conditions change for example, should there be a reduction in capacity in the Canadian market place, management would
expect a positive impact on the Companys revenue per hundredweight.
During the third quarter of 2013, management focused on improving operating
efficiencies and continued its cost control initiatives to drive income from operations growth in the Company. The Canadian LTL operations load factor has increased over 2.0% in the first nine months of the year. At the same time, the Company
utilized lower cost off-peak rail schedules for its intermodal linehaul moves. In addition, management expects maintenance costs to continue to improve as the Company moves out older equipment and replaces it with the aforementioned new trailers and
containers purchased in 2013.
15
Lastly, management believes that additional shipment gains, future improvement in the Canadian pricing
environment, combined with a continued focus on operational and cost control initiatives, the Canadian LTL operation should be well positioned to improve income from operations over the long term.
Other
Mr. Rick Gaetz resigned as President and
Chief Executive Officer of Vitran effective April 4, 2013 and the Company recorded severance expense of $1.7 million. Mr. William Deluce was appointed Interim President and Chief Executive Officer effective the same day to replace
Mr. Gaetz.
The Board of Directors continues its evaluation of Vitrans remaining Canadian LTL business and is reviewing all appropriate
strategic options including the sale of the Company with a focus on enhancing shareholder value.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from continuing operations for the third quarter of 2013 generated $2.3 million compared to generating $1.5 million in the 2012 third quarter. Days
sales outstanding (DSO) in the third quarter of 2013 were 35.8 days compared to DSO of 35.0 days for the third quarter of 2012.
The
Companys future operating cash flows are largely dependent upon the Companys profitability and its ability to manage its working capital requirements, primarily accounts receivable, accounts payable, and wage and benefit accruals.
On September 23, 2013, Vitran entered into an agreement to sell the shares of its U.S. LTL business unit for cash consideration of $2.0 million and the
assumption of $32.8 million of U.S. real estate and capital lease debt by the purchaser. In addition, the purchaser agreed to fund cash deficits incurred by U.S. LTL from September 23, 2013 through to the date of closing of the transaction. The
transaction closed on October 7, 2013 and the purchaser has funded $1.4 million of cash deficits incurred by U.S. LTL between September 23, 2013 and October 7, 2013. As of September 30, 2013, the Company had received funding of
$0.4 million for cash deficits incurred between September 23, 2013 and September 30, 2013. Prior to closing the sale, the Company agreed to capitalize U.S. LTL with cash of $5.0 million. In conjunction with the completed sale of U.S. LTL,
Vitran amended its senior revolving credit agreement to reduce the borrowing capacity to $26.3 million, which is the amount of the letters of credit outstanding for the U.S. LTL business unit as of October 7, 2013. As part of the sale
transaction, the obligations under the letters of credit remain guaranteed by the Company. However, the purchaser has agreed to reduce such letters of credit to zero within 90 days from the date of closing of the sale. The maturity date of the
credit facility is also amended to January 6, 2014 and the Company may not draw any additional funds or request the issuance of any additional letters of credit. In addition, the Company is required to maintain $8.0 million in cash over the
next 90 days from the date of sale, which may be transferred to the lending group as cash collateral if the combined calculated availability of the Company and U.S. LTL under the credit agreement is equal to or less than $25.0 million or the total
cash on hand of the Company is less than $12.0 million. Should a triggering event occur requiring the $8.0 million to be transferred to the lending group as cash collateral, the funds would be returned to the Company, in whole or in part, upon the
letters of credit outstanding being reduced below $8.0 million.
On March 4, 2013, the Company completed the sale of its SCO business to Legacy for
$97.0 million in cash. The Company used a portion of the proceeds to fully reduce its outstanding debt under its senior revolving credit facility. During the second quarter of 2013 the Company received additional proceeds of $1.8 million upon final
determination of the working capital adjustment and paid income taxes of $1.4 million related to the sale.
As at September 30, 2013,
interest-bearing debt from continuing operations was $49.1 million consisting of $48.0 million of Canadian real estate term debt and $1.1 million of capital leases. There were no amounts outstanding under the Companys senior revolving credit
facility at September 30, 2013, except for outstanding letters of credit. At December 31, 2012, interest-bearing debt from continuing operations was $60.3 million consisting of $8.5 million drawn under the syndicated asset based revolving
credit facility, $50.5 million of Canadian real estate term debt and $1.3 million of capital leases.
16
For the nine months ended September 30, 2013, the Company repaid $0.8 million of real estate term debt, $0.1
million of capital leases and $8.5 million of its revolving credit facilities. At September 30, 2013, the Company had $25.9 million of available cash on its balance sheet. The Company was in compliance with all terms under its credit agreements
at September 30, 2013.
The Company generated $0.3 million in proceeds on the divestiture of surplus equipment in the first nine months of 2013.
Capital expenditures amounted to $0.7 million for the first nine months of 2013 and were funded from cash on hand.
The table below sets forth the
Companys capital expenditures for the three and nine months ended September 30:
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For the three months
ended Sept 30,
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For the nine months
ended Sept 30,
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(in thousands of dollars)
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2013
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2012
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2013
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2012
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Real estate and buildings
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$
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111
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$
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2,296
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|
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$
|
530
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|
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$
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4,951
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|
Trailing fleet
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|
|
6
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|
|
|
7
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|
|
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1,779
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Information technology
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|
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3
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|
|
|
9
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|
|
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53
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|
|
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273
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Other equipment
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|
4
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|
|
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36
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|
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71
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124
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Total
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$
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118
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$
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2,347
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$
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661
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$
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7,127
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Management estimates that cash capital expenditures for the remainder of 2013 will be between $1.0 million and $1.5 million.
The Company may enter into operating or capital leases to fund the acquisition of specific equipment should the business levels exceed the current equipment capacity of the Company. The Company expects to finance its capital requirements with cash
on-hand and operating or capital leases.
The Company has contractual obligations that include long-term debt consisting of term debt facilities, capital
leases for operating equipment and off-balance-sheet operating leases primarily consisting of trailing fleet and real estate leases. Operating leases form an integral part of the Companys financial structure and operating methodology as they
provide an alternative, cost-effective and flexible form of financing.
The following table summarizes our significant contractual obligations and
commercial commitments as of September 30, 2013: