Contrans next to shed income-trust cloak

WOODSTOCK, Ont. — Trucking’s most steadfast defender of the income trust model has changed his mind.

Contrans, one of the transport industry’s last income-trust holdouts, is converting back to a corporation.

On Wednesday, Contrans Chairman and CEO Stan Dunford reported that "the advantages originally offered by the income-trust model to Contrans and its unitholders have been greatly diminished by the poor business environment."

Therefore, he added, the board of trustees passes a resolution that it "intends to proceed with and to recommend to unitholders to approve converting the [income] fund back to a corporate entity."

The announcement came at Contrans’ second-quarter meeting of unitholders and about 15 months after Dunford said the change to corporate status probably wouldn’t happen. 

Though, immediately after Ottawa announced in 2006 it would tax income trusts like other businesses, Dunford became one of the first trucking execs to cast doubt on the future of income trusts. But since then, Dunford has held on to the income trust model while other public trust carriers like TransForce, Mullen and Andlauer converted from trust to corporation. 

"In spite of recent reports that the recession may have ended, management has not seen sufficient evidence of an economic recovery and remains skeptical as to the prospects for significant improvement in the near term," he said.

Starting in 2011, income trusts will be subject to standard taxation, and when the federal government announced the legislation stripping the trusts of their special status, the trusts were given a rollover period, during which time they could convert without penalty. That get-out-of-jail-free period is drawing to a close.

Dunford said he anticipates the conversion will come into effect Dec.1 of this year.

Conversion aside, Dunford reported that even though operating results for 2009 declined compared to 2008, "the current year’s results have been buoyed by the diversity of Contrans’ operations and customer base.

"We are also," he said, "encouraged by the discipline and determination with which management has responded to deteriorating business conditions. These efforts have produced new sources of revenue and have significantly reduced costs."

"Contrans," Dunford added, "remains fundamentally sound and profitable. It possesses a solid balance sheet, the strength of which management is fiercely committed to preserving."