Q2 2015 TransForce Inc Earnings Call

Jul 24, 2015 AM EDT
TFI.TO - TFI International Inc
Q2 2015 TransForce Inc Earnings Call
Jul 24, 2015 / 01:00PM GMT 

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Corporate Participants
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   *  Alain Bedard
      TransForce Inc. - Chairman, President, & CEO 

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Conference Call Participants
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   *  Mona Nazir
      Laurentian Bank - Analyst
   *  Jason Seidl
      Cowen and Company - Analyst
   *  Benoit Poirier
      Desjardins Capital Markets - Analyst
   *  Fadi Chamoun
      BMO Capital Markets - Analyst
   *  Walter Spracklin
      RBC Capital Markets - Analyst
   *  Hilda Maraachlian
      Cormack Securities - Analyst
   *  Cameron Doerksen
      National Bank Financial - Analyst
   *  Kevin Chiang
      CIBC World Markets - Analyst
   *  Turan Quettawala
      Scotiabank - Analyst

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Presentation
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Operator   [1]
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 Good morning, ladies and gentlemen. Welcome to TransForce second-quarter 2015 results conference call.

 (Operator Instructions)

 Before turning the meeting over to Management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Friday, July 24, 2015.

 I will now turn the conference over to Mr. Alain Bedard, Chairman, President, and CEO. Please go ahead.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [2]
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 Thank you, operator, and good morning, ladies and gentlemen. Our 2015 second-quarter results press release was issued yesterday after market close.

 Let me start by giving you an overview of the most important performance metric of the quarter, and then I will provide some details for each operating segment. Economy in Canada has contracted since the beginning of this year. Reduced business activity in the oil patch has had more far-reaching impacts than originally anticipated.

 As a result, our specialized truckload division servicing the oil and gas industry were hit hard. Low oil prices also further impacted our US rig moving activity but we reacted quickly to reduce capacity to eliminate operating losses.

 Despite these realities, TransForce had a very solid quarter mainly due to the positive contribution of acquisition made last year. The decentralized operating structure we built over the years really allowed us to respond quickly to specific economic circumstances and helped us mitigate the effects of challenging business environments at the local level.

 Total revenue for Q2 was CAD1.1 billion, up 23% over the comparable quarter last year, net of fuel surcharge revenue increased 27%. Adjusted EBIT was CAD97.8 million, up 23% over last year and represented 9.9% of revenue before fuel surcharge. The increase in EBIT was basically due to the contribution from the significant acquisition we made this past year. Adjusted net income rose to CAD71.3 million or CAD0.69 per diluted shares, up from CAD53.6 million or CAD0.55 per diluted shares in the prior period.

 We also managed to generate a very healthy free cash flow of CAD98.2 million or CAD0.97 a share in the second quarter. Higher cash flow from operating activities as well as the sales of property and equipment drove this increase.

 We repurchased 1.9 million common shares for CAD52.1 million, provided dividend payment for CAD17.4 million, and reduced our long-term debt by a net amount of CAD6.1 million. I will now give you some insight into each of our business segments.

 In our P&C, revenue before fuel surcharge was CAD305 million, up 6% over last year. Most of this increase is due to the Hazen Final Mile acquisition concluded this past May with trailing 12 months revenue of $45 million US. Package and Courier EBIT declined 3% in the second quarter of this year, and EBIT margin decreased slightly to 8.7% as increased transportation costs more than offset benefits from right sizing activities.

 In LTL, revenue before fuel surcharge was down slightly to CAD198 million compared to CAD204 million last year. Tonnage was down slightly but the dollar yield per ton was up 1.9% in the second quarter. Also, the stronger US dollar had a positive effect on the segment's Q2 revenue.

 EBIT in LTL decreased CAD0.3 million but EBIT margin was up 10 basis points versus last your to reach 10%. Lower equipment, terminal and admin, employee costs resulting from consolidation helped our margin. In Truckload, year-over-year revenue before fuel surcharge more than doubled to CAD366 million, essentially because of the Transport America and Contrans acquisition we made last year as well as a favorable foreign 1.2 in Q2 -- exchange impact, sorry.

 Excluding acquisition, revenue decreased by 11% mainly due to the weaker results from our Alberta based division. EBIT in Truckload grew from CAD20.9 million to CAD41.1 million year-over-year while the margin remains slightly stable at 11.2%. Given the revenue decrease, our efforts to align costs with demand allowed us to maintain operating margins.

 In the Waste Management segment, total revenue increased by 15% CAD55.7 million. The increase comes primarily from the Veolia acquisition as well as organic growth from the landfill operation at the Lafleche environmental complex in Ontario. EBIT in this segment was CAD12.8 million compared to CAD11.9 million during the same period last year. EBIT margin was 22%, down 1.6% from last year basically because of higher depreciation expenses at our landfill. Strategic initiatives to optimize the Veolia operation is now well underway, and we are seeing some positive impacts on margins.

 Finally, in our Logistics and Other Services segment, revenue grew by CAD7.7 million or 11%. CAD23.9 million comes from the Cornerstone Logistics which is part of the Contrans group. The growth in our existing Logistics division was CAD1.4 million in Q2. Our revenue from rig moving was down CAD17.6 million in the quarter. Adjusted EBIT was down by CAD4 million year-over-year.

 In rig moving services, the adjusted EBIT was negative CAD8.8 million. So going forward, we expected that adjusted EBIT for the rig moving services to be closer to breakeven the second half of 2015.

 In terms of our outlook, we expect that the Canadian economy will continue to be weaker than initially anticipated as the impact of the downturn and the oil price will continue to be a significant factor in the Canadian economy.

 On the upside, an uptick in consumer confidence and spending in the US is generating more businesses in the P&C and TL segments. Given these economic circumstances, we have reassessed our anticipated results for 2015 and now expect all revenue to reach CAD4.3 billion, adjusted EBITDA should be between CAD510 million and CAD530 million, and basic adjusted EPS in the neighborhood of CAD1.97 to CAD2.12 range. Finally, we expect free cash flow to be slightly over CAD300 million.

 Given the decentralized operation structure, we are confident that we have the flexibility and the agility to effectively adapt to evolving market conditions. While organic growth will remain limited over the short term, revenue and EBIT will be driven by continuous efficiency improvements, cost control, asset rationalization, as well as our disciplined acquisition strategy. It is gratifying that our strategy of selective accretive acquisitions over the past year has proven effective growing our shareholder value and buy back shares which we will continue to do.

 At this moment, we will be pleased to answer your questions. So please, operator.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions)

 Mona Nazir, Laurentian Bank.

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 Mona Nazir,  Laurentian Bank - Analyst   [2]
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 Good morning, Alain.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [3]
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 Good morning, Mona.

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 Mona Nazir,  Laurentian Bank - Analyst   [4]
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 Just a couple questions for me here. Thank you for the update on the guidance. You provided color on how the back half of the year is going to look, and overall it's about a 5% reduction in EBITDA versus what you were previously expecting. I'm just wondering how should we think about activity levels as we move into 2016? Do you think that tonnage will continue to be under pressure? And on that, you mentioned some right sizing of operations in the quarter. Do you think that staffing levels will remain in the truckload and rig moving divisions or more downsizing to come?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [5]
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 Okay. First of all, when we were making our plan in 2014, October, September, we never anticipated the backlash of this oil situation that affected so much, Alberta, Saskatchewan, and also some ripple effect to Ontario. With a $0.75 or CAD0.78, we thought if this happens, Ontario and to certain degree maybe Quebec manufacturing base, although a lot of that has disappeared over time, should get a boost. Well, we had a major issues with Alberta and Saskatchewan. We didn't get the benefit in Ontario so, that being said, this is a story after two quarters in 2015. We think that back half of this year, 2015, our Waste Management will have a very solid Q3 and Q4. In our P&C business, our same day last mile is going to have a much stronger last six months of the year than the first six months of the year.

 Our Canadian guys are doing a fantastic job of growing the business. We anticipate some new business coming in in Canada. Our US guys are doing a fantastic job. We are downsizing in terms of people, yes, but it's because we have better tools and then we can do a better job. In terms of our last -- our next-day service in our P&C, with all the moves that will be taking place in Q3, we will have about CAD2.5 million of severance cost because probably 100 people will be let go in Q3, but this is just being more efficient and adapting to a volume that is stable. So this is why all in all, we feel pretty good with the last six months of this year.

 The rig moving situation in the US has been a disaster for us. We thought we had the dream team over there, and as a matter fact, maybe they were dreaming more than the reality. They always thought that the markets would start to turn around but it never happened, so what we did is we closed down that office in Denver; that was done in Q2 so it cost a lot of money to do that. We shut down all of the terminals except three, so the three terminals that remain now are in operation are in North Dakota, Texas, and Louisiana. These are the best-performing terminals that we have today. If I look at my month of June and my month of July, we are operating very close or breakeven point now and that is very, very good compared to what we were going through in the month of April and May.

 We had to make a change so now we have a new executive team, which is mostly some of our Canadian team out of Edmonton that is supervising what's going on in the US, and that's why I feel very good about what's going to be happening in the last six months of the year. In our LTL, we said it before, it's a very difficult market in the east and our gold markets, which was really Alberta, this was where we were the most profitable. We are down 20% in revenue. We don't anticipate any improvement there because oil prices seems like it will stay depressed for a long time. Maybe a year, maybe two years, nobody knows really, so we're getting adjusted to that new reality that Alberta, it's never going to be like it was a year ago or two years ago. That is what we've been facing. This will still be a situation for us in Q3 and Q4 of this year and into 2016. But that being said, our Truckload division are doing very well with very, very little growth in volume.

 If you look at our Canadian operation, our base Truckload operation is doing fine, our profitability is improving, our cost is really under control doing better, and the only issues we have in our Truckload is really what is Alberta-based. Alberta based we have been suffering in Q2 and in Q1. We believe that Q3 and Q4 will see a slight improvement because the oil sands is where we have most of our business is going to improve. They were affected by forest fires and all; everything went wrong in Q2 for us in that province. But basically we feel good that this situation will improve. So that being said, 2016, I don't want to say it's still too early to say anything about 2016. We have to see Q3 of this year. How good we are going to be improving our situation. Then we are preparing our plan for 2016 then I'll be in a better position probably on the next conference call to give you a little bit better color on 2016, but it's still too early to talk about 2016.

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 Mona Nazir,  Laurentian Bank - Analyst   [6]
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 Perfect. Thank you. That was great color. Secondly here, you'd mentioned two main priorities for this year. Number one was debt reduction and number two was a potential divestiture of the waste management or abstracting additional value from that. On the debt reduction side, you generated really solid free cash flow this quarter, nearing CAD100 million. Much of that went to the buyback with some on the debt side. How do you think about debt reduction versus your share buyback? And of the CAD300 million pegged for free cash flow generation this year, how much do you think that will go towards debt reduction?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [7]
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 First of all, our debt is up because of the dollar. We have $600 million of US dollar denomination debt. So that $600 million at the end of December of last year was worth, I don't remember the exchange rate at the time, but now we are up to $1.25, $1.30 US, so that's one of the reasons why our debt is up. But with this kind of exchange rate based on our plan, our debt at the end of December of 2015 is going to be in the neighborhood of CAD1.5 billion, so we are at CAD1.6 billion something at the end of Q2, so the debt will be reduced by probably in the neighborhood of CAD100 million.

 In terms of buyback, all the buyback was funded by asset sales, real estate, not the equipment because the equipment we do a lot of equipment sales and this is part of our business. This is just normal that we do about CAD30 million to CAD35 million of equipment that we are selling every year. But what has been very good for us in Q2 is our real estate department has done a great job of selling buildings that we don't have any use for. So this CAD50 some million of building that we sold, that's the cash that we'll use to buy back the stock. It had no effect on the debt. What I'm saying is that going forward with a CAD24 stock, for sure we're going to buy a lot of stock. So I've got plan to buy back more stock in Q3 and Q4 because we're going to be selling more of these excess real estate. We are working, our real estate department is working on three property right now that will probably close between now and the end of Q3 or at maybe Q4, so we'll see more action towards debt as long as our stock is depressed like it is right now, we'll do more. Because to your second question on the waste side, we are working on it. It takes time. We anticipate that something is probably going to be in the cards for the end of this year, 2015, and we have lots of other projects that will create value for our shareholders. So I would be stupid with what I'm working on seeing the depressed valuation of our stock, if I don't say to my broker, please buy more stock.

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 Mona Nazir,  Laurentian Bank - Analyst   [8]
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 Perfect. Thank you. I will step back in queue.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [9]
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 Okay.

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Operator   [10]
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 Jason Seidl, Cowen and Company.

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 Jason Seidl,  Cowen and Company - Analyst   [11]
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 Good morning, Alain. How are you?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [12]
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 I'm good, Jason. How are you doing?

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 Jason Seidl,  Cowen and Company - Analyst   [13]
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 Earnings season, just trying to get through it. I wanted to focus a little bit on the truckload side and [P came out], so I know last time we spoke you were conducting a meeting of the minds, if you will, on a different truckload entities. Could you tell us where you guys are at and what you think the future look of your truckload business is going to be like? Is it going to start skewing more to owner operators? Just let us know.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [14]
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 In the US, I could not say that, Jason. Our TCA team has done a great job of adding more drivers to our fleet, and I'm very happy with what's going on there with Keith and the market there. So the US, it's not really an issue. But in Canada, what I can tell you though is that if I look at my truckload operation, just had a meeting with the Clark guys about two days ago, and we're adding owner-ops over there. In our P&C sector in Canada with the Canpar Loomis, we are adding owner-ops. And we had to let go some drivers because if you look at a small terminals, you cannot manage five or six drivers with a manager, it's not cost efficient. But if you turn these five or six guys into four or five because with a IC, you always need less than drivers. So if you change that to four or five ICs, sure, we'll do very good with that. This is what's going on now.

 But on the US side, what I can tell you over and above that is that Hazen last mile acquisition is going to do very, very good for us. And what we are doing now, let me just explain to you what we are doing, is that Hazen was really focused in servicing one niche industry that is also being serviced by Dynamex which is the world of the OD, Office Depot, OfficeMax, Staples, and all that, and what we are doing now is that more and more we're going to move business away from Dynamex into the specialty Hazen carrier. And now Dynamex focus is going to be more onto the eCommerce sector. We just added, you know that eCommerce guy that came out finally with a profit just a few days ago? Well, you know we just started in three markets for him and we are doing great. Finally, we are doing great with these guys and we are in discussion with more markets with them. That is now the focus of the Dynamex team there is really move away from that business of these customers in the stationary and all that, move way from these guys, transfer that to the specialty carrier that we have within the family which is Hazen.

 And we did the same thing in Canada. If you look at Canada, ICS is really a specialty niche guy that services the financial, the optical, to a certain degree dental and hearing aids, and all that. So they are niche carrier and ICS is doing very well. So we are try to replicate with Hazen. Hazen, that's the only thing they've been doing so they are the specials. They are the pros. So that's what we are doing with them, and at the same time that leaves more time for our Dynamex team to focus more on the eCommerce to try to get more of that profitable eCommerce business that we believe, finally, there's a change in the US and a lot of these eCommerce guys that used to deal a lot with the next day guys, the big guys, in some market where it makes sense. They are moving into a last mile guy like us and others. This is why I was saying earlier, I feel very, very good with our Q3 and Q4 in our Dynamex US operation. And the same thing in Canada, too.

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 Jason Seidl,  Cowen and Company - Analyst   [15]
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 Alain, that's great cover. Can you just go in a little bit more to the last mile eCommerce exposure? The initial read I think so far from peak season from a lot of the transportation companies has been modestly up except for those I think that are more skewed just for online retailing. Could you tell us what your customers are telling you to expect?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [16]
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 Exactly. That eCommerce guy I was talking about, those guys they anticipate some major growth in their revenue. And us, we are servicing them only in three small markets. We do San Diego. We do Tampa right now. We are going to be doing Orlando soon. We are in discussion with LA, so this is why I'm saying that by having our Dynamex team more focused servicing this area of the business, now that we have Hazen in the family, it is going to be wonderful for us. And I think we will be in a better position to grab more of that changes in the approach to the market by the eCommerce guys.

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 Jason Seidl,  Cowen and Company - Analyst   [17]
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 What about the business that you were doing for Google?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [18]
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 That's been slow. That's been slow. We are doing well in some markets and others not so much. So I think that the guys over there are working on the product because don't forget, we are piggybacking on them. If the product goes well, we do well, and it's been slow. In some markets like on the west coast, they are doing very good. And in New York, for instance, but in other markets not so good. I think that the guys are according to what my guys are telling me is the team there is looking at probably adapting the product, making some changes to be more in the position to compete and offer a solution to the brick-and-mortar guys. Because that is really what these guys are trying to do.

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 Jason Seidl,  Cowen and Company - Analyst   [19]
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 Okay. Alain, thank you so much for the time. I appreciate it.

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Operator   [20]
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 Benoit Poirier, Desjardins Capital Markets.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [21]
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 Thank you very much. Good morning, Alain.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [22]
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 Good morning, Benoit.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [23]
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 Just to come back on the previous question on the waste management divestiture, just wanted to know how close are you and what makes you confident to make an announcement in 2015?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [24]
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 I have been working on it for a long time, Benoit. We have looked at all kinds of possibilities, and finally I think that the recipe is in place, but we have the recipe now. But it's the summer so in the summer, you know what happens. A lot of people are on vacation. So that delays -- the cook is on holiday right now. Not me, but the guy in charge of the recipe. That means that it's been delayed a bit because it's summer but for sure, come Q3 or Q4, we'll come with something that's going to start -- we need to bring the value. When you look at the valuation of TFI today, I don't know, 10, 12 times earnings which is completely stupid, but it's the reality. So you think that makes sense to have CAD50 million of earnings coming from waste to be valued so cheap? It doesn't make any sense. We've got to do something, so that's why I'm saying something will happen. I have been working on it for a long time. It's my priority and the same thing is -- the same priority is the last mile in the US. It is also my second priority. I see a lot of potential there. That's why as I was explaining to Jason with the Hazen thing there, now the new focus of the Dynamex team, we are going to do very good there. So let's find a good solution for the ways which I think is soon, and then we will probably wait -- work on a great solution also for the last mile, the asset light business that we have within TFI that's not valued at all properly.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [25]
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 Okay. Okay. Very good color, Alain. You mentioned you still have CAD75 million of assets for sale. I'm just wondering what the time frame for selling those assets?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [26]
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 My real estate guys which have been very busy, are telling me that in Q3, we're going to be disposing of about CAD10 million, and I'm pushing these guys. We need not CAD10 million, we need CAD20 million. So the market because low interest rates, we have some very attractive properties that we don't need because we are becoming more and more efficient and so we have three that they are working on. I just advised them this morning that there's a fourth one that they are started working on it. So it's not going to be CAD50 million in Q3 and Q4, but the goal is to be close to CAD20 million in three and four, and all of that cash will be used to buy back stock because at CAD24, I'm telling you, we are buyers.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [27]
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 Perfect. Okay. So CAD20 million consolidated in total for the second half, right?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [28]
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 That's on the real estate sale, yes.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [29]
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 Okay. Perfect. Now if we look at your EBIT margin for P&C has been down 80 basis points year over year. You mentioned that you experienced negative organic growth because of the nonrenewal of unprofitable business so -- (multiple speakers).

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [30]
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 That's one thing, but at the same time, Benoit, we are growing our business in the US so it looks bad because year over year it's like we are going down, but as a matter fact' we are growing our business. So one account that we have been growing our business with in Texas is that this account decided to let go all of its drivers in Houston, San Antonio, and Austin. So all of this happened in Q2. But think about the number of drivers that these guys have let go. We are talking hundreds of people. So when you take over an operation like that and they let go 150 drivers, and you take it overnight over a period of a month, that creates big pressure on the system. So if you think that you're going to make money in the first day, it's impossible. There's a transition period. There's a cost. That's a long-term contract. But the first three months, you are not making any money. As a matter fact, we were losing money. This is I'm talking now the customer is asking us for Dallas, and I said to my guys, hold on. We can't -- let's solve the issue that we have within Texas and then we'll keep Dallas for last. But that's also affected us in Q2 so Q3, already we see that the business is now better under control because you understand, it's a transition. You take over the business, you know, the drivers our own drivers, they don't know the business. They're new. You are talking in Houston, 150 guys. That's a big city. That's what also one reason why our profitability in Q2 was a little bit affected. Severance also affected us in Q2, and severance will affect us even more in Q3 because like I said earlier, we are going to have about 100 people that will be let go in Canada and in the US in our P&C business. That's going to cost me CAD2.5 million.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [31]
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 Okay. And what about because you are focusing a lot growing your eCommerce initiative, and can you comment a little bit about the growth potential? And also I question the profitability of eCommerce given it's still early days. Could you provide more color on that, Alain?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [32]
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 The story has always been the same. With the eCommerce guy, nobody made money. And us, we kept on pushing back and say no, we are not going to work for nothing. We are not going to do that. The big eCommerce guy was not a good customer of ours. He was probably a customer of somebody else, but not us. But there's been some changes in the US with the next day guys, pushing back and saying we need -- with the story of Q4 of this year, I mean of last year, Q4 of the year before, so there are some pushback and those big eCommerce guy are building a distribution network to use less the next day guys was are expensive. That being said, this is ongoing now. For instance, the big eCommerce guy is just opening up in Orlando. That's what I'm saying. We're going to get the Orlando business pretty soon. What's happening is all that, and at the same time, us, we are saying to those eCommerce guys, we are not in the business of practicing deliveries. We are the business of making money. We work for our shareholders. We don't work for the volume. We don't work for the top line. We are not a 2% bottom line company. So, if you can find a guy at 2%, well deal with this guy.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [33]
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 Okay. Okay.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [34]
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 But we can't find the guy or there's not enough guys, so now those guys are talking to us and we are happy to see the discuss of them coming on board with us at a reasonable price where we can make a living. And where we could give a return to our shareholders. So that's what's happening now, and this is why I was explaining the vision with Hazen taking care of a lot of our business in the US, great business that we have in that sector so that the other team, Dynamex, and the super team we have there can be more focused in growing our healthcare business in the US, growing our eCommerce business because healthcare is about some 20% of our revenue. Growing that, growing the eCommerce profitable, and that's what we're doing now.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [35]
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 Okay, and last quick question just on the removing. It seems that you are running at about CAD45 million on the run rate basis a year.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [36]
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 Less than that, Benoit. We are running about CAD35 million.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [37]
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 CAD35 million. Okay. What is the goal going forward? Do you expect to keep those three facilities or the goal is totally to exit that and what could be the timeframe on the exit?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [38]
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 Like I said to my guys, energy is cyclical. Now that we cut the bleeding because under the previous dream team that I had, those guys were dreamers and I was losing money every day with their dream. With the good leadership of Bob McGonigal and his team, I feel confident that at least we'll be able to operate in those three terminals and not lose money in a very bad environment. That being said, at one point the tide will turn. The wind will turn around. My guys are telling me in Texas for the first time they are adding some rigs. Small, five, six, seven rigs, it's nothing. They were 1,800 rigs. They were down to 600, so if you add six, you are not adding a lot, but at the same time a lot of other truckers have downsized. A lot of other truckers cannot support the business environment right now, and are going out of business or just selling assets. So that's why I'm saying is that keep the boat afloat, CAD35 million for TFI is nothing. It's nothing. And maybe when the better times comes by, we could start to make a lot of money or a little bit of money but it's going to be small for us. But at least we save jobs as much as we can, and we protect our asset base.

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 Benoit Poirier,  Desjardins Capital Markets - Analyst   [39]
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 Okay. Thank you very much for the time, Alain.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [40]
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 Benoit, it's a pleasure.

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Operator   [41]
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 Fadi Chamoun, BMO Capital Markets.

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 Fadi Chamoun,  BMO Capital Markets - Analyst   [42]
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 Good morning, Alain.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [43]
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 Good morning, Fadi.

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 Fadi Chamoun,  BMO Capital Markets - Analyst   [44]
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 Thank you for all this good color. All of the topics I wanted to discuss have been discussed, but maybe if we can begin into the demand a little bit. So when you look at it in the east and some of the sort of Canadian dollars set of markets, have you seen any sense of things are getting better as the year progress over the course, no?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [45]
------------------------------
 No, not yet. Not yet. And this is a big disappointment that we had is we thought in theory that okay, oil is down CAD50, dollar will drop, Canadian dollar will drop in value, that's going help the manufacturing guys in Ontario and Quebec, so that will help us in our Truckload division to a certain degree, maybe a little bit of our LTL. But up to now, we haven't seen anything. Now, what the guys are telling me is that inventory levels are to the ground. So my guys, what they believe in is that Q3, probably mid-August, we should start to see some action. But right now, no.

------------------------------
 Fadi Chamoun,  BMO Capital Markets - Analyst   [46]
------------------------------
 Okay. And so if you envision a market where western Canada stabilizes at some point in the second half, and the east starts to maybe grow at a modest rate, so should we think we can transition into some neutral to positive organic growth sometime later this year?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [47]
------------------------------
 In theory, Fadi, you are right. In theory, the Canadian dollar being at $0.75, we should start to see things moving in Ontario. We haven't seen it. Our guys think it's going to happen, but we haven't seen it. If interior were right, I mean the Bank of Canada lowered its interest rate a few days ago to 0.5%, that tells you the story is that the Canadian economy is not moving at all. It's stable and maybe a little bit down. But the Canadian dollar is being so low now, are we going to start, according to our best information, is we should be busy in the fall. But I have reviewed our guidance to some lower numbers because based on what I have seen so far in Q2 and in Q1, it's been a major disappointment for me now. For sure, this CAD8 million of operating loss I have in my rig moving in Q2, this is not going to happen again. Because we've got rid of all the people and all the -- we shut down the Denver ad office. We closed down all the terminals, and we took all the hit in Q2, so that's done. So that being said, that's why we are cautious because in October of last year, we were optimistic. Now we are more cautious. This Alberta situation is really bad, and I think it's going to get worse. I think we have a situation there where a lot of people are losing their jobs. Their salary is rolled back, and they have a new government there. Taxes are increased and all that, so that's why we are very cautious about the western Canada. That's why overall, where we are very optimistic is in the US, our same-day last mile thing in the US. Same thing in Canada, too, with last mile. Our P&C because of all the action, if you let go 100 people, it's sad. We don't like to do that. But this is what we need to do to be more efficient. So we're going to take a hit of CAD2.5 million in Q3. But the payback is short.

------------------------------
 Fadi Chamoun,  BMO Capital Markets - Analyst   [48]
------------------------------
 Okay. You provided some good color about the eCommerce opportunity in the US and last mile so maybe that's a part of the pie that's growing, the pie is growing in Canada as well. Can you characterize your opportunity here in terms of that market for you?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [49]
------------------------------
 Yes, well in terms of numbers, it still hard to say, Fadi, but what I can tell you in principle, is that finally the largest eCommerce guy in the world, maybe not the world but in North America, we were finally able to service their customer and make money and have a reasonable return. And the only reason I think that this is happening is because the next day guys, the big guys in the next-day service, they say you know what, we don't want that much volume in Q4 or in Q3. It's too expensive for us. We don't have our return on that so guys, find another solution. Those eCommerce guys are building DCs so when you have a DC with the same-day guy, you can service an area of, depending on the city, maybe 50 miles. That is where we have the opportunities.

------------------------------
 Fadi Chamoun,  BMO Capital Markets - Analyst   [50]
------------------------------
 Great. Thanks for the color.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [51]
------------------------------
 Okay, Fadi. Take care.

------------------------------
Operator   [52]
------------------------------
 Walter Spracklin, RBC.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [53]
------------------------------
 Thanks very much. Good morning, Alain.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [54]
------------------------------
 Good morning, Walter.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [55]
------------------------------
 Just to follow-up on Fadi's question in the east, you said it's not getting better from the Canadian dollar, is it getting worse at all or is it just kind of stable?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [56]
------------------------------
 No, it's not getting worse. What my guys are saying is that the volume is okay. We are not very busy, but we are busy. But we haven't seen any uptick based on the theory that a low Canadian dollar should help the Canadian manufacturing to export into the US.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [57]
------------------------------
 Got it. Just wanted to make sure.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [58]
------------------------------
 We haven't seen that yet. No, we are not down. The only place we are down in our truckload is in Alberta.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [59]
------------------------------
 Right. Okay.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [60]
------------------------------
 And we believe that this reduction in revenue that we face in Q2, it relates to the oil sands. Some of our customers have been shut down in Q2 because of forest fire and all kinds of reasons. We believe that this is going to improve. It's not going to be as good as last year out west, but it's going to improve to a certain degree in Q3 and Q4.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [61]
------------------------------
 Okay. Turning to the CapEx, your CapEx trend given some of the weakness that you are seeing in the west, you are currently -- are we still going to see in 2015 about CAD100 million in net CapEx after disposal of rolling stock not including your property sales? Are you still looking at CAD100 million for this year?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [62]
------------------------------
 Yes, Walter. You know why? Because don't forget, now we are buying equipment in US dollars so the CAD100 million that we had a year ago Canadian net of disposal, now because of that dollar effect, it's not CAD100 million anymore, it's CAD115 million.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [63]
------------------------------
 You reduced it but it's offset by foreign exchange, is that right?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [64]
------------------------------
 Exactly.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [65]
------------------------------
 When we look into next year and if you continue as you see current trends, is it likely we see that CAD100 million come down therefore for next year based on what you're seeing today?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [66]
------------------------------
 No, I don't think so, Walter. It's still early to talk about 2016 but I think that 2016 will be better than 2015. I thought that about 2015 compared to 2014 and I was wrong at least for the first six months, but the feeling that we're getting is that it takes time for that low dollar to create some activity in Canada. So the discussion I'm having with my guys is that be patient, it's coming. It's coming.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [67]
------------------------------
 Okay. Just turning back on the waste, we were listening in on the Waste Management call yesterday and they said they're coming close to closing or announcing about CAD50 million to CAD75 million in EBITDA of acquisitions. That got me to thinking but I'm not asking you to comment on that other than is it impossible for waste management to get more involved with you in Quebec given the market share dynamic and the competitive concerns or is it the possibility that something might -- is it just possible that something could happen with Waste Management or is it impossible due to competitive dynamic?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [68]
------------------------------
 Walter, I think it's -- for them, to invest more in Quebec and in Ontario would be difficult for them.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [69]
------------------------------
 Right. Okay.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [70]
------------------------------
 I think it would be difficult for them. It's different with the other guy. The other guy is different. That is more possible. But them, it would be a difficult thing. If you look at our asset base, our landfill in Ottawa, our environmental complex we have in Ottawa, either them or the other guy, it's got no effect. It would be great asset for them. But it's the Montreal situation that could be a problem for the other guy. Because he just bought RCI a year ago or something like that, so on the collection side of it, that could be an issue. But on the Ontario side, it would be a great benefit to either one of the two.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [71]
------------------------------
 Okay. Would you split the two or no? You would rather look at it as one transaction, right?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [72]
------------------------------
 No. No. It's got to be one transaction

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [73]
------------------------------
 That's what I thought. Okay. Last question here just on your potential divestitures or acquisitions in general, would you consider this market to be a buyers market right now or a sellers market? In other words, are you seeing any potential pushback on the notion of selling some of your -- disposing some of your businesses and therefore would you perhaps look at acquisitions if people get really in the tough straights, particular in western Canada? How would you characterize what the environment is doing in terms of the acquisition market favoring buyers over sellers?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [74]
------------------------------
 You know, Walter, is we are M&A guys and right now, what we are buying is our stock because it's so cheap, but don't think that I'm not getting ready for 2016. I've got a few deals that I'm working on right now that's going to be huge benefit for our shareholders down the road. We are going to be buying our stock now because this is easy to do. We just call the broker and it's done, and we know what we're buying. But we've got some good potential in the cards and once the waste situation is settled and everybody knows what we are doing, then the next phase will be out. The next phase could be -- waste is poorly valued. Fine. You know what, our asset light division, last mile guys, it's even worse. Don't forget, we have about CAD500 million of last mile asset light highly profitable business in the US. Don't forget that.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [75]
------------------------------
 Okay.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [76]
------------------------------
 And this I think it's going to get tired one day.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [77]
------------------------------
 I don't believe it Understood. What areas do like in terms of potential acquisition opportunities?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [78]
------------------------------
 I think that what we have done lately is we did this Hazen deal, which is going to turn very good for us. We just bought All Canadian Courier also in Canada, small, but good, well-managed, Roger Sandhu, the guy, he's an ex-Dynamex guy, so he knows the business well, so this is going to be good for us. So that's one sector that will keep on growing both on the Canadian and US side. The waste is really like I said to one of the CEO of a waste company not so long ago, I said I like the waste. I 'd like to be a CEO of a good waste company. So maybe if I can't get your job, maybe I will have to build one waste company. So on the waste side for sure, that is the other sector that we are really looking at. And on the truckload sector, we still have our project. It's in the back of our mind. We are still looking at it. The US truckload market has cooled off a bit so -- but the Canadian dollar so cheap now, so we still have that in the back of our mind that if an opportunity comes by, we are going to be looking at it for sure.

 Last but not least, in the LTL, our guys are working day and night to adjust to costs. We look bad but because we lost a lot of revenue in our best market, which is Alberta. I've always said it. Our toughest market is Ontario, Quebec, and there we are doing okay but we lost the cream. We lost a lot of revenue in the cream market. Nothing we can do but we are working on it. There may be a partnership that we can develop in there. A lot of things that we are working on right now that will prove that probably 2016 is going to be a great year for us. 2015, we are going to finish the year strong but even 2016 is going to be even better.

------------------------------
 Walter Spracklin,  RBC Capital Markets - Analyst   [79]
------------------------------
 Okay. That's all my questions. Thank you very much, Alain.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [80]
------------------------------
 It's a pleasure, Walter.

------------------------------
Operator   [81]
------------------------------
 Hilda Maraachlian, Cormack Securities.

------------------------------
 Hilda Maraachlian,  Cormack Securities - Analyst   [82]
------------------------------
 Good morning, Alain. Most of my questions are answered but if you're coming back to the guidance, so you lowered your guidance by CAD30 million and in Q1, you said you were behind plan by CAD80 million. Can you just say how much you were behind plan in Q2? I just want a sense -- to get a sense of how much of this decline is because of the performance in the first half and how confident you are in a second.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [83]
------------------------------
 What we did in Q1, we were CAD8 million behind plan in Q1, and we are about, if I exclude the energy sector which is the CAD8 million loss which was not really. Just on the energy, we're CAD10 million behind plan. But if I exclude that, the rest of our business, we are about CAD4 million behind plan. So CAD8 plus CAD4 is CAD12 plus CAD8 is CAD20. The CAD8 of energy. So after CAD2, we are behind plan CAD20, but we believe that the last part of the year will be on plan. But we are very conservative. I don't want to be another optimistic like I was last fall and get hit on my head with not making the plan.

------------------------------
 Hilda Maraachlian,  Cormack Securities - Analyst   [84]
------------------------------
 What is giving you the confidence mostly, like just in the P&C business in the US, what's giving you confidence for the second half?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [85]
------------------------------
 First of all, I think although it's small for us but our waste management is going to do very good in Q3 and Q4. We are sure of that. That is a known fact. On the P&C side, our last mile guys, both Canada and US, will do very good. And our next day guys, a few CAD5 million or CAD3 million of severance, they will make the plan. The revenue is soft, but I'm convinced that these guys will make the plan. Where's the problem? The problem is in our truckload based in Alberta. These guys won't make the plan. So that's one of the reasons why we are little bit behind plan in our truckload, very small. But it's the LTL. Our LTL has been suffering for the last six years and it's still a shrinking market. So this is the only area where we have to work at it harder to get the cost out because we can't do anything with the revenue. I say that but on the other side, maybe we could work on something different and that something I'm working on right now to maybe, I don't know, maybe have some partnership of some kind with some players. Just to be more efficient. We have lots of potentials.

------------------------------
 Hilda Maraachlian,  Cormack Securities - Analyst   [86]
------------------------------
 You just said you didn't see a whole lot of exports to the US because of the weaker Canadian dollar so you're not really banking on picking that up in the second half of the year?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [87]
------------------------------
 No, we think it's going to happen but it's not in the cards, it's not in the plan. It's not something that we think is going to happen and it's in the plan, no. We think it's going to happen but it's really not in the plan today.

------------------------------
 Hilda Maraachlian,  Cormack Securities - Analyst   [88]
------------------------------
 Okay, great. On the pricing side on the cross-border, you are not really seeing much there either, are you?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [89]
------------------------------
 No. No.

------------------------------
 Hilda Maraachlian,  Cormack Securities - Analyst   [90]
------------------------------
 Great, thank you.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [91]
------------------------------
 It's a pleasure.

------------------------------
Operator   [92]
------------------------------
 Cameron Doerksen, National Bank Financial.

------------------------------
 Cameron Doerksen,  National Bank Financial - Analyst   [93]
------------------------------
 Good morning. Most of my questions have been answered. But I just wanted to ask a couple questions on foreign exchange. Can you update us on what your estimate is of the sensitivity to a Canadian dollar change to EPS?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [94]
------------------------------
 To EPS, okay. EPS. Okay, So.

------------------------------
 Cameron Doerksen,  National Bank Financial - Analyst   [95]
------------------------------
 Or another metric if you want.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [96]
------------------------------
 Every cent should help us buy about close to CAD1 million. So that being said, we can also take into account that the assets that we are buying or leasing, like the new trucks, are costing us about 20% more so that's a positive, but we also have a negative. The sum of the two, I would say probably today you are talking about CAD600,000.

------------------------------
 Cameron Doerksen,  National Bank Financial - Analyst   [97]
------------------------------
 Okay. And given that the Canadian dollar is sitting here at [CAD1.30], I'm just wondering your thoughts on hedging. Is there any desire to lock in the current rate on your US dollar cash flows?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [98]
------------------------------
 No. Not yet. Cameron, not yet. What we are trying to do as we speak is we are locking the interest rate on our US debt, so we have swapped today that amounts to about CAD325 million, so we are on the spot for the rest. So we are going to be adding to our protection something like a CAD200 million because we believe that the interest rates in the US will start creeping up. So that's why we are going to be protecting ourselves there, so we have CAD100 million that it is due in a year. We have another CAD125 million or CAD100 million that's due in two years, and we have another one, CAD125 million I think or CAD100 million that's due in five years, so we're going to double that so that we are going to have probably CAD250 million in five years so that's what we're doing in terms of swapping for interest. We'll definitely be working on, as soon as the waste situation is resolved, on our banking deal. We have a lender that was good for us at this time that's now is like a shylock, we're paying [CAD685] on the CAD125 million so this is going to be priority for us to reimburse that in November to reduce our cost of fund. And on the dollar, Cameron, it looks good, but every time I lock myself with the dollar, I lose money. So I said wait, wait, wait, wait, wait, and that's what we're doing, for now.

------------------------------
 Cameron Doerksen,  National Bank Financial - Analyst   [99]
------------------------------
 Fair enough. One other question for you just to really a clarification on the EBITDA guidance specifically. Correct me if I'm wrong, but it does look like in the segmented results this quarter, you've started to include asset gains in the number. It's not a big number in previous quarters but it was a big number in Q2. So I'm wondering if your guidance for the full year includes those gains on the sale of assets

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [100]
------------------------------
 You see, Cameron, that's a mistake we made over the course of the last 10 years. We have looked at because we are now more heavy into truckload, we look at all the US guys, we look at what Contrans was doing, and all the gain in disposal has always been part of EBITDA. When I was at TFI, we never included anything. So after discussing with our auditors and Greg comes from Contrans, and I said Greg, what are you guys doing? He said this is part of the EBITDA calculation. It's just normal. Everybody does it. That's why we made the change. True that exceptional in Q2 we had a gain on disposal of fixed assets. But I've said that from day one. We are selling real estate, and every time we sell real estate we make a lot of money. So that CAD75 million of real estate we have in the book, so the gain on that is probably CAD50 million. But it's like nobody understands that. Then I sell CAD50 million in the quarter and they say, oh yes, but you had a gain of CAD10 million, CAD12 million. This is not normal. I told you, we have more to come. That is part of our business because we are not magicians. What we're doing is that we are doing more with less so when we do more with less, we have excess assets that we sell.

------------------------------
 Cameron Doerksen,  National Bank Financial - Analyst   [101]
------------------------------
 Yes.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [102]
------------------------------
 That is exactly what's happening.

------------------------------
 Cameron Doerksen,  National Bank Financial - Analyst   [103]
------------------------------
 Okay. That makes sense. That's all I had. Thanks very much.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [104]
------------------------------
 Okay, very good, Cameron.

------------------------------
Operator   [105]
------------------------------
 Kevin Chiang, CIBC.

------------------------------
 Kevin Chiang,  CIBC World Markets - Analyst   [106]
------------------------------
 Hi, Alain. Good morning, and thanks for the color so far. Just a couple of quick ones for me, just back on Cameron's question. I know Q2 was exceptional in terms of the asset gains that dropped out to EBITDA, but when you look at your guidance before and your revised guidance, just trying to get a sense of what you would have built in in terms of asset gains and is that increase given the strong performance in Q2 on that line item?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [107]
------------------------------
 In there, in our numbers, okay, Kevin, we never included the gain on disposal of assets until now. But there was always some, on the equipment. It was not included. When we did our plan in October, it wasn't there. What happened in Q2 is we did way better than ever anticipated. We sold a property in Ontario that had been for sale for five years. Finally, we were able to unload that and had a reasonable gain. But what was also unforeseen is the disastrous Q2 in the rig moving business. I lost CAD3 million in selling assets in the US. Why? Because I shut so many terminals that I had to do it. I could have done it over the period of two years, my loss would have been less. But I said hey, we are cleaning the house, like I did in December 2013, in Canada, I said clean the house, get rid of that, but the rest of the excess of asset we are going to be selling slower and we are not going to lose as much money. So yes, in Q2, I had the benefit of a nice gain on disposal of real estate, but also I had the disastrous loss which is gone. It is never going to happen again in the energy sector.

------------------------------
 Kevin Chiang,  CIBC World Markets - Analyst   [108]
------------------------------
 Fair enough. Thanks for the color there. Just looking at your expectations for margin improvement over the next couple of years here, I think on previous calls you've talk about targeting, call it roughly 100 basis points improvement in margins this year, next year. On this call, you've talked about a lot of the right sizing you are doing. Just trying to get a sense of how you see margins progressing, maybe not just in 2015 but even 2016 onwards. Do you see an acceleration in that margin improvement given some of the steps you are taking today?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [109]
------------------------------
 You see, it's a little bit of a deception when you look at our P&C and you look at that and say, you have done nothing in Q1 and Q2 compared to last year. You didn't improve at all. The answer to that is yes, you are right, but here is why. Number one is like I was explaining about some new contracts, that's one thing. The other thing also that affected us in our P&C is the fact that fuel surcharge is killing us right now and let me explain you why. We have the chance of having high density so when you have high density, a high cost of fuel helps you a little bit. Low cost of fuel, it doesn't help you as much. We had the small situation. It's small, but every penny counts. And also we had the disastrous Alberta situation affecting all our sectors. So when you are running a network like our P&C next-day service or an LTL operation, if you have a drop in Alberta of 20% of your business because of the economy is in the (expletive), forget about your improvement. Just staying afloat like you were last year, it's a hell of an accomplishment.

 So these are all the small things that we never anticipate. But what we're saying is that with our new tools, with our new approach, we'll be reducing our workforce in the P&C by 100 people over the course of Q3. That's going to cost us a few million dollars, but it's going to help us improve that operating profit in getting maybe a 50 basis point because the Alberta situation we never thought that it would be so bad. From there, we will keep on building. Our same day last mile operation in the US or in Canada, that's where we are going to have 100 basis point improvement. For sure Q3 and Q4 this year versus last year, we are counting on these guys improving by 50 to 100 basis point.

------------------------------
 Kevin Chiang,  CIBC World Markets - Analyst   [110]
------------------------------
 That's helpful. Maybe lastly for me. I guess there's reports of UPS looking to acquire Coyote Logistics. I'm just trying to get a sense of how do you look at your own logistics division? I know it's not a large contributor today but it did show some organic growth in the second quarter so just broadly speaking, how do you see your logistics division growing or maybe playing into this trend here?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [111]
------------------------------
 What's happening right now is that in the US, you say logistics, you say asset light, and everybody goes banana. It's worth a lot of money. There was a company that just bought a CAD500 million revenue company, based out of Canada with no profit or very little profit and boom, okay, this is the next XPO. So when you look at us, what we're doing with our logistics company and our last mile asset light, because the two go hand-in-hand. And you do the sum of that and you look at that and you say, what is Alain doing? That guy is stupid. He has got a CAD70 million EBIT company, which is my last mile and my logistics company, and he lives with the valuation of stupid 10, 12, 13,14 times earnings. What is he doing? He should stop working like a maniac and talk to some investment bankers and maybe start looking at doing something. It doesn't make any sense and this is most of that business is US based. Right?

------------------------------
 Kevin Chiang,  CIBC World Markets - Analyst   [112]
------------------------------
 That's right

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [113]
------------------------------
 Maybe something is going to happen at one point. That's why we are saying to Walter, maybe Alain is tired of getting -- not tired of working, but tired of getting pricing that does not reflect the market. And we've talked about the waste and now if you look at what you just talked about for your ease and what's going on in the US, and there's lots of appetite for a Dynamex. I could sell Dynamex tomorrow. I don't want to do that because we're building it. But the price that the guys are offering me for Dynamex, now I'm starting to question myself with a CAD24 stock. Jesus Christ, I should sell it but I'm not going to sell it, Kevin. I'm not going to sell it, Kevin, because we're builders. But just to say that but we may do something with it though. We may put in the right place.

------------------------------
 Kevin Chiang,  CIBC World Markets - Analyst   [114]
------------------------------
 Fair enough. As always, thanks for the color, Alain.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [115]
------------------------------
 Okay, Kevin. Have a great day.

------------------------------
Operator   [116]
------------------------------
 Turan Quettawala, Scotiabank.

------------------------------
 Turan Quettawala,  Scotiabank - Analyst   [117]
------------------------------
 Good morning, Alain. How are you?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [118]
------------------------------
 I'm good, Turan. How about you?

------------------------------
 Turan Quettawala,  Scotiabank - Analyst   [119]
------------------------------
 Good, thank you very much. I have a couple quick clarifications first. I guess first of all on the earlier question on the sensitivity of the US dollar, just so I'm clear, the CAD600,000, that's a net income. Is that right?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [120]
------------------------------
 Yes, net income.

------------------------------
 Turan Quettawala,  Scotiabank - Analyst   [121]
------------------------------
 Okay, thank you. I guess the question I had, Alain, was that just looking at the truckload business, your organic growth was pretty weak. I know you talked about Alberta but a 11% decline. Can you give me some color on which segment that is coming from in the sense of like which company?

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [122]
------------------------------
 If you look at Ontario and Quebec based business, and our truckload, we are flat. We are not growing while we're flat. Where we got it pretty bad is our Westfreight business, for instance, which is a great company that I bought I think in 2006. If you look at my Winalta business, there we do a lot of pipe storage or pipe hauling for the drillers. We're down 30%, 40%. Farmer in the US, I do the same thing in the US much bigger. I'm down 40% in that business. So Farmer was a CAD65 million company, now it's a CAD25 million company or a CAD30 million company. This is where we got hit really badly in Q2. Farmer on the pipe hauling side in the US, we don't anticipate this is going to improve in three and four, a little bit, not as bad as Q2 but not a lot.

 But my Westfreight guys in Alberta and my Winalta guys, my Winalta guys are doing a fantastic job with this market environment. Our rebel operation, those guys are like rebels. Not so good because it's been really, really bad. So that is where, Turan, we missed the boat. It's been terrible for us this Alberta situation, but we feel that what relates to the oil sand should improve in three and four. What's related to the Texas pipe hauling, it's not going to improve. It's going to stay slow.

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 Turan Quettawala,  Scotiabank - Analyst   [123]
------------------------------
 That's helpful. It was Farmer as well, right? That's good, thank you. I guess the other question on P&C, I know you've talked about the unprofitable business. You also talked about the improvement -- the new contracts that you have and then there are obviously more new contracts coming here over the next few quarters, which obviously is good news but just wondering from a margin perspective then it seems like that's going to remain pressured here for the next couple of years?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [124]
------------------------------
 No, I don't think so, Turan, because if you look at my same day last mile in the US, I said just a few minutes ago that we believe this is where we are going to see some improvement in the bottom line in Q3 and in Q4. The next day guys in Canada, a little bit, not so much. So we'll be behind the goal of improving 100 basis point in the next day service. But we're positioning ourselves really good for 2016 with all the moves that are taking place right now into our next day service in Canada. In the US or in Canada in our last mile, customers like the eCommerce guys, it's not a big deal.

 But when you have a customer like an Office Depot or something like that, this is costing you some money to start up because you have to sort. Most of the time you get the business and you have to sort it. When you have sorting involved, it takes more time to educate the sorter and educate the drivers. You have an eCommerce guy like the largest eCommerce player in North America, you run off his docs so everything has been sorted by him. Understand what I'm saying? So it's not as contentious when you start the operation so the learning curve is not as bad with an eCommerce guy versus the other guys.

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 Turan Quettawala,  Scotiabank - Analyst   [125]
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 Okay. So basically margin improvement then next year?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [126]
------------------------------
 Yes. We feel good. We didn't deliver so far this year. But I'm telling you, we will deliver some in Q3 and Q4 because of our last mile guys. I'm telling you, Turan, my next day guys, Brian Kohut, Rick Ashee, Payne, and all these guys are working day and night. They are not happy with the situation. Nobody is happy at TFI. Nobody is happy to deliver results on the P&C which is no better than last year. Action has been taken and we will definitely keep on improving that business. Same thing with LTL.

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 Turan Quettawala,  Scotiabank - Analyst   [127]
------------------------------
 Okay. Fair enough. I guess maybe how is the Contrans integration going overall?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [128]
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 Very good. Very good. I had a meeting with the executive yesterday afternoon with all the Contrans executives. I'm very happy, very happy to have Greg also as our CFO. Greg is going to help our team in TFI. He's got the experience. I'm very happy with the executives over there. In the specialty truckload, in the van. I'm very happy with what's going on over there. But don't forget, they are going through the same thing. The big boom that we expected in Ontario, even Contrans is not feeling it. But guys are working so for instance, we are opening up the doors to the Contrans team to a lot of our what we do about the waste. So they will do more in the hauling of waste from a transfer station to landfill.

 We just acquired a few assets from a small company in Ontario. We're looking at doing more. The exchange between America and Contrans, exchange the best practice, the exchange of information between our Kingsway operation out of Quebec versus the Laidlaw operation in Ontario, on the dump operation, all kinds of good things that are coming out of that acquisition. We are talking about on the Board now, we have Stan and Stan said the only thing I don't like about this is the fact that I didn't sell my Company, sell it too cheap to Alain. I said no, don't say that.

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 Turan Quettawala,  Scotiabank - Analyst   [129]
------------------------------
 That's good to hear, Alain. One more last question and a bit of an oddball question here, but you said you like waste quite a bit here, you don't think you could get the valuation bump if you just bought more waste instead of selling it?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [130]
------------------------------
 Maybe I'm going to listen to your recommendation, Turan.

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 Turan Quettawala,  Scotiabank - Analyst   [131]
------------------------------
 Okay, thank you.

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Operator   [132]
------------------------------
 Walter Spracklin, RBC.

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 Walter Spracklin,  RBC Capital Markets - Analyst   [133]
------------------------------
 Hi, Alain, just coming back on just a clarification here. On the EBITDA excluding gain in sale, I know other companies used to and didn't do it, and I think the analyst community and certainly myself, we do exclude it when we see it reported within EBITDA. So I'm curious when you give your guidance therefore, how much do you bake into the new guidance range for sale of property -- gain on sale for property and equipment?

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [134]
------------------------------
 A gain on equipment, Walter, it's specific to truckload because if you look at my LTL, I never have a gain because LTL we use the equipment for so long that when we sell it, it's worth nothing. There's never any gain so you sell a CAD5,000 truck, you cannot have a gain on a CAD5,000 truck. So LTL and parcel, we don't have any gain. The fact that we have more gain now is because we are more heavy in the truckload. Truckload, that's a different story. The fact that way we operate, let's say with the existing TFI business, we were leasing most of these trucks so when you have an option to buy, which we always have, and the market is good so you buy the truck and you sell it back, you have a gain. Within America or Contrans, most of the time they were buying the trucks and selling it back and making money, the trailer the same thing. If you look at what we are saying let's say for the rest of 2015, baked in our numbers, you're talking -- we're getting about let's say between CAD300,000 to CAD400,000 a gain right now a month. So if you take CAD300,000 times 6, maybe CAD2 million.

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 Walter Spracklin,  RBC Capital Markets - Analyst   [135]
------------------------------
 Okay. Then you had -- I guess you had year to date about CAD15 million.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [136]
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 CAD15 million includes the real estate.

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 Walter Spracklin,  RBC Capital Markets - Analyst   [137]
------------------------------
 Right. So if we were to back all that out 15 and 17, you take CAD17 million off your guidance, would be your X gain on sales. Okay.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [138]
------------------------------
 Yes, but don't forget that I lost three on the rig moving side.

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 Walter Spracklin,  RBC Capital Markets - Analyst   [139]
------------------------------
 Right. Right.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [140]
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 Which is not going to happen again.

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 Walter Spracklin,  RBC Capital Markets - Analyst   [141]
------------------------------
 Right.

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 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [142]
------------------------------
 My gain is a little bit more. I always make money except if you go back to my Q1 of 2014, I made about CAD1.5 million selling my rig asset equipment that I had in Canada. Markets were different. This quarter, I lost CAD2.9 which is about $2 million selling and most of the loss, not most, all of the loss came from cranes. On average, I lost about CAD300,000 selling cranes. On the trucks and trailers, I didn't lose any. I lost money on the cranes.

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 Walter Spracklin,  RBC Capital Markets - Analyst   [143]
------------------------------
 Right. Okay. That's -- thanks for that clarification and I much appreciate it.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [144]
------------------------------
 Okay. Very good.

------------------------------
Operator   [145]
------------------------------
 Mr. Bedard, there are no further questions at this time. I turn the call back over to you.

------------------------------
 Alain Bedard,  TransForce Inc. - Chairman, President, & CEO    [146]
------------------------------
 Thank you for joining us today, so I look forward to speaking with you again following the release of our third-quarter results so have a great day and a pleasant rest of the summer. Thank you. Bye.

------------------------------
Operator   [147]
------------------------------
 Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.




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