TFI International Inc (TFII) 2007 Q2 法說會逐字稿

Thank you for standing by. Welcome to the TransForce Income Fund second-quarter results conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Wednesday, August 8th, 2007.

I would now like to turn the conference over to John Lute. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss the results for the second quarter of 2007 and the first half of 2007 for TransForce Income Fund. The results for the second quarter and half-year which ended on June 30, 2007 were issued by news release on Canada Newswire earlier today.

Alain Bedard, the Chairman, President and CEO of TransForce will review the highlights, and then Sal Vitale, the Chief Financial Officer, will discuss the financial results. Following their comments, we will open the lines for questions. Analysts and portfolio managers are welcome to ask questions over the phone, and the operator will be providing instructions. A recording of this call will be available until August 15, and that recording can be accessed by using the dial in and reservation numbers listed on the earnings release.

Business media and unit holders are welcome to listen to this call, and media are free to use management's comments and responses to questions in any coverage. However, we would ask they do not callers unless that individual has granted their consent. After management has finished with their remarks, the operator will poll for questions from analysts, and if any media want to ask follow-up questions, please contact me after this call. My number is 416-929-5883. That is also on the earnings release. Unitholder questions should be directed to Sal Vitale after this call.

Before Alain begins, I need to read this statement. The following discussion will include a review of development that affected TransForce's performance during the second quarter and first half of 2007 and may include forward-looking statements and estimates. Such comments will be affected by and involve known and unknown risks and uncertainties which may cause the actual results of the Fund to be materially different from those expressed or implied.

Now I will turn the call over to Alain Bedard, Chairman, President and CEO of TransForce Income Fund. Alain?

Well, thank you, John, and good afternoon, everyone, and thank you for joining us today. In the second quarter, the Fund continued to make strategic acquisitions designed to enhance long-term unitholder value. These are proving to be particularly important now as existing operations are having to adjust to weaker market conditions. In particular, TransForce's Truckload segment has experienced softer demand. Oilfield services were also affected by lower drilling activity in Western Canada.

Sal will review the financials in detail in a few moments. First, let's review some of the key features of the quarter.

We created a new Fleet Management & Personnel Services division that complements the other companies in the Fund. Financial results for this new line of business will be reported as part of the Specialized Services segment. The Company that we acquired in the second quarter meets our criteria of having solid track records and management teams. They complement the other businesses in the TransForce group of companies.

Now for an overview of the results. In the second quarter, the Fund increased revenue by 9% from the same period last year to $495 million. The Fund also increased EBITDA by 4% to a $64 million in the quarter from 61.6 in the second quarter of 2006. The increase in revenue and EBITDA are mainly attributable to significant acquisition made within the past 12 months.

In the first half of 2007, TransForce increased revenues to $960 million compared to $889 million a year ago. EBITDA also increased to $116.8 million in the first six months of the year compared to $110.7 million in the first half of 2006. The Fund remains committed to our diversification strategy.

In the most recent quarter, our LTL and Parcel Delivery segment accounted for 37% of our revenue. Specialized Services accounted for 25, and our Specialized Truckload and Truckload each accounted for 19% of revenue. We are diversified across regions, clients and a range of businesses while remaining focused on the transportation businesses. We continue to explore and act on opportunities to acquire good companies that will create value for our unit holders.

At this point I'm going to ask Sal to review TransForce's financial results for the quarter and the first half of 2007.

Thank you. Despite the tougher operating environment, our financial results for the second quarter were steady. In the quarter the Fund increased revenue by 9% to $495.7 million from $455.6 million last year. The increase in revenue was primarily the result of significant acquisitions. EBITDA, which is equivalent to operating income on our financial statements, increased by 4% to $64.1 million in the quarter from $61.6 million last year.

Cash flow from operating activities before non-cash working capital came in at $52.2 million this quarter compared with $53.8 million last year. Total distributable cash from ongoing operations in the second quarter was $55.2 million compared with $57.2 million last year. Net CapEx in the quarter was $10 million compared to $15.9 million last year. Regular distributions declared during the quarter were $32.4 million compared with $30.5 million last year ago. On a per unit basis, regular cash distributions declared to unit holders was $0.3975 compared with $0.38 last year. That resulted in a payout ratio of 78% this year compared with 84.5% last year.

To summarize the second quarter, TransForce's acquisitions allowed it to deliver steady financial results and increase in some key areas. Looking at the year-to-date results, the Fund increased revenues to $960.4 million, up from $889.3 million last year. EBITDA for the first half came in at 116.8 versus 110.7 last year. Cash flow before non-cash working capital was $97.3 million compared with $94.9 million last year. TransForce also increased its distributable cash from ongoing operations in the first half to $100.7 million from $100.1 million last year. Total distributions declared in the first six months of the year came in at $63.9 million or $0.785 a unit compared with $59 million or $0.7475 per unit in the first half of last year. Regular distribution declared as a percentage of cash available was 88.4% the first six months versus 86.1% last year.

I will hand it now back to you, Alain.

Thank you, Sal. Well, for the second half of the year, outlook is mixed. The recent challenging operating environment with a weakening US dollar continues to have an effect on the general economy in our industry. However, TransForce is well positioned to continue to generate revenue as a result of our successful acquisition and diversification strategy.

Moving forward, the Fund will continue to integrate the three acquisitions we have made in the new Fleet Management & Personnel Services. As I said, we are pretty excited about the potential here. Overall we will continue to explore opportunities to acquire good companies that create value for unit holders.

While the current conditions create challenges across the industry, they also create more acquisition opportunities. Subsequent to the end of the second quarter, we announced that TransForce has signed a letter of intent with Century II Holdings to acquire all of the issued and outstanding shares. Century is a publicly traded company, parent company of Information Communication Services known as ICS, one of Canada's leading business to business fixed route courier businesses.

In 2006 ICS Courier generated approximately $90 million in revenue. The transaction is conditional to signing a definitive agreement, normal closing and regulatory conditions and is expected to close on October 31, 2007. This will be another solid acquisition for the Fund that will open up a new service niche within TransForce Parcel Delivery business, significantly increasing volume and helping to solidify our competitive position in that segment of our business.

We continue to invest in the growth of our existing operations where appropriate. We're delivering value to our unit holders, and we remain dedicated to executing our strategy to achieve maximum efficiency and profitability.

At this point I'm going to turn the call over to the operator so that we can take your questions. Operator?

(OPERATOR INSTRUCTIONS). Navdeep Malik, Scotia Capital.

Maybe I just was wondering if you could provide some more color on the organic growth that you saw in Western Canada versus the East? Things like that, LTL versus TL?

Yes. See, our Truckload is growing out West hill, and our LTL have out West in the major cities like Calgary, Edmonton, Vancouver is still growing. The problem we are having is that north of Edmonton because the oil patch is dead, because the drilling activities show that it's affecting our LTL as well as our oilfield services. So, in general, out West, if you total everybody, we have a small organic growth over there, but nothing compared to what we used to have a year ago.

Okay. So the weakness in the energy activity is I guess percolating into the rest of the Western Canadian economy or in your business anyway?

To a certain degree. Because also again, the population out West is still growing. So the consumption will grow, so that is why in cities, in major cities like Red Deer, Calgary, Edmonton, Vancouver we have a growth there. But that growth has been slowed in a sense because we have a decline north of Edmonton into the oilpatch, whereas let's say last year we were growing all over the place.

Yes. And how about -- I guess that is referring to volumes. How about pricing -- (multiple speakers)?

Pricing is good. (multiple speakers). No, pricing is very good. No question on pricing compared to what you could listen to maybe in the US. I mean us in Canada, it is a highly competitive market, no question about that. But pricing is still very solid.

Are you referring to pricing in Western Canada or Eastern Canada -- (multiple speakers)/

No, in general. In general, in our LTL and even in our Truckload because you know we keep on saying that the Truckload market in the East is weak, but our pricing is remaining strong, and the only way we can protect our pricing is doing what we are doing is reducing the offer. So this is why in our Truckload our revenue this year after six months versus last year, our total revenue is down by close to 10%. But our percentage of gross margin remains the same. So we're protecting our margin. We're protecting our pricing. But okay, the demand being softer, so we are adjusting the offer to the demand.

Yes, so when you say pricing is firm, do you mean it is up like what range are we sort of seeing or what are you seeing?

(multiple speakers). Here because every time, every year we are looking for an increase, and this year it is going to be about the same as last year. We're looking at on average about 3% or 4% pricing increase.

Okay. When you see us maybe moving to the margins? I mean they were down, EBITDA margins were down about 80 basis points it looks like this quarter. What was the reasoning there? Was it a different shift in business or -- (multiple speakers)?

No, no, we got hit pretty bad. Two things. Number one is the US dollar, which is costing us, and it is a well known fact that TransForce has got an excess of US dollars of about $125 million. So every time the dollar loses a $0.01, it is costing me $1.25 million. And look at what it was at the end of March and what it is now at the end of June, and that is one issue. The dollar was a factor.

But the biggest factor is not the dollar. It is the low drilling activity in Western Canada. That was a killer for me in Q2. Just look at Precision Drilling. Their numbers were out I think it was a week ago or 10 days ago, I mean this activity, this sector of activity for us was at -- in Q2.

Okay. But isn't it -- I know it is a seasonally slower period in Q2, is it not? But I guess that still has -- (multiple speakers)

Yes, but it is much worse than last year. You see bottom-line it is costing me -- the slow activity in that sector cost me $6 million in the quarter.

Okay.

So $6 million for me in the quarter, it is a lot of money.

Okay. Maybe could you just comment on the three acquisitions that you completed that you mentioned? What sort of multiple? Because they are in a different type -- they are non-asset-based it appears like. What sort of multiple did you pay for those?

Yes, you see there is two things that we invested in in Q2. Number one is the leasing company that leases equipment. So this is capital intensive. But this is equipment leased to third parties.

Now the reasoning behind that is very simple. It is that there are two markets that we are attracting with that. The number one market is that TransForce has a lot of old trailers that could be leased for storage purposes to all kinds of customers.

In the past, because we did not have any salesforce within TransForce or within one of our divisions, we could not sell to customers warehousing of trailers. So the acquisition of Beaudry in Quebec gives us a salesforce of six persons that are now dedicated and trying to lead a trailer for storage.

Now the return on assets on that kind of a business is unbelievable. Okay? Why? Because you are leasing an old trailer that is worth maybe 4 or $5000 and you're getting about $2500 a year. So it's a fantastic return on assets, and there is a big market for that that we can do. So using these guys as our own salesforce, I think that we could get about $1 million to $2 million of business in that sector within the next 12 months.

Over and above that, the leasing business normally has a vacancy rate of in the good days maybe 5% to 10%. In the bad days, like it is now, 15% to 25%. If you look at TIP, if you look at Extra, if you look at PTR and all of these companies, right now their vacancy is about 20%. Now Beaudry, when we bought it, was about 10% to 12%, which was very good, but now being part of the TransForce group of companies and we always lease short-term equipment because of fluctuation, because of variation in the month or whatever.

So to give you an example, Canpar was leasing short-term trailers from a supplier in Ontario at least 25 trailers I don't remember. So we take this guy out, and we poured in the Beaudry trailer into Canpar. So what we're doing is we're bringing the vacancy of Beaudry to close to 2%. Now 1% of vacancy within Beaudry is $120,000 a year profit. So if you can reduce that by 10%, there is another bottom-line of $1 million. Plus 1000 trailers for us if there is not much there.

Now on the other aspect of the business, which is personnel, these are agencies where we have got 1000 employees that are leased to all kinds of customers. Now if you read, if you know one of the assets of trucking today it is our people. It is our driver. And everybody will tell you, well, it is tough to get drivers. It is tough to get this. I mean people are leaving the industry, all kinds of stuff. Don't you think that having an asset like that bodes well for the future? I think so. It is non-asset because I mean we are talking people.

Okay? We have a margin of about depending on the contract between 10 and 15% on average 13%. So it is a very, very high profitability bottom-line with no investment. Do you understand now?

Yes. Okay. That is fine. But I guess with some of these acquisitions that you have been doing, your debt levels have creeped up. So I mean you're at and around it looks like around 2.4 times. I mean where are you comfortable, or where could you see that going to?

I guess now also with the CH acquisition, you will be a bit higher than that as well. So what are your thoughts there?

Well, we're working on something because you know our covenant is around 3, okay? So we don't want to get to 3, and we don't want to get too close to these bankers because then they are going to start asking us money and fees and this and that. So this is why we're working on something right now, and it should be announced sometime in September.

Like you mean a percentage of divestitures or something like that? Or --

If you go back to history, every year we have done something to get rid of one part of the business that did not suit us.

Okay.

Okay?

(OPERATOR INSTRUCTIONS). Walter Spracklin, RBC Capital Markets.

Just on the revenue or the three companies that you acquired, do you have a number on revenue that that is going to contribute?

Yes, the rental of equipment today is about $10 million of revenue. The personnel leasing company up to the end of June because we've acquired another one sense that time, so the three of them will total on a yearly basis $50 million.

Okay.

$50 million for about 1000 people.

Alright. And that is generally higher margin business obviously like you were saying lower asset intensity?

No CapEx. No CapEx. The margin, depending on the contract, because for instance a guy that takes 100 people, he is not paying in the same margin as a guys that takes five. Right? So but on average, it is a very, very good business.

Okay. You mentioned price and volume information in your release on the LTL and parcel, and that is great color. I'm just wondering for the quarter, the Truckload less -- sorry, Truckload, Specialized Truckload and Specialized Services, I guess some of those are a mix of businesses. But maybe on the Truckload side, if you were to break out priced versus volume in the quarter, how would you break those two down?

Volume down 9%; price stable. See, we were able, Walter, through dropping our top-line by 9%, we were able to get a little bit better gross margin than last year in a super difficult market. Now you have to understand that when you drop the business 9%, 10% top-line, it takes you a little bit of time. Because don't forget that we replace trucks a quarter of the fleet every year.

Now we adjusted ourselves faster than we were able to adjust the number of trucks. So down the road, we're getting rid of equipment in the next month, in the next two months that the business is already out. But we were able to do that and keeping our gross margin at the same rate and even better than last year.

Okay. On your CapEx, given the lower level of activity I guess offset by acquisitions, you are sticking with the maintenance CapEx guidance of about $50 million equal to last year I guess? Is that fair?

It just seems that with lower activity I would intuitively think that you would probably be using less capital as you bring as you say the equipment off the -- takeaway some of the supply on the equipment side. Wouldn't you be using less CapEx?

Yes, yes. But we are not sure of that yet, Walter, because you know we acquired Byers last year. And Byers is leasing a lot of equipment out West short-term. And I'm just looking, because don't forget the price of equipment because the dollar has dropped so much is very advantageous to buy -- I'm talking trailers not trucks -- I'm talking trailers -- is very advantageous to buy trailers right now. So it probably is not going to get more than last year no doubt about that. It probably may be less, but I don't know yet.

Okay. You are being a little opportunistic I guess?

Yes.

Taking -- okay, got it.

Because don't forget, when nobody buys what do you think happens to the price?

Okay. And Sal, this is a question for you. On the taxes, current taxes paid, it looked like -- what can we put in there for current taxes? Is that something that we should -- I mean (multiple speakers)

You should use the pace that you see at Q2 because some of the acquisitions we've recently acquired still are less in their corporate structure, so they will attract corporate tax.

I see, okay. So about $3 million, 2.8 to $3 million?

Yes, you can use that.

Okay. Last question, how is Matrec doing? Are you happy with how that is going, and would that be one of the things that you would consider selling?

No, no, not now, not now. I mean Matrec is doing very, very good. I mean we have a pro, we have a king there. This guy, [Marc Fox], that just started about a year ago with us, he is doing a helluva good job for us, and we are very happy. I mean we talk a lot about what is not going right like the energy sector out West, etc., etc., and our Truckload which is not easy. But we have some very bright spot as well, and Matrec is one of them.

Another area where our business is growing is in our logistics. With TransForce logistics in Toronto, I think if I remember correctly because I don't have the numbers, our bottom line is $3 million more so far this year versus last year. And our business is growing at our UCL logistics division that is based again in Toronto but runs from the CF group of companies. So we have in order to maintain that position with a very difficult quarter, it is because we have some areas that we're doing very good.

I see. So if you were to describe without being specific what you're looking for in terms of divestiture, is it somewhere where you lack scale? Is it somewhere where it's not in an area or a geographic region? How are you examining your line or your portfolio of businesses to try to find out which ones you could divest of?

It has always been the same thing. Number one is, are we in that sector an influential player? Okay? So no question about the LTL, no question about the parcel. But if I take a business like the one we sold at Matrec, you know the environmental cleaning division (multiple speakers) we were just number four after Newalta and after Veolia. I mean we have nothing to do there. So we sold it.

So that is our first criteria, is that if I take one of the business that I have got in mind that I'm discussing right now with the potential buyer, we are probably number four in that sector. So it is always the number one question.

The number two is always our return on assets. If I'm number four and my return on assets is very low, it has got to go. Right? So these are the two things major that we look at first. (multiple speakers)

Go ahead.

The other thing, Walter, is what is the potential? Because let's see on number four, if you go back to the history of MC, I was number four, and I tried to acquire the number one or the number two, and they all said no. So finally, we sold number four to number three. Okay? So that is what we're doing all the time.

Okay. Well, all right, that is all my questions. Thanks very much for that color. That is great.

[Neema Ballou], Bloom Investment Counsel.

I just wanted to ask you, I wanted to run through it. I know obviously Century II is a really good business for the long run, but it seems it does not fit the mold of like the Truckload where you go in and a lot of the buyers are in a weak environment. You take them out at three to four times. Like Century on the surface looks expensive. I guess I wanted to ask, and I know there are synergies and all that, then I want to give you a chance to run through it.

But I wanted to ask what prompted the bid, Jaguar Financial came in at 675, and you guys came in at 975 for the asset. So what are you seeing in that business that really fits strategically with TransForce on the parcel side?

Okay. Number one is we had nothing to do with Jaguar. Our price had nothing to do in reaction to Jaguar or whatever. If they think that the Company is worth 675, good for them. Okay? But us the discussion we had was with the majority shareholder. So I started those discussions a few months ago, and Jaguar was not even a shareholder at the time.

Okay. So it was more of a financial thing that they just tried to sort of put it in play?

So what happened, if you turn back to clock, my first discussion with Jeff Davis and the majority shareholder, Jaguar was not even a shareholder in those days of the Company.

Got you.

In the midst of our discussion, this guy probably has a very long nose -- I don't know -- but he -- or he is very lucky, so he bought a block. And now he wants to buy the Company for 675, good for him. But he is a financial player.

Now us what do I see in that Company? Well, number one, it is a niche of a company, and besides the fact of all the synergies, I believe that we could grow through small acquisitions, not a 15, $20 million company. Small, 2, 4, 6, $8 million companies at normal purchasing price. Because the price I'm paying for this public company is not normal for me.

No, exactly.

If it is a public company, it has got to be fair according to being a public company. But it is not the normal price that we pay normally for a company.

No, you go in there on the private side, and you pay to three to five times (multiple speakers) let's say for truckers, it is a different sort of game, right?

Which is normal. Which is the reality which is fair. Now fair for a public company and fair for a private company is two different things. I did not have any options, so I'm paying fair price in my mind for a public company. But I'm going to use that as a base to, let's say, at $90 million today, I think there is a potential to grow that business to 125, 140 and 150. Okay? Because they are operating in a good environment. They have a national network, and their competition is all kinds of small players in Ontario, NBC and in Quebec or Alberta. Okay?

So we have a lots room in there to grow. We have a very good management team, because if you look -- I mean Century came out with their Q2 numbers today. I don't know if you have had a chance to look at it.

No, I have not.

But they are very good, and they have some organic growth because they are in fields that are growing. And we see the same thing within Canpar. I mean I did not say that earlier, but our volume at Canpar is growing. The parcel business is growing more than the Truckload business. The Truckload business is going down because we're losing jobs and manufacturing in the East, and it is not going to change. So we have to adjust in those sectors the offer with the demand, which we're doing ourselves.

Now over and above that, like I said before, there is tons of good things that we could do between Canpar and between ICS.

For ICS, though, for the most part, you're going to leave it as a stand-alone. It is not as if you are going to take all the volume and filter it through to Canpar?

No, no, no, I agree. Because you cannot -- you know it's not a tuck-in. Up to a few million dollars probably could be tuck-in into Canpar. We will know that after we acquire the Company. But basically it is going to be stand-alone. But don't forget, if you look at our LTL operation, change the way you stand-alone, okay and TST is stand-alone on the sales side and on the off-side.

On the backoffice side, in terms of the IT platform is the same platform. In terms of the Fleet Management, it is the same Fleet Management team. Okay? So there are some areas where the two companies are separate, but there are some areas where the two companies are the same.

Now for some of their distribution, I know they are on lease, right? As those leases come off, will you gradually start to feed that volume through?

No, what we will do is let's say -- are you talking a terminal lease? (multiple speakers) a facility lease?

Yes, a facility lease.

A facility? No, our intention is to like we do in our LTL division is trying to have both companies under the same room. So we could share linehaul, we could share some low density area using either company A or company B.

Got you. Okay, and I guess that is my question for now. Thank you very much.

Byron Berry, Dundee Securities.

Just a couple of quick follow-ups. Most of my questions have been asked. Did I hear you say that Truckload pricing and margin in the East, although revenues were down that margin has stayed constant?

Absolutely and improved a little bit.

And improved a little bit. Okay, that is great. In the disclosure in the statements, and excuse me if I just have not read them in great enough depth, you do break out organic from acquisition growth in a number of segments, but not Specialized Services where you breakout large acquisitions and then small acquisition organic. Could you break it down one level further and go organic?

Okay, Sal?

Well, the organic when you see Specialized Services, are you mentioning -- are you referring to Matrec and those types of divisions?

I assume so, yes. But it is as you report your revenues, not as I construct them myself, so.

Well, we have -- if you exclude -- if you look at Specialized Services, if you exclude the significant acquisitions, there is some organic growth in there as Alain touched on earlier within the Matrec divisions and the waste management. We have our dedicated divisions and our logistics. We have organic growth as well. Some new business. The percentages are not really the same in either one, but all of those areas are up over last year ago.

Okay. And the small acquisitions that are mentioned in your disclosure, as opposed to large acquisitions, how material were they, or did you really grow like close to 10% organically?

No, in the quarter, other than the significant acquisitions in Specialized Services, we have about $9 million over and above that that is related to multiple small acquisitions.

Right, okay. That would account for the majority of your $3 million growth in logistics as well then?

Correct.

Aleem Israel, Cormack Securities.

I just wanted to confirm on the Fleet Management, you said the revenues overall there are $50 million?

Yes, the $50 million is on the personnel agency of our business. (multiple speakers)

Yes -- (multiple speakers)

That is $50 million of business. This is 1000 employers that are leased to all kinds of companies.

And then the rental equipment side is --?

Is about $10 million today. 8 to 10 million to date. Okay? No, it is $8 million when we acquired the Company, but with a 10% vacancy so by reducing the vacancy, we will rein that to 9, and with the leasing of [Sword Schriller], our goal is to bring that another million so that it gets us to 10.

Okay. So what is the average EBITDA margin or what is the total EBITDA for that Fleet Management business then on day one?

Okay. On day one depending on -- are you talking the employee side of it or the equipment side?

Both.

On the equipment side, you're talking about 60% margin, EBITDA, okay, which is for sure the only thing you're doing is you're leasing equipment. And normally you're looking at each spread. Between what it is costing you versus the price that you're leasing, it could go -- the spread could go up to 30% on the spread. Do you understand?

30% spread, 30% --

Between our cost and the rental cost. Do you understand?

Yes.

Now on the personnel side, the spread or the gross margin is depending on which business you're talking about, but the average I would say is about 13%, 14% gross margin. And then the only thing that you have to deduct from that is your overhead, which should be about 6 or 7 points.

Okay.

So profit has to come around 7, may go up to 10. And it is not assets that sector.

And so in the second quarter, there was about $42.5 million worth of acquisitions that you made. What was the Beaudry and transport RC total?

Okay. Transport RC, I don't have the number with me. But transport RC it was an asset deal. So I don't remember exactly, but if I remember correctly, we bought the tankers for about $3 million. And we took on the equipment, the trucks, which most of them were leased.

Now on the Beaudry side, not including the personnel because the personnel we invested and won about $6 million acquisition cost for that sector of the business. And the equipment side cost us including that about 31 -- 31, $32 million on the equipment side including that.

So is the 31, $32 million included in that 42.5 million of total acquisitions you have spent in the quarter, or is that factored in with eco under your CapEx?

No, it does not go under our CapEx.

It is all business acquisition.

Sorry. Okay (multiple speakers)

Sorry. But we don't classify that as CapEx. This is business acquisition.

They just do different things, but they are all business acquisitions in the quarter.

Right. So the other nine acquisitions you had aside from those two, I guess those ones were really, really small deals then? Because it looks like if you back out the $6 million, the 30 and the 3, it leaves you with maybe what 9 or 10 for the other -- (multiple speakers)?

They were very small, yes.

So did those fall under Specialized Services mainly, or what segments are those going under?

There are some that went into Specialized Services, some into Specialized Truckload.

And do you have a rough split of that $10 million worth of acquisitions between that two?

With me no, but I can get that to you.

Okay, sure. Alright. That is all I had. Thanks.

(OPERATOR INSTRUCTIONS). Walter Spracklin, RBC Capital Markets.

I just wanted a follow-up question in terms of looking at your distributions going forward, you increased distributions back in April, and I guess there have been acquisitions since then and your debt covenants, as you mentioned, you did not want to get up to 3 times. Is that sort of indicating to me that you and obviously debt markets right now are difficult, and there is not a lot of appetite in equity. Is it safe to assume that you will be holding your distribution or holding cash back now to pay down some debt? Is that your assumption?

Yes, so going back to what you say, Walter, let's say that according to our plan, we have in excess at the end of the year, instead of being in cash distribution, it is going to be in paper distribution. So we keep the cash, and then we could reduce down debt. Okay?

And so when you say paper distribution, that would just be one where you provide distributions in the form of units to reflect any potential tax liability?

Yes, yes, exactly.

And at what point, Sal, do you have the level at what point that tax gets triggered? Is there a certain payout ratio below which you would be incurring a tax on the trust level?

Well, what I can tell you is that we are nowhere in danger of triggering any tax. We watch that on an ongoing basis, and if there is any excess and our current forecast indicates there will be some, it will be dealt with in units.

I show no further questions at this time. I will turn the conference back to you. Please proceed with your presentation or closing remarks.

Thank you. Since there are no more questions, I wanted to thank everyone for participating in this conference call. For any of you who joined while the call was in progress, a recording will be available until August 15, and you can get that by calling 1-800-558-5253 or in Toronto 416-626-4100 and entering passcode 21344435.

Thank you all. Have a good evening.

Thank you.

Thank you.

Thank you. Ladies and gentlemen, that concludes our conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a good day.