TFI International Inc (TFII) 2008 Q1 法說會逐字稿

Good morning ladies and gentlemen, thank you for standing by. Welcome to the TransForce Income Fund First Quarter Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, April 30, 2008. I would now like to turn the conference over to Mr. John Lute. Please proceed, sir.

Thank you, Jody, and good morning, everyone. Thank you for joining us today to discuss the results for the first quarter of 2008 for TransForce Income Fund. A news release detailing the results for the quarter, which ended March 31, 2008, was issued via Canada newswire earlier this morning.

Alain Bedard, the Chairman, President, and CEO of TransForce will review the highlights for the quarter, and then Sal Vitale, the Chief Financial Officer, will discuss the financial results in more detail. Following their comments, we will open the lines for questions from analysts. Analysts and portfolio managers are welcome to ask questions over the phone, and the operator will be providing instructions.

Business media and unit holders are welcome to listen to this call and media are free to use management's comments or responses to questions in any coverage. However, we would ask they do not quote the callers unless that individual has granted their consent. If any media want to ask follow-up questions, please contact me after this call. My number is 416-929-5883; it's also on the earnings release. Unit holder questions should be directed to Sal Vitale.

A recording of this call will be available until May 7, 2008, and that recording can be accessed using the dial-in and reservation numbers listed on the earnings release.

Before Alain begins, I need to read this statement. The following discussion will include a review of developments that affected TransForce's performance during the first quarter up to March 31, 2008, 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'll turn the call over to Alain Bedard, the Chairman, President and Chief Executive Officer of TransForce Income Fund. Alain?

Thank you, John, and good morning, everyone, and thank you for joining us today. I'm sure that you all have the financial statements that accompanied our news release, so Sal and I will briefly recap the highlights and financial results in order to leave us as much time as possible for you to ask questions.

Well, 2008 has begun in much the same way that 2007 ended. TransForce faced another challenging quarter as the deteriorating economic conditions of 2007 spilled over into this year. Nonetheless, we once again increased our revenue compared with both the same period in 2007 and previous quarter, although the first quarter is usually our weakest of the year.

We also increased our EBITDA over last quarter and last year but in the current environment, it would really be a miracle if we did that from our same operation. We didn't. Although those operations are doing relatively well, our EBITDA growth was from recent acquisition -- CAN $4.9 million and from a one-time favorable class-action settlement for CAN $4.5 million.

The relative strength of the Canadian dollar to the U.S. currency continued to be a major factor affecting our business both directly on us and on the business activity of our clients. Also, harsh winters are nothing new for parts of North America. The weather, during the first three months of 2008 was particularly tough and affected the performance of some of our business.

During the quarter, we also witnessed continued high fuel costs. On the positive side, our new package and courier segment performed very well during the quarter with ICS adding significantly to the strong results. As I mentioned, acquisitions such as ICS were responsible for the year-over-year EBITDA growth, but I am pleased to point out that we saw organic growth in some segments as well.

Specialized services has demonstrated strength with healthy organic growth in our waste management logistics and personal services division. The story around oil field services is somewhat different, as this industry is currently going through a slow period. Drilling activity has declined in Western Canada compared to the same time last year, and the sector is adjusting to a new financial framework.

Energy prices continue to climb, however, and on the long-term outlook seems positive for these services.

Overall, the economy is still facing uncertainty as the fallout from the credit and housing market in the U.S. continues. Yet, as the last year has shown, TransForce knows how to thrive in both strong and weaker economic conditions, and we will continue to execute our growth strategy regardless of short-term economic fluctuations. Our operations are more diversified than ever. Our LTL segment accounts for 28% of revenue during the quarter while specialized services contributed 27%, Truckload 19; Specialized Truckload 13; and the new Package and Courier segment, 13.

Our ability to weather economic slowdowns and sectarial dips is enhanced by having operations in different sectors and different parts of the country. Our first quarter results once again demonstrate that this to be the case.

We will continue to pursue diversification as our industry consolidates and are currently looking for a number of potential acquisition opportunities, about 100 million worth of them.

At this point, I would like to ask Sal to review TransForce financial results for the quarter.

Thank you, Alain, and good morning. The first quarter of 2008 we grew our revenue to CAN $526.3 million, 13.2% over last year. EBITDA defined as operating income before interest, taxes, depreciation, amortization, was $56.9 million compared to CAN $52.7 million, an increase of 8%. Our cash flow from operating activities before a net change in non-cash working capital items was 45.7 compared to 45.1 last year.

As Alain mentioned earlier, we faced challenges posed by the weakening economy during the quarter, but we maintained our distributions to unit holders and delivered value.

Distributable cash from operating activities totaled CAN $45.1 million consistent with last year at CAN $45.6 million. During the quarter we declared regular distributions of $32.4 million, also consistent with last year at CAN $31.6 million. Translated on a per-unit basis, this meant CAN $39.75 distributed to unit holders.

The payout ratio for Q1 came in at 90.5 versus 1.02 last year. Back to you, Alain.

Thank you, Sal. So the recent aggressive drops in the banks of Canada benchmark interest rate is a clear sign that the economy is slowing and that growth should be expected to be anemic during 2008.

On a more positive note, we do not expect to see the kind of rapid appreciation in the Canadian dollar that we saw over the past two years. And with a more stable dollar business can implement adjustment plans more effectively. TransForce continues to adjust as well, while we prefer to operate in a strong economy, we know how to operate in a weaker one.

We will also take advantage of the acquisition opportunity presented to us by this slowdown, seeking out and acquiring companies that offer good value. As always, we will make acquisitions to our good strategic fit operating in line of businesses that matches ours and that reinforce our aim of diversifying our sources of revenue.

Our Board recently decided to recommend to unit holders that we revert back to corporate status, and this move would enhance our ability to execute our acquisition strategy. It would increase our financial flexibility and let us pursue opportunities for acquisition that are on the horizon.

In changing back to a corporation, TransForce will still retain its goal of delivering value by maximizing efficiency and growing both organically and by acquisition. Unit holders will consider this recommendation of TransForce of the coming annual and special meeting on May 12.

So, in summary, we had a relatively good quarter despite very difficult business conditions, the worst in the last decade. The economy is slower, volumes are lower, fuel costs are higher, and pricing competition is stronger. We did as well as we did because of our diversification and the quality and dedication of our people. We are seeing organic growth in some of our operations, but acquisition continues to be central to our strategy. There are plenty of acquisition opportunities, but they will be much easier to complete on favorable terms under a new corporate structure.

We also believe that we will be able to generate a market valuation more in line with our true value as a corporation, and that is why the Board has recommended the conversion.

So, at this point, I am going to turn the call over to Jody so that we can take your questions. Jody?

(Operator Instructions) Neema Ballou, Bloom Investment.

I just wanted to get a sense of what drove the operating costs as a percentage of sales. Is it a matter of fuel costs being up and recapturing them with surcharges down the line?

That's one, yes, that's one, but the other thing is -- well, what happened in the first quarter is we had very difficult weather conditions in Ontario and in Quebec and the same thing in Western Canada. So what happens then is that it brings delays to our line haul, so our people are waiting for the freight because of the temperature, and this was very unusual for this year. We have that normally every winter, but this year was the worst that we've seen so far.

You are doing your P&D, let's say, in Toronto or in Montreal, and your trucks, they are always stuck at the customer's yard because they don't know where to put their snow. We had so much snow this year, it's unbelievable -- or in Quebec City. So, really, this was the big effect, and it's tough for us to really put a number on that, but this exceptional cause this year, I would say that it's probably between CAN $3 million to CAN $5 million that affected us in Calgary, we had the same issue in Edmonton.

We shouldn't necessarily look at that 73% as a regular for the rest of the year in terms of a percentage of sales basis?

No, no, no.

Walter Spracklin, RBC.

Just on the LTL, I'm noticing that the declines we're seeing in volume is actually tempering a little bit, and they're not as high as they were in any of the quarters last year. I'm just wondering are you seeing -- is this just on easier comparables and based on that easier comparables, should we continue to see lower declines and maybe even look forward to some increases later in the year?

Are you talking in terms of volume, Walter?

Volumes and LTL, yes.

Okay, volumes and LTL -- you see, what's happening with us is that what's affecting us on the dollar basis on our LTL really, let's say, this year versus last year was the dollar, okay? So if you take, for example, our TST Overland operation over 50% of the revenue are in U.S. dollars, so the volume is the same but the dollar, because of that CAN $0.15 or CAN $0.12 drop, you saw lower in terms of the dollar.

But these guys bounce back and are gaining more market because of some new businesses that are coming in like [Dana] and Bed, Bath, and Beyond, and they just signed a major deal with Home Depot here in Canada. They are attached to Lowe's -- Lowe's is opening more stores in Ontario. So let's say, take the year 2008, okay, definitely our business in the East, in our LTL, okay, volume-wise, is going to be growing. LTL-wise, out West, is still stable -- 1%, 2%, 3% -- and why is that? Because North of Edmonton, where all the oil field and energy sector has been slowed on the drilling has affected a little bit our LTL as well.

Okay. Just moving on to Package, I notice you had very good volume growth, 8.6%, pricing was down 1.3, but your total was 3.8. Was there any mix issues in there, or why the difference -- yeah, I thought it would be a little higher.

What happened at CanPar is that last year we -- late in the year, we just got a new account, a major one, okay? So that helped our volume, but, at the same time, based on -- we always establish a customer profile when we pick up a new account. And the pricing is always based on that profile. So sometimes that profile is not right, and this is what happened with that customer is that the profile that was given to us on which we based our pricing was wrong. So we're adjusting to that right now. So that's why it's affected a little bit our profitability on that account, but it gave us more volume.

Okay, and now that you are fixing it, is this being -- will we see the result of that in the second or third --?

It's got to be fixed on a positive way because we can't live with the profile that is not the reality. So then we have two options -- is either we just -- okay, the pricing according to the reality, or we just get out of that business.

Okay, okay, just on ICS, it looks like you came in at CAN $25 million for the quarter. If you look at a CAN $91 million yearly run rate is that what you would have expected? Is there seasonality in there? I know the weather was bad.

A little bit seasonality with ICS. ICS is a little bit different than CanPar. Their Q1 is a strong quarter for them as Q2 is; whereas, CanPar Q1 is not a very strong quarter for them.

Okay, so pretty much in line with what you'd be expecting?

Yes.

Next question, and this is for Sal, I guess. The CAN $4.5 million gain, is that -- I assume, is that included in your fixed cost -- or your SG&A fixed cost general admin?

Yes, yes, recorded in that category, and we expect to collect that amount towards the back end of the year.

Got, okay. But it was all booked in this first quarter in that category?

Yes, yes.

Okay, got it.

Yes, that's when the judgment was received, and so it was only -- it was appropriate to book it at that time.

Perfect, okay, and last question now for Alain -- your outlook for the year, has it changed at all with the Q1 results? Obviously, winter weather was a bit of a surprise. You talked about CAN $280 million EBITDA for 2008. Would you say that's still intact?

Yes, this is our goal. Okay, this is the plans for the year. I think that what we said is that we think that 2008 would be like 2007 -- pro forma acquisition. We are still in line with the same target, yes, so what we think is in the Q1, our energy sector was not doing this plan, okay, we're about CAN $3 million behind plan in that sector in Q1. We think that we'll gain that back in Q4 this year because our feeling is that things are going to be probably better, okay? But the rest of our business is very close to being online with our plan.

Aleem Israel, Cormark Securities.

Just on the class action, can you just give us some more color on what that was related to?

Yes, yes, I can -- it's a class action suit that stems back from -- goes back many years, late '80s, mid to late '80s, and it's essentially a workman's' comp claim, and interest surrounding certain refunds. So it's an accumulation of under -- you know, the refunds were calculated using interest rates back then, which were too low, and so the class action suit basically challenged the rates of interest that were applied on those refunds. Going back several years, it's built up to being CAN $4.5 million. And it was heard at the Supreme Court and so there is no opportunity to have it heard again.

And who is owing that, do you know?

It's the Quebec Workman's' Comp.

Okay, so a good creditor.

Oh, yeah, pretty good, pretty good.

Okay. The second question I had -- there's been a lot of discussion on some of the U.S. trucker conference calls about fuel caps. Can you just talk about what your exposure is there?

Yeah, we don't have that, Aleem. We don't quote any price that our fuel in, okay, and we don't provide any fuel caps for customers. It's too dangerous. We can't control the fuel price. The only thing we can control is our fuel consumption. We're trying to be more efficient, we're trying to control the speed. We just came out with our national policy that no trucks of transport now can run over 105.

So, again, like a Conway did in the U.S., to really conserve fuel and be more efficient. But in terms of the pricing of the fuel, there is nothing we can do on that, so, for us, to sit down with a customer and to say, "Well, you know what? We'll cap our fuel to 30%. So what do you think is going to happen? When it hits 40%, we'll be very mad because we're going to be losing 10% on the account than if we were making 10 points, so now we are at zero or -- I mean -- if the fuel drops to 25, the customer will call us and say, "Well, forget about the deal, so charge me only 25." To me, it's not a win-win, it's a lose-lose situation all the time. So we don't do something like that in Canada. In the U.S. maybe.

Now, the other thing, Aleem, that you have to be careful on that is that partial and LTL. The energy component is very different than hauling heavy truckload or truckload, eh? So if you put a cap on your fuel, let's say, for us, let's say we would be, in my mind, stupid to do something like that, but let's say we would it. It affects not as badly as if you do it with your heavy hauler.

Okay.

Okay? You use much less energy in CanPar than you -- than we would use at the West rate in Calgary.

Right, okay. On the maintenance capital side, you were lower in Q1 on a year-to-year basis. Is that seasonal, or do you think that maintenance capital for the year will be lower?

No, no, no. It's just seasonal.

Okay, and what are you thinking for the year in terms of total maintenance capital?

What we're seeing is it's going to be about CAN $50 million net of all disposals.

Okay. So it's probably 75 --

Yes, we're buying at U.S. dollars, so compared to last year, it's more equipment than last year.

Okay, and how much growth capital do you have budgeted?

Well, we don't segregate that, Aleem, but I would say that at least 10% of that is growth and about 15% of that -- no, more than that -- 20% of that is IT.

Okay, so you're saying the CAN $50 million net of the seasonal --

(inaudible), but disposal we always have a lot, okay, so the gross is probably closer to CAN $70 million.

Okay, but you're including growth in that number, right?

Yes, oh, yes.

Okay, and on the acquisition side, you had six acquisitions including Thibodeau in the quarter -- what segments were the other five from?

Some of them were in our Personal Services Division. Some of them are in our logistics sector, we'll be finalizing another small one next week in that sector. So we are really focusing in LTL in the Specialized Services and our Courier.

Okay, and then the last question -- you mentioned you've got Home Depot as a new customer. Is that for the whole national business?

No, what happened is that this was an account that was served by a major Canadian corporation and owned by a U.S. company, and their business was up for bid, so it's not a business that was, in the end, let's say a Canadian carrier like Muir's. It relates to transporter business supplying the Canadian source.

Okay, and so that's supplying all of the Canadian source?

Yes.

Kelvin Cheung, National Bank Financial.

I just wanted to come back to the fuel costs -- do you know -- could you quantify or maybe put any parameters as to how much that pass-through didn't go through and how much that might have affected results in Q1?

We don't have a real number on that, Kelvin, but it's always the lag, and so if the price increases every day, okay, which we saw a lot happen in the Q1 of this year, and again in the month of April. It's the lag. So you talk to your customer today, and you say, "I'm changing, I'm reviewing my price because of the fuel," and the guy always asks you, "Well, give me a week, give me two weeks," so it's always that lag that's really hurting us.

Now, how much of that, we don't calculate that, but we could say that it's at least CAN $5 million in Q1 of this year is that lag, because prices have been jumping fast and all the time.

Thank you for that color. I was just looking back at the fuel commentary and the MDMA thing that is now about 6% to 37%, that's kind of up from 5% to 29%. I just wanted to get an idea of where that change in the high end is. Is that by segment, or is that by --?

It's by segment, because if you run, say, a truckload that's going into the U.S. with today's price, it's going to cost you about CAN $0.85 a mile today to run that truck. Now, when I started in that business 10 years ago, you could run that truck for CAN $0.40 a mile.

Now, if you take CAN $0.40 in those days and the average revenue was about CAN $1.40 a mile, and today with the fuel, you're getting about CAN $2.10 a mile. So you see, it's really enough balance of what happened over the last five to 10 years.

Okay, great, and --

The fuel component is really very high now with the Truckload operation.

Okay, and then just --

And, you know, Kelvin, in those days, the salary of the employee was the biggest expenses on running a Truckload truck. Today it's fuel.

Okay, and just lastly, the outlook on the pass-through. There is that lag, but it does seem as though you could probably capture back these higher fuel price levels in, say, a quarter or two?

Yes, but do you see, Kelvin, plus we can't operate without the fuel surcharge, so if somebody comes to us to say, "Well, you need 40, but I'll pay you 20," so you know what? We'll either park the truck, sell the truck, or do something else.

Nav Maleek, Scotia Capital.

I just wanted to ask about the Truckload segment. It seems to have performed better this quarter than it has in previous quarters, and you mentioned that there is a number of acquisitions that were there. Could you maybe give us some more color on volumes and pricing in that segment?

Well, what helped us in Q1, really, Nav, is the fact that Dana -- we got their Truckload Division, as we bought their fleet. So that's why you see our Truckload is up, and this is just because of that dedicated business, really, because the rest of our Truckload business, would it be Papineau or would it be Highland in Ontario. They are all down.

So they're still down -- you know, in the past, you've talked about 8% to 10% volume declines.

Oh, yeah. Oh, yeah, absolutely. So we were helped in that quarter because of the Dana fleet that we took on board and one fleet also that we took on board was White Birch, Quebec; Masson, Quebec. So that's where we got the growth because the rest of our business is down.

Okay, and then just on the market, in general, or more broadly speaking, have you seen maybe an exit of capacity in the market, like any smaller truckers exiting the bankruptcies?

Yes, we are seeing that in Ontario more; a little bit in Quebec but Ontario we see a few players going down now -- but not enough, not enough. I mean, it's the good players that have to reduce the size of their fleet so that there is more price liquidity in the market than -- that's the only way to get out of that mess.

So you're still seeing some of these smaller competitors, maybe, in your view, being a bit irrational on the pricing, is that --?

Oh, absolutely, absolutely. Because, you see, a guy has got five to 10 trucks, it's easy he's going to close down, and he's going to do something else. But the guy that's stuck with 50 trucks or 75 trucks, he's not going to close down because he's going to have GE trying to make a deal, because GE doesn't want to take over those 50 trucks or 75 trucks because if you talk to Penske today, they have 20,000 trucks sitting in the U.S. So they don't want to take more trucks, so they'll make a deal with this trucker that's got 50 to 100 trucks. So either postpone four months of rent, and we'll give me CAN $10,000, and we'll put these four payments at the end of the lease or whatever. They'll strike a deal.

So these guys will not disappear, but under 50, let's say, a guy with five trucks, 10 trucks, 15 trucks, these guys are getting more discouraged, and for them to just say, "I'm out," this happens.

Okay, just the last question I have is on your debt -- it's up about CAN $100 million since the end of '07. Is that mainly just acquisitions or is there --?

Yes, it's mainly acquisition -- yes.

Jason Granger, BMO Capital Markets.

A couple of questions for you here -- firstly, could you speak to what you're seeing in terms of pricing volume, differences across regions if we compare Central Canada to Western Canada, and then in follow-up to that, if you could maybe add a little color in terms of what you're seeing across industry groups, say, if we compare retail versus forestry versus chemicals versus maritime containers.

Well, first of all, in terms of the geography, if you look at our Parcel and Courier business, I mean, for sure, we are doing a very good job all across Canada. So in that business, the volume is growing, and we don't see too much of this East versus West. And if you go to our LTL, there you see a little bit more difference there because of all these plants closure that we used to supply LTL to them, or Truckload, I mean, they are gone.

Now, what's helping us in the East, though, is that the population is growing, so the consumption is growing, so it helps a little bit, like you said, because retail is our biggest business out of our segment. So in the East -- we're losing LTL to plants are closing down. We're gaining because of population and demand on the retail side is growing.

Out West, well, they never had any manufacturing, so we've lost a little bit of LTL, like I said before, north of Edmonton because of this situation that we're going through now with the energy sector. But the population is growing, the consumption is growing, the economy is good there, so our volume is going up, and the pricing, we have a very good leadership position there, so our pricing is strong, although on the East/West corridor, when I say East/West is Ontario to the West, we have to adjust a little bit our pricing, but basically business is very good.

Truckload, I mean, it's day and night. Out West we are doing very good because big demand. In the East, we are not doing good because over the last two years, market is softening, the demand is gone because of all these adjustments that we're going through because of that dollar that appreciates so much. We're losing jobs here in Ontario and in Quebec, we're losing customers, right? They are closing down.

So there are too many trucks plus pressure -- and even the trucks that we have are not running as many miles as they used to, so it's an adjustment. So it's been like that for the last two years, and it continues -- and it will continue in 2008. It's the situation of the economy in the East, eh?

That's helpful. Now, with your rolling stock, have you been redeploying outfits from the Eastern operations to Western operations to try to maintain utilization or have you seen much evidence of other players doing that sort of thing?

No, not really, because you know what? In Canada, we're very different, so we have rules in Ontario, we have rules in Manitoba, we have rules in Quebec and rules in Alberta, and they are not the same. So take, for example, a flatbed, because we looked at that -- moving some of our flatbed from Quebec and Ontario into Western Canada, but the rules are different there, so we have to modify the equipment, so it doesn't make sense.

So it's very difficult. The same thing with the truck, okay. So over there they run trains, okay, they run double, they run all kinds of different equipment that we don't do here in Ontario or in Quebec, so our wheel base of our trucks are longer here than they are in the West. So it's very difficult to move those equipment. We try with people, and it's not easy.

That certain makes sense. Now, with the Thibodeau acquisition -- could you give us an update on the integration there and any further color on efforts to consolidate the LTL operations there?

Well, it's going pretty good. You see, we came in with Thibodeau. Thibodeau was a very good company with an EBITDA in the double digits, over 10%. So it was profitable, it was a good operation, but they had way too much equipment. They had way too many trucks, too many trailers, so in the first quarter we were able to pull out about 150 trailers out of their operation and about 50 trucks.

So we are looking at every terminal that Thibodeau has got. We are looking at their operation in Ontario just to make sure that is there a better way to do it than what we are doing now? We are working closely with different partners of the family, which would be King's Way or TST Overland or Daily Select to even have better density.

So, for sure, nothing has happened yet, but, for sure, there will be some terminals between the family in the remote towns of Quebec or Ontario that will have to be closed in order to gain more of that efficiency.

In terms of the back office, we are working with them in terms of technology, we are investing in the weight and cube, so there is a lot of things that we're doing there, and the same thing with ICS. We haven't talked about ICS, but we'll be investing a lot of money -- a bit this year and next year, you know, to implement more technology over there at ICS.

Okay, now, just looking at sort of big picture in your LTL and Truckload operations -- could you speak to what you're seeing in trends sequentially in the pricing and volume environment? If we, say, look at comparing the start of Q1 with the end of the quarter and then looking at where we are currently?

Yes, what we see in the LTL is that -- and this is one point that we didn't discuss is we see a lot of volume growing from U.S. to Canada. Because of the value of the Canadian dollar, a lot of people now can import products from the U.S. So on our LTL, we see a lot of volume growing from South to North, which is good for us. We have a good network of partners there.

Now, that's very good. The only side is that the pricing is always in U.S. dollars for these freights, freight moving, and the dollar is at par. If the dollar would be at CAN $1.25, like, two or three years ago, it would be fantastic for us, but it's still very profitable.

In terms of the East/West, like we talked a little bit earlier, we see that volume growing but not as much as in the past, and we see more like this West to West between the U.S. and Canada growing more than the East to West in Canada.

In terms of the Ontario and Quebec, it's not as good as it used to be because we're closing down plants in Ontario and the same thing in Quebec, and these plants used to support either customer in both provinces, and that's where the traffic is a little bit down, and that's where we're having most of the competitive pricing between the two.

Okay, and on the pricing front, would you say it's pretty much more of the same across, less than truckload and truckload comparing three months ago to where we are now?

I would say that LTL, yes, much of the same, and I think we'll be able to pass a substantive price increase in the summer like we do every year. In the Truckload we're still seeing a lot of pressure on the pricing -- and us, the action we have is that if there is too much pressure on the price, we are just walking away, and we'll deploy these assets for that capital somewhere.

Okay, and could you give us a sense of in terms of how much business you are walking away from, exiting some of that lower-margin business?

Yes, well, you see, there is an account in Quebec, it's a forestry company that just went on a bid with Ryder, and these guys approached us with where we had to reduce our price by 10% to 15%. We said, "You know what, guys, thanks but no thanks. Just find somebody else." And they will try somebody else, we're talking over CAN $10 million of business, and we'll just say, "You know what, guys, we're gone. We're going" on an annual basis.

Okay, and last question here, not to harp on the fuel issue, but with diesel around -- over CAN $4 a gallon, I think it's obviously a significant factor here. Revenue per hundredweight in your LTL space, your commentary there noted a 3.1% year-over-year gain now. Could you tell us what that would have been or what that was net of fuel?

I don't have the information with me, but we'll see -- and this is something that will come out in the next few months. It is not something that we publicize, but this is something that we're working on right now.

[Barbara Stremecka], Private Investor.

Good morning, I'm going to belabor this issue of fuel costs and your statement that nothing can be done, and I know you're putting on a fuel surcharge for your customers who are passing it on to the consumer, and you are cutting my dividend, and I am the consumer. And so I would like to know how much of your fuel charge is going to the government in taxation? How much of the cost per liter and why diesel is higher in some places than gasoline now, being a byproduct. How much of that is actually going to government in taxation? Have you looked at asking the government for a rebate on those taxes for commercial trucks?

And the second part of my question -- that would benefit all Canadians, plus you, plus your customers, as far as I can see it, and the government is getting enough revenue to fly around and take care of the rest of the world.

But the second part of my question is, I understand from some of the truckers that these new trucks that they are trying to make them more fuel-efficient and more hybrid are having more mechanical problems. Could that be the case and thank you?

To answer your last question, you are absolutely right. The new trucks that came out that are respecting the new control on fuel savings, et cetera, and commitments to be more green, these trucks. We don't have a lot of these trucks, but it's been a problem, but it's always the same thing. I went through that in 2002, and the same thing in 1998, and the first six months, when they come out with a new product, this is the quality of these American truck manufacturers is always an issue, and it takes them a little bit of time to adjust.

So to answer your question, yes, okay, it's a little bit of an issue right now on the new equipment.

Now, in terms of the taxes, the taxes vary from on province to another, and it varies from one state to the other in the U.S. And, us, depending on which state or which provinces that the truck is doing his mile, we are paying the tax according to that.

So taxes are very high in Canada, we know that, and the licensing of a truck, just to license a truck would cost about CAN $300 or CAN $400 a month to license a truck. So this is very expensive for a trucker, but we've been living with that system for the last 30, 40 years now. We have an association that's called the Canadian Trucking Association where Mr. Bradley is representing us and trying to lobby these guys in Ottawa. But, so far, we have not been very successful in trying to make these guys a little bit more understandable that taxes that we're paying on fuel, we should invest on our road network instead of investing elsewhere.

So I am very sorry to say that we've not been successful yet, but we are trying with this association to get these political guys in Ottawa and elsewhere in Canada to be more on top of the ball like it is the case in the U.S. at the same time.

So could you give me a ballpark idea in Canada of how much per liter is going to the government in taxes not counting the other taxes from the licensing and --?

If you look at the liter of CAN $1 -- CAN $1 a liter, if the fuel is CAN $1 a liter, you've got, depending on the province, again, because it varies, but federal and provincial --

It's CAN $1.26 out here in BC for diesel.

Well, let's say CAN $1.26, so you've got at least CAN $0.40 that is going to federal excise tax, federal sales tax, GSC, PSC, and all that. It's big, and don't forget that every time the price increases, the GSC is applied to it, and the PSC is applied to it. So they gain -- every time the price is going up, they take on more tax.

They are gaining, but every Canadian consumer is suffering as a result of it. So can they not see that a commercial -- at least a rebate for commercial truckers would be a benefit to everyone in the country? I mean, has anybody sort of suggested that to them?

Yes, well, we're trying to do that through the association but, don't forget, those political guys -- remember Flaherty, he said, we're not going to touch the income trust.

He thinks Canada is a safe haven -- only if you're a government employee. Anyway, I'm sorry, I'm taking up too much time here. You've answered my question, but I think that's the solution for everyone, is to try and get those fuel costs down.

Yes, well, you see, the history has told us that it's very difficult to put our trust in some of these political guys because, if you remember, Flaherty, before the election said we are not going to touch income trust --

That's why I voted for him but, anyway, the other thing is the new trucks now -- the hybrids -- is there a hybrid truck per se?

Not yet, not yet. Not in the class A trucks, there is no hybrid yet, no. I haven't seen any, so far.

And the trouble with the new ones is mechanical -- mechanical costs?

Yes, but that's going to be fixed. It's going to take them a little bit of time, but it's going to be fixed.

Okay, well, there's a 17-year-old kid in the United States that converted his half-ton, and it runs totally on solar, and he did it all by himself. So hopefully that's your future.

Yes, we'll see that.

There are no further questions at this time.

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