TFI International Inc (TFII) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the TransForce Inc. first-quarter 2009 results conference call. During the presentation, all parties will be in a listen-only mode. (Operator Instructions). As a reminder, this conference is being recorded Monday, April 27, 2009. I would now like to turn the conference over to Mr. John Lute.

Good morning, everyone. Thank you for joining us today to discuss the results of the first quarter of 2009 for TransForce Inc. A news release detailing the results for the period ended March 31, 2009, was issued via Canada Newswire on Friday, April 24.

Alain Bedard, the Chairman, President, and CEO of TransForce, will discuss the highlights, and then, Sal Vitale, the Chief Financial Officer, will review the Company's financials. Following their comments, we will open the line for questions from analysts.

Analysts and portfolio managers are welcome to ask questions over the phone and the Operator will be providing instructions. We ask that you ask only one question at a time, followed by one follow-up question if necessary, and then go back into the queue with any subsequent questions. This will allow for participants to get their questions answered in a timely manner.

Business media and shareholders 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media are free to use management's comments and responses to questions in any coverage; however, we would ask that they do not quote callers unless that individual has granted their consent.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. Shareholder questions should be directed to Sal Vitale.

A recording of this call will be available until midnight on May 4, 2009, and that recording can be accessed by using the dial-in and reservation numbers listed in the earnings release.

Now 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 ended March 31, 2009, and may include forward-looking statements and estimates. Such comments will be affected by and involve known and unknown risks and certainties, which may cause actual results of the Company 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.

Thank you, John, and good morning to everyone. As usual, and following the remarks I made at our annual meeting on Friday, we're going to keep our comments brief. Sal and I will move quickly through the Q1 highlights and financial results, then we will field your questions.

First off, let me provide some context for TransForce's results in the last quarter. As you all know, our economy is experiencing extreme challenges. The reality is that this environment is expected to persist for some time, and nobody really knows how long.

Achieving the best results depend on our team, ability to manage our cash and debt positions, controlling our costs, and operating very efficiently. Being efficient has always been an area of importance for TransForce, regardless of the economic climate.

In 2007, we froze executive salaries; in '08, we extended this initiative across the Company. We felt that it is important for management to take the lead and not ask others to do anything that we wouldn't do ourselves. We have reduced discretionary spending, and directed and empowered our people to find even more ways to cut costs.

Let's take a moment to review what TransForce accomplished in the first quarter. For the three months ended March 31, 2009, our revenue were CAD452 million compared to CAD526 million in the same period of '08, so a decrease of 14%.

Revenue, excluding fuel, were CAD422 million, compared to CAD469 million in the same period of '08, which is a decrease of 10%.

While revenues and EBITDA results have been affected by the general economic climate, TransForce was largely able to maintain its gross margin level from the first quarter of last year. This is a testament to our people's ability to improve efficiency, adjust our level of people and assets, to major drop in freight demands.

The lower revenue numbers directly related to the lower level of overall economic activity, and this was also apparent across most of our operating segments.

The LTL segments contributed to 29% of our total revenue, or CAD129 million, compared to CAD147 million in '08. The Package and Courier contributed 14% of overall revenue with a first-quarter revenue of CAD65.4 million, down a little from CAD68.8 million in the first quarter of '08.

Revenue from the Specialized Services segment contributed 26% of our total revenue, or CAD150 million, compared to CAD122 million in the same period last year. Finally, the Truckload segment -- TransForce's largest in terms of revenue -- contributed 34% of our revenue, CAD155 million compared to CAD201 million in the first quarter of 2008.

So at this point, I'll ask Sal to give you an overview of the other quarterly results.

In the first quarter ended March 31, 2009, revenues totaled CAD452.4 million, a decrease of 14% from CAD526.3 million last year. As Alain noted earlier, revenue excluding fuel surcharge totaled CAD422.2 million versus CAD469.5 million last year, a decrease of 10%.

Year-over-year variance is indicative of the general economic downturn. EBITDA, which is earnings before interest, taxes, depreciation, and amortization, and equivalent to operating income on TransForce's financial statement, totaled CAD44.5 million in Q1, versus CAD56.9 million last year. Excluding a one-time CAD4.5 million positive contribution to Q1 '08 EBITDA, EBITDA in the first quarter of 2009 decreased by 15%.

Also, EBITDA margin in Q1 '09 was 9.8%, versus 10% last year, again excluding the one-time gain of CAD4.5 million.

Cash flow from operations before working capital items totaled CAD33 million, compared with CAD45.7 million last year. Earnings before taxes totaled CAD4.3 million, versus CAD17.4 million last year. Earnings per share totaled CAD0.04, compared with CAD0.22 last year. During the quarter, TransForce paid out a CAD0.10 per-share dividend.

So, during these economic downturns, we are also doing our best to retain our people. They are vital to our long-term success, and continue to demonstrate why I believe they are the best in the business. The numerous factors affecting the economy make it difficult to predict when it will improve.

In the coming quarters, we will continue to focus on managing costs. Our excess cash will be used to reduce our debt, and we will also continue to monitor our industry for the opportunity to acquire good tuck-in companies at a fair price. An acquisition will add value to our bottom line in the near term and make sense over the long term.

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

(Operator Instructions). Walter Spracklin, RBC Capital Markets.

Thanks very much. Good morning, guys. Just on -- you mentioned at your AGM there on Friday, and you just referenced it again there, your strategy of use of cash flow. And your free cash flow. And you mentioned you're going to balance between reducing debt and making acquisitions.

If you were to look at your own projections on what your free cash flow between -- the rest of the year will be, is it really a function, then, of when the opportunities come up, or do you have -- half of our cash flow are going to go to acquisitions and half will pay off debt. Essentially, I'd like to get an idea of where your target will be on debt by the end of the year.

Mostly, it's going to be on debt. Because you see, what we are really looking at right now is nothing major.

It's just small tuck-in that -- for instance, we're looking at one right now, in Ontario, that -- it would be just a tuck-in. So it's a CAD14 million revenue company, but if we get rid of all the overhead costs, mostly, and it would be a tuck-in within one of our divisions, southern Ontario. So this is what I am saying. It's going to be very small.

If you look at our Q1, it was small. And the rest of the year is going to be very limited. To give you a number today, probably our acquisition costs could maybe total CAD20 million, CAD25 million for the year, max.

And are you still looking at CAD100 million in free cash flow? Is that still what you're targeting?

Yes.

No changes there?

No.

I want to say I really appreciate the extra guidance -- or, sorry, the extra disclosure you provided on the segmented results. That's very, very helpful.

And just on that note, you have your Specialized Services broken out. I'm just wondering, can you talk to us a bit about what's the components of that business, in terms of residential and commercial, and whether you see a lot of seasonality in the first quarter -- where the most pronounced seasonality comes in that business?

Specialized Services, in there we have, first of all, our energy sector. In our Specialized Services, we have waste, energy sector, and our logistics. Logistics is quite steady, and the waste is quite steady. Energy normally should be very good in Q1, very slow in Q2 and Q3, and fantastic in Q4.

Now this year -- again, as last year, our energy sector is the reason why our revenue is lower than last year. Because our waste and our logistics are both up. And when I talk energy, we are up in the U.S., but down in Canada.

And on the waste side, are you mostly -- how would you -- would you consider that residential versus commercial and so on? How would you characterize that business? Is it mostly residential (multiple speakers)

There's a mix, okay. I don't have the information at hand, Walter. What I would say -- .

That's fine. We can take that off-line.

Yes. What we could do is -- I [could] answer on you, on that one, because I'm not too sure.

Sal, can you give us any updates on debt covenants, and particularly on the measure that the banks use when measuring your debt covenant? Where you are [wearer] versus where your covenant is for the fourth quarter -- or first quarter?

As we mentioned in our MD&A, the two main covenants are respected at the end of Q1, and we foresee them to continue to be respected through 2009, without any real problems. And the two covenants, one is a debt -- adjusted debt to EBITDAR ratio, and the other is a fixed-cost (multiple speakers) ratio to EBITDAR, okay? They are disclosed in the MD&A, but they are both well within tolerance levels.

So the 2.93 versus the 3.5 there? (multiple speakers) You don't see any -- . Yes.

I don't see any problem -- we don't see any problem right now as we go through '09, looking at the current business and even if we were to maintain it at a slower pace, we still have plenty of [hip for profit] on the covenants.

Okay. My last question here is sort of on price and volume. In your disclosure there, you've broken out each of the segments on a price -- or a volume -- or a revenue basis. Down 8% in LTL, flat in Package and Courier, down 6% in Specialized, and down 18% in TL.

Truck load.

Yes. If we were to break that into price and volume in each of those segments, so starting with LTL down 8%, would that be mostly volume, I guess?

It's mostly volume. Yes.

Is there any price (multiple speakers)

LTL is volume, absolutely. Price -- I mean -- and it's the same thing with Truckload. It's volume. Because if you look at our gross margin, we're trying to protect that pretty good. So we will walk away, like Truckload has been a disaster for us in this quarter, because the market has been very difficult in Ontario and in Quebec because of all the plant closures and the lower demand for our customers' product.

So we -- instead of trying to play a cut revenue game, we say just cut the fleet. (multiple speakers)

Okay, so you didn't -- . In either of those divisions, you didn't really -- you didn't cut price in either of those divisions?

No. There could be some exceptions. For instance, we will always protect volume mostly in LTL versus our Truckload. Unless there is a very stupid argument between, let's say, us and some of our competition.

But our game has always been to protect our revenue and our margin.

Now, if you look at our Parcel, we are flat. We are a little bit up in one, which is ICS, and a little bit down in Canpar. But basically, the two of them were at zero. In Q1.

(multiple speakers) Pricing is good. Pricing is good. Pricing is good. With ICS, we were able to pass on a small increase. We are working on the same thing with Canpar. So when business picks up, we should be in a very good position.

And if you look at our Specialized Services, basically, okay, Matrec is up a little bit, but where we are really behind is our energy sector in Canada. Now, the energy sector in Canada, yes, we have to adjust our price because we are not the leader. There is another company which is the leader that is leading the game in terms of pricing. In Canada.

(multiple speakers) Excuse me, if I may add on this debt thing, our ratio of 293 is about the same as the one that we had in December. Also, just by going into a forecast, let's say that our EBITDA would be the same as it was in 2007, which is about CAD245 million. We still respect, very much, our covenant as well.

Okay. And my last question, sorry, here is on capacity in the industry. Are you seeing your competitors in this environment start to fall away? Is this something you expect to pick up? Are you ready to take advantage of that when -- if that does happen and we do see a return in volumes down the road?

What we could see is not really company closing down. There's a few small ones, but it's really the matter is that some very good operators are downsizing their fleet.

So this is something that is very important that happened probably more now, because at first a trucker will say, I'm going to wait because it's going to come back. After two quarters, he says, maybe -- I have a chance to reduce my fleet by 5%. Let's do it.

So what we saw over the last three, four, five months is guys adjusting the level of their fleet. When business picks up again, let's say late '09 or hopefully in '10, for sure, the demand is going to come back, and then us, because of our size, because of our reach, we will be in a very good position to adjust for that.

That's all my questions. Thanks very much and congratulations on a quarter that was a very difficult one.

Thank you.

Jason Granger, BMO Capital Markets.

Just looking at your segment disclosure here, so if I look at EBITDA margins using revenue excluding fuel surcharges, it looks like Less Than Truckload, Package and Courier, some deterioration there, which would be expected; Specialized Services, roughly flat; and Truckload up modestly. So a couple of questions on this.

I'm assuming -- is it fair to say Truckload being up modestly would relate some to gains on foreign exchange, translation with the cross-border business? That's one part of the question.

The second part of the question, just looking at Specialized Services -- I'm surprised that revenues didn't -- or margins didn't fall off a little bit there. So that was positive surprise, if you could just speak to that, please.

Jason, in the LTL and Parcel, the reason why our margins have been affected a little bit is because of the size of the overhead of these divisions versus the other two. In LTL and the Parcel, in percentage of revenue, your overhead is always higher than within a specialized division or in a truckload division. Okay?

So let's say you have a 10% drop, and you don't react because it's very difficult to react within a few months, in terms of your rent, in terms of your municipal taxes, in terms of your energy, because this is -- I mean, heating and electricity. So, you understand, this is very difficult for these two divisions to really adjust your level.

Now, in terms of our gross margin in both of these divisions, we were able to really do as good or even better job this year than last year. Where we have lost it is on the overhead.

Now if you look at my Specialized Services sector, like I said before, U.S. dollar helped us a little bit because we have some operation on the energy side on the U.S. side. So that helped us a bit. Our U.S. operation is doing very good. And we lost on the Canadian side, because the demand is so poor.

Now, on the other side, Matrec is doing very good on its residential and commercial, and landfill. Where we lost a bit at Matrec is, because of our recycling facility, commodities were way down in Q1. So I guess this cost me about CAD1 million in the quarter because of these low commodities.

Now the other thing, also, that hurt me a little bit with the LTL is bad debt. I had to take CAD1 million in bad debt in Q1 for customers which are -- so we are increasing our provision there because of this very difficult economy.

And Truckload, really, a little bit is the dollar, but it's also being more efficient. Dropping the customers -- because a lot of people think that the truck -- the customer dropped us, but sometimes we drop the customer. Because we are not going to renew trucks if we have a customer that's not paying the right price. Because he's playing the general economy, and this and that, and we don't want to take a risk. A credit risk with this guy.

Okay, that's helpful. Thanks. Just a function of some more operating leverage in your Less Than Truckload and Package and Courier with some miscellaneous various nuances in the other segments. Okay. Just shifting gears --

This is why, when you look at the American LTL guys, a lot of them are losing money right now, big time. Because it's very difficult for them, like us, to adjust the overhead because of this big drop in volume.

Yes, lots of operating leverage there. Just looking at the sequential trends there, your Less Than Truckload and Truckload businesses, could you give us some information there on -- from a volume perspective, how things were trending January, say, through March and even April, if possible? Just sort of on a year-over-year basis?

January was the worst. At the end of January, I thought I was going to lose my job. Looking at the numbers, I said, gee whiz, what's going on?

So, let's say if you put that on the scale, probably January I was down minus 25% to 30%. I said the world is coming to a stop. So January was very, very, very bad.

Now, February was way better, and March -- now, March, we have to be careful, because we had Easter last year in March, and this year we had no Easter. So we were very close to last year in March, but last year, you know, we have to play the game with -- you know it's Easter. So let's say that this year, if I forget about Easter, we were very close to, but we had Easter last year, not this year, in March.

Okay. So --

Okay, so we started very bad the year. Very bad. Everything was down. You see normally, after the holidays, the first week is always terrible. The second week could be mixed, depending on how strong is the economy.

Now this year, the first was bad, the second was bad, the third was bad, the fourth was bad, and it just started in the fifth.

So it sounds like March, almost flat on a year-over-year basis from volume.

Almost flat. If we don't -- if we exclude Easter, although we have to take that into account, we would have been very close to being flat. Which is not bad.

No, not at all, considering the environment. Not at all. How is April feeling in terms of price and volume?

About the same as March. So we'll be a little bit behind last year. But again, this year in April, we have Easter, and last year, we didn't have Easter. (multiple speakers) So, a four-day week is always a very terrible week.

So the first two weeks of April were way behind last year. Now we are looking at the third week, which is not bad. I haven't seen, so far, the week number four. But what I am talking to my guys, it's starting to -- just to unthaw, but it's not going to be -- April is not going to be as good as last year, no.

Okay.

The feeling we have is -- our feeling, when we talk to our guys, to our customers, is really -- nothing is going to really move good probably before the fall.

Okay.

Of this year.

Now looking at sequential OR trends through the balance of the year, and I appreciate your not giving guidance here, but is there some color you could give us there in terms of how we should look at, say, your operating ratio going from Q1 to Q2 to Q3, Q1 to Q2? Do we expect sort of a little bit below the typical seasonal improvement that would be normally expected?

Yes. I would say that. Due to -- we will definitely improve versus one, but it's not going to be as good as the normal two. So we'll still be handicapped. Three and four, it's hard to say.

But my feeling today, and our plan, I am repeating myself, is we are trying to do as good this year as we did last year. Now it's going to be a hell of a challenge because we are far behind after Q1. But we made a lot of adjustment. We made a lot of things that will bear fruit in three and four. Change sometimes take time before they take effect.

Yes, absolutely. Just a couple more quick questions here. On the -- comparing your Less Than Truckload to your Truckload business, which one would you expect to firm up first?

I think our LTL should firm up first, and I think the only reason for that would be -- there is a major trucking company right now in the U.S. that are going through very difficult time. And this company has lots of trans-boarder business.

So if something happens there, that would be a high benefit for us. Because we have a hell of a big machine with CF and TST.

And also, the other thing is when I look at my Parcel, Parcel and LTL are very close. My Parcel is close to being flat. So my LTL, where I lost the most is in western Canada. Because normally, out west, I was always lowering 2%, 3%, 4%, 5%, 6%.

Now, January, the roof just caved into the West. So if I'm down, let's say, 4% total LTL, it's because I am down 2% in the east and 10% out west.

That's helpful. That's quite the difference.

Now, when I say 10%, Jason, you got to be careful because it's not Calgary, it's Edmonton and Nort.

That makes sense.

It's all the energy up north that I'm getting killed. And Vancouver.

Okay. One last question here. On your cash flow statement here, so cash flow from operations after changes in working capital there, CAD53 million -- CAD53.5 million this year versus about CAD9 million last year. So there is about a CAD55 million, CAD56 million swing to the positive this year from changes in working capital.

Going forward, for modeling, should we sort of be expecting that you're working capital as a percent of revenues, DSO, and whatnot, stays pretty constant with some typical seasonal fluctuations? (multiple speakers)

I think what's going to happen there, and this is because we dropped so -- we went down so much in the quarter in terms of business (multiple speakers). Now, when business corrects, you will see more of a need of working capital. (multiple speakers)

Absolutely. And your receivables, relative to revenues, and your days sales outstanding and whatnot, (multiple speakers). Okay.

That has improved, no doubt about that. And it's going to keep on improving, because we started that program about eight to 10 months ago where we put more pressure on the customer, to respect the terms and pay us, because it's all a question of risk. And also, when we are very difficult situation, and your profit is so small, let's say our profit is 3% and we lose CAD1 million account, think about how much revenue it takes for us to cover that loss. (multiple speakers)

So we are really putting a lot of pressure on the operating -- and this is why we have done better than last year on the collection side.

Okay, great. I'd better get back into queue here. Thank you.

Nema [Belu], Bloom Investment Counsel Inc.

Good morning. I just wanted to ask -- I appreciate the insight you gave on the debt side and the covenants earlier. But if worst came to worst, you said, even if you reached 2007 results, you'd be well on side with covenants. (multiple speakers) But if you had to, do you still have levers to pull in terms of, maybe, reducing CapEx if you were getting too close to the line, or given what you see, despite the deterioration, you will still maintain a good spread on those covenants?

Yes. No, that's not a problem because, let's say we would feel that we were going down -- let's say to a 240 and 250. That means our revenue is down again. Because let's say we are down 10% in Q1. That would mean we are down 10% to 12%, again, in Q2 and Q3 and Q4. To get to that level of 240, 250.

And no, if we are that down, we don't need as many CapEx as we would need if we were just cruising in a normal business environment. So, yes, we could adjust ourselves there to a certain degree.

Because right now, the only assets -- the only CapEx that we have is all the equipment that was ordered last year, at last year's price, at last year's exchange rate, which is par. And we have about -- I would say about 50 trucks still on the dealer's lot that we are just waiting to pick up, and we are going one step at a time on that.

And that's it for now. We're waiting to see what's going to happen in two, and also this summer, so we won't have anything major, okay, until the fall.

I know you can't necessarily, obviously, like you said you can't predict where the economy is going, but from what you're saying, then, basically, you don't see this continued 10% 10% 10% revenue decline. Some stability returning maybe in the back half of the year?

That's our feeling. What we are saying is that I think we've hit the bottom of the barrel in January, February, and March. We don't feel that is going down more than where we were, so I think that we are stable now, stable down. Stable low.

Now, when are we going to go up? Our first feeling, when I talk to my guys, it's not going to happen before the fall.

But if worst came to worst, and you had those big revenue declines, you'd still be on side with the debt?

Absolutely.

Okay. Thanks a lot.

Aaron Duxbury, National Bank Financial.

Just looking at the cost, it seems like you took a few more terminals and some head count and some more fleet out of the mix. Do you have any kind of estimate on what kind of savings those would be for the rest of the year?

Yes. Just to give you an example, in our Parcel division, I would say in the month of March -- because in one division, ICS, we are implementing technology. So we removed about 25 people at ICS. And in our plan, as soon as our technology is fully implemented, which is about June July, there is another 20 to 25 that will leave the Company.

Another division, we did the same thing as Canpar. So there's about 20 to 25 people that were let go in March at Canpar. And again, if you remember at these two divisions, these two, Canpar and ICS, our volume is flat. So the reason we are making all these adjustments' priority is because of our technology that we are implementing.

Now in terms of our LTL, so we've made some changes in Quebec and in Ontario, so, for instance, we closed Peterborough in TST. We are closing -- what's the name -- Oshawa at TST, and those two terminals would be moving to the [Teeborough] terminal that was closed about a month ago in Whidbey.

We've closed down Val-D'Or for Kingsway. We've closed down Ottawa for Teeborough, so yes, we've made a lot of changes in the smaller centers in order to consolidate. And we keep on doing that.

But this is an ongoing process. It's got nothing to do with the fact that we are going through some kind of a war right now. It's an ongoing process.

So the terminals, they would've all been mainly LTL then, I guess.

LTL and Parcel, yes. Truckload, we did one in Quebec, where we amalgamated [Fortee] with [Pertoo]. So [Couture] had a terminal in [Dramanville], it's closed now. And they both operate out of [Mouchaville] in Montréal.

I don't know you can -- if you have a number for this, but do you know how much FX would have added in the quarter? Like that would've helped you, right, on the Truckload, I guess?

It helps us a little bit on the Truckload, yes. But at the same time, because of that slow demand, the revenue in U.S. dollars came down. So it was basically a wash.

We gained on the foreign exchange, but we had to adjust our price down. It's mostly our LTL, but again, our activity was down about a few percentage points in the East. So it helped us a bit. But I don't remember at what FX we closed the year last year. Do you remember that, Sal?

We were about par. About par.

So about par, and we closed the quarter at, what, 22?

Yes. 24 was the average in the quarter.

So there was a boost there, for sure.

Last question, you closed a couple of small acquisitions in the quarter. Can you mention just what segment those were in, and any other color about them?

Yes. One is in the Truckload, the specialized truckload sector in Ontario, and it's a tuck-in with McArthur. I think this one was done in January or February. And the other one is in the Bulk division, working with our Kingsway [bulge], and it's in Quebec, in [Vou D'Arille], and the guy that runs the show there is Mike McGrath. So a very nice -- a young guy, nice acquisition to our team.

That's great for me. Thanks a lot, guys.

Aleem Israel, Cormark Securities.

I had a couple just of follow-up questions. You mentioned March was flat, year on year. And then you mentioned April was down in the first couple of weeks. Can you maybe quantify how much April was down in the first couple of weeks?

This is just because of the Easter holiday, because this year Easter is in April, whereas last year it was in March.

Do you have a sense of (multiple speakers)

So we don't have the same number of days. So when I say we were flat in March, in actual fact we were flat because this year we didn't have the Easter, which we did last year. So that helped us to say that we are flat, but if you want to compare it on a day-to-day basis, we are not flat, we're down. (multiple speakers)

Yes, and I'm sure (multiple speakers) kind of January through March, you are down 10% to 15%, I guess. (multiple speakers)

Now, if you look at April, we're down versus last year, number one because of Easter. Because this year, we have two days less than last year after two weeks. So, for sure, our month of April, compared to last year, is not going to be at par, it's going to be down.

Now, down by how much, I don't know yet. But the first two weeks were not great weeks for us. Third week was fine, so we're just waiting to see what four and five is going to do for us.

Do you have a sense of maybe what your daily shipments are doing on a year-to-year basis?

Absolutely. Our daily shipments, year over year, is about the same as in March, or down, depending on which region. Our LTL is down out West 10% to 15%. Like I said before, it's mostly at Nort and Edmonton, Edmonton and Nort. And Vancouver.

In the East, we are down a few points. Our Parcel is about flat. Our Canpar used to be down 6% to 8%. We are closer to 6% now, so we are getting a little bit better. ICS is still ahead of the game.

And our Truckload, the demand for seasonal product is picking up, although it has been delayed by a week or two. But it's picking up now. Talking to my guys, they say it's picking up, but it's not as good as last year or in a normal year.

On the Truckload side, I've heard some comments from some other truckload players kind of out West that a lot of the demand from the Olympics and some of the building in BC that's been going on is now kind of behind us. And we are hearing about cement volumes kind of down 25%, year on year.

Is that a -- do you think it's a fair comment that we'll probably see western Canada weaker than eastern Canada on the Truckload side this year?

Us, we are not in BC on the Truckload. We are really only in Alberta. And we are still doing very good in Alberta on our Truckload division. Much better than the East.

Now, in terms of cement, for sure. Cement is down big time out West, and even in the East. Building materials, the same thing. But to tell you about these products out West, we are not really there. Our Truckload out West, I would say, is mostly specialized for the energy sector.

You mentioned [wire see] in terms of some of the cross-border revenue potentially being up for grabs if they don't make it. Do you have a sense of how much total revenue they do cross-border?

I didn't mention the name. I just mentioned a major carrier. (multiple speakers) But this major carrier's revenue, in our mind, is CAD500 million on the trans-border business. So it's big.

Okay. Last question, just on the SG&A side. Your fixed, general, and administrative as a percentage of your net revenue, so just before fuel was about 20%, and it was up about [200] basis points year on year.

Absolutely.

Do you think it will continue to trend kind of up 200 or 300 basis points, year on year, just given the fixed-cost base there? Or is there (multiple speakers)

If volume does not pick up -- see, this 300 point comes mostly from our LTL and Parcel, right? Okay? So, like I said before, we made some moves in the Parcel. We're making some moves in terms of the [overall] consolidation of our LTL division.

But that being said, if volume stays the same, now my big question is that -- and I was saying that to my executives, is that I can't live with 300 points higher all the time. So unless I think that this is a permanent drop, which I think it's not, so far we didn't make any major adjustments. I'm not going to kill the management team based on six months or nine months or a year.

But we are still investing in technology, in order to remove as much body as possible to be more efficient. Which we are doing in the LTL and in our Parcel. But this is part of an ongoing process.

Now, let's say we end up the year and we are still at about 250 points and we don't see anything getting better for '10, then we would have to make some very difficult choice because we can't live with that 300 points. Over another, let's say, six months or a year.

Okay. (multiple speakers)

I don't know if you understand what I am saying.

Yes, absolutely. Thanks.

There are no further questions at this time.

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