TFI International Inc (TFII) 2009 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the TransForce Inc. second-quarter 2009 results. (Operator Instructions). As a reminder, this conference call is being recorded, Thursday, July 23, 2009. It is now my pleasure to turn this conference over to Mr. John Lute.

Thank you, operator, and good morning everyone. Thank you for joining us today to discuss the results for the second quarter of 2009 for TransForce, Inc. A news release detailing the results for the three and six months period ended June 30, 2009 was issued by Canada NewsWire earlier this morning.

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 lines for questions from analysts.

Analysts and portfolio managers are welcome to ask questions over the phone. The operator will be providing instructions shortly. We ask that you please only ask one question at a time, followed perhaps by one follow-up question, if necessary, and then go back into the queue with any subsequent questions. This will allow for all 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 or 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 However, we would ask that they do not quote callers unless that individual has granted their consent.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 is also on the earnings release.

Shareholder questions should be directed to Sal Vitale. A recording of this call will be available until midnight on July 30, 2009. That recording can be accessed by using the dial-in. The reservation number is 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 second quarter ended June 30, 2009, 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 Company to be materially different from those expressed or implied.

Now I will turn the call over to Alain Bedard, the Chairman, President and Chief Executive Officer of TransForce.

Thank you, John, and welcome to everyone joining us today on the call. Our plan is to keep our remarks brief and leave as much time as possible to field your questions. Sal and I will review the second-quarter financial results and then we will open up the lines for questions. So before I get to the results, I want to provide a little color around the current operating environment.

We all know about the challenge that the Canadian and global economy has been experiencing. Activity across many sectors is down, and accordingly so is demand for many of our services. In that environment I am pleased that TransForce has been able to protect our margin and maintain our dividend.

Now the key for us has been our focus on cost and efficiency. We know that we cannot control the rate of the broader economy recovery, but what we can control is how well we operate our business. We continue to vigorously protect our margin. We also continue to align our operation with the current demand for our services. A comment is think what we can do when business comes back to a more normal environment.

Let's quickly review our results from the second quarter ended June 30. Revenues were down CAD464.2 million compared to CAD595.6 million in the same period of 2008, which is a decrease of 24%. Revenues, excluding fuel surcharge, were CAD424.8 million compared to CAD514 million a year -- over a year decrease of 17%.

The story for EBITDA, which was CAD59.8 million in the quarter compared to a CAD66.9 million in the second quarter of 2008. But excluding nonrecurring conversion-related costs of CAD8.7 million recorded in 2008, EBITDA decreased 21% year-over-year.

The lower revenue and EBITDA numbers are directly related to the lower level of overall economic activity in the economy. In the second quarter the LTL segment contributed to CAD133.9 million or 29% of our total revenue, compared to CAD174.8 million in 2008.

The Package and Courier segment was at CAD68.3 million or 15% of overall revenues. It decreased from CAD76.6 million in the second quarter of 2008.

Revenues from the Specialized Services, CAD104 million compared to CAD130 million at 22% of revenue. And finally Truckload segment, CAD159 million or 34% of our revenue compared to CAD228 million in 2008. So at this point I will ask Sal to give an overview of the other quarterly numbers and year-to-date.

In the second quarter cash flow from operations before nonworking capital -- non-cash working capital balances came in at CAD49.2 million compared with CAD60.2 million last year. Earnings before taxes came in at CAD26.4 million compared with CAD24.9 million last year. CAD5.2 million of this increase is due to changes in the fair value of our interest-rate swap contracts.

Income taxes expense increased CAD8.4 million in Q2 from CAD5.7 million last year as a result of TransForce now regretting income tax expense following its conversion from an income trust.

Net income in the quarter totaled CAD18 million compared with CAD19.3 million last year. Earnings per share came in at CAD0.21 compared with CAD0.22 last year. As Alain mentioned earlier, TransForce continues to pay out a dividend of CAD0.10 per share in the quarter.

Looking at our year-to-date results, revenues decreased 19% to CAD906.5 million from CAD1.1 billion last year. EBITDA also decreased by 16% to CAD104.3 million from CAD123.8 million last year. Net income totaled CAD21.1 million compared to CAD38.4 million. And earnings-per-share came in at CAD0.24 compared to CAD0.45 for last year.

I will hand things back to Alain.

Thank you, Sal. At this point I usually tell you what I think about the coming quarters and the rest of the year. This continues to be a challenge, because so much of what we are seeing is unprecedented. It is probable that we have reached the bottom. So what we are -- while we are staying focused on running a disciplined business, we are committed to meeting our CAD100 million target of debt reduction. And we are well on our way to achieving that, because we have reduced our debt more than CAD50 million in the first half of 2009.

Cost saving and efficiency will continue to be our focus as we work through the year. And at this point I'm going to turn the call over to the operator so that we can take your questions. Operator?

(Operator Instructions). Jason Granger, BMO Capital Markets.

On the margin expansion here -- so I was happy to see the expansion there, impressive given the environment. Could you just speak to some of the initiatives in place and where we are reaping the rewards in terms of your margin expansion?

Yes. You want to talk gross margin or net?

Actually, I am looking at the EBITDA margin. Sorry.

Okay, the EBITDA margin? Well, first of all, I think if we look at Package, that is one area that our volume were quite stable. And our EBITDA margin improved mostly based on being more efficient with the technology that we are using, etc., etc. through ICS. So that is where we got the benefit. And our overhead at the Package division, which is Canpar, and ICS, reduced a little bit in percentage of revenue, and this is again based on the technology that we are implementing at ICS and all the moves that we are doing (technical difficulty).

LTL is a different story. LTL, our volume is down double-digit, so it was a hell of a fight to protect our EBITDA margin. So the name of the game there is again density. So we have to adjust ourselves quite fast to the demand.

And this is based on the information that we get on a day-to-day basis so we can plan the distribution of our customer's shipment in a better fashion. So the tools that we have, and the management that we have -- very good team of management that we have in terms of monitoring that and adjusting ourselves to the demand shows us that we are able to protect our margin in a very difficult environment.

Although we have to give to some pricing pressure to a certain degree, in some areas of the country, in some of our customer base, because of competitive pressure. But through all of that we were able to really come out with an EBITDA margin and our LTL in Q2 above the 12% mark, which is in that environment not too bad.

Where we really struggle a lot is in our Specialized Services, not within Matrec or Logistics division, both of these two divisions in our Specialized Services did very good. The energy sector in Alberta is a disaster. We have to give big discount to our customer. The activity level is very, very low. So it is really a struggle, and this is why our EBITDA margin is around 13% in that sector, because our energy sector out West is bringing our average down big time.

Now on the SG&A side of that business, listen, we have lots to do. We are working with our people over there to adjust ourselves to the demand. But there is a little bit of a cultural issue in that sector is that you don't move and you have to wait because it is going to come back. So this is a very difficult environment to work with. And that kind of a culture has to change, because there is no way we can wait for another six months or wait for another year or whatever. We have to adjust ourselves in that sector.

This is -- in Q3 you will see an improvement in our SG&A versus the revenue, because that is an area that we will be attacking and trying to adjust ourselves to the demand. I am working with Darshan on that so we should have a better Q3 number, maybe not on the volume, but at least on the overhead.

Now last, but not least, our Truckload sector has been suffering badly in -- since the end of 2006 really. And here again I am working with our people there because our SG&A went from 8% to about 11% in that sector, which is unheard of. We never operate in double-digit SG&A in that sector.

So there we have a little bit of catch-up to do. And our gross -- our EBITDA margin was down single-digit. We went down to 9.5%. So that is an area in the Truckload we were able to protect our gross margin, but because we didn't adjust ourselves fast enough on the overhead, we have to drop a little bit on our EBITDA margin.

So it is really -- volume has been dropping very fast for the first six months of the year. And it is very difficult to adjust yourself. And if you look at other companies in our sector that came out with their numbers, it says really that that drop in volume is all over the place. It is a general lack of demand for freight services.

So it is really the power of your management team to really adjust yourself to the demand. And don't forget, that reducing fixed cost takes time. So it is not like the variable, where you could adjust yourself quite fast, but on the fixed cost side of it, it takes time.

And like I said in last meeting, last conference call, we have to be very careful in some sectors, because we feel that this big drop in volume is short-term. When I say short-term, it could be another six months, I don't know. It is going to come back. Our LTL business is going to come back.

The area where I am working big-time now, and you start to see the numbers when you look at our SG&A and percentage of revenue, is our Truckload sector. Although we have not done a fantastic job yet, but we are working on it now. And you'll see the benefit in Q3.

Our LTL we are still working on that. But there we have to be careful, because I think that this is just a drop within the next, let's say, six months. It should come back. And energy sector in Alberta, that is an area that we don't know when it is going to come back, so we have to adjust ourselves today, I mean now.

Just quickly here in a follow-up to that, in the LTL space could you speak to -- you referred to the volume pressure and the pricing. Could you give us a sense, excluding fuel surcharge, base level same-store sales pricing, in LTL what sort of pressure year-over-year you saw there? And also on the volumes regionally, the West versus the East, if you could give some color there.

Yes, the big pressure that we have -- the big drop in volume is really out West. Up to the end of the year 2008, the West we were sailing, we were happy. We were -- this was fantastic. Now something happened between December 15 and the year 2009. It is like the roof just caved in on us in Vancouver and Edmonton and [North]. Not Calgary as much. Calgary is more normal, Red Deer, etc., etc. But everywhere where you say -- when you talk about energy sector, this is -- we see double-digit drop in volumes, even in our LTL sector.

And pricing pressure over there, I wouldn't say it is a big issue out West. It is mostly in the East where there is more competition. There is more of those bigger carriers that are idle, like us, with volume being dropped 5%, 10%, 15%. But the volume in the East has not seen that much of a drop compared to what we see in Western Canada.

I had better get back in queue. Thanks very much for that. Congrats on the quarter.

Youssef Abboud, Clarus Securities.

A couple of questions just to follow up on the cost issue. Can I infer, Alaine, that the cost cutting measure will be mainly focused -- and we are going to see the benefit in two segment, Specialized Service (inaudible) NTL, that is what is going to get probably the best from the margin improvement? Is that correct?

It is correct because that is where my attention and the attention of my team is being focused now on. Out West with Darshan on the energy sector, definitely we are working on the plan to adjust ourselves. And to try to change a little bit of that culture of wait and see, because we can't keep on waiting until things will come back. This has got to change.

And in the Truckload sector this, again, it is a big play in the East, Ontario and Quebec. And for sure you already see some improvement in there. Yes, it is mostly in our LTL, but you will see some major improvement in the next months to come. Let's say in the last six months of the year.

Okay, just one last small question. Any impact from YRC problem on your volume?

Not yet. Not yet. Because don't forget, YRC is a big player on the domestic market in the US, and again in the transport business. So for now I think that maybe some US LTL players are getting some business on the domestic side. I think I read about Conway was saying that. But for us as of yet, no.

For sure if something would happen -- and we don't know. The only thing we know is that the employee will be voting on the new proposal, I think, it is early August. And that is, again, to reduce their salary. And if this is accepted, well then we will see. If it is not accepted then I don't know what is going to happen there. But we don't know. But so far it has not been a factor for us.

[Nima Baloo], Bloom Investment Counsel.

Congrats on a very good quarter. I just wanted to -- it is great that you are paying down debt, and that is exactly what you need to do. But I'm just wondering when in the future you might be in a position to start going after companies? Have you seen multiples come down?

And on that note, what areas would you target? Would you go after work a depressed Truckload sector, or are you still looking at maybe the Package and Courier parcel side?

I have always said that within Canpar we have a big issue of the volume. Because we have built fantastic terminals in Toronto and in Montreal, and those terminals are operating at 60% capacity right now, and even less because of the pressure on the volume. Although it is not that big within Canpar, but we dropped a few points.

So the first focus has always been at TransForce to buy something good. We don't like to buy something distressed. Distressed takes too long to turn around. So we like to buy something good and make it better.

So LTL has always been a big interest of ours. Package, if we could find a company that would be a perfect fit for Canpar, if we could find a company -- I have been looking out for that and nothing has happened yet, but that would be perfect.

Now in the Truckload sector in the East, I think the timing is not right for now. A lot of those truckload guys in the East are suffering big time. But the demand is not there. So it is -- I wouldn't do anything in 2009, that is for sure, in the Truckload sector.

In the Specialized Services that is an area that we are looking at. I made a few deals within Matrec -- small, okay over the years. If you look at my -- you will see some business acquisition in there -- small -- that we did over the first six months. I mean, Matrec is one of them that is involved in those small deals. Nice tuck-in for Matrec.

In the energy sector -- Alberta, I don't really know, although the timing may be right to buy something over there. But we have to change the culture. Like I said earlier, we have to be more lean and mean in that sector. So as long as we are not at that level, I'm not going to add more business in that sector over there. But I think the timing is right in the energy sector, but maybe not in 2009, maybe sometime early in 2010.

Do you think you will have plenty of time to take advantage, given the pace of economic recovery? I mean, no one can judge exactly when it will come back, but you think enough time to buy these things at still reasonable prices?

I think so. I think so. And don't forget, my approach is always the quality of management. I am not going to take a risk on buying a company today with management that is questionable. If I'm buying something good it is because the management here is good, so the risk is limited. And when business come back to more of a normal environment -- I don't know when -- my feeling is that the worst is behind us in terms of deterioration. So we are probably flat now, and I think the only place we could go is probably up. But it is going to be slow.

So if you buy something good today, and at a reasonable price -- because, yes, maybe you're still buying at X times EBITDA, which is -- if you're buying good, you have to pay more money. But if it is accretive for the shareholder, if there is some synergies involved, that makes a lot of sense.

Thanks very much.

But don't forget, like I said before, our focus is really this year working with our team, with our people, to try to protect our dividend, which is very important to me. Try to do that reduction of debt like we said we would do.

It is good to see that debt being paid down today.

Aleem Israel, Cormark Securities.

Just -- I just wanted to go back to LTL and Truckload. Can you maybe quantify what you're seeing on the pricing side in both of those segments?

On the Truckload side, our prices are protected. In this sense that we are still running trucks today at an average price which is identical to -- let's say to 2006, 2007, 2008. But the big thing is that we have to walk away from a lot of business. So what we do is we just say simple, we are not going to invest in trucks. So we are not replacing our trucks. And the only replacement we are putting in is really to support the business that makes sense.

So that is why if you look at our gross margin, it is fairly stable in there. Now because of demand slowing down faster than our fleet size, we always pay a little bit of a catch-up which affects a little bit our margin. Because by the time that the customer is gone, it takes a little bit of time to take the asset out of your book. Right? So there's a little bit of a lag here.

So my goal is, hey, we have to protect our margin. And if somebody else wants to do the job at the cheap price, what we'll do is we are protecting the business, and we will just transfer that business to our Logistics division, where if somebody stupid wants to haul the product for next to nothing, okay, we will just go through our Logistics division. So has been our approach in the Truckload sector.

Now in the LTL, that is a different story, because you've got a network so you've got to be -- you have to protect your marketshare to more of a degree. So what we have seen over the last six months really is we haven't lost any customers. The problem is that the customers are shipping less, and every shipment has got less weight. So that is what we see.

So it is not that we are losing business. As a matter of fact, we are gaining business, because TST has been a fantastic salesforce. It is a fantastic brand name. The same thing with CF out West. So those guys are gaining new accounts, but we are losing so much volume with existing accounts, because the demand is not there, that it shows that we were dropping in volume, yes, but we are not losing any business.

Now, like I said earlier, we have to sometimes take -- there is a big customer of ours that those guys are very efficient, very aggressive. That is the Kingsway account. And we had to protect the business. So we had to give a little bit on the margin.

Now when this happens, what do we do? We turn around and we try to see what can we do -- us, within Kingsway or TST, whatever, to be more efficient? Is there a way? And that is the result that you see there is, I think it is not to bad considering that this environment that is really crazy.

Just on the -- you talked about this a little bit -- just on the acquisitions, you had small tuck-ins in the second quarter. What sectors would they be in?

I am sorry, what did you say?

The four tuck-in acquisitions you had in the second quarter for CAD5 million total, what segments would they drop into?

Well, we did a few for Matrec -- small things here in Montreal. And we did one in the Specialized Services transportation. That is a company that is called Watson in the South Shore Montreal, which has got a lot of business with Bombardier -- you know, the transport division of Bombardier, the rail car. And so we are hauling from Thunder Bay into Toronto for them a rail car. So the same thing. So these guys are moving very highly specialized equipment. We are moving also steel beam for the new bridges all over Canada from Canam. So those guys are highly specialized, heavy hauler. So basically Specialized and into Matrec.

And the Matrec ones, would they be collection or just like transfer facilities?

It is collection mostly. So we bought a small guy here in Montreal that is called (inaudible), which collects downtown Montreal cardboard and paper, etc., etc. We bought another small guy that is a rolloff operation in the GTM, the Greater Montreal area -- GMA. So small tuck-ins.

Great, thanks.

Nothing major.

Aaron Duxbury, National Bank Financial.

Just first question on the Package and Courier, the margin performance there was quite nice. You talked a little bit about the ICS technology improvements. So I think you talked in the past about a bit of a restructuring and operational improvement going on at Canpar. So would those be showing up yet or is that more upside down the road?

Yes, yes, you are right. That is one thing also -- now we have Jim Houston now that takes over Canpar, which is working very closely with a team there. We are working on a lot of things, a lot of improvement. Some you could start to see now, but small. We will see more in the next six months.

Just on the Specialized Services, you talked a lot about the energy segment of that. I understood that that would have dropped off quite a bit after the winter drilling season. I guess, following that, is it natural gas or is it oil that is really impacting (multiple speakers)?

Natural gas. Natural gas. That is killing us.

I guess just whenever the prices come back, and then in the meantime you'll just cut down your fixed costs and do what you have [got to].

Yes, yes, yes. Because like I said earlier, the culture was wait and see over there. So let's wait and it is going to come back and it's going to come back. Although the Alberta government tried to stimulate the demand by reducing the royalty, but we don't see anything, anything, anything moving. So we have to adjust ourselves.

Just generally I guess truckers are usually some of the first people to see any signs of any gradual improvement in the economy. Do you guys have any comments maybe anecdotal things you are seeing that point to a (multiple speakers)?

No, we -- you see, we read a lot of good news, but don't forget, we are in July. So July is always a very slow month, like August, because a lot of people are on vacation. So the activity level is very slow. As a matter of fact, July is -- it is January is our worst month, and the next one is July, because there is so much plants -- they are being closed, activity slows down in Ontario and in Quebec. So it is very tough to say anything so far.

If you ask me that question in September, okay, I will be in a better position to answer something like that. But everything that we read -- when we talk to our customers, the way they see it is that, we have seen the worst, and the only way it could go is up. But I can't say that today, because we are in July, so I don't know if this is going to be a fact or not. But it is more positive today than it was ever in 2009.

Just a last quick one, you guys have obviously taken a ton of costs out of the system. When volumes do eventually come back, do you think like you'll see a new margin level? Is there a lot of these things that you won't have to layer back in to satisfy new demand, or can you just talk about maybe what your potential margin could look like now?

Well, I think that a lot of that -- it is out for good. Because, don't forget, look at the history of TransForce. In TransForce we have been growing that business through all kinds of acquisitions from 2002 to let's say the end of 2007. The focus of the CEO, myself, was really to grow the business, and I had some management team running the Company.

Now we go through a storm starting in the summer of 2008. So we say, ho, ho, ho, let's stop all acquisition and let's focus on the business -- the business we've got. So this has been my job over the last eight, nine months is to work with our guys to see how we can make it better and adjust ourselves to the level.

So I think we will always be better based on that big storm that we are going through now. And we will come out of that storm stronger, with better margin. No question about that in my mind.

(Operator Instructions). Youssef Abboud, Clarus Securities.

Salvador, just a question about the finance. The CAD28 million real estate loan related to [CID] I guess has already been paid, correct?

Yes, it has been repaid.

And one last quick question is, CAD6 million which is related to unrealized gains at the corporate level from the forex and the hedging of the oil future, this is below the EBITDA line or above the EBITDA line you book it?

It is CAD5.2 million in quarter and CAD5.5 million I think in the year to date. That is related to interest rate swap contracts, and it is below the EBITDA line.

Right, right. Okay, thank you very much.

Jason Granger, BMO Capital Markets.

Just turning back to volumes here, I am wondering if you guys could speak to what you saw as the quarter progressed -- April, May, June -- in terms of the year-over-year volume declines in your Less-Than-Truckload and your Truckload business?

Your question is that -- is let's say April or May and June year-over-year about stable versus last year?

Yes. So I am trying to get a sense of how things trended from Q1 to Q2, and in Q2 as the quarter progressed -- yes, on a year-over-year basis, so April '09 versus April '08 and then May '09 versus May '08.

It is about stable. It is about stable. So really if you look at the year '08 and we compare ourselves to -- in '09 versus, so the drop in volume in April, May and June were about standard. Now you have to be careful, because Easter was in April this year compared to last year. I mean -- or it was -- there was this thing of Easter which was different one year to the next.

But besides that, it was quite stable. So it is really -- we are still trending the same trend as last year. And we are down, so we didn't see a pickup so far.

So when you say stable, you are meaning (multiple speakers).

I am mean, let's say we are in that sector we are minus 10. We were minus 10 in April, minus 10 in May and in June.

Okay. How would that have compared to Q1, say, March?

Q1 March, it was worse. But it start -- let's say, if it is minus 10 April, May, June -- January was minus let's say 18. And February was minus 15. And March was minus 13. And then we are like flat since -- in terms of deterioration -- since the last two, three months.

Can you give us a sense of how July is feeling?

July so far -- it is a very difficult month to predict. Because so far we are not doing better in July versus last year in terms of -- let's say we were minus 10 in June, so that we are still minus 10 in July so far.

And just in follow-up to that, your exposure to the auto sector and forestry sectors, could you comment on how you are seeing business there, how things trended to Q2 versus Q1?

Yes. In the automotive sector, really we are mostly in the aftermarket. The only business we had was basically our TST automotive business where we were really working closely with a pickup plan in Oshawa. Now that business is gone. That business is finished. They closed the plant in May of this year, so that is gone. That is finished. And that is basically the only business that we have lost with GM. The rest of our business is quite stable, because we are in the aftermarket business.

In terms of the forestry, probably it has been slow for last two, three years there. And if you look at our Truckload sector, one of the reason we are down so much is because we are leaving that market of that forestry, because those guys -- I have lost money with WCB. I have lost money with Smurfit-Stone. And I say, hey, I can't worry for these guys, and work for nothing and then lose -- potentially lose the Accounts Receivable. So this is why when I say we are walking away from those guys that are financially in trouble and can't afford to pay for the right service, that is why we are going down so much. So our exposure to the forestry every month is less.

And just lastly here, are there some areas that you are seeing volume growth in LTL or Truckload, for instance, any food products or healthcare-related products or others?

That is a tough question, because I don't have that detailed information, so I don't know. One thing I could tell you is through TST, Bed Bath & Beyond, for instance, they are opening up in Canada, so that is one of our accounts.

The other one that -- Lowe's is growing in Canada. That is one account that is TST. So there are some areas that we are picking up new business. I was talking to one of my guy yesterday. We have picked up Yves Rocher as a customer with Canpar. We have picked up sunglass high-end guys with ICS, which is CAD0.5 million of business -- Maui Jim.

So there is a lot of things that, like I said before, you see volume going down and you would say, well, are they losing customers? Not really. We are gaining customers, as a matter of fact. We are gaining customers. The problem comes from our customer -- existing accounts that are shipping less.

Very good. That's it for me. Thanks guys.

Aleem Israel, Cormark Securities.

Just had a follow-up question on Matrec, because it obviously could be a pretty strategic asset for you from either a spinout or a sale standpoint at some point over the next 12 months. With these acquisitions you have made, how much do you estimate marketshare-wise you have now for the collection side of things in the Greater Montreal market?

Oh, boy, that is a very good question. I would say -- boy oh boy, I think if I remember correctly, we have over 400,000 doors. So it is at least 30%. When you say this is the Greater Montreal, this is North Shore, South Shore, the island, everything, I would say close to one-third for sure on the collection side.

On the collection side, okay.

Yes.

Would it be -- what would be the number for Quebec overall? Like does Matrec have much outside of just the Greater Montreal market or --?

Yes, we are in (inaudible). We are the biggest guy over there. We are in the Eastern Township. We just took over Magog, for instance, this year, a new contract. We are bidding in Quebec City. Quebec City decided to -- because some of Quebec City was done by city employees, and since they saw what is going on in Toronto, they say, ho, ho, ho, got to change something. So they made a deal that they will get rid of all their collection. So they are bidding their business right now.

So that could be a gain for us, because in Quebec City we've got probably 15% of the market. So we are a player there; we're not big. And then I said about Gatineau, close to Ottawa, that is another major sector for us. Because don't forget we are (multiple speakers).

Can you touch on what kind of size the Quebec City contract may be?

From what I could read, they are talking about 100,000 doors in Quebec City. So it is going to take a little bit of time, but they are bidding the business now.

And do you have any (multiple speakers). Do you have any significant contracts coming up in Greater Montreal?

Yes, we have one in -- that is called [Ocean], which is a regional municipality that we should know more about -- we are doing the business today at a distressed price. So hopefully we will get that business at a market price today. So that could be a big plus for Matrec, and that is about --.

How many doors would that be?

That I don't know. It is probably something in the neighborhood of 30,000 to 50,000 doors.

Is pricing in the market quite stable or are you seeing pretty significant opportunities to raise pricing?

No, I think the prices are fair here in Quebec right now on the collection side. I think that it is mostly -- you know, price that a guy will make a small profit, yes. So it is fair pricing. It is reasonable. And that is why we can invest in that sector.

The contract that you are doing your renewal on now and you are looking for an increase on, I remember when you acquired the business, you had a bunch of contracts that were (multiple speakers) from a margin perspective. Would this be the last of those contracts or do you have any more coming up?

Yes, I've got one in Quebec City that is due in January of 2010 and in (inaudible).

Okay.

That is the only one left.

There are no further questions at this time. I will turn the call back to you. Please continue with your presentation or closing remarks.

Thank you, operator. Since there are no more questions, I want 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 midnight, July 30, 2009 by calling 1-800-558-5253, or in Toronto 416-264-4100 and entering passcode 21431942. Thank you all. Have a good day.

Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines.