TFI International Inc (TFII) 2011 Q3 法說會逐字稿

Good morning ladies and gentlemen. Thank you for standing by. Welcome to the TransForce third-quarter 2011 results conference call.

At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be given at that time for you to queue up for questions. (Operator Instructions).

Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.

I would like to remind everyone that this conference call is being recorded on Tuesday, November 1, 2011.

I will now turn the conference over to Alain Bedard, Chairman, President and Chief Executive Officer. Please go ahead sir.

Thank you operator. Good morning everyone.

The news release detailing our third-quarter results for the period ended September 30, 2011 was issued by Canada NewsWire earlier this morning. We hope that you've had the chance to review it by now.

TransForce posted solid third-quarter results despite the continued uncertainty about the health of the North American economy. I am pleased to say that our constant focus on improving operating efficiencies and asset utilization yield a 34% increase on our key EBIT metric.

We made good progress on many fronts, mainly with respect dynamics where profitability is improving and at our LTL operation where operating performance also improved despite currency headwinds.

Another quarter of robust demand in the energy sector also yielded a strong profit increase in our Specialized Services segment. Loomis, which account now for more than 10% of our total revenue, recorded a loss for the third quarter. But since September 30, the date that the final segregation with DHL was accomplished, we are now putting our aggressive plan of efficiency improvements in place so that, by early 2012, we can operate at breakeven and shortly after contribute to profit.

I will briefly review our third-quarter financial results which again improved in every important metric. Our total revenue reached CAD743 million, representing a year-over-year increase of CAD243 million or 49%. Approximately CAD205 million of the increase resulted from our acquisition of Loomis in late July of 2011, Dynamex in February of 2011, and Speedy in August of 2010.

Revenue from existing operation increased CAD38 million or 8%.

Our third-quarter EBIT grew 34% to CAD57 million. This increase was driven by acquisition, ongoing cost management, and asset optimization initiatives. However, in terms of total revenue, EBIT was 7.7% versus 8.5% in the same quarter last year. This decrease mainly resulted from Dynamex lower margin and the loss at Loomis.

Adjusted profits for Q3 rose 49% to CAD33.3 million or CAD0.35 per share fully diluted, up from CAD22.3 million or CAD0.23 per share fully diluted last year. Adjusted profit excludes the after-tax effect of changes in the fair value of derivative, of net foreign exchange gain or loss, and of items that are not part of the Company's normal business.

Net cash from operating activity before net change in non-cash operating working capital rose to CAD73.2 million as a result of improved operating profitability. This represents a 27% increase over last year. This solid cash flow is used to reduce our long-term debt by an amount of more than CAD50 million during the quarter.

A look at our third-quarter results on a segment by segment basis. In Package and Courier, revenue, including fuel surcharge, was CAD265 million, up from CAD86.6 million in the same quarter of last year. This significant increase mainly results from CAD175 million overall contribution from Dynamex at Loomis. Revenue from existing operation grew 3%. EBIT in this segment rose by 50% to CAD14.8 million.

Moving on to LTL, we are showing improved results. Revenue, excluding fuel surcharge, increased slightly. EBIT reached CAD9 million, up from CAD6.2 million last year. Although some of the increase reflects a gain on the sale of two properties, the LTL market condition remains quite challenging and more consolidation is needed. We're working on optimizing our asset to the fullest extent.

In Truckload, revenue, excluding fuel surcharge, was flat versus the prior year as both volume and pricing remain stable. More importantly, we remain focused on capacity optimization and a disciplined market approach.

Finally, our Specialized Services had another strong quarter with revenue, excluding fuel surcharge, up 21% to CAD152 million. Demand from the oil and gas industry was partly robust. This factor also contributed to a solid 46% increase in EBIT to CAD22.4 million. Our Waste Management operation and ancillary transportation services activity also contributed nicely to profitability.

Looking ahead, the health of the North American economy is still a concern. However, TransForce has repeatedly proven its resilience and the flexibly of its business model by rapidly adapting to changing market conditions. We will remain proactive in reducing our costs, optimizing asset utilization, and using our strong cash flow to further reduce our debt as we did in the past.

In summary, although we have done a lot, we know we can do more and this [is] highly motivating for our team. At TransForce, we are privileged to have the best people in the industry and with the right tools, they will go an extra mile to deliver innovative value-added solution to our customer base. As we continue to evolve towards an asset-like business model, capital will be increasingly deployed in initiatives that add to our know-how and provide to our operating companies with the best resources in terms of people and leading-edge technology.

So now I'll be pleased to answer any question you may have.

(Operator Instructions). Cameron Doerksen, National Bank Financial.

Good morning. A couple of questions on Package and Courier. You've talked about getting Loomis back to profitability sort of early 2012. Just sort of wonder if you could touch on some of the specifics of things that need to be done there over the course of the next few months that are going to get you that probability.

Thanks for the question. First of all, it's very important to understand that we bought Loomis at the end of June and finally we had -- it took us three months to separate ourselves from DHL. So during that quarter where we lost CAD3 million, the Company was really managed by a transition team. So now, as we speak, it's been run by a TransForce team that is now getting involved within Loomis. So the first step we did is we moved one of our executives from ICS into the position of VP Finance, or CFO if you want to call it, for the Company. That was done about three weeks ago.

Since we took over, we were able to reorganize to a certain degree some administration things and all of that respect, and we had to let go of about 50 people so far.

Now, our first priority really into Loomis is technology. So we're moving our own TransForce platform, financial platform, into Loomis as we speak. That should be completed by -- we're in November now. It should be completed in November, and we're moving also our operational IT platform, which should be done by the middle of the summer. So that will help us big-time in terms of improving the financial results of the Company.

Another aspect of what we're working on is we have a few customers which are not fairly priced. So although it's a very difficult environment, there is pricing but there is no way that we can serve a good customer by losing money. So we've identified a list of accounts that are important to us, but we need a fair pricing if we have to serve these customers in the future. So Jim Houston and his team are working on that.

At the same time also, we moved one of our -- our VP of Operation of [Kampar] has been moved into the Loomis position, and we just hired a new VP of Sales that hopefully should -- she should be onboard very soon. So we are rebuilding the executive team at Loomis. That was step number one.

Technology is the first step that we're implementing really to save costs and prepare the Company to be a much more efficient company. Already, we see improved productivity in our sorting system, our sorting facility, so we are on the right track. That's why I am very confident, working with the management team that we have there, that no question that very early in 2012 we are at a breakeven, and by the end of next year I'm sure we'll be tracking with a 2% to 3% profit at that time. Our goal is to be double-digit, so sure we have a long way to go, but we know exactly what needs to be done.

Was there anything different now that you've had a chance to look at the business more closely in the last couple of months? Is there anything different in the business, better or worse than what your original expectations were when you purchased the business back in June?

The only thing I could say different is this is always difficult to buy a division of something that is not separate. When we bought ATS, it was much smaller, okay, and ATS was a very successful company anyhow. So what Mike and his team told me that ATS retail would look like we were very close to.

DHL Canada was a very different story because this is a company that has not been very successful over the past ten years. So they told us that this should be the picture of a separate DHL Loomis operation. But there was a little bit, a few mistakes in there, but no big deal.

The important thing for us is that we have a machine that generates today CAD275 million of revenue also. We have the tools to make this company profitable, working with our customers, working with our employees, investing in technology, because all of this will be done through a lot of investment. I mean, just on IT, we're looking at between CAD5 million and CAD10 million over the course of the next 12 months to update the scanners, to update the tunnel, the (inaudible) tunnels, and all that. So we know what needs to be done.

But don't forget the price that we paid is -- we paid a low price because we knew that we had to do a lot of investment. So at the end of the day, if you add the investment and our purchase price, so maybe our total cost will be around CAD40 million to CAD45 million. But don't forget we're buying a CAD275 million company. Plus we're also aiming a partnership with the best international player in the world, which is DHL.

Perfect. Have you seen any I guess early benefit from the partnership with DHL at this point?

Not yet, because we're busy trying to do what needs to be done at Loomis right now. One thing I could tell you, though, talking to Jim Houston and the team there, is service-wise there is no issue. So that's the big deal for customers. If you take on a business and you have tons of issues in the service, that's a big problem. The problems we have there is cost. The problem we have there is overhead. We have way too many people in the offices there, but we need tools. We need to change the tools that these guys used to have, and we also have, to a certain degree, an issue on pricing with certain accounts, which we're working on.

Okay. Just I guess secondly, sort of on the overall Company philosophy, it seems pretty clear that TransForce is sort of slowly shifting its model towards more of an asset-light (multiple speakers) really across the business. The packaging courier is the most obviously example there. But I'm just thinking about the other segments. What sort of things are you doing or thinking about doing to accelerate the sort of transition to more of an asset-light business in those other segments?

If you look at our LTL for instance, through that difficult period that we've been going through over the last two or three years, we have way less asset today than we had three years ago. That's the trend. No doubt we're working very closely with our management team to really change the model, but you'll see some improvement there.

On the Truckload side, the same thing. If you look at our fleet two or three years ago versus our fleet today, I mean independent contractor is more important today than what it was three or four years ago. So it's a trend, and that's why certain parts of the industry, like our energy sector, well, there is nothing you can do. You need the trucks and you need the cranes to perform the job, but the returns is very different than the returns that we used to see on our LTL or our Truckload.

So we are moving slowly in the right direction. If you look at Dynamex, for instance, which is all independent contractors there, you see we just announced -- we're announcing today that the President of Dynamex, Maynard, will be reporting to one of our Executive VP based in Toronto, Mr. Kohut. So that guy has lots of experience. He's been running ATS and ICS for us, so he has done very good there, so he knows the trend is that, hey, we need to improve the bottom line in Dynamex on working on the overhead, but then as soon as we are very solid, which we've improved already the bottom line of Dynamex by 1.3%, 1.4%, but that's not enough. We need to improve that by at least 3 to 4 points. As soon as this is done, which hopefully is going to be done in 2012, then we could work on growing this company in the US, because there is lots of potential there. So more and more you'll see us, our growth will be in those sectors.

Perfect. That's all I had. Thanks very much.

Jason Granger, BMO Capital Markets.

Thanks, good morning. Just carrying on with Dynamex here, could you just speak to what sort of -- what was happening with organic revenues in the quarter if you look at the US versus Canada?

In follow-up to that, in terms of the cost containment and integration efforts with Dynamex, still planning to launch some of those initiatives in the fall of this year. Any sort of color around potential savings from those?

Yes. So to answer your question, right now, organic growth in Canada is very small. But on the US it's quite impressive that we're growing 8%, 9%, 10% over there still in the US. So lots of potential of growing organically in the US. It's more limited in Canada because don't forget, the size of Dynamex Canada is CAD160 million compared to the size in the US which is about CAD330 million. So when you compare [it with] market, you have way more potential in the US than you can have in Canada. Number one.

Number two, in terms of savings in the US, we all know that the overhead of Dynamex in the US has to be under 20 points. Right now, it's not there; it's more than that. So we have to work towards this goal. In Canada, our overhead is about 15, 16 points, which is acceptable. It's not perfect but it's much better. So we have to do more in the US. This is why Brian Kohut and Maynard will be -- that's going to be their major goal from now on, November 1 into let say the summer of 2012.

Now, we have a very good IT system in the US, but it's not being used to the fullest extent. That's the same discussion I had with Loomis. Right now, 30% of our customers at Loomis, they have waybill by hand. We're in 2011; we're not in 1965. So Houston and his team, they have to correct that situation with customers. We don't accept waybill by hand in 2012. So but we had the same situation when we took on the Ontario government contract that was a pure account. So we had to educate the customer to say no, no, no. Today, we don't work like that. But we did. We did at [Kampar]; we will do at Loomis.

The same thing at Dynamex. We have beautiful tools but we were too busy doing something else. We didn't educate our people or our customer to use the tools that we have. And by doing -- by not doing that, what happens is you have more people in the office. You have higher overhead. You have higher fixed costs. I don't like that. So that's what we need to correct.

Very good. Just shifting gears here over to the convertible debenture deal completed in September, can you provide some color on that, your thoughts around doing that deal, still looking to take your debt down this year as you talked about levels previously with the potential resumption of M&A next year, or has something changed in your thought process around that?

Nothing has changed really, Jason. As you've seen, we reduced our debt in the quarter by about CAD50 million. Plus, we have to fund the working capital of Loomis because Loomis was an asset deal right? So just funding the working capital of Loomis costs us probably CAD20-some million. We're still a firm believer that we'll get, by the end of the year, with about CAD750 million of debt. So we're going to drop another CAD50 million.

Now, as I've always said, the reason for that debenture was just to give us flexibility, just in case that we see a transaction that we have to say yes to it because the price is fair and the tuck-in makes sense. So -- and there again, we've identified two sectors really that's very important to us, the energy sector in the US and the parcel business.

Now parcel, I don't think anything is going to happen there pretty soon because we're very busy with Loomis and Dynamex. Dynamex is not the same issue, but we're very busy -- Jim Houston and his team, the clock is ticking. We've got to turn that thing around and fast. We cannot afford -- I don't like red, so I don't like the result we have in that Q3 of losing CAD3 million, and that has to change fast. So in terms of acquisition, going to be very quiet there until the summer of 2012, and probably that's going to be on the US side with Dynamex.

On the energy sector we said it. On the Truckload we said we're going to be very quiet with that market because there's huge changes there happening over the last three years. On the LTL, we said, hey, listen. This is a very tough and very difficult market. It needs consolidation. There's too many players. There's too many guys and Murray Mullen did a transaction. He bought a small LTL company in Alberta. For sure that's going to help the market, put more discipline in that market. But there's more to come. If you look at the improvement of my LTL, we're on the right track. We're still far away from where we should be, but at least we're going in the right direction with all the changes that we implemented about a year ago.

As we speak, we just announced in the, East Ontario and Quebec, another round of changes, another round of cost cutting, another round of improving productivity that will probably yield a CAD5 million savings for the Company. I am out West next week working with our management team and we're looking at Phase II there as well of improved efficiency that's going to get -- we want our LTL EBIT closer to CAD10 million instead of CAD6 million.

Just last question and follow-up to that point on less than truckload -- so nice to see the rate of decline in less than truckload moderate on the topline Q3 versus Q2. Can you speak to how that has been trending, say, from July, August, September and here into October? In Q4/Q1 of next year, should we potentially be looking for less than truckload to be flat to slightly positive year-over-year on an organic revenue basis?

I think you are right because, out West, CF, we're finally -- the economy is better in Alberta. The economy is a little bit better in Saskatchewan, so we're starting improvements over there. In the East, Overland is doing a fantastic job with the sales force over there. But to say flat for next year, year-over-year, I think that's attainable. It's going to be flat at the top but better on the bottom line.

Very good. I'll get back in queue. Thanks.

David Newman, Cormark Securities.

Good morning. Just let me -- a couple of questions -- just follow up on Cam's question on the Loomis side. These few accounts, how material would they be I guess as a percentage of the overall revenues that you're getting from Loomis?

About 10% so far that we know that are really a problem. It's unacceptable. It's not fair. So Jim and his team are really working hard and discussing with customers. We are very, very far from reasonable in those accounts.

I know some of your peers are quite encouraged on that side that Loomis -- or DHL Canada had been one of the lower pricers in the market, that perhaps the rationalization in the market here could lead to just general rate increases overall. How far off are we -- I know you're just kind of sinking your teeth into it, but what's your sense overall? Is that going to play out at some point year?

Yes, I think that the team there was -- how would you call that -- predatory pricing.

Yes, yes.

So this is gone. For sure us, we don't work for nothing. We work for something that is fair. So we have some customers where we have some issues, and we are working with the customer. And no doubt that, in general, that sector of the industry will have more of a fair pricing because we don't -- we're not trying to get more out of the customer than is reasonable. We're just trying to get fair pricing so that we can have a nice return for our shareholder, because that's what the business is all about.

Absolutely. Overall, obviously the overall trucking market in the other segments too, there's been some good rationalization. It seems like the whole industry has been fairly prudent on the supply side. Are you seeing any -- I know not this quarter, but as you look out, are you seeing any potential for pricing improvement in the other segments, maybe not LTL but the other segments?

We don't count on that, David. I don't know. Hopefully, it will be there. At first, we thought that the pricing environment for truckload should start improving in the fall, and it didn't materialize, so it's still very flat to us. So I mean, our plan for 2012 is very easy. We'll do much better than what we're doing this year just because of costs and improved efficiency. So let's say our target for this year we're going to shoot for CAD310 million or something like that. Next year we'll be over CAD350 million with the same kind of environment, no question about it.

Just overall, the markets have always been relatively resilient. This is more of a macro question. But the railroads, we're seeing it. We're seeing it with the trucking companies where the fundamental boot on the ground economy seems a lot more resilient than the newspapers would lead you to believe. What is your sense of the dichotomy there? Just overall as you look out on the inventory retailers and guys like that, what do you think the potential leverage is there?

It's hard to understand, because we're on the road every day and we see what's going on, but then we read the paper and either it's too optimistic or too negative. So it's very difficult.

But when we talk to our customer, everybody is very prudent because nobody really knows where we're going. Just a week ago, we thought we had a deal in Europe, and then yesterday this Greek guy there says no, no, no, we're going to have a referendum. So we're back to square one there. That creates a lot of weight. The US dollar has appreciated yesterday versus the Canadian dollar, and then there we go again. So it's very -- the instability that we're going through, it gets us very nervous. But us, we go one step at a time and working on the cost. Hopefully, the demand will start improving sometimes, hopefully next year, and the pricing environment should get better at one point. So is it going to be 2012 or '13? We thought it would be '12. Now everybody thinks that no, it's not going to be before '13, or maybe '14 now. So we don't really know.

But one thing I can tell you is that what we're going to be doing this year, next year we'll do better. Why? Because we know what we can do at Loomis. We know what we can do with Dynamex. We know what we could do with our energy sector in the US where we've improved or in Canada. If you look at our specialized margin, we've improved but we know we could do more. We'll do better there. Our Waste Management will do better next year, so that's why we're very confident that we'll improve our bottom line next year, even with the same kind of environment, by 10% to 15%.

Yes, no, definitely. You guys have a little more resilient and certainly even in a flattish trucking environment, I think you guys just from efficiencies alone should be able to do better. Obviously (multiple speakers) free cash flow is looking pretty good. Any (multiple speakers) for next year at all? I know it's early days on sort of CapEx spend that you might have for 2012 or (multiple speakers)

I think that our CapEx will probably be about similar to the one that we had this year. Why? Because most of our growth, okay, through acquisition has been in asset like companies like Loomis or Dynamex. So really Loomis, the big CapEx there we're going to see is really IT where we are looking at between CAD5 million and CAD10 million. We are looking -- we are doing some now, okay, and so that will probably be the big thing over there at Loomis.

Are we going to expect some pretty decent cash flows next year as well?

Yes.

Excellent. Thanks.

Thank you David.

Benoit Poirier, Desjardins Securities.

Good morning. First question, you talk a little bit about the pricing environment for truckload, but could you maybe comment or provide more color about the pricing environment and also volume expectation for both the LTL and TL?

Okay. You see, in my mind, the truckload market will be stable as it is now, and it will be the same story in 2012. The only area where we see some kind of an improvement is really our flatbed operation where we are doing better, much better this year than we did last year. We see that continuing in 2012. But the regular box, 53 box from Canada into the US, that's not going to grow. That's going to stay stable to me, and that's it.

On the truckload side out Western Canada, that's a different story. The oilsands will grow big time next year. 2012 is going to be very big year there. So our UTL-based truckload operation there, our Lacaille operation there will see some organic growth. But the regular box that we have in Ontario and Quebec, that's going to be, at best, stable.

On the LTL side, I think that the West will again be different than the East. I think that what's happening in Alberta and in Saskatchewan, a little bit BC, the economy is on its track. The economy is improving. Oil is, again, over CAD80 a barrel, should be no issue with the oilsand and the drilling activity there. Our LTL will benefit from that, no question about it.

Our pricing, okay, we had the press pricing over there out West for the last two or three years. Our sales force, they're working with our TST team and our CF team over there are working to adjust prices so that it's fair, because our cost -- I mean it's very different, our costs in Alberta versus Ontario.

Now, LTL in the East, that's the big story. That's the big thing where there is definitely a consolidation that needs to happen more and more in the LTL world. So there is a company that was up for sale. We'll see where this company ends up, but for sure if it's somebody that's already in the business that buys this company, for sure that will benefit the market, but there's more to do. There's more to do because the market of LTL, excluding the West where the economy is growing but in the East is shrinking. So we have to adjust. That's what I was talking about just earlier about what we're doing with Kingsway and Select and Thibodeau. So we're adjusting ourself. We're going to save about CAD5 million or CAD6 million of costs because the market is not growing, so we have to adjust ourselves.

I guess it's fair to assume that capacity expansion for next year will be -- you'll will be very cautious on that.

On LTL, there is no capacity expansion, none at all. On the Parcel side, we're very busy with Loomis trying to put our information system in there, change the culture. We're lean and mean. We're not rich. We can't afford to lose money, no no no, this is not us. We're not a bank. We're very different.

Just to come back on the performance of Specialized Services, I understand that the big bomb came more from the energy and waste (multiple speakers) stable. But going from current level right now, would you see more upside in terms of margin expansion coming from oil and gas, or more from the waste management?

No, more is going to come from the energy sector because that is where we have host of our [occupancy]. But on the waste side, we have some nice projects that hopefully we could start to discuss publicly probably early next year. So our waste management team there is very busy working on organic growth of some projects, not on the acquisition side.

The energy sector, that's different. There's lots of potential because right now we're only in the Rockies, so we cover North Dakota, the back end. We are in Colorado, in Evans, so we have a very good market in the north. The big thing is that we are not in Louisiana or in Texas. That's an area that makes a lot of sense for us to be there.

Maybe last question, any color you could provide about pilot shortage right now, whether it's a current impact on you or (multiple speakers)

You mean the driver?

Yes.

No, that's no big deal, no, not at all. Down the road, if there is a shortage of people, our approach has always been very simple, is that [then] -- it's offering demand. We have to act accordingly. So this is the same thing. If you're a shipper and the phone rings all of the time because the truckers are not busy, what you do is you just push all the prices down. A trucker never understood that Economy 101 is when the phone rings, the trucker, he tries to find more trucks and he tries to find more drivers to respond to more demand.

Us, our answer is not that. Our answer is that we look at pricing first. We just want to make sure that all of the prices are fair, and then we start worrying about supplying the demand.

Walter Spracklin, RBC Capital Markets.

Good morning. So just most of my questions have been asked and answered. So I kind of want to just touch strategically on how you look at your business over the next year or two in terms of core assets or core businesses that you really want to focus in on, and what areas maybe you're going to be focusing less on or potentially divesting. I know that you've done a great job over the years of pulling together some pretty solid operations. But now they're big enough in and of themselves to represent standalone entities that many would argue are not getting the value they deserve. So how do you look at that and how do you approach that? Specifically on areas, it sounds like truckload is probably not too much of a focus for you right now. Is that something you see yourself divesting down the road?

Walter, truckload, it's a business that is capital intensive. So if you have a model of -- which we do have of a mix of IC, independent contractor, and trucks and employees, so for sure, you're absolutely right. So we have a very good truckload business today. But down the road, the more evolution that you see within TransForce, it may come to a point that either we buy somebody of a fairly good size in Canada to build a better truckload and then that truckload becomes the operation outside of TransForce, or we just sell it to somebody else, or we just keep it.

But for now, really our intention is to grow outside of the truckload sector. So we've identified the energy sector in the US. That is goal number one. The parcel, as I said earlier, will be quiet because, until the summer of 2012, because for a few reasons. Number one is we want to reduce our debt. Number two is we have to reduce our overhead within Dynamex and -- but the potential for growth through acquisition in the US is huge on the Dynamex side.

On the LTL side, if we see an opportunity to consolidate the market with a good brand name, there's a few. That will be very useful because if you go back and look at our -- true that it's just since 2008 that we published segmented information. But what I can tell you is in a normal year, our EBITDA in the LTL world was in the double digit. So that market used to be very good. It's been depressed for -- since 2008, late 2008. But that was a good market for us, which is you very rarely see that kind of return in the truckload market.

If I were to look at -- you mentioned sort of guiding CAD310 million this year, CAD350 million for next. I just want to make sure I understand. Your CAD350 million is essentially assuming no acquisitions --

No acquisition, no.

-- no significant changes in the outlook for the economy or the pricing environment. Is that a fair statement? Or --

It is. So if we have, in 2012, the same environment that we have in 2011, with what we have today, we will improve our bottom line between 10% and 15% based on (inaudible).

Part of that will be the annualizing of recent profitable acquisitions, and the increased in profitability on some of your -- the Loomis type to the 2% to 3% margin that you indicated? (multiple speakers)

Yes, Loomis will be one of them. Dynamex will be another big important player, the energy sector, both in Canada and the US, because I was not happy with our Q1 of last year. We could've done better, and this year we will do better, no question about it. The increased activity in the oilsand will put our West rate company up in a very good position.

Our LTL, no question about it, will do better next year than what we've done this year so far, mostly in Q1 and Q2, and hopefully Q3 and Q4. Our truckload, I don't see a lot of improvement there. So let's say this division stays flat. So that's why I'm very confident. Same economy, same environment, no acquisition except the one that we've already -- we have [Canaccord] okay, although this is small, but that's going to contribute, what, CAD2 million to our bottom line next year, no doubt about that. So that brings us about CAD350 million, CAD340 million, CAD350 million. That improves our cash flow.

Absolutely. Last question here -- you talked about -- looking at your topline here -- you talked a lot about, last year, about Dynamex not being in a -- not being going to be growing in terms of acquisitions and so on. But it sounds like right now that you've listened to the team down there. You've seen opportunity. So from a US growth perspective, the Oil and Gas segment is one area and perhaps Dynamex is an area for future acquisitions in the US. Is that a fair statement?

Yes it is.

That's all my questions. Thank you very much.

Kevin Chiang, CIBC.

Good morning. Just a couple of quick questions here. With US retailers moving to Canada, have you had any discussions with them? What's the potential impact here on I guess ATS retail as well as your overall operations?

That's a very good question because you're absolutely right. The US retailer, once they decide to move into Canada, they always talk to us. So they either talk to our at TST Overland or they were talk to an ATS or yes. You're absolutely right. So there is a potential there as we speak. Last week, I was in Toronto meeting with our ATS team there. We just -- Marcus was just coming back from New Jersey with a CAD1 million account that comes from the US. So you're absolutely right, the fact that we are a dominant retail player. If you look at my pie chart, you'll see that retail is really our number one and growing big time. The fact that we're so large and we have such a huge network of sorting facility either ATS or [Kampar] our Loomis, although I don't want to put more volume into Loomis now, I just want to make the volume we have today profitable and efficient, but the rest of the business -- and if it's an LTL account, I mean we have CF and Overland and Kingsway, so it's perfect for us. Yes?

Do you have a sense of what potential this offers you in terms of the bottom line or is it still early days for you guys?

It's still too early, but just to give you an example, when Lowes decided to come to Canada, Lowes is one of our accounts. Children's Place, they are growing into Canada, so it's one of our accounts. So every time the guy decides to come into Canada, some goes with the competition but a lot of them now are looking at us with -- we're really a changed company versus three years ago with the acquisition of ATS and now Loomis and what we could do across Canada. It's a different game.

That's helpful. Can you just remind me? I know you've spoken quite extensively about your topline. But when I backtracked, it looks like your sales from existing operations was up roughly just over 5% year-to-date on a year-over-year basis.

Yes.

When you look out into 2012, given the decline in consumer confidence and business confidence, what do you expect? Is 5% a good number for 2012, or should we expect something lower, maybe even higher, given some of the opportunities with Dynamex?

I would say that no more than 5%, no more than 5%, because our plan (inaudible) is always done with zero growth on the topline and major growth on the bottom line. But is 5% fair to say? On the energy sector, no question about it. On the waste side, I think so. On the truckload side, I don't think so. I think truckload will be more flat.

Now, if you look at our Parcel, yes. It depends what happens also with Loomis. Say, with the revenue, like I said earlier, we have about CAD25 million of business today, 10% of our total revenue that is question marked, so we're working with the customer to have a fair pricing on that. So that could be a potential loss of business. We'll see. But besides that, I think that this parcel business will grow by 2 to 3 points. So yes, maximum 5% I would say globally. I think we're going to end up the year at CAD2.7 billion, around that. And no acquisition, we'll flirting the 3%, the 2.9%, something like that, yes, 2.8%, 2.9%.

That's perfect. That's great detail.

Lastly, I'm not sure if this impacts you or not, but Honda announced I guess last night or this morning they are curtailing some production due to the flooding in Thailand. Just wondering if this is a headwind for you guys. Was there any impact from the Japanese earthquake on your volumes? I guess not. Okay.

No, no. A little bit, but nothing major.

That's it for me. Thank you very much.

Michael Simpson, Sentry Investments.

I was just wondering. Do you know how much revenue you get from hospitals or retirement care centers? Have you ever quantified that or broken that out?

Yes. Hospital and -- on the healthcare side, the big contributors for us comes from the Dynamex operation in the US. I would say it's about between CAD75 million to CAD100 million, maybe not CAD100 million. Let's say CAD75 million.

That's great. Do you think you could give any new business from Cardinal Health? They're making a purchase of Futuremed.

That I could not answer on that because I am not in all those details. I don't really know that.

Thanks.

Turan Quettawala, Scotia Capital.

Good morning. Just quickly one question. I'm just wondering if you're seeing any differences in the geographic, sort of on the geographic side in both US and Canada on pricing or volume.

That's a good question. Let me think about it. You know, we are not in the LTL in the US, and there I see some improvement in volume and pricing. That is very different here in Canada. On what we do in the US on the energy sector versus Canada, it's about the same. Both markets are improving in terms of volume and pricing. So not really. In the sector that we operate, I would say no.

Okay, that's great. Thank you very much. That's all I had.

Damir Gunja, TD Securities.

You mentioned that you'd like to see LTL longer-term at 10% EBIT. Can you just (multiple speakers)

We've done that in the past, so we've got to get back to that.

Can you just remind us on your other business lines where you'd like to see them as well, longer-term?

You see, the Parcel, this is where we need a lot of improvement. That will come from Dynamex and Loomis. So we know that we could generate in EBIT that is double-digit, let's say on average CAD10 million to CAD12 million. Same should be maybe a little bit lower for LTL, but not much in a good market environment.

Truckload sector, if you're between CAD8 million to CAD10 million, that's a good target. So we are not that far from where we should be.

Now, Specialized Services, this is where you could see lots of improvement there down the road with the better market condition that we're starting to see both in the US and in Canada. So there we have a few points, and that all depends on the mix between our waste management, our logistics and our energy sector. Our logistics, it's very difficult to have an EBIT of double-digit because there is no capital involved, there's nothing. So in our logistics world, if we have an EBIT of CAD8 million, that's good. We are very close to that. Now, on the energy sector and on the waste sector, this is -- the target has got to be closer to CAD20 million EBIT.

Would it be fair to say the Package and Courier, you're probably a couple years out from getting to those targets, given sort of the heavy lifting you have to do at Loomis and Dynamex?

Dynamex is not going to be that difficult. I think that Dynamex, we could fix that in the next 12 months. Loomis, that will take more time for sure, so I would say, to get to that double-digit number, it's going to take us for sure '12 and let's say '13, two years.

Thank you very much.

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

Thanks. Just a quick question here again back on Dynamex. Looking at your organic growth in the US Q2, Q3, high single low double-digit percent growth there. Dynamex in the US is often thought of largely a same-day delivery company, but you've also got the dedicated business down there, and you've got the pharma, which I think 20% to 25% of your revenue comes from. Can you just speak to how dedicated versus same-day delivery and pharmaceutical opportunities are coming into the mix with respect to that revenue growth and how you see that playing out down the line?

Yes, that's a very good question. On the same day, it's not a growing market, so the only growth we'll get there is through acquisition, no question about it.

On the dedicated, that is a big area of organic growth, or we could growth through acquisition in that sector as well. But organically that is where we're really growing. Basically, in one sector, which is healthcare, which represents more than 25% of our revenue, this is a big area of growth in terms of customers but also in terms of geography, because right now, just I'll give you an example, Florida. Florida, that's a big state for healthcare because there's lots of retirees, etc., etc., and it's a big state. Our presence in Florida is next to nothing. So we could grow by opening up in Florida and serving customers that we already have or new customers, or we could just buy somebody else that is a significant player in Florida because we are not there, or we're there but very small. You see. So lots of potential for organic growth, or growth through acquisition in Dynamex US.

Now, as I said, we're not going to do anything significant until let's say Q3 or Q4 of 2012, because now I want to reduce my costs. I want to make sure that all our business units are using our technology so that we can reduce our costs, because you need a very solid base before we start adding to the base.

Okay. The dedicated growth that you are seeing there, is that from new accounts, from existing accounts? Are you just seeing --

Both, both.

-- more existing accounts, say, okay the economy is uncertain. We just want to get out of this transportation business and give it to (multiple speakers)

We have both. We have accounts like the American Red Cross, which is a new account for us, which was an CAD8 million account where we're doing all their distribution on the West Coast. We have also accounts like [IKEA] where we're growing big time organically with them because their business is very successful.

Has something changed that's allowed you to start realizing more of that organic growth or new accounts generation?

Something changed. That is very difficult for me to answer. I think Mr. Walsh, although he was there for a very short-term, really changed the vision of the company. Us, we're taking on, okay, from that point with Maynard and now Brian Kohut will be involved, and what we're seeing is this -- is we're doing good on the revenue side. Our gross margin in the US is 30 points, which is good in that business. It's very good. The problem is that we need to know where that 15 not 22 or 24.

Okay. Thanks.

Benoit Poirier, Desjardins Securities.

Just to come back on the waste management side, could you provide more color about the upcoming contract opportunities for TransForce?

Yes, because, you see, most of our organic growth will come from Ontario. No question about it. We have a diamond in our stable which is our landfill in Moose Creek, so a lot of things that we're working on organically with Brian King, the guy that runs our Ontario operation working hand-in-hand with Mark Fox, so lots of stuff that we're working on. I can't really publicly talk about it until it's done, but the guys are very busy. So the growth will definitely come from Ontario.

Okay, thanks.

There are no further questions at this time. Please continue.

Thank you operator. So ladies and gentlemen, thank you for your interest in TransForce. I look forward to my next opportunity to update you on the progress of the Company when we report year-end's numbers. So have a good day. Thank you all.

Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.