TFI International Inc (TFII) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to TransForce 2011 fourth quarter and year end 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 provided at that time for to you 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, Wednesday, February 29, 2012. 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 results for the fourth quarter and fiscal year end December 31, 2011, was issued by Canada NewsWire earlier this morning. We hope that you have the chance to review it by now.

2011 was an excellent year for TransForce despite the North American economy that remains sluggish. We generated record revenue of CAD2.7 billion, achieved a solid 29% increase in our key EBIT metric and completed three significant acquisitions. We also generated free cash flow of about CAD203 million in 2011 allowing TransForce to reduce its debt after every acquisition. More specifically, although we invested CAD373 million in business acquisitions throughout the year, our long-term debt increased by less than CAD230 million. These results were achieved through our ongoing commitment to maximize efficiency and optimize asset utilization. More importantly, we have continued to invest in technology to provide our people with the best tools to offer a service that is second to none. This excellence sets us apart and builds shareholder value.

I will briefly review our fourth quarter results, which again, improved in every important metric. Total revenue reached CAD735 million, representing a year-over-year increase of 36%. The increase is mainly related to the 2011 acquisition of Dynamex in February, Loomis in June, and IE Miller in November. Revenue from existing operation decreased slightly as a result of lower volume and our discipline with regard to capacity and pricing. Fourth quarter EBIT grew 30% to CAD55.7 million. This increase was driven by acquisition, proactive management of operating expenses, and ongoing initiative to optimize asset utilization. In the quarter, we incurred about CAD3.5 million in restructuring costs in LTL and Package and Courier segments, which I will address shortly. As a percentage of total revenue, EBIT was 7.6 versus 7.9 the same period last year. This decrease mainly results result Dynamex lower margin and a loss, again, at Loomis in the quarter.

Adjusted profit for Q4 rose 63% to CAD33.9 million, or CAD0.34 per share fully diluted, up from CAD20.8 million, or CAD0.21 a share fully diluted last year. Dynamex. Its EBIT margin continued to improve as it has done since becoming part of TransForce. Fourth quarter results include a charge of CAD900,000 related to further headcount reduction at Dynamex. We believe these measures, combined with other cost reduction initiatives undertaken since the second quarter 2011, can result in gross annual savings of around CAD8.7 million. This said, until we see full benefits from these initiatives, the EBIT margin of the Package and Courier segment will likely remain in single digit, mostly because of the situation at Loomis.

Results improved once again in the LTL segment, although revenue, excluding fuel surcharge, decreased by 7% as a result of the consolidation of resources between several LTL divisions. EBIT stood at CAD3.1 million in the fourth quarter of 2011, up from just CAD500,000 last year. Moreover, this quarter's Q4 EBIT includes restructuring costs of CAD2.6 million, mainly resulting from employee termination. Excluding these items, LTL EBIT was CAD5.7 million. Although we made substantial progress in the second half of 2011, and more is anticipated in 2012, market conditions still remain quite challenging. TransForce will, therefore, remain proactive by taking the appropriate measure to maximize return on asset. We will also benefit from the acquisition of Quik X completed just after year end. Quik X is a strategic and profitable asset light addition to our LTL offering.

In Truckload, revenue excluding fuel surcharge was down 7% due to a drop in volume while pricing remained steady. We remain focused on capacity optimization, a disciplined market approach and solid execution. Excluding gains from the sale of property and equipment, we posted a 20% year-over-year improvement in EBIT in the fourth quarter. Service to the energy sector had a strong quarter with revenue up 39% to CAD91 million. Excluding a one-month contribution from IE Miller, revenue increased 21% driven by stronger demand from the North American oil and gas industry. Improved efficiencies from existing operation and the contribution of Miller yielded an EBIT of CAD10 million, or 10.9% of revenue versus CAD1.9 million or 2.9% of revenue a year ago.

Looking ahead, we believe that 2012 economic environment will be similar to 2011 with conditions continuing to improve, but only at the slow pace. We believe TransForce will further improve its results thanks to further efficiency gains, cost reduction measures and deleveraging of our greater density following last year's acquisitions. We will continue to adapt our business model to become more of an asset like Company. This will provide us with more operating flexibility and a greater return on assets. In parallel, we will also pursue a disciplined acquisition strategy with a particular focus on growing the Package and Courier, as well as services to the energy sector segments. TransForce has repeatedly proven its ability to generate a solid cash flow that is used to repay debt and grow through acquisition.

In summary, we're committed to our operating principle and to execute our strategy with the same discipline, rigger and passion that has made TransForce a North American leader in the transport and logistics industry. This firm commitment will build further shareholder value. I will be pleased to now answer any questions that you may have.

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

First question, wonder if you could give us an update on the Loomis integration, maybe go over what's been done so far, what's left to do? I realize this is a fairly lengthy process, but also any outlook on when you think you'll get that business back to profitability.

Cameron, like you said, that's going to be a very long process. Our strategy for 2012 is to work on the back office. Right now, by the end of April, we have the Canpar head office that's going to be closed down and they're going to be moved to the Loomis head office. We'll have combined that office by the end of April. We're also, at the same time, moving our IT platform to one of our locations that is right now sitting at the old Canpar head office. At the same time, we're moving also the Loomis IT system on our own IT system.

I would say that by the end of the year, all of the job at Loomis or Canpar will be done mostly on technology, IT platform, information system, making sure that the executives that are running Canpar and Loomis are up to the job because we have to replace most of the executives at Loomis as we speak, so that they understand our culture. That being said, we should be back to break even, like I said, probably around Q1 or Q2 of 2012. And showing probably a small profit by the end of 2012. This is based only on working on the admin side of the business.

Also, at the same time, we're working with some of our customers that the pricing is not fair so we're trying to address that as we speak. Although the environment is pretty difficult, but we're addressing that. The report I'm getting from my guys is that we've lost so far since the acquisition about CAD6 million of business that was not profitable to Loomis, but we also gained CAD6 million of profitable business with new business like (Inaudible) in Montreal, it's a new account that Loomis just got about a month ago.

2012, we're looking at every operation that we have but we won't do any major change within Loomis Canpar in 2012 in the operation because we need the information to be precise, exact, so that we can make the right decision. The problem we have right now is that the Loomis system that was used by these guys over there, it's not solid. It doesn't give us the right information.

Until we get this right information which is going to be June of this year, and we start building information into our model, then we can start taking action on the operations. Operations is going to be something of importance by the end of '12 and the big year is going to be 2013.

It is still your expectation, though, that ultimately you'll get margins at the Loomis business up to the same levels as the other Package and Courier segments, correct?

Cameron, this is the same thing as we're sure that the sun's going to set today and rise tomorrow. We are the kind of business people that we don't accept a division that loses money. And Loomis was poorly managed, and it had a bad culture. The crazy were in charge of the asylum. That will change and we're working on it. Houston's responsibility is to change the culture and turn that thing around. It will turn.

This thing with the Package and Courier, in the MD&A you mentioned there was some discounting in the pricing realm during the quarter from here later, have you seen that continue into 2012?

I think that Ferro is really busy right now. This is really a one time that we see a lot of activity there. These guys have their own issues like we do at the Loomis Canpar, so the pressure is still there. The competition is still fierce, but right now, I think everybody's busy. This is the worst quarter for everybody, January. I think we're all busy trying to do the best that we can to deliver what has to be delivered.

Right now, the environment has not changed. It's still very fierce competition with those guys at Ferro. We're there and we have lots to do at Loomis Canpar to reduce our costs and be more efficient.

In terms of service, the service is not an issue at Canpar Loomis. Cost is an issue and fair pricing from customers is an issue. Technology at Loomis was really behind times. Don't forget, we bought Canpar in 2002 and that company was under capitalized for many years. That's why we paid such a good price for Canpar in 2002. Same thing applies to Loomis. We didn't pay a lot of money for that company because it was worth nothing. Now it's going to be worth a lot once we turn that thing around, and it's going to turn around.

On the Truckload segment. You mentioned there was a temporary decline in volumes in Q4. What was that related to?

Well it's the economy in general in the east. You look at Quebec, you look at Ontario. Those two provinces are not growing and we have plant closure in Quebec. We had a stupid situation with Caterpillar in Ontario where these guys close the plant just lately. We are still going through, again, another phase of downsizing the industrial base of Canada. We're not going to work for nothing. We're downsizing again.

We've lost 7% of our revenue compared to last year because we are not going to accept to match low prices like that. Plus there's one week difference between this year and last year. Last year was 53 weeks and this year was 52 weeks for the year. That 7% is not a real 7% because we're missing a week. That being said, we are still down a few points versus last year in Truckload. If you look at our profitability, we're running at a 7% EBIT margin. That is our third best family because now parcel is down to 6.6% because of the Loomis situation.

Just last one for me on the waste management, you got the approval for the increased capacity at Lafleche. I think there's some business to follow from that. Could you describe what your outlook is there?

We were very lucky on that file because we have the support of our community there. The other thing too, there's lots of small size of in flows in Eastern Ontario. We were approached by a lot of different small towns in Eastern Ontario. We have now the capacity to go to a much bigger volume than what we're trailing today. We should be trailing, by the end of this year, about 450,000 to 500,000 done. Remember last year, we were at 300,000 done.

Lafleche is a diamond for us. Our compost is running at full capacity. We're treating right now 50,000 tons of compost of good quality. We're very proud of that. Around June of this year, we'll be producing electricity with our partner for that site. We'll be selling about 4 megawatts of electricity. We've got lots of stuff there. We have our own leach treatment center on the site. We're looking at E-waste for Ontario on that site. We're looking at that right now. We're looking at C&D waste recycling, which we are already doing in four of our sites in Quebec.

We've got lots of project there. I don't know if you noticed it, but we now have a new transfer station that we bought for CAD1 in Belleville, that will serve the Quincy area waste and recycling needs. That's going to be perfect.

Our location was terrible and this was a unique transaction because it was done with the collaboration with the Ontario Ministry of the Environment and local municipality because previously that site was let go by the previous owner. What we're doing at Lafleche is going to be wonderful for our shareholder and our community in the Eastern part of Ontario. Lots of good projects there.

David Newman, Cormark Securities.

Just the macro environment, there continues to be a disconnect on what we're seeing, a lot of the industry metrics and things like that. Your cautious outlook, is it concern or are you just being cautious? What is that disconnect of the overall industry factors that are out there showing truck tonnage and things like that all looking positive. And the organic growth still seems to be a little tepid. Any thoughts there?

The only thing I can tell you and Cameron is we are always very conservative because we don't want to say that we're going to do this and then we don't attain what we're saying that we're going to attain. Remember, we say we're going to lose the EBITDA of 310 to 315.

We're at 312. We're looking at 2012. Yes, there's lots of good news coming out of the US. Employment is up. Unemployment is down. Manufacturing is up. My month of January with Dynamex was a boom month. It was a fantastic month with all of the moves that we made in Q4. Our profit is up big time over there.

I'm looking at my energy sector in January. Everything looks pretty good, but I'm not sure. My philosophy or my impression may change once we get into the better months of April, May, and June. So far, we're cautious. We've got lots to do to make these guys at Loomis and Canpar more efficient. That's my focus.

If you have noticed that we split the energy from the other specialized services. It shows that our energy is doing okay, but we could do better than that. This is where Mark is involved with David Nightingale, our new President of Miller, and our management team at Speedy. I know we'll do better, but we have to stay very conservative so that we don't raise any expectation and then we under deliver.

Any change in your longer-term thoughts on margin targets from what you've seen so far and what you've digested? Any CapEx assumptions for this year coming up 2012 and any early EBITDA forecasts in terms of a range?

We think that 2012, our revenue's going to be around CAD3.2 billion. And I think that is very close to the consensus. Our EBITDA should be in the neighborhood of between CAD375 million, which would be the low, to maybe up to CAD400 million if everything starts to work in our direction. Now, that being said, we still have lots to do at Loomis because if you look at my EBIT margin for the Package with the Loomis situation, I'm down to less than 7% EBIT margin. This is not acceptable. EBIT margin in parcel has to be a minimum of double-digit.

If you look at my LTL in the quarter, I'm up to 2.5%, which is nothing, but you'll see my Q1 of 2012 and you'll say wow, what an improvement. My Truckload, I don't see that. Until volume comes back, we don't have any pricing power. 7.4% as we did, or 7% EBIT for the year, it's going to be very difficult to do better. But on the energy sector, you see 2.9% last year in Q4, 10.9% this year.

You'll see much better than that in 2012 because there we've got the market that's helping us. Both in Canada and in the US. With Mark Fox and Mr. Nightingale, we have lots of projects. You should hear from us pretty soon in terms of organic growth in Oklahoma. Organic growth in Texas because now we have a solid team over there down south.

We just transferred. We had an operation in Arkansas that was under the responsibility of Speedy. Now this has been transferred to Miller because those guys are based down in the south, so we did that. Speedy had an operation in Grand Junction. We just acquired PSI in Rifle, Colorado, in January. We shut down Grand Junction and now we're operating much closer to the markets from Rifle, Colorado. We've got a lot of good stuff coming out of there, but we're cautious.

Your CapEx, your starting to throw off some decent free cash flow. What's your thoughts on CapEx free cash flow for next year?

CapEx, we're going to be playing around the CAD60 million to CAD70 million mark net. Net of disposal. Probably closer to 60 than 70 because we just signed a deal. We're selling one of our terminals in Edmonton right now that's going to fetch us CAD16 million, which was an old buyers terminal. Net of all of the disposal, probably we will be playing around CAD60 million. Free cash flow is going to be in the neighborhood of 225, maybe 240 cash next year.

Last one for me just overall on the Dynamex side, sounds like things are going well there. You had a plan of looking at the SG&A and reducing that, where do you stand on that one?

What we did in Q4 in December of 2011, is we had to let go of 75 people there at Dynamex, which was phase 1. We have another phase that's going to be done sometime May and June of 2012. We've got to be lean and mean, and wait until you see our Q1 numbers. And you'll see that Mr. Skarka, the President of Dynamex, working with our EVP, Mr. [Coat Alatrano]. Those guys are doing a fantastic job there. I'm really happy. We're on the right track there.

Dynamex is not a worry because it's an easy fix in the sense that it's [OREB]. My gross margin in the US is 29% which is very much acceptable. My problem there is the OREB, and it's been addressed and it's been attacked. You'll see we're on the right track there.

Loomis is a much difficult situation because there is a culture there that has to be changed. The culture there was well, we lose money it's normal. What is this? We lose money it's normal? Well it's normal if you want to lose your job. Houston has a big job to do there, and his team.

That's why our first priority was to replace all of the executives of Loomis, which we did. We have a new CFO there coming out ICS. We have new VP of Op coming out of Canpar. We have a new lady at sales that comes from Dynamex. We went within the family to beef up the team there. We got rid of all of the ones that were there that for them, losing money was normal. And now we have to address the mid-management.

Like I said earlier to Cameron, we've got to be careful. We can't make a mistake and the poor reporting system that was in place at Loomis or DHL Canada at the time does not permit us to make a good decision. That's why our first priority was to get rid of that IT system at Loomis, which is going to be done by the summer of this year. Then we can make the right decision, and not make any mistake.

Is there any point where you put these things all together at some point?

No, because it's a different product. Don't forget, Canpar is not an expedited product, whereas DHL Loomis is an expedited product. There's lots of synergy that could be done in the back office. There's lots of synergy that could be done on the sorting system, but the P&D operation Loomis Canpar, that's a different story for a major city like Toronto, Vancouver, Montreal.

No facility rationization, either?

There will be, but none so far. There is definitely the target to the real estate department within TransForce is to reduce our number of locations within the next 24 months by 50 locations, and it's going to be done.

50 for the overall Company?

Yes.

Ben Vendittelli, Laurentian Bank Securities.

Just a follow-up question on the energy segment. We only had one month of IE Miller in there. As that starts affecting results, how can we see margin evolve in that segment?

The contribution of Miller's going to be great because on the revenue basis, we could look at on a yearly basis for 2012. You're talking about something on the revenue of about CAD140 million. Then if you look at the EBITDA, we should be in the 30% mark there, 28% to 30%. And the depreciation is no more than 4% or 5%. It's going to be a great contribution, Miller.

We should see some margin improvement for the segment as a whole?

Absolutely. You'll see margin improvement, too, with our cost operation in Canada. We'll see some improvement with the Speedy operation. When you look at this year for year-to-date of CAD326 million, if you add some kind of organic growth in there and then you add Miller to that, we should be very close to CAD500 million.

But the EBIT of CAD46 million, this is way, way behind what is going to be this year in 2012. EBITDA for sure is going to be over CAD100 million. EBIT's going to be way better than what it is. Right now it sits at about 12%, 14%. We should be closer to -- 10% right now. We should be closer to 14%.

In terms of organic growth in the quarter. You said there was an organic deterioration of about CAD6 million in the top line. Is there a significant difference between your organic growth, including fuel surcharges and excluding fuel surcharges?

Yes, yes. You have to look at it excluding fuel surcharge because fuel is going up. If you look at total revenue, fuel is helping you, but this is nothing for us. You've got to look at it net of fuel surcharge. That is where you see the difference. There again, there's also a disconnect because we had 53 weeks last year and 52 this year. It was in the fourth quarter that, that week was included last year. The real drop in revenue is not as bad as 7% because we're missing a week, but it's still there.

Benoit Poirier, Desjardins Capital Markets.

If you come back on the Package and Courier, obviously good organic growth for the year. However, when you look at the revenues, the decline 9% in Q4. You mentioned some color about the pricing, but would it be possible to break down between what is the main driver? Is it more driven by the volume or pricing actions?

Which sector, Benoit, are you talking about?

In Package.

In Package and Courier?

Yes, because it seems the organic growth was solid for the year, but down 9% in the quarter.

Okay. If you exclude the acquisition. There's one reason there, again is the 53 weeks versus 52. That's one reason. And there was also one situation at Canpar where they lost an CAD8 million account in the book business to the competition. That's one. Number two is ATS Entertainment segment is dropping because technology is changing. When I bought ATS two or three years ago, the revenue on the entertainment business was about CAD40 million, CAD42 million. As we speak now, we're down to about CAD30 million.

These are the reasons where you see the negative organic growth within our Package once you exclude the acquisition, the revenue from the acquisition, 53 weeks versus 52. In the quarter we are missing a week versus last year to one sector, which is entertainment at ATS. Another reason is an account that we lost at Canpar to the competition. For pricing, the competition came in and lowered our price by 27%. We said, good luck and we'll see you.

You didn't play that game on the pricing side, right?

We don't play games on the pricing. We have shareholders. We have targets to meet. We're not a stupid trucker that's going to work just to have trucks in the road and things like that. My approach has always been different. I don't like trucks, but we need trucks to do our job.

This is why, as you could see, is we're moving more and more into an asset like model, so we don't have to worry about the trucks and the pressure of the customer because you have trucks and then you have debt, and you have this and you have that. That's why us, we will walk away from business.

We did a good job on that at Loomis because we had to walk away from about CAD6 million of business, like I said to Cameron earlier. Also, our sales guys were doing a good job there and we gained CAD6 million. We're replacing bad business with good business.

On the margin front, you gave some very good color about the energy targeting 14%. It did eventually, so you're almost at 10%. Could you provide some color on the potential margin expansion that you're looking at for others in specialized services?

The other in specialized services, we're already doing a fantastic job there. We're very close to 15%. In that sector, I've got my specialized services in terms of labor that I'm renting to all kinds of people. I've got CAD60 million of business on a yearly basis in that sector there.

If you look at 326, which is my revenue for 2011 global, I've got about CAD50 million to CAD60 million of that business in there that doesn't generate a lot of profit. The reason being that when I bought that business four or five years ago, there was a shortage on drivers and people. Today, because of the economy for the last four years, there's no shortage. That business is very low yield, and it's affecting my profitability. If I exclude that, because I exclude CAD50 million to CAD60 million, it shows you my EBITDA closer to let's say 25%.

What's going to help me there is all of the different projects that we've talked about at McCracken Ontario, like this new transfer station in Belleville, like this new volume. Where we had the big support of our community there at our landfill at Lafleche where our capacity with our compost at Lafleche was 50,000 tons, but we're looking at other projects, E-recycling. That should be good project that's going to help us on the margin side. We're very happy with what we're doing today.

When we look at your cash deployment, obviously strong free cash flow generation this year. I'm wondering how much of debt you would like to pay down and if you could give us an update on the M&A front, whether, I know that you're working a lot on the integration, but do you foresee any opportunities for 2012 and which sector?

No. M&A is going to be very slow for us in the first six months of the year because we've got lots to do at Package and Courier with Loomis and Dynamex. We have a situation that we have to reduce our debt to a certain level, which we will start doing. We close the year at CAD870 million, something like that for the end of the year.

We acquired Quik X. We will be quiet on the M&A front for the first six months. Yes, we bought PSI in Rifle. That was a small CAD6 million deal of crane. There may be some small deals. We're looking right now at a small CAD14 million deal. Again, that's going to beef up our energy sector in Texas and Oklahoma, but nothing major. Major stuff will be forwards the Q3 and Q4 of 2012 because there's lots to do.

On the debt side, like I said, we'll probably come in at the end of Q1 with a debt around the CAD900 million mark, and so we're about at 2.2, 2.3 times EBITDA at this level. Let's see what happens there. By the end of Q2, we should be closer to an 875 number. No acquisition, nothing major except small stuff like I just told you. Then the big reduction would come so that if we don't do any acquisition in three and four, our debt would be under 750 by the end of the year. Let's say we close the year at CAD375 million to CAD400 million. We're under the two mark.

Turan Quettawala, Scotia Bank.

On the ATF Entertainment business, that CAD13 million of revenue, is that basically moving on movie reels? Is that what it is?

Yes, well CDs and all that stuff for the gaming, the video and all that sectors. All the major studios like Warner, Disney, these are all our customers.

With the move to digital that could go down further, right?

Yes, that will go down further. No doubt about that. Let's say we sit at 30 today. I think our plan for 2012 is going to be down to about 24.

On the P&C side, staying there, you talked quite a bit about the margins there at Loomis. If my math is correct, you are doing about a third of the margin that you would expect to do longer term from both Dynamex and Loomis combined. Is my math correct and secondly, is that more like 2013 or 2014 that you actually get to that level?

Well, you see, Dynamex is a much easier fix than Loomis. By the end of the year, this year, 2012, Dynamex should be on track to generate an EBIT that is comparable to an ATS or ICS which is acceptable. Double-digit EBIT. We are very close to. When we bought the company, those guys thought that 4% or 5% EBIT, we're doing the job. 4% or 5% EBIT, you're not doing the job. We look double-digit guys.

If our gross margin in the US sticks around 29, that means our OREB has got to be around 19 to be at double digit. We're not there yet that, but we're much better today than we were three months ago. Lots to do. There's a phase 2. To me, Dynamex probably if it's not by the end of this year, early next year we'll be there. In Canada, our OREB sits at about 16. The problem is that our margin in Canada sits only at 24. 24 and 16, I'm at 8. I'm not at 10.

In Canada, I've got a different problem. We're working on it. Loomis, that's going to take more time because, as I explained earlier, is that 2012 is really the year of back office. It's the year of admin. It's the year where we're not going to do a lot on the operation. That is where the money is. We can't touch the operation until we have a dependable information system. That's why our priority is not to start working on the operation. As we need a dependable information system which we have at Canpar, but we don't have it at Loomis, that's number one.

Number two is we need the right executive team. We bought the company. The reason these guys were losing money is not because of the driver. It's always because of the President and because of the executive team. We have to replace all these guys. We have a new team there. That's why major moves are not going to take place on the operation probably before next year.

That being said, I'm very confident that come summer, we stop losing money at that Loomis. The important thing, like I said earlier, is that Houston has to change the culture there with its team of losing money is normal at Loomis or DHL. These guys have been losing money for 10 years. They think that's normal, but it's not. Loomis is going to take more time.

If you look at the US on the Truckload side, a lot of the smaller operators are being squeezed out right now because of the changes. Just wondering how do you see the trend there in Canada and what is your expectation on pricing on Truckload for 2012?

To me, Truckload means volumes at best stable, maybe a little bit down. Pricing to me is going to stay the same. So for us, Truckload, we're not going to do much better in 2012. A little bit better, but not a lot better because the market conditions are definitely not on our side there.

It's much different in Canada than it is in the US?

It is much different in Canada; like the LTL. The LTL is much different in Canada than it is in the US. I would have fun with the LTL market in the US. You look at pricing there, you look at volume. It's a very different world than what we see us in Canada. But us, you'll see we'll do very, very well in 2012 compared to '10 or '11. It's not because of revenue or quality of revenue, it is because of strict, better costs and more efficient operation.

Jason Granger, BMO Capital Markets.

Just coming back to the Dynamex here. I think in Q3 there, volumes Dynamex in the US were up high single digits, in Canada up low single digits. Could you just speak to what performance you saw in the US and Canada in Q4 and how do you seen that shaping up in 2012?

It's the same trend, Jason. Same trend. Over there, so far, volume is still growing organically.

The same rate?

Yes.

Are you seeing more strength there in the dedicated contract services still versus the courier?

Yes. It's more of the dedicated business, Jason. The same-day stuff, it's a good business but it's not a business that's growing. Unless we start on the acquisition trail on that business, it's not a business that's growing organically. It's really the dedicated business that is growing there, and that's where we're gaining more and more strength, either in the US or even in Canada.

When you were talking about the M&A environment picking up steam a little bit in the back half of this year, could you speak to how you would prioritize your spending there, still be focused on courier and oil field and where about in courier to what extent should we be looking for you to continue to build out that US platform in courier? Where does the US courier business get to in terms of revenue, say, at the end of 2013?

Yes, you're right. You're absolutely right. Our focus is really on the energy sector in the US. And it's also on the package mostly in the US. If something comes up in Canada, for sure we're going to look at it. Definitely, it's more on the US side. The dollar is helping us on the acquisition. The market is great there.

If you look at Dynamex in the US side, they are CAD300 million some company. We're the leader in our business. We're number one on a CAD7 billion to CAD9 billion market depending who you talk to. There is lots of potential. You take a state like Florida, our presence there is very limited. And don't forget that Dynamex, a quarter of the revenue comes from the L care. For us it makes a lot of sense for us to be in Florida.

In some areas of Ohio, Illinois, there's some around the Great Lakes there, we could do more, we could do better there. On the west coast, we're a big player in California, but we could do more, let's say on the I-5 going all the way to Canada.

That's going to be our trend, okay, is to try to beef up in markets that we are not really present right now because don't forget, dedicated, you don't need a lot of assets. You don't need a big terminal like we need, for instance, for LTL or parcel. You just have to be there and have the people and have the team. You need the small location. Then you can start servicing the area.

On the energy sector, organically, we have a plan of growing more into western Oklahoma. We have a plan of growing more into the northwest of Texas. We're a big player in the south, but northwest and it's close to western Oklahoma.

We have also -- we're looking at an area that is North Dakota where we have a huge presence there, but we're also looking at Montana. Speedy in the old days, we were in Sydney, Montana, but it has been closed there. It is part of the Bakken field. Lots of organic stuff on the energy sector for now. Our plan down the road is we want to be more like the Mullen of the US. We are not going to be a Mullen of Canada because Mullen is Mullen.

When I say Mullen of the US, I mean a more diversified operation than just rig moving in the US. That probably will start to take shape by the end of this year. We're going to be very busy, but we're going to bring the debt down a bit. We're going to be on the right track with our plan.

Expanding your service line oil field in the US. Would a big part of that relate to fluid handling?

Yes. It could be sand, fuel, fluid, treatment. It's lots of opportunity there and it's just that we're already number one in rig moving in the US. Now we're just beefing up a few areas, like I just talked to you about, and then the next step is what else can we do?

In the US, have you guys felt any signs of slowdown from the fallout of the weak nat gas pricing?

No, because we're not really involved in the dry well. It's more like the liquid wells.

With the URS announcement to acquire Flint and it sounds like Flint or URS out of that transaction may look to divest the rig moving business, possibly also the water transport business. Flint's a big player in rig moving there in western Canada. Would you have any interest in either of those sorts of assets?

No. No. No interest for us, Jason in Canada, none. The US, that's a different story. They bought the rig moving asset a year ago of Stallion. We were looking at the business at the time. We may have an interest there, but on the Canadian side, I think that Murray is the best position, and we'll let Murray take on the Canadian. I prefer the US side.

Quickly turning back to your trucking businesses here. If we look at Truckload and Less-Than-Truck loads, is it fair to say you're expecting organic revenue growth to be essentially flat in 2012 or how should we look at that?

Yes. LTL and Truckload revenue flat. Profitability will definitely improve. LTL flat except for Quik X. If you exclude Quik X, the rest is flat. Profitability will definitely be up at the LTL. A little bit of improvement at the Truckload.

There was a restructuring expense there in LTL, I think about CAD2.5 million in the quarter. Could you elaborate on -- it sounds like some of the terminal consolidations have carried on. Elaborate on what was behind that and do you expect more of that to happen in 2012?

Yes. What we did is in Q4 of this year, we had the restructuring in Ontario, Quebec, and BC, Alberta, whereby we closed down probably 10 small terminals. The reason being that I prefer variable costs than fixed costs. That is very simple. And yes, there will be more on the LTL. Not a lot more, but there will probably be more. There will definitely be a lot of that in 2013, '14 but in Canpar Loomis.

Your net CapEx, you're talking CAD60 million to CAD70 million, probably closer to CAD60 million for 2012. Could you give us a sense of what the gross number would likely be?

The gross number is probably going to be around CAD90 million because, in terms of disposal, if you look at it every year, we got a lot. With all these closures or shutting down, we just sold a terminal to Ferro in Prince George. We're selling to one of our competition in Edmonton other terminals. Disposal will be around that CAD30 million mark for sure. 60 plus 30, so growth should be around 90.

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

Wanted to ask about the pricing strategy here and applaud your resilience and unwillingness to follow deep discounting. What's your sense of what your competitors are going to do going into 2012, particularly in the areas where big competitors make a difference, like in your P&C? Do you expect that deep discounting continuing into 2012 within your P&C specifically? And if there's any other worries you might have in any of your other divisions if you can comment on that as well.

Walter, in the P&C, everybody's busy there. UPS, they're busy trying to buy TNT which is going to be very good for the old international market. It's a fantastic deal. Those guys are great. They're busy doing that.

Our biggest issue in Canada is really the one that's owned by Ottawa. And over there, they have lots of issue. There's a new guy running the show there. They are combining their LTL operation which has not been a success with their package and courier. Us, we're busy too, because we have that Loomis, that's got to be fixed. We've got Canpar that's always been not the best of our division in terms of package and courier.

I think that the pressure's still there because there's still lots of customers that are trying to bid their business because they see some weakness in the market. But I think that the comment that I got from the President of that company that's owned by Ottawa is that finally this DHL is an out-of-control company now being taken over by TransForce is going to put peace to the market. The sales people there will be monitored so they don't act stupidly. That being said, I think the pressure is still there. It's tough to pass on an increase to customers, because our costs are rising.

Our costs are rising. In order to have a total cost down we have to improve our efficiency and productivity. That is what we're doing now. I see the year 2012 as still being not a great year for us in terms of volume and pricing power. LTL, Truckload, a little bit less than Package and Courier. But we'll do better because of our dedication to be more efficient.

And you mentioned cost pass-through. I know when trucking executives talk to me about fuel surcharge programs, they're a little more difficult to pass on when seasonally through the year during the weaker times, fuel going higher now. Are you finding that a difficult thing to do. Are your competitors using fuel surcharge as a price mechanism somewhat? Are you seeing that at all?

Stupid truckers, they do that, Walter. Stupid truckers, they think they're going to save their skin by doing that, which is completely stupid. You're absolutely right. Every year it seems like we always have the same issue in Q1. It's winter, the quality of the fuel is less because they have to put in additive because it's going to freeze, so you use more and the price goes up. Then you have problems trying to pass it onto the customer. Yes, we go through that. This is not something for you, Walter. I've been in trucking for 15 years. This is an ongoing fight all the time.

Is your guidance for 2012 contingent on what kind of fuel, fuel assumption?

No, no.

Essentially flat year-over-year?

Yes. When we talk about revenue around 3.2, us, we think fuel stays about the same. More important for us, is the EBITDA has got to be around 375, which is our low, and depending how successful we are with the Loomis, and Dynamex, and the LTL, and the Quik X and all that, we could be as high as 390 to 400. Even more important than that, Walter, is our free cash. This is to me the most important thing. We did over CAD200 million this year. If we could do something closer to CAD250 million, then I think our shareholders would start to get happier.

Last question here is on your waste. Congratulations on that permitting. I know that's not always the easiest thing to do when you look at these regulatory things. The 700,000, how much of that would you say has been sold? Are you starting the work on selling that capacity now? How quickly do you think that will be sold?

You see, Walter, we have the fantastic support of the community around us, number one. Number two is a lot of the small towns in Eastern Ontario. You start from Whitby all the way to Ottawa around that river there, the St. Lawrence River. They have the closing of the small landfill. Guys are getting afraid of shipping their waste into the US. We have lots of small towns coming to us.

Already, now that we have the authorization from the Ministry of Ontario, we already have customers. Now talking to Mark and Brian that runs our Ontario operation, those guys are very confident that by the end of the year 2012, we'll be flying at about 500,000 ton from 300,000 this year. They think that probably by the end of '13 we'll be very close to our goal on the new permit.

Mr. Bedard, we have no further questions at this time. Please continue.

Well, I would like to thank you all for being present at our conference, and I guess we'll see you on the next one. Have a good day.

Thank you. Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and you may now disconnect your lines.