TFI International Inc (TFII) 2014 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the TransForce 2014 third quarter 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 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 Friday, October 31, 2014.

I will now turn the conference over to Alain Bedard, Chairman, President and CEO. Please go ahead.

Well, thank you, Operator, and good morning, ladies and gentlemen. Yesterday after the market closed, we issued our news release for the third quarter ended September 30, 2014. We also issued a news release updating you on our offer for Contrans Group. In a nutshell, we are extending our offer again to November 11, to finalize approval under the Competition Act.

I will now discuss the highlights of the quarter, and then I will provide you with a more in-depth discussion of the performance of our operating segments.

In Q3 we achieved a total revenue increase of CAD206 million, or 27%, to CAD981 million, mainly from acquisitions made over the last 12 months. EBIT reached CAD82.8 million, up from CAD59 million last year. This 40% improvement is explained by the contribution of acquisitions and improvement in our existing operating divisions.

This progress was also achieved despite the impact of acquisition-related costs in the amount of CAD4.7 million, tied to the Transport America acquisition, and the offer to purchase all Contrans shares.

As a percentage of total revenue, the Q3 EBIT margin was 8.4%, up from 7.6% in Q3 of last year.

Acquired companies generated lower EBIT margin and, excluding their contribution, the overall EBIT margin on existing business was 9.2%. We're confident that over time the EBIT margin of our new division will improve.

Adjusted net income, which provided better indication of our operating profitability by excluding certain items detailed in our MD&A, rose 51% to CAD53.7 million, or CAD0.53 per diluted share, as compared to CAD35.5 million or CAD0.37 per share last year.

We generated very strong free cash flow of CAD104 million, or CAD1.06 per share, which was driven largely by higher cash flow from operating activities, improved working capital and the disposal of excess assets. For the most part, free cash flow was used to partially finance acquisitions and to buy back CAD4.7 million worth of TransForce common shares.

I'll now provide you with a more detailed look at the results for each of our business segments. In package and courier, revenue excluding fuel surcharge was CAD297 million, up 5% over the same period last year. The Ensenda acquisition accounts for the increase -- for this increase, as existing business was relatively flat.

The nonrenewal of unprofitable customers in our US same-day service was offset by further progress made in the e-commerce delivery market. EBIT in the P&C segment jumped 18% to CAD24.4 million, and the EBIT margin rose to 7.3%, up 80 basis points over last year.

We are continuing to generate, okay, substantial cost reduction by combining our operations in several small markets. In this regard, we closed 18 small sites in the third quarter alone, which should further enhance profitability going forward.

In the LTL segment, revenue before fuel surcharge was CAD198 million, a 44% increase over last year, driven by the Vitran and Clarke acquisitions. Excluding these acquisitions, revenue was down 5% due to lower volume.

EBIT increased CAD8.1 million to CAD21.8 million. However, excluding acquisitions and gains on the sales of properties, EBIT from existing operations was about CAD2.4 million lower than last year, reflecting the volume decrease.

During the quarter, we continued to dispose of excess assets with the sale of three properties. Although the terminal consolidation and closure of the past 12 months are providing TransForce with a more efficient cost structure going forward, I will -- we will continue to adjust supply and demand, and further reduce assets where density does not support a sound investment thesis. This is a priority for us.

We enjoyed a solid quarter in truckload segment, with revenue excluding fuel surcharge of CAD24.6 million, up 67% on last year. Most of this increase was attributable to the Transport America and Clarke Road Transport acquisitions. Without acquisitions, we had a 2% increase in revenue.

EBIT in the truckload was CAD25.4 million, up 69%, and EBIT margin was 8.7% compared to 9% in the same period a year ago. If we exclude our acquisitions, the EBIT margin from existing operations was up 1% over last year, which clearly demonstrates tangible benefit from our ability to adapt supply and demand -- to demand. With a more disciplined asset management, margins from acquired companies should catch up.

In the waste management segment, revenue was up 30% to CAD56 million, with a significant portion of that -- of this increase, attributable to the Veolia Solid Waste acquisition we made late in Q2.

Our Lafleche Environmental Complex in Ontario continues to generate increasing revenue, and we are seeing organic growth in our Quebec-based customers.

EBIT in this segment was up 1% to CAD12.1 million, and EBIT margin was 21.6% compared to 27.9% in the prior year. Lower margin is mainly due to the acquisition of our Veolia asset, and we still have a strong focus on bringing their margin up to our standards.

With respect to the -- to our outlook, we hope for modest economic improvement in Canada. As the value of the Canadian dollar has declined, we expect to see a gradual uptick in export activity going forward.

In the US, the economy is improving and this is generating more activity for our US-based division. Nevertheless, we anticipate over the short term only limited organic growth in our main operating markets.

Our strategic objective remains to improve return on assets; continue to improve our efficiencies; further rationalize assets and strictly align supply with market demand; meticulously control our costs; and continue to execute our disciplined acquisition strategy in the fragmented transportation industry. These are the measures that clearly drive revenue and EBIT growth for TransForce, and that ultimately create value for our shareholders.

So, at this time, I will be pleased to answer any questions.

(Operator Instructions). Mona Nazir, Laurentian.

Just wondering -- looking at the debt level currently, CAD1.2 billion, and taking into account Contrans -- that pro forma ratio will over your 3.5 limit.

I'm wondering if you could speak to your comfort around the debt plan -- debt level, and plan to get that down? I think on the last conference call you hinted that you would entertain an equity offering if the stock price gets to a level where it's looking good. How are you feeling about the current price?

Well, first of all, one thing we have to keep in mind is that we've converted, in October, CAD85 million of debt, okay, into equity. Okay? So, that means that our debt has been lowered by CAD85 million -- about CAD85 million. And now we have 4 million more shares on the market. So, that's number one.

Once we do -- once we close the Contrans deal, which probably should occur around mid-November, then at the end of the year, okay, our debt level, okay, will be just a little under 3.5 debt-to-EBITDA. If you include the trailing 12 months of Contrans, which is about CAD80 million; and if you add to our numbers, okay, the trailing 12 months of America, and all of the acquisitions we've made, okay -- so, being over 3, it's not a position that you like to be in.

But worse than that is to issue more equity. So, we don't have in our plan, short-term, to issue more equity. Really, our plan is to reduce our debt over the course of the next 12 months to an acceptable level. That's going to be under 3. Because, don't forget, we'll be generating a ton of cash in 2015.

So, our debt reduction, okay -- you'll see the major effect of that within the next 12 months. Based on our plan of 2015, our free cash flow for debt reimbursement will be more than CAD300 million. Okay? So, that's why, with this in mind, we don't anticipate any equity issue in the short term.

Okay. Perfect. And so, just furthering on that, to be clear, after Contrans you expect to kind of put a hold on acquisitions -- just digest what you have on your plate. But if you did have cash on hand, is there anything that's looking good from an acquisitions point of view, even if it's tuck-ins?

Well, you know what -- I was reading Mr. [Mullen's] comment about the pricing of acquisition, and the reason why they've been very quiet on the M&A side. What we're starting to see more and more in the US is that the evaluation is becoming out of control. Okay? So, we are still looking at all kinds of things in the US for a reasonable price.

So, if we encounter something that makes sense, we'll look at it. But, for now, for sure the priority is to integrate, okay, the acquisition of America, which is doing very well, okay; and then, with the strong support of the shoulder of Contrans -- and there, I would like to congratulate Mr. Dunford because -- and his team. They've done a fantastic job at Contrans. I was looking at their Q3, and they've done a great job over years and years, and we're very proud, once we can get this deal done, to have the Contrans Group within the TFI family.

So, I mean, priority is not M&A, for sure. Priority is really to integrate all the work that we've done. Because, don't forget, we spend -- we will have spent, with the Contrans deal, over CAD1 billion in acquisitions in 2014. So, that's a lot of money. That's a lot of investment. And that will bring to our shareholders a very nice payback over time.

Okay. Perfect. And you've been achieving significant savings from divesting certain operations that you deem unprofitable, reducing overhead by combining units, and that's furthered by synergies.

Do you think that there's still substantial room to increase overall efficiency, or do you think that you're nearing the end of what you can do with current operations; hence, you're growing via acquisition?

No, not at all. I mean, in the P&C sector in our next-day service in Canada, there's still lots that we could do. I mean, the guys have done a fantastic job so far in 2014.

And if you look at the improvement of P&C quarter over quarter, of about CAD4 million, bottom line, this all comes from our next-day service in Canada. Our same-day, okay, did not improve in the quarter. They will improve, okay; but they haven't really improved. So, I mean, they've done a fantastic job, but there's still lots to do.

On the LTL, okay -- there, we still have lots to do there as well. I mean, we're down on existing business CAD2.4 million. This is not acceptable. Okay? Yes, okay, we had lower volume. We have all kinds of excuses. But this is not something that we like to show our investors, that we're down on existing business. So, definitely we still have lots to do there.

On the truckload side, I'm very proud of what we've done. Okay? A 10% EBIT contribution from our existing business. Okay, the acquisition is not at 10%. I mean, we have a very strong team at America, here in the US. I mean, those guys will do a fantastic job. I mean, we're just trying to learn, okay, what they're doing, comparing what they're doing versus what we're doing in Canada. And we'll work together with these guys.

I mean, they are a strong -- there is a strong management team. Those guys -- they don't sit on their hands. Once we agree on what should be done to bring the 6% EBIT of America closer to a 10% -- I mean, these guys -- they're not stupid. They know -- and the job will get done. So, still a -- lots to do.

And on the waste side, I mean, we had lower, okay, volume in our landfill in Q3. So, this is why -- but you'll see a major improvement in Q4. Okay?

And also, the Veolia acquisition -- I mean, this was something new, okay? It takes time to -- for all the action that has been taken by our management team there. So, I'm very confident that you'll see a -- next quarter, a major improvement quarter over quarter.

Okay. Perfect. I'll step back in queue. Thank you.

Walter Spracklin, RBC.

So, I'd like to start, I guess, now that you get a little bit more visibility, hopefully -- certainly -- hopefully, this Contrans gets done November 11 as planned.

When you look out to 2015 now, with all the acquisitions that you have, and that you've made -- if you look on a normalized basis now in 2015, in terms of your outlook, can you update us on what you're thinking in terms of EBITDA and free cash flow trends for 2015?

Yes. We're still not done with the -- with our plans for 2015, Walter. But, so far, I could tell you that we believe that EBITDA, consolidated for 2015, including all the business units that we have, including Contrans -- hopefully that this gets done mid-November -- we're going to be talking about CAD550 -- something in that neighborhood. It depends on the price of fuel. It depends on the economy. But this is the best number that I could tell you so far. Okay?

Now, in terms of the free cash flow -- started with CAD550 million. The CapEx we anticipate with Contrans and with America in the family -- our CapEx net of disposal is going to be in the neighborhood of about CAD100 million. Okay?

So, that in mind -- so, let's say you're at CAD550 million. Minus the CapEx, you're down to CAD450 million. In terms of working capital requirement, all this should be taken care of, so you're at CAD450 million after CapEx.

And then you've got the dividend, okay, which will probably, based on our policy, improve that a little bit. Okay? So, you're talking probably, I don't know, CAD65 million, maybe, for a dividend -- CAD65 million to CAD70 million. So, CAD450 million minus CAD70 million -- okay, you're down to CAD370 million; something like that.

So, this is why, being conservative, okay, we're talking about a little bit more than CAD300 million. Because then we have the interest, okay, which is going to be higher, although we've converted some debentures. So, we're going to be north of CAD300 million. So, this is going to -- [that's] going to be CAD325 million to CAD350 million. That's (multiple speakers) --

So, that's after dividend -- after dividend (multiple speakers) --

After dividend and interest payment, yes.

Okay. And your tax rate and cash taxes payable -- is it -- do you have a -- is there anything going on in there, that we should consider? What would be your effective tax rate, and how much of that would be cash tax, if you have that on hand?

I would say cash tax is going to be about -- the tax rate, okay, is going to about 26%, 27%, okay, based on the best knowledge that I have today.

Okay. Great. You had -- and underlying that, I know in your opening remarks you mentioned modest, if any, growth. So, that EBITDA that you've just given us -- presumably, does that -- is -- are you effectively saying zero revenue growth for LTL, TL and parcel there?

Yes.

Or, is there modest growth built into that EBITDA (multiple speakers)?

No. No growth.

Okay. So, that's all based on zero growth.

Yes.

And if there were growth that came, then certainly that would be upside to that number. Great. Okay.

Yes. You see, Walter, planned, as we do us, okay, is always based on zero organic growth. Because this is always an unknown. Okay? And with my history -- and I'm saying that to all my executives -- if there's organic growth, we'll grab that. But that's going to be the cherry on the cake. Put up a plan where, when zero growth, you improve the bottom line. And that's our plan.

Yes. That's prudent. Yes. No, I completely agree there.

Last question here -- you've talked a little bit about potential divestitures next year, truckload. I guess maybe that's delayed a little bit now, with this, but it's still probably, and correct me if I'm wrong, a 2015 event.

Are there tax implications that we should consider, when you look at -- if you were to spin off waste or truckload? Are there -- how do we look at the tax implication of those type of events?

So, what the tax people have told me so far, Walter, is that if we divest, okay -- let's say we do a spin-off of our truckload down the road, and we sell for CAD300 million, okay, a part of that truckload division to the market. The first CAD300 million of a spin-off, there's no tax consequence. Okay? Then, when you sell the rest, then you trigger a tax bill. Okay?

Yes.

Now, this is if you do a spin-out. Now, if you do -- because that's one thing that we're looking at; but another thing that we're looking at also is, what if we do some kind of a vend-in? Okay? So, it's like a reverse takeover of a company in the US, where we don't get a lot of cash, but we get a lot of stock. So, the tax implication could be different then. So, we don't know exactly --

(Inaudible).

We don't know -- one thing is -- we know is that, if we do a spin-off, that's easy because this is completely under our control. If you try to do a vend-in, then you need the support of the target shareholders, to say yes to a deal like that.

Understood. And on the waste side, is there any tax implications there?

On the waste side it's quite similar. Okay?

Okay. Yes.

So -- but on the waste side, to me, we still have lots of work to do. So, I don't think that's going to be a 2015 event. I think, still, the priority is truckload. We've built a hell of a nice truckload company.

And once we close that Contrans deal, we have a very strong management team in Quebec. Very strong management team, with the Contrans team in Ontario, and a very strong team in the US with America. So, I mean --

(Inaudible).

-- we're second to none.

Yes. I agree. Okay. That's all my questions. Thank you very much, Alain.

Benoit Poirier, Desjardins Securities.

Just to come back on package and courier, when we look at your margin, 7.3% versus 8.4% last quarter, just wondering what's your level of confidence of reaching the double-digit number next year?

Oh. I mean, we're going towards that direction, Benoit. So, I mean, we're improving every quarter. Okay? So, I said that this year we should improve by about 100 basis points. In the same trend -- we should [note] the same trend next year.

Now, don't forget that all the improvement that we're seeing now comes from our next-day guys in Canada. Our same-day guys, either in Canada or in the US -- right now, as we speak, in Q3, there's no improvement there. Because we're still stuck in improving the operation of the Velocity acquisition that we made. Okay? We're at the end of that.

You'll see Q4, okay, which will be the first time, really, that our same-day business, both Canada and the US, is doing better, okay, than the year before.

Okay. Perfect. And what was the -- now, the contribution of Velocity in terms of revenue and margins?

The revenue of Velocity, okay -- we're down to about CAD60 million of business. Okay? So, we shed a lot of business. So, hindsight is always 20/20. So, if you asked me the question (inaudible) -- if you would have to do it again, would you buy Velocity, then I would say probably, okay; but maybe not when I did it last year. Right?

The problem with -- Velocity was a company that was out of control, with a very, very poor management team, with lots of revenue, lots of terminals, lots of cost; didn't make any money. And the plan was really to digest these operations much faster. So, we did that deal probably a year too early. Because it was a fix-it. Right?

Okay. Very good. And just on the waste side, the -- you experienced lower margin from waste collection. So, could you provide more color about whether it's temporary, or maybe the key reason; and how long do you think the Veolia integration will last?

Well, Veolia -- when we bought Veolia, these guys didn't make any money. Right? So, it's not normal, okay, with CAD40 million of business, that you don't make money. So, us, in Q3 -- we made a little bit of money. But the average EBIT of Matrec, okay, let's say is around 24 points, although in the quarter we're down to 21 points. Okay. But the average should be about 24 points.

Now, we buy something that don't make any money. So, for sure, it's going to be a drag on your earnings. So, we boost up the top line, but there was no bottom line. They didn't lose money. Okay? Veolia didn't lose money in Q3. But they made just a little bit of money.

So, we put in place, with Mr. Richmond and Mr. [Bulian], okay, a plan. And you will see major improvement in Q4, and on and on. So, in my mind, to bring Veolia up to our standard is probably going to take us 9 months; maybe 12 months max.

Now, Veolia will never generate 24%, 25% EBIT margin, because Veolia -- the asset that we acquired -- they have no landfill. Right? So, that's why, at best, that CAD40 million will probably contribute with the 15% EBIT margin. Right? So, there will always be a little bit of a drag on our 25% margin. But that's normal, because they don't have any landfill.

Okay. And any reason for the lower margin from waste collection, Alain? Is it kind of a volume or business -- particular business you've been losing, or --?

No, no, no, no. It's just a matter of timing. So, what we did is, we have more volume coming into Q1 in our Granby landfill. And you have a commitment with your permit.

So, if you -- in Q1, if you go -- instead of 24% of your yearly volume, go 35% in Q1, because the demand is there, well then you have to slow down, because you can't go over the 100%, okay, permit that you have. So, this is what we faced in Quebec, okay, with our landfill in Granby. So, we had to slow down a little bit.

Okay. And just (inaudible) package and courier for Google Express -- could you give an update on how the plan is progressing with them?

Well, the -- our e-commerce business in the US is really growing. Really growing, and growing quite fast. We have a few accounts, a few customers, where we're really proud of what's happening over there. We're going to be opening the same-day service for a major retailer, okay, starting in the next week, in three markets -- Chicago, New York and L.A.

With the other provider that you mention, okay, it's going great, in San Francisco; New York. Okay. We opened up some new markets for those guys -- Boston; D.C. It's new. Takes time, okay?

But I believe that the formula, okay, of some of the markets for the e-commerce, has to go to the same big guys -- some. I mean, maybe 5%, maybe 10%, maybe 15% -- I don't know. We're in a transition phase.

We are very well positioned with our team. And I'm telling you, I'm in Dallas right now, okay, and we had a budget meeting yesterday with our team there. We're going to do great things in 2015, here in the US. And that's the area that we're focusing.

Okay. And last question, Alain -- on the LTL side, organically revenues are down 5%, mostly due to tonnage. Margin slightly improved from almost 5% to 5.9% year over year. Maybe mention more color about what's happening on the tonnage side, and maybe what you expect in terms of -- what we should expect in terms of margin improvement from the current 5.9%.

You know what? The LTL market in Canada is really a (expletive) market. I mean, when you look at what's going on in the US, these guys have volume growth in the US. They have pricing.

I was looking at Con-way, for instance. Year over year they had a 5% price increase. I mean, us, we're just struggling to maintain the price -- a (expletive) price that we have. We're just struggling to do that.

Why? Because there's less demand every day for LTL in Canada. We lost most of our industrial base. And we have too much capacity. Right? So, that's why the acquisition of Vitran and Clarke is -- the direction we have to go is to have a better offer to a shrinking demand.

Now, there's a company that's being sold right now, and hopefully the deal will get done pretty soon -- that's another fairly good-sized company that will be under a group, where they want to make money. So, once this deal is done -- and hopefully there'll be more to be done in 2015, 2016 in Canada -- [there] will bring that market into a fair pricing.

The problem is, us, right now, we're working like slaves, okay, to reduce our costs, adjust our footprint -- we're doing everything we can on the costs side. But we're facing major headwinds since 2009, okay, in that market.

Now, one good thing, though, is the truckload market in Canada is improving slowly. And history tells us that truckload is the first market to dip. It's always the first one to come back. And we're starting to see some comeback, slowly, in the truckload market. We also know that LTL normally --

(multiple speakers) how much is driven by the market share moving to the rails? Because it's a story we hear a lot in the last few weeks or months.

What do you mean? You mean truckload volume moving to the rail?

LTL, sorry, Alain.

Oh, LTL moving to the rail? Well, that's us. I mean, the rail guys don't do any LTL. It's companies like us, and like Maritime Ontario, that provide LTL to the rail. You understand?

Yes.

They don't have any LTL operation, these guys. We use them for our [line haul]. So, they are not competing. The problem is that, in LTL, what I was just trying to explain you, is that LTL normally follows truckload's improvement, but a year later.

To answer your question, when do you anticipate to see some improvement -- truckload, I think, will get a lot of tailwind in 2015. LTL -- if history proves me right, maybe it's going to happen in 2016.

Okay. Perfect. Thanks for the time.

Turan Quettawala, Scotiabank.

I guess maybe, first question -- well, I know you talked quite a bit about EBITDA expectations for 2015, and I guess you're helping us with our model here. So, maybe on 2014, can you give us a sense of where you think it'll end up at now, on EBITDA?

Hey, listen, I mean, it all depends on the Contrans -- well, let's see. Without Contrans?

Without Contras, I guess, right? I mean, that's probably going to be Q1 now. Or maybe just (multiple speakers) -- maybe a month --

No. No, Contrans is going to be before Q1. Contrans, to me, is going to be mid-November. But let's say we exclude Contrans. Because, you know what? It's just a month, so it's not really relevant. Okay?

So, our plan really for this year will -- I think will just be a little over CAD400 million, or in that neighborhood of CAD400 million. So, I know that we're at, what CAD280 million -- something like that now, after 3 months -- after 3 quarters.

Yes.

Okay. So, we had a very rough Q1; good Q2; acceptable Q3, okay, with all the costs that we have to -- the -- all the financial, and all of that, and the severance. Because also, we paid CAD1.7 million of severance in the quarter. I think that we'll be in the neighborhood of CAD400 million in -- for 2014. Okay?

So, that means that our Q4 should be about the same as our Q3 of this year. Because we came out at CAD116 million, CAD117 million. If you exclude the [one-timer], we're at CAD120 million. So, we've missed, okay, the consensus, which I think was CAD122 million. I don't know what's the consensus for Q4. But we should be in the same neighborhood.

Got it. Okay. That's helpful. Thank you very much. And that's ex Contrans, right?

Ex Contrans, yes.

Yes. Okay. Thank you. And I guess maybe just a big-picture question here. So, you know, you're obviously doing a lot of restructuring in a lot of different segments, and I know you sort of talked about them.

But when you think about the ideal margin that you think you should be getting in P&C and LTL and truckload, can you give us a sense of just how far ahead you are on all this restructuring work? And, I guess, which one carries the most risk, in your view, in terms of you not being able to hit that maybe ideal margin?

Well, on the P&C side, I think that this is -- we're on the right track. So, we'll get to at least a double-digit EBIT, okay, in the short term, which is 12 to 18 months. I see some major improvement in our same-day going forward. I mean, we were bogged down a little bit in the US with that Velocity acquisition, which was my mistake.

But the same-day will improve, with e-commerce -- the -- so, this -- I feel very good about that. On the next-day service we have in Canada, we have a very strong team there, making a lot of changes. As you know may have noted, we shut down 18 terminals in small markets in Canada, and we'll keep on doing that. Okay? Because our intention is really to service 80% of the population.

So, we like Terrace, BC; but it's too small for us to be there. So, we got out of there. So, that's what we're doing, okay, to reduce our footprint, to be able to cover 80% of the Canadian market. And at the same time, reduce our investment.

We sold one terminal in Prince George for CAD6 million. It doesn't make any sense for us to have CAD6 million invested in Prince George for a terminal. It was good 30 years ago, when CF was the only guy in town. Now, we have competition. Everybody was trying to grow, and they opened up new terminals. So, I said, forget about it, guys; let's go back to basics. We'll service 80%.

So, P&C -- not an issue. LTL -- we should be in the same 10% and more EBIT. That is more difficult, okay, because we need a little bit of support on volume. Or, we need the market to adjust to a reduction in volume. And this is going to be done -- the second one's going to be done with more consolidation.

So, hopefully, like I said, one company will be taken over by somebody else, that will do exactly what I just said, and we'll improve the margin. And that's where -- the LTL used to be at 12%, 13% EBIT margin, up to 2008. Now, it's a depressed 6%, 7%.

So, what we're doing is, we're reducing our investment. Okay? We're selling, with a gain, a lot of assets. And we'll be selling more terminals. I've got another CAD25 million of terminals that will be sold within the next 12 months, with huge profit. And I reduce my asset base. I'm becoming more flexible. So, we'll be in a better position to adjust the volume.

In the truckload sector -- I mean, already, our existing business is double-digit in Q3. So -- and this is without any support from the Canadian market. I -- we're starting to feel that the Canadian market will slowly improve.

Is it because now the dollar is around $0.90, and some companies are now in a position to export to the US? There is more demand in the US? The US economy is improving? So, it's still too early. But the feeling we're getting when I talk to my guys, and we talk to our customers, is that we feel that 2015 should be a better year than 2014 for our truckload operation.

I was talking to Scott, our guy from America, and those guys anticipate an organic growth close to double digits, come 2015. Big issue is to get the power -- I mean, the driver. But the market is there. The pricing is improving.

So -- and on the waste side, it's a piece of cake. I mean, we have a very strong team there. I mean, yes, we're down a little bit in Q3, mostly because of the Veolia acquisition. But we'll bring these guys up to our standard pretty soon. So, to say that Matrec could generate CAD80 million in EBITDA in 2015 -- it's not far-fetched.

Okay. That's helpful. Thank you very much. I guess, then, maybe, on Veolia, though -- if I remember correctly, it was about a 17% EBITDA margin-ish kind of business when you bought it. So, I guess when you said it wasn't making any money, it was basically no EBIT? Is that right?

Yes. There was no EBIT.

Okay.

But it was not a 17% EBITDA margin. They were, if I remember correctly, about CAD40 million revenue. And basically, if -- they generate CAD4 million. So, that was probably more like a 10% in EBITDA

I see. Okay. Maybe I'm mistaken. That's helpful, Alain. Thank you very much. And actually, most of my other questions have been answered, so that's great. Thank you.

Cameron Doerksen, National Bank Financial.

Just wanted to talk about pricing a bit in the package and courier. We saw Purolator put out a press release a few weeks ago about increasing rates 4.9%. And I know that that doesn't necessarily mean that pricing is going up 4.9% next year, but what do you think that means? Is that -- I assume that would be directionally positive in your view.

Absolutely. I mean, I think, finally -- okay, if you go back 5 years ago, and when DHL was running -- was operating in the US, it was a depressed market. Because those guys were trying to gain market share away from FedEx and UPS. And UPS and FedEx had to protect, and the pricing environment was to (expletive).

So, to me, Puro has always been the leader in Canada; has always -- more attracted by volume than profit. And I think that we're starting to feel that there's a change there. I mean, there's -- there seems to be a new management team that understands that volume and no money -- it's not good for your shareholders.

So, we're very happy to see the leader of Canada in the next-day service saying, we need to adjust our rates. Okay?

But our plan, us, is based on no rate increase, Cameron. I mean, we don't dream of new volume and price increase. If it happens -- if we can do it, we'll do it. Okay?

But you need the leadership of the leader that says, hey, guys, we have to do something. If you look at the pricing -- because every time I talk to a Canadian shipper that has got US operation, first thing he tells me -- gee-whiz. It's expensive in the US. Well, no. It's not expensive in the US. It's cheap in Canada. So --

Yes. That -- yes, absolutely makes sense.

Yes.

Just a question on the other segment. I know you're not highlighting this too much any more, but you still have the logistics and rig hauling in there. And the margin was improved year over year. I'm just wondering if you can describe what happened there.

Yes. Well, on the logistics side, it's fairly simple. I mean, we're doing good. We're doing fine there. On the rig moving side, the fact that we shut down the Canadian operation is really helping our numbers. I mean, the revenue is down, okay, but at least we stopped losing money. Okay?

So, on the US side, we see some -- even oil at [$80] a barrel -- I mean, the activity is not growing, but it's not slowing down. Okay? We still have about CAD60 million of assets, okay, invested in that business in the US right now, with underperforming results. Okay?

So, we have a new leader that that's been with us for a year now -- Jay. Jay is doing his utmost best to improve what we have. I mean, he's everywhere, and trying to improve what we do.

So, right now, we are at a -- let's call it a small -- very small profit. But it's not acceptable. So, Jay knows that if we don't bring the return on assets to acceptable levels, I mean, we're going to have to do what we've done in Canada -- the same thing, we'll have to do it in the US. Because we can't invest capital with a 2% return on capital. Right?

So, Jay knows. He's working like a dog, day and night, to improve. Okay? It's a smaller company in the US right now. We are running about [CAD100] million a year in revenue. Okay? But the profit is not where it should be.

But this is a boom and bust mentality. In years you make a ton of money, you look like a hero; but then, market slows down, and you look like a zero. And that's what we've been looking like for the last -- 2013 and 2014.

But now, at least with the Canadian operation being shut down, we stopped losing money. It's not a cash flow drain. And when I look at what's happening on the Canadian side, I'm very happy with the decision we made to sell all the assets we had. We didn't lose any money in selling on the assets. And as a matter of fact, we gained, because we stopped losing money in operating those assets.

So, all in all, I'm pretty -- feeling good with that. Now, Jay's got a big job to do again in 2015, to make sure that the return on assets improves. Because then, if it doesn't improve, we'll have to take action.

Okay. Maybe -- just final question for me -- just, like I say, more of an industry, sort of truckload question, and just really on the margins, and thinking mainly about EBITDA margins here.

If I compare your truckload margins, and actually most of the other Canadian margins -- Canadian trucking margins in TL, they seem to be lower than most of the US guys. And [you'll] understand the mix of different -- mix of business is different. But is there anything structural in Canada that's different from the US, that would explain that?

Well, you see -- yes. You see, Cameron, the big difference between us and, let's say, most of the US carriers, is that they -- these guys all buy their trucks. Okay? Whereas, ours, we don't buy any trucks. We just lease them.

So, if you compare EBITDAR to EBITDAR, okay, it's where the comparison should be done. But really, EBITDAR -- not a lot of people look at that. So, if you compare me with either Contrans, or America, or Heartland -- us, our position's always been, because it's such a short-life asset, we're going to be leasing it with an option to buy it back at the end of the lease if we feel good about it.

But that reduces your EBITDAR. Okay? Because rental, okay, goes to your operation. It reduces your debt too. Okay? But it reduces your EBITDAR. So, us, the approach has always been like that. We're looking at America. We're looking at the -- what the rest of the guys are doing. And we'll see what the plan will be.

But let's say that our truckload business becomes, okay, a stand-alone business; then, for sure, we would be -- in order to be comparable -- because it's always, they compare you with somebody else.

But in order to be comparable, if we have to go towards more buying of the trucks, that's what we'll do. But don't forget, we know -- when it's within TFI, a lot of people don't see the value of that, either the waste or the P&C, because we're like a holding company.

Right. Yes. So, I mean, I guess that explains, if I look at your truckload results, the big increase in depreciation in the quarter was 100% related to the addition of Transport America.

America.

Right.

Yes.

And what -- and in your Canadian TL operations, what percentage is asset-light versus asset-heavy? I mean, it sounds like it's majority asset-light. But is there -- there must be some percentage that's owned.

Well, you see, what happens is that in our Canadian division, we buy all the trailers but we lease all the trucks. Okay? So, this is why, when you look at our capital intensity, okay -- if you look at America and you see they're 9%, or around 9% capital intensity, let's say with a 16% EBITDA margin. Then you're down to about a 7% EBIT.

If you look at us, okay, I mean, our capital intensity is much lower. Why? Because, I mean, we don't buy the trucks; we lease them. And if you compare that with Contrans, Contrans -- most of their trucks are bought. Okay? So, they buy most of their trucks, or capital leases. So, that's why their EBITDAR is higher, but their capital intensity is higher as well.

Okay. Great. Then, that explains it. Thanks very much.

Jason Seidl, Cowen & Co.

This is Matt Elkott for Jason, actually. If I can go back to the LTL segment and ask that question in a slightly different way -- so, your LTL revenue ex acquisitions was down 5%, and your operating expenses declined 3%. So, I was just trying to get a sense of where you expect this unfavorable variance to trend in Q4is it going to be favorable, or is it going to stay unfavorable but narrow, and in 2015 as well?

Well, you see, what -- all the moves that we've made -- okay, Matt, is towards reducing our costs. So, we were not able to adjust ourselves fast enough with that lower volume. Okay?

So, that's a killer for us, and this is where our guys are working, like, day and night to correct the situation. Because this is not acceptable. Really, that's the first quarter that we're seeing that our existing business is doing worse than the year before.

Based on all the discussion that's going on and all the action that has been taken, I don't anticipate to see a negative, okay, like we had in Q3. I was talking -- I was looking at our numbers of October this year versus last year. So, we're starting to see some improvement based on the action that we've taken.

We also announced the closing down of two of our terminals in Quebec, okay, in small regions, where we shut down the operations there and we're moving towards an [agent] model. And there's more to come. Okay? We're working on a plan that will affect a few of our terminals, again in LTL.

Because, you see, the big difference between the US and Canada is that the Canadian market is shrinking. And the pricing power -- it's not existing at all. So, we're fighting an uphill battle all the time, every quarter.

So, that's why the decision was made, okay, over the last few years, to reduce our footprint in areas where there's low density and high competition. We have high competition in high-density areas like Toronto, Montreal, Vancouver; but at least, okay, you could fight because that's a big market, and we retain some good market share there.

But in a small market, where you're fighting just a local guy with cost structure that's completely different than ours -- it's a no-win situation. So, we said, let's reduce our investment in these regions and let's focus on 80% of what we do. Okay? And let's do that, and do it more efficiently. It's all about time and energy.

So, that's what we're doing. You should see some improvement. I was very unhappy with the fact that our existing business is worse this quarter than last.

Our new business, Vitran and Clarke -- Clarke did very well, okay, in the quarter. And Vitran is -- has done a fantastic job, because their US business -- their transporter business -- they had a partner that didn't provide the right service. So, that affected Vitran Canada big-time. They lost a lot of business because of that.

But, I mean, the team there at Vitran -- they're not stupid. They're not sitting on their hands. They turned around and they went and they were able to get the -- whatever business they -- was lost because of our poor service of our partner in the US. They were able to get back some domestic Canadian business.

So, it can be done, okay? It's just a matter of, the focus has to be at the right place. So, 5, 6, 7 years ago, I remember the focus was, let's cover all the Canadian towns, maybe 5 to 10 years ago. For the last 2, 3 years, we -- us, we're saying, no, no, no, no. Forget about it. No. Our big carrier will cover 80%.

Yes, we still have some very niche carriers in Alberta that are doing very well. That, we keep; but the national carriers operating in a small Prince George town, or Prince Rupert -- forget about it. I mean, we're out of there.

Got you. And speaking -- that's very helpful. Thank you, Alain. Speaking of the differences between the freight demand and capacity dynamics in the US and Canada, is it feasible that if the US continues to be very strong, and capacity continues to be very tight, and Canada continues to be lackluster, is it feasible that any type of positive spillover effect could happen in Canada eventually?

Well, you know what, Matt? It's a different story. Because, in Canada, we lost most of our manufacturing base. Okay? So, all those plants that used to operate in Canada when we had a $0.75 dollar or an $0.80 dollar -- those poor guys are gone. They're dead. Okay?

If you look at my business 10 years ago in Toronto, a lot of my customers were industrial-based customers. Those guys are all dead. They're gone. And they will not come back. Okay? Because the decision has been made to shut down those Canadian plants, because they were small, okay, and move the manufacturing into the US.

So, this is -- to me, the LTL market in Canada, from 2007 till now -- it's been a depressed market. And it's also a market that's been shrinking because we lost a lot of our industrial base. And it's not going to come back. So, to me, it's a permanent impairment.

So, what you have to do, when you see a situation like that -- you have to adjust yourself. So, us -- what we're doing is, we're adjusting ourselves in a small market. So, we're pulling out of those small markets.

But our competition -- they have to understand that in order to become a more viable company, you have to reduce the offer. So, then, I mean, you could start adjusting the rates. Because at the rates that we're having in Canada -- I was looking, like I said earlier -- Con-way's rate improved 5% quarter over quarter.

I mean, if we would get that -- us -- we would be laughing all the way to the bank. But there's no way. There's no way we can get that, because there's too much offering in Canada. So, the only way you're going to control that better is by consolidation. The consolidated -- the LTL market in the US is way more consolidated than the one in Canada. Way more. So --

Got you.

That's the way to go.

Great. Thank you very much.

David Tyerman, Canaccord Genuity.

First question is just on the P&C margin. When I look at it sequentially, it looks like it's down about 1%.

Yes.

And I don't think I've heard, through the whole call, why that was. Maybe I missed it.

Well, Q3 and Q2 are different, I mean, historically. Right, David? So, what you have to do is always compare Q3 with Q3, and Q2 with Q2. So, our Q2 of this year was better than the Q2 of last year, and our Q3, okay, of this year was better. So, it's -- sequentially, okay, quarters are not all the same. Right?

What would be different from Q3 to Q2? You had more sales in Q3. I would think the operating conditions would be at least as easy; maybe easier, since you're not going to have much weather impact. I'm just wondering, why would you have lower margins sequentially in the summer in P&C?

Boy, that's a good question. But, you know what? I'd never looked at it like that, David. We always compare one quarter with the same. So, that's a good question. Let me think about it. Because July, August, okay -- if I look at my same-day business, okay, in Q3, where you got the July and August, the only good month that you have is really September. Right?

Yes.

If you look at Q2, you've got May and June, okay, that are strong months, and also most of the time April. So, what you have in Q3 is, you've got two weak months. July is even weaker because a lot of people are on vacation, et cetera, et cetera.

So, when I think about that, to have Q3 on the P&C smaller in terms of profitability -- well -- you say, well, the revenue is not the same, okay, or maybe a little bit more, so why would you be less profit? I never really looked at that, David.

Okay. Certainly would be interested, if there was one. Because it did -- your sales, even if you took the acquisition out, was pretty similar. So, I'm kind of surprised to see such a large decline in margins. (Multiple speakers) --

But don't forget one thing. Don't forget one thing. The Ensenda acquisition is the area where our sales have been growing, and the Ensenda acquisition in Q3, okay, because of intangible depreciation, and because also it was the first quarter -- the profitability of Ensenda, because it's an [agent] model, okay -- it's never going to be the same as a dynamic.

So, Ensenda, because it's an [agent] model, if -- bottom line is going to be in the neighborhood of 5%, 6%, okay, versus the dynamics that will be, once everything is done, in the neighborhood of a 10%, a 12%, maybe.

Okay. Perhaps that's the difference. I won't belabor the point. If you had an explanation, I'd certainly be interested.

Second question -- the rail guys who many of us cover, have been talking a lot about taking share from truck -- that their service is getting better; they're driving their costs down.

And so, for example, CP Rail seems -- has a very strong volume growth expectation over the next number of years. And a lot of it sounds like it's going to come out of truck. I was wondering if you are seeing increased competition from rail, and whether that's either impacting you on price, or volume, or both.

David, if I ask you the question, what is the service performance of rail guys right now -- on-time service performance?

I can't say in your area. I know what it is in grain, which is probably what you're driving at. But in your area -- in the truckload area, which presumably is the thing it would affect, this is what they're driving at. They're saying they're going to do a lot better; they're going to take it from you.

Well -- yes. Well, could be. But one thing is for sure, is we deal with them. Okay? We are a customer of the rail, us. We're more than CAD100 million of business that we give to the rail. And we have lots of service issues. Okay?

If you're looking at a trucking company with a performance on-time of 90%, you're talking a (expletive) company. I mean, the on-time performance of the trucking industry is probably in the neighborhood of 95% to 100% on-time. If you look at the rail performance, it's -- you can't compare that at all. That's number one.

Number two -- I mean, I don't know; I'm not in the rail business. But I could tell you one thing, is that, on commodity, you can't beat the rail. I mean, on coal, and grain, and all that -- it's -- that's why the rails are there. That's their market.

Now, if you start thinking about the truckload world, okay, or either USA and Canada, I mean, it depends on the business. For sure, if you're talking shipping coke product from Toronto to Calgary, I mean, why would you do that with a truck?

One thing is for sure, David, is that the trucking business is growing, okay, in the US. Not in Canada, because the economy in Canada is really flat. We're just starting to see some -- okay, some improvement in our truckload.

And the small reason for that is that the rail guys are eliminating, slowly, the boxcar. So, if you are a customer in La Tuque, Quebec, and the guy tells you, you know what? You're not going to get any boxcar any more. So, you're going to have to use the truck.

Okay. So, it sounds like, there, you're not seeing it then.

No, we're not seeing that at all. I mean, it's a question, David, that we get all the time. So, it's like, you could -- you could fly out of Toronto to get to Montreal, or you could use your car. You could take a bus. It all depends what you want to do. Right?

No, absolutely. Okay. And then the last question I had -- you've painted a picture, Alain, of some pretty good improvements for most of the sectors -- I think pretty much all of them, actually, in the next year or so.

And aside from the economy, are there any things that you can see that could prevent you from hitting the kinds of margins that you're talking about getting over the next 12 or 18 months?

No. The only reason, David, is people. We have the right team at our P&C next-day service. We have the right team at our same-day service, both Canada and the US. So, I feel pretty good that we're going to do what we're said that we're going to do.

LTL -- the same thing. It's about people. So, there -- I mean, we need to do a better job there, and we're working on it.

On the truckload side, I feel very good that, there, the truckload side, I think the market will help us in 2015, both Canadian and the US.

Waste side -- on the waste business, I mean, the market is definitely helping us. We have some small growth there.

And on the costs side, we've been investing in transfer stations like there's no tomorrow, and that will start to produce better results over the course of the next year. We still have a capacity issue at Moose Creek. We could put another 200,000 tons at Moose Creek. We're working on it. So, 200,000 tons -- that's a CAD5 million improvement to the bottom line, easy. So, I mean, we have lots of good stuff.

Now, one thing that we don't really talk about is the Canadian dollar. I mean, the Canadian dollar, if it stays at $0.90 like it was in Q3 -- slowly, I think that this will help the small manufacturing base that's still left in Canada, and that will help us. Don't forget that we generate a little over [150 million] of free cash in US dollars. So, if the dollar stays there, that should be a tailwind for us.

So, in terms of negatives, I don't think the Canadian economy could do worse than what it's doing now. I think that probably over the course of the next 12 to 24 months we should start to see some improvement piggybacked on the US economy. The US economy is slowly improving, slowly, which is good, right? So, no; I think that all the other balls are really aligned properly for us to be in a great position for 2015.

Okay. That's very helpful. Thank you.

David Chiang, CIBC.

It's actually Kevin, Alain. Just a couple of housekeeping questions, actually. Just in your P&C, if you were to back out the impact of Velocity and the fact that -- you called out the nonrenewal of some of the lower-margin customers -- would the rest of your business see positive organic growth? And if so --

Yes.

-- would it have been pricing, or volume, or maybe a little bit of both, that drove the rest of that?

Yes. If we exclude the Velocity business that were -- and even in 2015, okay, we still have the backlash of that Velocity to a certain degree. Okay? But no -- I mean, the US operation -- before I bought Velocity, okay, we were running an EBIT at the time close to 8 points. Okay?

Velocity killed me. Velocity -- I mean, the management team there worked day and night, and we kept on losing customers because the service was so bad, before we bought the company. And then the pricing with some business was -- didn't make any sense. So, I mean, it's really -- we were stuck in the mud for about 12 months.

Right now, okay, if you look at our Dynamex US operation, we're getting close to where we were, okay, before the Velocity acquisition. We added about [CAD15] million revenue, net of all the disposals we did. Okay?

And in Q4, finally, okay, like I said, the US Dynamex operation will do better, okay, than ever. Okay? So, we are on the right track, but we have to dispose of a lot of terminals and a lot of bad business.

So, like I said earlier, hindsight is always 20/20. So, if I would buy Velocity again when I bought it? No. Would I buy Velocity today? I would buy Velocity, because we have a stronger team now within Dynamex than a year and a half ago when we bought the company. Okay?

That's helpful. And then, just on the Contrans offer, I think in your early October press release you noted that the Competition Bureau was looking at what represented roughly 2.5% of your combined business.

Yes.

I noted in the -- obviously I didn't see it in the most recent press release. There wasn't a percentage there. Is it still the same amount of (multiple speakers) --

Same.

It's still the same. Okay. Just wanted to clarify [that].

It's a little bit less, okay, because at first they had concern, okay, with two business lines. Okay? Which -- the dry bulk and the dumpster operation. So, the dry bulk -- that's solved now. So, they understand there's no issue there. So, it's really -- it's even smaller than that 2% that we've talked about.

Perfect.

But we've answered all the questions, okay. The same with Contrans. Finally, okay, because they kept on asking for more and more and more -- so, October 6 finally was the last date that we said, okay, you guys got everything you want now? They said yes. Okay. So, now, from that point, we have 30 days. So, that leads us to November 5, at the end of the day.

So, that's why we are now in the position, once we get this No Action Letter, to close the Contrans deal. Because now we have the support of more than 70% of the shareholders at Contrans.

Perfect. It seems like you're getting close to the finish line there.

And just lastly for me, I think you're hearing more and more, I guess throughout the year, but especially now during this earnings season from UPS and FedEx, about how they're spending more money to prepare for peak season this winter -- have you seen an opportunity in your same-day service to increase your e-commerce market share?

I would imagine some of the customers that might have been put off by the poor service last winter, may look to move from next-day service to maybe same-day service as a way to (multiple speakers) --

No, it's too early, Kevin.

(Inaudible).

It's still too early. Because, don't forget, I mean, we're starting with a major retailer in the US, which is really the first time -- besides the IT company that we're servicing right now, it's really the first time that a major retailer says, you know what, guys? That's where we're going. Okay. So, we're starting with three markets with those guys.

And we've been talking for years with another major retailer, but we're going anywhere with these guys. I mean, it's like, they don't have the solution. Because, don't forget, if they don't have the solution -- us, we're just servicing the customer. So, if he doesn't have the solution -- but I think that the other major retailer has the solution; has the committed -- the commitment over there.

And I think this is going to be successful. But we're starting very small with them, with three markets. Okay? And we believe -- because this is in transition right now. Right? This is in transition.

The e-commerce in the US is serviced by USPS, UPS and FedEx. Okay? I think that there's a small share of that market. I don't know how much -- 5%, 10%, 15%. High-density markets -- New York; Chicago; L.A.; Houston; Dallas -- the big cities in the US -- Miami -- where density's high. Okay? The last mile guys are in a good position, okay, to gain some market share away from the next-day guys.

Right. Would it make sense -- I think FedEx has a same-day service, and I can't recall if USPS has one, but I don't believe UPS has a same-day service of any type of real scale.

Would it make sense for you to partner with them, or for them to partner with you, as a way to help them alleviate congestion in their terminals? Obviously they're spending a lot of money --

Hey, listen, I mean, we'll see, Kevin. Time will tell.

Time will tell.

Time will tell. I mean, this Company has got -- it's the best Company in the world. Okay? So, we'll see what their plan is. But one thing is for sure -- you cannot do same-day within a network. Even if you're called A, B, C, or D. It's got to be a separate operation with a separate technology, et cetera, et cetera.

And we have that, us. Okay? We don't mix our same-day business in Canada with our Canpar-Loomis operation. It doesn't work. It's different. So, that's the beauty of TFI today, is, we can offer that, okay to our customers both in Canada and in the US. We are the lead dog in the US, although we're small. Okay? But we're investing.

The problem is that I lost a year, okay, and that's my fault. Lost a year, okay, with this stupid Velocity thing there, that took me too long. But who doesn't make any mistakes? So, that's behind us now.

And the focus of our team here in Dallas is really, okay, to satisfy the demand and offer, okay, our new customer-based solution, okay, to be able to service that growing e-commerce, and also I think that the last mile guy will get some share of that market. It's never going to be 50% of the market; but if it's only 5% or 10%, I mean, it's going to be great for us.

As always, Alain, thanks for the color.

Maxim Sytchev, Dundee Capital.

Just maybe thinking sort of strategically and more medium-term than anything else, I mean, obviously, you're contemplating right now the -- sort of, the TL stuff, and potentially doing something on energy services.

So, how should we think about Company's positioning over the medium term? I mean, what are we trying to achieve over the next 3 to 4 years? What do you envision, actually, TFI to be down the line, as you rebalance the asset portfolio?

Well, you know what? We've said for the last 3 years that we want TFI to be an asset-light Company. And then Alain buys trucking -- truckload company. So, you've got -- guys, you know, what is he doing, this guy? I mean, he wants to be an asset-light, and he's buying truckload company. Is he stupid or what?

Well, no. What we're trying to do is, to -- TFI is an asset-light Company, but it's got a nice portfolio of truckload companies that could be -- now, with Contrans, that's got size. It's a CAD1.8 billion Company. It's got three super teams. Okay?

So, these guys could be standalone. So, within the next 2, 3 years I think it makes sense. Okay? Because the focus of TFI is to be in the asset-light world. Okay? If you look at the last acquisition we've made in the LTL, those guys -- their depreciation as a percent of revenue is about 1%. So, they are asset-light. Quik X was the same. Okay? All our P&C is really light.

Truckload -- it's a great business. Okay? We do it well. But we need the size. So, this is -- and we need geography. So, now, we have a super company in Canada with Contrans. We have a strong team in the US where we can grow. And that could be standalone. In one way, could it be a spin-off, or could it be a vend-in -- we'll see. Okay? So, that is one thing.

Then, the waste is a diamond in the rough. We're doing well. Okay? We did the small -- all the acquisitions. But something has to happen. Because, in my mind, it's not valued properly. Okay?

So, now, what's going to be first? Is it truckload or waste? That, I don't know. I'm working on both things at the same time. And whatever happens, the first one, we'll see.

The rest of our business, okay, which is our LTL, P&C, and our logistics -- that's a fit. The goal is really, okay, to grow in that sector. Now, on the next-day service in Canada -- not a lot we can do, okay, on the M&A side. The market is not growing. But I think that the market will start growing, okay, once the economy gets a little bit better.

The LTL, we need to consolidate more in Canada. It doesn't make any sense that we have that market, underperforming the US market like there's no tomorrow. But there's more consolidation that's been done in the US, so, us, and I think somebody else, okay -- we'll take charge of that. And we'll start to consolidate that market, that really needs a lot of consolidation.

Now, that being said, the same-day, and the LTL, and the P&C -- that makes a lot of sense to be standalone. So, when you look at TFI in 3 years, that is probably what you will see, is a huge cash flow machine from -- with P&C, LTL and logistics. And you'll see a great investment, okay, in truckload, that's probably going to go down with time, okay; and the same story on the waste side.

That's very helpful. Thanks a lot. And in terms of -- do you have an estimate of your market share in the LTL space in Canada? Roughly?

Yes. The LTL space in Canada right now -- we are probably, if you include our intermodal division with our over-the-road division, we'll probably have 20%, maybe 25%, of market share.

Okay. That's great. Thank you very much. That's it for us.

Mona Nazir, Laurentian.

Just some followups. You'd spoken about Velocity. I'm just wondering if you could provide an update on [Dynamic] and Loomis.

Well, Dynamex in the US or in Canada? Or both?

Both.

Both. Well, like I said, Dynamex US, we're doing very, very good now. I mean, Velocity is behind us. And 2015 is going to be a year where we're going to improve our bottom line by at least 100 basis points -- probably 100 to 150 basis points.

Our focus in the US is really to grow the e-commerce. We've got lots of demand, okay, and that's going to be the focus. Because we're not going to be stuck in the same situation like we were stuck in 2014, trying to get -- fish out bad customers; okay, get rid of terminals. This is over. Okay?

And in Canada, the same thing. I mean, we acquired small TDS. Okay. We're growing with some e-commerce there also in Canada. So, we have a strong team there. We will definitely improve, okay, Dynamex Canada by at least 100 basis points, there again. So, we'll be much closer to an 8.5% to 9% EBIT by the end of next year on both divisions, US and Canada.

Okay. And then, just going back to the comments on tonnage, the LTL side down 5%, and yield up on the truckload side -- how do we look at these going forward? Do you think, based on your comments, tonnage will continue to be down for the next at least 12 months, and pricing could trend further upwards as the economy improves on the truckload side?

Yes. Well, let's start with the LTL. The drop in volume in the LTL -- it's something -- the market is shrinking. Okay? So, our strategy, us, is to adjust ourselves to lesser demand. So, that being said, it's always difficult to adjust dollar for dollar when the volume is shrinking.

When we say volume, also, is -- it also is the size of the shipment that is shrinking. So, instead of having an average weight, let's say, of 1000 pounds, now you're stuck with 900 pound average-weight shipment. So, I mean, this is because the market is shrinking. And I don't anticipate this market to get any better in terms of volume in the LTL. Okay? So, we have an uphill battle again in 2015 in our LTL.

The good thing, though, is that with our intermodal division, like Quik X and Vitran and Clarke, they're at least -- because it's -- they're -- these guys are more asset-light, so it's easier for us to adjust to a variation of volume with these guys, because they don't do the P&D; they don't do the [line haul]. Okay? It's all third party. So, when volume drops, it's easier to adjust.

Whereas, the over-the-road guys, okay, you're stuck with the truck; you're stuck with the [line haul]; you're stuck with the terminals. And it's more difficult. And that's where we're going to with smaller, lower volume. And we're like the dog chasing its tail all the time.

In terms of the truckload, what we're starting to see is more demand. Okay? But I don't want to say it too loud, because it's just something new, I would say, since May of 2014. So, is it a trend? Is it -- it's just a [blip]? I don't know.

So, this is why we're prudent. Okay? We're conservative. By saying, we're -- just like to feel a little bit more uptick in demand there. But it takes us a little bit more time to be in a position to say, okay, the Canadian truckload market is starting to get aligned on the US market. Where, US market, we see demand. We see organic growth in the US. That's why I said earlier -- still, we haven't finalized the America -- Transport America budget.

Talking to Scott the other day, he was telling me they have a good feeling that organically they will grow top line by 8 -- 7, 8, 9 points. So, the market is growing in the US.

Okay. And just lastly for me, there was a substantial increase in fuel surcharge, up like 54% year over year. I understand that part of that is the acquisitions that you've done. But I'm just trying to get an understanding, even if you back out that, of why it increased so much, just given the price of fuel.

Well, it's all about the price of fuel there. It's more volume because of acquisition and the price of fuel that's going up. Now, it's going down, okay, so you will see probably a reverse action in Q4. But we suffered big-time in Q1, because the price of fuel in Q1 went through the roof, and it was winter.

Hopefully, okay, we'll get some of that money back in Q1 of 2015. Because if price of fuel stays low, that helps me, okay, in a tough quarter like Q1, because we consume more in Q1 because it's cold, okay, and when the price is high. And also, we're not busy as much.

So, when you call the customer to say I have to adjust your fuel surcharge, the guy says, wait for a week. Wait for a week, because it's January or February. So, it's difficult.

Okay. Perfect. Thank you.

Benoit Poirier, Desjardins Securities.

Yes. Alain, I just read the document, and you still have CAD100 million of assets for sale. I was just wondering if you could provide more color about the timing expected for that, and whether it -- what will be a potential opportunity with Contrans, once the acquisition close?

Okay. So, yes. That CAD100 million of asset that we're talking about -- this is real estate that we have. Okay?

Now, like I said earlier in the call, we have, within the next another 12 months, another CAD25 million that's going to go up, and that's going to be sold, and -- with huge profit.

If you look at my deal in Q3 of this year, I mean, we sold three pieces of property and we made a lot of money. So, you should see the same thing happening over the course of the next 12 months. A minimum of CAD25 million of that CAD100 million will be sold -- CAD25 million -- maybe up to CAD40 million -- within the next 12 months, will be sold.

And the reason is pretty simple. I'll give you an example. We shut down Val-d'Or. Okay? Because it was a poor terminal. I mean, too much competition. Return on asset was the (expletive). Now, we're in discussion right now, and I think that this terminal will be sold within the next 12 months -- Val-d'Or, the mining town, is doing well, so, I mean, that's one example.

We shut down Prince Rupert, and we're in discussion right now. We've got an offer on the table. So, that terminal should go within the next 12 months.

So, we've got a lot of good things. Because, like I said earlier, with our P&C and our LTL, we are moving out of low-density areas because, when volumes drop and you have a fixed cost like a terminal, it kills you.

Okay.

So, that's why we have CAD100 million of assets to get rid of.

Okay. Thanks. And for the waste, you're looking for about CAD80 million of EBITDA next year. Just wondering if you're still waiting to get to the CAD100 million threshold before thinking about the spin-off opportunity.

No, not necessarily, Benoit. I mean, CAD80 million -- it's a good target for us in 2015. Now, CAD80 million of EBITDA, but it's also important to look at the free cash. We generate a ton of free cash in that business. And it makes a lot of sense for us to combine this business with somebody else.

Like I said earlier, I mean, I'm busy right now, because I've got this and I've got the truckload, and also we have to integrate what we've bought. Okay? So, it's not going to be a really -- 2015 -- a big M&A year.

But it's going to be a big year, I think, for restructuring the strategy -- not the strategy, but the structure of TFI -- having a great truckload. If we could do that in 2015, that would be the great success. And so, that's really the plan.

Now, in terms of the waste, CAD80 million in EBITDA and strong free cash flow, 20%-some EBIT margin -- the combination -- there's not that many companies where we can combine with that. So, it's not that you have to chase 30 companies. I mean, it's a handful of companies where it makes sense for us to sit down and have a good chat.

Okay. Thanks again for the time.

Mr. Alain Bedard, there are no further questions at this time. Please continue.

Okay. Well, thank you very much for joining us on our call today. So, I look forward to speaking with you again following our fourth quarter. So, have a great day. Thank you.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.