Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the TransForce Year End and Fourth Quarter 2014 Earnings 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 Tuesday, March 3rd, 2015. I will now turn the conference over to Mr. 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 concerning results for the fourth quarter and fiscal year ended December 31, 2014. Let me begin by providing you an overview of the key performance indicators for the year and the fourth quarter and then I'll discuss the fourth quarter results of each of our operating segments in more depth. I am pleased with the substantial progress of TransForce made in 2014. We completed a number of significant acquisitions during the year. These additions to our network have greatly enhanced our service offering, extended our geographic reach throughout North America and added more talent to our pool of expertise. Total revenue for 2014 reached $3.7 billion, a 90% increase over 2013. EBIT grew to $275 million, which represents 8.4% of revenue before fuel surcharge, up from $209 million or 7.5% of revenue in the previous year. Adjusted net income was $176 million or $1.75 per diluted shares, up 43% over 2013 and free cash flow reached $321 million, equivalent to $3.24 a share versus $222 million or $2.41 per share last year. In the fourth quarter of 2014, total revenue reached $1.07 billion. This represents a 36% year-over-year increase and was essentially due to the acquisition made over the past 12 months. EBIT reached $79.9 million, up $36.4 million or 84% over last year. The increase was generated by $15.4 million contribution from acquisition, and a substantial $21.7 million improvement from existing operations. EBIT margin before fuel surcharge climbed 230 basis points to 8.4%. EBIT rose in all segments with the exception of waste management, where it remains stable. Adjusted net income, which excludes the after-tax effect of change in the fair value of derivatives, net foreign exchange gain or…

Thank you. [Operator Instructions] Your first question comes from the line of Mona Nazir from Laurentian Bank. Your line is open.

Good morning, Alain.

Yes. Good morning, Mona.

Just a couple of questions for me. So on the less-than-truckload side, I think we expected growth to be negative but it was flat year-over-year. Prices were stable last quarter, but they're now up significantly 5.8%, and that is enough to offset volume. Just wondering, how do we think about this going forward? Do you think that overall LTL or organic growth could be flat or even up this year? Or still thinking negative, overall?

Well, you see Mona, what's helping us in the LTL right now is the fact that the Canadian dollar is at $0.80 and we have a lot of traffic that comes from the US, that is based in US dollar. So the fact that we're converting those US dollar and Canadian dollar is helping us, okay. So for us depreciation of the Canadian dollar is really a tailwind for LTL operation. So this is what's helping us, because if you look at the Canadian base business that we have with – the volume that we have today there is no growth and I don’t anticipate any growth, okay, in 2015 in our LTL domestic business. So really what's helping us right now on the revenue side is really the appreciation of the US dollar versus the Canadian dollar.

Okay. And then secondly, on the packaging courier side, I know it was a challenging period for your peer UPS, and they stated it was a complex operating environment in regard to e-commerce.

Yes.

I am just wondering if you could speak to how you're handling the growth, and where are you given the rapid growth? I know you have been expanding in new markets, Chicago, New York, and speak to how this is progressing?

Yes. Well, you see the way UPS service, the e-commerce is very different than how we service the e-commerce ourselves in the US. I mean, UPS is the best company in the world, okay, but it operates on the network system, on the line-all P&D operation, like we do as in Canada with our next day service like Canpar and Loomis. The problem that they are facing is that the e-commerce, the way we service us is through dedicated operation, okay, and off the customers dock, using our last mile operation, and we are running that with independent contractor. So it’s very different model versus the UPS or the FedEx model or the USPS model in the US. So it’s in the earlier stage, okay. Right now the way we are doing it ourselves, that this is a very, very small portion of the market right now. Now, is this share of that market using a last mile guy like us, going to grow, probably, how much, we don’t really know because we're still in a very early stage of that.

Okay. Perfect. And just lastly here for me, there are a number of ways to reduce debt here. On the last call, you spoke about using cash flow to pay it down, which is a possibility, number one. Secondly, you spoke about spinning off the truckload and or waste management division. And lastly, even though you said you may not go this route, but there is always equity financing or some financing way. I'm just wondering, there are a number of options and maybe you should just go through your thought process on each, and the timing of a spin-off, if it is still in the plan?

Well, first of all I think part of our 2015 plan, as I said is that, we want to bring a – above $400 million to $600 million of that long-term, let say like Mullen did. Mullen did a great job on that, okay, so they brought in at 10 or a 11 year debt, and this is what we're working on right now. So that is one thing. In terms of the equity, this is completely out of the question. I mean, with our strong free cash flow and in our plan one thing that is never part of our plan is all the excess real estate asset that we have, that we're going to be selling and this is going to be between $25 million and $50 million again this year. Already we're in discussion with about $25 million to $30 million of asset, real estate asset that will be sold probably within six months. Now that being said, in terms of the waste management, what we want to do with the waste management is really before – well we got a few option. One would be just to sell it, outright sale. This is something that we don’t want to do. What we would like to do is take what we have and build with something, combined that with something, somebody other companies and build a great Canadian waste management company. So this is what we're working on. But that would be done outside of TFI. Because TFI is a transportation company and we were successful on buying waste management assets from Swiss in 2005, we turned that into a very successful story and we want to build on that. We don’t want to sell it. But its difficult to build, okay, a waste management company within…

Okay. Thank you.

You're welcome.

Your next question comes from the line of Walter Spracklin from RBC. Your line is open.

Thanks so much. Good morning, Alain.

Good morning, Walter.

So I'd like to go back just broad guidance. I know you reiterate your guidance in your press release. I just wanted to confirm you are still targeting 550 EBITDA for 2015 is that still on track?

Yes, that’s still on track. I mean, what we're seeing is its going to between 540 and 560, depending on you know, all kinds of factor. I mean, we got the US dollar. We got the oil. We got the slowdown in Alberta. We have all kinds of issues, but we still believe after two months of 2015 with a very difficult month of February weather wise I think.

Yes.

We still believe that this is attainable.

So, let's call it a $140 million increase, you've always based that on zero growth, is that still as your organic growth.

Yes.

And obviously the rest there therefore coming from your – the acquisitions that you made last year, plus any integration. How would break those two up to $140 million, how much of that will be integration savings and how much of that will be acquisition?

Well, if you look at the 406 that we came out this year and if you add all the acquisition, let say Contrans for about 11 months and then you add America for six months, and you add Vitran for two months, I mean, that’s going to take the 406 to about 500.

Okay. All right.

Okay. So to say that from 500 we're going to 550 or 540 or 560, okay, this is really everything is about cost, everything is about – we're going to get a little bit of tailwind on the truckload sector we believe that, okay. How much? We don’t really know, okay, but we believe that the truckload, the market is going to help us.

Right.

By in the LTL or in the P&C business, a little bit maybe on the P&C the market will help us because now the number one player Canada is acting differently than – for the last 10 years. LTL, we're not going to get any up from that market, that’s for sure, except maybe the Canadian dollar. So this is all about cost. And what we said is that all the measure that we put in place in the P&C and in the LTL and to a certain degree in our truckload operation, this is going to improve our profitability by about 10%. So from 500 it goes to about 540 to 550.

Right. And presumably that’s mostly going to come in package and courier, little bit I guess in the LTL, is that right?

Yes, well, its going to be spread out, because don’t forget, waste I mean, if you look at our number, waste we should improve at least by $4 million to $5 million. Its not lot, when you're targeting $50 million, but waste going to improve a little bit. So $5 million, $6 million should come from the waste. The P&C, we're shooting for 100 basis points. So 100 basis point on a 1 point, to 1.3 you're talking then to $14 million there on the P&C. The LTL we're looking at something similar. With the acquisition of Contrans and the fact that our team are working closely with the Contrans team, we said that this should bring us probably an additional $5 million to $10 million over the course of this year. The SG&A within the company, we're tweaking every cause that we can do, okay?

Right. So if I add those up real quick, though, P&C, 10 to 14, LTL 10 to 14, that’s 20 to 28 and then 5 million for…

Then you've got 5 in the waste, okay…

And 5 to 10 in Contrans, we're looking at 30, okay. Yes, that all make sense. Perfect…

It’s going to be a tough job Walter. It’s not a done deal. But the way we are at the TFIs, we are conservative, but we work hard and we put a target, that you got to work for it.

Yes, for sure. And after that’s done in 2015, how much left is in the cost story after that, how much more?

Oh! I would say probably not a lot in the truckload sector. I mean, once we've integrated the Contrans and the America and all that, maybe a few millions, maybe I would say probably after 50 basis point on the truckload side, so maybe another $10 million, okay, on the truckload side. On the parcel side, I still believe that we have to be over double-digit EBIT. So if you look at what we've done this year, even if we improve by a 100 basis point we're still far from a 10% EBIT. I think we're going to be close to 9. So in my mind in 2016 and 2017 we still have to improve by 100 basis point in that business. And really our same day operation in the US or in Canada is where we need a lot of improvement there. And the acquisition of Velocity, it was a difficult situation for us. I mean, so we lost a little bit of our focus. So now our guys are all refocused and also I mean, we've got new business coming in. So this is why to me P&C. LTL that’s the big question. I mean, if the market is not helping us on the cost side, we're getting close to the maximum we could do with what we have. So let say we improve by 100 basis point there again this year its going to be very difficult if the market is not helping us. Right now good thing though is that the US dollar is helping us and every forecast that I am looking at is telling me that the Canadian dollar will be very cheap for 2015 and 2016, so.

Right. Last question here then, is, on the premise that you're guiding diligently and conservatively at 0% growth for next year. What could emerge and what indications, if any, have you seen that might signal a potential increase in – or improvement in the overall trucking sector fundamentals? And you know, I was a little encouraged by the 6 - 5.8% yield, but you mentioned that was mainly translation gains, so perhaps the strength there, or that as an early indicator, perhaps, is not quite the early indicator we were hoping for. Is there any signs of, any bright signs in the distance that you are seeing in any, either truckload, LTL, or parcel, that suggests that the underlying fundamentals that are you currently guiding us at zero percent might be a little bit better than that into 2015 or into 2016?

Well, I think the truckload Walter, we're probably a little bit conservative there. I think the market will help us on the volume side in the truckload sector. I mean, with the US economy that we're seeing to be like improving. Now we're questioning because we're looking at January and February. I mean, we had a very difficult winter there as well on the East Coast. So we're not too sure yet. But I'd say that the US economy keeps on improving, truckload will definitely benefit from growth in volume.

And that will be a leading indicator for you other…

On the Canadian next day service that we have a Loomis, Canpar, small, the volume small volume. I don’t see anything major there in 2015, maybe in 2016. On the same day last mile there we have more – we're more happy when we look at the situation. We've got lots of good stuff in the pipeline even in the US and in Canada. So there I mean, we are little bit more optimistic in terms of volume. LTL I am not optimistic at all. I mean, looking at this Canadian market and its shrinking. So, what's going to help us, well that the good thing is the US dollar like we said earlier. But in terms of pricing there is too much, still too much capacity in the Canadian LTL market. So the good thing is that Murray bought Gardewine, that’s fantastic, great for the market. But there is more that needs to be done. There is more that needs to be done, mostly in Ontario and in Quebec.

Last housekeeping question, how much of EBITDA came from the Contrans acquisition in fourth quarter?

Very small, Walter, very small, because don’t forget, we took it on in mid November.

Yes.

Okay, and you got two bad weeks. The last two weeks of December are shitty weeks. So I don’t remember exactly, but I know that on an EBIT side we lost money with Contrans.

Okay. Got it. Okay, that’s all…

Very small…

Okay. Those were my questions. Thanks very much, Alain.

Pleasure.

Your next question comes from the line of Damir Gunja from TD Securities. Your line is open.

Thanks. Good morning, Alain.

Hey. Good morning, Damir.

Just on the capital side, I was just curios are there any divestures beyond the real estate that you are thinking about?

No, no. I mean, not at all Damir. See one thing we have to understand is that every year, okay, we will divest now with Contrans and with America and the rest of our operation, about $50 million of trucks and trailers and all that. This is in a normal course of the business. But what I am saying is that, so if my CapEx is schedule to be 150 to 160, is now with the US dollar appreciation, so maybe my 150 is going to be closer to 160, but my disposals is going to be on the equipment normally, okay. In the neighborhood of $45 million to $60 million because we never know that’s the normal course of business. Above that, what I am saying is that, we will have between $25 million to $50 million of excess real estate. For example okay, we're selling one of our terminal in Prince Rupert. We're in discussion, final discussion with a buyer. We're selling two of our building that have been mostly empty for five years in next to the GM plant in Ontario, that’s another $12 million, $13 million. So these are all excess asset that we're selling and that’s going to bring in $25 million to $50 million of cash over and above the normal stuff. Now you say, its that sustainable, sure it is because in 2016 once we do that $25 to $50 in 2016 we're going to do another $25 to $50, because as we speak Damir we got between $125 million to $150 million of real – excess real estate. On the Contrans deal we're selling a building at $11 million in Edmonton as we speak, right.

And maybe just a second one then, I guess on the acquisition side. How are you thinking about acquisitions for the coming year? And does the higher US dollar give you a little bit of pause in the US market, or is that not really a factor?

No, it’s not really factor of the US dollar. But there is going to pause in 2015 on M&A for TFI because 2015 is going to be a year of strategic moves, like I explained to Mona, okay, is I got to do something with the waste. I am sitting on the fence right now. I've got a great asset, lot of people want to buy it, when I say lot, not a lot, but a few people wants to buy the asset. So I got to do something, its either I am going to sell it like I did when I bought CF and I sold Milne & Craighead because I couldn’t grow it or I am going to grow it, but outside of TFI. So that is – it’s not going to be a really an M&A activity, but its going to be strategic move to create more value for the TFI shareholder.

By growing it outside of TFI, do you mean like a joint venture type arrangement or…

Yes, it could be a joint venture, or it could be a combination with somebody else. I mean, I am looking at all kinds of strategic moves.

Okay. Thank very much.

Okay. You're welcome, Damir.

Your next question comes from the line of Umayr Allem from National Bank Financial. Your line is open.

Hi, good morning. Here I am filling in for Cam today.

Yes, good morning.

Thanks. Although there is not much focus on it, could you highlight some of the things that impacted your other segment in terms of revenue and EBIT?

Okay. The other segment is very simple. In there what we have is really our logistic operation and our rig moving business. The rig moving business is the only rig moving business we still have is in the US and this is slowing down as we speak, price of oil is at $50 a barrel. So we have a plan for 2015 of about $100 million in revenue US and 2% or 3% profit bottom line. This is probably an optimistic figure as we speak right now. And this is a business that our team, they are working very hard to keep cost done. And our logistics, I mean, that’s something that we don’t talk a lot about, but that’s a growing business. I mean, with the Contrans acquisition we added a nice logistics business that Contrans added Cornerstone Logistics which is about $60 million. That’s going to beef up that sector. And organically I mean, there is some growth there and we're very happy with – we have a new Clarke North America division that was added last year. We're trying to build a kind of a low brokers division with out Transport America franchise in the US. I mean, there is lots of good stuff that may happen there.

All right. Thanks. And another question, on the waste, it was effected in Q4 by product mix. So, how would you go about improving the mix in that segment to get the margins up?

Well, you see, that when we talk about product mix is the fact that Veolia, its product mix is very different than us. They don’t have any landfill. They don’t have any compost facility. So the product mix of waste management within TFI is change permanently with this acquisition, okay. So really what's going to be the driver though of our increase profit, is the fact that we have to reduce cost at the Veolia type of operation and that’s going to take us maybe 6 to12 months to do within the year 2015, and that’s going to bring up our EBIT closer to a 22 to 23. But we'll never be back to where we were because Veolia has got not landfill. So its got a different mix, that’s what we're saying when we talk about the mix.

Okay. And just last question for me, is there anything you will do differently in looking for your next CFO?

Well, you know, CFO it’s a tough job within TFI. So its takes lots of talent and listen I mean, we have a lots of candidates that to take over that job. So we'll see what we'll do next – in the next few months.

All right. Thanks. That’s it’s from me.

You're welcome.

Your next comes from the line of Fadi Chamoun from BMO Capital Markets. Your line is open.

H, Alain. This is Devin Pinchani [ph] for Fadi's. How are doing?

I am doing well. How about you Davin?

Good. Thanks. So just want to circle back on the rollout of the same day services with your major e-tailing customers in the US…

Yes.

I believe many of these services are introduced at little or no cost to the customer for a trial period. And as this incentive period rolls off, just wondering how demand has trended in these markets? Also how does the margin profile of this business compare before and after this trial period?

Well, you see Devin what we do as for customers in the US on e-commerce I mean, is the same margin as we have for any of our business. I mean, we don’t operate a line of business within, let say Dynamex US operation, as a loss leader or in the fate that maybe is going to be good in two years, we don’t do that. So every e-commerce account that we have are generating a normal profit like is expectable to us. Now that being said, the experience that we're going through right now is that, I mean, its been really good in some markets, like New York, like LA, like San Francisco. But its been slow in other market like Chicago, Boston and D.C. So I mean, we're just piggy backed on our customers. So if they are successful, while will be successful, right now, they are having a tough time. Now we are the largest retailer in the world, which we started in LA with those guys late last year, but these guys are brick-and-mortar guys. And the e-commerce it’s not their business. They are not an Amazon company. Amazon was built with this e-commerce mentality. Those brick-and-mortar guys were build with brick-and-mortar guy’s mentality and they are trying to come up with a solution. And these are big guys and its not been easy. They've tested their product with the number one transport company in the world and was not a success. Now we're discussing with them. We opened up one market where we're supposed to run three markets, but we are doing only one. Hopefully I mean, we'll get to more than one market, but its – we're still in the early stage of this business, very early. Now is this going to work? I think so because it works in England, it works in Japan, it works in China. But so far I mean, its still very, very small sector of the e-commerce business that service by last mile guy.

Okay. That's helpful. So just sticking with the e-commerce, so many of the larger next day couriers in the US are – they are investing big sums of money in their IT systems aimed at reducing redelivery costs in their B2C business, you know, looking at improved delivery scheduling, leveraging their networks at pickup locations. How does Dynamex manage its potential drain on margins, and can you remind us, within Dynamex, how much of your revenue is from, like, B2C?

Okay. Well, first of all I mean, the e-commerce in the US is always been service from day one by USPS, FedEx or UPS, okay. And they've always been charging big dollars for the service. And they've been growing. The problem is that its peak and valley. So if you remember in Q4 of 2013 there was big issues, service wasn’t there, lots of complaints and last year Q4 of 2014 they had invested tons of money and they came out with a negative results. I mean, the largest guy came out with some negative results. So now they are saying well maybe we've going to have a peak charge or this or that. So I don’t know where these guys are going. But I could tell you is that, in high density market like New York, like LA, San Francisco, Chicago, Miami and all these high density market the same day last mile solution is way more efficient and much cheaper, because we don’t touch the product as many times as a next day guy. Its just a different way of doing it. That’s what I believe is some of our future, but it’s not in our numbers at all today. And we're going to grow the business just to practice delivery and not make any money, I am telling you that.

Okay. Thanks, Alain. That was helpful.

Okay. You're welcome.

[Operator Instructions] Your next question comes from the line of Maxim Sytchev from Dundee International Markets. Your line is open.

Thank you. Good morning, Alain.

Good morning, Maxim.

Just a quick question in relation to leverage, I mean, obviously in the short term you are trying to pay down debt. But what should be sort of the magic net debt-to-EBITDA when you are going to think M&A, I mean, which I assume is more of 2016 event?

Yes. Well, we've got to bring that down under the 2.5 Maxim to start thinking about going back to leverage. This is to us I mean, right now we are three point something’s, 3 point, two, three, whatever it is, and its not going to come down by a lot in Q1, as we all know. It’s coming down by about $50 million in Q2. So its still going to be too high and its really in Q3 and Q4. So this is why my real focus in 2015 is not going to be buying big companies like we did in 2014 and investing a bit over a $1 billion. If I do that then its because its such a great transaction that then I will have to resort to equity, which I don’t want to do. So this is why we're focusing more in 2015 in some strategic move, like I've discussed on the waste and maybe to a certain level on the truckload side.

Okay. And then sort of thinking about having that permanent debt on the balance sheet, what are your initial thoughts in terms of how would think about structuring this?

Well, what we'd like to do is like Murray did I mean, a group of insurance company that want to lend us money for the long-term and interest rates are still low in Canada and they will probably stay low for at least another year because the economy is not doing that well. There is some discussion that maybe in the US side in later part of 2015 they will start moving up the rate. So this is what I've said to our VP Finance I said, guys lets get organized now. The problem that we face is until we know if we are going to a strategic move in 2015 then I don’t want to put on long-term debt and then the guy says to me, well, yes, but you can sell this or you can take this away from TFI and combine that with somebody else. So you understand what I am saying?

Yes. Absolutely. And then maybe just one last thing. In terms of – I mean obviously with diesel pricing being lower, which is a tailwind for you guys but at the same time, a negative offset on rig moving, can you quantify sort of, I don't know, a $0.01 move on diesel in terms if there is any material impact on EPS or it just gets muddied up?

No, what the fact that price of oil is lower, its not really directing, affecting our operation, except like you said on the rig move which is slowing down that activity. But really with the customer I mean, its really pass-through and the only good benefit that I see is that now the consumer is got more money in his pocket, it will probably help him reduce its debt and then maybe at one point start consuming a little bit more than what they are doing now in Canada I am talking about. In US, I think that I am in the US most of my time and I see the way people reacting there. The shopping center and the restaurant, it’s always we're feeling that it’s already in – it’s a new economy in the US. They are back on their feet and we see that the salaries are improving, you saw the announcement of the Wal-Mart and another major chain announced that they have improve salary thee. So it’s a different feeling in the US. We're not getting that feeling here in Canada. But I am convinced that it’s just a matter of time, its going to come probably not in 2015, hopefully in 2016.

And what are your thoughts in relation to the Alberta slowdown spillover on the rest of the business? How do you think about it?

Yes, it’s slowing down, sorry as no question about that. It’s slowing down and I see that’s – the good thing though is that we're not in the rig moving business anymore, but I see slowing down in our LTL business. Truckload is still not really affected because most of our truckload is on the oil sand operation there. But yes, we are feeling the pinch and slowly its slowing down in Alberta.

Actually talking about sort of oil levered assets, any change of mind in relation to rig moving assets? What's the update there?

Well, the update is simple is that, we came out with a plan in with about a $100 million revenue and making like we did last year three or four points bottom line. But I am telling you Maxim after two months we're not there and this why we took fast action. I mean, we operate in Colorado, we operate in Texas and in Louisiana and we also had an operation in PA. So I said to my guys, speaking about PA, I mean, we'll go back to PA when we can make money. We can't make money in PA, so we shut down PA at the end of February. And we're monitoring that all the time and I am not going bleed any cash with an operation like I said to Devin I mean, we're not in a business of practicing delivery practicing rig moving and losing money.

Right. Okay. So I guess if you're not seeing material improvements over the next six months, would you consider strategic alternatives for this thing?

Well, to sell it, its other question, I mean, nobody is going to buy. I mean, there is tons of people that wants to sell. So its – what we'll do probably Maxim is we're just going to keep whatever we are making money at, so we have a nice operation in Colorado where we've always made money. We have a great operation in Louisiana and it’s a tough market Louisiana, but we have a great operation there. We've always made money. So we'll keep the operation that are financially – that we can benefit and make money and the rest we'll just shut them down and park the asset and wait for the market to come back.

Okay. That’s very helpful. Thank you very much.

Welcome.

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

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