Second Quarter Ended June 30, 2016

Second Quarter Ended June 30, 2016
1
Forward-Looking Statements
In the interest of providing shareholders and potential investors with information regarding
TransForce, including management’s assessment of future plans and operations, certain
statements in this presentation are forward-looking statements subject to risks, uncertainties
and other important factors that could cause the Company’s actual performance to differ
materially from those expressed in or implied by such statements.
Such factors are further discussed under Risks and Uncertainties in the Company’s Annual
Information Form and MD&A, but readers are cautioned that the list of factors that may affect
future growth, results and performance is not exhaustive, and undue reliance should not be
placed on forward-looking statements.
Although the Company believes that the expectations conveyed by the forward-looking
statements are based on information available to it on the date such statements were made,
there can be no assurance that such expectations will prove to be correct. All subsequent
forward-looking statements, whether written or orally attributable to the Company or persons
acting on its behalf, are expressly qualified in their entirety by these cautionary statements.
Unless otherwise required by applicable securities laws, the Company expressly disclaims any
intention, and assumes no obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
2
Why Invest in TransForce
Profitable
earnings
growth
company
Proven
acquisition
strategy
Portfolio of
value added
solutions and
services
Superior
record of
shareholder
value creation
Financial
discipline
Market leader in
key transportation
and logistics
segments
Diversification
by industry
sectors and
geography
3
Creating Shareholder Value
• Solidifying our position as a leader in the North American transportation
and logistics industry
• Delivering profitable earnings growth – both organic and through our
proven acquisition strategy
– Disciplined, strategic, and profitable acquisitions and partnerships
– Focus on operations, integration, and realization of synergies
• Maintaining a strong balance sheet and access to capital
• Leveraging our team of dedicated professionals to provide value-added
services and solutions across each of our business segments
4
Consistent, Profitable Growth
Revenue Before Fuel Surcharge*
EBITDA* and Diluted EPS*
(millions of CA$)
4,000
3,623
500
433
2.00
1.75
400
3,000
1.33
300
1.50
1.25
200
2,000
1,000
2011
2012
2013
2014
2015
TTM
13.1% Revenue BFS CAGR (2011-TTM)
1.00
100
0.75
0
0.50
11
12
13
14
EBITDA (millions of CA$)
15
TTM
Diluted EPS (CA$)
15.0% EBITDA CAGR (2011-TTM)
17.2% Diluted EPS CAGR (2011-TTM)
*From continuing operations
5
Commitment to Generating Free Cash Flow
Cumulative Cash Returned
to Shareholders
Free Cash Flow (FCF)*
(millions of CA$)
(millions of CA$)
800
350
291
300
662
700
600
500
250
400
200
300
200
150
100
2011
100
2012
2013
2014
2015
TTM
0
2011
2012
2013
2014
2015
TTM
10.8% FCF CAGR (2011-TTM)
83.3% FCF CONVERSION (TTM)
* Defined as Net cash from continuing operations less additions to property and equipment
plus proceeds from sale of property and equipment and assets held for sale.
6
Delivering Shareholder Value
250%
5-year total return
200%
150%
TSX Total Return
100%
50%
0%
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
* Total return performance includes dividends.
7
Review of TransForce
8
Company Overview
• A North American leader in the transportation and logistics industry
− Canada’s #1 transportation and logistics enterprise with U.S. transborder
activities both in LTL and TL and international capabilities with our
international partner
− Leadership position in both U.S. and Canada Same-Day / Last Mile Delivery
− A significant presence in U.S. domestic TL
• Our leadership position allows us to:
– Attract the most qualified people
– Attract larger and more diversified customers
– Play a key role in the direction and consolidation of the industry
• 14,327 qualified employees at June 30, 2016 plus significant use of
independent contractors and agents
• 373 terminals (281 across Canada and 92 in the U.S.)
9
Business Strategy
• Diversified across four core business segments
• Focus on growing asset-light and value-added operations and lower capital
intensity
Segment’s Total Revenue Contribution
(before inter-segment eliminations)
YTD 2016
2015
Package and Courier (P&C)
35%
33%
Less-Than-Truckload (LTL)
21%
22%
Truckload (TL)
38%
39%
Logistics
6%
6%
10
Diversification Reduces Business Risks
• TransForce has built a robust and well-diversified revenue base
– No single client accounts for > 5% of consolidated revenue
By Top Customers' Industry (6M-2016)
By Geography (6M-2016)
Retail
3%
3%
2%
Manufactured Goods
4%
Services
Automotive
5%
31%
5%
Food & Beverage
Building Materials
Energy
5%
Metals & Mining
7%
Forest Products
12%
7%
8%
8%
38%
62%
Canada
United States
Chemicals & Explosives
Maritime Containers
Waste Management
Others
11
Growth Opportunities
12
Growth Through Acquisitions - Strategy
• Strategic, disciplined, and accretive acquisitions
– Proven track record of executing acquisition strategy
• Completed over 100 acquisitions in the past 10 years
• Strong focus on integration, operations and realization of synergies
• Recent significant acquisitions:
– Four businesses operating in the specialized TL segment and generating
approximately $49 million in annual revenue (completed in Q1 and Q2 2016)
– All Canadian Courier (Same day/last mile P&C delivery, $25 million in revenue,
completed in July 2015)
• Important provider of same-day and overnight delivery and logistics services in Canada
– Hazen Final Mile (Same day/last mile P&C delivery, US$45 million in revenue,
completed in May 2015)
• Services retail clients in the United States
13
Growth Through Acquisitions - Synergies
• Example of synergy realization: terminal consolidation
– Notably in Package and Courier and LTL
– 40 terminal closures in the last 12 months, both in the U.S. and Canada through
consolidation
• 5 sites closed in Q2-2016
– Synergies within line haul and purchased transportation
– Greater purchasing power for equipment, fuel and insurance
– Lower facility expenses
14
Growth in E-Commerce
•
TransForce services e-commerce
from 80 North American cities
•
Currently providing same-day
delivery for a leading retailer in 18
North American markets, which is
more than half the locations that
company offers same-day delivery in
•
E-commerce revenue run rate of
CA$369 million*
•
Further opportunities for the
Package and Courier segment, both
through acquisitions and organic
growth
•
Increasing facility utilization with
addition of same-day service
* Includes B2B and B2C revenues.
15
TFI in E-Commerce Throughout the Portfolio
TTM E-Commerce Revenue by Segment
(millions of $CA)
P&C
TL
LTL
Logistics
Total
Canada
43.8
9.2
3.1
-
56.1
U.S.
228.9
84.1
-
0.3
313.3
Total
272.7
93.3
3.1
0.3
369.4
16
Evolution of E-Commerce Fulfillment
The evolution of E-Commerce fulfillment has created numerous opportunities
for TransForce companies
Next-Day Services
Shipper Warehouse
Same-Day Services
Shipper - Warehouse
Region A
Pickup
Sorting
Facility
Direct Delivery
Linehaul
Business
Delivery
Customer
Region B
Sorting
Facility
Business
Customer
17
Growth in TFI E-Commerce Revenue
E-Commerce Revenue
(millions of CA$)
369.4
400
350
300
250
200
150
100
2011
2012
2013
2014
2015
TTM
22.0% E-Commerce Revenue CAGR
(2011-TTM)
18
TFI’s E-Commerce Customers Deliver Outsized Growth
E-Commerce Revenue with Customer A
(millions of CA$)
100
90
90
Evolution of B2B/B2C Split
80
70
60
22%
50
40
2011 2012 2013 2014 2015
26%
31%
32%
34%
39%
74%
69%
68%
66%
61%
2012
2013
2014
2015
TTM
TTM
14.0% Revenue CAGR (2011-TTM)
E-Commerce Revenue with Customer B
70
60
50
40
30
20
10
0
2011
(millions of CA$)
78%
63
2011
B2B
2012
2013
2014
2015
B2C
TTM
115.3% Revenue CAGR (2011-TTM)
19
Financial Highlights
(From continuing operations)
20
Five-Year Financial Highlights
Revenue before Fuel Surcharge
EBITDA*
(billions of CA$)
3.6
4
3
2
1
12
13
14
15
TTM
Free Cash Flow*
433
12
291
13
14
15
TTM
Operating Income
350
(millions of CA$)
350
300
250
200
150
100
500
450
400
350
300
250
200
(millions of CA$)
(millions of CA$)
300
253
250
200
150
100
12
13
1.89
1.64
14
2.45
$ / share
15
2.91
TTM
12
3.00
7.5%
13
14
15
7.3%
7.7%
7.6%
Margin as a % of revenue before fuel surcharge
TTM
7.0%
* These are non-IFRS measures. Please refer to the tables at the end of the presentation for a reconciliation of non-IFRS measures.
21
Five-Year Financial Highlights
Cash Flow Usage
Net Cash Flow from Continuing Operations
(in millions of CA$)
400
363.2
350
300
250
200
150
100
Net maintenance Capex
Proceeds from excess assets
Business acquisitions
Net long-term debt repayment
(proceeds)
Cash return to shareholders
Dividend paid
Share buy back
Others
Net cash from discontinued
operations
TOTAL
2012
2013
2014
2015
TTM
45.2
(12.6)
80.4
26.2
(25.7)
57.3
43.9
(58.8)
814.2
117.8
(52.4)
44.8
93.8
(23.5)
41.4
63.5
71.2
(579.4)
139.1
808.6
108.5
67.3
114.0
190.4
244.6
(1.4)
24.5
(38.6)
(2.7)
7.5
(71.9)
(68.6)
(66.8)
(78.2)
(809.2)
211.7
152.2
228.5
358.8
363.2
46.6
61.9
48.1
19.2
56.6
57.4
68.6
121.8
66.5
178.1
22
Five-Year Financial Highlights
• CAPEX and depreciation are very low when compared to the industry due
to asset-light model, which reduces capital intensity
Capital Expenditures
(% of Total Revenue)
4.5%
Depreciation
4.5%
(% of Total Revenue)
4.0%
4.0%
3.3%
3.5%
3.0%
3.0%
2.5%
2.5%
2.0%
2.0%
1.5%
1.5%
1.0%
3.3%
3.5%
12
13
14
15
TTM
1.0%
12
13
14
15
TTM
23
Segmented Financial Highlights – Q2 2016
Package and
Courier
(in millions of $)
Less-ThanTruckload
Truckload
Logistics
Q2-2016 Q2-2015 Q2-2016 Q2-2015 Q2-2016 Q2-2015 Q2-2016
Revenue before fuel
surcharge
EBITDAR
Total (*)
Q2-2015
(restated)
Q2-2016
Q2-2015
(restated)
323
305
184
198
353
366
59
69
904
921
54
48
25
31
74
80
8
13
152
166
16.8%
15.7%
13.4%
15.4%
20.9%
21.7%
13.3%
19.1%
16.8%
18.1%
40
35
21
28
59
67
6
12
118
137
12.5%
11.4%
11.4%
14.0%
16.8%
18.3%
10.8%
17.3%
13.1%
14.8%
Operating income
32
27
14
20
32
41
5
11
73
93
Operating margin (%)
9.9%
8.7%
7.5%
10.0%
9.0%
11.2%
9.2%
16.1%
8.1%
10.1%
Total Assets
688
690
620
692
1,529
1,537
133
136
3,008
3,078
Total Hard Assets
241
245
407
471
776
779
38
47
1,498
1,563
Adjusted Net Income**
55
67
Free Cash Flow**
84
91
EBITDAR Margin (%)
EBITDA
EBITDA Margin (%)
* Including inter-segment revenue eliminations and corporate expenses and assets.
** These are non-IFRS measures. Please refer to the tables at the end of the presentation for a reconciliation of non-IFRS measures.
24
Segmented Financial Highlights – 6M 2016
Package and
Courier
(in millions of $)
Less-ThanTruckload
Truckload
Logistics
6M-2016 6M-2015 6M-2016 6M-2015 6M-2016 6M-2015 6M-2016
Revenue before fuel
surcharge
EBITDAR
Total (*)
6M-2015
6M-2015
6M-2016
(restated)
(restated)
643
591
356
381
688
709
113
131
1,771
1,779
95
83
39
44
136
143
14
21
270
282
14.8%
14.1%
11.1%
11.6%
19.8%
20.1%
12.8%
16.1%
15.3%
15.9%
67
58
32
39
108
118
12
18
204
224
10.5%
9.8%
9.1%
10.2%
15.7%
16.6%
10.2%
14.1%
11.5%
12.6%
Operating income
50
41
18
23
52
67
10
17
114
137
Operating margin (%)
7.7%
7.0%
5.0%
6.0%
7.6%
9.4%
8.5%
12.7%
6.4%
7.7%
Total Assets
688
690
620
692
1,529
1,537
133
136
3,008
3,078
Total Hard Assets
241
245
407
471
776
779
38
47
1,498
1,563
86
94
109
109
EBITDAR Margin (%)
EBITDA
EBITDA Margin (%)
Adjusted Net Income**
Free Cash Flow**
* Including inter-segment revenue eliminations and corporate expenses and assets.
** These are non-IFRS measures. Please refer to the tables at the end of the presentation for a reconciliation of non-IFRS measures.
25
Balance Sheet
• Leverage metrics
−
Disciplined acquisition strategy with focus on preserving balance sheet strength and
attractive cost of capital
−
Debt as at June 30, 2016: $853.5 million
Total Debt
Total Debt / EBITDA
(millions of CA$)
1,618
4.6x
1,615
3.6x
2.9x
2.9x
2.0x
12
5.6%
13
14
15
5.2%
4.0%
3.7%
Weighted average cost
TTM
808
774
12
13
854
14
15
TTM
3.5%
26
Balance Sheet
• Debt structure
– $1.2 billion unsecured banking credit facility
•
Matures in June 2020 and can be extended annually
•
Provides favourable terms and conditions and capital management
flexibility
– $125 million unsecured debentures
•
Interest rate between 3% and 3.45% and matures in December 2020
•
Can be repaid, without penalty, after December 18, 2019
– $75 million unsecured term loan
•
3.95% interest rate and matures in August 2019
•
Can be repaid, without penalty, after August 17, 2018
27
Why Invest in TransForce
28
Delivering Shareholder Value
Return on Equity
Expected Amortization of Intangible
Assets & Incremental EPS
ROE - %
20%
60
0.12
0.10
15%
33.8
40
10.8%
10%
0.10
0.08
0.06
20
0.04
0.02
5%
0
13
14
15
TTM
16
17
18
Amortization (in M$)
19
20
21
0.00
Incremental EPS (in $)
29
Delivering Shareholder Value
• Quarterly dividend currently at $0.17; annual dividend yield of 2.8%
(on June 30, 2016 share price)
– Plan to distribute 20-25% of annualized free cash flow available
• Free Cash Flow from continuing operations of $3.00 per share for the last 12
months ended June 30, 2016 – 12.5% yield
• Healthy Free Cash Flow conversion ratio of 83.3% for the last 12 months ended
June 30, 2016 (Defined as (EBITDA – Net CAPEX) / EBITDA)
• Average ROE of 12.7% since 2012
• Substantial issuer bid resulted in the repurchase of 2.7 million common shares
at $22.00 per share for a total of $59.4 million, as of March 28, 2016
• NCIB to repurchase up to 6 million shares until September 27, 2016
– 2,109,600 common shares repurchased in the first 6 months ended June 30, 2016
for a total of $49.0 million
• Benefits from evolution to an asset-light business model
– Higher return on assets and asset turnover
30
Outlook
• In Canada, low oil prices continued to negatively impact the economy while
the effects of a weak currency have yet to provide a boost to the
manufacturing sector
• In the U.S. resilient consumer spending is favourable for the P&C segment,
but a softer manufacturing sector may affect TL activities
• Ongoing focus on maximizing efficiency
–
Cost reduction initiatives in the P&C and LTL segments
–
Asset optimization throughout the organization
• Pursuing execution of a disciplined acquisition strategy in the fragmented
North American transportation and logistics market
• Asset-light model further strengthens cash flow generation
–
Used for strategic acquisitions and debt reduction
–
Dividends and share repurchases further increase shareholder returns
31
Five-Year Reconciliation of EBITDA*
(in millions of $)
(from continuing operations)
TTM
Q2-2016
2015
2014
2013
2012
132.1
145.7
116.2
77.5
101.7
Net finance costs
72.2
75.7
64.2
72.9
37.2
Income tax expense
48.7
55.1
47.2
26.6
38.8
Operating income
253.0
276.5
227.6
177.0
177.7
Depreciation of property and equipment
130.1
129.1
86.0
65.5
70.1
50.0
47.1
35.7
25.3
29.0
433.1
452.7
349.3
267.8
276.8
Net income
Amortization of intangible assets
EBITDA
* This is a non-IFRS measure.
32
Five-Year Reconciliation of
Free Cash Flow*
(in millions of $)
(from continuing operations)
Net cash from operating activities
Additions to property and equipment
Proceeds from sale of property and
equipment and AHFS
Free cash flow from continuing operations
TTM
Q2-2016
2015
2014
2013
2012
363.2
358.8
228.5
152.2
211.7
(131.1)
(157.8)
(69.3)
(49.2)
(52.4)
58.8
90.5
84.2
48.7
19.8
290.9
291.5
243.4
151.7
179.1
* This is a non-IFRS measure.
33
Three-Month and Six-Month Reconciliation of
Adjusted Net Income from Continuing Operations*
(in millions of $)
Three months ended
June 30
2016
Net income
Amortization of intangible assets related to
business acquisitions, net of tax
Net change in fair value of derivatives, net of
tax
Net foreign exchange loss, net of tax
Tax on multi-jurisdiction distributions
Net loss (income) from discontinued
operations
Adjusted net income from continuing
operations
2015
Six months ended
June 30
2016
2015
39.1
64.1
542.7
78.2
7.7
6.9
15.8
13.9
2.1
(2.1)
8.4
4.8
0.6
1.3
2.2
1.7
0.2
0.3
0.4
0.4
5.2
(3.9)
(483.1)
(4.9)
54.9
66.6
86.4
94.1
* This is a non-IFRS measure.
34
Three-Month and Six-Month Reconciliation of
Free Cash Flow*
(in millions of $)
Three months ended
June 30
2016
Net cash from continuing operations
Additions to property and equipment
Proceeds from sale of property and
equipment
Proceeds from sale of assets held for sale
Free cash flow from continuing operations
2015
Six months ended
June 30
2016
2015
99.5
87.7
139.5
135.1
(30.5)
(49.4)
(59.7)
(86.4)
15.3
31.7
28.9
40.0
-
20.6
-
20.6
84.3
90.6
108.7
109.3
* This is a non-IFRS measure.
35