Third Quarter Ended September 30, 2016

Transcription

1 Third Quarter Ended September 30,

2 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

3 Why Invest in TransForce Profitable earnings growth company Proven acquisition strategy Superior record of shareholder value creation Portfolio of value added solutions and services Financial discipline Market leader in key transportation and logistics segments Diversification by industry sectors and geography 3

4 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

5 Consistent, Profitable Growth Revenue Before Fuel Surcharge* (millions of CA$) EBITDA* and Diluted EPS* 4,000 3, ,000 2, , TTM TTM EBITDA (millions of CA$) Diluted EPS (CA$) 12.3% Revenue BFS CAGR (2011-TTM) 14.2% EBITDA CAGR (2011-TTM) 20.2% Diluted EPS CAGR (2011-TTM) *From continuing operations 5

6 Commitment to Generating Free Cash Flow Free Cash Flow (FCF)* (millions of CA$) Cumulative Cash Returned to Shareholders (millions of CA$) TTM 12.2% FCF CAGR (2011-TTM) 88.7% FCF CONVERSION (TTM) 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

7 Delivering Shareholder Value 400% 350% 5-year total return 300% 250% 200% 150% TSX Total Return 100% 50% 0% Sep/11 Sep/12 Sep/13 Sep/14 Sep/15 Sep/16 * Total return performance includes dividends. 7

8 Review of TransForce 8

9 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 14,187 qualified employees at September 30, 2016 plus significant use of independent contractors and agents 369 terminals (278 across Canada and 91 in the U.S.) 9

10 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 Package and Courier (P&C) 35% 33% Less-Than-Truckload (LTL) 21% 22% Truckload (TL) 38% 39% Logistics 6% 6% 10

11 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 (9M-2016) Retail 3% 3% 2% 4% Manufactured Goods Services 5% 5% 31% Automotive Food & Beverage Building Materials 5% 7% Energy Metals & Mining Forest Products 38% Canada 62% United States 7% 8% 8% 12% Chemicals & Explosives Maritime Containers Waste Management Others 11

12 Growth Opportunities 12

13 Acquisition of XPO Truckload (CFI) (Announced and Closed October 27, 2016) Top Quality TL Operation of Scale Strategic Benefits USD 530M revenue USD 115M EBITDA 29 locations 3,000 tractors and 7,500 trailers Approximately 50% of TransForce revenue now originates in the United States Approximately 50% of TransForce revenue is now in Truckload Access to Mexico Attractive Valuation EV/EBITDA multiple of less than 5x Immediately accretive to earnings Iconic Brand Reviving the iconic CFI brand under which this business has historically operated 13

14 Strong Shareholder Support TFI s share price increased 9% on the first day after the announcement on very high trading volume 9.0% increase Oct. 27 Oct. 28 Volume 14

15 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 15

16 Growth Through Acquisitions - Synergies Example of synergy realization: terminal consolidation Notably in Package and Courier and LTL 35 terminal closures in the last 12 months, both in the U.S. and Canada through consolidation 4 sites closed in Q Synergies within line haul and purchased transportation Greater purchasing power for equipment, fuel and insurance Lower facility expenses 16

17 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 trailing twelve months (TTM) of CA$389.8 million Further opportunities for the Package and Courier segment, both through acquisitions and organic growth Increasing facility utilization with addition of same-day service 17

18 TFI in E-Commerce Throughout the Portfolio TTM E-Commerce Revenue by Segment (millions of $CA) P&C TL LTL Logistics Total Canada U.S Total

19 Evolution of E-Commerce Fulfillment The evolution of E-Commerce fulfillment has created numerous opportunities for TransForce companies Shipper - Warehouse Business Next-Day Services Delivery Pickup Sorting Facility Sorting Facility Linehaul Customer Region A Region B Shipper - Warehouse Same-Day Services Business Direct Delivery Customer 19

20 Growth in TFI E-Commerce Revenue E-Commerce Revenue (millions of CA$) TTM 22.1% E-Commerce Revenue CAGR (2011-TTM) 20

21 TFI s E-Commerce Customers Deliver Outsized Growth E-Commerce Revenue with Customer A (millions of CA$) TTM 14.7% Revenue CAGR (2011-TTM) Evolution of B2B/B2C Split 22% 26% 31% 32% 34% 41% E-Commerce Revenue with Customer B (millions of CA$) % 74% % 68% 66% 59% TTM 119.1% Revenue CAGR (2011-TTM) TTM B2B B2C 21

22 Financial Highlights (From continuing operations) 22

23 Five-Year Financial Highlights Revenue before Fuel Surcharge (billions of CA$) TTM EBITDA* (millions of CA$) TTM Free Cash Flow* (millions of CA$) TTM $ / share Operating Income (millions of CA$) TTM 7.5% 7.3% 7.7% 7.6% 7.0% Margin as a % of revenue before fuel surcharge * These are non-ifrs measures. Please refer to the tables at the end of the presentation for a reconciliation of non-ifrs measures. 23

24 Five-Year Financial Highlights Cash Flow Usage Net maintenance Capex Proceeds from excess assets (12.6) (25.7) (58.8) (52.4) (28.8) Business acquisitions Net long-term debt repayment (579.4) (proceeds) Cash return to shareholders Dividend paid Share buy back Others (1.4) 24.5 (38.6) (2.7) 30.7 Net cash from discontinued operations Net Cash Flow from Continuing Operations (in millions of CA$) (71.9) (68.6) (66.8) (78.2) (790.7) TOTAL TTM 24

25 Five-Year Financial Highlights CAPEX and depreciation are very low when compared to the industry due to asset-light model, which reduces capital intensity 4.5% 4.0% 3.5% 3.0% Capital Expenditures (% of Total Revenue) 2.8% 4.5% 4.0% 3.5% 3.0% Depreciation (% of Total Revenue) 3.3% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% TTM 1.0% TTM 25

26 Segmented Financial Highlights Q (in millions of $) Package and Courier Less-Than- Truckload Truckload Logistics Total (*) Q Q Q Q Q Q Q Q (restated) Q Q (restated) Revenue before fuel surcharge EBITDAR EBITDAR Margin (%) 16.9% 14.2% 14.3% 12.0% 19.3% 21.4% 15.7% 14.0% 16.7% 16.4% EBITDA EBITDA Margin (%) 12.8% 9.8% 12.4% 10.4% 15.2% 17.7% 13.1% 11.5% 13.0% 12.8% Operating income Operating margin (%) 10.2% 7.0% 8.5% 6.3% 7.2% 10.3% 11.5% 10.1% 8.1% 8.0% Total Assets ,523 1, ,007 3,134 Total Hard Assets ,502 1,588 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. 26

27 Segmented Financial Highlights 9M 2016 (in millions of $) Package and Courier Less-Than- Truckload Truckload Logistics Total (*) 9M M M M M M M M-2015 (restated) 9M M-2015 (restated) Revenue before fuel surcharge ,031 1, ,668 2,692 EBITDAR EBITDAR Margin (%) 15.5% 14.1% 12.1% 11.7% 19.6% 20.6% 13.8% 15.4% 15.7% 16.0% EBITDA EBITDA Margin (%) 11.2% 9.8% 10.2% 10.3% 15.5% 17.0% 11.2% 13.3% 12.0% 12.7% Operating income Operating margin (%) 8.6% 7.0% 6.2% 6.1% 7.5% 9.7% 9.5% 11.9% 7.0% 7.8% Total Assets ,523 1, ,007 3,134 Total Hard Assets ,502 1,588 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. 27

28 Balance Sheet Leverage metrics Disciplined acquisition strategy with focus on preserving balance sheet strength and attractive cost of capital Debt as at September 30, 2016: $853.9 million Total Debt / EBITDA Total Debt (millions of CA$) 4.6x 1,618 1, x 2.9x 2.9x 2.0x TTM TTM 5.6% 5.2% 4.0% 3.7% 3.7% Weighted average cost 28

29 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 18, 2018 New $500 million acquisition credit (as of October 2016) Two tranches, $200 million maturing in October 2018 and $300 million maturing in October 2019 Same pricing, covenants and conditions as the revolving banking credit facility 29

30 Why Invest in TransForce 30

31 Delivering Shareholder Value 15.0% Return on Equity ROE - % 60 Expected Amortization of Intangible Assets & Incremental EPS % % % TTM Amortization (in M$) Incremental EPS (in $) 31

32 Delivering Shareholder Value Quarterly dividend was at $0.17; 12% increase to $0.19 on the next payment, annual dividend yield of 2.8% (on September 30, 2016 share price) Plan to distribute 20-25% of annualized free cash flow available Free Cash Flow from continuing operations of $3.32 per share for the last 12 months ended September 30, % yield Healthy Free Cash Flow conversion ratio of 88.7% for the last 12 months ended September 30, 2016 (Defined as (EBITDA Net CAPEX) / EBITDA) Average ROE of 13.5% since 2012 Substantial issuer bid in Q resulted in the repurchase of 2.7 million common shares at $22.00 per share for a total of $59.4 million Renewed NCIB to repurchase up to 6 million shares until September 29, ,702,200 common shares repurchased in the first 9 months for a total of $90.7 million Benefits from evolution to an asset-light business model Higher return on assets and asset turnover 32

33 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. healthy consumer spending is favourable for the P&C segment, but a softer manufacturing sector is expected to further 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 33

34 Five-Year Reconciliation of EBITDA* (in millions of $) (from continuing operations) TTM Q Net income Net finance costs Income tax expense Operating income Depreciation of property and equipment Amortization of intangible assets EBITDA * This is a non-ifrs measure. 34

35 Five-Year Reconciliation of Free Cash Flow* (in millions of $) (from continuing operations) TTM Q Net cash from operating activities Additions to property and equipment (108.7) (157.8) (69.3) (49.2) (52.4) Proceeds from sale of property and equipment and AHFS Free cash flow from continuing operations * This is a non-ifrs measure. 35

36 Three-Month and Nine-Month Reconciliation of Adjusted Net Income from Continuing Operations* (in millions of $) Three months ended September 30 Nine months ended September Net income Amortization of intangible assets related to business acquisitions, net of tax Net change in fair value of derivatives, net of tax (2.8) Net foreign exchange loss (gain), net of tax 0.2 (1.2) Tax on multi-jurisdiction distributions Net income from discontinued operations (0.4) (9.7) (483.5) (14.6) Adjusted net income from continuing operations * This is a non-ifrs measure. 36

37 Three-Month and Nine-Month Reconciliation of Free Cash Flow* (in millions of $) Three months ended September 30 Nine months ended September Net cash from continuing operations Additions to property and equipment (19.9) (42.3) (79.6) (128.7) Proceeds from sale of property and equipment Proceeds from sale of assets held for sale Free cash flow from continuing operations * This is a non-ifrs measure. 37

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