TransForce Inc.
TSX : TFI
OTCQX : TFIFF

TransForce Inc.

July 21, 2016 17:00 ET

TransForce Announces 2016 Second Quarter Results

MONTREAL, QUEBEC--(Marketwired - July 21, 2016) -

  • Revenue before fuel surcharge from continuing operations of $903.9 million
  • Operating income of $73.4 million, or 8.1% of revenue before fuel surcharge; higher margins in Package and Courier and LTL, excluding gains on asset sales
  • Adjusted net income from continuing operations* of $54.9 million, or $0.58 per diluted share*, versus $66.6 million last year, or $0.65 per diluted share
  • Free cash flow from continuing operations* of $84.3 million, or $0.90 per share*, used to repurchase common shares ($44.8 million) and reimburse debt ($30.2 million)

* This is a non-IFRS measure. For a reconciliation, please refer to the "Non-IFRS Measures" section below.

TransForce Inc. (TSX:TFI)(OTCQX:TFIFF), a North American leader in the transportation and logistics industry, today announced its results for the second quarter ended June 30, 2016. In 2015, TransForce ceased its U.S. rig moving operations and completed the sale of its Waste Management segment on February 1, 2016. Results for these activities are accordingly presented as discontinued operations in the Company's financial statements. Data for corresponding periods of the previous year have been restated.

"TransForce's second-quarter results reflect difficult market conditions in the North American freight market and a weak Canadian economy. Despite these factors restraining organic growth, TransForce made further progress. Our constant efforts to right-size operations, control costs and generate cash flow have produced solid operating results. In keeping with our disciplined capital management, free cash flow was used to repurchase common shares and reimburse debt," said Alain Bédard, Chairman, President and Chief Executive Officer of TransForce.

"We are pleased with further volume and margin increases in the Package and Courier (P&C) segment stemming from increased e-commerce activity in the United States. In the Less-than-Truckload (LTL) segment, lower volume was more than offset by additional efficiency gains, leading to a 40 basis point operating margin improvement when gains on the sale of assets are excluded. Volume in the Truckload (TL) segment reflects a challenging market, but our focus on asset-light brokerage activity is generating superior returns on capital. Finally, last year's non-recurring volume spike due to the port of Los Angeles strike was the primary reason for the lower year-over-year activity in the Logistics segment," added Mr. Bédard.

Financial highlights Quarters ended
June 30
Six months ended
June 30
(in millions of dollars, except per share data) 2016 2015 2016 2015
Total revenue from continuing operations 977.8 1,029.9 1,912.0 1,993.4
Revenue before fuel surcharge from continuing operations 903.9 920.9 1,770.6 1,778.9
Operating income from continuing operations(1) 73.4 93.3 113.7 137.2
Net cash from continuing operations 99.5 87.7 139.6 135.2
Free cash flow from continuing operations (2)(3) 84.3 90.6 108.7 109.3
Adjusted net income from continuing operations(2)(4) 54.9 66.6 86.4 94.1
Per share - diluted(5) ($) 0.58 0.65 0.89 0.91
Net income from continuing operations 44.3 60.2 59.6 73.2
Per share - diluted ($) 0.47 0.58 0.61 0.71
Net income(6) 39.1 64.1 542.7 78.2
Per share - diluted ($) 0.41 0.62 5.59 0.75
Weighted average number of shares outstanding ('000s) 93,598 101,462 95,608 101,919
(1) Net income from continuing operations before finance income and costs, and income tax expense.
(2) This is a non-IFRS measure. For a reconciliation, please refer to the "Non-IFRS Measures" section below.
(3) Net cash from continuing operations, less additions to property and equipment, plus proceeds from sale of property and equipment and assets held for sale.
(4) Net income excluding amortization of intangible assets related to business acquisitions, net changes in the fair value of derivatives, net foreign exchange gain or loss, net income or loss from discontinued operations and items not in the Company's normal business, net of tax.
(5) Adjusted net income from continuing operations divided by the weighted average number of diluted common shares outstanding.
(6) Includes net income (loss) from discontinued operations, of which a $490.8 million after-tax gain on the sale of the Waste Management segment recorded in the first quarter of 2016.

SECOND-QUARTER RESULTS

Total revenue from continuing operations reached $977.8 million, down 5% from last year. Net of fuel surcharge, revenue from continuing operations declined 2% to $903.9 million. This decrease reflects lower business volume, partially offset by acquisitions completed in the previous twelve months and the effect of local currency appreciation on U.S.-dollar denominated revenue.

Operating income from continuing operations totalled $73.4 million, compared with $93.3 million last year. As a percentage of revenue before fuel surcharge, operating income stood at 8.1% of revenue in the second quarter of 2016, versus 10.1% a year ago. The reduction in operating income reflects lower revenue, a $10.3 million year-over-year decline in gains on the sale of assets, as well as lower margins in the TL and Logistics segments. These factors were partially offset by improvement in the P&C segment resulting from optimization measures.

Net income from continuing operations reached $44.3 million, or $0.47 per diluted share, versus $60.2 million, or $0.58 per diluted share, a year ago. Adjusted net income from continuing operations, which excludes amortization of intangible assets related to business acquisitions, net changes in the fair value of derivatives, net foreign exchange gain or loss, and items not in the Company's normal business, net of tax, was $54.9 million, or $0.58 per diluted share, compared with $66.6 million last year, or $0.65 per diluted share. After taking into account the net loss from discontinued operations, net income amounted to $39.1 million, or $0.41 per diluted share, versus $64.1 million last year, or $0.62 per diluted share.

SIX-MONTH RESULTS

For the first six months of 2016, total revenue from continuing operations reached $1.9 billion, versus $2.0 billion in the first six months of 2015. Net of fuel surcharge, revenue from continuing operations held steady at $1.8 billion. Operating income from continuing operations amounted to $113.7 million, or 6.4% of revenue before fuel surcharge, compared with $137.2 million last year, or 7.7% of revenue before fuel surcharge.

Net income from continuing operations was $59.6 million, or $0.61 per diluted share, versus $73.2 million, or $0.71 per diluted share, a year ago. Adjusted net income from continuing operations stood at $86.4 million, or $0.89 per diluted share, compared with $94.1 million last year, or $0.91 per diluted share. Net income, which also includes a $490.8 million after-tax gain on the sale of the Waste Management segment recorded in the first quarter, reached $542.7 million, or $5.59 per diluted share, compared with $78.2 million last year, or $0.75 per diluted share.

SEGMENTED RESULTS FROM CONTINUING OPERATIONS

(in millions of dollars) Quarters ended
June 30
Six months ended
June 30
2016 2015 2016 2015
$ $ $ $
Revenue*
Package and Courier 323.2 304.8 642.7 591.5
Less-Than-Truckload 183.8 198.2 356.5 381.4
Truckload 353.3 366.1 688.0 708.6
Logistics 58.5 68.7 112.9 131.1
Eliminations (14.9 ) (17.0 ) (29.5 ) (33.7 )
Total 903.9 920.9 1,770.6 1,778.9

$

%
of Rev.
*

$

%
of Rev.
*

$

%
of Rev.
*

$

%
of Rev.
*
Operating Income (Loss)
Package and Courier 31.8 9.9 % 26.6 8.7 % 49.7 7.7 % 41.3 7.0 %
Less-Than-Truckload 13.7 7.5 % 19.8 10.0 % 17.9 5.0 % 22.8 6.0 %
Truckload 31.8 9.0 % 41.1 11.2 % 52.4 7.6 % 66.7 9.4 %
Logistics 5.4 9.2 % 11.0 16.1 % 9.6 8.5 % 16.6 12.7 %
Corporate (9.4 ) (5.3 ) (15.9 ) (10.2 )
Total 73.4 8.1 % 93.3 10.1 % 113.7 6.4 % 137.2 7.7 %
Note: due to rounding, totals may differ slightly from the sum.
* Revenue before fuel surcharge

FREE CASH FLOW AND FINANCIAL POSITION

During the second quarter, TransForce generated free cash flow from continuing operations of $84.3 million, or $0.90 per share. The Company used this free cash flow to repurchase 1.9 million common shares for a consideration of $44.8 million and to reimburse $30.2 million in long-term debt.

In the first half of 2016, TransForce repurchased 4.8 million shares under its normal course and substantial issuer bid programs for an aggregate consideration of $108.4 million. As at June 30, 2016, the Company was permitted to repurchase up to 3.6 million additional shares under its current normal course issuer bid program expiring on September 28, 2016.

OUTLOOK

"The North American freight market is not expected to improve significantly, as manufacturing activity is subdued on both sides of the border, while, additionally, the Canadian economy remains affected by low oil prices. In this difficult environment, we are encouraged by the steady progress of our asset-light activities, including e-commerce, intermodal and brokerage. We will seek to further enhance our leadership in these high-return niches. Additionally, our decentralized and diversified business model will allow TransForce to rapidly benefit from market opportunities that may arise. We are committed to maximizing cash flow generation in order to repurchase shares, reimburse debt and carry out our selective acquisition strategy. The addition of a new Vice-President, Mergers and Acquisitions now provides the ability to consistently focus on such activities. Success in our ability to invest in high return activities will create further shareholder value," concluded Mr. Bédard.

CONFERENCE CALL

TransForce will hold a conference call for analysts and portfolio managers on Friday, July 22, 2016 at 9:00 a.m. Eastern Time, to discuss these results. Business media are also invited to listen to the call. Interested parties can join the call by dialling 1-877-223-4471. A recording of the call will be available until midnight, August 5, 2016, by dialling 1-800-585-8367 or 416-621-4642 and entering passcode 32877375.

ABOUT TRANSFORCE

TransForce Inc. is a North American leader in the transportation and logistics industry operating across Canada and the United States through its subsidiaries. TransForce creates value for shareholders by identifying strategic acquisitions and managing a growing network of wholly-owned operating subsidiaries. Under the TransForce umbrella, companies benefit from financial and operational resources to build their businesses and increase their efficiency. TransForce companies service the following segments:

  • Package and Courier;
  • Less-Than-Truckload;
  • Truckload;
  • Logistics.

TransForce Inc. is publicly traded on the Toronto Stock Exchange (TSX:TFI) and the OTCQX marketplace in the U.S. (OTCQX:TFIFF). For more information, visit http://www.transforcecompany.com.

FORWARD-LOOKING STATEMENTS

Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of TransForce. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for TransForce's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.

NON-IFRS MEASURES

Adjusted net income from continuing operations, adjusted earnings from continuing operations per share, free cash flow from continuing operations and free cash flow from continuing operations per share are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these to be useful information to assist investors in evaluating the Company's profitability, liquidity and ability to generate funds to finance its operations. These measures do not have any standardize meaning under IFRS and could be calculated differently by other companies. These measures should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with IFRS.

Adjusted net income from continuing operations Quarters ended
June 30
Six months ended
June 30
(unaudited, in thousands of dollars, except per share data) 2016 2015 2016 2015
Net income 39,106 64,116 542,737 78,161
Amortization of intangible assets related to business acquisitions, net of tax 7,716 6,946 15,809 13,942
Net change in fair value of derivatives, net of tax 2,178 (2,158 ) 8,404 4,777
Net foreign exchange loss, net of tax 584 1,306 2,200 1,753
Tax on multi-jurisdiction distributions 188 296 383 423
Net loss (income) from discontinued operations 5,175 (3,882 ) (483,134 ) (4,937 )
Adjusted net income from continuing operations 54,947 66,624 86,399 94,119
Adjusted earnings per share from continuing operations - basic 0.59 0.66 0.90 0.92
Adjusted earnings per share from continuing operations - diluted 0.58 0.65 0.89 0.91
Free cash flow from continuing operations Quarters ended
June 30
Six months ended
June 30
(unaudited, in thousands of dollars, except per share data) 2016 2015 2016 2015
Net cash from operating activities 99,547 87,727 139,566 135,153
Additions to property and equipment (30,558 ) (49,390 ) (59,680 ) (86,422 )
Proceeds from sale of property and equipment 15,306 31,721 28,850 40,037
Proceeds from sale of assets held for sale - 20,553 - 20,553
Free cash flow from continuing operations 84,295 90,611 108,736 109,321
Free cash flow from continuing operations per share(1) 0.90 0.89 1.14 1.07
(1) Free cash flow from continuing operations divided by the weighted average number of common shares outstanding.

Note to readers: Consolidated financial statements and Management's Discussion & Analysis are available on TransForce's website at www.transforcecompany.com.

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