TransForce Inc.
TSX : TFI
OTCQX : TFIFF

TransForce Inc.

October 20, 2016 17:00 ET

TransForce Announces 2016 Third Quarter Results

Strong performance in Package and Courier with a 3% revenue increase and a 50% improvement in operating income

MONTREAL, QUEBEC--(Marketwired - Oct. 20, 2016) -

  • Revenue before fuel surcharge from continuing operations of $897.4 million
  • Operating income of $72.4 million, or 8.1% of revenue before fuel surcharge; solid year-over-year improvements in Package and Courier, as well as in LTL
  • Adjusted net income from continuing operations* of $56.4 million, or $0.60 per diluted share*, versus $48.6 million last year, or $0.48 per diluted share
  • Free cash flow from continuing operations* of $81.3 million, or $0.88 per share*, a portion of which was returned to shareholders through the repurchase of common shares ($41.8 million) and dividends ($15.8 million)
  • Quarterly dividend increased 12% to $0.19 per share from $0.17 previously

* 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 third quarter ended September 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 recorded solid third-quarter results in most business segments. This speaks highly of our focus on asset-light activities that produce superior returns even as we continue to face headwinds from an uncertain economy and weak manufacturing activity. Our successful actions gave rise to a strong free cash flow generation that was mostly returned to shareholders by repurchasing common shares and paying our regular dividend," said Alain Bédard, Chairman, President and Chief Executive Officer of TransForce.

"Revenue growth in the Package and Courier (P&C) segment was driven by our expanding reach in e-commerce activity. Less-than-Truckload (LTL) activity remains subdued by a soft Canadian economy, but enhanced by improved operating margins. An ailing North American manufacturing sector is holding back freight volume in the Truckload (TL) segment where we are continuing to right-size operations and focus on high-return activities. Lower customer volume is also affecting Logistics activities which nevertheless continue to produce superior returns," added Mr. Bédard.

Financial highlights Quarters ended
Sept. 30
Nine months ended
Sept. 30
(in millions of dollars, except per share data) 2016 2015 2016 2015
Total revenue from continuing operations 975.5 1,009.7 2,887.5 3,003.1
Revenue before fuel surcharge from continuing operations 897.4 913.2 2,668.0 2,692.1
Operating income from continuing operations1 72.4 72.8 186.1 210.0
Net cash from continuing operations 88.3 86.9 228.1 222.1
Free cash flow from continuing operations2, 3 81.3 56.4 190.3 165.8
Adjusted net income from continuing operations2, 4 56.4 48.6 142.8 142.7
Per share - diluted5 ($) 0.60 0.48 1.49 1.39
Net income from continuing operations 51.1 31.9 110.7 105.1
Per share - diluted ($) 0.54 0.32 1.15 1.02
Net income6 51.5 41.6 594.2 119.8
Per share - diluted ($) 0.55 0.41 6.18 1.16
Weighted average number of shares outstanding ('000s) 92,218 99,209 94,470 101,016
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.

THIRD-QUARTER RESULTS

Total revenue from continuing operations reached $975.5 million, down 3% from last year. Net of fuel surcharge, revenue from continuing operations declined 2% to $897.4 million. This decrease reflects lower business volume in the LTL and TL segments, partially offset by acquisitions completed in the previous twelve months and higher volume in the P&C segment.

Operating income from continuing operations totalled $72.4 million, compared with $72.8 million last year. As a percentage of revenue before fuel surcharge, operating income stood at 8.1% of revenue in the third quarter of 2016, versus 8.0% a year ago. The improvement in operating income as a percentage of revenue reflects solid margin gains in the P&C and LTL segments, partially offset by lower TL margins resulting from difficult market conditions.

Net income from continuing operations reached $51.1 million, or $0.54 per diluted share, versus $31.9 million, or $0.32 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 $56.4 million, or $0.60 per diluted share, compared with $48.6 million last year, or $0.48 per diluted share. After taking into account net income from discontinued operations, net income amounted to $51.5 million, or $0.55 per diluted share, versus $41.6 million last year, or $0.41 per diluted share.

NINE-MONTH RESULTS

For the first nine months of 2016, total revenue from continuing operations reached $2.9 billion, versus $3.0 billion in the first nine months of 2015. Net of fuel surcharge, revenue from continuing operations held steady at $2.7 billion. Operating income from continuing operations amounted to $186.1 million, or 7.0% of revenue before fuel surcharge, compared with $210.0 million last year, or 7.8% of revenue before fuel surcharge.

Net income from continuing operations was $110.7 million, or $1.15 per diluted share, versus $105.1 million, or $1.02 per diluted share, a year ago. Adjusted net income from continuing operations stood at $142.8 million, or $1.49 per diluted share, compared with $142.7 million last year, or $1.39 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 $594.2 million, or $6.18 per diluted share, compared with $119.8 million last year, or $1.16 per diluted share.

SEGMENTED RESULTS FROM CONTINUING OPERATIONS

(in millions of dollars) Quarters ended
Sept. 30
Nine months ended
Sept. 30
2016 2015 2016 2015
$ $ $ $
Revenue*
Package and Courier 328.4 318.2 971.1 909.7
Less-Than-Truckload 181.1 192.1 537.5 573.5
Truckload 343.3 362.0 1,031.3 1,070.5
Logistics 58.1 58.9 171.0 190.0
Eliminations (13.5 ) (17.9 ) (43.0 ) (51.6 )
Total 897.4 913.2 2,668.0 2,692.1
$ %
of Rev.
*
$ %
of Rev.
*
$ %
of Rev.
*
$ %
of Rev.
*
Operating Income (Loss)
Package and Courier 33.6 10.2 % 22.4 7.0 % 83.3 8.6 % 63.7 7.0 %
Less-Than-Truckload 15.3 8.5 % 12.2 6.3 % 33.2 6.2 % 35.0 6.1 %
Truckload 24.9 7.2 % 37.3 10.3 % 77.3 7.5 % 104.0 9.7 %
Logistics 6.7 11.5 % 6.0 10.1 % 16.3 9.5 % 22.6 11.9 %
Corporate (8.0 ) (5.1 ) (23.9 ) (15.3 )
Total 72.4 8.1 % 72.8 8.0 % 186.1 7.0 % 210.0 7.8 %
Note: due to rounding, totals may differ slightly from the sum.
* Revenue before fuel surcharge

FREE CASH FLOW AND FINANCIAL POSITION

During the third quarter, TransForce generated free cash flow from continuing operations of $81.3 million, or $0.88 per share. The Company mainly used this free cash flow to return funds to shareholders through the repurchase of 1.6 million common shares for a consideration of $41.8 million and the payment of dividends amounting to $15.8 million.

In the first nine months of 2016, TransForce repurchased 6.4 million shares under its normal course and substantial issuer bid programs for an aggregate consideration of $150.1 million. On September 28, 2016, the Company renewed its normal course issuer bid program under which it can repurchase up to 6.0 million common shares until September 29, 2017.

QUARTERLY DIVIDEND INCREASED TO $0.19 PER SHARE

The Board of Directors of TransForce has approved a 12% dividend increase over its previous quarterly dividend of $0.17 per share. This increase is in keeping with TransForce's stated dividend policy and reflects the Company's ability to generate a strong free cash flow. The new quarterly dividend of $0.19 per share will be effective as of the next regular payment.

OUTLOOK

"We expect market conditions to remain fragile due to weak manufacturing activity across North America and softness in Canada where the economy remains broadly affected by low resource prices. Under such constraints, TransForce's decentralized and diversified business model is a key advantage, as we can rapidly adapt to evolving market conditions and capture high-return opportunities that may arise. Our focus remains on growing asset-light activities, such as e-commerce as well as intermodal and brokerage, which produce superior returns and generate a solid cash flow. We will continue to use our free cash flow to repurchase shares and reimburse debt, while remaining on the lookout to deploy capital in executing our selective acquisition strategy. TransForce remains firmly committed to enhancing shareholder value and our actions will continue to reflect this commitment," concluded Mr. Bédard.

CONFERENCE CALL

TransForce will hold a conference call for analysts and portfolio managers on Friday, October 21, 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, November 4, 2016, by dialling 1-800-585-8367 or 416-621-4642 and entering passcode 65717267.

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
Sept. 30
Nine months ended
Sept. 30
(unaudited, in thousands of dollars, except per share data) 2016 2015 2016 2015
Net income 51,503 41,630 594,240 119,791
Amortization of intangible assets related to business acquisitions, net of tax 7,701 7,192 23,510 21,134
Net change in fair value of derivatives, net of tax (2,790 ) 8,649 5,614 13,426
Net foreign exchange loss (gain), net of tax 230 (1,178 ) 2,430 575
Tax on multi-jurisdiction distributions 201 2,012 584 2,435
Net income from discontinued operations (434 ) (9,727 ) (483,568 ) (14,664 )
Adjusted net income from continuing operations 56,411 48,578 142,810 142,697
Adjusted earnings per share from continuing operations - basic 0.61 0.49 1.51 1.41
Adjusted earnings per share from continuing operations - diluted 0.60 0.48 1.49 1.39
Free cash flow from continuing operations Quarters ended
Sept. 30
Nine months ended
Sept. 30
(unaudited, in thousands of dollars, except per share data) 2016 2015 2016 2015
Net cash from operating activities 88,302 86,905 228,093 222,058
Additions to property and equipment (19,863 ) (42,263 ) (79,543 ) (128,685 )
Proceeds from sale of property and equipment 12,902 11,793 41,752 51,830
Proceeds from sale of assets held for sale - - - 20,553
Free cash flow from continuing operations 81,341 56,435 190,302 165,756
Free cash flow from continuing operations per share1 0.88 0.57 2.01 1.64
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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