TFII Q2 2019 Earnings Call
Operator: Good morning, ladies and gentlemen, thank you for standing by. Welcome to TFI International Second Quarter 2019 Results 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 call 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 Friday, July 26, 2019. I will now turn the conference call over to Alain Bedard, Chairman, President and CEO. Please go ahead.
Alain Bedard: Well, thank you, operator and thank you everyone, for joining us this morning. So yesterday after the close of trading, we released our second quarter results. And if you need a copy of the release, please visit our Website. So we continue to have a record year due to our steadfast commitment to executing on a on the fundamentals of the business regardless of the economic cycle. This remains the case at CFI international despite the recently declining freight trends. This focus of the fundamentals allow us to drive strong and consistent free cash flow and earnings per share that we know our shareholders appreciate and that allows us the flexibility to optimize our approach to the business. As a reminder of what this sharp focus entails, during the second quarter, our team constantly drove operating efficiencies we pursue an asset led business model. We maintain our strong balance sheet and we sought accretive business acquisition in a highly disciplined manner, completing three during the quarter. I assure you this focus will not change giving our aim of generating not just growth, but profitable growth all in the interest of creating and unlocking shareholder value, and whenever possible returning excess capital to our shareholders. Taking a look at our second quarter results, our overall revenue grew 2% year-over-year to $1.34 billion the highest quarterly revenue in our company's history. More important to us, given our focus on profitability, not just the top line growth, operating income from continuing operations was up 21% to $149 million and our adjusted EPS from continuing operation on a diluted bases was up 19% to $1.18. We had two largely offsetting onetime items in this quarter. First, we recognize a gain on acquisition of 11 million related to the BeavEx transaction in April that you'll see in the intangible items. Second, we took a $12 million legal charge net of tax recovery related to an accident in 2012 in our legacy rig moving business that you'll see in discontinued operation this quarter. Our strong operating results this quarter stemmed from the continued growth and profitability of our business. Let's have a look at each segment now. Our P&C represents 13% of total segment revenue and revenue before fuel surcharge was flat a $159 million. Operating income held constant at $30 million and the operating margin was 18.9 million versus 19 million in the corresponding period the year before. This stable performance came despite the general slowing in the freight environment, which we believe reflects our commitment to deploying cutting edge technology, optimizing the business mix an asset utilization and leveraging our strong network to capitalize on e-commerce growth opportunities. LTL represents 19% of total segment revenue and generated before revenue before fuel surcharge of $219 million relative to $239 million the prior year. Most importantly, our operating income climbed significantly to $30 million up 22% and our operating margin jumped 340 basis points to 13.8%. This strong performance reflects a 14.6% increase in our revenue per hundred weight excluding fuel surcharge as we continue to focus on the quality of our freight. Our truckload segment represents 29% of total revenue and generated revenue before fuel surcharge of $570 million up a solid 9% over the prior year period. Truck load operating income expense significantly up 21% to $67 million as our operating margin increased 120 basis points to 11.8%. Our adjusted operating ratio were 87.1 for the Canadian truck load, 87 for the specialized trucks load and 90.2 for our U.S. truck load. The U.S. truck load figure represents a significant improvement on 430 basis points compared to our year earlier performance. Logistics and Last Mile, represents 19% of total revenue and generated revenue before fuel surcharge of $245 million relative to $247 in the prior year second quarter. Our operating income benefited from a onetime gain to the BeavEx acquisition was $29 million or $18 million net of this gain. Our Canadian Last Mile operation led by Kal Atwal overtime produce a significant significantly higher margin than in the U.S. And we're pleased to have announced earlier this month that Kal will now be responsible for our U.S. Last Mile operation in addition to Canada. Now let's turn to our capital allocation. We've invested $78 million in business acquisitions during the quarter, and we returned $85 million to our shareholders, including $20 million in dividends and $65 million of share buybacks. As of now, we've executed on the entire buyback authorization for the six million shares that was first granted in September of last year. Earlier this week, our board approved management's request to increase the maximum number of common shares available for repurchase on the recurrent NCIB by 1 million shares, and we have approval from the Toronto Stock Exchange. Going forward, our capital allocation plan remains consistent as we intend to buy back shares and extend our track record of identifying attractive acquisition opportunity executing on them in a highly disciplined manner. In terms of our full year outlook, we're pleased to increase our guidance for full year adjusted and diluted EPS from continuing operation to $3.90 to $4 up from previously stated range of $3.80 to $3.90. So with that, operator I would be pleased to take investors question. If you could please open the lines.
Operator: Thank you. [Operator Instructions] Your first question comes from Jason Seidl with Cowen. Your line is open.
Jason Seidl: Thank you operator. Good morning Alain. Wanted to focus a little bit on your trucking segment in the U.S. Clearly, an excellent job you guys in an extremely tough environment when we look at some of the other results. Can you go over some of the aspects of the quarter and 30 basis point improvements and what really drove that?
Alain Bedard: Well as we said Jason. I mean we have a fantastic team now running our U.S. truckload operation under the leadership of Greg Orr. And like all the discussion we're having with Greg it is always been turning around. We've got to be lean and mean and as we always say the Tiger is always the last one to survive in the jungle. And we know that the freight environment in 2019 is not the same environment as it was in 2018. And that being said, we've also said that with Greg and his team said, guys we've got to work on the costs, because this is something that we can grow, we can control. We cannot control the market, so market you got up and down and all that, but if you are lean and mean and you control your costs, and you're doing a better job on that, I mean you would bring the results like the other guys are doing now. So what have we've been working on is the same story is let's get the miles to the driver. Let's get quality miles to our driver. Let's make sure that we use our -- the asset to the utmost limit that we can use them, the trucks and the trailers. Let's make sure that we don't we don't have equipment sitting at the fence like it used to be the situation a few years ago. Let's work on our fuel economy on our trucks. Let's -- let's make sure that maintenance cost is in line. And if I look at history, and I could say today that our CFI team on the maintenance cost is as good as our Canadian operation now. We still have some works to do at TCA. But basically, the MPG, the usage of the equipment, the miles and all that, these are all things that we've been working on okay with Greg. Also, we are investing in some technologies because right now PCA, a financial system is not the same as CFI. So by the end of this year -- our TCA management team will be running in the same Lawson financial software that our CFI team. So now Greg is easier for him to oversee both operations. We're also looking at our TMS [ph] to run because we still run a very old platform both TCE and CFI. So this is going to be a major investment of ours into 2020. Once we're done with Lawson, we're going to be working on the new TMS, that's the CFI, TCA, TMS For the U.S. So the focus there has always been guys, okay let's take advantage of the market. Market is up. Okay fine, but let's never forget about cost. We got to be very cost conscious, efficient, improve operation. And this is what we've been done. I mean, if you look at that now, we’re the combined operation is about ninety point something, ninety point two I think. So it is quite an accomplishment if you just compared to a year ago, and if you compare to two years ago, I mean this is just magic. I mean, how is that possible? So our team, we’re very proud of our team now in the U.S. are running our truckload operation, very proud. And we are proud of our Canadian team, because if you look at the special TTL and our van division in Canada, we're running in 87 or in, and also a difficult environment there.
Jason Seidl: No, no there was a clearly good job in the quarter by you guys. How should we think about that or are sequentially in that truckload division moving forward. I mean are there still costs to take out, when we look at the back half of this year or is it something I think it's a difficult market if we can maintain this, that will be great?
Alain Bedard: Well the way we see it, Jason is that our plan remains basically the same. We see the rest of the year being soft okay in the U.S. and the same in Canada. I mean, the freight environment is still going to be soft in our mind. Hopefully, I'm wrong and is going to be stronger, but so this is why our guys like Greg Orr and Steve Brookshaw and Kent [Indiscernible], those guys are really focused on let's make our operation even more efficient that they are today. Now, like I said earlier, we cannot control the market, but what we can't control is our cost. So our focus is going to be guys, let's get costs even better than what we have today and it's a non-going always try to do better. Now, based on our plan and based on our guidance, okay we're improving our guidance on an EPS by $0.10 only. Okay, which is not a lot, because we're conservative. But in this plan, I mean, it's based on the fact that our truck load will perform okay, about the same way as they're performing now. So hopefully, I mean the market does not create too much of an issue for us.
Jason Seidl: I'm not going to work for you here. Next question is going to jump to the LTL before I turn over to somebody else. Obviously you said, you improve the freight quality a lot, but I know you guys before it's really focused on cost before streamlining that network taking some good out. We wanted to know how much of it was freight cost. How much of it was the cost turn out. And then also with your freight quality, how much customer turnover did you have and what is your mix now versus before?
Alain Bedard: Yes that's a very good question, Jason. So in terms of our focus on quality of freight, our philosophy over the last two years has changed tremendously because Canada is a big country and you need density because serving a customer with LPL cost a lot of money versus a P&C shipment. So you've got to make sure that you've got some density. So what we've been doing over the last two or three years is that our, our network has been focused on dense areas of Canada, which we've accomplished. Also at the same time, you know we've introduced tools like freight snap and all these tools to make sure that there's no cheaters in our system, because all the pricing most of all the pricing is done on a per week basis and you know somebody tells you it's 1500 then you do -- you're in a rush. £1500 and it's actually £2000. So now we're doing a better job on that, making sure that all the sensorial, all the different stuff is invoiced to the customer like it should be. And also, what we've said to our guys is that you know you cannot be in the business of hauling minimums at let's say 50 bucks for a pallet between let's say Toronto and Montreal. This is not for us. I mean, this is a this is a loser. So we clean all these shipments that don't fit the network, that don't fit the philosophy of the company. So we're not in the business of practicing delivery, us we're in the business of making money, serving customers on behalf of our shareholders. That that's the vision of TFI. So this is the cleanup. So if you look at our revenue, our revenue is down okay for two reasons. One is, some freight that doesn't fit the network or doesn't fit the philosophy of the company and also the fact that LTL in Canada is shrinking because my customer of LTL are being affected by the e-commerce. The brick and mortar guys, the mall guys are being affected, so the revenue has to come down in the LTL. So this is why we've always been active on the M&A side. So we should be announcing a small transaction in this segment very soon in Canada. At the same time, our focus has been on the intermodal, because this is a cheaper solution for shipping across Canada from east to west. And this is what we've build with Vitran, with NFF and with Clark over the last few years. And this is really an asset light operation for us because line all has been done by the rail guys and most of our P&D operation I would say, 99% is done through a known operator or an agent. So again, this is the focus of listen, let's propose to our customer a cheaper option, if they want, which is the intermodal. And if the guys want to be over the road, well they’ve got to pay a fair price, because as we need the fair return. Those customers that earn Jason, not so much. I mean, yes for sure, I mean we have a huge U.S. shipper that went on an RFP and the guy says, we're not making a lot of money. We need a chief carrier, we’ll say, listen, I mean thanks, but no thanks. I mean, deal with somebody else and then let's see what happens, because some customer that are left okay because of race issue, some of them are coming back because they need the service.
Jason Seidl: Alain, that’s great color. I appreciate the time as always.
Alain Bedard: Pleasure, Jason. Take care.
Operator: Our next question comes from the line of Konark Gupta with Scotiabank. Your line is open.
Konark Gupta: Thanks and good morning everyone.
Alain Bedard: Good morning.
Konark Gupta: Morning, Alain. I just have a few questions here, one, so you have beaten expectations on the EPS Alain in the first half and the industry is calling out for a normal peak season in the second half. Obviously, it looks like you're obviously not done on the margin improvement. So any thoughts on the room for further upside in your revised guidance, and what would be the key puts and takes and that could influence your guidance.
Alain Bedard: Well you see that's a very good question, because you know us we're very conservative. So, yes if I listen to our model, okay we could say maybe 420 or something like that. But there's so many things that are uncertain, okay right now in the U.S. For example, this China thing there with the trade and this. So there's a lot of things that everything looks good, when you look at it. But then, the free environment in the U.S. is still soft. So us, we're very careful because we don't control the market. We don't control the activity on the market. So this is why we're careful, okay with our forecast and we say listen, yeah sure, I mean, 398 to 4 bucks is doable. Can we do better than that? Probably we'll see. But us, we like you know to understate the fact and over deliver. I don't remember exactly the right phrase, but under promise and over deliver that’s the phrase that I was looking for. And so we're not in the business to create Mirage and we're saying okay this is what we think that is attainable, doable. Hopefully, we do better than that.
Konark Gupta: Yes, that makes sense obviously and clearly we have seen that. So please continue to do that. Second, on the margin. So they were quite strong across the board and especially LTL. So looks like the pricing was very, very good there. So my question is really, is first the pricing that you have seen in Q2 on LTL side, especially is that sustainable in the second half of this year? And are you intentionally letting volumes go elsewhere if pricing does not make sense?
Alain Bedard: Absolutely. You're absolutely, right. I mean, the reason that our pricing has improved so much is because we let go of business that didn't make any sense, that low margin. When I say low margin is, when we talk to our customer and at the end of the day, our bottom line is 3%. We say, listen Mr. Customer, with these rates our profit is 3%. I mean, I cannot invest a truck or trailer or an employee to service you for 3% because I would be stupid to do that because you know the best thing would be to buy, let's say Scotiabank’s stock and I would get more than 3% in dividend. Right?
Konark Gupta: Yes. And that one makes sense.
Alain Bedard: So that's our thinking. That's our thinking. So we say to -- and you know things changed. There's always an evolution in the business. So for instance if the shippers average weight two years ago was eleven hundred pounds per ship, and now he's down to 850 okay, because his business has slowed. Well for me, I'm getting less money and my cost is as much or maybe even more than it was like two years ago. So we have to address that. So we're talking to some customers and we say hey guys, we need to improve the rates or have somebody else do the work. And if these guys are in business just to break even, okay good for you. But us, we're going to do something else.
Konark Gupta: Yes. That make sense, that's great, Alain. Then lasting TL. So your U.S. TL business obviously showed -- continue to show improvement on OR SIDE, which you are kind of expecting I guess. But what cost weakness in Canada in specialized in the second quarter? And then would you expect the U.S. to hit the mid-80% OR at some point this year or maybe next year?
Alain Bedard: Okay, so let's talk to Canada first. Well, what has affected us really badly in Canada is our Flatbed division, okay. So our flatbed division in Ontario, mostly Ontario, is really suffering right now because of while we have first the story of the steel tariff. Okay, so steel tariffs created the mess in our Flatbed, because we're the largest owner of steel in Ontario Flatbed. So, that was not good news for us. Now excuse me. Those tariffs have been removed now. But you can't turn a big ship on the time, so it will take months and months before we go back to normal. So probably, we're going to be still suffering in Q2, 3 and probably in Q4. So our Flatbed has been affected badly. So this is one of the reason why we're running just an 87 OR which is the same as our Van division. Normally, we should be running in Q2 an 83 to an 85 OR in our specialty truckload. So that was part of the business that was affected badly. Also, we've invested in a great company in the U.S. which is highly seasonal holic. Okay. Is really highly seasonal, so it's a beach hauler. So these guys are not really busy. We're busy, but not that much busy, but it becomes really crazy busy. Okay. Starting let’s say August, the end of August into early in 2020 like January and February. So this again, is something that's not showing up. That should improve. That should improve in 3 and 4, but the Flatbed has been a little bit of a rock in our shoe in Canada, because of the steel tariff, because the rest of the business, our tank division is doing very well. Our steel, stainless steel division is doing very well. Our ball division is doing well. So it's really the Flatbed has affected us. Now in terms of where do we see Q3 and Q4? On the U.S. side, I mean, I've always said over an average of 10 years you have to be running a 90 OR because you're going to have some great years at 85, and you're going to have some more difficult years at 93 or maybe 94. I think that right now, we're in the middle of this not great, not bad, so it’s average. So for me, if we can be steady at around 90 or maybe 88 to 90 for the rest of the year, I would be a very happy camper.
Konark Gupta: Okay, that's great color Alain. Thanks so much, and congrats on great results.
Alain Bedard: Thank you.
Operator: Our next question comes from the [Indiscernible] with BMO. Your line is open.
Unidentified Analyst: Okay. Thank you. Good morning Alain.
Alain Bedard: Good morning.
Unidentified Analyst: So first question. Can you kind of talk a little bit about the dynamic in the last mile in the U.S. What do you think the issues are, and how do you go about fixing that?
Alain Bedard: Yes absolutely. So if you look at the way we run Canada, I mean, there's a -- there's a huge difference into the EBIT of our Canadian operation and the EBIT of our U.S. operation. There's many reasons for that, reason number one, is that the U.S. market we have way more competition from companies that are not doing well. So BeavEx is one of them. Okay. So we took on BeavEx just a few weeks ago. East Connection was also one of them, East Connection has been closed two, three months ago. There's another one that will probably fold within the next month or two. So the market environment in the U.S. there's a lot of companies that are owned by people that probably don't like to make money or don't know how to make money in the sector. So that's reason number one, reason number two, and this is why we ask Kal, our Canadian guy to help Scott, which is you know a great Scott leverage runs our U.S. operation, and with the acquisition of BeavEx which is you know BeavEx was not making any money. So we said, Kal could you help our friend Scott there? Okay because the market is starting to clean up. I mean it's going to be a little bit better, but we have to shed costs. We have to improve our technology. We have to do a lot of stuff, so let's build a stronger team with the Canadian supporting and helping the U.S. team and vice versa. So in my mind, okay, we have to improve the U.S. operations by at least four to five hundred basis point, which means, bottom line $20 billion to $30 billion improvement over the next two years. And this is with the help of the market getting improved in terms of competitors that don't like to make money or don't know how to make money. And I think that the crazies there are in charge of the asylum. I mean, nobody is running the show. And the fact also that we us have to work on our costs and be more efficient. So as an example, our real estate costs in the U.S. is growing at about 5% to 6% of revenue. In Canada, we're running at 2% to 3%. So you cannot run the last mile operation at 5% to 6%. Now as we know, cost of industrial space is just going through the roof with increases of 20% to 30% to 40% more because the demand is there. So us, we have to operate in a more efficient way. So this is what the team effort is going to be to reduce our operating costs and at the same time, hopefully that some competitors smarten up and start building a team so that they are focused on making money just not just growing volume, because you know we could grow the company 20% in the U.S. easily, but at 2%. And us, we're not in the business of 2%.
Unidentified Analyst: Okay. That looks like there is a plan to go after this, so I'm guessing the benefit of all these action you're taking are probably more the 2020 story?
Alain Bedard: Well it’s now, okay but it’s going to take us atleast a year to 18 months to bring the U.S. operation to at least closer to Canada. I mean, Canada it's got. It's always the same story, we try to always do better. Okay. But let's say, Canada we're running at 90% efficiency, U.S. we're running at 50% efficiency. So we got a lot of work to do in the U.S. at the same time that we have to digest BeavEx.
Unidentified Analyst: Okay m my second question is on the pricing. Can you kind of talk a little bit about how the pricing environment is in truckload, conventional truckload drive on in the U.S. and Canada and how it's kind of played out in the last few months and how you see that in the back half of the year?
Alain Bedard: Pricing is steady. I mean, it's got a little bit of pressure, but globally it's about steady. The problem we have is that the freight environment is soft. Okay so for sure, guys with lots of trucks and no freight they get nervous and they call the world to get freight so. So, for now, it's still okay, because us what we're trying to do is to fill okay the demand, the empty trucks that we have every morning, okay with customers that we already deal with. So we're not on the Web trying to find loads in here and there. So that's our focus right now. And we believe that this market environment is probably now some guys are saying it should improve Q3, Q4 our plan obviously is that there's no improvement. Hopefully there is. So pricing environment in Canada is okay. It's not great, but it's okay. We feel a little bit of softness in on the East Coast like Ontario, Quebec we have a situation in Canada with what they call the driver Inc syndrome where we have the fair competition from some companies in Canada. So that creates a little bit of pressure on race but besides that, we feel good. We have our costs really under control, we’re still working on them on the Canadian side for sure where we have some opportunities with our specialty truckload, because we took on a lot of M&A in our special TTL boarding in Quebec and in Ontario. So for sure when we're buying a company, those guys are not running on any seven OR. Okay, so if they're good, they're running in 92 OR 93 OR, some of them are running a ninety five OR. So this is why our guys like Steve Brookshaw seem are really busy in shedding cost in all the M&A that we've done over the last 12 to 18 months. So yes, we could see some improvement in our cost basis, in our specialty truckload within the next six to twelve months. Right.
Unidentified Analyst: Okay, great. Thanks. Alain.
Alain Bedard: Pleasure.
Operator: Our next question comes from the line of Walter Spracklin with RBC Capital Markets. Your line is open.
Walter Spracklin: Thanks very much. Good morning Alain.
Alain Bedard: Good morning, Walter.
Walter Spracklin: So focusing in on your outlook, you've changed your pole quite a bit here, I think you're noting, you mentioned a mixed-tech economy, the potential for more challenging trucking conditions. I'm wondering, just looking at the volume, I know a lot of the volume that went away, you sent away on purpose and get getting rid of bad volume is always a good thing. How much of the volume declined that you saw it across the divisions was actually economically driven that is -- was not demarketed volume it was, it was just lower same-store volume because of a weaker demand environment among your good customers?
Alain Bedard: Well let's talk about P&C. So what we're facing now in the P&C is our customer in the mall, in the brick and mortars are slowing down, right. And our e-commerce customer is growing up. So you look at my review, my review is flat. But I'm trading mall for e-commerce right now. This is what's happening, okay. My LTL, okay what we've done is like I said earlier, we shared the business of all these guys that could not afford a carrier that wants to make money. So, so this has been the focus. And you know we’re $12 million less in revenue in the quarter. A lot of that had to come from the Kingsway TSC overland combination a year ago. Okay, so that’s still as a comparison that you know we're comparing that and the NFF acquisition that we did about a year and a half ago okay with where we bought a company at 80 million and today the – and losing 80 million losing eight to 10 and today's it a 50 million making five to six. You know so we did this is ongoing. And at the same time like I said earlier, the LTL because of the e-commerce my customers are suffering. So to have a 4%, 3%, 4% negative growth in the LTL to me it seems like normal because business is changing. On the truckload side, we don't share really customers there. We did that in the U.S. until probably like late 17, early 18, but right now in the U.S. I mean, it's just business as usual. We're happy with the customers, we have, we are trying to improve our mix of customers, but there's no real major change in our customer base. And the same thing with our Canadian truckload, I mean, we're -- no we've got some good customer. The only area where we see a little bit of change is in our special TTL, where we have an issue in the cement hauling business with some driver ink there. You this, this phenomenon that we have mostly in Ontario that is really unfair. We have that, but basically the rest of our steel or lumber or chemical or food grade business, it's really steady. So it's it's really trying to improve our cost on the day to day, because if you look at my improvement in my LTL. This is not the market, this is market rates did not improve there 13%, 14%. No, it's just that we got rid of all these guys that are cheap, that wants you to be a 2% guy. We said thanks, but call somebody else, because us we manage our capital, and we can invest capital for a guy that wants us to be a 2% guy.
Walter Spracklin: Makes sense. And you continue to be a good free cash flow grower. Do you have an updated guidance on that for 2019 in terms of your free cash flow?
Alain Bedard: Yeah, yeah. So it's going to be. While this year we have – we’re buying back a terminal in Toronto. That’s going to cost me 38 million. Okay. The wide-trend terminal in Toronto. We're also investing 10 million, a little bit more than $10 million to $12 million exceptionally in Calgary for our Canpar Loomis hub in Calgary, that's going to open up late in the year. But that being said, and that being in our free cash flow for this year, the net will be about 400 million. After paying for those $50 million of special onetime major investment. Now, in 2020 we're building also in Calgary a new intermodal hub for our Vitran, Clarke, Quik X, NFF operation in Calgary. So that's going to be we own the land but the building is going to cost us between $15 million to $20 million. So this is going to be 2020.
Walter Spracklin: So when we look at your net CapEx for 2020, we should at least see it hold in given some of the 1 times you did this year you'll do a few more one times next year.
Alain Bedard: Yes.
Walter Spracklin: So not a big change in your CapEx for next year is what you're saying?
Alain Bedard: No. No, no…
Walter Spracklin: Okay.
Alain Bedard: So this year the one time, because of the building in Toronto okay and the equipment in Calgary is about $50 million. Next year, we're buying back another terminal in Montreal and we're building a new one in Calgary, which is going to cost us about $50 million. So it’s $50 million, this year $50 million next year which is exceptional, which is building. But that being said, even with that okay, investing the cash we're still left with about $400 million dollars of free cash flow after paying for those $50 million dollars investments.
Walter Spracklin: Right. Right. And when you look at your free cash flow then after that CapEx let's say after dividends are paid, you've got a dollar of free cash flow left. What are you earmarking in terms of buyback versus acquisitions? How would you -- how would you expect to divide up that dollar after you know whether it's through more dividend growth, is it what kind of mixture of that dividend growth buyback and acquisitions are you targeting?
Alain Bedard: Well first of all I think that we will change our dividend for 2020. So right now, we're at $0.24 a quarter. I think my recommendation to the board will be in October around $0.27, $0.03 more. Okay because our policy has always been to get at least 20% free cash flow back to our shareholders in terms of dividend. Now, after the dividend, okay our philosophy has been okay there’s no big whale. Okay, there’s nothing major happening in 2019. There may be something more of size in 2020. So this is why we've asked the board to approve that million shares, which we're going to do right now until the end of September. And we've also asked for $7 million for 2019 to 2020. And so that will come within the next few weeks as soon as the TSX approve it and all that. So a real -- unless there is a big big whale for us in 2020, which we're working on what you never know that could be 21, unless we have that for sure the focus is going to be reduce the share count. I mean, we love to buy our stock at more than 10% free cash flow. We love that. So this is what we're doing now. We love to do that. So for sure, if things remain the same and there's no big whale in 2020, we're going to buy back another 7 million shares to bring the share count down to 75 million shares. And then, okay, we'll for sure do probably like $200 million to $225 million of small tuck in. We've got so many opportunities for growth, okay, based on the recommendation of our great operations team that we could easily spend next year at least $200 million on good tuck in M&A.
Walter Spracklin: Okay, sounds great. Thank you very much, Alain as always.
Alain Bedard: It’s a pleasure, Walter. Take care.
Operator: And our next question comes from the line of Cameron Doerksen with National Bank. Your line is open.
Cameron Doerksen: Yes thanks very much. Good morning. Maybe just follow up on the M&A you just discussed the potential for tuck-in? Given that maybe the freight environment North America has gotten a little softer here. Are you seeing some, like it's more favorable valuations in the things that are looking at?
Alain Bedard: Absolutely, Cameron. Yes you’re absolutely right. Because there is two things that helps us. First of all the valuation, let’s say the four or five times or whatever it is, okay, I should come down, okay for sure. And your valuation in fact is on an EBITDA that’s lower than let’s say 2018. So it’s a double whammy for us a buyer of companies. So it helps us, big times. So this is why like I was saying to Walter for sure, we are going to be investing atleast $200 million on M&A in 2020. You should see us between now and the end of the year with maybe just a few deals, okay because we did above that this year and we have to digest, okay what we’ve won. So, probably three and four this year is going to be much quieter than one and two, but we’re getting ready for a good M&A year for 2020, excuse me of about $200 and maybe a big whale that’s going to change you know like a CFI change the company in 2016 late 2017, maybe. I mean we're working on that. But you know, you got to be patient, and you've got to be focused on what you’re trying to do.
Cameron Doerksen: Right, absolutely. So maybe second question just on the P&C segment, the margins that are continued to be very good. But I'm wondering, if you could just talk a little bit about the competitions. If I look at one of your big competitors there Puro later, they made a big announcement not too long ago about significant investment in their network including an expansion of capacity, I mean, I'm just wondering, what that means do you think for competitive market ? And also what is the mean for your requirement to invest more in that business?
Alain Bedard: Yes. You see Cameron the manager that you talked about, I mean they made a choice. Okay, they made a choice that they're piggyback on the largest e-tailer in North America. Us, we made the choice of not investing for those guys, like FedEx. Okay FedEx said, we're not going to invest for those guys. We're seeing the same thing. I mean, we're servicing that guy in small market like Victoria, Regina [ph] and all that, but we're not investing for that guy for the let's say Toronto or Montreal or Vancouver. So us, we're investing for other customers. So this is why we're investing in Calgary. Okay, right now for our new hub for Canpar Loomis. 2020 we're going to be working on Edmonton because Edmonton has to be done after Calgary and well we've always started okay for Edmonton, because Edmonton has to be done after Calgary and we’ve already started for Toronto because we have to do Toronto in 2023. So while we are investing in customers, where you can make money. So if I have a guy that says to me I don't make money in my distribution, so I think that you should not. Or if the guy tells me well your margin is my opportunity, I don't really like that kind of statement. So I'm not going to work for you. So this is why us, we're way more conservative than the other guy and we're investing with the knowledge of we don't want a 50 year payback on the investment, it's a little bit long. So it's got to make sense. So if you think about Calgary, what we're doing is we have a payback of about three years on the Calgary, three, four years depending on who you listen to. Makes sense. Better technology, more efficient. Like Toronto it's going go to be the same thing because you know our JCC center is very close to capacity right now. So the first step is that we're going to do a move with one of our satellite and then we're going to do the JCC center Phase Two probably like 2022, 2023. So we are investing Cameron to answer your question, but in a smart way for a customer where we can get a fair return.
Cameron Doerksen: Note that absolutely makes sense. So that's all I had. Thanks very much.
Alain Bedard: Thank you Cameron.
Operator: Our next question comes from the line of Benoit Poirier with Desjardins. Your line is open.
Benoit Poirier: Hey, good morning Alain, congratulations for the good quarter.
Alain Bedard: Thank you, thank you Benoit.
Benoit Poirier: Just to come back on the M&A, I understand that you don’t expect a lot some modest M&A for the backhalf of the year, but just looking at big wealth, are there any particular segment where you believe a big wealth could be catch eventually in 2020, 2021?
Alain Bedard: Well, if we look at the last mile operation, okay we did our friend BeavEx which added about $100 million to our revenue in the U.S. There we're looking for sure to beef up our last mile operation. It's tough for us to do in Canada, but I think we could do more in the U.S. okay and we're working on that because we believe that the last mile operation that we have is the most efficient way to service e-commerce. Okay, we have a next day operation in Canada. Okay, that service e-commerce, but this is based on customer's demand and all of that. It's a great way to serve as the e-commerce, but is it the most lean and mean way. We don't think so. If the customer has some distribution center in the major cities, last mile is the way to go in our mind. Now that being said, so this is one of our focus in the U.S. One thing is for sure LTL like I said earlier is shrinking. You know every year because of the e-commerce, so that's also an area for us to keep an eye open. If we could catch something of size in that sector. Now on the specialty truckload side, we started slowly in the U.S. We bought two good companies [Indiscernible] very happy with what's going on there. As you know our mix in Canada between regular van and specialty is about 50/50, in the U.S. is about 90:10 so or 80:20. So we want closer to a 50:50 mix in the U.S. So that's also an area that we're really looking at. There are some good companies there that could be interesting for us. So we keep an eye on that. And the only P&C, it's tough for us to do something in Canada because there's not a lot that we could put our hands on because there's not much. I mean, if you exclude the big guys there's not a lot of guys left to do something on the M&A side. So this is why P&C is probably a little bit more difficult, but LTL last mile and special TTL is really where our focus is. And you know we're working on a few things. And like I said, earlier patience is the name of the game in our world of M&A.
Benoit Poirier: Okay. And LTL, would it be fair to say that it would be only Canada where you could maybe look at the LTL in the U.S. as well Alain?
Alain Bedard: Well like I said, you know for sure Canada. I mean, we're looking on the Canadian side because we're the largest player in the LTL. If a nice opportunity comes up in the U.S. absolutely we'll look at that. I mean it's we have a great partner. That's the way we service the U.S. today. But you know maybe one day you could know by the partner I don't know but it could be an opportunity on the U.S. side. Absolutely. I mean, we like the LTL world. Okay. In the U.S. it's a it's a market that is way more, how would I say it, less less players, more disciplined than the Canadian market.
Benoit Poirier: Okay, okay, very good.
Alain Bedard: But more discipline. I mean, the U.S. is more disciplined than the Canadian market, because there's less players here.
Benoit Poirier: Okay. And just on BeavEx, could you talk a little bit about the integration of BeavEx versus your initial expectations? How does it go on this side?
Alain Bedard: It's still early. Benoit, it’s still early. What the guys are saying is that right now we're addressing a lot of issues. Those guys didn't make any money, okay for two reasons. Reason number one is they had too many, too much real-estate, too many staff, too many of too many. So their costs went through the roof. Number one. Number two is as normal, when you have a weak management team. Yours have shitty rates with customers, so that's the other issue that we have to address slowly. We're in discussion with some customers that took advantage of BeavEx, because you know it's just normal. If the guy doesn't know what he's talking about then you can take advantage of the guy. I mean the shippers are smart. So we're working on that now as we speak. So this is why with Kal and the support of all the team there it's still early because we bought the company in just a few weeks ago but we're busy. We're busy fixing situation. And everybody knows in the U.S. that you know when we're running five to eight points behind the Canadian division there's something wrong. So there's something wrong because in Canada we don't have a BeavEx that is, that was not doing the right thing. In the U.S. we had BeavEx. We had velocity. We had this guy and this guy in the east connection and this and that. So, but we have to work better on the cost, but the integration of BeavEx to what I know so far is going well and is according to plan.
Benoit Poirier: Okay. And Alain, when we look at the overall valuation of your stock currently trading close to a five year low obviously valuation is much lower than it used to be. You've been disciplined in the past looking to make some potential divestiture. You've done it on the waste side. Do you see any opportunities right now to create value for shareholders or you prefer to do to grab some M&A opportunities given that the valuation is more attractive? How do you look at some potential divestiture given your current valuation?
Alain Bedard: Well there's two ways to answer that. Number one is, I'm happy okay, because it creates an opportunity for us to buy back our stock. And like I said earlier, we should probably reduce their share count by 8 million between now and the end of 2020, which is about 10% of our shares. Now, that being said, you're absolutely right in the sense that you know if people don't see the value of PFI then what you do is you buy back the stock or at the same time you could divest of an asset like the ways like you said that was sold for about eleven times EBITDA when the company was traded that maybe six or seven at the time. So for sure, if you look at the way these are being done. Okay. I will just see an example of when Dicom [ph] Canada was bought by GLS which is owned by Royal Mail. I mean, you look at this transaction and you see wow! And then you put the same valuation to one of CFI’s business and you say this doesn't make any sense. This doesn't make any sense. So yeah, it's something my job is to make sure that we allocate capital properly and then we're on plan and also when I see an asset like the waste and we may have some other assets within CFI that are so undervalued based on market evaluation today that yeah, maybe, maybe it's something that we're working on. I mean, time will tell.
Benoit Poirier: Okay, perfect. And just a quick one for me. You mentioned an update on the free cash. What about your CapEx Alain? Is it still 200 to 225 is kind of a good number for this year and next year?
Alain Bedard: Yes, absolutely.
Benoit Poirier: Okay. And would it be the same in 2020 Alain in terms of CapEx?
Alain Bedard: Well if there's no huge transaction. I mean it will be in the same ballpark. We don't anticipate to reduce our CapEx because some of the truckload guys in the U.S. are saying oh, we're going to reduce our CapEx. No, we're not reducing our CapEx. Okay, the only way we will reduce our CapEx is because you know the business does not warrant investing in a truck because the profitability of this account does not make any sense.
Benoit Poirier: Okay perfect. Thank you very much for the time, Alain.
Alain Bedard: Pleasure. Benoit.
Operator: Our next question comes from the line of Nav Malik with Industrial Alliance. Your line is open.
Nav Malik: Thank you. Good morning. So I just want to follow up on the capital allocation, and I know you're are being aggressive with the share buyback. But what about in terms of debt repayment? Is that what are your thoughts on paying down debt versus the share buyback?
Alain Bedard: Well you see our approach to leverage has always been the same. I mean, we like to play between two and two and a half. And right now, we're at about two and a quarter. So with all the buyback that we've done, I mean we buyback what about six million shares so far trailing twelve months. So we feel good about that. And as long as we believe between the two and a half and two, we feel really good. Now, maybe what can happen is and the same thing in the past. If there's a big whale and a transaction that could push the let's see the leverage to three or maybe three and a quarter, then, okay what we do is then we have to be careful with the buyback because then we have to you know spend more of our capital repaying our debt.
Nav Malik: Yeah, I mean, I guess, that's kind of my question in terms of the balance between share buybacks and debt. I mean, it certainly seems like you're being very aggressive on the share repurchases, but you know -- I just wondering why not allocate some more capital, some more of that free cash flow towards debt repayment rather than rather than share repurchasing?
Alain Bedard: While because the costs, you see my shares cost me a fortune right now in terms of the dividend and the yield versus very low interest rates. So that's why our decision is, let's focus more on buying back the share versus reducing the debt. We're working on something right now. That again is going to lower the costs of our debt. So we feel good. I mean if you go back in history, because this we always look at history and you go back into the 2008 major recession, our revenue went down 20% our EBITDA went down 20%. Our debt at the end of ‘08 was $800 million. Our debt at the end of 9 ‘09 was $675 if I remember. And we went through all this storm. Okay, so we feel very good. Now let's say that's the same thing happened now. So excluding IFRS thing there, PFI’s EBITDA would be what? Let's say $800 million, goes down 20% goes down to 650. Our debt is 1.7 today, so 650 times three. So our leverage would go up to very close to three. So and then, if there's a 20% drop in revenue, then there's a 20% drop in CapEx which is just normal, so your debt comes down. So we feel good. I mean, we do all this scenario now, because we’re not in the business of not knowing where we're going. I've done that for 40 years, so we have a vision. We can make mistakes. Yeah, but right now, when I look at the stock price at $38 dollars. I'm so happy of buying it back. I mean, it's you know we trade at less than 10 times earnings. The average, the normal average of 10 years between 15 and 17 for a high quality company. So to me, wow, and I've got some shareholders in U.S. that says, Alain, stay in Canada, don't come to the U.S. market because you know we're buying your stock and we're just laughing all the way to the bank. Don't, don't get into the New York Stock Exchange. Don't do that. Stay, stay in Toronto. And we're buying the stock and we make we're just laughing.
Nav Malik: Yes, fair enough. Okay, I just wanted to move to the the truckload, the U.S. truckload side, so very impressive results in the quarter certainly in terms of their -- I mean in the operating ratio, and I'm just wondering if you can comment. I mean, some of the U.S. truckload carriers were talking about an oversupply of capacity potentially correcting itself or potentially correcting by year end. Are you of the same view? Like are you seeing maybe you could comment on how you're seeing that market unfold?
Alain Bedard: So if you look at the Class 8 trucks that are being sold and the cancellation order and all that, this is the stupidity of our industry. It is in the good times like 2018, on the right side, we buy more trucks, we add capacity and then we end up with the 2019 market. Okay. Being soft for a few reasons; one, because of the Chinese tariff, there was pre buying in Q3 and Q4 of last year. So if you pre buy Q3 and Q4 of 2018, then you've got too much inventory, while you've got lots of inventory in Q1 and Q2. So that affects the trucker’s soft environment, some small truckers panic. Okay, DC whew. I’ve got new trucks coming, and it's just it's the stupidity. Now what the truckload guys in the U.S. are saying is that this should resolve, okay, early into next year or maybe late into this year. I'm not a magician. I cannot say that I don't know. The only thing I can say is my team under Greg Orr, those guys are focused on cost and me coming [Indiscernible] the AA team in terms of being lean and mean, and this is the focus. And if those guys are right, that the market will start to improve late in 2019. We'll take advantage of that, but we're not hoping for that. Our focus on us is let's work on something that we control which is us, our cost. That's how we manage our business. But if these guys are right, and the markets start to tighten up and the rates trying to get better for sure I mean, we’ll adjust ourselves to the market.
Nav Malik: Okay. Great. Thanks very much for the color, Alain.
Alain Bedard: Pleasure, Nav.
Operator: Our next question comes from the line of Kevin Chang with CIBC. Your line is open.
Kevin Chang: Hey, good morning, Alain. Thanks for taking my question. Just one for me. You've talked a lot about growth through acquisitions here as a way to maybe offset some of the potential softness and that could be coming down the pipeline. I think back to the freight recession a few years ago, there was some difficulty in integrating some of the assets you had acquired there. You had to put in a little bit more capital to kind of get it to work and we're obviously seeing the benefits of that today. Just wondering, when you look at your due diligence process today given the outlooks little bit more uncertain, is there anything you're doing differently to make sure that the earnings that you're buying are stickier or that the assets you're buying are of the quality that you think that they should be so that there isn't some sort of unforeseen negative surprise what we start folding then. Has anything changed over the past few years post the freight recession we had back in 2015 and 2016?
Alain Bedard: You see, Kevin, when you do M&A there's always risk. You could due dil for two years, okay, and you save a 100% but you're never save a 100% because there's always something that may happen that was unforeseen, right? So what you have to look at is what's your average over 10 20 years of what your batting average, because nobody bats for thousand. So if you bat for 400 you're great, right? So if you look at TFI's history, when we bought CFI, sure, we were disappointed. We were disappointed in our due dil we use all kinds of people, they are pass with due dil. But there are some information in M&A the seller is always very cautious because you're competing with him which is customer information. So, if you look at the CFI acquisition, the big problem we have there, number one problem is we had about $60 million of freight that did not fit the network with terrible rates and it took us close to a year to get rid of that. And that's something that we could have done another three years of due dil and this is information that is never available, because you're buying and you're competing with the guy. He's not going to show you his customer list, right? So there's always things that may happen. But us we have an experienced team and I think that the proof is in the pudding. I mean we've done a lot of acquisition. And if you look at some roll up in the U.S., some are good, some are still looking good and some don't look too good. But if you look at CFI over 20 years we took this company from 100 million losing 10 in 1996 to 5.5 billion today and making what 400 something.
Kevin Chang: Right.
Alain Bedard: And this was done through smart M&A because this is my job. This is what I've done when I was with my previous employer and this is what we've done at TFI. But there's no certainty on M&A. You could do whatever you want. There may be some surprises. But I mean we got the 18, right? So our team are looking at that and say, hey, I think we're going to fix it. CFI was more difficult because we didn't have a lot of bench strength in the US. Now I could say that we have a hell of a team. We have a great team in our van division in the U.S. No question about that. So we could take on more. And on the Canadian side, we're second to none.
Kevin Chang: That's fair enough. And great color there as well. If I could just ask one last question here on the EPS guidance range. I know there's been some moving parts and you acknowledge that in your opening remarks about the market being a bit softer, but you're folding in some M&A. If I to look at the buckets from the 354 of adjusted EPS you had last year moving up about let's say the midpoint of your guidance above $0.40. How would I break that up? When I do the quick math is it like 20 plus cents from M&A. Maybe I'm wrong there let me know. About $0.10 IFRS maybe and the rest is organic?
Alain Bedard: IFRS is out there. I mean we don't talk about IFRS.
Kevin Chang: Okay.
Alain Bedard: IFRS for us is like stupid accounting.
Kevin Chang: Okay.
Alain Bedard: No, no, we don't talk about that. With our banking deal it's completely excluded IFRS. We don't even talk about that. So for us when we talk about the $0.40 improvement a lot of it comes from our U.S. deal.
Kevin Chang: Right. Seems about half benefit would be U.S. – half the benefits is organic.
Alain Bedard: Yes. And our U.S. -- I mean our Canadian M&A is not as profitable. It's profitable but it's not as profitable as our existing business, because like I said earlier we buy a company that's a 92 or 95. They're doing good. But us globally our specialty is 87. So, if we buy 95 we've got an opportunity to bring those guys at least to 87. But that takes time. So this is why Steve and his team there are really busy bringing all these acquisitions closer to 87. So, this is the beauty of having such a strong team in Ontario on our Special TTL. But that takes time. It does not happen overnight. The only problem we had so far with our specialty I said it earlier is our flatbed division that was affected by the political environment between U.S. and Canada on the steel. With that tariffs are gone. But okay tariffs have been gone for a month and a half, but that will take us six months to get back on our feet with the customers.
Kevin Chang: Makes sense. Thanks for the color line, Alain.
Alain Bedard: Pleasure.
Operator: Our next question comes from the line of David Ross with Stifel. Your line is open.
David Ross: Yes. Good morning.
Alain Bedard: Good morning, David.
David Ross: I just wanted to touch the last mile segment. You talked about having a differentiated strategy there thinking that I guess you're taking a more efficient approach than some of the other big guys that have taken more of an asset based approach. Could you I guess, flush out a little bit more what you're thinking bigger picture from last mile strategy in the U.S.?
Alain Bedard: Yes. Good question, David. So our approach is number one, is if we could take on like a BeavEX or something like another BeavEX. I mean this is step number one. Step number two is we're beefing up our U.S. team with the Canadian leadership to work more towards our cost. And number three part of our strategy is we need more of a sales team that's going to be in a position to really work closer to customer so that they can understand that our proposal is the same as the proposal of the largest e-tailer in North America, because we do the same thing as these guys are doing for their own product. Okay. We run with a known operating model. We service more than 65 different markets in the U.S. So we have a huge coverage. But we're probably one of the best kept secret in the U.S. because our sales team's effort was probably not focused in the right direction. So this is why we brought Carl [ph] the Canadian guy that done a great job in Canada in helping Scott and Scott is an experienced guy company man and Scott's focus is going be okay, let's lead the sales team in the right direction. So organically we can get more organically than what we're getting now. And let's have Carl focus on the M&A side working with the ops guy, working with Scott in our ops team there to be leaner, more efficient, and also working with our CFO to make sure that we have better tools to manage cash and to manage cost on the admin side. So, it's a huge effort because if I look at TFI today and you say, where you see more potential of improving? I would say last mile U.S. is number one. And this is why we're beefing up the team. And then number two would be specialty truckload because we bought a lot of 95 company. So Steve's will have a lot of work to do between let's say six months ago and another 12 months to bring these guys into the 85 or 80 to the 85 or 83 to 85 [Indiscernible] where we should be. Now we're not there okay because of two reason; M&A is one and the flatbed is hurting us a little bit. Hopefully our flatbed, we have a good plan there and we'll get the results back on track and the M&A that we know it's just a matter of time.
David Ross: And for the sales force that you mentioned, do you think you need a separate last mile sales force or are the sales people capable or the right people to sell last mile, logistics truckload, other services that TFI might offer?
Alain Bedard: No. As we believe in really trying to sell something that you understand well, and our sales team got to be focused in selling the last mile within our last mile group. Because you know having our truckload guys selling last mile at the same time, I mean, we don't believe in that. I know that some guys are talking about the guys says, he sell food, he sells break and he sells, he sells motor and he sells everything for the house. I mean us we really focus sales team of last mile focus on e-commerce, growing that and also having the market and the customer understand that our proposal is the same as the largest e-tailer. And our costs are even better because we're lean and mean. Well, we're going to get leaner in the U.S. but we're really lean and mean in Canada.
David Ross: And last question on the last mile is, are there any holes in your network or areas that you're looking to beef up as you look to have a national U.S. product?
Alain Bedard: That's a good question. I'm looking at -- there's some areas that we could be little bit more present. We're really strong on the West Coast, on the high five all the way from let's see the Canadian border down to California strong there. If you look at the East Coast we're really strong in Florida and New England we could be a little bit stronger, Boston maybe. But we're really strong New York going all the way. Carolina, we could be a little bit stronger, Florida we're good. And then you look at Texas where we're solid there. And then the Midwest; Illinois and Pennsylvania and all these areas we could be a little bit stronger in that Great Lakes kind of operation there like Detroit where we're there but we're not really a big player there. So there there's some pockets that we still need to do better. But basically I would say that we're probably like 75% to 80% of where we should be in terms of market coverage. Now the focus is really Dave to really be leaner and meaner in the years of where we're going. Try to grow organically with a stronger sales force more focus on trying to explain to customers potential customers that our recipe is great. We're the largest e-commerce. Last Mile guy e-commerce, I mean, we're not hauling fridge and stoves with our last mile. Yes we have a small division called PPM that does that for a few states out west. But us we're not hauling fridge. Our last mile is parcel like what the largest e-tailer is doing.
David Ross: Excellent. Well that's all. Very helpful color. Thank you very much and congratulations for the CFI team on terrific operating result.
Alain Bedard: They did a great job. Thank you. Thank you, Dave.
Operator: Our next question comes from the line of Noman Sadi [ph] with Laurentian Bank.. Your line is open.
Unidentified Analyst: Hi. It's [Indiscernible]. Good morning everyone.
Alain Bedard: Good morning.
Unidentified Analyst: Alain, if you could comment on the e-commerce revenues that are still growing at 15% and 16%?
Alain Bedard: Yes. Our e-commerce is still growing. I don't remember. I don't have that next to me. The last numbers that we came up with, but for sure our e-commerce is still growing by growing profitability, because you know we could grow 40% our e-commerce if we want. But grow at 2% like I said many many times, it's not us. I mean we're not going to do that. So our focus us is yes growth, fine, it's okay. We're going to make money.
Unidentified Analyst: Fair enough. And just one more from my end. Could you speak to the driver, which is the cost on that side of the U.S. side as compared what it was last year?
Alain Bedard: Yes. Well, last year was a year of correction. I mean there was lots of catching up to do for the driver's salary. And at the same time the freight environment was booming and there was lots of freight, because don't forget early in 2018 you got the ELDs [ph] implementation. So that add an effect for the let's say the first what three six months and then there was this tariff with China. So there was this overbuying being a product because of the tariffs that everybody knew that was supposed to come on which they did. So 18 was really a great freight environment year, and also it was also a great year for the driver because we were able to you know improve the salary of those guys. 2019, it's a different world. It's a different environment. I mean, the market is way softer, so what you see is that you got more stability in the drivers wages. On the Canadian side, it's a different world. We increase salary every year by 2% to 3% on our driver or you know it's got nothing to do with the market. It's just that this is, this brings us stability in Canada. This is why our turnover agenda for our truckload division is next to nothing is about 10% whereas you know in the U.S. our turnover is about 80% to 90% which is about the same as the environment, but this is the U.S. This is the way it's been done there.
Unidentified Analyst: Fair enough. Thanks for color on that and congratulations on your results.
Alain Bedard: Thank you.
Operator: No further questions at this time. I'll turn it back over to you.
Alain Bedard: Well thank you operator and thank you everyone for joining our call this morning. We greatly appreciate your interest in TFI International. Hopefully, you gather from my remarks today that we -- as we continue to move through 2019 we will remain focused on seeking opportunities to create value unlocking it for investors and whenever possible returning excess capital to our shoulder. So I look forward to updating you as the year progresses. And thank you again for being with us this morning and have a great day. Thank you.
Operator: This concludes today's conference call and you may now disconnect.