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2022 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2022
Management’s Discussion and Analysis
GENERAL INFORMATION
The following is TFI International Inc.’s management discussion and analysis (“MD&A”). Throughout this MD&A, the terms “Company”, “TFI International”
and “TFI” shall mean TFI International Inc., and shall include its independent operating subsidiaries. This MD&A provides a comparison of the Company’s
performance for its three-month period and year ended December 31, 2022 with the corresponding three-month period and year ended December 31,
2021 and it reviews the Company’s financial position as of December 31, 2022. It also includes a discussion of the Company’s affairs up to February 22,
2023, which is the date of this MD&A. The MD&A should be read in conjunction with the audited consolidated financial statements and accompanying
notes as at and for the year ended December 31, 2022.
In this document, all financial data are prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”) unless otherwise noted. All amounts are in United States dollars (U.S. dollars), and the term “dollar”, as well as the
symbol “$”, designate U.S. dollars unless otherwise indicated. Variances may exist as numbers have been rounded. This MD&A also uses non-IFRS
financial measures. Refer to the section of this report entitled “Non-IFRS Financial Measures” for a complete description of these measures.
The Company’s audited consolidated financial statements have been approved by its Board of Directors (“Board”) upon recommendation of its audit
committee on February 22, 2023. Prospective data, comments and analysis are also provided wherever appropriate to assist existing and new investors
to see the business from a corporate management point of view. Such disclosure is subject to reasonable constraints for maintaining the confidentiality of
certain information that, if published, would probably have an adverse impact on the competitive position of the Company.
Additional information relating to the Company can be found on its website at www.tfiintl.com. The Company’s continuous disclosure materials, including
its annual and quarterly MD&A, annual and quarterly consolidated financial statements, annual report, annual information form, management proxy circular
and the various press releases issued by the Company are also available on its website, or directly through the SEDAR system at www.sedar.com, or
through the EDGAR system at www.sec.gov/edgar.html.
FORWARD-LOOKING STATEMENTS
The Company may make statements in this report that reflect its current expectations regarding future results of operations, performance and
achievements. These are “forward-looking” statements and reflect management’s current beliefs. They are based on information currently available to
management. Words such as “may”, “might”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, “to its knowledge”, “could”, “design”,
“forecast”, “goal”, “hope”, “intend”, “likely”, “predict”, “project”, “seek”, “should”, “target”, “will”, “would” or “continue” and words and expressions of similar
import are intended to identify these forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results and those presently anticipated or projected.
The Company wishes to caution readers not to place undue reliance on any forward-looking statements which reference issues only as of the date made.
The following important factors could cause the Company’s actual financial performance to differ materially from that expressed in any forward-looking
statement: the highly competitive market conditions, the Company’s ability to recruit, train and retain qualified drivers, fuel price variations and the
Company’s ability to recover these costs from its customers, foreign currency fluctuations, the impact of environmental standards and regulations, changes
in governmental regulations applicable to the Company’s operations, adverse weather conditions, accidents, the market for used equipment, changes in
interest rates, cost of liability insurance coverage, downturns in general economic conditions affecting the Company and its customers, credit market
liquidity, and the Company’s ability to identify, negotiate, consummate and successfully integrate business acquisitions.
The foregoing list should not be construed as exhaustive, and the Company disclaims any subsequent obligation to revise or update any previously made
forward-looking statements unless required to do so by applicable securities laws. Unanticipated events are likely to occur. Readers should also refer to
the section “Risks and Uncertainties” at the end of this MD&A for additional information on risk factors and other events that are not within the Company’s
control. The Company’s future financial and operating results may fluctuate as a result of these and other risk factors.
2022 Annual Report│2
SELECTED FINANCIAL DATA AND HIGHLIGHTS
(unaudited)
(in thousands of U.S. dollars, except per share data)
Three months ended
December 31
2020
2021
2022
2022
Revenue before fuel surcharge
Fuel surcharge
Total revenue
Adjusted EBITDA1
Operating income
Net income
Adjusted net income1
Net cash from operating activities
Free cash flow1
Per share data
EPS – diluted
Adjusted EPS – diluted1
Dividends
As a percentage of revenue before fuel surcharge
Adjusted EBITDA margin1
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Operating margin1
Adjusted operating ratio1
Management’s Discussion and Analysis
1,616,495
340,199
1,956,694
304,956
216,860
153,494
151,759
248,348
188,273
1,888,423
252,491
2,140,914
318,466
214,979
144,139
148,620
190,333
120,749
1,048,147
73,859
1,122,006
193,538
117,122
86,328
93,357
164,928
134,715
7,357,064
1,455,427
8,812,491
1,425,024
1,146,038
823,232
731,668
971,645
880,892
Years ended
December 31
2020
3,484,303
296,831
3,781,134
699,589
416,567
275,675
299,763
610,862
544,644
2021*
6,468,785
751,644
7,220,429
1,076,479
979,229
754,405
498,348
855,351
700,889
1.74
1.72
0.35
18.9%
3.5%
2.0%
0.8%
13.4%
87.4%
1.52
1.57
0.27
16.9%
3.5%
1.7%
0.7%
11.4%
89.0%
0.91
0.98
0.23
18.5%
4.2%
2.1%
1.3%
11.2%
89.1%
9.02
8.02
1.16
19.4%
3.4%
1.7%
0.8%
15.6%
86.5%
7.91
5.23
0.96
16.6%
3.5%
1.7%
0.9%
15.1%
89.4%
3.03
3.30
0.80
20.1%
4.9%
2.3%
1.4%
12.0%
88.5%
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
Q4 Highlights
Fourth quarter operating income of $216.9 million increased 1% from $215.0 million the same quarter last year, benefiting from contributions from
acquisitions made over the past year and strong execution across the organization including an asset-light approach and cost reductions.
Net income of $153.5 million increased 6% compared to $144.1 million in Q4 2021. Diluted earnings per share (diluted “EPS”) of $1.74 increased
14% compared to $1.52 in Q4 2021.
Adjusted net income1, a non-IFRS measure, of $151.8 million increased 2% compared to $148.6 million in Q4 2021.
Adjusted diluted EPS1, a non-IFRS measure, of $1.72 increased 10% compared to $1.57 in Q4 2021.
Net cash from operating activities of $248.3 million increased 30% compared to $190.3 million in Q4 2021.
Free cash flow1, a non-IFRS measure, of $188.3 million increased 56% compared to $120.7 million in Q4 2021.
The Company’s reportable segments performed as follows:
o
o
o
o
Package and Courier operating income increased 2% to $37.6 million;
Less-Than-Truckload operating income decreased 15% to $88.2 million;
Truckload operating income increased 16% to $71.8 million; and
Logistics operating income increased 4% to $34.2 million.
During the fourth quarter the Company repurchased and canceled 901,467 shares for $83.5 million.
On December 15, 2022, the Board of Directors of TFI declared a quarterly dividend of $0.35 per share paid on January 16, 2023, a 30% increase
over the quarterly dividend of $0.27 per share dividend declared in Q4 2021.
During the quarter, TFI International acquired Quévrac Ltee, Boutin and T-Lane Transportation, and subsequent to quarter end acquired selected
assets of Stallion Express, LLC and the Axsun Group which will operate in the Logistics segment and D.M. Breton Inc., that will operate in the TL
segment.
1 This is a non-IFRS measure. For a reconciliation, please refer to the “Non-IFRS financial measures” section below.
2022 Annual Report│3
Management’s Discussion and Analysis
ABOUT TFI INTERNATIONAL
Services
TFI International is a North American leader in the transportation and logistics industry, operating across the United States and Canada through its
subsidiaries. TFI International creates value for shareholders by identifying strategic acquisitions and managing a growing network of wholly-owned
operating subsidiaries. Under the TFI International umbrella, companies benefit from financial and operational resources to build their businesses and
increase their efficiency. TFI International companies service the following reportable segments:
1. Package and Courier ("P&C");
2. Less-Than-Truckload (“LTL”);
3. Truckload (“TL”);
4.
Logistics.
Seasonality of operations
The activities conducted by the Company are subject to general demand for freight transportation. Historically, demand has been relatively stable with the
first quarter generally the weakest. Furthermore, during the harsh winter months, fuel consumption and maintenance costs tend to rise.
Human resources
As at December 31, 2022, the Company had 25,836 employees in TFI International’s various business segments across North America. This compares
to 29,539 employees as at December 31, 2021. The year-over-year decrease of 3,703 is attributable to a decrease of 2,865 due to the sale of CFI's
Truckload, Temp Control and Mexican non-asset logistic business (collectively referred to as "CFI"), rationalizations of 2,135 mainly in the LTL segment,
offset by an increase from business acquisitions of 1,297 employees . The Company believes that it has a relatively low turnover rate among its employees
in Canada, and a normal turnover rate in the U.S. comparable to other U.S. carriers, and that its employee relations are very good.
Equipment
The Company believes it has the largest trucking fleet in Canada and a significant presence in the U.S. market. As at December 31, 2022, the Company
had 11,442 tractors, 38,091 trailers and 6,905 independent contractors. This compares to 13,384 tractors, 50,091 trailers and 7,524 independent
contractors1 as at December 31, 2021.
Facilities
TFI International’s head office is in Montréal, Québec and its executive office is in Etobicoke, Ontario. As at December 31, 2022, the Company had 544
facilities, as compared to 576 facilities as at December 31, 2021. Of these, 249 are located in Canada, including 165 and 84 in Eastern and Western
Canada, respectively. The Company also had 295 facilities in the United States. In the last twelve months, 30 facilities were added from business
acquisitions, 23 were removed through the disposal of business and terminal consolidation decreased the total number of facilities by 39, mainly in the TL
segment. In Q4 2022, the Company closed 15 sites.
1 Disclosure updated to reflect only owner operators who were active within the quarter presented.
2022 Annual Report│4
Customers
The Company has a diverse customer base across a broad cross-section of industries with no single client accounting for more than 5% of consolidated
revenue. Because of its customer diversity, as well as the wide geographic scope of the Company’s service offerings and the range of segments in which
it operates, a downturn in the activities of an individual customer or customers in a particular industry would not be expected to have a material adverse
impact on operations. The Company has forged strategic partnerships with other transport companies in order to extend its service offerings to customers
Management’s Discussion and Analysis
across North America.
Retail
Manufactured Goods
Automotive
Building Materials
Metals & Mining
Food & Beverage
Services
Chemicals & Explosives
Forest Products
Energy
Maritime Containers
Others
Revenue by Top Customers' Industry
(46% of total revenue)
28%
18%
12%
8%
7%
7%
6%
4%
3%
3%
1%
3%
(For the year ended December 31, 2022)
2022 Annual Report│5
CONSOLIDATED RESULTS
This section provides general comments on the consolidated results of operations. A more detailed analysis is provided in the “Segmented Results”
Management’s Discussion and Analysis
section.
2022 business acquisitions
In line with its growth strategy, the Company acquired eleven businesses during 2022.
On March 19, 2022, TFI International acquired Unity Courier Services, Inc. (“Unity”). Unity is a California-based provider of regularly scheduled same-day
service and short-term delivery solutions for the US west coast.
On May 27, 2022 TFI International acquired South Shore Transportation Company, Inc. (“South Shore”). Based out of Sandusky, Ohio South Shore,
provides flatbed truckload services to the building products segment in the U.S. Midwest.
On June 10, 2022, TFI International acquired selected assets of Premium Ventures Inc (“Premium”). Premium specializes in oversized and overweight
freight in Ontario, Canada.
On June 17, 2022, TFI International acquired selected assets of Cedar Creek Express, LLC and DDW Transportation, LLC (collectively referred to as
“Cedar Creek”). Cedar Creek operates in the U.S. Midwest and provides food grade tank services.
On July 3, 2022, TFI International acquired selected assets of Transport St-Amour (referred to as “St-Amour”). St-Amour operates in Quebec and provides
food grade tank services.
On July 10, 2022, TFI International acquired HO-RO Trucking Company, Inc (referred to as “HO-RO”). HO-RO operates in the North eastern United States
and provides flatbed services primarily focusing on delivery of building materials.
On August 28, 2022, TFI International acquired Transport St-Michel Inc., Remorquage St-Michel Inc., and Location Dion Inc., (collectively referred to as
“Transport St-Michel”). Based out of Quebec, Transport St-Michel provides a full range of transportation services including flatbed and specialized tank
deliveries.
On September 30, 2022, TFI International acquired selected assets of the subsidiaries of LLL Holdings, Inc. (collectively referred to as “Girton”). Girton
operates in the U.S. Midwest and specializes in the transportation of liquid commodities.
On October 2, 2022, TFI International acquired Quevrac Ltee ("Quevrac"). Quevrac provides dry bulk transportation, principally cement, in Quebec and
Ontario.
On October 30, 2022, TFI International acquired selected assets of Groupe Boutin Inc., V. Boutin Express Inc., Frontenac Express Inc., Transport Jean
Beaudry Inc., and Transnat Express Inc. (collectively "Boutin"). Boutin operates in eastern Canada and specializes in truckload and dedicated truckload
transportation.
On November 20, 2022, TFI international acquired 0806434 B.C. Ltd, OTM Express Trucking & Logistics 2013 Ltd., 2234360 Alberta Ltd., and 557317
B.C. Ltd. (collectively referred to as "T-Lane"). T-Lane operates in the specialized truckload segment using an asset light model and serving Canada and
the United States markets.
Revenue
For the three months ended December 31, 2022, total revenue was $1,956.7 million, down 9%, or $184.2 million, from Q4 2021. The decrease was mainly
attributable to the sale of CFI which had sales of $139.2 million in Q4 2021 and a decrease of $102.3 million from existing operations due to a reduction
of volumes, offset by contributions from business acquisitions of $57.3 million.
For the year ended December 31, 2022, total revenue was $8.81 billion, up 22%, or $1.59 billion, from 2021. The increase was mainly attributable to the
contribution from business acquisitions of $1.44 billion and to an increase of $155.5 million from existing operations, which included an increase in fuel
surcharge revenue of $482.0 million, partially offset with the sale of CFI which decreased total revenues by $177.2 million.
Operating expenses
For the three months ended December 31, 2022, the Company’s operating expenses decreased by $186.1 million, to $1,739.8 million, down from $1,925.9
million in Q4 2021. The decrease is in-line with the decrease in revenues from the existing operations, the sale of CFI and from an additional $9.3 million
gain on the sale of assets held for sale, partially offset by an increase of $49.6 million from business acquisitions.
For the three months ended December 31, 2022, material and services expenses, net of fuel surcharge, decreased by 2.4 percentage points of revenue
before fuel surcharge compared to the same period last year due mainly to the impact to an increase in the fuel surcharge.
2022 Annual Report│6
Management’s Discussion and Analysis
For the three months ended December 31, 2022, personnel expense decreased 14% to $514.6 million from $598.6 million in Q4 2021. The decrease is
in-line with the revenue before fuel surcharge as management responded to the reduction of volume with a corresponding adjustment of personnel costs.
This decrease is offset by an increase from business acquisitions of $20.2 million.
Other operating expenses, which are primarily comprised of costs related to office and terminal rent, taxes, heating, telecommunications, maintenance
and security and other general administrative expenses, decreased by $13.4 million for the three months ended December 31, 2022 as compared to the
same period last year, attributable primarily to a reduction in external personnel costs of $4.0 million and from a reduction in repair and maintenance costs
of $4.7 million primarily from the LTL segment.
For the year ended December 31, 2022, the Company’s operating expenses increased by $1.43 billion from $6.24 billion in 2021 to $7.67 billion in 2022.
The increase is mainly attributable to $1.32 billion from business acquisitions and also from $283.6 million from the prior year bargain purchase gain offset
by reductions to the operating expenses from the gain on the sale of CFI of $73.7 million, additional gains on the sale of assets held for sale of $65.7
million and from additional sales of property and equipment of $31.1 million. The operating expenses from existing operations as a percentage of total
revenue decreased from 86.4% to 86.0%.
Operating income
For the three months ended December 31, 2022, TFI International’s operating income rose by $1.9 million to $216.9 million as compared to $215.0 million
in the same quarter in 2021, which included contributions of $7.7 million from business acquisitions and excluded the contribution from CFI of $12.6 million
from Q4 2021. The operating margin as a percentage of revenue before fuel surcharge was 13.4% compared to 11.4% in Q4 2021.
For the year ended December 31, 2022, TFI International’s operating income rose by $166.8 million to $1,146.0 million as compared to $979.2 million in
2021. The increase is primarily attributable to the increase in revenues and margins during the year in addition to the impact from business acquisitions of
$115.1 million, the gain on the sale of CFI of $73.7 million, and the increase in gain on assets held for sale of $65.7 million offset by a $283.6 million
bargain purchase gain recognized in 2021 as well as contributions from CFI in 2021 of $17.5 million. The operating margin as a percentage of revenue
before fuel surcharge of 15.6% increased compared to 15.1% in the prior year.
Finance income and costs
(unaudited)
(in thousands of U.S. dollars)
Finance costs (income)
Interest expense on long-term debt
Interest expense on lease liabilities
Interest income and accretion on promissory note
Net change in fair value and accretion expense of contingent considerations
Net foreign exchange (gain) loss
Net impact of early repayment of contingent consideration
Others
Net finance costs
Interest expense on long-term debt
Three months ended
December 31
2021
12,393
3,403
(1,573)
1,571
(939)
—
6,586
21,441
2022
11,809
3,413
(1,075)
90
(564)
—
3,290
16,963
Years ended
December 31
2021
45,953
13,521
(2,187)
1,932
(1,471)
(1,469)
16,739
73,018
2022
52,230
13,264
(1,750)
216
556
—
15,881
80,397
Interest expense on long-term debt for the three-month period ended December 31, 2022 was $0.6 million less than the same quarter last year. The
decrease resulted from a decrease to the average debt level, based on the month-end debt levels, of $1.32 billion for Q4 2022 compared to an average
debt level of $1.58 billion in Q4 2021 which was offset by an increase in the average interest rate on the debt which had increased from 3.15% in Q4 2021
to 3.53% in the current quarter.
For the year ended December 31, 2022 the interest expense was $6.3 million higher than the prior year. The increase resulted from an increase to the
average debt level, based on the month-end debt levels, of $1.56 billion for 2022 compared to an average debt level of $1.46 billion in 2021 as well as an
increase in the average interest rate on the debt which had increased from 3.18% in 2021 to 3.35% in 2022.
Net foreign exchange gain or loss and net investment hedge
The Company designates as a hedge a portion of its U.S. dollar denominated debt held against its net investments in U.S. operations. This accounting
treatment allows the Company to offset the designated portion of foreign exchange gain (or loss) of its debt against the foreign exchange loss (or gain) of
its net investments in U.S. operations and present them in other comprehensive income. Net foreign exchange gains or losses recorded in income or loss
are attributable to the translation of the U.S. dollar portion of the Company’s credit facilities not designated as a hedge and to the translation of other
financial assets and liabilities denominated in currencies other than the functional currency. For the three-month period ended December 31, 2022, a gain
of $19.7 million of foreign exchange variations (a gain of $20.2 million net of tax) was recorded to other comprehensive income as it relates to the translation
of the debt in the net investment hedge. For the three-month period ended December 31, 2021, a gain of $1.8 million of foreign exchange variations (a
gain of $1.5 million net of tax) was recorded to other comprehensive income as it relates to the translation of the debt in the net investment hedge.
2022 Annual Report│7
For the year ended December 31, 2022, a loss of $76.1 million of foreign exchange variations (a loss of $72.0 million net of tax) was recorded to other
comprehensive income as it relates to the translation of the debt in the net investment hedge. For the year ended December 31, 2021, a loss of $17.9
million of foreign exchange variations (a loss of $15.5 million net of tax) was recorded to other comprehensive income as it relates to the translation of the
Management’s Discussion and Analysis
debt in the net investment hedge.
Other Financial Expenses
For the three-month period ended December 31, 2022, other financial expenses decreased from $6.6 million in the prior year period to $3.3 million. For
the year ended December 31, 2022, other financial expenses decreased $0.9 million to $15.9 million as compared to $16.7 million in the prior year. The
other financial expenses are primarily recurring bank charges and transaction fees.
Income tax expense
For the three months ended December 31, 2022, the Company’s effective tax rate was 23.2%. The income tax expense of $46.4 million reflects a $6.6
million favorable variance versus an anticipated income tax expense of $53.0 million based on the Company’s statutory tax rate of 26.5%. The favorable
variance is mainly due to favorable variations from tax deductions and tax exempt income of $6.8 million.
For the year ended December 31, 2022, the Company’s effective tax rate was 22.7%. The income tax expense of $242.4 million reflects a $40.0 million
favorable variance versus an anticipated income tax expense of $282.4 million based on the Company’s statutory tax rate of 26.5%. The favorable variance
is mainly due to the tax deductions and tax exempt income of $40.2 million, primarily from the sale of CFI.
Net income and adjusted net income
(unaudited)
(in thousands of U.S. dollars, except per share data)
2022
153,494
13,969
Three months ended
December 31
2020
86,328
13,786
2021*
144,139
13,128
Net income
Amortization of intangible assets related to business acquisitions
Net change in fair value and accretion expense of contingent
considerations
Net foreign exchange (gain) loss
(Gain) loss on sale of business and direct attributable costs
Bargain purchase gain
Gain on sale of land and buildings and assets held for sale
(Gain) loss on disposal of intangible assets
Tax impact of adjustments
Adjusted net income1
Adjusted EPS – basic1
Adjusted EPS – diluted1
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
90
(564)
2,069
—
(15,941)
—
(1,358)
151,759
1.75
1.72
1,571
(939)
—
—
(6,638)
(5)
(2,636)
148,620
1.60
1.57
141
373
(306)
—
(2,206)
—
(3,199)
93,357
1.00
0.98
Years ended
December 31
2020
275,675
47,623
224
(1,237)
(306)
(4,008)
(11,893)
—
(10,278)
299,763
3.36
3.30
2021*
754,405
50,498
1,932
(1,471)
—
(283,593)
(11,978)
1
(11,446)
498,348
5.36
5.23
2022
823,232
52,003
216
556
(69,753)
—
(77,870)
—
3,284
731,668
8.19
8.02
For the three months ended December 31, 2022, TFI International’s net income was $153.5 million as compared to $144.1 million in Q4 2021. The
Company’s adjusted net income1, a non-IFRS measure, which excludes items listed in the above table, was $151.8 million as compared to $148.6 million
in Q4 2021, an increase of 2% or $3.2 million. Adjusted EPS, fully diluted, increased by $0.15 to $1.72 from $1.57 in Q4 2021.
For the year ended December 31, 2022, TFI International’s net income was $823.2 million as compared to $754.4 million in 2021, which included a bargain
purchase gain on the acquisition of UPS Freight of $283.6 million. The Company’s adjusted net income1, a non-IFRS measure, which excludes items listed
in the above table, was $731.7 million as compared to $498.3 million in 2021, an increase of 47% or $233.3 million. Adjusted EPS, fully diluted, increased
by $2.79 to $8.02 from $5.23 in 2021.
1 This is a non-IFRS. For the reconciliation, refer to the “Non-IFRS financial measures” section below.
2022 Annual Report│8
SEGMENTED RESULTS
To facilitate the comparison of business level activity and operating costs between periods, the Company compares the revenue before fuel surcharge
(“revenue”) and reallocates the fuel surcharge revenue to materials and services expenses within operating expenses. Note that “Total revenue” is not
Management’s Discussion and Analysis
affected by this reallocation.
Selected segmented financial information
(unaudited)
(in thousands of U.S. dollars)
Three months ended December 31, 2022
Revenue before fuel surcharge1
% of total revenue2
Adjusted EBITDA3
Adjusted EBITDA margin3,4
Operating income (loss)
Operating margin3,4
Total assets less intangible assets3
Net capital expenditures3
Three months ended December 31, 2021
Revenue before fuel surcharge1
% of total revenue2
Adjusted EBITDA3
Adjusted EBITDA margin3,4
Operating income (loss)
Operating margin3,4
Total assets less intangible assets3
Net capital expenditures3
YTD December 31, 2022
Revenue before fuel surcharge1
% of total revenue2
Adjusted EBITDA3
Adjusted EBITDA margin3,4
Operating income (loss)
Operating margin3,4
Total assets less intangible assets3
Net capital expenditures3
YTD December 31, 2021
Revenue before fuel surcharge1
% of total revenue2
Adjusted EBITDA3
Adjusted EBITDA margin3,4
Operating income (loss)
Operating margin3,4
Total assets less intangible assets3
Net capital expenditures3
Package
and
Courier
Less-
Than-
Truckload*
Truckload
Logistics
Corporate
Eliminations
Total
129,074
9%
43,935
34.0%
37,563
29.1%
182,605
6,045
150,074
8%
43,496
29.0%
36,713
24.5%
186,116
5,926
498,972
7%
160,838
32.2%
134,306
26.9%
182,605
10,636
560,147
9%
134,845
24.1%
108,440
19.4%
186,116
14,445
720,783
46%
126,307
17.5%
88,240
12.2%
2,107,874
57,273
822,911
44%
141,189
17.2%
103,449
12.6%
2,162,534
46,986
3,243,557
45%
567,759
17.5%
470,807
14.5%
2,107,874
132,814
2,440,640
39%
415,641
17.0%
572,798
23.5%
2,162,534
52,703
403,351
25%
104,007
25.8%
71,842
17.8%
1,085,629
14,248
506,432
27%
111,848
22.1%
61,803
12.2%
1,362,007
15,113
1,986,331
28%
557,058
28.0%
366,868
18.5%
1,085,629
31,658
1,901,157
30%
431,181
22.7%
230,189
12.1%
1,362,007
69,177
375,968
20%
43,473
11.6%
34,204
9.1%
263,017
131
427,561
20%
42,465
9.9%
32,869
7.7%
292,026
192
1,689,122
20%
178,690
10.6%
140,446
8.3%
263,017
676
1,620,926
23%
169,005
10.4%
142,794
8.8%
292,026
316
—
(12,681)
(12,766)
(14,989)
274,595
58
—
—
—
—
—
(18,555)
(20,532)
(19,855)
88,059
20
—
—
—
—
(60,918)
(39,321)
33,611
274,595
170
—
—
—
—
—
(54,085)
(74,193)
(74,992)
88,059
141
—
—
—
—
1,616,495
100%
304,956
18.9%
216,860
13.4%
3,913,720
77,755
1,888,423
100%
318,466
16.9%
214,979
11.4%
4,090,742
68,237
7,357,064
100%
1,425,024
19.4%
1,146,038
15.6%
3,913,720
175,954
6,468,785
100%
1,076,479
16.6%
979,229
15.1%
4,090,742
136,782
* Recasted for adjustments to provisional amounts for UPS Freight prior year business combination.
1 Includes intersegment revenue.
2 Segment revenue including fuel surcharge and intersegment revenue to consolidated revenue including fuel surcharge and intersegment revenue.
3 This is a non-IFRS measures. For a reconciliation, refer to the “Non-IFRS financial measures” section below.
4 As a percentage of revenue before fuel surcharge.
2022 Annual Report│9
Management’s Discussion and Analysis
Three months ended December 31
%
Years ended December 31
%
%
%
2022
172,381
(43,307)
129,074
Package and Courier
(unaudited)
(in thousands of U.S. dollars)
Total revenue
Fuel surcharge
Revenue
Materials and services expenses (net of fuel
surcharge)
Personnel expenses
Other operating expenses
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Gain on sale of rolling stock and equipment
(Gain) loss on derecognition of right-of-use assets
Loss on disposal of intangible assets
Operating income
Adjusted EBITDA1
Return on invested capital1
1 This is a non-IFRS measure. For a reconciliation, refer to the “Non-IFRS financial measures” section below.
33.1%
27.8%
5.2%
2.4%
2.4%
0.1%
-0.1%
-
-
29.1%
34.0%
32.5%
42,784
35,877
6,667
3,080
3,135
157
(189)
-
-
37,563
43,935
60,636
39,060
6,905
3,297
3,300
186
(23)
2021
177,368
(27,294)
150,074
36,713
43,496
100.0%
-
-
2022
650,844
(151,872)
498,972
167,725
144,650
26,845
12,863
13,024
645
(1,087)
1
-
134,306
160,838
100.0%
40.4%
26.0%
4.6%
2.2%
2.2%
0.1%
-0.0%
-
-
24.5%
29.0%
25.3%
2021
641,449
(81,302)
560,147
243,786
154,820
26,762
12,392
13,109
903
(59)
(7)
1
108,440
134,845
100.0%
33.6%
29.0%
5.4%
2.6%
2.6%
0.1%
-0.2%
0.0%
-
26.9%
32.2%
100.0%
43.5%
27.6%
4.8%
2.2%
2.3%
0.2%
-0.0%
-0.0%
0.0%
19.4%
24.1%
Operational data
(unaudited)
(Revenue in U.S. dollars)
Revenue per pound (including fuel)
Revenue per pound (excluding fuel)
Revenue per package (excluding fuel)
Tonnage (in thousands of metric tons)
Packages (in thousands)
Average weight per package (in lbs.)
Vehicle count, average
Weekly revenue per vehicle (incl. fuel, in thousands of U.S. dollars)
2022
$0.47
$0.35
$5.59
167
23,107
15.93
1,028
$12.90
Three months ended December 31
Variance
%
9.3%
$0.04
-2.8%
$(0.01)
-8.5%
$(0.52)
-10.7%
(20)
-6.0%
(1,474)
-5.0%
(0.84)
-9.7%
(111)
7.7%
$0.92
2021
$0.43
$0.36
$6.11
187
24,581
16.77
1,139
$11.98
2022
$0.48
$0.37
$5.88
614
84,915
15.94
1,046
$11.97
Years ended December 31
%
9.1%
-5.1%
-5.3%
-6.4%
-5.9%
-0.6%
-2.2%
3.7%
2021 Variance
$0.44
$0.39
$6.21
656
90,257
16.03
1,069
$11.54
$0.04
$(0.02)
$(0.33)
(42)
(5,342)
(0.09)
(23)
$0.43
Revenue
For the three months ended December 31, 2022, revenue of $129.1 million compared to $150.1 million in Q4 2021. This decrease is mostly attributable
to a 6.0% decrease in packages combined with an 8.5% decrease in revenue per package (excluding fuel surcharge). The decrease in revenue per
package is attributable to a decrease of 2.8% in revenue per pound (excluding fuel surcharge) and a 5.0% decrease in the average weight per package.
The decrease in packages is attributable to a decline in market demand, primarily in business-to-consumer deliveries.
For the year ended December 31, 2022, revenue of $499.0 million compared to $560.1 million in 2021. This decrease is attributable to a 5.3% decrease
in revenue per package combined with a 5.9% decrease in packages related primarily to softness in the business-to-consumer market.
Operating expenses
For the three months ended December 31, 2022, materials and services expenses, net of fuel surcharge revenue, decreased $17.9 million, or 29.4%,
mostly due to an increase of $16.0 million in fuel surcharge revenue combined with a $1.0 million reduction in tires and rolling stock maintenance and
repairs expenses. Personnel expenses decreased by $3.2 million, or 8.1%, as management responded to a decrease in volumes.
For the year ended December 31, 2022, materials and services expenses, net of fuel surcharge revenue, decreased $76.1 million, or 31.2%, mostly due
to a $70.6 million increase in fuel surcharge revenue combined with a decrease of $6.3 million in sub-contracted P&D costs driven by lower volumes. This
was partially offset by a $5.1 million increase in linehaul purchases mainly due to higher fuel surcharge paid to linehaul sub-contractors. Personnel
expenses, specifically direct labor, decreased by $10.2 million, or 6.6%, primarily due to a decrease in volumes.
Operating income
Operating income for the three months ended December 31, 2022, increased by $0.9 million, or 2.4%, compared to the fourth quarter of 2021. The
operating margin of 29.1% in the fourth quarter of 2022 was an improvement compared to 24.4% for the same period in 2021.
For the year ended December 31, 2022, operating income increased by $25.9 million, from $108.4 million in 2021 to $134.3 million in 2022 driven by
consistent focus on improving the quality of freight and the efficiency of the network.
The return on invested capital increased 720 basis points, from 25.3% in the trailing twelve months ended December 31, 2021, to 32.5% in the twelve
months ended December 31, 2022. The operating margin was 26.9% in 2022 compared to 19.4% in 2021.
2022 Annual Report│10
Less-Than-Truckload
(unaudited)
(in thousands of U.S. dollars)
Total revenue
Fuel surcharge
Revenue
Materials and services expenses (net of fuel
surcharge)
Personnel expenses
Other operating expenses
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Bargain Purchase Gain
Gain on sale of rolling stock and equipment
Gain on derecognition of right-of-use assets
(Gain) loss on sale of land and buildings and assets
held for sale
Management’s Discussion and Analysis
Three months ended December 31
%
%
Years ended December 31
%
2022
903,713
(182,930)
720,783
226,839
311,248
58,050
26,374
9,641
2,065
-
(1,601)
(60)
(13)
88,240
126,307
2021
959,546
(136,635)
822,911
274,166
348,237
60,196
25,846
9,398
2,495
-
(842)
(35)
1
103,449
141,189
100.0%
31.5%
43.2%
8.1%
3.7%
1.3%
0.3%
-
-0.2%
-0.0%
-0.0%
12.2%
17.5%
2022
4,023,163
(779,606)
3,243,557
1,003,662
1,432,857
243,347
104,850
38,985
8,831
-
(4,056)
(12)
(55,714)
470,807
567,759
%
100.0%
30.9%
44.2%
7.5%
3.2%
1.2%
0.3%
-
-0.1%
-0.0%
-1.7%
14.5%
17.5%
2021*
2,815,390
(374,750)
2,440,640
848,273
1,022,214
155,992
73,242
33,050
9,768
(271,593)
(907)
(573)
(1,624)
572,798
415,641
100.0%
33.3%
42.3%
7.3%
3.1%
1.1%
0.3%
-
-0.1%
-0.0%
0.0%
12.6%
17.2%
100.0%
34.8%
41.9%
6.4%
3.0%
1.4%
0.4%
-11.1%
-0.0%
-0.0%
-0.1%
23.5%
17.0%
Operating income
Adjusted EBITDA1
* Recasted for adjustments to provisional amounts for UPS Freight prior year business combination
1 This is a non-IFRS measure. For a reconciliation, refer to the “Non-IFRS financial measures” section below.
Operational data
(unaudited)
(Revenue in U.S. dollars)
U.S. LTL
Revenue (in thousands of dollars)1
Adjusted Operating Ratio2
Revenue per hundredweight (excluding fuel)1
Revenue per shipment (excluding fuel)1
Revenue per hundredweight (including fuel)1
Revenue per shipment (including fuel)1
Tonnage (in thousands of tons)1
Shipments (in thousands)1
Average weight per shipment (in lbs)1
Average length of haul (in miles)1
Vehicle count, average4
Return on invested capital2,3
Canadian LTL
Revenue (in thousands of dollars)
Adjusted Operating Ratio2
Revenue per hundredweight (excluding fuel)
Revenue per shipment (excluding fuel)
Revenue per hundredweight (including fuel)1
Revenue per shipment (including fuel)1
Tonnage (in thousands of tons)
Shipments (in thousands)
Average weight per shipment (in lbs)
Average length of haul (in miles)
Vehicle count, average
Return on invested capital2
2022
475,389
90.4%
$30.05
$322.74
$39.04
$419.26
791
1,473
1,074
1,092
4,410
18.8%
123,176
75.3%
$10.84
$235.97
$14.46
$314.61
568
522
2,176
734
808
24.0%
Three months ended December 31
%
Variance
2021
568,761
89.4%
$29.20
$310.97
$34.76
$371.17
974
1,829
1,065
1,110
4,583
-
144,697
78.3%
$11.13
$223.30
$13.33
$267.43
650
648
2,006
791
810
17.8%
(93,372)
-16.4%
$0.85
$11.77
$4.28
$48.09
(183)
(356)
9
(18)
(173)
2.9%
3.8%
12.3%
13.3%
-18.8%
-19.5%
0.8%
-1.6%
-3.8%
(21,521)
-14.9%
$(0.29)
$12.67
$1.13
$47.18
(82)
(126)
170
(57)
(2)
-2.6%
5.7%
8.5%
17.6%
-12.6%
-19.4%
8.5%
-7.2%
-0.2%
2022
2,186,668
89.9%
$29.67
$320.20
$38.03
$410.38
3,685
6,829
1,079
1,101
4,685
548,012
74.0%
$11.26
$241.95
$14.65
$314.88
2,434
2,265
2,149
748
800
Years ended December 31
%
2021 Variance
1,586,228
90.1%
$28.52
$299.91
$33.57
$353.06
2,781
5,289
1,052
1,089
4,866
556,891
79.9%
$10.80
$222.40
$12.62
$260.01
2,579
2,504
2,060
773
837
600,440
37.9%
$1.15
$20.29
$4.46
$57.32
904
1,540
27
12
(181)
4.0%
6.8%
13.3%
16.2%
32.5%
29.1%
2.6%
1.1%
-3.7%
(8,879)
-1.6%
$0.46
$19.55
$2.03
$54.87
(145)
(239)
89
(25)
(37)
4.3%
8.8%
16.1%
21.1%
-5.6%
-9.5%
4.3%
-3.2%
-4.4%
1 Operational statistics exclude figures from Ground Freight Pricing (“GFP”).
2 This is a non-IFRS measure. For a reconciliation please refer to the “Non-IFRS and Other Financial Measures” section below.
3 The Return on invested capital for the U.S. LTL is not disclosed as the trailing twelve-month information is not available for fiscal 2021, as it was acquired on April 30, 2021.
4 The vehicle count average for the year ended December 31, 2021 was adjusted to calculate the average since the acquisition of UPS Freight on April 30, 2021. As at December 31, 2022 the active
vehicle count was 4,046.
Revenue
For the three months ended December 31, 2022, revenue decreased by $102.1 million to $720.8 million. This decrease was mainly due to a 16.4%, or
$93.4 million reduction coming from the Company's U.S. LTL operations, combined with a 14.9%, or $21.5 million reduction in the Canadian LTL operation,
but partially offset by a 13.1% or $14.6 million increase in revenue coming from Ground with Freight Pricing (GFP). The reduction in U.S. LTL revenue
was the result of a 19.5% decrease in shipment count partially offset by a 3.8% increase in revenue per shipment (excluding fuel) when compared to the
fourth quarter of 2021. The decrease was primarily driven by the Company's intentional elimination of unprofitable freight combined with softer volumes
due to a weaker end market. The Canadian LTL operation revenue decrease was caused by a 19.4% decrease in shipment count, partially offset by a
5.7% increase in revenue per shipment (excluding fuel). The increase in Canadian LTL revenue per shipment was the result of an 8.5% increase in
average weight per shipment, partially offset by a 2.6% decrease in revenue per hundredweight (before fuel). The increase in GFP revenue is mostly
coming from an impressive 11.6% increase in shipments delivered.
For the year ended December 31, 2022, revenue increased $802.9 million to $3,243.6 million. The increase is mainly attributable to business acquisitions
contributions in the U.S. LTL of $933.3 million. The revenue from existing operations increased $21.5 million, or 4%, compared to the prior year.
Operating expenses
For the three months ended December 31, 2022, materials and services expenses, net of fuel surcharge revenue, decreased $47.3 million, or 17.3%,
attributable to $46.3 million higher fuel surcharge revenue, combined with a $12.1 million reduction in sub-contractor costs and partially offset by an $8.2
2022 Annual Report│11
Management’s Discussion and Analysis
million increase in fuel cost and a $8.4 million increase in accidents and claims expense. Personnel expenses decreased $37.0 million, mostly from U.S.
LTL operations and caused by the reduction of volume in the quarter, but partially offset by an increase in administrative salaries as the Company is
progressively creating back-office related jobs in order to exit the Transition Service Agreement with UPS. Other operating expenses decreased $2.1
million, mostly from $5.6 million lower building repairs and maintenance cost combined with $1.3 million lower professional fees but offset by a $4.6 million
increase in IT related expenses as the Company had IT costs in the quarter related to the implementation of a new accounting system, again in order to
expedite the exit of our Transition Service Agreement with UPS.
For the year ended December 31, 2022, materials and services expenses, net of fuel surcharge revenue, increased by $155.4 million, with $284.7 million
attributable to business acquisitions. Materials and services expenses from existing operations decreased $129.3 million, or 15.2%, mostly due to a $217.2
million increase in fuel surcharge revenue, partially offset by a $47.1 million increase in sub-contractor costs and a $42.3 million increase in fuel cost.
Personnel expenses from existing operations decreased $42.0 million, or 4.1%, mostly attributable to a reduction in Direct labor cost following the drop in
volume. Other operating expenses from existing operations increased $18.2 million when compared to the same period in 2021, $18.1 million coming
from bad debt expenses and higher IT costs.
Operating income
Operating income for the three months ended December 31, 2022, decreased by $15.2 million to $88.2 million, mostly from U.S. LTL operations. Adjusted
operating ratio, a non-IFRS measure, of Canadian LTL operations improved to 75.3% in the fourth quarter of 2022 as compared to 78.3% in the same
quarter in 2021. U.S. LTL operations achieved a 90.4% adjusted operating ratio, a non-IFRS measure, in the fourth quarter of 2022, compared to 89.4%
in the fourth quarter of 2021, the increase being mostly attributable to lower volume and higher administrative expenses to implement back-office services
while still paying UPS for the Transition Service Agreement.
For the year ended December 31, 2022, operating income of $470.8 million compared to $572.8 million in 2021. U.S. LTL operations operating income
decreased $131.3 million, due to a bargain purchase gain of $271.6 million recognized in the prior year, partially offset by a $92.6 million increase from
business acquisitions and a $55.1 million increase in the gain on asset held for sale. Canadian LTL operating income increased $29.3 million when
compared to the prior year.
The return on invested capital, a non-IFRS measure, of the Company's Canadian based LTL segment was 24.0% in the fourth quarter of 2022, a 620-
basis point increase from 17.8% for the 12 months ended December 31, 2021. The increase is mostly related to materially higher operating income,
combined with slightly lower invested capital. Return on invested capital of the U.S. LTL operations was 22.8% in the fourth quarter of 2022.
2022 Annual Report│12
Management’s Discussion and Analysis
2022
502,784
(99,433)
403,351
174,305
115,449
13,709
26,695
15,730
5,699
(3,981)
(138)
(15,959)
-
71,842
104,007
Truckload
(unaudited)
(in thousands of U.S. dollars)
Total revenue
Fuel surcharge
Revenue
Materials and services expenses (net of fuel
surcharge)
Personnel expenses
Other operating expenses
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Gain on sale of rolling stock and equipment
Gain on derecognition of right-of-use assets
Gain on sale of land and buildings and assets
held for sale
Gain on disposal of intangible assets
Operating income
Adjusted EBITDA1
Operational data
(unaudited)
Specialized TL2
Revenue (in thousands of U.S. dollars)
Adjusted operating ratio1
Tractor count, average
Trailer count, average
Tractor age
Trailer age
Number of owner operators, average
Return on invested capital1
Canadian based Conventional TL
Revenue (in thousands of U.S. dollars)
Adjusted operating ratio1
Total mileage (in thousands)
Tractor count, average
Trailer count, average
Tractor age
Trailer age
Number of owner operators, average
Return on invested capital1
Three months ended December 31
%
%
Years ended December 31
%
2021
584,009
(77,577)
506,432
221,538
160,351
19,193
35,652
15,087
5,960
(6,338)
(160)
(6,649)
(5)
61,803
111,848
2022
2,451,038
(464,707)
1,986,331
%
100.0%
2021
2,162,752
(261,595)
1,901,157
821,442
585,891
76,612
129,013
59,473
23,944
(54,481)
(191)
(22,240)
-
366,868
557,058
41.4%
29.5%
3.9%
6.5%
3.0%
1.2%
-2.7%
-0.0%
-1.1%
-
18.5%
28.0%
823,645
604,041
66,468
137,301
52,680
21,580
(23,747)
(431)
(10,569)
-
230,189
431,181
100.0%
43.7%
31.7%
3.8%
7.0%
3.0%
1.2%
-1.3%
-0.0%
-1.3%
-0.0%
12.2%
22.1%
100.0%
43.2%
28.6%
3.4%
6.6%
3.9%
1.4%
-1.0%
-0.0%
-4.0%
-
17.8%
25.8%
100.0%
43.3%
31.8%
3.5%
7.2%
2.8%
1.1%
-1.2%
-0.0%
-0.6%
-
12.1%
22.7%
2022
325,493
87.4%
3,839
11,004
3.6
11.5
1,193
13.4%
79,101
81.1%
24,498
858
3,636
3.5
7.3
254
21.3%
Three months ended December 31
%
Variance
2021
328,648
89.6%
3,845
11,302
3.4
10.5
1,201
9.2%
73,786
88.4%
26,467
728
3,401
4.1
7.5
324
10.9%
(3,154)
(7)
(298)
0.2
1.0
(8)
-1.0%
-0.2%
-2.6%
5.5%
9.8%
-0.7%
5,315
7.2%
(1,969)
130
235
(0.6)
(0.2)
(70)
-7.4%
17.9%
6.9%
-13.7%
-2.5%
-21.7%
2022
1,362,390
83.1%
3,641
10,833
3.6
11.5
1,126
322,553
78.7%
93,923
741
3,456
3.5
7.3
269
Years ended December 31
%
2021 Variance
1,233,791
88.7%
3,722
10,912
3.4
10.5
1,217
250,177
87.9%
92,236
640
2,884
4.1
7.5
306
128,599
10.4%
(81)
(79)
0.2
1.0
(91)
-2.2%
-0.7%
5.5%
9.8%
-7.5%
72,376
28.9%
1,687
102
572
(0.6)
(0.2)
(37)
1.8%
15.9%
19.8%
-13.7%
-2.5%
-12.0%
1 This is a non-IFRS measure. For a reconciliation, please refer to the “Non-IFRS Financial Measures” section below.
2 Recasted comparative figures for change in operating segments of the dedicated operations from US Conventional Truckload as a result of the sale of business of CFI.
During Q4 2022, Quevrac and Boutin were acquired and incorporated into the Truckload segment.
Revenue
For the three months ended December 31, 2022, revenue decreased by $103.1 million, or 20%, from $506.4 million in Q4 2021 to $403.4 million.
Contributing primarily to this decrease was the impact on revenue from the sale of CFI of $113.8 million and a decrease in revenue from existing operations
of $29.5 million, partially offset by contributions from business acquisitions of $40.3 million. For Specialized TL, revenue decreased by $3.2 million, or
1.0%, compared to the prior year period, primarily due to an organic decline of $34.4 million, partially offset by contributions from business acquisitions of
$31.3 million. For Canadian based conventional TL operations, revenue increased by $5.3 million, or 7.2%, compared to the same prior year period. The
increase was mainly due to a 5.7% improvement in revenue per tractor, driven by a 20.7% improvement in revenue per mile, partially offset by a 12.4%
decline in miles per tractor.
For the year ended December 31, 2022, TL revenue increased by $85.2 million, or 4%, from $1,901.2 million in 2021 to $1,986.3 million in 2022. This
increase is mainly due to contributions from business acquisitions of $227.6 million, partially offset by the impact on revenue from the sale of CFI of $150.9
million.
Operating expenses
For the three months ended December 31, 2022, operating expenses, net of fuel surcharge, decreased by $113.1 million or 25%, from $444.6 million in
2021 to $331.5 million in 2022. This is mainly due to a decrease in operating expenses of $86.6 million following the sale of CFI and a decrease in operating
expenses, net of fuel surcharge, from existing truckload operations of $59.8 million, partially offset by an increase of $33.3 million in operating expenses,
net of fuel surcharge, from business acquisitions.
For the year ended December 31, 2022, TL operating expenses, net of fuel surcharge, decreased by $51.5 million or 3%, from $1,671.0 million in 2021 to
$1,619.5 million in 2022. This is primarily due to a decrease in operating expenses of $91.3 million following the sale of CFI, an increase in gain on sale
of property and equipment of $42.2 million, and a decrease in operating expenses, net of fuel surcharge, from existing truckload operations, partially offset
by an increase of $209.2 million in operating expenses, net of fuel surcharge, from business acquisition.
2022 Annual Report│13
Management’s Discussion and Analysis
Operating income
For the three months ended December 31, 2022, operating income for the TL segment was $71.8 million for the three months ended December 31, 2022,
up 16% from $61.8 million in the fourth quarter of 2021. Contributions to operating income from business acquisitions were $7.0 million and excluded the
contribution from CFI of $12.6 million from Q4 2021.
For the year ended December 31, 2022, operating income in the TL segment increased by $136.7 million, or 59%, from $230.2 million in 2021 to $366.9
million in 2022. The increase was primarily organic, in addition to gains on sale of rolling stock and equipment of $42.2 million and, contributions from
business acquisitions of $18.5 million and excluded the contribution from CFI of $17.5 million.
Return on invested capital, a non-IFRS measure, for the Specialized TL segment increased to 13.4% as compared to 9.2% in the same prior year period
due primarily to an increase in operating income. The return on invested capital, a non-IFRS measure, for Canadian based Conventional TL was 21.3%,
up from 10.9% for the same prior year period, reflecting an increase in operating income.
Three months ended December 31
%
Years ended December 31
%
%
%
2022
394,071
(18,103)
375,968
Logistics
(unaudited)
(in thousands of U.S. dollars)
Total revenue
Fuel surcharge
Revenue
Materials and services expenses (net of fuel
surcharge)
Personnel expenses
Other operating expenses
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Bargain purchase gain
(Gain) loss on sale of rolling stock and equipment
-
Gain on derecognition of right-of-use assets
3
Loss on sale of land and building
32,869
Operating income
Adjusted EBITDA1
42,465
Return on invested capital1
19.9%
1 This is a non-IFRS measure. For a reconciliation, refer to the “Non-IFRS financial measures” section below.
269,625
35,770
27,107
333
3,644
5,292
-
(7)
-
-
34,204
43,473
21.9%
71.7%
9.5%
7.2%
0.1%
1.0%
1.4%
-
-0.0%
-
-
9.1%
11.6%
323,164
29,419
32,443
375
3,442
5,776
2021
441,086
(13,525)
427,561
100.0%
70
-
2022
1,763,280
(74,158)
1,689,122
1,232,049
143,505
134,923
1,460
14,794
21,990
-
(37)
(8)
-
140,446
178,690
2021
1,662,072
(41,146)
1,620,926
1,223,846
116,523
111,742
1,581
13,943
22,684
(12,000)
70
(260)
3
142,794
169,005
100.0%
72.9%
8.5%
8.0%
0.1%
0.9%
1.3%
-
-0.0%
-0.0%
-
8.3%
10.6%
100.0%
75.6%
6.9%
7.6%
0.1%
0.8%
1.4%
-
0.0%
-
0.0%
7.7%
9.9%
100.0%
75.5%
7.2%
6.9%
0.1%
0.9%
1.4%
-0.7%
0.0%
-0.0%
0.0%
8.8%
10.4%
During Q4 2022, T-Lane was acquired and incorporated in the Logistics segment.
Revenue
For the three months ended December 31, 2022, revenue decreased by $51.6 million, or 12%, from $427.6 million in Q4 2021 to $376.0 million in Q4
2022, mainly due to a 3PL volume drop amounting to $42.8 million during the fourth quarter and the remaining revenue decrease from the last mile
divisions. The contribution from business acquisitions in the quarter was $10.4 million.
For the year ended December 31, 2022, revenue increased by $68.2 million, or 4%, from $1,620.9 million in 2021 to $1,689.1 million. The increase is
attributable to the contribution from business acquisitions of $53.9 million and $14.3 million from existing operations mainly driven by the 3PL business.
Approximately 78% (2021 – 77%) of the Logistics segment’s revenues in the quarter were generated from operations in the U.S. and approximately 22%
(2021 – 23%) were generated from operations in Canada.
Operating expenses
For the three months ended December 31, 2022, total operating expenses, net of fuel surcharge decreased by $52.9 million, or 13%, relative to the same
prior year period, from $394.7 million to $341.8 million. Business acquisitions accounted for a $9.7 million increase in operating expenses, and total
operating expenses, net of fuel surcharge, decreased by $62.7 million for existing operations. Materials and services expenses decreased by $54.5 million
mostly related to the 3PL and last mile volume decrease. Other operating expenses decreased by $5.8 million, mainly due to a reduction in other
administrative costs.
For the year ended December 31, 2022, total operating expenses, net of fuel surcharge increased by $70.5 million, or 5%, from $1,478.1 million to $1,548.7
million. The increase in total operating expenses, net of fuel surcharge, is primarily from business acquisitions of $49.9 million, $8.7 million from existing
operations, and $12.0 million from the bargain purchase gain recognized in 2021. The increase from existing operations is mostly from increases from a
litigation settlement in the US last mile division of $11.8 million and increased sales commissions of $12.9 million related to revenue growth, offset by
decreases in materials and services expense, net of fuel surcharge of $8.1 million and a decrease in personnel expenses of $1.7 million.
2022 Annual Report│14
Management’s Discussion and Analysis
Operating income
Operating income for the three months ended December 31, 2022, increased by $1.3 million, or 4%, from $32.9 million to $34.2 million. The increase is
partially due to cost management efforts by management and $0.7 million of contributions from business acquisitions.
For the year ended December 31, 2022, operating income decreased by $2.3 million, or 2%. The decrease is due to the $11.8 million settlement expense
and the benefit of $12.0 million from the bargain purchase gain included in the 2021 results, offset by $4.1 million from business acquisitions.
The return on invested capital1, a non-IFRS measure, increased to 21.9% from 19.9% in the same prior year period.
LIQUIDITY AND CAPITAL RESOURCES
Sources and uses of cash
(unaudited)
(in thousands of U.S. dollars)
Sources of cash:
Net cash from operating activities
Proceeds from sale of property and equipment
Proceeds from sale of assets held for sale
Net variance in cash and bank indebtedness
Net proceeds from long-term debt
Proceeds from the sale of business
Others
Total sources
Uses of cash:
Purchases of property and equipment
Business combinations, net of cash acquired
Net variance in cash and bank indebtedness
Net repayment of long-term debt
Repayment of lease liabilities
Dividends paid
Repurchase of own shares
Others
Total usage
Cash flow from operating activities
Three months ended
2022
December 31
2021
Years ended
December 31
2021
2022
248,348
17,685
33,956
—
1,172
—
13,948
315,109
111,716
23,180
14,915
—
31,194
23,746
83,497
26,861
315,109
190,333
22,508
10,503
45,647
71,161
—
42,969
383,121
101,578
96,328
—
—
32,035
21,406
106,863
24,911
383,121
971,645
128,821
131,250
—
—
546,228
29,682
1,807,626
350,824
158,251
120,335
272,030
123,606
97,321
567,983
117,276
1,807,626
855,351
92,842
19,869
—
736,030
—
64,589
1,768,681
268,656
1,008,131
22,168
—
115,336
85,386
198,153
70,851
1,768,681
For the year ended December 31, 2022, net cash from operating activities increased by 14% to $971.6 million from $855.4 million in 2021. This $116.3
million increase is attributable to an increase in net income and non-cash expenses offset by a decline in non-cash working capital of $163.7 million
resulting from an increase in sales which increased the accounts receivable balance, and in particular from the increase in fuel costs for which payments
must be made much faster than fuel surcharge revenue is received. The increase in taxes paid of $35.4 million is due to the increase in profits.
1 Refer to the section “Non-IFRS financial measures”.
2022 Annual Report│15
Cash flow used in investing activities
Property and equipment
The following table presents the additions of property and equipment by category for the three-month periods and years ended December 31, 2022 and
Management’s Discussion and Analysis
2021.
(unaudited)
(in thousands of U.S. dollars)
Additions to property and equipment:
Purchases as stated on cash flow statements
Non-cash adjustments
Additions by category:
Land and buildings
Rolling stock
Equipment
Three months ended
December 31
2021
2022
111,716
1,321
113,037
17,498
87,306
8,233
113,037
101,578
1,017
102,595
11,939
85,868
4,788
102,595
Years ended
December 31
2021
268,656
(1,483)
267,173
36,902
217,080
13,191
267,173
2022
350,824
445
351,269
46,928
286,277
18,064
351,269
The Company invests in new equipment to maintain its quality of service while minimizing maintenance costs. Its capital expenditures reflect the level of
reinvestment required to keep its equipment in good order and to maintain a strategic allocation of its capital resources. The increase in additions in 2022
compared to 2021 is due primarily to the fleet renewal of TForce Freight.
In the normal course of activities, the Company constantly renews its rolling stock equipment generating regular proceeds and gain or loss on disposition.
The following table indicates the proceeds and gains or losses from sale of property and equipment and assets held for sale by category for the three-
month periods and years ended December 31, 2022 and 2021.
(unaudited)
(in thousands of U.S. dollars)
Proceeds by category:
Land and buildings
Rolling stock
Equipment
Gains (losses) by category:
Land and buildings
Rolling stock
Equipment
Business acquisitions
Three months ended
December 31
2022
2021
2022
Years ended
December 31
2021
33,857
17,727
57
51,641
15,945
7,219
(1,414)
21,750
10,592
22,394
25
33,011
6,638
7,309
(169)
13,778
131,684
126,034
2,353
260,071
77,881
59,671
63
137,615
19,222
93,411
78
112,711
11,978
25,176
(320)
36,834
For the year ended December 31, 2022, cash used in business acquisitions, net of cash acquired, totaled $158.3 million to acquire eleven businesses.
Refer to the section of this report entitled “2022 business acquisitions” and further information can be found in note 5 of the December 31, 2022 audited
consolidated financial statements.
Business dispositions
On August 31, 2022, the Company announced the completion of the sale of CFI’s Truckload, Temp Control and Mexican non-asset logistics business to
Heartland Express, Inc. which generated proceeds from the sale of business of $546.2 million.
Purchase of investments
For the year ended December 31, 2022 cash used in the purchase of investments was $80.6 million (2021 – $35.9 million). Management has elected to
measure these investments at fair value through OCI.
2022 Annual Report│16
Management’s Discussion and Analysis
Cash flow used in financing activities
Debt
On March 23, 2022, the Company received $200 million in proceeds from the issuance of new debt taking the form of unsecured senior notes consisting
of two tranches maturing on March 23, 2032, and 2037, bearing a fixed interest rate of 3.50% and 3.80%. Deferred financing fees of $0.3 million were
recognized on the amount as a result of the transaction.
On March 23, 2022, the Company received an additional $100 million in proceeds from the amended and restated debt agreement signed on July 2, 2021,
taking the form of unsecured senior notes as the third tranche maturing on April 2, 2034, bearing a fixed interest rate of 3.55%. Deferred financing fees of
$0.1 million were recognized as a result of the transaction.
The two debt instruments described above are subject to certain covenants regarding the maintenance of financial ratios. These are the same covenants
as previously required by the Company’s syndicated revolving credit agreement as described in note 26(f) of the 2022 annual consolidated financial
statements.
The proceeds of two debt issuances were used in full to pay off the unsecured term loan which was due in June 2022 without any penalty.
On September 2, 2022, the Company extended its credit facility until August 16, 2026. Under the new extension, the CAD availability and USD availability
remain unchanged. Effective as of September 2, 2022, the interest rate will be the sum of the adjusted term secured overnight financing rate published by
the Federal Reverse Bank of New York (“SOFR”) plus an applicable margin, which can vary between 113 and 175 basis points based on certain ratios.
The change in interest rate did not have a material impact on the Company's financial statements as the Company has no interest rate swaps that hedge
variable interest debt. The Company is subject to certain covenants in note 26(f) of the 2022 annual consolidated financial statements with regarding the
maintenance of financial ratios. These are the same covenants as previously required by the Company's syndicated revolving credit agreement, the
exception of the definition of funded debt for which unrestricted cash shall be reduced from the total amount of the funded debt. Deferred financing fees of
$0.8 million were recognized on the increase.
NCIB on common shares
Pursuant to the renewal of the normal course issuer bid (“NCIB”), which began on November 2, 2022 and ending on November 1, 2023, the Company is
authorized to repurchase for cancellation up to a maximum of 6,370,199 of its common shares under certain conditions. As at December 31, 2022, and
since the inception of this NCIB, the Company has repurchased and canceled 436,820 common shares.
For the year ended December 31, 2022, the Company repurchased 6,368,322 common shares (as compared to 2,157,862 during the same period in
2021) at a weighted average price of $89.19 per share (as compared to $91.83 in the prior year period) for a total purchase price of $499.4 million (as
compared to $174.7 million the prior year period).
Free cash flow1
(unaudited)
(in thousands of U.S. dollars)
Net cash from operating activities
Additions to property and equipment
Proceeds from sale of property and equipment
Proceeds from sale of assets held for sale
Free cash flow
Three months ended
December 31
2020
164,928
(60,410)
23,949
6,248
134,715
2021
190,333
(102,595)
22,508
10,503
120,749
Years ended
December 31
2020
610,862
(142,814)
52,116
24,480
544,644
2021
855,351
(267,173)
92,842
19,869
700,889
2022
971,645
(350,824)
128,821
131,250
880,892
2022
248,348
(111,716)
17,685
33,956
188,273
The Company's objectives when managing its cash flow from operations are to ensure proper capital investment in order to provide stability and
competitiveness for its operations, to ensure sufficient liquidity to pursue its growth strategy, and to undertake selective business acquisitions within a
sound capital structure and a solid financial position.
For the year ended December 31, 2022, TFI International generated free cash flow of $880.9 million, compared to $700.9 million in 2021, which represents
a year-over-year increase of $180.0 million, or 26%. The increase is due to an increase of $116.3 million in net cash from operating activities as explained
above. The additions to property and equipment increased by $83.7 million as compared to the same prior year period as a result of fleet renewals due to
the difficulty in procuring equipment in 2021. The proceeds from the sale of property and equipment increased by $36.0 million as compared to the prior
year, due to the replenishment of the fleet discussed above and increased prices in the market. The proceeds from assets held for sale increased by
$111.4 million from 2021, and are related to the sale of redundant assets.
1 This is a non-IFRS measure. Refer to the “Non-IFRS financial measures” section below.
2022 Annual Report│17
Free cash flow conversion1, which measures the level of capital employed to generate earnings, for the year ended December 31, 2022, of 87.7% compares
to 87.3% in the same prior year period.
Based on the December 31, 2022, closing share price of $100.24, the free cash flow1 generated by the Company in the preceding twelve months ($880.9
million, or $10.18 per share outstanding) represented a yield of 10.2%.
Management’s Discussion and Analysis
Financial position
(unaudited)
(in thousands of U.S. dollars)
Intangible assets
Total assets, less intangible assets1
Long-term debt
Lease liabilities
Shareholders' equity
* Recasted for adjustments to provisional amounts for UPS Freight prior year business combination
As at
December 31, 2022
1,592,110
3,913,720
1,315,757
413,039
2,463,070
As at
December 31, 2021*
1,792,921
4,090,742
1,608,094
429,206
2,310,355
Compared to December 31, 2021, the Company’s total assets less intangible assets, long-term debt and lease liabilities have decreased. These decreases
are primarily attributable to the sale of CFI and the associated assets and liabilities. The proceeds from the sale were used to immediately reduce the
variable rate debt the Company had on its unsecured revolving facility. The increase in shareholder’s equity is mostly due to the repurchase and
cancellation of the common shares.
Contractual obligations, commitments, contingencies and off-balance sheet arrangements
The following table indicates the Company’s contractual obligations with their respective maturity dates at December 31, 2022, including future interest
payments.
(unaudited)
(in thousands of U.S. dollars)
Unsecured debenture – December 2024
Unsecured senior notes – December 2026 to March 2037
Conditional sales contracts
Lease liabilities
Interest on debt and lease liabilities
Total contractual obligations
Total
147,558
1,080,000
92,822
413,039
380,517
2,113,936
Less than
1 year
—
—
37,087
115,934
57,324
210,345
1 to 3
years
147,558
—
40,466
163,902
96,613
448,539
3 to 5
years
—
150,000
11,302
73,741
75,582
310,625
After
5 years
—
930,000
3,967
59,462
150,998
1,144,427
On March 23, 2022, the Company received $200 million in proceeds from the issuance of new debt taking the form of unsecured senior notes consisting
of two tranches maturing on March 23, 2032, and 2037, bearing a fixed interest rate of 3.50% and 3.80%. Deferred financing fees of $0.3 million were
recognized as a result of the transaction.
On March 23, 2022, the Company received an additional $100 million in proceeds from the amendment and restatement of the debt agreement signed on
July 2, 2021, taking the form of unsecured senior notes as the third tranche maturing on April 2, 2034, bearing a fixed interest rate of 3.55%. Deferred
financing fees of $0.1 million were recognized as a result of the transaction.
The unsecured term loan of $326.1 million which was due in June 2022 was repaid in full with the proceeds from the two debt issuances above.
As at December 31, 2022 the Company’s long term debt was comprised 100% of fixed rate debts (2021 – 85.1%) and nil variable rate debt (2021 – 14.9%).
The following table indicates the Company’s financial covenants to be maintained under its credit facility. These covenants are measured on a consolidated
rolling twelve-month basis and are calculated as prescribed by the credit agreement which, among other things, requires the exclusion of the impact of the
new standard IFRS 16 Leases:
(unaudited)
Covenants
Funded debt-to- EBITDA ratio [ratio of total debt, net of cash, plus letters of credit and some other long-
term liabilities to earnings before interest, income tax, depreciation and amortization (“EBITDA”),
including last twelve months adjusted EBITDA from business acquisitions]
EBITDAR Coverage Ratio [ratio of EBITDAR (EBITDA before rent and including last twelve months
adjusted EBITDAR from business acquisitions) to interest and net rent expenses]
Requirements
As at
December 31, 2022
< 3.50
> 1.75
0.96
6.22
1 This is a non-IFRS measure. Refer to the “Non-IFRS financial measures” section below.
As at December 31, 2022, the Company had $66.8 million of outstanding letters of credit ($47.4 million on December 31, 2021).
2022 Annual Report│18
As at December 31, 2022, the Company had $149.8 million of purchase commitments and $13.9 million of purchase orders that the Company intends to
enter into a lease that is expected to materialize within a year (December 31, 2021 – $87.5 million and $13.2 million, respectively).
Management’s Discussion and Analysis
Dividends and outstanding share data
Dividends
The Company declared $30.3 million in dividends, or $0.35 per common share, in the fourth quarter of 2022. The Board of Directors approved a quarterly
dividend of $0.35 per outstanding common share of the Company’s capital, for an expected aggregate payment of $30.3 million to be paid on April 17,
2023, to shareholders of record at the close of business on March 31, 2023.
Outstanding shares and share-based awards
A total of 86,539,559 common shares were outstanding as at December 31, 2022 (December 31, 2021 – 92,152,893). There was no material change in
the Company’s outstanding share capital between December 31, 2022 and February 22, 2023.
As at December 31, 2022, the number of outstanding options to acquire common shares issued under the Company’s stock option plan was 1,301,972
(December 31, 2021 – 2,060,960) of which 1,272,811 were exercisable (December 31, 2021 – 1,705,284). Each stock option entitles the holder to purchase
one common share of the Company at an exercise price based on the volume-weighted average trading price of the Company’s shares for the last five
trading days immediately preceding the effective date of the grant.
As at December 31, 2022, the number of restricted share units (‘’RSUs’’) granted under the Company’s equity incentive plan to its senior employees was
272,330 (December 31, 2021 – 271,704). On February 7, 2022, the Board of Directors approved the grant of 63,404 RSUs under the Company’s equity
incentive plan. The RSUs will vest in February of the third year following the grant date. Upon satisfaction of the required service period, the plan provides
for settlement of the award through shares. On April 28, 2022, the Company granted a total of 10,815 RSUs under the Company’s equity incentive plan.
The fair value of the RSUs is determined to be the share price fair value at the date of the grant and is recognized as a share-based compensation
expense, through contributed surplus, over the vesting period. The fair value of the RSUs granted was $83.28 per unit. On August 31, 2022, due to the
sale of CFI 22,876 RSUs were forfeited and the employees were compensated based on the text of the plan.
As at December 31, 2021, the number of performance share units (‘’PSUs’’) granted under the Company’s equity incentive plan to its senior employees
was 261,451 (December 31, 2021 – 225,765). On February 7, 2022, the Board of Directors approved the grant of 63,404 PSUs under the Company’s
equity incentive plan. The PSUs will vest in February of the third year following the grant date. Upon satisfaction of the required service period, the plan
provides for settlement of the award through shares. On August 31, 2022, due to the sale of CFI 41,380 PSUs were canceled, including the 18,504 added
for the performance, conditions met, and the employees were compensated based on the text of the plan.
Legal proceedings
The Company is involved in litigation arising from the ordinary course of business primarily involving claims for bodily injury and property damage. It is not
feasible to predict or determine the outcome of these or similar proceedings. However, the Company believes the ultimate recovery or liability, if any,
resulting from such litigation individually or in total would not materially adversely nor positively affect the Company’s financial condition or performance
and, if necessary, has been provided for in the financial statements.
2022 Annual Report│19
Management’s Discussion and Analysis
OUTLOOK
The North American economic growth forecast from leading economists remains subdued due to a variety of factors including elevated interest rates, high
inflation that affects wages, energy and commodity prices, labor shortages, global supply chain challenges, and slower growth in many international
markets. TFI International’s diversity across industrial and consumer end markets and across many modes of transportation, along with the Company’s
disciplined approach to operations, helped generate solid results during the fourth quarter, but macro uncertainty and the possibility of economic recession
in the year ahead remains.
TFI International’s business has proven resilient in the face of recent macro challenges and management remains vigilant in its monitoring for new potential
risks that could cause further economic disruption, resulting in additional rounds of declining freight volumes and higher costs that could adversely affect
TFI’s operating companies and the markets they serve. These uncertainties include but are not limited to geopolitical risk such as the ongoing war in
Ukraine, tight labor market conditions, policy changes surrounding international trade, environmental mandates and changes to the tax code in any
jurisdictions in which TFI International operates.
Barring a more significant economic downturn, management believes the Company is well positioned for continued solid operational and financial
performance in 2023, benefiting from its financial foundation and strong cash flow that allows for strategic investment. The Company strives for a lean
cost structure and has a longstanding focus on profitability, efficiency, network density, customer service, optimal pricing, driver retention, and capacity
rationalization. TFI also continues to have material synergy opportunities related to the 2021 acquisition of TForce Freight, and has meaningful
opportunities to enhance performance within most of its other operations. In addition, TFI’s diverse industrial exposure through specialized TL and LTL
should continue to benefit from a shift toward domestic manufacturing, while its P&C and Logistics business segments should benefit over the long term
from the expansion of e-commerce, which provides both growth and margin expansion opportunities.
Regardless of the operating environment, management’s goal is to build shareholder value through consistent adherence to its operating principles,
including customer focus, an asset-light approach, and continual efforts to enhance efficiencies. In addition, TFI International values free cash flow
generation and strong liquidity with a conservative balance sheet that features a high portion of attractive fixed-rate spreads and limited near-term debt
maturities. This strong financial footing allows the Company to prudently invest and pursue select, accretive acquisitions while returning excess capital to
shareholders.
SUMMARY OF EIGHT MOST RECENT QUARTERLY RESULTS
(in millions of U.S. dollars, except per share data)
Q4’22
Q3’22
Q2’22
Q1’22
Total revenue
Adjusted EBITDA1
Operating income
Net income
EPS – basic
EPS – diluted
Adjusted net income1
Adjusted EPS -
diluted1
1 This is a non-IFRS measure. For a reconciliation refer to the “Non-IFRS financial measures” section below.
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
2,191.5
330.0
219.8
147.7
1.61
1.57
157.6
2,422.3
441.9
391.0
276.8
3.05
3.00
241.1
1,956.7
305.0
216.9
153.5
1.77
1.74
151.8
2,242.0
348.2
318.4
245.2
2.78
2.72
181.2
1.68
2.61
1.72
2.01
Q4’21
2,140.9
318.5
215.0
144.1
1.56
1.52
148.6
Q3’21
2,094.0
296.4
191.6
131.6
1.42
1.38
138.9
Q2’21*
1,836.7
285.4
470.9
411.8
4.42
4.32
137.2
Q1’21
1,148.8
176.2
101.7
66.9
0.72
0.70
73.6
1.57
1.46
1.44
0.77
The differences between the quarters are mainly the result of seasonality (softer in Q1) and business acquisitions. The increase in Q2 2021 is due to the
bargain purchase gain of $283.6 million on the acquisition of UPS Freight, and the Q3 2022 includes a $75.7 million gain on the sale of CFI.
NON-IFRS FINANCIAL MEASURES
Financial data have been prepared in conformity with IFRS, including the following measures:
Operating expenses: Operating expenses include: a) materials and services expenses, which are primarily costs related to independent contractors and
vehicle operation; vehicle operation expenses, which primarily include fuel, repairs and maintenance, vehicle leasing costs, insurance, permits and
operating supplies; b) personnel expenses; c) other operating expenses, which are primarily composed of costs related to offices’ and terminals’ rent,
taxes, heating, telecommunications, maintenance and security and other general administrative expenses; d) depreciation of property and equipment,
depreciation of right-of-use assets, amortization of intangible assets and gain or loss on the sale of rolling stock and equipment, on derecognition of right-
of use assets, on sale of business and on sale of land and buildings and assets held for sale; e) bargain purchase gain; and f) impairment of intangible
assets.
Operating income (loss): Net income or loss before finance income and costs and income tax expense, as stated in the consolidated financial statements.
2022 Annual Report│20
Management’s Discussion and Analysis
This MD&A includes references to certain non-IFRS financial measures as described below. These non-IFRS financial measures are not standardized
financial measures under IFRS used to prepare the financial statements of the Company to which the measures relate and might not be comparable to
similar financial measures disclosed by other issuers. Accordingly, they should not be considered in isolation, in addition to, not as a substitute for or
superior to, measures of financial performance prepared in accordance with IFRS. The terms and definitions of non-IFRS measures used in this MD&A
and a reconciliation of each non-IFRS measure to the most directly comparable IFRS measure are provided below.
Adjusted net income: Net income or loss excluding amortization of intangible assets related to business acquisitions, net change in the fair value and
accretion expense of contingent considerations, net change in the fair value of derivatives, net foreign exchange gain or loss, impairment of intangible
assets, bargain purchase gain, gain or loss on sale of land and buildings, assets held for sale of and building, gain or loss on the sale of business and
directly attributable expenses due to disposal, gain or loss on the disposal of intangible assets and U.S. Tax Reform. In presenting an adjusted net income
and adjusted EPS, the Company’s intent is to help provide an understanding of what would have been the net income and earnings per share in a context
of significant business combinations and excluding specific impacts and to reflect earnings from a strictly operating perspective. The amortization of
intangible assets related to business acquisitions comprises amortization expense of customer relationships, trademarks and non-compete agreements
accounted for in business combinations and the income tax effects related to this amortization. Management also believes, in excluding amortization of
intangible assets related to business acquisitions, it provides more information on the amortization of intangible asset expense portion, net of tax, that will
not have to be replaced to preserve the Company’s ability to generate similar future cash flows. The Company excludes these items because they affect
the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Excluding these items does not
imply they are necessarily non-recurring. See reconciliation on page 8.
Adjusted earnings per share (adjusted “EPS”) - basic: Adjusted net income divided by the weighted average number of common shares.
Adjusted EPS - diluted: Adjusted net income divided by the weighted average number of diluted common shares.
Adjusted EBITDA: Net income before finance income and costs, income tax expense, depreciation, amortization, impairment of intangible assets, bargain
purchase gain, and gain or loss on sale of land and buildings, assets held for sale, sale of business, and gain or loss on disposal of intangible assets.
Management believes adjusted EBITDA to be a useful supplemental measure. Adjusted EBITDA is provided to assist in determining the ability of the
Company to assess its performance.
Segmented adjusted EBITDA refers to operating income (loss) before depreciation, amortization, impairment of intangible assets, bargain purchase gain,
gain or loss on sale of business, land and buildings, and assets held for sale and gain or loss on disposal of intangible assets. Management believes
adjusted EBITDA to be a useful supplemental measure. Adjusted EBITDA is provided to assist in determining the ability of the Company to assess its
performance.
Consolidated adjusted EBITDA reconciliation:
(unaudited)
(in thousands of U.S. dollars)
Net income
Net finance costs
Income tax expense
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
(Gain) loss on sale of business
Bargain purchase gain
(Gain) loss on sale of land and buildings
Gain on sale of assets held for sale
(Gain) loss on sale of intangible assets
Adjusted EBITDA
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
2022
153,494
16,963
46,403
56,587
32,150
13,262
2,069
—
—
(15,972)
—
304,956
Three months ended
December 31
2020
86,328
15,382
15,412
43,753
21,618
13,557
(306)
—
5
(2,211)
—
193,538
2021
144,139
21,441
49,399
65,294
31,190
13,653
—
—
9
(6,654)
(5)
318,466
Years ended
December 31
2020
275,675
53,910
86,982
170,520
80,496
48,213
(306)
(4,008)
6
(11,899)
—
699,589
2021*
754,405
73,018
151,806
225,007
112,782
55,243
—
(283,593)
19
(12,209)
1
1,076,479
2022
823,232
80,397
242,409
248,638
126,276
55,679
(73,653)
—
(43)
(77,911)
—
1,425,024
2022 Annual Report│21
Segmented adjusted EBITDA reconciliation:
(unaudited)
(in thousands of U.S. dollars)
Package and Courier
Operating income
Depreciation and amortization
Loss on disposal of intangible assets
Adjusted EBITDA
Less-Than-Truckload
Operating income
Depreciation and amortization
Bargain purchase gain
(Gain) loss on sale of land and buildings
Gain on sale of assets held for sale
Adjusted EBITDA
Truckload
Operating income
Depreciation and amortization
(Gain) loss on sale of land and buildings
Gain on sale of assets held for sale
Gain on disposal of intangible assets
Adjusted EBITDA
Logistics
Operating income
Depreciation and amortization
Bargain purchase gain
Loss on sale of land and buildings
Adjusted EBITDA
Corporate
Operating loss
Depreciation and amortization
(Gain) loss on sale of business
Adjusted EBITDA
Management’s Discussion and Analysis
Three months ended
December 31
2021
2022
37,563
6,372
—
43,935
88,240
38,080
—
(1)
(12)
126,307
71,842
48,124
1
(15,960)
—
104,007
34,204
9,269
—
—
43,473
(14,989)
154
2,069
(12,766)
36,713
6,783
—
43,496
103,449
37,739
—
6
(5)
141,189
61,803
56,699
—
(6,649)
(5)
111,848
32,869
9,593
—
3
42,465
(19,855)
(677)
—
(20,532)
Years ended
December 31
2021*
108,440
26,404
1
134,845
572,798
116,060
(271,593)
16
(1,640)
415,641
230,189
211,561
—
(10,569)
—
431,181
142,794
38,208
(12,000)
3
169,005
(74,992)
799
—
(74,193)
2022
134,306
26,532
—
160,838
470,807
152,666
—
—
(55,714)
567,759
366,868
212,430
(43)
(22,197)
—
557,058
140,446
38,244
—
—
178,690
33,611
721
(73,653)
(39,321)
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue before fuel surcharge.
Free cash flow: Net cash from operating activities less additions to property and equipment plus proceeds from sale of property and equipment and
assets held for sale. Management believes that this measure provides a benchmark to evaluate the performance of the Company in regard to its ability
to meet capital requirements. See reconciliation on page 17.
Free cash flow conversion: Adjusted EBITDA less net capital expenditures, divided by the adjusted EBITDA. Management believes that this measure
provides a benchmark to evaluate the performance of the Company in regard to its ability to convert its operating profit into free cash flow.
Free cash flow conversion reconciliation:
(unaudited)
(in thousands of U.S. dollars)
Net income
Net finance costs
Income tax expense
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
(Gain) loss on the sale of business
Bargain purchase gain
(Gain) loss on sale of land and buildings
Gain on sale of assets held for sale
(Gain) loss on sale of intangible assets
Adjusted EBITDA
Net capital expenditures
Adjusted EBITDA less net capital expenditures
Free cash flow conversion
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
Three months ended
December 31
2021
144,139
21,441
49,399
65,294
31,190
13,653
—
—
9
(6,654)
(5)
318,466
(68,237)
250,229
78.6%
2022
153,494
16,963
46,403
56,587
32,150
13,262
2,069
—
—
(15,972)
—
304,956
(77,755)
227,201
74.5%
Years ended
December 31
2021*
754,405
73,018
151,806
225,007
112,782
55,243
—
(283,593)
19
(12,209)
1
1,076,479
(136,782)
939,697
87.3%
2022
823,232
80,397
242,409
248,638
126,276
55,679
(73,653)
—
(43)
(77,911)
—
1,425,024
(175,954)
1,249,070
87.7%
2022 Annual Report│22
Management’s Discussion and Analysis
Total assets less intangible assets: Management believes that this presents a more useful basis to evaluate the return on the productive assets. The
excluded intangibles relate primarily to intangibles assets acquired through business acquisitions.
(unaudited)
(in thousands of U.S. dollars)
As at December 31, 2022
Total assets
Intangible assets
Total assets less intangible assets
Package
and
Courier
Less-
Than-
Truckload
Truckload Logistics Corporate Eliminations
Total
362,724 2,275,672 1,861,093 731,564
775,464 468,547
180,119
182,605 2,107,874 1,085,629 263,017
167,798
274,777
182
274,595
- 5,505,830
- 1,592,110
- 3,913,720
As at December 31, 2021*
Total assets
Intangible assets
Total assets less intangible assets
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
379,881 2,351,138 2,317,615 746,638
955,608 454,612
193,765
186,116 2,162,534 1,362,007 292,026
188,604
88,391
332
88,059
- 5,883,663
- 1,792,921
- 4,090,742
2022 Annual Report│23
Net capital expenditures: Additions to rolling stock and equipment, net of proceeds from the sale of rolling stock and equipment and assets held for
sale excluding property. Management believes that this measure illustrates the recurring net capital expenditures which is required for the respective
Management’s Discussion and Analysis
period.
(unaudited)
(in thousands of U.S. dollars)
Three months ended December 31, 2022
Additions to rolling stock
Additions to equipment
Proceeds from the sale of rolling stock
Proceeds from the sale of equipment
Net capital expenditures
Three months ended December 31, 2021
Additions to rolling stock
Additions to equipment
Proceeds from the sale of rolling stock
Proceeds from the sale of equipment
Net capital expenditures
YTD ended December 31, 2022
Additions to rolling stock
Additions to equipment
Proceeds from the sale of rolling stock
Proceeds from the sale of equipment
Net capital expenditures
YTD ended December 31, 2021
Additions to rolling stock
Additions to equipment
Proceeds from the sale of rolling stock
Proceeds from the sale of equipment
Net capital expenditures
Package
and
Courier
5,786
579
(320)
-
6,045
4,794
1,112
20
-
5,926
9,991
2,227
(1,579)
(3)
10,636
11,569
3,125
(246)
(3)
14,445
Less-
Than-
Truckload Truckload
Logistics Corporate Eliminations
Total
58,353
5,025
(6,399)
294
57,273
23,167
2,134
(11,252)
199
14,248
47,680
1,620
(2,313)
(1)
46,986
33,394
1,801
(20,075)
(7)
15,113
134,898
10,888
(13,067)
95
132,814
141,388
3,747
(111,582)
(1,895)
31,658
55,087
2,655
(5,024)
(15)
52,703
150,282
6,897
(87,995)
(7)
69,177
-
437
(115)
(191)
131
-
235
(26)
(17)
192
—
1,032
(165)
(191)
676
142
373
(146)
(53)
316
-
58
-
-
58
-
20
-
-
20
-
170
-
-
170
-
141
-
-
141
87,306
8,233
(18,086)
302
77,755
85,868
4,788
(22,394)
(25)
68,237
286,277
18,064
(126,393)
(1,994)
175,954
217,080
13,191
(93,411)
(78)
136,782
Operating margin is calculated as operating income (loss) as a percentage of revenue before fuel surcharge.
Adjusted operating ratio: Operating expenses before gain on sale of business, bargain purchase gain, and gain or loss on sale of land and buildings
and assets held for sale, and gain or loss on disposal of intangible assets (“Adjusted operating expenses”), net of fuel surcharge revenue, divided by
revenue before fuel surcharge. Although the adjusted operating ratio is not a recognized financial measure defined by IFRS, it is a widely recognized
measure in the transportation industry, which the Company believes provides a comparable benchmark for evaluating the Company’s performance. Also,
to facilitate the comparison of business level activity and operating costs between periods, the Company compares the revenue before fuel surcharge
(“revenue”) and reallocates the fuel surcharge revenue to materials and services expenses within operating expenses.
Consolidated adjusted operating ratio reconciliation:
(unaudited)
(in thousands of U.S. dollars)
Operating expenses
(Gain) loss on sale of business
Bargain purchase gain
Gain (loss) on sale of land and building
Gain on sale of assets held for sale
Gain (loss) on disposal of intangible assets
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge revenue
Revenue before fuel surcharge
Adjusted operating ratio
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination.
2022
1,739,834
(2,069)
—
—
15,972
—
1,753,737
(340,199)
1,413,538
1,616,495
87.4%
Three months ended
December 31
2020
1,004,884
306
—
(5)
2,211
—
1,007,396
(73,859)
933,537
1,048,147
2021
1,925,935
—
—
(9)
6,654
5
1,932,585
(252,491)
1,680,094
1,888,423
89.0%
2022
7,666,453
73,653
—
43
77,911
—
7,818,060
(1,455,427)
6,362,633
7,357,064
2021*
6,241,200
—
283,593
(19)
12,209
(1)
6,536,982
(751,644)
5,785,338
6,468,785
Years ended
December 31
2020
3,364,567
306
4,008
(6)
11,899
—
3,380,774
(296,831)
3,083,943
3,484,303
88.5%
89.1%
86.5%
89.4%
2022 Annual Report│24
Less-Than-Truckload and Truckload reportable segments adjusted operating ratio reconciliation and Truckload operating segments
Management’s Discussion and Analysis
reconciliations:
(unaudited)
(in thousands of U.S. dollars)
Less-Than-Truckload
Total revenue
Total operating expenses
Operating income
Operating expenses
Bargain purchase gain
Gain (loss) on sale of land and buildings and assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge revenue
Revenue before fuel surcharge
Adjusted operating ratio
Less-Than-Truckload - Revenue before fuel surcharge
U.S. based LTL
Canadian based LTL
Eliminations
Less-Than-Truckload - Fuel surcharge revenue
U.S. based LTL
Canadian based LTL
Eliminations
Less-Than-Truckload - Operating income (loss)
U.S. based LTL
Canadian based LTL
U.S. based LTL
Operating expenses*
Bargain purchase gain
Gain (loss) on sale of land and buildings and assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge
Revenue before fuel surcharge
Adjusted operating ratio
Canadian based LTL
Operating expenses*
Gain on sale of land and buildings and assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge
Revenue before fuel surcharge
Adjusted operating ratio
* Recasted for adjustments to provisional amounts of UPS Freight prior year business combination
* Operating expenses excluding intra LTL eliminations
Three months ended
December 31
2021*
2022
903,713
815,473
88,240
815,473
—
13
815,486
(182,930)
632,556
720,783
87.8%
601,436
123,176
(3,829)
720,783
142,180
41,051
(301)
182,930
57,819
30,421
88,240
685,797
-
-
685,797
(142,180)
543,617
601,436
90.4%
133,806
13
133,819
(41,051)
92,768
123,176
75.3%
959,546
856,097
103,449
856,097
—
(1)
856,096
(136,635)
719,461
822,911
87.4%
680,212
144,697
(1,998)
822,911
108,275
28,598
(238)
136,635
72,077
31,372
103,449
716,410
-
(7)
716,403
(108,275)
608,128
680,212
89.4%
141,923
6
141,929
(28,598)
113,331
144,697
78.3%
2022
4,023,163
3,552,356
470,807
3,552,356
—
55,714
3,608,070
(779,606)
2,828,464
3,243,557
87.2%
2,709,762
548,012
(14,217)
3,243,557
615,840
165,185
(1,419)
779,606
327,793
143,014
470,807
2,997,809
-
55,054
3,052,863
(615,840)
2,437,023
2,709,762
89.9%
570,183
660
570,843
(165,185)
405,658
548,012
74.0%
Years ended
December 31
2021*
2,815,390
2,242,592
572,798
2,242,592
271,593
1,624
2,515,809
(374,750)
2,141,059
2,440,640
87.7%
1,889,611
556,891
(5,862)
2,440,640
281,110
94,166
(526)
374,750
459,071
113,727
572,798
1,711,650
271,593
(17)
1,983,226
(281,110)
1,702,116
1,889,611
90.1%
537,330
1,641
538,971
(94,166)
444,805
556,891
79.9%
2022 Annual Report│25
Less-Than-Truckload and Truckload reportable segments adjusted operating ratio reconciliation and Truckload operating segments
Management’s Discussion and Analysis
reconciliations (continued):
(unaudited)
(in thousands of U.S. dollars)
Truckload
Total revenue
Total operating expenses
Operating income
Operating expenses
Gain on sale of business
Gain on sale of land and buildings and assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge revenue
Revenue before fuel surcharge
Adjusted operating ratio
Truckload - Revenue before fuel surcharge
U.S. based Conventional TL1
Canadian based Conventional TL
Specialized TL1
Eliminations
Truckload - Fuel surcharge revenue
U.S. based Conventional TL1
Canadian based Conventional TL
Specialized TL1
Eliminations
Truckload - Operating income
U.S. based Conventional TL1
Canadian based Conventional TL
Specialized TL1
U.S. based Conventional TL1
Operating expenses*
Gain on sale of land and buildings and assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge revenue
Revenue before fuel surcharge
Adjusted operating ratio
Canadian based Conventional TL
Operating expenses*
Gain on sale of land and buildings and assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge revenue
Revenue before fuel surcharge
Adjusted operating ratio
Specialized TL1
Operating expenses*
Gain on sale of assets held for sale
Adjusted operating expenses
Fuel surcharge revenue
Adjusted operating expenses, net of fuel surcharge revenue
Revenue before fuel surcharge
Adjusted operating ratio
(2,173)
506,432
(8,638)
1,986,331
Three months ended
2022
December 31
2021
502,784
430,942
71,842
430,942
—
15,959
446,901
(99,433)
347,468
403,351
86.1%
—
79,101
325,493
(1,243)
403,351
—
17,307
82,288
(162)
99,433
—
30,463
41,379
71,842
—
—
—
—
—
—
—
65,945
15,485
81,430
(17,307)
64,123
79,101
81.1%
366,402
474
366,876
(82,288)
284,588
325,493
87.4%
584,009
522,206
61,803
522,206
—
6,649
528,855
(77,577)
451,278
506,432
89.1%
106,171
73,786
328,648
20,337
9,414
48,045
(219)
77,577
12,409
8,565
40,829
61,803
114,099
—
114,099
(20,337)
93,762
106,171
88.3%
74,635
—
74,635
(9,414)
65,221
73,786
88.4%
335,864
6,649
342,513
(48,045)
294,468
328,648
89.6%
2022
2,451,038
2,084,170
366,868
2,084,170
—
22,240
2,106,410
(464,707)
1,641,703
1,986,331
82.7%
310,026
322,553
1,362,390
82,059
62,929
321,362
(1,643)
464,707
46,133
84,321
236,414
366,868
345,952
—
345,952
(82,059)
263,893
310,026
85.1%
301,161
15,529
316,690
(62,929)
253,761
322,553
78.7%
Years ended
December 31
2021
2,162,752
1,932,563
230,189
1,932,563
—
10,569
1,943,132
(261,595)
1,681,537
1,901,157
88.4%
424,320
250,177
1,233,761
(7,101)
1,901,157
72,527
29,043
160,574
(549)
261,595
49,989
30,367
149,833
230,189
446,858
—
446,858
(72,527)
374,331
424,320
88.2%
248,853
17
248,870
(29,043)
219,827
250,177
87.9%
1,447,338
6,711
1,454,049
(321,362)
1,132,687
1,362,390
83.1%
1,244,502
10,552
1,255,054
(160,574)
1,094,480
1,233,761
88.7%
2022 Annual Report│26
1 Recasted comparative figures for change in operating segments of the dedicated operations from US Conventional Truckload as a result of the sale of business of CFI.
* Operating expenses excluding intra TL eliminations
Return on invested capital (“ROIC”): Management believes ROIC at the segment level is a useful measure in the efficiency in the use of capital funds.
The Company calculates ROIC as segment operating income net of exclusions, after tax, divided by the segment average invested capital. Operating
income net of exclusions, after tax, is calculated as the trailing twelve months of operating income before bargain purchase gain, gain or loss on the sale
of land and buildings and assets held for sale, and amortization of intangible assets, after tax using the statutory tax rate of the Company. Average invested
capital is calculated intangibles plus total assets excluding intangibles, net of trade and other payables, current taxes payable and provisions averaged
Management’s Discussion and Analysis
between the beginning and ending balance over a twelve-month period.
Return on invested capital segment reconciliation:
(unaudited)
(in thousands of U.S. dollars)
Package and Courier
Operating income
Amortization of intangible assets
Operating income, net of exclusions
Income tax
Operating income net of exclusions, after tax
Intangible assets
Total assets, excluding intangible assets
less: Trade and other payables, income taxes payable and provisions
Total invested capital, current year
Intangible assets, prior year
Total assets, excluding intangible assets, prior year
less: Trade and other payables, income taxes payable and provisions, prior year
Total invested capital, prior year
Average invested capital
Return on invested capital
Less-Than-Truckload - Canadian based LTL
Operating income
Gain on sale of assets held for sale
Amortization of intangible assets
Operating income, net of exclusions
Income tax
Operating income net of exclusions, after tax
Intangible assets
Total assets, excluding intangible assets
less: Trade and other payables, income taxes payable and provisions
Total invested capital, current year
Intangible assets, prior year
Total assets, excluding intangible assets, prior year
less: Trade and other payables, income taxes payable and provisions, prior year
Total invested capital, prior year
Average invested capital
Return on invested capital
2022
134,306
645
134,951
26.5%
99,189
180,119
182,605
(67,428)
295,296
193,765
186,116
(65,438)
314,443
304,870
32.5%
143,014
(660)
7,713
150,067
26.5%
110,299
162,397
352,949
(77,439)
437,907
182,084
373,655
(74,241)
481,498
459,703
24.0%
As at
December 31
2021
108,440
903
109,343
26.5%
80,367
193,765
186,116
(65,438)
314,443
193,288
194,631
(66,793)
321,126
317,785
25.3%
113,727
(1,640)
9,004
121,091
26.5%
89,002
182,084
373,655
(74,241)
481,498
189,579
403,549
(76,608)
516,520
499,009
17.8%
2022 Annual Report│27
Return on invested capital segment reconciliation (continued):
(unaudited)
(in thousands of U.S. dollars)
Truckload - Canadian based Conventional TL
Operating income
Gain on sale of land and buildings
Gain on sale of assets held for sale
Amortization of intangible assets
Operating income, net of exclusions
Income tax
Operating income net of exclusions, after tax
Intangible assets
Total assets, excluding intangible assets
less: Trade and other payables, income taxes payable and provisions
Total invested capital, current year
Intangible assets, prior year
Total assets, excluding intangible assets, prior year
less: Trade and other payables, income taxes payable and provisions, prior year
Total invested capital, prior year
Average invested capital
Return on invested capital
Truckload - Specialized TL*
Operating income
Gain on sale of assets held for sale
Amortization of intangible assets
Operating income, net of exclusions
Income tax
Operating income net of exclusions, after tax
Intangible assets
Total assets, excluding intangible assets
less: Trade and other payables, income taxes payable and provisions
Total invested capital, current year
Intangible assets, prior year
Total assets, excluding intangible assets, prior year
less: Trade and other payables, income taxes payable and provisions, prior year
Total invested capital, prior year
Average invested capital
Return on invested capital
Logistics
Operating income
Loss on sale of land and buildings
Amortization of intangible assets
Bargain Purchase gain
Operating income, net of exclusions
Income tax
Operating income net of exclusions, after tax
Intangible assets
Total assets, excluding intangible assets
less: Trade and other payables, income taxes payable and provisions
Total invested capital, current year
Intangible assets, prior year
Total assets, excluding intangible assets, prior year
less: Trade and other payables, income taxes payable and provisions, prior year
Total invested capital, prior year
Average invested capital
Return on invested capital
Management’s Discussion and Analysis
2022
84,321
(44)
(15,485)
1,958
70,750
26.5%
52,001
96,941
185,740
(40,671)
242,010
104,947
169,197
(28,473)
245,671
243,841
21.3%
236,414
(6,711)
20,495
250,198
26.5%
183,896
678,522
906,564
(151,097)
1,433,989
658,692
791,293
(139,683)
1,310,302
1,372,146
13.4%
140,446
—
21,990
—
162,436
26.5%
119,390
468,547
263,550
(186,557)
545,540
454,612
292,026
(199,967)
546,671
546,106
21.9%
As at
December 31
2021
30,367
—
(17)
2,124
32,474
26.5%
23,868
104,947
169,197
(28,473)
245,671
96,737
121,407
(24,839)
193,305
219,488
10.9%
149,833
(10,553)
17,394
156,674
26.5%
115,155
658,692
791,293
(139,683)
1,310,302
615,865
701,987
(112,888)
1,204,964
1,257,633
9.2%
142,794
3
22,683
(12,000)
153,480
26.5%
112,808
454,612
292,026
(199,967)
546,671
457,098
272,592
(144,305)
585,385
566,028
19.9%
* Recasted comparative figures for change in operating segments of the dedicated operations from US Conventional Truckload as a result of the sale of business of CFI.
Return on invested capital for US LTL : Management believes ROIC at the segment level is a useful measure in the efficiency in the use of capital funds
and the ROIC calculation for U.S. LTL has been modified as compared to the other segment ROICs due to the impact of the bargain purchase gain to
provide more consistent comparison to other segments ROIC calculation. The modification includes reducing the total assets, excluding intangible assets
by the bargain purchase gain, using the acquisition price instead of the prior year invested capital, and reducing the current year total invested capital by
the total liabilities of the US.
2022 Annual Report│28
(unaudited)
(in thousands of U.S. dollars)
Less-Than-Truckload - U.S. based LTL
Operating income
Loss on sale of land and buildings
Gain on sale of assets held for sale
Amortization of intangible assets
Operating income, net of exclusions
Income tax
Operating income net of exclusions, after tax
Intangible assets
Total assets, excluding intangible assets
less: Total liabilities
Total invested capital, current year
Total invested capital, acquisition price
Average invested capital
Return on invested capital
Management’s Discussion and Analysis
2022
327,793
8
(55,054)
1,118
273,865
26.5%
201,291
5,401
1,483,288
(637,340)
851,349
838,910
845,130
23.8%
As at
December 31
2021*
—
—
—
—
—
—
—
—
—
—
—
—
—
—
* The return on invested capital for the U.S. LTL is not disclosed as the trailing twelve-month information was not available for 2021.
2022 Annual Report│29
Management’s Discussion and Analysis
RISKS AND UNCERTAINTIES
The Company’s future results may be affected by a number of factors over many of which the Company has little or no control.
The following discussion of risk factors contains forward-looking statements. The following issues, uncertainties and risks, among
others, should be considered in evaluating the Company’s business, prospects, financial condition, results of operations and
cash flows.
Competition. The Company faces growing competition from other transporters in Canada, the United States and Mexico. These
factors, including the following, could impair the Company’s ability to maintain or improve its profitability and could have a material
adverse effect on the Company’s results of operations:
the Company competes with many other transportation companies of varying sizes, including Canadian, U.S. and Mexican
transportation companies;
the Company’s competitors may periodically reduce their freight rates to gain business, which may limit the Company’s
ability to maintain or increase freight rates or maintain growth in the Company’s business;
some of the Company’s customers are other transportation companies or companies that also operate their own private
trucking fleets, and they may decide to transport more of their own freight or bundle transportation with other services;
some of the Company’s customers may reduce the number of carriers they use by selecting so-called “core carriers” as
approved service providers or by engaging dedicated providers, and in some instances the Company may not be selected;
many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress
freight rates or result in the loss of some of the Company’s business to competitors;
the market for qualified drivers is highly competitive, particularly in the Company’s growing U.S. operations, and the
Company’s inability to attract and retain drivers could reduce its equipment utilization and cause the Company to increase
compensation, both of which would adversely affect the Company’s profitability;
economies of scale that may be passed on to smaller carriers by procurement aggregation providers may improve their
ability to compete with the Company;
some of the Company’s smaller competitors may not yet be fully compliant with recently-enacted regulations which may
allow such competitors to take advantage of additional driver productivity;
advances in technology, such as advanced safety systems, automated package sorting, handling and delivery, vehicle
platooning, alternative fuel vehicles, autonomous vehicle technology and digitization of freight services, may require the
Company to increase investments in order to remain competitive, and the Company’s customers may not be willing to
accept higher freight rates to cover the cost of these investments;
the Company’s competitors may have better safety records than the Company or a perception of better safety records,
which could impair the Company’s ability to compete;
some high-volume package shippers, such as Amazon.com, are developing and implementing in-house delivery capabilities
and utilizing independent contractors for deliveries, which could in turn reduce the Company’s revenues and market share;
the Company’s brand names may be subject to adverse publicity (whether or not justified) and lose significant value, which
could result in reduced demand for the Company’s services;
competition from freight brokerage companies may materially adversely affect the Company’s customer relationships and
freight rates; and
higher fuel prices and, in turn, higher fuel surcharges to the Company’s customers may cause some of the Company’s
customers to consider freight transportation alternatives, including rail transportation.
Regulation. In Canada, carriers must obtain licenses issued by provincial transport boards in order to carry goods inter-
provincially or to transport goods within any province. Licensing from U.S. and Mexican regulatory authorities is also required for
the transportation of goods in Canada, the United States, and Mexico. Any change in or violation of existing or future regulations
could have an adverse impact on the scope of the Company’s activities. Future laws and regulations may be more stringent,
require changes in the Company’s operating practices, influence the demand for transportation services or require the Company
to incur significant additional costs. Higher costs incurred by the Company, or by the Company’s suppliers who pass the costs
onto the Company through higher supplies and materials pricing, could adversely affect the Company’s results of operations.
In addition to the regulatory regime applicable to operations in Canada, the Company is increasing its operations in the United
States, and is therefore increasingly subject to rules and regulations related to the U.S. transportation industry, including
2022 Annual Report │30
Management’s Discussion and Analysis
regulation from various federal, state and local agencies, including the Department of Transportation (“DOT”) (in part through the
Federal Motor Carrier Safety Administration (“FMCSA”)), the Environmental Protection Agency (“EPA”) and the Department of
Homeland Security. Drivers must, both in Canada and the United States, comply with safety and fitness regulations, including
those relating to drug and alcohol testing, driver safety performance and hours of service. Weight and dimensions, exhaust
emissions and fuel efficiency are also subject to government regulation. The Company may also become subject to new or more
restrictive regulations relating to fuel efficiency, exhaust emissions, hours of service, drug and alcohol testing, ergonomics, on-
board reporting of operations, collective bargaining, security at ports, speed limitations, driver training and other matters affecting
safety or operating methods.
In the United States, there are currently two methods of evaluating the safety and fitness of carriers: the Compliance, Safety,
Accountability (“CSA”) program, which evaluates and ranks fleets on certain safety-related standards by analyzing data from
recent safety events and investigation results, and the DOT safety rating, which is based on an on-site investigation and affects
a carrier’s ability to operate in interstate commerce. Additionally, the FMCSA has proposed rules in the past that would change
the methodologies used to determine carrier safety and fitness.
Under the CSA program, carriers are evaluated and ranked against their peers based on seven categories of safety-related data.
The seven categories of safety-related data currently include Unsafe Driving, Hours-of-Service Compliance, Driver Fitness,
Controlled Substances/Alcohol, Vehicle Maintenance, Hazardous Materials Compliance and Crash Indicator (such categories
known as “BASICs”). Carriers are grouped by category with other carriers that have a similar number of safety events (i.e.
crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile or score. If the Company were
subject to any such interventions, this could have an adverse effect on the Company’s business, financial condition and results
of operations. As a result, the Company’s fleet could be ranked poorly as compared to peer carriers. There is no guarantee that
the Company will be able to maintain its current safety ratings or that it will not be subject to interventions in the future. The
Company recruits first-time drivers to be part of its fleet, and these drivers may have a higher likelihood of creating adverse safety
events under CSA. The occurrence of future deficiencies could affect driver recruitment in the United States by causing high-
quality drivers to seek employment with other carriers or limit the pool of available drivers or could cause the Company’s
customers to direct their business away from the Company and to carriers with higher fleet safety rankings, either of which would
materially adversely affect the Company’s business, financial condition and results of operations. In addition, future deficiencies
could increase the Company’s insurance expenses. Additionally, competition for drivers with favorable safety backgrounds may
increase, which could necessitate increases in driver-related compensation costs. Further, the Company may incur greater than
expected expenses in its attempts to improve unfavorable scores.
In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing results and
requiring motor carriers and medical review officers to provide records of violations by commercial drivers of FMCSA drug and
alcohol testing requirements. Motor carriers in the United States will be required to query the clearinghouse to ensure drivers
and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them from operating
commercial motor vehicles. The final rule became effective on January 4, 2017, with a compliance date of January 6, 2020. In
December 2019, however, the FMCSA announced a final rule extending by three years the date for state driver’s licensing
agencies to comply with certain requirements. The December 2016 commercial driver’s license rule required states to request
information from the clearinghouse about individuals prior to issuing, renewing, upgrading or transferring a commercial driver’s
license. This new action will allow states’ compliance with the requirement, which was set to begin January 2020, to be delayed
until January 2023. The compliance date of January 2020 remained in place for all other requirements set forth in the
clearinghouse final rule, however. Upon implementation, the rule may reduce the number of available drivers in an already
constrained driver market. Pursuant to a new rule finalized by the FMCSA, effective November 2021, states are required to query
the clearinghouse when issuing, renewing, transferring, or upgrading a commercial drivers license and must revoke a driver’s
commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.
In addition, other rules have been proposed or made final by the FMCSA, including (i) a rule requiring the use of speed-limiting
devices on heavy-duty tractors to restrict maximum speeds, which was proposed in 2016, and (ii) a rule setting out minimum
driver training standards for new drivers applying for commercial driver’s licenses for the first time and to experienced drivers
upgrading their licenses or seeking a hazardous materials endorsement, which was made final in December 2016 with a
compliance date in February 2020 (FMCSA officials delayed implementation of the final rule by two years). In July 2017, the DOT
announced that it would no longer pursue a speed limiter rule, but left open the possibility that it could resume such a pursuit in
2022 Annual Report │31
Management’s Discussion and Analysis
the future. In May 2021, however, a bill was reintroduced in the U.S. House of Representatives that would require commercial
motor vehicles with gross weight exceeding 26,000 pounds to eb equipped with a speed limiting device, prohibiting speeds
greater than 65 miles per hour. Whether the bill will become law is uncertain. The effect of these rules, to the extent they become
effective, could result in a decrease in fleet production and/or driver availability, either of which could materially adversely affect
the Company’s business, financial condition and results of operations.
The Company’s subsidiaries with U.S. operating authority currently have a satisfactory DOT rating, which is the highest available
rating under the current safety rating scale. If the Company’s subsidiaries with U.S. operating authority were to receive a
conditional or unsatisfactory DOT safety rating, it could materially adversely affect the Company’s business, financial condition
and results of operations as customer contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory
rating could materially adversely affect or restrict the Company’s operations and increase the Company’s insurance costs.
The FMCSA has proposed regulations that would modify the existing rating system and the safety labels assigned to motor
carriers evaluated by the DOT. Under regulations that were proposed in 2016, the methodology for determining a carrier’s DOT
safety rating would be expanded to include the on-road safety performance of the carrier’s drivers and equipment, as well as
results obtained from investigations. Exceeding certain thresholds based on such performance or results would cause a carrier
to receive an unfit safety rating. The proposed regulations were withdrawn in March 2017, but the FMCSA noted that a similar
process may be initiated in the future. If similar regulations were enacted and the Company were to receive an unfit or other
negative safety rating, the Company’s business would be materially adversely affected in the same manner as if it received a
conditional or unsatisfactory safety rating under the current regulations. In addition, poor safety performance could lead to
increased risk of liability, increased insurance, maintenance and equipment costs and potential loss of customers, which could
materially adversely affect the Company’s business, financial condition and results of operations. The FMCSA has also indicated
that it is in the early phases of a new study on the causation of large truck crashes. Although it remains unclear whether such a
study will ultimately be completed, the results of such study could spur further proposed and/or final rules regarding safety and
fitness in the United States.
From time to time, the FMCSA proposes and implements changes to regulations impacting hours-of-service. Such changes can
negatively impact the Company’s productivity and affect its operations and profitability by reducing the number of hours per day
or week the Company’s U.S. drivers and independent contractors may operate and/or disrupt the Company’s network. However,
in August 2019, the FMCSA issued a proposal to make changes to its hours-of-service rules that would allow U.S. truck drivers
more flexibility with their 30-minute rest break and with dividing their time in the sleeper berth. It also would extend by two hours
the duty time for U.S. drivers encountering adverse weather, and extend the shorthaul exemption by lengthening the drivers’
maximum on-duty period from 12 hours to 14 hours. In June 2020, the FMCSA adopted a final rule substantially as proposed,
which became effective in September 2020. Certain industry groups have challenged these rules in U.S. courts, and it remains
unclear what, if anything, will come from such challenges. Any future changes to U.S. hours-of-service regulations could
materially and adversely affect the Company’s operations and profitability.
The U.S. National Highway Traffic Safety Administration, the EPA and certain U.S. states, including California, have adopted
regulations that are aimed at reducing tractor emissions and/or increasing fuel economy of the equipment the Company uses.
Certain of these regulations are currently effective, with stricter emission and fuel economy standards becoming effective over
the next several years. Other regulations have been proposed in the United States that would similarly increase these standards.
U.S. federal and state lawmakers and regulators have also adopted or are considering a variety of other climate-change legal
requirements related to carbon emissions and greenhouse gas emissions. These legal requirements could potentially limit
carbon emissions within certain states and municipalities in the United States. Certain of these legal requirements restrict the
location and amount of time that diesel-powered tractors (like the Company’s) may idle, which may force the Company to
purchase on-board power units that do not require the engine to idle or to alter the Company’s drivers’ behavior, which might
result in a decrease in productivity and/or an increase in driver turnover. All of these regulations have increased, and may
continue to increase, the cost of new tractors and trailers and may require the Company to retrofit certain of its tractors and
trailers, may increase its maintenance costs, and could impair equipment productivity and increase the Company’s operating
costs, particularly if such costs are not offset by potential fuel savings. The occurrence of any of these adverse effects, combined
with the uncertainty as to the reliability of the newly-designed diesel engines and the residual values of the Company’s equipment,
could materially adversely affect the Company’s business, financial condition and results of operations. Furthermore, any future
regulations that impose restrictions, caps, taxes or other controls on emissions of greenhouse gases could adversely affect the
2022 Annual Report │32
Management’s Discussion and Analysis
Company’s operations and financial results. The Company cannot predict the extent to which its operations and productivity will
be impacted by any future regulations. The Company will continue monitoring its compliance with U.S. federal and state
environmental regulations.
In March 2014, the U.S. Ninth Circuit Court of Appeals (the “Ninth Circuit”) held that the application of California state wage and
hour laws to interstate truck drivers is not pre-empted by U.S. federal law. The case was appealed to the U.S. Supreme Court,
which denied certiorari in May 2015, and accordingly, the Ninth Circuit decision stood. However, in December 2018, the FMCSA
granted a petition filed by the American Trucking Associations determining that federal law pre-empts California’s wage and hour
laws, and interstate truck drivers are not subject to such laws. The FMCSA’s decision was appealed by labor groups and multiple
lawsuits were filed in U.S. courts seeking to overturn the decision. I January 2021, however, the Ninth Circuit upheld the FMCSA’s
determination that U.S. federal law does pre-empt California’s meal and rest break laws, as applied to drivers of property-carrying
commercial motor vehicles. Other current and future U.S. state and local wage and hour laws, including laws related to employee
meal breaks and rest periods, may vary significantly from U.S. federal law. Further, driver piece rate compensation, which is an
industry standard, has been attacked as non-compliant with state minimum wage laws. As a result, the Company, along with
other companies in the industry, is subject to an uneven patchwork of wage and hour laws throughout the United States. In
addition, the uncertainty with respect to the practical application of wage and hour laws are, and in the future may be, resulting
in additional costs for the Company and the industry as a whole, and a negative outcome with respect to any of the above-
mentioned lawsuits could materially affect the Company. If U.S. federal legislation is not passed pre-empting state and local
wage and hour laws, the Company will either need to continue complying with the most restrictive state and local laws across its
entire fleet in the United States, or revise its management systems to comply with varying state and local laws. Either solution
could result in increased compliance and labor costs, driver turnover, decreased efficiency and increased risk of non-compliance.
In April 2016, the Food and Drug Administration (“FDA”) published a final rule establishing requirements for shippers, loaders,
carriers by motor vehicle and rail vehicle, and receivers engaged in the transportation of food, to use sanitary transportation
practices to ensure the safety of the food they transport as part of the FSMA. This rule sets forth requirements related to (i) the
design and maintenance of equipment used to transport food, (ii) the measures taken during food transportation to ensure food
safety, (iii) the training of carrier personnel in sanitary food transportation practices, and (iv) maintenance and retention of records
of written procedures, agreements, and training related to the foregoing items. These requirements took effect for larger carriers
in April 2017 and apply to the Company when it acts as a carrier or as a broker. If the Company is found to be in violation of
applicable laws or regulations related to the FSMA or if the Company transports food or goods that are contaminated or are found
to cause illness and/or death, the Company could be subject to substantial fines, lawsuits, penalties and/or criminal and civil
liability, any of which could have a material adverse effect on the Company’s business, financial condition, and results of
operations.
Changes in existing regulations and implementation of new regulations, such as those related to trailer size limits, emissions and
fuel economy, hours of service, mandating ELDs and drug and alcohol testing in Canada, the United States and Mexico, could
increase capacity in the industry or improve the position of certain competitors, either of which could negatively impact pricing
and volumes or require additional investments by the Company. The short-term and long-term impacts of changes in legislation
or regulations are difficult to predict and could materially adversely affect the Company’s results of operations.
The right to continue to hold applicable licenses and permits is generally subject to maintaining satisfactory compliance with
regulatory and safety guidelines, policies and laws. Although the Company is committed to compliance with laws and safety,
there is no assurance that it will be in full compliance with them at all times. Consequently, at some future time, the Company
could be required to incur significant costs to maintain or improve its compliance record.
United States and Mexican operations. A significant portion of the Company’s revenue is derived from operations in the United
States and transportation to and from Mexico. The Company’s international operations are subject to a variety of risks, including
fluctuations in foreign currencies, changes in the economic strength or greater volatility in the economies of foreign countries in
which the Company does business, difficulties in enforcing contractual rights and intellectual property rights, compliance burdens
associated with export and import laws, theft or vandalism, and social, political and economic instability. The Company’s
international operations could be adversely affected by restrictions on travel. Additional risks associated with the Company’s
international operations include restrictive trade policies, imposition of duties, changes to trade agreements and other treaties,
taxes or government royalties by foreign governments, adverse changes in the regulatory environments, including in tax laws
and regulations, of the foreign countries in which the Company does business, compliance with anti-corruption and anti-bribery
2022 Annual Report │33
Management’s Discussion and Analysis
laws, restrictions on the withdrawal of foreign investments, the ability to identify and retain qualified local managers and the
challenge of managing a culturally and geographically diverse operation. The Company cannot guarantee compliance with all
applicable laws, and violations could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational
harm, litigation or regulatory action and other consequences that might adversely affect the Company’s results of operations.
The current United States Presidential Administration provided informal guidance that it is in favor of certain changes to U.S. tax
law, including increasing the corporate tax rate from its current rate of 21%. In the event that the corporate tax rate is increased,
the Company’s financial position, and financial results from its United States operations may be adversely affected.
The implementation of tariffs or quotas or changes to certain trade agreements could, among other things, increase the costs of
the materials used by the Company’s suppliers to produce new revenue equipment or increase the price of fuel. Such cost
increases for the Company’s revenue equipment suppliers would likely be passed on to the Company, and to the extent fuel
prices increase, the Company may not be able to fully recover such increases through rate increases or the Company’s fuel
surcharge program, either of which could have a material adverse effect on the Company’s business.
The United States-Mexico-Canada Agreement (“USMCA”) entered into effect in July 2020. The USMCA is designed to
modernize food and agriculture trade, advance rules of origin for automobiles and trucks, and enhance intellectual property
protections, among other matters, according to the Office of the U.S. Trade Representative. It is difficult to predict at this stage
what could be the impact of the USMCA on the economy, including the transportation industry. However, given the amount of
North American trade that moves by truck it could have a significant impact on supply and demand in the transportation industry,
and could adversely impact the amount, movement and patterns of freight transported by the Company.
The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly
impact how the Company will apply the law and impact the Company’s results of operations in future periods. The timing and
scope of such regulations and interpretative guidance are uncertain. In addition, there is a risk that states within the United States
or foreign jurisdictions may amend their tax laws in response to these tax reforms, which could have a material adverse effect
on the Company’s results.
In addition, if the Company is unable to maintain its Free and Secure Trade (“FAST”) and U.S. Customs Trade Partnership
Against Terrorism (“C-TPAT”) certification statuses, it may have significant border delays, which could cause its cross-border
operations to be less efficient than those of competitor carriers that obtain or continue to maintain FAST and C-TPAT
certifications.
Operating Environment and Seasonality. The Company is exposed to the following factors, among others, affecting its
operating environment:
the Company’s future insurance and claims expense, including the cost of its liability insurance premiums and the number
and dollar amount of claims, may exceed historical levels, which would require the Company to incur additional costs and
could reduce the Company’s earnings;
a decline in the demand for used revenue equipment could result in decreased equipment sales, lower resale values and
lower gains (or recording losses) on sales of assets;
tractor and trailer vendors may reduce their manufacturing output in response to lower demand for their products in
economic downturns or shortages of component parts, including the current shortage of semiconductors and other
components and supplies, such as steel, which may materially adversely affect the Company’s ability to purchase a quantity
of new revenue equipment that is sufficient to sustain its desired growth rate and negatively impact the Company’s financial
results if it incurs higher costs to purchase tractors and trailers; and
increased prices for new revenue equipment, design changes of new engines, reduced equipment efficiency resulting from
new engines designed to reduce emissions, or decreased availability of new revenue equipment.
The Company’s tractor productivity decreases during the winter season because inclement weather impedes operations and
some shippers reduce their shipments after the winter holiday season. Revenue may also be adversely affected by inclement
weather and holidays, since revenue is directly related to available working days of shippers. At the same time, operating
expenses increase and fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency,
increased claims and higher equipment repair expenditures. The Company may also suffer from weather-related or other
unforeseen events such as tornadoes, hurricanes, blizzards, ice storms, floods, and fires, which may increase in frequency and
severity due to climate change, as well as other man-made disasters. These events may disrupt fuel supplies, increase fuel
2022 Annual Report │34
Management’s Discussion and Analysis
costs, disrupt freight shipments or routes, affect regional economies, damage or destroy the Company’s assets or adversely
affect the business or financial condition of the Company’s customers, any of which could materially adversely affect the
Company’s results of operations or make the Company’s results of operations more volatile.
General Economic, Credit, and Business Conditions. The Company’s business is subject to general economic, credit,
business and regulatory factors that are largely beyond the Company’s control, and which could have a material adverse effect
on the Company’s operating results.
The Company’s industry is subject to cyclical pressures, and the Company’s business is dependent on a number of factors that
may have a material adverse effect on its results of operations, many of which are beyond the Company’s control. The Company
believes that some of the most significant of these factors include (i) excess tractor and trailer capacity in the transportation
industry in comparison with shipping demand; (ii) declines in the resale value of used equipment; (iii) limited supply and increased
cost of new and used equipment; (iv) recruiting and retaining qualified drivers; (v) strikes, work stoppages or work slowdowns at
the Company’s facilities or at customer, port, border crossing or other shipping-related facilities; (vi) compliance with ongoing
regulatory requirements; (vii) increases in interest rates, fuel taxes, tolls and license and registration fees; and (vii) rising
healthcare and insurance and claims costs in the United States; and (ix) the impact of the COVID-19 pandemic.
The Company is also affected by (i) recessionary economic cycles, which tend to be characterized by weak demand and
downward pressure on rates; (ii) changes in customers’ inventory levels and in the availability of funding for their working capital;
(iii) changes in the way in which the Company’s customers choose to source or utilize the Company’s services; and (iv) downturns
in customers’ business cycles, such as retail and manufacturing, where the Company has significant customer concentration.
Economic conditions may adversely affect customers and their demand for and ability to pay for the Company’s services.
Customers encountering adverse economic conditions represent a greater potential for loss and the Company may be required
to increase its allowance for doubtful accounts.
Economic conditions that decrease shipping demand and increase the supply of available tractors and trailers can exert
downward pressure on rates and equipment utilization, thereby decreasing asset productivity. The risks associated with these
factors are heightened when the economy is weakened. Some of the principal risks during such times include:
the Company may experience a reduction in overall freight levels, which may impair the Company’s asset utilization;
freight patterns may change as supply chains are redesigned, resulting in an imbalance between the Company’s capacity
and assets and customers’ freight demand;
the Company may be forced to accept more loads from freight brokers, where freight rates are typically lower, or may be
forced to incur more non-revenue generating miles to obtain loads;
the Company may increase the size of its fleet during periods of high freight demand during which its competitors also
increase their capacity, and the Company may experience losses in greater amounts than such competitors during
subsequent cycles of softened freight demand if the Company is required to dispose of assets at a loss to match reduced
freight demand;
customers may solicit bids for freight from multiple trucking companies or select competitors that offer lower rates in an
attempt to lower their costs, and the Company may be forced to lower its rates or lose freight; and
lack of access to current sources of credit or lack of lender access to capital, leading to an inability to secure credit financing
on satisfactory terms, or at all.
The Company is subject to cost increases that are outside the Company’s control that could materially reduce the Company’s
profitability if it is unable to increase its rates sufficiently. Such cost increases include, but are not limited to, increases in fuel and
energy prices, driver and office employee wages, purchased transportation costs, taxes, interest rates, tolls, license and
registration fees, insurance premiums and claims, revenue equipment and related maintenance, and tires and other components.
Strikes or other work stoppages at the Company’s service centers or at customer, port, border or other shipping locations,
deterioration of Canadian, U.S. or Mexican transportation infrastructure and reduced investment in such infrastructure, or actual
or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group
located in a foreign state or heightened security requirements could lead to wear, tear and damage to the Company’s equipment,
driver dissatisfaction, reduced economic demand, reduced availability of credit, increased prices for fuel or temporary closing of
the shipping locations or borders between Canada, the United States and Mexico. Further, the Company may not be able to
2022 Annual Report │35
Management’s Discussion and Analysis
appropriately adjust its costs and staffing levels to meet changing market demands. In periods of rapid change, it is more difficult
to match the Company’s staffing level to its business needs.
The Company’s operations, with the exception of its brokerage operations, are capital intensive and asset heavy. If anticipated
demand differs materially from actual usage, the Company may have too many or too few assets. During periods of decreased
customer demand, the Company’s asset utilization may suffer, and it may be forced to sell equipment on the open market or turn
in equipment under certain equipment leases in order to right size its fleet. This could cause the Company to incur losses on
such sales or require payments in connection with equipment the Company turns in, particularly during times of a softer used
equipment market, either of which could have a material adverse effect on the Company’s profitability.
Although the Company’s business volume is not highly concentrated, its customers’ financial failures or loss of customer business
may materially adversely affect the Company. If the Company were unable to generate sufficient cash from operations, it would
need to seek alternative sources of capital, including financing, to meet its capital requirements. In the event that the Company
were unable to generate sufficient cash from operations or obtain financing on favorable terms in the future, it may have to limit
its fleet size, enter into less favorable financing arrangements or operate its revenue equipment for longer periods, any of which
could have a materially adverse effect on its profitability.
Coronavirus and its variants (“COVID-19”) outbreak or other similar outbreaks. The recent outbreak of COVID-19, and any
other outbreaks of contagious diseases or other adverse public health developments, could have a materially adverse effect on
the Company’s financial condition, liquidity, results of operations, and cash flows. The outbreak of COVID-19 has resulted in
governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions,
quarantines, shelter in place orders, increased border and port controls and closures, and shutdowns. There is considerable
uncertainty regarding such measures and potential future measures, including vaccine, testing and masks mandates, all of which
could limit the Company’s ability to meet customer demand, as well as reduce customer demand. Furthermore, government
vaccine, testing, and mask mandates may increase the Company’s turnover and make recruiting more difficult, particularly among
the Company’s driver personnel.
Certain of the Company’s office personnel have been working remotely, which could disrupt to a certain extent the Company’s
management, business, finance, and financial reporting teams. The Company may experience an increase in absences or
terminations among its driver and non-driver personnel due to the outbreak of COVID-19, which could have a materially adverse
effect on the Company’s operating results. Further, the Company’s operations, particularly in areas of increased COVID-19
infections, could be disrupted resulting in a negative impact on the Company’s operations and results.
The outbreak of COVID-19 has significantly increased uncertainty. Risks related to a slowdown or recession are described in the
Company’s risk factor titled “General Economic, Credit and Business Conditions”.
Short-term and long-term developments related to COVID-19 have been unpredictable and the extent to which further
developments could impact the Company’s operations, financial condition, access to credit, liquidity, results of operations, and
cash flows is highly uncertain. Such developments may include the geographic spread and duration of the virus, the distribution
and availability of vaccines, vaccine hesitancy, the severity of the disease and the actions that may be taken by various
governmental authorities and other third parties in response to the outbreak.
In November 2021, the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) published an
emergency temporary standard requiring all employers within the U.S. with over 100 employees to ensure that their employees
are fully vaccinated or, in the alternative, to ensure that all unvaccinated employees return a negative COVID-19 test at least
once a week before coming to work. However, the United States Supreme Court blocked this emergency temporary standard
from coming into effect.
Effective January 2022, the Canadian government is prohibiting unvaccinated foreigners, including U.S. citizens, from crossing
the border. Effective January 2022, the U.S. Government is prohibiting unvaccinated foreigners, including Canadian citizens,
from crossing the U.S.-Canada border and the U.S.-Mexico border. The effect of these border requirements, in addition to any
other vaccine, testing, or mask mandates that go into effect may, amongst other things, (i) cause the Company’s employees to
go to smaller employers, especially if any future mandates are only subject to larger employers, or leave the trucking industry
altogether, (ii) result in logistical issues, increased expenses, and operational issues resulting from ensuring compliance with
such mandates, such as the costs of arranging for COVID-19 tests for the Company’s unvaccinated employees, especially for
2022 Annual Report │36
Management’s Discussion and Analysis
the Company’s unvaccinated drivers, (iii) result in increased costs relating to recruiting and training of drivers, and (iv) result in
decreased revenue and other operational issues if we are unable to recruit and retain drivers. Any such vaccine, testing, or mask
mandate that is interpreted as to apply to commercial drivers would significantly reduce the pool of drivers available to us and
the industry as a whole, exacerbating the current driver shortage even further. Accordingly, any vaccine, testing, or mask
mandate, to the extent that it goes into effect, may have a material adverse effect on the Company’s business, the Company’s
operations, and the Company’s financial condition and position.
Interest Rate Fluctuations. Future cash flows related to variable-rate financial liabilities could be impacted by changes in
benchmark rates such as Bankers’ Acceptance or secured overnight financing rate published by the Federal Reserve Bank of
New York ("SOFR"). In addition, the Company is exposed to gains and losses arising from changes in interest rates through its
derivative financial instruments carried at fair value.
Currency Fluctuations. The Company’s financial results are reported in U.S. dollars and a large portion of the Company’s
revenue and operating costs are realized in currencies other than the U.S. dollar, primarily the Canadian dollar. The exchange
rates between these currencies and the U.S. dollar have fluctuated in recent years and will likely continue to do so in the future.
It is not possible to mitigate all exposure to fluctuations in foreign currency exchange rates. The results of operations are therefore
affected by movements of these currencies against the U.S. dollar.
Price and Availability of Fuel. Fuel is one of the Company’s largest operating expenses. Diesel fuel prices fluctuate greatly due
to factors beyond the Company’s control, such as political events, commodity futures trading, currency fluctuations, natural and
man-made disasters, terrorist activities and armed conflicts, any of which may lead to an increase in the cost of fuel. Fuel prices
are also affected by the rising demand for fuel in developing countries and could be materially adversely affected by the use of
crude oil and oil reserves for purposes other than fuel production and by diminished drilling activity. Such events may lead not
only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain. Because the Company’s
operations are dependent upon diesel fuel, significant diesel fuel cost increases, shortages or supply disruptions could have a
material adverse effect on the Company’s business, financial condition and results of operations.
While the Company has fuel surcharge programs in place with a majority of the Company’s customers, which historically have
helped the Company offset the majority of the negative impact of rising fuel prices, the Company also incurs fuel costs that cannot
be recovered even with respect to customers with which the Company maintains fuel surcharge programs, such as those
associated with non-revenue generating miles or time when the Company’s engines are idling. Moreover, the terms of each
customer’s fuel surcharge program vary from one division to another, and the recoverability for fuel price increases varies as
well. In addition, because the Company’s fuel surcharge recovery lags behind changes in fuel prices, the Company’s fuel
surcharge recovery may not capture the increased costs the Company pays for fuel, especially when prices are rising. This could
lead to fluctuations in the Company’s levels of reimbursement, such as has occurred in the past. There can be no assurance that
such fuel surcharges can be maintained indefinitely or that they will be fully effective.
Insurance. The Company’s operations are subject to risks inherent in the transportation sector, including personal injury,
property damage, workers’ compensation and employment and other issues. The Company’s future insurance and claims
expenses may exceed historical levels, which could reduce the Company’s earnings. The Company subscribes for insurance in
amounts it considers appropriate in the circumstances and having regard to industry norms. Like many in the industry, the
Company self-insures a significant portion of the claims exposure related to cargo loss, bodily injury, workers’ compensation and
property damages. Due to the Company’s significant self-insured amounts, the Company has exposure to fluctuations in the
number or severity of claims and the risk of being required to accrue or pay additional amounts if the Company’s estimates are
revised or claims ultimately prove to be in excess of the amounts originally assessed. Further, the Company’s self-insured
retention levels could change and result in more volatility than in recent years.
The Company holds a fully-fronted policy of CAD $10 million limit per occurrence for automobile bodily injury, property damage
and commercial general liability for its Canadian Insurance Program, subject to certain exceptions. The Company retains a
deductible of US $2.25 million for certain U.S. subsidiaries on their primary US $5 million limit policies for automobile bodily injury
and property damage, also subject to certain exceptions, and a 50% quota share deductible for the US $5 million limit in excess
of US $5 million. The Company retains a deductible of US $1 million on its primary US $5 million limit policy for certain U.S.
subsidiaries for commercial general liability. The Company retains deductibles of up to US $1 million per occurrence for workers’
2022 Annual Report │37
Management’s Discussion and Analysis
compensation claims. The Company’s liability coverage has a total limit of US $100 million per occurrence for both its Canadian
and U.S. divisions.
Although the Company believes its aggregate insurance limits should be sufficient to cover reasonably expected claims, it is
possible that the amount of one or more claims could exceed the Company’s aggregate coverage limits or that the Company will
chose not to obtain insurance in respect of such claims. If any claim were to exceed the Company’s coverage, the Company
would bear the excess, in addition to the Company’s other self-insured amounts. The Company’s results of operations and
financial condition could be materially and adversely affected if (i) cost per claim or the number of claims significantly exceeds
the Company’s coverage limits or retention amounts; (ii) the Company experiences a claim in excess of its coverage limits; (iii)
the Company’s insurance carriers fail to pay on the Company’s insurance claims; (iv) the Company experiences a significant
increase in premiums; or (v) the Company experiences a claim for which coverage is not provided, either because the Company
chose not to obtain insurance as a result of high premiums or because the claim is not covered by insurance which the Company
has in place.
The Company accrues the costs of the uninsured portion of pending claims based on estimates derived from the Company’s
evaluation of the nature and severity of individual claims and an estimate of future claims development based upon historical
claims development trends. Actual settlement of the Company’s retained claim liabilities could differ from its estimates due to a
number of uncertainties, including evaluation of severity, legal costs and claims that have been incurred but not reported. Due to
the Company’s high retained amounts, it has significant exposure to fluctuations in the number and severity of claims. If the
Company were required to accrue or pay additional amounts because its estimates are revised or the claims ultimately prove to
be more severe than originally assessed, its financial condition and results of operations may be materially adversely affected.
Employee Relations. With the acquisition of UPS Freight and prior Canadian acquisitions, the Company has a substantial
number of unionized employees in the U.S. and Canada. Although the Company believes that its relations with its employees
are satisfactory, no assurance can be given that the Company will be able to successfully extend or renegotiate the Company’s
current collective agreements as they expire from time to time or that additional employees will not attempt to unionize.
The unionization of the Company’s employees in additional business units, adverse changes in terms under collective bargaining
agreements, or actual or threatened strikes, work stoppages or slow downs, could have a material adverse effect on the
Company’s business, customer retention, results of operations, financial condition and liquidity, and could cause significant
disruption of, or inefficiencies in, its operations, because:
a)
restrictive work rules could hamper the Company’s ability to improve or sustain operating efficiency or could impair the
Company’s service reputation and limit its ability to provide certain services;
b) a strike or work stoppage could negatively impact the Company’s profitability and could damage customer and employee
relationships;
c)
shippers may limit their use of unionized trucking companies because of the threat of strikes and other work stoppages;
d)
the Company could fail to extend or renegotiate its collective agreements or experience material increases in wages or
benefits;
e) disputes with the Company’s unions could arise; and
f)
an election and bargaining process could divert management’s time and attention from the Company’s overall objectives
and impose significant expenses.
The Company’s collective agreements have a variety of expiration dates, to the last of which is in March 2028. In a small number
of cases, the expiration date of the collective agreement has passed; in such cases, the Corporation is generally in the process
of renegotiating the agreement. The Company cannot predict the effect which any new collective agreements or the failure to
enter into such agreements upon the expiry of the current agreements may have on its operations.
The Company has limited experience with unionized employees in the U.S. There may be additional risks related to the increased
number of unionized U.S. employees from the acquisition of UPS Freight. The impact the Company’s unionized operations could
have on non-unionized operations is uncertain.
2022 Annual Report │38
Management’s Discussion and Analysis
Drivers. Increases in driver compensation or difficulties attracting and retaining qualified drivers could have a material adverse
effect on the Company’s profitability and the ability to maintain or grow the Company’s fleet.
Like many in the transportation sector, the Company experiences substantial difficulty in attracting and retaining sufficient
numbers of qualified drivers. The trucking industry periodically experiences a shortage of qualified drivers. The Company believes
the shortage of qualified drivers and intense competition for drivers from other transportation companies will create difficulties in
maintaining or increasing the number of drivers and may negatively impact the Company’s ability to engage a sufficient number
of drivers, and the Company’s inability to do so may negatively impact its operations. Further, the compensation the Company
offers its drivers and independent contractor expenses are subject to market conditions, and the Company may find it necessary
to increase driver and independent contractor compensation in future periods.
In addition, the Company and many other trucking companies suffer from a high turnover rate of drivers in the U.S. TL market.
This high turnover rate requires the Company to continually recruit a substantial number of new drivers in order to operate existing
revenue equipment. Driver shortages are exacerbated during periods of economic expansion, in which alternative employment
opportunities, including in the construction and manufacturing industries, which may offer better compensation and/or more time
at home, are more plentiful and freight demand increases, or during periods of economic downturns, in which unemployment
benefits might be extended and financing is limited for independent contractors who seek to purchase equipment, or the scarcity
or growth of loans for students who seek financial aid for driving school. In addition, enrollment at driving schools may be further
limited by COVID-19 social distancing requirements, vaccine, testing, and mask mandates, and other regulatory requirements
that reduces the number of eligible drivers. The lack of adequate tractor parking along some U.S. highways and congestion
caused by inadequate highway funding may make it more difficult for drivers to comply with hours of service regulations and
cause added stress for drivers, further reducing the pool of eligible drivers. The Company’s use of team-driven tractors for
expedited shipments requires two drivers per tractor, which further increases the number of drivers the Company must recruit
and retain in comparison to operations that require one driver per tractor. The Company also employs driver hiring standards,
which could further reduce the pool of available drivers from which the Company would hire. If the Company is unable to continue
to attract and retain a sufficient number of drivers, the Company could be forced to, among other things, adjust the Company’s
compensation packages, increase the number of the Company’s tractors without drivers or operate with fewer trucks and face
difficulty meeting shipper demands, any of which could adversely affect the Company’s growth and profitability.
Independent Contractors. The Company’s contracts with U.S. independent contractors are governed by U.S. federal leasing
regulations, which impose specific requirements on the Company and the independent contractors. If more stringent state or
U.S. federal leasing regulations are adopted, U.S. independent contractors could be deterred from becoming independent
contractor drivers, which could materially adversely affect the Company’s goal of maintaining its current fleet levels of
independent contractors.
The Company provides financing to certain qualified Canadian independent contractors and financial guarantees to a small
number of U.S. independent contractors. If the Company were unable to provide such financing or guarantees in the future, due
to liquidity constraints or other restrictions, it may experience a decrease in the number of independent contractors it is able to
engage. Further, if independent contractors the Company engages default under or otherwise terminate the financing
arrangements and the Company is unable to find replacement independent contractors or seat the tractors with its drivers, the
Company may incur losses on amounts owed to it with respect to such tractors.
Pursuant to the Company’s fuel surcharge program with independent contractors, the Company pays independent contractors
with which it contracts a fuel surcharge that increases with the increase in fuel prices. A significant increase or rapid fluctuation
in fuel prices could cause the Company’s costs under this program to be higher than the revenue the Company receives under
its customer fuel surcharge programs.
U.S. tax and other regulatory authorities, as well as U.S. independent contractors themselves, have increasingly asserted that
U.S. independent contractor drivers in the trucking industry are employees rather than independent contractors, and the
Company’s classification of independent contractors has been the subject of audits by such authorities from time to time. U.S.
federal and state legislation has been introduced in the past that would make it easier for tax and other authorities to reclassify
independent contractors as employees, including legislation to increase the recordkeeping requirements for those that engage
independent contractor drivers and to increase the penalties for companies who misclassify their employees and are found to
have violated employees’ overtime and/or wage requirements. The most recent example being the Protecting the Rights to
2022 Annual Report │39
Management’s Discussion and Analysis
Organize (“PRO”) Act, which was passed by the U.S. House of Representatives and received by the U.S. Senate in March 2021
and remains with the U.S. Senate’s Committee on Health, Education, Labor, and Pensions. The PRO Act proposes to apply the
“ABC Test” (described below) for classifying workers under Federal Fair Labor Standards Act claims. It is unknown whether any
of the proposed legislation will become law or whether any industry-based exemptions from any resulting law will be granted.
Additionally, U.S. federal legislators have sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to
treat individuals as independent contractors if they are following a long-standing, recognized practice, to extend the U.S. Fair
Labor Standards Act to independent contractors and to impose notice requirements based on employment or independent
contractor status and fines for failure to comply. Some U.S. states have put initiatives in place to increase their revenue from
items such as unemployment, workers’ compensation and income taxes, and a reclassification of independent contractors as
employees would help states with this initiative. Further, courts in certain U.S. states have issued decisions that could result in a
greater likelihood that independent contractors would be judicially classified as employees in such states.
In September 2019, California enacted a new law, A.B. 5 (“AB5”), that made it more difficult for workers to be classified as
independent contractors (as opposed to employees). AB5 provides that the three-pronged “ABC Test” must be used to determine
worker classifications in wage order claims. Under the ABC Test, a worker is presumed to be an employee and the burden to
demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria: (a)
the worker is free from control and direction in the performance of services; (b) the worker is performing work outside the usual
course of the business of the hiring company; and (c) the worker is customarily engaged in an independently established trade,
occupation, or business. How AB5 will be enforced is still to be determined. In January 2021, however, the California Supreme
Court ruled that the ABC Test could apply retroactively to all cases not yet final as of the date the original decision was rendered,
April 2018. While it was set to enter into effect in January 2020, a U.S. federal judge in California issued a preliminary injunction
barring the enforcement of AB5 on the trucking industry while the California Trucking Association (“CTA”) moves forward with its
suit seeking to invalidate AB5. The Ninth Circuit rejected the reasoning behind the injunction in April 2021, ruling that AB5 is not
pre-empted by U.S. federal law, but granted a stay of the AB5 mandate in June 2021 (preventing its application and temporarily
continuing the injunction) while the CTA petitioned the United States Supreme Court (the “Supreme Court”) to review the decision.
In November 2021, the Supreme Court requested that the U.S. solicitor general weigh in on the case. The injunction will remain
in place until the Supreme Court makes a decision on whether to proceed in hearing the case. While the stay of the AB5 mandate
provides temporary relief to the enforcement of AB5, it remains unclear how long such relief will last, and whether the CTA will
ultimately be successful in invalidating the law. It is also possible AB5 will spur similar legislation in states other than California,
which could adversely affect the Company’s results of operations and profitability.
U.S. class action lawsuits and other lawsuits have been filed against certain members of the Company’s industry seeking to
reclassify independent contractors as employees for a variety of purposes, including workers’ compensation and health care
coverage. In addition, companies that use lease purchase independent contractor programs, such as the Company, have been
more susceptible to reclassification lawsuits, and several recent decisions have been made in favor of those seeking to classify
independent contractor truck drivers as employees. U.S. taxing and other regulatory authorities and courts apply a variety of
standards in their determination of independent contractor status. If the independent contractors with whom the Company
contracts are determined to be employees, the Company would incur additional exposure under U.S. federal and state tax,
workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential
liability for employee benefits and tax withholdings, and the Company’s business, financial condition and results of operations
could be materially adversely affected. The Company has settled certain class action cases in Massachusetts and California in
the past with independent contractors who alleged they were misclassified.
Acquisitions and Integration Risks. Historically, acquisitions have been a part of the Company’s growth strategy. The
Company may not be able to successfully integrate acquisitions into the Company’s business, or may incur significant unexpected
costs in doing so. Further, the process of integrating acquired businesses may be disruptive to the Company’s existing business
and may cause an interruption or reduction of the Company’s business as a result of the following factors, among others:
loss of drivers, key employees, customers or contracts;
possible inconsistencies in or conflicts between standards, controls, procedures and policies among the combined
companies and the need to implement company-wide financial, accounting, information technology and other systems;
failure to maintain or improve the safety or quality of services that have historically been provided;
inability to retain, integrate, hire or recruit qualified employees;
2022 Annual Report │40
Management’s Discussion and Analysis
unanticipated environmental or other liabilities;
risks of entering new markets or business offerings in which we have had no or only limited prior experience;
failure to coordinate geographically dispersed organizations; and
the diversion of management’s attention from the Company’s day-to-day business as a result of the need to manage any
disruptions and difficulties and the need to add management resources to do so.
Given the nature and size of UPS Freight, as well as the structure of the acquisition as a carveout from UPS, the acquisition of
UPS Freight presents the following risks, in addition to risks noted elsewhere in these risk factors:
a large portion of the business of UPS Freight prior to the acquisition was with affiliates of UPS. While there are
transportation service agreements in effect with such affiliates of UPS, such affiliates may decide to reduce or eliminate
business with the Company in the future and we have limited contractual protections to prevent the loss of such business;
some of the information and operating systems of UPS Freight were integrated with UPS prior to the acquisition. The
Company is in the process of transitioning such systems and could experience disruptions during the transition or difficulty
or delay in building its systems and personnel to operate them;
the Company had limited experience in the U.S. LTL market prior to the acquisition and we may be unsuccessful in
integrating UPS Freight and operating it profitably;
given the size and complexity of the acquired U.S. LTL operations of UPS Freight, management’s attention may be diverted
from other areas of the Company; and
the Company acquired a substantial number of unionized U.S. employees in the acquisition and unionized employees
present significant risks.
Anticipated cost savings, synergies, revenue enhancements or other benefits from any acquisitions that the Company undertakes
may not materialize in the expected timeframe or at all. The Company’s estimated cost savings, synergies, revenue
enhancements and other benefits from acquisitions are subject to a number of assumptions about the timing, execution and
costs associated with realizing such synergies. Such assumptions are inherently uncertain and are subject to a wide variety of
significant business, economic and competition risks. There can be no assurance that such assumptions will turn out to be correct
and, as a result, the amount of cost savings, synergies, revenue enhancements and other benefits the Company actually realizes
and/or the timing of such realization may differ significantly (and may be significantly lower) from the ones the Company
estimated, and the Company may incur significant costs in reaching the estimated cost savings, synergies, revenue
enhancements or other benefits. Further, management of acquired operations through a decentralized approach may create
inefficiencies or inconsistencies.
Many of the Company’s recent acquisitions have involved the purchase of stock of existing companies. These acquisitions, as
well as acquisitions of substantially all of the assets of a company, may expose the Company to liability for actions taken by an
acquired business and its management before the Company’s acquisition. The due diligence the Company conducts in
connection with an acquisition and any contractual guarantees or indemnities that the Company receives from the sellers of
acquired companies may not be sufficient to protect the Company from, or compensate the Company for, actual liabilities. The
representations made by the sellers expire at varying periods after the closing. A material liability associated with an acquisition,
especially where there is no right to indemnification, could adversely affect the Company’s results of operations, financial
condition and liquidity.
The Company continues to review acquisition and investment opportunities in order to acquire companies and assets that meet
the Company’s investment criteria, some of which may be significant. Depending on the number of acquisitions and investments
and funding requirements, the Company may need to raise substantial additional capital and increase the Company’s
indebtedness. Instability or disruptions in the capital markets, including credit markets, or the deterioration of the Company’s
financial condition due to internal or external factors, could restrict or prohibit access to the capital markets and could also
increase the Company’s cost of capital. To the extent the Company raises additional capital through the sale of equity, equity-
linked or convertible debt securities, the issuance of such securities could result in dilution to the Company’s existing
shareholders. If the Company raises additional funds through the issuance of debt securities, the terms of such debt could impose
additional restrictions and costs on the Company’s operations. Additional capital, if required, may not be available on acceptable
terms or at all. If the Company is unable to obtain additional capital at a reasonable cost, the Company may be required to forego
potential acquisitions, which could impair the execution of the Company’s growth strategy.
2022 Annual Report │41
Management’s Discussion and Analysis
The Company routinely evaluates its operations and considers opportunities to divest certain of its assets. In addition, the
Company faces competition for acquisition opportunities. This external competition may hinder the Company’s ability to identify
and/or consummate future acquisitions successfully. There is also a risk of impairment of acquired goodwill and intangible assets.
This risk of impairment to goodwill and intangible assets exists because the assumptions used in the initial valuation, such as
interest rates or forecasted cash flows, may change when testing for impairment is required.
There is no assurance that the Company will be successful in identifying, negotiating, consummating or integrating any future
acquisitions. If the Company does not make any future acquisitions, or divests certain of its operations, the Company’s growth
rate could be materially and adversely affected. Any future acquisitions the Company does undertake could involve the dilutive
issuance of equity securities or the incurring of additional indebtedness.
Growth. There is no assurance that in the future, the Company’s business will grow substantially or without volatility, nor is there
any assurance that the Company will be able to effectively adapt its management, administrative and operational systems to
respond to any future growth. Furthermore, there is no assurance that the Company’s operating margins will not be adversely
affected by future changes in and expansion of its business or by changes in economic conditions or that it will be able to sustain
or improve its profitability in the future.
Environmental Matters. The Company uses storage tanks at certain of its Canadian and U.S. transportation terminals. Canadian
and U.S. laws and regulations generally impose potential liability on the present and former owners or occupants or custodians
of properties on which contamination has occurred, as well as on parties who arranged for the disposal of waste at such
properties. Although the Company is not aware of any contamination which, if remediation or clean-up were required, would have
a material adverse effect on it, certain of the Company’s current or former facilities have been in operation for many years and
over such time, the Company or the prior owners, operators or custodians of the properties may have generated and disposed
of wastes which are or may be considered hazardous. Liability under certain of these laws and regulations may be imposed on
a joint and several basis and without regard to whether the Company knew of, or was responsible for, the presence or disposal
of these materials or whether the activities giving rise to the contamination was legal when it occurred. In addition, the presence
of those substances, or the failure to properly dispose of or remove those substances, may adversely affect the Company’s ability
to sell or rent that property. If the Company incurs liability under these laws and regulations and if it cannot identify other parties
which it can compel to contribute to its expenses and who are financially able to do so, it could have a material adverse effect on
the Company’s financial condition and results of operations. There can be no assurance that the Company will not be required
at some future date to incur significant costs or liabilities pursuant to environmental laws, or that the Company’s operations,
business or assets will not be materially affected by current or future environmental laws.
The Company’s transportation operations and its properties are subject to extensive and frequently-changing federal, provincial,
state, municipal and local environmental laws, regulations and requirements in Canada, the United States and Mexico relating
to, among other things, air emissions, the management of contaminants, including hazardous substances and other materials
(including the generation, handling, storage, transportation and disposal thereof), discharges and the remediation of
environmental impacts (such as the contamination of soil and water, including ground water). A risk of environmental liabilities is
inherent in transportation operations, historic activities associated with such operations and the ownership, management and
control of real estate.
Environmental laws may authorize, among other things, federal, provincial, state and local environmental regulatory agencies to
issue orders, bring administrative or judicial actions for violations of environmental laws and regulations or to revoke or deny the
renewal of a permit. Potential penalties for such violations may include, among other things, civil and criminal monetary penalties,
imprisonment, permit suspension or revocation and injunctive relief. These agencies may also, among other things, revoke or
deny renewal of the Company’s operating permits, franchises or licenses for violations or alleged violations of environmental
laws or regulations and impose environmental assessment, removal of contamination, follow up or control procedures.
Environmental Contamination. The Company could be subject to orders and other legal actions and procedures brought by
governmental or private parties in connection with environmental contamination, emissions or discharges. If the Company is
involved in a spill or other accident involving hazardous substances, if there are releases of hazardous substances the Company
transports, if soil or groundwater contamination is found at the Company’s current or former facilities or results from the
Company’s operations, or if the Company is found to be in violation of applicable laws or regulations, the Company could be
2022 Annual Report │42
Management’s Discussion and Analysis
subject to cleanup costs and liabilities, including substantial fines or penalties or civil and criminal liability, any of which could
have a materially adverse effect on the Company’s business and operating results.
Key Personnel. The future success of the Company will be based in large part on the quality of the Company’s management
and key personnel. The Company’s management and key personal possess valuable knowledge about the transportation and
logistics industry and their knowledge of and relationships with the Company’s key customers and vendors would be difficult to
replace. The loss of key personnel could have a negative effect on the Company. There can be no assurance that the Company
will be able to retain its current key personnel or, in the event of their departure, to develop or attract new personnel of equal
quality.
Dependence on Third Parties. Certain portions of the Company’s business are dependent upon the services of third-party
capacity providers, including other transportation companies. For that portion of the Company’s business, the Company does
not own or control the transportation assets that deliver the customers’ freight, and the Company does not employ the people
directly involved in delivering the freight. This reliance could cause delays in reporting certain events, including recognizing
revenue and claims. These third-party providers seek other freight opportunities and may require increased compensation in
times of improved freight demand or tight trucking capacity. The Company’s inability to secure the services of these third parties
could significantly limit the Company’s ability to serve its customers on competitive terms. Additionally, if the Company is unable
to secure sufficient equipment or other transportation services to meet the Company’s commitments to its customers or provide
the Company’s services on competitive terms, the Company’s operating results could be materially and adversely affected. The
Company’s ability to secure sufficient equipment or other transportation services is affected by many risks beyond the Company’s
control, including equipment shortages in the transportation industry, particularly among contracted carriers, interruptions in
service due to labor disputes, changes in regulations impacting transportation and changes in transportation rates.
Loan Default. The agreements governing the Company’s indebtedness, including the Credit Facility and the Term Loan, contain
certain restrictions and other covenants relating to, among other things, funded debt, distributions, liens, investments, acquisitions
and dispositions outside the ordinary course of business and affiliate transactions. If the Company fails to comply with any of its
financing arrangement covenants, restrictions and requirements, the Company could be in default under the relevant agreement,
which could cause cross-defaults under other financing arrangements. In the event of any such default, if the Company failed to
obtain replacement financing or amendments to or waivers under the applicable financing arrangement, the Company may be
unable to pay dividends to its shareholders, and its lenders could cease making further advances, declare the Company’s debt
to be immediately due and payable, fail to renew letters of credit, impose significant restrictions and requirements on the
Company’s operations, institute foreclosure procedures against their collateral, or impose significant fees and transaction costs.
If debt acceleration occurs, economic conditions may make it difficult or expensive to refinance the accelerated debt or the
Company may have to issue equity securities, which would dilute share ownership. Even if new financing is made available to
the Company, credit may not be available to the Company on acceptable terms. A default under the Company’s financing
arrangements could result in a materially adverse effect on its liquidity, financial condition and results of operations. As at the
date hereof, the Company is in compliance with all of its debt covenants and obligations.
Credit Facilities. The Company has significant ongoing capital requirements that could affect the Company’s profitability if the
Company is unable to generate sufficient cash from operations and/or obtain financing on favorable terms. The trucking industry
and the Company’s trucking operations are capital intensive, and require significant capital expenditures annually. The amount
and timing of such capital expenditures depend on various factors, including anticipated freight demand and the price and
availability of assets. If anticipated demand differs materially from actual usage, the Company’s trucking operations may have
too many or too few assets. Moreover, resource requirements vary based on customer demand, which may be subject to
seasonal or general economic conditions. During periods of decreased customer demand, the Company’s asset utilization may
suffer, and it may be forced to sell equipment on the open market or turn in equipment under certain equipment leases in order
to right size its fleet. This could cause the Company to incur losses on such sales or require payments in connection with such
turn ins, particularly during times of a softer used equipment market, either of which could have a materially adverse effect on
the Company’s profitability.
The Company’s indebtedness may increase from time to time in the future for various reasons, including fluctuations in results
of operations, capital expenditures and potential acquisitions. The agreements governing the Company’s indebtedness, including
the Credit Facility and the Term Loan, mature on various dates, ranging from 2023 to 2036. There can be no assurance that
2022 Annual Report │43
Management’s Discussion and Analysis
such agreements governing the Company’s indebtedness will be renewed or refinanced, or if renewed or refinanced, that the
renewal or refinancing will occur on equally favorable terms to the Company. The Company’s ability to pay dividends to
shareholders and ability to purchase new revenue equipment may be adversely affected if the Company is not able to renew the
Credit Facility or the Term Loan or arrange refinancing of any indebtedness, or if such renewal or refinancing, as the case may
be, occurs on terms materially less favorable to the Company than at present. If the Company is unable to generate sufficient
cash flow from operations and obtain financing on terms favorable to the Company in the future, the Company may have to limit
the Company’s fleet size, enter into less favorable financing arrangements or operate the Company’s revenue equipment for
longer periods, any of which may have a material adverse effect on the Company’s operations.
Increased prices for new revenue equipment, design changes of new engines, decreased availability of new revenue equipment
and future use of autonomous tractors could have a material adverse effect on the Company’s business, financial condition,
operations, and profitability.
The Company is subject to risk with respect to higher prices for new equipment for its trucking operations. The Company has
experienced an increase in prices for new tractors in recent years, and the resale value of the tractors has not increased to the
same extent. Prices have increased and may continue to increase, due to, among other reasons, (i) increases in commodity
prices; (ii) U.S. government regulations applicable to newly-manufactured tractors, trailers and diesel engines; (iii) the pricing
discretion of equipment manufacturers; and (iv) component and supply chain issues that limit availability of new equipment and
increase prices. Increased regulation has increased the cost of the Company’s new tractors and could impair equipment
productivity, in some cases, resulting in lower fuel mileage, and increasing the Company’s operating expenses. Further
regulations with stricter emissions and efficiency requirements have been proposed that would further increase the Company’s
costs and impair equipment productivity. These adverse effects, combined with the uncertainty as to the reliability of the vehicles
equipped with the newly designed diesel engines and the residual values realized from the disposition of these vehicles could
increase the Company’s costs or otherwise adversely affect the Company’s business or operations as the regulations become
effective. Over the past several years, some manufacturers have significantly increased new equipment prices, in part to meet
new engine design and operations requirements. Furthermore, future use of autonomous tractors could increase the price of
new tractors and decrease the value of used non-autonomous tractors. The Company’s business could be harmed if it is unable
to continue to obtain an adequate supply of new tractors and trailers for these or other reasons. As a result, the Company
expects to continue to pay increased prices for equipment and incur additional expenses for the foreseeable future.
Tractor and trailer vendors may reduce their manufacturing output in response to lower demand for their products in economic
downturns or shortages of component parts. Currently, tractor and trailer manufacturers are experiencing significant shortages
of semiconductor chips and other component parts and supplies, including steel, forcing many manufacturers to curtail or
suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles,
which could have a material adverse effect on the Company’s business, financial condition, and results of operations, particularly
the Company’s maintenance expense and driver retention.
The Company has certain revenue equipment leases and financing arrangements with balloon payments at the end of the lease
term equal to the residual value the Company is contracted to receive from certain equipment manufacturers upon sale or trade
back to the manufacturers. If the Company does not purchase new equipment that triggers the trade-back obligation, or the
equipment manufacturers do not pay the contracted value at the end of the lease term, the Company could be exposed to losses
equal to the excess of the balloon payment owed to the lease or finance company over the proceeds from selling the equipment
on the open market.
The Company has trade-in and repurchase commitments that specify, among other things, what its primary equipment vendors
will pay it for disposal of a certain portion of the Company’s revenue equipment. The prices the Company expects to receive
under these arrangements may be higher than the prices it would receive in the open market. The Company may suffer a
financial loss upon disposition of its equipment if these vendors refuse or are unable to meet their financial obligations under
these agreements, it does not enter into definitive agreements that reflect favorable equipment replacement or trade-in terms, it
fails to or is unable to enter into similar arrangements in the future, or it does not purchase the number of new replacement units
from the vendors required for such trade-ins.
Used equipment prices are subject to substantial fluctuations based on freight demand, supply of used trucks, availability of
financing, presence of buyers for export and commodity prices for scrap metal. These and any impacts of a depressed market
2022 Annual Report │44
Management’s Discussion and Analysis
for used equipment could require the Company to dispose of its revenue equipment below the carrying value. This leads to
losses on disposal or impairments of revenue equipment, when not otherwise protected by residual value arrangements.
Deteriorations of resale prices or trades at depressed values could cause losses on disposal or impairment charges in future
periods.
Difficulty in obtaining goods and services from the Company’s vendors and suppliers could adversely affect its business.
The Company is dependent upon its vendors and suppliers for certain products and materials. The Company believes that it
has positive vendor and supplier relationships and it is generally able to obtain acceptable pricing and other terms from such
parties. If the Company fails to maintain positive relationships with its vendors and suppliers, or if its vendors and suppliers are
unable to provide the products and materials it needs or undergo financial hardship, the Company could experience difficulty in
obtaining needed goods and services because of production interruptions, limited material availability or other reasons. As a
consequence, the Company’s business and operations could be adversely affected.
Customer and Credit Risks. The Company provides services to clients primarily in Canada, the United States and Mexico. The
concentration of credit risk to which the Company is exposed is limited due to the significant number of customers that make up
its client base and their distribution across different geographic areas. Furthermore, no client accounted for more than 5% of the
Company’s total accounts receivable for the year ended December 31, 2022. Generally, the Company does not have long-term
contracts with its major customers. Accordingly, in response to economic conditions, supply and demand factors in the industry,
the Company’s performance, the Company’s customers’ internal initiatives or other factors, the Company’s customers may
reduce or eliminate their use of the Company’s services, or may threaten to do so in order to gain pricing and other concessions
from the Company.
Economic conditions and capital markets may adversely affect the Company’s customers and their ability to remain solvent. The
customers’ financial difficulties can negatively impact the Company’s results of operations and financial condition, especially if
those customers were to delay or default in payment to the Company. For certain customers, the Company has entered into
multi-year contracts, and the rates the Company charges may not remain advantageous.
Availability of Capital. If the economic and/or the credit markets weaken, or the Company is unable to enter into acceptable
financing arrangements to acquire revenue equipment, make investments and fund working capital on terms favorable to it, the
Company’s business, financial results and results of operations could be materially and adversely affected. The Company may
need to incur additional indebtedness, reduce dividends or sell additional shares in order to accommodate these items. A decline
in the credit or equity markets and any increase in volatility could make it more difficult for the Company to obtain financing and
may lead to an adverse impact on the Company’s profitability and operations.
Information Systems. The Company depends heavily on the proper functioning, availability and security of the Company’s
information and communication systems, including financial reporting and operating systems, in operating the Company’s
business. The Company’s operating system is critical to understanding customer demands, accepting and planning loads,
dispatching equipment and drivers and billing and collecting for the Company’s services. The Company’s financial reporting
system is critical to producing accurate and timely financial statements and analyzing business information to help the Company
manage its business effectively. The Company receives and transmits confidential data with and among its customers, drivers,
vendors, employees and service providers in the normal course of business.
The Company’s operations and those of its technology and communications service providers are vulnerable to interruption by
natural disasters, such as fires, storms, and floods, which may increase in frequency and severity due to climate change, as well
as other events beyond the Company’s control, including cybersecurity breaches and threats, such as hackers, malware and
viruses, power loss, telecommunications failure, terrorist attacks and Internet failures. The Company’s systems are also
vulnerable to unauthorized access and viewing, misappropriation, altering or deleting of information, including customer, driver,
vendor, employee and service provider information and its proprietary business information. If any of the Company’s critical
information systems fail, are breached or become otherwise unavailable, the Company’s ability to manage its fleet efficiently, to
respond to customers’ requests effectively, to maintain billing and other records reliably, to maintain the confidentiality of the
Company’s data and to bill for services and prepare financial statements accurately or in a timely manner would be challenged.
Any significant system failure, upgrade complication, cybersecurity breach or other system disruption could interrupt or delay the
Company’s operations, damage its reputation, cause the Company to lose customers, cause the Company to incur costs to
2022 Annual Report │45
Management’s Discussion and Analysis
repair its systems, pay fines or in respect of litigation or impact the Company’s ability to manage its operations and report its
financial performance, any of which could have a material adverse effect on the Company’s business.
Remote Work. The Company has, and will continue to have, a portion of its employees that work from home full-time or under
flexible work arrangements, which exposes the Company to additional cybersecurity risks. Employees working remotely may
expose the Company to cybersecurity risks through: (i) unauthorized access to sensitive information as a result of increased
remote access, including employees' use of Company-owned and personal devices and videoconferencing functions and
applications to remotely handle, access, discuss or transmit confidential information, (ii) increased exposure to phishing and
other scams as cybercriminals may, among other things, install malicious software on the Company's systems and equipment
and access sensitive information, and (iii) violation of international, federal, or state-specific privacy laws. The Company believes
that the increased number of employees working remotely has incrementally increased the cyber risk profile of the Company,
but the Company is unable to predict the extent or impacts of those risks at this time. A significant disruption of our information
technology systems, unauthorized access or a loss of confidential information, or legal claims resulting from a privacy law could
have a material adverse effect on the Company.
Litigation. The Company’s business is subject to the risk of litigation by employees, customers, vendors, government agencies,
shareholders and other parties. The outcome of litigation is difficult to assess or quantify, and the magnitude of the potential loss
relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may also be significant.
Not all claims are covered by the Company’s insurance, and there can be no assurance that the Company’s coverage limits will
be adequate to cover all amounts in dispute. In the United States, where the Company has growing operations, many trucking
companies have been subject to class-action lawsuits alleging violations of various federal and state wage laws regarding, among
other things, employee classification, employee meal breaks, rest periods, overtime eligibility, and failure to pay for all hours
worked. A number of these lawsuits have resulted in the payment of substantial settlements or damages by the defendants. The
Company may at some future date be subject to such a class-action lawsuit. In addition, the Company may be subject, and has
been subject in the past, to litigation resulting from trucking accidents. The number and severity of litigation claims may be
worsened by distracted driving by both truck drivers and other motorists. To the extent the Company experiences claims that are
uninsured, exceed the Company’s coverage limits, involve significant aggregate use of the Company’s self-insured retention
amounts or cause increases in future funded premiums, the resulting expenses could have a material adverse effect on the
Company’s business, results of operations, financial condition and cash flows.
Internal Control. Beginning with the year ended December 31, 2021, the Company is required, pursuant to Section 404 of the
U.S. Sarbanes-Oxley Act, to furnish a report by management on the effectiveness of its internal control over financial reporting.
In addition, the Company’s independent registered public accounting firm must report on its evaluation of the Company’s internal
control over financial reporting. The Company reported material weaknesses as of December 31, 2021 which were remediated
in 2022 such that the 2022 evaluation of internal control over financial reporting concluded that the internal controls over financial
reporting were effective. If the Company fails to comply with Section 404 of the U.S. Sarbanes-Oxley Act and does not maintain
effective internal controls in the future, it could result in a material misstatement of the Company’s financial statements, which
could cause investors to lose confidence in the Company’s financial statements and cause the trading price of the Common
Shares to decline.
Material Transactions. The Company has acquired numerous companies pursuant to its acquisition strategy and, in addition,
has sold business units, including the sale in February 2016 of its then-Waste Management segment for CAD $800 million. The
Company buys and sells business units in the normal course of its business. Accordingly, at any given time, the Company may
consider, or be in the process of negotiating, a number of potential acquisitions and dispositions, some of which may be material
in size. In connection with such potential transactions, the Company regularly enters into non-disclosure or confidentiality
agreements, indicative term sheets, non-binding letters of intent and other similar agreements with potential sellers and buyers,
and conducts extensive due diligence as applicable. These potential transactions may relate to some or all of the Company’s
four reportable segments, that is, TL, Logistics, LTL, and Package and Courier. The Company’s active acquisition and disposition
strategy requires a significant amount of management time and resources. Although the Company complies with its disclosure
obligations under applicable securities laws, the announcement of any material transaction by the Company (or rumors thereof,
even if unfounded) could result in volatility in the market price and trading volume of the Common Shares. Further, the Company
cannot predict the reaction of the market, or of the Company’s stakeholders, customers or competitors, to the announcement of
any such material transaction or to rumors thereof.
2022 Annual Report │46
Management’s Discussion and Analysis
Dividends and Share Repurchases. The payment of future dividends and the amount thereof is uncertain and is at the sole
discretion of the Board of Directors of the Company and is considered each quarter. The payment of dividends is dependent
upon, among other things, operating cash flow generated by the Company, its financial requirements for operations, the execution
of its growth strategy and the satisfaction of solvency tests imposed by the Canada Business Corporations Act for the declaration
and payment of dividends. Similarly, any future repurchase of shares by the Company is at the sole discretion of the Board of
Directors and is dependent on the factors described above. Any future repurchase of shares by the Company is uncertain.
Attention on Environmental, Social and Governance (ESG) Matters. Companies are facing increasing attention from
stakeholders relating to ESG matters, including environmental stewardship, social responsibility, and diversity and inclusion.
Organizations that provide information to investors on corporate governance and related matters have developed ratings
processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their
investment and voting decisions. Unfavorable ESG ratings may lead to negative sentiment toward the Company, which could
have a negative impact on the Company's stock price.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and
assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and
liabilities, the disclosures about contingent assets and liabilities, and the reported amounts of revenues and expenses. Such
estimates include establishing the fair value of intangible assets related to business combinations, determining estimates and
assumptions related to impairment tests for goodwill, determining estimates and assumptions related to the accrued benefit
obligation, and determining estimates and assumptions related to the evaluation of provisions for self-insurance and litigations.
These estimates and assumptions are based on management’s best estimates and judgments. Key drivers in critical estimates
are as follows:
Fair value of intangible assets related to business combinations
Projected future cash flows
Acquisition specific discount rate
Attrition rate established from historical trends
Impairment tests for goodwill
Discount rates
Forecasted revenue growth, operating margin, EBITDA margin as well as capital expenditures
Comparable public company EBITDA multiples
Accrued benefit obligation
Discount rates
Salary growth
Mortality tables
Self-Insurance and litigations
Historical claim experience, severity factors affecting the amounts ultimately paid, and current and expected levels of
cost per claims
Third party evaluations
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors,
including the current economic environment, which management believes to be reasonable under the circumstances.
Management adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ from
2022 Annual Report │47
Management’s Discussion and Analysis
these estimates. Changes in those estimates and assumptions resulting from changes in the economic environment will be
reflected in the financial statements of future periods.
CHANGES IN ACCOUNTING POLICIES
Adopted during the period
The following new standards, and amendments to standards and interpretations, are effective for the first time for interim periods
beginning on or after January 1, 2022 and have been applied in preparing the audited consolidated financial statements:
Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to IAS 37)
These new standards did not have a material impact on the Company’s audited consolidated financial statements.
To be adopted in future periods
The following new standards and amendments to standards are not yet effective for the year ended December 31, 2022, and
have not been applied in preparing the audited consolidated financial statements:
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
Definition of Accounting Estimates (Amendments to IAS 8)
Lease Liability in a Sales and Leaseback (Amendments to IFRS 16)
Further information can be found in note 3 of the December 31, 2022 audited consolidated financial statements.
CONTROLS AND PROCEDURES
In compliance with the provisions of Canadian Securities Administrators’ National Instrument 52-109 and the U.S. Securities
Exchange Act of 1934, as amended (the “Exchange Act”), the Company has filed certificates signed by the President and Chief
Executive Officer (“CEO”) and by the Chief Financial Officer (“CFO”) that, among other things, report on:
their responsibility for establishing and maintaining disclosure controls and procedures and internal control over financial
reporting for the Company; and
the design of disclosure controls and procedures and the design of internal controls over financial reporting.
Disclosure controls and procedures
The President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), have designed disclosure controls
and procedures (as defined in National Instrument 52-109 and Rule 13a-15(e) and 15d-15(e) under the Exchange Act), or have
caused them to be designed under their supervision, in order to provide reasonable assurance that:
material information relating to the Company is made known to the CEO and CFO by others; and
information required to be disclosed by the Company in its filings, under applicable securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation.
As at December 31, 2022, an evaluation was carried out under the supervision of the CEO and CFO, of the design and operating
effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the CEO and CFO concluded that
the Company's disclosure controls and procedures were appropriately designed and were operating effectively as at December
31, 2022.
Management’s Annual Report on Internal Controls over Financial Reporting
The CEO and CFO have also designed internal control over financial reporting (as defined in National Instrument 52-109 and
Rules 13a-15(f) and 15d-15(f) under the Exchange Act), or have caused them to be designed under their supervision, in order
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with IFRS.
As at December 31, 2022 an evaluation was carried out, under the supervision of the CEO and the CFO, of the effectiveness of
the Company’s internal control over financial reporting. Based on this evaluation, the CEO and the CFO concluded that the
Company’s internal control over financial reporting were appropriately designed and operating effectively as at December 31,
2022.The control framework used to design the Company’s internal controls over financial reporting is based on the criteria set
2022 Annual Report │48
Management’s Discussion and Analysis
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated
Framework (2013 framework).
The effectiveness of internal controls over financial reporting as of December 31, 2022 has been audited by KPMG LLP, the
Company’s registered public accounting firm that audited the consolidated financial statements and is included with the
Company’s consolidated financial statements. KPMG LLP has concluded the Company has maintained effective internal control
over financial reporting as of December 31, 2022.
Remediation of Previously Reported Material Weaknesses
As previously disclosed in the 2021 annual Management Discussion and Analysis and 2022 interim Management Discussion
and Analysis, the Company identified two material weaknesses in the internal control over financial reporting as follows:
IT General Controls: The Company had an aggregation of control deficiencies within its information technology (IT) general
controls across multiple systems supporting the Company's business processes, including deficiencies relating to user access
controls, change management, and high-privileged access.
Order to Cash Process: Due to the material weakness described above, automated controls and manual controls that are
dependent on information from affected IT systems around the order to cash process, which encompasses billing and pricing
sub processes were found not to be effective. In addition, there was inadequate review and documentation of manual process
level controls.
During the year, management took actions to remediate these material weaknesses including improving the access review
process by implementing standard review procedures across the Company's divisions and performing periodic reviews. High
privileged access deficiencies were remediated by removing unnecessary access and performing periodic reviews as well as
implementing a second layer of access authorization where possible. Lastly, ticketing systems and mechanisms were
implemented along with documented approval matrices such that changes were adequately performed. Management tested the
operating effectiveness of these controls as part of its year-end assessment and at that time was able to determine the actions
remediated the material weakness.
Changes in internal controls over financial reporting
Other than the changes described in the "Remediation of Previously Reported Material Weaknesses" section above, there were
no changes to the Company’s internal controls over financial reporting during the quarter ended December 31, 2022 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
2022 Annual Report │49
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders and Board of Directors TFI International Inc.
Opinion on the Consolidated Financial Statements
the accompanying consolidated statements of
We have audited
financial position of TFI
International Inc. (the "Company") as of December 31, 2022 and 2021, the related consolidated
statements of income, comprehensive income, changes in equity, and cash flows for the years ended
December 31, 2022 and 2021, and the related notes (collectively, the "consolidated financial
statements"). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2022 and 2021, and its financial
performance and its cash flows for the years ended December 31, 2022 and 2021, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards
Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) ("PCAOB"), the Company’s internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report
dated February 22, 2023 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
2022 Annual Report │50
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.
Evaluation of the fair value measurement of land and buildings acquired in the
UPS Ground Freight Inc. acquisition
As discussed in Notes 5(a) and 5(d) to the consolidated financial statements, on April 30, 2021, the
Company completed the acquisition of UPS Freight, the less-than-truckload and dedicated truckload
divisions of United Parcel Service, Inc. As a result of the business combination, the Company acquired,
amongst other assets, land and buildings with a final fair value of $859.2 million. The fair value of land
and buildings was determined by management using the market comparison technique and cost
technique. The valuation model considers market prices for comparable sites, when available, and
considers depreciated replacement cost, which reflects adjustments for physical deterioration, when
appropriate. Significant inputs included market prices for comparable sites and average rebuild cost. In
fiscal 2022, adjustments were made to the provisional amounts which recasted the amounts recorded
in fiscal 2021. A final bargain purchase gain in the amount of $283.6 million was recognized in the
statement of income for the year ended December 31, 2021.
We identified the evaluation of the final fair value measurement of land and buildings acquired in the
UPS Freight acquisition as a critical audit matter. There was a high degree of subjectivity that required
significant auditor judgement in evaluating the market prices for comparable lands and average rebuild
costs for comparable depreciated buildings. Additionally, the procedures required use of professionals
with specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to the
update of the valuation process of the land and buildings to finalize the provisional amounts. For a
sample of land and building items, we compared the market prices used by management to external
market data for comparable items. We involved valuation professionals with specialized skills and
knowledge, who assisted in evaluating the valuation methods and certain assumptions used in the
determination of the land and buildings final fair value measurements.
2022 Annual Report │51
Assessment of the self-insurance provisions
As discussed in Note 17 to the consolidated financial statements, the Company has $96.3 million of
self-insurance provisions as of December 31, 2022. As discussed in Note 3(l), self-insurance provisions
represent the uninsured portion of outstanding claims at year-end. The provision represents an accrual
for estimated future disbursements associated with the self-insured portion for claims filed at year-end
and incurred but not reported related to cargo loss, bodily injury, worker’s compensation and property
damages. The estimates are based on the Company’s historical experience including settlement
patterns and payment trends.
We identified the assessment of the self-insurance provisions as a critical audit matter. Significant
auditor judgment was required to evaluate the amounts that will ultimately be paid to settle these claims.
Significant assumptions that affected the estimated provisions included the consideration of historical
claim experience, severity factors affecting the amounts ultimately paid which are used to determine
the loss development patterns, and current and expected levels of cost per claims which are used to
determine expected loss ratios. Additionally, the provisions included estimates for claims that have
been incurred but have not been reported, and specialized skills and knowledge were needed to
evaluate the actuarial methods and assumptions used to assess these estimates.
The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to the
reconciliation and monitoring of its self-insurance provision. For claims for which the estimate is
determined using actuarial methods, which included claims incurred but not reported, we involved
actuarial professionals with specialized skills and knowledge, who assisted in:
comparing the Company’s actuarial reserving methods with generally accepted actuarial
standards;
evaluating assumptions used in determining the provisions, including the loss development pattern
and the expected loss ratios;
developing an expected range of the provisions, including for claims incurred but not reported, by
applying actuarial methods and assumptions to the Company’s data and comparing to the
Company’s estimated provisions.
2022 Annual Report │52
For claims for which the estimate is not determined using actuarial methods, for a selection of claims,
we confirmed with the Company’s external counsel regarding the Company’s evaluation of claims and
any excluded claims.
We have served as the Company’s auditor since 2003.
Montréal, Canada
February 22, 2023
2022 Annual Report │53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders and Board of Directors of TFI International Inc.
Opinion on Internal Control Over Financial Reporting
We have audited TFI International Inc.’s (the "Company") internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) ("PCAOB"), the consolidated statements of financial position of the Company as
of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive
income, changes in equity, and cash flows for the years ended December 31, 2022 and 2021, and the
related notes (collectively, the "consolidated financial statements"), and our report dated February 22,
2023 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included
in the “Management’s Annual Report on Internal Controls over Financial Reporting” section in the
Company’s Management’s Discussion and Analysis. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
2022 Annual Report │54
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Montréal, Canada
February 22, 2023
2022 Annual Report │55
TFI International Inc.
(in thousands of U.S. dollars)
Assets
Cash and cash equivalents
Trade and other receivables
Inventoried supplies
Current taxes recoverable
Prepaid expenses
Assets held for sale
Current assets
Property and equipment
Right-of-use assets
Intangible assets
Investments
Employee benefits
Other assets
Deferred tax assets
Non-current assets
Total assets
Liabilities
Trade and other payables
Current taxes payable
Provisions
Other financial liabilities
Long-term debt
Lease liabilities
Current liabilities
Long-term debt
Lease liabilities
Employee benefits
Provisions
Other financial liabilities
Deferred tax liabilities
Non-current liabilities
Total liabilities
Equity
Share capital
Contributed surplus
Accumulated other comprehensive income
Retained earnings
Total equity
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Note
7
9
10
11
12
16
18
13
17
14
15
14
15
16
17
18
19
19, 21
DECEMBER 31, 2022 AND 2021
As at
December 31,
2022
As at
December 31,
2021*
147,117
1,030,726
24,181
12,788
38,501
10,250
1,263,563
2,131,955
381,640
1,592,110
85,964
4,359
19,192
27,047
4,242,267
5,505,830
708,768
41,714
43,903
19,275
37,087
115,934
966,681
1,278,670
297,105
-
131,736
382
368,186
2,076,079
3,042,760
1,089,229
41,491
(233,321)
1,565,671
2,463,070
19,292
1,056,023
24,402
6,080
54,518
1,943
1,162,258
2,455,141
398,533
1,792,921
31,391
-
13,724
29,695
4,721,405
5,883,663
861,908
16,552
39,012
10,566
363,586
115,344
1,406,968
1,244,508
313,862
68,037
108,145
8,033
423,755
2,166,340
3,573,308
1,133,181
39,150
(144,665)
1,282,689
2,310,355
Contingencies, letters of credit and other commitments
Subsequent events
Total liabilities and equity
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d)) and for change in
presentation (see note 12).
5,505,830
5,883,663
27
29
The notes on pages 61 to 103 are an integral part of these consolidated financial statements.
On behalf of the Board:
Director
Alain Bédard
Director
André Bérard
2022 Annual Report │56
TFI International Inc.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of U.S. dollars, except per share amounts)
Note
2022
2021*
Revenue
Fuel surcharge
Total revenue
Materials and services expenses
Personnel expenses
Other operating expenses
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Gain on sale of business
Bargain purchase gain
Gain on sale of rolling stock and equipment
Gain on derecognition of right-of-use assets
(Gain) loss on sale of land and buildings
Gain on sale of assets held for sale
Loss on disposal of intangible assets
Total operating expenses
Operating income
Finance (income) costs
Finance income
Finance costs
Net finance costs
Income before income tax
Income tax expense
Net income
Earnings per share
Basic earnings per share
Diluted earnings per share
7,357,064
1,455,427
8,812,491
4,592,191
2,362,856
492,291
248,638
126,276
55,679
(73,653)
-
(59,661)
(210)
(43)
(77,911)
-
7,666,453
1,146,038
(1,750)
82,147
80,397
1,065,641
242,409
823,232
9.21
9.02
22
23
9
10
11
6
5
24
24
25
20
20
6,468,785
751,644
7,220,429
3,815,453
1,974,081
380,342
225,007
112,782
55,243
-
(283,593)
(24,644)
(1,282)
19
(12,209)
1
6,241,200
979,229
(5,127)
78,145
73,018
906,211
151,806
754,405
8.11
7.91
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
The notes on pages 61 to 103 are an integral part of these consolidated financial statements.
2022 Annual Report │57
TFI International Inc.
(In thousands of U.S. dollars)
Net income
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2022 AND 2021
2022
2021*
823,232
754,405
Other comprehensive (loss) income
Items that may be reclassified to income or loss in future years:
Foreign currency translation differences
Net investment hedge, net of tax
Employee benefits, net of tax
Items that may never be reclassified to income:
Defined benefit plan remeasurement, net of tax
Items directly reclassified to retained earnings:
Unrealized (loss) gain on investments in equity securities
measured at fair value through OCI, net of tax
Other comprehensive (loss) income, net of tax
(10,148)
(72,046)
292
63,508
(5,495)
(23,889)
Total comprehensive income
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
799,343
The notes on pages 61 to 103 are an integral part of these consolidated financial statements.
12,960
(15,542)
87
(4,128)
24,147
17,524
771,929
2022 Annual Report │58
TFI International Inc.
(In thousands of U.S. dollars)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2022 AND 2021
Accumulated
unrealized
loss on
employee
Accumulated Accumulated
unrealized
gain (loss)
on invest-
foreign
currency
translation
differences
Note
Share Contributed
surplus
capital
benefit & net invest-
plans ment hedge
ments in
equity
securities
Retained
earnings
(deficit)
Total
equity
attributable
to owners
of the
Company
Balance as at December 31, 2021*
1,133,181
39,150
(292)
(156,926)
12,553
1,282,689
2,310,355
Net income
Other comprehensive income (loss), net of tax
Realized (loss) gain on equity securities
Total comprehensive income (loss)
-
-
-
-
-
-
-
-
-
292
-
292
-
(82,194)
-
(82,194)
-
(5,495)
(1,259)
(6,754)
823,232
63,508
1,259
887,999
Share-based payment transactions, net of tax
Stock options exercised, net of tax
Dividends to owners of the Company
Repurchase of own shares
Net settlement of restricted share units, net of tax
Total transactions with owners, recorded directly in equity
21
19, 21
19
19
19, 21
-
22,800
-
(68,536)
1,784
(43,952)
16,298
(6,298)
-
-
(7,659)
2,341
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(102,615)
(499,447)
(2,955)
(605,017)
823,232
(23,889)
-
799,343
16,298
16,502
(102,615)
(567,983)
(8,830)
(646,628)
Balance as at December 31, 2022
1,089,229
41,491
-
(239,120)
5,799 1,565,671
2,463,070
Balance as at December 31, 2020
1,120,049
19,783
(379)
(154,344)
-
803,503
1,788,612
Net income*
Other comprehensive income (loss), net of tax
Realized (loss) gain on equity securities
Total comprehensive income (loss)
-
-
-
-
Share-based payment transactions, net of tax
Stock options exercised, net of tax
Dividends to owners of the Company
Repurchase of own shares
Net settlement of restricted share units, net of tax
Total transactions with owners, recorded directly in equity
21
19, 21
19
19
19, 21
-
26,324
-
(23,449)
10,257
13,132
-
-
-
-
27,577
(3,266)
-
-
(4,944)
19,367
Balance as at December 31, 2021*
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
1,133,181
39,150
The notes on pages 61 to 103 are an integral part of these consolidated financial statements.
-
87
-
87
-
-
-
-
-
-
-
(2,582)
-
(2,582)
-
24,147
(11,594)
12,553
-
-
-
-
-
-
-
-
-
-
-
-
754,405
(4,128)
11,594
761,871
-
-
(89,121)
(174,704)
(18,860)
(282,685)
754,405
17,524
-
771,929
27,577
23,058
(89,121)
(198,153)
(13,547)
(250,186)
(292)
(156,926)
12,553
1,282,689
2,310,355
2022 Annual Report │59
TFI International Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of U.S. dollars)
Note
2022
2021*
823,232
754,405
Cash flows from operating activities
Net income
Adjustments for:
Depreciation of property and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Share-based payment transactions
Net finance costs
Income tax expense
Gain on sale of business
Bargain purchase gain
Gain on sale of property and equipment
Gain on derecognition of right-of-use assets
Gain on sale of assets held for sale
Loss on disposal of intangible assets
Employee benefits
Provisions, net of payments
Net change in non-cash operating working capital
Interest paid
Income tax paid
Net cash from operating activities
Cash flows from (used in) investing activities
Purchases of property and equipment
Proceeds from sale of property and equipment
Proceeds from sale of assets held for sale
Purchases of intangible assets
Proceeds from sale of intangible assets
Proceeds from sale of business, net of cash disposed
Business combinations, net of cash acquired
Purchases of investments
Proceeds from sale of investments
Others
Net cash from (used in) investing activities
Cash flows (used in) from financing activities
Net decrease (increase) in bank indebtedness
Proceeds from long-term debt
Repayment of long-term debt
Net (increase) decrease in revolving facilities
Repayment of lease liabilities
Repayment of other financial liabilities
Dividends paid
Repurchase of own shares
Proceeds from exercise of stock options
Payment for settlement of restricted share units
Net cash (used in) from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
127,825
19,292
147,117
The notes on pages 61 to 103 are an integral part of these consolidated financial statements.
9
10
11
21
24
25
6
8
9
11
6
5
14
14
14
15
19
19
248,638
126,276
55,679
14,648
80,397
242,409
(73,653)
-
(59,704)
(210)
(77,911)
-
14,946
26,044
(147,453)
(77,512)
(224,181)
971,645
(350,824)
128,821
131,250
(6,120)
250
546,228
(158,251)
(80,551)
12,930
(311)
223,422
7,490
334,164
(369,692)
(236,502)
(123,606)
(21,108)
(97,321)
(567,983)
16,502
(9,186)
(1,067,242)
225,007
112,782
55,243
15,424
73,018
151,806
-
(283,593)
(24,625)
(1,282)
(12,209)
1
(20,193)
21,890
41,940
(65,453)
(188,810)
855,351
(268,656)
92,842
19,869
(7,143)
-
-
(1,008,131)
(35,913)
40,686
3,789
(1,162,657)
(7,173)
661,039
(43,868)
118,859
(115,336)
(11,216)
(85,386)
(198,153)
20,114
(16,579)
322,301
14,995
4,297
19,292
2022 Annual Report │60
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
1. Reporting entity
TFI International Inc. (the “Company”) is incorporated under the Canada Business Corporations Act, and is a company domiciled in
Canada. The address of the Company’s registered office is 8801 Trans-Canada Highway, Suite 500, Montreal, Quebec, H4S 1Z6.
The consolidated financial statements of the Company as at and for the years ended December 31, 2022 and 2021 comprise the Company
and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).
The Group is involved in the provision of transportation and logistics services across the United States, Canada and Mexico.
2. Basis of preparation
a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements were authorized for issue by the Board of Directors on February 22, 2023.
b) Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis except for the following material items in
the statements of financial position:
investment in equity securities, derivative financial instruments and contingent considerations are measured at fair value;
liabilities for cash-settled share-based payment arrangements are measured at fair value in accordance with IFRS 2;
the defined benefit pension plan liability is recognized as the net total of the present value of the defined benefit obligation less
the fair value of the plan assets; and
assets and liabilities acquired in business combinations are measured at fair value at acquisition date.
These consolidated financial statements are expressed in U.S. dollars, except where otherwise indicated.
c) Functional and presentation currency
The Company’s consolidated financial statements are presented in U.S. dollars (“U.S. dollars” or “USD”). All information in these
consolidated financial statements is presented in USD unless otherwise specified.
The Company’s functional currency is the Canadian dollar (“CAD” or “CDN$”). Translation gains and losses from the application of
the U.S. dollar as the presentation currency while the Canadian dollar is the functional currency are included as part of the
accumulated foreign currency translation differences and net investment hedge.
All financial information presented in U.S. dollars has been rounded to the nearest thousand.
d) Use of estimates and judgments
The preparation of the accompanying financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of
assets and liabilities, the disclosures about contingent assets and liabilities, and the reported amounts of revenues and expenses.
Such estimates include the valuation of goodwill and intangible assets, the measurement of identified assets and liabilities acquired
in business combinations, income tax provisions, defined benefit obligation and the self-insurance and other provisions and
contingencies. These estimates and assumptions are based on management’s best estimates and judgments.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including
the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts
such estimates and assumptions when facts and circumstances dictate. Actual results could differ from these estimates. Changes
in those estimates and assumptions resulting from changes in the economic environment will be reflected in the financial statements
of future periods.
2022 Annual Report │61
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Information about critical judgments, assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial year is included in the following notes:
Note 5 – Establishing the fair value of intangible assets and land and buildings related to business combinations;
Note 16 – Determining estimates and assumptions related to the evaluation of the defined benefit obligation; and
Note 17 – Determining estimates and assumptions related to the evaluation of provisions for self-insurance and litigations.
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements,
unless otherwise indicated. The accounting policies have been applied consistently by Group entities.
a) Basis of consolidation
i)
Business combinations
The Group measures goodwill as the fair value of the consideration transferred including the fair value of liabilities resulting
from contingent consideration arrangements, less the net recognized amount of the identifiable assets acquired and liabilities
assumed, all measured at fair value as of the acquisition date. When the excess is negative, a bargain purchase gain is
recognized immediately in income or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection
with a business combination, are expensed as incurred.
ii)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has the right to, variable
returns from its involvement with the entity and has the ability to affect those through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the
date that control ceases.
iii)
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
b) Foreign currency translation
i)
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group’s entities at exchange
rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the
functional currency at the exchange rate in effect at the reporting date. The foreign currency gain or loss on monetary items is
the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest
and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the
reporting period. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated at the rate in effect on the transaction date. Income and expense items denominated in foreign currency are
translated at the date of the transactions. Gains and losses are included in income or loss.
ii)
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations,
are translated to Canadian dollars at exchange rates in effect at the reporting date. The income and expenses of foreign
operations are translated to Canadian dollars at the average exchange rate in effect during the reporting period.
Foreign currency differences are recognized in other comprehensive income (“OCI”) in the accumulated foreign currency
translation differences account.
2022 Annual Report │62
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
When a foreign operation is disposed of, the relevant amount in the cumulative amount of foreign currency translation
differences is transferred to income or loss as part of the income or loss on disposal. On the partial disposal of a subsidiary
while retaining control, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other
partial disposal of a foreign operation, the relevant proportion is reclassified to income or loss.
Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement
of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the
net investment in the foreign operation, are recognized in other comprehensive income in the accumulated foreign currency
translation differences account.
Translation gains and losses from the application of U.S dollars as the presentation currency while the Canadian dollar is the
functional currency are included as part of the cumulative foreign currency translation adjustment.
c) Financial instruments
i)
Non-derivative financial assets
The Group initially recognizes financial assets on the trade date at which the Group becomes a party to the contractual
provisions of the instrument. Financial assets are initially measured at fair value, except for trade receivables which are initially
measured at their transaction price when the trade receivables do not contain a significant financing component. If the financial
asset is not subsequently accounted for at fair value through profit or loss, then the initial measurement includes transaction
costs that are directly attributable to the asset’s acquisition or origination. On initial recognition, the Group classifies its financial
assets as subsequently measured at either amortized cost or fair value, depending on its business model for managing the
financial assets and the contractual cash flow characteristics of the financial assets and depending on the purpose for which
the financial assets were acquired.
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards
of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the
Group is recognized as a separate asset or liability.
Financial assets and liabilities are offset and the net amount is presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously.
Financial assets measured at amortized cost
A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment
loss, if:
The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal
and/or interest.
The Group currently classifies its cash equivalents, trade and other receivables and long-term non-trade receivables included
in other non-current assets as financial assets measured at amortized cost.
The Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost. The Group
has a portfolio of trade receivables at the reporting date. The Group uses a provision matrix to determine the lifetime expected
credit losses for the portfolio.
The Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted
for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to
be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest
rate. Losses are recognized in income or loss and reflected in an allowance account against trade and other receivables.
2022 Annual Report │63
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Financial assets measured at fair value
These assets are measured at fair value and changes therein, including any interest or dividend income, are recognized in
income or loss. However, for investments in equity instruments that are not held for trading, the Group may elect at initial
recognition to present gains and losses in other comprehensive income. For such investments measured at fair value through
other comprehensive income, gains and losses are never reclassified to profit or loss, and no impairment is recognized in profit
or loss. Dividends earned from such investments are recognized in profit or loss, unless the dividend clearly represents a
repayment of part of the cost of the investment.
Financial assets measured at fair value through other comprehensive income
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent
changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.
ii)
Non-derivative financial liabilities
The Group initially recognizes debt issued and subordinated liabilities on the date that they are originated. All other financial
liabilities are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the
instrument.
A financial liability is derecognized when its contractual obligations are discharged or cancelled or expire.
Financial liabilities are classified into financial liabilities measured at amortized cost and financial liabilities measured at fair
value.
Financial liabilities measured at amortized cost
A financial liability is subsequently measured at amortized cost, using the effective interest method. The Group currently
classifies bank indebtedness, trade and other payables and long-term debt as financial liabilities measured at amortized cost.
Financial liabilities measured at fair value
Financial liabilities at fair value are initially recognized at fair value and are re-measured at each reporting date with any changes
therein recognized in net earnings. The Group currently classifies its contingent consideration liability in connection with a
business acquisition as a financial liability measured at fair value.
iii)
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and stock
options are recognized as a deduction to share capital, net of any tax effects.
When share capital recognized as equity is repurchased, share capital is reduced by the amount equal to weighted average
historical cost of repurchased equity. The excess amount of the consideration paid, which includes directly attributable costs,
net of any tax effects, is recognized as a deduction from retained earnings.
iv)
Derivative financial instruments
The Group uses derivative financial instruments to manage its foreign currency and interest rate risk exposures. Embedded
derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the
host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through income
or loss.
Derivatives and embedded derivatives are recognized initially at fair value; related transaction costs are recognized in income
or loss as incurred. Subsequent to initial recognition, derivatives and embedded derivatives are measured at fair value, and
changes therein are recognized in net change in fair value of foreign exchange derivatives in income or loss with the exception
of net change in fair value of cross currency interest rate swap contracts recognized in net foreign exchange gain or loss in
income or loss.
2022 Annual Report │64
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
d) Hedge accounting
Management’s risk strategy is focused on reducing the variability in profit or losses and cash flows associated with exposure to
market risks. Hedge accounting is used to reduce this variability to an acceptable level. The hedges employed by the Group reduce
the currency fluctuation exposures.
On the initial designation of a hedging relationship, the Group formally documents the relationship between the hedging instrument
and the hedged items, including the risk management objectives and strategy in undertaking the hedge transaction, together with
the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the
inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be effective in
offsetting the changes in the fair value or cash flows of the respective hedged items throughout the period for which the hedge is
designated.
Net investment hedge
The Group designates a portion of its U.S. dollar denominated debt as a hedging item in a net investment hedge. The Group applies
hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the Company’s
functional currency (CAD), regardless of whether the net investment is held directly or through an intermediate parent.
Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net investment in foreign
operations are recognized in other comprehensive income to the extent that the hedge is effective and are presented in the currency
translation differences account within equity. To the extent that the hedge is ineffective, such differences are recognized in income
or loss. When the hedged net investment is disposed of, the relevant amount in the translation reserve is transferred to income or
loss as part of the gain or loss on disposal.
e) Property and equipment
Property and equipment are accounted for at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset and borrowing costs on qualifying assets.
When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major
components) of property and equipment.
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with
the carrying amount of property and equipment, and are recognized in net income or loss.
Depreciation is based on the cost of an asset less its residual value and is recognized in income or loss over the estimated useful
life of each component of an item of property and equipment.
The depreciation method and useful lives are as follows:
Categories
Buildings
Rolling stock
Equipment
Basis
Straight-line
Primarily straight-line
Primarily straight-line
Useful lives
15 – 40 years
3 – 20 years
5 – 12 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted prospectively, if
appropriate.
Property and equipment are reviewed for impairment in accordance with IAS 36 Impairment of Assets when there are indicators that
the carrying value may not be recoverable.
f)
Intangible assets
i)
Goodwill
Goodwill that arises upon business combinations is included in intangible assets.
Goodwill is not amortized and is measured at cost less accumulated impairment losses.
2022 Annual Report │65
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
ii)
Other intangible assets
Intangible assets consist of customer relationships, trademarks, non-compete agreements and information technology.
The Group determines the fair value of the customer relationship intangible assets using the excess earnings model and
internally developed significant assumptions including:
1. Forecasted revenue attributable to existing customer contracts and relationships;
2. Estimated annual attrition rate;
3. Forecasted operating margins; and
4. Discount rates
The internally developed assumptions are based on limited observable market information which cause measurement uncertainty,
and the fair value of the customer related intangible assets are sensitive to changes to these assumptions.
Intangible assets that are acquired by the Group and have finite lives are measured at cost less accumulated amortization and
accumulated impairment losses.
Intangible assets with finite lives are amortized on a straight-line basis over the following estimated useful lives:
Categories
Customer relationships
Trademarks
Non-compete agreements
Information technology
Useful lives
5 – 20 years
5 – 20 years
3 – 10 years
5 – 7 years
Useful lives are reviewed at each financial year-end and adjusted prospectively, if appropriate.
g) Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
the contract involves the use of an identified asset – this may be specific explicitly or implicitly, and should be physically distinct
or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, the
asset is not identified;
the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use;
and
the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are
most relevant to changing how and for what purpose the asset is used.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract
to each lease component on the basis of their relative stand-alone prices.
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred, less any lease incentives received.
The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-
line method as this most closely reflects the expected pattern consumption of the future economic benefits. The lease term includes
periods covered by an option to extend if the Group is reasonably certain to exercise that option. In addition, the right-of-use asset
is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that cannot be readily determined, the Group's incremental borrowing
2022 Annual Report │66
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
rate. The incremental borrowing rate is a function of the Group’s incremental borrowing rate, the nature of the underlying asset, the
location of the asset and the length of the lease. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in the
future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12
months or leases and leases of low-value assets. The Group recognises these lease payments as an expense on a straight-line
basis over the lease term.
h)
Inventoried supplies
Inventoried supplies consist primarily of repair parts and fuel and are measured at the lower of cost and net realizable value.
i)
Impairment
Non-financial assets
The carrying amounts of the Group’s non-financial assets other than inventoried supplies and deferred tax assets are reviewed at
each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill, the recoverable amount is estimated on December 31 of each year.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of
assets (the “cash-generating unit”, or “CGU”). For the purposes of goodwill impairment testing, goodwill acquired in a business
combination is allocated to the group of CGUs (usually a Group’s operating segment), that is expected to benefit from the synergies
of the combination. This allocation is subject to an operating segment ceiling test and reflects the lowest level at which that goodwill
is monitored for internal reporting purposes. The Company performs goodwill impairment testing annually, or more frequently if
events or circumstances indicate the carrying value of a CGU, which is a Group’s operating segment, may exceed the recoverable
amount of the CGU. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or group of assets. The fair value
less cost to sell is based on market comparable multiples applied to forecasted earnings before financial expenses, income taxes,
depreciation and amortization ("adjusted EBITDA") for the next year, which takes into account financial forecasts approved by senior
management.
The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired,
then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.
Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the
units, if any, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a prorata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods
are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized. Impairment losses and impairment reversals are recognized
in income or loss.
2022 Annual Report │67
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
j) Assets held for sale
Non-current assets are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than
through continuing use.
Such assets are generally measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on
initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are recognized in
income or loss.
Once classified as held-for-sale, intangible assets and property and equipment are no longer amortized or depreciated.
k) Employee benefits
i)
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution pension plans are recognized as an employee benefit expense in income or loss in the periods during which
services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a
reduction in future payments is available.
ii)
Defined benefit plans
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in return for their services in the current and prior periods discounting
that amount and deducting the fair value of any plan assets. The discount rate is the yield at the reporting date on AAA, AA or
A credit-rated fixed income securities that have maturity dates approximating the terms of the Group’s obligations and that are
denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a
qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized
asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions
in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any
minimum funding requirements that apply to any plan in the Group.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other
comprehensive income. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for
the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to
the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during
the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit
plans are recognized in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service
or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the
settlement of a defined benefit plan when the settlement occurs.
iii)
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or income-sharing plans if
the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee,
and the obligation can be estimated reliably.
2022 Annual Report │68
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
iv)
Share-based payment transactions
The grant date fair value of equity share-based payment awards granted to employees is recognized as a personnel expense,
with a corresponding increase in contributed surplus, over the period that the employees unconditionally become entitled to the
awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service
conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards
that do meet the related service condition at the vesting date.
The fair value of the amount payable to board members in respect of deferred share unit (“DSU”), which are to be settled in
cash, is recognized as an expense with a corresponding increase in liabilities. The liability is remeasured at each reporting date
until settlement. The Group presents mark-to-market (gain) loss on DSUs in personnel expenses.
v)
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and
when the Group recognises costs for a restructuring. If benefits are not expected to be fully settled within 12 months of the end
of the reporting period, then they are discounted.
l)
Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value
of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the unwinding of
the discount is recognized as finance cost.
Self-Insurance
Self-insurance provisions represent the uninsured portion of outstanding claims at year-end. The provision represents an accrual for
estimated future disbursements associated with the self-insured portion for claims filed at year-end and incurred but not reported,
related to cargo loss, bodily injury, worker’s compensation and property damages. The estimates are based on the Group’s historical
experience including settlement patterns and payment trends. The most significant assumptions in the estimation process include
the consideration of historical claim experience, severity factors affecting the amounts ultimately paid, and current and expected
levels of cost per claims. Changes in assumptions and experience could cause these estimates to change significantly in the near
term.
m) Revenue recognition
The Group’s normal business operations consist of the provision of transportation and logistics services. All revenue relating to
normal business operations is recognized over time in the statement of income. The stage of completion of the service is determined
using the proportion of days completed to date compared to the estimated total days of the service. Revenue is presented net of
trade discounts and volume rebates. Revenue is recognized as services are rendered, when the control of promised services is
transferred to customers in an amount that reflects the consideration the Group expects to be entitled to receive in exchange for
those services measured based on the consideration specified in a contract with the customers. The Group considers the contract
with customers to include the general transportation service agreement and the individual bill of ladings with customers.
Based on the evaluation of the control model, certain businesses, mainly in the Less-Than-Truckload segment, act as the principal
within their revenue arrangements. The affected businesses report transportation revenue gross of associated purchase
transportation costs rather than net of such amounts within the consolidated statements of income.
n) Other operating expenses
Other operating expenses consist primarily of third-party commissions, transitional service agreement fees, information technology
support and software expenses, building expenses (including repairs and maintenance, electricity, janitorial & security services and
property taxes).
o) Finance income and finance costs
Finance income comprises interest income on funds invested, dividend income and interest and accretion on promissory note.
Interest income is recognized as it accrues in income or loss, using the effective interest method.
2022 Annual Report │69
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Finance costs comprise interest expense on bank indebtedness and long-term debt, unwinding of the discount on provisions and
impairment losses recognized on financial assets (other than trade receivables).
Fair value gains or losses on derivative financial instruments and on contingent considerations, and foreign currency gains and
losses are reported on a net basis as either finance income or cost.
p)
Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in income or loss except to
the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary
differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable income or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable
temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be
applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the
reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but
they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is
probable that future taxable income will be available against which they can be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
q) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is calculated by dividing
the income or loss attributable to common shareholders of the Company by the weighted average number of common shares
outstanding during the period, adjusted for own shares held, if any. Diluted EPS is determined by adjusting the income or loss
attributable to common shareholders and the weighted average number of common shares outstanding, adjusted for own shares
held, for the effects of all dilutive potential common shares, which comprise convertible debentures, warrants, and restricted share
units and stock options granted to employees.
r) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating
segments’ operating results are reviewed regularly by the Group’s chief executive officer (“CEO”) to make decisions about resources
to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Group’s headquarters), head office
expenses, income tax assets, liabilities and expenses, as well as long-term debt and interest expense thereon.
Sales between the Group’s segments are measured at the exchange amount. Transactions, other than sales, are measured at
carrying value. Segment capital expenditure is the total cost incurred during the period to acquire property and equipment, and
intangible assets other than goodwill.
s) Government grants
The Group recognizes a government grant when there is reasonable assurance it will comply with the conditions required to qualify
for the grant, and that the grant will be received. The Group recognizes government grants as a reduction to the expense that the
grant is intended to offset.
2022 Annual Report │70
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
t) New standards and interpretations adopted during the year
The following new standards, and amendments to standards and interpretations, are effective for the first time for interim periods
beginning on or after January 1, 2022 and have been applied in preparing these consolidated financial statements.
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
On May 14, 2020, the IASB issued Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37). The amendments
are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the
amendments are first applied. Early adoption is permitted. IAS 37 does not specify which costs are included as a cost of fulfilling a
contract when determining whether a contract is onerous. The IASB’s amendments address this issue by clarifying that the “costs
of fulfilling a contract” comprise both:
the incremental costs – e.g. direct labour and materials; and
an allocation of other direct costs – e.g. an allocation of the depreciation charge for an item of property and equipment
used in fulfilling the contract.
The adoption of the amendments did not have a material impact on the Group’s consolidated financial statements.
New standards and interpretations not yet adopted
The following new standards are not yet effective for the year ended December 31, 2022, and have not been applied in preparing
these consolidated financial statements:
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements (the 2020 amendments), to clarify
the classification of liabilities as current or non-current. On October 31, 2022, the IASB issued Non-current Liabilities with Covenants
(Amendments to IAS 1) (the 2022 amendments), to improve the information a company provides about long-term debt with
covenants. The 2020 amendments and the 2022 amendments (collectively “the Amendments”) are effective for annual periods
beginning on or after January 1, 2024. Early adoption is permitted. A company that applies the 2020 amendments early is required
to also apply the 2022 amendments.
For the purposes of non-current classification, the Amendments removed the requirement for a right to defer settlement or roll over
of a liability for at least twelve months to be unconditional. Instead, such a right must exist at the end of the reporting period and
have substance. The Amendments reconfirmed that only covenants with which a company must comply on or before the reporting
date affect the classification of a liability as current or non-current. Covenants with which a company must comply after the reporting
date do not affect a liability’s classification at that date.
The Amendments also clarify how a company classifies a liability that includes a counterparty conversion option. The Amendments
state that:
the settlement of a liability includes transferring a company’s own equity instruments to the counterparty; and
when classifying liabilities as current or non-current a company can ignore only those conversion options that are
recognized as equity.
The extent of the impact of adoption of the amendments has not yet been determined.
Definition of Accounting Estimates (Amendments to IAS 8)
On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8). The amendments are effective
for annual periods beginning on or after January 1, 2023. Early adoption is permitted. The amendments introduce a new definition
for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement
uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that
a company develops an accounting estimate to achieve the objective set out by an accounting policy. The adoption of the
amendments is not expected to have a material impact.
2022 Annual Report │71
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Lease Liability in a Sale and Leaseback
On September 22, 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16). The amendments are
effective for annual periods beginning on or after January 1, 2024. Early adoption is permitted. The amendment introduces a new
accounting model which impacts how a seller-lessee accounts for variable lease payments that arise in a sale-and-leaseback
transaction. The amendments clarify that on initial recognition, the seller-lessee includes variable lease payments when it measures
a lease liability arising from a sale-and-leaseback transaction and after initial recognition, the seller-lessee applies the general
requirements for subsequent accounting of the lease liability such that it recognizes no gain or loss relating to the right of use it
retains. The amendments need to be applied retrospectively, which require seller-lessees to reassess and potentially restate sale-
and-leaseback transactions entered into since implementation of IFRS 16 in 2019. The extent of the impact of adoption of the
amendments has not yet been determined.
4. Segment reporting
The Group operates within the transportation and logistics industry in the United States, Canada and Mexico in different reportable
segments, as described below. The reportable segments are managed independently as they require different technology and capital
resources. For each of the operating segments, the Group’s CEO reviews internal management reports. The following summary describes
the operations in each of the Group’s reportable segments:
Package and Courier: Pickup, transport and delivery of items across North America.
Less-Than-Truckload (a): Pickup, consolidation, transport and delivery of smaller loads.
Truckload (b):
Logistics:
Full loads carried directly from the customer to the destination using a closed van or specialized equipment to
meet customers’ specific needs. Includes expedited transportation, flatbed, tank, container and dedicated
services.
Asset-light logistics services, including brokerage, freight forwarding and transportation management, as well as
small package parcel delivery.
(a)
Beginning in the second quarter of fiscal 2021, due to the acquisition of UPS Ground Freight Inc., the Less-Than-Truckload reporting segment now
represents the aggregation of the Canadian Less-Than-Truckload and U.S. Less-Than-Truckload operating segments. The aggregation of the segment was
analyzed using management’s judgment in accordance with IFRS 8. The operating segments were determined to be similar, amongst others, with respect
to the nature of services offered and the methods used to distribute their services, additionally, they have similar economic characteristics with respect to
long-term expected gross margin, levels of capital invested and market place trends.
(b)
Prior to August 31, 2022, the Truckload reporting segment represented the aggregation of the Canadian Conventional Truckload, U.S. Conventional
Truckload, and Specialized Truckload operating segments. The aggregation of the segment was analyzed using management’s judgment in accordance with
IFRS 8. The operating segments were determined to be similar, amongst others, with respect to the nature of services offered and the methods used to
distribute their services. Additionally, they have similar economic characteristics with respect to long-term expected gross margin, levels of capital invested
and market place trends. On August 31,2022, the Group sold CFI’s Truckload, Temp Control and Mexican non-asset logistics businesses, operating primarily
in the U.S. Conventional Truckload operating segment. Subsequent to the sale, the remaining business operations in the Group’s U.S. Conventional
Truckload operating segment were transferred to the Specialized Truckload operating segment. Because the transfer was amongst operating segments in
the same reportable segment and the aggregation criteria continued to be met, there was no impact on the reportable segment results.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment operating
income or loss. This measure is included in the internal management reports that are reviewed by the Group’s CEO and refers to
“Operating income” in the consolidated statements of income. Segment’s operating income or loss is used to measure performance as
management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that
operate within these industries.
2022 Annual Report │72
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
2022
Revenue(1)
Fuel surcharge(1)
Total revenue(1)
Operating income
Selected items:
Depreciation and
amortization
Gain on sale of
land and buildings
Gain on sale of
assets held for sale
Gain on sale of
business
Intangible assets
Total assets
Total liabilities
Additions to property
and equipment
2021*
Revenue(1)(2)
Fuel surcharge(1)(2)
Total revenue(1)
Operating income (loss)
Selected items:
Depreciation and
amortization
Loss on sale of land
and buildings
Gain on sale of
assets held for sale
Loss on sale of
intangible assets
Bargain purchase gain(3)
Intangible assets
Total assets
Total liabilities
Additions to property
and equipment
Package
and
Courier
Less-
Than-
Truckload
Truckload
Logistics Corporate Eliminations
Total
498,972
151,872
650,844
134,306
3,243,556
779,607
4,023,163
470,807
1,986,331
464,707
2,451,038
366,868
1,689,122
74,158
1,763,280
140,446
-
-
-
33,611
(60,917)
(14,917)
(75,834)
-
7,357,064
1,455,427
8,812,491
1,146,038
26,532
152,666
212,430
38,244
721
-
-
-
43
55,714
22,197
-
-
-
-
-
180,119
362,724
126,383
-
167,798
2,275,672
836,937
-
775,464
1,861,093
464,962
-
468,547
731,564
239,916
73,653
182
274,777
1,374,687
-
-
-
430,593
43
77,911
-
-
-
(125)
73,653
1,592,110
5,505,830
3,042,760
15,097
168,667
165,953
1,150
402
-
351,269
560,147
81,302
641,449
108,440
2,440,640
374,750
2,815,390
572,798
1,901,157
261,595
2,162,752
230,189
1,620,926
41,146
1,662,072
142,794
-
-
-
(74,992 )
(54,085)
(7,149)
(61,234)
-
6,468,785
751,644
7,220,429
979,229
26,404
116,060
211,561
38,208
799
-
-
(16)
-
1,640
10,569
(3 )
-
-
-
(1)
-
193,765
379,881
128,599
-
271,593
188,604
2,351,138
957,148
-
-
955,608
2,317,615
559,438
-
12,000
454,612
746,638
248,122
-
-
332
88,391
1,680,135
-
-
-
393,032
(19)
12,209
-
-
-
-
(134)
(1)
283,593
1,792,921
5,883,663
3,573,308
19,347
65,543
181,313
809
161
-
267,173
(1) Includes intersegment revenue and intersegment fuel surcharge
* Recasted for:
(2) Changes in presentation for consistency with the current year presentation: “intersegment revenue and fuel surcharge” presented separately in
previous periods is now presented within “revenue” and “fuel surcharge”.
(3) Adjustments to provisional amounts of UPS Freight prior year business combination (see note 5d))
2022 Annual Report │73
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Geographical information
Revenue is attributed to geographical locations based on the origin of service’s location.
2022
Canada
United States
Mexico
Total revenue
2021
Canada
United States
Mexico
Total revenue
Package
and
Courier
650,844
-
-
650,844
Less-
Than-
Truckload
Truckload
Logistics Eliminations
Total
667,506
3,355,657
-
4,023,163
1,182,198
1,268,840
-
2,451,038
256,714
1,488,941
17,625
1,763,280
(34,202)
(41,632)
-
(75,834)
2,723,060
6,071,806
17,625
8,812,491
641,449
-
-
641,449
576,311
2,239,079
-
2,815,390
912,166
1,250,586
-
2,162,752
269,568
1,370,843
21,661
1,662,072
(31,193)
(30,041)
-
(61,234)
2,368,301
4,830,467
21,661
7,220,429
Segment assets are based on the geographical location of the assets.
Property and equipment, right-of-use assets and intangible assets
Canada
United States
Mexico
As at
December 31, 2022
As at
December 31, 2021*
1,848,746
2,256,959
-
4,105,705
1,933,050
2,698,630
14,915
4,646,595
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d)).
5. Business combinations
a) Business combinations
In line with the Group’s growth strategy, the Group acquired eleven businesses during 2022, which were not considered to be
material. These transactions were concluded in order to add density in the Group’s current network and further expand value-added
services.
During the year ended December 31, 2022, the non-material businesses, in aggregate, contributed revenue and net income of
$100.6 million and $5.9 million respectively since the acquisitions.
Had the Group acquired these non-material businesses on January 1, 2022, as per management’s best estimates, the revenue and
net income for these entities would have been $235.7 million and $18.1 million, respectively. In determining these estimated
amounts, management assumed that the fair value adjustments that arose on the date of acquisition would have been the same
had the acquisitions occurred on January 1, 2022 and adjusted for interest, based on the purchase price and average borrowing
rate of the Group, and income tax expenses based on the effective tax rate.
During the year ended December 31, 2022, transaction costs of $0.1 million have been expensed in other operating expenses in
the consolidated statements of income in relation to the above-mentioned business acquisitions.
As of the reporting date, the Group had not completed the purchase price allocation over the identifiable net assets and goodwill of
the 2022 acquisitions. Information to confirm the fair value of certain assets and liabilities is still to be obtained for these acquisitions.
As the Group obtains more information, the allocation will be completed.
2022 Annual Report │74
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The table below presents the purchase price allocation based on the best information available to the Group to date :
Identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Trade and other receivables
Inventoried supplies and prepaid expenses
Property and equipment
Right-of-use assets
Intangible assets
Other assets
Trade and other payables
Income tax payable
Provisions
Lease liabilities
Deferred tax liabilities
Total identifiable net assets
Total consideration transferred
Goodwill
Cash
Contingent consideration
Total consideration transferred
* Includes non-material adjustments to prior year's acquisitions
Note
9
10
11
17
15
18
11
December 31, 2022*
863
28,231
2,179
70,959
28,269
45,740
368
(10,327)
(1,465)
(280)
(28,269)
(13,848)
122,420
181,608
59,188
159,114
22,494
181,608
The trade receivables comprise gross amounts due of $28.4 million, of which $0.1 million was expected to be uncollectible at the
acquisition date.
Of the goodwill and intangible assets acquired through business combinations in 2022, $2.9 million is deductible for tax purposes.
In line with the Group’s growth strategy, the Group acquired ten businesses during 2021, of which UPS Ground Freight Inc. (“UPS
Freight”), which was renamed TForce Freight Inc. (“TForce Freight”) in April 2021, was considered material. All other acquisitions
were not considered to be material.
On April 30, 2021, the Group completed the acquisition of UPS Freight, the Less-Than-Truckload and dedicated truckload divisions
of United Parcel Service, Inc. The purchase price for this business acquisition totalled for $864.6 million, which was funded by a
mixture of cash on hand and the remaining balance was drawn from the currently existing unsecured revolving credit facility. The
fair value of the identifiable net assets acquired, including the fair value of the customer relationships acquired, exceeded the
purchase price, resulting in a bargain purchase gain of $283.6 million in the Less-Than-Truckload and Logistics segments ($271.6
million and $12.0 million respectively). The bargain purchase gain resulted mainly from the measurement of the fair value related to
the company’s tangible assets. During the year ended December 31, 2021, the business contributed revenue and net income of
$2,334.4 million and $122.6 million (excluding the bargain purchase gain of $283.6 million), respectively since the acquisition.
Had the Group acquired UPS Freight on January 1, 2021, as per management’s best estimates, the revenue and net income for this
entity would have been $3,438.3 million and $146.0 million (excluding the bargain purchase gain of $283.6 million), respectively. In
determining these estimated amounts, management assumed that the fair value adjustments that arose on the date of acquisition
would have been the same had the acquisitions occurred on January 1, 2021 and adjusted for interest, based on the purchase price
and average borrowing rate of the Group, and income tax expenses based on the effective tax rate.
During the year ended December 31, 2021, the non-material businesses, in aggregate, contributed revenue and net income of $64.9
million and $0.9 million respectively since the acquisitions.
Had the Group acquired the non-material businesses on January 1, 2021, as per management’s best estimates, the revenue and
net income for these entities would have been $174.9 million and $5.6 million (excluding the bargain purchase gain of $283.6 million),
respectively. In determining these estimated amounts, management assumed that the fair value adjustments that arose on the date
of acquisition would have been the same had the acquisitions occurred on January 1, 2021 and adjusted for interest, based on the
purchase price and average borrowing rate of the Group, and income tax expenses based on the effective tax rate.
Of the goodwill and intangible assets acquired through business combinations in 2021, $5.7 million is deductible for tax purposes.
During the year ended December 31, 2021, transaction costs of $8.7 million had been expensed in other operating expenses in the
consolidated statements of income in relation to the above-mentioned business acquisitions.
2022 Annual Report │75
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The table below presents the purchase price allocation as at December 31, 2021:
Identifiable assets acquired and liabilities assumed
UPS Freight
(reassessed
Note
- see note 5d))*
December 31, 2021
Others**
11,570
23,806
3,500
86,872
10,619
25,914
65
9
10
11
Cash and cash equivalents
Trade and other receivables
Inventoried supplies and prepaid expenses
Property and equipment
Right-of-use assets
Intangible assets
Other assets
Trade and other payables
Income tax payable
Employee benefits
Provisions
Other non-current liabilities
Long-term debt
Lease liabilities
Deferred tax liabilities
Total identifiable net assets
Total consideration transferred
Goodwill
Bargain purchase gain
Cash
Contingent consideration
Total consideration transferred
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year's business combination (see note 5d))
* *Includes non-material adjustments to prior year's acquisitions
6
328,468
26,643
1,309,465
100,971
18,856
8,133
(209,474 )
-
(65,849 )
(74,867 )
(56 )
-
(100,971 )
(193,125 )
1,148,200
864,607
-
(283,593 )
864,607
-
864,607
-
(222)
(6)
(3,484)
(10,619)
(17,785)
113,092
162,313
49,221
-
155,100
7,213
162,313
14
15
18
(14,470)
(2,668)
17
11
11,576
352,274
30,143
1,396,337
111,590
44,770
8,198
(223,944)
(2,668)
(65,849)
(75,089)
(62)
(3,484)
(111,590)
(210,910)
1,261,292
1,026,920
49,221
(283,593)
1,019,707
7,213
1,026,920
The valuation techniques used for measuring the fair value of land and buildings ($859.2 million) and customer relationships ($12.0
million) acquired regarding UPS Freight were as follows:
Assets acquired
Land and buildings
Valuation technique
Market comparison technique and cost technique: The
valuation model considers market prices for comparable sites,
when available, and considers depreciated replacement cost,
which reflects adjustments for physical deterioration, when
appropriate.
Key inputs
- Market prices for comparable sites
- Average rebuild cost
Customer relationships Excess earnings method: The valuation model considers the
present value of net cash flows expected to be generated by
the customer relationships, by excluding any cash flows related
to contributory assets.
- Forecasted revenue attributable to
existing customers and relationships
- Annual attrition rate
- Forecasted operating margin
- Discount rate
b) Goodwill
The goodwill is attributable mainly to the premium of an established business operation with a good reputation in the transportation
industry, and the synergies expected to be achieved from integrating the acquired entity into the Group’s existing business.
The goodwill arising in the business combinations has been allocated to operating segments as indicated in the table below, which
represents the lowest level at which goodwill is monitored internally.
Operating segment
Canadian Less-Than-Truckload
Canadian Truckload
Specialized Truckload
U.S. Truckload
Logistics
Reportable segment
Less-Than-Truckload
Truckload
Truckload
Truckload
Logistics
* Includes non-material adjustments to prior year's acquisitions
December 31, 2022*
-
811
35,865
-
22,512
59,188
December 31, 2021*
(225 )
4,079
42,546
2,846
(25 )
49,221
2022 Annual Report │76
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
c) Contingent consideration
The contingent consideration for the year ended December 31, 2022 relates to non-material business acquisitions and is recorded
in the original purchase price allocation. This consideration is contingent on achieving specified earning levels in a future period.
The maximum amount payable was $22.5 million in less than one year, and $21.0 million was paid prior to year-end.
The contingent consideration for the year ended December 31, 2021 relates to a non-material business acquisition and is recorded
in the original purchase price allocation. The fair value was determined using expected cash flows discounted at rates between 3.9%
and 6.4%. This consideration is contingent on achieving specified earning levels in future periods. The maximum amount payable
was $0.4 million in one year and $7.6 million in two years.
The contingent consideration balance at December 31, 2022 is $8.8 million (2021 - $8.7 million) and is presented in other financial
liabilities on the consolidated statements of financial position.
d) Adjustment to the provisional amounts of prior year’s business combinations
The 2021 annual consolidated financial statements included details of the Group’s business combinations and set out provisional
fair values relating to the consideration paid and net assets acquired of UPS Ground Freight Inc. This acquisition was accounted for
under the provisions of IFRS 3.
As required by IFRS 3, the provisional fair values have been reassessed in light of information obtained during the measurement
period following the acquisition and adjustments are required to be retrospectively reflected from the date of acquisition.
Consequently, the fair value of certain assets acquired, and liabilities assumed of UPS Ground Freight Inc. in fiscal 2021 were
adjusted in the quarter ended June 30, 2022 when the purchase price allocation was completed, and accordingly, the comparative
information as at December 31, 2021 included in these consolidated financial statements has been revised as detailed below. The
adjustment to prior period financial information from the date of acquisition to date resulted in an incremental $90.0 million bargain
purchase gain which resulted in the June 30, 2021 financial information being recasted.
As a result a final bargain purchase gain in the amount of $283.6 million was recognized in the statement of income for the year
ended December 31, 2021.
Cash and cash equivalents
Trade and other receivables
Inventoried supplies and prepaid expenses
Property and equipment
Right-of-use assets
Intangible assets
Other assets
Trade and other payables
Income tax payable
Employee benefits
Provisions
Other non-current liabilities
Lease liabilities
Deferred tax liabilities
Total identifiable net assets
Total consideration transferred
Bargain purchase gain
Total consideration transferred
Dec. 31, 2021
Provisional
fair value
6
328,468
26,643
1,186,198
100,971
18,856
860
(208,928)
302
(65,849)
(50,352)
(56)
(100,971)
(177,992)
1,058,156
864,607
(193,549)
864,607
Q2-2022
Measurement
period adjustments
-
-
-
123,267
-
-
7,273
(546)
(302)
-
(24,515)
-
-
(15,133)
90,044
-
(90,044)
-
Final
reassessed
fair value
6
328,468
26,643
1,309,465
100,971
18,856
8,133
(209,474)
-
(65,849)
(74,867)
(56)
(100,971)
(193,125)
1,148,200
864,607
(283,593)
864,607
2022 Annual Report │77
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
e) Adjustment to the provisional amounts of prior year’s non-material business combinations
The 2021 annual consolidated financial statements included details of the Group’s business combinations and set out provisional
fair values relating to the consideration paid and net assets acquired of various non-material acquisitions not mentioned previously.
These acquisitions were accounted for under the provisions of IFRS 3.
As required by IFRS 3, the provisional fair values have been reassessed in light of information obtained during the measurement
period following the acquisition. Consequently, the fair value of certain assets acquired, and liabilities assumed of the non-material
acquisitions in fiscal 2021 have been adjusted and finalized in 2022. No material adjustments were required to the provisional fair
values for these prior period’s business combinations.
6. Sale of business
On August 31, 2022, CFI’s Truckload, Temp Control and Mexican non-asset logistics businesses were sold to Heartland Express for a
net consideration of $553.0 million, which includes cash consideration, net working capital adjustments and is net of incremental selling
costs of $4.5 million. The total consideration is subject to additional working capital closing adjustments and still subject to buyer
acceptance as of the date of issuance of these financial statements. The sale resulted in a gain on sale of business of $73.7 million. The
businesses operated primarily in the U.S. Conventional Truckload operating segment of the Group’s Truckload reportable segment. The
Group kept the Dedicated and U.S. Logistics (non-asset U.S. based logistics services provider) divisions, which continue to be reported
in the Truckload reportable segment. TFI also retained pre-closing accident and workers’ compensation claims.
The table below presents the net assets disposed:
Cash and cash equivalents
Trade and other receivables
Inventoried supplies and prepaid expenses
Property and equipment
Right-of-use assets
Intangible assets
Goodwill
Other assets
Accumulated other comprehensive income - CTA
Trade and other payables
Income tax payable
Employee benefits
Provisions
Lease liabilities
Deferred tax liabilities
Total identifiable net assets
Total consideration received
Gain on sale of business
Note
9
10
11
11
17
15
18
December 31, 2022
6,790
77,877
7,856
321,123
3,203
42,599
144,551
306
2,737
(46,776)
(564)
(1,302)
(1,465)
(3,129)
(74,441)
479,365
553,018
73,653
The goodwill disposed of was allocated to operating segments as indicated in the table below, which represents the lowest level at which
goodwill is monitored internally:
Operating segment
U.S. Truckload
Logistics
Reportable segment
Truckload
Logistics
December 31, 2022
141,056
3,495
144,551
7. Trade and other receivables
Trade receivables, net of expected credit loss
Other receivables
December 31, 2022
966,428
64,298
1,030,726
December 31, 2021
986,783
69,240
1,056,023
The Group’s exposure to credit and currency risks related to trade and other receivables is disclosed in note 26 a) and d).
2022 Annual Report │78
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Trade receivables as at December 31, 2022 include $48.5 million of in-transit revenue balances (December 31, 2021 – $58.2 million).
Due to the short-term nature of the transportation and logistics services provided by the Group, these services are expected to be
completed within the week following the year-end.
8. Additional cash flow information
Net change in non-cash operating working capital
Trade and other receivables
Inventoried supplies
Prepaid expenses
Trade and other payables
9. Property and equipment
Cost
Balance at December 31, 2020
Additions through business combinations**
Other additions
Disposals
Transfer from right-of-use assets
Reclassification (to) from assets held for sale
Effect of movements in exchange rates
Balance at December 31, 2021
Additions through business combinations*
Other additions
Disposals
Sale of business
Reclassification to assets held for sale
Effect of movements in exchange rates
Balance at December 31, 2022
Accumulated Depreciation
Balance at December 31, 2020
Depreciation
Disposals
Transfer from right-of-use assets
Reclassification (to) from assets held for sale
Effect of movements in exchange rates
Balance at December 31, 2021
Depreciation
Disposals
Sale of business
Reclassification to assets held for sale
Effect of movements in exchange rates
Balance at December 31, 2022
2022
(59,105)
(1,498)
9,924
(96,774)
(147,453)
2021
(101,664)
(1,233)
(9,455)
154,292
41,940
Note
Land and
buildings
Rolling
stock
Equipment
Total
5
5
6
6
314,804
889,657
36,902
(1,473)
-
(8,843)
2,221
1,233,268
2,003
46,928
(678)
(31,356)
(67,203)
(15,972)
1,166,990
59,817
16,301
(1,332)
-
(2,997)
223
72,012
21,353
(137)
(6,837)
(5,426)
2,175
83,140
1,267,617
445,656
217,080
(177,992)
21,474
1,023
(2,395)
1,772,463
66,240
286,277
(122,946)
(452,547)
-
(47,939)
1,501,548
494,322
187,895
(110,341)
5,746
424
(153)
577,893
203,431
(56,549)
(157,618)
-
(23,885)
543,272
134,234
61,024
13,191
(8,773)
-
-
1,089
200,765
2,716
18,064
(9,370)
(1,817)
-
(5,570)
204,788
88,088
20,811
(8,347)
-
-
898
101,450
23,854
(7,191)
(142)
-
(3,012)
114,959
1,716,655
1,396,337
267,173
(188,238 )
21,474
(7,820 )
915
3,206,496
70,959
351,269
(132,994 )
(485,720 )
(67,203 )
(69,481 )
2,873,326
642,227
225,007
(120,020 )
5,746
(2,573 )
968
751,355
248,638
(63,877 )
(164,597 )
(5,426 )
(24,722 )
741,371
2,455,141
2,131,955
Net carrying amounts
At December 31, 2021
At December 31, 2022
* Includes non-material adjustments to prior year's acquisitions
** Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d)).
1,161,256
1,083,850
1,194,570
958,276
99,315
89,829
As at December 31, 2022, $1.3 million is included in trade and other payables for the purchases of property and equipment (December 31,
2021 – $1.0 million).
Security
As at December 31, 2022, certain rolling stock are pledged as security for conditional sales contracts, with a carrying amount of $126.4
million (December 31, 2021 - $144.5 million) (see note 14).
2022 Annual Report │79
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
10. Right-of-use assets
Cost
Balance at December 31, 2020
Transfer to property and equipment
Other additions
Additions through business combinations*
Derecognition**
Effect of movements in exchange rates
Balance at December 31, 2021
Other additions
Additions through business combinations*
Sale of business
Derecognition**
Effect of movements in exchange rates
Balance at December 31, 2022
Depreciation
Balance at December 31, 2020
Transfer to property and equipment
Depreciation
Derecognition**
Effect of movements in exchange rates
Balance at December 31, 2021
Depreciation
Sale of business
Derecognition**
Effect of movements in exchange rates
Balance at December 31, 2022
Note
Land and
buildings
Rolling
stock
Equipment
Total
5
5
6
6
452,106
-
37,768
57,916
(39,842)
2,329
510,277
62,353
14,217
(238)
(31,475)
(26,343)
528,791
232,541
-
59,719
(35,691)
938
257,507
66,036
(130)
(22,733)
(14,424)
286,256
191,164
(21,474)
51,494
52,465
(40,434)
495
233,710
53,906
14,052
(5,780)
(34,221)
(9,624)
252,043
74,503
(5,746)
51,953
(30,926)
308
90,092
59,101
(2,685)
(26,783)
(4,754)
114,971
2,290
-
1,084
1,209
(668)
(12)
3,903
962
-
-
(977)
(91)
3,797
1,231
-
1,110
(579)
(4)
1,758
1,139
-
(1,082)
(51)
1,764
645,560
(21,474 )
90,346
111,590
(80,944 )
2,812
747,890
117,221
28,269
(6,018 )
(66,673 )
(36,058 )
784,631
308,275
(5,746 )
112,782
(67,196 )
1,242
349,357
126,276
(2,815 )
(50,598 )
(19,229 )
402,991
Net carrying amounts
At December 31, 2021
At December 31, 2022
* Includes non-material adjustments to prior year's acquisitions
** Derecognized right-of-use assets include negotiated asset purchases and extinguishments resulting from accidents as well as fully amortized or end of
term right-of-use assets.
398,533
381,640
143,618
137,072
252,770
242,535
2,145
2,033
2022 Annual Report │80
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
11.
Intangible assets
compete Information
Note Goodwill relationships Trademarks agreements technology
Customer
Total
Other intangible assets
Non-
Cost
Balance at December 31, 2020
Additions through business combinations*
Other additions
Extinguishments
Effect of movements in exchange rates
Balance at December 31, 2021
Additions through business combinations*
Other additions
Disposals
Sale of business
Extinguishments
Effect of movements in exchange rates
Balance at December 31, 2022
Amortization and impairment losses
Balance at December 31, 2020
Amortization
Extinguishments
Effect of movements in exchange rates
Balance at December 31, 2021
Amortization
Disposals
Sale of business
Extinguishments
Effect of movements in exchange rates
Balance at December 31, 2022
Net carrying amounts
At December 31, 2021
At December 31, 2022
5
1,523,626
49,221
-
-
(556)
5
1,572,291
59,188
-
-
6
(210,806)
-
(61,328)
1,359,345
148,016
-
-
(536)
147,480
-
-
6
(66,255)
-
(3,213)
78,012
574,942
29,130
3,263
(18,357)
(464)
588,514
38,121
-
-
(33,312)
(61,985)
(17,641)
513,697
261,599
44,862
(18,357)
(526)
287,578
43,538
-
(16,669)
(61,985)
(8,210)
244,252
86,402
4,166
-
(1,178)
(579)
88,811
3,846
-
(380)
(28,589)
(19,058)
(1,950)
42,680
43,636
3,274
(1,178)
(57)
45,675
4,764
(130)
(2,996)
(19,058)
(1,205)
27,050
14,688
4,405
-
(1,027)
(118)
17,948
3,727
-
-
(150)
(836)
(682)
20,007
5,304
3,378
(1,027)
11
7,666
3,702
-
(26)
(836)
(376)
10,130
22,524
7,069
3,880
(1,510)
33
31,996
46
6,120
-
(1,075)
(1,321)
(644)
2,222,182
93,991
7,143
(22,072)
(1,684)
2,299,560
104,928
6,120
(380)
(273,932)
(83,200)
(82,245)
1,970,851
35,122
15,964
3,729
(1,509)
56
18,240
3,675
-
(836)
(1,321)
(461)
19,297
474,519
55,243
(22,071)
(1,052)
506,639
55,679
(130)
(86,782)
(83,200)
(13,465)
378,741
1,424,811
1,281,333
300,936
269,445
43,136
15,630
10,282
9,877
13,756
15,825
1,792,921
1,592,110
* Includes non-material adjustments to prior year's acquisitions
In 2022, CFI’s Truckload, Temp Control and Mexican non-asset logistics businesses were sold to Heartland Express, including the
indefinite-life trademarks. At December 31, 2022, there are no material indefinite life intangible assets.
At December 31, 2021, the Group performed its annual impairment testing for indefinite life trademarks. The Group estimated the value
in use to be $36.6 million compared to its carrying value of $27.5 million, resulting in no impairment charge. Management used the relief-
from-royalty method and discount rates between 6.7% and 9.9% in its analysis.
In 2021, the Group rebranded a subsidiary by initiating a change of name. The Group estimates that previous tradename will retain value
for a 2-year period during the transition. Accordingly, the amortization period had been changed from indefinite life to 2 years for the
remaining net book value of this subsidiary of $3.5 million.
2022 Annual Report │81
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
At December 31, 2022, the Group performed its annual goodwill impairment tests for operating segments which represent the lowest
level within the Group at which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill
allocated to each unit are as follows:
Reportable segment / operating segment
Package and Courier
Less-Than-Truckload
Canadian Less-Than-Truckload
Truckload
Canadian Truckload
Specialized Truckload*
U.S. Truckload*
Logistics
December 31,
2022
177,941
December 31,
2021
190,853
128,449
137,638
87,604
546,674
-
340,665
1,281,333
93,152
536,267
141,064
325,837
1,424,811
* On August 31,2022, TFI International sold CFI’s Truckload, Temp Control and Mexican non-asset logistics businesses, operating primarily in the US-based
Conventional TL operating segment. Subsequent to the sale, the remaining businesses operations in TFI International’s US-based Conventional TL operating
segment, were transferred to the Specialized TL operating segment. This resulted in a retrospective recasting of goodwill of $104.5 million transferred from
US-based Conventional TL operating segment to the Specialized TL operating segment to the 2021 amounts.
The results as at December 31, 2022 determined that the recoverable amounts of the Group’s operating segments exceeded their
respective carrying amounts.
The recoverable amounts of the Group’s operating segments were determined using the value in use approach. The value in use
methodology is based on discounted future cash flows. Management believes that the discounted future cash flows method is appropriate
as it allows more precise valuation of specific future cash flows.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rates as follows:
Reportable segment / operating segment
Package and Courier
Less-Than-Truckload
Canadian Less-Than-Truckload
Truckload
2022
11.5%
11.5%
2021
9.3%
9.3%
Canadian Truckload
Specialized Truckload*
U.S. Truckload*
11.7%
10.5%
10.5%
Logistics
8.7%
* On August 31,2022, TFI International sold CFI’s Truckload, Temp Control and Mexican non-asset logistics businesses, operating primarily in the US-based
Conventional TL operating segment. Subsequent to the sale, the remaining businesses operations in TFI International’s US-based Conventional TL operating
segment, were transferred to the Specialized TL operating segment.
13.9%
12.7%
-
10.9%
The discount rates were estimated based on past experience, and industry average weighted average cost of capital, which were based
on a possible range of debt leveraging of 40.0% (2021 – 40.0%) at a market interest rate of 9.4% (2021 – 5.7%).
First year cash flows were projected based on forecasted cash flows which are based on previous operating results adjusted to reflect
current economic conditions. For a further 4-year period, cash flows were extrapolated using an average growth rate of 2.0% (2021 –
2.0%) in revenues and margins were adjusted where deemed appropriate. The terminal value growth rate was 2.0% (2021 – 2.0%). The
values assigned to the key assumptions represent management’s assessment of future trends in the transportation industry and were
based on both external and internal sources (historical data).
12.
Investments
Level 1 investments
Level 3 investments
As at
As at
December 31, 2022 December 31, 2021
71,979
13,985
85,964
16,391
15,000
31,391
Investments that were previously disclosed in Other assets in the consolidated statements of financial position are now separately
presented in the Investments line item and were recast due to the material nature of the account in 2022.
2022 Annual Report │82
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Level 1 investments include 1,026,696 shares of ArcBest Corporation (NYSE: ARCB) that were marked to market with the publicly
available stock price. Level 3 investments were marked to fair value based on the company performance as at December 31, 2022. The
Group elected to designate these investments as at fair value through OCI.
13. Trade and other payables
Trade payables and accrued expenses
Personnel accrued expenses
Dividend payable
As at
December 31,
2022
498,777
179,702
30,289
708,768
As at
December 31,
2021*
612,092
224,935
24,881
861,908
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d)).
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 26.
14. Long-term debt
This note provides information about the contractual terms of the Group’s interest-bearing long-term debt, which are measured at
amortized cost. For more information about the Group’s exposure to interest rate, foreign exchange currency and liquidity, see note 26.
Non-current liabilities
Unsecured revolving facilities
Unsecured debenture
Unsecured senior notes
Conditional sales contracts
Current liabilities
Current portion of unsecured term loan
Current portion of conditional sales contracts
As at
December 31, 2022
As at
December 31, 2021
-
147,233
1,075,702
55,735
1,278,670
-
37,087
37,087
239,406
157,743
778,613
68,746
1,244,508
324,444
39,142
363,586
Terms and conditions of outstanding long-term debt are as follows:
Currency
Nominal
interest
rate
Year of
maturity
Face
value
Carrying
amount
Face
value
Carrying
amount
2022
2021
Unsecured revolving facility
Unsecured revolving facility
Unsecured revolving facility
Unsecured revolving facility
Unsecured term loan
Unsecured debenture
Unsecured senior notes
Unsecured senior notes
Unsecured senior notes
Unsecured senior notes
Conditional sales contracts
-
2026
BA + 1.125%
CAD
a
-
2026
CAD
BA + 1.125%
a
-
2026
USD SOFR + 1.125%
a
-
2026
USD SOFR + 1.125%
a
2022
-
BA + 1.125%
CAD
a
3.32% - 4.22%
CAD
2024 200,000
b
2.89% - 3.85% 2026 - 2033 180,000
USD
c
3.15% - 3.50% 2029 - 2036 500,000
USD
c
2.87% - 3.55% 2029 - 2034 200,000
USD
c
3.50% - 3.80% 2032 - 2037 200,000
c
USD
1.45% - 5.28% 2022 - 2024 125,810
d Mainly CAD
-
-
-
-
-
147,233
179,013
497,258
199,644
199,787
92,822
1,315,757
130,000
21,279
120,000
3,100
410,000
200,000
180,000
500,000
100,000
-
136,338
101,061
16,646
118,634
3,065
324,444
157,743
179,658
499,049
99,906
-
107,888
1,608,094
2022 Annual Report │83
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The table below summarizes changes to the long-term debt:
Balance at beginning of year
Proceeds from long-term debt
Business combinations
Repayment of long-term debt
Net increase (decrease) in revolving facilities
Amortization of deferred financing fees
Effect of movements in exchange rates
Effect of movements in exchange rates - debt designated as net investment hedge
Balance at end of year
a) Unsecured revolving credit facility and term loans
Note
5
2022
1,608,094
334,164
-
(369,692)
(236,502)
1,296
(97,744)
76,141
1,315,757
2021
872,544
661,039
3,484
(43,868)
118,859
1,296
(23,154)
17,894
1,608,094
On September 2, 2022, the Group extended its credit facility until August 16, 2026. Under the new extension, the CAD availability and
USD availability remain unchanged. The adoption of the Interest Rate Benchmark Reform - Phase 2 did not have a material impact on
the Group’s consolidated financial statements as the only debt balances subject to LIBOR reform is the USD portion of unsecured revolver.
The revolver agreement indicated that SOFR would be the main replacement for LIBOR in the United States. Effective as of September
2, 2022, the interest rate was the sum of the adjusted term secured overnight financing rate published by the Federal Reserve Bank of
New York (“SOFR”) plus an applicable margin, which can vary between 113 and 175 basis points based on certain ratios. The change in
interest rate did not have a material impact on the Group’s financial statements as the Group has no interest rate swaps that hedge
variable interest debt. Deferred financing fees of $0.8 million were recognized on the extension.
The revolving credit facility is unsecured and can be extended annually. The Group’s revolving facilities have a total size of $929.6 million
(December 31, 2021 - $997.1 million). The agreement provides an additional $185.8 million of credit availability (CAD $245 million and
USD $5 million). As of December 31, 2022, the credit facility’s interest rate on CAD denominated debt was 4.49% (2021 – 1.70%) and
on USD denominated debt was 4.30% (2021 – 1.35%).
On August 16, 2021, the Group extended its revolving credit facility until August 16, 2025. Under the extension, CAD availability was
increased by CAD $10 million and USD availability increased by USD $50 million. Based on certain ratios, the interest rate will be the
sum of the banker’s acceptance rate, or Libor rate on US$ denominated debt, plus an applicable margin, which can vary between 113
basis points and 175 basis points. The applicable margin on the credit facility was 1.25% as of December 31, 2021.
On December 18, 2021, the Group repaid, without penalty, the first tranche of CAD $200 million of its term loan which was due in June
2022. The remaining second tranche of term loan of CAD $410 million is unsecured and was due in June 2022 and was repaid in March
2022. Early repayment, in part or whole, was permitted, without penalty, and permanently reduced the amount borrowed. The terms and
conditions of this unsecured term loan were the same as the unsecured revolving credit facility and are subject to the same covenants.
As of December 31, 2021, the term loan’s interest rate was 1.90%.
The debt issuances described above are subject to certain covenants regarding the maintenance of financial ratios. The Group was in
compliance with these covenants at year-end (see note 26(f)).
b) Unsecured debenture
The unsecured debenture is maturing in December 2024 and is carrying an interest rate between 3.32% and 4.22% (2021 – 3.32% to
4.22%) depending on certain ratios. As of December 31, 2022, the debenture’s effective rate was 3.32% (2021 – 3.57%). The debenture
may be repaid, without penalty, after December 20, 2022, subject to the approval of the Group’s syndicate of bank lenders.
c) Unsecured senior notes
This loan takes the form of senior notes each carrying an interest rate and maturity date as detailed in the table above. These notes may
be prepaid at any time prior to maturity date, in part or in total, at 100% of the principal amount and the make-whole amount determined
at the prepayment date with respect to such principal amount.
On March 23, 2022, the Company received $200 million in proceeds from the issuance of new debts taking the form of unsecured senior
notes consisting of two tranches, of $100 million each, maturing on March 23, 2032, and 2037, bearing fixed interest rates of 3.50% and
3.80%, respectively. Deferred financing fees of $0.3 million were recognized as a result of the transaction.
2022 Annual Report │84
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
On March 23, 2022, the Company received additional $100 million in proceeds from the amendment and restatement of the debt
agreement signed on July 2, 2021, taking the form of unsecured senior notes as the third tranche maturing on April 2, 2034, bearing fixed
interest rate of 3.55%. Deferred financing fees of $0.1 million were recognized as a result of the transaction.
The proceeds raised from the two debt issuances were used in full to pay off the unsecured term loan which was due in June 2022 without
any penalty.
On January 13, 2021, the Group received $500 million in proceeds from the issuance of a new debt taking the form of unsecured senior
notes consisting of four tranches maturing between January 2029 and January 2036 and bearing fixed interest between 3.15% and
3.50%. These notes may be prepaid at any time prior to maturity dates, in part or in total, at 100% of the principal amount and the make-
whole amount determined at the prepayment date with respect to such principal amount. Deferred financing fees of $1.4 million were
recognized on the increase.
On July 2, 2021, the Group received $100 million in proceeds from the issuance of a new debt taking the form of unsecured senior notes
consisting of two tranches maturing on July 2, 2029, and July 2, 2033, bearing fixed interest of 2.87% and 3.34%. These notes may be
prepaid at any time prior to maturity dates, in part or in total, at 100% of the principal amount and the make-whole amount determined at
the prepayment date with respect to such principal amount.
On July 14, 2021, the Group received $30 million in proceeds from the issuance of a new debt taking the form of unsecured senior notes
consisting of two tranches maturing on July 14, 2029, and July 14, 2033, bearing fixed interest of 2.89% and 3.37%. These notes may be
prepaid at any time prior to maturity dates, in part or in total, at 100% of the principal amount and the make-whole amount determined at
the prepayment date with respect to such principal amount.
The debt issuances described above are subject to certain covenants regarding the maintenance of financial ratios. The Group was in
compliance with these covenants at year-end (see note 26(f)).
d) Conditional sales contracts
Conditional sales contracts are secured by rolling stock having a carrying value of $126.4 million (December 31, 2021 - $144.5 million,)
(see note 9).
e) Principal installments of other long-term debt payable during the subsequent years are as follows:
Unsecured debenture
Unsecured senior notes
Conditional sales contracts
15. Lease liabilities
Current portion of lease liabilities
Long-term portion of lease liabilities
The table below summarizes changes to the lease liabilities:
Balance at beginning of year
Business combinations
Sale of business
Additions
Derecognition*
Repayment
Effect of movements in exchange rates
Balance at end of year
Less than
1 year
1 to 5
years
More than
5 years
-
-
37,087
37,087
147,558
150,000
51,768
349,326
-
930,000
3,967
933,967
Total
147,558
1,080,000
92,822
1,320,380
As at
As at
December 31, 2022 December 31, 2021
115,344
313,862
429,206
115,934
297,105
413,039
Note
5
6
2022
429,206
28,269
(3,129)
117,221
(16,285)
(123,606)
(18,637)
413,039
2021
355,986
111,590
-
90,346
(15,030)
(115,336)
1,650
429,206
2022 Annual Report │85
* Derecognized lease liabilities include negotiated asset purchases and extinguishments resulting from accidents.
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The incremental borrowing rate used on average for 2022 is 4.01% (2021 – 2.59%).
Extension options
Some real estate leases contain extension options exercisable by the Group. Where practicable, the Group seeks to include extension
options in new leases to provide operational flexibility. The Group assesses at the lease commencement date whether it is reasonably
certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there are
significant events or significant changes in circumstances within its control.
The lease liabilities include future lease payments of $9.9 million (2021 – $12.7 million) related to extension options that the Group is
reasonably certain to exercise.
The Group has estimated that the potential future lease payments, should it exercise the remaining extension options, would result in an
increase in lease liabilities of $377.7 million (2021 - $362.4 million).
The Group does not have a significant exposure to termination options and penalties.
Variable lease payments
Some leases contain variable lease payments which are not included in the measurement of the lease liability. These payments include,
amongst others, common area maintenance fees, municipal taxes and vehicle maintenance fees. The expense related to variable lease
payments for the year ended December 31, 2022 was $20.6 million (2021 - $18.9 million).
Sub-leases
The Group sub-leases some of its properties. Income from sub-leasing right-of-use assets for the year ended December 31, 2022 was
$15.2 million (2021 - $15.4 million), presented in “Other operating expenses”.
Contractual cash flows
The total contractual cash flow maturities of the Group’s lease liabilities are as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years
As at
December 31, 2022
129,059
260,095
64,950
454,104
For the year ended December 31, 2022, operating lease expenses of $45.6 million (2021 – $42.4 million) were recognized in the
consolidated statement of income for leases that either did not meet the definition of a lease under IFRS 16, or were excluded based on
practical expedients applied.
16. Employee benefits
TFI International pension plans
The Group sponsors defined benefit pension plans for 99 of its employees (2021 – 105).
These plans are all within Canada and include one unregistered plan. All the defined benefit plans are no longer offered to employees
and two defined benefits plans in the past have been converted prospectively to defined contribution plans. Therefore, the future obligation
will only vary by actuarial re-measurements.
With the exception of one plan, all other plans do not have recurring contributions for employees. These plans are still required to fund
past service costs. The remaining plan is fully funded by the Group.
The Group measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each
year. The most recent actuarial valuation of the pension plans for funding purposes was as of December 31, 2021 and the next required
valuation will be as of December 31, 2022.
2022 Annual Report │86
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
TForce Freight pension plans
Pursuant to the terms of the purchase agreement for TForce Freight, the Group has recognized defined benefit pension plans for certain
participants of the UPS Pension plans. The pension plans have ongoing benefit accruals and new employees that are eligible to participate
in the plans once they satisfy the participation requirements. The pension plans include 8,787 active participants (2021 - 9,399).
The plans do not have recurring contributions for employees. These plans are still required to fund past service costs and are fully funded
by the Group. The Group measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at
December 31 of each year. The most recent actuarial valuation of the pension plans for funding purposes was as of December 31, 2021.
Information in the tables that follow pertains to all of the Group’s defined benefit pension plans.
Defined benefit obligation
Fair value of plan assets
Net defined benefit liability (asset)
Plan assets comprise:
TFI International pension plans
Equity securities
Debt securities
Other
TForce Freight pension plans
Equity securities
Debt securities
December 31, 2022
December 31, 2021
TFI
International
pension
plans
20,189
(10,214)
9,975
TForce
Freight
pension
plans
144,110
(158,444)
(14,334)
TFI
International
pension
plans
27,127
(13,437 )
13,690
Total
164,299
(168,658 )
(4,359 )
TForce
Freight
pension
plans
133,653
(80,466)
53,187
Total
160,780
(93,903)
66,877
December 31, 2022
December 31, 2021
7%
91%
2%
95%
5%
6%
89%
5%
48%
52%
All equity and debt securities have quoted prices in active markets. Debt securities are held through mutual funds and primarily hold
investments with ratings of AAA, AA or A, based on Moody’s ratings.
The other asset categories are real estate investment trusts.
Movement in the present value of the accrued benefit obligation for defined benefit plans:
December 31, 2022
TFI
International
pension
plans
TForce
Freight
pension
plans
Note
December 31, 2021
TFI
International
pension
plans
TForce
Freight
pension
plans
Total
Total
Defined benefit obligation,
beginning of year
Increase through business
combinations
5
Current service cost
Interest cost
Benefits paid
Remeasurement (gain) loss arising from:
- Demographic
- Financial assumptions
- Experience
Settlement
Effect of movements in exchange rates
Defined benefit obligation, end of year
27,127
133,653
160,780
35,529
-
35,529
-
539
730
(985 )
-
115,967
3,522
(1,283)
-
116,506
4,252
(2,268)
-
(4,880 )
(489 )
-
(1,853 )
20,189
(12,200)
(83,707)
(11,463)
82
(461)
144,110
(12,200)
(88,587)
(11,952)
82
(2,314)
164,299
-
619
814
(4,885)
-
(1,402)
(426)
(3,420)
298
27,127
70,261
54,818
1,475
(552)
252
7,399
-
-
-
133,653
70,261
55,437
2,289
(5,437 )
252
5,997
(426 )
(3,420 )
298
160,780
2022 Annual Report │87
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Movement in the fair value of plan assets for defined benefit plans:
December 31, 2022
December 31, 2021
TFI
International
pension
plans
Note
TForce
Freight
pension
plans
TFI
International
pension
plans
Total
TForce
Freight
pension
plans
Total
13,437
80,466
93,903
21,147
-
21,147
Fair value of plan assets,
beginning of year
Increase through business
5
combinations
Interest income
Employer contributions
Benefits paid
Fair value remeasurement
Plan administration expenses
Settlement
Effect of movements in exchange rates
Fair value of plan assets, end of year
-
348
457
(985)
(2,066)
(59)
-
(918)
10,214
-
3,746
103,099
(1,283)
(25,407)
(1,735)
-
(442)
158,444
-
4,094
103,556
(2,268)
(27,473)
(1,794)
-
(1,360)
168,658
-
451
815
(4,885)
(698)
(112)
(3,475)
194
13,437
4,412
100
75,482
(552)
1,008
-
-
16
80,466
4,412
551
76,297
(5,437)
310
(112)
(3,475)
210
93,903
Expense recognized in income or loss:
Total
55,437
1,738
112
55
57,342
861
Total
13,304
Current service cost
Net interest cost
Plan administration expenses
Net settlement
Pension expense
Actual return on plan assets
December 31, 2022
December 31, 2021
TFI
International
pension
plans
539
382
59
-
980
(1,718)
TForce
Freight
pension
plans
115,967
(224)
1,735
82
117,560
(21,661)
TFI
International
pension
plans
619
363
112
55
1,149
(247 )
Total
116,506
158
1,794
82
118,540
(23,379 )
TForce
Freight
pension
plans
54,818
1,375
-
-
56,193
1,108
Actuarial losses recognized in other comprehensive income:
Amount accumulated in retained
earnings, beginning of year
Recognized during the year
Amount accumulated in retained
earnings, end of year
Recognized during the year, net of tax
December 31, 2022
TFI
International
pension
plans
12,174
TForce
Freight
pension
plans
6,643
December 31, 2021
TFI
International
pension
plans
13,304
TForce
Freight
pension
plans
-
Total
18,817
(3,303)
(81,881)
(85,184 )
(1,130 )
6,643
5,513
8,871
(2,435)
(75,238)
(61,073)
(66,367 )
(63,508 )
12,174
(833 )
6,643
4,961
18,817
4,128
The significant actuarial assumptions used (expressed as weighted average):
Defined benefit obligation:
Discount rate at
Future salary increases
Employee benefit expense:
Discount rate at
Rate of return on plan assets at
Future salary increases
December 31, 2022
December 31, 2021
TFI
International
pension
plans
TForce
Freight
pension
plans
TFI
International
pension
plans
TForce
Freight
pension
plans
5.0%
1.6%
2.4%
2.4%
3.0%
5.2 %
2.0 %
5.2 %
5.2 %
2.0 %
3.0%
1.6%
5.2%
5.2%
2.0%
2.9%
2.0%
2.9%
2.9%
2.0%
2022 Annual Report │88
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the value
of the liabilities in the defined benefit plans are as follows:
December 31, 2022
December 31, 2021
Longevity at age 65 for current pensioners
Males
Females
Longevity at age 65 for current members aged 45
Males
Females
TFI
International
pension
plans
TForce
Freight
pension
plans
TFI
International
pension
plans
22.7
24.9
23.6
25.8
19.0
21.4
20.6
22.9
22.7
24.9
23.6
25.8
At December 31, 2022 the weighted average duration of the defined benefit obligation was:
TFI International pension plans
TForce Freight pension plans
TForce
Freight
pension
plans
20.1
22.2
21.7
23.7
9.7
18.0
The following table presents the impact of changes of major assumptions on the defined benefit obligation for the years ended:
Discount rate (1% movement)
Life expectancy (1-year movement)
Historical information:
Defined benefit obligation
Fair value of plan assets
(Surplus) deficit in the plan
2022
2021
Increase
Decrease
(25,536)
3,911
32,517
(4,122)
Increase
(27,922)
4,475
Decrease
36,696
(4,650)
2022
164,299
(168,658)
(4,359)
2021
160,780
(93,903)
66,877
2020
35,529
(21,147)
14,382
2019
31,449
(18,108)
13,341
2018
27,579
(16,581)
10,998
Experience adjustments arising on plan obligations
Experience adjustments arising on plan assets
(112,739)
(27,473)
5,823
310
3,220
1,129
2,116
467
(2,427)
(815)
The Group expects contributions of $0.1 million to be paid to its defined benefit plans in 2023.
2022 Annual Report │89
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
17. Provisions
Balance at December 31, 2020
Additions through business combinations*
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Unwind of discount on long-term provisions
Effect of movements in exchange rates
Balance at December 31, 2021
Additions through business combinations
Sale of business
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Unwind of discount on long-term provisions
Effect of movements in exchange rates
Balance at December 31, 2022
As at December 31, 2022
Current provisions
Non-current provisions
As at December 31, 2021*
Current provisions
Non-current provisions
Self insurance
5
5
6
47,733
125
94,885
(62,836)
(9,259)
(929)
(252)
69,467
-
(1,465)
126,439
(80,040)
(13,236)
(4,153)
(761)
96,251
Other
6,522
74,964
4,352
(7,977)
-
-
(171)
77,690
280
-
15,372
(13,470)
(306)
-
(178)
79,388
Total
54,255
75,089
99,237
(70,813)
(9,259)
(929)
(423)
147,157
280
(1,465)
141,811
(93,510)
(13,542)
(4,153)
(939)
175,639
33,918
62,333
96,251
9,985
69,403
79,388
43,903
131,736
175,639
26,771
42,696
69,467
12,241
65,449
77,690
39,012
108,145
147,157
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
Self-insurance provisions represent the uninsured portion of outstanding claims at year-end. The current portion reflects the amount
expected to be paid in the following year. Due to the long-term nature of the liability, the provision has been calculated using a discount
rate of 3.99% (2021 – 1.3%). Other provisions include mainly litigation provisions of $42.3 million (2021 - $34.6 million) and environmental
remediation liabilities of $23.4 million (2021 - $26.5 million). Litigation provisions contain various pending claims for which management
used judgement and assumptions about future events. The outcomes will depend on future claim developments.
18. Deferred tax assets and liabilities
Property and equipment
Intangible assets
Right-of-use assets
Employee benefits
Provisions
Tax losses
Other
Net deferred tax liabilities
Presented as:
Deferred tax assets
Deferred tax liabilities
December 31,
2022
(360,111)
(72,032)
7,497
23,111
53,818
5,686
892
(341,139)
December 31,
2021*
(432,334)
(78,888)
8,025
43,821
57,961
10,272
(2,917)
(394,060)
27,047
(368,186)
29,695
(423,755)
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
2022 Annual Report │90
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Movement in temporary differences during the year:
Balance Recognized Recognized Disposal
of
directly
Property and equipment
Intangible assets
Long-term debt
Employee benefits
Provisions
Tax losses
Other
Net deferred tax liabilities
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
in equity business combinations
(3,810)
67,442
(11,821)
8,490
-
-
-
-
1,407
(1,490)
17
-
358
-
(13,848)
74,441
7,194
1,956
(497)
(27,421)
406
(545)
2,755
(16,152)
December 31,
2021*
(432,334 )
(78,888 )
8,025
43,821
57,961
10,272
(2,917 )
(394,060 )
in income
or loss
1,397
8,231
(31 )
6,711
(4,466 )
(4,058 )
696
8,480
Acquired
Balance
in business December 31,
2022
Balance Recognized Recognized Disposal
of
directly
Property and equipment
Intangible assets
Long-term debt
Employee benefits
Provisions
Tax losses
Other
Net deferred tax liabilities
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
in equity business combinations*
(255,467)
(11,045)
-
16,679
28,298
10,625
-
(210,910)
1,402
(790)
15
13,384
13
(210)
(1,917)
11,897
December 31,
2020
(178,087 )
(73,496 )
4,852
10,634
15,151
94
(108 )
(220,960 )
in income
or loss
(182 )
6,443
3,158
3,124
14,499
(237 )
(892 )
25,913
-
-
-
-
-
-
-
-
Acquired
Balance
in business December 31,
2021
(360,111 )
(72,032 )
7,497
23,111
53,818
5,686
892
(341,139 )
(432,334 )
(78,888 )
8,025
43,821
57,961
10,272
(2,917 )
(394,060 )
19. Share capital and other components of equity
The Company is authorized to issue an unlimited number of common shares and preferred shares, issuable in series. Both common and
preferred shares are without par value. All issued shares are fully paid.
The common shares entitle the holders thereof to one vote per share. The holders of the common shares are entitled to receive dividends
as declared from time to time. Subject to the rights, privileges, restrictions and conditions attached to any other class of shares of the
Company, the holders of the common shares are entitled to receive the remaining property of the Company upon its dissolution, liquidation
or winding-up.
The preferred shares may be issued in one or more series, with such rights and conditions as may be determined by resolution of the
Directors who shall determine the designation, rights, privileges, conditions and restrictions to be attached to the preferred shares of such
series. There are no voting rights attached to the preferred shares except as prescribed by law. In the event of the liquidation, dissolution
or winding-up of the Company, or any other distribution of assets of the Company among its shareholders, the holders of the preferred
shares of each series are entitled to receive, with priority over the common shares and any other shares ranking junior to the preferred
shares of the Company, an amount equal to the redemption price for such shares, plus an amount equal to any dividends declared
thereon but unpaid and not more. The preferred shares for each series are also entitled to such other preferences over the common
shares and any other shares ranking junior to the preferred shares as may be determined as to their respective series authorized to be
issued. The preferred shares of each series shall be on a parity basis with the preferred shares of every other series with respect to
payment of dividends and return of capital. There are no preferred shares currently issued and outstanding.
The following table summarizes the number of common shares issued:
(in number of shares)
Balance, beginning of year
Repurchase and cancellation of own shares
Stock options exercised
Balance, end of period
Note
21
2022
92,152,893
(6,368,322)
754,988
86,539,559
2021
93,397,985
(2,157,862)
912,770
92,152,893
2022 Annual Report │91
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The following table summarizes the share capital issued and fully paid:
Balance, beginning of year
Repurchase and cancellation of own shares
Cash consideration of stock options exercised
Ascribed value credited to share capital on stock options exercised, net of tax
Issuance of shares on settlement of RSUs, net of tax
Balance, end of year
2022
1,133,181
(68,536)
16,502
6,298
1,784
1,089,229
2021
1,120,049
(23,449 )
20,114
6,210
10,257
1,133,181
Pursuant to the normal course issuer bid (“NCIB”) which began on November 2, 2022 and ending on November 1, 2023, the Company is
authorized to repurchase for cancellation up to a maximum of 6,370,199 of its common shares under certain conditions. As at
December 31, 2022, and since the inception of this NCIB, the Company has repurchased and cancelled 436,820 shares.
During 2022, the Company repurchased 6,368,322 common shares at a weighted average price of $89.19 per share for a total purchase
price of $568.0 million relating to the NCIB. During 2021, the Company repurchased 2,157,862 common shares at a weighted average
price of $91.83 per share for a total purchase price of $198.2 million relating to a previous NCIB. The excess of the purchase price paid
over the carrying value of the shares repurchased in the amount of $499.4 million (2021 – $174.7 million) was charged to retained earnings
as share repurchase premium.
Contributed surplus
The contributed surplus account is used to record amounts arising on the issue of equity-settled share-based payment awards (see note
21).
Accumulated other comprehensive income (“AOCI”)
At December 31, 2022 and 2021, AOCI is comprised of accumulated foreign currency translation differences arising from the translation
of the financial statements of foreign operations, financial assets measured at fair value through OCI, gain or loss on net investment
hedge, realized gains on investments and defined benefit plan remeasurement gain or loss.
Dividends
In 2022, the Company declared quarterly dividends amounting to a total of $1.16 per outstanding common share when the dividend was
declared (2021 – $0.96) for a total of $102.6 million (2021 - $89.1 million). On February 22, 2023, the Board of Directors approved a
quarterly dividend of $0.35 per outstanding common share of the Company’s capital, for an expected aggregate payment of $30.3 million
to be paid on April 17, 2023 to shareholders of record at the close of business on March 31, 2023.
20. Earnings per share
Basic earnings per share
The basic earnings per share and the weighted average number of common shares outstanding have been calculated as follows:
(in thousands of dollars and number of shares)
Net income
Issued common shares, beginning of period
Effect of stock options exercised
Effect of repurchase of own shares
Weighted average number of common shares
2022
823,232
92,152,893
314,112
(3,107,423)
89,359,582
Earnings per share – basic (in dollars)
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
9.21
2021*
754,405
93,397,985
593,740
(937,480)
93,054,245
8.11
2022 Annual Report │92
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Diluted earnings per share
The diluted earnings per share and the weighted average number of common shares outstanding after adjustment for the effects of all
dilutive common shares have been calculated as follows:
(in thousands of dollars and number of shares)
Net income
Weighted average number of common shares
Dilutive effect:
Stock options and restricted share units
Weighted average number of diluted common shares
2022
823,232
89,359,582
1,898,097
91,257,679
Earnings per share - diluted (in dollars)
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
9.02
2021*
754,405
93,054,245
2,281,778
95,336,023
7.91
As at December 31, 2022, no stock options were excluded from the calculation of diluted earnings per share (2021 – nil) as none were
deemed to be anti-dilutive.
The average market value of the Company’s shares for purposes of calculating the dilutive effect of stock options was based on quoted
market prices for the period during which the options were outstanding.
21. Share-based payment arrangements
Stock option plan (equity-settled)
The Company offers a stock option plan for the benefit of certain of its employees. The maximum number of shares that can be issued
upon the exercise of options granted under the current 2012 stock option plan is 5,979,201. Each stock option entitles its holder to receive
one common share upon exercise. The exercise price payable for each option is determined by the Board of Directors at the date of
grant, and may not be less than the volume weighted average trading price of the Company’s shares for the last five trading days
immediately preceding the grant date. The options vest in equal installments over three years and the expense is recognized following
the accelerated method as each installment is fair valued separately and recorded over the respective vesting periods. The table below
summarizes the changes in the outstanding stock options:
(in thousands of options and in dollars)
Balance, beginning of year
Exercised
Forfeited
Balance, end of year
Options exercisable, end of year
2022
Weighted
average
exercise
price
25.70
21.84
40.41
27.89
27.60
Number
of
options
2,061
(755)
(4)
1,302
1,273
2021
Weighted
average
exercise
price
24.65
22.30
23.70
25.70
24.27
Number
of
options
2,982
(913)
(8)
2,061
1,705
The following table summarizes information about stock options outstanding and exercisable at December 31, 2022:
(in thousands of options and in dollars)
Options outstanding
Exercise prices
18.83
26.82
23.70
30.71
40.41
Weighted
average
remaining
contractual life
(in years)
0.6
1.1
2.1
3.2
4.6
2.5
Number
of
options
128
164
325
607
78
1,302
Options
exercisable
Number
of
options
128
164
325
607
49
1,273
Of the options outstanding at December 31, 2022, a total of 1,106,883 (2021 – 1,669,767) are held by key management personnel.
The weighted average share price at the date of exercise for stock options exercised in 2022 was $99.32 (2021 – $87.65).
2022 Annual Report │93
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
In 2022, the Group recognized a compensation expense of $0.4 million (2021 - $1.0 million) with a corresponding increase to contributed
surplus.
No stock options were granted during 2022 and 2021 under the Company’s stock option plan.
Deferred share unit plan for board members (cash-settled)
The Company offers a deferred share unit (“DSU”) plan for its board members. Under this plan, until December 31, 2020, board members
may elect to receive cash, DSUs or a combination of both for their compensation. The following table provides the number of DSUs
related to this plan:
(in units)
Balance, beginning of year
Paid
Dividends paid in units
Balance, end of year
2022
306,554
-
3,574
310,128
2021
373,926
(71,709)
4,337
306,554
In 2022, the Group recognized, as a result of the cash-settled director compensation plan, a compensation expense of $1.2 million (2021
- $1.1 million). In personnel expenses, the Group recognized a mark-to-market gain on DSUs of $1.3 million (2021 – loss of $22.9 million).
As at December 31, 2022, the total carrying amount of liabilities for cash-settled arrangements recorded in trade and other payables
amounted to $31.0 million (2021 - $34.4 million).
Effective January 1, 2021, a new director compensation program was put in place. Quarterly cash amounts are paid to the board members
on the 2nd Thursday following each quarter. In addition, an equity portion of compensation are awarded, comprised of restricted share
units granted annually effective on the date of each Annual Meeting, with a vesting period of one year.
Performance contingent restricted share unit and performance share unit plans (equity-settled)
The Company offers an equity incentive plan for the benefit of senior employees of the Group. Each participant’s annual LTIP allocation
is split in two equally weighted awards of performance share units (“PSUs”) and of restricted share units (‘’RSUs’’). The PSUs are subject
to both performance and time cliff vesting conditions on the third anniversary of the award whereas the RSUs are only subject to a time
cliff vesting condition on the third anniversary of the award. The performance conditions attached to the PSUs are equally weighted
between absolute earnings before interest and income tax and relative total shareholder return (“TSR”). For purposes of the relative TSR
portion, there are two equally weighted comparisons: the first portion is compared against the TSR of a group of transportation industry
peers and the second portion is compared against the S&P/TSX60 index.
Restricted share units
On February 7, 2022, the Company granted a total of 63,404 RSUs under the Company’s equity incentive plan of which 39,750 were
granted to key management personnel. The fair value of the RSUs is determined to be the share price fair value at the date of the grant
and is recognized as a share-based compensation expense, through contributed surplus, over the vesting period. The fair value of the
RSUs granted was $98.27 per unit.
On April 28, 2022, the Company granted a total of 10,815 RSUs under the Company’s equity incentive plan of which 10,815 were granted
to the directors of the Company under the new director compensation plan. The fair value of the RSUs is determined to be the share price
fair value at the date of the grant and is recognized as a share-based compensation expense, through contributed surplus, over the
vesting period. The fair value of the RSUs granted was $83.28 per unit.
On February 8, 2021, the Company granted a total of 78,122 RSUs under the Company’s equity incentive plan of which 51,328 were
granted to key management personnel. The fair value of the RSUs is determined to be the share price fair value at the date of the grant
and is recognized as a share-based compensation expense, through contributed surplus, over the vesting period. The fair value of the
RSUs granted was $70.59 per unit.
On April 27, 2021, the Company granted a total of 12,924 RSUs under the Company’s equity incentive plan of which 12,924 were granted
to the directors of the Company under the new director compensation plan. The fair value of the RSUs is determined to be the share price
2022 Annual Report │94
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
fair value at the date of the grant and is recognized as a share-based compensation expense, through contributed surplus, over the
vesting period. The RSUs vest on April 30, 2022. The fair value of the RSUs granted was $77.32 per unit.
On December 20, 2021, the Company granted a total of 34,221 RSUs under the Company’s equity incentive plan of which 34,221 were
granted to key management personnel. The fair value of the RSUs is determined to be the share price fair value at the date of the grant
and is recognized as a share-based compensation expense, through contributed surplus, over the vesting period. The RSUs vest on April
30, 2022. The fair value of the RSUs granted was $103.66 per unit.
The table below summarizes changes to the outstanding RSUs:
(in thousands of RSUs and in dollars)
Balance, beginning of year
Granted
Reinvested
Settled
Settled on sale of business
Forfeited
Balance, end of year
Number
of
RSUs
272
74
3
(49)
(15)
(13)
272
2022
Weighted
average
grant date
fair value
54.27
96.04
60.68
93.80
44.19
71.13
58.33
Number
of
RSUs
299
125
4
(153)
-
(3)
272
2021
Weighted
average
grant date
fair value
31.54
80.29
37.90
30.70
-
53.12
54.27
The following table summarizes information about RSUs outstanding and exercisable as at December 31, 2022:
(in thousands of RSUs and in dollars)
Grant date fair value
32.41
83.28
70.59
98.27
Number of
RSUs
131
11
71
59
272
RSUs outstanding
Remaining
contractual life
(in years)
0.1
0.3
1.1
2.1
0.8
On August 31, 2022, due to the sale of CFI’s truckload, Temp Control and Mexican non-asset logistics businesses, a total of 22,876
RSUs were cancelled (14,630 RSUs settled and 8,246 RSUs forfeited), and the employees were compensated based on the plan terms,
which require unvested awards to be forfeited and vested awards to be paid out in cash equal to the fair value of the shares. The weighted
average share price at the date of settlement of RSUs was $104.28. The Group expensed the total initial grant date fair value of the
settled RSUs and the excess of the price paid over the carrying value of shares, in the amount of $0.8 million, was accounted for as
repurchase of an equity interest and charged to retained earnings.
The weighted average share price at the date of settlement of the other RSUs vested in 2022 was $83.28 (2021 – $107.76). The excess
of the purchase price paid to repurchase shares on the market over the carrying value of awarded RSUs, in the amount of $1.2 million
(2021 – $18.9 million), was charged to retained earnings as share repurchase premium.
In 2022, the Group recognized, as a result of RSUs, a compensation expense of $6.9 million (2021 - $8.2 million) with a corresponding
increase to contributed surplus.
Of the RSUs outstanding at December 31, 2022, a total of 171,790 (2021 – 171,222) are held by key management personnel.
Performance share units
On February 7, 2022, the Company granted a total of 63,404 PSUs under the Company’s equity incentive plan of which 39,750 were
granted to key management personnel. The fair value of the PSUs is determined using a Monte Carlo simulation model for the TSR
portion and using management’s estimates for the absolute earnings before interest and income tax portion. The estimates related to the
absolute earnings before interest and income tax portion are revised during the vesting period and the cumulative amount recognized at
each reporting date is based on the number of equity instruments for which service and non-market performance conditions are expected
to be satisfied. The share-based compensation expense is recognized, through contributed surplus, over the vesting period. The fair
value of the PSUs granted was $100.43 per unit as at grant date and $112.71 per unit as at December 31, 2022
2022 Annual Report │95
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
On February 8, 2021, the Company granted a total of 78,122 PSUs under the Company’s equity incentive plan of which 51,328 were
granted to key management personnel. The fair value of the PSUs is determined using a Monte Carlo simulation model for the TSR
portion and using management’s estimates for the absolute earnings before interest and income tax portion. The estimates related to the
absolute earnings before interest and income tax portion are revised during the vesting period and the cumulative amount recognized at
each reporting date is based on the number of equity instruments for which service and non-market performance conditions are expected
to be satisfied. The share-based compensation expense is recognized, through contributed surplus, over the vesting period. The fair
value of the PSUs granted was $89.64 per unit as at grant date and $114.35 per unit as at December 31, 2022 (2021 - $105.53 per unit).
The table below summarizes changes to the outstanding PSUs:
(in thousands of PSUs and in dollars)
Balance, beginning of year
Granted
Reinvested
Settled
Added due to performance conditions
Settled on sale of business
Forfeited
Balance, end of year
Number
of
PSUs
226
63
3
(6)
22
(28)
(19)
261
2022
Weighted
average
grant date
fair value
52.25
100.43
62.94
47.77
50.87
46.85
75.59
62.87
Number
of
PSUs
147
78
3
-
-
-
(2)
226
2021
Weighted
average
grant date
fair value
32.41
89.64
45.64
-
-
-
41.65
52.25
The following table summarizes information about PSUs outstanding and exercisable as at December 31, 2022:
(in thousands of PSUs and in dollars)
Grant date fair value
32.41
89.64
100.43
Number of
PSUs
132
70
59
261
PSUs outstanding
Remaining
contractual life
(in years)
0.1
1.1
2.1
0.8
On August 31, 2022, due to the sale of CFI’s truckload, Temp Control and Mexican non-asset logistics businesses, a total of 41,380
PSUs, including 18,504 PSUs added for performance conditions met as per PSU plan terms, were cancelled (28,442 PSUs settled and
12,938 PSUs forfeited), and the employees were compensated based on the plan terms, which require unvested awards to be forfeited
and vested awards to be paid out in cash equal to the fair value of the shares. The weighted average share price at the date of settlement
of PSUs was $104.28. The Group expensed the total fair value of the settled PSUs and the excess of the price paid over the carrying
value of shares, in the amount of $0.8 million, was accounted for as repurchase of an equity interest and charged to retained earnings.
In 2022, the Group recognized, as a result of PSUs, a compensation expense of $7.3 million (2021 - $6.2 million) with a corresponding
increase to contributed surplus.
Of the PSUs outstanding at December 31, 2022, a total of 171,790 (2021 – 138,141) are held by key management personnel.
23. Materials and services expenses
The Group’s materials and services expenses are primarily costs related to independent contractors and vehicle operation expenses.
Vehicle operation expenses consists primarily of fuel costs, repairs and maintenance, insurance, permits and operating supplies.
Independent contractors
Vehicle operation expenses
2022
3,394,544
1,197,647
4,592,191
2021
2,911,393
904,060
3,815,453
2022 Annual Report │96
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
24. Personnel expenses
Short-term employee benefits
Contributions to defined contribution plans
Current and past service costs related to defined benefit plans
Termination benefits
Equity-settled share-based payment transactions
Cash-settled share-based payment transactions
Note
16
21
21
2022
2,216,769
9,570
116,506
6,688
14,648
(1,325)
2,362,856
2021
1,863,907
9,323
55,437
6,053
15,424
23,937
1,974,081
In 2020, the Canada Emergency Wage Subsidy (“CEWS”) was established to enable Canadian employers to re-hire workers previously
laid off, help prevent further job losses, and to better position themselves to resume normal operations following the COVID-19 pandemic
declaration and crisis.
During 2021, certain legal entities within the Company qualified for the CEWS resulting in a $12.3 million (2022 - nil) subsidy that was
recorded and offset against personnel expenses, presented in short-term employee benefits, in the consolidated statement of income.
24. Finance income and finance costs
Recognized in income or loss:
Costs (income)
Interest expense on long-term debt and amortization of
deferred financing fees
Interest expense on lease liabilities
Interest income
Net change in fair value and accretion expense
of contingent considerations
Net foreign exchange loss (gain)
Net impact of early repayment of contingent consideration
Other financial expenses
Net finance costs
Presented as:
Finance income
Finance costs
25.
Income tax expense
Income tax recognized in income or loss:
Current tax expense
Current period
Adjustment for prior periods
Deferred tax expense (recovery)
Origination and reversal of temporary differences
Variation in tax rate
Adjustment for prior periods
Income tax expense
Income tax recognized in other comprehensive income:
Foreign currency translation differences
Defined benefit plan remeasurement gains (losses)
Employee benefit
Loss on net investment hedge
Change in fair value of investment in equity securities
2022
52,230
13,264
(1,750)
216
556
-
15,881
80,397
(1,750)
82,147
2022
263,877
(12,988 )
250,889
(19,834 )
(242 )
11,596
(8,480 )
242,409
2021
45,953
13,521
(2,187)
1,932
(1,471)
(1,469)
16,739
73,018
(5,127)
78,145
2021
179,821
(2,102 )
177,719
(27,427 )
175
1,339
(25,913 )
151,806
2022
Before
Tax
(benefit)
tax expense
(10,148)
85,184
304
(76,141)
(6,573)
(7,374)
-
21,676
12
(4,095)
(1,078)
16,515
Net of
tax
(10,148)
63,508
292
(72,046)
(5,495)
(23,889)
2021
Before
Tax
(benefit)
Tax expense
12,960
(5,513)
124
(17,894)
27,803
17,480
-
(1,385)
37
(2,352)
3,656
(44)
Net of
tax
12,960
(4,128)
87
(15,542)
24,147
17,524
2022 Annual Report │97
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Reconciliation of effective tax rate:
Income before income tax
Income tax using the Company’s statutory tax rate
Increase (decrease) resulting from:
2022
1,065,641
26.5%
282,395
26.5%
2021**
906,211
240,146
Rate differential between jurisdictions
Variation in tax rate
Non deductible expenses
Tax deductions and tax exempt income*
Adjustment for prior periods
Multi-jurisdiction tax
(2,297)
-0.2%
175
0.0%
5,670
0.3%
(92,355)
-3.8%
(763)
-0.1%
1,230
0.1%
151,806
22.7%
* Tax deductions and tax exempt income for 2022 is mainly due to the gain on sale of business recorded on the sale of CFI’s Truckload, Temp Control and Mexican non-asset
logistics businesses resulting in no taxes. In 2021, tax deductions and tax exempt income is mainly due to the tax exempt bargain purchase gain recorded on the acquisition of UPS
Freight, which was recasted for adjustments to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
** Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
(2,206)
(242)
3,105
(40,172)
(1,392)
921
242,409
-0.3%
0.0%
0.6%
-10.2%
-0.1%
0.1%
16.8%
26. Financial instruments and financial risk management
Risks
In the normal course of its operations and through its financial assets and liabilities, the Group is exposed to the following risks:
credit risk
liquidity risk
market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives and processes for managing
risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial
statements.
Risk management framework
The Group’s management identifies and analyzes the risks faced by the Group, sets appropriate risk limits and controls, and monitors
risks and adherence to limits. Risk management is reviewed regularly to reflect changes in market conditions and the Group’s activities.
The Board of Directors has overall responsibility of the Group’s risk management framework. The Board of Directors monitors the Group’s
risks through its audit committee. The audit committee reports regularly to the Board of Directors on its activities.
The Group’s audit committee oversees how management monitors and manages the Group’s risks and is assisted in its oversight role by
the Group’s internal audit. Internal audit undertakes both regular and ad hoc reviews of risk, the results of which are reported to the audit
committee.
a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligation, and arises principally from the Group’s trade receivables. The Group grants credit to its customers in the ordinary course
of business. Management believes that the credit risk of trade receivables is limited due to the following reasons:
There is a broad base of customers with dispersion across different market segments;
No single customer accounts for more than 5% of the Group’s revenue;
Approximately 85.3% (2021 – 89.7%) of the Group’s trade receivables are not past due or 30 days or less past due;
Bad debt expense has been less than 0.2% of consolidated revenues for the last 2 years.
2022 Annual Report │98
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Exposure to credit risk
The Group’s maximum credit exposure corresponds to the carrying amount of the financial assets. The maximum exposure to credit risk
at the reporting date was:
Trade and other receivables
Impairment losses
December 31,
2022
1,030,726
December 31,
2021
1,056,023
The aging of trade and other receivables at the reporting date was:
Not past due
Past due 1 – 30 days
Past due 31 – 60 days
Past due more than 60 days
Total
2022
696,357
184,907
83,676
94,824
1,059,764
Impairment
2022
1,124
2,904
8,712
16,298
29,038
Total
2021
772,077
178,641
63,634
68,988
1,083,340
Impairment
2021
462
2,732
8,195
15,928
27,317
The movement in the allowance for expected credit loss in respect of trade and other receivables during the year was as follows:
Balance, beginning of year
Business combinations
Sale of business
Bad debt expenses
Amount written off and recoveries
Effect of movements in exchange rates
Balance, end of year
b) Liquidity risk
2022
27,317
127
(1,914)
19,644
(14,129)
(2,007)
29,038
2021
11,528
9,561
-
10,854
(4,372)
(254)
27,317
Liquidity risk is the risk that the Group will not be able to meet its financial obligations associated with its financial liabilities that are settled
by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses
or risking damage to its reputation.
Cash inflows and cash outflows requirements from Group’s entities are monitored closely and separately to ensure the Group optimizes
its cash return on investment. Typically, the Group ensures that it has sufficient cash to meet expected operational expenses; this excludes
the potential impact of extreme circumstances that cannot reasonably be predicted. The Group monitors its short and medium-term
liquidity needs on an ongoing basis using forecasting tools. In addition, the Group maintains revolving facilities, which have $911.8 million
availability as at December 31, 2022 (2021 - $747.6 million) and an additional $185.8 million credit available (CAD $245 million and USD
$5 million). The additional credit is available under certain conditions under the Group’s syndicated bank agreement (2021 - $198.9
million, CAD $245 million and USD $5 million).
The following are the contractual maturities of the financial liabilities, including estimated interest payment:
Carrying Contractual
amount
cash flows
Less than
1 year
1 to 2
years
2 to 5 More than
5 years
years
2022
Trade and other payables
Long-term debt
Other financial liability
2021*
Trade and other payables
Long-term debt
Other financial liability
708,768
1,315,757
8,775
2,033,300
708,768
1,659,085
8,775
2,376,628
708,768
80,916
8,775
798,459
-
268,727
-
268,727
-
229,969
-
229,969
-
1,079,473
-
1,079,473
861,908
861,908
1,608,094 1,896,085
8,674
861,908
-
404,454 283,736 463,538
57
2,478,676 2,766,667 1,267,923 290,792 463,595
1,561
8,674
7,056
-
-
744,357
-
744,357
2022 Annual Report │99
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
It is not expected that the contractual cash flows could occur significantly earlier, or at significantly different amounts.
c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or
the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure
within acceptable parameters, while optimizing the return.
The Group buys and sell derivatives, periodically, and also incurs financial liabilities, in order to manage market risks. All such transactions
are carried out within the guidelines set by the Group’s management and it does not use derivatives for speculative purposes.
d) Currency risk
The Group is exposed to currency risk on financial assets and liabilities, sales and purchases that are denominated in a currency other
than the respective functional currencies of Group entities. Primarily the Canadian entities are exposed to U.S. dollars and entities having
a functional currency other than the Canadian dollars (foreign operations) are not significantly exposed to currency risk. The Group
mitigates and manages its future USD cash flow by creating offsetting positions through the use of foreign exchange contracts periodically
and USD debt.
To mitigate its financial net liabilities exposure to foreign currency risk related to Canadian entities, the Group designated a portion of its
U.S. dollar denominated debt as a hedging item in a net investment hedge.
The Group’s financial assets and liabilities exposure to foreign currency risk related to Canadian entities was as follows based on notional
amounts:
Trade and other receivables
Trade and other payables
Long-term debt
Balance sheet exposure
Long-term debt designated as investment hedge
Net balance sheet exposure
2022
50,732
(8,301)
(1,079,774)
(1,037,343)
1,080,000
42,657
2021
50,192
(4,804)
(903,556)
(858,168)
900,000
41,832
The Group estimates its annual net USD denominated cash flow from operating activities at approximately $710 million (2021 - $720
million). This cash flow is earned evenly throughout the year.
The following exchange rates applied during the year:
Average USD for the year ended
Closing USD as at
Sensitivity analysis
December 31,
2022
1.3013
1.3554
December 31,
2021
1.2535
1.2637
A 1-cent increase in the U.S. dollar at the reporting date, assuming all other variables, in particular interest rates, remain constant, would
have increased (decreased) equity and income or loss by the amounts shown below. The analysis is performed on the same basis for
2021.
Balance sheet exposure
Long-term debt designated as investment hedge
Net balance sheet exposure
1-cent
Increase
(7,653)
7,968
315
2022
1-cent
Decrease
7,653
(7,968)
(315)
1-cent
Increase
(6,791)
7,122
331
2021
1-cent
Decrease
6,791
(7,122)
(331)
2022 Annual Report │100
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
e)
Interest rate risk
The Group’s intention is to minimize its exposure to changes in interest rates by maintaining a significant portion of fixed-rate interest-
bearing long-term debt. This is achieved by periodically entering into interest rate swaps, although no interest rate swaps were in effect
during 2022.
At December 31, 2022 and 2021, the interest rate profile of the Group’s carrying amount interest-bearing financial instruments excluding
the effects of interest rate derivatives was:
Fixed rate instruments
Variable rate instruments
2022
1,315,757
-
1,315,757
2021
1,044,244
563,850
1,608,094
The fair value of the interest rate swaps has been estimated using industry standard valuation models which use rates published on
financial capital markets, adjusted for credit risk.
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial liabilities at fair value through income or loss. Therefore a change in interest rates
at the reporting date would not affect income or loss.
Cash flow sensitivity analysis for variable rate instruments
A 1% change in interest rates at the reporting date would have increased (decreased) equity and net income or net loss by the amounts
shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is
performed on the same basis for 2021.
Interest on variable rate instrument
f) Capital management
2022
2021
1% increase 1% decrease
1% increase
-
-
(4,156)
1% decrease
4,156
For the purposes of capital management, capital consists of share capital and retained earnings of the Group. The Group's objectives
when managing capital are:
To ensure proper capital investment in order to provide stability and competitiveness to its operations;
To ensure sufficient liquidity to pursue its growth strategy and undertake selective acquisitions;
To maintain an appropriate debt level so that there are no financial constraints on the use of capital; and
To maintain investors, creditors and market confidence.
The Group seeks to maintain a balance between the highest returns that might be possible with higher level of borrowings and the
advantages and security by a sound capital position.
The Group monitors its long-term debt using the ratios below to maintain an appropriate debt level. The Group’s debt-to-equity and debt-
to-capitalization ratios are as follows:
Long-term debt
Shareholders' equity
Debt-to-equity ratio
Debt-to-capitalization ratio1
1 Long-term debt divided by the sum of shareholders' equity and long-term debt.
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
1,315,757
2,463,070
0.53
0.35
2022
2021*
1,608,094
2,310,355
0.70
0.41
There were no changes in the Group’s approach to capital management during the year.
2022 Annual Report │101
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The Group’s credit facility agreement requires monitoring two ratios on a quarterly basis. The first is a ratio of total debt plus letters of
credit and some other long-term liabilities less cash (unrestricted cash for the credit facility and cash up to $100 million for the unsecured
senior notes) to net income or loss before finance income and costs, income tax expense (recovery), depreciation, amortization,
impairment of intangible assets, bargain purchase gain, and gain or loss on sale of land and buildings, assets held for sale and intangible
assets (“Adjusted EBITDA”). The second is a ratio of adjusted earnings before interest, income taxes, depreciation and amortization and
rent expense (“EBITDAR”), and, including last twelve months adjusted EBITDAR from acquisitions to interest and net rent expenses.
These ratios are measured on a consolidated last twelve-month basis and are calculated as prescribed by the credit agreement which,
among other things, requires the exclusion of the impact of IFRS 16 leases. These ratios must be kept below a certain threshold so as
not to breach a covenant in the Group’s syndicated bank. At December 31, 2022 and 2021, the Group was in compliance with its financial
covenants.
Management believes that the Group has sufficient liquidity to continue both its operations as well as its acquisition strategy.
Upon maturity of the Group’s long-term debt, the Group’s management and its Board of Directors will assess if the long-term debt should
be renewed at its original value, increased or decreased based on the then required capital need, credit availability and future interest
rates.
g) Accounting classification and fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statements of financial position, are as
follows:
Financial assets
Assets carried at fair value
Investment in equity securities
Assets carried at amortized cost
Trade and other receivables
Financial liabilities
Liabilities carried at fair value
Other financial liability
Liabilities carried at amortized cost
Trade and other payables
Long-term debt
December 31, 2022
Carrying
Amount
Fair
Value
December 31, 2021*
Fair
Value
Carrying
Amount
85,964
85,964
31,391
31,391
1,030,726
1,116,690
1,030,726
1,116,690
1,056,023
1,087,414
1,056,023
1,087,414
19,657
19,657
18,599
18,599
708,768
1,315,757
2,044,182
708,768
1,300,591
2,029,016
861,908
1,608,094
2,488,601
861,908
1,378,813
2,259,320
* Recasted in fiscal 2022 for adjustments made to provisional amounts of UPS Freight prior year’s business combination (see note 5d))
Interest rates used for determining fair value
The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at December 31
plus an adequate credit spread, and were as follows:
Long-term debt
Fair value hierarchy
2022
3.4%
2021
2.1%
Group’s financial assets and liabilities recorded at fair value on a recurring basis are investment in equity securities discussed above.
Investment in equity securities include Level 1 investments that are marked to market with the publicly traded information as at
December 31, 2022. The remaining investment in equity securities is measured using level-3 inputs of the fair value hierarchy.
27. Contingencies, letters of credit and other commitments
a) Contingencies
2022 Annual Report │102
TFI International Inc.
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
There are pending operational and personnel related claims against the Group. In the opinion of management, these claims are
adequately provided for in long-term provisions on the consolidated statements of financial position and settlement should not have
a significant impact on the Group’s financial position or results of operations.
b) Letters of credit
As at December 31, 2022, the Group had $66.8 million of outstanding letters of credit (2021 - $47.4 million).
c) Other commitments
As at December 31, 2022, the Group had $149.8 million of purchase commitments (2021 – $75.1 million) and $13.9 million of
purchase orders for leases that the Group intends to enter into and that are expected to materialize within a year (2021 – $13.2
million).
28. Related parties
Parent and ultimate controlling party
There is no single ultimate controlling party. Although the shares of the Company are widely held, certain institutional investors hold
meaningful positions.
Transactions with key management personnel
Board members of the Company, executive officers and top managers of major Group’s entities are deemed to be key management
personnel. There were no other transactions with key management personnel other than their respective compensation.
Key management personnel compensation
In addition to their salaries, the Company also provides non-cash benefits to board members and executive officers.
Executive officers also participate in the Company’s stock option and performance contingent restricted share unit and performance share
unit plans and board members are entitled to deferred share units, as described in note 21. Costs incurred for key management personnel
in relation to these plans are detailed below.
Key management personnel compensation comprised:
Short-term benefits
Post-employment benefits
Equity-settled share-based payment transactions
29. Subsequent events
2022
16,858
800
10,874
28,532
2021
14,427
793
11,031
26,251
Subsequent to year end the Company acquired three businesses for a cash total of $68.8 million and contingent consideration remaining
to be evaluated, including the Axsun Group.
2022 Annual Report │103
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company of Canada
100 University Avenue, 8th floor
Toronto, Ontario M5J 2Y1
Canada and the United States
Telephone: 1 800 564-6253
Fax: 1 888 453-0330
International
Telephone: 514 982-7800
Fax: 416 263-9394
Computershare Trust Company, N.A.
Co-Transfer Agent (U.S.)
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, April 26, 2023 at 1:30 p.m.
Details to be confirmed at a later date at :
www.tfiintl.com/en/news/
Si vous désirez recevoir la version française de
ce rapport, veuillez écrire au secrétaire de la société :
8801, route Transcanadienne, bureau 500
Montréal (Québec) H4S 1Z6
CORPORATE
INFORMATION
EXECUTIVE OFFICE
96 Disco Road
Etobicoke, Ontario M9W 0A3
Telephone: 647 725-4500
HEAD OFFICE
8801 Trans-Canada Highway, Suite 500
Montreal, Quebec H4S 1Z6
Telephone: 514 331-4000
Fax: 514 337-4200
Web site: www.tfiintl.com
E-mail: administration@tfiintl.com
AUDITORS
KPMG LLP
STOCK EXCHANGE LISTING
TFI International Inc. shares are listed on the New York
Stock Exchange and the Toronto Stock Exchange
under the symbol TFII.
FINANCIAL INSTITUTIONS
National Bank of Canada
Royal Bank of Canada
Bank of America, N.A.
JPMorgan Chase Bank, N.A.
The Toronto Dominion Bank
PNC Bank
Bank of Montreal
U.S. Bank, N.A.
Fonds de solidarité FTQ
Prudential Financial, Inc.
Guggenheim Investments
MetLife Investment Management, LLC
Barings, LLC
Voya Investment Management, LLC
New York Life Private Capital, LLC
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