TFI International
Annual Report 2023

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2023 Report
2022 Report
2021 Report
2020 Report
2019 Report

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Plain-text annual report

T F I I N T E R N A T I O N A L 2 0 1 7 A N N U A L R E P O R T 2023 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS CONSOLIDATED FINANCIAL STATEMENTS FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2023 GENERAL INFORMATION Management’s Discussion and Analysis 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., including its operating subsidiaries. This MD&A provides a comparison of the Company’s performance for its three-month and year ended December 31, 2023 with the corresponding three-month and year ended December 31, 2022 and it reviews the Company’s financial position as of December 31, 2023. It also includes a discussion of the Company’s affairs up to February 15, 2024, 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, 2023. 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 15, 2024. 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.shtml. 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. 2023 Annual Report │2 SELECTED FINANCIAL DATA AND HIGHLIGHTS (unaudited) (in thousands of U.S. dollars, except per share data) 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 Q4 Highlights Management’s Discussion and Analysis Three months ended December 31 2021 2023 1,674,114 294,564 1,968,678 320,938 198,257 131,386 147,020 302,580 243,788 2022 1,616,495 340,199 1,956,694 304,956 216,860 153,494 151,759 248,348 188,273 2023 2022 1,888,423 252,491 2,140,914 318,466 214,979 144,139 148,620 190,333 120,749 6,416,886 1,104,281 7,521,167 1,187,940 757,635 504,877 538,333 1,013,839 775,895 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 2021 6,468,785 751,644 7,220,429 1,076,479 979,229 754,405 498,348 855,351 700,889 1.53 1.71 0.40 19.2% 3.8% 2.1% 1.0% 11.8% 87.7% 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% 5.80 6.18 1.45 18.5% 3.9% 2.1% 0.9% 11.8% 88.4% 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%        Fourth quarter operating income of $198.3 million compares to $216.9 million the same quarter last year, primarily reflecting weaker market conditions and a reduction of $23.0 million the gain, net of impairment, on the sale of assets held for sale. Net income of $131.4 million compares to $153.5 million in Q4 2022. Diluted earnings per share (diluted “EPS”) of $1.53 compares to $1.74 in Q4 2022. Adjusted net income1, a non-IFRS measure, of $147.0 million compares to $151.8 million in Q4 2022. Adjusted diluted EPS1, a non-IFRS measure, of $1.71 compares to $1.72 in Q4 2022. Net cash from operating activities of $302.6 million grew from $248.3 million in Q4 2022. Free cash flow1, a non-IFRS measure, of $243.8 million grew from $188.3 million in Q4 2022. The Company’s reportable segments performed as follows: o o Package and Courier operating income decreased 8% to $34.7 million on lower volumes, rates and fuel surcharge; Less-Than-Truckload operating income decreased 19% to $71.4 million on the $7.2 million net loss on assets to held-for-sale, as well as lower volumes offset by strong operational performance and contributions from acquisitions; o Truckload operating income decreased 29% to $50.7 million primarily on lower rates and volumes offset by contributions from acquisitions; and o Logistics operating income increased 60% to $54.7 million resulting from the August 2023 acquisition of JHT Holdings, Inc, as well as strong operational performance in the US same day package and LTL brokerage businesses.  Improvement of the claims ratio in the US LTL to 0.3% from 1.0% a year earlier, and a consistent claims ratio of 0.1% in Canadian LTL.  On December 18, 2023, the Board of Directors of TFI declared a quarterly dividend of $0.40 per share paid on January 15, 2024, a 14% increase over the quarterly dividend of $0.35 per share declared in Q4 2022. The annualized dividend1 represents 17.4% of the trailing twelve-month free cash flow.  During the quarter, TFI International agreed to acquire Daseke, Inc., in a transaction expected to close during the second quarter of 2024, after which Daseke's operating companies will operate as part of the TFI's Truckload segment. Also during the quarter, the Company acquired Dahlsten Truck Line, which operates in the Truckload segment. Subsequent to the quarter, the Company acquired Sharp Trucking Services Ltd.  During the fourth quarter, the Company returned $199.2 million of capital to the shareholders through $30.0 million in quarterly dividends and $169.2 million of share repurchases, as the Company repurchased and cancelled 1,500,000 shares. 1 This is a non-IFRS measure. For a reconciliation, please refer to the “Non-IFRS financial measures” section below. 2023 Annual Report │3 ABOUT TFI INTERNATIONAL Services Management’s Discussion and Analysis TFI International is a North American leader in the transportation and logistics industry, operating in the United States and Canada. 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 weakest generally occurring during the first quarter. Furthermore, during the harsh winter months, fuel consumption and maintenance costs tend to rise. Human resources As at December 31, 2023, the Company had 25,123 employees throughout TFI International’s various business segments across North America. This compares to 25,836 employees as at December 31, 2022. The year-over-year decrease of 713 employees is attributable to business acquisitions that added 2,351 employees offset by rationalizations affecting 3,064 employees mainly in the LTL segment. 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 is a significant transportation provider throughout North America. As at December 31, 2023, the Company had 11,455 trucks, 34,599 trailers and 7,504 independent contractors. This compares to 11,442 trucks, 38,091 trailers and 6,905 independent contractors as at December 31, 2022. Facilities TFI International’s head office is in Montréal, Québec and its executive office is in Etobicoke, Ontario. As at December 31, 2023, the Company had 598 facilities, as compared to 544 facilities as at December 31, 2022. Of these 598 facilities, 330 are located in the United States and 268 are located in Canada. In the last twelve months, 86 facilities were added from business acquisitions and terminal consolidation decreased the total number of facilities by 32, mainly in the LTL and Logistics segments. 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 Revenue by Top Customers' Industry (58% of total revenue in the year ended December 31, 2023) across North America. Retail Manufactured Goods Automotive Building Materials Metals & Mining Food & Beverage Services Chemicals & Explosives Forest Products Energy Maritime Containers Waste Management Others 24% 14% 12% 12% 7% 8% 5% 4% 3% 3% 1% 1% 6% 2023 Annual Report │4 CONSOLIDATED RESULTS Management’s Discussion and Analysis This section provides general comments on the consolidated results of operations. A more detailed analysis is provided in the “Segmented Results” section. 2023 business acquisitions In line with its growth strategy, the Company acquired twelve businesses during 2023. On January 9, 2023, TFI International acquired selected assets of Stallion Express, LLC (“Stallion”). Stallion services the long-term care pharmacy of the medical logistics market in the eastern United States and is reported in the Logistics segment. On February 5, 2023, TFI International acquired D.M. Breton Inc. (“D.M. Breton”). Based out of Quebec, D.M. Breton transports freight, lumber and paper products between Canada and the United States and is reported in the Truckload segment. On February 17, 2023, TFI International acquired Axsun Inc. and its subsidiaries ("Axsun"). Based out of Montreal, Quebec, but operated from multiple locations, Axsun is a provider of intermodal and freight brokerage services across Canada and the United States. Axsun is reported in the Logistics segment. On March 20, 2023, TFI International acquired Hot-Line Freight Systems, Inc. and Hot-Line Logistics, LLC (collectively referred to as "Hot-Line"). Hot-Line is a Wisconsin-based LTL provider servicing the Midwestern USA and is reported in the LTL segment. On April 2, 2023, TFI international acquired SM Freight Inc. ("SM Freight"). SM Freight is based in Southern Ontario and specializes in refrigerated services to and from the U.S., and also provides warehousing services. SM Freight is reported in the Truckload segment. On April 30, 2023, TFI International acquired Launch Logistix Inc. ("Launch"). Launch is an existing independent agent of TFWW, an operating division of TFI, based in Minnesota providing logistics services. Launch is reported in the Logistics segment. On May 21, 2023, TFI International acquired Les Placements Jonadagi Inc. ("Jonadagi"). Jonadagi is a truckload company based in Vaudreuil, Quebec, and provides truckload services to eastern Canada. Jonadagi is reported in the Truckload segment. On July 13, 2023, TFI international acquired Siemens Transportation Group ("STG"). STG is based in Saskatchewan, Canada and provides LTL, truckload and flatbed services throughout North America. STG is reported in the LTL and Truckload segments. On August 3, 2023, TFI International acquired Ulch Transport Limited ("Ulch"). Ulch specializes in truckload transportation of food products, including liquid food products and refrigerated goods, throughout North America. Ulch is based in Ontario, Canada and is reported in the Truckload segment. On August 16, 2023, TFI International acquired JHT Holdings, Inc. ("JHT"). JHT is an asset light logistics and transportation provider for Class 6-8 truck manufacturers, transporting new trucks from manufacturing and final assembly plants to dealers and end customers. JHT is reported in the Logistics segment. On September 1, 2023, TFI International acquired Vedder Transportation Group ("Vedder"). Vedder specializes in tank truck transport of food grade liquids and dry bulk commodities and operates in Western Canada. This transaction included the acquisition of significant real estate properties amounting to $57.2 million. Vedder is reported in the Truckload segment. On November 19, 2023, TFI International acquired Dahlsten Truck Line Ltd ("Dahlsten"). Dahlsten specializes in dry bulk food-grade tank transportation operating across the American Midwest. Dahlsten is reported in the Truckload segment. 2023 Annual Report │5 Revenue Management’s Discussion and Analysis For the three months ended December 31, 2023, total revenue was $1,968.7 million, compared to $1,956.7 million in Q4 2022. The increase was mainly attributable to contributions from business acquisitions of $235.0 million partially offset by a weakened market which resulted in weaker volumes and pricing decreases particularly in the TL segment. For the year ended December 31, 2023, total revenue was $7.52 billion compared to $8.81 billion from 2022. The decrease was mainly attributable to weakened market which resulted in weaker volumes and pricing decreases particularly in the TL segment contributing to a decrease in revenue before surcharge from existing operations of $1,427.0 million, as well as the sale of CFI which had revenue of $415.2 million in 2022. This decrease was partially offset by contributions from business acquisitions of $550.9 million. Operating expenses For the three months ended December 31, 2023, the Company’s operating expenses increased by $30.6 million, to $1,770.4 million, from $1,739.8 million in Q4 2022. This increase was due to an increase from business acquisitions of $210.9 million offset partially by a decrease in operating expenses from existing operations of $180.3 million, as revenues decreased. For the three months ended December 31, 2023, materials and services expenses, net of fuel surcharge, increased by $17.4 million, to $771.3 million from $694.0 million in the same period last year due primarily to an increase from business acquisitions of $106.8 million, partially offset by a decrease in revenues. For the three months ended December 31, 2023, personnel expense increased 4% to $534.2 million from $514.6 million in Q4 2022. The increase is attributable primarily to an increase in business acquisitions of $55.0 million offset by reduced expenses in response to the decline in revenues and the ability of the Company to quickly adjust to demand levels. 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, increased by $1.4 million, or 1%, for the three months ended December 31, 2023, as compared to the same period last year, as increased costs from business acquisitions were partially offset by a reduction of spending due to a decline in revenues. Gains on the sale of and impairment on assets held for sale decreased by $23.0 million from a gain of $16.0 million in Q4 2022 to a loss of $7.0 million. The loss in Q4 2023 include a loss on rolling stock of $11.3 million. For the year ended December 31, 2023, the Company’s operating expenses decreased by $902.9 million from $7.67 billion in 2022 to $6.76 billion in 2023. The decrease is mainly attributable to a reduction in existing operations of $996.8 million, driven by a decrease in revenues, and the sale of CFI which incurred $401.1 million of operating expenses in the same period last year. This is partially offset by an increase in operating expense from business acquisition of $495.0 million. Operating income For the three months ended December 31, 2023, the Company’s operating income was $198.3 million compared to $216.9 million during the same quarter in 2022. The decrease is primarily attributable to the decline in revenues as a result of weaker market demand in the quarter and the impact of a decrease in gains from assets held for sale of $23.0 million, offset by the contribution from acquisitions of $24.1 million. For the year ended December 31, 2023, the Company’s operating income of $757.6 million compared to $1,146.0 million in 2022. 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 Net change in fair value and accretion expense of contingent considerations Net foreign exchange (gain) loss Others Net finance costs Interest expense on long-term debt Three months ended December 31 2022 11,809 3,413 (1,075) 90 (564) 3,290 16,963 2023 20,757 4,431 (3,838) 31 (1,620) 3,502 23,263 Years ended December 31 2022 52,230 13,264 (1,750) 216 556 15,881 80,397 2023 59,432 16,042 (8,121) 165 (491) 13,844 80,871 Interest expense on long-term debt for the three-month period ended December 31, 2023 increased by $8.9 million as compared to the same quarter last year as the average level of debt rose from $1.32 billion to $1.81 billion as a result of the $500.0 million debt agreement in the quarter, and the rate also increased from 3.57% to 4.60%. 2023 Annual Report │6 Management’s Discussion and Analysis The interest expense on long-term debt for the year ended December 31, 2023, increased by $7.2 million as compared to the same period last year mainly due to an increase in the average interest rate from 3.35% to 3.95% in 2023. 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, 2023, a gain of $41.3 million of foreign exchange variations (a gain of $41.2 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, 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 year ended December 31, 2023, a gain of $37.9 million of foreign exchange variations (a gain of $39.7 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, 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. Income tax expense For the three months ended December 31, 2023, the Company’s effective tax rate was 24.9%. The income tax expense of $43.6 million reflects a $2.8 million favorable variance versus an anticipated income tax expense of $46.4 million based on the Company’s statutory tax rate of 26.5%. The favorable variance is due to a favorable variation from tax deductions and tax-exempt income of $3.8 million and adjustments for prior years of $2.0 million partially offset by an unfavorable variation from a variation in tax rate of $1.3 million. For the year ended December 31, 2023, the Company’s effective tax rate was 25.4%. The income tax expense of $171.9 million reflects a $7.5 million favorable variance versus an anticipated income tax expense of $179.3 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 $14.9 million which is partially offset by an unfavorable variance of $5.3 million for multi-jurisdiction tax. Net income and adjusted net income (unaudited) (in thousands of U.S. dollars, except per share data) 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) loss, net of impairment, 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 2023 131,386 15,598 31 (1,620) — — 7,026 — (5,401) 147,020 1.73 1.71 Three months ended December 31 2021 144,139 13,128 2022 153,494 13,969 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 2023 504,877 56,160 165 (491) 3,011 — (14,721) — (10,668) 538,333 6.27 6.18 Years ended December 31 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, 2023, TFI International’s net income was $131.4 million as compared to $153.5 million in Q4 2022. The Company’s adjusted net income1, a non-IFRS measure, which excludes items listed in the above table, was $147.0 million as compared to $151.8 million in Q4 2022, a decrease of 3% or $4.8 million. Adjusted EPS1, fully diluted, of $1.71 compared to $1.72 in Q4 2022. 1 This is a non-IFRS. For the reconciliation, refer to the “Non-IFRS financial measures” section below. 2023 Annual Report │7 SEGMENTED RESULTS Management’s Discussion and Analysis 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 affected by this reallocation. Selected segmented financial information (unaudited) (in thousands of U.S. dollars) Three months ended December 31, 2023 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, 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 Year ended December 31, 2023 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 Year ended December 31, 2022 Revenue before fuel surcharge1 % of total revenue2 Adjusted EBITDA3 Adjusted EBITDA margin3,4 Operating income Operating margin3,4 Total assets less intangible assets3 Net capital expenditures3 Package and Courier Less- Than- Truckload 122,033 8% 40,939 33.5% 34,711 28.4% 175,336 9,572 129,074 9% 43,935 34.0% 37,563 29.1% 182,605 6,045 461,930 8% 139,437 30.2% 114,360 24.8% 175,336 19,935 498,972 7% 160,838 32.2% 134,306 26.9% 182,605 10,636 695,930 43% 125,064 18.0% 71,447 10.3% 2,134,895 37,380 720,783 46% 126,307 17.5% 88,240 12.2% 2,107,874 57,273 2,777,309 44% 473,602 17.1% 310,429 11.2% 2,134,895 154,832 3,243,557 45% 567,759 17.5% 470,807 14.5% 2,107,874 132,814 Truckload Logistics Corporate Eliminations Total 399,277 24% 98,770 24.7% 50,657 12.7% 1,146,497 4,725 403,351 25% 104,007 25.8% 71,842 17.8% 1,085,629 14,248 1,625,592 26% 428,203 26.3% 237,393 14.6% 1,146,497 29,098 1,986,331 28% 557,058 28.0% 366,868 18.5% 1,085,629 31,658 471,638 25% 69,230 14.7% 54,654 11.6% 357,251 1,792 375,968 20% 43,473 11.6% 34,204 9.1% 263,017 131 1,604,878 22% 207,800 12.9% 160,112 10.0% 357,251 3,725 1,689,122 20% 178,690 10.6% 140,446 8.3% 263,017 676 — (14,764) (13,065) (13,212) 450,340 129 — — — — — (12,681) (12,766) (14,989) 274,595 58 — — — — (52,823) (61,102) (64,659) 450,340 238 — — — — — (60,918) (39,321) 33,611 274,595 170 — — — — 1,674,114 100% 320,938 19.2% 198,257 11.8% 4,264,319 53,598 1,616,495 100% 304,956 18.9% 216,860 13.4% 3,913,720 77,755 6,416,886 100% 1,187,940 18.5% 757,635 11.8% 4,264,319 207,828 7,357,064 100% 1,425,024 19.4% 1,146,038 15.6% 3,913,720 175,954 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. 2023 Annual Report │8 Management’s Discussion and Analysis Three months ended December 31 % % Years ended December 31 % 2023 156,198 (34,165) 122,033 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 sale of land and buildings and assets held for sale 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. 41,104 33,695 6,403 2,969 3,103 156 (106) (2) 42,784 35,877 6,667 3,080 3,135 157 (189) - 33.7% 27.6% 5.2% 2.4% 2.5% 0.1% -0.1% -0.0% - 28.4% 33.5% 28.1% - 34,711 40,939 - 37,563 43,935 100.0% 2023 583,198 (121,268) 461,930 % 100.0% 2022 650,844 (151,872) 498,972 100.0% 33.1% 27.8% 5.2% 2.4% 2.4% 0.1% -0.1% - - 29.1% 34.0% 32.5% 163,960 133,504 26,374 11,789 12,654 627 (510) (835) 7 114,360 139,437 35.5% 28.9% 5.7% 2.6% 2.7% 0.1% -0.1% -0.2% 0.0% 24.8% 30.2% 167,725 144,650 26,845 12,863 13,024 645 (1,087) 1 — 134,306 160,838 100.0% 33.6% 29.0% 5.4% 2.6% 2.6% 0.1% -0.2% 0.0% 0.0% 26.9% 32.2% Operational data (unaudited) (Revenue in U.S. dollars) Revenue per pound (including fuel) Revenue per pound (excluding fuel) Revenue per package (including 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) 2023 $0.48 $0.37 $7.03 $5.49 148 22,230 14.67 995 $12.08 Three months ended December 31 Variance % -2.1% $0.01 5.7% $0.02 -5.8% $(0.43) -1.8% $(0.10) -11.4% (19) -3.8% (877) -7.9% (1.26) -3.2% (33) -6.4% $(0.82) 2022 $0.47 $0.35 $7.46 $5.59 167 23,107 15.93 1,028 $12.90 2023 $0.47 $0.37 $7.27 $5.76 563 80,245 15.46 990 $11.33 Years ended December 31 % -2.1% — -5.1% -2.0% -8.3% -5.5% -3.0% -5.3% -5.4% 2022 Variance $0.48 $0.37 $7.66 $5.88 614 84,915 15.94 1,046 $11.97 $(0.01) $— $(0.39) $(0.12) (51) (4,670) (0.48) (56) $(0.64) Revenue For the three months ended December 31, 2023, revenue decreased by $7.0 million or 5%, from $129.1 million in 2022 to $122.0 million in 2023. This decrease is mostly attributable to a 3.8% decrease in packages and a 1.8% decrease in revenue per package (excluding fuel surcharge). The decrease in revenue per package is attributable to a decrease of 7.9% in average weight per package but partially offset by an increase in revenue per pound (excluding fuel surcharge) of 5.7%. The decrease in packages is attributable to softness in the market, primarily in the business-to-consumer deliveries. For the year ended December 31, 2023, revenue decreased by $37.0 million or 7%, from $499.0 million in 2022 to $461.9 million in 2023. This decrease is attributable to a 2.0% decrease in revenue per package combined with a 5.5% decrease in packages related primarily to softness in the business-to- consumer market. Operating expenses For the three months ended December 31, 2023, materials and services expenses, net of fuel surcharge revenue, decreased by $1.7 million or 4%, mostly due to a decrease of $7.8 million in sub-contractor costs and $1.2 million in external labor, offset by a decrease of $9.1 million in fuel surcharge revenue. Personnel expenses decreased by $2.2 million, or 6%, mostly explained by reduced direct labor from lower volume. For the year ended December 31, 2023, materials and services expenses, net of fuel surcharge revenue, decreased by $3.8 million or 2%, mostly due to a $30.6 million decrease in fuel surcharge revenue offset by a decrease of $28.0 million in external labor and sub-contractor costs, a $3.0 million decrease in fuel costs and $1.3 million in maintenance & repair. Personnel expenses decreased by $11.1 million or 8% primarily from a $7.0 million decrease in direct labor, combined with a $3.3 million decrease in admin salaries and a $0.8 million decrease in severance cost. The decrease in direct labor is primarily attributable to the decrease in overall volume. Operating income Operating income for the three months ended December 31, 2023 decreased by $2.9 million or 8%. The operating margin was 28.4% in the fourth quarter of 2023, a decrease when compared to 29.1% for the same period in 2022. For the year ended December 31, 2023, operating income decreased by $19.9 million or 15%. The operating margin was 24.8% for 2023 compared to 26.9% for 2022. 2023 Annual Report │9 Management’s Discussion and Analysis Return on invested capital, a non-IFRS measure, decreased 440 basis points, from 32.5% in the trailing twelve months ended December 31, 2022, to 28.1% in the trailing twelve months ended December 31, 2023 mainly due to a decrease of $14.7 million in net operating income after taxes combined with an increase of $10.0 million in invested capital over the same period. 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 Gain on sale of rolling stock and equipment Gain on derecognition of right-of-use assets (Gain) loss, net of impairment, on sale of land and buildings and assets held for sale Operating income Adjusted EBITDA1 2023 846,410 (150,480) 695,930 213,583 299,793 58,177 35,212 8,728 2,432 (687) — 7,245 71,447 125,064 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) 88,240 126,307 100.0% 30.7% 43.1% 8.4% 5.1% 1.3% 0.3% -0.1% 0.0% 1.0% 10.3% 18.0% 2023 3,368,567 (591,258) 2,777,309 827,533 1,244,092 233,229 132,027 32,774 8,883 (1,038) (109) (10,511) 310,429 473,602 % 100.0% 29.8% 44.8% 8.4% 4.8% 1.2% 0.3% -0.0% -0.0% -0.4% 11.2% 17.1% 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% 31.5% 43.2% 8.1% 3.7% 1.3% 0.3% -0.2% -0.0% -0.0% 12.2% 17.5% 100.0% 30.9% 44.2% 7.5% 3.2% 1.2% 0.3% -0.1% -0.0% -1.7% 14.5% 17.5% 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 Cargo claims (% revenue) Vehicle count, average3 Truck age4 Business days Return on invested capital2 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) Cargo claims (% revenue) Vehicle count, average Truck age Business days Return on invested capital2 Three months ended December 31 % Variance 2022 2023 2023 Years ended December 31 % 2022 Variance 481,102 91.0% $28.81 $342.18 $35.52 $421.89 835 1,406 1,188 1,132 0.5% 3,974 4.7 62 15.1% 138,241 79.9% $10.82 $237.12 $13.90 $304.68 639 583 2,192 856 0.1% 777 4.8 62 20.1% 475,389 90.4% $30.05 $322.74 $39.04 $419.26 791 1,473 1,074 1,092 1.5% 4,410 6.6 62 23.8% 123,176 75.3% $10.84 $235.97 $14.46 $314.61 568 522 2,176 734 0.1% 808 5.1 62 24.0% 5,713 1.2% $(1.24) $19.44 $(3.52) $2.63 44 (67) 114 40 (436) (1.9) — -4.1% 6.0% -9.0% 0.6% 5.6% -4.5% 10.6% 3.7% -9.9% -28.8% 0.0% 1,912,623 2,186,668 89.9% $29.67 $320.20 $38.03 $410.38 3,685 6,829 1,079 1,101 0.7% 4,685 7.4 253 92.2% $28.61 $322.26 $35.31 $397.72 3,342 5,935 1,126 1,111 0.5% 4,097 4.8 254 (274,045) -12.5% $(1.06) $2.06 $(2.72) $(12.66) (343) (894) 47 10 (588) (2.6) 1.0 -3.6% 0.6% -7.2% -3.1% -9.3% -13.1% 4.4% 0.9% -12.6% -35.1% 0.4% 15,065 12.2% $(0.02) $1.15 $(0.56) $(9.93) 71 61 16 122 (31) (0.3) — -0.2% 0.5% -3.9% -3.2% 12.5% 11.7% 0.7% 16.6% -3.8% -5.9% 0.0% 531,784 76.6% $10.83 $235.20 $13.82 $300.32 2,456 2,261 2,172 852 0.2% 788 4.8 250 548,012 74.0% $11.26 $241.95 $14.65 $314.88 2,434 2,265 2,149 748 0.2% 800 4.8 250 (16,228) -3.0% $(0.43) $(6.75) $(0.83) $(14.56) 22 (4) 23 104 (12) — — -3.8% -2.8% -5.7% -4.6% 0.9% -0.2% 1.1% 13.9% -1.5% 0.0% 0.0% 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 As at December 31, 2023 the active vehicle count was 3,364 (December 31, 2022 - 4,046) 4 The truck age for U.S. LTL operations has been presented for active trucks. 2023 Annual Report │10 Revenue Management’s Discussion and Analysis For the three months ended December 31, 2023, revenue decreased by $24.9 million to $695.9 million. This decrease is a combination of a $44.1 million reduction in existing U.S. LTL operations including Ground with Freight pricing (GFP) and a $0.4 million reduction in existing Canadian LTL operations. This decrease was partially offset by a contribution from business acquisitions of $19.6 million. The reduction in U.S. LTL revenue was primarily driven by a reduction of Ground with Freight pricing (GFP) volume of 36.4%, partly offset by an increase of 5.6% in tonnage, a reduction of 4.5% in shipment count and an increase of 6.0% in revenue per shipment (excluding fuel) in U.S. LTL excluding Ground with Freight pricing (GFP). The decrease in U.S. LTL volume was primarily driven by softer volumes due to a weaker end market. The Canadian LTL revenue increase was caused by a 11.7% increase in shipments, while the revenue per shipment (excluding fuel) increased 0.5% For the year ended December 31, 2023, revenue decreased $466.2 million, or 14%, to $2,777.3 million. The decrease is due primarily to the decrease in volume and is partially offset by an increase of $46.1 million related to business acquisitions. Operating expenses For the three months ended December 31, 2023, materials and services expenses, net of fuel surcharge revenue decreased $13.3 million, or 6%, attributable mostly to a $47.9 million reduction in sub-contractor costs related to lower volume, a $11.0 million reduction in fuel expense and a $3.1 million decrease in cargo claims, partially offset by a $38.8 million reduction in fuel surcharge revenue and $8.5 million from business acquisitions. Personnel expenses decreased $11.5 million, or 4%, mostly from a $12.6 million reduction in U.S. direct and administrative salaries caused by the reduction of volume in the quarter and lower pension service cost partially offset by an increase from business acquisitions of $7.4 million. Other operating expenses remained mostly flat at $58.2 million. Depreciation of property and equipment increased 34%, or $8.8 million, with $6.6 million in U.S. LTL operations. During the quarter ended December 31, 2023, U.S. LTL operations recorded a loss of $8.1 million on sale of assets held for sale following the sale of a property and equipment. As of December 31, 2023, the LTL segment’s terminals had 12,904 doors, of which 10,390 are owned. For the year ended December 31, 2023, materials and services expenses, net of fuel surcharge revenue, decreased $176.1 million, or 18%, attributable mostly to a $274.9 million reduction in sub-contractor costs, a $86.7 million reduction in fuel expense and a $12.9 million decrease in rolling stock maintenance and repair, and partially offset by a $198.3 million reduction in fuel surcharge revenue, all related to lower volume and business acquisitions of $20.4 million also partially offset the decrease. Personnel expenses decreased $188.8 million, or 13%, mostly from $143.1 million reduction in U.S. direct and administrative salaries caused by the reduction of volume and $58.0 million lower pension service cost, partly offset by an increase in severance costs of $10.0 million and $17.9 million from business acquisitions. Other operating expenses decreased $10.1 million, or 4%, mostly from a decrease of $8.2 million in external personnel. Depreciation of property and equipment increased 26%, or $27.2 million, most of it from higher equipment and rolling stock depreciation in U.S. LTL operations and $2.5 million from business acquisitions. Operating income Operating income for the three months ended December 31, 2023, decreased $16.8 million to $71.4 million. Adjusted operating ratio, a non-IFRS measure, of Canadian LTL operations increased to 79.9% in the fourth quarter of 2023, as compared to 75.3% for the same period in 2022. Adjusted operating ratio of the U.S. LTL operations increased to 91.0% in the fourth quarter of 2023, as compared to 90.4% for the same period in 2022. For the year ended December 31, 2023, operating income decreased $160.4 million, or 34%, to $310.4 million. The majority of the decrease is attributable to U.S. LTL operations of $143.3 million, which includes a $48.0 million reduction in gain on sale of assets held for sale. Return on invested capital, a non-IFRS measure, of the Canadian based LTL operations was 20.1% for the 12 months ended on December 31, 2023, a 390-basis point decrease from 24.0% in the previous 12 month period. Return on invested capital, a non-IFRS measure, of the U.S. LTL operations was 15.1%, which compares to 18.8% the year before. 2023 Annual Report │11 2023 479,596 (80,319) 399,277 166,850 121,120 14,540 23,863 18,341 5,902 (1,768) (235) 7 50,657 98,770 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) loss on sale of land and buildings and assets held for sale Operating income Adjusted EBITDA1 Operational data (unaudited) Specialized TL Revenue (in thousands of U.S. dollars) Adjusted operating ratio1 Revenue per truck per week (excluding fuel) Revenue per truck per week (including fuel) Truck count, average Trailer count, average Truck 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) Revenue per mile (excluding fuel)2 Revenue per mile (including fuel)2 Revenue per truck per week (excluding fuel) Revenue per truck per week (including fuel) Truck count, average Trailer count, average Truck age Trailer age Number of owner operators, average Return on invested capital1 Management’s Discussion and Analysis Three months ended December 31 % % Years ended December 31 % 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 2023 1,936,038 (310,446) 1,625,592 % 100.0% 2022 2,451,038 (464,707) 1,986,331 682,342 473,948 55,420 101,508 70,084 23,169 (13,828) (493) (3,951) 237,393 428,203 42.0% 29.2% 3.4% 6.2% 4.3% 1.4% -0.9% -0.0% -0.2% 14.6% 26.3% 821,442 585,891 76,612 129,013 59,473 23,944 (54,481) (191) (22,240) 366,868 557,058 100.0% 43.2% 28.6% 3.4% 6.6% 3.9% 1.4% -1.0% -0.0% -4.0% 17.8% 25.8% 100.0% 41.8% 30.3% 3.6% 6.0% 4.6% 1.5% -0.4% -0.1% 0.0% 12.7% 24.7% 100.0% 41.4% 29.5% 3.9% 6.5% 3.0% 1.2% -2.7% -0.0% -1.1% 18.5% 28.0% Three months ended December 31 % Variance 2022 2023 2023 2022 Years ended December 31 % Variance 323,952 87.0% $4,133 $5,086 4,051 10,402 3.4 12.7 1,223 10.3% 77,815 89.0% 25,917 $2.08 $2.67 $3,094 $3,973 1,072 3,861 3.3 7.9 267 12.6% 325,493 87.4% $4,197 $5,455 3,839 11,004 3.6 11.5 1,193 13.4% 79,101 81.1% 24,498 $2.24 $2.94 $3,792 $4,989 858 3,636 3.5 7.3 254 21.3% (1,541) -0.5% $(64) $(369) 212 (602) (0.2) 1.2 30 -1.5% -6.8% 5.5% -5.5% -5.6% 10.4% 2.5% 1,323,083 1,362,390 83.1% $4,582 $5,879 3,641 10,833 3.6 11.5 1,126 85.8% $4,232 $5,174 3,977 10,460 3.4 12.7 1,208 (39,307) -2.9% $(350) $(705) 336 (373) (0.2) 1.2 82 -7.6% -12.0% 9.2% -3.4% -5.6% 10.4% 7.3% (1,286) -1.6% 1,419 $(0.16) $(0.27) $(698) $(1,016) 214 225 (0.2) 0.6 13 5.8% -7.2% -9.4% -18.4% -20.4% 24.9% 6.2% -5.7% 8.2% 5.0% 311,838 85.6% 102,559 $2.11 $2.67 $3,266 $4,133 1,024 3,923 3.3 7.9 250 322,553 78.7% 93,923 $2.30 $2.97 $4,102 $5,299 741 3,456 3.5 7.3 269 (10,715) -3.3% 8,636 $(0.19) $(0.30) $(836) $(1,166) 283 467 (0.2) 0.6 (19) 9.2% -8.0% -9.9% -20.4% -22.0% 38.2% 13.5% -5.7% 8.2% -7.1% 1 This is a non-IFRS measure. For a reconciliation, please refer to the “Non-IFRS Financial Measures” section below. 2 The revenue per mile calculation excludes brokerage revenues During Q4 2023, Dahlsten was acquired and incorporated into the TL segment. Revenue For the three months ended December 31, 2023, revenue decreased by $4.1 million, or 1%, from $403.4 million in Q4 2022 to $399.3 million in Q4 2023. This decrease was primarily due to a decrease in revenue from existing operations of $41.2 million, partially offset by contributions from business acquisitions of $37.1 million. The revenue for Specialized TL decreased by $1.5 million or 1% compared to the prior year period, due to an organic decline of $27.6 million mostly offset by contributions from business acquisitions of $26.1 million. For Canadian based conventional TL operations, revenue decreased by $1.3 million or 2% compared to the same prior year period, made up of a decline in revenue of $12.3 million from existing operations, mostly offset by contributions from business acquisitions of $11.0 million. An 18.4% decline in revenue per truck excluding fuel surcharge was experienced in Q4 2023 compared to Q4 2022, driven by a 7.2% decline in revenue per mile combined with a 12.1% decline in miles per truck. For the year ended December 31, 2023, TL revenue decreased by $360.7 million, or 18%, from $1,986.3 million in 2022 to $1,625.6 million in 2023. This decrease was mainly due to the impact on revenue from the sale of CFI for $309.7 million combined with a decline in revenue from existing operations of $220.1 million, primarily the result of pricing and lower volumes, and partially offset by the contributions from business acquisitions of $169.0 million. Operating expenses For the three months ended December 31, 2023, operating expenses, net of fuel surcharge, increased by $17.1 million, or 5%, from $331.5 million in Q4 2022 to $348.6 million in Q4 2023. This is mainly due to a decrease in operating expenses, net of fuel surcharge, from existing truckload operations of $17.4 million offset by an increase of $34.6 million in operating expenses, net of fuel surcharge, from business acquisitions. 2023 Annual Report │12                 Management’s Discussion and Analysis For the year ended December 31, 2023, TL operating expenses, net of fuel surcharge, decreased by $231.3 million, or 14%, from $1,619.5 million in 2022 to $1,388.2 million in 2023. This is mainly due to a decrease in operating expenses, net of fuel surcharge, of $295.9 million from the sale of CFI, combined with a decrease of $80.3 million from existing operations, and partially offset by an increase of $145.0 million from business acquisitions. Operating income Operating income for the TL segment was $50.7 million for the three months ended December 31, 2023, down 29% from $71.8 million in the fourth quarter of 2022. The decrease in operating income was mostly due to a $16.0 million gain on assets held for sale in 2022 as well as lower volume and pricing coming from a softer market. Contributions to operating income from business acquisitions were $2.5 million. For the year ended December 31, 2023, operating income in the TL segment decreased by $129.5 million, or 35%, from $366.9 million in 2022 to $237.4 million in 2023. The decrease was due to the sale of CFI, which contributed $45.7 million to operating income in 2022, combined with a $107.8 million decrease from existing operations, partially offset by $24.0 million from business acquisitions. Return on invested capital, a non-IFRS measure, for the Specialized TL segment decreased to 10.3% from 13.4% in the same prior year period. Return on invested capital, a non-IFRS measure, for Canadian based Conventional TL was 12.6%, down from 21.3% for the same prior year period. The decrease is attributable to lower operating income coupled with higher deployed capital from the business acquisitions. Three months ended December 31 % Years ended December 31 % % 2023 504,493 (32,855) 471,638 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 Gain on sale of rolling stock and equipment Gain on derecognition of right-of-use assets Gain on sale of land and building 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. 269,625 35,770 27,107 333 3,644 5,292 (7) — — 34,204 43,473 309,079 67,034 26,323 1,905 4,712 8,185 (24) (4) (226) 54,654 69,230 65.5% 14.2% 5.6% 0.4% 1.0% 1.7% -0.0% -0.0% -0.0% 11.6% 14.7% 18.8% 2022 394,071 (18,103) 375,968 100.0% 100.0% 71.7% 9.5% 7.2% 0.1% 1.0% 1.4% -0.0% — — 9.1% 11.6% 21.9% 2023 1,697,016 (92,138) 1,604,878 1,102,396 191,146 103,715 4,094 16,583 27,237 (134) (45) (226) 160,112 207,800 % 100.0% 68.7% 11.9% 6.5% 0.3% 1.0% 1.7% -0.0% -0.0% -0.0% 10.0% 12.9% 2022 1,763,280 (74,158) 1,689,122 1,232,049 143,505 134,923 1,460 14,794 21,990 (37) (8) — 140,446 178,690 100.0% 72.9% 8.5% 8.0% 0.1% 0.9% 1.3% -0.0% -0.0% — 8.3% 10.6% Revenue For the three months ended December 31, 2023, revenue increased by 95.6 million, or 25%, from $376.0 million in 2022 to $471.6 million in 2023. The increase was from contributions from business acquisitions of $149.9 million, offset by a decrease of $54.2 million, mostly due to lower 3PL volume. For the year ended December 31, 2023, revenue decreased by 84.2 million, or 5%, from $1,689.1 million in 2022 to $1,604.9 million. Revenue from existing operations decreased by $354.5 million, from which $338.3 million is attributable to the 3PL existing operations offset partially by contributions from business acquisitions of $270.2 million. Approximately 81% (2022 – 78%) of the Logistics segment’s revenues in the quarter were generated from operations in the U.S. and approximately 19% (2022 – 22%) were generated from operations in Canada. Operating expenses For the three months ended December 31, 2023, total operating expenses, net of fuel surcharge increased by $75.2 million, or 22% relative to the same prior year period, from $341.8 million to $417.0 million. The decrease in total operating expenses, net of fuel surcharge, from existing operations was $52.3 million and was offset by an increase of $127.8 million from business acquisitions. Materials and services expenses increased by $39.5 million from which $84.4 million comes from business acquisitions offset by a $44.9 million decrease related to 3PL and last mile volume. Personnel expenses increased $31.3 million, mainly due to business acquisitions of $35.6 million offset partially by a reduction to headcount and commissions in some divisions. For the year ended December 31, 2023, total operating expenses, net of fuel surcharge decreased by $103.9 million, or 7%, from $1,548.7 million to $1,444.8 million. The decrease in total operating expenses, net of fuel surcharge, from existing operations was $340.5 million and was partially offset by an increase of $236.6 million from business acquisitions. This decrease was primarily due to a decrease in materials and services expenses (net of fuel surcharge) of $282.5 million related to revenue and $17.5 million from a reduction in agent commissions in existing operations. Furthermore, litigation 2023 Annual Report │13 Management’s Discussion and Analysis settlement in the US last mile division decreased by $12.0 million and personnel expenses decreased $11.4 million mostly related to the headcount reduction. Operating income Operating income for the three months ended December 31, 2023, increased by $20.5 million, or 60%, from $34.2 million to $54.7 million, mostly explained by the JHT business acquisition. For the year ended December 31, 2023, operating income increased by $19.7 million, or 14% as a result of contributions from business acquisitions of $33.7 million, partially offset by a decrease of $14.0 million from existing operations. The return on invested capital of 18.8% compared to 21.9% 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 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 2023 December 31 2022 Years ended December 31 2022 2023 302,580 11,708 10,143 269,082 — 24,096 617,609 80,643 10,114 256,100 — 33,576 29,983 169,189 38,004 617,609 248,348 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 1,013,839 73,339 50,280 558,871 — 126,567 1,822,896 361,563 628,701 194,776 — 128,107 121,095 288,024 100,630 1,822,896 971,645 128,821 131,250 — 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 For the year ended December 31, 2023, net cash from operating activities increased by 4% to $1,013.8 million from $971.6 million in 2022. This increase was due to primarily to an increase in non-cash working capital of $254.1 million, resulting primarily from a decrease in sales which decreased the accounts receivable balance, and in particular the increase in fuel costs in 2022 for which payments must be made much faster than fuel surcharge revenue is received. This was partially offset by the decrease in net income and an unfavorable impact from provisions of $59.7 million. 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 year ended December 31, 2023 and 2022. (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 2022 2023 80,643 — 80,643 13,622 60,355 6,666 80,643 111,716 1,321 113,037 17,498 87,306 8,233 113,037 Years ended December 31 2022 350,824 445 351,269 46,928 286,277 18,064 351,269 2023 361,563 (1,316) 360,247 77,516 265,687 17,044 360,247 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. 2023 Annual Report │14 Management’s Discussion and Analysis 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, 2023 and 2022. (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 2023 2022 2023 Years ended December 31 2022 8,428 13,423 — 21,851 4,257 (2,582) (3) 1,672 33,857 17,727 57 51,641 15,945 7,219 (1,414) 21,750 48,716 74,762 141 123,619 25,910 10,372 22 36,304 131,684 126,034 2,353 260,071 77,881 59,671 63 137,615 For the year ended December 31, 2023, cash used in business acquisitions, net of cash acquired, totaled $628.7 million to acquire twelve businesses. The business acquisitions include properties valued at $144.3 million. Refer to the section of this report entitled “2023 business acquisitions” and further information can be found in note 5 of the December 31, 2023, audited consolidated financial statements. Purchase and sale of investments For the year ended December 31, 2023, $41.7 million was used in the purchase of investments as compared to $80.6 million used in 2022. For the year ended December 31, 2023, $89.2 million of proceeds were generated from the sale of investments as compared to $12.9 million in 2022. These investments were previously elected to be measured at fair value through OCI. Cash flow used in financing activities Debt On August 15, 2023, the Company received $75.0 million in proceeds from the issuance of new debt taking the form of guaranteed senior notes consisting of two tranches maturing on August 19, 2035 and 2038, bearing a fixed interest rate of 5.56% and 5.64%, respectively. On October 13, 2023, the Company received $500.0 million in proceeds from the issuance of new debt taking the form of unsecured senior notes consisting of 5 tranches with maturities ranging from five to twenty years, bearing interest at a weighted average rate of 6.70%. NCIB on common shares Pursuant to the renewal of the normal course issuer bid (“NCIB”), which began on November 2, 2023, and ends on November 1, 2024, the Company is authorized to repurchase for cancellation up to a maximum of 7,161,046 of its common shares under certain conditions. As at December 31, 2023, and since the inception of this NCIB, the Company has repurchased and cancelled 785,140 common shares. For the year ended December 31, 2023, the Company repurchased 2,609,900 common shares (as compared to 6,368,322 during the same period in 2022) at a weighted average price of $110.36 (as compared to $89.19 in the prior year period) for a total purchase price of $288.0 million (as compared to $568.0 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 2023 302,580 (80,643) 11,708 10,143 243,788 1 This is a non-IFRS measure. Refer to the “Non-IFRS financial measures” section below Three months ended December 31 2021 2022 248,348 (111,716) 17,685 33,956 188,273 2023 190,333 1,013,839 (361,563) (102,595 ) 73,339 22,508 50,280 10,503 775,895 120,749 Years ended December 31 2021 855,351 (267,173) 92,842 19,869 700,889 2022 971,645 (350,824) 128,821 131,250 880,892 2023 Annual Report │15 Management’s Discussion and Analysis 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 solid financial position. For the year ended December 31, 2023, the Company generated free cash flow of $775.9 million, compared to $880.9 million in 2022, which represents a year-over-year decrease of $105.0 million, or 12%. This decrease was due to reduced proceeds from the sale of assets, as proceeds from the sale of assets held for sale decreased by $81.0 million and proceeds from the sale of property and equipment decreased by $55.5 million. The decrease in the proceeds from the sale of property and equipment was due to less sales of equipment primarily attributable to the sale of CFI and to a softer equipment resale market. These decreases were offset in part by an increase of $42.2 million from net cash from operating activities explained above. Free cash flow conversion1, which measures the level of capital employed to generate earnings, for the year ended December 31, 2023, of 82.5% compares to 87.7% in the same prior year period. Based on the December 31, 2023, closing share price of $133.70, the free cash flow1 generated by the Company in the preceding twelve months ($775.9 million, or $9.03 per share) represented a yield of 6.9%. 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 $9.86 per share outstanding) represented a yield of 10.2%. Financial position (unaudited) (in thousands of U.S. dollars) Intangible assets Total assets, less intangible assets1 Long-term debt Lease liabilities Shareholders' equity 1 This is a non-IFRS measure. For a reconciliation refer to the “Non-IFRS financial measures” section below. As at December 31, 2023 2,019,301 4,264,319 1,884,182 460,158 2,591,410 As at December 31, 2022 1,592,110 3,913,720 1,315,757 413,039 2,463,070 As compared to December 31, 2023, the Company’s financial position has been impacted primarily by business acquisitions, resulting in increases in intangible assets and long-term debt, for which the Company obtained fixed rate debt agreements. The remaining variations are primarily from fluctuations in working capital and exchange rates. Contractual obligations, commitments, contingencies and off-balance sheet arrangements The following table indicates the Company’s contractual obligations, excluding purchase commitments, with their respective maturity dates at December 31, 2023, including future interest payments. (unaudited) (in thousands of U.S. dollars) Unsecured revolving facility – August 2026 Unsecured debenture – December 2024 Unsecured senior notes – December 2026 to October 2043 Conditional sales contracts Lease liabilities Other long-term debt Interest on debt and lease liabilities Total contractual obligations Total 23,906 151,023 1,655,000 54,253 460,158 4,693 791,729 3,140,761 Less than 1 year — 151,023 — 22,974 127,397 354 99,486 401,234 1 to 3 years 23,906 — 150,000 27,396 179,053 742 172,219 553,316 3 to 5 years — — — 3,883 86,241 3,596 126,387 220,107 After 5 years — — 1,505,000 — 67,467 — 393,637 1,966,104 On August 15, 2023, the Company received $75.0 million in proceeds from the issuance of new debt taking the form of guaranteed senior notes consisting of two tranches maturing on August 19, 2035 and 2038, bearing a fixed interest rate of 5.56% and 5.64%, respectively. On October 13, 2023, the Company received $500.0 million in proceeds from the issuance of new debt taking the form of unsecured senior notes consisting of 5 tranches with maturities ranging from five to twenty years, bearing interest at a weighted average rate of 6.70%. As at December 31, 2023, the Company’s long-term debt is comprised of 99% of fixed rate debt (2022 – 100%) and 1% variable rate debt (2022 – nil). As at December 31, 2023, the Company has classified the unsecured debenture to short term as repayment is required in December 2024. The Company plans to refund this debt using its existing facilities. 2023 Annual Report │16 Management’s Discussion and Analysis 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 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, 2023 < 3.50 > 1.75 1.49 5.65 As at December 31, 2023, the Company had $106.2 million of outstanding letters of credit ($66.8 million on December 31, 2022). As at December 31, 2023, the Company had $62.3 million of purchase commitments and $44.4 million of purchase orders that the Company intends to enter into a lease (December 31, 2022 – $149.8 million and $13.9 million, respectively). On December 22, 2023, the Company agreed to acquire Daseke, Inc. for $8.30 a common share, subject to approval by holders of a majority of the outstanding shares of Daseke common stock and other customary closing conditions. The total enterprise value of the transaction is approximately $1.1 billion, including the merger consideration for the common stock, retirement of Daseke's outstanding preferred stock, payoff or assumption of outstanding debt, net of cash, and estimated transaction fees and expenses. Dividends and outstanding share data Dividends The Company declared $33.8 million in dividends, or $0.40 per common share, in the fourth quarter of 2023. On February 15, 2024, the Board of Directors approved a quarterly dividend of $0.40 per outstanding common share of the Company’s capital, for an expected aggregate payment of $33.8 million to be paid on April 15, 2024, to shareholders of record at the close of business on March 29, 2024. Outstanding shares and share-based awards A total of 84,441,733 common shares were outstanding as at December 31, 2023 (December 31, 2022 – 86,539,559). There was no material change in the Company’s outstanding share capital between December 31, 2023 and February 15, 2024. The average diluted shares for the three months ended December 31, 2023, were 86,074,702 shares as compared to 88,334,333 shares in the same prior year period. The average diluted shares for the year ended December 31, 2023, were 87,054,769 shares as compared to 91,257,679 shares in the same prior year period. This reduction is due to the share repurchases and cancellations. As at December 31, 2023, the number of outstanding options to acquire common shares issued under the Company’s stock option plan was 789,898 (December 31, 2022 – 1,301,972) of which 789,898 were exercisable (December 31, 2022 – 1,272,811). 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, 2023, the number of restricted share units (‘’RSUs’’) granted under the Company’s equity incentive plan to its senior employees was 191,469 (December 31, 2022 – 272,330). On February 6, 2023, the Board of Directors approved the grant of 55,400 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 26, 2023, the Company granted a total of 7,632 RSUs under the Company's equity incentive plan to the directors as part of the 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 $115.51 per unit for the February grant and $117.85 per unit for the April grant. As at December 31, 2023, the number of performance share units (‘’PSUs’’) granted under the Company’s equity incentive plan to its senior employees was 183,792 (December 31, 2022 – 261,451). On February 6, 2023, the Board of Directors approved the grant of 55,400 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. During the fourth quarter, the outstanding awards remaining under the previous deferred share unit plan for board member were settled. This resulted in a settlement of $30.5 million of which $27.6 million was paid in the quarter and $2.9 million was recorded as a payable and will be paid in Q4 2024. 2023 Annual Report │17 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. Management’s Discussion and Analysis OUTLOOK The North American economic growth forecast from leading economists remains subdued and uncertain due to a variety of factors including elevated interest rates, high inflation, escalating geopolitical conflicts, global supply chain challenges, labor shortages, the U.S. election cycle, and slower growth in many international markets. Despite reduced freight volumes industrywide, TFI International’s diversity across industrial and consumer end markets and multiple modes of transportation, along with the Company’s disciplined approach to operations, helped support results during the fourth quarter. While the macro outlook remains uncertain with the possibility of economic recession in 2024, should the freight cycle instead improve, management believes that its well-timed investments during the weaker market conditions of 2023 should help drive even stronger results into the future. TFI International 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. Uncertainties include but are not limited to changes in diesel prices, geopolitical risks such as the growing conflict in the Middle East and the ongoing war in Ukraine, labor market conditions and related changes in consumer sentiment that can affect end market demand, policy changes surrounding international trade, environmental mandates, interest rate policies and changes to the tax code in any jurisdictions in which TFI International operates. While North American economic uncertainty is likely to continue weighing on freight demand dynamics, management believes the Company remains well positioned to navigate these difficult operating conditions, benefiting from its recently further improved financial foundation and strong cash flow, and its lean cost structure that stems from a longstanding focus on profitability, efficiency, network density, customer service, optimal pricing, driver retention and capacity rationalization. TFI also continues to pursue additional material operating improvement opportunities related to the 2021 acquisition of TForce Freight and has opportunities to enhance performance within most of its other operations. Longer term, TFI’s diverse industrial exposure through its specialized TL and LTL segments should continue to benefit from a gradual shift toward domestic manufacturing, while its P&C and Logistics business segments should benefit from the expansion of e-commerce. 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 strong free cash flow generation and ample liquidity with a conservative balance sheet that features primarily fixed rate debt and limited near-term debt maturities. This strong financial footing allows the Company to strategically invest and pursue select, accretive acquisitions even during times of market weakness, while returning excess capital to shareholders. SUMMARY OF EIGHT MOST RECENT QUARTERLY RESULTS (in millions of U.S. dollars, except per share data) Q4’23 Q3’23 Q2’23 Q1’23 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. 1,968.7 320.9 198.3 131.4 1.54 1.53 147.0 1,911.0 302.5 200.6 133.3 1.55 1.54 136.0 1,850.2 264.2 166.4 111.9 1.29 1.27 116.5 1,791.3 300.3 192.4 128.2 1.49 1.47 138.9 1.71 1.57 1.33 1.59 Q4’22 1,956.7 305.0 216.9 153.5 1.77 1.74 151.8 Q3’22 2,242.0 348.2 318.4 245.2 2.78 2.72 181.2 Q2’22 2,422.3 441.9 391.0 276.8 3.05 3.00 241.1 Q1’22 2,191.5 330.0 219.8 147.7 1.61 1.57 157.6 1.72 2.01 2.61 1.68 The differences between the quarters are mainly the result of seasonality (softer in Q1) and business acquisitions. The increase in Q3 2022 was due to a gain of $75.7 million gain on the sale of CFI, and the increase in Q2 2022 is due to a $60.9 million gain on the sale of assets held for sale. 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 2023 Annual Report │18 Management’s Discussion and Analysis 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. 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, nor 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 and assets held for sale, impairment on assets held for sale, gain or loss on the sale of business and directly attributable expense due to the 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, that 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 7. 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) loss, net of impairment, on sale of assets held for sale (Gain) loss on sale of intangible assets Adjusted EBITDA Three months ended December 31 2021 144,139 21,441 49,399 65,294 31,190 13,653 — — 9 (6,654) (5) 318,466 2022 153,494 16,963 46,403 56,587 32,150 13,262 2,069 — — (15,972) — 304,956 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 2022 823,232 80,397 242,409 248,638 126,276 55,679 (73,653) — (43) (77,911) — 1,425,024 2023 504,877 80,871 171,887 249,835 132,112 60,028 3,011 — 40 (14,721) — 1,187,940 2023 131,386 23,263 43,608 64,053 34,901 16,701 — — — 7,026 — 320,938 2023 Annual Report │19 Segmented adjusted EBITDA reconciliation: (unaudited) (in thousands of U.S. dollars) Package and Courier Operating income Depreciation and amortization Loss on sale of assets held for sale Adjusted EBITDA Less-Than-Truckload Operating income Depreciation and amortization (Gain) loss on sale of land and buildings (Gain) loss, net of impairment, on sale of assets held for sale Adjusted EBITDA Truckload Operating income Depreciation and amortization (Gain) loss on sale of land and buildings (Gain) loss on sale of assets held for sale Adjusted EBITDA Logistics Operating income Depreciation and amortization Gain on sale of assets held for sale 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 2023 34,711 6,228 — 40,939 71,447 46,372 (1) 7,246 125,064 50,657 48,106 1 6 98,770 54,654 14,802 (226) 69,230 (13,212) 147 — (13,065) 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) Years ended December 31 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) 2023 114,360 25,070 7 139,437 310,429 173,684 35 (10,546) 473,602 237,393 194,761 5 (3,956) 428,203 160,112 47,914 (226) 207,800 (64,659) 546 3,011 (61,102) Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue before fuel surcharge. Annualized dividend is calculated by annualizing the cash outflow of the most recent dividend issued and dividing by the trailing twelve month free cash flow. Management believes that this measure provides insight on the amount of free cash to be used fund the dividend, and consequently what can be used for other purposes. The annualized dividend as at December 31, 2022 was 13.8%. 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 15. 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 (Gain) loss on sale of land and buildings (Gain) loss, net of impairment, on sale assets held for sale Adjusted EBITDA Net capital expenditures Adjusted EBITDA less net capital expenditures Free cash flow conversion Three months ended December 31 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% 2023 131,386 23,263 43,608 64,053 34,901 16,701 — — 7,026 320,938 (53,598) 267,340 83.3% Years ended December 31 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% 2023 504,877 80,871 171,887 249,835 132,112 60,028 3,011 40 (14,721) 1,187,940 (207,828) 980,112 82.5% 2023 Annual Report │20 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, 2023 Total assets Intangible assets Total assets less intangible assets 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 359,177 2,329,677 2,004,163 1,140,174 782,923 183,841 857,666 194,782 357,251 175,336 2,134,895 1,146,497 450,429 89 450,340 - 6,283,620 - 2,019,301 - 4,264,319 362,724 2,275,672 1,861,093 180,119 775,464 167,798 182,605 2,107,874 1,085,629 731,564 468,547 263,017 274,777 182 274,595 - 5,505,830 - 1,592,110 - 3,913,720 2023 Annual Report │21 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 are required for the respective Management’s Discussion and Analysis period. (unaudited) (in thousands of U.S. dollars) Three months ended December 31, 2023 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, 2022 Additions to rolling stock Additions to equipment Proceeds from the sale of rolling stock Proceeds from the sale of equipment Net capital expenditures Year ended December 31, 2023 Additions to rolling stock Additions to equipment Proceeds from the sale of rolling stock Proceeds from the sale of equipment Net capital expenditures Year 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 Package and Courier Less- Than- Truckload Truckload Logistics Corporate Eliminations Total 5,940 4,059 (427) - 9,572 40,970 310 (3,900) - 37,380 11,821 1,887 (8,983) - 4,725 1,624 281 (113) - 1,792 5,786 579 (320) - 6,045 58,353 5,025 (6,399) 294 57,273 23,167 2,134 (11,252) 199 14,248 15,318 6,212 (1,595) 175,640 3,174 (23,871) 72,000 6,078 (48,962) - (111) 19,935 154,832 (18) 29,098 9,991 134,898 141,388 10,888 2,227 3,747 (13,067) (111,582) (1,579) (1,895) (3) 31,658 95 10,636 132,814 - 437 (115) (191) 131 2,729 1,342 (334) (12) 3,725 - 1,032 (165) (191) 676 - 129 - - 129 - 58 - - 58 - 238 - - 238 - 170 - - 170 60,355 6,666 (13,423) - 53,598 87,306 8,233 (18,086) 302 77,755 265,687 17,044 (74,762) (141) 207,828 286,277 18,064 (126,393) (1,994) 175,954 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 (loss), net of impairment, 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 2023 1,770,421 — — — (7,026) — 1,763,395 (294,564) 1,468,831 1,674,114 87.7% Three months ended December 31 2021 1,925,935 — — (9) 6,654 5 1,932,585 (252,491) 1,680,094 1,888,423 89.0% 2022 1,739,834 (2,069) — — 15,972 — 1,753,737 (340,199) 1,413,538 1,616,495 87.4% 2023 6,763,532 (3,011) — (40) 14,721 — 6,775,202 (1,104,281) 5,670,921 6,416,886 88.4% Years ended December 31 2021 6,241,200 — 283,593 (19) 12,209 (1) 6,536,982 (751,644) 5,785,338 6,468,785 89.4% 2022 7,666,453 73,653 — 43 77,911 — 7,818,060 (1,455,427) 6,362,633 7,357,064 86.5% 2023 Annual Report │22 Management’s Discussion and Analysis Less-Than-Truckload and Truckload reportable segments adjusted operating ratio reconciliation and Truckload operating segments reconciliations: (unaudited) (in thousands of U.S. dollars) Less-Than-Truckload Total revenue Total operating expenses Operating income Operating expenses Gain (loss) on sale of land and buildings Gain (loss), net of impairment, 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 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* Gain (loss) on sale of land and buildings Gain (loss), net of impairment, on sale of 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 Gain (loss), net of impairment, on sale of assets held for sale Adjusted operating expenses Fuel surcharge revenue Adjusted operating expenses, net of fuel surcharge Revenue before fuel surcharge Adjusted operating ratio * Operating expenses excluding intra LTL eliminations Three months ended December 31 2022 2023 846,410 774,963 71,447 774,963 1 (7,246) 767,718 (150,480) 617,238 695,930 88.7% 562,666 138,241 (4,977) 695,930 112,079 39,388 (987) 150,480 43,627 27,820 71,447 631,118 1 (7,247) 623,872 (112,079) 511,793 562,666 91.0% 149,809 - 1 149,810 (39,388) 110,422 138,241 79.9% 903,713 815,473 88,240 815,473 1 12 815,486 (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 1 12 133,819 (41,051) 92,768 123,176 75.3% 2023 3,368,567 3,058,138 310,429 3,058,138 (35) 10,546 3,068,649 (591,258) 2,477,391 2,777,309 89.2% 2,262,987 531,784 (17,462) 2,777,309 447,820 147,247 (3,809) 591,258 186,231 124,198 310,429 2,524,576 (35) 10,549 2,535,090 (447,820) 2,087,270 2,262,987 92.2% 554,833 - (3) 554,830 (147,247) 407,583 531,784 76.6% Years ended December 31 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% 2023 Annual Report │23 Management’s Discussion and Analysis Less-Than-Truckload and Truckload reportable segments adjusted operating ratio reconciliation and Truckload operating segments reconciliations (continued): (unaudited) (in thousands of U.S. dollars) Truckload Total revenue Total operating expenses Operating income Operating expenses Gain (loss) on sale of land and buildings Gain (loss) 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 Truckload - Revenue before fuel surcharge U.S. based Conventional TL Canadian based Conventional TL Specialized TL Eliminations Truckload - Fuel surcharge revenue U.S. based Conventional TL Canadian based Conventional TL Specialized TL Eliminations Truckload - Operating income U.S. based Conventional TL Canadian based Conventional TL Specialized TL U.S. based Conventional TL 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 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 Specialized TL Operating expenses* Loss on sale of land and buildings Gain (loss) 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 * Operating expenses excluding intra TL eliminations Three months ended 2023 December 31 2022 502,784 430,942 71,842 430,942 (1) 15,960 446,901 (99,433) 347,468 403,351 86.1% — 79,101 325,493 2023 1,936,038 1,698,645 237,393 1,698,645 (5) 3,956 1,702,596 (310,446) 1,392,150 1,625,592 85.6% — 311,838 1,323,083 (1,243) 403,351 (9,329) 1,625,592 — 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 (1) 475 366,876 (82,288) 284,588 325,493 87.4% — 57,447 254,161 (1,162) 310,446 — 45,004 192,389 237,393 — — — — — 324,281 — — 324,281 (57,447) 266,834 311,838 85.6% 1,384,855 (5) 3,956 1,388,806 (254,161) 1,134,645 1,323,083 85.8% Years ended December 31 2022 2,451,038 2,084,170 366,868 2,084,170 43 22,197 2,106,410 (464,707) 1,641,703 1,986,331 82.7% 310,026 322,553 1,362,390 (8,638) 1,986,331 82,059 62,929 321,362 (1,643) 464,707 46,133 84,321 236,414 366,868 345,952 (82,059) 263,893 310,026 85.1% 301,161 43 15,486 316,690 (62,929) 253,761 322,553 78.7% 1,447,338 — 6,711 1,454,049 (321,362) 1,132,687 1,362,390 83.1% 479,596 428,939 50,657 428,939 (1) (6) 428,932 (80,319) 348,613 399,277 87.3% — 77,815 323,952 (2,490) 399,277 — 15,287 65,366 (334) 80,319 — 8,584 42,073 50,657 — — — — — 84,518 — — 84,518 (15,287) 69,231 77,815 89.0% 347,245 (1) (6) 347,238 (65,366) 281,872 323,952 87.0% 2023 Annual Report │24 Management’s Discussion and Analysis 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 as total assets excluding intangibles, net of trade and other payables, current taxes payable and provisions averaged 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 Loss 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 Less-Than-Truckload - Canadian based LTL Operating income (Gain) loss 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 2023 114,360 7 627 114,994 26.5% 84,521 183,841 175,336 (53,870) 305,307 180,119 182,605 (67,428) 295,296 300,302 As at December 31 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 28.1% 32.5% 124,198 3 7,531 131,732 26.5% 96,823 184,025 418,217 (78,384) 523,858 162,397 352,949 (77,439) 437,907 480,883 143,014 (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 20.1% 24.0% 2023 Annual Report │25 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 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: 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 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 Management’s Discussion and Analysis 2023 45,004 — — 2,133 47,137 26.5% 34,646 121,871 210,872 (26,866) 305,877 96,941 185,740 (40,671) 242,010 273,944 As at December 31 2022 84,321 (43) (15,486) 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 12.6% 21.3% 192,389 5 (3,956) 21,036 209,474 26.5% 153,963 735,795 935,625 (124,538) 1,546,882 678,522 906,564 (151,097) 1,433,989 1,490,436 236,414 — (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 10.3% 13.4% 160,112 (226) 27,237 187,123 26.5% 137,535 782,923 357,251 (220,328) 919,846 468,547 263,550 (186,557) 545,540 732,693 140,446 — 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 18.8% 21.9% 2023 Annual Report │26 Management’s Discussion and Analysis 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. The return on invested capital of the U.S. based LTL has been modified to remove the impacts of the bargain purchase gain from the operating income net of exclusions as well as from the average invested capital to align the capital with the acquisition price. (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 As at December 31 2023 2022 186,231 35 (10,549) 1,353 177,070 26.5% 130,146 10,757 1,445,085 (571,468) 884,374 838,910 861,642 15.1% 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 % 2023 Annual Report │27 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. 2023 Annual Report │28 Management’s Discussion and Analysis 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 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 2023 Annual Report │29 Management’s Discussion and Analysis 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 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 be 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 truck 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 trucks (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 trucks and trailers and may require the Company to retrofit certain of its trucks 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 2023 Annual Report │30 Management’s Discussion and Analysis 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 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, 2023 Annual Report │31 Management’s Discussion and Analysis 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 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; truck 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 trucks 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 truck 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 2023 Annual Report │32 Management’s Discussion and Analysis 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 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 truck 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 trucks 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 2023 Annual Report │33 Management’s Discussion and Analysis the shipping locations or borders between Canada, the United States and Mexico. Further, the Company may not be able to 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. The effect of any 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 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. 2023 Annual Report │34 Management’s Discussion and Analysis 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’ 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 2023 Annual Report │35 Management’s Discussion and Analysis 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. On July 13, 2023, the Company reached an agreement with the US International Brotherhood of Teamster Union for the renewal of the Collective Bargaining Agreement. This new five-year agreement is subject to ratification by the employees. 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 2023 Annual Report │36 Management’s Discussion and Analysis 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 truck 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 trucks for expedited shipments requires two drivers per truck, which further increases the number of drivers the Company must recruit and retain in comparison to operations that require one driver per truck. 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 trucks 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 trucks with its drivers, the Company may incur losses on amounts owed to it with respect to such trucks. 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 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 2023 Annual Report │37 Management’s Discussion and Analysis 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; 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. 2023 Annual Report │38 Management’s Discussion and Analysis 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. 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. 2023 Annual Report │39 Management’s Discussion and Analysis 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 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 personnel 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 2023 Annual Report │40 Management’s Discussion and Analysis 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 2024 to 2043. There can be no assurance that 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 2023 Annual Report │41 Management’s Discussion and Analysis 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 trucks 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 trucks in recent years, and the resale value of the trucks 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 trucks, 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 trucks 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 trucks could increase the price of new trucks and decrease the value of used non-autonomous trucks. The Company’s business could be harmed if it is unable to continue to obtain an adequate supply of new trucks 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. Truck 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, truck 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 trucks 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 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. 2023 Annual Report │42 Management’s Discussion and Analysis 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, 2023. 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 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. 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 2023 Annual Report │43 Management’s Discussion and Analysis 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. 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. 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 controls over financial reporting were effective. If the Company fails to comply with Section 404 of the 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. 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. 2023 Annual Report │44 Management’s Discussion and Analysis 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 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 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 beginning on or after January 1, 2023, and have been applied in preparing the audited consolidated financial statements: Definition of Accounting Estimates (Amendments to IAS 8) These new standards did not have a material impact on the Company’s unaudited condensed consolidated interim financial statements. 2023 Annual Report │45 Management’s Discussion and Analysis To be adopted in future periods The following new standards and amendments to standards are not yet effective for the year ended December 31, 2023, and have not been applied in preparing the unaudited condensed consolidated interim financial statements: Classification of Liabilities as Current or Non-current (Amendments to IAS 1) Lease Liability in a Sales and Leaseback (Amendments to IFRS 16) Further information can be found in note 3 of the December 31, 2023, 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, 2023, 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, 2023. 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, 2023, 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, 2023. The control framework used to design the Company’s internal controls over financial reporting is based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated Framework (2013 framework). The Company's internal controls over financial reporting as of December 31, 2023 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, 2023. Limitation on scope of design As permitted under the relevant securities rules, the Company has limited the scope of its evaluation of disclosure controls and procedures and internal control over financial reporting to exclude controls, policies and procedures of JHT as it was not acquired more than 365 days before the end of the financial period to which the CEO and CFO certificates relate. For the year ended 2023 Annual Report │46 Management’s Discussion and Analysis December 31, 2023, JHT constituted 3.3% of current assets, 7.2% of long term assets, 4.3% of current liabilities, 3.1% of long term liabilities, 3.0% of revenue, and 4.5% of net income. The Company is required to and will include JHT in its disclosure controls and procedures and internal controls over financial reporting beginning in the third quarter of 2024. Changes in internal controls over financial reporting No changes were made to the Company’s internal controls over financial reporting during the quarter and year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. 2023 Annual Report │47                               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors TFI International Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial position of TFI International Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the years ended December 31, 2023 and 2022, 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, 2023 and 2022, and the financial performance and its cash flows for the years ended December 31, 2023 and 2022, 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, 2023, 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 15, 2024 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. 2023 Annual Report │48       Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the self-insurance provisions As discussed in Note 17 to the consolidated financial statements, the Company has $123.6 million of self-insurance provisions as of December 31, 2023. As discussed in Note 3(k), 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. 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. 2023 Annual Report │49   We have served as the Company’s auditor since 2003. Montréal, Canada February 15, 2024 2023 Annual Report │50         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors 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, 2023, 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, 2023, 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, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the years ended December 31, 2023 and 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 15, 2024 expressed an unqualified opinion on those consolidated financial statements. The Company acquired JHT Holdings Inc. ("JHT") during 2023, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, JHT’s internal control over financial reporting associated with 3.3% of current assets and 7.2% of long term assets, 4.3% of current liabilities, 3.1% of long term liabilities, 3.0% of revenue, and 4.5% of net income included in the consolidated financial statements of the Company as of and for the year ended December 31, 2023. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of JHT. 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. 2023 Annual Report │51 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. 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 15, 2024 2023 Annual Report │52       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 loss Retained earnings Total equity Contingencies, letters of credit and other commitments Total liabilities and equity CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2023 AND 2022 As at December 31, 2023 As at December 31, 2022 335,556 894,771 23,964 23,637 56,269 1,802 1,335,999 2,415,472 425,630 2,019,301 50,209 - 16,394 20,615 4,947,621 6,283,620 671,936 2,442 66,565 23,420 174,351 127,397 1,066,111 1,709,831 332,761 53,231 93,335 3,699 433,242 2,626,099 3,692,210 1,107,290 37,684 (200,539) 1,646,975 2,591,410 147,117 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 6,283,620 5,505,830 Note 7 9 10 11 12 16 18 13 17 14 15 14 15 16 17 18 19 19, 21 27 The notes on pages 58 to 98 are an integral part of these consolidated financial statements. On behalf of the Board: Director Alain Bédard Director André Bérard 2023 Annual Report │53 TFI International Inc. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2023 AND 2022 (In thousands of U.S. dollars, except per share amounts) Note 2023 2022 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 Loss (gain) on sale of business Gain on sale of rolling stock and equipment Gain on derecognition of right-of-use assets Loss (gain) on sale of land and buildings Gain, net of impairment, on sale of assets held for sale 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 6,416,886 1,104,281 7,521,167 3,805,846 2,109,622 434,751 249,835 132,112 60,028 3,011 (15,510) (1,482) 40 (14,721) 6,763,532 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) 7,666,453 757,635 1,146,038 (8,612) 89,483 80,871 676,764 171,887 504,877 5.88 5.80 (1,750) 82,147 80,397 1,065,641 242,409 823,232 9.21 9.02 22 23 9 10 11 6 24 24 25 20 20 The notes on pages 58 to 98 are an integral part of these consolidated financial statements. 2023 Annual Report │54 TFI International Inc. (In thousands of U.S. dollars) Net income Other comprehensive income (loss) 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 gain (loss) on investments in equity securities measured at fair value through OCI, net of tax Other comprehensive income (loss), net of tax CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2023 AND 2022 2023 2022 504,877 823,232 (881 ) 39,705 - 2,016 7,281 48,121 (10,148) (72,046) 292 63,508 (5,495) (23,889) Total comprehensive income 552,998 799,343 The notes on pages 58 to 98 are an integral part of these consolidated financial statements. 2023 Annual Report │55 TFI International Inc. (In thousands of U.S. dollars) Note Share capital Contributed surplus CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2023 AND 2022 Accumulated unrealized loss on employee benefit Accumulated Accumulated unrealized gain (loss) on invest- foreign currency translation differences & 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, 2022 1,089,229 41,491 Net income Other comprehensive income, net of tax Realized (loss) gain on equity securities Total comprehensive (loss) income 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 and performance share units, net of tax Total transactions with owners, recorded directly in equity - - - - - 17,179 - (28,303) 29,185 18,061 - - - - 21,424 (4,402) - - (20,829) (3,807) 21 19, 21 19 19 19, 21 Balance as at December 31, 2023 1,107,290 37,684 - - - - - - - - - - - - (239,120) 5,799 1,565,671 2,463,070 - 38,824 - 38,824 - 7,281 (13,323) (6,042) - - - - - - - - - - - - 504,877 2,016 13,323 520,216 - - (124,254) (259,721) (54,937) (438,912) 504,877 48,121 - 552,998 21,424 12,777 (124,254) (288,024) (46,581) (424,658) (200,296) (243) 1,646,975 2,591,410 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) 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 Balance as at December 31, 2022 1,089,229 41,491 The notes on pages 58 to 98 are an integral part of these consolidated financial statements.  - 292 - 292 - - - - - - - - (82,194) - (82,194) - (5,495) (1,259) (6,754) - - - - - - - - - - - - 823,232 63,508 1,259 887,999 - - (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) (239,120) 5,799 1,565,671 2,463,070 2023 Annual Report │56     TFI International Inc. (In thousands of U.S. dollars) 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 Loss (gain) on sale of business Gain on sale of property and equipment Gain on derecognition of right-of-use assets Gain, net of impairment, on sale of assets held for sale 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 (used in) from 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 (used in) from investing activities Cash flows used in 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 Decrease of other financial liabilities Dividends paid Repurchase of own shares Proceeds from exercise of stock options Share repurchase for settlement of restricted share units and performance share units Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2023 AND 2022 Note 2023 2022 504,877 823,232 9 10 11 21 24 25 6 8 9 11 6 5 14 14 14 15 19 19 249,835 132,112 60,028 13,451 80,871 171,887 3,011 (15,470 ) (1,482 ) (14,721 ) 60,212 (33,696 ) 106,631 (70,354 ) (233,353 ) 1,013,839 (361,563 ) 73,339 50,280 (2,758 ) - - (628,701 ) (41,719 ) 89,225 24,565 (797,332 ) (6,337 ) 575,000 (41,371 ) 25,242 (128,107 ) (9,572 ) (121,095 ) (288,024 ) 12,777 (46,581 ) (28,068 ) 188,439 147,117 335,556 248,638 126,276 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) 127,825 19,292 147,117 The notes on pages 58 to 98 are an integral part of these consolidated financial statements. 2023 Annual Report │57 TFI International Inc. (Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2023 AND 2022 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, 2023 and 2022 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, until August 31, 2022, 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 15, 2024. 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. 2023 Annual Report │58     TFI International Inc. (Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2023 AND 2022 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 material 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. Material 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. 2023 Annual Report │59     TFI International Inc. (Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2023 AND 2022 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 judgment 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. 2023 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, 2023 AND 2022 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. 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. 2023 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, 2023 AND 2022 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. 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 2023 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, 2023 AND 2022 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 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. 2023 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, 2023 AND 2022 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) 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. i) 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. j) Employee benefits a) 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 2023 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, 2023 AND 2022 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. b) 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. c) 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. d) 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. e) 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. k) 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. 2023 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, 2023 AND 2022 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. l) 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. m) Other operating expenses Other operating expenses consist primarily of third-party commissions, information technology support and software expenses, building expenses (including repairs and maintenance, electricity, janitorial & security services and property taxes). n) Finance income and finance costs Finance income comprises interest income on funds invested, dividend income and interest. Interest income is recognized as it accrues in income or loss, using the effective interest method. 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. o) 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. 2023 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, 2023 AND 2022 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. p) 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. q) 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. r) 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 periods beginning on or after January 1, 2023 and have been applied in preparing these consolidated financial statements 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 did not have a material impact on the Group’s consolidated financial statements. International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12) In May 2023, the International Accounting Standards Board issued International Tax Reform – Pillar Two Model Rules to amend IAS 12. The amendments provide a temporary mandatory exception from the accounting for deferred tax that arises from legislation implementing the GloBE model rules. Entities are effectively prohibited from recognizing or disclosing information about deferred tax assets and liabilities related to top-up tax. This temporary exception applies to annual financial statements ending for periods on or after December 31, 2023 and applies retrospectively. 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, 2023, and have not been applied in preparing these consolidated financial statements: 2023 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, 2023 AND 2022 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 adoption of the amendments is not expected to have a material impact. 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 adoption of the amendments is not expected to have a material impact. 2023 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, 2023 AND 2022 4. Segment reporting The Group operates within the transportation and logistics industry in the United States, Canada and, until August 31, 2022, 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) The Less-Than-Truckload reporting segment 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. Prior to August 31, 2022, the Truckload reporting segment represented the aggregation of the Canadian Conventional Truckload, U.S. Conventional (b) 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. 2023 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, 2023 AND 2022 2023 Revenue(1) Fuel surcharge(1) Total revenue(1) Operating income (loss) Selected items: Depreciation and amortization Loss on sale of land and buildings Gain, net of impairment, on sale of assets held for sale Loss on sale of business Intangible assets Total assets Total liabilities Additions to property and equipment 2022 Revenue(1) Fuel surcharge(1) Total revenue(1) Operating income Selected items: Package and Courier Less- Than- Truckload Truckload Logistics Corporate Eliminations Total 461,930 121,268 583,198 114,360 2,777,308 591,259 3,368,567 310,429 1,625,592 310,446 1,936,038 237,393 1,604,878 92,138 1,697,016 160,112 - - - (64,659) (52,822) (10,830) (63,652) - 6,416,886 1,104,281 7,521,167 757,635 25,070 173,684 194,761 47,914 - (35) (5) - 546 - - - 441,975 (40) - - 183,841 359,177 100,733 10,546 - 194,782 2,329,677 778,018 3,949 - 857,666 2,004,163 462,812 226 - 782,923 1,140,174 336,875 - (3,011) 89 450,429 2,013,900 - - - - (128) 14,721 (3,011) 2,019,301 6,283,620 3,692,210 22,136 217,191 115,048 5,561 311 - 360,247 498,972 151,872 650,844 134,306 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 Depreciation and amortization Gain on sale of land and buildings Gain, net of impairment, on sale of assets held for sale Gain on sale of business Intangible assets Total assets Total liabilities Additions to property and equipment 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 - - - - (125) 77,911 73,653 1,592,110 5,505,830 3,042,760 168,667 (1) Includes intersegment revenue and intersegment fuel surcharge 15,097 165,953 1,150 402 - 351,269 2023 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, 2023 AND 2022 Geographical information Revenue is attributed to geographical locations based on the origin of service’s location. 2023 Canada United States Total 2022 Canada United States Mexico Total Package and Courier Less- Than- Truckload Truckload Logistics Eliminations Total 583,198 - 583,198 608,545 2,760,022 3,368,567 1,139,272 796,766 1,936,038 271,136 1,425,880 1,697,016 (34,915) (28,737) (63,652) 2,567,236 4,953,931 7,521,167 650,844 - - 650,844 667,506 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 Segment assets are based on the geographical location of the assets. Property and equipment, right-of-use assets and intangible assets Canada United States As at December 31, 2023 As at December 31, 2022 2,208,595 2,651,808 4,860,403 1,848,746 2,256,959 4,105,705 5. Business combinations a) Business combinations In line with the Group’s growth strategy, the Group acquired twelve businesses during 2023, of which JHT Holdings, Inc. was considered material. All other acquisitions 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. On August 16, 2023, the Group completed the acquisition of JHT Holdings, Inc. ("JHT"), a leading asset light logistics and transportation provider in North America for Class 6-8 truck manufacturers, which includes a joint-venture that is equity-accounted and included in other assets. The purchase price for this business acquisition totaled $309.3 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. During the year ended December 31, 2023, the business contributed revenue and net income of $225.3 million and $18.0 million, respectively since the acquisition. Had the Group acquired JHT on January 1, 2023, as per management’s best estimates, the revenue and net income for this entity would have been $589.5 million and $50.5 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 acquisition occurred on January 1, 2023 and adjusted for interest, based on the purchase price and average borrowing rate of the Group, and income tax expense based on the effective tax rate of the entity. During the year ended December 31, 2023, the non-material businesses, in aggregate, contributed revenue and net loss of $178.3 million and $6.3 million respectively since the acquisitions. Had the Group acquired these non-material businesses on January 1, 2023, as per management’s best estimates, the revenue and net income for these entities would have been $333.2 million and $9.1 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, 2023 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 entities. During the year ended December 31, 2023, transaction costs of $0.9 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 determination of the fair value of assets acquired and liabilities assumed of the 2023 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. 2023 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, 2023 AND 2022 The table below presents the determination of the fair value of assets acquired and liabilities assumed 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) receivable Provisions Other non-current liabilities Long-term debt Lease liabilities Deferred tax liabilities Total identifiable net assets Total consideration transferred Goodwill Cash Contingent consideration Total consideration transferred Note 9 10 11 17 14 15 18 11 JHT 5,709 38,250 10,976 65,489 5,385 198,659 23,887 (35,221 ) (1,682 ) (19,919 ) (444 ) (4,808 ) (5,385 ) (55,367 ) 225,529 309,304 83,775 309,304 - 309,304 Others 11,873 39,650 5,897 174,850 25,609 80,807 115 (28,884 ) 729 - (44 ) - (25,609 ) (32,375 ) 252,618 350,451 97,833 336,979 13,472 350,451 December 31, 2023 17,582 77,900 16,873 240,339 30,994 279,466 24,002 (64,105 ) (953 ) (19,919 ) (488 ) (4,808 ) (30,994 ) (87,742 ) 478,147 659,755 181,608 646,283 13,472 659,755 The valuation techniques used for measuring the fair value of land and buildings ($49.5 million) and customer relationships ($175.2 million) acquired regarding JHT 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 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. - Market prices for comparable sites - Average rebuild cost - Forecasted revenue attributable to existing customers and relationships - Annual attrition rate - Forecasted operating margin - Discount rate The fair values measured on the amounts regarding JHT are on a provisional basis, mainly regarding land and buildings and deferred tax liabilities. This is mainly due to pending completion and review of valuations and site visits for the land and buildings and mainly due to the complexity of the information for the provisions. If new information is obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition that implies adjustments to the amounts, the accounting for the acquisition will be revised. The trade receivables comprise gross amounts due of $80.0 million, of which $2.1 million was expected to be uncollectible at the acquisition date. Of the goodwill and intangible assets acquired through business combinations in 2023, $18.9 million is deductible for tax purposes. 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 2023 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, 2023 AND 2022 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 were expensed in other operating expenses in the consolidated statements of income in relation to the above-mentioned business acquisitions. Of the goodwill and intangible assets acquired through business combinations in 2022, $2.9 million was deductible for tax purposes. The table below presents the determination of the fair value of assets acquired and liabilities assumed of the 2022 acquisitions as at December 31, 2022: 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 Note December 31, 2022 9 10 11 17 15 18 863 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 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 U.S. Less-Than-Truckload Canadian Truckload Specialized Truckload Logistics Reportable segment Less-Than-Truckload Less-Than-Truckload Truckload Truckload Logistics December 31, 2023 December 31, 2022 9,142 3,376 16,017 43,080 109,993 181,608 - - 811 35,865 22,512 59,188 c) Contingent consideration The contingent consideration for the year ended December 31, 2023 relates to non-material business acquisitions and is recorded in the original determination of the fair value of assets acquired and liabilities assumed. These considerations are contingent on achieving specified earning levels in future periods. The maximum amount payable is $13.5 million in less than one year, and $0.8 million in more than one year. The contingent consideration for the year ended December 31, 2022 related to non-material business acquisitions and was recorded in the original determination of the fair value of assets acquired and liabilities assumed. This consideration was contingent on achieving specified earning levels in a future period. The maximum amount payable was $22.5 million in less than one year, and 2023 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, 2023 AND 2022 $21.0 million was paid prior to December 31, 2022. During the year ended December 31, 2023, no measurement adjustments were made. The contingent consideration balance at December 31, 2023 is $13.2 million (2022 - $8.8 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 non-material business combinations The 2022 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 2022 have been adjusted and finalized in 2023. 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 included cash consideration, net working capital adjustments and was net of incremental selling costs of $4.5 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 In fiscal 2023, a loss of $3.0 million was recorded as a loss on sale of business related to an other liabilities adjustment. 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, 2023 846,681 48,090 894,771 December 31, 2022 966,428 64,298 1,030,726 The Group’s exposure to credit and currency risks related to trade and other receivables is disclosed in note 26 a) and d). 2023 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, 2023 AND 2022 Trade receivables as at December 31, 2023 include $32.4 million of in-transit revenue balances (December 31, 2022 – $48.5 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 2023 224,121 6,533 (11,648) (112,375) 106,631 2022 (59,105) (1,498) 9,924 (96,774) (147,453) Cost 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 Additions through business combinations Other additions Disposals Reclassification to assets held for sale Reclassification between categories* Effect of movements in exchange rates Balance at December 31, 2023 Accumulated Depreciation 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 Depreciation Disposals Reclassification to assets held for sale Reclassification between categories* Effect of movements in exchange rates Balance at December 31, 2023 Note Land and buildings Rolling stock Equipment Total 5 6 5 6 1,233,268 2,003 46,928 (678) (31,356) (67,203) (15,972) 1,166,990 145,204 77,516 (398) (13,325) - 7,990 1,383,977 72,012 21,353 (137) (6,837) (5,426) 2,175 83,140 21,841 (92) (1,003) - 1,515 105,401 1,772,463 66,240 286,277 (122,946) (452,547) - (47,939) 1,501,548 91,870 265,687 (136,028) (19,741) 36,319 18,545 1,758,200 577,893 203,431 (56,549) (157,618) - (23,885) 543,272 210,523 (78,584) (4,947) 11,089 8,879 690,232 200,765 2,716 18,064 (9,370) (1,817) - (5,570) 204,788 3,265 17,044 (529) - (36,319) 4,122 192,371 101,450 23,854 (7,191) (142) - (3,012) 114,959 17,471 (410) - (11,089) 2,512 123,443 3,206,496 70,959 351,269 (132,994) (485,720) (67,203) (69,481) 2,873,326 240,339 360,247 (136,955) (33,066) - 30,657 3,334,548 751,355 248,638 (63,877) (164,597) (5,426) (24,722) 741,371 249,835 (79,086) (5,950) - 12,906 919,076 Net carrying amounts At December 31, 2022 At December 31, 2023 * Reclassification between categories had no impact on the depreciation of the reclassified property and equipment. 1,083,850 1,278,576 958,276 1,067,968 89,829 68,928 2,131,955 2,415,472 As at December 31, 2023, there are no amounts included in trade and other payables for the purchases of property and equipment (December 31, 2022 – $1.3 million). Security As at December 31, 2023, certain rolling stock are pledged as security for conditional sales contracts, with a carrying amount of $89.6 million (December 31, 2022 - $126.4 million) (see note 14). 2023 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, 2023 AND 2022 10. Right-of-use assets Cost 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 Other additions Additions through business combinations Derecognition* Effect of movements in exchange rates Balance at December 31, 2023 Depreciation Balance at December 31, 2021 Depreciation Sale of business Derecognition* Effect of movements in exchange rates Balance at December 31, 2022 Depreciation Derecognition* Effect of movements in exchange rates Balance at December 31, 2023 Note Land and buildings Rolling stock Equipment Total 5 6 5 6 510,277 62,353 14,217 (238 ) (31,475 ) (26,343 ) 528,791 74,580 15,033 (39,674 ) 9,629 588,359 257,507 66,036 (130 ) (22,733 ) (14,424 ) 286,256 66,877 (28,074 ) 5,456 330,515 233,710 53,906 14,052 (5,780) (34,221) (9,624) 252,043 79,690 15,961 (62,276) 4,940 290,358 90,092 59,101 (2,685) (26,783) (4,754) 114,971 64,340 (56,723) 2,089 124,677 3,903 962 - - (977) (91) 3,797 948 - (971) 40 3,814 1,758 1,139 - (1,082) (51) 1,764 895 (971) 21 1,709 747,890 117,221 28,269 (6,018) (66,673) (36,058) 784,631 155,218 30,994 (102,921) 14,609 882,531 349,357 126,276 (2,815) (50,598) (19,229) 402,991 132,112 (85,768) 7,566 456,901 Net carrying amounts At December 31, 2022 At December 31, 2023 * 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. 242,535 257,844 137,072 165,681 381,640 425,630 2,033 2,105 2023 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, 2023 AND 2022 11. Intangible assets Other intangible assets Note Goodwill relationships Customer Trademarks Non- compete and other agreements Information technology Total 1,572,291 588,514 88,811 17,948 31,996 2,299,560 Cost 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 Additions through business combinations Other additions Extinguishments Effect of movements in 5 6 59,188 - - (210,806) - (61,328) 1,359,345 5 181,608 - - exchange rates Balance at December 31, 2023 21,176 1,562,129 Amortization and impairment losses Balance at December 31, 2021 Amortization Disposals Sale of business Extinguishments Effect of movements in exchange rates Balance at December 31, 2022 Amortization Extinguishments Effect of movements in exchange rates 6 exchange rates Balance at December 31, 2023 147,480 - - (66,255) - (3,213) 78,012 - - 1,040 79,052 38,121 - - (33,312) (61,985) (17,641) 513,697 244,574 - (7,203) 6,127 757,195 287,578 43,538 - (16,669) (61,985) (8,210) 244,252 46,629 (7,203) 3,150 286,828 3,846 - (380) (28,589) (19,058) (1,950) 42,680 27,127 - (7,820) 685 62,672 45,675 4,764 (130) (2,996) (19,058) (1,205) 27,050 5,461 (7,820) 428 25,119 3,727 - - (150) (836) (682) 20,007 5,556 - (2,524) 280 23,319 7,666 3,702 - (26) (836) (376) 10,130 4,099 (2,524) 168 11,873 46 6,120 - (1,075) (1,321) (644) 35,122 104,928 6,120 (380) (273,932) (83,200) (82,245) 1,970,851 2,209 2,758 (1,029) 461,074 2,758 (18,576) 245 39,305 28,513 2,444,620 18,240 3,675 - (836) (1,321) (461) 19,297 3,839 (1,029) 340 22,447 506,639 55,679 (130) (86,782) (83,200) (13,465) 378,741 60,028 (18,576) 5,126 425,319 Net carrying amounts At December 31, 2022 At December 31, 2023 1,281,333 1,483,077 269,445 470,367 15,630 37,553 9,877 11,446 15,825 16,858 1,592,110 2,019,301 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, 2023 and December 31 2022, there are no material indefinite life intangible assets. At December 31, 2023 and 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 U.S. Less-Than-Truckload Truckload Canadian Truckload Specialized Truckload* Logistics December 31, 2023 182,120 December 31, 2022 177,941 140,402 3,375 109,593 599,292 448,295 1,483,077 128,449 - 87,604 546,674 340,665 1,281,333 * 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. 2023 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, 2023 AND 2022 The results as at December 31, 2023 and 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 U.S. Less-Than-Truckload Truckload 2023 12.0% 12.0% 11.4% 2022 11.5% 11.5% - Canadian Truckload Specialized Truckload* 13.9% 12.7% Logistics 10.9% * 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. 14.4% 13.2% 11.4% 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% (2022 – 40.0%) at a market interest rate of 10.5% (2022 – 9.4%). 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% (2022 – 2.0%) in revenues and margins were adjusted where deemed appropriate. The terminal value growth rate was 2.0% (2022 – 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 2 investments Level 3 investments As at December 31, 2023 31,557 4,339 14,313 50,209 As at December 31, 2022 71,979 - 13,985 85,964 Level 3 investments were marked to fair value based on the latest financing round as at December 31, 2023. The Group elected to designate all of its investments as fair value through OCI. 13. Trade and other payables Trade payables and accrued expenses Personnel accrued expenses Dividend payable As at December 31, 2023 450,638 187,522 33,776 671,936 As at December 31, 2022 498,777 179,702 30,289 708,768 The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 26. 2023 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, 2023 AND 2022 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 Other long-term debt Current liabilities Current portion of unsecured debenture Current portion of other long-term debt Current portion of conditional sales contracts As at December 31, 2023 As at December 31, 2022 22,166 - 1,652,049 31,278 4,338 1,709,831 151,023 354 22,974 174,351 - 147,233 1,075,702 55,735 - 1,278,670 - - 37,087 37,087 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 2023 2022 Unsecured revolving facility Unsecured revolving facility Unsecured debenture Unsecured senior notes Unsecured senior notes Unsecured senior notes Unsecured senior notes Unsecured senior notes Conditional sales contracts Other long-term debt CAD BA + 1.125% a USD SOFR + 1.125% a CAD 3.32% - 4.22% b USD 2.89% - 5.64% c USD 3.15% - 3.50% c USD 2.87% - 3.55% c 3.5% - 3.8% USD c c 6.27%- 7.11% USD d Mainly CAD 1.45% - 5.28% USD 3.04% 2026 30,400 2026 1,000 2024 200,000 2026- 2038 255,000 2029- 2036 500,000 2029- 2034 200,000 2032- 2037 200,000 2028- 2043 500,000 2024-2027 71,847 4,692 2027 21,239 927 151,023 254,376 499,100 199,665 199,808 499,100 54,252 4,692 1,884,182 - - 200,000 180,000 500,000 200,000 200,000 - 125,810 - - - 147,233 179,013 497,258 199,644 199,787 - 92,822 - 1,315,757 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 Note 5 2023 1,315,757 575,000 4,808 (41,371) 25,242 1,337 41,322 (37,913) 1,884,182 2022 1,608,094 334,164 - (369,692) (236,502) 1,296 (97,744) 76,141 1,315,757 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 that were subject to LIBOR reform was 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. Deferred financing fees of $0.8 million were recognized on the extension. 2023 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, 2023 AND 2022 The Canadian interest rate benchmark reform - cessation of CDOR is not expected to have a material impact on the Group's financial statements. As at December 31, 2023, the only debt balances subject to the CDOR reform are the CAD portion of unsecured revolver with a drawn amount of $24.0 million at year-end. The CDOR tenor will cease to exist no later than June 28, 2024. As at December 31, 2023, the Group has no interest rate swaps that hedge variable interest debt. The revolving credit facility is unsecured and can be extended annually. The Group’s revolving facilities have a total size of $951.4 million (December 31, 2022 - $929.6 million). The agreement provides an additional $190.0 million of credit availability (CAD $245 million and USD $5 million). The additional credit is available under certain conditions under the Group’s syndicated revolving credit agreement. As of December 31, 2023, the credit facility’s interest rate on CAD denominated debt was 6.58% (2022 – 4.49%) and on USD denominated debt was 6.60% (2022 – 4.30%). 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% (2022 – 3.32% to 4.22%) depending on certain ratios. As of December 31, 2023, the debenture’s effective rate was 3.32% (2022 – 3.32%). 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 October 13, 2023, the Company received $500 million in proceeds from the issuance of new debts taking the form of unsecured senior notes consisting of five tranches, with terms from 5 to 20 years and bearing fixed interest rates between 6.27% and 7.11%. Deferred financing fees of $1.2 million were recognized as a result of the transaction. On August 21, 2023, the Company received $75 million in proceeds from the issuance of new debts taking the form of unsecured senior notes consisting of two tranches, $50 million and $25 million, maturing on August 19, 2035 and 2038, bearing fixed interest rates of 5.56% and 5.64%, respectively. Deferred financing fees of $0.1 million were recognized as a result of the transaction. 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. 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 in fiscal 2022 were used in full to pay off the unsecured term loan which was due in June 2022 without any penalty. 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 $89.6 million (December 31, 2022 - $126.4 million,) (see note 9). 2023 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, 2023 AND 2022 e) Principal installments of long-term debt payable during the subsequent years are as follows: Unsecured revolving facilities Unsecured debenture Unsecured senior notes Conditional sales contracts Other long-term debt 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 - 151,023 - 22,974 354 174,351 23,906 - 150,000 31,279 4,338 209,523 - - 1,505,000 - - 1,505,000 Total 23,906 151,023 1,655,000 54,253 4,692 1,888,874 As at December 31, 2023 127,397 332,761 460,158 As at December 31, 2022 115,934 297,105 413,039 5 6 2023 413,039 30,994 - 155,218 (18,635) (128,107) 7,649 460,158 2022 429,206 28,269 (3,129) 117,221 (16,285) (123,606) (18,637) 413,039 * Derecognized lease liabilities include negotiated asset purchases and extinguishments resulting from accidents. The incremental borrowing rate used on average for 2023 is 5.44% (2022 – 4.01%). 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 $7.9 million (2022 – $9.9 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 $375.0 million (2022 - $377.7 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, 2023 was $21.9 million (2022 - $20.6 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, 2023 was $15.7 million (2022 - $15.2 million), presented in “Other operating expenses”. 2023 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, 2023 AND 2022 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, 2023 145,542 295,989 78,016 519,547 For the year ended December 31, 2023, operating lease expenses of $36.8 million (2022 – $45.6 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 1 of its employees (2022 – 99). These plans are all within Canada and include one unregistered plan. The last pension benefits were paid in 2023 for all the defined benefit pension plans but one. The defined benefit plans are no longer offered to employees. Therefore, the future obligation will only vary by actuarial re-measurements. 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, 2022 and the next required valuation will be as of December 31, 2023. 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 6,895 active participants (2022 - 8,787). 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, 2022 and the next required valuation will be as of December 31, 2023. 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, 2023 December 31, 2022 TFI International pension plans 13,999 (200) 13,799 TForce Freight pension plans 212,373 (172,941) 39,432 TFI International pension plans 20,189 (10,214) 9,975 Total 226,372 (173,141) 53,231 TForce Freight pension plans 144,110 (158,444) (14,334) Total 164,299 (168,658) (4,359) December 31, 2023 December 31, 2022 14% 0% 86% 95% 5% 7% 91% 2% 95% 5% 2023 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, 2023 AND 2022 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. Movement in the present value of the accrued benefit obligation for defined benefit plans: December 31, 2023 TFI International TForce Freight pension plans pension plans December 31, 2022 TFI International pension plans TForce Freight pension plans Total Defined benefit obligation, beginning of year Current service cost Interest cost Benefits paid Remeasurement loss (gain) arising from: - Demographic - Financial assumptions - Experience Settlement Effect of movements in exchange rates Defined benefit obligation, end of year 20,189 144,110 164,299 58,537 58,155 8,129 7,342 (13,971) (3,832) 382 787 (10,139) 27,127 133,653 539 115,967 3,522 730 (1,283) (985) - 566 1,849 28 337 1,017 7,869 89 57 346 13,999 212,373 226,372 1,017 7,303 (1,760) 29 9 (12,200) - (83,707) (4,880) (11,463) (489) 82 - (461) (1,853) 20,189 144,110 Movement in the fair value of plan assets for defined benefit plans: Fair value of plan assets, beginning of year Interest income Employer contributions Benefits paid Fair value remeasurement Plan administration expenses Effect of movements in exchange rates Fair value of plan assets, end of year Expense recognized in income or loss: Current service cost Net interest cost Plan administration expenses Net settlement Pension expense Actual return on plan assets December 31, 2023 December 31, 2022 TFI International pension plans TForce Freight pension plans 10,214 250 37 (10,139) (165) (44) 47 200 158,444 8,124 - (3,832) 11,816 (1,623) 12 172,941 TFI International pension plans TForce Freight pension plans 13,437 348 457 (985) (2,066) (59) (918) 10,214 80,466 3,746 103,099 (1,283) (25,407) (1,735) (442) 158,444 Total 168,658 8,374 37 (13,971) 11,651 (1,667) 59 173,141 December 31, 2023 December 31, 2022 TFI International pension plans 382 537 44 28 991 85 TForce Freight pension plans 58,155 (782) 1,623 29 59,025 19,940 TFI International pension plans 539 382 59 - 980 (1,718) TForce Freight pension plans 115,967 (224) 1,735 82 117,560 (21,661) Total 58,537 (245) 1,667 57 60,016 20,025 Total 160,780 116,506 4,252 (2,268) (12,200) (88,587) (11,952) 82 (2,314) 164,299 Total 93,903 4,094 103,556 (2,268) (27,473) (1,794) (1,360) 168,658 Total 116,506 158 1,794 82 118,540 (23,379) 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, 2023 TFI International pension plans 8,871 TForce Freight pension plans (75,238) December 31, 2022 TFI International pension plans 12,174 TForce Freight pension plans 6,643 Total (66,367) Total 18,817 2,580 (5,256) (2,676) (3,303) (81,881) (85,184) 11,451 1,902 (80,494) (3,918) (69,043) (2,016) 8,871 (2,435) (75,238) (61,073) (66,367) (63,508) 2023 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, 2023 AND 2022 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, 2023 December 31, 2022 TFI International pension plans TForce Freight pension plans TFI International pension plans 4.8% 3.0% 5.0% 5.0% 3.0% 5.0% 2.0% 5.0% 5.0% 2.0% 5.0% 1.6% 2.4% 2.4% 3.0% TForce Freight pension plans 5.2% 2.0% 5.2% 5.2% 2.0% 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, 2023 December 31, 2022 TFI International pension plans TForce Freight pension plans TFI International pension plans TForce Freight pension plans Longevity at age 65 for current pensioners Males Females Longevity at age 65 for current members aged 45 Males Females 22.3 25.0 23.8 26.3 19.1 22.0 20.6 23.4 22.7 24.9 23.6 25.8 At December 31, 2023 the weighted average duration of the defined benefit obligation was: TFI International pension plans TForce Freight pension plans 19.0 21.4 20.6 22.9 9.5 17.6 The following table presents the impact of changes of major assumptions on the defined benefit obligation for the years ended: Discount rate (1% movement) Historical information: Defined benefit obligation Fair value of plan assets Deficit (surplus) in the plan 2023 2022 Increase Decrease (34,520) 44,102 Increase (25,536) Decrease 32,517 2023 2022 226,372 (173,141) 53,231 164,299 (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 Experience adjustments arising on plan obligations Experience adjustments arising on plan assets 8,975 11,651 (112,739) (27,473) 5,823 310 3,220 1,129 2,116 467 The Group expects contributions of $20.0 million to be paid to its defined benefit plans in 2024. Contributions to multi-employer plans Pursuant to the terms of the purchase agreement for JHT, the Group participates in, under collective bargaining agreements, three multi- employer benefit plans named :    Central States, Southeast and Soutwest Areas Pension Plan IAM National Pension Fund Western Congerence of Teamsters Pension Plan The Groups contribution under the plans were expensed as incurred and totaled $3.5 million in 2023. 2023 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, 2023 AND 2022 17. Provisions Balance at December 31, 2021 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 Sale of business Effect of movements in exchange rates Balance at December 31, 2022 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, 2023 As at December 31, 2023 Current provisions Non-current provisions As at December 31, 2022 Current provisions Non-current provisions Note Self-insurance 5 6 5 69,467 - 126,439 (80,040 ) (13,236 ) (4,153 ) (1,465 ) (761 ) 96,251 16,364 159,276 (129,089 ) (16,705 ) (2,666 ) 214 123,645 Other 77,690 280 15,372 (13,470) (306) - - (178) 79,388 3,555 12,937 (52,637) (7,080) - 92 36,255 Total 147,157 280 141,811 (93,510) (13,542) (4,153) (1,465) (939) 175,639 19,919 172,213 (181,726) (23,785) (2,666) 306 159,900 46,940 76,705 123,645 19,625 16,630 36,255 66,565 93,335 159,900 33,918 62,333 96,251 9,985 69,403 79,388 43,903 131,736 175,639 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 3.84% (2022 – 3.99%). Other provisions include mainly litigation provisions of $16.6 million (2022 - $42.3 million) and environmental remediation liabilities of $9.7 million (2022 - $23.4 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, 2023 (382,208) (127,547) 8,600 26,510 51,458 10,054 506 (412,627) December 31, 2022 (360,111) (72,032) 7,497 23,111 53,818 5,686 892 (341,139) 20,615 (433,242) 27,047 (368,186) 2023 Annual Report │85     TFI International Inc. (Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2023 AND 2022 Movement in temporary differences during the year: Property and equipment Intangible assets Long-term debt Employee benefits Provisions Tax losses Other Net deferred tax liabilities Property and equipment Intangible assets Long-term debt Employee benefits Provisions Tax losses Other Net deferred tax liabilities Balance Recognized Recognized directly in income Disposal of December 31, 2022 or loss in equity business combinations (360,111 ) (72,032 ) 7,497 23,111 53,818 5,686 892 (341,139 ) 8,637 10,870 660 5,119 (5,399) 2,953 (396) 22,444 (3,233) (798) 443 (1,720) (2,303) 1,411 10 (6,190) - - - - - - - - Balance Recognized Recognized directly in income Disposal of December 31, 2021 (432,334 ) (78,888 ) 8,025 43,821 57,961 10,272 (2,917 ) (394,060 ) business combinations or loss in equity 1,397 8,231 (31) 6,711 (4,466) (4,058) 696 8,480 7,194 1,956 (497) (27,421) 406 (545) 2,755 (16,152) 67,442 8,490 - - (1,490) - - 74,441 Acquired Balance in business December 31, 2023 (382,208 ) (127,547 ) 8,600 26,510 51,458 10,054 506 (412,627 ) (27,501) (65,587) - - 5,342 4 - (87,742) Acquired Balance in business December 31, 2022 (360,111 ) (72,032 ) 7,497 23,111 53,818 5,686 892 (341,139 ) (3,810) (11,821) - - 1,407 17 358 (13,848) 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 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 2023 86,539,559 (2,609,900) 512,074 84,441,733 2022 92,152,893 (6,368,322) 754,988 86,539,559 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 and PSUs, net of tax Balance, end of year 2023 1,089,229 (28,303) 12,777 4,402 29,185 1,107,290 2022 1,133,181 (68,536) 16,502 6,298 1,784 1,089,229 Pursuant to the normal course issuer bid (“NCIB”) which began on November 2, 2023 and ends on November 1, 2024, the Company is authorized to repurchase for cancellation up to a maximum of 7,161,046 of its common shares under certain conditions. As at December 31, 2023, and since the inception of this NCIB, the Company has repurchased and cancelled 785,140 shares.    During 2023, the Company repurchased 2,609,900 common shares at a weighted average price of $110.36 per share for a total purchase price of $288.0 million relating to the current and prior NCIB. During 2022, the Company repurchased 6,368,322 common shares at a 2023 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, 2023 AND 2022 weighted average price of $89.19 per share for a total purchase price of $568.0 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 $259.7 million (2022 – $499.4 million) was charged to retained earnings as share repurchase premium. Dividends In 2023, the Company declared quarterly dividends amounting to a total of $1.45 per outstanding common share when the dividend was declared (2022 – $1.16) for a total of $124.3 million (2022 - $102.6 million). On February 15, 2024, the Board of Directors approved a quarterly dividend of $0.40 per outstanding common share of the Company’s capital, for an expected aggregate payment of $33.8 million to be paid on April 15, 2024 to shareholders of record at the close of business on March 29, 2024. 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 2023 504,877 86,539,559 340,802 (972,615) 85,907,746 2022 823,232 92,152,893 314,112 (3,107,423 ) 89,359,582 Earnings per share – basic (in dollars) 5.88 9.21 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, restricted share units and performance share units Weighted average number of diluted common shares Earnings per share - diluted (in dollars) 2023 504,877 85,907,746 2022 823,232 89,359,582 1,147,023 87,054,769 1,898,097 91,257,679 5.80 9.02 As at December 31, 2023, no stock options were excluded from the calculation of diluted earnings per share (2022 – 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. 2023 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, 2023 AND 2022 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 Number of options 1,302 (512) - 790 790 2023 Weighted average exercise price 27.89 25.92 - 29.17 29.17 Number of options 2,061 (755 ) (4 ) 1,302 1,273 2022 Weighted average exercise price 25.70 21.84 40.41 27.89 27.60 The following table summarizes information about stock options outstanding and exercisable at December 31, 2023: (in thousands of options and in dollars) Options outstanding and exercisable Exercise prices 26.82 23.70 30.71 40.41 Number of options 13 233 496 48 790 Weighted average remaining contractual life (in years) 0.1 1.1 2.2 3.6 1.9 Of the options outstanding at December 31, 2023, a total of 726,572 (2022 – 1,106,883) are held by key management personnel. The weighted average share price at the date of exercise for stock options exercised in 2023 was $123.72 (2022 – $99.32). In 2023, the Group recognized a compensation expense of $0.2 million (2022 - $0.4 million) with a corresponding increase to contributed surplus. No stock options were granted during 2023 and 2022 under the Company’s stock option plan. Deferred share unit plan for board members (cash-settled) Quarterly cash amounts are paid to the board members on the second Thursday following each quarter. In addition, an equity portion of compensation is awarded, comprised of restricted share units granted annually effective on the date of each Annual Meeting, with a vesting period of one year. Until December 31, 2020, the Company offered a deferred share unit (“DSU”) plan for its board members. Under this plan, board members could 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 Forfeited Dividends paid in units Balance, end of year 2023 310,128 (313,312 ) (170 ) 3,354 - 2022 306,554 - - 3,574 310,128 2023 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, 2023 AND 2022 In 2023, the Group recognized, as a result of the cash-settled director compensation plan, a compensation expense of $1.1 million (2022 - $1.2 million). In personnel expenses, the Group recognized a mark-to-market loss on DSUs of $4.5 million (2022 – gain of $1.3 million). As at December 31, 2023, the total carrying amount of liabilities for cash-settled arrangements recorded in trade and other payables is $2.9 million (2022 - $31.0 million) following the settlement of all outstanding DSUs in 2023 for a total cash settlement of $35.8 million, of which $2.9 million is payable at the end of 2024. 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 6, 2023, the Company granted a total of 55,400 RSUs under the Company’s equity incentive plan of which 38,275 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 $115.51 per unit. On April 26, 2023, the Company granted a total of 7,632 RSUs under the Company’s equity incentive plan of which 7,632 were granted to the directors under the 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 $117.85 per unit. 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. 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 63 4 (145) - (2) 192 2023 Weighted average grant date fair value 58.33 115.81 74.69 36.87 - 69.92 93.62 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 2023 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, 2023 AND 2022 The following table summarizes information about RSUs outstanding and exercisable as at December 31, 2023: (in thousands of RSUs and in dollars) Grant date fair value 70.59 117.85 98.27 115.51 Number of RSUs 71 8 58 55 192 RSUs outstanding Remaining contractual life (in years) 0.1 0.3 1.1 2.1 1.0 The weighted average share price at the date of settlement of the other RSUs vested in 2023 was $115.13 (2022 – $83.28). The excess of the purchase price paid to repurchase shares on the market over the carrying value of awarded RSUs, in the amount of $18.3 million (2022 – $1.2 million), was charged to retained earnings as share repurchase premium. 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 required 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. In 2023, the Group recognized, as a result of RSUs, a compensation expense of $6.0 million (2022 - $6.9 million) with a corresponding increase to contributed surplus. Of the RSUs outstanding at December 31, 2023, a total of 116,368 (2022 – 171,790) are held by key management personnel. Performance share units On February 6, 2023, the Company granted a total of 55,400 PSUs under the Company’s equity incentive plan of which 38,275 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 $135.15 per unit as at grant date and $135.15 per unit as at December 31, 2023. 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 $120.08 per unit as at December 31, 2023. 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 261 55 4 (267) 134 - (3) 184 2023 Weighted average grant date fair value 62.87 135.15 84.93 32.70 32.93 - 109.61 106.17 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 2023 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, 2023 AND 2022 The following table summarizes information about PSUs outstanding and exercisable as at December 31, 2023: (in thousands of PSUs and in dollars) Grant date fair value 89.64 100.43 135.15 Number of PSUs 71 58 55 184   PSUs outstanding Remaining contractual life (in years) 0.1 1.1 2.1 1.0 The weighted average share price at the date of settlement of the other PSUs vested in 2023 was $115.13 (2022 – $104.53). The excess of the purchase price paid to repurchase shares on the market over the carrying value of awarded PSUs, in the amount of $36.6 million, was charged to retained earnings as share repurchase premium (2022 – $1.8 million). 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 2023, the Group recognized, as a result of PSUs, a compensation expense of $7.3 million (2022 - $7.3 million) with a corresponding increase to contributed surplus. Of the PSUs outstanding at December 31, 2023, a total of 116,368 (2022 – 171,790) are held by key management personnel. 22. 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 23. 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 2023 2,805,924 999,922 3,805,846 2022 3,394,544 1,197,647 4,592,191 Note 16 21 21 2023 2,007,954 8,399 58,537 16,743 13,451 4,538 2,109,622 2022 2,216,769 9,570 116,506 6,688 14,648 (1,325) 2,362,856 2023 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, 2023 AND 2022 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 (gain) loss 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 years Deferred tax expense (recovery) Origination and reversal of temporary differences Variation in tax rate Adjustment for prior years Income tax expense Income tax recognized in other comprehensive income: 2023 Before Tax (benefit) tax expense 2023 59,432 16,042 (8,121) 165 (491) 13,844 80,871 (8,612) 89,483 2023 192,388 1,943 194,331 (20,102) 1,551 (3,893) (22,444) 171,887 2022 Before Tax (benefit) Tax expense 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 Net of tax (10,148) 63,508 292 (72,046) (5,495) (23,889) Foreign currency translation differences Defined benefit plan remeasurement gains (losses) Employee benefit Gain (loss) on net investment hedge Change in fair value of investment in equity securities (881) 2,676 - 37,913 8,383 48,091 - 660 - - (10,148) 2,016 85,184 21,676 12 304 (4,095) (76,141) (1,078) (6,573) (7,374) 16,515 - (1,792) 39,705 7,281 1,102 (30) 48,121 Net of tax (881 ) Reconciliation of effective tax rate: Income before income tax Income tax using the Company’s statutory tax rate Increase (decrease) resulting from: Rate differential between jurisdictions Variation in tax rate Non deductible expenses Tax deductions and tax 2023 676,764 2022 1,065,641 26.5% 179,342 26.5% 282,395 0.1% 0.2% 0.3% 548 1,551 2,005 -0.2% 0.0% 0.3% (2,206 ) (242 ) 3,105 exempt income* Adjustment for prior periods Multi-jurisdiction tax (40,172 ) (1,392 ) 921 242,409 * 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. (14,909) (1,950) 5,300 171,887 -3.8% -0.1% 0.1% 22.7% -2.2% -0.3% 0.8% 25.4% 2023 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, 2023 AND 2022 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 89.9% (2022 – 85.3%) of the Group’s trade receivables are not past due or 30 days or less past due; Bad debt expense has been less than 0.3% of consolidated revenues for the last 2 years. 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 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 December 31, 2023 894,771 December 31, 2022 1,030,726 Allowance for expected Total 2023 619,888 159,928 47,529 96,932 924,277 credit loss 2023 1,817 2,909 8,727 16,053 29,506 Total 2022 696,357 184,907 83,676 94,824 1,059,764 Allowance for expected credit loss 2022 1,124 2,904 8,712 16,298 29,038 2023 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, 2023 AND 2022 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 2023 29,038 2,100 - 30,992 (33,302) 678 29,506 2022 27,317 127 (1,914) 19,644 (14,129) (2,007) 29,038 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 the 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 $915.3 million availability as at December 31, 2023 (2022 - $911.8 million) and an additional $190.0 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 (2022 - $185.8 million, CAD $245 million and USD $5 million). The following are the contractual maturities of the financial liabilities, including estimated interest payment: 2023 Trade and other payables Long-term debt Other financial liability 2022 Trade and other payables Long-term debt Other financial liability Carrying Contractual amount cash flows Less than 1 year 1 to 2 years 2 to 5 More than 5 years years 671,936 1,884,274 13,572 2,569,782 671,936 2,644,474 13,572 3,329,982 671,936 257,414 12,732 942,083 - 354,206 840 355,046 - 293,772 - 293,772 - 1,739,082 - 1,739,082 708,768 708,768 708,768 - 1,315,757 1,659,085 80,916 268,727 229,969 1,079,473 - 8,775 2,033,300 2,376,628 798,459 268,727 229,969 1,079,473 8,775 8,775 - - - - 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. The Group buys investment in equity securities to hold the investments for the long term for strategic purposes. All investments are designated as fair value through OCI. 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 2023 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, 2023 AND 2022 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 2023 41,239 (7,379) (1,654,689) (1,620,829) 1,655,000 34,171 2022 50,732 (8,301) (1,079,774) (1,037,343) 1,080,000 42,657 The Group estimates its annual net USD denominated cash flow from operating activities at approximately $470 million (2022 - $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, 2023 1.3497 1.3243 December 31, 2022 1.3013 1.3554 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 2022. Balance sheet exposure Long-term debt designated as investment hedge Net balance sheet exposure e) Interest rate risk 1-cent Increase (12,239) 12,497 258 2023 1-cent Decrease 12,239 (12,497) (258) 1-cent Increase (7,653) 7,968 315 2022 1-cent Decrease 7,653 (7,968) (315) 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 2023. At December 31, 2023 and 2022, the interest rate profile of the Group’s carrying amount of interest-bearing financial instruments excluding the effects of interest rate derivatives was: Fixed rate instruments 2023 1,884,182 1,884,182 2022 1,315,757 1,315,757 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. 2023 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, 2023 AND 2022 f) Capital management 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: e) To ensure proper capital investment in order to provide stability and competitiveness to its operations; f) To ensure sufficient liquidity to pursue its growth strategy and undertake selective acquisitions; g) To maintain an appropriate debt level so that there are no financial constraints on the use of capital; and h) To maintain investors, creditors and market confidence. The Group seeks to maintain a balance between the highest returns that might be possible with higher levels of borrowings and the advantages and security of 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. There were no changes in the Group’s approach to capital management during the year. 2023 1,884,182 2,591,410 0.73 0.42 2022 1,315,757 2,463,070 0.53 0.35 The Group’s credit facility agreement requires monitoring of 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”), 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, 2023 and 2022, 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, credit availability and future interest rates. 2023 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, 2023 AND 2022 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, 2023 Carrying Amount Fair Value December 31, 2022 Fair Value Carrying Amount 50,209 50,209 85,964 85,964 894,771 944,980 894,771 944,980 1,030,726 1,116,690 1,030,726 1,116,690 27,119 27,119 19,657 19,657 671,936 1,884,182 2,583,237 671,936 1,678,662 2,377,717 708,768 1,315,757 2,044,182 708,768 1,300,591 2,029,016 Interest rates used for determining fair value The carrying amount of the Group’s debt does not approximate fair value. The interest rates used to discount estimated cash flows to calculate fair value, when applicable, are based on the current interest rates for debt with similar terms, company rating and remaining maturity. Fair value hierarchy The 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, 2023, and Level 2 investments that are marked to market using valuation techniques in which all significant inputs were based on observable market data. 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 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, 2023, the Group had $106.2 million of outstanding letters of credit (2022 - $66.8 million). c) Other commitments As at December 31, 2023, the Group had $62.3 million of purchase commitments (2022 – $149.8 million) and $44.4 million of purchase orders for leases that the Group intends to enter into and that are expected to materialize within a year (2022 – $13.9 million). On December 22, 2023, the Group has signed a definitive agreement to acquire Daseke, Inc., a flatbed and specialized transportation and logistics company in North America, for $8.30 in cash per common share, including merger consideration for the common stock, retirement of Daseke's preferred stock, payoff or assumption of outstanding debt, net of cash and estimated transaction fees and expenses, estimated at $1.1 billion. The transaction is subject to approval of holders of a majority of the outstanding shares of Daseke common stock and other customary closing conditions, including regulatory approvals, and is expected to close during the second quarter of 2024. 2023 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, 2023 AND 2022 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 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 2023 15,457 619 8,674 24,750 2022 16,858 800 10,874 28,532 2023 Annual Report │98       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 Thursday, April 25, 2024 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 T F I I N T E R N A T I O N A L 2 0 1 7 A N N U A L R E P O R T www.tfiintl.com

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