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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
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