TransForce delivers steady results; reconsidering income trust setup

MONTREAL — Canada’s largest for-hire carrier says recent changes to how income trusts are taxed taxes and a weakened North American market has its board considering a conversion to a corporate structure.

“High fuel costs and the strong Canadian dollar in the fourth quarter of 2007 continued to be challenging for our industry and for some of the TransForce companies,” said Alain Bédard, chairman, president and CEO. “The downturn in economic activity is unfortunate but not unexpected. While some businesses such as cross-border LTL and truckload have been negatively affected by declines in trade activity, we have other businesses performing very well.”

Despite recent market volatility, the company announced it increased its revenues in the final quarter of 2007 to $493.5 million from $456.8 million the year before.

Bedard attributed some of the growth to a string of significant acquisitions and above average strength in its parcel delivery and ancillary services.

Alain Bedard says he doesn’t expect a
rebound in the market anytime soon.

Total revenue for the year increased to $1.9 billion from $1.8 billion in 2006. Significant acquisitions were responsible for $124.1 million of that, says the company.

TransForce has acquired more than 75 competitors over the last five years and says it doesn’t plan on putting the brakes on fleet buying. However, federal rules introduced in 2006 that change how income trusts are taxed could slow down the recent pace.

“There continues to be a significant opportunity for TransForce to play a leading role in the consolidation of the Canadian transportation industry, particularly in light of the current business and economic environment,” comments Bedard. “The rules … may limit TransForce’s ability to continue with its strategic objectives especially as it relates to the ability to raise funds and thereby effect acquisitions.

As a result, TransForce’s board has directed management “to investigate all alternatives … including possible conversion to a corporate structure.”

For this year, though, the company’s geographic and business line diversification meant that unitholders were able to benefit from gains in our parcel division as well as our waste management, logistics, fleet management and personnel and leasing businesses, says Bedard.

He says he does not expect a return to a more buoyant North American economy in the short-term but he remains convinced that the company’s strategy and operating management are working effectively.

He noted that overall business conditions may encourage further outsourcing by client companies and that this would be a positive development for the Fund’s acquisitions in the logistics, dedicated fleet and personnel services businesses.