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TFI International Inc. reported an increase in both profits and revenue in the fourth quarter as it works toward completion of its acquisition of UPS Freight, the less-than-truckload and dedicated truckload divisions of UPS Inc., later this year.
The Montreal-based truckload and logistics company also said that it is changing its financial reporting to U.S. dollars to reflect its growing business in the U.S. and its planned acquisition of the UPS division.
TFI’s net income from continuing operations grew 49% to $86.3 million in Q4 compared with $58 million in the same period a year earlier. Diluted earnings per share from continuing operations rose to 91 cents from 70 cents.
Revenue increased 13% to $1.1 billion compared with $989 million a year earlier.
The company’s gains extended across most of its business segments. Revenue grew 16% for its package and courier business segment, 2% for truckload and 59% for logistics. But revenue declined 10% for less than truckload, compared to the same period a year earlier. TFI logged increases in operating profits across all of its segments.
“We generated robust operating and financial results despite the ongoing pandemic and our focus on health and safety of our employees and customers,” CEO Alain Bédard said in a Feb. 8 conference call with industry analysts.
For the year, TFI reported net income from continuing operations of $275.7 million, a 12.9% gain over the $244.2 million posted a year earlier. Revenue, however, decreased 3.1% to $3.8 billion from $3.9 billion in 2019.
In January TFI paid $800 million in cash to acquire UPS Freight, the LTL and dedicated truckload divisions of UPS. Most of the business will fall under TFI’s less-than-truckload sector and operate under its new name, TForce Freight. The unit generates about $3 billion in annual revenue.
TForce Freight will continue to provide LTL services for UPS. Moreover, the shipping giant has agreed to continue to provide freight volumes and other services to TForce Freight for a base term of five years. The deal is expected to close in the second quarter.
Bédard said it will take several years for TFI to absorb and integrate the UPS Freight acquisition. The company’s first goal is to make operational improvements by updating the 1,000-tractor fleet that comes with the UPS business.
“Our focus will be equipment,” Bédard said. “We need to reduce maintenance, improve safety and improve the driver’s experience. Instead of driving a 2004 tractor they will be driving a 2021.”
Lowering those expenses will have an immediate impact of starting to reduce the business unit’s operating ratio — the percentage that expenses represent of revenue. TFI’s legacy LTL business has an operating ratio of about 83. By comparison, Old Dominion Freight Line, a major LTL competitor, posted an operating ratio of 76.3 in the fourth quarter.
“We will be really busy in the U.S. getting this company to the level of profitability that is normal,” Bédard said.
But the high level of freight demand and tight capacity in the U.S. create a tailwind for TFI as it absorbs the UPS business, he said.
“The customer reception is that this is a fantastic transaction because, as you know, UPS Freight was very, very minimal in terms of their portfolio and a percentage of the UPS business. So it was not a real focus of theirs. It will be a real focus of ours,” he said.
Bédard said TFI will put any more large acquisitions on pause while it integrates UPS Freight, but noted that the company is constantly looking at small, strategic deals that add to its business.
Earlier in February, TFI announced a deal to purchase Fleetway Transport Inc. of Brantford, Ontario, truckload and heavy-haul motor carrier.
TFI International ranks No. 11 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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