TFI International Inc. (TFII) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the TFI International 2022 Annual and Special Meeting. [Operator Instructions] I would like to remind everyone that this call is being recorded on Thursday, April 28, 2022. I will now turn the call over to Alain Bedard, Chairman of the Board, President and Chief Executive Officer of TFI International. Please go ahead, sir.

Well, thank you, and good afternoon, ladies and gentlemen. Welcome to the TFI International 2022 Annual and Special Meeting. Again, this year, in light of the COVID-19 pandemic, we have asked all shareholders not to attend the meeting in person and to vote by proxy prior to the meeting, which many of you have done. We have taken measures to conduct this meeting as -- so as to protect the health of all participants, including remote telephone participation by myself, by the scrutineers for the meeting and others. We are therefore making this meeting available by telephone. Shareholders will be able to ask questions in a few minutes after we have conducted the official business of the meeting. In order to ask your question, please follow the instruction from the operator at the conclusion of the official business. We thank you for your understanding. We'll now start the meeting. I will act as Chairman of the meeting. And with the consent of the meeting, I'll ask Josiane Langlois, who is present at the TFI's head office in Montreal, to act as Secretary. Also, with the consent of the meeting, I now ask Steve Gilbert and Claire Girard of Computershare Trust Company of Canada, to act as scrutineers for this meeting to tabulate the number of shareholders and the number of shares represented at this meeting in person or by proxy and to report thereon to me as Chairman of the meeting. There are several routine matters to be dealt with at this meeting. To expedite matters, I've arranged for certain shareholders to make and second various motions. The matters to be considered at this meeting are the presentation of the 2021 annual financial statements of TFI; the election of the directors; the appointment of TFI's auditor; a nonbinding advisory vote approving the compensation of TFI's named Executive Officer, commonly known as say on pay; and a nonbinding advisory vote on the frequency of our say-on-pay vote. The election of the directors will be held by ballot. Unless a ballot is required by a registered shareholder or a proxy holder, all other votes at the meeting will be conducted by voice vote as permitted by the Canadian Business Corporations Act. I'll now begin the official portion of this meeting. I'll call upon the scrutineers to present the report on attendance, and I direct that such report be annexed to the minutes of this meeting as is scheduled.

Good afternoon, Mr. Chairman. We, the undersigned scrutineers from Computershare Trust Company of Canada, hereby report that there are at least 7 shareholders and/or proxy holders present at this meeting representing in person or by proxy 74,376,517 shares, being 80.79% of the total 92,057,998 outstanding shares of TFI International Inc. And we will hand in a report signed by myself, Steve Gilbert, and by Claire Girard, both the scrutineers. Thank you.

Well, thank you, Mr. Gilbert. So the scrutineers' report shows a quorum to be present. I declare the meeting to be regularly constituted. The meeting -- the notice calling for this meeting and accompanying documents have either been mailed or made available electronically to all the shareholders of the corporation and to the corporation's auditors. With the consent of the meeting, we will dispense with the reading of the notice. Also, with the consent of the meeting, we will dispense with the reading of the minutes of the last meeting of shareholders held on April 27, 2021, and I direct that such minutes be taken as read and approved and that they be signed as being correct. The first item on the agenda is the presentation of the 2021 annual financial statements. The annual report containing the consolidated financial statements of the corporation for the fiscal year ended December 31, 2021, and the auditor's report thereon have been mailed to shareholders who requested them. They are also available electronically on SEDAR, EDGAR and on the TFI International website. The next item of business is the election of the directors of TFI International. I would now like to introduce the 10 candidates for election this year, and they are Leslie Abi-Karam, Andre Berard, William T. England, Diane Giard, Richard Guay, Debra Kelly-Ennis, Neil D. Manning, Joey Saputo, Rosemary Turner; and myself, Alain Bedard, Chairman of the Board, President and Chief Executive Officer of TFI International. I declare the meeting open for nomination, and I would ask Josiane Langlois to present her nominations.

Thank you, Mr. Chairman. I'm Josiane Langlois, and I am a shareholder and a proxy holder of TFI International. I nominate each of Leslie Abi-Karam, Alain Bedard, Andre Berard, William England, Diane Giard, Richard Guay, Debra Kelly-Ennis, Neil Manning, Joey Saputo and Rosemary Turner as directors of TFI International Inc. to hold office until the next Annual Meeting of the Shareholders or until their successors are elected or appointed.

Well, thank you, Josiane. Are there any further nominations? Okay. So as there are no further nomination, I declare the nominations closed. We will now vote. So because TFI International has a majority voting policy for the election of directors, we will vote by ballot in order for the votes to be accurately compiled. As all ballots were signed, submitted and tabulated prior to this meeting by proxy holder, including myself and Josiane Langlois, I now call upon the scrutineers to present the results of the vote on the election of directors.

Mr. Chairman, as scrutineer, we report that the 10 nominees received votes in favor ranging from 94.05% to 99.91% of all shares voted or withheld from voting.

Well, thank you, Mr. Gilbert. So based on those results, I declare that the 10 nominees have been elected as director of TFI International to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. TFI International will issue a press release announcing the results and file a detailed report of voting results on SEDAR and EDGAR shortly after this meeting. The next item of business is the appointment of the auditors of TFI International, and I would ask Mr. David Saperstein to present a motion.

Well, thank you, Mr. Bedard. And I am David Saperstein, and I am a shareholder and a proxy holder of TFI International Inc. Be it resolved that KPMG LLP Chartered Professional Accountants be and they are hereby appointed auditor of TFI International Inc. to hold office until the next Annual Meeting of Shareholders at such remuneration as may be fixed by the directors of TFI International and the directors be and they are hereby authorized to fix such remuneration.

Okay. Thank you, Mr. Saperstein. So I'll now ask Josiane Langlois to second the motion.

I second the motion.

Okay. So all those in favor, please say yes. [Voting]

All those against, please say no. [Voting]

Good. So I declare the motion carried. The next item of business is a nonbinding advisory vote on executive compensation or say on pay as set out in our management information circular dated March 18, 2022. I would ask Josiane Langlois to present the motion set out in our management information circular.

Resolved that on an advisory basis and not to diminish the role and responsibilities of the Board that the shareholders approve the compensation of the corporation's named executive officers as disclosed in the management information circular dated March 18, 2022, including the compensation discussion and analysis, the accompanying compensation table and the relative narrative disclosure.

Thank you. And I would ask David Saperstein to second the motion.

I second the motion.

Thank you. So all those in favor, please say yes. . [Voting]

All those against, please say no. [Voting]

Good. So I declare the motion carried. The next item of business is a nonbinding advisory vote on the frequency of our say-on-pay vote. I will ask Josiane Langlois again to present the motion set out in our circular.

Resolved on an advisory basis and not to diminish the role and responsibilities of the Board that the shareholders wish the corporation to include an advisory vote on the corporation's executive compensation every year, 2 years or 3 years.

Well, the proxy form sent to shareholders provide an opportunity to choose among these 3 options, that is holding a say-on-pay vote every 1, 2 or 3 years. TFI's Board of Directors recommended that shareholders vote on say on pay every year. I now call upon the scrutineers to present the results of the proxy vote on the frequency of say on pay.

Mr. Chairman, we report that of the 74,327,888 shares voted, 99.37% of the votes are in favor of the motion for every year, 0.08% voted for every 2 years, and 0.1% voted for every 3 years. Thank you.

Thank you. So the Board of Directors will review the results of this advisory vote, and we thank all shareholders who expressed their view by voting. So as we have completed the official business of the meeting, I now ask for a motion to terminate the meeting.

I move that the meeting be terminated.

I second the motion.

All those in favor, please say yes. [Voting]

All those against, please say no. [Voting]

Thank you. So I declare the motion carried and the official portion of the meeting terminated. So the meeting is now open for questions. So operator, please proceed with the question period.

[Operator Instructions] Your first question comes from the line of [ Shang Wu ].

This is [ Shang Wu ], and I'm very impressed by TFI under the current leadership. I wonder if the CEO and the Board has a succession plan and how long the CEO plan to stay as the CEO going forward.

Well, thank you, sir. It's a very good question. And for sure, it's also a question that the Board really looked at. And for sure, we have a plan. And to answer your second part of your question, the CEO is in there, again, for probably another 5 years. I would like to be part of that team at least for another 5 years. We got so much to do. We just acquired a fantastic company in the U.S. That is called TForce Freight now. We have lots to do over there. It's just -- I mean, we're just scratching the surface as we speak now after a year that we bought it. It's a great team. I mean we're having our Canadian folks helping our U.S. team to perform better. So this is not going to happen overnight. It's a big company, and it will take some time. So with all these different challenges, my commitment to the Board and to our shareholders and to our family members, because TFI is like a family, is I would like to stay at least for 5 year, unless the Board says, "I think you should retire." So you haven't said that yet, so I mean...

I apologize in advance as I will be mispronouncing the last name, but the second on the queue is [indiscernible] from [ Trident ].

I have 2 questions, if I may. First, I'd like to ask about the pricing power that the company has in light of recent spike in inflation and the projection that, that is going to last longer than our central banks have outlined previously. So essentially, can we pass on the increased cost of fuel and other expenses on to our customers? And the second question is related to the use of excess cash going forward. I know that there has been an increase in that long-term debt as a result of acquisitions. I'd like to know how capital will be allocated in terms of dividend increases, share repurchases and/or long-term debt as you foresee it, say, over the next 5 years.

Well, the first part of your question, I mean, I think that we're going to be releasing our Q1 numbers after market close today, and I think that this will answer your question. I mean for sure, I mean, at TFI, everybody is rolling up their sleeves. We know that inflation is with us for not for 6 months, it will last. The supply chain system around the world, okay, has been affected badly by COVID, by this war now that we have in Europe and all that. So it will take some time before our supply chain gets back to normal. And in the meantime, for sure, we're going to have to go through some inflation because the price of energy is going to go high like it is now. It may reduce depending on what happens in Europe, but still the foreseeable future is that it will probably remain high. And by looking at our Q1 results that we will publicize after market close today, I think it's going to be a confirmation that the team at TFI is really, really doing a fantastic job. Okay. So in terms of what are we going to do with our cash flow, I mean we said that TFI generates probably a little bit more than USD 700 million of free cash flow. So our priority number one, and we stated, is we have 20% of our free cash flow, normally, above 20% has to go back to our shareholders in the form of either dividend or buy back shares. So that is number one. Number two has always been M&A, right? But we've said that every 2 to 3 years we do something of size. But in between those 2, 3 years, we do $200 million to $250 million of small, nice tuck-in deals that we've done year-after-years, and we're going to keep doing the same thing this year, right? And then what's left is for reducing our debt. So our forecast, if nothing changes, is that our debt will be reduced by about USD 400 million by the end of '22. Our leverage is -- roughly, is around 1.5x EBITDA. And the forecast is that unless we do a lot of M&A, it's going to go down to maybe 1.25x, 1x to 1.25x depending on M&A and NCIB. So the last leg, okay, the fourth leg is NCIB. So for sure, we were not very active in Q1 in terms of our NCIB. Based on today's price of $100 for TFI share -- CAD 100, okay, for sure, you will see us a little bit more active in Q2.

It appears that we have no further questions, so I will now turn back the call to Mr. Alain Bedard for closing remarks.

Well, thank you, operator. So ladies and gentlemen, to ask -- sorry, so thank you, operator. And thank you to our shareholders for your support of TFI International. So this concludes our meeting. Thanks a lot.