Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the TransForce Second Quarter 2016 Results Conference Call. [Operating Instructions] Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, Friday, July 22, 2016. I will now turn the conference over to Alain Bédard, Chairman, President and CEO. Please go ahead, sir. Alain Bédard: Well, thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us this morning. Our 2016 second quarter results press release was issued yesterday after market close. Let me begin today by giving you some of the key highlights of the quarter. So in broad terms, market conditions in North American trade market have been somewhat challenging and the Canadian economy has been clearly weakened by the prevailing condition in the energy markets. These issues are reflected in our results for the second quarter, particularly in regard to organic growth. That said, TransForce was able to generate solid Q2 operating results thanks in large part to continuous effort made in rightsizing operations, rigorously controlling costs and generating cash flow. TransForce initiatives to move asset-light activities, including e-commerce in the U.S., also led to further volume and margin increase in our P&C segment. Our decentralized business model is geared toward quickly aligning supply with demand as market conditions evolve. And this model continues to serve the company well. Total revenue from continuing operations in Q2 was $978 million, a 5% decline compared to the same quarter last year. Before fuel surcharge, revenue from continuing operations was down 2%…

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. [Operator Instructions] Your first question comes from the line of Mona Nazir from Laurentian Bank. Please go ahead.

Good morning, everyone. Alain Bédard: Good morning, Mona.

Just a couple questions from me. Firstly, the core of your company in strategy has been your M&A activity. I'm just wondering if you could speak to why you decided to create an M&A position now, as when I look back, you've been pretty successful in consolidating the market. Is it because there are larger acquisitions or more complex structure, as we've seen a lot of new entity formation on the Truckload side? So any elaboration would be much appreciated. Alain Bédard: That's a very good question. You know, I've been doing M&A for the last 20 years within TFI, and we have the opportunity to have a young guy, he's not even 40 years old, with lots of experience, U.S.-based, because as you know, and I've said it many times, acquisition in Canada is pretty limited to us. So yes, we're doing the small deals in Ontario here and there, but anything significant in Canada, for us, it's becoming some kind of a problem because of our size. So this is why the focus has to be on the U.S. I was thinking that we had the opportunity to have this nice man to help us on the M&A side and also on other subjects, because he's got lots of knowledge, very well educated, he knows a lot of people. So it's really an investment in the future that we're doing, and I think David is going to be a good support for Greg and myself in trying to grow this company south of the border.

Okay, and the timing - Alain Bédard: And Mona - excuse me - but Mona, let me say one thing that's clear: I'm not retiring next week. Okay? So David is here to help me and Greg, in growing this company, but it's not because I'm going to be retiring within six months.

Okay. And the timing of the transaction could still occur in 2016 or 2017, correct? Alain Bédard: Absolutely. I mean, we've looked at many, many opportunities and we just want to make sure that it's the right fit, it fits well within TFI, so absolutely. I mean, there's lots of opportunity, like I've always said, you buy on bad news and you sell on good news. So right now, what we're doing is we're buying on bad news our stock because our stock has really been depressed over the last year or two. So that's what we're doing. But as soon as we find the right opportunity, the right fit, definitely, we'll move on.

Okay, perfect. And just last week when your priced up back into - going back through your remarks in conference calls over the last year plus, I know looking at the different divisions, LTL has not been looking that great, but recently we've been seeing some positive trends on the P&C side that have helped. But on the Truckload side, we saw some optimism a little bit on the yield side and then volumes. But that has not held. I'm just wondering, how do we think about organic growth going forward? Do you see it getting better or remain as it is, heading into Q3 and the balance of the year? Alain Bédard: So LTL is shrinking and will keep on shrinking in Canada. There's no question about that. I mean, our Q2 was difficult on the top line because of the situation in western Canada. There are two provinces that are really affected badly and Newfoundland in the east. And also the brick and mortar guys that are being serviced by our LTL companies are suffering because of the e-commerce at the same time. So it will keep on shrinking, what, 3%, 4%, 5%, and also our goal is really to protect our margin and to improve our bottom line at the same time by reducing our costs. And if we ever see an opportunity that fits well in our LTL market in Canada, well, we'll look at it. But I don't see anything in the next 12 to 18 months in the LTL. On the P&C side, though, organic growth, we definitely see that moving on in the U.S. and at the same time in Canada. I mean, our Canpar operation is growing its e-commerce business; the same thing with Dynamex in Canada and the same thing in…

Thank you, that was really good color.

Your next question comes from the line of Freddy Chamin [ph] from BMO. Please go ahead.

Good morning, Alain. I want to dig into the P&C segment margin a little bit. You've had a decent improvement and it seems like you're signaling that there's quite a bit of sustainability to that going forward. Can you give us an idea, sort of, what the margins are like in the U.S. and Dynamex and what are we doing in Canada and what really drove that improvement, and how should we think about where the upside will come from over the next few quarters in that segment? Alain Bédard: Very good question, Freddy. So here's the situation. The e-commerce in the U.S., and everybody knows about that, it's been growing for many, many years. But the last mile guys were never really part of the equation. I mean, they were just a very insignificant player in the e-commerce until about a year ago, where one of our customers started to open up a lot of distribution centers. So that creates a lot of demand for the last mile guy, and that will keep on growing in the U.S. And the same thing: We have two major customers in e-commerce that will be growing in the business like there's no tomorrow in the U.S. And we're piggybacked on the growth of these guys. And at the same time, we also are letting go low-margin guys, the guys that are like, oh, you're a 2% guy. No, no, no. 2% doesn't fit our model, a 2% bottom line is not going to make it at Dynamex Canada and Dynamex U.S. So we are replacing all that low-margin business as we speak. And we've been doing that for 1 ½ years to 2 years now. So the same thing in Canada. We have a lot of bad accounts filled with low margin…

Okay. So if you - like you know you had a 2% organic growth, and you're signaling that maybe you had some upgrade in the revenue quality like you let go some business. Look, how should we think about the real organic growth if we start to see sort of more stability in the book-of-business and really like - is this a business that can grow mid-single digit once we get to that point where the quality of the book is… Alain Bédard: Mid-single digit is really something that's attainable right now, you don't see it because - I mean we're replacing low margin account by better margin account. So in the U.S. I would say that the clean-up is - I would say probably 95% done. But Dynamex Canada we have a big job to do there, we have a big clean-up to do there. I mean - so we have lots of very low margin account, I mean - if you look at all the division that we have within our P&C, Dynamex Canada is really the dog, it's the lowest margin division that we have within this division and the guys are working really hard to improve that.

Okay. The second question just quickly, I mean on the truckload side - you made this U.S. acquisition a while ago, Transport America. And it feels like you're saying that there is - that you want to maybe expand that exposure in U.S. and I'm just wondering sort of given your experience right now so far with Transport America and the U.S. Truckload market in general, like what's the appetite of growing this business? Is it - feels like you want to be bigger there but at the same time this is a very challenging market and I'm not sure what we should be in the making of it like longer term is this - business is going to be much bigger part of transport or is this - what's the strategy, the end game there? Alain Bédard: Well, you see we jumped into the U.S. Truckload market in the summer of 2014. And that was a great period for truckload because you know there was lots of demand for truckload and if you look at the truckload market in the U.S. it's highly fragmented, its way worse than in Canada. And at the same time you had a lot of good companies that add trucks. And this favorable situation we have because of that strike in LA, and because the dollar was still okay - disappeared in 2015. So we just started mid-2015 to see the effect of adding trucks on the road with a lower demand environment. So a lot of truckload guys in the U.S. are suffering right now because of these poor decisions. So you say well, why you would grow more into an industry that so not disciplined like that? Well, I think that - what we could do is just say; you know what…

Yes. Good color, I get it. Thank you.

Your next question comes on line of Walter Spracklin from RBC. Please go ahead.

Thanks very much, good morning, Alain. Alain Bédard: Good morning, Walter.

So I'll start - continue on the truckload, I mean down the road you've signaled that your valuation is somewhat negatively impacted by the dichotomy between a traditional truckload business and you know a last mile business that is really tapping the growth of some the e-commerce initiatives, and you talked about perhaps spinning-off truckload. Is that still in the books? Are you waiting for a better market? Is that - what would be the timeframe there if you're continuing with that strategy? Alain Bédard: Walter, for sure it's not going to be a 2016 event. I mean the market is really not good right now and on the truckload side in the U.S. - I mean there is no IPO, there is nothing that's going to happen in 2016. So really in 2016 is - can we make that type of acquisition that I was just discussing with Freddie there. I mean can we find that right company that's going to be the right fit. So that's what we're looking at right now, but the plan, which size - for sure it's something that I've got in my mind and we'll see if it makes sense in 2017 but right now it's not really part of the - really the focus right now.

Okay. And if I could come back to your outlook, you had guidance out there in my notes the last check was around the 450 to 465? Alain Bédard: Yes.

Any update there in terms of your guidance on EBITDA and cash flow - free cash flow? Alain Bédard: So what we said is 450 to 465, and if you look at where we have today after two quarters it's very disappointing because it's going to be a hell of a job to really reach that target because I've said it from day one, we believe that Q1 and Q2 will be difficult and Q3 and Q4 would be better. We still believe that, that Q3 and Q4 will be much better than what we saw in Q1 and in Q2. Don't forget that in Q2 we had a few million dollars of the exceptional cost like professional fees, and some accident that were really, costly to us. Now that being said, are we still feeling good that is going to be north of 450, no I don't think so, could be between 435 and 450 I think that's what - that's where we are today between 435 and 450 because of the very slow start of our - Q1 and Q2, without any acquisition I feel that's pretty good. And then in terms of cash flow Walter, cash flow is not going to change much, it's not going to change much, free cash flow.

Okay. And then just on the same note and just going through the divisions and listening to what you said on P&C, seeing organic growth, seeing margin expansion, again I think I have in my notes around once - I think it was a wide range you had four EBITDA potential in 2016 but do you have - on a P&C and LTL bases those been the growth, the ones that are really performing well here. Any sense by - are you updating any EBITDA guidance for those two segment separately? Alain Bédard: No, not now, I mean we need Q3 because I think that you will see some good improvement in the P&C market in Q3 and in Q4. And then probably in October we will be in a better position to have a better feeling of what's going on with the truckload market in the U.S., what's going on with our growth in the last mile business that we have because like I was saying, we have two major customers that are really helping us grow this e-commerce in the U.S. In Canada we have two good customers as well. So I mean we have to see a little bit clearer because as I said our e-commerce in the U.S. with one customer just a year and half ago was like zero, and now we're probably run - it will be probably be running a north of $35 million for this year.

And those two customers, do you have them - what are their contracts, are they locked in for a number years or is it more on a short-term basis? Alain Bédard: It's - contracts in our world, unless it's really dedicated Walter, it doesn't really existing. So it's more likely a relationship, we provide very, very good service to these guys. They are very demanding customers because e-commerce is - a lot of it is service, service. If they go on the website of our customer, they don't want see that we're short of the product, and the product is late. So these customers are highly demanding, so we follow the service activity day-by-day, side-by-side. We're servicing with customer number one in the U.S. were up to 17 site that we serviced these guys from. Customer number two, only two site as we speak now - no, more than that, five sites. And we're going to be probably by early next year into the 10 to 12 site with these other guys.

Okay. So you could double - in order of magnitude is that - suggesting a doubling on a number two there? Alain Bédard: It's going to be probably doubling yes, and these guys are very, very smart. They came to market it was okay but not great, but these guys are so much money and they have so much brain power that they are coming back. We're just opening with them in San Jose, a new facility just for them, and they are coming back with a new recipe which I think it's going to be a home run.

Final question, in that e-commerce side, are there any new customers that - new large customers that you are bidding right now that you see some opportunity to get new business outside of the strong growth you're getting from your existing customers? Alain Bédard: The brick and mortar guys Walter, they still have a lot of issues and trying to figure out the e-commerce. So we have one in Canada that it's going to be a probably a $6 million account, it's a large brick and more guys. And I think they're testing the product in Canada before you know going full fledge in the U.S. But we're talking to a lot of them, okay, if you take a retailer in Canada big retailer in Canada the problem that he has is that he's got franchisees. Okay. So franchisees got a territory. So how what how do you servers that territory with e-commerce, right?

Got it. Alain Bédard: You understand what I am saying. So it's a problem for them, so it's a problem for us, but to me it's just we're just scratching the surface of the e-commerce. Walter it is just we're in the early or like in the first inning.

Okay. All right, well that's all my questions. Thanks very much, Alain. Alain Bédard: Thank you, Walter.

Your next question comes from Benoit Poirier from Desjardins Capital Markets. Please go ahead.

Good morning, Alain. Alain Bédard: Good morning, Benoit.

Just to come back on your package or NCP business what would be roughly the size right now and what could be kind of be your forecast in terms of the revenue next year given the side that you are going to expand with the number two customer? Alain Bédard: What we said is e-commerce growth is going to be in 2016 in the neighborhood of about 160 or 150 maybe 175. For sure in 2017 the way we see it is that it's going to be probably closer to 225 and it could go up to 275. I'm talking both Canada and the U.S.A.

Okay, perfect. And you talked about dynamic and the fact that it's still - there is more restructuring to be done. I'm just wondering what is the magnitude of the revenues you could be looking to replace or lose given that the low profitability of that business right now. How sizeable is that business? Alain Bédard: Well, the size of Dynamex Canada right now is about CAD150, CAD160 and then there there's about $40 million of account that are highly questionable in terms of profitability. You know the Dynamex Canada is like I said it's the dog of our PNC division, because right now there are only 4% bottom-line type of guy, and 4% is a war for us. Alright? So that's not going to work but he's got some good business, he's got some eights, he's got some nines, but he's got some dogs at two and one [ph]. So it's probably $40 million business that will have to be replaced slowly, okay, overtime and let me tell you that the guys that are in that division like I said earlier we have a new CFO that just started about, I think it's this week or last week. And that sort of - business number one working with the guy that runs the show there Chris has been there for a long time, a little bit of change in mentality 2% is not going to make it, you know so it's going to take us sometime in Canada, but we did the same thing in the U.S. And in the U.S. it's much bigger and then we finally were able to do it with the Scott and his team, we have a very, very strong team in the U.S. right now at Dynamex.

Okay. And if we stay on the margins side I mean you were close to do double digit if I look at the EBIT margin in Q2, so it seems that Q3, Q4 will still be solid. So just wondering whether we should be close to the double digit or even above that and given what's happening with all the change, the growth in the U.S. should we be about - should we be in the double digits for next year which would be a sizable improvement versus 2015? Alain Bédard: I think will be double digit next year for sure including the depreciation of intangible because depreciation of the intangible that it will cost me about 1.2% okay. So if I remember correctly so we'll definitely be even taking into consideration that depreciation will be a double-digit next year because like I said Dynamex Canada will definitely improve, I mean the guys are working day and night, every rock there's been turned over to really change this approach, and the guy on the net day market the they're doing a fantastic job in terms of the operation, and we are starting to get the feeling that the market that's been really, really soft for us on the next day servicing Canada with zero growth, we are starting to see that maybe in 2017 we'll start to see some organic growth in that sector.

Okay. And when you talk about 1.2% really includes the amortization of intangible as well as depression. Alain Bédard: That's what I am talking about, yes.

Okay, very good. And could you provide us some color about Puro later, it seems that there are some labor issues and whether you see some kind of pent-up demand for you guys? Alain Bédard: Well, you see our approach to this maybe Canada post-strike has been different than Puro. Puro said please bring the volume in, and we said no, no, no. We're not going to take volume for short-term and disrupt service to our good costumers. So that is really the approach that we took, which is probably a little bit different than Puro because we hear that they are having a service issue. And it's normal, because if you do 100,000 shipments a day then you go up to 175,000, for a week or two, for sure it creates a lot of disruption. That's why for us, we said no, no, no, no. Because as soon as the strike is over, or there's no strike or whatever, the threat of the strike is over, all these customers go back to Canada Post because it's cheap rates and they like the service of Canada Post and we can't afford to operate and lose money. So that's why the strike in July, or the possibility of a strike, or the threat of a strike at Canada Post has a little bit of influence on our numbers, but not much.

Okay, very good color. Just on the truckload side, could you provide more color about the opportunities to rightsize the business? What needs to be done and also what we should expect from a margin standpoint on the truckload side, Alain? Alain Bédard: Well, the U.S. Truckload side is what you're talking about. It's a cyclical situation here because everybody was happy in 2014; guys had 5% more trucks on the road and, at the same time, this opportunity of that strike disappeared because they solved the strike. And the demand from the industrial base from the U.S. was reduced because of the appreciation of the U.S. dollar. So this is cyclical because, there again, now the market is being adjusted but, in the meantime, we're suffering. We're suffering in 2016, that's for sure, we suffered in Q3 and Q4 of 2015, and we're going to be suffering probably Q2 of 2017. Until the offer and demand are balanced, like they should be. So what we're really doing with our good management team that we have in the U.S. is we're aggressively looking at every penny that we're spending.

Okay, perfect. And just in terms of 2017, I understand that it's probably a bit early but you mentioned some color about the ELD, the package and courier business, so I'm just curious what type of - what kind of EDITBA growth we might see in 2017, given the current market environment. Alain Bédard: Well, you said it, Benoit. It's still too early. I mean, we have to have to - you know, I need to see more of July, August and September. So this is why, in October, when we have our conference call of Q3, I'll be in a better position to really give the market some indication of what we see for 2017. It's still too early. We need to see some improvement in the U.S. domestic market, which I think that we've hit the bottom of the barrel. But in Q3, we'll know more and we'll know also more about the timing in the U.S. of this improved market condition. So is it going to be in Q1, or is it going to be in 2017, or is it going to be in Q4 of 2017? It' still too early to say but what I can say, though, is that our P&C business - because this is for sure on the right track of improving - we're improving at Dynamex Canada. That's where we have a lot of opportunity. Our Loomis operation, we still have a lot of costs to take out of that business and improving the operations, but the guys are working at it. So we're doing well. And we're going to do better.

Okay. And just in terms of CapEx what would be the kind of number you're looking at this year and the remaining assets for sale? Alain Bédard: The remaining assets for sale that we have on the balance sheet is about $13 million, we'll have that sold before the end of the year. We took again another $5 million provision from these assets, because the market for energy-type-related assets is really, really bad. So that's going to be gone. In terms of real estate, in Q3, we'll probably be selling two or three small properties and, by the end of the year, another one or two properties. So it's not going to be large deals, but it's going to probably be in the neighborhood - if you totaled all of these real estate deals between now and the rest of the year, you're talking maybe between $10 million and $20 million of disposals. On the CapEx side, I've said it, we will be spending about $80 million to sustain our company. So it's a normal year for us, a little bit less CapEx, probably at Transport America because the market has slowed down a bit. But we are investing heavily into our LTL to be more efficient technology and a sorting facility for next-day services on the P&C side.

Okay. And last one for me, just for the logistics margin at around 7%: Is this going to be a good run rate going forward, Alain, or should we expect a pick-up in that division? Alain Bédard: Do you mean our logistics revenue or the bottom-line?

Logistic margins, a good margin of 7.4%? Alain Bédard: Yes, well you see, the logistics margin of EBIT, we should be closer to 10%. I don't have the numbers in front of me, Benoit, but in my mind, we're in that neighborhood of 10%. So you're saying 7%, it's probably because of the intangible depreciation.

Okay. And this is kind of the sustainable number going forward, Alain? Alain Bédard: Yes, we're small in that sector, we're doing about $200 million or something near that. It's really small but it's high quality, and we're not growing that very fast. But if we see an opportunity, we'll definitely look at it.

Okay, thanks very much for the time, Alain. Alain Bédard: Pleasure, Benoit. Take care.

The next question comes from the line of Cameron Doerkse from National Bank Financial. Please go ahead.

Yes, thanks, good morning. I just want to go back to the MMA and the priorities there. You talked a bit about the Truckload in the U.S. I would assume that maybe you would want to wait on that until after the U.S. election to see if a wall goes up between U.S. and Mexico, but if we put that aside, where are you seeing, I guess, maybe the most opportunities or what would be the best valuation? Would it be in packaging and couriers, you mentioned logistics in the last question. Is that something that you could come back to look at? Just any thoughts on what you're seeing as far as what's available and what the priorities are on truckload? Alain Bédard: P&C has always been the priority. Logistics is nice, but it's always difficult to buy a logistics company because a lot of it is in the end of the relationship with the customer, so that's why we're not a big fan of acquiring logistics companies. If we see something that fit, if we something that we feel good about, yes, we'll do it. But it's going to be small deals in the logistics sector. On the P&C side, the problem that we face all the time there is that we're competing with private equity, so if it's a large deal, there's an option, and then you've got all these PE that are coming in, and we'll put the valuation of 8 or 12 times, and you know, when TFI trades at 6 or 7, it's not going to be good for the dilution. I mean, a lot of guys will say, Alain's going crazy again, he's buying a company at 8 to 10 times. So that's my problem. In a smaller deal, on the P&C side,…

No, that makes sense. You highlighted in your - I guess in the next [ph] statements and in your comments today about the freight brokerage business within truckload. Is that something that you expect to continue to grow and is that something where you can do an acquisition to accelerate the growth of that? Alain Bédard: It's something that we will definitely keep on growing. No question about that because if you look at Transport America, for instance, they are very, very small in that revenue of $50+ million. So the opportunity is real to grow that Transport America. That's really one sector that these guys have not been up to par to where they should be. So that's number one. In terms of acquisition, like I said earlier, I'm not a big fan of buying those brokerage companies. Then again, another of our competitors, XBO, bought a lot of brokerage houses at 8 to 10 times. There's a market there, and me, I can't touch something at 8 to 10 times. The reaction of - if you just look at what happened to our stock, our stock went down to $18 because there was some speculation that we were buying somebody at 10/12/13/15 times, and everybody got nervous and they dumped the stock. It created an opportunity for me to buy it back, but still, it's an issue.

Yes, it makes sense. So just to wrap it up, then, if there's maybe no large-scale deals that happen here at least in the near term, how active do you think you'll be on the share buyback, if you bought stock up to north of $24. Do you still feel it's a good buy here? Alain Bédard: Absolutely. We'll be announcing that the Board has renewed our - allowed us to renew our NCIB, which is ending at the end of September. In our plan, Cameron, as I said to our Board, is we are looking at buying back up to 9 million shares. Our FIB was not very successful because we were able to get only 2 million shares. But between now and the end of 2017, I would like to reduce our share count by about 9 million. Because we've got too many shareholders that are nervous, that listen to that small broker, and so I think that 9 million shares of TFI will be out of that market before now and 2017. That's about 10% of our share count today.

Right, very good. All the rest of my questions have been answered, so thank you very much. Alain Bédard: Thank you, Cameron.

The next question comes from the line of Jason Seidl of Cowen and Company. Please go ahead.

Hey Alain, how are you, sir? Alain Bédard: Hey, I'm very good. How about you, Jason?

No complaints here. Listen, just a couple quick questions for you. Looking at the trucking business in the U.S.; there is been obviously a differential in the first half of 2016 between pricing in the truckload side and pricing on the LTL side. We're getting a sense that spot rates, at least in the truckload side, are moving up. Could you tell us what you're seeing on the LTL front? Alain Bédard: Well, on the LTL side, what we're seeing, Jason, is that the market in Canada is really, really not growing at all because of the economy is very weak and, number two, the e-commerce like the Amazon and the others, are really affecting the brick and mortar guys and these are my customers, my LTL customers, so our revenue is going down. And this is some kind of an impairment - a permanent impairment of the market, so we have to adjust ourselves and that's what we're doing. If you look at the - I think our Q2 was very good in terms of adjusting with lower revenue, to some good level of profitability.

Okay, that's a good update. And can you talk a little bit about what kind of an impact, if any, the Fort McMurry fires have had on you guys, and if there's a chance to see a little bit of a rebuild boost at the last half of the year? Alain Bédard: The fires at Fort Mac probably affected us by something around $1 million bottom-line. Now in terms of building it back, it's too early to say, but for sure, in 2017, that should be a little bit of a tailwind for us, compared to being a headwind for us in 2016. People are back, but it's still very slow over there. But with the price of oil being like that, what we see is that there's not going to be any new major project, that's for sure. And they will probably keep on running what they have and what they've been investing in over there, of course unless oil goes back to $70 or $80, which I don't think is going to happen any time soon. But yes, it should help us a little bit in 2017.

Okay. Just lastly, you kind of mentioned your EBITDA targets were somewhere between 430 or 450 for the year. How should we think about the cadence for the back half of the year? Is that going to be more 4Q loaded, are you still going to be able to grow that EBITDA for 3Q? Alain Bédard: Yes, we believe that our Q3 is going to be better than our Q2. And Q4 is always the same thing because of Christmas and the holidays, it's not as good as Q3. But we think that July, so far what I've seen from July is pretty good because our P&C keeps on improving. It's still slow and soft in our Truckload in the U.S. It's still slow and soft in our LTL, but our P&C is really pulling us in the right direction. And then in Q4, we believe that the e-commerce is going to be a really strong Q4, come October and November, with our two major accounts that are really humming. We believe that this is going to be helpful for us. If the U.S. domestic market starts to improve in Q4, that is going to be a good benefit for us, absolutely.

And Alain, you mentioned when you were talking about M&A, that you have an interest in looking at somebody that has a Mexican exposure, maybe a U.S. exposure. Could you talk about the size? What would be a good size for you guys to look at, what would you be comfortable going up to in an acquisition? Alain Bédard: Well, you see, we run America with about 1,400 trucks. So, for sure, we're looking at something that's going to be more than 1,000 trucks. Less than 1,000 trucks, for us it doesn't make any sense. But on the same token more than 5,000 trucks doesn't make any sense either. So it's going to be between 1,000 and 3,000, 4,000, 5,000 additional. And there's not that many carriers that have that kind of fleet, so we're talking to maybe four or five candidates in that sector. But for sure, it's going to be good for us. It's going to boost our density, it's going to prove - because as I said earlier, American's revenue, about 10% of it comes from the Mexican market, which is pretty good.

All right, that's great color, Alain. I appreciate the time, as always, sir. Alain Bédard: Pleasure, Jason. Take care.

Your next question comes from the line of Turan Quettawala from Scotiabank. Please go ahead.

Hey, good morning, Alain. I had just a couple of quick questions here. First of all, on the P&C side, you obviously spoke about the differences in the U.S. and Canada. Is it possible to give us a little bit of color on what the magnitude of strength or weakness might be in the two countries? Alain Bédard: Well, you know, you're talking TNT, right?

That's right. Alain Bédard: Well, the difference between Canada and the U.S. is that in the U.S. we've been working very hard with the management team that we have there, and we were bogged down for about two years with the Velocity acquisition. And we have a - we were able to build a better team in the U.S. than in Canada. In Canada, we have this small acquisition of TBS in western Canada that really caused us more problem than anything. And we are rebuilding Dynamex Canada with a much better team than we had a year ago. The market condition, we should do as good or even better in Canada. We are a way more dominant player in Canada on the last mile than in the U.S. because it's just that we have to change our mindset that a 2% guy doesn't fit us. We don't want to be big, we want to be profitable, okay, so sometimes you know you have guys that say; any yet but we're making two points, I said no, no, no; we're too busy, we don't have time to service a two point guy, because if the market so often that he's going to call you back and you going to be dragged down to zero with this guy. So let's refocus and that's because the e-commerce - we have the chance of having the knowledge that not a lot of people have in Canada because of our brother in the U.S. is probably two-three years ahead. So we so we can learn from the U.S. guy whereas a lot of people in Canada they don't know because they don't have any brother in the U.S. So change your mindset, stop servicing those poor guys that cannot afford to pay us the right price, and let's focus on the good business. Where you going to see some growth, for sure I mean we see that in the U.S. big time in terms of growth, like I said in the month of July we're delivering on average about 35,000 parcels a day for one customer, okay. So this is big. So in Canada we're doing chicken shit right now with Dynamex Canada. We're doing better with all Canadian Courier which is a much smaller company but there we have a small management team that's always been focus on the bottom line in profit. Dynamex culture in Canada and in U.S. too when we bought the company, the focus always been volume that's why. In 2011, I want to buy Dynamex Canada because they were - their mindset has always been volume and cheap price, and finally had to buy both, because you know the competition that Greenbrier made it - but the end of the day it was a good move buying both.

Okay, that's helpful. Thank you. And I guess just in terms of the guidance for next year, is it fair to assume though that the improvement that you're doing in P&C. Will definitely be able to sort of offset maybe some challenges from PM - TL? Something about 2017 overall? Alain Bédard: I think so. I think that you know our target the 450 it's going to be tough for us to really attain that in 2016 but I think that with all the improvement that we have in our P&C and then probably 2017 is not going to be as difficult for us on the truckload the U.S. domestic truckload. I mean if you talk to those U.S. guys I mean the result that's coming out right now are very, very bad, but I think that Q3 and Q4 you guys start to see some improvement because capacities shrinking, they're not buying more trucks and adding trucks, they're letting go people, they'll letting go drivers few small carriers are going bankrupt because they can't, you know go to that that cycle. So 2017 we should be held by the improvement of Dynamex Canada and Loomis, and also the improvement of Dynamex U.S. too soon and the growth that - organic growth and our truckload for sure should be better than what we saw in 2016.

Great. And then I have just last good clarification from me in terms of - I think the corporate expenses were a little bit higher this quarter, I think you eluted to making some stuff, is that basically - should we expect little trend back down again as we look at Q3, Q4? Alain Bédard: Yes, absolutely because what's in there is $1 million in professional fees, that are not you know usual and we also because of our captive - a captive is the responsibility of a head office and we had a major settlement that cost in office $2 million, that's why you see a big bump in the expenses of corporate, so you should not see that in and the rest of the year.

Got it, that's helpful. Thank you so much, Alain. Alain Bédard: Pleasure, Turan. Take care.

The next question comes from the line of David [ph] from Cormark Securities. Please go ahead.

First question, I just want to clarify your EBITDA guidance. So does that include the asset gains that you show on your P&L statement? Alain Bédard: We're going back to same question. No. You see us, when we talk about that our EBITDA target it includes the normal gain on disposal of equipment. So that's why what the difference between Q2 of this year and Q2 of last year, there's $10 million of difference then this is all related to real estate asset sales.

Okay. So I don't see $10 million difference. I know you reference that in the tax MD&A - where would I see that in the statements? Alain Bédard: Well, if you look at our logistics for instance, this is an easy one, if you look at disposal gaining there's a gain this year and there's a gain last year and there's no gain this year. This is a property that was sold. If you look at our LTL, this year versus last year and last year we sold two property for a major gain, this year there's no disposal of real estate in our two numbers, so this is why the only thing you see there is equipment.

Right. Alain Bédard: So if you sum up the LTL and the logistic that is the difference between the last few gain if I remember correctly 2015 verses this year a gain of five, so the gain of five this year is 99% equipment that we sell on an ongoing basis where last year you have that $4 million, $5 million a gain on equipment and you had also a gain on disposal of real estate.

Right. And how much would you expect in the 235, 435 to 450 of normal gains? Alain Bédard: Well, the normal gain and disposal of equipment, okay that we have year-over-year all the time because of our depreciation, aggressive depreciation, you're talking between $15 million to $20 million every year.

That's what you'd expect this year? Alain Bédard: Yes.

Okay, that's fine. And then a second question just on the CapEx, so the $80 million you're talking about is that the equivalent of the - looks like about $30 million spent in the first half, you'd have $50 million in the second? Alain Bédard: Yes.

Okay, that's helpful. And then on the tax rate, it is being lower in the first half of the year, maybe closer in the second quarter - do you have - can you provide any insight into where you see that going in the second half of this year and into 2017? Alain Bédard: The only variation in the tax rate that I know is how much profit comes from the U.S. and the U.S. has a larger tax rate than - higher tax rate than in Canada, because what the guys are telling me is that our tax rate should be in that 27% neighborhood if everything stays the same but let's see our profit contribution from the U.S. is more, which is the case now because of Dynamex U.S. is way more profitable this year than last year, I mean that may increase our tax rate a little bit so but 27 % I think it's the number to play with.

Okay, perfect. That's all for me and it's been lots of good info, thank you. Alain Bédard: Pleasure, David. Take care.

There are no further questions at this time. Mr. Bédard, I turn the call back over to you. Alain Bédard: Thank you for joining us this morning. So I look forward to speaking with you again following the release of our next quarterly results. Thank you and have a great day. Bye.

This concludes today's conference call. You may now disconnect.