TransForce Sees Growth in U.S. Freight

For those who haven’t been paying attention to TransForce, Canada’s largest trucking operator, it’s time to start. The company’s $310 million acquisition of Minnesota’s Transport America, a $350 million truckload carrier, underscores how big a force TransForce has become in North American trucking.

Most reporting on the deal yesterday missed an important fact — since 2009, TransForce has increased revenue by more $1 billion, in U.S. and Canadian dollars.

Let me repeat, TransForce increased revenue by $1 billion in five years — and not the easiest five years for trucking and the U.S. and Canadian economies.

Here are the numbers: In 2009, TransForce reported C$1.85 billion in revenue. That figure had increased 68.4 percent to C$3.11 billion — the equivalent of about US$2.9 billion — at the end of last year.

Some more numbers that help frame TransForce in terms of size: As of March 31, the company had 20,900 employees and independent contractors, 11,820 tractors and trucks and 425 terminals, including 106 facilities in the United States.

By revenue alone, TransForce should rank among the 10 largest trucking operators, probably just below Landstar, the $2.95 billion truckload operator that ranked eighth on the SJ Consulting Group/JOC 2013 list of Top 50 Trucking Companies.

If many people in the U.S. aren’t too familiar with TransForce, that’s partly because TransForce doesn’t operate a big fleet of tractor-trailers emblazoned with the TransForce name and logo. The company truly is a holding company, with 59 operating subsidiaries, each of which operates independently. Better known are the company’s brands, such as TST Overland, Loomis Express (the former domestic Canadian business of DHL), Dynamex, Canadian Freightways and Vitran.

The company has swiftly and almost silently added companies and customers to its portfolio. Over the past 15 years, TransForce has acquired about 140 companies, according to John Heinzl, investment reporter at Toronto’s The Globe and Mail.

“As it grows, TransForce looks for ways to cut costs and make its operations more efficient in a bid to boost margins,” Heinzl wrote last month. “Its efforts have delivered some impressive results for investors.” TransForce posted an annualized return of 39.2 percent for the five years that ended May 2, he reported.

More recently, earnings have been squeezed. TransForce’s adjusted net profit dropped 18 percent in the first quarter to C$19.9 million. Operating profit dropped 15.3 percent in 2013 after rising 32.6 percent in 2012 and 29.2 percent in 2011, according to an analysis by SJ Consulting Group. Revenue in 2013 dropped 1 percent, after climbing 16.7 percent in 2012 and 34.4 percent in 2011.

The squeeze hasn’t slowed TransForce down. The company made three major acquisitions last year — Velocity Express in the U.S., E.L. Farmer in the U.S., and Clarke Transport in Canada — and acquired Vitran in Canada this March.

Transport America, set to become TransForce’s 60th operating company by the end of this month, is its biggest acquisition in recent years — the largest since its 2011 purchase of same-day courier Dynamex for $248 million. In most ways, the Transport America purchase continues the long-standing strategy set by Chairman, President and CEO Alain Bédard — to seek out well-run companies, buy them and build them up for greater shareholder return. Transport America also offers TransForce a bridgehead into new territory: the U.S. truckload market, where many large companies increasingly aspire to acquire smaller competitors.

“The truckload market in the U.S. is very different than the one in Canada,” Bédard told analysts on a conference call, as reported by Reuters in Canada. The U.S. market is growing faster, he said, and there are more acquisition opportunities.

The U.S. also offers TransForce more leg room for revenue expansion. As of last year, only 30 percent of TransForce revenue originated in the U.S., but Bédard sees more “organic growth” in truckload markets south of the Canadian border.

TransForce has plenty of room to expand in truckload — the smallest of its four core businesses in terms of revenue. Last year, TransForce’s 24 truckload subsidiaries accounted for about US$535 million in revenue, including fuel surcharges — roughly 18 percent of TransForce’s total revenue. The package and courier segment accounted for 40 percent of TransForce revenue last year, less-than-truckload 20 percent, and logistics and specialized services 22 percent.

Add the US$350 million in revenue Transport America enjoyed in 2013 and TransForce will be an US$885 million truckload operator, about the 12th largest truckload supplier in North America. There plenty of other companies out there that could take TransForce’s truckload sales closer to the $1 billion mark, and beyond.

Contact William B. Cassidy at wcassidy@joc.com and follow him on Twitter: @wbcassidy_joc.

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