tfii-ex992_14.htm

The following is TFI International Inc.’s management discussion and analysis (“MD&A”). Throughout this MD&A, the terms “Company”, “TFI International” and “TFI” shall mean TFI International Inc., and shall include its independent operating subsidiaries. This MD&A provides a comparison of the Company’s performance for its three-month period ended March 31, 2022 with the corresponding three-month period ended March 31, 2021 and it reviews the Company’s financial position as of March 31, 2022. It also includes a discussion of the Company’s affairs up to April 28, 2022, which is the date of this MD&A. The MD&A should be read in conjunction with the unaudited condensed consolidated interim financial statements as of March 31, 2022 and the audited consolidated financial statements and accompanying notes as at and for the year ended December 31, 2021.

In this document, all financial data are prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) unless otherwise noted. All amounts are in United States dollars (U.S. dollars), and the term “dollar”, as well as the symbol “$”, designate U.S. dollars unless otherwise indicated. Variances may exist as numbers have been rounded. This MD&A also uses non-IFRS financial measures. Refer to the section of this report entitled “Non-IFRS Financial Measures” for a complete description of these measures.

The Company’s unaudited consolidated condensed interim financial statements have been approved by its Board of Directors (“Board”) upon recommendation of its audit committee on April 28, 2022. Prospective data, comments and analysis are also provided wherever appropriate to assist existing and new investors to see the business from a corporate management point of view. Such disclosure is subject to reasonable constraints for maintaining the confidentiality of certain information that, if published, would probably have an adverse impact on the competitive position of the Company.

Additional information relating to the Company can be found on its website at www.tfiintl.com. The Company’s continuous disclosure materials, including its annual and quarterly MD&A, annual and quarterly consolidated financial statements, annual report, annual information form, management proxy circular and the various press releases issued by the Company are also available on its website, or directly through the SEDAR system at www.sedar.com, or through the EDGAR system at www.sec.gov/edgar.shtml.

The Company may make statements in this report that reflect its current expectations regarding future results of operations, performance and achievements. These are “forward-looking” statements and reflect management’s current beliefs. They are based on information currently available to management. Words such as “may”, “might”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, “to its knowledge”, “could”, “design”, “forecast”, “goal”, “hope”, “intend”, “likely”, “predict”, “project”, “seek”, “should”, “target”, “will”, “would” or “continue” and words and expressions of similar import are intended to identify these forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected.

The Company wishes to caution readers not to place undue reliance on any forward-looking statements which reference issues only as of the date made. The following important factors could cause the Company’s actual financial performance to differ materially from that expressed in any forward-looking statement: the highly competitive market conditions, the Company’s ability to recruit, train and retain qualified drivers, fuel price variations and the Company’s ability to recover these costs from its customers, foreign currency fluctuations, the impact of environmental standards and regulations, changes in governmental regulations applicable to the Company’s operations, adverse weather conditions, accidents, the market for used equipment, changes in interest rates, cost of liability insurance coverage, downturns in general economic conditions affecting the Company and its customers, credit market liquidity, and the Company’s ability to identify, negotiate, consummate and successfully integrate business acquisitions.

The foregoing list should not be construed as exhaustive, and the Company disclaims any subsequent obligation to revise or update any previously made forward-looking statements unless required to do so by applicable securities laws. Unanticipated events are likely to occur. Readers should also refer to the section “Risks and Uncertainties” at the end of this MD&A for additional information on risk factors and other events that are not within the Company’s control. The Company’s future financial and operating results may fluctuate as a result of these and other risk factors.

(unaudited) (in thousands of U.S. dollars, except per share data)	Three months ended March 31
	2022			2021			2020*
Revenue before fuel surcharge		1,893,848			1,059,134			829,099
Fuel surcharge		297,671			89,673			95,410
Total revenue		2,191,519			1,148,807			924,509
Adjusted EBITDA¹		329,954			176,197			149,059
Operating income		219,766			101,745			87,328
Net income		147,723			66,887			55,788
Adjusted net income¹		157,575			73,637			52,563
Net cash from operating activities		137,691			155,195			137,177
Free cash flow¹		91,771			143,471			129,135
Per share data
EPS – diluted		1.57			0.70			0.65
Adjusted EPS – diluted¹		1.68			0.77			0.61
Dividends		0.27			0.23			0.19
As a percentage of revenue before fuel surcharge
Adjusted EBITDA margin¹		17.4	%		16.6	%		18.0	%
Depreciation of property and equipment		3.4	%		3.9	%		5.1	%
Depreciation of right-of-use assets		1.7	%		2.2	%		2.3	%
Amortization of intangible assets		0.8	%		1.4	%		1.4	%
Operating margin¹		11.6	%		9.6	%		10.5	%
Adjusted operating ratio¹		88.4	%		90.8	%		90.9	%

¹This is a non-IFRS measure. For a reconciliation, please refer to the “Non-IFRS financial measures” section below.

ABOUT TFI INTERNATIONAL

Services

TFI International is a North American leader in the transportation and logistics industry, operating across the United States, Canada and Mexico through its subsidiaries. TFI International creates value for shareholders by identifying strategic acquisitions and managing a growing network of wholly-owned operating subsidiaries. Under the TFI International umbrella, companies benefit from financial and operational resources to build their businesses and increase their efficiency. TFI International companies service the following reportable segments:

•

Package and Courier;

•

Less-Than-Truckload (“LTL”);

•

Truckload (“TL”);

•

Logistics.

Seasonality of operations

The activities conducted by the Company are subject to general demand for freight transportation. Historically, demand has been relatively stable with the first quarter generally the weakest. Furthermore, during the harsh winter months, fuel consumption and maintenance costs tend to rise.

Human resources

As at March 31, 2022, the Company had 29,051 employees in TFI International’s various business segments across North America. This compares to 16,408 employees as at March 31, 2021. The year-over-year increase of 12,643 is attributable to business acquisitions that added 16,068 employees offset by rationalizations affecting 3,425 employees mainly in the LTL segment. The Company believes that it has a relatively low turnover rate among its employees in Canada, and a normal turnover rate in the U.S. comparable to other U.S. carriers, and that its employee relations are very good.

Equipment

The Company believes it has the largest trucking fleet in Canada and a significant presence in the U.S. market. As at March 31, 2022, the Company had 12,953 tractors, 48,901 trailers and 6,922 independent contractors¹. This compares to 7,832 tractors, 25,354 trailers and 7,833 independent contractors¹ as at March 31, 2021.

Facilities

TFI International’s head office is in Montréal, Québec and its executive office is in Etobicoke, Ontario. As at March 31, 2022, the Company had 569 facilities, as compared to 366 facilities as at March 31, 2021. Of these, 246 are located in Canada, including 160 and 86 in Eastern and Western Canada, respectively. The Company also had 318 facilities in the United States and 12 facilities in Mexico. In the last twelve months, 228 facilities were added from business acquisitions, and terminal consolidation decreased the total number of facilities by 25, mainly in the P&C and TL segments. In Q1 2022, the Company closed 18 sites.

Customers

The Company has a diverse customer base across a broad cross-section of industries with no single client accounting for more than 5% of consolidated revenue. Because of its customer diversity, as well as the wide geographic scope of the Company’s service offerings and the range of segments in which it operates, a downturn in the activities of an individual customer or customers in a particular industry would not be expected to have a material adverse impact on operations. The Company has forged strategic partnerships with other transport companies in order to extend its service offerings to customers across North America.

Revenue by Top Customers' Industry (49% of total revenue)
Retail	34%
Manufactured Goods	15%
Building Materials	9%
Automotive	8%
Metals & Mining	7%
Services	6%
Food & Beverage	6%
Chemicals & Explosives	5%
Forest Products	3%
Energy	2%
Waste Management	1%
Others	4%

(For the year ended December 31, 2021)

¹ Disclosure updated to reflect only owner operators who were active within the quarter presented.

This section provides general comments on the consolidated results of operations. A more detailed analysis is provided in the “Segmented Results” section.

In line with its growth strategy, the Company acquired Unity Courier Services, Inc. (“Unity”) on March 19, 2022. Unity is a California-based provider of regularly scheduled same-day service and short-term delivery solutions for the US west coast.

For the three months ended March 31, 2022, total revenue was $2,191.5 million, up 91%, or $1,042.7 million, from Q1 2021. The increase was mainly attributable to the contribution from business acquisitions of $941.9 million and an increase of $100.8 million from existing operations, which included an increase in fuel surcharge revenue of $64.9 million due to the sharp increase in fuel costs.

For the three months ended March 31, 2022, the Company’s operating expenses increased by $924.7 million, to $1,971.8 million, from $1,047.1 million in Q1 2021. The increase is attributable to $875.4 million from business acquisitions, and $49.3 million from existing operations.

For the three months ended March 31, 2022, material and services expenses, net of fuel surcharge, increased by $266.5 million, or $842.7 million from $576.2 million from the same period last year due mainly to the impact from business acquisitions of $268.8 million.

For the three months ended March 31, 2022, personnel expense increased 143% to $624.8 million from $257.3 million in Q1 2021. The increase is attributable to an impact from business acquisitions of $372.0 million. The personnel expense includes a $2.1 million gain on the mark-to-market of the director share units in Q1 2022 as compared to a $8.4 million loss in same prior year period.

Other operating expenses, which are primarily comprised of costs related to office and terminal rent, taxes, heating, telecommunications, maintenance and security and other general administrative expenses, increased by $62.8 million for the three months ended March 31, 2022 as compared to the same period last year, attributable primarily to the impact from business acquisitions of $57.0 million.

For the three months ended March 31, 2022, the Company’s operating income rose by $118.0 million to $219.8 million as compared to $101.7 million in the same quarter in 2021. The increase was driven by business acquisitions of $66.6 million and an increase from existing operations of $51.4 million. The increase from existing operations was due to maintaining tight controls on expenses while benefiting from increased spot rates. The operating margin as a percentage of revenue before fuel surcharge of 11.6% compared to 9.6% in Q1 2021

Interest expense on long-term debt for the three-month period ended March 31, 2022 was $2.3 million higher than the same quarter last year. The increase is attributable to a higher average debt level, based on the month-end debt levels, of $1.64 billion for Q1 2022 compared to an average debt level of $1.15 billion in Q1 2021, and is offset by a small decrease in the effective interest rate.

The Company designates as a hedge a portion of its U.S. dollar denominated debt held against its net investments in U.S. operations. This accounting treatment allows the Company to offset the designated portion of foreign exchange gain (or loss) of its debt against the foreign exchange loss (or gain) of its net investments in U.S. operations and present them in other comprehensive income. Net foreign exchange gains or losses recorded in income or loss are attributable to the translation of the U.S. dollar portion of the Company’s credit facilities not designated as a hedge and to the translation of other

financial assets and liabilities denominated in currencies other than the functional currency. For the three-month period ended March 31, 2022, a gain of $8.8 million of foreign exchange variations (a gain of $7.6 million net of tax) was recorded to other comprehensive income as it relates to the translation of the debt in the net investment hedge. For the three-month period ended March 31, 2021, a gain of $2.9 million of foreign exchange variations (a gain of $2.5 million net of tax) was recorded to other comprehensive income as it relates to the translation of the debt in the net investment hedge.

For the three-month period ended March 31, 2022, other financial expenses increased by $2.5 million to $4.5 million as compared to $1.9 million in the prior year period. The increase is attributable to recurring bank charges and transaction fees primarily from the business acquisition of TForce Freight in 2021.

For the three months ended March 31, 2022, the Company’s effective tax rate was 26.0%. The income tax expense of $51.9 million reflects a $1.0 million favorable variance versus an anticipated income tax expense of $52.9 million based on the Company’s statutory tax rate of 26.5%. The favorable variance is mainly due to favorable variations from tax deductions and tax exempt income of $4.8 million partially offset by a negative variation of $2.3 million for adjustments from prior periods.

*Recasted for change in presentation currency from Canadian dollar to U.S. dollar.

For the three months ended March 31, 2022, TFI International’s net income was $147.7 million as compared to $66.9 million in Q1 2021. The Company’s adjusted net income¹, a non-IFRS measure, which excludes items listed in the above table, was $157.6 million as compared to $73.6 million in Q1 2021, an increase of 114% or $55.3 million. Adjusted EPS, fully diluted, increased by $0.91 to $1.68 from $0.77 in Q1 2021.

¹ This is a non-IFRS. For the reconciliation, refer to the “Non-IFRS financial measures” section below.

To facilitate the comparison of business level activity and operating costs between periods, the Company compares the revenue before fuel surcharge (“revenue”) and reallocates the fuel surcharge revenue to materials and services expenses within operating expenses. Note that “Total revenue” is not affected by this reallocation.

(unaudited) (in thousands of U.S. dollars)	Package and Courier	Less- Than-Truckload	Truckload	Logistics	Corporate	Eliminations	Total
Three months ended March 31, 2022
Revenue before fuel surcharge¹	124,580	835,399	515,925	435,378	—	(17,434)	1,893,848
% of total revenue²	7%	45%	28%	20%			100%
Adjusted EBITDA³	32,939	132,272	127,212	44,325	(6,794)	—	329,954
Adjusted EBITDA margin^3,4	26.4%	15.8%	24.7%	10.2%			16.9%
Operating income (loss)	26,085	94,770	71,028	34,882	(6,999)	—	219,766
Operating margin^3,4	20.9%	11.3%	13.8%	8.0%			11.6%
Total assets less intangible assets³	186,640	2,140,174	1,368,297	307,403	97,386	—	4,099,900
Net capital expenditures³	3,146	45,277	(5,906)	507	81	—	43,105
Three months ended March 31, 2021
Revenue before fuel surcharge¹	131,523	131,626	424,567	378,392	—	(6,974)	1,059,134
% of total revenue²	13%	13%	41%	33%			100%
Adjusted EBITDA³	24,863	34,639	94,617	39,377	(17,299)	—	176,197
Adjusted EBITDA margin^3,4	18.9%	26.3%	22.3%	10.4%			16.6%
Operating income (loss)	18,324	22,136	50,006	29,060	(17,781)	—	101,745
Operating margin^3,4	13.9%	16.8%	11.8%	7.7%			9.6%
Total assets less intangible assets³	182,277	402,509	1,194,462	257,802	438,835		2,475,885
Net capital expenditures³	1,044	3,096	5,708	4	20	—	9,872

²Segment revenue including fuel surcharge and intersegment revenue to consolidated revenue including fuel surcharge and intersegment revenue.

³This is a non-IFRS measures. For a reconciliation, refer to the “Non-IFRS financial measures” section below.

(unaudited)	Three months ended March 31
(in thousands of U.S. dollars)	2022	%	2021	%
Total revenue	152,835		145,965
Fuel surcharge	(28,255)		(14,442)
Revenue	124,580	100.0%	131,523	100.0%
Materials and services expenses (net of fuel surcharge)	46,866	37.6%	61,057	46.4%
Personnel expenses	37,845	30.4%	38,380	29.2%
Other operating expenses	7,121	5.7%	7,245	5.5%
Depreciation of property and equipment	3,341	2.7%	3,038	2.3%
Depreciation of right-of-use assets	3,349	2.7%	3,245	2.5%
Amortization of intangible assets	164	0.1%	256	0.2%
Gain on sale of rolling stock and equipment	(191)	-0.2%	(17)	-0.0%
Gain on derecognition of right-of-use assets	-	-	(5)	-0.0%
Operating income	26,085	20.9%	18,324	13.9%
Adjusted EBITDA¹	32,939	26.4%	24,863	18.9%
Return on invested capital¹		26.4%		20.4%

¹ This is a non-IFRS measure. For a reconciliation, refer to the “Non-IFRS financial measures” section below.

For the three months ended March 31, 2022, revenue decreased by $6.9 million or 5.3%, from $131.5 million in 2021 to $124.6 million. This

decrease is mostly attributable to a 5.5% decrease in packages offset by a 0.2% increase in revenue per package (excluding fuel surcharge). The increase in revenue per package is attributable to a 6.5% increase in average weight per package and reduced by a decrease of 4.9% in revenue per pound. The decrease in packages is attributable to demarketing of low yield business-to-consumer deliveries and a market wide reduction in business-to-consumer volume. The increase in weight per package is mainly attributable to the increase of business-to-business’ share of the total volume.

For the three months ended March 31, 2022, materials and services expenses, net of fuel surcharge revenue, decreased $14.2 million or 23.2%, mostly due to an increase of $13.8 million in fuel surcharge revenue. Personnel expenses decreased by $0.5 million or 1.4% primarily from a $2.2 million decrease in direct labor offset by an increase of $1.0 million in administrative salaries. The decrease in direct labor and agent contractor costs is primarily attributable to the decrease in overall volume.

Operating income for the three months ended March 31, 2022, increased by $7.8 million or 42.4% compared to the first quarter of 2021 and the

operating margin was 20.9%, a strong improvement when compared to 13.9% for the same period in 2021.

The return on invested capital increased 600 basis points, from 20.4% in the trailing twelve months ended March 31, 2021, to 26.4% in the trailing

twelve months ended March 31, 2022. This is due primarily due to an increase in operating income over the same period.

(unaudited)	Three months ended March 31
(in thousands of U.S. dollars)	2022	%	2021	%
Total revenue	1,000,110		150,522
Fuel surcharge	(164,711)		(18,896)
Revenue	835,399	100.0%	131,626	100.0%
Materials and services expenses (net of fuel surcharge)	267,080	32.0%	60,243	45.8%
Personnel expenses	378,896	45.4%	32,386	24.6%
Other operating expenses	57,374	6.9%	4,454	3.4%
Depreciation of property and equipment	25,555	3.1%	4,552	3.5%
Depreciation of right-of-use assets	9,647	1.2%	5,723	4.3%
Amortization of intangible assets	2,300	0.3%	2,237	1.7%
Gain on sale of rolling stock and equipment	(301)	-0.0%	(63)	-0.0%
(Gain) loss on derecognition of right-of-use assets	78	0.0%	(33)	-0.0%
Gain on sale of land and buildings and assets held for sale	—	0.0%	(9)	0.0%
Operating income	94,770	11.3%	22,136	16.8%
Adjusted EBITDA¹	132,272	15.8%	34,639	26.3%

¹ This is a non-IFRS measure. For a reconciliation, refer to the “Non-IFRS financial measures” section below.

Operational data
(unaudited)	Three months ended March 31
(Revenue in U.S. dollars)	2022	2021	Variance	%
U.S. LTL
Revenue (in thousands of dollars)¹	581,421	638	580,784	NM
Adjusted Operating Ratio²	90.7%	89.8%
Revenue per hundredweight (excluding fuel)¹	$29.01	-	$29.01
Revenue per shipment (excluding fuel)¹	$315.48	-	$315.48
Tonnage (in thousands of tons)¹	1,002	-	1,002
Shipments (in thousands)¹	1,843	-	1,843
Average weight per shipment (in lbs)¹	1,087	-	1,087
Average length of haul (in miles)¹	1,104	-	1,104
Vehicle count, average	4,501	8	4,493	NM
Return on invested capital^2,3	22.0%	-
Canadian LTL
Revenue (in thousands of dollars)	142,498	131,626	10,872	8.3%
Adjusted Operating Ratio²	79.1%	83.2%
Revenue per hundredweight (excluding fuel)	$11.53	$10.30	$1.23	11.9%
Revenue per shipment (excluding fuel)	$244.00	$222.72	$21.28	9.6%
Tonnage (in thousands of tons)	618	639	(21)	-3.3%
Shipments (in thousands)	584	591	(7)	-1.2%
Average weight per shipment (in lbs)	2,116	2,162	(46)	-2.1%
Average length of haul (in miles)	776	757	19	2.5%
Vehicle count, average	798	872	(74)	-8.5%
Return on invested capital²	18.4%	15.4%
¹ Operational statistics exclude figures from Ground Freight Pricing (“GFP”).
² This is a non-IFRS measure. For a reconciliation please refer to the “Non-IFRS and Other Financial Measures” section below.
³ Comparative return on invested capital for 2021 is not disclosed as the segment was created post UPS Freight acquisition in Q2 2021.

For the three months ended March 31, 2022, revenue before fuel surcharge increased by $703.8 million to $835.4 million. This increase is mainly due to the acquisition of UPS Freight that contributed $695.0 million. In the U.S. LTL, the Company continued to implement actions on selected accounts to increase the quality of the freight, with a focus on freight that fits the network and that the Company can serve efficiently. This led to a 2.1% increase in the average weight per shipment when compared to the fourth quarter of 2021. In addition, the Company implemented increases in base rates and accessorial revenue to further improve the yield, which led to a 1.5% increase in revenue per shipment (excluding fuel) when compared to the fourth quarter of 2021, and a 11.5% increase when compared to the second quarter of 2021. Revenue from the existing operations increased $8.7 million or 6.6%. In Canadian LTL, this increase in revenue is due to a 9.6% increase in revenue per shipment (excluding fuel) partially offset by a 1.2% decrease in shipments. The increase in revenue per shipment is the result of an 11.9% increase in revenue per hundredweight partially offset by a 2.1% decrease in

average weight per shipment. Continuous improvement to shipment profile, focus on improving the quality of freight and account-level yield management drove the yield improvement versus 2021.

For the three months ended March 31, 2022, materials and services expenses, net of fuel surcharge revenue, increased $206.8 million, including $211.7 million increase attributable to business acquisition. This was partially offset by $14.0 million higher fuel surcharge revenue net of $5.6 million from higher sub-contractor cost in the rest of the LTL segment. Personnel expenses increased $346.5 million, with $341.4 million coming from business acquisitions and $5.1 million from existing operations mostly from a reduction in Canada Emergency Wage Subsidy. Other operating expenses increased $52.9 million due primarily to the business acquisition of UPS Freight combined with a $1.0 million increase in real estates costs from the Canadian LTL operations.

Operating income for the three months ended March 31, 2022, increased $72.6 million to $94.8 million. This increase includes a $65.2 million contribution from business acquisitions and an increase of $7.5 million, or 33.8%, from existing operations. Adjusted operating ratio, a non-IFRS measure, of the Canadian LTL operations improved to 79.1% in the first quarter of 2022 as compared to 83.2% the same quarter in 2021. With the focus on improving freight profile by identifying shipments that fits the Company’s network, US LTL operations, mostly represented by the UPS Freight acquisition, achieved a 90.7% adjusted operating ratio, a non-IFRS measure, in the first quarter of 2022 from a strong focus on yield improvement combined with a focus on productivity.

The return on invested capital, a non-IFRS measure, of our Canadian based LTL segment was 18.4% in the first quarter of 2022, a 300 basis point increase from 15.4% in the first quarter of 2021. That increase is mostly related to materially higher operating income, partially reduced because of slightly higher invested capital.

(unaudited)	Three months ended March 31
(in thousands of U.S. dollars)	2022	%	2021	%
Total revenue	609,674		474,606
Fuel surcharge	(93,749)		(50,039)
Revenue	515,925	100.0%	424,567	100.0%
Materials and services expenses (net of fuel surcharge)	225,493	43.7%	181,334	42.7%
Personnel expenses	163,160	31.6%	137,625	32.4%
Other operating expenses	19,521	3.8%	14,614	3.4%
Depreciation of property and equipment	35,057	6.8%	33,101	7.8%
Depreciation of right-of-use assets	14,856	2.9%	10,324	2.4%
Amortization of intangible assets	6,315	1.2%	5,115	1.2%
Gain on sale of rolling stock and equipment	(19,334)	-3.7%	(3,527)	-0.8%
Gain on derecognition of right-of-use assets	(127)	-0.0%	(96)	-0.0%
Gain on sale of land and buildings and assets held for sale	(44)	-0.0%	(3,929)	-0.9%
Operating income	71,028	13.8%	50,006	11.8%
Adjusted EBITDA¹	127,212	24.7%	94,617	22.3%

Operational data	Three months ended March 31
(unaudited)	2022	2021	Variance	%
U.S. based Conventional TL
Revenue (in thousands of U.S. dollars)	191,765	155,619	36,147	23.2%
Adjusted operating ratio	89.1%	93.4%
Total mileage (in thousands)	79,681	81,286	(1,605)	-2.0%
Tractor count, average	3,320	2,854	467	16.4%
Trailer count, average	11,578	10,856	722	6.6%
Tractor age	3.0	2.4	0.6	27.2%
Trailer age	8.0	7.3	0.7	9.8%
Number of owner operators, average	324	533	(209)	-39.3%
Return on invested capital¹	6.5%	5.5%
Canadian based Conventional TL
Revenue (in thousands of U.S. dollars)	76,307	55,792	20,515	36.8%
Adjusted operating ratio	85.6%	88.1%
Total mileage (in thousands)	23,159	22,151	1,008	4.6%
Tractor count, average	694	624	70	11.2%
Trailer count, average	3,512	2,748	763	27.8%
Tractor age	3.1	2.6	0.5	17.2%
Trailer age	7.2	5.2	2.0	38.2%
Number of owner operators, average	288	307	(19)	-6.3%
Return on invested capital¹	11.9%	11.8%
Specialized TL
Revenue (in thousands of U.S. dollars)	249,884	214,237	35,647	16.6%
Adjusted operating ratio	84.4%	86.4%
Tractor count, average	2,246	2,307	(61)	-2.6%
Trailer count, average	7,128	6,643	485	7.3%
Tractor age	3.9	3.8	0.1	2.2%
Trailer age	12.5	12.8	(0.3)	-2.6%
Number of owner operators, average	1,085	1,052	33	3.1%
Return on invested capital¹	11.7%	10.9%
¹ This is a non-IFRS measure. For a reconciliation, please refer to the “Non-IFRS Financial Measures” section below.

For the three months ended March 31, 2022, revenue increased by $91.4 million, or 21.5%, from $424.6 million in Q1 2021 to $515.9 million. This increase was mainly due to contributions from business acquisitions of $90.1 million. For U.S. based conventional TL, revenue increased by $36.1 million, or 23.2%, compared to prior year period. The increase was due primarily to $49.2 million in revenue from the business acquisition of TForce Freight’s TL division, offset by a decline in revenue from existing U.S. based conventional TL operations. The strong pricing and tight capacity in the U.S. market led to a 21.4% improvement year over year in revenue per mile. Miles per tractor declined by 8.9%, which is attributable to unseated tractors resulting from limited driver availability. For the three months ended March 31, 2022, the average unseated tractors percentage in the U.S. based conventional TL existing operations remained high at 13.4%, compared to 13.8% in 2021. For Canadian based conventional TL operations, revenue increased by $20.5 million, or 36.8%, compared to the same prior year period, primarily from organic growth in existing operations of $12.7 million. The increase was due to a 20.9% improvement in revenue per tractor, driven by a 22.0% improvement in revenue per mile, with miles broadly flat year over year. For Specialized TL, revenue increased by $35.6 million, or 16.6%, compared to the prior year period, primarily from contributions from business acquisitions of $26.6 million and organic growth of $9.0 million.

For the three months ended March 31, 2022, operating expenses, net of fuel surcharge, increased by $70.3 million or 19%, from $374.6 million in 2021 to $444.9 million in 2022. This is mainly due to $88.8 million in operating expenses, net of fuel surcharge, from business acquisitions, partially offset by a decrease in operating expenses, net of fuel surcharge, from existing truckload operations. The Company continues to improve its cost structure and increase the efficiency and profitability of its existing fleet and network of independent contractors. In U.S. based conventional truckload, as a result of the assets acquired in the business acquisition of TForce Freight’s TL division, the Company continues to evaluate its level of excess equipment and started to dispose of excess equipment generating an additional $15.8 million gain when compared to the same prior year period.

For the three months ended March 31, 2022, the TL segment’s operating ratio was 86.2%, which improved from 88.2% in the same prior year period. Operating income for the TL segment was $71.0 million for the three months ended March 31, 2022, up from $50.0 million in the first quarter of 2021.

The return on invested capital, a non-IFRS measure, for U.S. based and Canadian based Conventional TL was 6.5% and 11.9% compared to 5.5% and 11.8%, respectively, for the same prior year period, reflecting an increase in operating income. The return on invested capital, a non-IFRS measure, for the Specialized TL segment increased to 11.7% as compared to 10.9% in the same prior year period due primarily to an increase in operating income.

(unaudited)	Three months ended March 31
(in thousands of U.S. dollars)	2022	%	2021	%
Total revenue	449,420		385,378
Fuel surcharge	(14,042)		(6,986)
Revenue	435,378	100.0%	378,392	100.0%
Materials and services expenses (net of fuel surcharge)	329,021	75.6%	286,438	75.7%
Personnel expenses	31,086	7.1%	28,849	7.6%
Other operating expenses	30,954	7.1%	23,985	6.3%
Depreciation of property and equipment	371	0.1%	412	0.1%
Depreciation of right-of-use assets	3,672	0.8%	3,495	0.9%
Amortization of intangible assets	5,400	1.2%	6,410	1.7%
Loss on sale of rolling stock and equipment	—	—	2	0.0%
Gain on derecognition of right-of-use assets	(8)	-0.0%	(259)	-0.1%
Operating income	34,882	8.0%	29,060	7.7%
Adjusted EBITDA¹	44,325	10.2%	39,377	10.4%
Return on invested capital¹		20.0%		18.6%

¹ This is a non-IFRS measure. For a reconciliation, refer to the “Non-IFRS financial measures” section below.

For the three months ended March 31, 2022, revenue increased by $57.0 million, or 15%, from $378.4 million in 2021 to $435.4 million in 2022. Excluding business acquisition, revenue increased by $43.3 million, or 11%, mainly due to the 3PL volume improvement in the U.S and the remaining $12.2 million is due to the acquisition of the TForce Freight Logistics segment during the second quarter of 2021.

Approximately 78% (2021 – 75%) of the Logistics segment’s revenues in the quarter were generated from operations in the U.S. and approximately 22% (2021 – 25%) were generated from operations in Canada and Mexico.

For the three months ended March 31, 2022, total operating expenses, net of fuel surcharge increased by $51.2 million, or 15% relative to the same prior year period, from $349.3 million to $400.5 million. Business acquisitions accounted for $13.6 million and total operating expenses, net of fuel surcharge increased by $37.5 million for existing operations. For the existing operations, materials and services expenses (net of fuel surcharge) increased by $33.0 million related to revenue growth. In addition, other operating expenses increased by $6.3 million mostly due to TFWW agent commission related to higher 3PL revenue.

Operating income for the three months ended March 31, 2022 increased by $5.8 million, or 20%, from $29.1 million to $34.9 million. Excluding business acquisitions, operating margin increased by $5.7 million, mainly as a result of better quality revenue and margin improvement in our 3PL US businesses.

The return on invested capital increased to 20.0% from 18.6% in the same prior year period. This increase is due primarily to organic growth and operating margin expansion in existing operations.

(unaudited) (in thousands of U.S. dollars)	Three months ended March 31
	2022		2021
Sources of cash:
Net cash from operating activities		137,691		155,195
Proceeds from sale of property and equipment		43,915		17,000
Proceeds from sale of assets held for sale		—		6,491
Net variance in cash and bank indebtedness		—		—
Net proceeds from long-term debt		86,716		361,589
Others		5,125		10,407
Total sources		273,447		550,682
Uses of cash:
Purchases of property and equipment		90,426		37,369
Business combinations, net of cash acquired		22,235		19,019
Net variance in cash and bank indebtedness		1,552		401,499
Repayment of lease liabilities		30,627		24,161
Dividends paid		24,940		21,273
Repurchase of own shares		74,029		46,087
Others		29,638		1,274
Total usage		273,447		550,682

For the three-month period ended March 31, 2022, net cash from operating activities decreased by 11% to $137.7 million from $155.2 million in 2021. The $17.5 million decrease is attributable primarily to declines in non-cash working capital of $175.4 million, resulting primarily from an increase in fuel surcharge, and $16.3 million from gains on the sale of property and equipment. These declines are offset by increases in net income of $80.8 million, increase in depreciation expenses of $31.9 million, increase in provisions net of payments of $16.7 million and increase in income taxes of $36.0 million. The increase in taxes is due to an increase in profits.

The following table presents the additions of property and equipment by category for the three-month periods ended March 31, 2022 and 2021.

The Company invests in new equipment to maintain its quality of service while minimizing maintenance costs. Its capital expenditures reflect the level of reinvestment required to keep its equipment in good order and to maintain a strategic allocation of its capital resources. The increase in additions in 2022 compared to 2021 is due primarily to the fleet renewal of TForce Freight, acquired in the second quarter of 2021. In addition, the procurement of equipment was difficult in 2021 resulting in lower capital expenditures.

In the normal course of activities, the Company constantly renews its rolling stock equipment generating regular proceeds and gain or loss on disposition. The following table indicates the proceeds and gains or losses from sale of property and equipment and assets held for sale by category for the three-month periods ended March 31, 2022 and 2021.

For the three-month period ended March 31, 2022, cash used in business acquisitions, net of cash acquired, totalled $22.2 million to acquire one business. Refer to the section of this report entitled “2022 business acquisitions” and further information can be found in note 5 of the March 31, 2022 unaudited condensed consolidated interim financial statements.

For the three-month period ended March 31, 2022, cash used in the purchase of investments was $27.6 million (2021 – nil). These investments have been elected to be measured at fair value through OCI.

On March 23, 2022, the Company received $200 million in proceeds from the issuance of new debt taking the form of unsecured senior notes consisting of two tranches maturing on March 23, 2032, and 2037, bearing a fixed interest rate of 3.50% and 3.80%. Deferred financing fees of $0.3 million were recognized on the amount.

On March 23, 2022, the Company received an additional $100 million in proceeds from the amendment and restatement of the debt agreement signed on July 2, 2021, taking the form of unsecured senior notes as the third tranche maturing on April 2, 2034, bearing a fixed interest rate of 3.55%. Deferred financing fees of $0.1 million were recognized on the increase.

The two debt instruments described above are subject to certain covenants regarding the maintenance of financial ratios. These are the same covenants as previously required by the Company’s syndicated revolving credit agreement as described in note 25(f) of the 2021 annual consolidated financial statements.

The proceeds of two debt issuances were used in full to pay off the unsecured term loan which was due in June 2022 without any penalty.

Pursuant to the renewal of the normal course issuer bid (“NCIB”), which began on November 2, 2021 and is ending on November 1, 2022, the Company is authorized to repurchase for cancellation up to a maximum of 7,000,000 of its common shares under certain conditions. As at March 31, 2022, and since the inception of this NCIB, the Company has repurchased and cancelled 1,735,600 common shares.

For the three-month period ended March 31, 2022, the Company repurchased 735,600 common shares (as compared to 642,200 during the same period in 2021) at a weighted average price of $100.64 per share (as compared to $71.76 in the prior year period) for a total purchase price of $74.0 million (as compared to $46.1 million the prior year period).

*Recasted for change in presentation currency from Canadian dollar to U.S. dollar.

The Company's objectives when managing its cash flow from operations are to ensure proper capital investment in order to provide stability and competitiveness for its operations, to ensure sufficient liquidity to pursue its growth strategy, and to undertake selective business acquisitions within a sound capital structure and a solid financial position.

For the three-month period ended March 31, 2022, TFI International generated free cash flow of $91.8 million, compared to $143.5 million in 2021, which represents a year-over-year decrease of $51.7 million, or 36%. The decrease in net cash from operating activities is attributable to declines in non-cash working capital of $175.4 million, resulting primarily from an increase in fuel surcharge, and an adjustment to net income of $16.3 million from gains on the sale of property and equipment. These declines are offset by increases in net income of $80.8 million, increase in depreciation expenses of $31.9 million, increase in provisions net of payments of $16.7 million and increase in income taxes of $36.0 million. The increase in taxes is due to an increase in profits. The additions to property and equipment increased by $54.6 million as compared to the same prior year period as a result of fleet renewals from the prior year acquisitions, specifically TForce Freight, and due to the difficultly in procuring equipment in 2021. The proceeds from the sale of property and equipment and assets held for sale increased by $20.4 million as compared to the prior year, due to the replenishment of the fleet and increased prices in the market.

Free cash flow conversion¹, which measures the level of capital employed to generate earnings, for the three-month period ended March 31, 2022, of 86.9% compares to 94.4% in the same prior year period, as net capital expenditures in 2022 increased from the previous period.

Based on the March 31, 2022 closing share price of $106.51, the free cash flow¹ generated by the Company in the preceding twelve months ($649.2 million, or $7.09 per share outstanding) represented a yield of 6.7%.

¹ This is a non-IFRS measure. Refer to the “Non-IFRS financial measures” section below.

¹ This is a non-IFRS measure. Refer to the reconciliation in “Non-IFRS financial measures” below.

Compared to December 31, 2021, the Company’s total assets less intangible assets, long-term debt and shareholders’ equity increased. The increase in the total assets, less intangible assets can be attributed to the increase in working capital from the increase in revenue in addition to the increase in other assets from investments while the increase in shareholder’s equity is mostly due to the repurchase and cancellation of the shares. The increase in debt corresponds with these increases.

Contractual obligations, commitments, contingencies and off-balance sheet arrangements

The following table indicates the Company’s contractual obligations with their respective maturity dates at March 31, 2022, including future interest payments.

(unaudited) (in thousands of U.S. dollars)	Total		Less than 1 year		1 to 3 years		3 to 5 years		After 5 years
Unsecured revolving facility – August 2025		358,601		—		—		358,601		—
Unsecured term loan – June 2022		—		—		—		—		—
Unsecured debenture – December 2024		159,719		—		159,719		—		—
Unsecured senior notes – December 2026 to March 2037		1,080,000		—		—		—		1,080,000
Conditional sales contracts		108,468		40,809		50,023		16,857		779
Lease liabilities		413,593		113,979		166,120		67,521		65,973
Interest on debt and lease liabilities		442,714		55,963		99,679		79,641		207,432
Total contractual obligations		2,563,095		210,751		475,541		522,620		1,354,184

The unsecured term loan of $326.1 million which was due in June 2022 was repaid in full with the proceeds from the two debt issuances above.

The following table indicates the Company’s financial covenants to be maintained under its credit facility. These covenants are measured on a consolidated rolling twelve-month basis and are calculated as prescribed by the credit agreement which, among other things, requires the exclusion of the impact of the new standard IFRS 16 Leases:

As at March 31, 2022, the Company had $49.5 million of outstanding letters of credit ($47.4 million on December 31, 2021).

As at March 31, 2022, the Company had $148.4 million of purchase commitments and $5.6 million of purchase orders that the Company intends to enter into a lease that is expected to materialize within a year (December 31, 2021 – $75.1 million and $13.2 million, respectively).

The Company declared $24.7 million in dividends, or $0.27 per common share, in the first quarter of 2022. On April 28, 2022, the Board of Directors approved a quarterly dividend of $0.27 per outstanding common share of the Company’s capital, for an expected aggregate payment of $24.7 million to be paid on July 15, 2022, to shareholders of record at the close of business on June 30, 2022.

A total of 91,599,354 common shares were outstanding as at March 31, 2022 (December 31, 2021 – 92,152,893). There was no material change in the Company’s outstanding share capital between March 31, 2022 and April 28, 2022.

As at March 31, 2022, the number of outstanding options to acquire common shares issued under the Company’s stock option plan was 1,878,899 (December 31, 2021 – 2,060,960) of which 1,523,223 were exercisable (December 31, 2021 – 1,705,284). Each stock option entitles the holder to purchase one common share of the Company at an exercise price based on the volume-weighted average trading price of the Company’s shares for the last five trading days immediately preceding the effective date of the grant.

As at March 31, 2022, the number of restricted share units (‘’RSUs’’) granted under the Company’s equity incentive plan to its senior employees was 333,940 (December 31, 2021 – 271,703). On February 7, 2022, the Board of Directors approved the grant of 63,404 RSUs under the Company’s equity incentive plan. The RSUs will vest in February of the third year following the grant date. Upon satisfaction of the required service period, the plan provides for settlement of the award through shares.

As at March 31, 2022, the number of performance share units (‘’PSUs’’) granted under the Company’s equity incentive plan to its senior employees was 287,925 (December 31, 2021 – 225,765). On February 7, 2022, the Board of Directors approved the grant of 63,404 PSUs under the Company’s equity incentive plan. The PSUs will vest in February of the third year following the grant date. Upon satisfaction of the required service period, the plan provides for settlement of the award through shares.

The Company is involved in litigation arising from the ordinary course of business primarily involving claims for bodily injury and property damage. It is not feasible to predict or determine the outcome of these or similar proceedings. However, the Company believes the ultimate recovery or liability, if any, resulting from such litigation individually or in total would not materially adversely nor positively affect the Company’s financial condition or performance and, if necessary, has been provided for in the financial statements.

The North American economy has shown recent potential for slowing due to higher inflation, rising interest rates, elevated energy prices, global supply chain challenges and other factors. However, TFI International serves a highly diverse set of industrial and consumer end markets, across many modes of transportation, which delivered very strong results for TFI in the first quarter. Nonetheless, macro uncertainty persists and several leading economists see the possibility of economic recession over the coming year.

TFI International has successfully navigated recent macro challenges and management remains vigilant in its monitoring for new potential risks, including additional COVID-19 variants and the potential economic disruption they could cause, risks related to energy prices, supply chain disruption, driver availability and higher wages. As in the past, factors such as these may cause additional rounds of declining freight volumes and higher costs, adversely affect TFI’s operating companies and the markets they serve. Additional uncertainties include but are not limited to escalating geopolitical risk, policy changes surrounding international trade, environmental mandates and changes to the tax code in any jurisdictions in which TFI International operates.

Management believes the Company is well positioned for continued solid operational and financial performance in 2022 due to its strong financial foundation, its lean cost structure, and a longstanding focus on profitability, efficiency, network density, customer service, optimizing pricing, driver retention, and the rationalization of assets to avoid internal overcapacity. TFI continues to have material synergy opportunities related to 2021’s acquisition of UPS Freight (now TForce Freight), the integration of which continues as planned, and the Company also has meaningful opportunities to enhance performance within its US Truckload and US LTL operations. In addition, the Company’s industrial exposure through specialized TL and LTL should benefit from increased domestic manufacturing as a result of reduced imports from abroad due to global supply chain issues. Finally, TFI is well positioned to benefit from the ongoing expansion of e-commerce, which provides both growth and margin expansion opportunities for its P&C and Logistics business segments.

TFI International’s favorable positioning, which was significantly enhanced by last year’s acquisition of UPS Freight, should enable continued solid results assuming no significant degradation in economic conditions. Longer term, regardless of the operating environment, management’s goal is to build shareholder value through consistent adherence to its operating principles, including customer focus, an asset-light approach, and continual efforts to enhance efficiencies. In addition, the Company values free cash flow generation and maintaining strong liquidity, and recently further enhanced its

conservative balance sheet which features a high portion of attractive fixed-rate spreads and limited near-term debt maturities. This strong financial footing allows management to prudently invest in the business and pursue select, accretive acquisitions while returning excess capital to shareholders.

(in millions of U.S. dollars, except per share data)
	Q1’22		Q4’21		Q3’21		Q2’21		Q1’21		Q4’20		Q3’20		Q2’20
Total revenue		2,191.5		2,140.9		2,094.0		1,836.7		1,148.8		1,122.0		936.1		798.5
Adjusted EBITDA¹		330.0		318.5		296.4		285.4		176.2		193.5		189.4		167.6
Operating income		219.8		215.0		191.6		380.9		101.7		117.1		117.0		95.1
Net income		147.7		144.1		131.6		321.7		66.9		86.3		83.1		50.5
EPS – basic		1.61		1.56		1.42		3.45		0.72		0.92		0.91		0.58
EPS – diluted		1.57		1.52		1.38		3.37		0.70		0.91		0.90		0.57
Adjusted net income¹		157.6		148.6		138.9		137.2		73.6		93.4		87.5		67.2
Adjusted EPS - diluted¹		1.68		1.57		1.46		1.44		0.77		0.98		0.94		0.76

¹ This is a non-IFRS measure. For a reconciliation refer to the “Non-IFRS financial measures” section below.

The differences between the quarters are mainly the result of seasonality (softer in Q1) and business acquisitions. The increase in Q2 2021 is due to the recognition of a bargain purchase gain.

Financial data have been prepared in conformity with IFRS, including the following measures:

Operating expenses: Operating expenses include: a) materials and services expenses, which are primarily costs related to independent contractors and vehicle operation; vehicle operation expenses, which primarily include fuel, repairs and maintenance, vehicle leasing costs, insurance, permits and operating supplies; b) personnel expenses; c) other operating expenses, which are primarily composed of costs related to offices’ and terminals’ rent, taxes, heating, telecommunications, maintenance and security and other general administrative expenses; d) depreciation of property and equipment, depreciation of right-of-use assets, amortization of intangible assets and gain or loss on the sale of rolling stock and equipment, on derecognition of right-of use assets, on sale of business and on sale of land and buildings and assets held for sale; e) bargain purchase gain; and f) impairment of intangible assets.

Operating income (loss): Net income or loss before finance income and costs and income tax expense, as stated in the consolidated financial statements.

This MD&A includes references to certain non-IFRS financial measures as described below. These non-IFRS financial measures are not standardized financial measures under IFRS used to prepare the financial statements of the Company to which the measures relate and might not be comparable to similar financial measures disclosed by other issuers. Accordingly, they should not be considered in isolation, in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with IFRS. The terms and definitions of non-IFRS measures used in this MD&A and a reconciliation of each non-IFRS measure to the most directly comparable IFRS measure are provided below.

Adjusted net income: Net income or loss excluding amortization of intangible assets related to business acquisitions, net change in the fair value and accretion expense of contingent considerations, net change in the fair value of derivatives, net foreign exchange gain or loss, impairment of intangible assets, bargain purchase gain, gain or loss on sale of land and buildings, assets held for sale and sale of business, gain or loss on the disposal of intangible assets and U.S. Tax Reform. In presenting an adjusted net income and adjusted EPS, the Company’s intent is to help provide an understanding of what would have been the net income and earnings per share in a context of significant business combinations and excluding specific impacts and to reflect earnings from a strictly operating perspective. The amortization of intangible assets related to business acquisitions comprises amortization expense of customer relationships, trademarks and non-compete agreements accounted for in business combinations and the income tax effects related to this amortization. Management also believes, in excluding amortization of intangible assets related to business acquisitions, it provides more information on the amortization of intangible asset expense portion, net of tax, that will not have to be replaced to preserve the Company’s ability to generate similar future cash flows. The Company excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Excluding these items does not imply they are necessarily non-recurring. See reconciliation on page 6.

Adjusted earnings per share (adjusted “EPS”) - basic: Adjusted net income divided by the weighted average number of common shares.

Adjusted EPS - diluted: Adjusted net income divided by the weighted average number of diluted common shares.

Adjusted EBITDA: Net income before finance income and costs, income tax expense, depreciation, amortization, impairment of intangible assets, bargain purchase gain, and gain or loss on sale of land and buildings, assets held for sale, sale of business, and gain or loss on disposal of intangible assets. Management believes adjusted EBITDA to be a useful supplemental measure. Adjusted EBITDA is provided to assist in determining the ability of the Company to assess its performance.

Segmented adjusted EBITDA refers to operating income (loss) before depreciation, amortization, impairment of intangible assets, bargain purchase gain, gain or loss on sale of business, land and buildings, and assets held for sale and gain or loss on disposal of intangible assets. Management believes adjusted EBITDA to be a useful supplemental measure. Adjusted EBITDA is provided to assist in determining the ability of the Company to assess its performance.

*Recasted for change in presentation currency from Canadian dollar to U.S. dollar.

(unaudited) (in thousands of U.S. dollars)	Three months ended March 31
	2022	2021
Package and Courier
Operating income	26,085	18,324
Depreciation and amortization	6,854	6,539
Adjusted EBITDA	32,939	24,863
Less-Than-Truckload
Operating income	94,770	22,136
Depreciation and amortization	37,502	12,512
Gain on sale of assets held for sale	—	(9)
Adjusted EBITDA	132,272	34,639
Truckload
Operating income	71,028	50,006
Depreciation and amortization	56,228	48,540
Gain on sale of land and buildings	(44)	—
Gain on sale of assets held for sale	—	(3,929)
Adjusted EBITDA	127,212	94,617
Logistics
Operating income	34,882	29,060
Depreciation and amortization	9,443	10,317
Adjusted EBITDA	44,325	39,377
Corporate
Operating loss	(6,999)	(17,781)
Depreciation and amortization	205	482
Adjusted EBITDA	(6,794)	(17,299)

Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue before fuel surcharge.

Free cash flow: Net cash from operating activities less additions to property and equipment plus proceeds from sale of property and equipment and assets held for sale. Management believes that this measure provides a benchmark to evaluate the performance of the Company in regard to its ability to meet capital requirements. See reconciliation on page 15.

Free cash flow conversion: Adjusted EBITDA less net capital expenditures, divided by the adjusted EBITDA. Management believes that this measure provides a benchmark to evaluate the performance of the Company in regard to its ability to convert its operating profit into free cash flow.

Total assets less intangible assets: Management believes that this presents a more useful basis to evaluate the return on the productive assets. The excluded intangibles relate primarily to intangibles assets acquired through business acquisitions.

(unaudited) (in thousands of U.S. dollars)	Package and Courier		Less- Than-Truckload		Truckload		Logistics		Corporate		Eliminations		Total
As at March 31, 2022
Total assets		382,027		2,328,133		2,321,932		803,972		97,689		-		5,933,753
Intangible assets		195,387		187,959		953,635		496,569		303		-		1,833,853
Total assets less intangible assets		186,640		2,140,174		1,368,297		307,403		97,386		-		4,099,900

As at December 31, 2021
Total assets		379,881		2,220,598		2,317,615		746,638		88,391		-		5,753,123
Intangible assets		193,765		188,604		955,608		454,612		332		-		1,792,921
Total assets less intangible assets		186,116		2,031,994		1,362,007		292,026		88,059		-		3,960,202

Net capital expenditures: Additions to rolling stock and equipment, net of proceeds from the sale of rolling stock and equipment and assets held for sale excluding property. Management believes that this measure illustrates the recurring net capital expenditures which is required for the respective period.

(unaudited) (in thousands of U.S. dollars)	Package and Courier			Less- Than-Truckload			Truckload			Logistics			Corporate		Eliminations	Total
Three months ended March 31, 2022
Additions to rolling stock		2,797			45,731			33,345			-			-			81,873
Additions to equipment		624			2,720			1,136			519			81			5,080
Proceeds from the sale of rolling stock		(272	)		(3,169	)		(38,644	)		(12	)		-			(42,097	)
Proceeds from the sale of equipment		(3	)		(5	)		(1,743	)		-			-			(1,751	)
Net capital expenditures		3,146			45,277			(5,906	)		507			81			43,105

Three months ended March 31, 2021
Additions to rolling stock		138			3,584			20,636			67			-			24,425
Additions to equipment		946			151			1,685			8			20			2,810
Proceeds from the sale of rolling stock		(40	)		(639	)		(16,613	)		(71	)		-			(17,363	)
Proceeds from the sale of equipment		-			-			-			-			-			-
Net capital expenditures		1,044			3,096			5,708			4			20			9,872

Operating margin is calculated as operating income (loss) as a percentage of revenue before fuel surcharge.

Adjusted operating ratio: Operating expenses before gain on sale of business, bargain purchase gain, and gain or loss on sale of land and buildings and assets held for sale, and gain or loss on disposal of intangible assets (“Adjusted operating expenses”), net of fuel surcharge revenue, divided by revenue before fuel surcharge. Although the adjusted operating ratio is not a recognized financial measure defined by IFRS, it is a widely recognized measure in the transportation industry, which the Company believes provides a comparable benchmark for evaluating the Company’s performance. Also, to facilitate the comparison of business level activity and operating costs between periods, the Company compares the revenue before fuel surcharge (“revenue”) and reallocates the fuel surcharge revenue to materials and services expenses within operating expenses.

*Recasted for changes in presentation currency from Canadian dollar to U.S. dollar.

Less-Than-Truckload and Truckload reportable segments adjusted operating ratio reconciliation and Truckload operating segments reconciliations:

(unaudited) (in thousands of U.S. dollars)	Three months ended March 31
	2022	2021
Less-Than-Truckload
Total revenue	1,000,110	150,522
Total operating expenses	905,340	128,386
Operating income	94,770	22,136
Operating expenses	905,340	128,386
Bargain purchase gain	—	—
Gain on sale of land and buildings and assets held for sale	—	9
Adjusted operating expenses	905,340	128,395
Fuel surcharge revenue	(164,711)	(18,896)
Adjusted operating expenses, net of fuel surcharge revenue	740,629	109,499
Revenue before fuel surcharge	835,399	131,626
Adjusted operating ratio	88.7%	83.2%
Less-Than-Truckload - Revenue before fuel surcharge
U.S. based LTL	695,761	638
Canadian based LTL	142,498	131,626
Eliminations	(2,860)	(638)
	835,399	131,626
Less-Than-Truckload - Fuel surcharge revenue
U.S. based LTL	131,833	-
Canadian based LTL	33,154	18,897
Eliminations	(276)	(1)
	164,711	18,896
Less-Than-Truckload - Operating income (loss)
U.S. based LTL	65,044	65
Canadian based LTL	29,726	22,071
	94,770	22,136
U.S. based LTL
Operating expenses*	762,550	573
Bargain purchase gain	-	-
Loss on sale of land and buildings and assets held for sale	-	-
Adjusted operating expenses	762,550	573
Fuel surcharge revenue	(131,833)	-
Adjusted operating expenses, net of fuel surcharge	630,717	573
Revenue before fuel surcharge	695,761	638
Adjusted operating ratio	90.7%	89.8%
Canadian based LTL
Operating expenses*	145,926	128,452
Gain on sale of land and buildings and assets held for sale	-	9
Adjusted operating expenses	145,926	128,461
Fuel surcharge revenue	(33,154)	(18,897)
Adjusted operating expenses, net of fuel surcharge	112,772	109,564
Revenue before fuel surcharge	142,498	131,626
Adjusted operating ratio	79.1%	83.2%

Less-Than-Truckload and Truckload reportable segments adjusted operating ratio reconciliation and Truckload operating segments reconciliations (continued):

(unaudited) (in thousands of U.S. dollars)	Three months ended March 31
	2022			2021
Truckload
Total revenue		609,674			474,606
Total operating expenses		538,646			424,600
Operating income		71,028			50,006
Operating expenses		538,646			424,600
Gain on sale of business		—			—
Gain on sale of land and buildings and assets held for sale		44			3,929
Adjusted operating expenses		538,690			428,529
Fuel surcharge revenue		(93,749	)		(50,039	)
Adjusted operating expenses, net of fuel surcharge revenue		444,941			378,490
Revenue before fuel surcharge		515,925			424,567
Adjusted operating ratio		86.2	%		89.1	%
Truckload - Revenue before fuel surcharge
U.S. based Conventional TL		191,765			155,619
Canadian based Conventional TL		76,307			55,792
Specialized TL		249,884			214,237
Eliminations		(2,031	)		(1,081	)
		515,925			424,567
Truckload - Fuel surcharge revenue
U.S. based Conventional TL		39,542			23,428
Canadian based Conventional TL		11,251			5,844
Specialized TL		43,181			20,822
Eliminations		(225	)		(55	)
		93,749			50,039
Truckload - Operating income
U.S. based Conventional TL		20,868			10,259
Canadian based Conventional TL		11,059			6,622
Specialized TL		39,101			33,125
		71,028			50,006
U.S. based Conventional TL
Adjusted operating expenses		210,439			168,788
Fuel surcharge revenue		(39,542	)		(23,428	)
Adjusted operating expenses, net of fuel surcharge revenue		170,897			145,360
Revenue before fuel surcharge		191,765			155,619
Adjusted operating ratio		89.1	%		93.4	%
Canadian based Conventional TL
Operating expenses*		76,499			55,014
Gain on sale of land and buildings and assets held for sale		44			—
Adjusted operating expenses		76,543			55,014
Fuel surcharge revenue		(11,251	)		(5,844	)
Adjusted operating expenses, net of fuel surcharge revenue		65,292			49,170
Revenue before fuel surcharge		76,307			55,792
Adjusted operating ratio		85.6	%		88.1	%
Specialized TL
Operating expenses*		253,964			201,934
Gain on sale of assets held for sale		—			3,929
Adjusted operating expenses		253,964			205,863
Fuel surcharge revenue		(43,181	)		(20,822	)
Adjusted operating expenses, net of fuel surcharge revenue		210,783			185,041
Revenue before fuel surcharge		249,884			214,237
Adjusted operating ratio		84.4	%		86.4	%

Return on invested capital (“ROIC”): Management believes ROIC at the segment level is a useful measure in the efficiency in the use of capital funds. The Company calculates ROIC as segment operating income net of exclusions, after tax, divided by the segment average invested capital. Operating income net of exclusions, after tax, is calculated as the trailing twelve months of operating income before bargain purchase gain, gain or loss on the sale of land and buildings and assets held for sale, and amortization of intangible assets, after tax using the statutory tax rate of the Company. Average invested capital is calculated as total assets excluding intangibles, net of trade and other payables, current taxes payable and provisions averaged between the beginning and ending balance over a twelve-month period.

Return on invested capital segment reconciliation:

(unaudited) (in thousands of U.S. dollars)	As at March 31
	2022			2021
Package and Courier
Operating income		116,201			85,510
Gain on sale of assets held for sale		—			(92	)
Amortization of intangible assets		811			968
Operating income, net of exclusions		117,012			86,386
Income tax		26.5	%		26.5	%
Operating income net of exclusions, after tax		86,004			63,494
Intangible assets		195,387			195,326
Total assets, excluding intangible assets		186,640			182,277
less: Trade and other payables, income taxes payable and provisions		(51,346	)		(56,360	)
Total invested capital, current year		330,681			321,243
Intangible assets, prior year		195,326			175,419
Total assets, excluding intangible assets, prior year		182,277			164,235
less: Trade and other payables, income taxes payable and provisions, prior year		(56,360	)		(39,507	)
Total invested capital, prior year		321,243			300,147
Average invested capital		325,962			310,695
Return on invested capital		26.4	%		20.4	%
Less-Than-Truckload - Canadian based LTL
Operating income		121,382			96,999
Gain on sale of assets held for sale		(1,640	)		—
Amortization of intangible assets		8,788			8,550
Operating income, net of exclusions		128,530			105,549
Income tax		26.5	%		26.5	%
Operating income net of exclusions, after tax		94,470			77,579
Intangible assets		181,719			189,601
Total assets, excluding intangible assets		395,233			402,509
less: Trade and other payables, income taxes payable and provisions		(75,732	)		(66,457	)
Total invested capital, current year		501,220			525,653
Intangible assets, prior year		189,601			172,187
Total assets, excluding intangible assets, prior year		402,509			373,012
less: Trade and other payables, income taxes payable and provisions, prior year		(66,457	)		(61,180	)
Total invested capital, prior year		525,653			484,019
Average invested capital		513,437			504,836
Return on invested capital		18.4	%		15.4	%
Truckload - U.S. based Conventional TL
Operating income		66,073			51,800
Gain on sale of assets held for sale		(6,643	)		(1,103	)
Amortization of intangible assets		8,080			6,832
Operating income, net of exclusions		67,510			57,529
Income tax		26.5	%		26.5	%
Operating income net of exclusions, after tax		49,620			42,284
Intangible assets		307,358			312,743
Total assets, excluding intangible assets		582,295			526,218
less: Trade and other payables, income taxes payable and provisions		(100,090	)		(99,940	)
Total invested capital, current year		789,563			739,021
Intangible assets, prior year		312,743			316,165
Total assets, excluding intangible assets, prior year		526,218			554,866
less: Trade and other payables, income taxes payable and provisions, prior year		(99,940	)		(74,585	)
Total invested capital, prior year		739,021			796,446
Average invested capital		764,292			767,734
Return on invested capital		6.5	%		5.5	%

Return on invested capital segment reconciliation (continued):

(unaudited) (in thousands of U.S. dollars)	As at March 31
	2022			2021
Truckload - Canadian based Conventional TL
Operating income		34,804			28,620
Gain on sale of land and buildings		(44	)		—
Gain on sale of assets held for sale		(17	)		—
Amortization of intangible assets		2,093			2,067
Operating income, net of exclusions		36,836			30,687
Income tax		26.5	%		26.5	%
Operating income net of exclusions, after tax		27,074			22,555
Intangible assets		106,238			98,009
Total assets, excluding intangible assets		178,222			124,663
less: Trade and other payables, income taxes payable and provisions		(28,885	)		(23,672	)
Total invested capital, current year		255,575			199,000
Intangible assets, prior year		98,009			88,996
Total assets, excluding intangible assets, prior year		124,663			111,770
less: Trade and other payables, income taxes payable and provisions, prior year		(23,672	)		(18,439	)
Total invested capital, prior year		199,000			182,327
Average invested capital		227,288			190,664
Return on invested capital		11.9	%		11.8	%
Truckload - Specialized TL
Operating income		150,334			129,236
(Gain) loss on assets held for sale		19			(6,868	)
Amortization of intangible assets		12,606			11,054
Operating income, net of exclusions		162,959			133,422
Income tax		26.5	%		26.5	%
Operating income net of exclusions, after tax		119,775			98,065
Intangible assets		540,041			501,586
Total assets, excluding intangible assets		607,780			543,583
less: Trade and other payables, income taxes payable and provisions		(81,934	)		(67,356	)
Total invested capital, current year		1,065,887			977,813
Intangible assets, prior year		501,586			412,778
Total assets, excluding intangible assets, prior year		543,583			456,858
less: Trade and other payables, income taxes payable and provisions, prior year		(67,356	)		(55,237	)
Total invested capital, prior year		977,813			814,399
Average invested capital		1,021,850			896,106
Return on invested capital		11.7	%		10.9	%
Logistics
Operating income		148,616			94,344
Loss on sale of land and buildings		3			5
Amortization of intangible assets		21,673			20,214
Bargain Purchase gain		(12,000	)		—
Operating income, net of exclusions		158,292			114,563
Income tax		26.5	%		26.5	%
Operating income net of exclusions, after tax		116,345			84,204
Intangible assets		496,569			455,572
Total assets, excluding intangible assets		307,403			257,802
less: Trade and other payables, income taxes payable and provisions		(195,686	)		(159,050	)
Total invested capital, current year		608,286			554,324
Intangible assets, prior year		455,572			252,039
Total assets, excluding intangible assets, prior year		257,802			171,538
less: Trade and other payables, income taxes payable and provisions, prior year		(159,050	)		(70,100	)
Total invested capital, prior year		554,324			353,477
Average invested capital		581,305			453,901
Return on invested capital		20.0	%		18.6	%

Return on invested capital for US LTL: Management believes ROIC at the segment level is a useful measure in the efficiency in the use of capital funds. The return on invested capital of the U.S. based LTL has been modified to remove the impacts of the bargain purchase gain from the operating income net of exclusions as well as from the average invested capital to align the capital with the acquisition price. In addition, as the Company has only owned UPS Freight, which represents substantially all of the U.S. based LTL operations, for 11 months, the average invested capital was adjusted to reflect the 11 months of ownership.

(unaudited) (in thousands of U.S. dollars)	As at March 31
	2022			2021*
Less-Than-Truckload - U.S. based LTL
Operating income		434,071			—
Loss on sale of land and buildings		17
Gain on sale of assets held for sale		—
Amortization of intangible assets		1,004
Bargain Purchase gain		(193,549	)
Operating income, net of exclusions		241,543			—
Income tax		26.5	%
Operating income net of exclusions, after tax		177,534			—
Intangible assets		6,240
Total assets, excluding intangible assets		1,744,941
less: Liabilities		(644,099	)
less: Impact of Bargain purchase gain		(181,549	)
Total invested capital, current year		925,533			—
Total invested capital, acquisition price		838,910			—
Average invested capital		882,222			—
Adjustment for less than full year¹		(73,519	)
Adjusted average invested capital		808,703
Return on invested capital		22.0	%
¹ This adjustment removes 1 month out of the annual average invested capital to reflect 11 months of ownership.
* Comparative information not meaningful

RISKS AND UNCERTAINTIES

The Company’s future results may be affected by a number of factors over many of which the Company has little or no control. The following discussion of risk factors contains forward-looking statements. The following issues, uncertainties and risks, among others, should be considered in evaluating the Company’s business, prospects, financial condition, results of operations and cash flows.

Competition. The Company faces growing competition from other transporters in Canada, the United States and Mexico. These factors, including the following, could impair the Company’s ability to maintain or improve its profitability and could have a material adverse effect on the Company’s results of operations:

•	the Company competes with many other transportation companies of varying sizes, including Canadian, U.S. and Mexican transportation companies;

•	the Company’s competitors may periodically reduce their freight rates to gain business, which may limit the Company’s ability to maintain or increase freight rates or maintain growth in the Company’s business;

•	some of the Company’s customers are other transportation companies or companies that also operate their own private trucking fleets, and they may decide to transport more of their own freight or bundle transportation with other services;

•	some of the Company’s customers may reduce the number of carriers they use by selecting so-called “core carriers” as approved service providers or by engaging dedicated providers, and in some instances the Company may not be selected;

•	many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress freight rates or result in the loss of some of the Company’s business to competitors;

•

the market for qualified drivers is highly competitive, particularly in the Company’s growing U.S. operations, and the Company’s inability to attract and retain drivers could reduce its equipment utilization and cause the Company to increase compensation, both of which would adversely affect the Company’s profitability;

•	economies of scale that may be passed on to smaller carriers by procurement aggregation providers may improve their ability to compete with the Company;

•	some of the Company’s smaller competitors may not yet be fully compliant with recently-enacted regulations which may allow such competitors to take advantage of additional driver productivity;

•

advances in technology, such as advanced safety systems, automated package sorting, handling and delivery, vehicle platooning, alternative fuel vehicles, autonomous vehicle technology and digitization of freight services, may require the Company to increase investments in order to remain competitive, and the Company’s customers may not be willing to accept higher freight rates to cover the cost of these investments;

•	the Company’s competitors may have better safety records than the Company or a perception of better safety records, which could impair the Company’s ability to compete;

•	some high-volume package shippers, such as Amazon.com, are developing and implementing in-house delivery capabilities and utilizing independent contractors for deliveries, which could in turn reduce the Company’s revenues and market share;

•	the Company’s brand names may be subject to adverse publicity (whether or not justified) and lose significant value, which could result in reduced demand for the Company’s services;

•	competition from freight brokerage companies may materially adversely affect the Company’s customer relationships and freight rates; and

•	higher fuel prices and, in turn, higher fuel surcharges to the Company’s customers may cause some of the Company’s customers to consider freight transportation alternatives, including rail transportation.

Regulation. In Canada, carriers must obtain licenses issued by provincial transport boards in order to carry goods inter-provincially or to transport goods within any province. Licensing from U.S. and Mexican regulatory authorities is also required for the transportation of goods in Canada, the United States, and Mexico. Any change in or violation of existing or future regulations could have an adverse impact on the scope of the Company’s activities. Future laws and regulations may be more stringent, require changes in the Company’s operating practices, influence the demand for transportation services or require the Company to incur significant additional costs. Higher costs incurred by the Company, or by the Company’s suppliers who pass the costs onto the Company through higher supplies and materials pricing, could adversely affect the Company’s results of operations.

In addition to the regulatory regime applicable to operations in Canada, the Company is increasing its operations in the United States, and is therefore increasingly subject to rules and regulations related to the U.S. transportation industry, including regulation from various federal, state and local agencies, including the Department of Transportation (“DOT”) (in part through the Federal Motor Carrier Safety Administration (“FMCSA”)), the Environmental Protection Agency (“EPA”) and the Department of Homeland Security. Drivers must, both in Canada and the United States, comply with safety and fitness regulations, including those relating to drug and alcohol testing, driver safety performance and hours of service. Weight and dimensions, exhaust emissions and fuel efficiency are also subject to government regulation. The Company may also become subject to new or more restrictive regulations relating to fuel efficiency, exhaust emissions, hours of service, drug and alcohol testing, ergonomics, on-board reporting of operations, collective bargaining, security at ports, speed limitations, driver training and other matters affecting safety or operating methods.

In the United States, there are currently two methods of evaluating the safety and fitness of carriers: the Compliance, Safety, Accountability (“CSA”) program, which evaluates and ranks fleets on certain safety-related standards by analyzing data from recent safety events and investigation results, and the DOT safety rating, which is based on an on-site investigation and affects a carrier’s ability to operate in interstate commerce. Additionally, the FMCSA has proposed rules in the past that would change the methodologies used to determine carrier safety and fitness.

Under the CSA program, carriers are evaluated and ranked against their peers based on seven categories of safety-related data. The seven categories of safety-related data currently include Unsafe Driving, Hours-of-Service Compliance, Driver Fitness, Controlled Substances/Alcohol, Vehicle Maintenance, Hazardous Materials Compliance and Crash Indicator (such categories known as “BASICs”). Carriers are grouped by category with other carriers that have a similar number of safety events (i.e. crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile or score. If the Company were subject to any such interventions, this could have an adverse effect on the Company’s business, financial condition and results of operations. As a result, the Company’s fleet could be ranked poorly as compared to peer carriers. There is no guarantee that the Company will be able to maintain its current safety ratings or that it will not be subject to interventions in the future. The Company recruits first-time drivers to be part of its fleet, and these drivers may have a higher likelihood of creating adverse safety events under CSA. The occurrence of future deficiencies could affect driver recruitment in the United States by causing high-quality drivers to seek employment with other carriers or limit the pool of available drivers or could cause the Company’s customers to direct their business away from the Company and to carriers with higher fleet safety rankings, either of which would materially adversely affect the Company’s business, financial condition and results of operations. In addition, future deficiencies could increase the Company’s insurance expenses. Additionally, competition for drivers with favorable safety backgrounds may increase, which could necessitate increases in driver-related compensation costs. Further, the Company may incur greater than expected expenses in its attempts to improve unfavorable scores.

In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing results and requiring motor carriers and medical review officers to provide records of violations by commercial drivers of FMCSA drug and alcohol testing requirements. Motor carriers in the United States will be required to query the clearinghouse to ensure drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them from operating commercial motor vehicles. The final rule became effective on January 4, 2017, with a compliance date of January 6, 2020. In December 2019, however, the FMCSA announced a final rule extending by three years the date for state driver’s licensing agencies to comply with certain requirements. The December 2016 commercial driver’s license rule required states to request information from the clearinghouse about individuals prior to issuing, renewing, upgrading or transferring a commercial driver’s license. This new action will allow states’ compliance with the requirement, which was set to begin January 2020, to be delayed until January 2023. The compliance date of January 2020 remained in place for all other requirements set forth in the clearinghouse final rule, however. Upon implementation, the rule may reduce the number of available drivers in an already constrained driver market. Pursuant to a new rule finalized by the FMCSA, effective November 2021, states are required to query the clearinghouse when issuing, renewing, transferring, or upgrading a commercial drivers license and must revoke a driver’s commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.

In addition, other rules have been proposed or made final by the FMCSA, including (i) a rule requiring the use of speed-limiting devices on heavy-duty tractors to restrict maximum speeds, which was proposed in 2016, and (ii) a rule setting out minimum driver training standards for new drivers applying for commercial driver’s licenses for the first time and to experienced drivers upgrading their licenses or seeking a hazardous materials endorsement, which was made final in December 2016 with a compliance date in February 2020 (FMCSA officials delayed implementation of the final rule by two years). In July 2017, the DOT announced that it would no longer pursue a speed limiter rule, but left open the possibility that it could resume such a pursuit in the future. In May 2021, however, a bill was reintroduced in the U.S. House of Representatives that would require commercial motor vehicles with gross weight exceeding 26,000 pounds to eb equipped with a speed limiting device, prohibiting speeds greater than 65 miles per hour. Whether the bill will become law is uncertain. The effect of these rules, to the extent they become effective, could result in a decrease in fleet production and/or driver availability, either of which could materially adversely affect the Company’s business, financial condition and results of operations.

The Company’s subsidiaries with U.S. operating authority currently have a satisfactory DOT rating, which is the highest available rating under the current safety rating scale. If the Company’s subsidiaries with U.S. operating authority were to receive a conditional or unsatisfactory DOT safety rating, it could materially adversely affect the Company’s business, financial condition and results of operations as customer contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory rating could materially adversely affect or restrict the Company’s operations and increase the Company’s insurance costs.

The FMCSA has proposed regulations that would modify the existing rating system and the safety labels assigned to motor carriers evaluated by the DOT. Under regulations that were proposed in 2016, the methodology for determining a carrier’s DOT safety rating would be expanded to include the on-road safety performance of the carrier’s drivers and equipment, as well as results obtained from investigations. Exceeding certain thresholds based on such performance or results would cause a carrier to receive an unfit safety rating. The proposed regulations were withdrawn in March 2017, but the FMCSA noted that a

similar process may be initiated in the future. If similar regulations were enacted and the Company were to receive an unfit or other negative safety rating, the Company’s business would be materially adversely affected in the same manner as if it received a conditional or unsatisfactory safety rating under the current regulations. In addition, poor safety performance could lead to increased risk of liability, increased insurance, maintenance and equipment costs and potential loss of customers, which could materially adversely affect the Company’s business, financial condition and results of operations. The FMCSA has also indicated that it is in the early phases of a new study on the causation of large truck crashes. Although it remains unclear whether such a study will ultimately be completed, the results of such study could spur further proposed and/or final rules regarding safety and fitness in the United States.

From time to time, the FMCSA proposes and implements changes to regulations impacting hours-of-service. Such changes can negatively impact the Company’s productivity and affect its operations and profitability by reducing the number of hours per day or week the Company’s U.S. drivers and independent contractors may operate and/or disrupt the Company’s network. However, in August 2019, the FMCSA issued a proposal to make changes to its hours-of-service rules that would allow U.S. truck drivers more flexibility with their 30-minute rest break and with dividing their time in the sleeper berth. It also would extend by two hours the duty time for U.S. drivers encountering adverse weather, and extend the shorthaul exemption by lengthening the drivers’ maximum on-duty period from 12 hours to 14 hours. In June 2020, the FMCSA adopted a final rule substantially as proposed, which became effective in September 2020. Certain industry groups have challenged these rules in U.S. courts, and it remains unclear what, if anything, will come from such challenges. Any future changes to U.S. hours-of-service regulations could materially and adversely affect the Company’s operations and profitability.

The U.S. National Highway Traffic Safety Administration, the EPA and certain U.S. states, including California, have adopted regulations that are aimed at reducing tractor emissions and/or increasing fuel economy of the equipment the Company uses. Certain of these regulations are currently effective, with stricter emission and fuel economy standards becoming effective over the next several years. Other regulations have been proposed in the United States that would similarly increase these standards. U.S. federal and state lawmakers and regulators have also adopted or are considering a variety of other climate-change legal requirements related to carbon emissions and greenhouse gas emissions. These legal requirements could potentially limit carbon emissions within certain states and municipalities in the United States. Certain of these legal requirements restrict the location and amount of time that diesel-powered tractors (like the Company’s) may idle, which may force the Company to purchase on-board power units that do not require the engine to idle or to alter the Company’s drivers’ behavior, which might result in a decrease in productivity and/or an increase in driver turnover. All of these regulations have increased, and may continue to increase, the cost of new tractors and trailers and may require the Company to retrofit certain of its tractors and trailers, may increase its maintenance costs, and could impair equipment productivity and increase the Company’s operating costs, particularly if such costs are not offset by potential fuel savings. The occurrence of any of these adverse effects, combined with the uncertainty as to the reliability of the newly-designed diesel engines and the residual values of the Company’s equipment, could materially adversely affect the Company’s business, financial condition and results of operations. Furthermore, any future regulations that impose restrictions, caps, taxes or other controls on emissions of greenhouse gases could adversely affect the Company’s operations and financial results. The Company cannot predict the extent to which its operations and productivity will be impacted by any future regulations. The Company will continue monitoring its compliance with U.S. federal and state environmental regulations.

In March 2014, the U.S. Ninth Circuit Court of Appeals (the “Ninth Circuit”) held that the application of California state wage and hour laws to interstate truck drivers is not pre-empted by U.S. federal law. The case was appealed to the U.S. Supreme Court, which denied certiorari in May 2015, and accordingly, the Ninth Circuit decision stood. However, in December 2018, the FMCSA granted a petition filed by the American Trucking Associations determining that federal law pre-empts California’s wage and hour laws, and interstate truck drivers are not subject to such laws. The FMCSA’s decision was appealed by labor groups and multiple lawsuits were filed in U.S. courts seeking to overturn the decision. I January 2021, however, the Ninth Circuit upheld the FMCSA’s determination that U.S. federal law does pre-empt California’s meal and rest break laws, as applied to drivers of property-carrying commercial motor vehicles. Other current and future U.S. state and local wage and hour laws, including laws related to employee meal breaks and rest periods, may vary significantly from U.S. federal law. Further, driver piece rate compensation, which is an industry standard, has been attacked as non-compliant with state minimum wage laws. As a result, the Company, along with other companies in the industry, is subject to an uneven patchwork of wage and hour laws throughout the United States. In addition, the uncertainty with respect to the practical application of wage and hour laws are, and in the future may be, resulting in additional costs for the Company and the industry as a whole, and a negative outcome with respect to any of the above-mentioned lawsuits could materially affect the Company. If U.S. federal legislation is not passed pre-empting state and local wage and hour laws, the Company will either need to continue complying with the most restrictive state and local laws across its entire fleet in the United States, or revise its management systems to comply with varying state and local laws. Either solution could result in increased compliance and labor costs, driver turnover, decreased efficiency and increased risk of non-compliance. In April 2016, the Food and Drug Administration (“FDA”) published a final rule establishing requirements for shippers, loaders, carriers by motor vehicle and rail vehicle, and receivers engaged in the transportation of food, to use sanitary transportation practices to ensure the safety of the food they transport as part of the FSMA. This rule sets

forth requirements related to (i) the design and maintenance of equipment used to transport food, (ii) the measures taken during food transportation to ensure food safety, (iii) the training of carrier personnel in sanitary food transportation practices, and (iv) maintenance and retention of records of written procedures, agreements, and training related to the foregoing items. These requirements took effect for larger carriers in April 2017 and apply to the Company when it acts as a carrier or as a broker. If the Company is found to be in violation of applicable laws or regulations related to the FSMA or if the Company transports food or goods that are contaminated or are found to cause illness and/or death, the Company could be subject to substantial fines, lawsuits, penalties and/or criminal and civil liability, any of which could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Changes in existing regulations and implementation of new regulations, such as those related to trailer size limits, emissions and fuel economy, hours of service, mandating ELDs and drug and alcohol testing in Canada, the United States and Mexico, could increase capacity in the industry or improve the position of certain competitors, either of which could negatively impact pricing and volumes or require additional investments by the Company. The short-term and long-term impacts of changes in legislation or regulations are difficult to predict and could materially adversely affect the Company’s results of operations.

The right to continue to hold applicable licenses and permits is generally subject to maintaining satisfactory compliance with regulatory and safety guidelines, policies and laws. Although the Company is committed to compliance with laws and safety, there is no assurance that it will be in full compliance with them at all times. Consequently, at some future time, the Company could be required to incur significant costs to maintain or improve its compliance record.

United States and Mexican operations. A significant portion of the Company’s revenue is derived from operations in the United States and transportation to and from Mexico. The Company’s international operations are subject to a variety of risks, including fluctuations in foreign currencies, changes in the economic strength or greater volatility in the economies of foreign countries in which the Company does business, difficulties in enforcing contractual rights and intellectual property rights, compliance burdens associated with export and import laws, theft or vandalism, and social, political and economic instability. The Company’s international operations could be adversely affected by restrictions on travel. Additional risks associated with the Company’s international operations include restrictive trade policies, imposition of duties, changes to trade agreements and other treaties, taxes or government royalties by foreign governments, adverse changes in the regulatory environments, including in tax laws and regulations, of the foreign countries in which the Company does business, compliance with anti-corruption and anti-bribery laws, restrictions on the withdrawal of foreign investments, the ability to identify and retain qualified local managers and the challenge of managing a culturally and geographically diverse operation. The Company cannot guarantee compliance with all applicable laws, and violations could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect the Company’s results of operations.

The Company accrues the costs of the uninsured portion of pending claims based on estimates derived from the Company’s evaluation of the nature and severity of individual claims and an estimate of future claims development based upon historical claims development trends. Actual settlement of the Company’s retained claim liabilities could differ from its estimates due to a number of uncertainties, including evaluation of severity, legal costs and claims that have been incurred but not reported. Due to the Company’s high retained amounts, it has significant exposure to fluctuations in the number and severity of claims. If the Company were required to accrue or pay additional amounts because its estimates are revised or the claims ultimately prove to be more severe than originally assessed, its financial condition and results of operations may be materially adversely affected.

Employee Relations. With the acquisition of UPS Freight and prior Canadian acquisitions, the Company has a substantial number of unionized employees in the U.S. and Canada. Although the Company believes that its relations with its employees are satisfactory, no assurance can be given that the Company will be able to successfully extend or renegotiate the Company’s current collective agreements as they expire from time to time or that additional employees will not attempt to unionize.

The unionization of the Company’s employees in additional business units, adverse changes in terms under collective bargaining agreements, or actual or threatened strikes, work stoppages or slow downs, could have a material adverse effect on the Company’s business, customer retention, results of operations, financial condition and liquidity, and could cause significant disruption of, or inefficiencies in, its operations, because:

•	restrictive work rules could hamper the Company’s ability to improve or sustain operating efficiency or could impair the Company’s service reputation and limit its ability to provide certain services;

•	a strike or work stoppage could negatively impact the Company’s profitability and could damage customer and employee relationships;

•	shippers may limit their use of unionized trucking companies because of the threat of strikes and other work stoppages;

•	the Company could fail to extend or renegotiate its collective agreements or experience material increases in wages or benefits;

•	disputes with the Company’s unions could arise; and

•	an election and bargaining process could divert management’s time and attention from the Company’s overall objectives and impose significant expenses.

The Company’s collective agreements have a variety of expiration dates, to the last of which is in September 2024. In a small number of cases, the expiration date of the collective agreement has passed; in such cases, the Corporation is generally in the process of renegotiating the agreement. The Company cannot predict the effect which any new collective agreements or the failure to enter into such agreements upon the expiry of the current agreements may have on its operations.

The Company has limited experience with unionized employees in the U.S. There may be additional risks related to the increased number of unionized U.S. employees from the acquisition of UPS Freight. The impact the Company’s unionized operations could have on non-unionized operations is uncertain.

Drivers. Increases in driver compensation or difficulties attracting and retaining qualified drivers could have a material adverse effect on the Company’s profitability and the ability to maintain or grow the Company’s fleet.

Like many in the transportation sector, the Company experiences substantial difficulty in attracting and retaining sufficient numbers of qualified drivers. The trucking industry periodically experiences a shortage of qualified drivers. The Company believes the shortage of qualified drivers and intense competition for drivers from other transportation companies will create difficulties in maintaining or increasing the number of drivers and may negatively impact the Company’s ability to engage a sufficient number of drivers, and the Company’s inability to do so may negatively impact its operations. Further, the compensation the Company offers its drivers and independent contractor expenses are subject to market conditions, and the Company may find it necessary to increase driver and independent contractor compensation in future periods.

In addition, the Company and many other trucking companies suffer from a high turnover rate of drivers in the U.S. TL market. This high turnover rate requires the Company to continually recruit a substantial number of new drivers in order to operate existing revenue equipment. Driver shortages are exacerbated during periods of economic expansion, in which alternative employment opportunities, including in the construction and manufacturing industries, which may offer better compensation and/or more time at home, are more plentiful and freight demand increases, or during periods of economic downturns, in which unemployment benefits might be extended and financing is limited for independent contractors who seek to purchase equipment, or the scarcity or growth of loans for students who seek financial aid for driving school. In addition, enrollment at driving schools may be further limited by COVID-19 social distancing requirements, vaccine, testing, and mask mandates, and other regulatory requirements that reduces the number of eligible drivers. The lack of adequate tractor parking along some U.S. highways and congestion caused by inadequate highway funding may make it more difficult for drivers to comply with hours of service regulations and cause added stress for drivers, further reducing the pool of eligible drivers. The Company’s use of team-driven tractors for expedited shipments requires two drivers per tractor, which further increases the number of drivers the Company must recruit and retain in comparison to operations that require one driver per tractor. The Company also employs driver hiring standards, which could further reduce the pool of available drivers from which the Company would hire. If the Company is unable to continue to attract and retain a sufficient number of drivers, the Company could be forced to, among other things, adjust the Company’s compensation packages, increase the number of the Company’s tractors without drivers or operate with fewer trucks and

face difficulty meeting shipper demands, any of which could adversely affect the Company’s growth and profitability.

Independent Contractors. The Company’s contracts with U.S. independent contractors are governed by U.S. federal leasing regulations, which impose specific requirements on the Company and the independent contractors. If more stringent state or U.S. federal leasing regulations are adopted, U.S. independent contractors could be deterred from becoming independent contractor drivers, which could materially adversely affect the Company’s goal of maintaining its current fleet levels of independent contractors.

The Company provides financing to certain qualified Canadian independent contractors and financial guarantees to a small number of U.S. independent contractors. If the Company were unable to provide such financing or guarantees in the future, due to liquidity constraints or other restrictions, it may experience a decrease in the number of independent contractors it is able to engage. Further, if independent contractors the Company engages default under or otherwise terminate the financing arrangements and the Company is unable to find replacement independent contractors or seat the tractors with its drivers, the Company may incur losses on amounts owed to it with respect to such tractors.

Pursuant to the Company’s fuel surcharge program with independent contractors, the Company pays independent contractors with which it contracts a fuel surcharge that increases with the increase in fuel prices. A significant increase or rapid fluctuation in fuel prices could cause the Company’s costs under this program to be higher than the revenue the Company receives under its customer fuel surcharge programs.

U.S. tax and other regulatory authorities, as well as U.S. independent contractors themselves, have increasingly asserted that U.S. independent contractor drivers in the trucking industry are employees rather than independent contractors, and the Company’s classification of independent contractors has been the subject of audits by such authorities from time to time. U.S. federal and state legislation has been introduced in the past that would make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements for those that engage independent contractor drivers and to increase the penalties for companies who misclassify their employees and are found to have violated employees’ overtime and/or wage requirements. The most recent example being the Protecting the Rights to Organize (“PRO”) Act, which was passed by the U.S. House of Representatives and received by the U.S. Senate in March 2021 and remains with the U.S. Senate’s Committee on Health, Education, Labor, and Pensions. The PRO Act proposes to apply the “ABC Test” (described below) for classifying workers under Federal Fair Labor Standards Act claims. It is unknown whether any of the proposed legislation will become law or whether any industry-based exemptions from any resulting law will be granted. Additionally, U.S. federal legislators have sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent contractors if they are following a long-standing, recognized practice, to extend the U.S. Fair Labor Standards Act to independent contractors and to impose notice requirements based on employment or independent contractor status and fines for failure to comply. Some U.S. states have put initiatives in place to increase their revenue from items such as unemployment, workers’ compensation and income taxes, and a reclassification of independent contractors as employees would help states with this initiative. Further, courts in certain U.S. states have issued decisions that could result in a greater likelihood that independent contractors would be judicially classified as employees in such states.

In September 2019, California enacted a new law, A.B. 5 (“AB5”), that made it more difficult for workers to be classified as independent contractors (as opposed to employees). AB5 provides that the three-pronged “ABC Test” must be used to determine worker classifications in wage order claims. Under the ABC Test, a worker is presumed to be an employee and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria: (a) the worker is free from control and direction in the performance of services; (b) the worker is performing work outside the usual course of the business of the hiring company; and (c) the worker is customarily engaged in an independently established trade, occupation, or business. How AB5 will be enforced is still to be determined. In January 2021, however, the California Supreme Court ruled that the ABC Test could apply retroactively to all cases not yet final as of the date the original decision was rendered, April 2018. While it was set to enter into effect in January 2020, a U.S. federal judge in California issued a preliminary injunction barring the enforcement of AB5 on the trucking industry while the California Trucking Association (“CTA”) moves forward with its suit seeking to invalidate AB5. The Ninth Circuit rejected the reasoning behind the injunction in April 2021, ruling that AB5 is not pre-empted by U.S. federal law, but granted a stay of the AB5 mandate in June 2021 (preventing its application and temporarily continuing the injunction) while the CTA petitioned the United States Supreme Court (the “Supreme Court”) to review the decision. In November 2021, the Supreme Court requested that the U.S. solicitor general weigh in on the case. The injunction will remain in place until the Supreme Court makes a decision on whether to proceed in hearing the case. While the stay of the AB5 mandate provides temporary relief to the enforcement of AB5, it remains unclear how long such relief will last, and whether the CTA will ultimately be successful in invalidating the law. It is also possible AB5 will spur similar legislation in states other than California, which could adversely affect the Company’s results of operations and profitability.

U.S. class action lawsuits and other lawsuits have been filed against certain members of the Company’s industry seeking to reclassify independent contractors as employees for a variety of purposes, including workers’ compensation and health care coverage. In addition, companies that use lease purchase independent contractor programs, such as the Company, have been more susceptible to reclassification lawsuits, and several recent decisions have been made in favor of those seeking to classify independent contractor truck drivers as employees.

U.S. taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If the independent contractors with whom the Company contracts are determined to be employees, the Company would incur additional exposure under U.S. federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings, and the Company’s business, financial condition and results of operations could be materially adversely affected. The Company has settled certain class action cases in Massachusetts and California in the past with independent contractors who alleged they were misclassified.

Acquisitions and Integration Risks. Historically, acquisitions have been a part of the Company’s growth strategy. The Company may not be able to successfully integrate acquisitions into the Company’s business, or may incur significant unexpected costs in doing so. Further, the process of integrating acquired businesses may be disruptive to the Company’s existing business and may cause an interruption or reduction of the Company’s business as a result of the following factors, among others:

•	loss of drivers, key employees, customers or contracts;

•	possible inconsistencies in or conflicts between standards, controls, procedures and policies among the combined companies and the need to implement company-wide financial, accounting, information technology and other systems;

•	failure to maintain or improve the safety or quality of services that have historically been provided;

•	inability to retain, integrate, hire or recruit qualified employees;

•	unanticipated environmental or other liabilities;

•	risks of entering new markets or business offerings in which we have had no or only limited prior experience;

•	failure to coordinate geographically dispersed organizations; and

•	the diversion of management’s attention from the Company’s day-to-day business as a result of the need to manage any disruptions and difficulties and the need to add management resources to do so.

Given the nature and size of UPS Freight, as well as the structure of the acquisition as a carveout from UPS, the acquisition of UPS Freight presents the following risks, in addition to risks noted elsewhere in these risk factors:

•

a large portion of the business of UPS Freight prior to the acquisition was with affiliates of UPS. While there are transportation service agreements in effect with such affiliates of UPS, such affiliates may decide to reduce or eliminate business with the Company in the future and we have limited contractual protections to prevent the loss of such business;

•

some of the information and operating systems of UPS Freight were integrated with UPS prior to the acquisition. The Company is in the process of transitioning such systems and could experience disruptions during the transition or difficulty or delay in building its systems and personnel to operate them;

•	the Company had limited experience in the U.S. LTL market prior to the acquisition and we may be unsuccessful in integrating UPS Freight and operating it profitably;

•	given the size and complexity of the acquired U.S. LTL operations of UPS Freight, management’s attention may be diverted from other areas of the Company; and

•	the Company acquired a substantial number of unionized U.S. employees in the acquisition and unionized employees present significant risks.

Anticipated cost savings, synergies, revenue enhancements or other benefits from any acquisitions that the Company undertakes may not materialize in the expected timeframe or at all. The Company’s estimated cost savings, synergies, revenue enhancements and other benefits from acquisitions are subject to a number of assumptions about the timing, execution and costs associated with realizing such synergies. Such assumptions are inherently uncertain and are subject to a wide variety of significant business, economic and competition risks. There can be no assurance that such assumptions will turn out to be correct and, as a result, the amount of cost savings, synergies, revenue enhancements and other benefits the Company actually realizes and/or the timing of such realization may differ significantly (and may be significantly lower) from the ones the Company estimated, and the Company may incur significant costs in reaching the estimated cost savings, synergies, revenue enhancements or other benefits. Further, management of acquired operations through a decentralized approach may create inefficiencies or inconsistencies.

Many of the Company’s recent acquisitions have involved the purchase of stock of existing companies. These acquisitions, as well as acquisitions of substantially all of the assets of a company, may expose the Company to liability for actions taken by an acquired business and its management before the Company’s acquisition. The due diligence the Company conducts in connection with an acquisition and any contractual guarantees or indemnities that the Company receives from the sellers of acquired companies may not be sufficient to protect the Company from, or compensate the Company for, actual liabilities. The representations made by the sellers expire at varying periods after the closing. A material liability associated with an acquisition, especially where there is no right to indemnification, could adversely affect the Company’s results of operations, financial condition and liquidity.

The Company continues to review acquisition and investment opportunities in order to acquire companies and assets that meet the Company’s investment criteria, some of which may be significant. Depending on the number of acquisitions and investments and funding requirements, the Company may need to raise substantial additional capital and increase the Company’s indebtedness. Instability or disruptions in the capital markets, including credit markets, or the deterioration of the Company’s financial condition due to internal or external factors, could restrict or prohibit access to the capital markets and could also increase the Company’s cost of capital. To the extent the Company raises additional capital through the sale of equity, equity-linked or convertible debt securities, the issuance of such securities

could result in dilution to the Company’s existing shareholders. If the Company raises additional funds through the issuance of debt securities, the terms of such debt could impose additional restrictions and costs on the Company’s operations. Additional capital, if required, may not be available on acceptable terms or at all. If the Company is unable to obtain additional capital at a reasonable cost, the Company may be required to forego potential acquisitions, which could impair the execution of the Company’s growth strategy.

The Company routinely evaluates its operations and considers opportunities to divest certain of its assets. In addition, the Company faces competition for acquisition opportunities. This external competition may hinder the Company’s ability to identify and/or consummate future acquisitions successfully. There is also a risk of impairment of acquired goodwill and intangible assets. This risk of impairment to goodwill and intangible assets exists because the assumptions used in the initial valuation, such as interest rates or forecasted cash flows, may change when testing for impairment is required.

There is no assurance that the Company will be successful in identifying, negotiating, consummating or integrating any future acquisitions. If the Company does not make any future acquisitions, or divests certain of its operations, the Company’s growth rate could be materially and adversely affected. Any future acquisitions the Company does undertake could involve the dilutive issuance of equity securities or the incurring of additional indebtedness.

Growth. There is no assurance that in the future, the Company’s business will grow substantially or without volatility, nor is there any assurance that the Company will be able to effectively adapt its management, administrative and operational systems to respond to any future growth. Furthermore, there is no assurance that the Company’s operating margins will not be adversely affected by future changes in and expansion of its business or by changes in economic conditions or that it will be able to sustain or improve its profitability in the future.

Environmental Matters. The Company uses storage tanks at certain of its Canadian and U.S. transportation terminals. Canadian and U.S. laws and regulations generally impose potential liability on the present and former owners or occupants or custodians of properties on which contamination has occurred, as well as on parties who arranged for the disposal of waste at such properties. Although the Company is not aware of any contamination which, if remediation or clean-up were required, would have a material adverse effect on it, certain of the Company’s current or former facilities have been in operation for many years and over such time, the Company or the prior owners, operators or custodians of the properties may have generated and disposed of wastes which are or may be considered hazardous. Liability under certain of these laws and regulations may be imposed on a joint and several basis and without regard to whether the Company knew of, or was responsible for, the presence or disposal of these materials or whether the activities giving rise to the contamination was legal when it occurred. In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect the Company’s ability to sell or rent that property. If the Company incurs liability under these laws and regulations and if it cannot identify other parties which it can compel to contribute to its expenses and who are financially able to do so, it could have a material adverse effect on the Company’s financial condition and results of operations. There can be no assurance that the Company will not be required at some future date to incur significant costs or liabilities pursuant to environmental laws, or that the Company’s operations, business or assets will not be materially affected by current or future environmental laws.

The Company’s transportation operations and its properties are subject to extensive and frequently-changing federal, provincial, state, municipal and local environmental laws, regulations and requirements in Canada, the United States and Mexico relating to, among other things, air emissions, the management of contaminants, including hazardous substances and other materials (including the generation, handling, storage, transportation and disposal thereof), discharges and the remediation of environmental impacts (such as the contamination of soil and water, including ground water). A risk of environmental liabilities is inherent in transportation operations, historic activities associated with such operations and the ownership, management and control of real estate.

Environmental laws may authorize, among other things, federal, provincial, state and local environmental regulatory agencies to issue orders, bring administrative or judicial actions for violations of environmental laws and regulations or to revoke or deny the renewal of a permit. Potential penalties for such violations may include, among other things, civil and criminal monetary penalties, imprisonment, permit suspension or revocation and injunctive relief. These agencies may also, among other things, revoke or deny renewal of the Company’s operating permits, franchises or licenses for violations or alleged violations of environmental laws or regulations and impose environmental assessment, removal of contamination, follow up or control procedures.

Environmental Contamination. The Company could be subject to orders and other legal actions and procedures brought by governmental or private parties in connection with environmental contamination, emissions or discharges. If the Company is involved in a spill or other accident involving hazardous substances, if there are releases of hazardous substances the Company transports, if soil or groundwater contamination is found at the Company’s current or former facilities or results from the Company’s operations, or if the Company is found to be in violation of applicable laws or regulations, the Company could be subject to cleanup costs and liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on the Company’s business and operating results.

Key Personnel. The future success of the Company will be based in large part on the quality of the Company’s management and key personnel. The Company’s management and key personal possess valuable knowledge about the transportation and logistics industry and

their knowledge of and relationships with the Company’s key customers and vendors would be difficult to replace. The loss of key personnel could have a negative effect on the Company. There can be no assurance that the Company will be able to retain its current key personnel or, in the event of their departure, to develop or attract new personnel of equal quality.

Dependence on Third Parties. Certain portions of the Company’s business are dependent upon the services of third-party capacity providers, including other transportation companies. For that portion of the Company’s business, the Company does not own or control the transportation assets that deliver the customers’ freight, and the Company does not employ the people directly involved in delivering the freight. This reliance could cause delays in reporting certain events, including recognizing revenue and claims. These third-party providers seek other freight opportunities and may require increased compensation in times of improved freight demand or tight trucking capacity. The Company’s inability to secure the services of these third parties could significantly limit the Company’s ability to serve its customers on competitive terms. Additionally, if the Company is unable to secure sufficient equipment or other transportation services to meet the Company’s commitments to its customers or provide the Company’s services on competitive terms, the Company’s operating results could be materially and adversely affected. The Company’s ability to secure sufficient equipment or other transportation services is affected by many risks beyond the Company’s control, including equipment shortages in the transportation industry, particularly among contracted carriers, interruptions in service due to labor disputes, changes in regulations impacting transportation and changes in transportation rates.

Loan Default. The agreements governing the Company’s indebtedness, including the Credit Facility and the Term Loan, contain certain restrictions and other covenants relating to, among other things, funded debt, distributions, liens, investments, acquisitions and dispositions outside the ordinary course of business and affiliate transactions. If the Company fails to comply with any of its financing arrangement covenants, restrictions and requirements, the Company could be in default under the relevant agreement, which could cause cross-defaults under other financing arrangements. In the event of any such default, if the Company failed to obtain replacement financing or amendments to or waivers under the applicable financing arrangement, the Company may be unable to pay dividends to its shareholders, and its lenders could cease making further advances, declare the Company’s debt to be immediately due and payable, fail to renew letters of credit, impose significant restrictions and requirements on the Company’s operations, institute foreclosure procedures against their collateral, or impose significant fees and transaction costs. If debt acceleration occurs, economic conditions may make it difficult or expensive to refinance the accelerated debt or the Company may have to issue equity securities, which would dilute share ownership. Even if new financing is made available to the Company, credit may not be available to the Company on acceptable terms. A default under the Company’s financing arrangements could result in a materially adverse effect on its liquidity, financial condition and results of operations. As at the date hereof, the Company is in compliance with all of its debt covenants and obligations.

Credit Facilities. The Company has significant ongoing capital requirements that could affect the Company’s profitability if the Company is unable to generate sufficient cash from operations and/or obtain financing on favorable terms. The trucking industry and the Company’s trucking operations are capital intensive, and require significant capital expenditures annually. The amount and timing of such capital expenditures depend on various factors, including anticipated freight demand and the price and availability of assets. If anticipated demand differs materially from actual usage, the Company’s trucking operations may have too many or too few assets. Moreover, resource requirements vary based on customer demand, which may be subject to seasonal or general economic conditions. During periods of decreased customer demand, the Company’s asset utilization may suffer, and it may be forced to sell equipment on the open market or turn in equipment under certain equipment leases in order to right size its fleet. This could cause the Company to incur losses on such sales or require payments in connection with such turn ins, particularly during times of a softer used equipment market, either of which could have a materially adverse effect on the Company’s profitability.

The Company’s indebtedness may increase from time to time in the future for various reasons, including fluctuations in results of operations, capital expenditures and potential acquisitions. The agreements governing the Company’s indebtedness, including the Credit Facility and the Term Loan, mature on various dates, ranging from 2022 to 2036. There can be no assurance that such agreements governing the Company’s indebtedness will be renewed or refinanced, or if renewed or refinanced, that the renewal or refinancing will occur on equally favorable terms to the Company. The Company’s ability to pay dividends to shareholders and ability to purchase new revenue equipment may be adversely affected if the Company is not able to renew the Credit Facility or the Term Loan or arrange refinancing of any indebtedness, or if such renewal or refinancing, as the case may be, occurs on terms materially less favorable to the Company than at present. If the Company is unable to generate sufficient cash flow from operations and obtain financing on terms favorable to the Company in the future, the Company may have to limit the Company’s fleet size, enter into less favorable financing arrangements or operate the Company’s revenue equipment for longer periods, any of which may have a material adverse effect on the Company’s operations.

Increased prices for new revenue equipment, design changes of new engines, decreased availability of new revenue equipment and future use of autonomous tractors could have a material adverse effect on the Company’s business, financial condition, operations, and profitability.

The Company is subject to risk with respect to higher prices for new equipment for its trucking operations. The Company has experienced an increase in prices for new tractors in recent years, and the resale value of the tractors has not increased to the same extent. Prices have

increased and may continue to increase, due to, among other reasons, (i) increases in commodity prices; (ii) U.S. government regulations applicable to newly-manufactured tractors, trailers and diesel engines; (iii) the pricing discretion of equipment manufacturers; and (iv) component and supply chain issues that limit availability of new equipment and increase prices. Increased regulation has increased the cost of the Company’s new tractors and could impair equipment productivity, in some cases, resulting in lower fuel mileage, and increasing the Company’s operating expenses. Further regulations with stricter emissions and efficiency requirements have been proposed that would further increase the Company’s costs and impair equipment productivity. These adverse effects, combined with the uncertainty as to the reliability of the vehicles equipped with the newly designed diesel engines and the residual values realized from the disposition of these vehicles could increase the Company’s costs or otherwise adversely affect the Company’s business or operations as the regulations become effective. Over the past several years, some manufacturers have significantly increased new equipment prices, in part to meet new engine design and operations requirements. Furthermore, future use of autonomous tractors could increase the price of new tractors and decrease the value of used non-autonomous tractors. The Company’s business could be harmed if it is unable to continue to obtain an adequate supply of new tractors and trailers for these or other reasons. As a result, the Company expects to continue to pay increased prices for equipment and incur additional expenses for the foreseeable future.

Availability of Capital. If the economic and/or the credit markets weaken, or the Company is unable to enter into acceptable financing arrangements to acquire revenue equipment, make investments and fund working capital on terms favorable to it, the Company’s business, financial results and results of operations could be materially and adversely affected. The Company may need to incur additional indebtedness, reduce dividends or sell additional shares in order to accommodate these items. A decline in the credit or equity markets and any increase in volatility could make it more difficult for the Company to obtain financing and may lead to an adverse impact on the Company’s profitability and operations.

Information Systems. The Company depends heavily on the proper functioning, availability and security of the Company’s information and communication systems, including financial reporting and operating systems, in operating the Company’s business. The Company’s operating system is critical to understanding customer demands, accepting and planning loads, dispatching equipment and drivers and billing and collecting for the Company’s services. The Company’s financial reporting system is critical to producing accurate and timely financial statements and analyzing business information to help the Company manage its business effectively. The Company receives and transmits confidential data with and among its customers, drivers, vendors, employees and service providers in the normal course of business.

The Company’s operations and those of its technology and communications service providers are vulnerable to interruption by natural disasters, such as fires, storms, and floods, which may increase in frequency and severity due to climate change, as well as other events beyond the Company’s control, including cybersecurity breaches and threats, such as hackers, malware and viruses, power loss, telecommunications failure, terrorist attacks and Internet failures. The Company’s systems are also vulnerable to unauthorized access and viewing, misappropriation, altering or deleting of information, including customer, driver, vendor, employee and service provider information and its proprietary business information. If any of the Company’s critical information systems fail, are breached or become otherwise unavailable, the Company’s ability to manage its fleet efficiently, to respond to customers’ requests effectively, to maintain billing and other records reliably, to maintain the confidentiality of the Company’s data and to bill for services and prepare financial statements accurately or in a timely manner would be challenged. Any significant system failure, upgrade complication, cybersecurity breach or other system disruption could interrupt or delay the Company’s operations, damage its reputation, cause the Company to lose customers, cause the Company to incur costs to repair its systems, pay fines or in respect of litigation or impact the Company’s ability to manage its operations and report its financial performance, any of which could have a material adverse effect on the Company’s business.

Litigation. The Company’s business is subject to the risk of litigation by employees, customers, vendors, government agencies, shareholders and other parties. The outcome of litigation is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may also be significant. Not all claims are covered by the Company’s insurance, and there can be no assurance that the Company’s coverage limits will be adequate to cover all amounts in dispute. In the United States, where the Company has growing operations, many trucking companies have been subject to class-action lawsuits alleging violations of various federal and state wage laws regarding, among other things, employee classification, employee meal breaks, rest periods, overtime eligibility, and failure to pay for all hours worked. A number of these lawsuits have resulted in the payment of substantial settlements or damages by the defendants. The Company may at some future date be subject to such a class-action lawsuit. In addition, the Company may be subject, and has been subject in the past, to litigation resulting from trucking accidents. The number and severity of litigation claims may be worsened by distracted driving by both truck drivers and other motorists. To the extent the Company experiences claims that are uninsured, exceed the Company’s coverage limits, involve significant aggregate use of the Company’s self-insured retention amounts or cause increases in future funded premiums, the resulting expenses could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

Internal Control. Beginning with the year ended December 31, 2021, the Company is required, pursuant to Section 404 of the U.S. Sarbanes-Oxley Act, to furnish a report by management on the effectiveness of its internal control over financial reporting. In addition, the Company’s independent registered public accounting firm must report on its evaluation of the Company’s internal control over financial reporting. The Company has identified material weaknesses as at December 31, 2021 in the Company’s internal control over financial reporting related to Information technology general controls and the order to cash process. As a result of these material weaknesses, the Company has concluded that it did not maintain effective disclosure controls and procedures and internal controls over financial reporting. Further, Company’s independent registered public accounting firm has issued an adverse opinion indicating that the Company has not maintained effective internal control over financial reporting as at December 31, 2021. The Company’s management team has begun taking action to develop a remediation plan for these material weaknesses, and while the Company expects to remediate these in fiscal 2022, the Company cannot be certain when the remediation will be completed. If the Company fails to fully remediate these material weaknesses or fails to maintain effective internal controls in the future, it could result in a material misstatement of the Company’s financial statements, which could cause investors to lose confidence in the Company’s financial statements and cause the trading price of the Common Shares to decline.

Management segment for CAD $800 million. The Company buys and sells business units in the normal course of its business. Accordingly, at any given time, the Company may consider, or be in the process of negotiating, a number of potential acquisitions and dispositions, some of which may be material in size. In connection with such potential transactions, the Company regularly enters into non-disclosure or confidentiality agreements, indicative term sheets, non-binding letters of intent and other similar agreements with potential sellers and buyers, and conducts extensive due diligence as applicable. These potential transactions may relate to some or all of the Company’s four reportable segments, that is, TL, Logistics, LTL, and Package and Courier. The Company’s active acquisition and disposition strategy requires a significant amount of management time and resources. Although the Company complies with its disclosure obligations under applicable securities laws, the announcement of any material transaction by the Company (or rumours thereof, even if unfounded) could result in volatility in the market price and trading volume of the Common Shares. Further, the Company cannot predict the reaction of the market, or of the Company’s stakeholders, customers or competitors, to the announcement of any such material transaction or to rumours thereof.

Dividends and Share Repurchases. The payment of future dividends and the amount thereof is uncertain and is at the sole discretion of the Board of Directors of the Company and is considered each quarter. The payment of dividends is dependent upon, among other things, operating cash flow generated by the Company, its financial requirements for operations, the execution of its growth strategy and the satisfaction of solvency tests imposed by the Canada Business Corporations Act for the declaration and payment of dividends. Similarly, any future repurchase of shares by the Company is at the sole discretion of the Board of Directors and is dependent on the factors described above. Any future repurchase of shares by the Company is uncertain.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities, the disclosures about contingent assets and liabilities, and the reported amounts of revenues and expenses. Such estimates include establishing the fair value of intangible assets related to business combinations, determining estimates and assumptions related to impairment tests for goodwill, determining estimates and assumptions related to the accrued benefit obligation, and determining estimates and assumptions related to the evaluation of provisions for self-insurance and litigations. These estimates and assumptions are based on management’s best estimates and judgments. Key drivers in critical estimates are as follows:

Fair value of intangible assets related to business combinations

•

Projected future cashflows

•

Acquisition specific discount rate

•

Attrition rate established from historical trends

Impairment tests for goodwill

•

Discount rates

•

Forecasted revenue growth, operating margin, EBITDA margin as well as capital expenditures

•

Comparable public company EBITDA multiples

Accrued benefit obligation

•

Discount rates

•

Salary growth

•

Mortality tables

Self-Insurance and litigations

•

Historical claim experience, severity factors affecting the amounts ultimately paid, and current and expected levels of cost per claims

•

Third party evaluations

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ from these estimates. Changes in those estimates and assumptions resulting from changes in the economic environment will be reflected in the financial statements of future periods.

CHANGES IN ACCOUNTING POLICIES

Adopted during the period

The following new standards, and amendments to standards and interpretations, are effective for the first time for interim periods beginning on or after January 1, 2022, and have been applied in preparing the unaudited condensed consolidated interim financial statements:

Onerous Contracts – Cost of Fulfilling a Contract

(Amendments to IAS 37)

These new standards did not have a material impact on the Company’s unaudited condensed consolidated interim financial statements.

To be adopted in future periods

The following new standards and amendments to standards are not yet effective for the year ended December 31, 2022, and have not been applied in preparing the unaudited condensed consolidated interim financial statements:

Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

Definition of Accounting Estimates (Amendments to IAS 8)

Further information can be found in note 3 of the March 31, 2022, unaudited condensed consolidated interim financial statements.

CONTROLS AND PROCEDURES

In compliance with the provisions of Canadian Securities Administrators’ National Instrument 52-109 and the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company has filed certificates signed by the President and Chief Executive Officer (“CEO”) and by the Chief Financial Officer (“CFO”) that, among other things, report on:

•	their responsibility for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Company; and

•	the design of disclosure controls and procedures and the design of internal controls over financial reporting.

Disclosure controls and procedures

The President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), have designed disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), or have caused them to be designed under their supervision, in order to provide reasonable assurance that:

•	material information relating to the Company is made known to the CEO and CFO by others; and

•	information required to be disclosed by the Company in its filings, under applicable securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

As at March 31, 2022, an evaluation was carried out under the supervision of the CEO and CFO, of the design of the Company’s disclosure controls and procedures. Based on this evaluation, the CEO and CFO concluded that due to the material weaknesses in our internal control over financial reporting as described below in Management’s Annual Report on Internal Controls over Financial Reporting as at December 31, 2021, the Company’s disclosure controls and procedures were not effective as of March 31, 2022 as the controls have not yet been adequately remediated.

Management’s Annual Report on Internal Controls over Financial Reporting

The CEO and CFO have also designed internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), or have caused them to be designed under their supervision, in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

As at December 31, 2021, an evaluation was carried out, under the supervision of the CEO and the CFO, of the effectiveness of the Company’s internal control over financial reporting. Based on this evaluation, the CEO and the CFO concluded that material weaknesses exist, as described below, and due to these material weaknesses, the Company’s internal control over financial reporting is not effective as of December 31, 2021. The control framework used to design the Company’s internal controls over financial reporting is based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated Framework (2013 framework). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the Company’s evaluation of internal controls over financial reporting, the following control deficiencies were considered to be material weaknesses:

•

IT General Controls: The Company had an aggregation of control deficiencies within its information technology (IT) general controls across multiple systems supporting the Company’s business processes, including deficiencies relating to user access controls, change management, and high-privileged access. The Company concluded that process-level automated controls and manual controls that are dependent on information from affected IT systems, where risks could not be mitigated, were ineffective because they could have been adversely impacted by the IT general control deficiencies; and

•

Order to Cash Process: Due to the material weakness described above, automated controls and manual controls that are dependent on information from affected IT systems around the order to cash process, which encompasses billing and pricing sub processes were found to not be effective. In addition, there was inadequate review and documentation of manual process level controls.

Notwithstanding these material weaknesses, management has concluded that the Company’s Audited consolidated financial statements as at and for the year ended December 31, 2021 present fairly, in all material respects, the Company’s financial position, results of operations, changes in equity and cash flows in accordance with IFRS. These material weaknesses did not have an impact on the Company’s financial reporting and as a result, there were no material adjustments to the Company’s audited consolidated financial statements for the year ended December 31, 2021 and there were no changes to previously released financial results. However, because the material weaknesses create a reasonable possibility that a material misstatement to our financial statements would not be prevented or detected on a timely basis, we concluded that as of December 31, 2021 the internal control over financial reporting was not effective.

The effectiveness of internal controls over financial reporting as of December 31, 2021 has been audited by KPMG LLP, the Company’s registered public accounting firm that audited the consolidated financial statements and is included with the Company’s consolidated financial statements. KPMG LLP’s adverse opinion, as stated in their report, is that the Company has not maintained effective internal control over financial reporting as of December 31, 2021.

(unaudited) (in thousands of U.S. dollars)	Three months ended March 31
Finance costs (income)	2022	2021
Interest expense on long-term debt	12,131	9,872
Interest expense on lease liabilities	3,361	3,002
Interest income and accretion on promissory note	(23)	(569)
Net change in fair value and accretion expense of contingent considerations	(43)	259
Net foreign exchange (gain) loss	307	(38)
Others	4,456	1,909
Net finance costs	20,189	14,435

Operational data
(unaudited)	Three months ended March 31
(Revenue in U.S. dollars)	2022	2021	Variance	%
Revenue per pound (including fuel)	$0.47	$0.46	$0.01	2.2%
Revenue per pound (excluding fuel)	$0.39	$0.41	$(0.02)	-4.9%
Revenue per package (excluding fuel)	$6.07	$6.06	$0.01	0.2%
Tonnage (in thousands of metric tons)	146	145	1	0.7%
Packages (in thousands)	20,508	21,700	(1,192)	-5.5%
Average weight per package (in lbs.)	15.69	14.73	0.96	6.5%
Vehicle count, average	1,139	1,039	100	9.6%
Weekly revenue per vehicle (incl. fuel, in thousands of U.S. dollars)	$10.32	$10.81	$(0.49)	-4.5%

(unaudited) (in thousands of U.S. dollars)	Three months ended March 31
	2022			2021
Additions to property and equipment:
Purchases as stated on cash flow statements		90,426			37,369
Non-cash adjustments		(591	)		(2,154	)
		89,835			35,215
Additions by category:
Land and buildings		2,882			7,980
Rolling stock		81,873			24,425
Equipment		5,080			2,810
		89,835			35,215

GENERAL INFORMATION		2
FORWARD-LOOKING STATEMENTS		2
SELECTED FINANCIAL DATA AND HIGHLIGHTS		3
ABOUT TFI INTERNATIONAL		4
CONSOLIDATED RESULTS		5
SEGMENTED RESULTS		7
LIQUIDITY AND CAPITAL RESOURCES		13
OUTLOOK		17
SUMMARY OF EIGHT MOST RECENT QUARTERLY RESULTS		18
NON-IFRS FINANCIAL MEASURES		18
RISKS AND UNCERTAINTIES		27
CRITICAL ACCOUNTING POLICIES AND ESTIMATES		41
CHANGES IN ACCOUNTING POLICIES		41
CONTROLS AND PROCEDURES		42

(unaudited) (in thousands of U.S. dollars)	As at March 31, 2022		As at December 31, 2021
Intangible assets		1,833,853		1,792,921
Total assets, less intangible assets¹		4,099,900		3,960,202
Long-term debt		1,701,803		1,608,094
Lease liabilities		413,593		429,206
Shareholders' equity		2,278,524		2,220,311