out of the box solutions · 2010 annual report 1 co r po ra te pr ofile t. rans f ce i nc. is a...

Out Of the BOx SOlutiOnS

fOr SharehOlder Value

2010 annual repOrt

HS

Our MiSSiOn

to establish itself as a leader in the north

american transportation and logistics indus-

try through strategic, profitable acquisitions

and partnerships. transforce will create

shareholder value by fostering a positive

work environment to leverage the skills of

its team of dedicated professionals and

provide creative solutions tailored to

specific customer needs.

1 Continent

2 CountrieS

4 oPerAtionAL SeGMentS

12 inDuStrieS

64 oPerAtinG CoMPAnieS

253 terMinALS

6,200 PoWer unitS

11,600 trAiLerS

13,400 PeoPLe

75,000 CuStoMerS

2010 Annual Report 12010 Annual Report 1

CoRpoRAte pRofile

transforce inc. is a North American leader in the

transportation and logistics industry. operating

across the United States and Canada, transforce

creates value for shareholders by identifying strate-

gic acquisitions and managing a growing network

of wholly-owned, operating subsidiaries. Under

the transforce umbrella, companies benefit from

corporate financial and operational resources to

build their businesses and increase their efficiency.

transforce companies service four well-defined

segments:

• PackageandCourier;

• Less-Than-Truckload;

• Truckload,specializedtruckloadand

dedicatedservices;

• SpecializedServices:wastemanagement,

energy sector services, logistics,

fleet management and personnel services.

transforce inc. (tfi) is publicly traded on the

toronto Stock exchange (tSX). for more informa-

tion, visit www.transforcecompany.com.

2 transforce

• Totalrevenueof$2billion;

• Increaseof18.3%inEBITDAto$268.0million,or13.4%oftotalrevenue;

• Netincomeof$104.6million,representing$1.09pershare,fullydiluted;

• AcquisitionofsubstantiallyalloftheassetsofSpeedyHeavyHaulingInc.,

extendingTransForce’scoverageintheU.S.energyservicesindustrytosixstates;

• Acquisitionoftheremaining50%ofLaflècheEnvironmentalInc.,providing

transforce with valuable landfill operations in ontario and a range of

environmentalservices;

• ExpansionofourPackageandCourierfootprintwiththeacquisitionof

Dallas-basedDynamexInc.subsequenttoyearend.

transforce delivered another year of growth, while suc-cessfully furthering its objective of industry consolidation. even as the economic recovery remained sluggish, the Company improved its competitive position and enhanced shareholder value. Major accomplishments included:

2010 MAjoR HIgHLIgHTS

2010 Annual Report 3

FINANCIALHIgHLIgHTS

2010 2009 2008 2007 2006 (5)

Operating results (in millions of dollars) $ $ $ $ $

Revenue 2,002.1 1,846.5 2,261.9 1,940.1 1,794.8

EBITDA (1) 268.0 226.5 280.0 243.0 241.7

Net income (2) 104.6 55.9 79.7 100.8 131.7

Cash flow from operating activities 200.4 209.8 207.6 210.4 198.9

free cash flow(3) 163.7 172.9 131.1 98.3 108.9

Financial pOsitiOn (in millions of dollars)

total assets 1,623.6 1,527.3 1,621.9 1,442.5 1,215.7

long-term debt(4) 633.9 707.9 808.0 686.6 394.4

Shareholders’ equity 611.5 533.4 509.9 492.5 579.3

per share Data

Net income (2) –Basic 1.10 0.62 0.92 1.17 1.55

–Diluted 1.09 0.62 0.92 1.17 1.55

EBITDA (1) 2.81 2.52 3.24 2.83 2.85

Cash flow from operating activities 2.10 2.33 2.40 2.45 2.35

Bookvalue 6.42 5.60 5.87 5.67 6.67

Financial ratiOs

EBITDAmargin 13.4% 12.3% 12.4% 12.5% 13.5%

operating ratio 92.9% 94.7% 92.9% 92.8% 91.3%

Return on equity (2) 18.3% 10.7% 15.9% 17.9% 27.0%

long-term debt to equity(4) 1.04 1.33 1.58 1.39 0.68

(1) Earningsbeforeinterest,taxes,depreciationandamortization(2) Beforegoodwillimpairmentchargesin2009and2007(3) Cashflowfromoperatingactivities,lessnetadditionstoproperty,plantandequipment(4) Includingcurrentportionoflong-termdebtandconvertibleunsecuredsubordinateddebentures(5) Fromcontinuingoperations

revenue (millionsof$)

06 07 08 09 10

1,79

4.8

1,94

0.1

2,26

1.9

1,84

6.5

2,00

2.1

eBitDa (millionsof$)

06 07 08 09 10

241.

7

243.

0

280.

0

226.

5

268.

0

Free cash Flow (millionsof$)

06 07 08 09 10

108.

9

98.3

131.

1

172.

9

163.

7

4 transforce

STRAIgHTTALKFROMALAINBÉDARD

In2010,TransForcewithstoodongoingrecessionarypressuresandseizedopportuni-ties to grow strategically. With key acquisitions, strict attention to cost management, and progressive development of network synergies, the Company enhanced its North American competitiveness and continued to build shareholder value.

Despitetheweakeconomy,theCompanydeliveredsolidresults.Wegenerated

increasedrevenuesandEBITDA,ourkeymetric,grew18.3%.TransForcecompleted

highly strategic acquisitions, broadening our network strengths and further

positioning the Company for significant growth once the economy fully recovers.

in times of economic uncertainty, proactive cost management is essential. All initiati-

veswerecarefullytargetedtooptimizeassetutilization,withoutreducingcustomer

servicelevels.IntheLTLsector,wemaximizedoperationalefficiencybycentralizing

several service centres into one location, lowering fixed costs. in the energy sector,

our new customer service hub consolidates all client needs, providing single source

logistics and transportation. these programs and others have enabled us to make

significant progress in reaching our objectives.

transforce pursues profitable growth by acquiring successful, well-managed opera-

ting companies, by further improving their performance, and by employing the best

people in the industry. precise execution enhances shareholder value.

Ourmostsignificanttransaction,DynamexInc.,wascompletedinFebruary2011

andaddsahighlyrespectedbrandtoourPackageandCouriercapability.Dynamex’s

same-day delivery enhances service to existing customers while the combination of

TransForceandDynamexconstitutesapowerfulofferingtopotentialnewclients.

Importantly,incorporatingDynamex’sserviceswillopendoorsforTransForceinthe

U.S. market.

the 2010 acquisition of Speedy substantially improved transforce’s competitive

position in the U.S. energy services sector. Coverage was expanded to six states and

our service offering broadened, as transforce became an important player in the

crane business. We are now well positioned to benefit from the impending recovery

in the industry.

Wealsocompletedtheacquisitionoftheremaining50%oftheLaflècheEnviron-

mental inc. landfill and environmental complex, giving us valuable landfill operations

in ontario. this transaction also provides a range of environmental services, and a

host of synergies which should improve our ability to increase margins in our waste

management business.

on what basis would you

qualify 2010 as a successful

year for transforce?

outline the key initiatives taken

byTransForcein2010.Didresults

measure up to expectations?

transforce completed a number of

acquisitions in 2010 and early in

2011.Howdoesthisgrowthstrategy

add to shareholder value?


it starts with the exhaustive analysis undertaken prior to making any acquisition.

Businessselectionisthemostimportantstep.Havingtheadequatemanagement

inplacewiththeproperorganizationalculturearekeyfundamentalsthathelp

transforce in achieving success. once the transaction is complete, we ensure that

our extensive infrastructure and support systems are in place on day one. We take

a highly disciplined approach to integrating each new business, providing strategic

direction and the necessary technology, allowing management to concentrate on

daily operations and customer service.

Very much so, as our strong balance sheet and cash flow generation clearly demons-

trate.Despitemorethan$140millionforbusinessacquisitions,netcapitalexpendi-

turesanddividendstoshareholders,long-termdebtwasstillreducedby$74million.

Moreover, our debt is increasingly flexible, as evidenced by the issue of >

HowisTransForcesosuccessfulin

efficiently and profitably integrating

so many new companies?

DoesTransForcehavesufficient

financial flexibility to continue to

aggressively pursue its industry

consolidation strategy?

alain Bédard

chairman of the Board,

president and

chief executive Officer

6 transforce

Where does transforce need

to invest in order to sustain

its market leadership?

>

What are your most appealing

business opportunities over the

short-term?

Howdoyouseetheeconomy

evolving through 2011 and what

are the possible ramifications for

transforce?

transforce has become the undisputed

market leader in Canada in its field.

Doesthisstatuschangeyourstrategic

thinking as we move forward?

$143.8millioninconvertibleunsecuredsubordinateddebentures,proceedsfrom

whichpartiallyfinancedtheDynamexpurchase.During2010,werenegotiatednew

creditfacilitiestotalling$650millionthatcanbeextendedbyanadditional$150

million under certain conditions. Accordingly, transforce can confidently continue to

be an active industry consolidator.

two strengths determine market winners in our industry: the quality of people, and

the effectiveness of technology. We will continue to invest in our professional and

dedicated workforce who continually conceive and deliver optimal solutions for our

customers.TransForcealsorecognizesthatourteamsmustbesupportedbythe

latest technological advances. As such, we ensure our people are equipped with the

best possible decision-making tools.

DefinitelyPackageandCourier,particularlygiventheacquisitionofDynamex.Orga-

nically, Canpar secured a three-year contract to supply overnight courier services

tothegovernmentofOntariothrough2013,withtwoextensionoptions.Thisisa

major win in a competitive market and points the way to further penetration. We

alsoseesignificantpromiseinSpecializedServices,whereouracquisitionactivityin

oilfield services in the U.S. increased our geographical reach and service offering.

Not at all. the transportation and logistics market remains highly fragmented and

our strategic planning is based on a continental approach. We will continue to seek

out the best opportunities to increase our geographic reach, provide complementary

services and increase market penetration.

We regard the future with confidence and the year ahead should show improve-

ment over 2010. Volumes should remain relatively stable while a better pricing envi-

ronment leads to increased profitability. Unpredictable elements include the strength

oftheCanadiandollarandthecostoffuel,butourconstantdrivetooptimizeope-

ratingassetutilizationshouldalleviateexcessivepressureonmargins.TheLTLmarket

is likely to remain sluggish, so our growth focus will continue to be on package and

CourierandSpecializedServices.

AlainBédard

ChairmanoftheBoard,

president and Chief executive officer


WHyINvEST iN tRANSfoRCe

• Continuouslyseekingtodistinguishitselfthroughvalue-addedservicesand

solutions,TransForcehasahistoryofgrowthinallkeymetrics.Inrevenue,EBITDA

and margin percentage, the Company has demonstrated a consistent ability to

better its performance.

• Inthefaceofrecession-causedweaknessesinitsindustry,TransForceproved

resilient. to continue to deliver solid results, the Company reduced costs,

improved efficiency, and benefited from its core business model. transforce also

continued investing in both technology and people, thus further developing its

expertise and enhancing its brand.

• Leveragingthestrengthofitsbalancesheet,TransForcehasmaintainedan

unwavering focus on growth through strategic acquisitions. over the years,

purchases have further broadened transforce’s service offering, extended its reach

into new markets, and created significant cross-selling opportunities. in keeping

with its objectives, the Company expanded its package and Courier footprint with

theacquisitionofDynamexinFebruary2011.

• TransForcebenefitsfromanincreasinglystrongermarketpresence,streamlined

operations and highly experienced management. As the recovery

gathers full momentum, these key attributes further position

the Company for an exciting new phase of growth.

transforce is relentlessly pursuing expansion in new and existing markets through strategic acquisitions and organic growth. the Company is progressively building shareholder value while consolidating the North Ameri-can transportation and logistics industry.

Why DO Business With transFOrcecOMpanies

• We believe in the power of quality. Quality is our energy source. the distinction of our services stems from the pride we take in delivering excellence.

• We insist on ethical conduct. transForce operates on a platform of uncompromising integrity.

• We are dedicated to innovation. Our focus is providing solutions to meet our customers’ needs. continuous improvement is a pillar of transForce culture.

• We are ambitious. We strive for industry leadership by providing absolute reliability and the utmost in creativity and value.

8 transforce

oUR people

As transforce pursues the consolidation of the North American trucking and logistics industry, our prior analysis of any acquisi-

tion must reveal a significant human resources benefit. We are interested in acquiring only those enterprises which are managed

and staffed by exceptionally talented individuals who can add value to our network.

every new member of transforce joins a Company that is motivated by challenges. our people accept no limitations on how far

theycango.Theyarestimulatedbynewtechnologies,recognizeopportunitiesandareeagertoexercisenewcapabilities.Thisis

transforce – a family of bold thinkers, early adopters, natural decision-makers.

the backgrounds, interests and dreams of our employees are diverse, yet they have created a community of purpose and a sense

ofsolidarity.Wesubscribetooptimism,spiritedparticipation,andcontinuouslearningateveryleveloftheorganization.All

voices are heard, all goals shared – and all success starts with the team.

We define success as living up to – and exceeding – our customers’ expectations. in that determined quest, our subsidiaries

share best practices and benefit from the support of the entire transforce network. every day, we find new ways to address

transportation challenges and help create the future of logistics.

Ultimately the caliber of our personnel is what determines the velocity of our growth. the transforce brand is respected across

North America for one simple reason: our people never stop earning the esteem of our customers. they are genuinely the drivers

of our ongoing continental expansion.

the transforce advantage starts with our people. they are highly skilled at what they do, and passionate about their creativity. thinking outside the box, they take special pride in developing original solutions and delivering premium quality service to our customers.


OPERATINgREvIEW

EBITDA (asapercentageoftotalEBITDA)

Revenue (as a percentage of total revenue)

24% PACKAgEANDCOURIER

19% PACKAgEANDCOURIER

18% LESS-THAN-TRUCKLOAD(LTL)

26% LESS-THAN-TRUCKLOAD(LTL)

24% TRUCKLOAD

31% TRUCKLOAD

34% SPECIALIzEDSERvICES

24% SPECIALIzEDSERvICES

Package and courier

Less-Than-TruckLoad (LTL)

TruckLoad

sPeciaLized services

10 transforce

PACKAgEANDCOURIER

the segment’s principal challenge in 2010 was to overcome negative organic growth, an oversupplied market and downward

pricing pressures while maintaining profit margins. this was achieved as underlined by the segment’s solid performance. total

revenueswere$396million,upfrom$295millionin2009.Thesegainsweremainlyattributabletoafull-yearcontributionfrom

ATSRetailSolutionsandtoamajornewthree-yearcontractforCanpartosupplyovernightcourierservicestothegovernment

ofOntario.Thiscontractrunsthrough2013withtwoextensionoptionsoftwoyearseach.

the better than anticipated financial results were also achieved due to strategic cost cutting initiatives including staff reductions,

routeoptimizationandtheconversionofcertaindriver/brokerrelationships.WealsoleveragedourTransForceaffiliationbyrene-

gotiatingcertainthird-partyagreements.Asaresult,profitabilityimprovedsignificantlywithEBITDAof$62.8million,upfrom

$47.7millionayearearlier.

We maintained our edge with our vertical focus, one-stop shopping, and fixed route pickups and deliveries. other transforce

companies were also added as linehaul suppliers, thereby further increasing network efficiencies. Additional investments in

technology offered enhanced e-commerce solutions to our customers, answering their quest for lower costs. A core competi-

tiveadvantageremainedourabilitytoidentifyselectconsumerproductindustrysegmentsthatrequirespecializedsupplychain

services.

in 2011, we expect marginal organic growth and a continuation of aggressive pricing strategies from competitors. While we

may have to reduce rates to protect our client base, technology-driven efficiencies should continue to improve margins. We

foreseegrowththroughtheemergenceofICSSameDayservice,inthemovementofnon-traditionalgoods,andtheopportunity

tocross-promotethestrengthsthatexistbetweenICS,Canpar,ATSandDynamex,ournewestcompany.Thishighly-strategic

acquisition enhances service to existing customers while offering a powerful value proposition to potential new clients in same-

day delivery services, and by opening new doors to U.S. markets.

eBitDa*

revenue*

24%

19%

now in its fourth year as an autonomous

segment, package and courier comprises

several of the most prestigious brands in

the north american industry, including

canpar and Dynamex, and is transForce’s

fastest-growing operation.

* as percentages of total eBitDa and revenue


LESS-THAN-TRUCKLOAD(LTL)

2010LTLrevenueswere$525million,virtuallyunchangedfrom$524millionlastyear.Lingeringrecessionarypressures,the

strong Canadian dollar, and a highly competitive marketplace that created pressure on freight rates in some regions were the

principalissuesencounteredthroughtheyear.TheseobstaclescausedourEBIDTAtodecreaseto$46.6million,from$50.4

million the previous year.

TransForceproactivelydealtwiththesematters,implementingaprogramofassetoptimization,includingheadcountreduction,

terminalclosuresandvariousrationalizationmeasures.Wealsomaximizedoperationalsynergiesbyintegratingseveralservice

centres to lower fixed costs.

transforce maintained a solid market position by virtue of its North American reach, including the most extensive direct service

network in Western Canada and its ability to provide a single source of multimodal transportation solutions. initiatives positio-

ning us for growth include lane improvements, new routes and gateway services. in parallel, we continue to invest in technologi-

cal operating solutions, which result into websites enhancements that greatly facilitate customer orders and inquiries.

our established, strong business relationships are built on operational success promise to deliver market share gains through

newcustomersandgreaterpenetrationofexistingones.Customersrecognizeourabilitytosolvetheirtransportationneedsand

our proven track record of safety and on-time delivery. As customers evolve from rate-based criteria to a value-based selection

methodology, the ability to market the solutions offered by transforce’s divisions as a single cell is a powerful competitive tool

we intend to leverage.

With continuing economic uncertainty and a strong Canadian dollar, we are guardedly optimistic for 2011. prospects are gene-

rally better in Western Canada which appears to be leading the continent in recovery. Competitive ltl pricing pressures will ease

only when industry capacity is realigned, but we anticipate our proactive cost reduction measures will have a favourable impact

on operating profitability going forward.

eBitDa*

revenue*

18%

26%

a one-stop shop for multimodal

solutions, and a leader in its field

technologically, transForce’s less-

than-truckload capacity is canada’s

largest – and growing steadily

through partnerships in the u.s.


12 transforce

TRUCKLOAD

the tl segment maintained a satisfactory level of profitability in 2010 despite slight reductions in overall mileage, volume and

pricing.Theseresultswereachievedbyconcentratingonsegmentswherewearefirmlyentrenched;byvirtueoftheabilityto

respondrapidlytoclientdemands;andthroughongoingefficiencyinitiativesandcostreductions.TLrevenuesfortheyearwere

$643million,comparedwith$639millionin2009,anincreaseof1%,whileEBITDArose8%to$64.4million.

focused on lowering costs, transforce companies reduced third party trailer rental expenses through equipment transfers and

dispatchefficiencies.Rationalizationswerealsoachievedbyconsolidatingoperationsandoptimizingfleetutilizationthrougha

reduction in tractor count, including the conversion of owned tractors to owner-operators. Significant savings in maintenance

costswerealsoachievedthroughfleetmodernizationwherebeneficialopportunitiesarose.However,brokeredrateswiththird-

party carriers remain high in tighter markets, putting pressure on margins.

in the energy sector, a customer service hub was created to offer single source logistics and transportation. this strategy aims at

capturing all the transportation needs of our energy customers. it also allows us to further grow our business one customer at a

time, as we demonstrate the value we add by consolidating all their transportation needs.

goingforward,TransForceissolidlyfinancedandpositionedtomeetourcontinuingindustrychallengesincludingrisingfuel

prices and a strong Canadian currency. Although tl has historically been the sector where overcapacity diminishes first, thus

stabilizingvolumeandprices,weexpectaslowrecoveryin2011andonlygradualrecuperationofvolumes.Improvementsare

anticipatedintheEnergysector,whereseveralsmallOilSandsprojectsareexpectedtocomeonstream.Butfirstandforemost,

wewillcontinuetomanageourcostsandoptimizeassetutilization,withoutcompromisingcustomerservice.

eBitDa*

revenue*

24%

31%

across canada and into the united

states, transForce provides conventional

and specialized truckload services, with

knowledge-based, higher value-added

logistics for many industries with specific

transportation needs.



SPECIALIzEDSERvICES

ThesloweconomicrecoverycontinuedtoimpedethesectorsservedbyourSpecializedServicescompanies.Nonethelessreve-

nuesforthesegmentreached$496millionin2010,upfrom$438millionin2009,drivenbytheacquisitionoftheremaining

50%oftheLaflècheEnvironmentalInc.landfillandenvironmentalcomplexandsubstantiallyalloftheassetsofSpeedyHeavy

HaulingInc.,whileEBITDArose48%to$90.1million.

the performance of transforce’s energy sector services companies mirrorred the sluggishness of the global oil and gas industry.

However,theacquisitionofSpeedyincreasedourU.S.presencetosixstatesandallowedustoincreaseourserviceoffering.

it also broadened our crane capability, making us an important player in this niche. in 2011, we anticipate higher volume and

more widespread market penetration for our oilfield services as we continue to expand our geographic footprint.

performance in Waste Management was better than anticipated. Although new competition caused a slight decrease in com-

mercial and residential collections, we increased volumes in our higher-margin landfill and compost processing businesses. ope-

rations in recycling processing showed a modest recovery. A strict focus on expense reductions resulted in margin enhancement

in most areas of the business. in 2011, we expect to continue leveraging the investments and developments instituted in recent

years, and we are positioned to benefit significantly once the recovery accelerates.

transforce’s logistics Services maintained revenue levels in spite of a stagnant market and severe pricing pressures. this was

accomplished by increasing the number of active customers, expanding into related markets, and discontinuing low demand

services. investments were maintained in our key assets: our people. We believe we have the best people in the industry which

allows our companies to provide superior service and, more importantly, to anticipate customers’ future needs. With a recovery

taking hold in many strategic markets, 2011 and beyond is regarded with renewed optimism.

eBitDa*

revenue*

34%

24%

through numerous subsidiaries

transForce offers diverse specialized

services including logistics, energy

industry support, waste management,

fleet management and personnel

services.


14 transforce

aLain BÉdard, Fca, cMaChairman, president and

Chief executive officer,

transforce inc.

andrÉ BÉrardCorporateDirector

Lucien BouchardPartnerinthelawfirmofDaviesWard

phillips and Vineberg llp

richard guaYConsultantandCorporateDirector

BOARDOFDIRECTORS

CORPORATEgOvERNANCE

We do more than obey a set of rules; we have adopted a fundamental

attitude, based on our principle of accountability.

code oF eThics

to ensure we meet the highest standards of governance, the Board

of Directors is guided – and transForce’s business activities are shaped

– by the principles outlined in transForce’s code of ethics. the code

applies to everyone from the Board to all employees of transForce and

its operating divisions. it incorporates all of our guiding principles and

provides a frame of reference for dealing with complex and sensitive

issues. it is the responsibility of the Board’s corporate governance and

nominating committee to ensure compliance, on a regular basis and

as required, with the controls described in the code in the following

areas:

1. compliance with laws and regulations

a) unfair trade practices – compliance with competition and

anti-trust laws

b) Disclosure of information and Dealing in transForce securities

2. Maintaining confidential and proprietary information

3. protecting competitors’ information

4. avoiding conflicts of interest

5. safeguarding company assets

6. Dealing with public or government Officials

7. ensuring equitable employment and compensation

8. encouraging public relations

9. establishing accurate records and reporting

10. controlling information technologies and the internet

11. protecting the environment

12. promoting Occupational health, safety and compliance

Board oF direcTors

transForce is governed by its Board of Directors, which is elected an-

nually by the shareholders. the Board currently has eight members, of

whom the majority are defined as independent, one is management,

and two are associated with the corporation’s largest investor. the

Board also has its own governing charter and appoints a lead Director

whose role is to provide leadership in ensuring the effectiveness of

the Board and who is responsible for: (i) ensuring committees of the

Board function appropriately; (ii) chairing meetings of the indepen-

dent members of the Board; (iii) chairing meetings of the Board when

the chair of the Board, is absent; and (iv) ensuring that the Board

functions independently of management.

As an industry leader, transforce inc. meets and complies with the toronto Stock exchange’s guidelines for effective corporate governance.

14 transforce


ronaLd d. rogers, caCorporateDirector

eManueLe (Lino) saPuToChairmanoftheBoard,SaputoInc.

JoeY saPuTopresident, Montreal impact and

Saputo Stadium

h. John sToLLerY, P. eng.ChairmanoftheBoard,

process Capital Corporation

Board coMMiTTees

the Board of Directors has established three committees to assist with

the analysis of issues and allow more time for the full board to discuss

and debate business matters. each committee is governed by its own

charter, which is reviewed on a yearly basis.

audit committee

the Board’s audit committee was established to assist the Board of

Directors in fulfilling its oversight responsibilities by reviewing, with

its auditors, the financial reports and other financial information

provided to the public, the internal controls regarding finance and

accounting, and the corporation’s auditing, accounting and financial

reporting processes.

the committee consists of three independent Directors. its responsibi-

lities include:

• Reviewannualandquarterlyfinancialstatementswith

management and independent auditors prior to the release

or filing of reports

• Reviewanddiscusswithmanagementallsignificantissues

regarding corporate risk, accounting principles and practices

• RecommendindependentauditorstotheBoard,ensure

independence, and review the performance of the independent

auditors

• Reviewanddiscussresultsandsignificantfindingsbythe

independent auditors

• EvaluateeffectivenessandindependenceoftheCorporation’s

internal audit function

human resources and compensation committee

the human resources and compensation committee consists of

three Board members, appointed annually, who are all independent

Directors. its responsibilities include:

• AssesstheCorporation’smanagementsuccessionplan

• AssesstheCorporation’sperformanceandcompensationplan

for senior officers

• Reviewhumanresourcespractices

corporate governance and nominating committee

the corporate governance and nominating committee consists of

three Board members, appointed annually, who are all independent

Directors.

in addition to overseeing the corporation’s code of ethics and

Disclosure policy, the committee has authority and responsibility for

a number of areas including:

• AccessandimplementCorporateGovernancePoliciesbasedon

Best practices and ensure compliance

• AssessBoardmembershipneedsandrecommendBoardnominees

• AssessCommitteesandBoardeffectiveness

• Institutetrainingordevelopmentactivities

• DeterminethecompositionoftheBoard’scommittees

• Reviewanyrelatedpartytransaction

in addition to the code of ethics, the Board of Directors has

implemented the following:

• DisclosurePolicy

• RulesofConductofInsidersRespectingTradingofSecurities

of transForce inc.

• WhistleblowerPolicy

• MinimumShareholdingPoliciesforDirectorsand

executive Officers


Table of conTenTs

FORWARD-LOOKING STATEMENTS 2 OUR BUSINESS 3 CONSOLIDATED FINANCIAL RESULTS 4

CONSOLIDATED hIGhLIGhTS AND SELECTED FINANCIAL DATA 4 CONSOLIDATED RESULTS 5 SEGMENTED RESULTS 7RECONCILIATION OF NON-GAAP FINANCIAL MEASURES 13 SUMMARY OF EIGhT MOST RECENT QUARTERLY

RESULTS 16 LIQUIDITY AND CAPITAL RESOURCES16 CRITICAL ACCOUNTING POLICIES AND ESTIMATES 22ChANGES IN ACCOUNTING POLICIES 22 RISKS AND UNCERTAINTIES 27 CONTROLS AND PROCEDURES 28 OUTLOOK 29 CONSOLIDATED FINANCIAL STATEMENTS 30

ManageMenT’s discussion and analysis and consolidaTed financial sTaTeMenTs

year ended december 31, 2010

Management’s Discussion and Analysis

2 TransForce inc.

The following is TransForce Inc.’s management discussion and analysis (“MD&A”). Throughout this MD&A, the terms “Company” and “TransForce” shall mean TransForce Inc., and shall include its independent operating subsidiaries. This MD&A provides a comparison of the Company’s performance for its three-month period and the year ended December 31, 2010 with the three-month period and the year ended December 31, 2009 and it reviews the Company’s financial position as at December 31, 2010. It also includes a discussion of the Company’s affairs up to February 24, 2011. This discussion should be read in conjunction with the consolidated financial statements and accompanying notes.

In this document, all financial data are prepared in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”). All amounts are in Canadian dollars, and the term “dollar”, as well as the symbols “$” and “C$”, designate Canadian dollars unless otherwise indicated. This MD&A also uses non-GAAP financial measures. Please refer to the section of this report entitled “Reconciliation of Non-GAAP Financial Measures” for a complete description of these measures on page 13.

The Company’s annual consolidated financial statements have been approved by its Board of Directors upon recommendation of its audit committee prior to release. 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.transforcecompany.com. The Company’s continuous disclosure materials, including its annual and quarterly MD&A, annual and quarterly 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.

foRWaRd-looKing sTaTeMenTs

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”, “could”, “should”, “would”, “believe”, “expect”, “anticipate” 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:

(1) The highly competitive conditions that currently exist in the Company’s market and the Company’s ability to compete

(2) The Company’s ability to recruit, train and retain qualified drivers

(3) Increases in fuel prices, and the Company’s ability to recover these costs from its customers

(4) Foreign currency fluctuations

(5) The impact of environmental standards and regulations

(6) Changes in governmental regulations applicable to the Company’s operations

(7) Adverse weather conditions

(8) Accidents

(9) The market for used equipment

(10) Changes in interest rates

(11) Cost of liability insurance coverage

(12) Downturns in general economic conditions affecting the Company and its customers

(13) Illiquid credit markets



The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation subsequently 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.

ouR business

TransForce is Canada’s pre-eminent transportation and logistics services provider. Its operations extend throughout Canada, and it directly serves more urban centers than any other Canadian transport and logistics services provider.

servicesTransForce provides a comprehensive and unique combination of capabilities, resources and geographical coverage in both domestic and trans-border markets. Its companies currently operate in four well-defined business segments:

• PackageandCourier;

• Less-Than-Truckload;

• Truckload,whichincludesspecializedtruckloadanddedicatedservices;

• SpecializedServices,which includeswastemanagement,energysectorservices, logistics,fleetmanagementand personnel services.

In each of these reportable segments, the Company’s independent subsidiaries are recognized for their professionalexpertise. TransForce offers package and courier service across Canada and less-than-truckload service across Canada and intotheUnitedStates through itsexclusivepartnerships.Truckloadservice includesdryvan,specializedequipmentanddedicated services providing service in both thedomestic and trans-bordermarkets. Specialized services includewastemanagement, energy sector services, logistics, fleet management and personnel services.

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 being generally the weakest in terms of demand, both the second and third quarters being stronger, and the fourth quarter being the strongest. Furthermore, during the harsh winter months, fuel consumption and maintenance costs tend to rise.

Human resourcesThe Company has approximately 13,400 employees. These include 1,800 owner-operators and 1,500 employees who work in the Company’s personnel services divisions across Canada in TransForce’s different business segments. This compares to approximately 13,900 employees including 1,800 owner-operators and 1,800 employees in the Company’s personnel services divisions as at December 31, 2009. A number of these employees are subject to collective agreements. The Company considers that it has a relatively low turnover rate among its employees and that employee relations are very good.

equipment The Company has the largest trucking fleet in Canada, with approximately 6,200 power units (including 1,800 owner-operators) and 11,600 trailers as at December 31, 2010. This includes approximately 1,200 trailers leased to third parties by the Company’s fleet management services. This compares to approximately 6,600 power units (including 1,700 owner-operators) and 12,000 trailers as at December 31, 2009.

facilitiesThe Company’s head office is in Montréal, Québec. As at December 31, 2010 the Company has 253 terminals, with 92 in Western Canada, 68 in Québec, 59 in Ontario and 23 in the Atlantic Provinces. The Company also has eleven terminals in the United States. This compares to 260 terminals as at December 31, 2009. The acquisition of Speedy heavy hauling added five terminals in the United States and the terminal consolidation achieved in the last twelve months decreased the total by 12.


4 TransForce inc.

customersThe Company has a diverse customer base operating across a broad cross-section of industries (see graph below) with no single client accounting for more than 10% of consolidated revenue. Because of its customer diversity, as well as the wide geographic scope of the Company’s service offering and the range of segments in which it operates, a downturn in the activities of individual customers or customers in a particular industry is not expected to have a material adverse impact on the operations of the Company. In the last several years, the Company concluded strategic partnerships with other transport companies in North America in order to extend its service offering to customers across Canada and the United States.

consolidaTed financial ResulTs

consolidated highlights and selected financial data

fourth quarter• Totalrevenueincreased10%to$540million

• Revenueincreased9%to$494million

• EBITDAincreased26%to$76million

• EBIDTAmargin14.0%versus12.3%inQ42009

• Freecashflowincreased81%to$57million from $32 million in 2009

• Freecashflowpershareup82%to $0.60 ($0.33 in 2009)

• Dilutedadjustedearningspershareincreased 16% to $0.22 from $0.19 in Q4 2009

• Completionofa6%convertibleunsecured subordinated debentures of $144 million

• Signatureofadefinitivemergeragreementtoacquire Dynamex Inc. in Q1 2011

year• Totalrevenueincreased8%to$2.0billion

• Revenueincreased7%to$1.8billion

• EBITDAincreased18%to$268million

• EBITDAmargin13.4%versus12.3%in2009

• Freecashflowhasbeen$164million versus $173 million in 2009

• Freecashflowparsharewasat$1.72 ($1.92 in 2009)

• Dilutedadjustedearningspershareincreased 46% to $0.76 from $0.52 in 2009

• Completionofanew$650-millioncreditfacility

• Acquisitionofremaining50%ofLafleche’s landfill and environmental complex

• Acquisitionofsubstantiallyalloftheassetsof Speedy heavy hauling Inc.

• Totaldebtdecreasedby$74millionto$634million



(unaudited, in thousands of dollars, except per share data)

fourth quarters ended december 31 years ended december 31 2010 2009 Variance 2010 2009 VarianceRevenue 494,284 452,445 9% 1,840,100 1,718,357 7%Fuel surcharge 45,424 36,183 26% 162,018 128,169 26%Total revenue 539,708 488,628 10% 2,002,118 1,846,526 8%EBITDA(1) 75,758 60,250 26% 267,968 226,544 18%Operating income before depreciation(1) 72,071 59,350 21% 260,180 218,385 19%Adjusted net income(1) 20,851 17,789 17% 73,190 46,476 57%Net income (net loss) 35,583 (27,159) – 104,592 10,929 –Cash flow from operating activities 78,352 48,257 62% 200,390 209,806 (4%)Free cash flow(1) 57,173 31,601 81% 163,729 172,869 (5%)Weighted average number of shares outstanding 95,317,672 95,253,937 95,276,515 90,036,501 Per share data Free cash flow 0.60 0.33 82% 1.72 1.92 (10%) Adjusted earnings – diluted(1) 0.22 0.19 16% 0.76 0.52 46% Earnings – basic 0.37 (0.29) – 1.10 0.12 – Earnings – diluted 0.37 (0.29) – 1.09 0.12 – Dividends 0.10 0.10 – 0.40 0.40 –Margin (as a percentage of total revenue) EBITDA margin 14.0% 12.3% 13.4% 12.3% Operating margin before depreciation 13.4% 12.1% 13.0% 11.8% Operating ratio(1) 92.4% 94.0% 92.9% 94.7% (1) Please refer to the section “Reconciliation of non-GAAP financial measures” on page 13.

consolidated results

For purposes of its comments in the section of the MD&A referencing fourth quarter and 2010 consolidated financial results, the Company accounted only for the impacts of the two most important business acquisitions, ATS Retail Solutions (“ATS”), which was completed in Q4 2009 and the assets of Speedy Heavy Hauling Inc. (“Speedy”) acquired in Q3 2010.

RevenueFor the fourth quarter, the increase in total revenue year-over-year was mainly attributable to the significant acquisitions, which added $33 million, and organic growth of $11 million in the energy sector services. Overall, the Company continued to observe small volume increases and, as seen in the third quarter, price increases in the Package and Courier and the SpecializedServicessegments.Asa result, revenue increased9%to$494million.Comparedwith lastyear, thehigheraverage diesel fuel price observed since the beginning of this fiscal year contributed to the increase in the fuel surcharge included in total revenue. Consequently, total revenue in the three-month period ended December 31, 2010 increased 10% to $540 million from $489 million in Q4 2009.

For the year ended December 31, 2010, the increase in total revenue year-over-year was mainly attributable to the significant acquisitions and internal growth in the energy sector services, which added $118 million and $35 million respectively. Total revenue in the year ended December 31, 2010 increased 8% to $2.0 billion from $1.8 billion in 2009.


6 TransForce inc.

operating income before depreciationThe Company’s costs include operating expenses, which are primarily costs related to employees and subcontractors, vehicle operation, insurance, road taxes and operating permits, and fixed costs and general and administrative expenses (“FCG&A”), which are primarily composed of costs related to employee salaries, rent, telecommunications, maintenance, security and other general expenses.

fourth quarterOperating expenses for the fourth quarter of 2010 were $381 million, compared with $353 million in 2009. The significant acquisitions added $23 million for the quarter.

FCG&A expenses for the fourth quarter of 2010 were $87 million compared with $77 million in Q4 2009. The significant acquisitionsadded$4million.Theseexpensescontinuetobescrutinizedandwereaffectedbyonetimerestructuringcostsrelated to employee terminations ($1.7 million in Q4 2010). Increases were necessary to support the operation’s high service level. Bad debt expense for Q4 2010 was $0.5 million compared with $0.7 million in Q4 2009.

TransForce’s operating improvements in the fourth quarter of 2010 are well demonstrated by its operating income before depreciation ($72 million in Q4 2010 compared with $59 million for 2009, an increase of 21% or $13 million). Costs did not increase at the same pace as revenue, demonstrating the Company’s continuing commitment to efficiency. As a percentage of sales, operating income before depreciation stood at 13.4%, a 1.3 percentage point increase on a year-over-year basis.

yearOperating expenses for the year ended December 31, 2010 were $1.4 billion, compared with $1.3 billion in 2009. The significant acquisitions added $78 million during 2010.

FCG&A expenses for the year ended December 31, 2010 were $332 million compared with $311 million in 2009. The significant acquisitions added $22 million. Year-over-year costs decreased, before the significant acquisitions, by $1 million reflecting the Company’s effort in its terminal consolidations, which reduced the leased premises and related expenses. Bad debt expense for the year ended December 31, 2010 was $2.4 million compared with $3.7 million in 2009. Costs related to employee terminations for the year ended December 31, 2010 totaled $5.0 million, comparable to last year.

TransForce’s operating improvements in the year ended December 31, 2010 are confirmed by the 19% increase in its operating income before depreciation ($260 million in 2010 compared with $218 million for 2009). Again, the Company benefited from its terminal consolidations and its effort to reduce operating expenses to activity level. As a percentage of sales, operating income before depreciation stood at 13.0%, a 1.2 percentage point increase on a year-over-year basis. The Company benefited also from additional sales in high margin segments with the ATS and Speedy acquisitions and internal growthinthePackageandCourierandtheSpecializedServicessegments.

depreciation and amortizationIn both the fourth quarter and for the year, Depreciation of property, plant and equipment was relatively stable. Appropriate capital investments to maintain the Company’s fleet were completed throughout the year, while increased productivity and additional owner-operators even helped the Company to reduce the fleet slightly, despite volume increases, in the last quarter of 2010.

IntangibleassetamortizationincreasedduetotheATSacquisition.



interest on long-term debt and convertible debenturesFor the quarter and year ended December 31, 2010, Interest on long-term debt and convertible debentures increased pri-marily as a result of the 0.75% interest rate net increase from the Company’s new credit facility renewed in July 2010 and improved financial conditions. The newly issued convertible debentures also added to the increase due to its higher interest rate. however, these impacts were reduced by the Company’s actions to lower its debt level by $74 million in comparison to December 31 of last year.

Consequently, Interest on long-term debt and convertible debentures increased from $8 million in Q4 2009 to $11 million in Q4 2010 and was $38 million in the year ended December 31, 2010 compared with $35 million in 2009.

change in fair value of derivativesThe Company’s derivative financial instruments, taken to mitigate foreign exchange and interest rate risks, have seen their fair value increased by $8 million in Q4 2010 while in the same quarter last year, their fair value stayed stable. For the year ended December 31, 2010, the fair value gained $8 million, compared with a gain of $14 million last year.

In addition to the above, the Company’s Revenue and Income before provision for income taxes (“EBT”) have been impacted by the US dollar depreciation throughout 2010. The following table provides the evolution of the US exchange rate and the impact on the Company’s EBT for each of the reported periods considering the annual US-denominated excess cash flow of $105 million.

(unaudited) - (EBT in thousands of dollars) 2010 2009 Impact on EBTAverage for quarters ended December 31 c$1.0128 C$1.0564 (1,145) Average for years ended December 31 c$1.0299 C$1.1420 (11,771) Closing as at December 31 c$0.9946 C$1.0510

Provision for income taxesIncome tax expense increased to $33 million in the year ended December 31, 2010 from $21 million in 2009.

For the year ended December 31, 2010, income tax expense reflected a $9 million favourable variance versus an anticipated income tax expense of $42 million based on the Company’s statutory tax rate of 30.48%. The non-taxable gain on remeasurement to fair value of the existing interest in acquiree decreased the income tax expense by $5 million in Q1 2010, and the non-taxable gain on business acquisition decreased the income tax expense by $3 million in Q4 2010.

For the year 2009, the income tax expense reflected an $11 million unfavourable variance versus an anticipated income tax expense of $10 million based on the Company’s statutory tax rate of 31.03%. The non-deductible goodwill impairment charge increased the income tax expense by $14 million and the future income tax benefit following a change in statutory rates decreased the income tax expense by $4 million.

segmented results

For the purpose of this section, “EBITDA” refers to the line “Income before the following” on the consolidated financial statements (refer to the section “Reconciliation of non-GAAP financial measures” on page 13). Also, to facilitate the comparison of business level activity and operating costs between periods, the Company reallocates the fuel surcharge revenue within the operating expenses.


8 TransForce inc.

selected segmented financial information (unaudited – in thousands of dollars)

fourth quarterended december 31, 2010

Package and less-Than- specialized courier Truckload Truckload services corporate eliminations TotalTotal revenue 118,241 126,912 167,577 142,475 – (15,497) 539,708 ebiTda 21,384 7,068 16,750 24,426 6,130 – 75,758 ebT 15,948 (102) 10,669 21,832 (899) – 47,448 % of total revenue before eliminations 21% 23% 30% 26% 100%ebiTda Margin 18.1% 5.6% 10.0% 17.1% 14.0%

ended December 31, 2009

Packageand Less-Than- Specialized Courier Truckload Truckload Services Corporate Eliminations TotalTotal revenue 93,886 131,582 164,357 111,943 – (13,140) 488,628 EBITDA 16,307 9,565 16,169 14,016 4,193 – 60,250 EBT 11,440 2,511 7,182 (40,166) (4,507) – (23,540) % of total revenue before eliminations 19% 26% 33% 22% 100%EBITDA Margin 17.4% 7.3% 9.8% 12.5% 12.3%

yearended december 31, 2010

Package and less-Than- specialized courier Truckload Truckload services corporate eliminations TotalTotal revenue 395,683 524,587 642,617 495,635 – (56,404) 2,002,118 ebiTda 62,835 46,574 64,367 90,090 4,102 – 267,968 ebT 40,963 17,201 39,007 74,165 (33,371) – 137,965 % of total revenue before eliminations 19% 26% 31% 24% 100%ebiTda Margin 15.9% 8.9% 10.0% 18.2% 13.4%

ended December 31, 2009

Packageand Less-Than- Specialized Courier Truckload Truckload Services Corporate Eliminations TotalTotal revenue 294,911 523,966 639,216 438,081 – (49,648) 1,846,526 EBITDA 47,675 50,417 59,711 60,807 7,934 – 226,544 EBT 31,229 22,339 22,430 (22,286) (21,372) – 32,340 % of total revenue before eliminations 15% 28% 34% 23% 100%EBITDA Margin 16.2% 9.6% 9.3% 13.9% 12.3%



Package and courier

(unaudited, in thousands of dollars) fourth quarters ended december 31 years ended december 31 2010 2009 Variance 2010 2009 VarianceTotal revenue 118,241 93,886 26% 395,683 294,911 34%Fuel surcharge (9,757) (6,869) 42% (31,200) (19,145) 63%Revenue 108,484 87,017 25% 364,483 275,766 32%Operating expenses (net of fuel surcharge) 63,856 51,359 24% 215,473 162,341 33%FCG&A expenses 23,244 19,351 20% 86,175 65,750 31%ebiTda 21,384 16,307 31% 62,835 47,675 32%Depreciation of property, plant and equipment 2,775 2,747 1% 10,870 11,081 (2%)Amortizationofintangibleassets 2,642 2,129 24% 10,884 5,374 103%Loss (gain) on disposal of property, plant and equipment 19 (9) – 118 (9) –ebT 15,948 11,440 39% 40,963 31,229 31%

EBITDA margin 18.1% 17.4% 15.9% 16.2%

In the fourth quarter of 2009, the Company completed the acquisition of ATS, which had a significant positive impact on the results of the Package and Courier segment. For greater clarity, references to impacts from ATS on the Company’s results take into account 2009 ATS results from the acquisition date (November 19, 2009).

ATS accounted for $14 million in additional revenue during Q4 2010 and $84 million for the whole year. Therefore, excluding its impact, the Company’s Package and Courier segment saw its revenue increase by $7 million (8%) and $5 million (2%) for the fourth quarter and the year respectively.

For the fourth quarter, the $7 million revenue increase is attributed to Canpar. Canpar has been contracted to supply courier services to the Government of Ontario for a period of three years. The contract became effective on September 1, 2010 and runs through to 2013 with two extension options of two years each. Canpar has hired 125 new drivers and dockworkers, 15 management and clerical employees and invested $3 million in rolling stock to deliver more than 12,000 parcels a day for the government, with 95% of the shipments being completed within Ontario.

Operating expenses from Package and Courier activities for Q4 2010 were $64 million, against $51 million in Q4 2009. The significant ATS acquisition added $9 million. FCG&A expenses from Package and Courier activities for Q4 2010 were $23 million, against $19 million in Q4 2009. The significant acquisition added $2 million in Q4 2010. Discounting the ATS acquisition, this sector’s Operating and FCG&A expenses were almost unchanged compared to the same quarter last year.

On a yearly basis, Operating expenses were $215 million, against $162 million in 2009. The significant ATS acquisition added $53 million. FCG&A expenses were $86 million, against $66 million in 2009. The significant acquisition added $20 million in the year ended December 31, 2010. Discounting the significant acquisition, this sector’s Operating and FCG&A expenses were almost unchanged compared to last year. Improved efficiencies allowed the Company to reduce expenses in costs related to employees and subcontractors, so the $5 million additional revenue impacted totally upon EBITDA and EBT.

Since the majority of the assets used by ATS came from operating leases, the depreciation of property, plant and equipment didnotincrease.TheincreaseintheamortizationofintangibleassetswascausedbytheacquisitionofATS.

EBT from Package and Courier activities increased to $41 million in 2010, compared with $31 million last year. The existing divisions generated $5 million of the $10 million increase in this last measure.


10 TransForce inc.

less-Than-Truckload

(unaudited, in thousands of dollars) fourth quarters ended december 31 years ended december 31 2010 2009 Variance 2010 2009 VarianceTotal revenue 126,912 131,582 (4%) 524,587 523,966 0%Fuel surcharge (16,629) (14,390) 16% (63,986) (53,901) 19%Revenue 110,283 117,192 (6%) 460,601 470,065 (2%)Operating expenses (net of fuel surcharge) 74,286 80,524 (8%) 305,273 310,389 (2%)FCG&A expenses 28,929 27,103 7% 108,754 109,259 (0%)ebiTda 7,068 9,565 (26%) 46,574 50,417 (8%)Depreciation of property, plant and equipment 6,679 6,589 1% 27,341 27,093 1%Amortizationofintangibleassets 565 534 6% 2,209 2,148 3%Gain on disposal of property, plant and equipment (74) (69) 7% (177) (1,163) (85%)ebT (102) 2,511 – 17,201 22,339 (23%) EBITDA margin 5.6% 7.3% 8.9% 9.6%

During the quarter, the Company conducted two major consolidations in its operations in the Québec-Ontario region and in the Western Canada region. Thibodeau was integrated into Select Daily and became Select Thibodeau, and Byers was fully integrated into Canadian Freightways, the major Less-Than-Truckload (“LTL”) operation in Western Canada. In addition, the CompanyalsostartedtheintegrationofEpicExpressintoKingsway;thisconsolidationisplannedtobefinalizedinQ12011.These combinations became necessary due to the persistent underperformance of this segment in regard to contributing to the Company’s results and should be seen as a direct result of the overcapacity in this industry. It became evident to managementthattheconsolidationofdivisionswasnecessarytofullyrealizethepotentialsynergieswithinitsnetwork;theterminal consolidations that had taken place within its LTL segment in the previous 18 months were not sufficient.

From the beginning of 2010, two obstacles affected TransForce LTL revenues and EBITDA: pricing and US dollar depreciation. This quarter’s revenue was also affected by the consolidations where decisions had to be made on non-profitable routes. On the positive side, the Company continued to observe increased tonnage from its current customer base, both in the fourth quarter and throughout the year. Overall, revenue for the LTL segment decreased year-over-year 6% in Q4 2010 and 2% for the whole year. Again, the depreciation of the US dollar impacted the Company’s revenue, as well as its EBITDA, in the fourth quarter and for the twelve-month period of 2010 by $1 million and $8 million respectively.

Operatingexpensescontinuedtodecreasemorethanthehandledvolume;aresultofthestrategicterminalconsolidationswhich allowed the Company to improve its operating efficiency.

For the fourth quarter, the increase in the FCG&A expenses is due to costs related to employee terminations and integration costs totalling $2 million. On a yearly basis, the actions taken by the Company produced positive results. Indeed, excluding the $2 million one time costs and the additional rent expenses resulting from the sale and leaseback transaction concluded in March 2010, the FCG&A expenses would have decreased by $4 million.

For the twelve months ended December 31, 2010, the Company’s EBITDA margin from LTL activities decreased slightly by 0.7 percentage point to 8.9%. Although volume increases have been observed since March 2010 and are fairly consistent on a month-to-month basis, volume is still lower than in 2008.

The LTL segment’s EBT for the year ended December 31, 2010 was $17 million compared with $22 million in 2009. The 2009 results include a $1.2 million gain on disposition of property, plant and equipment and the 2010 EBITDA margin would have been 1.5% higher without the impact of the US dollar depreciation for the year.



Truckload

(unaudited, in thousands of dollars) fourth quarters ended december 31 years ended december 31 2010 2009 Variance 2010 2009 VarianceTotal revenue 167,577 164,357 2% 642,617 639,216 1%Fuel surcharge (17,619) (13,756) 28% (61,950) (50,769) 22%Revenue 149,958 150,601 (0%) 580,667 588,447 (1%)Operating expenses (net of fuel surcharge) 117,068 118,521 (1%) 453,569 459,069 (1%)FCG&A expenses 16,140 15,911 1% 62,731 69,667 (10%)ebiTda 16,750 16,169 4% 64,367 59,711 8%Depreciation of property, plant and equipment 7,246 8,632 (16%) 31,356 36,324 (14%)Amortizationofintangibleassets 577 574 1% 2,227 2,287 (3%)Gain on disposal of property, plant and equipment (1,742) (219) – (8,223) (1,330) –ebT 10,669 7,182 49% 39,007 22,430 74% EBITDA margin 10.0% 9.8% 10.0% 9.3%

Truckload revenue was relatively stable through the whole year 2010 and for each quarter. The 1% 2010 decrease is mainly due to the US dollars depreciation, which impacted revenue by $6 million. Although mileage and price showed a slight decrease during the year, the Company maintained that truckload is historically the sector where industry overcapacity diminishes first. The fourth quarter ended stable in terms of price variation, excluding the US dollar’s negative impact, on a year-over-year comparison.

FCG&A expenses from Truckload activities for the year ended December 31, 2010 were $63 million, compared with $70 million for 2009. The $7 million reduction is a direct result of the Company’s action to regroup some operations and branches throughout 2009, reducing the leased premises and related expenses. In addition, bad debt expense was $0.7 million during the year ended December 31, 2010 compared with $1.3 million in 2009. For the quarter, the FCG&A didnotsignificantlychangebecausemostoftherationalizationswereinplaceinQ42009.

As a result, EBITDA from Truckload activities for Q4 2010 was $17 million, compared with $16 million for Q4 2009, up 4%. EBITDA for the year ended December 31, 2010 was $64 million, compared with $60 million for 2009. The EBITDA margin increased to 10.0%, a 0.7 percentage point increase, against 9.3% for the same period last year.

In comparison to the same period last year, depreciation of property, plant and equipment decreased in the same proportion asthetractorcount.FortheyearendedDecember31,2010,theCompanyrealizedatotalof$6.5millioningainonthedisposition of five properties in the Province of Québec.

With approximately the same revenue, cost-reduction efforts over more than a year significantly improved the Company’s EBT in the Truckload segment in the quarter as well as for the year. This measure stood at $39 million for 2010, compared with $22 million a year earlier, up 74%.

Operating expenses from Truckload activities for both Q4 2010 and the year 2010 decreased by 1%. On December 31, including owner-operators, the total tractor count was 2,200 for 2010 and 2,300 in 2009; this confirmed a better fleet utilization given thatthe segment’s revenue is stable. This efficiency and the addition of owner-operators translated into less long-term equipment leases, where costs decreased 35% from 2009 to 2010, and less rolling stock depreciation.

Power units december December 31, 2010 31, 2009Owned tractors 1,300 1,500Owner-operators 900 800 2,200 2,300


12 TransForce inc.

specialized services

(unaudited, in thousands of dollars) fourth quarters ended december 31 years ended december 31 2010 2009 Variance 2010 2009 VarianceTotal revenue 142,475 111,943 27% 495,635 438,081 13%Fuel surcharge (1,419) (1,168) 21% (4,882) (4,354) 12%Revenue 141,056 110,775 27% 490,753 433,727 13%Operating expenses (net of fuel surcharge) 100,010 81,916 22% 342,641 315,842 8%FCG&A expenses 16,620 14,843 12% 58,022 57,078 2%ebiTda 24,426 14,016 74% 90,090 60,807 48%Depreciation ofproperty, plant and equipment 8,454 6,741 25% 29,405 27,927 5%Amortizationofintangibleassets 3,272 2,528 29% 12,250 10,236 20%Goodwill impairment – 45,000 – – 45,000 –Remeasurement to fair value of existing interest in acquiree – – – (16,279) – –Gain on business acquisition (9,518) – – (9,518) – –Loss (gain) on disposal of property, plant and equipment 386 (87) – 67 (70) –ebT 21,832 (40,166) – 74,165 (22,286) –adjusted ebT (1) 12,314 4,834 155% 48,368 22,714 113% EBITDA margin 17.1% 12.5% 18.2% 13.9% (1) EBT excluding goodwill impairment, Remeasurement to fair value of existing interest in acquiree and Gain on business acquisition.

On August 17, 2010, the Company completed the acquisition of Speedy, which had a positive impact on the results of this segment’s energy services as some of the acquired assets have been allocated to hemphill’s current customers, thus reducing subcontracting and increasing the EBITDA margin.

This segment’s revenue continued to show a very good progression. For the three-month period ended December 31, 2010, the energy services businesses increased their revenue year-over-year by $27 million, of which $17 million came from the Speedy acquisition. Similar results were observed for the twelve-month period increase, of which $25 million was added by the Speedy acquisition and $35 million came from existing operations in the energy sector.

EBITDAfromSpecializedServicesactivitiesforQ42010increased74%to$24million,comparedwith$14millioninQ42009, and for the year 2010, increased 48% to $90 million, compared with $61 million for 2009. The EBITDA margin in this segment was 18.2% in 2010, up 4.3 percentage points, against 13.9% in 2009. The waste management operations continued to contribute to this increase with a better margin than last year in both compared periods due to increased volumesinthehigher-marginlandfillandcompostprocessing.Theenergysectorwascharacterizedbysolidincreasesinitsrevenue,bothfrominternalgrowthandacquisition,whichincreasedequipmentutilizationandprofitabilityin2010.

The acquisition of Speedy in Q3 2010 explained the majority of the increase in the depreciation of property, plant and equipmentandtheacquisitionoftheremaining50%ofLaflecheinQ12010explainedtheincreaseintheamortizationofthe intangible assets.

As mentioned in the consolidated financial statements, the application of a new accounting standard (CICA hB 1582, Business Combinations) resulted in two unusual gains. The acquisition of the remaining 50% of Lafleche caused the previously held interest in that company to be valued at fair value, resulting in a gain of $16 million. And the fair value of Speedy’s net identifiable assets acquired and the liabilities assumed exceed the consideration paid, and therefore resulted in a gain on business acquisition of $10 million recorded in Q4 2010.

As a result of the above, the adjusted EBT augmented significantly to $48 million in 2010 from $23 million in 2009, up 113%.



ReconciliaTion of non-gaaP financial MeasuRes

Financial data have been prepared in conformity with GAAP. however, certain measures used in this discussion and analysis donothaveanystandardizedmeaningunderGAAPandcouldbecalculateddifferentlybyothercompanies.TheCompanybelieves that certain non-GAAP financial measures, when presented in conjunction with comparable GAAP financial measures, are useful to investors and other readers because that information is an appropriate measure for evaluating the Company’s operating performance. Internally, the Corporation uses this non-GAAP financial information as an indicator of business performance. These measures should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.

non-gaaP financial measures

EBITDA Earnings before interest, income taxes, depreciation, amortization, change in fair value of interest rate derivatives, goodwill impairment, remeasurement to fair value of existing interest in acquiree, gain on business acquisition and gain or loss on disposal of property, plant and equipment.

Operating income Net income before interest, income taxes, change in fair value of derivatives and remeasurement to fair value of existing interest in acquiree.

Operating income before depreciation

Operatingincomebeforedepreciation,amortizationandgainorlossondisposalofproperty,plant and equipment.

Operating ratio The sum of operating expenses, fixed costs, general and administrative expenses, depreciation andamortization,lessthegainorplusthelossondisposalofproperty,plantandequipment,divided by revenue.

Adjusted net income and earnings per share

Net income and earnings per share excluding the after-tax effect of changes in the fair value of derivatives and of items that are not in the Company’s normal business.

Free cash flow Cash flows from operating activities less net additions to property, plant and equipment.

ebiTda

Management believes it to be a useful supplemental measure. It is provided to assist in determining the ability of the Company to generate cash from its operations.

Reconciliation of net income to ebiTda

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009net income 35,583 (27,159) 104,592 10,929 Depreciationandamortization 32,241 30,505 126,659 122,602 Interest on long-term debt 10,861 7,784 37,630 34,996 Change in fair value of interest rate derivatives (3,863) 824 (274) (5,546) Goodwill impairment – 45,000 – 45,000 Remeasurement to fair value of existing interest in acquiree – – (16,279) –Gain on business acquisition (9,518) – (9,518) –Gain on disposal of property, plant and equipment (1,411) (323) (8,215) (2,848) Income taxes 11,865 3,619 33,373 21,411 ebiTda 75,758 60,250 267,968 226,544


14 TransForce inc.

operating income and operating income before depreciationManagement relies on operating income and operating income before depreciation as measurements as they provide an indication of the results generated by TransForce’s principal business activities and the performance of its operations.

Reconciliation of net income to operating income and operating income before depreciation

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009net income 35,583 (27,159) 104,592 10,929Interest on long-term debt 10,861 7,784 37,630 34,996 Change in fair value of derivatives (7,550) (76) (8,062) (13,705) Goodwill impairment – 45,000 – 45,000 Remeasurement to fair value of existing interest in acquiree – – (16,279) –Gain on business acquisition (9,518) – (9,518) –Income taxes 11,865 3,619 33,373 21,411 operating income 41,241 29,168 141,736 98,631 Depreciationandamortization 32,241 30,505 126,659 122,602 Gain on disposal of property, plant and equipment (1,411) (323) (8,215) (2,848) operating income before depreciation 72,071 59,350 260,180 218,385

operating ratioAlthough the operating ratio is not a recognized financial measure defined by GAAP, it is a widely recognized measure in the transportation industry, which we believe provides a comparable benchmark for evaluating the Company’s performance.

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009Operating expenses 380,999 352,772 1,409,671 1,316,989 Fixed costs, general and administrative expenses 86,638 76,506 332,267 311,152 Depreciationandamortization 32,241 30,505 126,659 122,602 Gain on disposal of property, plant and equipment (1,411) (323) (8,215) (2,848) 498,467 459,460 1,860,382 1,747,895 Total revenue 539,708 488,628 2,002,118 1,846,526 Operating ratio 92.4% 94.0% 92.9% 94.7%



adjusted net income and earnings per shareIn presenting an adjusted net income and earnings per share the Company’s intent is to help provide an understanding of what would have been the net income and earnings per share excluding impacts in terms of nature or time within the reported period that are not normally encountered by the Company.

(unaudited, in thousands of dollars, except per share data) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009net income 35,583 (27,159) 104,592 10,929 Change in fair value of derivatives (after tax) (5,214) (52) (5,605) (9,453) Goodwill impairment – 45,000 – 45,000 Remeasurement to fair value of existing interest in acquiree – – (16,279) –Gain on business acquisition (9,518) – (9,518) –adjusted net income 20,851 17,789 73,190 46,476 adjusted earnings per share – basic 0.22 0.19 0.77 0.52 adjusted earnings per share – diluted 0.22 0.19 0.76 0.52

free cash flowManagement believes that this measure provides a comparable benchmark to evaluate the performance of the Company to ensure adequate capacity to meet capital requirements

Reconciliation of free cash flow

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009Cash flow from operating activities before net change in non-cash operating working capital 66,937 50,684 219,394 191,234 Net change in non-cash operating working capital 11,415 (2,427) (19,004) 18,572 Additions to property, plant and equipment (29,993) (20,150) (101,932) (60,022) Proceeds from disposal of property, plant and equipment 8,814 3,494 65,271 23,085 free cash flow 57,173 31,601 163,729 172,869


16 TransForce inc.

suMMaRy of eigHT MosT RecenT QuaRTeRly ResulTs

(in millions of dollars, except per share data)

Q4 10 Q3 10 Q2 10 Q1 10 Q4 09 Q3 09 Q2 09 Q1 09Revenue 539.7 499.5 496.9 466.1 488.6 451.4 454.2 452.4EBITDA(1) 75.8 74.5 67.1 50.7 60.3 62.0 59.8 44.5Adjusted net income(1) 20.9 23.2 23.3 5.9 17.8 13.1 11.3 4.3Net income (loss) 35.6 25.4 17.1 26.6 (27.2) 17.0 18.0 3.1Earnings (loss) per share Basic 0.37 0.27 0.18 0.28 (0.29) 0.19 0.21 0.04 Diluted 0.37 0.27 0.18 0.28 (0.29) 0.19 0.21 0.04(1) Please refer to the section “Reconciliation of non-GAAP financial measures” on page 13.

liQuidiTy and caPiTal ResouRces

sources and uses of cash

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009Sources of cash: Cash flow from operating activities before net change in non-cash operating working capital 66,937 50,684 219,394 191,234 Net change in non-cash operating working capital 11,415 – – 18,572 Increase in bank indebtedness 13,050 2,856 18,089 – Increase in long-term debt – 42,990 357,729 950 Issuance of debentures 138,000 – 138,000 – Issuance of shares 134 – 470 47,616 Proceeds from disposal of property, plant and equipment 8,814 3,494 65,271 23,085 Others 1,330 – – –Total sources 239,680 100,024 798,953 281,457 Uses of cash: Net change in non-cash operating working capital – 2,427 19,004 – Decrease in bank indebtedness – – – 5,691 Repayment of long-term debt 199,892 9,493 571,853 112,140 Dividends paid 9,531 9,525 38,107 36,136 Additions to property, plant and equipment 29,993 20,150 101,932 60,022 Business acquisitions 264 57,881 66,598 67,095 Others – 548 1,459 373 Total usage 239,680 100,024 798,953 281,457



cash flow from operating activitiesFor the three-month period ended December 31, 2010, cash flow from operating activities before net change in non-cash operating working capital increased 32% from the same quarter of 2009. For the year ended December 31, 2010, cash flow from operating activities before net change in non-cash operating working capital increased 15% from the same period of 2009. It amounted to $219 million in the year 2010, compared with $191 million a year earlier. Operations from significant acquisitions generated additional cash flow of $5 million in the fourth quarter and $15 million for the year ended December 31, 2010. The remaining increases for both reported periods came from the superior operating performance that TransForce delivered in 2010.

In 2010, the Company’s working capital used cash flow while, last year, it generated cash inflow. The increase in the Company’s working capital balances is due to the Speedy business acquisition, where the asset transaction excluded the needed working capital for the day-to-day operations of the acquired business, and the increase in the Company’s revenue. During the fourth quarter of 2010, the $11 million inflow generated by the working capital was due to the improvement in the receivable recovery period which had deteriorated as at September 30, 2010.

cash flow from investing activitiesThe following table indicates the Company’s additions to its property, plant and equipment by category for the three-month period and the year ended December 31, 2010.

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009Additions to property, plant and equipment: Additions – as stated 29,993 20,150 101,932 60,022 Acquisitions under capital leases and conditional sales contracts – 621 – 5,040 29,993 20,771 101,932 65,062 Additions by category: Land and building 7,336 1,480 28,134 8,399 Rolling stock 16,564 15,922 59,236 44,223 Other equipment (mainly technology) 6,093 3,369 14,562 12,440 29,993 20,771 101,932 65,062

The Company invests in new equipment to ensure its quality of service while keeping maintenance costs low. Its capital expenditure in the recent quarters reflects the level of reinvestment required to keep its equipment in good order as well as maintain an adequate allocation of its capital resources.

The Company’s rolling stock acquisitions returned to standard from the second quarter of 2010. Last year and beginning of 2010, they had been lower than normal due to: • Decreaseinactivitylevelcomparedtorecordyear2008; • LowerreplacementcostsgiventherelativevalueoftheCanadiandollartotheUSdollarwhencomparedtopreviousyears; • Conversion of owned power units into owner-operators. As at December 2008, 25% of the Company’s power units

wereowner-operators;todaythismeasurestandsat30%.This5%variancereducedtheCompany’srenewalneedsby approximately 310 power units.


18 TransForce inc.

The following table indicates the Company’s dispositions of its property, plant and equipment by category for the three-month period and the year ended December 31, 2010.

(unaudited, in thousands of dollars) Three months Three months year Year ended ended ended ended dec. 31, 2010 Dec. 31, 2009 dec. 31, 2010 Dec. 31, 2009Dispositions by category: Land and building 2,559 – 45,462 8,161 Rolling stock 6,255 3,423 19,543 14,794 Other equipment – 71 266 130 8,814 3,494 65,271 23,085

For the year ended December 31, 2010, the proceeds from the disposal of land and buildings include $32 million for the sale and leaseback of a property (see Commitments). For the year ended December 31, 2010, the $8 million gain on disposal of property, plant and equipment (2009 – $3 million) reported in the consolidated statements of income came mainly from land and building dispositions in the amount of $7 million.

For the year ended December 31, 2010, business acquisitions totalled $67 million (2009 – $67 million). The main acquisitions included, on March 2, 2010, the acquisition of the remaining 50% interest in Laflèche Environmental Inc., formerly a joint ventureoftheCompany;andSpeedy,whichwascompletedonAugust17,2010.

The Company’s investing activities used total cash flow of $20 million in Q4 2010 compared with $75 million in Q4 2009. For the year ended December 31, 2010, investing activities used total cash flow of $105 million compared with $104 million in 2009.

free cash flowThe Company’s objectives when managing its cash flow from operations are to ensure proper capital investment in order to provide stability and competitiveness to its operations, to ensure sufficient liquidity to pursue its growth strategy and undertake selective acquisitions, and to maintain an appropriate debt level so that there are no financial constraints on the use of capital.

The Company maintained its free cash flow(1) above the $160 million mark for a second year in a row. This achievement was not accomplished to the detriment of capital expenditures, which were significantly higher than last year by $42 million. The solid performance from TransForce’s operations and the sale and leaseback transaction helped greatly to generate $164 million in free cash flow for the year 2010, compared with $173 million in the same period of 2009.

For the three-month period ending December 31, 2010, the $25 million increase of generated free cash flow was also attributed to the good performance of its operations, and to the positive net change in the Company’s working capital balances.

(1) Please refer to the section “Reconciliation of non-GAAP financial measures” on page 13.



cash flow from financing activities

contractual obligations The following table indicates the Company’s contractual obligations with their respective maturity dates at December 31, 2010.

(unaudited, in thousands of dollars) less than 1-3 4-5 after Total 1 year years years 5 yearsThree-year revolving facility – July 2013 167,369 – 167,369 – –Five-year term loan – July 2015 200,000 – – 200,000 –Unsecured debenture – October 2017 100,000 – – – 100,000Capital lease obligations 7,243 2,925 3,378 940 –Other long term obligations 34,855 10,879 15,719 3,757 4,500Total long-term debt 509,467 13,804 186,466 204,697 104,500 Convertible debentures (1) – November 2015 143,750 – – 143,750 –Total contractual obligations 653,217 13,804 186,466 348,447 104,500

(1) The above table assumes no conversion of the convertible debentures to maturity.

The Company also had $21 million in letters of credit outstanding against the three-year revolving facility. As a result, $262 million was available to be drawn under this facility at December 31, 2010.

The Company renewed the $100 million unsecured debenture with Solidarity Fund QFL in May 2010. The term of the loan has been extended and is now repayable on October 30, 2017. The interest rate on the loan is 7.75% and fixed for the whole term.

In July 2010, the Company reached an agreement with a syndicate of 15 lenders, led by National Bank of Canada as Administrative Agent, Sole Bookrunner and Co-Lead Arranger and Royal Bank of Canada as Syndication Agent and Co-Lead Arranger, for a $650-million credit facility. The credit facility comprises a $200-million five-year term loan and a $450-million revolving facility with an initial term of three years that can be extended by two one-year terms, subject to certain conditions. This agreement also provides the Company with an additional $150 million credit, available under certain conditions. The maximum interest rates will be variable, with the term loan at 300 basis points and the revolving facility at 275 basis points above the rate for bankers’ acceptances. These spreads cannot be increased but can be lowered under certain conditions, depending on the financial condition of the Company. Based on its actual financial condition, the spreads for the term loan and the revolving facility are 250 and 225 basis points respectively, a 25 basis points decrease from September 30, 2010.

The following table indicates the Company’s financial covenants to be maintained under the syndicated bank debt. These covenants are measured on a consolidated last twelve-month basis:

covenants as at Requirements dec. 31, 2010Total debt-to-ebiTda ratio [ratio of total debt to earnings before interest, incometaxes,depreciationandamortization(“EBITDA”)] <3.50 2.47senior debt-to-ebiTda ratio [ratio of senior debt (total debt less unsecured debenturewithSolidarityFundQFL)toEBITDA] <3.00 1.61adjusted ebiTdaR-to-fixed charge ratio [ratio of adjusted EBITDAR (EBITDA before rent)tofixedcharge(interest,rent,dividendandscheduledebtrepayment)] >1.15 1.81

The Company believes it will be in compliance with these covenants for the next twelve months.


20 TransForce inc.

On November 19, 2010, the Company completed a bought-deal public offering by issuing 6% convertible unsecured subordinated debentures in an aggregate principal amount of $144 million. The proceed net of the underwriters’ fees and issuance costs amounted to $138 million. The convertible debentures have been approved for listing on the Toronto Stock Exchange and are trading under the symbol “TFI.DB”. The convertible debentures were sold to a syndicate of underwrit-ers co-led by National Bank Financial Inc. and RBC Dominion Securities Inc. The convertible debentures bear interest at a rate of 6% per annum, payable semi-annually on May 31 and November 30 each year, commencing on May 31, 2011. The convertible debentures are convertible at the holder’s option into TransForce common shares at a conversion price of $19.05 per share, representing a conversion rate of 52.4934 TransForce shares per $1,000 principal amount of convertible debentures. The convertible debentures will mature on November 30, 2015 and may be redeemed by TransForce, in certain circumstances, after November 30, 2013.

TransForce used the net proceeds of the convertible debentures for general corporate purposes, to reduce indebtedness, and to support its program of strategic acquisitions. Particularly, the $262 million availability on the three-year revolving facility resulting from the issuance of the convertible debentures has been used to finance the acquisition of Dynamex Inc. and to maintain the Company’s general capital needs.

financial position

(unaudited, in thousands of dollars) as at As at dec. 31, 2010 Dec. 31, 2009 VarianceTotal assets 1,623,606 1,527,312 96,294 6%Total debt (Current portion of long-term debt, Long-term debt and Convertible debentures) 633,925 707,929 (74,004) (10%)Shareholders’ equity 611,532 533,415 78,117 15%Debt-to-equity ratio 1.04 1.33 Debt-to-capital ratio 0.51 0.57

As a result of the Company’s net long-term debt repayment, the total debt decreased by $74 million during the year ended December 31, 2010 and $100 million in 2009. These accomplishments during the last two years significantly improved the Company’s financial position. The Company’s debt-to-equity and debt-to-capital ratios have improved since December 2009 and reflect the Company’s constant effort to reduce its debt and to maintain an appropriate debt level so that there are no financial constraints on the use of capital.

dividends and outstanding share dataThe Company paid $38 million, or 40 cents per share, in dividends on common shares in 2010, compared to $36 million, or 40 cents per share, in 2009. This is an increase of more than 5% mainly due to the public offering and the private placement, by which 8,463,840 common shares were issued on August 13, 2009.

As at December 31, 2010, a total of 95,328,255 common shares were outstanding (December 2009 – 95,253,937).

As at December 31, 2010, the number of outstanding options to acquire common shares issued under the Company’s Stock option plan was 2,782,615 (December 2009 – 1,882,600) of which 538,001 (December 2009 – Nil) were exercisable. Each stock option entitles the holder to purchase one common share of the Company at an exercise price established based on the market price of the shares at the date the option was granted.

There was no significant change in the Company’s outstanding capital stock between December 31, 2010 and February 24, 2011.



commitments, contingencies and off-balance sheet arrangements

commitments due by period

(unaudited, in thousands of dollars) less than 1-3 4-5 after Total 1 year years years 5 yearsoperating leases – rolling stock 26,363 10,368 13,143 2,852 –operating leases – real estate & others 167,507 24,495 35,679 21,304 86,029Total off-balance sheet obligations 193,870 34,863 48,822 24,156 86,029 Twosignificantlong-termrealestateleasescomprisedthe$168millionrealestatecommitments;$29millionrelatedto the Canpar Toronto hub under a lease terminating in 2026, and $70 million related to the Calgary Canadian Freightways head office and operating hub under a lease terminating in 2035. 159 properties constituted the remaining real estate operating leases.

The Calgary property associated with the above lease was part of a sale and leaseback transaction for a total consideration of $32 million, which occurred in March, 2010. This transaction generated a gain of $9 million which has been deferred andisamortizedovertheleaseterm.

Excluded from the above table is a contingent consideration related to the ATS business acquisition, concluded on November 19, 2009, which has not been recorded in the purchase price allocation and in the consolidated financial statements. This consideration is contingent on achieving specified revenue levels in future periods. The maximum yearly amount payable over the next four years is $4 million for a total consideration of $16 million. On yearly confirmations of the contractual conditions, the amounts then payable, if any, will be added to goodwill. In 2010, an amount of $3.6 million has been paid and added to goodwill under this contingent consideration.

financial instrumentsThe Company has entered into foreign exchange forward contracts, average rate forward exchange contracts and currency option instruments for the sale of US dollars in exchange for Canadian dollars that expire on various dates through December 2011. As at December 31, 2010, the notional amount of these contracts was US$99 million (December 2009 - US$77 million). The average exchange rate of these contracts was C$1.0766 (December 2009 - C$1.1361).

The fair value of the foreign exchange contracts generally reflects the estimated amount that the Company would receive from settlements of favourable contracts, or which it would be required to pay to cancel unfavourable contracts at the balance sheet date. As at December 31, 2010, the foreign exchange contract fair value was positive $6 million (December 2009 – positive $4 million).

The Company has also entered into interest rate swap contracts in order to mitigate the interest rate risk on a portion of its variable rate debt. As at December 31, 2010, the Company had interest rate swap contracts on the notional amount of $371 million of debt (December 2009 - $338 million), at an average contracted Banker’s Acceptance rate of 2.81% (December 2009 – 2.85%), that expire at various dates through October 2013. This represents 96% of the Company’s total variable rate debt. As a result, the effective interest rate on the interest swap contracts is 5.4% at December 31, 2010 (December 2009 – 4.4%). As at that date, the fair value of the interest rate swap contracts was negative $8 million (December 2009 - negative $8 million).


22 TransForce inc.

legal proceedingsThe 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 affect the Company’s financial condition or results of operations and, if necessary, have been provided for in the financial statements.

subsequent event On December 14, 2010, the Company has entered into a merger agreement with Dynamex Inc. (“Dynamex”), pursuant to which TransForce has agreed to acquire all outstanding shares of Dynamex for $25.00 per share in cash. Dynamex’s Board of Directors has unanimously approved the merger agreement with TransForce and the stockholders agreed to the merger agreement in a vote held on February 18, 2011. The transaction closed on February 22, 2011 and is valued at approximately US$248.0 million and has been funded by use of the Company’s revolving debt facility. Based on available financial information of Dynamex regarding the net assets acquired at the date of the closing, which is two days earlier than the date the Company published these financial statements, the Company estimates the excess of the purchase price over the net assets acquired to approximate US$138 million. This excess will be allocated to the assets and liabilities acquired, based on their respective fair value, during the first quarter of 2011.

In January 2011, the Company completed a sale and leaseback of one of its properties for a cash consideration of $40 million.

cRiTical accounTing Policies and esTiMaTes

The Company considers its purchase price allocation, goodwill and intangible asset valuation estimates as being critical and that, if changed, could materially affect the Company’s overall financial condition or results of operations. Refer to note 2(b) Use of estimates in the Company’s audited 2010 financial statements.

cHanges in accounTing Policies

adopted during the current periodThe following three new Sections are effective for fiscal years beginning on or after January 1, 2011. Earlier application is permitted and the Company elected to adopt them for the fiscal year beginning on January 1, 2010. These Sections had to be implemented concurrently.

(a) business combinations: CICA issued hB 1582, Business Combinations, to establish new standards for accounting for business combinations.

It is the Canadian equivalent to International Financial Reporting Standards (“IFRS”) 3, Business Combinations. The Section is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period for which it has been adopted.

This new Section requires, among other things, that most identifiable assets, liabilities, non-controlling interests

and goodwill acquired in a business combination be recorded at “full fair value” and acquisition-related costs be recognizedasexpensesasincurredandthatliabilitiesassociatedwithrestructuringorexitactivitiesberecognizedonly if they meet the definition of a liability as of the acquisition date.

(b) consolidated financial statements: CICA issued hB 1601, Consolidated Financial Statements, which supersedes the like-named hB 1600. When

adopted, this Section applies to interim and annual financial statements. The Section establishes standards for the preparation of consolidated financial statements. hB 1601 carries forward the consolidation guidance previously included in hB 1600.



(c) non-controlling interests: CICA issued hB 1602, Non-Controlling Interests, to provide guidance on accounting for non-controlling interests

subsequent to a business combination. hB 1602 replicates the provisions of IAS 27, Consolidated and Separate Financial Statements, other than the disclosure requirements. The key features are: non-controlling interests in subsidiaries are presented in the consolidated balance sheet with equity, separate from the parent shareholders’ equity. In income statements, non-controlling interest is not deducted in arriving at consolidated net income, but is allocated to the controlling interest and the non-controlling interest according to their percentage ownership.

The adoption of these three new standards impacted the Company’s consolidated financial statements as detailed in note 3.

To be adopted in future periods

conversion to international financial Reporting standards

conVeRsion PRogRessIn 2005, the Accounting Standards Board of Canada (“AcSB”) announced that accounting standards in Canada are to converge with IFRS. On February 13, 2008, AcSB confirmed that publicly accountable entities will be required to prepare financial statements in accordance with IFRS, in full and without modification, for interim and annual financial statements for fiscal years beginning on or after January 1, 2011, which represent the “Changeover” date for the Company. In the Company’s reporting for those periods following the Changeover date, comparative data for equivalent periods in the previous fiscal year will be required, making January 1, 2010 the “Transition” date for the Company.

IFRS uses a conceptual framework similar to Canadian GAAP, but presents significant differences on certain recognition, measurement and disclosure principles.

The Company’s transition to full implementation of IFRS consists of four phases:

PHase Key acTiViTies sTaTus

Phase 1 –

Preliminary

Study

Perform a high-level assessment to identify areas of accounting differences and their impact that may arise from the transition to IFRS.

Completed in July 2009.

Phase 2 –

Evaluation

PrioritizetheareasidentifiedinPhase1(high, medium or low priority).

Completed in the first quarter 2010.

Perform an evaluation of the key areas that may be affected by the transition to IFRS and develop a conversion plan.

Evaluation has been completed for all key standards and significant policy choices have been identified.Standards with lower impact and requiring limited data collection will be assessed during beginning of fiscal year 2011.Since changes are expected to IFRS standards during the conversion period and these could affect the conversion plan, a monitoring process has been established.


24 TransForce inc.

PHase Key acTiViTies sTaTus

Phase 3 –

Conversion

Design and develop solutions to modifications required to the significant existing accounting policies.

Began in Q3 2010 (see Summary of key expected changes hereafter).

Design and develop any required changes to information systems.

The Company did not have a significant impact on its information systems.

Design and develop internal controls over financial reporting.

The Company has concluded that internal controls applicable to its reporting processes under Canadian GAAP are fundamentally the same as those required in its IFRS reporting environment.

Design and develop disclosure controls and procedures.

Disclosure controls and procedures are being updated. The Company will update its reporting package to include all data required for its consolidated financial statement disclosures under IFRS. At this moment, the modifications required are not important.

Evaluation of impacts on business processes and contractual arrangements.

The Company’s new bank arrangements have been negotiated to allow the transition from Canadian GAAP to IFRS.Other significant contracts are being reviewed and we do not expect any significant impacts as a result of conversion to IFRS.Processes are being put in place to adjust budget and variable incentive compensation under IFRS for fiscal year 2011.

Communication and training program for the Company’s finance staff.

The majority of the selected training has been performed and pertinent information has been transferred to divisional finance staff.

Phase 4 –

Implementation

Design tools to prepare IFRS opening balance sheet and comparative information.

The Company has created a duplicate IFRS environment in its information systems to track all adjusting IFRS entries for its opening balance sheet and throughout its dual reporting period.

Changes identified are implemented and tested to ensure that any difference is addressed prior to the Changeover date and necessary training will continue until completion.

In progress.

Prepare IFRS financial statements. IFRS financial statements model have been developed for both interim and annual reporting.



suMMaRy of Key eXPecTed cHanges

The comparisons of IFRS with Canadian GAAP, which are currently reflected in the Company’s accounting policies, have helped identify a number of areas of differences.

IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions, in certain areas, to the general requirement for full retrospective application of IFRS. The significant optional exemptions that the Company expects to apply are described within the relevant accounting policies below, along with the expected opening balance sheet impact of each choice.

Most adjustments required on transition to IFRS will be made, retrospectively, against opening retained earnings as at January 1, 2010.

The following are selected key areas of accounting differences where changes in accounting policies in conversion to IFRS may impact the Company’s consolidated financial statements. The list and comments should not be construed as a comprehensive list of changes that will result from transition to IFRS but rather highlight those areas of accounting differences the Company currently believes to be most significant. Analysis is still in progress and certain decisions remain to be made where choices relating to accounting policies are available. At this stage, the Company is not able to reliably quantify the full impact of these differences on the Company’s consolidated financial statements but it will be ready for its March 31, 2011 filing.

accounTingPolicy

Key diffeRences in accounTing TReaTMenT PoTenTial Key iMPacTs

Business

combinations

The Company will elect to apply IFRS prospectively for business combinations from November 1, 2009.

opening balance sheet: An increase in liabilities and goodwill for the contingent consideration related to the ATS business acquisition. Impact before taxes should be between $15 million and $20 million.subsequent to transition: There will be no significant impact to the consolidated financial statements as a result of this election.


26 TransForce inc.

accounTingPolicy


Property, plant

and equipment

IAS 16 - Property, plant and equipment requires a more rigorous and broader separation accounting for the asset’s components.

opening balance sheet:There will be no significant impact to the consolidated financial statements as a result of this difference.subsequent to transition: Depreciation expense could therefore be different under IFRS.

At the Transition date, the fair value can be used as deemed cost under IFRS 1 and the Company plans to use it for some of its properties to reflect their underlying additional value. The Company plans to revalue the Calgary and Burnaby properties that have been sold and leased back in Q1 2010 and Q1 2011 respectively and 16 of its principal terminal lands.

opening balance sheet:An increase in the property plant and equipment with a net increase in equity. This election will be done mainly on specific land. Impact before taxes should be approximately $90 million. subsequent to transition: There will be no significant increase in the depreciation expense.

Impairment

of assets

Under IFRS, asset impairment testing is done at the lowest cash generating unit (CGU) level. A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is allocated to the CGU or groups of CGUs that should benefit from the synergies of a business combination. To determine whether impairment should berecognized,thecarryingamountoftheCGUiscompared to its recoverable amount, which is the higher of fair value less costs to sell and value in use (present value of future cash flows). Under Canadian GAAP, the carrying amount is compared to undiscounted future cash flows and if impairment is required, the amount of the impairment is determined by comparing the carrying amount of the asset to its fair value.

opening balance sheet: Based on our actual assessment, which is not totally completed, goodwill impairment up to $70millioncouldberecognizedunder IFRS, with a net adjustment to equity.subsequent to transition: The one-step impairment test under IFRS may result in more frequent write-downs of assets. Reversals of previous write-downs may be required in future periods for asset impairments other than goodwill and indefinite-lived intangible assets.

Provisions and

contingent

liabilities

IFRSrequiresaprovisiontoberecognizedwhenitisprobable (more likely than not) that an outflow of resources will be required to settle the obligation, while a higher threshold is used under Canadian GAAP.

opening balance sheet and subsequent to transition: We have not completed our assessment of the impact. It is possible that additional provisions will berecognizedunderIFRS.



accounTingPolicy


Employee benefits

IAS 19 Employee Benefits requires actuarial gains and losses to be measured in accordance with IFRS from plan start dates to the Transition date to IFRS. IFRS 1 allows recognition of accumulated actuarial gains and losses in retained earnings as at the Transition date and prospective application of IAS 19. The Corporation plans to use this exemption.

opening balance sheet: An increase in accrued benefit liabilities of $5.4 million and a net decrease in equity. subsequent to transition: Pension cost will no longer include theamortizationcomponentofthenet actuarial losses at Transition date. Given our current pension deficit, this change will result in a reduction of pension cost in the near term.

Income taxes Various changes in accounting policy under IFRS will also impact the corresponding deferred tax asset or liability.

opening balance sheet: We have not completed our assessment of the impact.subsequent to transition: The impact will depend on the net amount of all differences in accounting policy.

The Company will continue to review all proposed and ongoing projects of the IASB and assess their impact on its conversion process.

RisKs and unceRTainTies

economic conditionsDemand for freight transport is closely linked to the state of the overall economy. Consequently, a change in general economic growth could affect the Company’s performance. however, the Company serves an extensive customer base, covers a broad geographic area, and operates in four distinct transport sectors. These factors may mitigate the effects of an economic downturn.

competitionDeregulation in the transport industry has increased the number of competitors, as well as competition with respect to pricing. Competition is strong within the Canadian market. In addition, the Company faces competition from other transporters in the United States.

RegulationNotwithstanding that the transportation industry is largely deregulated, 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 United States regulatory authorities is also required for the transportation of goods between Canada and the United States. Any change in these regulations could have an adverse impact on the scope of the Company’s activities.


28 TransForce inc.

General operating environmentThe Company is subject to changes in its general operating environment. The elements affecting its environment are the cost of liability insurance, the market for used equipment, adverse weather conditions and accidents.

Fuel pricesThe Company is exposed to variations in the price of fuel. The Company is generally able to recover the majority of additional fuel costs through surcharges to its customers. It also strives to ensure the fuel consumption of its fleet is as efficient as possible. The cost of fuel ranges from 3% to 12% of an operating segment’s total revenue depending on the operating segment.

Currency fluctuationsIn the normal course of business, the Company is subject to fluctuations in the value of the US dollar. The Company manages this risk through the use of foreign exchange contracts. Please refer to the Financial Instruments section for more details on currency fluctuation.

The Company estimates its annual US-denominated excess cash flow at $105 million (before exchange contracts). A change of one cent in the exchange rate would impact the Company’s earnings before taxes by approximately $1.1 million on an annual basis (before foreign exchange contracts).

Interest rates fluctuationsThe Company is subject to fluctuations in interest rates. The Company had $14 million of long-term debt at variable rates as at December 31, 2010 (net of $371 million of interest rate swap contracts). A 1% change in interest rates would not have materially impacted the Company’s 2010 earnings before taxes.

CreditThe Company sells services to clients primarily in Canada and the United States. The concentration of credit risk to which the Company is exposed is limited due to the significant number of customers that make up its client base and their distribution across different geographic areas. As at December 31, 2010, no client accounted for more than 10% of total accounts receivable.

Loan defaultThe Company’s current credit facilities and financing agreement impose certain covenant requirements. There is a risk that such loans may go into default if there is a breach in complying with such covenants and obligations which could result in the Company being unable to pay dividends to shareholders, and result in lenders realizing on their security and causing the Company to lose some or all of its investment. As at December 31, 2010, the Company is in compliance with all of its debt covenants and obligations.

Key personnelThe future success of the Company will be based in large part on the quality of its management and key personnel. 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 personnel or, in the event of their departure, to attract new personnel of equal quality.

CONTROLS AND PROCEDURES

In compliance with the provisions of Canadian Securities Administrators’ Regulation 52-109, the Company has filed certificates signed by the President and Chief Executive Officer (CEO), acting also as Chief Financial Officer that, among other things, report on: • his responsibility for establishing and maintaining disclosure controls and procedures and internal control over financial

reporting for the Company; and • the design and effectiveness of disclosure controls and procedures and the design and effectiveness of internal controls

over financial reporting.



Disclosure controls and proceduresThe CEO has designed disclosure controls and procedures, or has caused them to be designed under his supervision, in order to provide reasonable assurance that: • material information relating to the Company is made known to the CEO by others, particularly during the period in

which the annual filings are being prepared; and • information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or

submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

As at December 31, 2010, an evaluation was carried out, under the supervision of the CEO, of the design and operating effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the CEO concluded that the Company’s disclosure controls and procedures were effective as at December 31, 2010.

Internal controls over financial reportingThe CEO has also designed internal controls over financial reporting, or has caused them to be designed under his 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 Canadian GAAP.

As at December 31, 2010, an evaluation was carried out, under the supervision of the CEO, of the design and operating effectiveness of the Company’s internal controls over financial reporting. Based on this evaluation, the CEO concluded that the internal controls over financial reporting were effective as at December 31, 2010, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated Framework.

Changes in internal controls over financial reportingNo changes were made to the Company’s internal controls over financial reporting that occurred during the quarter and fiscal year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

OUTLOOK

During the fourth quarter of the year, TransForce continued to benefit from its discipline of comprehensive cost management, increased geographic reach and value-added solutions to the Company’s growing customer base. Despite a still recovering economy, the Company posted solid year-over-year improvement.

While the general economy is expected to improve in 2011, the Company believes the progress will be slight . Industry volumes should remain relatively stable while a better pricing environment is expected to lead to increased profitability. Unpredictable elements include the strength of the Canadian dollar and the cost of fuel. TransForce is committed to its successful program of controlling costs, improving operating efficiencies as well as protecting and improving its operating margins. The Company’s market leadership, strong financial situation and skilled workforce position it to take advantage of market improvements.

Further, TransForce remains committed to its strategy of growth through a highly disciplined and selective approach to acquisitions, with a particular focus on the Package and Courier and Specialized Services sectors, its fastest growing businesses. The acquisition of Dynamex presents several opportunities as its addition strengthens existing services and creates meaningful opportunities in the U.S. TransForce has a track record of successfully integrating acquisitions. The combination of the two companies is expected to yield significant synergies, enlarge the Company’s geographic footprint and increase customer services. TransForce is poised to benefit from revenue increases and to translate this into enhanced profitability and shareholder value.

30 TransForce inc.

ManageMenT’s ResPonsibiliTy

The consolidated financial statements of TransForce Inc. and all information in this annual report are the responsibility of management and have been approved by the Board of Directors.

The financial statements have been prepared by management in conformity with generally accepted accounting principles in Canada. They include some amounts that are based on management’s best estimates and judgement. Financial information included elsewhere in the annual report is consistent with that in the financial statements.

The management of TransForce Inc. has developed and maintains an internal accounting system and administrative controls in order to provide reasonable assurance that the financial transactions are properly recorded and carried out with the necessary approval, and that the consolidated financial statements are properly prepared and the assets properly safeguarded.

The Board of Directors carries out its responsibility for the financial statements in this annual report principally through its Audit Committee. The Audit Committee reviews the Company’s annual consolidated financial statements and recommends their approval by the Board of Directors.

These financial statements have been audited by the external auditors, KPMG LLP, Chartered Accountants, whosereport follows.

Alain Bédard, FCA, CMAChairman of the Board,President and Chief Executive OfficerFebruary 24, 2011

Consolidated Financial Statements


indePendenT audiToRs’ RePoRTTo the shareholders of Transforce inc.

We have audited the accompanying consolidated financial statements of TransForce Inc., which comprise the consolidated balance sheets as at December 31, 2010 and 2009, the consolidated statements of income, comprehensive income and retained earnings and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Generally Accepted Accounting Principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinions.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of TransForce Inc. as at December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in accordance with Generally Accepted Accounting Principles.

Chartered AccountantsFebruary 24, 2011Montréal, Canada

* CA Auditor permit no 8821.


32 TransForce inc.


consolidated balance sheets

December 31, 2010 and 2009(In thousands of dollars) 2010 2009

assetsCurrent assets: Accounts receivable and other $ 292,592 $ 262,219 Inventories 9,053 9,116 Income tax receivable – 751 Prepaid expenses 9,170 9,480 310,815 281,566

Property, plant and equipment (note 4) 688,176 667,315Intangible assets (note 5) 172,604 146,946Goodwill (note 6) 432,784 418,951Other assets 13,369 8,430Future income taxes (note 12) 5,858 4,104 $ 1,623,606 $ 1,527,312

liabilities and shareholders’ equityCurrent liabilities: Bank indebtedness $ 24,916 $ 6,826 Accounts payable and accrued liabilities 196,804 181,765 Income taxes payable 4,117 – Dividends payable 9,533 9,525 Current portion of long-term debt (note 7) 12,244 403,763 247,614 601,879

Long-term debt (note 7) 492,245 304,166Asset retirement obligations (note 8) 18,257 10,794Other liabilities 16,366 7,825Future income taxes (note 12) 108,156 69,233Convertible debentures (note 9) 129,436 –

Shareholders’ equity: Share capital (note 10) 568,165 567,551 Contributed surplus (note 11) 3,072 900 Equity component of convertible debentures (note 9) 8,854 – Retained earnings (deficit) 31,441 (35,036) 611,532 533,415Commitments, contingencies and guarantees (note 15)Subsequent event (note 17) $ 1,623,606 $ 1,527,312

See accompanying notes to consolidated financial statements.

On behalf of the Board:

Director Director Alain Bédard Ronald D. Rogers



consolidated statements of income, comprehensive income and Retained earnings

Years ended December 31, 2010 and 2009(In thousands of dollars, except per share amounts) 2010 2009

Revenue $ 1,840,100 $ 1,718,357Fuel surcharge 162,018 128,169 2,002,118 1,846,526

Expenses: Operating expenses 1,409,671 1,316,989 Fixed costs, general and administrative expenses 332,267 311,152Income before the following 260,180 218,385

Depreciation of property, plant and equipment 99,089 102,557Amortizationofintangibleassets 27,570 20,045Interest on long-term debt and convertible debentures 37,630 34,996Change in fair value of foreign exchange derivatives (7,788) (8,159)Change in fair value of interest rate derivatives (274) (5,546)Gain on disposal of property, plant and equipment (8,215) (2,848)Remeasurement to fair value of existing interest in acquiree (note 3 (b)) (16,279) – Gain on business acquisition (note 3 (a)) (9,518) – Goodwill impairment (note 6) – 45,000Income before provision for income taxes 137,965 32,340

Provision for income taxes (note 12): Current 16,540 9,055 Future 16,833 12,356 33,373 21,411

Net income and comprehensive income 104,592 10,929

Deficit, beginning of year (35,036) (9,554)

Dividends (38,115) (36,411)Retained earnings (deficit), end of year $ 31,441 $ (35,036)

Earnings per share (note 10 (c)) Basic $ 1.10 $ 0.12 Diluted 1.09 0.12See accompanying notes to consolidated financial statements.


34 TransForce inc.

consolidated statements of cash flows

Years ended December 31, 2010 and 2009(In thousands of dollars) 2010 2009

Cash flows from operating activities: Net income $ 104,592 $ 10,929 Non-cash items: Depreciation of property, plant and equipment 99,089 102,557 Amortizationofintangibleassets 27,570 20,045 Stock-based compensation 2,316 900 Future income taxes 16,833 12,356 Gain on disposal of property, plant and equipment (8,215) (2,848) Remeasurement to fair value of existing interest in acquiree (note 3 (b)) (16,279) – Gain on business acquisition (note 3 (a)) (9,518) – Amortizationoffinancingcharges 2,345 1,560 Goodwill impairment – 45,000 Others 661 735 219,394 191,234

Net change in non-cash operating working capital (19,004) 18,572 200,390 209,806

Cash flows from financing activities: Increase (decrease) in bank indebtedness 18,089 (5,691) Increase in long-term debt 357,729 950 Repayment of long-term debt (571,853) (112,140) Issuance of convertible debentures 138,000 – Dividends paid (38,107) (36,136) Issuance of shares 470 47,616 (95,672) (105,401)

Cash flows from investing activities: Additions to property, plant and equipment (101,932) (60,022) Proceeds from disposal of property, plant and equipment 65,271 23,085 Business acquisitions (including bank indebtedness, net of cash) (note 3) (66,598) (67,095) Others (1,459) (373) (104,718) (104,405) Net change in cash and cash equivalents during the year – – Cash and cash equivalents, beginning of year – – Cash and cash equivalents, end of year $ – $ –

Supplemental cash flow information: Cash paid during the year for: Interest $ 36,083 $ 34,941 Income taxes 11,510 10,395

See accompanying notes to consolidated financial statements.



notes to consolidated financial statements

Years ended December 31, 2010 and 2009(Tabular amounts in thousands of dollars)

TransForce Inc. (the ‘’Company’’) is incorporated under the Canada Business Corporations Act.

1. changes in accounting policies:

Adopted during the current period: The following three new standards are effective for fiscal years beginning on or after January 1, 2011. Earlier

application is permitted and the Company elected to adopt them for the fiscal year beginning on January 1, 2010. These Sections had to be implemented concurrently.

(a) Business combinations:

The Canadian Institute of Chartered Accountants (“CICA”) issued handbook (“hB”) Section 1582, Business Combinations, to establish new standards for accounting for business combinations. It is the Canadian equivalent to International Financial Reporting Standards (“IFRS”) 3, Business Combinations. The Section is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period for which it has been adopted.

This new Section requires, among other things, that most identifiable assets, liabilities, non-controlling interests and goodwill acquired in a business combination be recorded at “full fair value” and acquisition-related costs be recognizedasexpensesasincurredandthatliabilitiesassociatedwithrestructuringorexitactivitiesberecognizedonly if they meet the definition of a liability as of the acquisition date.

(b) Consolidated financial statements and non-controlling interest:

Sections 1601 and 1602 together replace former Section 1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602, which converges with the requirements of International Accounting Standard 27 (IAS 27), Consolidated and Separate Financial Statements, establishes standards for accounting of a non-controlling interest resulting from a business acquisition, whereas the interest is recognized as a distinct component of shareholders’ equity. Net incomepresents the allocation between the controlling and non-controlling interest.

The adoption of the hB Sections 1582, 1601 and 1602 on January 1, 2010 did not have an impact on our consolidated financial statements. The effect on the transaction of the years is described in note 3 of the consolidated financial statements.

To be adopted in future periods:

IFRS: In February 2008, the Canadian’s Accounting Standards Board (“AcSB”) confirmed that Canadian generally accepted

accounting principles (“Canadian GAAP”), as used by publicly accountable enterprises, will be superseded by IFRS for fiscal years beginning on or after January 1, 2011.

The Company is currently evaluating the impact of the adoption of these new standards on the consolidated financial statements. For the Company, the conversion to IFRS will be required for interim and annual financial statements for the year ending December 31, 2011. IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences on recognition, measurement and disclosures. (Refer to Management Discussion and Analysis for further discussion on IFRS impacts.)


36 TransForce inc.

notes to consolidated financial statements (continued)


2. significant accounting policies:

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts recorded in the financial statements or disclosed in the accompanying notes.

(a) Principles of consolidation:

The consolidated financial statements of the Company have been prepared in accordance with Canadian GAAP. The Company carries on its business through its own divisions, subsidiaries, associated businesses and joint ventures. The accounts of its subsidiaries are consolidated. Investments over which the Company exercises significant influence are accounted for by the equity method. Joint ventures, which are established to carry out specific projects, are accounted for using the proportionate consolidation method. Joint ventures represent a negligible portion of the Company’s operations.

(b) Use of estimates:

The preparation of the accompanying financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and the reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, goodwill, intangible assets, other long-lived assets and derivative financial instruments, the calculation of income taxes, asset retirement obligations and pension obligations. These estimates and assumptions are based on management’s best estimates and judgment.

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.

(c) Property, plant and equipment and capital leases:

Property, plant and equipment are accounted for at cost and depreciated over their estimated useful lives, considering their residual value, according to the following methods and annual rates:

Asset Basis Rate/period Buildings Declining balance 5% Rolling stock Primarily straight-line 6% to 30% Furniture, equipment, machinery and hardware Primarily straight-line 10% to 20% Leasehold improvements Straight-line Term of leases

Capital leases, transferring substantially all the risks and benefits of ownership relating to property leased to the Company,arecapitalizedbyrecording,asassetsandliabilities,thepresentvalueofminimumleasepaymentsprovidedforundertheseleases.Theleasedpropertiescapitalizedunderthispolicyareamortizedovertheirestimateduseful life.





2. significant accounting policies (continued):

(d) Goodwill and intangibles:

Goodwill represents the excess of the purchase price over the fair value of net assets of acquired businesses. Goodwill is tested for impairment annually or more often, when an event occurs or circumstances arise that could indicate a reduction of its fair value. Any impairment in the value of goodwill is charged to income in the period it occurs.

Goodwill is assessed for impairment annually using the two-step method and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability of goodwill is measured at the reporting unit level. The Company consistently determines the fair value of its reporting units based on the use of comparative market multiples. The use of comparative market multiples (the market approach) compares the Company to other comparable companies based on valuation multiples to arrive at fair value. The Company regularly compares itself and its divisions to its competitors and the Company believes the judgments used to arrive at these comparable companies are reasonable. There are inherent uncertainties related to these factors and judgment in applying them to the analysis of goodwill for impairment.

When testing for goodwill impairment, the Company first compares the fair value of a reporting unit with its carrying amount. Fair value of a reporting unit is determined using the market approach based on the Company’s future budgets, which include many assumptions as to the anticipated Company’s growth, general economic conditions, the feasibility of certain corporate transactions and other expectations as deemed appropriate. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered potentially impaired and further tests are performed to measure the amount of impairment loss. In the second step of the goodwill impairment test, the Company compares the implied fair value of the reporting unit’s goodwill with the carrying amount of the reporting unit’s goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value,animpairmentlossisrecognizedinanamountequaltothecarryingamountofgoodwilloveritsimpliedfair value. The implied fair value of goodwill is determined in the same manner that the amount of goodwill recognizedinabusinesscombinationisdetermined.TheCompanyallocatesthefairvalueofareportingunittoall of the assets and liabilities of that unit, including intangible assets, as if the reporting unit had been acquired in a business combination. Any excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities represents the implied fair value of goodwill.

Intangible assets consist of customer relationships, customer contracts, trademarks, licenses and permits and software.Intangibleassetswithfinitelivesareamortizedonastraight-linebasisovertheirexpectedlivesrangingfrom 3 to 25 years and are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.


38 TransForce inc.




(e) Financial instruments:

Financial assets and liabilities are initially recognized at fair value and classified at inception as either held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities. Subsequently, financial instruments are measured in accordance with the measurement provision of the category to which they have been initially classified. Transaction costs are expensed as incurred for financial instruments classified as held-for-trading. For other financial instruments, transaction costs are accumulated on initial recognition and presented as a reduction of the underlying financial instruments. Financial assets and financial liabilities held- for-tradingaremeasuredatfairvaluewithchangesinfairvaluerecognizedinincome.Available-for-salefinancialassets are measured at fair value and changes in fair value are recorded in other comprehensive income. Financial assetsheld-to-maturity,loansandreceivables,andotherfinancialliabilitiesaremeasuredatamortizedcostusingthe effective interest method.

The Company has classified its bank indebtedness as held-for-trading. Accounts receivable, deposits, loans and other long-term receivables are classified as loans and receivables. All of the Company’s financial liabilities are classified as other financial liabilities.

Financial instruments that comprise a liability component and an equity component are classified separately on the balance sheet on initial recognition in accordance with the substance of the contractual obligations.

Derivative instruments and embedded derivatives in financial contracts that are not closely related to the underlyinghostcontractarerecordedatfairvaluewithchangesinthefairvaluerecognizedinincome.

From time to time, the Company may use various derivative financial instruments to manage its exposure to fluctuations in foreign currency exchange rates, interest rates, and commodity pricing. The Company does not hold or use any derivative instruments for speculative purposes. The Company does not apply hedge accounting.

(f) Revenue recognition:

The Company performs primarily short-to-medium-distance hauls. Revenue is recognized when the freightisdelivered. Revenuesderived fromtheLogisticsandWasteManagementoperationsare recognizedas theservices are rendered.

(g) Pension costs and obligations:

The pension obligations of the defined benefit pension plan are actuarially determined using the projected benefit method prorated on years of service and management’s best estimates of expected plan investment performance, salary escalation and retirement ages of employees. Pension obligations are discounted based on current market interest rates, and plan assets are valued at fair value. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. Current service costs are expensed during the year in whichtheyoccur.Pastservicecostsfromplanamendmentsareamortizedonastraight-linebasisovertheaverageremaining service period of active employees at the date of amendment. The excess of the net actuarial gain (loss) over 10% of the greater of the opening balance of the accrued benefit obligation and the opening balance of the fairvalueofplanassetsisamortizedovertheaverageremainingserviceperiodofactiveemployees.






(h) Foreign currency translation:

Monetary assets and liabilities in foreign currency of domestic operations and integrated foreign operations are translated at the exchange rate in effect at the balance sheet date, whereas other assets and liabilities are translated at the rate in effect on the transaction date. Income and expense items in foreign currency are translated at the average rate in effect during the year, with the exception of depreciation which is translated at the historical rate. Gains and losses are recorded in income.

(i) Income taxes:

The Company accounts for income taxes using the asset and liability method. Under this method, income taxes arerecognizedbasedontheexpectedfuturetaxconsequencesofthedifferencesbetweenthecarryingamountsand tax basis of assets and liabilities, using the enacted or substantively enacted tax rates for the periods in which such differences are expected to reverse. A valuation allowance is provided to the extent that it is more likely thannotthatfutureincometaxassetswillnotberealized.

(j) Cash and cash equivalents:

Cash and cash equivalents are restricted to cash and highly liquid investments having an initial term of three months or less from the acquisition date and are recorded at fair value.

(k) Asset retirement obligations:

Assetretirementobligationsarerecognized,atfairvalue,intheperiodinwhichtheCompanyincurredeitherastatutory, contractual or legal obligation associated with the retirement of a fixed asset. The associated costs are capitalizedaspartofthecarryingvalueoftherelatedassetanddepreciatedoveritsremainingusefullife.Theliability is accreted using various assumptions determined by the Company.

(l) Inventory:

Inventoryisrecordedatthelowerofcostandnetrealizablevalue.

(m) Stock-based compensation:

The Company uses the fair value based method of accounting for all stock options granted to its employees, wherebyacompensationexpenseisrecognizedoverthevestingperiodoftheoptions,withacorrespondingincrease to contributed surplus. The Company bases the accruals of compensation cost on the best available estimate of the number of options that are expected to vest and revises that estimate, if subsequent information indicates that actual forfeitures were likely to differ from initial estimates. When stock options are exercised, capital stock is credited by the sum of the consideration paid by the employee, together with the related portion previously recorded in contributed surplus.

Deferred Stock Units (“DSUs”) are recognized in compensation expense and accrued liabilities as they areawarded. DSUs are re-measured at each reporting period, until settlement, using the trading price of the underlying shares.


40 TransForce inc.




(n) Earnings per share:

Earnings per common share is calculated on the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method to determine the dilutive effect of options, warrants and equivalents. Under this method, a number of incremental shares, if they are dilutive, are calculated assuming that the outstanding in-the-money stock options, warrants and equivalents are exercised, and that the proceeds from the transactions are used to purchase common shares at the average market price during the period.

The dilutive effects of the convertible debentures are reflected in the diluted earnings per share by application of the “if-converted” method, if dilutive. Under the if-converted method, convertible debentures are assumed to have been converted at the beginning of the period (or at the time of issuance, if later). Therefore, the numerator is adjusted for the after tax net income impact and the resulting common shares are included in the denominator for the purposes of calculating diluted earnings per share.

3. business acquisitions:

(a) Business acquisitions:

During 2010, the Company acquired three businesses, of which two are significant. The acquisition of all of the voting shares of 2000590 Ontario Limited, which owned the remaining 50% interest in Laflèche Environmental Inc. (“Lafleche”), one of the Company’s joint ventures, on March 2, 2010 and on August 17, 2010 the Company entered into an asset purchase agreement to purchase substantially all the assets of Speedy heavy hauling Inc. (“Speedy”). Concurrently with the above, the Company entered into an arrangement agreement with the parent company of Speedy to acquire an equity interest along with an option to acquire the remaining equity within the next three years, for a consideration of US$2.6 million.

The fair value of Speedy’s net identifiable assets acquired and the liabilities assumed exceed the consideration paid.AsperCICAHBSection1582,BusinessCombinations,theCompanyshallrecognizetheresultinggaininthe consolidated statement of income on the acquisition date. As a result of this new standard, the Company recorded a gain of $9.5 million under “Gain on acquisition of business”.

During 2009, the Company acquired five businesses, the largest one is the Retail Solutions Division of ATS Andlauer Transportation Services Limited Partnership (“ATS”), on November 19, 2009.

These acquisitions were recorded under the purchase method and the earnings of the businesses acquired were consolidated from the date of their acquisition. As of the date of the financial statements, we have not completed the purchase price allocation over the identifiable and unidentifiable assets of Speedy. As we obtain more information we will complete the allocation. The table below presents the purchase price allocation based on the best available information to the Company to date.





3. business acquisitions (continued):

(a) Business acquisitions (continued):

Lafleche Speedy Others 2010 2009 Assets: Cash $ 388 $ – $ 75 $ 463 $ 581 Non-cash operating working capital – 295 207 502 2,087 Property, plant and equipment 12,255 49,753 869 62,877 8,032 Intangible assets 28,000 2,900 – 30,900 34,263 Goodwill 8,465 – 4,239 12,704 28,792 Other assets 4,128 – – 4,128 – 53,236 52,948 5,390 111,574 73,755

Liabilities: Non-cash operating working capital 8,320 – – 8,320 – Long-term debt 3,925 4,382 322 8,629 3,910 Asset retirement obligations 3,587 – – 3,587 – Future income tax liabilities 7,904 6,555 – 14,459 1,545 23,736 10,937 322 34,995 5,455 Net assets 29,500 42,011 5,068 76,579 68,300

Gain on business acquisition – 9,518 – 9,518 – Due to vendors – – – – 624

Cash consideration $ 29,500 $ 32,493 $ 5,068 $ 67,061 $ 67,676

Of the goodwill and intangible assets acquired in 2010, nil is deductible for tax purposes (2009 - $56.4 million).


42 TransForce inc.



3. business acquisitions (continued):

(b) Remeasurement to fair value of existing interest in acquiree

As per the CICA hB Section 1582, Business Combinations, following the acquisition of control of Lafleche, the Company had to revaluate its previously held interest in Lafleche to fair value and the resulting gain is to be recognizedintheconsolidatedstatementofincome.Asaresultofthisnewstandard,theCompanyrecordedagain of $16.3 million under “Remeasurement to fair value of existing interest in acquiree”. The following table summarizesthechangeinthefairvaluebycategory:

Assets:

Intangible assets $ 21,027 Goodwill 1,129

Liabilities: Future income tax liabilities 5,877 Remeasurement to fair value of existing interest in acquiree $ 16,279

(c) A contingent consideration related to the ATS business acquisition, concluded on November 19, 2009, has not been recorded in the original purchase price allocation and in the consolidated financial statements. This consideration is contingent on achieving specified revenue levels in future periods. The maximum yearly amount payable over the next four years is $4 million for a total consideration of $16 million. On yearly confirmations of the contractual conditions, the amounts then payable, if any, will be added to goodwill. In 2010, an amount of $3.6 million has been paid and added to goodwill under this contingent consideration.

4. Property, plant and equipment:

2010 2009 accumulated Accumulated cost depreciation Cost depreciation

Land $ 125,422 $ – $ 120,250 $ –Buildings 164,463 39,762 168,633 39,094Rolling stock 682,757 330,891 633,913 297,783Furniture,equipment, machinery and hardware 172,885 96,617 133,983 62,856Leasehold improvements 21,353 11,434 23,685 13,416 1,166,880 $ 478,704 1,080,464 $ 413,149

Accumulated depreciation 478,704 413,149 Net carrying value $ 688,176 $ 667,315

Property, plant and equipment include assets under capital leases for rolling stock and machinery, which are recorded at the present value of minimum lease payments provided for under these leases totaling $16.6 million (2009 - $38.9 million), less related accumulated depreciation amounting to $6.5 million (2009 - $19.9 million).





4. Property, plant and equipment (continued):

Property, plant and equipment also include assets held for sale in the amount of $4.3 million (2009 - $5.7 million).

During the year, the Company did not acquire property, plant and equipment under capital leases and conditional sales contracts (2009 - $5 million).

5. intangible assets:

2010 2009 accumulated Accumulated cost amortization Cost amortization

Customer relationships $ 97,610 $ 49,721 $ 96,418 $ 33,725Customer contracts 7,798 3,069 11,991 8,910Trademarks 11,984 7,007 11,234 4,372Non-compete agreements, licenses and permits 122,857 10,610 81,676 10,025Software 8,411 5,649 11,570 8,911 248,660 $ 76,056 212,889 $ 65,943

Accumulatedamortization 76,056 65,943 Net carrying value $ 172,604 $ 146,946

During the year, the Company acquired $1.5 million (2009 - $27.1 million) of customer relationships, $0.7 million (2009 - $3.4 million) of trademarks, $1.7 million (2009 - nil) of customer contracts, $27.0 million (2009 - $3.8 million) of non-compete agreements, licenses and permits and $1.3 million (2009 - $0.7 million) of software.


44 TransForce inc.



6. goodwill:

Package Less-Than- Specialized and Courier Truckload Truckload Services Total

Balance as at December 31, 2008 $ 96,910 $ 114,025 $ 78,334 $ 146,582 $ 435,851Business acquisitions 25,067 – 3,302 423 28,792Business disposal – – – (692) (692)Goodwill impairment – – – (45,000) (45,000)Reclassification – – 3,864 (3,864) –

Balance as at December 31, 2009 $ 121,977 $ 114,025 $ 85,500 $ 97,449 $ 418,951Business acquisitions 4,583 356 100 7,665 12,704Remeasurement to fair value of existing interest in acquiree – – – 1,129 1,129

balance as at december 31, 2010 $ 126,560 $ 114,381 $ 85,600 $ 106,243 $ 432,784

The Company performed its goodwill impairment test as at December 31, 2010. The results determined that no carrying amount of reporting unit exceeded its fair value. Accordingly, no goodwill impairment charge was recognizedin2010.

As at December 31, 2009, the results of the goodwill impairment test determined that the carrying amount of the Company’sOilfieldServicesreportingunit,partofthespecializedservicesreportingsegment,exceededitsfairvalue.Accordingly,agoodwillimpairmentlossof$45.0millionwasrecognizedintheCompany’sOilfieldServicesreportingunit in 2009.

Changes in economic and operating conditions that occur after the annual impairment analysis and their impact on the assumptions used may result in a goodwill impairment charge in the future. Such economic and operating conditions may include an important and sustained decline in the Company’s market capitalization, decrease in customer demands and illiquidity in the overall credit markets. Management will continue to monitor these conditions and if such changes in economic and operating conditions occur, it may require a goodwill impairment test to be performed.





7. long-term debt

2010 2009 Termloanatauthorizedamountof$200million,variablebanker’s acceptance rate plus 250 basis points, no repayment provisions, maturing July 2015 (see (b)) $ 200,000 $ –

Revolvingfacility,atauthorizedamountof$450million, variable banker’s acceptance rate plus 225 basis points, no repayment provisions, maturing July 2013 (see (b)) 167,369 –

Termloan,atauthorizedamountof$160million,variablebanker’s acceptance rate plus 165 basis points, no repayment provisions – 160,000 Revolvingtermloan,atauthorizedamountof$515million, variable banker’s acceptance rate plus 150 basis points, no repayment provisions – 378,095

Unsecured debenture of $100 million, fixed rate of 7.75%, maturing in October 2017 (see (c)) 100,000 100,000

Obligationsundercapitalleases,collateralizedbyrollingstockand machinery, having a carrying value of $10,104,000, interest rates varying between 3.90% and 9%, payable in monthly instalments of $308,000, principal and interest, maturing on various dates through July 2015 (see (a)) 7,243 14,749

Conditionalsalescontracts,collateralizedbyrollingstock, having a carrying value of $19,136,000, interest rates varying between nil and 7.58%, payable in monthly instalments of $598,000, principal and interest, maturing on various dates through August 2015 15,624 24,825

Notes payable and purchase price balances, interest rates varying between nil and 6.95%, payable in monthly, quarterly and annual instalments, maturing on various dates through October 2018 19,231 32,053 509,467 709,722 Financing charges (4,978) (1,793) 504,489 707,929 Current portion of long-term debt 12,244 403,763 $ 492,245 $ 304,166

(a) The interest for the period on obligations under capital leases was $0.7 million (2009 - $1.3 million).


46 TransForce inc.

notes to consolidated financial statements (continued)Years ended December 31, 2010 and 2009(Tabular amounts in thousands of dollars)

7. long-term debt (continued):

(b) On July 16, 2010, the Company successfully refinanced its Revolving term loan coming to maturity in October 2010 and at the same time modified its Term loan agreement maturing in October 2013. The existing Revolving term loan has been repaid and a new Revolving facility with a $450 million availability and an initial three-year term that can be extended at the option of the Company for two periods of one year each, subject to certain conditions, has been contracted. The modified Term loan has a principal amount of $200 million instead of $160 million, has been fully drawn upon issuance and has a five-year maturity. This agreement also provides the Company with an additional $150 million credit, available under certain conditions. As of December 31, 2010, the new Revolving facility and the modified Term loan bear interest at variable banker’s acceptance rate plus 250basispoints and225basispoints, respectively. The term loansare collateralizedbyaccounts receivableplus certain rolling stock of the Company with a carrying value of $615.2 million. Under the terms of the loan agreements, the Company is subject to certain covenants regarding the maintenance of financial ratios. Based on certain ratios, the interest rate will vary between banker’s acceptance rate plus 150 basis points to banker’s acceptance rate plus 300 basis points. The Company was in compliance with these covenants at year-end.

(c) On May 12, 2010, the Company has renegotiated its $100 million loan agreement with Solidarity Fund QFL. The loan is in the form of an unsecured debenture of TFI holdings Inc., an indirect wholly-owned subsidiary of the Company, and is repayable in October 2017. The debenture may be repaid, without penalty, commencing two years after the date of disbursement of the loan, subject to the approval of the Company’s syndicate of bank lenders. The loan now bears interest at an annual rate of 7.75% (from 9% before), payable monthly.

Minimum instalments payable for the subsequent years under capital leases amounting to approximately $8.2 million, of which $1.0 million is interest, are as follows:

2011 $ 3,405 2012 1,990 2013 1,822 2014 626 2015 365

Principal instalments of other long-term debt payable during the subsequent years are as follows:

2011 $ 9,319 2012 6,965 2013 173,513 2014 1,567 2015 201,597 Thereafter 104,285

8. asset retirement obligations:

The analysis of the asset retirement obligations for the year ended December 31, 2010 is as follows:

Balance as at December 31, 2009 $ 10,794 Additional liability for current obligations 3,430 Accretion expense 789 Payment of obligations (343) Acquisition of business 3,587 balance as at december 31, 2010 $ 18,257





8. asset retirement obligations (continued):

Included in depreciation for property, plant and equipment is a charge of $0.8 million (2009 - $0.6 million) for the amortizationoftheassetretirementcost.

The following assumptions were used to estimate the fair value of the obligations on the initial date of adoption and as at December 31, 2010:

Total undiscounted amount of the estimated cash flows $ 24,242 Risk-free interest rate 5% to 6% Inflation rate 2% to 5.17%

The estimate of the total liability for future asset retirement obligations is subject to change, based on amendments to laws and regulations and as new information concerning the Company’s operations becomes available. Future changes, if any, to the estimated total liability as a result of amended requirements, laws, regulations and operating assumptionsmaybesignificantandwouldberecognizedprospectivelyasachangeinestimate,whenapplicable.

9. convertibles debentures:

On November 19, 2010 the Company issued convertible debentures which bear interest at a rate of 6% per annum, payable semi-annually on May 31 and November 30 each year. The convertible debentures are convertible at the holder’s option into the Company common shares at a conversion price of $19.05 per share, representing a conversion rate of 52.4934 common shares per $1,000 principal amount of convertible debentures. The convertible debentures will mature on November 30, 2015 and may be redeemed by TransForce, in certain circumstances, after November 30, 2013. The interest expense on the convertible debentures accounted for using the effective interestratemethodamountedto$1.3million,includingamortizationoffinancingchargesandaccretionexpenseof the equity components, for the year ended December 31, 2010 and is included under the caption “Interest on long-term debt and convertible debentures” in the consolidated statement of income. The aggregate nominal value of the convertible debentures amounts to $143.8 million. The proceeds, net of financing charges, amounted to $138 million.

10. share capital:

(a) Shares:

TheCompanyisauthorizedtoissueanunlimitednumberofcommonsharesandpreferredshares,issuableinseries. (i) Common shares: The common shares entitle the holders thereof to one vote per share. The holders of the common shares

are entitled to receive any dividends declared by the Company on the common shares.

Subject to the rights, privileges, restrictions and conditions attached to any other class of shares of the Company, the holders of the common shares are entitled to receive the remaining property of the Company upon its dissolution, liquidation or winding-up.

On August 13, 2009, the Company completed a public offering and a private placement, by which 8,463,840 common shares were issued and sold at a price of $5.85 per share. The proceeds, net of the underwriters’ fees and issue costs of $1.9 million, amounted to $47.6 million ($48.1 million after related income taxes).


48 TransForce inc.

notes to consolidated financial statements (continued)Years ended December 31, 2010 and 2009(Tabular amounts in thousands of dollars)

10. share capital (continued):

(a) Shares (continued):

(ii) Preferred shares: The preferred shares may be issued in one or more series, with such rights and conditions as may be

determined by resolution of the directors who shall determine the designation, rights, privileges, conditions and restrictions to be attached to the preferred shares of such series. There are no voting rights attached to the preferred shares except as prescribed by law. In the event of the liquidation, dissolution or winding-up of the Company, or any other distribution of assets of the Company among its shareholders, the holders of the preferred shares of each series are entitled to receive, with priority over the common shares and any other shares ranking junior to the preferred shares of the Company, an amount equal to the redemption price for such shares, plus an amount equal to any dividends declared thereon but unpaid and no more. The preferred shares for each series are also entitled to such other preferences over the common shares and any other sharesrankingjuniortothepreferredsharesasmaybedeterminedastotheirrespectiveseriesauthorizedto be issued. The preferred shares of each series shall be on a parity basis with the preferred shares of every other series with respect to payment of dividends and return of capital. There are no preferred shares currently issued and outstanding.

Number Amount Issued and outstanding: Balance as at December 31, 2008 86,790,097 $ 519,404 Shares issued pursuant to a public offering and a private placement 8,463,840 48,147 Balance as at December 31, 2009 95,253,937 567,551

Shares issued pursuant to exercise of stock options 74,318 470 Ascribed value credited to share capital from exercise of stock options (note 11) – 144 balance as at december 31, 2010 95,328,255 $ 568,165

(b) Stock-based compensation:

Stock option plan: The Company offers a stock option plan for the benefit of certain of its employees. The maximum number of

shares which may be issued under this plan shall be equal to ten percent (10%) of the number of issued and outstanding shares of the Company from time to time. Each stock option entitles its holder to receive one share upon exercise. The exercise price payable for each common share covered by a stock option is determined by the Board of Directors at the date of grant, but may not be less than the closing price of volume weighted average trading price of the Company’s shares for the last five trading days immediately preceding the effective date of thegrant.Theoptionsvestinequalinstalmentsoverthreeyearsandtheexpenseinrecognizedfollowingtheaccelerated method as each instalment is fair valued separately.






(b) Stock-based compensation (continued)

Thetablebelowsummarizesthechangesinthestockoptionplan:

2010 2009 Weighted Weighted number of average Number of average options exercise price options exercise price Balance,beginning of period 1,882,600 $ 6.32 – $ – Granted 1,030,400 9.46 1,882,600 6.32 Exercised (74,318) 6.32 – – Forfeited (56,067) 6.32 – – Balance, end of period 2,782,615 7.48 1,882,600 6.32 Options exercisable, end of period 538,001 $ 6.32 – $ –

For the year ended December 31, 2010, the Company recognized a compensation expense, under “Fixed costs, general and administrative expenses”, of $2.3 million (2009 - $0.9 million) with an offsetting credit to “Contributed surplus”.

Compensation cost related to stock option awards granted under the fair value based approach was calculated using the following assumptions:

2010 2009 Expected option life 6 years 6 years Risk-free interest rate 2.96% 3.00% Expected stock price volatility 42.00% 55.00% Average dividend yield 4.23% 6.33% Weighted average fair value of options granted $ 2.72 $ 1.94

Deferred share unit plan for directors:

The Company offers a deferred share unit plan (“DSU”) for its directors. Under this plan, directors may elect to receive cash, deferred share units or a combination of both for their compensation.

The following table provides the number of units related to this plan:

2010 2009 Balance, beginning of period 75,795 – Directors compensation 44,626 73,405 Dividends paid in units 3,891 2,390 Balance, end of period 124,312 75,795

FortheyearendedDecember31,2010,theCompanyrecognizedacompensationexpense,under“Fixedcosts,general and administrative expenses”, of $0.9 million (2009 - $0.6 million) with an offsetting credit to “Accounts payable and accrued liabilities”.


50 TransForce inc.




(c) Earnings per share:

The table below shows the calculation of basic and diluted net income per share for the following periods:

2010 2009 Net income $ 104,592 $ 10,929 Weighted average number of shares outstanding - Basic 95,276,515 90,036,501 Weighted average number of dilutive options 597,995 – Weighted average number of shares outstanding - Diluted 95,874,510 90,036,501 Earnings per share - Basic $ 1.10 $ 0.12 Earnings per share - Diluted $ 1.09 $ 0.12

As at December 31, 2010, 1,030,400 stock options (2009 - 1,882,600) were excluded from the calculation of diluted earnings per share as these options were deemed to be anti-dilutive.

The convertible debentures had no dilutive effect for the above periods; however, these securities couldpotentially dilute earnings per share in future periods.

(d) Capital management:

The Company’s objectives when managing capital are: • Toensurepropercapitalinvestmentinordertoprovidestabilityandcompetitivenesstoitsoperations; • Toensuresufficientliquiditytopursueitsgrowthstrategyandundertakeselectiveacquisitions;and • Tomaintainanappropriatedebtlevelsothattherearenofinancialconstraintsontheuseofcapital.

On a quarterly basis, the Company monitors three ratios. The first is a ratio of total debt to earnings before interest,incometaxes,depreciationandamortization(“EBITDA”).Thesecondisaratioofseniordebt(totaldebtless unsecured debenture with Solidarity Fund QFL) to EBITDA. The third is a ratio of adjusted earnings before interest,incometaxes,depreciationandamortizationandrentexpense(“EBITDAR”)tofixedcharge(interest,rent expense, dividend and schedule debt repayment). These ratios are measured on a consolidated last twelve-month basis and must be kept below a certain threshold so as not to breach a covenant in the Company’s syndicated bank agreement. At December 31, 2010 the Company was in compliance with its financial covenants.

The Company has sufficient liquidity to continue both its operations as well as its acquisition strategy.

Upon maturity of the Company’s long-term debt, the Company’s management and its board of directors will assess if the debt should be renewed at its original value, increased or decreased based on the then required capital need, credit availability and future interest rates.

11. contributed surplus:

2010 2009 Balance, beginning of period $ 900 $ – Stock option compensation expenses 2,316 900 Ascribed value credited to share capital from exercise of stock options (144) –

Balance, end of period $ 3,072 $ 900





12. income taxes:

The effective income tax rates differ from the federal and provincial statutory income tax rates in Canada mainly as a result of the following:

2010 2009 Income before provision for income taxes $ 137,965 $ 32,340 Canadian statutory income tax rate 30.48% 31.03% Income taxes calculated at statutory rates 42,052 10,035

Increase (decrease) resulting from: Future income tax charge (benefit) following a change in statutory rates 137 (3,678) Goodwill impairment – 14,130 Loss on foreign exchange 267 561 Remeasurement to fair value of existing interest in acquiree (note 3 (b)) (5,049) – Gain on business acquisition (note 3 (a)) (3,273) – Other (761) 363 $ 33,373 $ 21,411

Future income taxes represent the net tax effect of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities. Significant components of the Company’s future income tax assets (liabilities) as at December 31, 2010 and 2009 were as follows:

2010 2009 The tax effect of temporary differences relates to the following: Property, plant and equipment and intangible assets $ (109,813) $ (70,926) Liabilities and other provisions 4,487 3,723 Loss carryforwards, expiring between 2026 and 2030 3,028 2,074 Net future income tax liabilities $ (102,298) $ (65,129)

13. Pension plan:

Defined contribution pension plans:

The Company maintains defined contribution pension plans for its salaried employees and contributes an amount ranging from 1% to 6% of each participant’s eligible salary.

The Company has expensed $12.5 million for these plans in the year ended December 31, 2010 (2009 - $13.0 million).

Defined benefit pension plans:

The Company has defined benefit pension plans for 610 of its employees.

The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. The most recent actuarial valuation of the pension plans for funding purposes was as of December 31, 2008 and the next required valuation will be as of December 31, 2010.


52 TransForce inc.



13. Pension plan (continued):

Defined benefit pension plans (continued):

Information about the Company’s defined benefit pension plans as at December 31, 2010 and 2009 is as follows:

2010 2009 Componentsofdefinedbenefitcostrecognized: Current service cost $ 921 $ 727 Interest cost 1,704 1,714 Actual return on plan assets (1,550) (2,574) Actuarial losses 1,833 4,010 Settlement loss 383 – Curtailment gain (150) – Benefitcostbeforeadjustmentstorecognizethelong-term nature of defined benefit plans 3,141 3,877

Adjustmentstorecognizethelong-termnatureofdefined benefit plans: Difference between expected and actual return on plan assets for the year 107 1,251 Differencebetweenactuariallossesrecognized and actual actuarial losses on accrued benefit obligation for the year (1,651) (3,868) Amortizationoftransitionobligation 19 19 Total adjustments to defer costs to future periods (1,525) (2,598) Totalbenefitcostrecognized $ 1,616 $ 1,279

Change in benefit obligation: Benefit obligation, beginning of year $ 28,528 $ 23,445 Employee contributions 389 439 Benefits paid (1,948) (1,807) Current service cost 921 727 Interest cost on accrued benefit obligation 1,704 1,714 Actuarial losses 1,833 4,010 Curtailment gain (150) – Benefit obligation, end of year $ 31,277 $ 28,528

Change in plan assets: Fair value of assets, beginning of year $ 22,084 $ 18,954 Employer contributions 1,944 1,924 Employee contributions 389 439 Benefits paid (1,948) (1,807) Actual return on plan assets 1,550 2,574 Fair value of assets, end of year $ 24,019 $ 22,084





13. Pension plan (continued):

Defined benefit pension plans (continued):

2010 2009 Reconciliation: Accrued benefit obligation $ 31,277 $ 28,528 Fair value of plan assets 24,019 22,084 Funded status of plans - deficit (7,258) (6,444)

Unamortizedamounts: Net actuarial losses 6,545 5,403 Accrued benefit liability $ (713) $ (1,041) Other assets $ 2,524 $ 1,656 Other liabilities (3,237) (2,697) $ (713) $ (1,041)

The significant assumptions used are as follows: 2010 2009 Accrued benefit obligation: Discount rate 5.7% 6.2% Rate of salary escalation 3.3% 3.2%

Benefit costs for the years: Discount rate 6.1% 7.4% Expected long-term rate of return on plan assets 6.6% 6.7% Rate of salary escalation 3.3% 3.2%

Plan assets consist of: 2010 2009 Asset category: Equity securities 54% 52% Debt securities 42% 43% Money market fund 4% 5% 100% 100%

14. financial instruments:

Risks:

In the normal course of its operations and through its financial assets and liabilities, the Company is exposed to risks related to US dollar exchange rate fluctuations, to fuel price fluctuations, as well as to interest rate fluctuations. The Company manages these risks by using derivative financial instruments. The Company’s management is responsible for determining the acceptable level of risk and does not use derivative financial instruments for speculative purposes.


54 TransForce inc.



14. financial instruments (continued):

Risks (continued):

The following analysis provides a measurement of risks as at December 31, 2010. (a) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The Company grants credit to its customers under the ordinary course of business. Management believes that the credit risk of accounts receivable is limited due to the following reasons:

• Thereisabroadbaseofcustomerswithdispersionacrossdifferentmarketsegments. • Nosinglecustomeraccountsformorethan10%oftheCompany’stotalrevenue. • Approximately92%(2009-92%)oftheCompany’stradeaccountsreceivablearelessthan60daysold. • Bad debt write-offs to total revenue have been approximately 0.2% of consolidated revenues for the

last three years. In light of the above, the allowance for doubtful accounts at December 31, 2010 was $4.9 million and $5.0 million at December 31, 2009. All bad debt write-offs are charged to fixed costs, general and administrative expenses.

2010 2009 Allowance for doubtful accounts, beginning of year $ 5,047 $ 6,989 Bad debt expense 2,422 3,738 Amount written off and recoveries (2,575) (5,680)

Allowance for doubtful accounts, end of year $ 4,894 $ 5,047

As at December 31, 2010, the Company’s maximum credit exposure corresponds to the carrying amount of the financial assets.

(b) Foreign exchange risk:

Currency risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s activities which result in exposure to fluctuations in foreign currency exchange rates consist of the selling of transportation services which will be paid in US$. The Company estimates its annual net US denominated cash flow at approximately $105 million (2009 - $116 million). This cash flow is earned evenly throughout the year.






(b) Foreign exchange risk (continued):

At December 31, 2010, the US/CA rate was $0.9946 (2009 - $1.0466). Based on the small year-end balance sheet exposure of US$0.2 million ($US assets net of $US liabilities), a 1-cent increase in the Canadian dollar would result in a decrease in income before provision for income taxes of approximately nil (2009 - $0.3 million), while a 1-cent decrease would result in an increase of approximately nil (2009 - $0.3 million) in income before provision for income taxes.

The Company mitigates and manages its exposure to future cash receipt and disbursement through the use of derivative financial instruments. These instruments include forward contracts and currency option instruments, which are commitments to buy or sell at a future date, and will be settled in cash.

The Company’s commitments to sell foreign currencies as at December 31, 2010 and 2009 are as follows:

2010 notional notional contract contract exchange amount amount fair value rate Maturity us$ ca$ ca$

Sell contracts: Foreign exchange average rate forward contracts (US$ for CA$) 1.077 less than 1 year $ 68,814 $ 74,114 $ 5,637 Foreign exchange forward contracts (US$ for CA$) 1.09 less than 1 year 6,000 6,540 556 Sell options: Currency option instruments (US$ for CA$) 1.0722 less than 1 year 24,500 26,270 (215) Accounts receivable and other $ 5,978


56 TransForce inc.




(b) Foreign exchange risk (continued):

2009 Notional Notional contract contract Exchange amount amount Fair value rate Maturity US$ CA$ CA$ Sell contracts: Foreign exchange average rate forward contracts (US$ for CA$) 1.1659 Less than 1 year $ 34,993 $ 40,798 $ 4,158 Foreign exchange average rate forward contracts (US$ for CA$) 1.1621 1 to 2 years 5,625 6,537 592 Foreign exchange forward contracts (US$ for CA$) 1.07 Less than 1 year 18,000 19,260 328

Sell options: Currency option instruments (US$ for CA$) 1.07 1 to 2 years 18,000 19,260 (989) Accounts receivable and other $ 4,089

The fair value of foreign exchange forward and currency option contracts has been determined using rates published by the financial institution which is counterparty to these contracts.

(c) Interest rate risk:

Interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company had $385 million (2009 - $562 million) of long-term debt at variable rates as at December 31, 2010. All other debts of the Company, being $124 million (2009 - $145 million) of capital leases, conditional sales type leases, mortgages and other loans, have fixed interest rates and are therefore not exposed to cash flow interest rate risk.

In order to limit the Company’s exposure to interest rate fluctuations, the Company entered into interest rate swap contracts. As at December 31, 2010, the Company had interest rate swap contracts on the notional amount of $371 million (2009 - $338 million) of debt at an average contracted banker’s acceptance rate of 2.81% (2009 - 2.85%) that expire at various dates through October 2013. As a result, the effective interest rate on the interest swap contracts is 5.4% (2009 - 4.4%) at December 31, 2010.






(c) Interest rate risk: (continued):

Therefore, the Company had $14 million (2009 - $224 million) of long-term debt at variable rates as at December 31, 2010, net of $371 million (2009 - $338 million) of interest rate swap contracts. Based on long-term debts at variable rates as at December 31, 2010, had interest rates been 100-basis points higher, income before provision for income taxes would have been approximately $0.1 million (2009 - $2.2 million) lower. had interest rates been 100-basis points lower, income before provision for income taxes would have been approximately $0.1 million (2009 - $2.2 million) higher.

The Company’s interest rate swap contracts at December 31, 2010 and 2009 are as follows:

2010 notional contract amount fair value ca$ ca$ Coverage period: Next 12 months $ 371,250 $ (3,657) 1 to 2 years 312,148 (2,852) 2 to 3 years 203,906 (1,511) Liabilities $ (8,020) Short-term portion in accounts payable and accrued liabilities $ (3,657) Long-term portion in other long-term liabilities (4,363) 2009 Notional contract amount Fair value CA$ CA$ Coverage period: Next 12 months $ 337,917 $ (3,166) 1 to 2 years 306,250 (3,103) 2 to 3 years 275,000 (1,463) 3 to 4 years 191,667 (562) Liabilities $ (8,294) Short-term portion in accounts payable and accrued liabilities $ (3,166) Long-term portion in other long-term liabilities (5,128)

The fair value of the interest rate swaps has been determined using rates published on financial capital markets.

(d) Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to its reputation. Typically, the Company ensures that it has sufficient cash or available creditlinestomeetexpectedoperationalexpenses;thisexcludesthepotentialimpactofextremecircumstancesthat cannot reasonably be predicted. The Company monitors its short and medium-term liquidity needs on an ongoing basis using forecasting tools. In addition, the Company maintains a revolving facility which matures in July 2013 (see notes 7 and 10 (d)).


58 TransForce inc.




(d) Liquidity risk (continued):

The following are the contractual maturities of the financial liabilities as at December 31, 2010:

Fair Carrying Contractual Less than 1 to 3 4 to 5 More than

value amount cash flows(i) 1 year years years 5 years

Financial liabilities: Bank indebtedness $ 24,916 $ 24,916 $ 24,916 $ 24,916 $ – $ – $ – Long-term debt 514,464 504,489 627,419 37,902 232,459 236,698 120,360 Convertible debentures 146,625 129,436 186,875 8,625 17,250 161,000 – Accounts payable and other short-term liabilities 210,454 210,454 210,454 210,454 – – –

Total $ 896,459 $ 869,295 $ 1,049,664 $ 281,897 $ 249,709 $ 397,698 $ 120,360

(i) Includes interest recalculated based on rate at December 31, 2010.

The only financial assets and liabilities of the Company recorded at fair value on a recurring basis are bank indebtedness and the derivative financial instruments discussed above. Bank indebtedness is measured using level 1 inputs of the fair value hierarchy while all derivatives financials instrument are measured using level 2 inputs. The Company doesn’t have any financial assets or liabilities measured using level 3 inputs.

It is the Company’s intention to either renew the long-term debts coming due in the next 12 months at similar terms and conditions or to repay them. All other financial liabilities would be financed through the collection of accounts receivable and cash flow generated from the business.

In addition, the Company has $262 million (2009 - $121 million) available on its Revolving facility that was not drawn at December 31, 2010.

15. commitments, contingencies and guarantees:

(a) The Company entered into operating leases expiring on various dates through March 2035, which call for lease payments of $194 million (2009 - $133 million) with respect to rolling stock, real estate and others. Minimum lease payments for the upcoming years are as follows:

2011 $ 34,863 2012 27,830 2013 20,992 2014 14,281 2015 9,875 2016 to 2035 86,029

(b) As at December 31, 2010, the Company had outstanding letters of credit for an aggregate amount of $21million(2009-$16million).ThelettersofguaranteearecollateralizedbytheCompany’saccountsreceivableplus certain rolling stock.





15. commitments, contingencies and guarantees (continued):

(c) There are pending claims against the Company and, in the opinion of management, these claims are adequately provided for and settlement should not have a significant impact on the Company’s financial position or results of operations.

16. segmented information:

The Company operates within the trucking and logistics industry in Canada and the United States in the following fourreportablesegments:PackageandCourier,Less-Than-Truckload,Truckload,aswellasSpecializedServices.

Sales between Company’s segments are measured at the exchange amount. Transactions, other than sales, are measured at carrying value.

2010

Package less-Than- specialized and courier Truckload Truckload services corporate eliminations Total

Revenue $ 364,483 $ 460,601 $ 580,667 $ 490,753 $ – $ (56,404) $ 1,840,100 Fuel surcharge 31,200 63,986 61,950 4,882 – – 162,018

395,683 524,587 642,617 495,635 – (56,404) 2,002,118

Income before the following 62,835 46,574 64,367 90,090 (3,686) – 260,180 Depreciation of property, plant and equipment 10,870 27,341 31,356 29,405 117 – 99,089 Amortizationof intangible assets 10,884 2,209 2,227 12,250 – – 27,570 Remeasurement to fair value of existing interest in acquiree – – – (16,279) – – (16,279) Gain on business acquisition – – – (9,518) – – (9,518) Interest on long-term debt and convertible debentures – – – – 37,630 – 37,630 Change in fair value of derivatives – – – – (8,062) – (8,062) Loss (gain) on disposal 118 (177) (8,223) 67 – – (8,215) Income (loss) before provision for income taxes 40,963 17,201 39,007 74,165 (33,371) – 137,965

Total assets 257,765 482,372 330,049 542,305 11,115 – 1,623,606 Capital expenditures 7,636 51,165 26,501 16,630 – – 101,932 Goodwill 126,560 114,381 85,600 106,243 – – 432,784 Intangible assets 30,305 4,405 5,409 132,471 14 – 172,604


60 TransForce inc.



16. segmented information (continued):

2009

Package Less-Than- Specialized and Courier Truckload Truckload Services Corporate Eliminations Total Revenue $ 275,766 $ 470,065 $ 588,447 $ 433,727 $ – $ (49,648) $ 1,718,357 Fuel surcharge 19,145 53,901 50,769 4,354 – – 128,169

294,911 523,966 639,216 438,081 – (49,648) 1,846,526

Income before the following 47,675 50,417 59,711 60,807 (225) – 218,385 Depreciation of property, plant and equipment 11,081 27,093 36,324 27,927 132 – 102,557 Amortizationof intangible assets 5,374 2,148 2,287 10,236 – – 20,045 Goodwill impairment – – – 45,000 – – 45,000 Interest on long-term debt and convertible debentures – – – – 34,996 – 34,996 Change in fair value of derivatives – – – – (13,705) – (13,705) Gain on disposal (9) (1,163) (1,330) (70) (276) – (2,848) Income (loss) before provision for income taxes 31,229 22,339 22,430 (22,286) (21,372) – 32,340

Total assets 262,951 494,491 344,164 419,534 6,172 – 1,527,312 Capital expenditures 3,344 23,878 21,337 11,463 – – 60,022 Goodwill 121,977 114,025 85,451 97,498 – – 418,951 Intangible assets 40,512 6,174 7,357 92,903 – – 146,946

The accounting policies of the reportable segments are the same as those applied by the Company. The Company measures the performance of each segment by relying on revenues by segment and through the use of key operating performance indicators.

The Company’s operating revenues by geographic segment are as follows:

2010 2009 Canada $ 1,395,059 $ 1,292,309 United States 607,059 554,217 $ 2,002,118 $ 1,846,526

Revenues allocated to the United States include the transborder revenues between Canada and the United States. Property, plant and equipment and goodwill are mostly located in Canada.





17. subsequent event:

On December 14, 2010, the Company has entered into a merger agreement with Dynamex Inc. (“Dynamex”), pursuant to which TransForce has agreed to acquire all outstanding shares of Dynamex for US$25.00 per share in cash. Dynamex’s Board of Directors has unanimously approved the merger agreement with TransForce and the stockholders agreed to the merger agreement in a vote held on February 18, 2011. The transaction closed on February 22, 2011 and is valued at approximately US$248.0 million and has been funded by use of the Company’s revolving debt facility. Based on available financial information of Dynamex regarding the net assets acquired at the date of the closing, which is two days earlier than the date the Company published these financial statements, the Company estimates the excess of the purchase price over the net assets acquired to approximate US$138 million. This excess will be allocated to the assets and liabilities acquired, based on their respective fair value, during the first quarter of 2011.

In January 2011, the Company completed a sale and leaseback of one of its properties for a cash consideration of $40 million.

18. comparative figures:

Certain comparative figures for prior periods have been reclassified to conform with the financial statement presentation adopted in the current year.

transforce

CORPORATEDIRECTORy

alain Bédard, Fca, cMaChairmanoftheBoard,president and Chief executive officer

Johanne deanVice-president, Marketing and Communications

sylvain desaulniers, circVice-president, HumanResources

Josiane-M. Langlois, LL.M.Vice-president, legal Affairs and Corporate Secretary

chantal Martel, LL.B.Vice-president, insurance and Compliance

Louis gagnonVice-president, BusinessDevelopment

ken Tourangeau, caVice-president, Administration

Martin Quesnel, caVice-president, finance

a & M international & ganeca yvanLapointegeneralManager

BergeronAndréBergeronpresident

BesnerJean-FrançoisDodiervP&generalManager

coutureSerge poulingeneralManager

d. donnellyMichaelMcgrathpresident

durocher internationalSteve lamontagnegeneralManager

ghL TransportgilbertBériaultVp Sales & operations

golden internationalMartingodboutgeneralManager

grégoireJean-FrançoisDodiervP&generalManager

highland & highland intermodalTerrygardinervP&generalManager

J.c. germainJean-Claudegermainpresident

kingsway Bulkjunior Roypresident

Lacaille internationalJean-FrançoisDodiervP&generalManager

LandryJean-FrançoisDodiervP&generalManager

Legal Freight servicesRobertMcgonigalgeneralManager

Mcarthur expressjoe SmelkoChief operating officer

Mcgill & MartransJeanDastousgeneralManager

Mirabel Logistic

nordiqueJean-FrançoisDodiervP&generalManager

Papineau internationalJean-FrançoisDodiervP&generalManager

P & W intermodal & MTMXMarkJoczysgeneralManager

Trans4 dedicated servicesBrendaEverittvP&generalManager

TsT expedited & TsT airjeff laforetvP&generalManager

TsT Truckloadtom philipsvP&generalManager

universal contract LogisticsRobertMcgonigalgeneralManager

uTL Transportation servicesBobCruthersvP&generalManager

WatsonMartinDupuispresident

WinaltaBobCruthersvP&generalManager

canadian FreightwaysRalph Wettsteinpresident

click expressRalph Wettsteinpresident

kingswayRickgrowdenvP&generalManager

La crete Transportjake fehrgeneralManager

select ThibodeauChristiangendreaugeneralManager

TsT overland expressRob o’Reillypresident

aTs retail solutionsMarcus pryce-jonespresident

canparJamesP.Houstonpresident

ics courierBrianKohutpresident

TransForce inc.

TruckLoad

Less-Than-TruckLoadPackage & courier

LaflecheBrianKingpresident

Malex – Matrec – ThibaultMarc foxpresident

hemphill speedyMarc foxpresident

howard’s Transport services

kos oilfield TransportationDaleSymonVice president

McMurray serv-u expeditingelvis pentongeneralManager

rebel TransportRon lystanggeneralManager

Westfreight systemsRichard Warnockpresident

Beaudry Personnel services & associatesAndréCarlegeneralManager

TLs Trailer Leasing servicesNormanBrazeauVp Sales & operations

unique Personnel servicespaul Christiepresident

ck LogisticsConnie Robertspresident

e&L LogisticsAlbertLégerpresident

kobelt TransportationChris forsythepresident

Patriot Freight servicesjames lavoiepresident

st-LambertJean-FrançoisDodiervP&generalManager

stream LogisticsRickBairdgeneralManager

Trans4 LogisticsJamesP.Houstonpresident

TranstermRoss WerthgeneralManager

TsT Load Brokeragetom philipsvP&generalManager

sPeciaLized services

Waste Management services energy sector services

Fleet Management & Personnel services

Logistics services

HS

COrpOrate infOrMatiOn

HEAD OFFICE

transForce inc.

8801 trans-Canada Highway

Suite 500

Montreal, Quebec H4S 1Z6

telephone: 514 331-4000

Fax: 514 337-4200

Web site: www.transforcecompany.com

e-mail: [email protected]

AUDITORS

KPMG LLP

FINANCIAL INSTITUTIONS

national Bank of Canada

royal Bank of Canada

the Bank of nova Scotia

Bank of Montreal

Ge Capital Canada

Caisse de Dépôt et Placement du Québec

Société Générale de Financement

Business Development Bank of Canada (BDC)

Caisse Centrale Desjardins

Canadian imperial Bank of Commerce

Bank of tokyo-Mitsubishi uFJ (Canada)

Bank of America Merrill Lynch

HSBC Bank Canada

Alberta treasury Branch

Canadian Western Bank

ANNUAL MEETING OF SHAREHOLDERS

tuesday, May 17, 2011

at 1:30 p.m.

toronto Stock exchange

exchange tower

130 King Street West

toronto, ontario M5X 1J2

STOCK EXCHANGE LISTING

transForce inc. shares are listed

on the toronto Stock exchange

under the symbol tFi.

REGISTRAR AND TRANSFER AGENT

Computershare trust Company

of Canada

100 university Avenue, 9th floor

toronto, ontario M5J 2Y1

telephone: 514 982-7555

1 800 564-6253

Fax: 1 888 453-0330

DESIGNED AND WRITTEN by

MaisonBrison Communications

Si vous désirez recevoir la version française de

ce rapport, veuillez écrire au secrétaire de la société :

8801, route Transcanadienne, bureau 500

Montréal (Québec) H4S 1Z6

1 Continent

2 CountrieS

4 oPerAtionAL SeGMentS

12 inDuStrieS

64 oPerAtinG CoMPAnieS

253 terMinALS

6,200 PoWer unitS

11,600 trAiLerS

13,400 PeoPLe

75,000 CuStoMerS

transforcecompany.com

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