TFI International suffered declines in revenue and net income in the first quarter, but feels optimistic conditions are ripe for a meaningful acquisition later this year.

The company posted Q1 earnings of $166.4 million (all figures U.S.), down from $219.8 million the same quarter last year on lower freight volumes and non-recurring costs, including $9.5 million in severance and early buyouts. On a conference call with analysts, chairman Alain Bedard said the company has about 800-900 people on layoff and has been offering early retirement packages as a bounce in shipment volumes isn’t expected this year.

First quarter net income of $111.9 million was down from $147.7 million a year ago. Earnings were also affected by unfavorable foreign exchange fluctuations and the loss of revenue resulting from the sale of U.S. truckload division CFI last year. The company lowered its guidance from about $8 per share to $7, as optimism wanes about the second half of this year.

Bedard told analysts the initial belief earlier this year was that there’d be a strengthening in market conditions in the second half.

“When we talk to customers more and more, inventory is still high,” he said, noting consumer spending is shifting back from goods to travel. The focus in the meantime continues to be on cost control, where Bedard said there’s still room for improvement. This includes optimizing the TForce Freight fleet for pure LTL operations.

UPS Freight changes

“UPS Freight was run like a package company hauling LTL,” he said. “We’re changing that now.”

This means replacing small trailers with longer ones, handling larger shipments, and reducing the amount of drive time between deliveries through network optimization. The company has finished changing over IT systems so management has better visibility of costs and can improve decision making, Bedard noted.

While tough market conditions put pressure on revenues, Bedard said they also create opportunities for M&A. And he teased a big deal in Canada that will be announced later this year.

“Buy on bad news, sell on good news,” Bedard said. “There’s lots of bad news right now in transportation.”

The company is actively pursuing deals on both sides of the border. The company has, meanwhile, sold about 50,000 of its shares in U.S. rival Arcbest, but Bedard said that was done to stay under the 5% ownership threshold that would require additional reporting.

Canadian volumes for TFI International were down about 9% in the quarter, while U.S. LTL shipments fell about 20%. “I’d say about half of that is the market, the other half is all the cleanup we’ve been doing since we bought [UPS Freight],” Bedard said of the U.S. decline.

The company has earmarked about $300 million for acquisitions and share buybacks this year.

“We don’t want to miss the boat, because we like to buy on bad news,” Bedard reiterated. “Bad news is always good for TFI.”