Q1 2020 Earnings Call

Ladies and gentlemen, this is the operator your lines will remain on musicals until the conference begins the conference will be getting momentarily.

Thank you for your patience.

[music].

Good morning, ladies and gentlemen, thank you for standing by welcome to testify Internationals first quarter 2020 results conference call.

At this time all participants are in a listen only mode.

Following the presentation, we will conduct a question answer session instructions for entering the Q will be provided at that time.

Before turning the call over to management. Please be advised that this conference call will contain several statements that are forward looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. All dollar amounts are in Canadian dollars also.

Last year the company adopted the new accounting standards under I F. R. S 16, and as a result certain numbers are not directly compatible with past results Lastly, I'd like to remind everyone that this conference call is being recorded on Wednesday April 22nd Twentytwenty.

Ill now turn the call over to I like the Dart Chairman, President and Chief Executive Officer of T.F.I. International. Please go ahead Sir.

Well. Thank you for the introduction of pre area and I appreciate everyone. Joining us this morning as the world continues to navigate through these unprecedent times.

Yesterday after the close we released our first quarter results.

If you need a copy of the release please visit the website.

We have previously communicated our most priority since the start of the cool with 19 pandemic.

Has been to halt and well being of our employees' hard customers.

And the communities we serve.

In early March our senior executive team came together to strategize and established guidelines for operating.

For operations during the quarter wouldn't know bars and pandemic.

Well the Winder guidance do you find denationalized been ending the ongoing crisis, well and I believe that we will emerge even stronger when economy conditions returned to normal.

I know youre most interested in current condition.

We are responding but I wanted to briefly discuss our accomplishments during the first quarter, starting with our listing in the New York stock exchange.

This was a highly successful strategic accomplishments for T., a fine, but also very natural step given how the company has rapidly grown over the years to sort of all of North America.

Our NYSE listing in February was well received in the culmination of many years of successful growth and value creation and our company.

The proceeds from the offering I've been provided an even stronger financial foundation for T. aside to navigate what's ahead.

Operationally during the first quarter performance was solid despite the significant in back of covert 19, beginning in March.

I've said, often as I've often said.

Regardless of fluctuating business condition and the industry wide capacity concerns that's still exist during most of the quarter. We have to you if I always focus on the basic fundamentals of the business.

This consistent approach.

How are we optimize our free cash flow and everything for shares, which then used to expand our business and create long term value shareholders.

Example, weeper issue and that's it like business model, we seek opportunities when insufficiencies and we maintained a strong balance sheet.

When his strategic to do so.

We also look at accretive acquisition opportunity always in highly disciplined manner and in early March we completed the acquisition of R.R. Donnelleys for your service business.

This modest acquisitions with digitally adds critical mass and valuable new customers to our T Force logistics same day parcel delivery operation in the U.S.

In terms of our first quarter financial resorts results total revenue was up 1% compared to prior years first quarter 1.2 billion.

More important to us because of our emphasis on profitability operating income increased 13% 118 million well, our adjusted EPS on a diluted basis was up 8% to 83 cents.

In addition, we generate net cash from operating activity of 192 million up a very robust, 19% when compared to the year a go figure.

Before reviewing our balance sheet strength and the expenses reduction measure we have introduced I want to share with you all each of our business of a four business segments before and during the quarter and discuss each has been affected by the cool with 19.

Although transportation and logistics was quickly deem as in its social essential service.

During the last two weeks of March.

We did begin to feel the effect of government told policies put in place to flatten the curve.

Starting with P. and see this segment represents 13% of total revenue before fuel surcharge and saw revenue decline of 4% you over you in the March quarter.

Operating income was 16 million compared to 21 million into call I'll spend the corresponding year.

Probably a year quarter and the segment operating margin was 11.1 relative to 14.3.

Package and core your which is typically like ours margin business.

I just felt the largest impact from the cool with 19 would be to be activity slowing significantly.

This segment has been a focal point of our cost reduction efforts that will review in a moment and you are former guidance given kobin 19, well instead provide you a look.

Over the.

The year over year performance for each of our segments.

But late March in early April.

For a pea and see our revenue were running negative 20 or 20% versus the prior year. During the last two weeks of March.

And negative 30% during the first two weeks of April.

Turning to LTL segment represents 16% of total segment revenue before fuel surcharge and so revenue declined 14% year over year in March quarter.

Our operating income was 18 million compared to 28 million.

In the prior year, primarily driven by 9 million gain on sales of real estate in Q1 of 2019, and our operating margin was 9.8 compared to 13.3.

For the LTL revenue were running negative 17% versus prior years during the last two weeks of March and negative 39%. During the first two weeks of April.

Next up is our truckload our segment or larger segment, representing 40% of total segment revenue before fuel surcharge.

Truckload saw revenue grow 1% you are you in the March quarter.

Our operating income was 63 million up 24% relative to 51 million a year earlier.

And our operating margin was 11.8.

Was it was very solid 220 basis, when compared to the probably first quarter of last year.

For truckload or revenue, we're we're running negative 4% versus the prior years range.

Last two weeks of March and negative 20% during the first two weeks of April with both dry van and specialized operation impacted.

Lastly, logistics is our second largest segment that 24% of total revenue.

Before fuel surcharge and so revenue grow 20% year over year in the March quarter.

Our operating income Jones, 71% to 26 million from 15 million a year earlier, reflecting a 290 basis point increase.

Our margin to 9.7%.

Approximately half of this increase in logistics operating income relates to the bargain.

Purchase price gains recognized in the association with the acquisition of the Courier services business of R.R. Donnelley with the rest <unk> from operating.

The improvements anybody.

Logistics.

Receive a boost in recent weeks.

With both the E commerce and medical end markets doing very well, partially offset by weakness.

In B to B.

For logistics already knew were running positive 39% versus the prior year. During the last two weeks of March and positive 12%. During the first two weeks of April.

Next I'll discuss our balance sheet, which currently reflects the lowers leverage.

Our company has in many years.

Further.

We ended the the March quarter with about $130 million in cash and equivalents 800 million 830 million still available on our.

Revolving credit facility and no debt maturities until 200 million comes due in June of 2021.

Turning to covert 19th pandemic, our balance sheet does continue to serve us to serve as a source of strength 40, a fly international.

Shifting gears.

I want to spend a moment on the expense reduction effort.

Well, we quickly moved to reduce operating costs and Capex in March we have approach all decision with an eye towards strategically, enabling t. a flight to quickly snapped back and emerge even stronger once the operating environment improves but for now everyone within the T. a five organization is currently pitching in and are very.

Grateful for the fried and professionalism of our people are shown doing everything they can two of our customers and help our company to this stretch.

Someone to many steps we've taken include the following first.

We reduced.

Wage for executives anywhere from five to as much as 15% for all she level officers and all executive VP across our organization.

Second for more than a thousand fulltime employees, we reduce or were quick to four days, while helping down through this time by maintaining therapy at 85% of base salary.

Which amounts to an increase in there.

The wage.

Third.

Many other employees were subject to reduction in force.

Which we owe will prove temporary <unk>.

These individuals.

I've not on didn't you continue to provide benefits, but we also instituted a base salary recovery program to support them. During this period of temporary unemployment.

Fourth we spend the all capex to which we had not committed and we plan to revisit these potential old news as conditions permit.

Again. These are just a few examples of them and these strategies. We have implemented in addition, I should mention that we have provided full support to our.

Operating companies so that they can protect the health and safety of all employees in full accordance to with local requirement.

At this point, 70% of our at office employees are working at home and we have taken additional precaution within our offices.

These includes the installation of sanitizer dispensers six foot distancing policies.

Limiting in person means to treat people restricting non essential visitors from office.

Visitor log in mandatory questionnaire and more thorough cleaning of common areas.

Before opening for Q Aneel mentioned that our overall capital a location plan. Despite current strategic delays in Capex is unchanged.

We invest capital, where we see the best risk adjusted return well paying a quarterly dividend and continuing our track record of identifying attractive acquisition opportunities.

We approach all capital allocation in highly disciplined manner as we always have.

And as you've seen in our results over the years, we look to drain to generate not just growth but profitable growth.

Our ultimate goal a t. a fight age to create and unlock shareholder value returning excess capital to our shareholders whenever possible.

I want to thank all the dedicated and hard working people of TIFIA.

We have demonstrated pride into work.

Do you do.

Do you do each and every day during the cold with 19 outbreak I also want to welcome aboard all our new investors that took part in a recent offering on the New York stock exchange and we wish assure you that generating long term shareholder value will always be.

A key focus of T. A fine international with that operator, I'd like to take questions from the audience.

If you if you could please open the lines.

Certainly at this time, if you'd like to ask a question by phone. Please press star one on your telephone keypad to withdraw your question press the pound key Jason Seidl with Cowen Your line is open.

Oh, Thank you operator, well good morning, good Oh, I wanted to start all well asking questions about Uh huh.

That's why we know tee up by itself doesn't have a large exposure to energy.

However, the decline we've seen in oil prices starts to flow through and put the Canadian economy will likely going to free up a a lot of people are you still holding energy and energy related goods exactly a whole lot of the possibly out into the marketplace.

Yeah, well Jay said, you know our exposure to energy is really really small I mean, we have a small operation that's left for us in Texas.

C and D O. They saw market, but this is really small revenue for us.

And Ah we were still very present in Alberta, with our LTL and to a certain degree in our specialty tea out, but really the service that we provide with the energy sector in Alberta or assist catch one is very very limited.

I would say that today energy is very small component of T. applies revenue.

For sure if you look at the Alberta.

I mean.

The province has been slap with the double whammy, a it's got the oil situation and is also has the virus like everybody else in the world. So our LTL is been affected Uh huh.

You know probably the same as the rest of Canada.

If we look at our specialty truckload has been affected a little bit more than the average that we see a on the east coast.

Ontario, Quebec.

And speaking about the LTL, obviously, there's a lot of operational leverage in that model over the past couple of years Cfives, it's really couldn't be approach to sort of streamline their network or get it is a.

As soon as possible, but is there anything left to do there or any other small terminals to close down or is it sort of just your at where you're at right up the storm here.

Well you know what Jason this a very good question then absolutely I mean.

We will be you know two years ago, we we've combined PST overland with kings when the east Okay and that was a major transaction for us and its save US a lot of dollars because you have to understand that on the can eat inside the LTL is shrinking every week every month because of the E Commerce and no viruses.

One more okay, that's just not helping us.

So what we are planning and this is gonna be thinking a effect at the end of April is the.

Also now doing the combination of TST overland, Okay with our C. F operation to Great names in Canada, CF was only a regional player.

Covering a western Canada, and the T.S.T. overland is a national carrier. So as of the end of April Okay. That's one more moved up we're doing.

To streamline and be more efficient and so I was just looking at the equipment. So we're going to shed about a two to 300 piece of equipment in terms of a headcount. So I mean, the head counts will be down a significantly because of that because we're getting ready because this LTL keeps on shrinking so.

There's no other options for us in Canada that we have to adjust to the volume.

Yeah for sure as soon as we can okay. We've got some some targets in mind, we're also talking to some people.

Because a lot of people in the LTL business in Canada are not making money because they have the same problem with us is that.

ER volume is keeps on coming down and they don't know what to do.

To us we have a plan. So our plan is always put in place and we adjust and Weve got thing, we and you know we have to live with the market condition.

And our focus is always a boat you know serving customers, but we have to make money.

No that's something real quick before I turn it over to somebody else, what's the average age of the you're wrong.

Now in the U.S.

In the U.S., a I would say at the end of March I mean were just under two years of age. So this is why what we did on the Capex side on the U.S. talking with Greg and the team there and David as we said guys I mean, our.

Neither sole knew that we can't afford so what we've done in the U.S., we cancel the capex for everything that was not committed so.

So probably what we'll see is we still have some capex coming in for U S. T. L. In Q2.

In terms of trucks and trailers, but after Q2 everything has been canceled.

So this means if I remember correctly about $60 million net.

Capex that will not be done in 2020.

For U.S.T. up a Canadian dollars, though so I mean, you put that in U.S. into both lets say 40 45 U.S.

Okay, perfect listen Elaine I.

At the time as always we set out there.

Thank you likewise, thank you Jason.

Mona Nazir with Laurentian Bank your line is open.

Good morning, Thank you for taking my questions and congrats on the quarter in a challenging environment.

Okay cool mono.

And so my first question is just a clarification. So for LTL did you said the last two weeks of March was down 17%.

A you know what let me just check because.

I think so why do you think so.

That said that that Ah, yes, yes, 70% down yeah and then.

The first two weeks of April sorry.

But 39% down no garden add on that a mono is what we've seen really if I look at my first week of April.

Okay versus my second week of April No I've got my third week of paper because April for US is three month is five weeks.

So when I look at that I see a trend that this this volume okay. It was really really down the first week and a little bit less in the second week, a little bit less in the and the third week. So I think that right now we're probably until the you know the government decided to reopen.

Businesses.

Yeah, I mean, we're probably you know just improving a little bit week by week. The same thing with our PNC PNC. The first week. It was a disaster I mean Bang Whoa and then it starts to drop even more so the first the last two weeks of March Okay, because the announced the closing okay. We went down down down than the first week of April.

Again, even down more and then the second week of April back up a bit and then the three week of April you know, we're starting to see you know up a little bit. So this is why if I look at my P. and see as an example, a two weeks ago for the first two weeks that was down like a 40% now after three weeks I'm down only 30%.

Year over year.

Yeah. That's helpful. Because I was just looking even at the quarter I mean, LTL shipments were down almost 17% in the quarter.

Yes, I just given that margins improved significantly I would just wondering if that was safe to assume that the majority of back decline was driven by a reduction in lower margin business.

Yes that.

Okay.

Yeah, well nice true yeah, okay. Okay.

Just adding up on the stats that you've taken on over guard till.

You know reducing executive compensation.

<unk>.

Reducing office staff to 40 hours a week for low income PMT data to preserve capital I'm, just wondering combined what kind of an impact all of these items have on opex.

Yeah, [laughter] well that's a very good question then you know what [laughter]. This also depends on the level of volume that we.

But one thing I could say is that we've revised I mean, we are <unk> I am monitoring our PNC by the Dino Okay. The same thing with LTL. The same thing with a U.S. you know I used to monitor by the week now where by the date.

What I could answer on that is that you know a lot of people who are scared the t., if I would lose money.

Even in Q2, because old will be by but no we're not going to lose money in Q2, that's for sure I.

I can give any guidance, but what I could say that all the steps that could have been done okay, and we're following information and tools and data by the day in every business that we had a huge drop.

Like I, PNC, and our LTL and and my U.S. LTL. The reason that we're checking that by the day now is because that's the most capital intensive business, we have right because my Canadian truckload or specialty truck is not ask capital intensive and you know, yes my vendor.

Vision has been affected my specialty truckload as soon as.

As an example, the construction in Quebec has been shut down.

The mining has been shut down so now they're starting to reopen the then already we're starting to see some improvement in our no specialty truckload and Canadian truckload. So so really our focus us right now okay.

He is really our PNCR LTL and a U.S.T. all that we monitored by did they okay. Now to answer your question. Your original question how much what's the quantum of all of that I.

I can't really answer that are more now I don't know the numbers what was what I can tell you is that we are monitoring that by the day we're comparing.

During year over year day over day, you know comparing let's say for <unk> for instance, our labor costs used to be 12%. So are we at 13% or we had 11% where are we at.

And we're doing that for all like I said, LTL PNC and the U.S. deal.

[noise].

Okay, perfect and just lastly from me.

I understand the animal maybe temporarily on whole just given due diligence is challenging on third parties at this time and you want to preserve capital, but when the emanate tap turned back on I'm. Just wondering what can expect person that's exactly what can investors expect or you're going to be stickier.

[noise] verticals I know you just touched on LTL, but is there any scenario, where you would look outside of current activity I know in the past for example, you that that your waste that's what the Jan.

Yeah, absolutely no you see mono when the minute, we could do M&A again, okay, which maybe in Q3 depends.

On what April and May looks like but we will start really would slums small tuck in deals that we've been working on for the last a few months and we put on hold so that's how we're going to start you know M&A and it's going to be either in the U.S. or in Canada, but these will be small deals nothing major we were working on.

It can size deal prior to the this virus thing there.

But.

You know we were not going to do any major deals in 2020, it's it's too risky okay. Not knowing you know all long. This this virus gonna be with us for maybe it's a year and maybe it's 18 months nobody knows so this is why anything.

Size wont happen, probably until 21, but I would I would tend to say that small tuck ins that we could do in Ontario for instance, I.

I think that there's a probability that we could do that in Q2, we were in Q4 of 2020. So we have we have ample.

Have a file that we're looking out right now and don't forget.

If we are in a difficult position because revenue just disappeared because of this virus I mean, everybody else in the same bone.

Well in the same ship I mean, the market is difficult for everyone now the strong.

Like T. A fine that's got the balance sheet. That's got the team because don't forget you need the team to do all this M&A you need to solid solid.

Operational team to take over a company and just integrate like like we're doing in the U.S. right now with Donnelley. Okay. Sure. The guys will say well you got $5 million or profit.

Q1 that comes from that deal.

Yeah, because we buy at the right price so what's the what's the problem with that.

And then you'll see the only as an example, okay. It will help us grow our last mile logistics business in the U.S. with all the nice vertical.

Like health care for instance, or ecommerce.

Thank you that's very helpful.

Leisure pleasure Mona.

Jack Atkins with Stephens Your line is open.

Hello, and good morning. Thanks, so much for taking my questions are really appreciate it.

Pleasure Joe.

Oh, I guess just to kind of start off here with a couple of you know.

Higher level questions, but you know I know you've seen a lot over the years I know, you're young man, but you're seeing a lot over the years. So I guess I'd be curious to get your take on.

Sort of you know how you think.

What we're seeing right now from Kogas Cobot 19 pandemic, how does that structurally change the transportation markets in the U.S. in Canada.

That was we look out over the next couple of years and sort of you know how do you want to position tee up by to really capitalize on that.

Well, that's a very good question band and you know Jack we've learned from the lesson of 2008 2009 us at Ti If I. If you go back and look 2008 a revenue.

Dropped about 20%.

Our EBITDA dropped about the same but we were way more capital intensive than than we are today.

You know our balance sheet was not as strong as what it is today and you know.

That's one of the thing that we learn from that that crisis. Then if you look at this crisis is now okay and you look at that and you say.

Well Jesus Christ. This is really the first time that we have you know shut down everything just overnight just overnight. Okay. A the government decided that for health reasons. Okay. Well. This is got to shut down boom good-bye. So our beat to be has been affected.

And what we learn from that.

Okay. If we look you know in the future I think that this the the consumer okay was slowly moving towards more and more E commerce slowly.

I think that this is gonna be a catalyst okay for those guys too slowly even no none.

As much slowly, but probably a little bit faster into more and more of this E. Commerce thing because they're getting some of this consumer are getting used to the ecommerce okay, whereby let's see just a few months ago. These guys at while E. Commerce I don't really like that I'm I'm just gonna go shopping at the ball. So I think that this is gonna be really.

A catalyst to I'm, even more and more E commerce down the road, okay faster than they would have been without the virus.

I think that the solution that we have offset <unk> is unique because if you look at Canada. We offered the next day solution with the can't Bar Loomis operation.

Okay, which competes with the you know will you be s. or fedex or or pure all in Canada.

In the U.S., we don't have this solution, but we have our logistics and last mile solution, which is which is the same as the big E. Tailer everybody knows about Amazon we have exactly the same products. So so this is like a diamond.

And then the rough within the T. Five family and I think that people are just starting to understand you know wednesday's started understanding that Wow. This is a real diamond those guys. Okay can't compete easily well for sure we service Amazon as a customer although small, but we have the same service that we can offer it to other customers, which we're doing.

Okay, and which were growing so going back to your question what do I see from this is that E. Commerce, we'll keep on growing even faster and that's going to help a you know our last mile and logistics. This is to me. This is the first thing I see when I look at this up the other thing also is that the fact that.

The <unk> five is always been.

No low and capital intensity, if you look at the global tier find today were between four and 5% capital intensity why because our focus has always been to generate cash we want to generate cash why because we want to buy back stock we want to buy a.

Pay dividends to our shoulders, we wanted to do M&A et cetera, et cetera, we don't that free cash flow generation you can't do that I mean, yes, you know some trucking companies have no debt, but do you have no free cash flow for so for sure they can't afford to I've debt.

Or they can you know pay dividend so our approach us at <unk>.

Always been okay tried to do more with less so if you look at our you STL operation about a two years ago, Greg or or came to us and say hey, we have to start a logistics operation we didn't see a five so Greg makes a lot of sense. Okay. So we've invested into that.

We've also focused lately, even more into trying to grow our owner operators fleet in the U.S.. It's always been a problem to grow that lately I mean, Greg and his team has been very successful, where we're adding owner operator, so that will reduce our capital intensity you know hopefully for the next next years to come.

So I mean this is a really good question Jack and I think that this is what swing important about understanding where <unk> is today and where it can it be tomorrow. Okay. This this E commerce solution that we have with intensify it's like one of the best kept secret that North America.

Well that's that's.

Great to hear and I guess just to have just a follow up on on on that you know you guys have a great track record of free cash flow generation has continued in the first quarter. You know we've been hearing some anecdotes over the last couple of months that.

Shippers I've been trying to push back on on payment.

I as they look there's sort of hold on to cache everyone's trying to hold on a cash as much as they possibly can have you guys seem that how are you responding to that you know how are you thinking about your free cash flow generation this year more broadly.

Yeah, well for sure. There's some some customers that always tried to hide and give you the excuse me so.

You know just the delayed or payment, but elsewhere very strong on that and I'll give you. An example, there's a huge mining company in Canada that those guys. You know that all kinds of issues, where their IP system. You know that's always a good excuse and we said guys [laughter] I mean, we're not a bank I mean, we're not a bank. So we cannot support you guys. It's it's are you.

Huge corporation in an International Corporation. So fine they were able to get you know payment because we said guys. If we don't get the money you guys don't get the trucks. So that's always been our approach Jack I mean, you know eat when you do a transaction with a customer I mean, we agree on price we agree on service, but we also.

Real and payment terms.

And every everything in that agreement has to be respect.

Makes total sense well, thanks again for the time.

It's a pleasure Jack they care.

Scott Group with Wolfe Research your line is open.

Hey, good morning. Thanks.

The time guys. So can I measure clarify the the April updates that you gave that were helpful was that volume or revenue and if that's revenue is that.

With or without fuel.

No no I'd say, excluding fuel and this is revenue.

Okay.

And is there any way on on the so the PNC, that's I think down 30% in April can you just help us think about.

You know, what what trends, you're seeing specifically b to b verse B to C. Maybe just remind us of the mix would be to Beavers b to C. For you there and then anything that's notably different between the.

Side and the Courier side.

Yes. So so if you look at a pea and see you could split that in too. So you got Lumason camper, Okay, and you got our specialty kind of P. and C, which is I C. S and T.F.I.S. So if you look at T.F.I.T.F.I.S. and ice.

So those guys are nish beat to be a carrier. So those guys are way more affected. Okay. Then the khanfar Loomis why because khanfar Loomis as also beat to be but also as he is significant content of ecommerce.

Whereas if you look at T F.

Yes, and ice yes, they are basically very very little ecommerce in those two division because these are specialty carriers like as an example.

I see S is very heavy with a the insurance world a very heavy with the optical world a you know.

All in all that so it's really so all the dentist all the optical boutiques are close down I mean, I see us is just debt.

Okay. So so that's the big differences between the two so you'll see you know if you say, 30% down hockey in early April well that means that those specialty.

Guys are like closer to 50%, though okay and the other guys are closer to 20% though.

Because they have more E commerce and less would be to be exposure than the other one.

So is it fair to think then that the.

So within the down 30 that the the B to B, maybe to your point is down in half and the you happy to see all my foundries is okay. Yes, Sir yes are absolutely because you know with all these shut down I mean think about all the malls.

There are shut down completely so you all your.

Summers are closed.

So that's why our b to B, Okay has been affected so badly in our nish carrier like ice, yes and T.F.I.S.

What are the implications on on margins or for that segment. I know you said, Hey don't we're we're going to make money this quarter, but.

In that segment can the PNC segment make money in this kind of environment or is there any way to think about margins in that quarter right margins in that segment right now.

Well, we look at our forecasts are re forecasts and re forecasts.

Is we're not losing money in any of our sectors. Okay in Q2 based on.

And what we know after two or three weeks of operation in April.

So we're not gonna be an 18 point EBIT.

Okay PNC in Q2, it's impossible.

Well, we're not going to lose money.

Anything more Directionally you think is worth thinking about is the summit.

Mid single digit kind of business right now for the time being or could it be a little bit I would say so I would say so I mean, it all depends based on what we know so far but also when I look at the trend and that's what I was saying earlier, okay. There's a little bit of improvement in our trend. So so we really took a me.

Major hit you know.

A in the first two weeks of April it was really a while where are we going with that so we now think we found some kind of stability. Okay. And then slowly you know we're picking up again, because if you look at the the virus in Canada.

Let me get back is.

Been affected so bad it's terrible and then you've got Ontario, but if you look at the Western provinces. We we believe that those provinces will reopen fast food then let's see cut back to back we'll probably very slow because they've got so much.

You know viruses case are there more than 50% of.

Cases in Canada, right now so kit back will be slow, but the west will probably be you know the first areas in the Maritimes to reopen slowly so based on what we know okay and not forecasting a lot of improvement in Q2 in may or in June.

PNC will be something.

In the in the 3% to 5% probably but this is this is not a guy that this is an opinion.

No no I I get that and then just last thing you gave us that the truckload sort of capex, how much it's cut but in aggregate now what's the the Capex budget are planned for the year.

Net capex is probably going to flow around between 80 to 100 million net capex net of disposals, which is about half of what we normally do.

Yeah Okay.

Okay Alright, thank you for the time guys appreciate it.

Pleasure.

Tom Wadewitz with yes.

Line is open.

Yes, good morning, I think what's going on.

Yeah, good morning, falling a little bit along lines that the questions and topic you just had what is the.

B C b to B mix, and the PNC business and as.

As you look at that and your comments on you know acceleration in E. Commerce do you say well you know maybe before we wanted to be a stronger on b to b, but we kind of review the structure and a you know changed strategy a bit in terms of you know how we look at B to C. Even if it's a lower margin business in kind of core b to b.

That's a very good question because let me explain your philosophy, our philosophies. Our next day service, Okay, which is can't part Lou Misty, if I guess I see yes.

Which competes with U.P.S. Fedex and purely in Canada. Our focus US is yes, we'll do E commerce, but not so much where it makes sense.

And where where our margin could be as good as the rest of our business why because we have a solution that nobody is which is our logistics and last mile.

And this is really the best tool. This is really the efficient away.

In in huge no high density areas like a.

Lets say in Canada, Toronto, Montreal, et cetera, or New York Chicago in the U.S.

Ellie Houston Dallas, So our solution is really saying kind a solution that the big ecommerce guys is using two services customer way more efficient.

We more effective.

Less capital intensive because we don't have the conveyors, we don't need those conveyors, because you know that everything is done to sorting is all done at the customer level.

So that's why going back to your question or P and see business. The focus it will remain on B to B and I agree with you that maybe.

The beat to be will you don't get down the revenue will slowly get down because of this move of ecommerce, but we're also replacing some of that business with E. Commerce that makes sense. Okay that we could do in our you know next day service.

Well, we're trying to explain to our customers that guys. We offer another solution.

Which is our logistics and last mile, Okay, which is which is really good but.

You need like a the other guys like Amazon you need you need warehouses and if you don't have warehouses, it's very difficult to do okay. What the Amazon is doing.

So I mean, it sounds like it.

Might be fair to say that.

You know if there's a big acceleration BDC and E commerce and it it's more on a structural basis.

That that's kind of bad news for PNC to some extent, but it's really good news for your last mile business.

It is that fair that it kinda.

Our parcels, yes yep.

Yeah. This is exactly what I'm trying to what I'm trying to say, okay, and you know when I talked to calorie VP in charge of our logistics and last one I said Guy Count you got a diamond you you've got a diamond in the rough and end up the only problem is that people still don't understand what.

We can offer they understand the Amazon solution, Okay, because Amazon is fully integrated now from warehousing you know two distribution.

And the US we're not in the white warehousing business, we're just talking to some customers and say guys. If you have this kind of distribution network we could.

If you on the E commerce. So we'll take time well we have this solution that is you know it's it's unbelievable what we could do with that it's just it will take more time, but the E commerce because of this virus will accelerate absolutely. So it will be to the detriment to the beat to be in the PNC.

For us or four bureau for a probably Fedex and U.P.S., we'll see.

Thats a shoen.

And it's probably going to be some kind of a permanent kind of impairment of the beat to be because of what's going on.

Right. Okay. That's great that makes a lot of since one other question.

And for you.

You know your strategy is differentiated in terms of the aggressive use of the independent contractors and obviously that you know it's a component of her focus on cash.

You know I know there there's some cyclical aspect to attracting I do you can you can probably you know attract a whether.

Drivers rise he's or whatever I would think easier in this environment.

Do you look to make potentially structural changes on the mix do you say well you know there's an opportunity. If we were you know I I'm not sure the number in a specific business, but if we were 40% I see 60% company driver.

Now we want to go to 50 50 year, we want to flip it and go to 60 40 or do you look at the market and just say hey, we like our mix of IP in company a driver and this is just cyclical stuff that doesn't change the kind of structural.

I see versus company driver mix.

Yeah very good question then.

And you got to different Oh look at it differently either if it so truckload operation or if it's a PNC and LTL operation PNC and LTL operation.

No. It's it's a model that's very easy to run with owner operator, why because it's it's easier okay easy to find the guys are happy they have their own business.

Their home every night et cetera et cetera. So that's why if you look at our PNC and LTL I mean, our mix is very very high on the owner operator model on the truckload side I mean, it's it's more difficult even in the U.S., it's even more difficult okay. Because a lot of those guys don't make any money.

Because there's you know in the U.S., a lotta pressure on race with customers that customers are smart they feel that old there's an overcapacity because the truckers, but so many trucks in 2018, because they thought that this would be you know a fantastic a year for the next 15 years really but other than the trucks and now the rates are the.

Yet so those four older operators are just.

Dying.

So.

To answer your question I mean truckload for US you know a mix that makes sense is 65% asset.

And 35% non asset, which would be either logistics or owner operator.

But if you look at our PNC and LTL, it's completely the opposite so there you you'll see us running at 30% asset than 70% non asset.

So that that the mix, but you're saying the mix doesn't necessarily changed for you as a.

Because they don't current condition.

No.

Right. Okay. Thank you for the time.

Budget.

Ken Hoexter with Bank of America. Your line is open.

Hey, Good morning Lane, and Dave Barney Ken just wanted to.

A follow up on.

The I guess you have great insight given your multiple segments and I forget what you're saying on the down 30 down 50 kind of you know different depending on the segments, but where do you look first.

Given your multiple views into the market your touch points to see the trends as you prepare for the reopening <unk>, where do you expect to see that that kind of the signals.

First within your different endpoints.

I think that a you know.

Where we've been affected the most okay, which is our PNC and LTL, what we're waiting the signal is that that's one point they reopen the you know the shops the malls.

That the retail business because this is really.

The killing a or b to B business. So that's why we're monitoring that by the day.

About three weeks ago, I said when I looked at a the sharp decline in a revenue in their pncs guys. I mean, you guys monetary that by the day, but to US. It's why the week of that office, it's got to be done by the day and we monitor yelled at labor.

The owner operator costs, a the staff costs and all that so for US. The other thing also that we've implemented the is it kind of bring back the employees with the support deal. So if an employee has been laid off.

Okay and when he comes back let's see comes back after 12 weeks. So we have a program in place.

That he's got an incentive to come back so if I remember correctly. The first four weeks, we're supporting this guy with a $100 a week. After four weeks. We go up to 125 for the next four weeks and then we go to 150 a week. So let's say the guy has been a way for 10 weeks. So so he's got an incentive to come back to work.

When we call him back so he's ready to come back because over and above that he's got his job back. He is also hobby it kind of a bonus to come back to and pay all the bills that he's been stuck with because of this this pandemic.

Great and then yeah.

You kind of gave some thoughts on on your your margin outlook for for the the P. and see you just kinda give that the mix change on on the on the truckload side, given trying to stay asset light, but what kind of margins do you anticipate.

You know seeing on on that the truckload side.

<unk>.

It depends if you look at a U S. T. L. I mean, if we look at or re forecast for Q2 like I said, we have no sector that is gonna be losing money now are we gonna be able to run at 90 495, or so far what we see is our or in Q1 has been a.

Are you rated by about 100 basis point right. If you look at a I think we did a 92.4 and a you before we did 92.4. So 100 basis point, you know deterioration year over year now can we think that a in Q2 can we see a 500 basis.

Just point deterioration, maybe what I've seen so far from the other U.S.P.L. is that in Q1 some of them a deterioration of 150 basis point or even more.

Not a lot I've been coming out so far.

So.

No the target is always not to lose money and this is.

No most priority.

It's very early in the game because we have only three weeks experience in April but what I could tell you is that if you. If we look at our model none of our division are losing money.

And even though our U.S.T. a is not losing money based on what we could see we lost some customers.

Because of closure like Paccar It for instance.

But we also have customers that you know are doing three or four times more like clorox. So our revenue is down yes, it's more down that tcten cfive because of our dedicated business for instance, Mercedes has been shut down but they are reopening.

Okay. So all in all.

So that's why we're not giving guidance because it's such a no known environment, but the only thing I could see is that the guys are working really really hard and we're not gonna be losing money in in Q2 or any other quarters I mean in all of our division and.

And every one of them.

Appreciate that and just real quick I guess start to wrap up are you seeing any differences in your Canada operations versus U.S. and in general in terms of.

How you're handling.

The impacts.

Well, what we look at the Canadian operation a in our truckload sector I mean, we're we're really.

That is our flatbed because of the steel you know if car plans remain shut down for you know months and months because there's no demand for cars.

In Canada, I mean, it's really are flat bed business has been affected we don't have any flat bed business in the U.S. So so we're not in that business. So.

The rest of our business in Canada is fairly it's it's down but it's not down as much as our flatbed business.

All right.

Thanks.

[noise] pleasure can Konark Gupta with Scotiabank Your line is open.

Good morning, calling in.

Thanks for taking my question I hope, you're keeping a safe and healthy there.

Yes, we are.

Thanks, that's very good to hear yeah. So just wanted to ask your first on the on pricing. So the seems like a b C. As you noted then they find that shows the pricing that positive in Q1, and then most of the segments from.

The negative in Q4, so it looks like more what caused.

The pricing done like that and then how do you see the pricing tranche and then the first two weeks of epilepsy me colorful.

Yeah, well, if you if you're thinking about our pricing with a with our LTL for example, I mean, our pricing improve its not because the market thus improve in terms of pricing.

It's just because we're getting with all the time of low margin accounts. So this is why buy or you know getting rid of all those guys I don't want to pay the fair price. It improves our average revenue. So LTL, it's not a pricing power that we have is just that we're cleaning up again and we always find those those situation whereby.

Hi, a customer tried to take advantage of a hell of a trucking company a if you look at our PNC. Okay. It's more like a the average weight or the coincidence of delivery rates are fairly stable you STL or read.

Little bit under pressure not so much okay.

But what we see probably in Q2 is that will probably a little bit of pressure on the rates in the U.S.

Not so much in Canada, so far so ill the way we're going to win this war with this virus. It's it's a bulk costs in ansible volume now the focus has always been a terrified that we service.

Customer, where we can make money so get rid of all those guys, where we you lose money or you make two points. So it's it's the this is why we're so light in assets and this is why return on invested capital is so good is because we focus on that all the time no. The problem is when you have be to be shut down like like 50 per.

Said you you lose business you lose volume that are highly profitable and there's nothing you can do about that except adjusting your cost base.

Hopefully when those guys reopened a you know within the next few months I mean, we'll we'll be back on business, but like I said earlier on the PNC side no.

Long term medium long term, we'll probably see either flat or some reduced volume.

But that is will be 45 to the advantage of our solution, which is our last mile and logistics already we see that I mean, our logistics division in Canada is up.

If you look at their.

So far in Q2 were up Okay. That's basically the only division that were up.

Year over year.

Actually we need M&A.

I see no. Thanks for that and I think are you. Obviously gave you gave us a pretty good color on mall hobby revenue run rates have trended in March and April so thanks for that or just wanted to.

Stance on the truckload and logistics side I'm. So you you noted that number so on revenue being in a down 20% in April and then on logistics up 12% in April. So I'm just wanted to clarify is that apples to apples I mean normalizing for acquisitions, yes, there was some acquisitions, okay, yes, yes.

So they include acquisition. This year has a lot last year right.

Yeah Okay.

So the logistic isn't isn't the ecommerce Ah that's what's driving the revenue up or significantly Marcelo.

Yeah, well, let me get that again, okay. So if you look at their logistics year over year, Okay in Q1 versus.

There was no real a big M&A, but if you look at the first two weeks, Okay Donnelly isn't there.

Oh hi.

So done the if I remember correctly I think we closed the deal mid March. So that's why you know we still show a some improvement but don't forget like I said our logistics in.

And the is up organically, okay. There's no M&A there up a double digit in Canada.

Hmm and then in the U.S., we were down organically. If you exclude the dominated why because we were really badly affected in New York, New York's big market for us.

Detroit.

Costs in Chicago, and so we lose their we gain on the other side. So so we gain a little bit on the E commerce in the U.S., we gain a little bit on the west coast.

Texas, We've also been affected in South Florida.

So oh forecasts as an example in their logistics and last mile in Q2 in.

The U.S., excluding M&A is that we're going to be down probably like 10% because of New York, and Chicago and Detroit and all that.

Okay. That's good color and they ended Crescent Lisa you mentioned a they scored began you saw good demand like household goods, obviously health.

<unk> ecommerce getting their mind, it's like obviously, we talked extensively about PNC here, but can you talk about exposure to household goods healthcare ecommerce for other segments like an LTL Theo I lost my or logistics, so what kind of exposure you have there.

And then how do you compare those trends in those segments wasn't b to b.

Okay. So if you look at Ah you know logistics sector I mean in the U.S. were really really big on the health care. So, it's probably like 25% of our revenue today.

No. So it's we've got we've got really some good exposure.

In the U.S. last mile.

With that in our PNC in Canada, I mean, it's mostly are.

Excuse me, our specialty like a like a nice yes, because of its optical exposure, although it's health care, but all the shops are close all the stores are close so it's not helping me at all.

LTL, it's small I mean LTL.

It's mostly retail as you look at my Pie chart.

Ill retail is number one and we used to be big in industrial LTL in Canada, but they shut down all the plants over the last 10 15 years old So were most the retail carrier like everybody else now in Canada on the LTL side.

Okay makes sense and the lost them coming out of this and don't at all and do you do see an opportunity to optimize your portfolio like like you did and took all the Nathan line I'm not going to be offset any divestitures or an acquisition. So focused on particular area. So it would be looking at.

Oh, absolutely absolutely we.

No the way I see 20.

20 years like Okay. It's a it's a test it's a test and a and for sure is turning some lights on it hopefully it will help us a sell even more of our logistics and last mile to our customers. So that we can offer them a great service at a very very attractive price.

It also you know we look at the LTL in Canada, and it's it's are shrinking business. So so I think that Oh, we have to do more M&A in Canada, and the LTL side to help us in the future I think that there's a lots of opportunity and Canada, maybe a there'll be some opportunity in the U.S., we'll have to see that that down the road.

Because you know we we're on a partnership a model with a with a U.S. carry right now.

You know, maybe we'll we'll see what happens there.

On the truckload side I mean, we we see a lot of opportunity again and improving our density in Canada, Ontario, mostly.

To beef up the density the.

The offering or we could give our customers.

And we've opened up a small specialty truckload division in the U.S. through some acquisition, we would like to grow that so there again they'll be a lots of opportunity we were discussing with many many trucking company in the U.S. about Ah you know joined the family and do.

More with <unk>. So our balance sheet is really strong our team is second to none.

You know our mission is very clear. So you know we have to go through this storm, we we've navigate to some storm before we're going to navigate to this one we're really solid we monitoring.

[noise] monitored things by the day.

And we're not sitting on our hands.

That's all for me like I guess I'm not sure another good luck.

Thank you likewise.

Brian Ossenbeck with JP Morgan Your line is open.

[laughter] [laughter] good morning, everyone. Thanks for taking.

Taking my questions.

Well I just a follow up on that last that last one you're talking about consolidation. After obviously, thank you just run us through competition at this point in time, considering the big drop off and in volume. If you see any place that it's maybe a little bit outsized pressure, particularly in some of them more.

Challenging end markets and you know away from consolidation what do you think about the just the general health of some of your competition are you expecting apps and consolidation just for some capacity overhang to get lifted here as some players exit the markets you know maybe more of the asset heavy side of the business.

And well you know what we're seeing so far from the competition is I think that everybody. So busy trying to manage the you know the downsizing of the business.

You know they've not been chasing the other guys volume to try to replace the volume that they have lost because of whatever happened.

That's what we've seen so far.

<unk> that may change down the road, but so far I mean, everybody. So busy trying to manage okay safety for the employees downsizing. The operation. He was doing there is doing that.

We haven't seen any competition trying to chase volume. The other issue is that if you try to.

He is volume the shippers are busy also themselves trying to manage their own their own issues right.

So is that the right time for them to switch because a one truckers going crazy enough or.

Stupid rates mm. So so far so good on that I mean the.

As we have we haven't lost anything so far because of somebody comes in and and offer a stupid race to a shipper and the Guy says, okay I'm going to jump on that.

So far.

In terms of Ah you know the industry in general if you look at the industry in general in Canada is very different than the industry in general in the U.S.

Does what we see out of a you'll do large trucking company to you as their their balance sheet as strong most of them don't have any debts. So they don't they're not I don't think they're going to go crazy banana, but in Canada. It's a different story I mean, most of the companies are small a highly leverage.

And.

For sure. The some of those guys are calling us and we're saying guys. How many M&A is completely out of the question for US now, but we could start looking at the situation. So this is why when I say looking at the situation as you know today, we probably have eight or 10 active files in Canada that we're just waiting okay.

Just say okay goal, because we have a you know more visibility about our Q2 and what Q2, we may look like so if you think that a after we look at April we look at May and we okay. Fine here are we on plan with our new Reforecast man or we better than the plan or we.

Worse than the plan now will guide me into saying well. Okay. This is these are the small deals that we could do right away in Canada. These are the small deals right away, we could do in the U.S.

So so the M&A machine that T. Five has been put a whole for now okay because of we wanna be cautious, but that doesn't mean that the activity.

He is not there I mean, we have lots of opportunity that's gonna be so great for our shoulders in the future.

Okay got it.

On the self-help side of things happens here, you're managing through this just like everybody else, but.

What a while ago you can find some of the leadership.

<unk> for last mile logistics and give them some responsibility in the U.S. The Canadian team. So maybe just give us an update on things away from you know in areas that you can control combining the system is an operations platforms, rather on the t. outside.

You asked and then specifically on.

Last mile logistics is that something here, just sort of treading water on given the current environment or are there.

However, as you can call here in the meantime.

You know, what's the right and what we've done with our logistics or trying to have cow oversees both division USA and Canada, having dean oversees both salesforce.

She was in Canada, I think also our Canadian of financial team help our U.S. team there.

It's already already helping our U.S. team to do much better don't forget that these guys have to swallow. Okay. Three acquisition, we bought back completed I come U.S. completely.

Organized we bought be VIX in 19 completely disorganized, we bought the core your division of the only even worse. So those guys had a lot of challenge and they need help they need support and this is why you know if we look at the all these acquisition. This is be FEMA beefing up the.

Revenue, helping us oki improve our density and at the same time, we're also correcting some mistakes or the past some some culture is issue.

You know the focus about a you know making two points is that good business well maybe for the other guys not for US I mean changed his sculpture and.

If we if we look at our Q1 U.S. last mile. It improve it improved by I would say about 200 basis point and I said that in Q4 on the call or is that I'm seeing at least on a basis point improvement on the you and the U.S. last mile operation, even in a very difficult context <unk>.

Because some of our great markets like New York [laughter] forget about New York I mean, it's down 60% 60, 65%.

Because of what's going on there are some of the Greek markers like Chicago, It's down also as well so even with that I mean, what we're doing way better in terms of dollars bottom.

<unk>.

And percentage.

So it so great and the there's a lot more to do.

Okay got it last quick one if you can just offer some comments on.

The decentralized model that you have with more of the central overlay for a lot of the functions and the monitoring.

You touched on it a few times during the call in terms of Harry monitoring things, probably a day instead of by the weak, but just wanted to see if you give in this current stress test that you're going through what you think of the model going forward. If there are things are looking to add or tweak or is this kind of what you expected.

Hello, how for it to perform and the people underneath you given the current environment.

It is seeking a team is Ken I mean, Brian.

Our team it is really great what I've done is monitoring by the day instead of by the week is it's just I want to make sure because I've got a responsibility with the board and with my shoulders, and I don't want to come up with the.

She was the old okay. So we dropped the ball no no no no we can't come in with somebody shoes, we dropped the ball. So I've got a strong believed that my guys are doing the right thing, but I just wanted to make sure that hey, we don't drop the ball because this is like you said a lot of stress you have to manage downsizing you have to.

Managed customers expectation et cetera et cetera. So these are very very difficult times and you know in very difficult times. Like this is when you see that you got a hell of a crew and I'm. So proud of our crew at T.F.I. I mean, Oh My E V piece I mean, the guys are doing.

<unk>.

A fantastic job.

A fantastic job and me you know like we always doing the yet office would just want to make sure that those guys are you know focus on the writings and this is why no I went through a lot of different a phase critical phase in my trucking carrier been a truck or for some 20 years, So I'm I'm there.

Just to make sure that we don't dropped the ball, we don't lose focus and also on their to motivate the guys and to encourage them. It's not easy to do what we what we have to do now to be successful and to preserve capital and to keep the morale up.

You know when you drop a when you have a business that drops 50.

For said, it's not it's not a crisis. It's a tsunami. So so you have to let go people you have to what are we gonna do tomorrow. It's it's not easy and this just happens overnight, it's not something that has been going on okay for six months. It just boom and happened and then okay [laughter] what do you do now.

Right.

Right Okay.

Okay, great. Thanks, I appreciate the time.

Pleasure right.

Walter.

Rachlin with RBC capital markets. Your line is open and thanks very much good morning I like.

Good morning Walter.

So when I look at your free cash flow for this year I know you're probably.

To give any guidance there, but just looking at one dollar free cash flow deployment.

It sounds that you know obviously you know you talked about acquisitions being on hold for now.

With that hold as well you know, obviously dividend buyback and really you're just reloading your balance sheet building up.

<unk> is that the best description of of the 2020 strategy for free cash flow.

Yeah. So there's no concern on the on the dividends. So we're not going to you know do anything on the dividend and 2020.

In terms of M&A like I said nothing is going to happen in Q2, and there may be something in Q3, and then Q4 depending on.

What's the visibility we have now.

In terms of the buyback we put that on all we did some buy back in Q1, we bought back about a million three 1.3 million shares were not this was not normal because normally you don't issue shares and buy it back.

This was just because we gave notice to the yield the.

If I could see RBC that manager and see I'd be prior and the stock dip so much with a with what happened that a the buyback was now back on track, but as of April 1st I mean, we're not doing any buyback, we're just going to wait and see what once we see what April looks like what may looks like and what the stock price.

It looks like.

Maybe then it becomes a choice are we going to buy a company or we just gonna by the stock will see them, but I don't think and see I'd be isn't the picture at least for a few months.

And then as we go like MS. Yet Yeah, excuse me walk through but you know on the Capex side, it's gonna be a huge.

Action and we can afford that because our fleet is so young in the U.S. and then so weve cancel the U.S., but we postponed Canada. So so on the Canadian side, depending what we see in Q2 in the early Q3.

Or in Q3, we could we could get the benefit of those.

Epyx, okay, because they were booked at a very low exchange rate. The U.S., Canada. So we would like to do those can eat in Capex in Q4, but you know the environment has to be a you know a positive for us to do that.

You mentioned some follows you were you were you were.

Getting you're doing due diligence on your holding back for now obviously given the conditions. What's your mean you know concern is it really just you don't know how much covert is going to impact the operations of potential targets and you want to get a better handle on that or is it that the seller is gotten a little bit more reluctant or are you.

Negotiating price given everything going on what's the tenor of.

The discussions with those you're already have actively involved it yeah. So so the first reason for us to put that on the goal is to preserve cash you know not knowing okay. What will be the impact of the virus and how long. This is gonna be an issue. So that's the reason number.

All the discussion, we're having with sellers.

Nothing is about price so far.

Because we don't want to talk about price with these guys trying to tell them that well you know a market valuation of trucking company has dropped 30%. So a we have to drop our off for a 30%.

We.

Don't like to do that I mean, because you know maybe a T.F.I. stock is down 30, 40%, but this is maybe it's going to be up a 30% in a year and a half so.

If we don't play this game of trying to squeeze the seller, we have a reputation thus encanto and in the U.S. to be fair. So we.

Turning to buy you'll have a fair price but.

You know if there's a permanent impairment in the target okay. Because those customers on this guy has or let's see as revenue was 60 million and it will never be back at 60 minutes is because whatever happens I mean, he's got a lot of b to b customers.

Down and it will never reopened then we have two we addressed the price okay because of that but we never readdressed surprised because of market condition. This is not fair in our mine, but for now everything is on old because we want to be cautious about hill preserving the cash.

And on that note about.

An impairment and then opportunity obviously, there's going to be companies that post covert 19.

Our permanently impaired or there will be those that go back to normal and those that thrive and go to a you know benefit from a new normal when you look at each of your businesses generally once covert passes and.

A new kind of new normal establishes what's your anticipation division by division of whether they can go back to normal you know whether they will be a permanently impaired or are there or what what areas, where it would actually propelled to a new level post overtime.

Yeah.

So that's a that's very good question, though Walter and I think that are on PNC I said it or is that.

'cause it beat to be will never be the same.

Okay pre coal would 19 and after covert 19, I think that a lot of malls a lot of stores et cetera. So we'll never reopened.

So that's that we'll have some effect to our beat to be okay. We didnt Rps he nextcity.

Delivery system, because they've got will never reopened.

So that being said, but it will probably be small nothing major okay, but it will be more than you know if we went to have this virus that.

Accelerate the E commerce, so we will probably lose a little bit on that side, but we'll gain tremendously in our logistics and last mile operation.

Both in <unk> in Canada, and the U.S.

The LTL to me I've said it many many quarters is LTL it keeps on going down all the time because of the ecommerce.

Yes, so the only way us we've been able to sustain some kind of revenue is to M&A. Okay feed the beast why because and then just sort of continue serving the good customer that you acquired through the acquisition and just get rid of all the small guys that don't want to pay a fair price. So LTL is.

So little bit the same as a is the PNC because all these malls smoky I've been fed up fed by <unk>.

PNC guys and LTL Guy So to me, there's a little bit of permanent impairment. There. Okay. So this is why us our M&A strategy. Okay in in LTL, we'll keep on you know doing.

What we've been doing for you know for that long with time.

I don't think truck, though will be impair that all because truckload either specialty or van I mean, all this switch of E. Commerce is really not a big effect on truckload I mean, those fulfillment center have to be filled up like a.

The D.C. of of Wal Mart, and the D C or a of of Amazon and all the guy. So so on the truckload side I don't see anything significantly because of this virus before and after.

So huge gain in my mind down the road with our logistics will really seeing that some customers are just saying you know what we would like.

Or an Amazon type solution Buckeyes, we have that.

Well, yeah, but we don't have any dcs well, okay. Fine we don't have any de sees US well you could we could match you would someone that's got a D.C. that's their business to run the sees.

So we see that and it's it's a it's the diamond when did that.

T five family like that waste used to be isn't one of our diamond PNC is still a diamond went into <unk>, but it lost a little bit of his lustre because of this you know maybe some small permanent impairment because b to b will never be the same.

After this virus thing that gets back to normal.

But all in all if you sum that up within T.F.I.T., if I will be a huge gainer. Okay. After this virus is behind us.

Okay. That's really good color I really appreciate the talking about.

Pleasure Walter.

Cameron Doerksen with National Bank financial your line is open.

Yes, thanks, good morning.

Morning, Kevin.

Just two I really quick ones for me first just on the R.R. Donnelley acquisition that you mentioned that the profitability of that revenue is probably a pretty low I'm. Just wondering just into very short term what that means for for margins not business that business. So you can pretty rapidly get the.

The revenue improved.

Absolutely absolutely I'm convinced that the Cameron I mean.

No we bought the business.

We have to shed one major account that Ah you know didn't make any sense. So those guys are are gone the will be gone with the next few weeks.

There's another one that will be gone in June.

Significant customers, but you know.

It's it's just crazy listen to that we had he cargo liability with those guys in the $10 million I said things like I said, I mean, who can be hauling ER opioids or things like that with 10 million dollar.

So you can negotiate the race with the customer in the first thing you have to negotiate with them is we don't want to have this 10 million dollar liability.

So customer says well, we'll try to find another stupid trucker, that's going to accept that well good luck.

So so that being said those two customers two or three customers are gone the rest.

What we see so far it will be good business and it fits in the into our network. So this donnie acquisition once we get rid of all the things that don't fit <unk> fine, it's going to be fantastic.

Okay, Great and it just secondly for me just on the specialty truckload in Canada specifically.

No one of the drivers there is obviously construction activity ABR already starting to see a little bit opening up but I mean is that yes, that's kind of one of the bigger drivers of that business rebounding equally construction coming back.

Yeah construction, there's one mining is the other okay. So mining is back okay, but we you know for mining you need the.

The economy to get back on track so yes, the mines reopened in Canada. So it's good but we need the global economy to you know to be on track. So when you look at a at what is anticipated for 2020, most of Europe is gonna be down GDP about 5% six seven.

Sent the U.S. about the same so it's going to be still it difficult here for us in 2020, but I think 21 is going to you know explode back into you know what what makes more sense. The other business. That's affecting us is the the automotive business because of the steel so steel and automotive.

I think it's gonna be really difficult for them at least four year.

So so probably is gonna be slow until mid 2021 at 21 21 21.

So really the the specialty truckload.

It will probably to be the one that is less affected but really our.

Flatbed is the one that the this mostly affected and though as an example.

We all a lot of explosive for the mines Whoa everything was put on hold until now so in Quebec, a the construction has been put on old since mid March they are starting slowly to reopen <unk>. This has been a huge.

Huge negative for us in Quebec, I mean, Oh, I think Qubec was the only province or state that closed or under construction industry. So.

First thought that he is back on track.

Okay. That's helpful. That's all three thanks very much.

Pleasure Cameron.

David Ross with Stifel.

And your line is open.

Hey, good morning Len.

Well I think David.

Just a quick question on the last mile in the U.S. After the three deals you've done recently are there any holes left how do you think about the U.S. network and where do you want it to be in a couple of years versus where it stands today.

Oh, Yeah. That's a very good question here. So yes, we have some markets, where we should be stronger or better.

And we're always going to look out for for some M&A or we have discussion with another group and finally, a you know a maybe it will happen sometimes a late this year or lean to next year.

Well really the main focus of our business in the U.S. with cow and Dean there is two to really sell our solution. Okay. We've been very successful encana selling our solution, but not so much in the U.S. as of yet so really a you know we have a great solution for E.

Commerce, we have a great solution for let's say the healthcare industry, we do well, what we could do better and so really M&A, yes. If we can if we can find the right target in the U.S. absolutely will go to jump on that but I don't see anything major in 2020 on that but why she.

Very important with Cowen Dean and and Scott leverage and all the team in the U.S. His guys. We have a fantastic solution or key that is second to none and we have to <unk> to have customers understand better. So so we we are really focus on that for for 20 now.

The problem is that you know tried to sell something to a customer now it's difficult because you know there like us they're stuck in this major crisis of the virus. So.

There's not a lot of people to really listen to a new solution, but we're educating educating our salespeople you know were.

You know working on the program and all that to be ready as soon as we can sell this solution to the market. So right now big issue is how are we going to digest. All these acquisition, we're doing that now weve improve our bottom line like I said earlier in our U.S. logistics by about 200 basis points in Q1.

No we still have lot of work to do with <unk> Donnelley acquisition.

So we're busy we're busy we've got lots of good stuff, but also we're getting ready as soon this weekend to sell our solution like we're doing in Canada in the U.S.

And then he talked recently about the automotive sector and.

How that's going to take some time to come back.

9% of the business.

Which yeah segments is that most concentrated in would that be LPL and Canadian truckload or is there.

Because they didn't truckload and a little bit also U.S.T. also we got Paccar as an example customer both in U.S. in Canada.

Those guys are shut down.

Oh got Mercedes in the U.S., a those guys are shut down we got the Nissan Okay. So it's it's.

I would say probably little bit more U.S., then then Canada for for the automotive business today.

S.U.S. Mexico.

Okay, but it's primarily.

Early in the truckload segment.

It's yes truckload yeah, no no no nothing major in LTL or in PNC.

Excellent. Thank you.

[noise] pleasure do.

Our final question comes from a line of Ben Wap, Jorge with DB Chardan capital, if you'd like to ask a question.

Please press star one.

And why your line is open.

Good morning alike.

Yes, just to come back on the potential targets on the last mile business into your west would it be similar profiles to die calm down or we can be back sort this would be higher <unk>.

Let's say a more organized companies or would it be now would be the profile.

It's it's a it's going to be the same kind of profile.

Okay. The three that you just talked about.

Okay. That's great that's great, Okay, and when we look at E commerce, you've been very very disappointed in the past.

You could have grown that business much harder, but profitability was all always a big truck show. So I'm just wondering given the strong demand we see these days what about the pricing environment do you think there's better unfortunate jeez I give it a Muslims are.

We busy and is your goal to become fully integrated or really to complement.

The biggest player right now.

Yeah. Good question. So yes, you know Amazon for sure is really really busy ER and what we've done us in the meantime is you know.

Because new York as an example, I mean were down so much in New York with our regular customers. So oh.

Our U.S. team said, Okay, we'll we'll do a deal with Amazon. So right now we're we're delivering about 5000 parcels are they new York because were down so much. We know that this is short term, we know that a as soon as.

They will try to find somebody else to do it cheaper than us because us wearable making money.

But that being said Oh, you know the environment, what we're trying to do by the way is I've customer understand better our solution now or solution. Like you said is not fully integrated like an Amazon.

Amazons got the D.C. fulfillment center and distribution today. So our solution is a little bit like the other transportation company, a U.P.S. or Fedex whatever is that we offer the transportation not the DC.

But our solution to customers that have the she's or are matched up with the.

<unk> is is the same is similar to what an Amazon solution is very efficient.

Lean and mean, great service and that's what we're trying to do now down the road. Okay does it make sense for us to really have a partnership okay with with someone that's got the DC.

But b D and that's offering to the this kind of service to the shippers, maybe that may happen, but anyway, but we're not there yet.

Perfect and when we look at the the fuel and the foreign exchange <unk>, obviously, there's been some big movement year to date, which.

I would expect to be favorable so could you maybe provide some color or on how does that going to be flowing.

The bottom line with respect to fuel and ethics.

Yeah, well if he wants a pass through so really not nothing major for us on the fuel side, but really on the FX for.

Sure I mean are.

But but we need U.S. dollars profit to be you know significant so depending how all good our last mile and our truckload guys will do in the U.S. will definitely help t. a fine.

Our Canadian Division most the run the Canadian dollars, except for some of our truckload.

Vision, so it could help us a little bit in in your own the rest of the year because now we're I think the dollar is about $1.40 something like that so we'll see but this is not something I would say by the way, it's really significant for us in terms of bottom line.

Okay Perfect last one for me you.

Part of a consolidated number four net capex. This year I was just curious whether or the amount that bassett disposal should be bigger in light of a the adjustments to the capacity or I said disposal should be no you similar to the panel no normal normal I mean, what we're doing as we're not shedding.

So okay because of this no revenue shortfall is because.

You know like we're protecting our employees with our kind of system a bonus to bringing them back to work. We don't believe today that this will be long term impairment in terms of the volume. So it will be a disaster in Q2 in terms of the.

All you everything that we read says that maybe the U.S. a GDP in Q2 will be down like 30%, okay, but it's up in Q3, okay. So and in Q4 everything that we read about that so what we're saying is that okay. Well, we don't have any other options. So we sell what needs to be soul.

Oh, well what is still useful for the company in the time being isn't gonna have to park that defense and wait till the business comes back.

Okay. Thank you very much more defined by laying the congratulations again.

Thank you been or what.

There are no further questions at this time I would now like to turn the call back over.

I mean prepared for final remarks.

Well. Thank you operator for facilitating this morning's call in tank you everyone for joining us today. So we had to you if I very much appreciate your interest in a wants you to know that as I've said, we're working hard to create value on log and on lucky.

For.

Investors and whenever possible returning excess capital to our shareholders.

So I look forward to updating you throughout the year and I can assure you that working together, we will all make it through these unprecedent times and <unk> and emerge even stronger so I have a greedy and thank you again.

This.

Pollutes the T.F.I. International's first quarter 2020 results conference call. We thank you for your participation you may now disconnect.