Randy Cousins (BMO Capital Markets): Can you give us guidance as to how to think about materials and other for the second half?
Matthew K. Rose: There were less land sales than it was a year ago. It probably is at least in the third quarter at a reasonably low level to what it was at in the second quarter rather.
William Green (Morgan Stanley): Can you comment about the inter-modal in the second half and once you''ve lapped the loss for Transpacific business that went all water?
Unidentified Company Representative: The big thing to watch in the second half of the year is the import numbers into the West Coast because even though we''re lapping that loss of the customer who withdrew, the fact is in the first half of the year and the projections for the second half of the year show that the gross imports in the West Coast are going to be down significantly.
Lapping that comp just gets us back to that baseline from last year. We''re going to be watching those imports very closely to see if there is any strengthening demand with the typical holiday season. However, we''re not getting any indications at this point if there is going to be any significant peak season this year.
On the flip side, our domestic business had a very nice quarter and we have a very nice trend going on the domestic business. As the domestic trucking companies are looking at all of their input costs and activities, clearly J.B. Hunt led the way in their recent call by saying that they were aggressively pushing more to inter-modal from the road. We''re hopeful for that to continue on the second half of the year.
William Green (Morgan Stanley): How should we think about the growth and also if imports don''t rebound anytime soon, have you over built the inter-modal system or how do you think about the cost of utilization of that?
Matthew K. Rose: As far as your heavy over-build the answer is no. We just won''t be expanding as quickly as we otherwise would have until that volume does rebound.
William Green (Morgan Stanley): In terms of operating leverage in your business, you had very impressive top line growth. Fuel is obviously some of this. However, the operating earnings grew 7% to 8%. How do we get back to operating leverage? Is it just the fuel has to stabilize or volume growth has to be there? Is there something more you can do on productivity?
Thomas N. Hund: The biggest thing is if fuel stabilized, you''d see significant operating leverage. In the quarter you''re right. Revenue ex-fuel, ex the surcharge was up about 6-ish percent. Most of that was price. EPS was up about 11%. I would expect we''d typically do better than that. If you carve out the fuel headwind, that 6% actually turns into an EPS of about a 25% increase. That adds good leverage. What we''re saying is if fuel had stabilized, you''d have seen significant leverage here.
William Green (Morgan Stanley): You mentioned the PRB stockpiles, were you referring to the stockpiles of the mines or are you seeing stockpiles in your regional utilities high?
Matthew K. Rose: Stockpiles at the utilities are at about a five year high at the end of June. However, the last several weeks, in the self and even up in the upper mid west, it has gotten a lot harder. We think that the burn rate has picked up so far this month. Hopefully, that will continue on for the quarter.
Thomas Watewitz (J.P. Morgan): From an ag perspective, it''s been such a tremendous story for several years. Do you have at this point, any visibility to what realistic volumes might be in terms of the next ag year? Can you still see high single digit volumes or should it be lower single digit volumes?
Matthew K. Rose: There are a couple of things. One, it''s a little too early in the crop year to make those predictions. This is because we just don''t know what the quality of the crop is going to be yet. This is one business where it''s extremely difficult to project out until we see how that crop year plays out.
Thomas N. Hund: It''s a timing dividend. We had our Board meeting today. We had the couple of ag customers and an ag experts coming in. We just went through the real game changers in ag in terms of the global demand and the issue with ethanol. We also looked at how the rail road is situated and I''ve been anxious for a little while and I don''t think we have ever been better positioned in terms of our ag franchise to take some of the cyclicality out of it and to make it more of a confident level of growth type business throughout the year. We''re feeling very bullish about ag and we believe that where there is ocean spreads or high prices, all those things really favor our franchise and a lot of things we been telling you through the years what China converting from a exporter to an importer. We see its happening and so we think that we''ve got some long-term lags on this thing.
Edward Wolfe (Wolfe Research): On the Montana charge, is there a cash component of that?
Thomas N. Hund: No. In the 8-K we filed, we said this is an undiscounted number to be paid out over about 10 years.
Edward Wolfe (Wolfe Research): On the headcount side, it feels like the volume hasn''t been here for a while and the headcount are down but it is down less than we have seen. What is your thought process going forward on headcount?
Matthew K. Rose: We have been under less volume for a period of time now. This quarter we didn''t have people that were down but more of retention boards that we used in some of the areas that we rerouted to.
We''ll continue that product and it''ll be better in the third and fourth quarters. There will be better clarity on that once we have more certainty with our 2009 plan in terms of volume.
Thomas N. Hund: We''ll look at our hiring plans and we just won''t be hiring where we don''t need it.
Edward Wolfe (Wolfe Research): On the inter-modal side, I certainly didn''t foresee two or three years ago, that you could have imports as weak as they are and exports as strong as they are. Can you comment about heavier and more exports versus fewer or lighter weight inter-modals and what that means for the profitability per box?
John P. Lanigan, Jr: The inbound, going from the West Coast to the East, was the strength of the growth over a number of years. As that suddenly shifted, with the downturn in the economy and the weakening dollar and stimulating exports, those exports become loads as well. I don''t think from a revenue per unit standpoint there is a big impact because load is a load. The bigger impact is they''re not all coming back to the West Coast. A lot of them were exiting the East Coast because exports are still being purchased by Europe at a stronger rate than they are from Asia.
That''s part of the story. We had all those MTs going back to the West Coast until this current economic period and East Coast exports to Europe were up something like 30% over the last year.
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