Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from John Quealy – Canaccord Adams.
John Quealy – Canaccord Adams
First on North American Rehab if we could, Joe, can you give us a little bit more detail on the volume and price relationship in the impact on the model moving forward? Clearly volumes have gone up significantly. It’s unclear what volumes are going to do moving forward in this municipal market, but can you give us a little bit more detail, the 22.5 give or take gross margin in the quarter, do you think that’s a defendable margin based on varying levels of volume growth or deceleration moving forward?
J. Joseph Burgess
Well, I think that our – I think it’s difficult to look at gross margin in any particular quarter because there is some variation and seasonality to this business. However, what I can tell you and what I addressed in the remarks is we as a company are very focused on seeking out work where we think we can deliver quality margins to our investors, and not seeking out work that we think is either overly commoditized or not going to be work that we can perform at margins that we think are worth our while, frankly, to be in that work. And that’s driven by a great many factors.
Some of it can be just the level of some sub-contracting work, which can be impacted by the level of bundling that communities do with certain services as opposed to our core CIPP work. But I do think that a number of the initiatives that we’re taking, trying to focus on negotiating work with our communities, again trying to focus on areas where we have a great crew presence and strength which allows us to minimize mobilization costs and other logistical issues within our business, are helping us to drive down costs and increase margins in the work that we’re selecting to participate in.
John Quealy – Canaccord Adams
Clearly you’re steering away from low margins. Can you characterize pricing in the market in North America? How would you characterize it? Is pricing aggressive now or you haven’t seen anything yet?
J. Joseph Burgess
You know, I’ll tell you what I kind of talk about internally here. I think this business is very difficult to generalize about in terms of North America. We operate in Sewer and Water Rehab businesses and in many ways it’s the most local of businesses. So while this may seem like a broad answer we see some very aggressive pricing in some regions from time to time, and then we see markets that we think are priced more fairly for the risk, particularly the execution risk of any particular vendor is taking on that job.
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