Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Rich Wesolowski – Sidoti & Company.
Rich Wesolowski – Sidoti & Company
Can you talk about whether the recent economic financial events have prompted you to reconsider the strategy of adding headcount in anticipation of your business instead of in response to new business?
Phil Hawk
No, it hasn’t changed our view at all on that. As I mentioned we don’t see, obviously we’re watching it very, very closely, we don’t see, as I mentioned in my remarks, we don’t see any change in the basic demand for our services because again in our view it’s driven principally by the presence of the population of operating plants. We see frankly even with the severe downturn we don’t see scenarios where we’re going to see large scale plant closures or changes. Our view is basic demand is out there and our opportunity to gain share continues to be as robust as ever and we plan to continue that strategy.
Rich Wesolowski – Sidoti & Company
We spoke about wage inflation, other material cost inflation on the last call. Have you begun to revisit pricing on contracts to recoup some of those costs and if so do you think we’ll see the affect in TMS margins?
Phil Hawk
In fact, it’s an ongoing issue and challenge and yes we continue to address it. I would say the difficulty with looking at a single quarter’s data is that it is a single quarter and it’s reflecting and it includes the impact of lots of mix and puts and takes and changes, etc. I’m frankly pleased with the progress we’re making. We saw if you recall Ted’s summary kind of in field branch margin level which is really how we really focus on it we saw on average a point increase in the quarter versus a year ago. That includes a lot of ups and a few downs again because of the timing of projects here and there.
We’re seeing a lot of good focus on that. You saw a big decline in the gross margin in TMS; I think that may be what you’re referring to what we reported in the release. We don’t really look at and manage our business exactly that way but those are GAAP reports that we are required to put in there. The primary driver frankly is big projects particularly in Canada where we have a lot of pass through expenses per diem and living expenses so that just the inherent margins on the reported revenues of that are going to be lower than I’d say a stand alone business that doesn’t have some of that activity.
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