Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Kevin Sterling - Stephens Inc.
Kevin Sterling - Stephens Inc.
Regarding the DOJ investigation do you anticipate any legal expenses going forward and if so maybe can you give some color as to how you’re thinking about some of the potential legal expenses relating to that investigation?
Allen Doane
We do expect some legal expenses and we’re just not in a position at this point to estimate what they might be.
Kevin Sterling - Stephens Inc.
With your China service, it looks like you said you were partially recapturing some of your fuel costs, do you think you’ll be able to improve on this going forward, where does it stand in anticipation of recapturing maybe some more?
James Andrasick
As you may recall we have most of our businesses under annual contracts which open each year on May 1st, and in those 200-odd contracts every one of them has a fuel escalation charge or mechanism within it. This mechanism is fixed. Some of them operate monthly, some quarterly, and it’s a, to a certain degree a play against the base rate. Overall the market is sensitive to supply and demand conditions for every trade lane in the transpacific.
So we expect more or less to continue at the same margin level of performance that we experienced for part of the second quarter. Obviously everything depends on fuel prices whether they continue to rise of fall as they recently have, but we believe that the mechanisms we have in place will serve us well in this trade.
Kevin Sterling - Stephens Inc.
Some of the cost containments that Allen talked about in the presentation that you implemented at Matson in response to the softening markets could you give us some specifics and talk about some of these cost containments some more?
James Andrasick
We literally have 25 different initiatives running right now at Matson’s and I can assure you that we’re looking under every rock for more in this kind of environment. But the principal way we can control cost is by matching our capacity to the demand that’s out there. So we have made some significant modifications to our deployments, principally in the Hawaii service and by so thrifting, again without impacting our customers, most of the cost savings that we can generate will come from that particular kind of activity.
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