Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Thomas Wadewitz – J. P. Morgan.
Thomas Wadewitz – J. P. Morgan
I wanted to ask you first on your thoughts about the transportation gross margin which was a very impressive number, quite a bit above what we thought it might be, the 22.6 number. Do you think as you look at second quarter, is that a number which can actually go up? I mean, you commented on pricing that you’re paying the truck load carriers, your suppliers going down through the quarter so it seems like a very high number. But, is that likely to go up when you look at second quarter or do you think it is more likely to come down?
Chad M. Lindbloom
It’s really going to depend on what happens in the marketplace as a whole. Generally the first quarter when you look at history is the highest margin percentage of a quarter. So, they’re having some unusual times recently so it’s very difficult to predict and it’s really going to depend on the market supply and demand dynamics.
Thomas Wadewitz – J. P. Morgan
I guess you commented on the truck load pricing dynamic, is it a big deterioration in pricing where you would expect instead of being down 1% like you were in first quarter to be down significantly more in terms of what you pay to your truck load suppliers in the second quarter?
John P. Wiehoff
The customer pricing trend is downward and we would expect it to be a greater decline. The challenging thing to forecast is how that would relate to the cost of hire and exactly at what pace the two of them will work together. So, there’s a volume relationship, like I tried to describe how volume and price will kind of correlate. When you look at it fuel prices obviously are probably the greatest driver of that percentage and then you’ve got mix issues in there as well too for all the various categories of truck load services and less than truck load.
There’s a lot of variables that fall in to the mix and there’s a lot of market forces that impact it that are all moving around as fast as ever. So, that was really the essence of the message in the prepared comment is no matter how much you study it, it is just getting harder and harder to forecast it.
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