Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Second Quarter 2008 Conference Call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and answer-session. [Operator Instructions]. As a reminder, this conference is being recorded today, Tuesday July 22, 2008. I would now like to turn the conference over to Angie Freeman, C.H. Robinson Director of Investor Relations. Please go ahead, Ms. Freeman.

Thank you. On our call today will be John Wiehoff, CEO and Chad Lindbloom, Senior Vice President and CFO. John and Chad will provide some prepared comments on the highlights of our second quarter performance, and we will follow that with a question-and-answer session. I would like to remind you that comments made by John, Chad or others representing C.H. Robinson may contain forward-looking statements, which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. With that, I'll turn it to over to John.

Thank you, Angie. And thanks to everybody who is taking the time to listen to our second quarter conference call. About an hour ago, we issued a press release sharing the results for the second quarter of 2008. I want to start by highlighting just a couple of the key financial results on that release. For the second quarter ended June 30, of 2008, our gross revenues increased to 23.5% to $2.3 billion. Our net revenues increased 9.7% to $341 million. Our income from operations increased 11.3% to $144 million. Net income increased 9.9% to $90 million and diluted EPS increased 10.6% to $0.52 a share. Year-to-date for the six months, gross revenues were up 23% to $4.3 billion. Net revenues increased 11.7% to $679 million. Income from operations up 14.5% to $280 million, net income increased by 13.8% to $176 million, and diluted EPS up 14.6% to a $1.2 per share. Our results for the second quarter reflected the continuation of several themes that we've discussed, both at the beginning of 2008 and at the end of the first quarter results. I want to start by just revisiting a few of those topics briefly, because they remain pretty relevant to understanding the results. The first topic is gross revenue increases driven both by volume and price increases, related to fuel. In the press release, we shared some comments on volume and price activity, by mode, but the overall picture, driven largely by the truck load results, are that we had both volume and price increases during the quarter. But the price increases, by our analysis were virtually all driven by fuel price increases. We did experience continued growth from transactions or volume increases. And we continue to believe that we are taking market share, and that most all of…

Thank you, John. I'm going to cover some comments on our operating expenses, working capital, future capital expenditures and share repurchases. I will start with some comments with regarding our restricted stock program. John mentioned that our slower growth reduced some incentives compensation programs, including our restricted stock expense. As we mentioned last quarter, we currently expect that we will have additional equity grants awarded to participants later this year on 2009. Historically many of these awards, for many of these participants have been done on the periodic or a multi-year cycle rather than annually. One impact of this practice is they will likely be periods where more than one of these awards is being earned and expensed. We have two significant equity grants awarded under this multi-year cycle; one we will start investing in 2003 and one in 2006. Our awards have up to five years to pass [ph], but based on our significant earnings growth during the years of 2003 to 2005, our 2003 awards were fully invested prior to 2006. So we did not have overlapping expense. It is difficult to predict the impact of these new awards since investing and expense will be based on earnings growth and we don't know the total size of the awards at this time. It is likely that they will increase our personnel cost as a percentage of net revenue since the awards that began investing in 2006 will likely not be full invested by the end of this year. Now I move on to some of the comments, we made and add some color to the comments we made on other SG&A expenses. As we mentioned in the earning release we are continuing to invest in our business to support our long-term future, our people are traveling and selling…

Thank you, Mr. Lindbloom. Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions]. And our first question is from Justin Yagerman with Wachovia Securities. Please go ahead.

Hey, good afternoon. How are you?

Good.

I guess, looking back historically in this type of environment, just curious what your expectations are in terms of the lag between the pricing that you are able to push off to your customers and the gross margin contraction that you experienced in the transportation business. Obviously, we're in a different paradigm with fuel, and you discussed that, but what is your typical experience in a cycle, from cycle to cycle?

I think the important part along that question is, when will shippers start to tolerate or accept some sort of a price increase. And our sense through the first half of the year is that when we've tried to adjust prices on the shipper side that there was really no acceptance to it at all. Because it's perceived to be a continued soft market, shippers are already paying a lot more for fuel, and they just didn't feel they needed to be receptive to that. What changes this cycle is when freight starts to become tighter, and certain freight doesn't move. And then shippers will start to first transactionally and then ultimately through bid processes, start to accept rate increases that will allow for some of that margin expansion. So, I think, nobody knows for sure, and we certainly don't have a guess as to, when freight demand will accelerate. But, I think, that will be the next step that will change the market conditions and allow for some price adjustments.

Was there a lot of freight that you guys turned down, because you couldn't get an acceptable margin on it in the quarter? And, I guess, along those lines, did you see a difference in the fill rate on customer requests? So, if you were filling 95% of the loads that people were asking you to do, you're now filling 75% of the loads. And, I guess, where is that threshold where you typically then start to see this spurt in pricing getting passed through again?

We don't have precise metrics around turndowns and fill rates, but I do know that, each day we have a certain percentage of transactions that we actually loose money on, where it's costing us more to hire the capacity then we're able to bill the customer. And we certainly had a decent percentage of those in this quarter as well, which would indicate that, yes there are transactions that we're turning down because we can't get enough margin. And there are opportunities, where... or not opportunities, but situation where certain lanes and certain conditions, where pricing is just very difficult and we can't... we can't pass it along. It really becomes difficult to anticipate on an overall basis exactly when you reach that tipping point, and exactly when freight will sit long enough, that people will tolerate price increases in order to get it moved quicker.

Was there a segment of transportation especially in the truckload sector, whether it be refrigerated or flatbed where you shop better acceptance on the part of shippers to accept rate increases or past through where if you broke your margin down by... I guess specialty mode?

Not really, I would say the overall environment across all shippers is that pretty much everybody's business is under some variation of strain and everybody is paying a lot more for transportation because of fuel and so they really wasn't a lot of sympathy across there, I do know that the capacity in the refrigerator side was probably even a little tighter and probably had a little more churn to it, but it really didn't translate into a lot of price increases.

Got it. And I guess lastly and I'll turn it over to somebody else. Just if you could take us through sequentially in the quarter, how things progressed? How much of this margin deterioration occurred in June versus April and May? It would be very helpful.

When you look at the gross margin percentage, we saw a pretty direct correlation as fuel continued to rise throughout the quarter, that the margins continued to get compressed.

Right and you said that... and so was it in June, where you actually saw the market lift things to the point where you got compressed beyond the fuel. You'd mentioned that in your prepared remarks. Was that when that took place or was it throughout the quarter.

Throughout the quarter, it was market-by-market; day-by-day, week-by-week and equipment types also were part of it.

Okay. Helpful guys, thank you, appreciate it.

Thank you. Our next question is from Tom Wadewitz with JPMorgan. Please go ahead.

Yes, good afternoon. Let see; I wanted to follow up a little bit on Justin's question, just wanted to see if we could parse this a little bit further in terms of the gross margin pressure and whether you think that this is the beginning of pressure from tighter capacity and there is probably going to accelerated and get a bit worse or whether you're already seeing kind of a normal gross margin pressure from tighter capacity and it probably doesn't get much worse?

Its difficult and we don't predict kind of where it's going to go or where it's going go to, but I guess the way to think of that is that you got supply and demand right in all different market conditions and you're thinking about how does those match up or not match up well when you get a softening demand market like we've had for the last year and half or so and freight levels are flat to declining and the freight demand is soft, you see the capacity leaving, you see capacity ratcheting down to try to match better to that demand level and sort of where it goes from here is that demand levels stay soft or get softer than the capacity will need to continue to keep ratcheting down and won't provide a lot of increased margin opportunity or changes in conditions. The real lever point will be if freight demand hops back up or starts to strengthen this fall or this December or next spring or whenever that would happen that's what would really drive a dynamic change in the margins. So as we said in our release and in the prepared comments we really haven't seen any change in the market condition to date. But as we learned already this year these market conditions can change pretty fast and things like fuel price changes can accentuate how quickly they change.

SoI mean the way you characterized it, it sounds like it's primarily fuel that's causing the gross margin pressure in second quarter and that it's not... not yet a big impact from tighter capacity, is that right?

It's definitely both.

Okay.

But from a gross margin percentage standpoint, fuel would be the larger component to crack.

Okay, and typically in terms of the timing of your contracts, if... assuming that the contracts are somewhat of a constrain in getting your pricing up. How long would it take to get those... most of the business expiring where you could try to price up in response to the higher pricing you maybe paying for capacities, Is that two quarter delay or is it longer than that?

Well there are, that's where it gets relevant to sort of think of the freight in two baskets, one being the transactional stuff that sort of moves daily, that can price adjust daily, and other longer term price commitments that generally get referred to as contractual relationships where they don't move daily, they generally bid annually or something like that, but most of them even have kind of 30 day notice type thing. So the market, the market can move pretty fluidly and things can... at least a decent portion of the freight can re-price fairly quickly when market conditions warrant it. But if the supply and demand is relatively matched like it was in this quarter, it really doesn't trigger the environment where a lot of bidding or re-pricing starts to happen.

Okay so it's not necessarily a long time lag. But you got to have the right market conditions. And then I guess one more, I'll pass the line to someone else, I think Chad, you had some comments on some factors where there is some doubtful accounts and I think you talked about some accident costs in the quarter. Those showed up on SG&A, is that right? And then is it fair to think of some of those as being a bit unusual in terms of the magnitude in the second quarter and might not be a similar amount in a more normal quarter?

Yes, if you look at the doubtful accounts, like you said part of this or half the increase roughly is just based on higher gross revenues. Because obviously our bad debt and our need for an allowance in our receivable balance is based on gross revenues not on net revenues. And then there was a couple that we hope are unusual write-offs. But on these types of economic times we could have some other customers have financial difficulties where we face some additional write-offs. But like I said in the call, overall looking at our existing receivable portfolio, it appears to be as high quality as it's been in the past. On the freight claims, yes, it was pretty rare for us to... well on the continued liability case that I mentioned, it's pretty rare for us to have a significant liability settlement because the way our business works and the way the contracts flow. All that liability is put back to the actual carrier. In this particular case we chose to settle it rather than continuing to litigate and that was it, about half of the increase that we had in total insurance and claims.

So what... I mean if you look at those that you want to characterize as a little bit more one time in nature. Are those 1 million in the quarter or 5 million in the quarter? Is there any way you kind of frame that... the magnitude of them?

Yes, I really hate these, as far the claim experience is, it's probably $1 million worth of what we would consider unusual, the bad debt provision, I can't really even say what's unusual versus not.

And the auto claim, the other liability claim, I guess?

That was in at the $1 million number that I talked about between some cargo claims in that auto liability claims.

Okay, so both of those are in the 1 million area. Okay. All right great, well, thank you for the time.

Thank you, our next question is from the line of Jon Langenfeld with Robert W. Baird. Please go ahead.

Good afternoon. Chad, can you just remind us the incremental... potential incremental investing of the restricted stock. Will that take place... will the next layer of that start at the first of the year?

Yes,the grants will likely happen in November, December of 2008 with the investing and therefore the expensing to begin in 2009.

Okay, all right, very good. And then it's not clear on that last point with the claim. There were kind of two layers of claim. One is the freight claims, damaged freights, something along those lines, the others would fall on that line of this contingent auto liability claim which was an accident amount or something?

Yes, it was an accident from a couple years ago.

Okay, but those are two different buckets you highlighted in your prepared remarks?

Yes, they were freight claims, they were just a couple... one or two stolen trailers of relatively high valued goods where we chose to step in and preserve the customer relationship and will seek restitution from the carriers.

Got it.

Where they rejected the claim.

Got it, but the carriers are still around, the insurance companies of the carriers are still around?

Yes.

Okay, very good. And then the piece of the CapEx you had talked about, the $8 million you said it was above and beyond the $25 million, the $25 million was just your standard CapEx guidance this year?

Yes.

Correctand is that... when we think about normal run-rate CapEx in the $25 million to $30 million in the coming years outside of this data centers, is that a realistic range?

That was probably outside of what we have been calling and we've had a field done on recently, real estate or building expenses, that at this size of the company that's a pretty good range, and it could grow as the business grows.

Yes.

So, the bulk of the CapEx is technology related, which grows as you add people, desks and phones which grow as we add people.

Right. And speaking of people, in terms of the headcount growth, I mean, you've been looking at the sequential headcount additions. Were those spreads throughout the business or were there some areas in particular that took on more headcounts?

It was pretty much spread throughout the business. The college graduations, as well as taking on interns, we have increased the amount of interns that we used during the summer, it's growth... part of the growth. But it's pretty much spread throughout the branch network.

Okay. And then the final question is just on the volume growth side. You're still well above market. I'm just wondering, the general trends of the volumes, flowing from where they were in the second half of last year, really the fourth quarter and the first quarter. Is some of that due to you think, that the shippers and the carriers now being more comfortable if you will with the high fuel prices. And maybe in the fourth and the first quarter, the volatility caught them off guard, and so they were forced to think of more alternatives than the standard carrier-shipper relation?

That could be true, in some instances. I think, it's really hard to generalize across the board as to what's going on in every shippers stock [ph] in terms of how they are approaching the market. But, the market conditions have been changing fast, and challenging. So, yes, that stock prices certainly could apply there some. But, I think, you see a wide range of how contracted out different shippers were, and how they are reacting to a softer market, in terms of honoring or not honoring those contracts and how everybody is looking at fuel prices, in all of their routing decisions. It's a pretty fluid environment when you've got things changing so aggressively like that.

Okay. Good. Well, thanks for the color.

Thank you. Our next question is from the line of Matt Troy with Citigroup. Please go ahead.

Thanks. It's interesting your comments earlier on the other SG&A, specifically investing in future business, I think you've said travel, pursuing sales leads, new offices and people. How do you measure the return on these investments? How elastic are they? I guess, what I'm trying to get is how quickly can you rein them in, should these growth opportunities, that you're chasing not materialize, in caught [ph] say a few months of timeframe?

I think fairly quickly. We have always had a decent level of turnover in the business. And we're constantly adding staff at a level greater than that. And so, in the past when our metrics have led us to the conclusion that we should slowdown the hiring process, between that and the high degree of variable pay that we have, we can bring it back into line fairly quickly. But, when we look at the business today, and we look at the volume growth and the market share that we believe we're taking, we think that's driven in a large part by having an aggressive sales funnel, and hiring a lot of people and motivating them to go out and build relationships. And so, we've... we want to manage that carefully, but also continue to encourage that behavior. That if we can build our market share and build a stronger network, and a greater presence during this part of the cycle that when the market turns we should be well-positioned.

Okay. It was... if I look at it, it might be difficult to just aggregate. But, I mean, was this a case of throwing more resources at the core trucking business, to chase while trying to just scarce [ph] your freight at tougher rates. Or was this more investment in growth areas like ocean, air and international and some of the more longer term opportunities. Or was it really balanced.

It was across the board. The headcount increase was in all the various business lines.

Okay. But out away from the headcount, also, just when you talk about, some of the investment in SG&A, other SG&A. I mean, should we think about this as just, more hustling and the more mature trucking opportunity, or an opportunity to ramp investment in the higher growth, longer term, things away from truck?

All of the above. So, truckload business is 70% of the revenues, and about 70% of the people. Our mindset there is that we're 1% to 2% share, and there is some macro things that look like it's continuing to support our model, and continuing to drive share opportunity our way, and so we don't, we don't want a weak economy to get in the way of us pursuing that.

The net revenue per employee, that is a great statistic for you folks, you have to go back several years to find the quarter over assuming year-over-year decline. You did see that this quarter and I think you explained why. Is that a metric that you can manage to, to get back into the black, in the back half of the year? Is it just simply slowing sales higher, or is that a metric we should focus on in terms of your ability to measure the discretionary cost.

It is definitely a relevant metric that in fact is probably one of the key one that drives a lot of the high range decisions. However the metrics that we really rely on are office-by-office and as we grow and diversify our service offerings the appropriate metrics by business line, by office can vary quite a bit and we don't really share those for competitive reasons. So yes it is a very relevant metric, it's one that we look at a lot, throughout the network in terms of making the appropriate staffing decisions. But the guidelines that we have are not absolutes, we allow freedom, where we think we have opportunities to pursue or business that we know we're ramping up on, that they need the flexibility there to staff up for them. So yes, it matters, yes we're managing that and it is a very important thing to follow, but there is some ranges and broader guidelines that were used to manage ourselves throughout the rest of the year.

And also was down less than 1%, and it was a tight market, with margin compression, like we talked about which both of those would were further constraint on the net revenue per head.

Right again that order of magnitude not a big amount, but just it sticks out because I think 2002 first quarter was the last time you saw year-over-year declines in just the infrequency. I think is what raised the flag for me. But the last question it's just, it was interesting your commentary and your allowance for doubtful accounts, what you said was up 50% half of which I think you attributed to just growth in the business, the other half due to product centric some one-off incident. Just curious, tactically operationally, how do you drill down in times like this when customers and carriers might be looking for more flexibility, might be looking to lean on your balance sheet a little bit more. What do you do just to rein in the controls a bit to make sure that it doesn't get away from you on the credit side?

Sure, the only place that carriers owe us money is T-Check, and T-Check obviously their carriers are the customers and they did drive part of the increase Javec [ph] was a customer of T-Check and we did take a hit on Javec when went out of business and but as far as how we manage when you look at whether its those customers or the Robinson customers, we have a centralized credit function that continuously monitors customer's credit ratings and their how well they're doing financially and look at our exposure, we have some policies in place that have some ratios and some calculation, for volumes judgment at times. When you look at most of the larger right-offs we had during this quarter. Most of those we had coactively been reducing the credit limit, I can think of one example where the credit limit in the exposure about six months ago was at a $1.5 million and by the time the customer filed for chapter 11 we have managed their credit limit down to $0.5 million. So yes there are customers put a lot of pressure on you this time, they don't like it when your credit limits get cut, but those are tough decisions that you'll have to look at the potential reward versus trade-off and how poor is their financial condition and how bad is there trend?

I think one other points that's relevant along your question is that the credit limit decisions that Chad is referencing are clearly a very important element of that broader topic that we talked a lot about in relationship building and so when our people are out selling and building those relationships with the customers, we're looking for a long-term commitment, we want to build long-term relationships and the quality of the freight and the environment that we're trying to establish with that shipper, the credit terms become one key element of that. So we're doing in this type of an environment in addition to tightening the analysis that Chad references is to make certain that we're emphasizing the long-term relationships element ever as well.

Right, got it. Thanks for the details.

Thank you. Our next question is from of Alex Brand with Stephens Inc. Please go ahead.

Thanks. Good afternoon, guys.

Good afternoon.

Have you guys said what's you're looking at in terms of contract versus spot now.

We have not, we've in the past stated in all of our 30,000 active customers ID's that we have about somewhere in the neighborhood of 300, customer ID's that make up roughly half of the business on the transportation side and in those larger relationship there is generally some variation of a contract or pre-priced commitments. So at times we've estimated half-and-half of being a mixture of transactional, our pre-priced and contractual business, but in virtually all of our customer relationships there can be some combination of the two, where even with those larger customers, there is transactional freight, and there is many smaller customers that we have longer term price commitments to them. I think the one relevant way to think about, contractual or pre-committed pricing is that, when prices are relatively stable, like they are now, there is less bid activity going on either way, than when rates or capacity is moving in one direction up or down. So, you can look at the underlying contractual commitments and works in place, but maybe even more important is kind of the overall market environment and how stable it is, leading to rates generally staying more constant.

What, I guess, I'm trying to figure out. If longer term price commitments, is that what's driving unprofitable transactions? Because I'm trying to understand where do you draw that line, where you say, we can't do that unprofitable transaction for you anymore, despite the relationship we want to have with you?

I know, it's sometimes a difficult the answer to accept. But that's a very decentralized customer by customer decision, around the length of the relationship, the historic profitability of the freight and what commitments were made. So, there are relationships where we have a longer term pricing agreement, and we'll accept margin compression to the point of losing money on loads if that's the commitment we've made to the customer. And how and when, to renegotiate that commitment, and exactly what we are looking for to correct it, varies account by account.

Okay. So, is there the distinct possibility that you're going go through a period here where because fuel is sort of the unprecedented dynamic in this cycle that you might have a higher level of unprofitable transactions than the company's ever experienced in a previous cycle?

I wouldn't imagine that, because when we reach margin compression to the point of losing money, we generally don't tolerate that very long, unless there is a absolute contractual commitment which we... where... a must haul type, where there is volume commitments, and we have very few of those. So, it could be that there is continued pressure on margins, given fuel price changes and shipper attitudes and receptiveness towards re-pricing. But, to the degree of having very high and continued levels of shipments where we lose money that would be unlikely.

Okay. Then, you talked about that you think you're still having market share gains. Clearly, you're doing better than the industry, but you do have tougher volume comps in the back half the year. So, how good do you feel about sort of maintaining what I think you've said before, your thought was kind of high single-digit ongoing share gain?

I know that, we are investing as much as ever in quality people and training them and the flexibility that we allow to the network in making decisions around hiring new sales people, and building those relationships. The first half of the year showed some confidence, in being able to continue that. But I also know that market conditions change fast, and it's been a pretty wacky year so far. So, we feel pretty good about it, there is good momentum, going into the last half of the year. But, it's hard for us to know with absolute are certainly exactly what the second half of the year is going to bring.

All right. And just one more John. When you talk about the 15% growth rate and you've said in fairness you've always said, sometime it's going to be below that. When you think about that, are you thinking about, we want to grow 15% every year or is this something where you could say, we're looking at compounded annual rates starting in '02, I mean, is there a long-term kind of base year where you say this is where we're going to measure ourselves from this point.

So, many of our incentives plans, including restricted stock investing are all premised around the 15% growth rate, and internally our culture is that that's the definition of success. In my 16 years here, I don't really remember ever having a budget that didn't come close to that in terms of a planned growth rate. But, obviously, we haven't achieved that, in all of the years, the last 15 years or so. So, we do think of that as being our definition of success, and something that we'll strive pretty aggressively to try to get towards, regardless of what the environment is. But as we've suggested many times, as the year wears on, depending upon what's happening with freight demand and market conditioning, market conditions and overall economic growth, we may know that going into next year that it's not nearly as likely that we'll get there.

And to answer to your question, it's definitely a long-term view. And it's not that we have an exact base starting here. I think if you look at any five year or longer period, you will see that we probably achieved... I haven't done it on every year, but I believe we probably achieved on a five year basis a 15% CAGR.

Yes, but it's probably been high --

Going all the way back to 1977 I think is where we analyzed it back to at the IPO time.

Okay. Fair enough. Thanks for the time guys.

Thank you.

Thank you. Our next question is from the line of John Barnes with BB&T Capital Markets. Please go ahead. John Barnes - BB&T Capital: Good afternoon guys. Hey, sorry if I missed this earlier. Just kind of curious, as you look at truckload versus LTL, was there a greater degree of margin compression within truckload versus LTL or was it somewhere across the board?

There was much greater degree of margin compression within truckload. LTL margins were relatively consistent with the year ago. John Barnes - BB&T Capital: Okay. And in terms of your operating expenses on a go forward, you have more summer interns and that type of thing. Is that something that will ebb off in the back half I guess as internships come to a close and that type of thing? Should we see some reduction in those expenses or will they just be offset by layering in additional, maybe more full-time employees?

Yes, it really depends on the hiring decisions are decentralized, and based on what branch managers see. John talked earlier a lot about the parameters that branches have in place and the flexibility that they have. So it's really hard to say, you're going to see headcount drop off because the summer interns go back to school. Because as long as the company continues to grow, the headcount will probably in total continue to grow. John Barnes - BB&T Capital: Okay. You guys haven't done anything material on an acquisition in a fair amount of time. I mean with the balance sheet the way it is, and we've heard from a number of companies that acquisition multiples, valuation multiples are starting to come in at more reasonable levels. Is your appetite for the right kind of acquisitions still there? And can you just talk to what you've seen from a pipeline standpoint? And do you believe multiples have come in enough to maybe warrant getting aggressive there?

I think we've gone through a period of time with the private equity, and the credit that they were able to achieve that in our industry, especially because of the strong cash flow metrics and things like that, it was very difficult for any strategic to be competitive in a bidding process. I do and we have seen and believe that multiples are coming in a little bit, but haven't seen any large transactions to prove that. But yes, we're definitely still looking for the right acquisitions. We are active in marketplace, continuously looking at deals. But we keep very strong parameters on the deals we will do both from a financial perspective and a valuation perspective as well as cultural fit, the right type of business model, focused on third party logistics, good customers relationship et cetera. So we're very... still going to maintain our level of selectivity when we're looking at acquisitions. John Barnes - BB&T Capital: As you look at those criteria that you have, what are the two... one or two most difficult parameters to get over right now? I mean if multiples are coming in, is it the right strategic fit, cultural issues that are standing in your way or the multiples still... evaluation issues still kind of first and foremost?

I would say that in all markets, we probably killed more deals based on cultural fit and business models and things like that that we have numbers. John Barnes - BB&T Capital: Okay.

Andwhen Chad says business model, often times that's asset commitment and different philosophies around how to service customers that we don't think will fit in our approach to serving them. John Barnes - BB&T Capital: Sure. Speaking of asset commitment, I've asked you this question a couple times before. But just curious as to have you seen any further... any decisions within the rail industry to change kind of the asset ownership position on especially like intermodal containers? Your answer one time before had been hey, if we were four stone containers [ph] we would look at doing intermodal differently or leave that industry. Have you seen anything in that regards?

No. No real significant changes other than that three of the four major railroads continue to make commitments that they are going to add container capacity and that they will continue to provide access from a traditional IMC method. So a lot of us expect that intermodal will continue to be a pretty relevant option for a lot of shippers going forward. So that's the topic that we're going to stay close to and try to make sure that we have competitive service offerings on all the railroads. But not a lot has changed; just a lot of discussion about what's the optimum way to access capacity and get pricing on each of the major rail relationships. John Barnes - BB&T Capital: Okay. And lastly, as you look at capacity, and you talked about truckload being as tight as it is, you've gotten this question before about other competitors entering the market, some of the more asset intensive truckers getting into the brokerage business. As capacity gets tighter, do you feel like the competitive environment is more difficult this time around because of the new entrants into the market absorbing more capacity, making it tougher to come by or has anything really changed on that front and it's always been a competitive market?

In the universe of what drives a tight market or a soft market, obviously, competition and a competitive market is one element of that whole thing. And it always has been a relatively competitive market. It still feels to us like the dominant variable is freight demand. When shipment levels move up or down, they move much more quickly than the capacity side and they move much more quickly than competitive adjustments. So while clearly there is evolution in the competitive factor of it, it really doesn't stick out as a lead variable in terms of what's driving the tighter loose parts of the market. John Barnes - BB&T Capital: Okay, all right. Thanks for your time guys.

Thank you. Ladies and gentlemen, our last question is from the line of Edward Wolf with Wolf Research. Please go ahead.

Hey, thanks guys for hanging in there. This is very educational; I appreciate it. Am I right that you said that in July, the gross yields were flattish for transportation?

Gross margin percentages in July were consistent with the second quarter.

Consistent with the second quarter of '08?

Correct.

The integration [ph] of the margin trend that we saw in the second quarter.

Okay. And on the LTL side, they were flat with a year ago, give or take?

Correct.

What's the difference... if fuel is the biggest part of the impact on squeezing yield, what's the difference between LTL and truckload? Are they not getting as much of compliance?

I think that they get into the differences and how the services are priced with LTL companies, carriers generally, giving a longer term price commitments. I know there were several of larger LTL carriers who were significantly discounting or not applying fuel surcharges during the quarter. So the LTL relationships that we have, while there are transactional elements to them, they tend to be more automated with a little bit longer term pricing relationships.

And our truckload capacity side, we hire almost all of our capacity on a spot basis. So really, fuel is adjusting real time there. On LTL, more of our capacity is formulaic based, pre-agreed to both on the sell and the buy, it's a higher percentage of contractual pricing.

Well, wouldn't you think that if you had a longer contract on the LTL side and there was more contract that when fuel spiked, you would get hurt with that more, not less? What am I missing there?

No, I think the LTL arrangements would tend to have fuel surcharges going both ways in those contractual relationships where on the truckload side, we're purchasing all inclusive transactionally. So it wouldn't... it would pass through more seamlessly on the LTL relationships.

Okay, that makes sense. Can you talk about, John, you started to talk about how in the '04 through '06 period, it was a unique period in terms of the rate increases that were going on in the marketplace? Do you get a sense that we could be entering in a period like that at the end of '08 and '09? Are things going to get that tighter? Do they feel similar to that?

I think there is a distinct chance of that because if you look at in '04, '05, '06, what was driving the price increases, most of the carriers were attributing it first to driver shortages and the compensation that they were having to pay to attract new drivers and secondarily, to incremental cost of equipment for new OEM stuff being new emission standards, you had hours of service, a lot of those things in there. From our understanding, some of the motor carriers might have better information, but from our understanding of it, those driver demographics are still an issue. They are still emissions issues. The hours of service limits are still out there. And as capacity gets driven out of the marketplace in this soft part of the cycle and now add to that credit issues around financing questions of how capacity will return, you can build a plausible argument that there's plenty of room for continued price increases when the market starts to tighten.

Did it happen as quickly do you think, this third or fourth quarter?

It certainly could start to happen. How much it could get, I don't know.

Okay. Switching gears for a second, when I look at your model, depreciation as a percentage of revenue was up quite a bit at 2.6%. Can you talk a little bit to if there is anything going on there?

Part of our occupancy being the new owned building that we are sitting in right now, the headquarters, rather than having a rent expense for this building, we have depreciation. That's definitely a big part of it. When you look at our overall cap or our overall properties and equipment and look historically over the last five or six years, when you look at the net increase in the net balance on the balance sheet, the biggest drivers are real estate, both the building that we bought and refurbished a few years ago in Chicago, the land that we bought here and then building the building here.

So on an absolute basis, Chad, that almost $9 million is a fair number to work off of going forward?

Yes.

Okay.

This stuff is going to... this stuff that will be fully depreciated, I don't... I am looking for the $9 million number.

At 8.8 million.

Of depreciation? I don't think so. The amount for the quarter was $7.7 million; year-to-date, amount is about $15 million.

Okay, that's my mistake. It's our model. So that $7.7 million is a decent number going forward?

Yes, I mean it's grown from... a year ago, it was $6.6 million, the biggest chunk of the increase is this building, the building plus the furnishings within the building and the equipment within the building.

Okay, now that's fair enough. I had a little typo in here; that's my mistake. And just cleaning up a couple of other things. The stock option plans that you talked about where the grants are year-end and then they start to have the impact in '09.

Yes

Any sense of the magnitude of that? In the past... how do we think about that?

You said stock options, but it's restricted stock, just for clarity. We plan to do it at the end of the year. It's really... our best guess right now if earnings were up 15% and the grants were roughly the size we expect them to be, they might be in the magnitude of 1% of net revenues. That would be our best guess at this point, but again, there's a lot of variables that are yet to be seen.

Okay. And then just final question, when you look out at your carrier base, the number of carriers are out there, have you seen enough of them go away or shrink recently that you have concerns for meeting demand as you go out the next couple of quarters?

Not concerns for meeting demand at the current levels of freight demand. But I think it ties into the earlier question that we've certainly seen enough capacity leave the marketplace that we know when freight demands rise and the market conditions change that there is going to need to be a lot of capacity that returns and there's going to be a lot of challenges around drivers and financing and equipment to make that happen. So not under the current market conditions. But I think that's... there has definitely been enough capacity leaving the marketplace that could make it interesting if freight demand returns quickly.

And is there some kind of number, is it GDP at 3%, is it 2%? How do you think directionally about what that means?

We don't really look at those metrics. It's difficult because as we are trying to take market share and with each customer, you never know for certain what their total volume of freight is versus how much you are getting. And so the broader economic metrics don't really help us in the short term to try to measure that. We look at it mostly as to when we go home at the end of each day, what were the market conditions and were there more loads to move that we didn't have capacity for or the other way around? That's really how we'll start to see the change in freight demand.

Okay, thanks a lot for the time. I appreciate it.

Thank you.

Unfortunately, we are out of time, so that will have to be our last question. We apologize to those of you in the queue that we could not get to you today. Thank you for participating in our second quarter 2008 conference call. I want to remind you that this call will be available for replay in the Investor Relations sections of the C.H. Robinson website at www.chrobinson.com. It will also be available by dialing 800-405-2236 and entering the passcode 11116078 #. The replay will be available at approximately 7.00 PM Eastern Time today. If you have additional questions, please feel free to call me, Angie Freeman at 952-937-7847. Thank you.

Thank you. Ladies and gentlemen, this does conclude the C.H. Robinson second quarter 2008 conference call. You may now disconnect.