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During the conference call, we may refer to certain non-GAAP or adjusted financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is available on our website at aclines.com in the Investor Relation sections under non-GAAP financial data.Also, as a reminder, you can follow along today via a live webcast featuring a slide presentation which can also be accessed at aclines.com. I'll remind you that if you plan on viewing the slide presentation please listen to the call via your computer speakers rather than dialing in by telephone in order to avoid a time lapse between the slide presentation and the audio. Additionally, in today's presentation and in the slides references to year-to-date, those are intended to refer to the six months ended June 30, 2010. Joining me on the call today we have Mike Ryan, our President and CEO and Tom Pilholski our Senior Vice President and CFO. With that, I'll now turn the call over to Mike. Mike Ryan Thanks, David. I think the last time we got together it was snowy, cold Jeffersonville and now it's tropical, rainy Jeffersonville. So, we've had hot days on the river this summer but welcome to all of you and thank you for joining us. Our second quarter earnings performance was stronger than first quarter and stronger than second quarter 2009. This strength demonstrates to us that our strategies are beginning to produce positive results. We continue to make significant progress with cost reduction programs in both transportation and manufacturing. Our aggressive focus on cost control drove the $10.4 million improvement and our transportation segment's operating income compared to the prior year quarter. We also lowered our interest cost by 17% due to lower outstanding debt balances. We were able to improve our transportation operating ratio 7 points to 95.2% versus the prior year quarter.
Our rightsizing strategy at Jeffboat allowed us to breakeven overcoming greatly reduced demand volumes. Our prudent cash management allowed us to also fund the building of 50 new dry covered hoppers in the first half of 2010 as we reinvested in our fleet.We have seen some volume recovery and our key transportation business lines of liquids and metals, but volumes still remain below pre-recession levels. Pricing levels, although are now stabilized, also remain well below levels achieved in produce of normal volume. We remain cautiously optimistic relative to the sustainability of the recovery phase as there's still a long road back to a healthy economy and to pre-recession business levels. While the economy is showing new signs of life, the recovery is still fragile at this stage. In manufacturing at Jeffboat, production levels declined significantly as potential customers continue to delay capital spending for new barges. We right sized the manufacturing business and production capacity during the recession. These actions positioned us to still generate positive operating income in the first half. We also achieved this despite the negative impact of a one month labor strike in April. In May, we reached a new three year agreement with our represented workers at the shipyard. We were able to successfully work with the union to find wage and healthcare alternatives that we hope will help us to be competitive in the new barge production markets in the near future. Historically, we generated stronger financial results in the second half of the calendar year driven by demand from the grain harvest and the impact of that demand on grain and spot shipping rates. Based on the early USDA forecast for the harvest, we believe that trend will continue. We expect to experience a more traditional grain demand increase this year in late third quarter and early fourth quarter compared to last year when the harvest was delayed due to weather conditions.
In the market place the June federal reserve base book analysis continues to report modest ongoing increases in economic activity in all districts with some improvement and employment and capital spending. Manufacturing is described as gradually improving although inventory investment was noted to be slowing. The army core of engineer's industry tonnage statistics indicated positive year-over-year trends.Read the rest of this transcript for free on seekingalpha.com