Question-and-Answer Session
Operator
Thank you. (Operator instructions) We will go first to Arnie Ursaner at CJS Securities.
Arnold Ursaner – CJS Securities
Hi, good morning. First question I have is on the rehab side your leverage was tremendous. On the $3.6 million improvement in revenue you had $2.5 million improvement in gross profit. Obviously, that type of leverage is probably not sustainable, but can you give us a feel for how much you have driven down your cost structure and what you believe your incremental margins are at this point in rehab?
David Martin
Actually I think Tom Vossman can – this is David, but I will chime in when necessarily but Tom Vossman can chime in on the improvements that have been made in North America.
Tom Vossman
Hey, Arnie, it’s Tom. Actually, the only thing I changed with your question is I actually believe that we are pretty excited that the improvements you are seeing are sustainable. We continue to project at the markets flat to possibly ending slightly up by year-end. But we have seen a tremendous capability to improve our production about little over 8% on 12% less crew capacity. So, as Joe alluded to, with a significant reduction in our fixed cost base that we think we can continue to execute at this level we’ve still got some additional improvements to make. But with that kind of production up our labor cost are down 5% year-over-year against the production that’s up 8%. So, I think if you look across all the major cost segments, we have seen improvement, the only area that you would expect us to – I think as everybody is, is the impact that fuel is having, but even in that area we have seen our consumption go down offsetting the impact of fuel by almost 50%. So, across all those major cost metrics we are seeing improvement from North America.
Arnold Ursaner – CJS Securities
That’s a great answer. Thank you very much. The other question I have is I am a little surprised by the stability of CIPP pricing given what is obviously a very challenging competitive environment, general contractors with a lot less work to do. How do you comment on the stability of pricing given what is probably this challenging environment? Why are you winning business at attractive pricing and margins.
Tom Vossman
Yeah, Arnie, it’s – I think the safe answer for us is the changes we alluded to in the prior two quarters related to a focus in our BD staff on non-bid work is beginning to yield dividends at margins that are better than what we get out of the bid work. So, that’s certainly probably the most – the biggest impact – we have actually seen an increase year-over-year of double-digit growth in our negotiated work platform. So, that’s one of the biggest contributors I think offset by a stable gross margin business in the rest of North America and I will also state that we continue to see it in selected regions where the market is soft to down, offset by some areas where the – the market is pretty healthy. And so fortunately with our national coverage we are able to leverage some areas where we are seeing some tough margins at the bid table, offset by areas where we are able to leverage our position in strong markets.
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