Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Robert Cornell – Barclays Capital.
Robert Cornell – Barclays Capital
A couple of questions, would you characterize this quarter or some part of this quarter as the trough in this cycle?
Kirk S. Hachigian
That’s the million question, it feels like it Bob. I mean, when you look at all the numbers, the book-to-bill, the sequential performance obviously we looked at everybody else’s earnings, you’re seeing good news about automotive production rates now after the catastrophe of the second quarter, industrial production, factory utilization, it all feels like that. Although, this is like nothing we’ve ever seen and so I think the way we’ve set the company up is that the inventory levels, the working capital, the headcount, the cost structure, we’re poised to grind it out at these levels for the prolonged future. We’re certainly able to leverage up extremely attractive, if we got any volume or any revenue, that picks up through the businesses.
So, I like where we are. We’ve done some tough stuff, our people have executed and done a terrific job across the board liquidating inventory and taking some tough actions but I don’t know if I have any hard economic data yet Bob that suggests we’re out of the woods yet here.
Robert Cornell – Barclays Capital
Of course you mentioned on the commercial side the issues around delays, no new projects and vacancies. Would you expand on that whole point please? First of all expand on that point and then I’ve got a companion question.
Kirk S. Hachigian
I go out and see our customers of course. I was out in Seattle, I was out in San Francisco, from small town retail space to condos, townhouses, lodging, any of the markets large historically pretty attractive markets you see over builts, you see property values plunging and so I think you’ve got a real mess to work yourself through for the next couple of years. Now, with that said, there’s the energy efficiency stuff that’s going on which is still growing for us. We’ve got the controls, the international, our new product vitality index is strong.
I think residential has bottomed on the construction side so I think that will come back. Healthcare and education is still holding up. Our order rates in lighting in particular have stabilized so we’re not seeing them decay any worse and we think from a cost perspective you’re going to see some pricing deterioration but material purchase prices variance to offset some of that. And, the stimulus bill ought to help probably more in ’10 and ’11. So, you’ve got a lot of negatives, you’ve got some positives, net/net we think ’10 still looks negative somewhere in the 10% to 15% range.
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