Welcome to the Acuity Brands 2007 fourth quarter and full year results conference call. (Operator Instructions) Now I would like to introduce Mr. Dan Smith, Vice President and Treasurer of Acuity Brands. Sir, you may begin.

Thank you. Good morning. With me today to discuss our fourth quarter and full year results are Vern Nagel, our Chairman, President and Chief Executive Officer; Ricky Reece, our Executive Vice President and Chief Financial Officer; and other selected members of our executive team. We are webcasting today's conference call at www.AcuityBrands.com. I would like to remind everyone that during this call we may make projections or forward-looking statements regarding future events or future financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our most recent 10-K and 10-Q SEC filings in today's press release which identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. Now let me turn this call over to Vern Nagel.

Thank you, Dan. Good morning, everyone. I would like to make a few comments and then Ricky and I will be happy to answer any of our questions. On behalf of our 10,000 associates worldwide, I'm again pleased to announce record results both for the fourth quarter and for the full year in 2007. 2007 was an outstanding year for Acuity Brands. We sold more products and earned more income for the fourth quarter and for the full year than in any other respective periods in our history. In fact, we exceeded all of our longer term financial targets in 2007. Also, this is our tenth quarter in a row of quarter-over-quarter record earnings as we again overcame a number of challenges. I know many of you have already seen our results and Ricky will provide more detail in our financials a bit later in the call, but the following are a few of the key financial highlights. First for the quarter. Consolidated net sales for the quarter were $693 million, up almost 3% compared with the year-ago period. This increase was due primarily to benefits from the successful implementation of our company-wide pricing strategies and the introduction of new products over the last few years. Gross profit margin was 43%, up 140 basis points over the year-ago period. Consolidated operating profit margin exceeded 12% for the first time ever, reaching 12.1%; an increase of 130 basis points. Included in the quarter was approximately $800,000 of non-tax deductible expenses for the spin-off of Acuity Specialty Products. This reduced margins by 10 basis points and diluted EPS by $0.02 per share. Diluted earnings per share were a $1.16, up 25% from the year-ago period. Net income of $51.5 million topped the $50 million threshold in the quarter for the first time…

Thank you, Vern and good morning, everyone. Vern previously discussed our consolidated operating results for the quarter and full year so I will not repeat this information. However, I would like to discuss and provide more detail around our segment results for the quarter and full year. Next, I'll provide some information regarding our outstanding performance for the quarter and the year in cash flow generation, including some metrics regarding working capital management and our investing activities, as well as our healthy financial condition as of the end of the fiscal year. Then I would like to conclude with an update on the planned spin-off of ASP, including updating previously disclosed information regarding planned capital structure and certain financial characteristics of each business post-spin. Let's start by looking more deeply at the results of the lighting segment. Sales for ABL for the fourth quarter increased 3.1% compared with the year-ago period. As Vern said previously, this increase was primarily due to increased pricing and the contribution of new products introduced over the last few years. Also contributing about two-thirds of a percent to this revenue increase was the acquisition of Mark Architectural Lighting, which we completed in mid-July so its results were included for six weeks of the quarter; and a modest boost from a favorable impact from foreign currency translation which added about 0.5% to the favorable comparison. The favorable impact of our full capture pricing strategy, a better mix of products sold and the above-average profit margin contribution at Mark Lighting contributed to our $11.4 million, or 17.3% increase in operating profit at ABL for the fourth quarter compared with the year-ago period. In addition, these factors further supported the 170 basis points improvement in ABL's operating profit for the quarter. This improvement in profit margin was achieved…

Thank you, Ricky. As we look at Acuity Brands in total, we were very pleased with the performance and progress we made in 2007 on our key annual improvement priorities, including to better serve our customers, improve productivity, enhance profit margins and drive strong cash flow. We expect this momentum to carry into 2008. As we look forward to 2008 for Acuity Brands with the lighting company as its lone subsidiary, we do have our challenges and our opportunities. Just to note a few of the challenges. First, we expect to continue to experience cost pressures for certain raw materials, component products, fuel and employee-related items such as healthcare. Second, we continue to find ways to make up for costs associated with investments in programs to drive future profitable growth including those that enhance customer service, improve productivity, expand our access to market and innovate new products. Third, as the markets continue to grapple with issues associated with the fallout of the sub-prime lending market, there is the potential this could lead to rising interest rates or a tightening of lending practices for commercial projects. This of course could have a disruptive influence on the broader economy which could dampen demand in both the nonresidential construction market and the residential market. Fourth, we expect the residential market to be somewhat softer for the foreseeable future, somewhat impacting our shipments through the home improvement channel and for other infrastructure-related products that are tied to new construction for the residential housing market. Lastly, there always exists the potential for irrational pricing tactics by undisciplined competitors. While we monitor these issues closely, we continue to be very vigilant on our pricing and quotation posture and continue to drive programs throughout the company to enhance our competitive position. Overall, we continue to be cautiously…

Our first question comes from Peter Lisnic - Robert W. Baird.

If I could just ask you a quick question on the stock and flow business, it sounds like there is some pricing pressure that perhaps has gotten worse there. Can you maybe give us a sense as to what exactly is going on in stock and flow and how the demand environment there looks?

I don't know that the pricing pressures there have necessarily gotten worse. They have been very, very competitive. We participate in that market in a significant way but we pick and choose how and where we will participate. As I said in my prepared remarks, we have focused very aggressively on the larger project business where we have, again, a very significant competitive advantage. As we have done that, we have chosen not to participate at some of the price points in certain portions of that stock and flow business. As I said, I believe that's probably impacted our top line growth right by probably 2 to 3 points. But as you can see from growing our operating profit dollars as well as improving our margins, we continue to drive very substantial growth. It's my expectation that in the early part of 2008 we will begin to address the lost stock and flow business in a way with products that have features and benefits at competitive price points that will allow us to maintain our margin expectation. So again, Peter, I'm not going to say that the stock and flow business has materially changed. We've see this really throughout the year. I would say that in our fourth quarter it was a bit of a tough comp because in last year's fourth quarter, as you'll recall, the industry had a price increase and so there was a stimulation, if you will, of or an acceleration of volume in fourth quarter of last year that I think drove a little bit of an uptick in last year's numbers that was not repeated in this year's fourth quarter.

Your last comment there sort of hints upon my next question which is, it sounds like the order picture seems pretty solid. You're looking for volume growth to be up low single-digits in '08. Can you give us a sense as to what's going on with order patterns? The thing that drew my attention in the press release was that you had some delays in orders being released from your agents. I'm just wondering if that's an ancillary impact of the global credit issues that we're working our way through now?

It's very interesting to us and so I'll give you just my own personal view. I don't know that there's a lot of fact base around this. The words and the music don't seem to quite match. So everyone reads the newspapers, but yet we look at quotation activity, we look at the architectural building index, we talk to customers. There is still a great deal of activity out there but yet everyone talks about what they read in the newspaper while they're going to work every day and are very busy. July construction starts were down considerably but then August was up about 6%. I think what you're seeing is just some of the dislocation that is being caused by what's happening and people are again, waiting and watching a little bit. Our August order rates were spotty but yet then September, we have come back to be really quite favorable. So the quarter was favorable and September actually reflects I think a continuation of a favorable trend. The only thing I can say is that the leading indicators of positive unit volume growth for lighting fixtures continues, in our view, to be in place and we think that our order book reflects that, though I do thing that some of that day-to-day inconsistency probably will linger due to that uncertainty that is in the marketplace for the reasons that you articulated.

Your next question comes from Robert McCarthy – Banc of America Securities.

To talk about this 2% to 3% volume you think you basically ceded, primarily in stock and flow, in quarters past you referred to a couple competitors or one competitor being a little soft on price, almost to the point of being a little irrational. Are you still seeing that phenomenon?

We believe that the pricing environment has really not changed significantly. We still see it's regional, it's pockets, it's in different pieces of the business where folks execute over pricing strategies that we don't quite understand. But having said that, I don't think anything has materially changed. We continue to be very aggressive in our full capture pricing strategy. As we said, really over the last couple of years, we have taken that increase in price and we have reinvested it back into the business in terms of new products. We're bringing out new products at a very rapid rate and those are being received in the marketplace very positively. These are lighting fixtures that provide superior lighting characteristics, while providing our customers with tremendous energy savings and so there's a great deal of value that's being provided there and that's what you're seeing as our mix changes. But on the flow side, on the stock and flow side, again, it's a very important part of our business.

How big a part of your business?

It varies but I think we have said in our 10-K that the project side is roughly 75% of our business while the non-project side, and this would include things like our home improvement capabilities, our national accounts represent about 25% of the business.

Stock and flow would be within that 25%?

Correct.

Perhaps you could talk a little bit about the energy efficiency theme and the new product introductions. Has your product fatality index gone up recently if you look at the back half of the year or any kind of run rate you can give us there? How much of your overall portfolio now do you think is levered towards more energy efficient fixtures?

I would say that I don't have an exact percentage of our portfolio but we have been aggressive over the last 24 months of migrating from different types of lamp and ballast configurations to far more energy efficient configurations and so I would say a very significant portion of our portfolio is now what we would call energy efficient and we continue to drive that portion of our business as our engineers and our product market development folks continue to really look for new ways to enhance that. Again, what you're seeing quite frankly for us, we're seeing nice growth in various sectors of our business whether it's national accounts, whether it's on the project side, folks looking to develop certified buildings. We're very proactive in that and again, that's where you're seeing the benefit of our product mix continuing to improve.

So we should expect to see these kind of price and mix attributes impacting your core results going forward? You would be in a positive price environment over the next couple years, given the fact that you have overhauled your portfolio of products?

I would expect us to continue to improve our operating profit. We are, as you know Rob, our focus is to improve on our base business, our operating profit margins by 70 basis points or better while pulling through the variable contribution that we get on unit volume growth. So it is my expectation as we will ultimately conclude 2008 that we will have improved our margins in a very positive way.

On non-res for 2008, you did talk about some key sub segments in non-residential that you expect to grow and your overall outlook suggests low single-digit volumes. Could you talk about those key segments or drivers? The second question with respective to non-res is, I understand that all the indicators right now remain relatively healthy but some of the indicators that build up into the leading indicators could be degrading over time. What milestones should investors look for, for a softening non-res market at the margin from your standpoint? What will you be looking for to get a better sense of the tail for 2008 as we head toward the end of 2007 on a calendar year basis?

Well, I believe that the fundamentals are in place for the balance of calendar 2007, which is the first third, if you will, of our fiscal 2008. Again, what are those things? Employment factors, interest rate environment. While the spreads have tightened up a tad here, with the fed lowering rates, I mean, the ten-year treasury is now at what? 454 or something? It's down 60 to 70 basis points from its 52-week high. While spreads have tightened up, I think overall interest rates remain very, very favorable for this type of activity. You look at vacancy rates, both city as well as suburban environments, favorable. If you look at rising rents in these markets, favorable. You're not seeing a lot of over building around the country so absorption continues to be favorable. The backlog, the construction backlog continues to be favorable. So those are the types of things that we continue to look at on a macro basis. Obviously we are very in touch with our customer base and looking at the activities, what's on their drawing board, and how can we help facilitate that. The architectural building index continues to be very favorable. As I talk to folks in that portion of the industry, they're actually finding it difficult to find people because of all the projects that they have, or inquiries. So I believe all of those things that you follow, Rob, and investors follow are good indicators of where we're going.

Your next question comes from Christopher Glynn - CIBC World Markets.

On ROAM, how are you seeing the uptick and the adoption and the rollout and any kind of competitive presence there and maybe just some metrics around what you think that can do over the next couple years.

Why don't I ask Ricky to address that? Ricky leads a small team that really acts as the board of directors for that business. We're quite excited about ROAM and its prospects.

Thank you, first, for those who may not be familiar on the call, ROAM is our remote monitoring and management of lighting fixtures primarily for utility and municipal applications using the lighting along the roadway and in the subdivisions and so forth. We are pretty much complete with a major installation that we're putting in outside Phoenix, Arizona in Glendale and are very excited about that application, as is more importantly the customer. We are continuing to fill the funnel on prospects and opportunities there, calling primarily on the larger cities and municipalities and investor-owned utilities and we believe we have a differentiability product out there. There are some competitors that we are having to compete against, but we believe not only the product but equally important, the features around how we manage the information for the municipality or the utility for them to use that and push the information out to the maintenance workers and so forth differentiates us. So we continue to be excited. As far as exactly what kind of potential do we see as you can appreciate, there are millions and millions of light poles out there and our objective is to see how many of those we can put our ROAM fixture on. And then you've got opportunity beyond to use that technology for other types of near adjacencies to utilize than bandwidth. So were excited not only about the ability of that, but the sustainability of the growth of that and the consistency of it, reducing our dependence on new construction cycles.

Generally positive commentary on the sustainability of the pricing environment is what I heard. It looks like pricing did have a lesser contribution than it has had in some time in the quarter. Correct me if I'm wrong. Just wondering about your comments on those areas, as well as the current commodity cost inflation environment and outlook relative to what you've seen in general over the past couple of years?

Chris, when you look and analyze the quarter, what you're going to see at Acuity Brands Lighting is that our pull-through on the incremental $16 million of revenue was about 70% at the operating profit level. So our ability to drive price and mix and differentiate our service capabilities is alive and well in the marketplace. Again, if you take the impact of residential of 2 to 3 points on the stock and flow side, you see a very favorable picture in our business in terms of growth. That's pretty exciting. Our operating profit at ABL grew in the quarter 17%. So I believe that on a go-forward basis, the things that we are focusing on, we will continue to see favorability in '08. We have our challenges. The chop is out there in the marketplace, people are reading newspapers, but we believe between new product introductions, particularly directed at this potential of the flow business as well as introduction of products in our specialty business as well as productivity improvements, we see a favorable picture for 2008. So again, we remain cautiously optimistic that we will be able either to meet or exceed many of our longer-term financial goals. That to me is very positive. On the material and component side, we're kind of speculating 2 to 3 points.

We're seeing moderation there, certainly not the rapid increase; we're expecting moderation there and not the rapid increase we've had over the last 18 months. The major inputs we look at still are aluminum, copper. Most of the folks that forecast that are looking at moderate, very low single-digit if not flat to maybe even declines as you go out further. Fuel of course is a bit of a challenge. We're continuing to see oil prices at very high historical levels. But that has a double edge for us. Positive in one way because question earlier was asked by Rob on what do we see in regards to the retrofit activity as you see fuel cost and all go up. That makes the trade-off much more positive to re-fixture a facility to take advantage of these energy savings. Fuel is not a big input to our raw materials but obviously is a factor in our freight. That one we are forecasting that we will continue to see increases year-over-year, but more in the low to mid single-digit level.

Your next question comes from Matt McCall - BB&T Capital Markets.

Vern, you gave some interesting breakdown of the lighting business. You talked about the 75% project, 25% non-project and I think you broke out some specialty brands that represent one-third of the lighting business. I don't think I heard it referenced that way. Maybe can you explain how those products are different and maybe is there a difference in, the growth rate or the profitability of what you would term specialty products?

Our specialty brands include Holophane, include Gotham, include Mark Architectural Lighting, which we just acquired, include Hydrel, include Peerless. These are all very, very well-known brands in the industry. They're known for their specialty nature and those businesses comprise in total about one-third of our total revenues and of course are very important on various types of projects. As you know, the Holophane brand goes to market through its own direct sales force while the other brands participate with our package agency folks and participate in what we call our volume-based business. I would say that the margin characteristics are slightly higher on the specialty products but yet when I look at our volume-based businesses, there our cash flow return on investment is extremely attractive. This is why when folks examine our business and try and compare them to our competitors, we like to ask them to look at our cash flow return on investment. We are so dominant in the volume side of the marketplace, the margins there may not be as high as some of these smaller specialty brands but the cash flow return on investment and how we lever that asset base is very attractive for our shareholders. Those businesses are growing both the volume and the specialty businesses are growing at a nice clip. So I will try to give a little bit of insight into how we manage that. We are continuing to focus on rounding out our portfolio in terms of specialty type of products and brands but we are investing very heavily in our volume-based brands because this is where there is tremendous mass appeal in terms of the market size. The energy story around those is huge. It's really both sides of the business that you're seeing margin expansion and contribution to our cash flow return on investment.

That's helpful and leads into my next question. You stole my point. I think the point about the 70% incremental margin is a big one. That was eye-popping. But that's obviously a great story and the first question is, if we look into '08 I know you mentioned the 70 basis points of incremental margin plus a contribution margin on top of that. As you talk about the separate businesses now, maybe could you address what lighting looks like, versus what ASP looks like? ASP's incremental margin is obviously a very different story. Where would you expect most of the margin improvement in each one of those business to come? Would it be gross margin, would it be SG&A, a mix for each business?

That's a good question. Let me do ASP first and then we'll do ABL. I think ASP really has a unique opportunity for future growth. The management team and many of the leaders of that business have had a significant distraction put upon them by virtue of the spin-off. It takes a lot of time and effort and it's taken a lot of their time and effort to prepare for the spin-off. I think some of the opportunities that are in the marketplace for them, they have not been able to fully realize those because of the diversion of their attention. I believe that in their business, you will see opportunities to both improve margin as they lean out their supply chain. I also believe that you will see opportunities to improve their operating structure as they continue to lean out their whole distribution and go-to-market system. John Morgan and the team will be articulating that on a road show here shortly. I think that shareholders will really get an opportunity to see the power and the opportunity of that business. So I see top line growth, I see margin improvement at gross profit and I see operating expense opportunities or operating opportunities to improve over the next 12 to 24 months. When I look at Acuity Brands Lighting, I see our opportunities to continue to enhance our top line growth. It's our expectation that we will grow at above market rates in 2008 and beyond, primarily because of the introduction of new products and services into the business. Many of these products and services also bring with them enhanced margins because of the value proposition that they bring. I believe that in terms of our supply chain at ABL, there continues to be significant opportunity for improvement and our folks are very focused on those internal capabilities. From a shareholders' perspective, we probably didn't fully lever, if you will, our operating expenses as well as we could have in 2008, primarily because what you're not seeing is employee-related costs, whether it's performance-based incentive compensation or healthcare costs. If you exclude that, it's my expectation that we would continue to make good progress on improving our productivity in that area in 2008. It's a focus for us. So I would see, again, top line growth opportunity at the gross profit level due to the supply chain improvements and then levering our fixed overheads, if you will, from an operating expense point of view. By the way, all of this I believe will continue to drive a greater improvement in our cash flow return on investment. That's a big deal. We generated as a company positive EVA of over $86 million in 2007 so I believe we're focused on the right things to drive shareholder value.

That is also helpful. Just to jump back to the metrics you've given us in the past, the 20% to 25% incremental margin, 70 basis points. That was for the company as a whole. How should we look at those specific metrics as we break the company apart?

I believe what I have said is that from a variable contribution perspective, ASP is probably a little bit higher than ABL. But we're probably not materially different than other, if you will, product manufacturing type companies and so the number is somewhere in the 25 point range on a variable contribution basis, that is probably not a bad number to use for your models.

For ABL?

For ABL, probably a little bit higher than that.

Margin opportunities, 70 basis points is mostly for ABL, is that correct?

Yes. I mean, that's the challenge. We of course have put that challenge out to our self and I think we started that three or four years ago, and we've been good so far on that and there's no reason for us to back down now.

You delivered. That's why I keep asking the question, because I want to see how long it can last. Last question, you mentioned some lumpy order patterns, I think it was with ASP from one of your consumer channel customers. Any update there? Is that lumpiness going to improve next quarter?

The comment that I made in this conference call around the lumpiness of orders was directed at ABL, really from the project side. I feel like that lumpiness has a lot more to do with people reading the newspapers than the real activity that out there. When it comes to our consumer products group on the lighting side, our folks there continue to do just an outstanding job of serving the home improvement channel. We believe that the POS sales through that channel actually for our products the decline has been dramatically less than the overall decline that folks have seen in that space, due to the residential downtick. I think that has a lot to do with new products that we've brought out; it has a lot to do with our merchandising capability, it has a lot to do with just how we access those customers through that channel, so very favorable there. What that means is that year-over-year we did not see a significant diminution in sales in the lighting side. Going forward, we still expect that channel to be challenging by virtue of the end customer base. I think people, you read this just as I do, but I think people are expecting calendar year 2008 to still be a very challenging year for the housing market. On ASP's side of the world, the opportunity and the challenge that they have there is while they still are a very significant player in the home improvement channel, some of the changes in strategy or the evolving strategy that some of the major customers have limits some of the shelf space that is available to ASP. So their challenge is how do they extend their access to market, how do they increase their shelf space? Their SKU count isn't going down, it's just simply that the shelf space available to them is, so that's had some impact in terms of incoming orders, but POS still continues to be positive for them.

Matt, I would add, because I did make a comment on ASP or Zep, they did experience in the fourth quarter some reduction in inventory held by a major retailer in the home improvement channel and then fewer promotional activities. The promotional activities can be a bit lumpy, these are the near the checkout counter or the half pallet type sales that you might see or promotional activities and it just so happened in the fourth quarter that Zep didn't experience as much of that that obviously can drive volume. As Vern said, the POS was stronger than what our sales to this channel reflected so we would hope that might get back to a more normal pace and that choppiness or air bubble will come on through.

Your next question comes from Robert McCarthy - Banc of America Securities.

If you just think about your residential exposure, it's relatively minimal but it must have had a pretty significant decline if it was only 1% on a consolidated basis. Are you seeing declines in concert with new home starts on the order south of 20%?

Rob, a couple of things. First of all, we were very clear that it is virtually impossible for us to have exact data. It's our belief that overall that was the impact. The impact came in a couple of areas. It came in what we believe would be direct shipments of product that would find its way, but also some of the ancillary products. We've seen in some markets which had fairly robust residential growth where that has slowed down. Products that we would sell into infrastructure-related, you know, lighting roadways, strip malls, some of these things that are the output or the follow-on to residential construction, we've seen some impact there.

Would you characterize that as your light commercial exposure then, too?

I would say that there is exposure there in that regard.

That number you highlighted to us, does that take into account strictly residential or your light commercial number as well? Or is it also impacting your volumes in light commercial as well?

I'm including the impact of our light commercial activity.

So the 1% would be light commercial and res consolidated?

Yes.

Maybe longer-term since we can talk about LED and the overall regulatory environment just for energy efficiency, what kind of milestones could we look for? There's been talk of legislation basically to ban going forward incandescent light bulbs in Federal facilities. That might cause a migration to more energy efficient lamp sources and lighting fixtures.. Could you talk about any kind of regulatory or legislative milestones that could be coming up over time? Additionally, given the fact that Phillips has the stated goal of improving it's overall presence in North America and are really attacking the market from new, more energy efficient lamps, whatever technology that would be -- florescent or LED -- could you talk about from that standpoint any kind of comment on their strategy and will they need to get market access to exploit that strategy going forward?

Well, I'll try and answer your 15 questions.

Yes, and then I just have a couple more follow-ups.

First of all with regard to legislation and the incandescent bulbs and stuff, we know that there is legislation that is either out there or is being proposed whether it's California or New York; actually the opportunity, our folks internally believe that raising the energy standards with which products need to perform at is probably the best way to do that. Because there's always evolving technologies even in the incandescent side. Having said that, we believe that there is still a great deal of opportunity in the traditional fluorescent lamp, current ballast configuration to really drive greater energy opportunities as well as improve the lighting output. So LED is a growing and important portion of the market but the largest portion and it will be for quite some time continues to be the more traditional ballast lamp configuration and we believe that the partners that we are working with there will be, again, continued advancements there that will be very exciting and we'll continue to push the cost benefit profile of LED. Again, unique opportunities. When it comes to LED, I believe that we are very, very strongly and positively situated to bring LED products to market because again, LED is really simply a light source and it needs to have a fixture that creates the proper environment so it can do what it's supposed to do. Our folks really are all over this.

Do you think you have a competitive advantage versus your competitors in that space?

I don't know that we have necessarily a competitive advantage or not. There are folks that are attempting to bring out new types of white LED and put those into fixtures that are different than color. When it comes to color, we have many products today, Hydrel, Peerless, Gotham, many products that use LED today and are available to our customers, so very exciting opportunities that fit particular applications. It's the white light opportunity that is now evolving into the market. Still very cost prohibitive, very expensive for mass appeal but nonetheless, we continue to introduce and examine opportunities to find the right applications for these types of fixtures. I believe you'll see them evolve over the next handful of years in a positive way. Phillips, coming into the market they acquired Color Kinetics. Color Kinetics has a very niche position in the market place and so we would expect that Color Kinetics, we work very closely with them, we will continue to have that relationship. Phillips is one of our largest suppliers. We have a very strong relationship with them and so our expectation is that relationship will continue to evolve in a positive way.

Your final question comes from Christopher Glynn - CIBC World Markets.

Going a little deeper into some of the puts and takes on the volume outlook, I just wonder if the delays in project orders released from sales agents, if that effectively is push out to the fiscal first quarter or the first half and if there is also a prebuy impact expected in the next quarter or two relative to the most recent price increases?

It's hard to say, but it's our sense that as people realize that the sky is not going to fall -- and I do realize that folks, some of Wall Street is looking into their portfolios and trying to understand what did they buy when they bought some of these sub-prime products -- but I believe on the commercial side, most of what we have seen has not been speculative. It's been for projects that really do have good economics. Can't say that in every specific project, but in general. So I have a favorable view around what that environment looks like. So whether it's pushed out, yes it probably has. Again, September is just a month. We've got a long way to go but September's orders I think were favorable, making up for what we saw as choppiness in August, which probably was driven by very weak stuff in July. July is when sub-prime hit and I think everyone just stopped. They were like deer in the headlights, so to speak. So it's our view that we will see favorability, though, again, with choppiness in 2008.

Finally, comments on the interplay of maybe light commercial falling off further as the residential environment deepens versus seems like maybe there's a bit of a pickup in the heavy project environment.

Well again, there are certain markets on the resi side that are being pounded worse than others, it's where they have had a great deal of speculative build. I think that those few markets will continue to experience a rather negative fallout. The demographics continue to be strong. We still have population growth, the age of kids, schools need to be built so we continue to see favorable trends in those things. I think while we may have seen a temporary lull in some of the smaller projects that are ancillary to residential build, I think on a longer-term basis it is still favorable due to those, again, interest rate environment, demographics, job creation. Those are the key indicators on the longer-term basis.

I will now turn the call back over to Mr. Vernon Nagel for closing remarks.

Thank you for your time this morning, everyone. We believe that we are focusing on the right objectives, deploying proper strategies and driving the organization to succeed in critical areas that deliver on the expectations of our key stakeholders. We believe our future is bright and we thank you for your continued support.