Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of David Gold - Sidoti & Co.
David Gold - Sidoti & Co.
Can you elaborate just a little more on the comment about the general decline in discretionary spending and particularly how that relates to janitorial?
Henrik Slipsager
There are certain parts of the janitorial services that are very dependent on extra service of discretionary spending and that is particularly in the northeast region or in particular New York where the sales of business and the pricing is separated from the main building towards tenant services. So when tenant service demands are lowered like its been in primarily the financial sectors over the past three months, you will see a major impact because our fixed cost base in the buildings don’t change.
So it’s basically our revenue are dropping at the same rate as our extra services decline but our cost base stays the same. So it’s primarily on the financial services piece. I have not seen it in many other areas and it’s not a vacancy thing it’s more a spending thing.
David Gold - Sidoti & Co.
So on that basis, essentially its incremental business that presumably is higher margin, these clients because you don’t have high related costs with it, you already have the people on staff in there, its just extra work that they can do, right?
Henrik Slipsager
Correct.
David Gold - Sidoti & Co.
If that continues is there anything that we can do to reduce related costs related or capacity related with that or is it not that easy?
Henrik Slipsager
I don’t think you’re going to see any changes in the way we’re running the jobs because basically with the existing Union situation it will be very difficult to cut labor but the key thing is when these contracts are up for renewal which happens pretty much annually if this continues, and we see it continuing into the future we will renegotiate the price because everybody is in the same boat. It’s not an ABM problem it’s a business problem.
David Gold - Sidoti & Co.
On the lighting business, the sale price, can you give us a sense of how much of that say would be upfront and how much is accounts receivable buyout that maybe comes over time?
Henrik Slipsager
It’s approximately half upfront and I would say probably of the remaining half you’ll see 70%-80% of that come in the first six months and the rest over the period, over the next two years. If I was to give you big numbers, $50-$60 million over the first six months and the remainder over the next 2.5 years.
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