Question-and-Answer Session
Operator
(Operator Instructions)
Your first question comes from the line of Charles Strauzer of CJS Securities.
Charles Strauzer – CJS Securities
The divested businesses in the Systems segment, beyond the gain that you recorded in Q3 what is the impact on that segment in terms of lost revenue and potential profits in those businesses?
David Walker
Both of those businesses combined last year had revenue of about $30.8 million and they made about 4.3%. So they were profitable and they had declined about 11% in the aggregate in 2008.
Charles Strauzer – CJS Securities
On the operating margin for the Operations business at 10-15% obviously you are doing very well there. What are the factors that could cause the margin to go to the lower end of that range over the year?
Richard Montoni
A couple of things. I think Dave Walker in his comments said for the full year we expect that segment to deliver 12-15%. But for long term year out we have set our range for 10-15%. In terms of what are the factors there are many factors. The factors that come to mind that are most significant would be the stage of new work that we take on. Generally on the longer term contracts we find that front end we have investments. Sometimes these expenditures need to be expensed as incurred pursuant to generally accepted accounting principles. So you may find situations where new work has either a negative margin or lower margin and then as the contract matures and we start driving efficiencies we get greater margins towards the tail end of the contract.
So, the nature and timing of the contracts would be a factor. I think that is probably the largest factor.
David Walker
Quarter over quarter you get fluctuations due to timing of maybe the equivalent of open enrollment so we’ll get big expenditures that may bear lower profit on individual quarters.
Charles Strauzer – CJS Securities
Also the six contracts up for re-bid, what is the status of those? Are those RFP’s submitted? Are they in kind of the review phase?
David Walker
That is in a hold pattern at this point in time. The state has not moved forward with the RFP process. We don’t know when those RFP’s will come out at this point.
Charles Strauzer – CJS Securities
On the Program Integrity you mentioned there is a new area that you are focusing on some of the Consulting business with that. There is a number of the Medicare/Medicaid integrity contracts up for bid under the Civil Task order. Are you bidding for any of those right now?
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