Question-and-Answer Session
Operator
We will now conduct a question-and-answer session. (Operator Instructions) Our first question is from Rich Wesolowski from Sidoti & Company. Please proceed with your question.
Rich Wesolowski – Sidoti & Co.
Bill, can you elaborate a little bit on some of the comments you made on the top of the prepared remarks about the seasonal downturn in business and also the $2.5 million drop from gross profit from the Construction segment in 4Q?
William A. Coskey
What happens to a company like ours that bills hours is in the fourth quarter people obviously have holiday benefits, people utilize the vacation they’ve accrued during the year and so the fourth quarter we just normally bill less hours as a company and I think that added to that effect was the fact that this year we had a project rolling off which was the Louisiana ethanol project and it was a large project especially for our construction group and we failed to replace that work. My guess is we held some people on overhead and we dropped some gross margin, I think I said $2.5 million in gross margin, from one quarter to the next which was really the most significant dynamic thing that happened one quarter going to the next.
Rich Wesolowski – Sidoti & Co.
So you kept extra people on overhead, that’s overhead reflected in the cost of sales and not in the SG&A?
William A. Coskey
Not in the SG&A. It’ll be variable overhead that’s in the direct cost.
Rich Wesolowski – Sidoti & Co.
And along the same lines, the SG&A you guys showed a lot better leverage here in the December quarter than you had in September. I’m just curious how those costs can fluctuate so widely from one period to the next. Can you help me understand that?
William A. Coskey
Bob, can you help me with that one?
Robert W. Raiford
Some of it I guess the write down on the note as a bad debt expense but also the write down on the goodwill impairment went to amortization expense both down in SG&A. We have I guess made some considerations going forward trying to flatten out our SG&A with our budgeting process going forward so you won’t see material variances on our SG&A numbers and everything that’s associated with our reimbursable work is going to be up in our charges.
Rich Wesolowski – Sidoti & Co.
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