Question-and-Answer Session
Operator
(Operator Instructions) Our first question does come from Josh Fogel with Sidoti & Company. Sir you may ask your question.
Josh Fogel – Sidoti & Company
I just wanted to start first in telecom services, what do you think is the likelihood that you will be reimbursed partially from this client?
Jack Egan
It’s tough to say at this time. We definitely think we’ll recuperate some of the money but at this time it’s too early to give guidance on numbers.
Josh Fogel – Sidoti & Company
Okay. But, the relationship remains intact? There’s no chance of losing this business?
Steven A. Shaw
We’re continuing to get orders from the client and we’re continuing to provide services to them.
Josh Fogel – Sidoti & Company
Okay. Could you maybe discuss the contract pipeline at all? I see that inventory came down a lot since the end of last quarter and I was wondering if this was fully to reflect the contract dispute or just overall contract opportunities were drying up?
Steven A. Shaw
Specifically in the telecom I take it?
Josh Fogel – Sidoti & Company
Yes, in telecom.
Jack Egan
The backlog Josh is about $69 million compared to $76 million a year ago.
Josh Fogel – Sidoti & Company
Okay. I guess looking at the segment’s operating profit if you pull out x the charge segment revenue was much higher than what I was looking for but operating profits x the charge were basically flat, or actually significantly lower than the $4 million you put up the quarter before and I was wondering what was driving the margin weakness here?
Jack Egan
They had some much better profitable jobs that they were working last year compared to this year and this year had a higher overhead rate.
Josh Fogel – Sidoti & Company
Shifting to staffing, in the technical placement business there’s a big drop in the operating profit there and outside of the startup costs you mentioned for VMC you said that there was a change in the sales mix and I was just wondering now if you’re targeting lower margin staffing assignments there or are you seeing a deterioration in the pricing power of this business?
Jack Egan
It’s actually the sales was on a good side for the A&I division which increased their profitability. On the technical side the weakness was almost totally related to the startup costs of the new projects and VMC and they also benefited last year as Steven mentioned before, from a settlement of a vendor dispute.
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