Question-and-Answer Session
Operator
Our first question comes from the line of Robert Dunn with Sidoti and Company. Please proceed with your question.
Robert Dunn – Sidoti and Company
Hey, good morning, guys.
Rick McClelland
Good morning.
Robert Dunn – Sidoti and Company
I just want to see if I could get a little more specific on what was driving the leverage in terms of the other line out in the cost of sales, I know you said it was kind of cost saving initiatives on that newer business, could you be just be a little more specific about what was driving that?
Rick McClelland
Yes, in that area, that is where we have warehouse cost in some of the new business that we started at personnel calls associated with [inaudible] when we did this at our locations and so we recline in those particular areas, reduced the amount of cost that we were incurring and there were some additional benefit that we received related to insurance in areas like that.
Robert Dunn – Sidoti and Company
And all of these things will persist I mean it was not certain one time to the quarter?
Rick McClelland
We believe so.
Robert Dunn – Sidoti and Company
Okay, when you kind of think of it like that it seems that the low end, below the mid part of your guidance seems a bit conservative, would you say that, would you agree with that statement?
Rick McClelland
We have given our guidance. We believe we will be in that range and so at this point we are not going to change that guidance. If we get through the next quarter and it becomes apparent that it should be adjusted, we will do it at the end of the next quarter.
Robert Dunn – Sidoti and Company
Okay, great. Just one thing about the franchising as well at the end of the quarter, you had now 40 signed agreements, is that correct?
Rick McClelland
That was the end of the last quarter. We had new five new agreement signed this quarter.
Robert Dunn – Sidoti and Company
So, now it is 45?
Rick McClelland
Yes.
Robert Dunn – Sidoti and Company
Okay, great. Thanks a lot.
Operator
Our next question comes from the line of Clayton Ripley with Bears Capital. Please proceed with your question.
Clayton Ripley – Bears Capital Management
Yes, is there any update on the litigation front I guess related to EDD or the California suit?
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