Question-and-Answer Session
Operator
Your first question comes from Josh Vogel – Sidoti and Company
Josh Vogel – Sidoti & Company
I guess my first question is more from a macro standpoint. I was wondering if you were seeing with your client base, are they starting to add employees to their payrolls?
William Sherertz
Josh, no. The first step you're going to see is the average work week is 33 hours now, and the first step is not going to e add employees it's going to work those people longer hours. Then they get into overtime they start working them at over time and then they'll add so it's actually a three step process. What we're seeing right now is a fairly consistent work week which would imply the good news is that it's not getting worse but we don't see any strong uptick at this point either.
Josh Vogel – Sidoti & Company
Okay and as the work week increases I guess I just want to have a better idea of the leverage here that you have with each client. Are you going to be more profitable with an increasing work week or with them having more employees on the pay roll?
William Sherertz
Both affect us. Our margins are determined by wages so the more wages a company pays the more gross margin we get, so we have it both ways.
Josh Vogel – Sidoti & Company
Now shifting to the staffing business, I know the year-over-year comps are tough but we have seen some nice sequential improvement two quarters in a row here. Can you remind us, what are the seasonal factors in this business?
William Sherertz
We do an awful lot of canning which is a spring, summer, fall business where we're running canneries we do some of the wine business down in Napa where we're stocking the shelves and packaging and helping out with the storage and those kinds of things, those are seasonal. And then beyond that a big part of our staffing is out of Utah and [inaudible] Utah [circles] our staffing and they do a lot of manufacturing, packaging those kinds of things particularly the vitamins and others. But typically staffing will fall off in December and January and February.
Josh Vogel – Sidoti & Company
What about the margin profile in that business I know it has a lower payroll component. I know you're consolidating gross margins are about 4.5%. I'm just curios what the staffing gross margins are.
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