Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Bonnie Wachtel – Wachtel & Company, Incorporated.
Bonnie Wachtel – Wachtel & Company, Incorporated
I have two questions, one involves the SEC settlement, the other is with respect to your operations. Let me ask the operation question first, this is really I think primarily directed to John, there are two items that have jumped out at me in the discussion in the last quarter and in the first quarter results, for the last quarter it was the ProtoStar bankruptcy, for the first quarter it was the fact that you had placed in to your projections the expectation of winning a contract away from Harris on which they were the incumbent, you were not successful in that effort.
I am concerned and I’ve heard many others concerned about the huge increase in expenses at Integral impacting your rates and making the company less competitive which blows out a lot of any business development efforts if you’re going to lose it all on cost. I’d like to speak to your impression of that situation John or Bill and also what you’re doing to avoid any similar situations to ProtoStar on the credit side?
John B. Higginbotham
Let’s first with ProtoStar, you’ve got hundreds of customers as you know and on any given day any one of these customers can have difficulties. Unfortunately, ProtoStar in the last month or so apparently had reached a point of insolvency and also filed for bankruptcy. We do give a financial test of all of our customers, the vast majority of them are large, very well capitalized institutions or government agencies so it’s usually quite easy to make financial tests if you will with respect to these customers.
Occasionally, you’ll have a small [inaudible] situation, ProtoStar is by no means the only one that this company services but it’s a relatively small percentage of our customer base. Nonetheless, clearly we need to track our customers as closely as possible to make sure that we have early warning on situations where they may be getting in stress financially. I think in ProtoStar’s case, Bill and the team and our commercial group actually did a very good job of early warning on this mitigating any sort of adverse impact to the minimum amount possible and it shows that the system is working.
Business in this particular market place has this type of risk and it’s obviously higher today than it was a few years ago when capital wasn’t an issue. But, we do track it and we are monitoring all of our customer base. We are treating these situations conservatively so I think you have a situation here where there is a very good expectation of a successful outcome here ProtoStar, albeit we’re taking properly a conservative assessment of the circumstance.
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