Page 105 - FINAL Combined CB2_Neat

EXPENSES

As revenue levels decreased from last year, so did expenses. The cost cutting measures that
began in the previous year resulted in a decrease in expenses of over $1 million. A significant
portion of the decrease was in salaries and benefits as headcounts were lower. Facilities costs
were flat. Communications & Computers, Insurance, Bad Debt & Costs of Errors combined for a
35% decrease. Professional services was the only category showing an increase due to the non-
recurring services relating to the leadership transition and management reorganization.

The overhead rate continues to come down as Management works toward “right sizing”. Fiscal
year 2015 saw the highest overhead in company history at 2.32 times direct labor. This year ended
with overhead at 2.14 and next year is projected to be another decrease. Utilization, hours spent
working on projects versus non-project hours, has the biggest impact on the overhead rate. When
everyone is busy working on projects and utilization increases, there are less salary dollars going
into the overhead bucket.

After salaries and benefits, facility costs are the next largest expense. They are also the most
difficult to manage on a short-term basis due to lease commitments. The end of the fiscal year
was the termination date for the Chicago office lease as well. After much thought and
consideration, it was determined that a Chicago address is too valuable to give up and a lease
extension for a smaller, right sized space in the same building was negotiated.

Once again, no interest or taxes! The cash position remained strong throughout the year. There
was never a need to borrow against the line of credit. Even after a profitable year and using
some of the tax benefits from the IRS Section 179D deduction for energy savings accumulated in
past years, a significant tax benefit balance remains for the future.

Operating Expenses FYE 2017

Miscellaneous,
Insurance & Professional Svcs,
$253,306 , 3%
$281,122 , 3%
Salaries, $5,917,557 ,
Communications &
61%
Computer, $487,812 , 5%
Facilities,
$965,800 , 10%

Marketing Exp (Non-
labor), $435,474 , 4%

Employee Benefits, Utilization
$1,379,010 , 14% 52.3%
Salaries + Benefits
=
75% of Operating