Crawford & Co (CRD.A) 2008 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. My name is Tina, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company second quarter 2008 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawfordandcompany.com under the investor relations section. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period and instructions will follow at that time. (OPERATOR INSTRUCTIONS) As a reminder ladies and gentlemen, this conference is being recorded, today, Monday, August 4, 2008. Some of the matters to be discussed in this conference call and in the supplementary financial presentation may include forward-looking statements that involve risks and uncertainties, including statements regarding our ability to pay dividends in the future. The company's actual results achieved in future quarters could differ materially from results that may be implied by such forward-looking statements. The company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of the call or to reflect the occurrence of unanticipated events. For a complete discussion regarding factors which could affect the company's financial performance, please refer to the company's Form 10-K for the year ended December 31, 2007 filed with the is Securities and Exchange Commission. Particularly the information under the headings business, risk factors, legal proceedings, and managements discussion and analysis of financial conditions and results of operation.

This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required, a reconciliation is provided for those measures to the most comparable GAAP measures which is available on our web site at www.crawfordandcompany.com/quarterly releases. I would now like the introduce Mr. Jeffrey Bowman, President and Chief Executive Officer of Crawford & Company. Mr. Bowman, you may begin your conference.

Thank you. A very warm welcome to our investors, clients and employees this is afternoon for a discussion of our second quarter and half year results and expectations for the balance of 2008. I am Jeffrey, Bowman, President and CEO of Crawford & Company and joining me from the global executive management team this afternoon are Bruce Swain our CFO and Allen Nelson, our General Counsel Chief Administrative Officer.

I am continually encouraged by the potential that we have in front of us in all of our business units. And while I am pleased with the solid progress we have made in the second quarter, we still have a great deal of work to do in order to execute and achieve the potential we have outlined in our strategic plan. So let me review some of the progress we have made in the second quarter. During the second quarter, we have continued to work hard to execute the plans we outlined at the beginning of the year. Now I am pleased to say we have produced significant positive operational results over the prior year. Globally, insurance continues to be a growth business and providing an independent, quality-driven local regional or global claims service is crucial to our client's business proposition. Our goal always is to drive our operations to deliver quality to our clients by investing in education and training and maintaining very strong relationships at all levels. The objective, as outlined in our strategic plan, positions Crawford & Company as a target-driven corporation that achieves its financial and quality goals and meets its commitments to our clients, employees and shareholders. Let me now briefly review some of our strategic activities.

First, our strategic plan, the strength of working together, is helping Crawford's employees derive a common understanding of the strategy and direction of our corporation based on Crawford & Company's vision, mission and values. Through those plans, we have created business momentum in the first half of 2008 which is defining the direction for the whole global organization. One example is the British Insurance Award given by the industry in July to our UK operations for their work on a major loss during the historic 2007 floods. The whole corporation is proud of this prestigious award. Secondly, our global executive management team is demonstrating its readiness and ability to adapt quickly to rapidly changing market conditions, both locally and globally. In the second quarter, we saw continued progress in two areas in particular. Aggressive management of our internal cost base and implementing better sales processes and information to grow the top line, that resulted in some of the increased operating earnings. Thirdly, improving and increasing our corporate marketing and selling efforts across all of our business units to emphasize key account management that will drive significant revenue growth over time. Doing this properly, I am confident that the operating leverage we can create through this initiative will be significant. Fourthly, our commitment to delivering on our promised technology solutions is going according to plan. The global insurance industry continues to face competitive and regulatory changes that require innovative technology solutions to the claims process. Giving our clients access to timely and accurate data is critical to the business proposition we offer. We are very confident in the Broadspire business unit that the new RiskTech product, our self insured market technology system will be deployed on plan and ready for clients at the end of the fourth quarter 2008.

We announced last quarter that we have integrated Exactware, the industry's leading property estimated solution into our US Property and Casualty claims management system known as CMS2. This has accelerated the realization of operational efficiencies in the US Property and Casualty business unit. We are realizing global economies of scale by leveraging our information and communication technologies support division across our enterprise to create both cost savings and creative solutions. Fifthly, over the longer term, our entire leadership team is working together to build the plan for 2009 to 2011. This strategic development process has been implemented into the business unit to advance our competitive advantage, both operationally and financially. The process centers on delivering quality services and solutions to our clients in an ever-expanding number of markets in a way that rewards our investors and employees. It is a journey, but we have a commitment and sense of urgency and direction that we are all excited about. Now let me turn your attention to the second quarter results.

Crawford delivered a second quarter of strong results in a challenging economic environment. Our group revenue improved by 9.4%. Strong revenue growth internationally and in the US Property and Casualty business unit more than offset the revenue declines in the Broadspire and legal settlement businesses. Operating margins improved in three of the four segments in quarter two and has improved across all segments on a year-to-date basis. Our SG&A costs struck 90 basis points as a percentage of sales for the quarter. We are also pleased to report net income is up 167%, excluding last year's gain from the sale of our headquarters. This quarter produced an increase in EPS, earnings per share, to $0.16 per share over the $0.12 per share in 2007, which is the best second quarter performance since 2001. We have stated before that 2008 is not just about improving earnings. It is about delivering on a strategy to improve our balance sheet and cash flow through working capital management and debt reduction. The improvement of our operating cash flows compared to the first half of 2007 also shows that we are making progress. Bruce will report further on these corporate metrics in a moment.

Let me talk about your four reportable segments starting with the international division. Year-to-date, international operations represented 42.4% of the company's total revenues compared with 35.6% in the previous year. For the quarter, international operations reported revenue growth of 27.9% over 2007 which includes a foreign currency benefit of $7 million leaving organic growth of 20% quarter-over-quarter. Operating margins also improved to 9.2% and operating earnings were up 129% over the prior period in 2007. We are pleased with the increased margin growth we are seeing in the international business unit. Our UK and Canadian operations continue to grow their client bases where we have the ability to increase volume business significantly. During the year, we launched a number of new product lines. An example of this is strategic loss management which deals with complex large property claims. It is a totally new service package dedicated to the handling of large claims assignments and is being very well received by our clients. We are now benefiting, also, from a number of large 2007 contract wins that are predominantly Property and Casualty programs, and these programs are increasing in claim assignments and translating into revenues and operating earnings as they begin to expand.

Reviewing now our US Property and Casualty segments, as previously stated, our goal in 2008, even in a challenging overall claims environment, is to improve US Property and Casualty's revenue growth and to ensure that we manage cost to provide an acceptable operating margin. Financially, our US Property and Casualty operation has approximate performed well in quarter two and for the half year. We are optimistic about continued performance for the balance of the year. Revenue is both ahead of plan and ahead of last year in the quarter. In quarter two, we did see an increase in catastrophe claims revenue. As a result of the investments we incurred in previous years in employee training and quality, we are delivering a quality product linked with our technology implementation of CMS2 in 2007, we are now beginning to benefit financially and operationally from a process efficiency standpoint. In this soft insurance market, we have positioned US Property and Casualty business unit to take a bigger share of the claims market as our clients consolidate independent adjustments. We are now beginning to see significant outsourcing opportunities from clients in the volume claims business. So now, turning to Broadspire. As reported, Broadspire's revenue declined from last year. We anticipated this decline in our business planning and we remain confident in the long term opportunities for Broadspire.

In June 2008, I reported some important management changes. First, Dennis Replogle has assumed the role of Chairman of Broadspire. Dennis will be focused on business development and concentrate on the growth of the growth of our core claim and medical services. With this change, Ken Martino became CEO of Broadspire and Ken's primary focus will be on the running of the company on a day-to-day basis and he will be leading the strategic and financial direction of Broadspire. Together with several other new appointments, this Broadspire management team is focused on capitalized growth opportunities, improving efficiency and growing a sustainable and profitable business. As previously noted, Broadspire is still in a transitional phase within its core claims business as run off claims assumed in the acquisition have been slow to replace with new business. An additional factor that has limited revenue growth is the continued frequency decline within the workers compensation business throughout the industry. A significant portion of our claim service business, approximately 68% comes from the workers compensation claims services. This means that our existing revenue stream declines even as we retain our current customers due to the decline in claims volume.

In new business, we are continuing to see a healthy flow of new business opportunities and our sales pipeline remains strong. Movement of claims service business has been slow across the industry and at Broadspire. Many potential clients are conducting pricing reviews in RFP but they are not seeing the need to move the business at this time. Current conditions in the commercial insurance market have risk managers and our main buyers focused on their insurance premium rates rather than on our the claims service programs. Our retention rates on our existing business remain high in excess of 94%. We continue to meet the needs of our existing customers and expand on our relationships. We have been able to increase our penetration of additional claims services or new services with our clients and have added over $5 million of new business through the first two quarters. The expansion of our medical management services from the traditional workers compensation market into the health and productivity market has begun to gain traction. We are seeing more opportunities to utilize our Nurse Case Management, Return to Work and Physician Review services with a broader customer base that includes self-administered customers, disability and health insurance as well as some wellness service providers. Part of our strategy is to further refine our business proposition to the national account marketplace, focusing on loss control reduction strategies and services.

We are developing a more quantitive approach around the results focus model that shows the hard dollar benefit from using our services. With the major issue in workers compensation being the increasing cost of medical services, we feel we have a compelling ability to save our clients more in medical costs than our competition. The same discussion does carry over into the health and productivity market which positions us well to continue to expand our medical management services (inaudible). We remain very focused on increasing revenue in our Broadspire business unit.

Now, (inaudible) this unit, legal settlement administration. The Garden City Group second quarter revenue continued to be effected by the timing of case flow. However, we can report a healthy backlog of work that is now over $52 million as compared to $41 million at the end of the same period in 2007. As previously reported, in some cases, we are awaiting preliminary court approval, on some we are awaiting documentation of the settlement and others we are awaiting appeals to be revolved. Despite the expected declining revenue, we are pleased that GCG's management improved operating margins and operating earnings over the year.

In the class action marketplace, in quarter two, we are seeing a number of challenges. A, a consolidation of some competitors which we predicted last quarter and B, pricing pressures by competitors. We are happy with the quality of our product and the strong margins we have achieved, and we remain conservatively optimistic about the future. GCG's bankruptcy practices has seen an increased activity in quarter two. We are increasing our investment in (inaudible) and account management in this product and expect to further growth. We are pleased to report that we have recently been retained on several engagements from new clients in this product line and we expect this will be a growing source of revenue as the economy continues to weaken. We are, for the second time this year, raising the guidance for fiscal 2008, and taking a conservative approach to our projections consistent with the strategy -- strategic direction of the company. Consolidated revenue before reimbursement was between $1.02 billion and $1.03 billion. Consolidated operating earnings between $63.4 million and $68.1 million. After reflecting stock-based compensation expense, net corporate interest expense and tangible asset amortization expense and income taxes consolidated net income between $25.6 million and $27.7 million or $0.50 to $0.54 per share. Our outlook for 2008 does not include any significant catastrophe revenue related to a land fall hurricane in either the Caribbean or the United States, and therefore, we are projecting our original 2008 plan in quarters three and four which was based on 2007 levels.

Let me finish my quarter two comment by stating that our global executive management team will continue to build on these operational improvements and we expect to execute on plan in the second half of the year. As I outlined in our corporate strategic plan, we will focus on cost reduction, improving operational quality and efficiency and delivering results for expanded sales and marketing activity. That is our collective objective for 2008. If you combine those objectives and our stated goals in managing working capital, we expect to finish the year in a good position. I look forward to your questions after Bruce has finished his financial summary. Over to you, Bruce, to review the company's overall financial performance for the second quarter before we take questions.

Thank you, Jeff.

Companywide revenues before reimbursements increased by 9.4% in the 2008 second quarter to $263.3 million from $240.5 million in the prior year's second quarter. This increase is attributable to double digit organic growth from our international operations and improvements in our US Property and Casualty segment which offset declines in revenues generated in our legal settlement administration and Broadspire segments. Our pretax income totaled $12.7 million as compared to pretax income of $9.5 million we reported in last year's second quarter. We recognized fully diluted earnings per share of $0.16 for the current quarter as compared to earnings per share of $0.12 in last year's second quarter. Second quarter 2007 earnings per share included $0.06 per share related to the gain on disposable assets as a result of the sale of our former corporate headquarters. The company's selling, general and administrative expenses were 21% of revenues in the 2008 second quarter compared to 21.9% of revenues in the prior year quarter. Turning to our operations, international revenues surged 20% in the 2008 second quarter on a local currency basis and by 27.9% in US dollars to $113.4 million on a 2.7% increase in claim referrals. This revenue growth reflects increased case referrals in our Canadian and Asia Pacific operating regions resulting from new business wins during 2007 and 2008 and higher catastrophe claims activity and the positive impact of claims generated by the UK flooding events which occurred during June and July of 2007 and we were completing during the 2008 second quarter.

International operating earnings improved to $10.4 million in the current quarter, more than doubling last year's second quarter operating earnings of $4.6 million. This improvement reflects an increase in the operating margin from 5.2% in 2007 second quarter to 9.2% in the 2008 quarter. Revenues from the US Property and Casualty segment totaled $51.2 million in the 2008 second quarter, growing 7.2% from the $47.8 million we reported in last year's second quarter. Revenues generated by our catastrophe adjusters totaled approximately $3.5 million in the 2008 second quarter, increasing over the $1.3 million produced in the prior year period. Claim referrals in our US Property and Casualty segment were down 3.3% in the 2008 second quarter. This decline was driven by the decision of a large client to to insource the handling of high frequency, low severity vehicle claims that were previously outsourced to Crawford. Excluding these low value vehicle claim referrals, overall claim referrals would have been up 6% in the 2008 second quarter. Operating earnings in our US Property and Casualty segment totaled $5.1million or an operating margin of 9.9% of revenues in the 2008 second quarter. This is compared to operating earnings of $1.2 million or 2.5% of revenues in the prior year quarter. This improvement was driven primarily through technology driven efficiencies and strong cost management in this segment. Revenues from our Broadspire segment decreased by 4.9% to $79 million, due primarily to declines in workers compensation claims referred in the current period. Overall, claim volumes in this segment were down 11.5% during the 2008 second quarter. Broadspire's operating earnings in the 2008 second quarter totaled $2.5 million or 3.2% of revenues, down slightly from operating earnings of $2.8 million or 3.3% of revenues in the 2007 second quarter.

Legal settlement administration revenues, comprised of class action and bankruptcy claims administration services, declined 6.8% in the 2008 second quarter to $19.6 million. Operating earnings totaled $3.1 million in the 2008 second quarter or 16.1% of revenues as compared to $3 million or 14.4% of revenues in the prior year period. Legal settlement administration continues to have a strong backlog of projects awarded totaling approximately $52.8 million at June 30, 2008 as compared to $41.1 million at June 30, 2007. Our cash in short term investment position at June 30, 2008 totaled $48.3 million as compared to $50.9 million at December 31, 2007 and $45.7 million at June 30, 2007. Our total accounts receivable balance totaled $323.9 million at June 30, increasing $8.7 million over the prior year balance -- or over the year end balance, rather. Total debt increased $2.8 million at June 30 as we have had net borrowings under our revolving credit facility to meet short term cash needs, primarily in the first quarter of this year. Cash provided by operations totaled $11 million-dollar for the 2008 period compared to $6.4 million used in operations in the prior year period. This $17.4 million improvement was primarily due to higher net income and improved working capital management. During the quarter, we made $2.9 million contribution to our US defined benefit pension plan. after reflecting capital expenditures, capitalized software and required debt repayments, our free cash flow through the 2008 second quarter was a negative $3.3 million, improving $16.1 million over the prior year of negative $19.4 million. This wraps up my comments. Now I'd like to give our callers a chance to ask any questions they might have about our second quarter release. Tina, would you please explain the procedures for handling questions to our audience?

(OPERATOR INSTRUCTIONS). We will pause for just a moment to compile the Q&A roster. Our first question will come from the line of Mark Hughes.

Thank you very much. Very nice quarter. You suggested that you are seeing a significant outsourcing opportunities, sounds like the domestic market. Could you expand on that a little bit? Are you talking about new contracts that you are evaluating, increasing volume under existing agreements, kind of what is driving that?

There's a little bit of both of those, Mark. We are seeing a general consolidation of business in the number of IAs that they're using independent adjusters for getting more commonality over process and efficiencies and some of the technology issues that we're driving. That's becoming a general theme in a lot of the client relationships that we are having. We are seeing opportunities for them. I mean, it is not just a US issue. That' a significant issue overseas as well.

Do you feel like there's more pressure in that direction now, it the soft insurance market? Has that gotten more intense?

Yes, I think so. I think we are seeing an increased number of RFPs coming in. We are seeing an increased number of contractual negotiations where there are consolidations and there are requirements around the technology. And I think our platform, both from a global standpoint and from domestic markets standpoint, is working well in our favor.

Great. How about the -- talking about more efficiencies coming from the Exactware integration, how far are you in that process? Should we expect more benefits from that?

Absolutely. The full integration of Exactware was carried out at the end of the first quarter. What has happened is CMS2 was implemented in 2007. Exactware has now been implemented so we gain a lot of efficiencies internally with the transfer of the electronic work product through Exactware linking into our back office systems and we are seeing efficiencies coming in at a very high rate within our own operations to meet the requirements and electronically hook up with our clients at the same time. That will progress further as we put further enhancements in place.

Right. Could you characterize the medical case management market? You talked about more opportunity there. Are you seeing more RFPs like with the outsourcing of the claims management?

We have invested, at the beginning of this year in the sales force for the unbundled services. We have set up some new teams on -- effectively to handle those increasing unbundled services going forward, especially designing -- with the issues in the works that comes with this decrease in some of the statistics and the claims coming in and increasing cost of medical services, we are seeing a lot of discussions that are coming up around health and productivity market and expanding into the medical arenas. We are getting a healthy traction, as I said earlier, in that particular business line.

Got you. And then Bruce, any -- what are your latest thoughts in terms of cash from operations for the full year?

For the full year, we are looking at operating cash flow right now at the $38 million to $42 million rate.

Okay. Alright. Great, thanks very much.

Thanks, Mark.

(OPERATOR INSTRUCTIONS). Our next question will come from the line of Manny [Riser].

Good afternoon, gentlemen.

Hey, Manny.

Follow up with a previous question. My first question is direct towards you on the financial side. Do we anticipate further payments for the pension plan as well as debt pay-down for the second half of the year?

Yes, for the pension plan in the US, I guess, talking about the US defined benefit plan, we have made, in the first quarter we made the first installment of the $2.9 million into that, into that plan. We, in the beginning of the third quarter, we made another contribution of $2.9 million. We have approximately $11 million to go this year into that plan and that is factored into our operating cash flow projection that I previously gave.

Does that include what you guys made in the third quarter?

Yes.

So basically it is like -- it is $8.1 additional million at this point?

Yes. Well, yes, probably closer to $10 million.

Okay.

But that is included in our projections for operating cash flow for the remainder of the year. Our goal this year for debt repayment is -- from here on out is probably about the $10 million range. In terms of total funded debt, we ended the second quarter a bit higher than where we were at the end of the year. We think that we will get down to the year end level during the third quarter, and then our goal is to make about $10 million of debt repayments this year against our outstanding borrowings. I think a lot of that is going to be dependent upon increased improvement in our RA profile. That's something that we are managing very closely as a management team, trying to drive our days sales outstanding down as on an organization. And as we make progress along those lines, we think we will be able to generate the free cash flow necessary to deleverage some.

So if I understand you correctly by the end of this year, total debt should be, what is it, $10 million less than at the end of last year?

That's right.

Okay. Moving away from the financial side, on the second quarter with the P&C division, catastrophe had a nice contribution from what I could see, $3 million plus. Has that trend continued in the third quarter?

For the beginning of the third quarter, we have seen a little bit of activity in the Hurricane Dolly situation. We have taken a couple of thousand assignments there. We are obviously watching Edward fairly closely at this present moment and we have a significant number of adjusters on standby. We've also had some events happen in the Canadian market over the past three or four weeks which are nice little boosts that come from a catastrophe of those sizes. They're not the huge ones, but they are what we are building our base business on. So the answer is yes, we are seeing some small effects of it.

Great. And going on to Broadspire and RiskTech. You made a comment that it should be operating, I think you said by the -- up and running fully by the end of this fiscal year.

Absolutely correct, yes.

Are we still on target for November 15?

Absolutely, 100%.

Okay. So, and in terms of cost benefit savings moving forward? , the number that you are working with for the 12 months, or starting, I guess, January 1 would be what, $15 million, $20

Well -- hey Manny, this is Bruce. RiskTech goes in in November 15 of this year and as we have talked about on previous calls, our strategy around RiskTech is really broken down into three components because there's three operating systems that exist today within the Broadspire segment that we are going to be migrating on to the Risktech platform. Our first focus is on the largest claims system that within the Broadspire entity that we acquired, and we are in the process of getting the system ready to convert those claims onto the RiskTech platform. That is on schedule for November 15 for a go live date, and that integration will last through, say, April of 2009. There is also another track related to the system that Crawford claims were handled on previous to the acquisition and that project will be ongoing through 2009. And then there's, I guess the smallest platform that we have is in claims operating on, that's the third stage of the integration at the adjuster desk level. When all of those phases are complete, we think that the annualized cost savings we can achieve is in the $15 million to $20 million-dollar range. Some of that we will begin to see next year, once we turn off the cost of related to the largest preacquisition, Broadspire system environment that we were operating on. But we won't see the full benefit until we get out to, really the full year benefit won't be seen until probably 2011. We will be ramping up to those benefits as we go from say mid 2009 through the end of 2010.

What we will be seeing, Manny is that all new clients coming in from the 15th of November will be able to go on to the RiskTech system.

So on a rolling basis, Jeff and Bruce, if we basically look at the middle of next year, we're starting to get some benefits because the first system will be operating as fully installed and we could get benefits as of April 15, like Bruce said.

Yes, we will start to realize some benefits in the summer of 2009. That's when an outsourced contract that we have for hosting the system that we're integrating off of expires and that contract alone runs us about $6.5 million a year. So we know cash out costs in the second half of next year will half of that. We will also get some efficiencies from the adjuster desk perspective, we expect to get efficiencies there, and also, it's going to give us much stronger sales proposition out in the marketplace with the systems, we'll get some benefits there. It is not just a -- cost savings are important and something we are intently focused on. But there's also a client facing market opportunity associated with this as well.

It sounds like it could be a sales and marketing opportunity as well.

Sure.

Moving to Garden City, the legal settlements division. Backlog is , I think at a record of $52 million and seems like we are getting close to having some of the large claims being released. Do we anticipate some of those claims coming due in the third quarter, being

We can't project on when those claims will be certified by the judges, Manny. We sit and work to insure that we are ready for when they do become certified, but as moment, we are going into the summer season, and we don't see many being released in very near future. But we are actively all over that every day of the week.

You mentioned, Jeff, that Garden City, the bankruptcy business is testing very attractive for us. You also mentioned that on the competitive side, it is in some consolidation. Do you look at us as being a possible acquirer of some additional companies out there? In the Garden City side.

No real comment on that one, Manny. The -- on the business of bankruptcy side, yes, we are seeing some developments and we continue to invest in that business unit within GCG, but that is really from acquisition of personnel.

Well, are there other areas on the Garden City side, new areas of business that you are excited about, that is, like bankruptcy is a relatively new division for us. Are there some other sides of the business that you can talk about?

We have a quality product within the class action business and we continue to develop and promote that through our operation. The bankruptcy section we are investing in at this present moment and we see that, and that's taking a lot of our management's time up. They are getting some success on this. We are a small player in the United States market on this, but we are continuing to invest and grow in it. As for other product lines, part of our strength in working together is that we are cross selling with Garden Citigroup with the rest of the US operations and hopefully, we will see some strong performances out of additional clients in that basis as well.

Among our competitors, who would be the publicly created competitors out there?

In class action arena?

Yes.

Epic would be the largest. I think they may be the only public -- publicly held competitor of Garden City. There's a variety of other private firms that they compete with.

Okay. And my last question concerns the guidance. I was pleased to see that you raised the guidance. However, Jeff and Bruce, it still seems like you are playing it extremely close to the vest with the first half of the year that we've had. I am just curious as to your thoughts on the second half of the year. Traditionally, your third quarter is a relatively strong quarter with some of the -- if we have any type of weather and Garden City gets anything released, I would anticipate third quarter you continue to trend with the first two quarters.

Well, two general comments on that, Manny. Firstly, we are looking at guidance between 50 and 54 for the year end, which is a significant improvement, and if you take just the operating earnings, EPS last year of 21. So we are, we know we are making a lot of traction this our operational efficiencies and our aggressive cost management and obviously, into our revenue growth. From that perspective, we are pleased with some of the business units and the actual progress that we have made. Weather does affect our business and -- at all times but we are not growing the business just for castastrophies. When they happen, we will be in a very good position to be able to service our clients. We have many sales and marketing initiatives going an at this moment to insure that should that happen, we will be in a good position to take advantage of it.

Great. But with the first half of the year, Jeff, recording already $0.34, if one seems to be too difficult to stretch to look ahead and based on past history, to come up with a number certainly higher even in the $0.54 and you and I have discussed this in the past, and based on the first quarter, I was pushing you in the same direction and I am doing the same thing now. We've had two pretty strong quarters and certainly it seems that we are very capable of exceeding even the upper range at this point. Is this kind of --

We are seeing an improvement over the 2007 third and fourth quarters.

Okay. Hopefully it will continue. Good quarters, guys.

Okay. Thank you.

Thank you.

We have no further questions at this time. I would like to turn the call back to Mr. Bowman for any closing remarks.

Thank you. I would like to thank everyone for joining us this afternoon and wish everybody a great week and hopefully, talk to you on the next quarterly call. Thanks.

Ladies and gentlemen, thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6:00 p.m. today through 11:59 p.m. on August 11, 2008. The conference ID number for the replay is 57145572. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. Thank you. You may now disconnect.