Crawford & Co (CRD.A) 2011 Q2 法說會逐字稿

Good afternoon. My name is Ashley and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company second quarter 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. Instructions will follow at that time. (Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded today, Monday, August 8, 2011.

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. These statements may include, but are not limited to, statements regarding the funded status of our defined benefit pension plan, our expectations related to future revenues and expenses, all long-term liquidity requirements, and our ability to pay dividends in the future. The Company's actual results achieved in the future quarters could differ materially from results that may be implied by such forward-looking statements. The Company undertakes no obligation to promptly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of a call or to reflect the occurrence of an anticipated event. In addition, you are reminded that operating results for any historical period are not necessarily indicative of results to be expected for any future period. For a complete discussion regarding factors which could affect the Company's performance, please refer to the Company's form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission, particularly the information under the headings Business, Risk Factors, Legal Proceedings, and Management's Discussion and Analysis of financial condition and results of operations as well as subsequent Company filings with the SEC. 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 directly comparable GAAP measures.

I would now like to introduce Mr. Jeffrey Bowman, President and Chief Executive Officer of Crawford & Company. Mr. Bowman, you may begin your conference.

Thank you, Ashley. A warm welcome to our investors, clients, and employees this afternoon. I am Jeffrey Bowman, President and CEO of Crawford & Company. Joining me from the Global Executive Management Team this afternoon are Bruce Swain, our CFO, and Allen Nelson, our General Counsel and Chief Administrative Officer. In line with our previous calls, I will begin with some opening comments on our very strong second quarter and first half year results. Bruce will then review the second quarter financials in more detail, which will be followed by a review of our business segments and comments on our strategic initiatives and conclude with our corporate focus and increase to our guidance.

Let me first remind you that in the first quarter, we realigned two of our business segments by moving the Canadian and Latin American and Caribbean operations from the former international operations segment to a new Americas segment. In addition, our former US property and casualty segment is now included in the Americas segment. The remaining operations in the former international operations segment comprising of all operations in Europe, including the UK, Middle East, Africa as well as Asia-Pacific, including Australia and New Zealand, are now referred to as EMEA/AP.

I'm pleased to report strong consolidated financial results for the second quarter. Revenue was up 22% and net income attributable to Crawford & Company was $13.5 million compared with a loss of $2.5 million in the prior year. Our claims assignments for the group were up 13.1%. Our consolidated GAAP earnings per share reached $0.25 compared to non-GAAP earnings per share of $0.10 after adjusting for the special charges of $0.15 per share in the second quarter a year ago. This result is our fourth consecutive quarterly improvement year-over-year and it is a very good first half of the year.

As we have discussed over the past several quarters, special projects in our legal settlement administration segment has been very important to our revenue and earnings performance over the first half of 2011. We saw strength in our core property and casualty business, both in the US and in the EMEA/AP business segment, reflecting high levels of catastrophic claim activity. A recent marsh study of the US insurance arena reported that the transitional property market we are experiencing may last for a prolonged period as a continued surplus of capital in the reinsurance market, along with ample capacity in the retail market, should curtail the hardening of the market.

However, among the factors that could cause a shift in the property market are continued severe weather, an Atlantic hurricane or a worsening of the global economy. For Crawford, 2011 has seen an increase in global weather events over the past several months. Our response to these events for our clients has been rapid, nimble, and innovative. As previously reported, the Americas segment claims activity started off the year slowly but the second quarter saw significant increases as weather events occurred in the US and Canada. Our claims intake in the US increased following the catastrophic weather we had in April through June across the Midwest and eastern US. Our Americas business unit reported a 14.4% increase in claims assignments over the prior year.

In our Americas business unit, claims volumes are increasing and our share of the market has grown, which should improve results. We remain confident that the strategies and actions taken by management during the prior year will deliver strong operating results for the balance of 2011. Our EMEA/AP segment reported good second quarter results following weather-related claims in both Australia and the UK in the first quarter. EMEA/AP reported strong quarter claims activity, which was up 13.8%. We are encouraged by these factors and have accordingly raised our expectations for the year.

Our guidance reflects continued strong performance in legal settlement administration despite our expectation that the overall volume in this project will slow from current levels in the second half. We also expect a continued improvement in the claim count in the US property area and continued stabilization of Broadspire's casualty and workers compensation markets. On July 25, the panel deciding the Broadspire legal arbitration issued a final decision, which will result in a third quarter after-tax gain of $5.8 million, which is reflected in the guidance we offered today. I am pleased that this ends the outstanding legal matters related to the Broadspire acquisition.

Management has been committed to the restoration of a quarterly dividend since its suspension several years ago. The dividend was restored in February of this year, and, as announced this morning, was declared again by the board to payment in the third quarter. The board authorized an increase to the dividend on the A, non-voting shares from $0.02 to $0.03; and on the B, voting shares, the dividend remained at $0.02. This dividend weighting offers slightly higher dividend compensation to investors in the non-voting A shares. We regard the payment of a dividend as an important part of the total return to Crawford shareholders. Our intent is to support a modest dividend premium for the A shares as appropriate going forward.

That concludes my initial remarks. Bruce, would you please review the Company's overall financial performance for the second quarter?

Company-wide revenues before reimbursements in the 2011 second quarter were $291.7 million, up 22% over the $238.2 million in the prior year second quarter. Our net income attributable to Crawford & Company totaled $13.5 million in the 2011 second quarter, reversing the loss of $2.5 million in the 2010 period. Second quarter diluted earnings per share on a GAAP basis were $0.25 in the 2011 period compared to a loss per share of $0.05 in the 2010 period.

During the 2010 second quarter, the Company incurred severance costs of $1.2 million after related income taxes, or $0.02 per share. Also, during the 2010 second quarter, the Company recorded a good will impairment charge of $7.3 million, or $0.13 per share. After adjusting for the impact of the good will impairment charge and the restructuring charge in the 2010 second quarter, adjusted earnings per share on a non-GAAP basis totaled $0.10 per share in the 2010 second quarter compared to $0.25 on a GAAP basis in the 2011 period. The Company's selling, general, and administrative expenses, or SG&A, totaled $57.2 million, or 19.6% of revenues in the 2011 second quarter, increasing $6.8 million from $50.4 million, or 21.2% of revenues in the prior year quarter. This increase in costs is primarily due to higher self insurance costs, increases in bad debt expense, non-capitalized professional fees associated with IT system implementations, and higher incentive compensation expense.

Revenues, net income attributable to Crawford & Company and earnings per share in the 2011 second quarter were impacted by a number of non-operating items, including changes in foreign currency exchange, restructuring, good will impairment, and other items. Additionally, the Company's underlying operations contributed positively to the second quarter 2011 results. As compared to the 2010 period, during the 2011 second quarter, the US dollar was weaker against most of the major foreign currencies in which we operate globally. This had an overall positive impact on the Company's consolidated revenues and the Americas and EMEA/AP segment revenues in the second quarter compared to the 2010 period.

Revenues from the Americas segment totaled $95.7 million in the 2011 second quarter, increasing 16% from the $82.3 million reported in last year's quarter. A sharp increase in weather-related claims in the US was aided by an increase in Canadian revenues as a result of increased case volume and the positive impact of exchange rate movements. Before reflecting the positive impact of exchange rate fluctuation, Americas revenues increased 12.8% to $92.9 million during the 2011 quarter on a constant dollar basis.

Operating earnings in our Americas segment totaled $10.2 million, or an operating margin of 10.6% of revenues in the 2011 second quarter. This compared to operating earnings of $5.3 million or 6.4% of revenues in the prior year quarter. This improvement primarily reflects the strong incremental margins generated from catastrophe-related work in the US property and casualty operations. Before reflecting the positive impact of exchange rate fluctuations, America's operating earnings totaled $9.9 million during the 2011 quarter on a constant dollar basis.

Revenues generated by our catastrophe adjustors in the US totaled approximately $10 million in the 2011 second quarter, increasing from $3.6 million in the 2010 quarter. The increase in revenues was due to the surge in claims we experienced from the severe weather in the midwestern and southeastern United States during the 2011 quarter. EMEA/AP revenues increased 24% in the 2011 second quarter to $87.3 million from $70.4 million in the 2010 period.

Our revenue performance reflects weather-related claim increases in out Asia-Pacific operating region and the positive impact of exchange rate movements. Before reflecting the positive impact of exchange rate fluctuations, EMEA/AP revenues increased by 15.7% to $81.5 million during the 2011 quarter on a constant dollar basis. EMEA/AP operating earnings increased to $7.6 million during the current quarter, up from last year's second quarter operating earnings $5.3 million. The operating margin in this segment was 8.7% in the 2011 quarter, increasing from 7.5% in the 2010 second quarter.

Before reflecting the positive impact of exchange rate fluctuations, EMEA/AP operating earnings totaled $7 million during the 2011 quarter on a constant dollar basis. Revenues from our Broadspire segment decreased to $57.9 million in the 2011 second quarter, down 5.3% from $61.2 million in the prior year quarter, reflecting lower levels of revenues from our existing clients due to a lengthening in the duration of workers' compensation claims, which is having the adverse impact of slowing down the revenue recognition pattern on these claims. In addition, we are experiencing changes in the mix of claims, with a higher percentage of less complex, lower value claims. Broadspire's operating loss in the 2011 quarter totaled $3.1 million, or negative 5.4% of revenues, increasing from the operating loss of $1.8 million, or negative 2.9% of revenues in the 2010 second quarter. We continue to focus on cost efficiency within this segment in light of unfavorable revenue and claim duration trends.

Legal settlement administration revenues comprised of class action and bankruptcy claims administration services as well as significant special project revenues, totaled $50.8 million in the 2011 second quarter, more than doubling the $24.3 million reported in the prior year quarter and reflecting the benefit of the ongoing Gulf-related special project. Operating earnings totaled $14.8 million in the 2011 second quarter, or 29.1% of revenues as compared to $5.6 million, or 22.9% of revenues in the prior year period. Legal settlement administration continues to have a strong backlog of projects awarded, totalling approximately $75.2 million at June 30, 2011, as compared to $56.5 million at June 30, 2010.

Our cash and cash equivalent position at June 30, 2011 totaled $37.2 million as compared to $93.5 million at December 31, 2010, reflecting borrowings held at year end 2010 that were used to make a $20 million contribution to the frozen US defined pension plan in January 2011 and cash used to fund working capital expansion through the first six months of 2011 resulting from the increase in revenues. Our investment in unbilled and billed receivables has increased by $56.3 million in US dollars during 2011 as a result of higher year-to-date 2011 revenues.

Our pension liabilities decreased through June 30, 2011 by $26 million, primarily as a result of the $20 million contribution to our frozen US defined benefit pension plan during January 2011. Our total debt has decreased in 2011 by $2.3 million. Cash used in operations totaled $33.2 million for the first six months of 2011 compared to $29.6 million used in operations in the prior year period. This $3.6 million increase was primarily due to accelerated US pension contributions during the 2011 first quarter, growth in unbilled and billed receivables, and increased payments related to incentive compensation and 401(k) contributions in the US.

Free cash flow improved by $2.3 million, primarily reflecting lower mandatory principal payments on the Company's long-term debt and lower capitalized software costs. The Company's cash requirements typically peak during the first half of the year and decline over the balance of the year, with substantial cash inflows usually occurring in the fourth quarter from some of our major markets. Back to you, Jeff.

Thanks, Bruce. During the first half of 2011, our focus on attracting new business and retaining our current customers continues to be linked to the Crawford system of claims solutions, which is prominently displayed on our website and in our recent annual report. Our global and local clients range from the largest multinational insurance carriers to local insurance companies. The system defines our competitive advantage, reinforces our industry leadership, and clarifies our portfolio of businesses to our clients.

Significant attention has been put into the key account management and cross-selling initiatives throughout our businesses globally. Today, our clients include more than 200 of the Fortune 500 companies. Our clients worldwide continue to challenge us to be more responsive in our claims handling, as they demand sustainable performance improvement through better control of indemnity spend, improved business processes, better automation and increased [adranolytics]. We are well positioned to handle these challenges going forward and I am very pleased with the global response of our organization this year in light of the increased number of catastrophic events. We have proven that we can respond quickly and efficiently to catastrophic situations as they occur. We are focused on innovation as a means of creating value for our clients. As one example, by accelerating our overall technology strategy and investment to deliver better analytics for both local and global clients.

We recently announced the acquisition of a significant global business process management software package. The BPM Suite, with its mobile, social media, and process automation capabilities will improve operational efficiencies and effectiveness internally and ultimately enhance how we service our clients. It will automate tasks that are currently performed manually and improve accuracy and reduce expenses. Crawford has consistently increased utilization of mobile technologies to enhance our quality and leverage knowledge across new services and solutions. We will continue our diligence in cash management and expense control and will stay focused on maintaining our long-term strategic goals of improving our balance sheet and maximizing cash generation.

Our overall case growth was up 13.1% versus the second quarter a year ago, driven by weather events and new business gains. We have always indicated that our business is sensitive to catastrophic weather events that trigger a large number of insurance claims. Over the past several months, we have seen a number of these events occur globally. Insured indemnity dollars in 2011 are well ahead of the past three years, underscoring the sharp increase in catastrophe losses over the global marketplace. This demonstrates the industry-wide significance of catastrophe losses through the first half of 2011. The first six months to date insured industry losses totaled $72.5 billion, compared with $75.1 billion for the whole of 2008, $38.8 billion in 2009, and $49.6 billion in 2010. We see the increase in claims payments in our US and Asia-Pacific arenas where events reflect the following events -- in Australia, Queensland, and Victoria, flooding in December 2010, to January 2011; the New Zealand earthquakes in February 2011 and June 2011; the Japan earthquake in March 2011; and the US severe weather between February to June in 2011.

So let me now turn to the outlook for each of our business units, starting with the Americas segment, which represents 32% of our overall consolidated revenues in the first half. While our property and casualty clients in the United States, similar to the rest of the world, still see a softening of property and casualty premiums, United States claims frequency increased sharply during the first six months of 2011 with particular acceleration in quarter two. We executed a strong response to the catastrophic events and from our analysis, we are satisfied that we are gaining market share by securing new accounts and expanding our services to our current clients.

Let me talk about some additional bright spots for the US property and casualty division that gives us confidence in our 2011 outlook. The US property and casualty group has invested in resources for our casualty services business, especially in the United States transportation area for the trucking business. We are growing in this area in 2011 through new client wins. Our stated goal of growing Global Technical Services, GTS, and our large complex claims unit in the United States is on track as we continue to be nominated on account with high value complex claims and as a result, we continue to add executive general adjustors aggressively as our GTS claims volume increases. In quarter two, claims were up 6.7% and 4.8% year-to-date.

Our industry-leading contractor connection business in the US still continues to build momentum as we add more contractors to the program and, more importantly, several new clients. 2011 claims are up 17.5% over 2010 in the second quarter and 12.4% year-to-date. The ongoing expansion of contractor connection in the US is a result of insurance carriers moving high frequency, low severity property claims directly to repair networks. We expect this trend to continue in the future and we are positioned as the market leader in this important area.

During the second quarter of 2011, we reorganized the US field offices and the GTS offices to create a stronger, unified business model. Our operations in Canada improved significantly over last year, mainly due to more weather-related events. Revenue is up in the second quarter by 14%, assisted by exchange rates and new revenue from Canadian contractor connection business as well as a claims volume increase of 20.1%. We continue to manage our costs as we grow the business in Canada.

Lastly, and on the Latin American and Caribbean operations, second quarter revenue increased 13% in local currency over the comparable quarter last year due to the growth of our GTS division in Brazil. Claims volume decreased in the second quarter versus the prior year due to the loss of our high volume, low severity affinity program in Brazil.

Now, turning to the EMEA/AP operations, which represent 29% of our consolidated revenue over the first half. Our focus on sustainable client revenue has been successful in this business segment. In the second quarter our revenue grew 24%. Our claims volume reflected an increase of 13.8%. We continue to make progress with our initiatives to grow our Lloyd's market share and have recorded increased activity this year. It is worth noting that our Broadspire TPA services in Europe are expanding their business with US multinational clients, supporting our global initiative of cross selling our services worldwide. To date, we are providing these services from 14 of our international locations with more to come.

In the UK, our operation benefited from a surge in weather events in early 2011 following severe cold weather through December and January. The resulting small homeowner claims are flowing through the UK and this inventory should reduce through quarter three and four. In continental Europe, the Middle East and Africa, or SEMEA, we continue to see encouraging development and positive changes. Both our revenue and our claims increased in the second quarter over 2010 by 5.8% and 10.8% respectively. Our newly appointed management team is driving a new performance culture into this region to improve both operational and financial performance.

Now, turning to Asia-Pacific. The significant weather events that continued into 2011 for Australia and New Zealand have increased our claims volume by 42.5% for the quarter over 2010. We are handling claims throughout Queensland and the city of Brisbane, which was devastated by widely reported flooding. Many of the claims were of significant size and we continue to monitor the full extent of our clients' aggregated reserves. Market feedback has been excellent, acknowledging the response we were able to provide from around the world. We currently have teams working in New Zealand and Tokyo, responding to both local and international instructions on these events.

Our Broadspire operation, which represented 20% of the consolidated revenue for the first half of 2011, reported a loss for the quarter on lower revenues. We remained firmly committed to the business and believe strongly that Broadspire's solid market position, integrated service model, and quality of service offer the market a truly competitive product. Broadspire's internal ability to fully integrate all of our services, claims management, medical management, and medical bill review, give us market-leading capabilities to provide innovative solutions and improve the bottom line for our customers. This is Crawford's -- this is critical to Crawford's strategic development as we take every opportunity to cross-sell our services and work on improving results in these operations. Broadspire is an integral part of the Crawford product line and strategy.

In the second quarter, we saw a 7.7% increase in claims at Broadspire. Quarter two casualty claims were influenced by a global product recall assignment, which will continue for some years. The workers compensation claims volume increased in quarter two due to the increases in staffing and healthcare segments, while the manufacturing and construction areas wait for a return to job growth. We continue to receive a significant number of new RFPs, which confirm that our prospects in our pipeline are very encouraging. Our focus is to convert these opportunities into new revenue. We are emphasizing the development of new business opportunities with an enhanced value proposition and target market approach, executed by the cross-selling of additional services and balancing our cost base over the period. The trend to outsource medical management is a positive from Broadspire.

As reported last quarter, following the recent M&A activity involving our competitors, we have secured a number of new programs and we are seeing opportunity for further client wins as our competitors grapple with integration issues. We also see large carriers shortening the approved number of TPAs, which will benefit the larger players, including Broadspire and Crawford. Service innovation is a critical success factor for Broadspire. We continue to enhance current services through technology and to develop new ways of managing lost costs to meet the complex challenges in today's marketplace. We believe that our aggressive marketing and sales programs are gaining traction on this basis.

Our new products include chronic pain protocol, a treatment regime using our clinical resources that incorporates managing the physical and psychological aspects to reduce the drug and physical dependencies to return the injured worker back to work more quickly. Broadspire At Home is a program that provides needed clinical services in the home setting, reducing the cost of hospital expenses by moving the individual to their home with services provided by specialty companies that can provide the same level of needed care. Workers On Loan and Broadspire My Claims also add new functionality to our service leads. As we continue to drive our sales and marketing plans, we expect to see improved financial performance in the second half of this year.

We are very pleased with the Legal Settlement Administration, or LSA, segment's revenues and operating earnings this year. The quarterly results were strong and represented the third best quarter in LSA history. LSA represented 19% of our consolidated revenue in the first half and the quarter was a continuation of the very strong performance of the second half of 2010 and the first quarter 2011 with respect to both revenue and operating earnings. Both increased significantly due to the special project that started in the 2010 third quarter.

Our attention to assist in the creation and management of the Gulf Coast Claims facility has been a very important assignment for the incorporation and has had a very positive effect on our results. Our outlook for this project is that activity will slow over the second half of the year from their extraordinary levels of the past year, as reflected in our LSA backlog, which is substantially below the record at the close of the first quarter. Additionally, the class action market remains challenging. However, we have been retained in new significant class actions and have seen a number of small and mid-market bankruptcy matters. During the past three months, we have been appointed to a number of mortgage-backed security settlements in the banking industry. That concludes my comments on our business segment.

Let me now turn to our 2011 focus and our guidance. As discussed, we have updated and increased our initial guidance for 2011. Factors affecting these increases include the special project and legal settlement administration and catastrophic events in the US and Asia-Pacific. Our revised guidance is as follows -- consolidated revenue before reimbursements between $1.07 billion and $1.1 billion; consolidated operating earnings between $75 million and $83 million; consolidated cash provided by operating activities between $30 million and $35 million. Net income attributable to Crawford & Company on a GAAP basis between $41 million and $46.5 million, or $0.75 to $0.85 diluted earnings per share, an increase of more than 40% over our original guidance. As discussed earlier, this includes a special credit of $5.8 million net of tax, or $0.11 per share related to the final decision and award issued on July 25, 2011 in the arbitration proceedings with Platinum Equity related to the purchase of Broadspire.

In the first half of 2011, Crawford has delivered a significantly improved financial position. We are very focused on delivering operating improvement in our Broadspire business, both domestically and globally. We will continue to grow and improve our Americas, EMEA/AP, and LSA business segments for the balance of 2011. Our Worldwide Management Team is aggressively executing on our strategies as laid out and is developing and executing a culture in which our employees worldwide understand the values that foster improved performance for our clients and our shareholders. Our results and 2011 guidance are tangible evidence of the benefit of having a diversity of earnings in a volatile market. Given the market strength and reputation of our business segments and the balance of earning powers for our corporation, we continue to remain very optimistic and confident about our growth opportunities as we execute on our corporate strategies for our shareholder.

Thank you for your time today and we look forward to your questions. Operator, will you please explain the process for asking questions to our audience?

(Operator Instructions)

Your first question comes from the line of Mark Hughes with SunTrust.

Thank you very much. The number of CAT adjustors that are out there now relative to the peak, could you give us some sense of where you stand here, a third of the way through the quarter?

The number of adjustors we've got out in the US is approximately at this moment about 200. And if you put that in context, Mark, the recent -- last time we were at that time of level was in the third quarter 2008 in the United States. So, it shows you the significance of the claims on the books at the moment.

Alright. Is that to say that the -- you're still near the peak number of adjustors?

We're still working on plans going into the second half of the year.

Right, okay. How about -- you talked about being able to pick up some new programs at the expense of one of your competitors within the Broadspire segment and you've picked up some new contracts -- looking at a lot of new opportunity. Can you give us a sense of when you think we have a good opportunity for revenue to stabilize there, assuming these underlying issues with frequency are continued at the current trend? Where can we look for stabilization in that business?

Well, I think two parts there. I'll take the operational part first, Mark. We have a very strong pipeline at this moment in the Broadspire operation with potential new clients coming on board. We had an excellent client retention in the second quarter, which was 99%. So we're seeing -- and we're seeing an increase in claims volumes. There are some factors around the revenue, which obviously we are looking to make sure we stabilize that revenue, and there are some accounting factors around that which Bruce will just touch on. But we're very confident about the client retention and the new clients where we're picking up on the RFPs as we go through the balance of this year and into 2012.

Yes, Mark, this is Bruce. A few of the things that have impacted us are lengthening of duration in the claims where they're going on for a bit longer than we had anticipated. And in a lot of these contracts that we have with our clients, it's a fixed fee for the handling of the claim for its life. So you have durations extending out, you -- it slows the revenue recognition pattern down on those claims. Some of that is partially made up for by the fact that you have higher medical management revenues associated with a longer duration client.

We've also seen some pricing pressure in this marketplace and somewhat of a shift in mix here recently to lower value claims as opposed to some of the more complex indemnity claims. That all conspires to have a negative impact on revenues. But the big driver in that business is new business wins and getting acceleration there and really getting our fair share of the programs that come out to market. And when we do that, we believe that we'll be able to stabilize the revenue and then manage our costs to at least a breakeven level, if not slightly profitable. Then from there, it's growth in revenues that's going to drive strong incremental margins for us as we go forward.

Right. Now, if you achieve some sort of acceptable level of success on these new opportunities, how much time would have to pass? How many opportunities do you have to look at? Then, when before you are looking at a positive top line? Is that a 2012 event? You win the business this year and it comes on next year and that's a reasonable outcome?

I think that's a fair comment. A lot of the programs we're bringing on now have 1 October start dates and, obviously, as we move through the balance of the year, the new programs will probably go into the January 2012 area.

Okay. Then one final question. The -- if you look at the Gulf activity now, again, kind of the same form of question -- how are you looking currently today in terms of run rate compared to where you were on average in Q2?

Well, we're obviously seeing a slowdown in our forecast going forward, but that's very much dependent on our client and the amount of work that he will advise us of or reduce as the program goes through. I mean, it's a very difficult one to forecast.

Is that more of -- you're anticipating that? But currently where are you now? Are you still-- ?

We are seeing a decrease at the moment.

Yes. Okay. Alright, thank you.

(Operator Instructions) We'll pause for a moment to compile the Q&A roster.

And there are no further questions in the queue at this time. I will now turn the call back over to Mr. Bowman for any closing remarks.

Thank you. Thank you for your time and questions this afternoon. Thanks, Mark. Finally, our strategies has remained. Firstly, securing new business wins. Secondly, focusing on improving operational efficiency. Thirdly, a disciplined approach to expense management and working capital. Fourthly, our employee commitment and engagement. And fifthly, our 100% commitment to our shareholders that we are improving the corporation and enhancing the shareholder experience. I'd like to thank everyone for joining us this afternoon and wish you all a good week. Thank you and good-bye.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6.00 pm today through 11.59 pm on August 15, 2011. The conference ID number for the replay is 86077611. The number to dial for the replay is 1- 855-859-2056 or 404-537-3406. Thank you. You may now disconnect.