Crawford & Co (CRD.A) 2012 Q2 法說會逐字稿

Good afternoon. My name is Samantha and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company second quarter 2012 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawfordandcompany.com under the investors relation section. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions will follow at that time.

(Operator Instructions)

As a reminder, ladies and gentlemen, this conference is being recorded today on Monday, August the 6, 2012. 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 benefits pension plan, our expectation in relation to future revenues and expenses, our long-term liquidity requirements, and 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.

In addition, you are reminded that the operating results for any historical period are not necessarily indicative of results to be expected of any future period. 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 the 31, 2011. Now with the Securities and Exchange Commission, particularly the information under headings business, risk factors, legal proceedings, and management discussion, and analysis of financial condition and results of operations as well as subsequent Company's filings with the SEC. This presentation 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, Samantha. A warm welcome to our investors, clients, and employees this afternoon. I'm 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. I will begin with some opening comments on our second quarter results. Bruce will then review the second quarter financials in more detail which will be followed by a review of our businesses, comments on our strategic initiatives, and conclude with an update on our corporate focus and increased 2012 guidance.

Although segment results were mixed, our consolidated results were ahead of our initial expectations for the quarter. Our second quarter 2012 revenue was 1% over 2011. And our operating results reflected a positive performance in our Legal Settlement Administration segment, and a very strong performance in our EMEA/AP operation which is responding to global events particularly in Thailand. We continue to be very positive about our consolidated performance considering the current weather factors and feel we are well positioned for the second half of the year, which is why we are increasing our guidance.

As we have discussed, our expectations coming into 2012 were that revenues relating to the special project in our Legal Settlement Administration segment would taper. We saw claims volumes decline in the fourth quarter of 2011 and again in the 2012 first quarter. However, in the 2012 second quarter, Crawford's GCG subsidiary was awarded a role to provide administration services in the recently announced class actions surrounding the Deepwater Horizon settlement. We are very pleased to continue working on this important special project and our second quarter results in this segment reflect this activity.

As we indicated in our Press Release, we continue to see substantial improvement in the Broadspire segment as we have reduced losses by over $6 million for the year-to-date period as compared to the same period in 2011. Our goal continues to be bringing Broadspire to a sustained, acceptable level of profitability. Although we fell slightly short in the 2012 second quarter, we remain positive on a return to profitability in this business through the remainder of 2012. The turnaround of Broadspire's profitability remains one of the key objectives for our management team, and we are optimistic for the remainder of the year. Continuing a trend we saw in the past two quarters, the weather in the 2012 second quarter remained mild in North America and milder than expected on a global basis. Our US, Canada, and UK businesses saw claims intake decline as milder weather affected volumes.

It is worth a moment to mention the strengthening of our Global Executive Management Team. We announced last month the appointment of Vince Cole, as EVP, Global Strategy and Performance Development. And last week, Manny Lauria as Global Head of Sales and Marketing. Both of these executives will play a vital role in the execution of the Company's future growth strategies, and I am personally very excited about their appointments. Lastly, we were pleased to announce an increase in our dividends this morning, with $0.04 per share being declared for CRD. A and $0.03 per share being declared for CRD. B.

That concludes my initial remarks, and I will discuss the business unit operation performance after Bruce has reviewed the financials. Bruce, would you please review the Company's overall performance for the second quarter?

Company-wide revenues before reimbursements in the 2012 second quarter were $293.8 million, up 1% from the $291.7 million in the prior year's second quarter. Strong results in our Legal Settlement Administration and EMEA/AP segments helped offset weather related weakness in the Americas segment during the 2012 period. Our net income attributable to Crawford & Company totaled $10.4 million in the 2012 second quarter, compared with $13.5 million in the 2011 period. Second quarter 2012 diluted earnings per share were $0.19 for CRD. A and $0.18 for CRD. B, compared to earnings per share for each class of $0.25 in the 2011 period. Revenues, net income attributable to Crawford & Company, and earnings per share in the 2012 second quarter were not significantly impacted by foreign exchange movements. The Company's selling, general, and administrative expenses, or SG&A, totaled $59.1 million or 20.1% of revenues in the 2012 second quarter, increasing 3% from $57.2 million or 19.6% of revenues in the prior year quarter. This increase in cost is primarily due to higher professional indemnity, self insurance expense, compensation costs, and professional fees.

Corporate interest expense was $1.7 million lower in the 2012 second quarter, reflecting the benefit of lower interest rates on our borrowings as a result of our fourth quarter 2011 refinancing. During the 2012 second quarter, the Company recorded a pretax charge of $1.6 million related to a project to outsource certain aspects of our US technology infrastructure. The Company expects this project to continue through the 2012 third quarter with additional pretax costs of approximately $300,000 expected. This special charge decreased earnings per share by $0.02 in the 2012 second quarter. There were no special charges in the 2011 quarter. As a result of changes in the mix of income we received from our various international operations and the related income tax rates, our effective tax rate is higher in 2012 than in 2011. During 2012, the Company paid a higher dividend on its CRD. A common stock than on its CRD. B shares. This dividend differential can result in different earnings per share for each class of stock due to the two class method of computing EPS as required by current accounting guidance. Reference to EPS in this call will generally be only for CRD. B, as that is the more dilutive measure.

Revenues from the Americas segment totaled $77.6 million in the 2012 second quarter, down 19% from the $95.7 million reported in last year's quarter, reflecting weak industry-wide claims volumes in the US and Canada as a result of mild weather. Operating earnings in our Americas segment were $1.4 million in the 2012 second quarter or 2% of revenues. This is compared to operating earnings of $10.2 million or 11% of revenues in the prior year quarter. Revenues generated by our catastrophe adjustors in the US totaled $5.5 million in the 2012 second quarter, decreasing from $10 million in the 2011 quarter. The decrease in revenues was primarily due to relatively mild weather in the US during the 2012 first and second quarters.

EMEA/AP revenues increased 8% in the 2012 second quarter to $93.8 million, from $87.3 million in the 2011 period. Our revenue improvement reflects catastrophe related increases in our Asia-Pacific region and increased claim referrals in our CEMEA, or Continental Europe, the Middle East, and Africa operating region. EMEA/AP operating earnings increased to $11.8 million during the current quarter, up 54% from last year's second quarter operating earnings of $7.6 million. The operating margin in this segment was 13% in the 2012 quarter, increasing from 9% in the 2011 second quarter. Revenues from our Broadspire segment increased to $60 million in the 2012 second quarter, up 4% from $57.9 million in the prior year quarter, reflecting an increase in workers' compensation claims and strong medical management revenues. Broadspire's operating loss in the 2012 quarter totaled $338,000 or less than 1% of revenues, improving from the operating loss of $3.1 million or negative 5% of revenues in the 2011 second quarter. We continue to focus on strategies to drive profitability in this segment's operating results.

Legal Settlement Administration revenues comprised of class action and bankruptcy claims administration services as well as significant special project revenues totaled $62.5 million in the 2012 second quarter, increasing 23% from the $50.8 million in the prior year quarter. This revenue increase was largely related to our work on the Deepwater Horizon class action settlement. Operating earnings totaled $15.8 million in the 2012 second quarter or 25% of revenues, as compared to $14.8 million for 29% of revenues in the prior year period. Legal Settlement Administration continues to have a strong backlog of projects awarded totaling $73 million at June 30, 2012, as compared to $75.2 million at June 30, 2011.

Our cash and cash equivalents position at June 30, 2012 totaled $45.7 million, as compared to $77.6 million at December 31, 2011, and $37.2 million at June 30, 2011. Reflecting the anticipated usage of cash we experience in the beginning of each year, our investment in unbilled and billed receivables has increased by $49.7 million during 2012, partly as a result of growth in Asia-Pacific and Legal Settlement Administration. Our pension liabilities declined by $10.7 million through the first six months of 2012. Our total debt has increased in 2012 by $16.9 million reflecting our seasonal pattern of borrowings that typically occur early in the year. Cash used in operations totaled $26.4 million for year-to-date 2012, compared to $33.2 million used in operations in the prior year period. This $6.8 million improvement was primarily due to reduced US pension contributions in 2012. However, free cash flow improved by only $3.4 million, reflecting higher investments in fixed assets and capitalized software during 2012. 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 in-flows usually occurring in the fourth quarter from some of our major markets.

Back to you, Jeff.

Thanks, Bruce. As touched upon in my earlier comments, our revenue and cases increased sequentially for the group versus the first quarter of 2012, but decreased against the second quarter of 2011, reflecting continued mild weather and a benign event environment in the US, UK and Canada. For the quarter, we saw group case volume decrease 5.5% versus a year ago. As in the first quarter, a difference between the second quarter 2012 and 2011 revenue reflected industry-wide swings in claims volume, driven by high levels of weather and event losses a year ago and unexpected very low levels of weather event losses through the most recent quarter. Unlike the first quarter, however, year over year gains in our Legal Settlement Administration segment were an important contributor to consolidated revenue performance this quarter and offset some of this softness. Another bright spot was the performance in EMEA/AP where our operating results reflect the strength of our industry-leading CAT response in the Asia-Pacific region. We have also seen an improvement in the Broadspire segment, as the overall claims frequency at Broadspire accelerated, primarily due to workers' compensation case volumes. It is also important to note that we continue to handle a multi-year global product recall related special project, demonstrating our unique global reach and capabilities in this business. We are pleased with the progress and developments being made by Broadspire and the quarter have -- and in the quarter our Broadspire retention rate was extremely high at 99.4%, which gives a year-to-date retention rate of 98.2%.

Let me now turn to the outlook for each of our business units, starting with the Americas segment, which represents 28% of our consolidated revenues year-to-date. Compared against a record claims frequency pattern in 2011, the US property and casualty business saw claims frequency fall short of the prior year in the second quarter 2012, due to the benign weather we have discussed. Nonetheless, frequency increased from first quarter 2012 levels. Recognizing these weather trends, we continue to impose strict expense controls in our US operations. Our quality scores in the US are excellent, and we continue to be nominated on major property programs by our clients as a result. Over the past few quarters, the US property and casualty group has invested resources in our casualty services business, especially in the US transportation area and we are seeing growth in this part of our business through new client wins and in increasing claims. In the month of June, we saw an upturn in activity in the US with several declared catastrophes resulting in increased claims volume in the Southeast and Midwest regions. As a result, our claims inventory improved late in the second quarter, extending into the third quarter. These weather related increases affect our field offices, Contractor Connection, and our casualty claims operation.

Like the US, Canada experienced a negative impact from weather with a decline in case volume and revenue in the second quarter. We continue to actively manage costs in this area as well, reflecting the overall claims volume conditions. Latin America saw an increase in claims over 2011, although our revenue was down in the quarter from 2011, mainly reflecting weakness in our largest market, which was related to the delay in the new programs starting up.

Our industry leading Contractor Connection business in the US continues to build momentum as we add more contractors and clients to the program. The ongoing expansion of Contractor Connection in the US as well as in Canada is a result of insurance carriers moving high frequency, low severity property claims direct to repair networks. We expect this trend to continue in the future, and we are positioned in the North American market as the leader in this important area. At our recent annual Contractor Connection conference, we set another attendance record with more than 2,500 contractors and clients and over 100 exhibitors attending. In a recent Press Release, we announced the expansion of our 15 year partnership with USAA to launch The Home Improvement Network, an online service that connects USAA members with our network of professional, credentialed contractors who are financially stable, licensed, and insured.

The EMEA/AP operations represent 31% of our consolidated revenues year-to-date. Our focus on sustainable client revenue has been successful in this business unit. In the second quarter, our revenue grew in both the Asia-Pacific region and CEMEA. The UK market continues to undergo change with increased focus on price and a current client shift to insourcing for the volume property business. We saw a decrease in the revenue against the prior year due to a combination of benign weather and a lack of volume in the market. We continue to emphasize the broad range of Crawford's services including GTS and Broadspire in this market and believe that these efforts are making meaningful progress. We have put in place a reorganization to merge our home and commercial field force which will result in significant cost savings going forward. We also continue to expand our Broadspire third party administration services beyond the UK and into Europe for our US multinational clients, supporting our global initiatives of cross-selling our services worldwide. We are now providing TPA services from 21 of our international locations with further expansion into Asia-Pacific currently underway.

In the CEMEA region we see encouraging developments and positive changes. Our revenue increased in the second quarter over 2011 on a 27% growth in claims frequency. Our management team is driving a new performance culture into this region to improve operational and financial performance. In the Asia-Pacific region, the significant weather events that took place during 2011 and 2012 in Australia and Thailand have increased our revenue for the quarter by 7.5% over 2011. We currently have teams working in these locations responding to both local and international instructions on the catastrophic events that affected those countries last year. We expect to see related revenue continue into the second half of 2012 and into 2013. Our performance in this region has resulted in more accounts being awarded to us and has a very positive market recognition of our Asia-Pacific catastrophe services.

Our Broadspire operation, which represents 21% of our consolidated revenues to date, reported a small loss for the second quarter. Revenue was higher than quarter two last year by $2 million. Our goal continues to be profitability at the year end. In 2012, this business has shown distinct progress and recovery from a very weak claims environment. In the quarter, we saw a revenue increase as our existing customer base produced positive gains in workers' compensation and casualty claims frequency. Our workers' comp claims volume is up 16% over last year's second quarter. And in addition, we saw incremental volume from new customer wins. We expect to see continued improvement in Broadspire's financial performance into the second half of 2012. We are $2.8 million better in operating earnings for the second quarter over last year, and $6.1 million ahead year-to-date. We 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 gives us a market leading capability to provide innovative solutions and improve the bottom line for our customer. This is critical to Crawford's strategic development as we take every opportunity to cross-sell our service and work on improving results in these operations. Broadspire is an important contributor to the Crawford product line and our global strategy. As a result, we continue to be focused on our major improvement strategies, sales force effectiveness, customer retention, technology investments, and reducing costs from global sourcing of non-customer facing back office operations. Broadspire's sales run rate improved again in the second quarter, as we continue to receive significant numbers of new RFPs which confirm that the prospects in our pipeline are very encouraging. In summary, we remain enthusiastic about Broadspire's progress in 2012.

Despite the comparisons with the record performance in 2011, we are very pleased with the Legal Settlement Administration or LSA segment's revenue and operating earnings this quarter. LSA represents 20% of our 2012 revenue to date and the quarterly results were ahead of our expectations. As discussed, we recently announced Deepwater Horizon class action surrounding the Gulf oil spill settlement. This is an important assignment for the Company. Turning to other LSA business areas, the class action market remains challenging overall. A recent study showed that the pace of new security lawsuits has declined. However, we have been successful in retaining a number of significant new class actions and have seen a number of new bankruptcy assignments. Our backlog remains strong in this segment at $73 million, and we are encouraged about the future of this business. That concludes my comments on our business segments.

Let me turn to our guidance and 2012 focus. On balance, we are seeing positive trends in our business and remain optimistic about the balance of 2012. Therefore, we are increasing our guidance for 2012 as follows. Consolidated revenues before reimbursements between $1.05 billion and $1.08 billion. Consolidated operating earnings between $74.5 million and $82 million. Consolidated cash provided by operating activities between $35 million and $40 million. And net income attributable to Crawford & Company on a GAAP basis between $32.5 million and $37 million, or $0.56 to $0.66 diluted earnings per Crawford B share.

We are very encouraged by the performance of GCG and EMEA/AP and on the directional trend of Broadspire. As always, weather driven claims volume can provide both positive and negative swings in our operations which we saw in the second quarter in the US, Canada, and the UK. However, our practice has consistently been to react to lower volumes with aggressive cost control and this weather cycle, while challenging, is no different. As we look to the remainder of 2012, we remain focused on four areas. First, bringing Broadspire and the Americas to an acceptable earnings profile. Second, continuing to grow our core revenue and improve our operating earnings. Third, capitalizing on global opportunity with clients, especially multinational organizations. And fourth, enhancing returns to our shareholders. Our worldwide management team is aggressively executing on our strategies I've laid out, and is creating a culture in which our employees worldwide understand the values that foster improved performance for our clients and shareholders.

Given the market strengths and reputation of our global business portfolio and the balance of earnings power of our corporation, we continue to remain very optimistic and confident about our growth opportunities as we execute on our corporate strategies for our shareholders. Thank you for your time. We look forward to your questions. Operator, will you please explain the process for asking questions to our audience.

(Operator Instructions)

Adam Klauber, William Blair.

The Gulf contractor facility now, could you maybe talk about how it worked before? Seemed like with the government, everyone just routed claim -- any claims to you. So, how does the business flow under the new set-up?

Well, we were actually the administrator on the original Gulf Coast Claims Facility, and that effectively meant handling the administration behind the scenes on all the claims. That facility is now a class action settlement, and we have set up an operation on behalf of our clients in Louisiana, and are handling the administration now under what is called DWH, which is Deepwater Horizon. So, it's moved from a facility to actually a class action settlement.

Okay. And as is a typical class action, do you get paid time and T&M as far as just the work flow back and forth between the different parties? Is that how the revenues flow? And also along with that, was there in this quarter -- was there any initial set-up, any extra revenue that just hit this quarter because it was a new contract, or is it just normal flow?

Hi, Adam. This is Bruce. The billing is predominantly time and materials, which is similar to what the Gulf Coast Claims Facility was. In any class action settlement, you tend to have kind of lumpy revenue and earnings streams from them, and there does tend to be a fair amount of work on the onset of the program to get everything set up. But this is a project that we anticipate lasting for a few years in terms of how the class action settlement's been set up, and not to say that the results that we saw in the second quarter are going to continue on during the entire course of it. But whatever happens along the way, we're in the position to participate, being the administrator.

Okay, that's helpful. On International Operations, the margin was clearly better. Is that driven by -- are the Asian -- are the margins in the Asian business better? Why did the margin jump up so much in the second quarter?

Okay. Three parts to our EMEA/AP operations. There's obviously the UK, CEMEA, and then Asia-Pacific. Asia-Pacific, we have an ongoing arrangement with the flooding that took place last year, which will continue for the balance of this year and into -- very much into 2013 on the volume that we currently have. This is very large claims. This is very large -- a large number of the large claims that we're handling. So, we see that as a part of the increase in the margin.

We also have the Australian -- the balance of the Australian flooding that we've been working with the local insurers on, and overseas markets as well. And again, that has been a very large exercise for us to undertake.

Our European operations are improving their margins. We've had a lot of reorganization taking place there. And then in the UK, we're going through at this moment a change in our operation there, as I said, where we're merging our commercial and our home operations in reply to really some changes that are happening in the UK market, which are very specific to that market. And if you put that together with some of the cost controls that we've put in place, that margin is increasing. It's been a very good story in the second quarter.

Okay. And then as far as Broadspire, again, it's nice to see claim volumes begin to move up. I think you show in one of your charts, you actually had more growth in the medical management segment it looks like compared to the other segments. Is any of that third-party business, or is that still part of the core business?

When you say third party, Adam, are you talking about unbundled business?

Yes, correct.

Yes, we have seen a bit of a pick-up in some of the unbundled business in our medical management business, and that certainly helped throughout 2012. That's a focus that we have in that business is to better penetrate the unbundled market, and we think there's good opportunity there going forward. As you pointed out, the increase in workers' comp claims is the -- that's the core business of Broadspire, and that's a very encouraging sign for us.

Okay. And then, as far as capital management and share buybacks, you announced a program earlier. How many shares did you buy, and is there a rough estimate of how much cash you have to use whether to buybacks or other sources for the back half of the year?

So, for the share repurchase, we said that we'd buy back up to 2 million shares over, I believe it's the next three years from the time the announcement was made. We began in June, and we repurchased 57,000 shares through the end of June. And we'll be executing on that program as we go forward throughout the rest of this year.

Jack Sherck, SunTrust.

How long do you expect the claims activity in Thailand to continue?

We see this continuing through the balance of this year, and probably into at least the first six months of 2013.

Okay. And then just the timing of the class action revenue under the new contract on the legal settlement, why was backlog down sequentially with that contract win?

Well, the thing about the class action settlement that we've got, similar to the Gulf Coast Claims Facility is, the visibility that you have into the future work that you're going to be performing is somewhat limited. So, while this program is going to go on for multiple years, our visibility into the exact nature and amount of work that we're going to be doing for our client, we really have about a 90-day to 120-day window or so where we have good visibility into what that work is going to require. So, that's going to be reflected in our backlog that we report, and it's going to be reflected in the guidance that we provide as well.

Okay, I understand. And then on Broadspire, a nice jump you had in claims, up 16%. How much of that was same-customer volume versus new business?

It was a mixture of that, Jack. We're seeing volume increases in the temporary staffing area and healthcare area, and then we have a number of new wins as well. We don't split it down between new clients and old clients in that way, but it is a healthy increase which we're seeing, and we see at this moment continuing.

And then just following up on Broadspire, any opportunities for cost savings through system changes or anything else like that, we should expect?

Technology has been a big issue. We released RiskTech at the end of last year, and in our medical management side we have a complete paperless organization there now. And that has resulted in us being able to take cost out of the operation. What I would say is we're always looking at matching our costs and revenue. And with Broadspire beginning to start to win new clients, to start to increase the volume they've got, that assists us in getting that margin back up to where it should be.

Okay. And just my final question is on the Americas, if claims volume kind of stays where it's at with mild weather and so forth, just how should we think about margins?

Jack, we don't specifically guide on segment-level operating margins, but I'll tell you, one of the challenges we have in our business is when claim volumes are declining, and revenue is declining, keeping our level of cost up with the drop in revenues. So, in a stable revenue environment, we'll be able to adjust our cost base to get to an acceptable operating margin. The challenge we have is when revenues are dropping, our ability to cut cost and keep up with that. In a stable revenue environment, we think we can get to an acceptable margin.

Mark Hughes, SunTrust.

In the US business, any update on trends in outsourcing there? Obviously you're being influenced by catastrophe claims volume. What's your sense about where we are in the cycle of carriers being more or less interested in outsourcing claims?

I think you've got to put it in context of the weather patterns taking place, and the claims volume. There's no doubt that our clients who tend to outsource anywhere from 100% to, say, 30 -- 100% to perhaps a maximum of 30% of claims have had situations in the past three quarters where the volume of claims has just decreased significantly, which affects our volume as an outsourcer to those companies where we don't do 100% of the outsourcing of their claims. So, we're not seeing a systemic change in that pattern.

Rather, we're seeing more of a -- by the different tiers of insurers we look at, we're seeing different strategies being implemented. And we've got lots of strategies around Contractor Connection, fast track claims that we're doing, and then obviously our services of our high-end complex claims losses, and then our casualty programs. We've seen a significant increase in casualty, but we've seen, there again, a significant decrease in the property claims. But I wouldn't say there's a wholesale change. It's basically the weather has had an effect on that.

Right. With the legal settlement, correct me if I'm wrong, but with the class action lawsuit, there's a certain degree of activity up front as the class action gets going, and then it's kind of back-end loaded once a settlement is reached. In this case, it looks like you've started strongly on that upfront activity. If you wouldn't mind saying again what you feel like the duration of this -- at least this initial round of activity, how long that might persist?

Mark, it's Bruce. You are right, in a class action context, it tends to have kind of a barbell shape where you've got a lot of activity in the front. And then, once it winds through the attorneys and the courts, you have a settlement and distribution on the end. What the front end looks like is -- it's difficult to say right now. It's relatively early on, and the advertising and noticings have gone out, and claims are coming in. So, as long as there's incoming activity and questions from the class members, and materials being filed, and activity related to collecting all of the information in order to make some quantification of the damages, then we'll be involved in that.

And that's really down to the folks that are overseeing this project as to how far that front end runs, and when they will move on to the next phase of the settlement. Typically with this business unit as a whole, our visibility into the future revenues are -- they tend to be somewhat limited because of that fact. So, as I think Jack may have asked the question related to the backlog -- that's one reason. That's a factor that comes into our assessment of the backlog, and also when we give guidance for the year.

One thing, Mark -- it's Jeff -- one thing we have to also bear in mind is that the current settlements have tumbled slightly, in terms of the number of class actions advised. And there was a report out a couple of weeks ago that said it's the fewest monetary of courts since the laws were overhauled in 1995. So, we're seeing the pace of new security lawsuits decrease at this moment, which is something we have to bear in mind looking forward as well.

(Operator Instructions)

We have no further questions. Mr. Bowman, would you like to make any closing remarks?

Yes, I'd like to thank everyone for their time and questions this afternoon, and wish everyone joining us a pleasant afternoon and a great week. Thanks very much.

Thank you for participating in today's Crawford & Company's conference call. This call will be available for replay beginning at 6.00 PM today through 11.59 PM on August 20, 2012. The conference ID number for the replay is 13559676. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. Thank you. You may now disconnect.