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Executives

Jeffrey T. Bowman – President & Chief Executive Officer

W. Bruce Swain, Jr. – Executive Vice President & Chief Financial Officer

Allen Nelson - General Counsel and Chief Administrative Officer

Analysts

Mark Hughes – SunTrust Robinson Humphrey Capital Markets

[Manny Riser]

Crawford & Company (CRDB) Q2 2008 Earnings Call August 4, 2008 3:00 PM ET

Operator

Welcome everyone to the Crawford & Company second quarter 2008 earnings release conference call. In conjunction with this call, a supplementary financial presentation on our website at www.crawfordandcompany.com under the investor relations section. (Operator Instructions)

Some of the matters to be discussed in this conference call and in the supplementary financial presentation may include forward-looking 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 event or circumstances occurring after the date of the call, or to reflect the occurrence of unanticipated event.

For a complete discussion regarding factors which could affect the company’s financial performance, please refer to the company’s Form 10K for the year ended December 31, 2007 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 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 website at www.crawfordandcompany.com/quarterlyreleases.

I would now like to introduce Jeffrey Bowman, President and Chief Executive Officer of Crawford and Company.

Jeffrey T. Bowman

A very warm welcome to our investors, class and employees this 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 and 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 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. I am pleased to say we have produced significant, positive operational results over the prior year.

Globally, insurance continues to be a growth business. I am providing an independent, quality driven, local, regional or global claims service is crucial to our clients’ business proposition. Our goal always is to drive our operations and 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 achieved 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 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 U.K. operation for their work on a major loss during the historic 2007 flood. 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 for 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 growth of our business unit that the new risk tech product, our self insured market technology system, will be deployed on plan and ready for clients at the end of the fourth quarter of 2008.

We announced last quarter that we have integrated Xactware, the industry’s leading property estimated solution into our U.S. property and casualty claims management system, known as CMS2. This has accelerated the realization of operational efficiencies in the U.S. property and casualty business unit. We are realizing global economies of scale by leveraging our information and communication technology 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. The 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 a sense of urgency and direction that we are all excited about.

Now let me turn 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 U.S. 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 dropped 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 flow as 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.

So let me talk about our four reportable segments, starting with the international division. Year-to-date, international operations represented 42.4% of the company’s total revenue 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 U.K. 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 revenue and operating earnings as they begin to expand.

Reviewing now our U.S. property and casualty segment, as previously stated, our goal in 2008 even in a challenging overall claims environment is to improve U.S. property and casualty’s revenue growth and to ensure that we manage cost to provide an acceptable operating margin. Financially, our U.S. property and casualty operation has 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 U.S. property and casualty business unit to take a bigger share of the claims market as our clients consolidate independent adjusters. 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 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 opportunity, 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 runoff 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 claims 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 declining 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 RFPs but they are not seeing the need to move the business at this time. Current conditions in the commercial insurance market have risk managers, our main buyers, focused on their insurance premium rates rather than on their claims service programs.

Our retention rates on 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 insurers 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 quantitative approach around the results focused model that shows the hard dollar benefit from using our services. With a 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 now. We remain very focused on increasing revenue in our Broadspire business unit.

Now our fourth business unit, legal settlement administration. The Garden City Group’s second quarter revenue continued to be affected 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, some we are awaiting documentation of the settlement, and others we are awaiting appeals to be resolved. Despite the expected decline in revenue, we are pleased that GCG’s management improved operating margins and operating earnings over the prior 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 practice has seen an increased activity in quarter two. We are increasing our investment in the sales and account management in this product and expect to further grow. 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 projection consistent with the strategic direction of the company. Consolidated revenue before reimbursement 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, intangible asset amortization expense and income taxes, consolidated net income between $25.6 million and $27.7 million or $.50 to $0.54 per share.

Our outlook for 2008 does not include any significant catastrophe revenue related to a land four 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 was 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 activities. That is our collective objective for 2008 and 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.

W. Bruce Swain, Jr.

Company-wide revenues before reimbursements increased by 9.4% in the 2008 second quarter to $263.3 million from $240.5 million in the prior year second quarter. This increase is attributable to double digit organic growth from our international operation and improvements in our U.S. property and casualty segment which offset declines in revenues generated in our legal settlement administration and Broadspire segment. 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 disposal of 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 U.S. 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 catastrophic claims activity and the positive impact of claims generated by the U.K. 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 the 2007 second quarter to 9.2% in the 2008 quarter. Revenues from the U.S. 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 U.S. 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 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 U.S. property and casualty segment totaled $5.1 million 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 and 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 year end balance. Total debt includes $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 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 a $2.9 million contribution to our U.S. defined benefit pension plan. After reflecting capital expenditures, capitalized software and required debt repayment 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 would 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.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question will come from the line of Mark Hughes.

Mark Hughes – SunTrust Robinson Humphrey Capital Markets

Jeff, you suggested that you’re seeing significant outsourcing opportunities, sounds like the domestic market. Could you expand on that a little bit? Are you talking about new contracts that you’re evaluating, increasing volume under existing agreements? What’s driving that?

Jeffrey T. Bowman

There’s a little bit of both of those, Mark. We are seeing a general consolidation of businesses 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’re having. We’re seeing opportunities for that. I mean, it’s not just the U.S. There’s a significant issue overseas as well.

Mark Hughes – SunTrust Robinson Humphrey Capital Markets

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

Jeffrey T. Bowman

Yes, I think so. I think we are seeing an increased number of RFPs coming in. We’re 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 market standpoints is working well in our favor.

Mark Hughes – SunTrust Robinson Humphrey Capital Markets

You’re talking about more efficiencies coming from the exact wear integration. How far along are you in that process? Should we expect more benefits from it?

Jeffrey T. Bowman

Absolutely. The full integration of exact wear was carried out at the end of the first quarter. What has happened is GMS2 was implemented in 2007, exact wear has now been implemented so that we gain a lot of efficiencies internally with the transfer of the electronic work product through exact wear linking into our back office systems. And we’re seeing efficiencies coming in at a very high rate within our own operation to meet the requirements and electronically hook up with our clients at the same time. And that will progress further as we put further enhancements in place.

Mark Hughes – SunTrust Robinson Humphrey Capital Markets

Would 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?

Jeffrey T. Bowman

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

Mark Hughes – SunTrust Robinson Humphrey Capital Markets

Bruce, what are your latest thoughts in terms of cash from operations for the full year?

W. Bruce Swain, Jr.

For the full year we’re looking at operating cash flow right now in the $38 million to $42 million range.

Operator

Our next question comes from [Manny Riser].

[Manny Riser]

I have a follow up with the previous question. Bruce, my first question is directed towards you on the financial side. Do we anticipate further payments for the pension plan as well as debt pay downs in the second half of the year?

W. Bruce Swain, Jr.

Yes. For the pension plan in the US defined benefit plan, in the first quarter we made the first installment of $2.9 million into that plan. 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.

[Manny Riser]

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

W. Bruce Swain, Jr.

Yes.

[Manny Riser]

So basically it’s $8.1 million additional at this point?

W. Bruce Swain, Jr.

Yes, probably closer to $10 million. That’s included in our projections for operating cash flow for the remainder of the year. Our goal this year for debt repayment 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’ll 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’s going to be dependent upon increased improvement in our AR profile and that’s something that we’re managing very closely as a management team trying to drive our day sales outstanding down as an organization. And as we make progress along those lines, we think that we’ll be able to generate the free cash flow necessary to deleverage some.

[Manny Riser]

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

W. Bruce Swain, Jr.

That’s right.

[Manny Riser]

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

Jeffrey T. Bowman

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

[Manny Riser]

And going on the Broadspire and Rich Tech. You made a comment that it should be operating I think you said up and fully running by the end of this fiscal year?

Jeffrey T. Bowman

Absolutely correct, yes.

[Manny Riser]

Now are we still on target for November 15?

Jeffrey T. Bowman

Absolutely 100%.

[Manny Riser]

And in terms of cost benefit savings moving forward, the number that you’re working with for the 12 months starting January 1 would be $15 million to $20 million?

W. Bruce Swain, Jr.

Risk Tech goes in November 15 of this year and as we’ve talked about on previous calls our strategy around Risk Tech is really broken down into three components. Because there are three operating systems that exist today within the Broadspire segment, we are going to be migrating onto the Risk Tech platform. Our first focus is on the largest claim system that was in the Broadspire entity that we acquired and we are in the process of getting the system ready to convert those claims onto the Risk Tech platform. And that’s 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 the smallest platform that we have some claims operating on is the third stage of the integration at the adjustor 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 range. Some of that we will begin to see next year once we turn off the cost related to the largest pre-acquisition Broadspire system environment that we were operating on but we won’t see the full benefit until we get out. Really the full-year benefit won’t be seen until probably 2011 but we’ll be ramping up to those benefits as we go from say mid-2009 through the end of 2010.

Jeffrey T. Bowman

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

[Manny Riser]

So on a rolling basis, Jeff and Bruce, if we basically look at the middle of next year it’s starting to get some benefits because the first system will be operating as fully installed and we should get benefits as of April 15 I guess like Bruce said?

W. Bruce Swain, Jr.

Yes, we’ll 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 get half of that. We’ll also get some efficiencies from the adjustor desk perspective. We expect to get efficiencies there and also it’s going to give us a much stronger sales proposition out in the market place with the system. So we’ll get some benefits there. Cost savings are important and something that we’re intently focused on but there’s also kind of a client spacing market opportunity associated with this as well.

[Manny Riser]

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

W. Bruce Swain, Jr.

Sure.

[Manny Riser]

Moving to Garden City, those legal settlement provisions. Backlog I think is at a record at $15 million and it seems like we’re 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 released?

Jeffrey T. Bowman

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

[Manny Riser]

You mentioned Jeff that Garden City the bankruptcy business has been very attractive for us. You also mentioned I guess on a competitive side you’ve seen some consolidations. Do you look at us as being a possible acquirer of some additional companies out there on the Garden City side?

Jeffrey T. Bowman

No real comment on that one Manny. On the 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.

[Manny Riser]

Are there other areas on the Garden City side and new areas of business that you’re excited about, like bankruptcy’s a relatively new division for us? Are there some other sides of the business that you could talk about?

Jeffrey T. Bowman

We have a quality product within the class action business and we continue to develop and promote that through our operations. The bankruptcy section we are investing in at this present moment and we see that not taking a lot of our management’s time up and they’re 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 of working together is that we are cross-selling in the Garden City group with the rest of the US operations and hopefully we will be seeing some strong performances out of additional clients in that basis as well.

[Manny Riser]

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

Jeffrey T. Bowman

In the class action arena?

[Manny Riser]

Yes.

W. Bruce Swain, Jr.

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

[Manny Riser]

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’re playing it extremely close for the best kind of with the first half of the year that we had. I’m just curious as to your thoughts on the second half of the year. Traditionally the third quarter is a relatively strong quarter. If we have any type of weather and if Garden City gets anything really, I would anticipate the third quarter should continue to trend to the first two quarters.

Jeffrey T. Bowman

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

[Manny Riser]

Right. But with the first half of the year Jeff recording already 34%, it wouldn’t seem to be too difficult to look ahead and based on past history come up with a number certainly higher even than the 54%. And you and I have discussed this in the past and based on the first quarter I was pushing in the same direction and I’m doing the same thing now. We’ve got two pretty strong quarters and certainly it would seem that we’re very capable of exceeding even the upper range at this point. That’s just a comment I’d like to make.

Jeffrey T. Bowman

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

Operator

We have no further questions at this time.

Jeffrey T. Bowman

I’d 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.

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