Good afternoon. My name is Veneda, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Second Quarter 2016 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, 2016. Now, I would like to introduce Allen W. Nelson, Crawford & Company’s General Counsel and Chief Administrative Officer.

Thank you, Veneda. 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 plans, our expectations related to future revenues and expenses, expectations regarding the timing, costs and synergies related to our Global Business Services Center, our acquisition and integration of GAB Robins in the UK, as well as other restructuring activities, 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 maybe 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 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 financial performance, please refer to the Company’s Form 10-Q for the quarter-ended June 30, 2016 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. Harsha Agadi, Chief Executive Officer of Crawford & Company. Harsha, you may begin our conference.

Good afternoon, and welcome to our second quarter 2016 earnings call. Joining me today are Bruce Swain, our CFO; and Allen Nelson, our General Counsel and Chief Administrative Officer. After our prepared remarks, we will open the call, as usual for your questions. To start, I am very excited with the opportunity our Board has given me to lead Crawford on a permanent basis, given the significant upside that I continue to see for our Company, employees, shareholders and clients. During my 10-month tenure as interim CEO, our team has made great progress in improving our financial results and preparing Crawford for both the opportunities and the challenges that lie ahead. As Crawford’s new CEO, I will build upon this momentum as our team’s focus will be on top line growth while remaining extremely vigilant on cost containment. Our second quarter results reflect the success that we have achieved in reducing our cost structure and positioning Crawford to expand our margins even in more difficult market environments like we experienced this quarter during which revenues before reimbursements declined by 7% year-over-year. Our revenue decline this quarter was primarily a result of the ongoing and expected contraction in Garden City Group segment as we continue to manage through the runoff of two large projects, foreign exchange headwinds from a stronger U.S. dollar that most businesses are experiencing and finally, softer trends in our U.S. Services segment. Importantly, non-GAAP consolidated operating earnings for the quarter were up 35% from the year ago quarter to $23.9 million, driven by strong operating margin expansion of 260 basis points to 8.5%. This margin expansion was largely driven by our restructuring initiatives successfully executed last year. As we have said, our focus is to transform Crawford into a business with more predictable financial results and growth…

Thank you, Harsha. Companywide revenues before reimbursements in the 2016 second quarter were $282.3 million, down 7% as compared with $304.4 million in the prior year’s second quarter, for the reasons Harsha previously mentioned. The Company’s selling, general and administrative expenses or SG&A, totaled $61 million, up from $57.2 million in the prior year quarter. As a percentage of revenues, these costs increased to 21.6% of revenues in the 2016 second quarter from 18.8% of revenues in the prior year quarter. This increase is primarily due to increased accounts receivable allowances and higher professional fees in the 2016 period. During the 2016 second quarter, the Company recorded restructuring and special charges of $3.5 million compared to $4.2 million in the 2015 quarter. These charges were associated with the ongoing implementation of the Global Business Services Center, the GAB Robins integration and other restructuring activities in operating and administrative areas around the world. Our net income attributable to shareholders of Crawford & Company totaled $8.6 million in the 2016 second quarter, more than doubling the net income of $4.1 million in the 2015 period. Second quarter 2016 diluted earnings per share were $0.16 for CRDA and $0.14 for CRDB compared to diluted earnings per share of $0.08 for CRDA and $0.06 for CRDB in the 2015 period. On a non-GAAP basis, before restructuring costs and special charges in both the 2016 and 2015 periods, second quarter 2016 diluted earnings per share were $0.27 for CRDA and $0.18 for CADB, compared to non-GAAP diluted earnings per share of $0.14 for CRDA and $0.12 for CRDB in the 2015 period. I will now review the second quarter performance of each of our business units, starting with the U.S. Services segment. Revenues from the U.S. Services segment totaled $58.8 million, down 12% from the…

Thank you, Bruce. And thank you all for joining our call this afternoon. As can be seen in our reaffirmed guidance, we have made significant strides positioning Crawford to deliver more consistent and predictable financial results even in more challenging markets, like we experienced this quarter. Our operating earnings and EBITDA have experienced significant growth, our weather dependency continues to decline and our top line growth initiatives are starting to take hold. I am pleased with our progress and remain confident that Crawford is well-positioned for the next phase of our strategic plan, returning the Company to top line growth in 2017. In essence, ladies and gentlemen, Crawford is rising, earnings per share is rising. Operator, please open the call to questions.

[Operator Instructions] Your first question is from the line of Adam Klauber with William Blair.

Thanks. Couple of different questions. Garden City, nice to see the backlog pick up; how’s the pipeline going forward?

Pipeline, Adam, is very strong. They’ve won some I’d call them mid-sized cases. And if anything, they hit rate on the RFPs at this time is higher than a year ago. So, the current management which includes obviously Ken and the broader leadership are in my opinion doing much better than a year ago, and this team was not in charge a year ago. So, they’re hitting at a higher batting average, if you will. And therefore, we look pretty good in terms of Garden City’s growth into 2017.

The margin on Garden City was better this quarter than it’s been the last couple of quarters. Is that getting ahead or do you think you can maintain always the 10% margin in that business for the near-term?

I think for the near-term, 10% would be a good goal to maintain. But as they scale into next year and revenues go up, they should be able to pick up some margin; also, they are constantly looking for efficiencies. And as they look for more efficiency in the second half of the year, some of that impact will also come into next year where the margins will go up. We’re in the middle of our planning stages now, as you would expect, being August. So, we’re actually pointed north in my opinion, both on revenue and margins with Garden City.

And then, in the Americas, you mentioned that part of the revenue decline was one large outsourced contract going way. Is this the first quarter that was impacted? And can you give the size of how big that contract is and will that hit the next couple of quarters also?

Hi, Adam, this is Bruce. Yes, last year that contract was worth about $52 million for us in 2015 and the [audio gap] quarter this year is the first quarter where we saw any real decline. We think that that contract decline over the next couple of quarters as well and then we’ll reassess where we’re in terms of 2017. But the second is really the first time we had any visibility into where that contract was going this year.

I think in addition, Adam, just to kind of give you a snapshot of the relationship, and it’s Americas, it’s U.S. Services, but some continent, the service level and the operational execution is superb with the client, client’s very happy. There is continued dialogue; I have meetings coming up. And we might get a different kind of revenue from them. And as we offer a full suite of services, our dialogues with our clients have expanded from a single service officering to a suite of services, so we might actually see upside; having said that, we’re still in the middle of that process, as we speak.

So, has that contract ended or is it just winding down? And I guess…

They’re making some shifts in certain centers that they’re working through. So, it’s not winding down per se, but with those shifts we might have a little loss of revenue or we might have a little pickup of revenue. But we’ll know that more till the end of the year, as we get closer to the end of the year. The good news is contractor connection which is sitting in the same segment is actually growing leaps and bounds as they grew about 25% or 24% versus year ago. So, we have that revenue partially offsetting some of this decline.

So, it’s not that the 52 is totally going away, but it’s just declining from where was that?

Correct.

What are your thoughts on using cash flow over the next 6 to 12 months?

We look at cash flow usage of capital expenditure certainly and investing back in the business. We’re committed to paying a healthy dividend as we’ve been doing and as we declared today. And then, we’ll look at deleveraging in the absence of any other compelling strategic alternative in front of us.

Yes. I think Adam, we have a fixation and maybe you might question that. We like being, if you will, the lowest levered company in the segment. And our debt to begin with is significantly lower, significantly lower than our competition. And we intend to continue to pay that down. We will continue to be quite discriminatory in terms of how we look at M&A. And we’re going to be very-disciplined when we’re looking at M&A, is it adding a good ardency to us and are we buying it at descent multiple, and what are we at Crawford bringing to the table to that acquisition. In addition, we are looking at leveraging more and more of technology to play a role in our future innovation. So, some of that CapEx will go in that direction as well.