2013-02-13 13:01:04 -
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Date: February 13, 2013
From: Jeffrey T. Bowman
Chief Executive Officer
Revenues Reach Annual Record of $1.177 Billion
Full Year Operating Earnings Increase 40%
Crawford & Company (www.crawfordandcompany.com) (NYSE: CRDA and CRDB), the
world's largest independent provider of claims management solutions to insurance
companies and self-insured entities, today announced its financial results for
the fourth quarter and year ended December 31, 2012.
Consolidated Results
Full year consolidated revenues before reimbursements totaled a record $1.177
billion for 2012, compared with $1.125 billion for 2011. Net income attributable
to shareholders of Crawford & Company in 2012 was $52.6 million, compared with
net income in 2011 of $45.4 million. Full year 2012 diluted earnings per share
were $0.97 for CRDA and $0.94 for CRDB, compared with diluted earnings per share
of $0.85 for CRDA and $0.83 for CRDB in the prior year.
Fourth quarter 2012 consolidated revenues before reimbursements totaled a record
$313.0 million, an increase of 18% from $265.6 million in the 2011 fourth
quarter. Fourth quarter 2012 net income attributable to shareholders of Crawford
& Company was $17.9 million, increasing 299% from $4.5 million in the 2011
fourth quarter. Fourth quarter 2012 diluted earnings per share were $0.33 for
CRDA and $0.32 for CRDB, compared with diluted earnings per share of $0.09 for
CRDA and $0.08 for CRDB, in the prior-year quarter.
Consolidated operating earnings, a non-GAAP financial measure, grew to an annual
record of $110.2 million in 2012, increasing 40% from $78.6 million in 2011. For
the 2012 fourth quarter, consolidated operating earnings totaled $38.9 million,
a quarterly record, more than tripling the $10.0 million reported in the 2011
fourth quarter.
During the 2012 fourth quarter, the Company recorded $8.5 million in special
charges, consisting of a $4.3 million loss on a property sublease and $4.2
million for severance costs, primarily related to the restructuring of our North
American operations. In the second and third quarters of 2012, the Company
incurred pretax special charges of $2.8 million for a project to outsource
certain aspects of our U.S. technology infrastructure. Excluding the special
charges, 2012 fourth quarter and full-year net income attributable to
shareholders of Crawford & Company would have been $23.2 million and $59.6
million, respectively, and diluted earnings per CRDB share would have been $0.42
and $1.07, respectively.
During the 2011 fourth quarter, the Company recorded a net $4.6 million in
special charges and credits, consisting of a $3.4 million write-off of deferred
financing costs related to the repayment of its then-outstanding Term Loan B and
$1.2 million in severance expense related to the Broadspire segment. The Company
also recorded a tax benefit of $5.5 million related to a change in the valuation
allowance for foreign tax credits. In the third quarter of 2011, the Company
recorded a gain of $7.0 million ($5.9 million net of tax) related to the final
settlement of an arbitration award. Excluding the arbitration award, tax
adjustment, and other special charges, 2011 fourth quarter and full-year net
income attributable to shareholders of Crawford & Company would have been $1.9
million and $37.0 million, respectively, and diluted earnings per CRDB share
would have been $0.03 and $0.67, respectively.
Balance Sheet and Cash Flow
Crawford & Company's consolidated cash and cash equivalents position as of
December 31, 2012 totaled $71.2 million compared with $77.6 million at
December 31, 2011.
The Company generated $92.9 million of cash from operations during 2012,
compared with $36.7 million during 2011. The $56.2 million increase in cash
provided by operations was largely due to an increase in operating earnings,
lower cash payments for accounts payable, accrued liabilities and accrued
compensation in 2012 compared with 2011, and reductions in defined benefit
pension contributions and taxes paid.
Management's Comments
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated,
"Our fourth quarter 2012 consolidated operating earnings more than tripled last
year's fourth quarter figures and were partly driven by our handling of claims
from superstorm Sandy and very strong results from our EMEA/AP and Legal
Settlement Administration segments. During the 2012 fourth quarter and full
year, we set financial records for consolidated revenues, operating earnings,
and operating cash flow.
"The Americas segment saw a surge in activity during the 2012 fourth quarter
resulting from superstorm Sandy in the northeastern U.S. which exceeded our
initial expectations heading into the quarter. This helped generate improvement
in this segment over the 2011 fourth quarter, and should provide us with a good
start to 2013.
"Our EMEA/AP segment results during the quarter were largely driven by the
ongoing handling of catastrophic flood losses in Thailand, although we also saw
improvements in our core U.K. and CEMEA operations. This segment was a very
important performer for us during 2012.
"During the 2012 fourth quarter our Legal Settlement Administration segment was
engaged in handling the Deep Water Horizon class action settlement, as well as a
number of other meaningful class action and bankruptcy matters. We expect
operating activity in this segment to be significant for us during 2013,
although at a reduced rate as compared to 2012.
"In the Broadspire segment, we recorded a slight operating profit for the 2012
fourth quarter and full year. We remain focused on delivering stronger operating
performance in this business and we are optimistic that we will show continued
improvement in the upcoming year."
Mr. Bowman concluded, "I am pleased that our results reflect the management
team's focus on our core strategic and operational goals and we expect to
continue to expand market share, drive efficiencies and capitalize on the
opportunities that present themselves in 2013. We are enthusiastic about our
business and are very focused on delivering shareholder value. The initial
guidance we are providing today for 2013 reflects the strength of our position
in the markets that we serve around the world."
Segment Results For the Fourth Quarter and Full Year
Americas
Americas revenues before reimbursements were $93.5 million in the fourth quarter
of 2012, an increase of 14% over $82.0 million in the 2011 fourth quarter. This
increase was primarily due to superstorm Sandy. The impact of changes in
foreign exchange rates for this segment for the 2012 fourth quarter was
insignificant. Operating earnings in the 2012 fourth quarter in the segment were
$4.4 million, or 5% of revenues, compared with a small operating loss in the
2011 fourth quarter.
For the year, Americas revenues before reimbursements decreased 7% to $334.4
million compared with $357.7 million in 2011. During 2012, the U.S. dollar
strengthened against foreign currencies in the segment, resulting in a negative
exchange rate impact to segment revenues of $3.0 million from 2011 to 2012.
Operating earnings decreased from $19.9 million in 2011 to $11.9 million in
2012, representing an operating margin of 6% and 4% in 2011 and 2012,
respectively.
EMEA/AP
Fourth quarter 2012 revenues before reimbursements for the EMEA/AP segment
increased 10% to $95.2 million from $86.2 million for the same period of 2011.
This increase was primarily due to the continued handling of cases from the
2011 flooding in Thailand. During the 2012 fourth quarter compared with the
2011 fourth quarter, the U.S. dollar strengthened against most major foreign
currencies, resulting in a negative exchange rate impact to revenues of $2.1
million in this segment. Operating earnings increased to $18.2 million in the
2012 fourth quarter, an increase of 129% over last year's fourth quarter
operating earnings of $8.0 million. The related operating margin was 19% in the
2012 fourth quarter, increasing from 9% in the 2011 fourth quarter.
For the year, revenues before reimbursements from our EMEA/AP segment totaled
$366.7 million, an 8% increase from $340.2 million in 2011. During 2012, the
U.S. dollar strengthened against most major foreign currencies, resulting in a
negative exchange rate impact to revenues of $10.3 million in 2012 compared with
2011. EMEA/AP operating earnings increased to $48.6 million in 2012, an increase
of 71% from 2011 operating earnings of $28.4 million. The operating margin
increased from 8% in 2011 to 13% in 2012.
Broadspire
Revenues before reimbursements from the Broadspire segment were $58.8 million in
the 2012 fourth quarter, slightly above the $58.2 million for the 2011 quarter.
Operating earnings totaled $0.4 million in the 2012 fourth quarter, or 1% of
revenues, compared with an operating loss of $2.3 million, or a negative
operating margin of 4%, in the prior-year period.
For the year, Broadspire segment revenues before reimbursements increased 2% to
$239.0 million compared with $234.8 million in 2011. Broadspire recorded break-
even operating results for the year, compared with an operating loss of $11.4
million, or a negative operating margin of 5% in 2011.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $65.4
million in the 2012 fourth quarter, compared with $39.2 million in the 2011
fourth quarter. Operating earnings totaled $18.2 million in the 2012 fourth
quarter, or 28% of revenues, compared with $8.8 million, or 22% of revenues, in
the prior-year period.
For the year, Legal Settlement Administration revenues before reimbursements
were $236.6 million, compared with $192.6 million in 2011. Operating earnings
were $60.3 million, increasing 17% from $51.3 million in 2011, with the related
operating margin decreasing slightly from 27% in 2011 to 25% in 2012. The
segment's awarded project backlog approximated $151.9 million at December 31,
2012, compared with $64.0 million at December 31, 2011.
2013 Guidance
Crawford & Company is providing initial guidance for 2013 as follows:
* Consolidated revenues before reimbursements between $1.05 and $1.08 billion.
* Consolidated operating earnings between $85.0 and $93.0 million.
* Consolidated cash provided by operating activities between $65.0 and $70.0
million.
* After reflecting stock option expense, net corporate interest expense,
customer-relationship intangible asset amortization expense, and income
taxes, net income attributable to shareholders of Crawford & Company on a
GAAP basis between $49.0 and $54.0 million, or $0.85 to $0.95 diluted
earnings per CRDB share.
Crawford's business is dependent, to a significant extent, on case volumes. The
Company cannot predict the future trend of case volumes for a number of reasons,
including the fact that the frequency and severity of weather-related claims and
the occurrence of natural and man-made disasters, which are a significant source
of claims and revenue for the Company, are generally not subject to accurate
forecasting.
Earnings per share may be different between CRDA and CRDB due to the payment of
a higher per share dividend on CRDA than CRDB, and the impact that has on the
earnings per share calculation according to generally accepted accounting
principles. References in this release are generally only to CRDB, as that
presents a more dilutive measure.
Crawford & Company's management will host a conference call with investors on
Wednesday, February 13, 2013 at 3:00 p.m. EST to discuss 2012 results. The call
will be recorded and available for replay through February 27, 2013. You may
dial 1-855-859-2056 (404-537-3406 international) to listen to the replay. The
access code is 94597751. Alternatively, please visit our web site at
www.crawfordandcompany.com for a live audio web cast and related financial
presentation.
Further information regarding the Company's financial position, operating
results, and cash flows for the quarter and year ended December 31, 2012 is
shown on the attached unaudited condensed consolidated financial statements.
Non-GAAP Presentation
In the normal course of business, our operating segments incur certain out-of-
pocket expenses that are thereafter reimbursed by our clients. Under GAAP, these
out-of-pocket expenses and associated reimbursements are required to be included
when reporting expenses and revenues, respectively, in our consolidated results
of operations. In the foregoing discussion and analysis of segment results of
operations, we do not include a gross up of segment expenses and revenues for
these pass-through reimbursed expenses. The amounts of reimbursed expenses and
related revenues offset each other in our results of operations with no impact
to our net income (loss) or operating earnings (loss). A reconciliation of
revenues before reimbursements to consolidated revenues determined in accordance
with GAAP is self-evident from the face of the accompanying unaudited condensed
consolidated statements of income.
Operating earnings is the primary financial performance measure used by our
senior management and chief operating decision maker ("CODM") to evaluate the
financial performance of our Company and operating segments, and make resource
allocation and certain compensation decisions. Unlike net income, segment
operating earnings is not a standard performance measure found in GAAP. We
believe this measure is useful to others in that it allows them to evaluate
segment and consolidated operating performance using the same criteria our
management and CODM use. Consolidated operating earnings (loss) represent
segment earnings (loss) including certain unallocated corporate and shared costs
and credits, but before net corporate interest expense, stock option expense,
amortization of customer-relationship intangible assets, special charges and
credits, income taxes, and net income or loss attributable to noncontrolling
interests. The reconciliation of operating earnings (loss) to net income
attributable to shareholders of Crawford & Company on a GAAP basis is presented
on page 6 below.
Unallocated corporate and shared costs and credits represent expenses and
credits related to our chief executive officer and Board of Directors, certain
provisions for bad debt allowances or subsequent recoveries such as those
related to bankrupt clients, defined benefit pension costs or credits for our
frozen U.S. pension plan, and certain self-insurance costs and recoveries that
are not allocated to our individual operating segments but are included in our
financial performance measure of consolidated operating earnings.
Income tax expense, net corporate interest expense, stock option expense, and
amortization of customer-relationship intangible assets are recurring components
of our net income, but they are not considered part of our consolidated or
segment operating earnings (loss) because they are managed on a corporate-wide
basis. Income tax expense is calculated for the Company on a consolidated basis
based on statutory rates in effect in the various jurisdictions in which we
provide services, and varies significantly by jurisdiction. Net corporate
interest expense results from capital structure decisions made by senior
management and affecting the Company as a whole. Stock option expense represents
the non-cash costs generally related to stock options and employee stock
purchase plan expenses which are not allocated to our operating segments.
Amortization expense is a non-cash expense for finite-lived customer-
relationship and trade name intangible assets acquired in business combinations.
None of these costs relate directly to the performance of our services or
operating activities and, therefore, are excluded from segment operating
earnings in order to better assess the results of each segment's operating
activities on a consistent basis.
Special charges and credits may arise from events (such as expenses related to
restructurings, losses on subleases, etc.) that are not allocated to any
particular segment since they historically have not regularly impacted our
performance and are not expected to impact our future performance on a regular
basis.
Following is a reconciliation of segment operating earnings (loss) to net income
attributable to shareholders of Crawford & Company on a GAAP basis and the
related margins as a percentage of revenues before reimbursements for all
periods presented (in thousands, except percentages):
+--------------+---------------------------------------+-+-----------------------------------+---+
| | Quarter ended | | Year ended
| |
|
+------------+------+------------+------+-+------------+------+------------+--+---+
| |December 31,| % |December 31,| % | |December 31,| %
|December 31,| % |
| | 2012 |Margin| 2011 |Margin| | 2012 |Margin| 2011
|Margin|
|
+------------+------+------------+------+-+------------+------+------------+------+
|Operating | | | | | | | |
| |
|Earnings | | | | | | | | |
|
|(Loss): | | | | | | | | |
|
| | | | | | | | | |
|
|Americas |$ 4,448 | 5 % |$ (238 ) | - | |$ 11,877 | 4 % |$ 19,851
| 6 % |
| | | | | | | | | |
|
|EMEA/AP | 18,232 |19 % | 7,956 | 9 % | | 48,585 |13 % | 28,421
| 8 % |
| | | | | | | | | |
|
|Broadspire | 444 | 1 % | (2,250 ) |(4 )% | | 27 | - | (11,434 )
|(5 )% |
| | | | | | | | | |
|
|Legal | 18,170 |28 % | 8,770 |22 % | | 60,284 |25 % | 51,307
|27 % |
|Settlement | | | | | | | | |
|
|Administration| | | | | | | | |
|
| | | | | | | | | |
|
|Unallocated | (2,441 ) |(1 )% | (4,206 ) |(2 )% | | (10,613 ) |(1 )% | (9,555 )
|(1 )% |
|corporate and | | | | | | | | |
|
|shared costs | | | | | | | | |
|
|and credits | | | | | | | | |
|
| +------------+ +------------+ | +------------+ +------------+
|
|Consolidated | 38,853 |12 % | 10,032 | 4 % | | 110,160 | 9 % | 78,590
| 7 % |
|Operating | | | | | | | | |
|
|Earnings | | | | | | | | |
|
| +------------+ +------------+ | +------------+ +------------+
|
|(Deduct) Add: | | | | | | | |
| |
| | | | | | | | | |
|
|Net corporate | (1,822 ) |(1 )% | (3,515 ) |(1 )% | | (8,607 ) |(1 )% | (15,911 )
|(1 )% |
|interest | | | | | | | | |
|
|expense | | | | | | | | |
|
| | | | | | | | | |
|
|Stock option | (86 ) | - | (75 ) | - | | (408 ) | - | (450 )
| - |
|expense | | | | | | | | |
|
| | | | | | | | | |
|
|Amortization | (1,629 ) |(1 )% | (1,646 ) |(1 )% | | (6,373 ) |(1 )% | (6,177 )
|(1 )% |
|expense | | | | | | | | |
|
| | | | | | | | | |
|
|Special | (8,538 ) |(3 )% | (4,613 ) |(2 )% | | (11,332 ) |(1 )% | 2,379 |
- |
|charges and | | | | | | | | |
|
|credits | | | | | | | | |
|
| | | | | | | | | |
|
|Income taxes | (8,744 ) |(3 )% | 4,598 | 2 % | | (29,957 ) |(3 )% | (12,739 )
|(1 )% |
| | | | | | | | | |
|
|Net income | (122 ) | - | (289 ) | - | | (866 ) | - | (288 )
| - |
|attributable | | | | | | | | |
|
|to non- | | | | | | | | |
|
|controlling | | | | | | | | |
|
|interests | | | | | | | | |
|
| +------------+ +------------+ | +------------+ +------------+
|
|Net income |$ 17,912 | 6 % |$ 4,492 | 2 % | |$ 52,617 | 4 % |$ 45,404
| 4 % |
|attributable | | | | | | | | |
|
|to | | | | | | | | |
|
|shareholders | | | | | | | | |
|
|of Crawford & | | | | | | | |
| |
|Company | | | | | | | | |
|
| +------------+ +------------+ | +------------+ +------------+
|
| | | | | | | | |
| |
+--------------+------------+------+------------+------+-+------------+------+------------+------+
Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is
the world's largest independent provider of claims management solutions to the
risk management and insurance industry, as well as to self-insured entities,
with an expansive global network serving clients in more than 70 countries. The
Crawford System of Claims Solutions(®) offers comprehensive, integrated claims
services, business process outsourcing and consulting services for major product
lines including property and casualty claims management, workers' compensation
claims and medical management, and legal settlement administration. The
Company's shares are traded on the NYSE under the symbols CRDA and CRDB.
The Company's two classes of stock are substantially identical, except with
respect to voting rights and the Company's ability to pay greater cash dividends
on the Class A Common Stock than on the Class B Common Stock, subject to certain
limitations. In addition, with respect to mergers or similar transactions,
holders of Class A Common Stock must receive the same type and amount of
consideration as holders of Class B Common Stock, unless approved by the holders
of 75% of the Class A Common Stock, voting as a class.
+------------------------------------------------------------------------------+
|This press release contains forward-looking statements, including statements|
|about the financial condition, results of operations and earnings outlook of|
|Crawford & Company. Statements, both qualitative and quantitative, that are|
|not historical facts may be "forward-looking statements" as defined in the|
|Private Securities Litigation Reform Act of 1995 and other federal securities|
|laws. Forward-looking statements involve a number of risks and uncertainties|
|that could cause actual results to differ materially from historical|
|experience or Crawford & Company's present expectations. Accordingly, no one|
|should place undue reliance on forward-looking statements, which speak only as|
|of the date on which they are made. Crawford & Company does not undertake to|
|update forward-looking statements to reflect the impact of circumstances or|
|events that may arise or not arise after the date the forward-looking|
|statements are made. For further information regarding Crawford & Company,|
|including factors that could cause our actual financial condition, results or|
|earnings to differ from those described in any forward-looking statements,|
|please read Crawford & Company's reports filed with the SEC and available at|
|www.sec.gov or in the Investor Relations section of Crawford & Company's|
|website at www.crawfordandcompany.com. |
+------------------------------------------------------------------------------+
FOR FURTHER INFORMATION REGARDING THIS PRESS RELEASE, PLEASE CALL BRUCE SWAIN AT
(404) 300-1051.
Q4 '12 Earnings Press Release 2.13.13 Final:
hugin.info/155880/R/1677410/547042.pdf
Q4 '12 Earnings Release Financials 2.13.13:
hugin.info/155880/R/1677410/547039.xls
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originality of the information contained therein.
Source: Crawford & Company via Thomson Reuters ONE
[HUG#1677410]
