Crawford & Company : Crawford & Company Reports Record 2012 Fourth Quarter and
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404)
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 December31, 2012.
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
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
December31, 2012 totaled $71.2 million compared with $77.6 million at
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.
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 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
millioncompared with $357.7 millionin 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,
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 $10.3million 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.
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
December31, 2012, compared with $64.0 million at December31, 2011.
Crawford & Company is providing initial guidance for 2013 as follows:
oConsolidated revenues before reimbursements between $1.05 and $1.08
oConsolidated operating earnings between $85.0 and $93.0 million.
oConsolidated cash provided by operating activities between $65.0 and $70.0
oAfter 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, February13, 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
Further information regarding the Company's financial position, operating
results, and cash flows for the quarter and year ended December31, 2012 is
shown on the attached unaudited condensed consolidated financial statements.
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
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
December31, % December31, % December31, % December31, %
2012 Margin 2011 Margin 2012 Margin 2011 Margin
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 %
Unallocated (2,441 ) (1 )% (4,206 ) (2 )% (10,613 ) (1 )% (9,555 ) (1 )%
Consolidated 38,853 12 % 10,032 4 % 110,160 9 % 78,590 7 %
Net corporate (1,822 ) (1 )% (3,515 ) (1 )% (8,607 ) (1 )% (15,911 ) (1 )%
Stock option (86 ) - (75 ) - (408 ) - (450 ) -
Amortization (1,629 ) (1 )% (1,646 ) (1 )% (6,373 ) (1 )% (6,177 ) (1 )%
Special charges (8,538 ) (3 )% (4,613 ) (2 )% (11,332 ) (1 )% 2,379 -
Income taxes (8,744 ) (3 )% 4,598 2 % (29,957 ) (3 )% (12,739 ) (1 )%
Net income (122 ) - (289 ) - (866 ) - (288 ) -
Net income $ 17,912 6 % $ 4,492 2 % $ 52,617 4 % $ 45,404 4 %
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
Q4 '12 Earnings Release Financials 2.13.13
This announcement is distributed by Thomson Reuters on behalf of Thomson
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of
information contained therein.
Source: Crawford & Company via Thomson Reuters ONE
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