ATLANTA, GA /PRNewswire/ — Crawford & Company (NYSE: CRDA; 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 first quarter ended March 31, 2011.
First quarter 2011 consolidated revenues before reimbursements totaled $285.0 million up 21% over $236.3 million reported in the 2010 first quarter. First quarter 2011 net income attributable to Crawford & Company was $12.1 million, increasing 298% over net income of $3.1 million reported in the 2010 first quarter. First quarter 2011 diluted earnings per share was $0.23 compared to $0.06 in the prior-year quarter.
During the 2010 first quarter, the Company incurred a loss on sublease of $2.0 million, after related income taxes. These costs reduced earnings per share by $0.04 for the 2010 first quarter. Similar costs were not incurred in the 2011 first quarter.
The Company’s consolidated cash and cash equivalents position as of March 31, 2011 totaled $46.7 million compared to $48.3 million at March 31, 2010 and $93.5 million at December 31, 2010. Crawford used $50.2 million of cash in operations during the 2011 first quarter, compared to $23.8 million used in the comparable 2010 period. The $26.4 million increase in cash used in operations was due to increases in unbilled revenues and accounts receivable, and reflects an additional $10.0 million in accelerated contributions to the Company’s frozen U.S. defined benefit pension plan.
During the first quarter of 2011, the Company realigned two of its reportable segments by moving the Canada and Latin America/Caribbean operations from the former International Operations segment to the new Americas segment. In addition, the Company’s former U.S. Property & Casualty segment is now included in the new Americas segment. The results of the former U.S. Property & Casualty segment will no longer be reported separately. The remaining operations in the former International Operations segment will now be called “Europe, Middle East, Africa, Asia Pacific” or “EMEA/AP”. EMEA/AP will include all operations in the U.K., continental Europe, the Middle East, Africa, and Asia Pacific (which includes Australia). The results of the former International Operations segment will no longer be reported separately. The changes were implemented to more closely align the segments with the current management reporting structure. The results of prior periods have been revised to conform to the current presentation of our reportable segments. The historical results of operations for 2010, 2009 and 2008, and for each quarter of 2010 and 2009, revised for these segment changes, are included in the attachments. The change in reportable segments does not have any impact on previously reported consolidated financial results.
Americas revenues before reimbursements were $85.3 million in the first quarter of 2011, increasing 1% from $84.9 million in the 2010 first quarter. During the 2011 first quarter compared to the 2010 first quarter, the U.S. dollar weakened against foreign currencies in Canada, Latin America and the Caribbean, resulting in a positive exchange rate impact to revenues of $2.3 million. Excluding the positive impact of exchange rate changes, Americas revenues would have been $83.1 million in the 2011 first quarter. Revenues generated by the Company’s catastrophe adjuster group in the U.S. were $5.4 million in the 2011 first quarter, increasing from $3.2 million in the 2010 period. Americas operating expenses for the 2011 first quarter increased by $4.2 million in U.S. dollars, a 5% increase, and increased by 3% on a constant dollar basis, compared to the 2010 period. Operating earnings in the 2011 first quarter in the segment declined to $3.1 million, resulting in an operating margin of 4%, compared to operating earnings of $6.8 million, or 8% of revenues in the 2010 first quarter.
Revenues before reimbursements from the Broadspire segment were $59.8 million in the 2011 first quarter, down 3% from $62.0 million in the 2010 quarter. Broadspire had an operating loss of $3.2 million in the 2011 first quarter, or an operating margin of (5)% of revenues, compared to an operating loss of $2.3 million, or (4)% of revenues, in the prior-year period.
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, “Our first quarter 2011 operating results reflect continued strong performance in our Legal Settlement Administration segment, and improvement in EMEA/AP results, primarily as a result of a surge in weather-related claims activity. Overall, we saw an encouraging 10.5% increase in new claim assignments over the prior year’s first quarter.
“In our Legal Settlement Administration segment, revenues increased sharply, which drove a substantial increase in operating earnings for the quarter. This increase was driven primarily from our continued engagement in the Gulf Coast Claims Facility (GCCF) special project. We continue to have a substantial backlog of awarded projects in this segment and expect the special project activity to continue through most of 2011, although at a reduced level.
“Our EMEA/AP segment was a strong contributor to operating performance for the quarter, with revenues increasing 16% over the 2010 quarter and operating earnings up nearly 50%. This part of our business was positively impacted by a substantial increase in weather-related claims activity in the 2011 quarter, particularly in our key United Kingdom and Australian markets. More recently, we have mobilized our global resources to assist our clients as they respond to the devastating earthquakes in New Zealand and Japan.
“Operating cash flow for the 2011 first quarter showed a seasonal decline from year-end 2010 levels. Historically, our cash requirements are highest in the first quarter and cash balances replenish over the course of the year. We are continuing to drive our Company to improve its working capital profile.”
Mr. Bowman concluded, “Our overall results for the 2011 first quarter were substantially better than our expectations and the upward revisions to our guidance reflect our increased confidence for the remainder of the year. However, we do expect industry conditions to continue to be challenging, particularly with the effects of employment levels and market conditions in our Broadspire and U.S. property & casualty businesses. We expect to continue to focus significant attention on these areas to drive market share expansion and operating efficiencies.”
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 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. Notwithstanding the foregoing, however, based upon first quarter 2011 results and management’s expectations with respect to the development of business for the remainder of the year, Crawford & Company revises and increases aspects of its previously issued guidance for 2011 as follows:
- Consolidated revenues before reimbursements between $1.04 billion and $1.07 billion.
- Consolidated operating earnings between $74.0 million and $82.0 million.
- Consolidated cash provided by operating activities between $30.0 million and $35.0 million.
- After reflecting stock-based compensation 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 $33.0 million and $38.0 million, or $0.60 to $0.70 diluted earnings per share.
The complete earnings release is available here.