ATLANTA /PRNewswire/ — 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 second quarter ended June 30, 2011.
Second quarter 2011 consolidated revenues before reimbursements totaled $291.7 million, up 22% over $238.2 million in the 2010 second quarter. Second quarter 2011 net income attributable to Crawford & Company was $13.5 million, compared with a net loss of $2.5 million recorded in the 2010 second quarter. Second quarter 2011 diluted earnings per share were $0.25 compared with the loss per share of $(0.05) reported in the prior-year quarter.
During the 2010 second quarter, the Company recorded a goodwill impairment charge of $7.3 million, or ($0.13) per share. Also during the 2010 second quarter, the Company incurred severance costs of $1.2 million after related income taxes, or ($0.02) per share. Earnings per share, and the related non-GAAP adjusted diluted earnings per share, including a reconciliation for the impact of the special items in the 2010 period, are set out in the table above.
The Company’s consolidated cash and cash equivalents position as of June 30, 2011 totaled $37.2 million, compared with $38.2 million at June 30, 2010 and $93.5 million at December 31, 2010. Crawford used $33.2 million of cash in operations during the 2011 year-to-date period, compared with $29.6 million during the comparable 2010 period. The $3.6 million increase in cash used in operations was due to increases in unbilled revenues and accounts receivable, and increased contributions to the Company’s frozen U.S. defined benefit pension plan, which were partially offset by higher net income.
Results by Segment
Americas revenues before reimbursements were $95.7 million in the second quarter of 2011, increasing 16% from $82.3 million in the 2010 second quarter. During the 2011 second quarter compared with the 2010 second quarter, the U.S. dollar weakened against foreign currencies in the segment, resulting in a positive exchange rate impact to revenues of $2.9 million. Excluding the positive impact of exchange rate changes, Americas revenues would have been $92.9 million in the 2011 second quarter. Revenues generated by the Company’s catastrophe adjuster group in the U.S. were $10.0 million in the 2011 second quarter, increasing from $3.6 million in the 2010 period. Americas operating expenses for the 2011 second quarter increased by $8.5 million in U.S. dollars, an 11% increase, and increased by 8% on a constant dollar basis, compared with the comparable 2010 period. Operating earnings in the 2011 second quarter in the segment increased to $10.2 million, or an operating margin of 11%, compared with operating earnings of $5.3 million, or 6% of revenues in the 2010 second quarter.
Second quarter 2011 revenues before reimbursements for the EMEA/AP segment increased 24% to $87.3 million from $70.4 million for the same period in 2010. During the 2011 second quarter compared with the 2010 second quarter, the U.S. dollar weakened against most major foreign currencies, resulting in a positive exchange rate impact to revenues of $5.8 million. Excluding the positive impact of exchange rate changes, EMEA/AP revenues would have been $81.5 million in the 2011 second quarter. EMEA/AP operating expenses for the 2011 second quarter increased by $14.5 million in U.S. dollars, a 22% increase, and increased by 14% on a constant dollar basis, compared with the comparable 2010 period. Operating earnings increased to $7.6 million in the 2011 second quarter, up 45% from 2010 second quarter operating earnings of $5.3 million. The related operating margin was 9% for the second quarter of 2011 and 7% in the comparable 2010 period.
Revenues before reimbursements from the Broadspire segment were $57.9 million in the 2011 second quarter, down 5% from $61.2 million in the 2010 second quarter. Broadspire had an operating loss of $3.1 million in the 2011 second quarter, or a negative operating margin of 5%, compared with an operating loss of $1.8 million, or a negative operating margin of 3%, in the prior year period. These declines were primarily due to lower revenues from existing clients due to a lengthening in the duration of certain workers’ compensation claims and a shift in mix to lower-margin claims, partially as a result of a special project for one of our clients.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $50.8 million in the 2011 second quarter, compared with $24.3 million in the 2010 second quarter, primarily the result of revenues from the special project that began in the summer of 2010. Operating earnings totaled $14.8 million in the 2011 second quarter, or 29% of revenues, compared with $5.6 million, or 23% of revenues, in the prior-year period. The segment’s awarded project backlog totaled approximately $75.2 million at June 30, 2011 as compared with $56.5 million at June 30, 2010.
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, “We are pleased with the improvement in our second quarter 2011 operating results which reflect double digit revenue growth increases in the Americas and EMEA/AP, primarily as a result of a surge in weather-related claims activity, and the continued strong performance in our Legal Settlement Administration segment.
“The Americas segment rebounded nicely from a slow start in the first quarter driven by weather-related claims increases in the U.S. and Canada. In the U.S., our catastrophe adjuster revenues exceeded $10 million in a quarter for the first time since the 2008 fourth quarter. The strong contribution margins from this revenue surge helped drive the segment’s operating margin to 11% for the 2011 second quarter.
“Our EMEA/AP segment was also a solid contributor, with revenues increasing 24% over the 2010 second quarter and operating earnings up 45% as compared to the 2010 second quarter. This part of our business continues to be positively impacted by a substantial increase in weather-related claims activity in our key United Kingdom and Australian markets.
“In our Legal Settlement Administration segment, we continue to see strong performance due to our engagement in the Gulf Coast Claims Facility (GCCF) special project. We have a strong backlog of awarded projects in this segment and expect the special project activity to continue through 2011, although at a reduced pace compared to current levels. We are excited about the opportunities we see emerging in this and related markets.
“We continue to see persistent high levels of unemployment in the U.S., which has put pressure on workplace-related claims volumes affecting our Broadspire segment. In addition, we are seeing the duration of certain workers’ compensation claims lengthening, and we are also experiencing changes in the mix of claims we are handling, with a higher percentage of less complex low-value claims. These factors are combining to put pressure on the Broadspire business. We are actively addressing these issues and focusing on business development opportunities in the marketplace. We remain confident that we can improve the financial profile of this operation over the remainder of 2011.”
Mr. Bowman concluded, “Our overall results for the 2011 second quarter continued to improve on our expectations. We are again revising our guidance upward to reflect the strong second quarter results and our increased visibility into the remainder of the year. The Company’s revised guidance includes a one-time after tax credit of $5.8 million due to a recovery in an arbitration from Platinum Equity Holdings related to the acquisition of Broadspire. We are pleased all arbitration matters related to that acquisition have now concluded, and we will report this credit in our third quarter results. As we experienced in the first half of the year, however, we expect industry conditions to be challenging, particularly with employment levels and market conditions in our Broadspire business. We will continue to focus significant attention on this area with the goal to drive market share expansion and operating efficiencies.”
Crawford & Company revises and increases aspects of its previously issued guidance for 2011 as follows:
- Consolidated revenues before reimbursements between $1.07 billion and $1.10 billion.
- Consolidated operating earnings between $75.0 million and $83.0 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, special credits, and income taxes, net income attributable to shareholders of Crawford & Company on a GAAP basis between $41.0 million and $46.5 million, or $0.75 to $0.85 diluted earnings per share.
- Before reflecting the special credit of $5.8 million net of tax, or $0.11 per share, related to an arbitration award, net income attributable to shareholders of Crawford & Company on a non-GAAP basis between $35.5 million and $41.0 million, or $0.65 to $0.75 diluted earnings per share.
The complete earnings release is available here.