ATLANTA /PRNewswire/ — Crawford & Company (www.crawfordandcompany.com) (NYSE: CRDA; CRDB), the world’s largest independent provider of claims management solutions to insurance companies and self-insured entities, recently announced its financial results for the third quarter ended September 30, 2011.
Third quarter 2011 consolidated revenues before reimbursements totaled $283.0 million, up 11% over $254.5 million in the 2010 third quarter. Third quarter 2011 net income attributable to Crawford & Company was $15.3 million, compared with $13.0 million recorded in the 2010 third quarter. Third quarter 2011 diluted earnings per share for CRDA and CRDB were $0.28 compared with $0.24 reported in the prior-year quarter. Third quarter 2011 diluted earnings per share for CRDA and CRDB were positively impacted by an arbitration award of $7.0 million ($5.9 million net of tax, or $0.11 per diluted share) related to the previously disclosed arbitration with Platinum Equity, LLC.
The Company’s consolidated cash and cash equivalents position as of September 30, 2011 totaled $68.0 million, compared with $93.5 million at December 31, 2010. Crawford used $17.6 million of cash in operations during the 2011 year-to-date period, compared with $25.1 million during the comparable 2010 period. The $7.5 million reduction in cash used in operations was due to higher net income, partially offset by higher accounts receivable and unbilled revenues and increased payments of accounts payable and accrued liabilities.
In the 2011 third quarter, the Company paid a higher dividend on CRDA than on CRDB. This may result in a different earnings per share (“EPS”) for each class of stock due to the two-class method of computing EPS as required by the guidance in Accounting Standards Codification 260 – “Earnings Per Share”. The two-class method is an earnings allocation method under which EPS is calculated for each class of common stock considering both dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period. Further references in this release will generally be only for CRDB, as that is the more dilutive measure.
Results by Segment
Americas revenues before reimbursements were $94.7 million in the third quarter of 2011, increasing 10% from $85.7 million in the 2010 third quarter. During the 2011 third quarter compared with the 2010 third quarter, the U.S. dollar weakened against foreign currencies in the segment, resulting in a positive exchange rate impact to revenues of $2.6 million in this segment. Excluding the positive impact of exchange rate changes, Americas revenues would have been $92.0 million in the 2011 third quarter. Revenues generated by the Company’s catastrophe adjuster group in the U.S. were $12.9 million in the 2011 third quarter, increasing from $4.6 million in the 2010 period. Americas operating expenses for the 2011 third quarter increased by $8.4 million in U.S. dollars, an 11% increase, and increased by 7% on a constant dollar basis, compared with the 2010 period. Operating earnings in the 2011 third quarter in the segment increased to $6.8 million, or an operating margin of 7%, compared with operating earnings of $6.2 million, or 7% of revenues in the 2010 third quarter.
Third quarter 2011 revenues before reimbursements for the EMEA/AP segment increased 27% to $87.0 million from $68.7 million in the same period of 2010. During the 2011 third quarter compared with the 2010 third quarter, the U.S. dollar weakened against most major foreign currencies, resulting in a positive exchange rate impact to revenues of $10.0 million in this segment. Excluding the positive impact of exchange rate changes, EMEA/AP revenues would have been $77.0 million in the 2011 third quarter. EMEA/AP operating expenses for the 2011 third quarter increased by $17.7 million in U.S. dollars, a 28% increase, and increased by 14% on a constant dollar basis, compared with the 2010 period. Operating earnings increased to $5.7 million in the 2011 third quarter from 2010 third quarter operating earnings of $5.1 million. The related operating margin was 7% for both the third quarter of 2011 and 2010.
Revenues before reimbursements from the Broadspire segment were $58.9 million in the 2011 third quarter, down 5% from $61.7 million in the 2010 third quarter. Broadspire had an operating loss of $2.9 million in the 2011 third quarter, or a negative operating margin of 5%, compared with an operating loss of $0.7 million, or a negative operating margin of 1%, 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 the ongoing special project for one of our clients.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $42.5 million in the 2011 third quarter, compared with $38.4 million in the 2010 third quarter. Operating earnings totaled $10.8 million in the 2011 third quarter, or 25% of revenues, compared with $11.0 million, or 29% of revenues, in the prior-year period. The segment’s awarded project backlog totaled approximately $72.5 million at September 30, 2011 as compared with $75.0 million at September 30, 2010.
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, “Our third quarter 2011 operating results reflect continued strong performance in our Americas, EMEA/AP and Legal Settlement Administration segments.
“Both the Americas segment and EMEA/AP benefited from weather-related claims increases, the former in the U.S. as a result of Hurricane Irene and the latter as a result of an increase in weather-related claims activity in our Australian market.
“In our Legal Settlement Administration segment, we continue to see solid results primarily from our engagement in the Gulf Coast Claims Facility special project. We still have a strong backlog of awarded projects in this segment and expect the special project activity to continue through 2011 and into 2012, although at a reduced rate as this project continues to wind down.
“Our Broadspire segment is closely correlated with the U.S. economy and continues to be affected by lower workplace-related claims volumes reflecting the high level of U.S. unemployment. In addition, we are seeing the duration of workers compensation claims lengthen, which is putting further pressure on this business. We are actively addressing these issues and focusing on significant technology improvements, business development, and cost control measures. As we have previously disclosed, during the 2011 third quarter we completed all remaining arbitration matters related to the acquisition of Broadspire. In connection with that, we recorded an after-tax $5.9 million one-time arbitration award in this year’s third quarter. We are pleased all arbitration matters associated with the Broadspire acquisition are now behind us as we continue to build this business unit.”
Mr. Bowman concluded, “As we end the year and prepare to enter 2012, I am optimistic that our strategic focus of getting Broadspire to an acceptable operating profit level, reducing our overall debt load, and enhancing shareholders’ returns through improved revenue and operating earnings as we capitalize on global opportunities and efficiencies will be executed.”
Crawford & Company revises and increases aspects of its previously issued guidance for 2011 as follows:
- Consolidated revenues before reimbursements between $1.10 billion and $1.13 billion.
- Consolidated operating earnings between $83.0 million and $89.0 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 charges, and income taxes, net income attributable to shareholders of Crawford & Company on a GAAP basis between $45.0 million and $47.5 million, or $0.81 to $0.86 diluted earnings per CRDB share.
- Before reflecting a net special credit of $1.6 million, or $0.04 per share, net income attributable to shareholders of Crawford & Company on a non-GAAP basis between $43.5 million and $46.0 million, or $0.77 to $0.82 diluted earnings per CRDB share.
The complete earnings release is available here: Crawford Third Quarter 2011 Results