Altanta, GA -(PRNewswire)- Crawford & Company (NYSE: CRDA and CRDB), an 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, 2012.
Third quarter 2012 consolidated revenues before reimbursements totaled $302.1 million, an increase of 7% from $283.0 million in the 2011 third quarter. Third quarter 2012 net income attributable to shareholders of Crawford & Company was $18.2 million, increasing 19% over the $15.3 million recorded in the 2011 third quarter. Third quarter 2012 diluted earnings per share were $0.33 for CRDA and CRDB, compared with diluted earnings per share for each class of $0.28 in the prior-year quarter.
During the 2012 third quarter, the Company incurred pretax special charges of approximately $0.3 million, or less than $0.01 per share of CRDA and CRDB after related income taxes, for the completion of a project to outsource certain aspects of our U.S. technology infrastructure. During the 2011 third quarter, the Company recorded a special credit of $7.0 million, or $0.11 per share of CRDA and CRDB after related income taxes, resulting from an arbitration award.
Balance Sheet and Cash Flow
The Company’s consolidated cash and cash equivalents position as of September 30, 2012 totaled $66.4 million, compared with $77.6 million at December 31, 2011 and $68.0 million at September 30, 2011.
Crawford generated $10.3 million of cash from operations during the 2012 year-to-date period, compared with $17.6 million used during the comparable 2011 period. The $27.9 million increase in cash provided by operations was largely due to 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, “For the 2012 third quarter we achieved new quarterly records for revenues, net income and earnings per share. These results were driven by strong performance in our EMEA/AP and Legal Settlement Administration segments and improvements in our Broadspire segment. We are mobilizing our resources to assist our clients in the aftermath of Superstorm Sandy. We anticipate that this event will generate significant claims volumes for us in the 2012 fourth quarter.
“During the 2012 third quarter our Legal Settlement Administration segment was heavily involved in the Deepwater Horizon class action settlement. We expect activity in this special project to continue for the remainder of 2012, although at a reduced rate.
“In the Broadspire segment, we continued to see substantial improvement over the 2011 comparable period results of that segment, as we reduced operating losses by $8.8 million for the year-to-date period through revenue increases and cost management. Our 2012 third quarter claims activity was up 4.4% over the 2011 third quarter. We remain focused on driving sequential operating improvement in this segment. The turnaround of Broadspire is one of the key objectives for our management team and we are optimistic that Broadspire will end the year profitably.
“Our EMEA/AP segment results continue to be driven primarily by the ongoing handling of catastrophic flood losses in Thailand. We have been encouraged with the operating performance of this segment during the 2012 third quarter, which has seen strong growth in revenues and operating earnings.
“The Americas segment saw an increase in claims activity during the 2012 third quarter resulting from Hurricane Isaac in the U.S. and catastrophe related claims in Canada. This helped generate sequential improvement over the 2012 second quarter results of this segment, despite relatively weak industry-wide claim volumes which have persisted throughout 2012.”
Mr. Bowman concluded, “We remain focused on our core strategic and operational goals and expect to further expand market share, drive efficiencies and capitalize on emerging opportunities as we enter 2013. In order to improve the Company’s financial performance in 2013, we anticipate taking a restructuring charge in the 2012 fourth quarter of approximately $5.0 million, before tax. We expect the cost efficiencies gained by our actions to produce annualized operating savings of approximately $4.2 million in our North American operations, helping to improve future operating margins in our Americas and Broadspire segments. This charge is included in the updated 2012 guidance we are providing today.”
Third Quarter 2012 Segment Results
Americas revenues before reimbursements were $85.9 million in the third quarter of 2012, decreasing 9% from $94.7 million in the 2011 third quarter. During the 2012 third quarter compared with the 2011 third quarter, the U.S. dollar strengthened against foreign currencies in the segment, resulting in a negative exchange rate impact to revenues of $0.9 million in this segment. Excluding the negative impact of exchange rate changes, Americas revenues would have been $86.8 million in the 2012 third quarter. Revenues generated by the Company’s catastrophe adjuster group in the U.S. were $9.6 million in the 2012 third quarter, decreasing from $12.9 million in the 2011 period. Americas operating expenses for the 2012 third quarter decreased by $8.5 million in U.S. dollars, a 10% decrease, and decreased by 8% on a constant dollar basis, compared with the 2011 period. Operating earnings in the 2012 third quarter decreased to $6.5 million, or an operating margin of 8%, compared with operating earnings of $6.8 million, or 7% of revenues, in the 2011 third quarter.
Third quarter 2012 revenues before reimbursements for the EMEA/AP segment increased 10% to $95.9 million from $87.0 million in the same period of 2011. During the 2012 third quarter compared with the 2011 third quarter, the U.S. dollar strengthened against most major foreign currencies, resulting in a negative exchange rate impact to revenues of $6.7 million in this segment. Excluding the negative impact of exchange rate changes, EMEA/AP revenues would have been $102.6 million in the 2012 third quarter. EMEA/AP operating expenses for the 2012 third quarter increased by $1.6 million in U.S. dollars, a 2% increase, and increased by 10% on a constant dollar basis, compared with the 2011 period. Operating earnings increased to $13.0 million in the 2012 third quarter from 2011 third quarter operating earnings of $5.7 million. The related operating margin was 14% in the 2012 third quarter compared with 7% in the 2011 third quarter.
Revenues before reimbursements from the Broadspire segment were $59.8 million in the 2012 third quarter, an increase of 2% from $58.9 million in the 2011 third quarter. Broadspire had an operating loss of $0.2 million in the 2012 third quarter, or a slightly negative operating margin, compared with an operating loss of $2.9 million, or a negative operating margin of 5%, in the prior year period.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $60.6 million in the 2012 third quarter, compared with $42.5 million in the 2011 third quarter. Operating earnings totaled $15.6 million in the 2012 third quarter, or 26% of revenues, compared with $10.8 million, or 25% of revenues, in the prior-year period. The segment’s awarded project backlog totaled approximately $118.0 million at September 30, 2012 as compared with $72.5 million at September 30, 2011.
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. Notwithstanding the foregoing, however, Crawford & Company is raising its guidance for 2012 as follows:
- Consolidated revenues before reimbursements between $1.13 and $1.14 billion
- Consolidated operating earnings between $85.0 and $90.0 million
- Consolidated cash provided by operating activities between $45.0 and $50.0 million
- After reflecting stock option expense, net corporate interest expense, customer-relationship intangible asset amortization expense, special charges, and income taxes, net income attributable to shareholders of Crawford & Company on a GAAP basis between $37.5 and $40.8 million, or $0.68 to $0.74 diluted earnings per CRDB share
- Before reflecting a 2012 fourth quarter special charge of $5.0 million, or $0.06 per share, net income attributable to shareholders of Crawford & Company on a non-GAAP basis between $40.7 and $44.0 million, or $0.74 to $0.80 diluted earnings per CRDB share
The foregoing 2012 guidance does not include any estimated impact from the Company’s anticipated response to claims resulting from Superstorm Sandy.
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.
The complete earnings release is available here: Crawford Third Quarter 2012 Results