Atlanta, GA – Crawford & Company (NYSE: CRDA and 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 second quarter ended June 30, 2013.
Second Quarter Financial Highlights
- Operating earnings increase 27%
- Net income increases 63%
- Diluted earnings per CRDB share of $0.30
- Company increases certain aspects of full-year guidance
Consolidated Results
Second quarter 2013 consolidated revenues before reimbursements totaled $298.9 million, an increase of 2% from $293.8 million in the 2012 second quarter. Second quarter 2013 net income attributable to shareholders of Crawford & Company was $17.0 million, increasing 63% from $10.4 million in the 2012 second quarter. Second quarter 2013 diluted earnings per share were $0.31 for CRDAand $0.30 for CRDB, compared with diluted earnings per share of $0.19 for CRDA and $0.18 for CRDB, in the prior-year quarter. Consolidated operating earnings, a non-GAAP financial measure, totaled $30.4 million in the 2013 second quarter, increasing 27% over $24.0 million in the 2012 second quarter.
During the 2012 second quarter, the Company recorded $1.6 million in special charges related to a project to outsource certain aspects of our U.S. technology infrastructure. There were no special charges during the 2013 second quarter.
Balance Sheet and Cash Flow
Crawford & Company’s consolidated cash and cash equivalents position as of June 30, 2013 totaled $47.2 million compared with $71.2 million at December 31, 2012 and $45.7 million at June 30, 2012.
The Company used $15.1 million of cash in operations during the first six months of 2013, compared with $26.4 million during the first six months of 2012. The Company’s operating cash needs typically peak during the first half of the year and decline during the balance of the year, due in part to annual payments made in the first half of each year to fund defined contribution retirement plans and incentive compensation plans.
Management’s Comments
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, “Our second quarter 2013 consolidated operating earnings increased 27% over last year’s second quarter figures, reflecting Broadspire’s improved operating performance and better results in our Americas segment. We were pleased to see more balanced consolidated operating results, as all of our segments produced positive operating earnings in the current quarter.
“The Americas segment saw the benefit of growth in Contractor Connection in the U.S., improvement in Latin America, and an increase in claims in our key Canadian market, which combined to generate solid year-over-year improvement in this segment.
“In our Broadspire business, we saw an improvement in operating profitability in the 2013 second quarter. While approximately $3.0 million of this improvement in revenues and operating earnings was a one-time benefit, the sequential increase in Broadspire’s continuing operating earnings over the 2013 first quarter was an encouraging result. We are pleased with the progress being made in this important element of the Company’s business and continue to be focused on driving ongoing operating improvements in Broadspire. We remain optimistic that this segment will show meaningful growth throughout the remainder of 2013.
“While the EMEA/AP segment posted strong results with a double digit operating margin in the 2013 quarter,revenues during the current quarter slowed in the U.K. and Asia-Pacific regions as compared to the 2012 period. During 2012, we were more heavily engaged in the ongoing handling of claims arising from the 2011 catastrophic flood losses in Thailand. While the Thailand catastrophe remains a meaningful project for us, related business activity has begun to taper as we wind up the handling of claims there.
“During the 2013 second quarter our Legal Settlement Administration segment remained engaged in responding to the Deepwater Horizon class action settlement, as well as a number of other meaningful class action and bankruptcy matters. We are encouraged to see our non-Gulf related work increasing, which bodes well for the longer-term outlook of this business. We expect operating activity in this segment to continue at a reduced rate as compared to the 2012 levels, but remain strong on a historical basis during the remainder of 2013.”
Mr. Bowman concluded, “We are pleased with the strong, balanced results in the 2013 second quarter and we are encouraged by the opportunities in front of us. We are driving our Company to create long-term shareholder value and see our results for the first half of this year as evidence of this. Based on our positive outlook for the second half of the year, we are increasing certain aspects of our annual guidance for the remainder of 2013.”
Segment Results
Certain marketing functions that were previously included in each segment are now included in our corporate administrative costs and allocated back to the segments. The results of prior periods have been revised to conform to the current presentation.
Americas
Americas revenues before reimbursements increased 7%, to $82.6 million in the second quarter of 2013, compared with $77.6 million in the 2012 second quarter. Operating earnings improved from $1.4 million in the 2012 period to $4.4 million in the 2013 period, representing an operating margin of 2% and 5% in the 2012 and 2013 periods, respectively. Changes in foreign exchange rates reduced our Americas revenues in the second quarter of 2013 compared with the prior year period by approximately 1%, but had a negligible impact on operating earnings.
EMEA/AP
Second quarter 2013 revenues before reimbursements for the EMEA/AP segment totaled $87.6 million, a 7% decrease from $93.8 million in the 2012 period. EMEA/AP operating earnings were $8.4 million in the 2013 period, a decrease of 28% from 2012 second quarter operating earnings of $11.7 million. The operating margin decreased from 13% in the 2012 period to 10% in 2013. Changes in foreign exchange rates reduced our EMEA/AP revenues in the second quarter of 2013 compared with the prior year period by approximately 2%, but had a negligible impact on operating earnings.
Broadspire
Broadspire segment revenues before reimbursements were $65.8 million in the 2013 second quarter, compared with $60.0 million in the 2012 quarter. Included in Broadspire’s revenues and operating earnings in the 2013 second quarter is a one-time benefit of $3.0 million related to the recognition of previously deferred revenue for certain lifetime claims handling obligations that the Company has been relieved of in the future as a result of events occurring during the quarter. Broadspire recorded operating earnings of $4.4 million in the 2013 second quarter, representing an operating margin of 7%, compared with an operating loss of $0.4 million in the 2012 second quarter, or an operating margin of (1)%.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $63.0 million in the 2013 second quarter, compared with $62.5 million in the 2012 second quarter. Operating earnings were $16.5 million in the 2013 second quarter, increasing 5% from $15.8 million in 2012, with the related operating margin increasing slightly from 25% in the 2012 period to 26% in the 2013 period. The segment’s awarded project backlog approximated $130.0 million at June 30, 2013, compared with $73.0 million at June 30, 2012.
2013 Guidance
Crawford & Company is affirming and increasing certain aspects of its full year 2013 guidance as follows:
- Consolidated revenues before reimbursements between $1.12 and $1.14 billion.
- Consolidated operating earnings between $95.0 and $99.0 million.
- Consolidated cash provided by operating activities between $65.0 and $70.0 million.
- Consolidated net income attributable to shareholders of Crawford & Company on a GAAP basis between $51.5 and $54.0 million, or $0.90 to $0.95 diluted earnings per CRDB share.
To a significant extent, Crawford’s business depends 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.
The complete earnings release is available here: Crawford & Company 2013 Second Quarter Results (PDF)
Source: Crawford & Co