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 third quarter ended September 30, 2013.
Third Quarter Financial Highlights
- Americas segment revenues increase 12%
- Broadspire segment revenues increase 6%
- Diluted earnings per CRDB share of $0.24, down from $0.33 in 2012
- Company affirms and updates certain aspects of its full-year guidance
Consolidated Results
Third quarter 2013 consolidated revenues before reimbursements totaled $293.3 million, a decrease of 3% from $302.1 million in the 2012 third quarter. Third quarter 2013 net income attributable to shareholders of Crawford & Company was $13.4 million, decreasing 26% from $18.2 million in the 2012 third quarter. Third quarter 2013 diluted earnings per share were $0.25 for CRDA and $0.24 for CRDB, compared with diluted earnings per share of $0.33 for both CRDA and CRDB in the prior-year quarter.
Consolidated operating earnings, a non-GAAP financial measure, totaled $26.3 million in the 2013 third quarter, decreasing 20% from $33.0 million in the 2012 third quarter.
Balance Sheet and Cash Flow
Crawford & Company’s consolidated cash and cash equivalents position as of September 30, 2013 totaled $51.1 million compared with $71.2 million at December 31, 2012 and $66.4 million at September 30, 2012.
The Company used $9.5 million of cash in operations during the first nine months of 2013, compared with cash provided by operations of $10.3 million during the first nine months of 2012, reflecting an increase in working capital during 2013.
Management’s Comments
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, “Our third quarter 2013 consolidated operating earnings were in line with our expectations although they declined from last year’s third quarter figures. The reported decline in revenues was due to anticipated decreases in our EMEA/AP and Legal Settlement Administration segment results, as we are winding down two significant special projects within these operations. These results were partially offset by improved performance in our Americas and Broadspire operations.
“The Americas segment saw the benefit of activity from an increase in weather-related claims in our Canadian market during the 2013 third quarter. This helped generate solid year-over-year improvement in this segment, with the quarter producing a 10% operating margin driven by the increased claim activity.
“In the Broadspire segment, we saw a continued improvement in operating profitability during the 2013 third quarter. We are pleased with the progress being made in this important business segment, which is reporting positive operating earnings year-to-date and is more than $5.0 million ahead of last year at this time. We continue to be focused on driving ongoing operating improvements in Broadspire and remain optimistic that we will show sustained operating profitability as we close 2013.
“We expected our EMEA/AP segment results to show a decline during the current quarter as compared to the 2012 period, when we were more heavily engaged in the ongoing handling of claims arising from the 2011 catastrophic flood losses in Thailand. We are finalizing the remaining claims associated with this special project and this is reflected in the current quarter’s lower operating results.
“Our Legal Settlement Administration segment continued to be engaged responding to the Deepwater Horizon class action settlement project, as well as a number of other class action and bankruptcy matters. We are engaged in administering a meaningful amount of non-Gulf related work, which is a positive in this business segment. We expect operating activity in this segment to taper for the remainder of 2013, as the Gulf-related work continues to wind down.”
Mr. Bowman concluded, “We were pleased to see more balanced consolidated operating results during the 2013 third quarter, as all of our segments produced positive operating earnings. We our driving our Company to create long-term shareholder value and see our results thus far this year as evidence of this. Based on our outlook for the remainder of the year, we are affirming and updating certain aspects of our annual guidance for the full year 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 12%, to $95.9 million in the third quarter of 2013, compared with $85.9 million in the 2012 third quarter. Operating earnings improved from $6.5 million in the 2012 third quarter to $9.7 million in the 2013 third quarter, representing an operating margin of 8% and 10% in the 2012 and 2013 periods, respectively. Changes in foreign exchange rates reduced our Americas revenues in the third quarter of 2013 compared with the prior year period by approximately 2%, but had a negligible impact on operating earnings.
EMEA/AP
Third quarter 2013 revenues before reimbursements for the EMEA/AP segment totaled $84.0 million, a 12% decrease from $95.9 million in the 2012 third quarter. EMEA/AP operating earnings were $4.3 million in the 2013 third quarter, a decrease of 67% from 2012 third quarter operating earnings of $13.0 million. The operating margin decreased from 14% in the 2012 period to 5% in the 2013 period. Changes in foreign exchange rates reduced our EMEA/AP revenues in the third 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 $63.3 million in the 2013 third quarter, increasing 6.0% compared with $59.8 million in the 2012 third quarter. Broadspire recorded operating earnings of $1.9 million in the 2013 third quarter, representing an operating margin of 3%, compared with an operating loss of $0.2 million in the 2012 third quarter.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $50.1 million in the 2013 third quarter, compared with $60.6 million in the 2012 third quarter. Operating earnings were $10.2 million in the 2013 third quarter, decreasing 35% from $15.6 million in the 2012 third quarter, with the related operating margin decreasing from 26% in the 2012 period to 20% in the 2013 period. The segment’s awarded project backlog approximated $117.0 million at September 30, 2013, compared with $118.0 million at September 30, 2012.
2013 Guidance
Crawford & Company is affirming and updating certain aspects of its full year 2013 guidance as follows:
- Consolidated revenues before reimbursements between $1.13 and $1.15 billion.
- Consolidated operating earnings between $95.0 and $99.0 million.
- Consolidated cash provided by operating activities between $50.0 and $55.0 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.
The complete earnings release is available here: Crawford & Company 2013 Third Quarter Results
Source: Crawford & Co