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 fourth quarter and year ended December 31, 2013.
The Company’s two classes of stock are substantially identical, except with respect to voting rights and the Company’s ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, voting as a class.
2013 Full Year Financial Highlights
- Revenues of $1.163 billion
- Consolidated operating earnings of $94.9 million
- Diluted earnings per share of $0.93 for CRDA and $0.90 for CRDB
- Operating cash flow of $77.8 million
- Total shareholders’ investment increased 46%
Full year consolidated revenues before reimbursements totaled $1.163 billion for 2013, compared with $1.177 billion for 2012. Net income attributable to shareholders of Crawford & Company in 2013 was $51.0 million, compared with net income in 2012 of $48.9 million. Full year 2013 diluted earnings per share were $0.93 for CRDA and $0.90 for CRDB, compared with diluted earnings per share of $0.91 for CRDA and $0.87 for CRDB in the prior year.
Fourth quarter 2013 consolidated revenues before reimbursements totaled $284.9 million, compared with $313.0 million in the 2012 fourth quarter. Fourth quarter 2013 net income attributable to shareholders of Crawford & Company was $10.8 million, compared with $14.2 million in the 2012 fourth quarter. Fourth quarter 2013 diluted earnings per share were $0.20 for CRDA and $0.19 for CRDB, compared with diluted earnings per share of $0.26 for CRDA and $0.25 for CRDB, in the prior-year quarter.
Consolidated operating earnings, a non-GAAP financial measure, were $94.9 million in 2013, compared with $110.2 million in 2012. For the 2013 fourth quarter, consolidated operating earnings totaled $20.2 million, compared with $38.9 million in the 2012 fourth quarter.
During the 2012 fourth quarter, the Company recorded $8.5 million in special charges, and for the full year 2012 incurred $11.3 million of such charges. There were no special charges during 2013. Excluding the 2012 special charges, 2012 fourth quarter and full-year net income attributable to shareholders of Crawford & Company would have been $19.5 million and $55.9 million, respectively, and diluted earnings per CRDB share would have been $0.35 and $1.00, respectively.
Balance Sheet and Cash Flow
Crawford & Company’s consolidated cash and cash equivalents position as of December 31, 2013 totaled $76.0 million compared with $71.2 million at December 31, 2012.
The Company generated $77.8 million of cash from operations during 2013, compared with $92.9 million during 2012. The $15.1 million decrease in cash provided by operations was largely due to higher payments for accounts payable and accrued liabilities during 2013, partially offset by improved accounts receivable performance.
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, “Overall we were pleased with financial performance for the year just ended, reporting growth in net income and diluted earnings per share on flat revenue performance. Our fourth quarter 2013 consolidated operating earnings were down from the prior year, but in line with our expectations heading into the quarter. Our results in last year’s fourth quarter were largely driven by our response to superstorm Sandy and special projects in our Asia Pacific and Legal Settlement Administration operations which, as expected, declined during 2013. During the 2013 fourth quarter and year, Broadspire’s operating performance reflected substantial improvement over prior periods. Despite a global absence of major weather events over the past year, we generated approximately $95 million in consolidated operating earnings and had more balance among our segment operating results, reflecting increasing strength in the Americas and profitable performance in Broadspire.
“The Americas segment grew substantially from 2012 to 2013, as results from our Canadian operations showed marked improvement during the year, and we saw continued growth in our Contractor Connection operations. During the 2013 fourth quarter, the comparison with 2012 claims associated with superstorm Sandy in the northeastern U.S. was unfavorable and resulted in an expected decrease quarter over quarter in the segment.
“Entering the year, we indicated our expectations that our EMEA/AP segment results would show a decline compared to 2012, as we finalized claims arising from the 2011 catastrophic flood losses in Thailand. The claims associated with this special project are now substantially complete, which is reflected in the 2013 fourth quarter’s and full year’s lower operating results as well as our outlook for 2014.
“Continued strong results from our Legal Settlement Administration segment during 2013 were supported by activity in the Deepwater Horizon class action settlement, as well as a number of other meaningful class action and bankruptcy matters. As we have indicated, activity levels associated with the Deepwater Horizon special project are expected to continue to decline during 2014 as compared to 2013 levels.
“In the Broadspire segment, we saw a steady and significant improvement in both revenue and operating profitability during 2013, and we were pleased with the progress made in these operations during the year. We are excited about the building strength of this business and remain focused on delivering continued operating improvement in the coming year.”
Mr. Bowman concluded, “In addition to balanced operating performance, we were pleased with the progress made in strengthening our balance sheet by reducing debt and pension obligations through careful working capital management. We continue to foster a supportive corporate culture that is highly results-oriented. Significant progress has been made toward achieving our strategic objectives, but we will continue to innovate and evolve, particularly in the area of technology, moving forward to improve the corporation and enhance our shareholders’ experience.”
Segment Results for the Fourth Quarter and Full Year
Americas revenues before reimbursements were $79.5 million in the fourth quarter of 2013, declining from $93.5 million in the 2012 fourth quarter, primarily due to the impact of claims arising from superstorm Sandy in the fourth quarter of 2012. A strengthened U.S. dollar compared to foreign currencies reduced our Americas revenues in the fourth quarter of 2013 compared with the prior year period by approximately 2%. Operating earnings were $1.2 million in the 2013 fourth quarter, compared with $4.4 million in the 2012 fourth quarter, representing an operating margin of 1% and 5% in the 2013 and 2012 periods, respectively.
For the year, Americas revenues before reimbursements increased 2% to $342.2 million compared with $334.4 million in 2012. During 2013, the U.S. dollar strengthened against foreign currencies in the segment, resulting in a negative exchange rate impact on segment revenues of approximately 2% from 2012 to 2013. Operating earnings increased from $11.9 million in 2012 to $18.5 million in 2013, representing an operating margin of 4% and 5% in 2012 and 2013, respectively.
Fourth quarter 2013 revenues before reimbursements for the EMEA/AP segment totaled $91.0 million, compared with $95.2 million in the 2012 fourth quarter. Changes in foreign exchange rates reduced our EMEA/AP revenues in the fourth quarter of 2013 compared with the prior year period by approximately 3%.EMEA/AP operating earnings were $12.7 million in the 2013 fourth quarter, compared with 2012 fourth quarter operating earnings of $18.2 million. The operating margin decreased from 19% in the 2012 period to 14% in the 2013 fourth quarter.
For the year, revenues before reimbursements from our EMEA/AP segment totaled $350.2 million, compared with $366.7 million in 2012. The strengthening of the U.S. dollar during 2013 resulted in a negative exchange rate impact on revenues of approximately 2% in 2013 compared with 2012. EMEA/AP operating earnings were $32.2 million in 2013, compared with 2012 operating earnings of $48.5 million. The operating margin decreased from 13% in 2012 to 9% in 2013.
Broadspire segment revenues before reimbursements were $65.4 million in the 2013 fourth quarter, increasing 11% compared with $58.8 million in the 2012 fourth quarter. Broadspire recorded operating earnings of $3.8 million in the 2013 fourth quarter, representing an operating margin of 6%, compared with operating earnings of $0.6 million, or 1.0% of revenues, in the 2012 fourth quarter.
For the year, Broadspire segment revenues before reimbursements increased 6% to $252.2 million compared with $239.0 million in 2012. Broadspire recorded operating earnings of $8.2 million for the year, or 3% of revenues, compared with break-even operating results in 2012.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $49.1 million in the 2013 fourth quarter, compared with $65.4 million in the 2012 fourth quarter. Operating earnings were $8.0 million in the 2013 fourth quarter, decreasing from $18.2 million in the 2012 fourth quarter, with the related operating margin decreasing from 28% in the 2012 period to 16% in the 2013 period.
For the year, Legal Settlement Administration revenues before reimbursements were $218.8 million, compared with $236.6 million in 2012. Operating earnings were $46.8 million, compared with $60.3 million in 2012, with the related operating margin decreasing from 25% in 2012 to 21% in 2013. The segment’s awarded project backlog approximated $108.2 million at December 31, 2013, compared with $151.9 million at December 31, 2012.
Crawford & Company is providing a guidance range for 2014 as follows:
- Consolidated revenues before reimbursements between $1.10 and $1.13 billion;
- Consolidated operating earnings between $95.0 and $103.0 million;
- Consolidated cash provided by operating activities between $60.0 and $70.0 million;
- Consolidated net income attributable to shareholders of Crawford & Company between $52.0 and $57.0 million;
- Diluted earnings per share of $0.94 to $1.04 for CRDA; and
- Diluted earnings per share of $0.90 to $1.00 for CRDB.
The complete earnings release is available here: Crawford & Company 2013 Fourth Quarter and Annual Results (PDF)