Crawford & Company Reports 2015 First Quarter Results
(Thomson Reuters ONE) -
Crawford & Company Reports 2015 First Quarter Results
Updates 2015 Guidance
ATLANTA, GA. (May 7, 2015) -- Crawford & Company (www.crawfordandcompany.com)
(NYSE: CRDA and CRDB), the world's largest independent provider of claims
management solutions to insurance companies and self-insured entities, today
announced its financial results for the first quarter ended March 31, 2015.
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 (CRDA) than on the voting Class B Common
Stock (CRDB), subject to certain limitations. In addition, with respect to
mergers or similar transactions, holders of CRDA must receive the same type and
amount of consideration as holders of CRDB, unless different consideration is
approved by the holders of 75% of CRDA, voting as a class.
First Quarter 2015 Highlights
* Revenues before reimbursements of $287.8 million, compared to $275.3 million
for the first quarter of 2014
* Net income attributable to shareholders of $3.0 million, down from $6.7
million in the same period last year
* Diluted earnings per share of $0.06 for CRDA and $0.04 for CRDB
* Acquisition of GAB Robins unconditionally cleared by the U.K. Competition &
Markets Authority
* Announced appointment of Kieran Rigby as Chief Executive Officer, Europe and
Clive Nicholls as Chief Executive Officer, U.K. & Ireland
* Commenced restructuring activities to reduce our expense base and improve
margins in our global claims businesses
* Recorded special charges of $1.1 million due to the ongoing implementation
of the Global Business Services Center in Manila
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated,
"The challenging market environment has continued through the 2015 first quarter
driving a further mix shift from high margin property claims, which typically
results from severe weather, to high volume, low-value claims both in the U.S.
and internationally. Given the persistence of this environment, we have made the
strategic decision to further rationalize our cost structure to reduce expenses
and enhance margins. Additionally, we have further realigned our senior
management team to improve execution and capitalize on the opportunities that we
see ahead of us. We expect the benefits of this plan to begin in the second
quarter of this year."
"In the U.K., we are pleased to report that we recently received approval for
the acquisition of GAB Robins from the Competition & Markets Authority and have
begun to rapidly integrate the two businesses. The key management decisions have
been announced, further enhancing our senior leadership team." Mr. Bowman
continued, "Importantly, our combined business and RFP activity in the U.K. have
remained robust through this period of uncertainty which is a credit to our
team. Additionally, our Broadspire segment performed well during the quarter and
continues to be a bright spot for us. Revenues were up 8% and we enjoyed our
first big contract win on the recently commenced disability product."
Mr. Bowman concluded, "Overall, we are optimistic about 2015. We have initiated
significant cost reduction efforts across the Company and believe these actions
will produce lasting benefits in our operating performance. As a result, we are
updating our 2015 annual guidance to reflect a higher special charge and also
increased operating earnings and diluted earnings per share before special
charges. Looking forward, we are positioning our Company to create long-term
shareholder value by focusing on profitable growth and leveraging the Company's
numerous global resources."
First Quarter 2015 Financial Results Compared to Prior Year Period
First quarter 2015 consolidated revenues before reimbursements totaled $287.8
million, compared with $275.3 million for first quarter 2014. First quarter
2015 net income attributable to shareholders of Crawford & Company was $3.0
million compared with net income of $6.7 million in the first quarter of 2014.
First quarter 2015 diluted earnings per share were $0.06 for CRDA and $0.04 for
CRDB, compared with diluted earnings per share of $0.12 for CRDA and $0.11 for
CRDB in the prior year quarter. Consolidated operating earnings, a non-GAAP
financial measure, were $10.7 million in the 2015 first quarter, compared with
$14.1 million in the 2014 period.
During the 2015 first quarter, the Company recorded special charges of $1.1
million, or $0.01 per share, associated with the ongoing implementation of its
Global Business Services Center in Manila, Philippines.
Before this special charge, first quarter earnings per share on a non-GAAP basis
were $0.07 for CRDA and $0.05 for CRDB.
Segment Results
Americas
Americas revenues before reimbursements were $89.5 million in the first quarter
of 2015, increasing from $87.9 million in the first quarter of 2014. The growth
in special project revenues in the U.S. was partially offset by weaker Canadian
operating results. Additionally, our North American Contractor Connection
business, while performing well, showed a modest slowdown in growth given the
difficult comparison with the polar vortex in the first quarter of 2014. A
headwind in the first quarter of 2015 was that the U.S. dollar strengthened
against most foreign currencies in the segment, resulting in a negative exchange
rate impact on segment revenues of approximately 5%. Operating earnings were
$5.0 million in the 2015 first quarter, compared with $6.9 million in the first
quarter of 2014, representing an operating margin of 6% and 8% in the 2015 and
2014 periods, respectively.
EMEA/AP
First quarter 2015 revenues before reimbursements for the EMEA/AP segment
totaled $91.3 million, compared with $80.3 million in the 2014 first quarter.
This increase was due to the inclusion of revenues from the acquisition of GAB
Robins in the U.K. Changes in foreign exchange rates negatively impacted
revenues in this segment by approximately 8% in the first quarter of 2015
compared with the prior year period. EMEA/AP operating earnings were $1.5
million in the 2015 first quarter, compared with first quarter 2014 operating
earnings of $1.9 million. The segment's operating margin was flat year-over-
year, at 2%.
Broadspire
Broadspire segment revenues before reimbursements were $69.7 million in the
2015 first quarter, up from $64.8 million in the 2014 first quarter. Broadspire
recorded operating earnings of $3.5 million in the first quarter of 2015,
representing an operating margin of 5%, compared with $2.0 million, or 3% of
revenues, in the 2014 first quarter. The segment's improvement was primarily
attributed to new client wins and growth in workers' compensation case
referrals.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $37.4
million in the first quarter of 2015, compared with $42.4 million in the same
period last year. The decrease in revenues was primarily due to anticipated
declines in volumes associated with the Deepwater Horizon class action
settlement. Operating earnings were flat year-over-year at $5.0 million, with
the related operating margin increasing from 12% in the 2014 period to 13% in
the 2015 period.
Balance Sheet and Cash Flow
Crawford & Company's consolidated cash and cash equivalents position as of March
31, 2015 totaled $40.8 million compared with $48.5 million at March 31, 2014.
The Company used $15.6 million of cash in operations during the first three
months of 2015, compared with $65.3 million during the first three months of
2014. The improvement in cash used in operating activities in the first quarter
of 2015 compared with the first quarter of 2014 was primarily due to improved
collections of year-end accounts receivable, increases in deferred revenue, and
lower payments for accrued liabilities, including incentive compensation.
2015 Guidance
Crawford & Company is updating parts of its guidance for 2015 as follows:
* Consolidated revenues before reimbursements remain between $1.16 and $1.19
billion;
* Consolidated operating earnings increased to between $87.0 and $97.0
million;
* Consolidated cash provided by operating activities unchanged between $40.0
and $50.0 million;
* After special charges, net income attributable to shareholders of Crawford &
Company remain between $29.5 and $35.0 million, or $0.57 to $0.67 diluted
earnings per CRDA share, or $0.50 to $0.60 diluted earnings per CRDB share;
* Before special charges, net income attributable to shareholders of Crawford
& Company increased to between $41.5 and $47.0 million, or $0.80 to $0.90
diluted earnings per CRDA share, or $0.73 to $0.83 diluted earnings per CRDB
share.
The Company expects to incur pretax special charges in 2015, currently estimated
at approximately $7.0 million for the integration of GAB Robins and $9.0 million
related to the establishment of a Global Business Services Center in Manila,
Philippines. In addition, the Company expects to incur an additional special
charge in 2015, currently estimated at $4.0 million, related to restructuring
activities in the EMEA/AP and Americas segments.
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.
In recent periods the Company has derived a material portion of its revenues and
operating earnings from a limited number of client engagements and special
projects within its Legal Settlement Administration segment, specifically its
work on the gulf-related class action settlement. Although the Company continued
to earn revenues from the Legal Settlement Administration projects in the first
quarter 2015, these revenues, and related operating earnings, were at a reduced
rate as compared to 2014. The projects continue to wind down, and the Company
expects these revenues, and related operating earnings, to be at a reduced rate
in all future periods, as compared to 2014. No assurances of timing of the
project end dates and, therefore, continued revenues or operating earnings, can
be provided. In the event the Company is unable to replace revenues and related
operating earnings from these projects as they wind down, or upon the
termination or other expiration thereof, with revenues and operating earnings
from new projects and customers within this or other segments, there could be a
material adverse effect on the Company's results of operations.
Conference Call
Crawford & Company's management will host a conference call with investors on
Thursday, May 7, 2015 at 3:00 p.m. EST to discuss first quarter 2015 results.
The call will be recorded and available for replay through June 6, 2015. You may
dial 1-855-859-2056 to listen to the replay. The access code is 23943883.
Alternatively, please visit our web site at www.crawfordandcompany.com for a
live audio web cast and related financial presentation.
Non-GAAP Presentation
In the normal course of business, our operating segments incur certain out-of-
pocket expenses that are thereafter reimbursed by our clients. Under GAAP, these
out-of-pocket expenses and associated reimbursements are required to be included
when reporting expenses and revenues, respectively, in our consolidated results
of operations. In the foregoing discussion and analysis of segment results of
operations, we do not include a gross up of segment expenses and revenues for
these pass-through reimbursed expenses. The amounts of reimbursed expenses and
related revenues offset each other in our results of operations with no impact
to our net income or operating earnings. A reconciliation of revenues before
reimbursements to consolidated revenues determined in accordance with GAAP is
self-evident from the face of the accompanying unaudited condensed consolidated
statements of income.
Operating earnings is the primary financial performance measure used by our
senior management and chief operating decision maker ("CODM") to evaluate the
financial performance of our Company and operating segments, and make resource
allocation and certain compensation decisions. Unlike net income, segment
operating earnings is not a standard performance measure found in GAAP. We
believe this measure is useful to others in that it allows them to evaluate
segment and consolidated operating performance using the same criteria used by
our senior management and CODM. Consolidated operating earnings represent
segment earnings including certain unallocated corporate and shared costs and
credits, but before net corporate interest expense, stock option expense,
amortization of customer-relationship intangible assets, any special charges or
credits, income taxes, and net income or loss attributable to noncontrolling
interests. The reconciliation of operating earnings to net income attributable
to shareholders of Crawford & Company on a GAAP basis is presented below.
Unallocated corporate and shared costs and credits represent expenses and
credits related to our chief executive officer and Board of Directors, certain
provisions for bad debt allowances or subsequent recoveries such as those
related to bankrupt clients, defined benefit pension costs or credits for our
frozen U.S. pension plan, and certain self-insurance costs and recoveries that
are not allocated to our individual operating segments but are included in our
financial performance measure of consolidated operating earnings. Special
charges or credits are non-core items not expected to impact our operations on a
regular recurring basis.
Income taxes, net corporate interest expense, stock option expense, and
amortization of customer-relationship intangible assets are recurring components
of our net income, but they are not considered part of our consolidated or
segment operating earnings because they are managed on a corporate-wide basis.
Income taxes are calculated for the Company on a consolidated basis based on
statutory rates in effect in the various jurisdictions in which we provide
services, and varies significantly by jurisdiction. Net corporate interest
expense results from capital structure decisions made by senior management and
the Board of Directors and affecting the Company as a whole. Stock option
expense represents the non-cash costs generally related to stock options and
employee stock purchase plan expenses which are not allocated to our operating
segments. Amortization expense is a non-cash expense for finite-lived customer-
relationship and trade name intangible assets acquired in business combinations.
None of these costs relate directly to the performance of our services or
operating activities and, therefore, are excluded from segment operating
earnings in order to better assess the results of each segment's operating
activities on a consistent basis.
Following is a reconciliation of segment and consolidated operating earnings to
net income attributable to shareholders of Crawford & Company on a GAAP basis
and the related margins as a percentage of revenues before reimbursements for
all periods presented (in thousands, except percentages):
+------------------------------------------------------------------------------+
| Three months ended |
| +----------+------+----------+------+
| | March | % | March | % |
| | 31, 2015 |Margin| 31, 2014 |Margin|
| +----------+------+----------+------+
|Operating Earnings: | | | | |
| | | | | |
|Americas |$ 4,976 | 6 %|$ 6,934 | 8 %|
| | | | | |
|EMEA/AP | 1,528 | 2 %| 1,900 | 2 %|
| | | | | |
|Broadspire | 3,537 | 5 %| 2,003 | 3 %|
| | | | | |
|Legal Settlement Administration | 4,951 |13 %| 4,967 |12 %|
| | | | | |
|Unallocated corporate and shared costs and| | | | |
|credits, net | (4,296 ) |(1 )%| (1,743 ) |(1 )%|
| +----------+ +----------+ |
|Consolidated Operating Earnings | 10,696 | 4 %| 14,061 | 5 %|
| +----------+ +----------+ |
|Deduct: | | | | |
| | | | | |
|Net corporate interest expense | (1,864 ) |(1 )%| (1,301 ) | - %|
| | | | | |
|Stock option expense | (149 ) | - %| (294 ) | - %|
| | | | | |
|Amortization expense | (2,098 ) |(1 )%| (1,592 ) |(1 )%|
| | | | | |
|Special charges | (1,063 ) | - %| - | - %|
| | | | | |
|Income taxes | (2,241 ) |(1 )%| (4,288 ) |(2 )%|
| | | | | |
|Net (income) loss attributable to non- | | | | |
|controlling interests | (295 ) | - %| 66 | - %|
| +----------+ +----------+ |
|Net income attributable to shareholders of| | | | |
|Crawford & Company |$ 2,986 | 1 %|$ 6,652 | 2 %|
| +----------+ +----------+ |
| | | | | |
+------------------------------------------+----------+------+----------+------+
Further information regarding the Company's financial position, operating
results, and cash flows for the three months ended March 31, 2015 is shown on
the attached unaudited condensed consolidated financial statements.
About Crawford & Company
Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is
the world's largest (based on annual revenues) independent provider of claims
management solutions to the risk management and insurance industry, as well as
to self-insured entities, with an expansive global network serving clients in
more than 70 countries. The Crawford Solution(SM) offers comprehensive,
integrated claims services, business process outsourcing and consulting services
for major product lines including property and casualty claims management,
workers' compensation claims and medical management, and legal settlement
administration. The Company's shares are traded on the NYSE under the symbols
CRDA and CRDB.
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 CRDA than on the voting CRDB, subject to certain limitations.
In addition, with respect to mergers or similar transactions, holders of CRDA
must receive the same type and amount of consideration as holders of CRDB,
unless different consideration is approved by the holders of 75% of CRDA, voting
as a class.
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.
FOR FURTHER INFORMATION REGARDING THIS PRESS RELEASE, PLEASE CALL BRUCE SWAIN AT
(404) 300-1051.
+------------------------------------------------------------------------------+
|This press release contains forward-looking statements, including statements|
|about the financial condition, results of operations and earnings outlook of|
|Crawford & Company. Statements, both qualitative and quantitative, that are|
|not historical facts may be "forward-looking statements" as defined in the|
|Private Securities Litigation Reform Act of 1995 and other federal securities|
|laws. Forward-looking statements involve a number of risks and uncertainties|
|that could cause actual results to differ materially from historical|
|experience or Crawford & Company's present expectations. Accordingly, no one|
|should place undue reliance on forward-looking statements, which speak only as|
|of the date on which they are made. Crawford & Company does not undertake to|
|update forward-looking statements to reflect the impact of circumstances or|
|events that may arise or not arise after the date the forward-looking|
|statements are made. For further information regarding Crawford & Company,|
|including factors that could cause our actual financial condition, results or|
|earnings to differ from those described in any forward-looking statements,|
|please read Crawford & Company's reports filed with the SEC and available at|
|www.sec.gov or in the Investor Relations section of Crawford & Company's|
|website at www.crawfordandcompany.com. |
+------------------------------------------------------------------------------+
Exhibit 99.1 Press Release dated 05.07.2015 v2 r97:
http://hugin.info/155880/R/1919577/687349.pdf
Exhibit 99.1 Press Release dated 05.07.2015 v2:
http://hugin.info/155880/R/1919577/687350.docx
Crawford 1Q 2015 Earnings Release:
http://hugin.info/155880/R/1919577/687351.xlsx
This announcement is distributed by GlobeNewswire on behalf of
GlobeNewswire clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Crawford & Company via GlobeNewswire
[HUG#1919577]
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Datum: 07.05.2015 - 13:00 Uhr
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