Crawford & Company Reports 2016 Third Quarter Results, Increases and Updates 2016 Guidance
(Thomson Reuters ONE) -
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
FOR IMMEDIATE RELEASE
Crawford & Company Reports 2016 Third Quarter Results
Increases and Updates 2016 Guidance
ATLANTA, GA. (November 7, 2016) -- Crawford & Company
(www.crawfordandcompany.com) (NYSE: CRD-A and CRD-B), one of the world's
largest independent providers of claims management solutions to insurance
companies and self-insured entities, today announced its financial results for
the third quarter ended September 30, 2016, and increased and updated its full
year 2016 guidance.
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 (CRD-A) than on the voting Class B Common
Stock (CRD-B), subject to certain limitations. In addition, with respect to
mergers or similar transactions, holders of CRD-A must receive the same type and
amount of consideration as holders of CRD-B, unless different consideration is
approved by the holders of 75% of CRD-A, voting as a class.
Third Quarter 2016 Summary
* Revenues before reimbursements of $277.3 million, compared with $293.3
million for the third quarter of 2015
* Net income attributable to shareholders of $10.9 million compared to a net
loss of $(0.9) million in the same period last year
* Diluted earnings per share of $0.20 for CRD-A and $0.18 for CRD-B, compared
with $(0.01) for CRD-A and $(0.03) for CRD-B in the prior year quarter
* Diluted earnings per share of $0.22 for CRD-A and $0.20 for CRD-B on a non-
GAAP basis in the 2016 quarter, before restructuring and special charges,
compared to $0.14 for CRD-A and $0.12 for CRD-B in the prior year quarter
* All four business segments achieved double digit operating margins this
quarter
* Consolidated operating earnings, a non-GAAP financial measure, were $26.3
million in the 2016 third quarter, compared with $23.1 million in the 2015
period
* Consolidated adjusted EBITDA, a non-GAAP financial measure, was $34.7
million in the 2016 third quarter, compared with $32.8 million in the 2015
period.
Mr. Harsha V. Agadi, chief executive officer of Crawford & Company, stated, "Our
third quarter results are a clear indication that the strategic initiatives
implemented beginning over a year ago are unlocking the potential that exists at
Crawford as we strive to deliver more predictable financial results regardless
of the market backdrop. While the environment remained challenging once again
this quarter, we achieved our best performance of the year as operating earnings
grew 14%, year over year, driven by 160 basis points of margin expansion.
Importantly, all four of our business segments generated double digit operating
margins this quarter.
"Looking at our 2016 third quarter results in more detail, our International
segment showed significant improvement, as operating earnings in all of our
major operating regions were up over the prior year. Broadspire delivered
another strong quarter with growing operating margins and steady, consistent
operating performance. The U.S. Services segment saw revenue declines related to
a large outsourced services project that is transitioning down this year,
partially offset by continued growth in our Contractor Connection service line.
Lastly, the new GCG leadership team is delivering strong results as operating
earnings doubled year over year, and new business win rates remained robust."
Mr. Agadi concluded, "While our operating earnings have expanded by 40% year to
date, we believe significant untapped potential remains across our global
operations. We will continue to evaluate our business segments as we strive to
deliver revenue growth and further operational improvements in order to remain
competitive and relevant in this ever changing world. To that end, it is
critical that we continue to transform our business as we must move faster than
our competitors, new market entrants and clients to ensure that we deliver
results for all of our stakeholders not only today but also in the future."
Segment Results for the Third Quarter
U.S. Services
U.S. Services revenues before reimbursements were $56.5 million in the third
quarter of 2016, decreasing 9% from $62.1 million in the third quarter of 2015.
The revenue decrease was primarily due to a reduction in U.S. Catastrophe
Services, partially offset by an increase in U.S. Contractor Connection
revenues. Operating earnings were $9.4 million in the 2016 third quarter,
compared with $10.8 million in the third quarter of 2015, representing operating
margins of 17% in both the 2016 and 2015 periods.
International
Third quarter 2016 revenues before reimbursements for the International segment
totaled $121.6 million, compared with $128.2 million in the 2015 third quarter.
This decrease was primarily due to changes in foreign exchange rates which
negatively impacted revenues by approximately 5%, or $6.1 million, in the third
quarter compared with the prior year period. International segment operating
earnings were $13.2 million in the 2016 third quarter, compared with $8.0
million in the 2015 third quarter. The segment's operating margin was 11% in the
2016 period as compared to 6% in the 2015 period. The increase in operating
margin for the 2016 quarter was a result of improvements in all of our major
operating regions and the benefits of cost reduction initiatives implemented in
2015.
Broadspire
Broadspire segment revenues before reimbursements were $76.7 million in the
2016 third quarter, up from $74.2 million in the 2015 third quarter. The revenue
increase was due to increased claims and medical management revenues and higher
average case values when compared with the 2015 period. Broadspire recorded
operating earnings of $8.3 million in the third quarter of 2016, representing an
operating margin of 11%, compared with $7.4 million, or 10% of revenues, in the
2015 third quarter.
Garden City Group
Garden City Group revenues before reimbursements were $22.5 million in the third
quarter of 2016, compared with $28.8 million in the same period of 2015. The
expected decrease in revenues was primarily due to declines in volumes
associated with certain large cases which are transitioning to conclusion.
Operating earnings were $2.4 million in the 2016 third quarter as compared to
$1.1 million in the 2015 period. The segment's operating margin for the 2016
quarter was 10% as compared to 4% for the 2015 period as a result of the impact
of cost reduction initiatives implemented earlier in 2016. At September
30, 2016 there was a backlog of projects awarded totaling approximately $94.0
million as compared to $76.0 million at September 30, 2015.
Unallocated Corporate and Shared Costs, Net
Unallocated corporate costs were $6.9 million in the third quarter of 2016,
compared with $4.3 million in the same period of 2015. The increased costs for
the three months of 2016 were due to an increase in professional fees and
defined benefit pension expense, partially offset by a decrease in self-insured
expenses.
Restructuring and Special Charges
The Company recorded restructuring and special charges of $1.5 million and $11.1
million in the 2016 and 2015 third quarters, respectively. Restructuring costs
of $1.4 million in the 2016 quarter were comprised of costs associated with the
ongoing implementation of the Global Business Services Center and the Global
Technology Services Center (the "Centers"), integration costs related to the GAB
Robins acquisition, and other restructuring costs in our operating segments and
administrative areas. Special charges of $0.1 million in 2016 were for certain
legal and professional fees. Restructuring costs of $6.1 million in the third
quarter of 2015 were for similar matters as in the 2016 period. Special charges
of $5.0 million in 2015 were recorded for certain legal and professional fees
and employee separation costs.
Balance Sheet and Cash Flow
Crawford & Company's consolidated cash and cash equivalents position as of
September 30, 2016 totaled $71.7 million compared with $76.1 million at
December 31, 2015.
The Company's operations provided $50.1 million of cash during the first nine
months of 2016, compared with $21.1 million in the 2015 period. The improvement
in cash provided by operating activities in the first nine months of 2016
compared with the 2015 period was primarily due to increased net income and a
decrease in working capital requirements.
2016 Guidance
Crawford & Company is increasing and updating its guidance for 2016 as follows:
* Consolidated revenues before reimbursements between $1.08 and $1.10 billion;
* After expected restructuring and special charges, net income attributable to
shareholders of Crawford & Company between $31.0 and $34.0 million, or $0.58
to $0.63 diluted earnings per CRD-A share, and $0.50 to $0.55 diluted
earnings per CRD-B share;
* Consolidated operating earnings between $85.0 and $90.0 million;
* Consolidated adjusted EBITDA between $125.0 and $130.0 million;
* Before expected restructuring and special charges, net income attributable
to shareholders of Crawford & Company on a non-GAAP basis between $39.0 and
$42.0 million, or $0.73 to $0.78 diluted earnings per CRD-A share, and $0.65
to $0.70 diluted earnings per CRD-B share.
The Company expects to incur restructuring and special charges in 2016 totaling
$11.0 million pretax. This is expected to be comprised of $4.4 million related
to the Centers and $6.6 million related to previously announced restructuring
plans and other special charges. As a result of restructuring charges incurred
related to the Centers in 2015 and 2016, the Company expects to achieve $10.3
million in savings in 2016.
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.
Conference Call
As previously announced, Crawford & Company will host a conference call today,
November 7, 2016 at 3:00 p.m. Eastern Time to discuss its third quarter 2016
results. The conference call can be accessed live by dialing 1-800-374-2518
using passcode 90684611. A presentation for today's call can also be found on
the investor relations portion of the Company's website,
http://www.crawfordandcompany.com. The call will be recorded and available for
replay through December 7, 2016. You may dial 1-855-859-2056 to listen to the
replay. The access code is 90684611.
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 operations.
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, but
before net corporate interest expense, stock option expense, amortization of
customer-relationship intangible assets, restructuring and special charges,
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.
Adjusted EBITDA is not a term defined by GAAP and as a result our measure of
adjusted EBITDA might not be comparable to similarly titled measures used by
other companies. However, adjusted EBITDA is used by management to evaluate,
assess and benchmark our operational results and the Company believes that
adjusted EBITDA is relevant and useful information widely used by analysts,
investors and other interested parties. Adjusted EBITDA is defined as net income
attributable to shareholders of Crawford & Company with adjustments for
depreciation and amortization, net corporate interest expense, income taxes,
restructuring and special charges, and stock-based compensation expense.
Unallocated corporate and shared costs represent expenses 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,
certain self-insurance costs and recoveries, and professional fees for corporate
level projects that are not allocated to our individual operating segments but
are included in our financial performance measure of consolidated operating
earnings. Restructuring and special charges are non-core items not directly
related to our normal business or operations, or our future performance.
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.
Income taxes are calculated for the non-GAAP presentation of net income before
restructuring and special charges based on statutory rates in effect in the
various jurisdictions in which charges exist, and vary by jurisdiction.
Following is a reconciliation of segment and consolidated operating earnings to
net income attributable to shareholders of Crawford & Company on a GAAP basis.
The reconciliation of 2016 guidance is to the midpoint of the guidance range.
+---------------+-----------------------+-+-----------------------+-+----------+
| | Three months ended | | Nine months ended | |Full Year |
| +-----------+-----------+ +-----------+-----------+ +----------+
| | September | September | | September | September | | Guidance |
|(in thousands) | 30, 2016 | 30, 2015 | | 30, 2016 | 30, 2015 | | 2016 |
| +-----------+-----------+ +-----------+-----------+ +----------+
|Operating | | | | | | | |
|earnings: | | | | | | | |
| | | | | | | | |
|U.S. Services |$ 9,379 |$ 10,841 | |$ 28,012 |$ 24,837 | | |
| | | | | | | | |
|International | 13,236 | 7,974 | | 31,243 | 11,484 | | |
| | | | | | | | |
|Broadspire | 8,263 | 7,435 | | 23,497 | 16,981 | | |
| | | | | | | | |
|Garden City | | | | | | | |
|Group | 2,351 | 1,141 | | 6,537 | 9,813 | | |
| | | | | | | | |
|Unallocated | | | | | | | |
|corporate and | | | | | | | |
|shared costs, | | | | | | | |
|net | (6,947 ) | (4,303 ) | | (17,454 ) | (11,648 ) | | |
| +-----------+-----------+ +-----------+-----------+ +----------+
|Consolidated | | | | | | | |
|operating | | | | | | | |
|earnings | 26,282 | 23,088 | | 71,835 | 51,467 | |$ 87,500 |
| +-----------+-----------+ +-----------+-----------+ +----------+
|(Deduct) add: | | | | | | | |
| | | | | | | | |
|Net corporate | | | | | | | |
|interest | | | | | | | |
|expense | (2,262 ) | (2,332 ) | | (7,553 ) | (6,238 ) | | (10,700 )|
| | | | | | | | |
|Stock option | | | | | | | |
|expense | (176 ) | (30 ) | | (403 ) | (357 ) | | (500 )|
| | | | | | | | |
|Amortization | | | | | | | |
|expense | (2,401 ) | (2,350 ) | | (7,280 ) | (6,782 ) | | (9,200 )|
| | | | | | | | |
|Restructuring | | | | | | | |
|and special | | | | | | | |
|charges | (1,488 ) | (11,078 ) | | (7,431 ) | (16,383 ) | | (11,000 )|
| | | | | | | | |
|Income taxes | (8,606 ) | (8,385 ) | | (20,029 ) | (15,335 ) | | (24,500 )|
| | | | | | | | |
|Net (income) | | | | | | | |
|loss | | | | | | | |
|attributable to| | | | | | | |
|non-controlling| | | | | | | |
|interests | (404 ) | 230 | | (937 ) | (189 ) | | 700 |
| +-----------+-----------+ +-----------+-----------+ +----------+
|Net income | | | | | | | |
|(loss) | | | | | | | |
|attributable to| | | | | | | |
|shareholders of| | | | | | | |
|Crawford & | | | | | | | |
|Company |$ 10,945 |$ (857 ) | |$ 28,202 |$ 6,183 | |$ 32,300 |
| +-----------+-----------+ +-----------+-----------+ +----------+
| |
+------------------------------------------------------------------------------+
Following is a reconciliation of net income attributable to shareholders of
Crawford & Company on a GAAP basis to adjusted EBITDA. The reconciliation of
2016 guidance is to the midpoint of the guidance range.
+--------------+-----------------------+-+-----------------------+-+-----------+
| | Three months ended | | Nine months ended | | Full Year |
| +-----------+-----------+ +-----------+-----------+ +-----------+
| | September | September | | September | September | | Guidance |
|(in thousands)| 30, 2016 | 30, 2015 | | 30, 2016 | 30, 2015 | | 2016 |
| +-----------+-----------+ +-----------+-----------+ +-----------+
|Net income | | | | | | | |
|(loss) | | | | | | | |
|attributable | | | | | | | |
|to | | | | | | | |
|shareholders | | | | | | | |
|of Crawford & | | | | | | | |
|Company |$ 10,945 |$ (857 ) | |$ 28,202 |$ 6,183 | |$ 32,300 |
| | | | | | | | |
|Add: | | | | | | | |
| | | | | | | | |
|Depreciation | | | | | | | |
|and | | | | | | | |
|amortization | 10,085 | 10,812 | | 30,643 | 32,219 | | 45,000 |
| | | | | | | | |
|Stock-based | | | | | | | |
|compensation | 1,289 | 1,089 | | 3,246 | 2,369 | | 4,000 |
| | | | | | | | |
|Net corporate | | | | | | | |
|interest | | | | | | | |
|expense | 2,262 | 2,332 | | 7,553 | 6,238 | | 10,700 |
| | | | | | | | |
|Restructuring | | | | | | | |
|and special | | | | | | | |
|charges | 1,488 | 11,078 | | 7,431 | 16,383 | | 11,000 |
| | | | | | | | |
|Income taxes | 8,606 | 8,385 | | 20,029 | 15,335 | | 24,500 |
| +-----------+-----------+ +-----------+-----------+ +-----------+
|Adjusted | | | | | | | |
|EBITDA |$ 34,675 |$ 32,839 | |$ 97,104 |$ 78,727 | |$ 127,500 |
| +-----------+-----------+ +-----------+-----------+ +-----------+
| |
+------------------------------------------------------------------------------+
Further information regarding the Company's operating results for the three
months and nine months ended September 30, 2016, financial position as of
September 30, 2016, and cash flows for the nine months ended September 30, 2016
is shown on the attached unaudited condensed consolidated financial statements.
About Crawford & Company
Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is
one of the world's largest independent providers 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(®) 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 CRD-A and CRD-B.
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.
Earnings per share may be different between CRD-A and CRD-B due to the payment
of a higher per share dividend on CRD-A than CRD-B, 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 expected future 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. |
+------------------------------------------------------------------------------+
press-release-crawco-us-3Q2016earnings-excel-11-07-2016:
http://hugin.info/155880/R/2054570/769216.xlsx
press-release-crawco-us-3q-earnings-11-07-2016:
http://hugin.info/155880/R/2054570/769220.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Crawford & Company via GlobeNewswire
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Datum: 07.11.2016 - 12:45 Uhr
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