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Crawford Reports Substantial
Improvement in 2008 First Quarter Results Net Income Rises 174% on Revenue
Growth of 5%
ATLANTA, May 5 /PRNewswire-FirstCall/ -- Crawford & Company (NYSE:
CRDA; 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,
2008.
Consolidated Results
First quarter 2008 consolidated revenues before
reimbursements totaled $255.5 million compared to $243.6 million in the
2007 first quarter. First quarter 2008 net income was $9.1 million
compared to net income of $3.3 million for the 2007 first quarter. First
quarter 2008 basic and diluted earnings per share were $0.18 compared to
$0.07 in the prior-year quarter. During the 2007 first quarter, the
Company recognized a gain on disposal of assets of $2.5 million, net of
related income taxes, or $0.05 per share, as a result of the sale of the
Company's subrogation services unit.
Crawford's operating cash flows for the 2008 first quarter
reflected cash used in operations of $4.1 million compared to cash used in
the prior year period of $32.2 million. This improvement was primarily due
to higher net income, a reduction in the growth of accounts receivable
balances, and lower payments for accounts payable and accrued liabilities.
The Company's consolidated cash and cash equivalent position as of March
31, 2008 totaled $42.8 million.
Effective with the 2008 first quarter, the Company
realigned its internal reporting structure to include the results of its
Strategic Warranty Services business within its U.S. Property &
Casualty segment. This business was previously managed as a component of
the Legal Settlement Administration segment. All prior period segment
results have been restated to reflect this change.
International Operations
First quarter 2008 revenues before reimbursements for the
International Operations segment grew to $106.7 million from $83.9 million
for the same period in 2007. Compared to the 2007 first quarter, during
the current quarter the U.S. dollar was weaker against most major foreign
currencies, resulting in a net exchange rate benefit in the current
quarter. Excluding the benefit of exchange rate fluctuations,
international revenues would have been $97.2 million in the 2008 first
quarter, reflecting growth in revenues on a constant dollar basis of
15.8%. International operating expenses increased by $17.7 million in U.S.
dollars, a 22.2% increase, and by 11.2% on a constant dollar basis.
Operating earnings improved to $9.0 million in the current quarter, more
than doubling last year's first quarter operating earnings of $4.0
million. The related operating margin was 8.4% in the 2008 first quarter,
improving from the 4.7% operating margin in the 2007 first quarter.
U.S. Property & Casualty
U.S. Property & Casualty revenues before
reimbursements were $49.5 million in the first quarter of 2008 compared to
$51.0 million in the 2007 first quarter. Revenues generated by the
Company's catastrophe adjuster group were $1.9 million in both the 2008
and 2007 first quarters. The prior-year quarter included $375,000 in
revenues generated by the Company's subrogation services unit which was
sold February 28, 2007. Operating earnings in the U.S. Property and
Casualty segment improved to $5.9 million, or 12.0% of revenues, compared
to $3.4 million, or 6.6% of revenues in the 2007 first quarter.
Broadspire
Revenues before reimbursements from the Broadspire segment
were $80.3 million in the 2008 first quarter compared to $84.5 million
generated in the 2007 quarter. In the 2008 first quarter, the Broadspire
segment's operating earnings improved to $1.7 million, or 2.2% of revenues
from a loss in the prior-year period of ($681,000), or (0.8%) of revenues.
Legal Settlement Administration
Legal Settlement Administration revenues before
reimbursements were $19.0 million for the 2008 first quarter, compared to
$24.2 million in the 2007 quarter. Operating earnings totaled $2.5 million
in the 2008 first quarter, or an operating margin of 13.2% of revenues,
compared to $2.6 million, or 10.9% of revenues, in the prior-year period.
The segment's awarded project backlog totaled approximately $50.5 million
at March 31, 2008 as compared to $31.1 million at March 31, 2007.
Mr. Jeffrey T. Bowman, chief executive officer of Crawford
& Company, stated, "Our first quarter 2008 operating results
reflect strong performance despite a difficult U.S. economic environment.
Our consolidated revenues before reimbursements improved by nearly 5% on
the strength of our international business."
"We were also pleased with our net income growth
during the 2008 first quarter, which was achieved primarily through strong
cost reduction initiatives that were implemented in 2007. This is the
highest quarterly earnings excluding special credits we have generated
since the 2001 second quarter. Our selling, general and administrative
("SG&A") costs declined by 8% in the quarter reflecting the
recovery of a previously written-off accounts receivable balance and lower
self-insurance expenses as well as the benefit of synergies we realized in
the Broadspire acquisition. As a percentage of revenues before
reimbursements, SG&A costs were 19.8% in the 2008 first quarter, down
from 22.6% in the prior-year quarter."
Mr. Bowman concluded, "Despite challenging macro
trends in the U.S. property & casualty and workers' compensation
markets, our outlook for 2008 is for a significant improvement in
consolidated operating results over 2007 even on modest overall sales
gains, as we focus on improving our efficiency. This company and
management team is committed to managing our operations toward improved
operating performance throughout the year, while at the same time
continuing to enhance our industry-leading quality."
Crawford & Company updated its guidance for 2008 as follows:
-- Consolidated revenues before reimbursements between $990 million and
$1.02 billion.
-- Consolidated operating earnings between $56.8 million and $61.6
million.
-- After reflecting stock-based compensation expense, net corporate
interest expense, intangible asset amortization expense, and income
taxes, consolidated net income on a GAAP basis between $20.2 million
and $23.3 million, or $0.40 to $0.46 per share.
Quarter ended
March 31, March 31,
2008 % Margin 2007 % Margin
Operating Earnings (Loss):
U.S. Property & Casualty $5,949 12.0% $3,376 6.6%
International Operations 8,987 8.4 3,964 4.7
Broadspire 1,747 2.2 (681) (0.8)
Legal Settlement
Administration 2,497 13.2 2,636 10.9
Unallocated corporate and
shared (costs) credits 651 0.3 (1,772) (0.7)
Add/(Deduct):
Other credit - - 3,978 1.6
Stock option expense (195) (0.1) (295) (0.1)
Amortization expense (1,508) (0.6) (1,436) (0.6)
Net corporate interest
expense (4,416) (1.7) (4,368) (1.8)
Income taxes (4,644) (1.8) (2,095) (0.9)
Net income $9,068 3.5 $3,307 1.4
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In Thousands, Except Per Share Amounts)
Quarter Ended March 31 2008 2007 % Change
Revenues:
Revenues Before Reimbursements $255,512 $243,608 5%
Reimbursements 19,161 19,416 -1%
Total Revenues 274,673 263,024 4%
Costs and Expenses:
Cost of Services Before
Reimbursements 186,743 182,707 2%
Reimbursements 19,161 19,416 -1%
Total Cost of Services 205,904 202,123 2%
Selling, General, and
Administrative 50,641 55,109 -8%
Corporate Interest Expense,
Net 4,416 4,368 1%
Total Costs and Expenses 260,961 261,600 0%
Gain on Disposal of
Subrogation Business - 3,978 nm
Income Before Income Taxes 13,712 5,402 154%
Income Taxes 4,644 2,095 122%
Net Income $9,068 $3,307 174%
Earnings Per Share - Basic and
Diluted $0.18 $0.07 173%
Average Numbers of Shares Used to
Compute:
Basic Earnings Per Share 50,575 50,390
Diluted Earnings Per Share 50,666 50,490
Cash Dividends Declared Per Share:
Class A Common Stock $0.00 $0.00
Class B Common Stock $0.00 $0.00
nm = not meaningful
CRAWFORD & COMPANY
SUMMARY RESULTS BY OPERATING SEGMENT
Quarter Ended March 31
Unaudited
(In Thousands, Except Percentages)
U.S. Property
& Casualty % International %
2008 2007 Change 2008 2007 Change
Revenues Before
Reimbursements $49,510 $50,996 -2.9% $106,710 $83,940 27.1%
Compensation &
Benefits 30,577 33,166 -7.8% 73,857 58,886 25.4%
% of Revenues 61.8% 65.1% 69.2% 70.2%
Expenses Other than
Reimbursements,
Compensation &
Benefits 12,984 14,454 -10.2% 23,866 21,090 13.2%
% of Revenues 26.2% 28.3% 22.4% 25.1%
Total Operating
Expenses 43,561 47,620 -8.5% 97,723 79,976 22.2%
Operating Earnings
(Loss) (1) $5,949 $3,376 76.2% $8,987 $3,964 126.7%
% of Revenues 12.0% 6.6% 8.4% 4.7%
Legal Settlement
Broadspire % Administration %
2008 2007 Change 2008 2007 Change
Revenues Before
Reimbursements $80,313 $84,520 -5.0% $18,979 $24,152 -21.4%
Compensation &
Benefits 45,414 49,954 -9.1% 9,269 10,876 -14.8%
% of Revenues 56.5% 59.1% 48.8% 45.0%
Expenses Other than
Reimbursements,
Compensation &
Benefits 33,152 35,247 -5.9% 7,213 10,640 -32.2%
% of Revenues 41.3% 41.7% 38.0% 44.1%
Total Operating
Expenses 78,566 85,201 -7.8% 16,482 21,516 -23.4%
Operating Earnings
(Loss) (1) $1,747 ($681) 356.5% $2,497 $2,636 -5.3%
% of Revenues 2.2% -0.8% 13.2% 10.9%
(1) A non-GAAP financial measurement which represents earnings (loss)
before net corporate interest expense, amortization of
customer-relationship intangible assets, stock option expense, income
tax expense, unallocated corporate and shared costs, and gains on
asset sales.
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2008 and December 31, 2007
(In Thousands)
Unaudited *
March 31 December 31
Assets 2008 2007
Current Assets:
Cash and Cash Equivalents $42,841 $50,855
Accounts Receivable, Net 191,078 178,528
Unbilled Revenues, Net 130,948 136,652
Prepaid Expenses and Other
Current Assets 18,638 16,717
Total Current Assets 383,505 382,752
Property and Equipment 152,161 153,733
Less Accumulated Depreciation (104,730) (104,467)
Net Property and Equipment 47,431 49,266
Other Assets:
Goodwill 262,319 263,769
Intangible Assets Arising
from Business Acquisitions, Net 116,932 118,678
Capitalized Software Costs, Net 41,690 40,032
Deferred Income Tax Assets, Net 18,607 18,923
Other Noncurrent Assets 28,449 29,362
Total Other Assets 467,997 470,764
Total Assets $898,933 $902,782
Liabilities and Shareholders'
Investment
Current Liabilities:
Short-Term Borrowings $35,015 $29,389
Accounts Payable 38,513 39,601
Accrued Compensation and
Related Costs 58,660 69,655
Other Accrued Current Liabilities 56,826 57,360
Self-Insured Risks 18,030 18,290
Accrued Income Taxes 14,431 10,435
Deferred Revenues 64,575 64,363
Current Installments of Long-Term
Debt and Capital Leases 2,313 2,475
Total Current Liabilities 288,363 291,568
Noncurrent Liabilities:
Long-Term Debt and Capital Leases,
Less Current Installments 182,955 183,449
Deferred Revenues 56,315 58,925
Self-Insured Risks 19,108 18,439
Postretirement Medical
Benefit Obligation 1,970 1,898
Accrued Pension Liabilities 74,362 76,977
Other Noncurrent Liabilities 12,328 12,265
Total Noncurrent Liabilities 347,038 351,953
Minority Interest in Equity of
Consolidated Affiliates 4,899 5,046
Shareholders' Investment:
Class A Common Stock, $1.00
Par Value 26,191 25,935
Class B Common Stock, $1.00
Par Value 24,697 24,697
Additional Paid-in Capital 19,743 19,057
Retained Earnings 232,955 223,793
Accumulated Other Comprehensive
Loss (44,953) (39,267)
Total Shareholders' Investment 258,633 254,215
Total Liabilities and
Shareholders' Investment $898,933 $902,782
* Derived from the audited Consolidated Balance Sheet
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended March 31, 2008 and March 31, 2007
Unaudited
(In Thousands)
2008 2007
Cash Flows From Operating
Activities:
Net Income $9,068 $3,307
Reconciliation of Net Income to Net
Cash Used In Operating Activities:
Depreciation and
Amortization Expense 7,336 7,265
Stock-Based Compensation Costs 962 687
Loss on Sales of Property and
Equipment, net 21 78
Gain on Sale of Subrogation
Business - (3,978)
Changes in Operating Assets and
Liabilities, net of effects of
acquisitions and disposition:
Accounts Receivable, net (13,987) (1,529)
Unbilled Revenues, net 3,849 (11,366)
Accrued Income Taxes 3,696 1,387
Accounts Payable and Accrued
Liabilities (3,424) (16,895)
Deferred Revenues (2,225) (5,946)
Accrued Retirement Costs (8,369) (4,211)
Prepaid Expenses and Other
Operating Activities (1,064) (1,024)
Net Cash Used In Operating Activities (4,137) (32,225)
Cash Flows From Investing Activities:
Acquisitions of Property and
Equipment, net (2,149) (3,240)
Capitalization of Computer
Software Costs (4,384) (2,675)
Proceeds from Sale of Investment
Security - 5,000
Proceeds from Sale of Subrogation
Business - 5,000
Other Investing Activities - (762)
Net Cash (Used In) Provided By Investing
Activities (6,533) 3,323
Cash Flows From Financing
Activities:
Increase in Short-Term
Borrowings, net 3,567 2,168
Payments on Long-Term Debt and
Capital Lease Obligations (732) (780)
Other Financing Activities (20) (6)
Net Cash Provided by Financing Activities 2,815 1,382
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (159) 921
Decrease in Cash and Cash Equivalents (8,014) (26,599)
Cash and Cash Equivalents at
Beginning of Period 50,855 61,674
Cash and Cash Equivalents at End
of Period $42,841 $35,075
Source: Crawford & Company
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