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Crawford Reports 2012 First Quarter Results
Company Reaffirms Guidance for 2012
Broadspire Reflects Improvement

ATLANTA, May 8, 2012 /PRNewswire/ -- 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, 2012.

Consolidated Results
First quarter 2012 consolidated revenues before reimbursements totaled $267.8 million, down 6% from $285.0 million reported in the 2011 first quarter. First quarter 2012 net income attributable to Crawford & Company was $6.1 million, decreasing 50%  from net income of $12.1 million reported in the 2011 first quarter. First quarter 2012 diluted earnings per share were $0.12 for CRDA and $0.11 for CRDB, compared with diluted earnings per share for each class of $0.23 in the prior-year quarter.

The difference in earnings per share between CRDA and CRDB for first quarter 2012 is 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. Further references in this release will generally be only to CRDB, as that presents a more dilutive measure.

During the 2012 first quarter, the Company incurred pretax special charges of approximately $890,000, or approximately $0.01 per share of CRDA and CRDB after related income taxes, related to a project to outsource certain aspects of our U.S. technology infrastructure. The Company expects this project to continue through the 2012 third quarter, with approximate additional pretax costs of $2.1 million. There were no special charges during the 2011 first quarter.

Balance Sheet and Cash Flow
The Company's consolidated cash and cash equivalents position as of March 31, 2012 totaled $47.4 million compared with $77.6 million at December 31, 2011.

Crawford used $38.2 million of cash in operations during the 2012 first quarter, compared with $50.2 million used in the comparable 2011 period. During the first three months of 2012, the Company made cash contributions of $1.7 million to its U.S. and U.K. defined benefit pension plans, compared with $21.7 million for the same period in 2011. The Company's operating cash needs typically peak during the first quarter and decline during the balance of the year, due in part to annual payments made in the first quarter of each year to fund defined contribution retirement plans and incentive compensation plans.

Management's Comments
Mr. Jeffrey T. Bowman, chief executive officer of Crawford & Company, stated, "Our first quarter 2012 operating results reflected a positive performance in our Broadspire operation, which helped offset an expected decline in our Legal Settlement Administration segment resulting from the GCCF project. Primarily as a result of historically mild winter weather this year, we also saw frequency declines in our Americas and EMEA/AP segments from last year's first quarter.

"In Broadspire we have been focusing on business development and cost control measures for the past several quarters. We have seen continued progress on both fronts during 2012 and were pleased to generate operating earnings in Broadspire during the 2012 first quarter. We are committed to delivering sequential quarterly operating improvement in our Broadspire operation as we work to return it to a sustained level of profitability. The turnaround of Broadspire is one of the key objectives for our management team and we are encouraged by our progress thus far.

"During the first quarter our GCG subsidiary was awarded a role to provide administration services in the recently announced class action settlement surrounding the Gulf Oil Spill. We are pleased to report that last week the Court confirmed that appointment. Obviously, we are very excited about once again being selected to work on this important special project.

"The Americas segment saw a decline in case referrals during the 2012 first quarter as relatively mild weather in the U.S. and Canada reduced industry-wide claims volumes. We are actively addressing our cost base in light of these lower claims volumes.

"Our EMEA/AP segment was impacted by a decrease in case referrals in the U.K. from weather-related claims as well as from the insourcing of claims by some of our clients, partially offset in Asia/Pacific by continued activity related to the completion of weather-related claims in our Australian market and the on-going handling of catastrophic flood losses in Thailand."

Mr. Bowman concluded, "Looking to the remainder of 2012, we continue to focus on executing our strategic plans to capitalize on the strength of Crawford's market position, the quality reputation of our professionals, and our unmatched service offerings.  We are still optimistic about the opportunities in front of us and look forward to seeing our strategies deliver results in 2012."

2012 Segment Results
Americas
Americas revenues before reimbursements were $77.5 million in the first quarter of 2012, decreasing 9% from $85.3 million in the 2011 first quarter. During the 2012 first quarter compared with the 2011 first quarter, the impact of changes in foreign exchange rates for this segment was insignificant.  Revenues generated by the Company's catastrophe adjuster group in the U.S. were $3.7 million in the 2012 first quarter, decreasing from $5.6 million in the 2011 period.  The segment reported an operating loss in the 2012 first quarter of $512,000, or (1)% or revenues, compared with operating earnings of $3.1 million, or 4% of revenues, in the 2011 first quarter.

EMEA/AP
First quarter 2012 revenues before reimbursements for the EMEA/AP segment increased 3% to $81.8 million from $79.8 million for the same period in 2011. During the 2012 first quarter compared with the 2011 first quarter, the impact of changes in foreign exchange rates for this segment was insignificant. Operating earnings decreased to $5.6 million in the 2012 first quarter, a decrease of 22% from last year's first quarter operating earnings of $7.2 million. The related operating margin was 7% for the first quarter of 2012, compared with 9%  in the first quarter of 2011. The decline in EMEA/AP operating earnings was primarily due to a lack of weather-related activity in the U.K.

Broadspire
Revenues before reimbursements from the Broadspire segment were $60.4 million in the 2012 first quarter, an increase of 1% over $59.8 million for the 2011 quarter. Broadspire operating earnings were  $137,000 in the 2012 first quarter, or less than 1% of revenues, compared with an operating loss of $3.2 million, or (5)% of revenues, in the prior-year period.

Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $48.1 million in the 2012 first quarter, compared with $60.2 million in the 2011 quarter.  Operating earnings totaled $10.7 million in the 2012 first quarter, or 22% of revenues, compared with $17.0 million, or 28% of revenues, in the prior-year period. At March 31, 2012, the segment's awarded projects backlog totaled approximately $105.0 million, compared with $110.0 million at March 31, 2011.

2012 Guidance
Crawford's business is dependent, to a significant extent, 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.  Notwithstanding the foregoing, however,  Crawford & Company is reaffirming its guidance for 2012 as follows:

  • Consolidated revenues before reimbursements between $990 million and $1.03 billion.
  • Consolidated operating earnings between $63.0 million and $70.0 million.
  • Consolidated cash provided by operating activities between $30.0 and $35.0 million.
  • After reflecting stock-based compensation expense, net corporate interest expense, customer-relationship intangible asset amortization expense, special charges, and income taxes, net income attributable to shareholders of Crawford & Company on a GAAP basis between $30.5 million and $35.5 million, or $0.52 to $0.62 diluted earnings per CRDB share.

Crawford & Company's management will host a conference call with investors on Tuesday, May 8, 2012 at 3:00 p.m. EDT to discuss earnings and other developments. The call will be recorded and available for replay through May 18, 2012. You may dial 1-855-859-2056 (404-537-3406 international) to listen to the replay. The access code is 75202295. Alternatively, please visit our web site at www.crawfordandcompany.com for a live audio web cast and related financial presentation.

Further information regarding the Company's financial position, operating results, and cash flows as of and for the quarter ended March 31, 2012 is shown on the attached unaudited condensed consolidated financial statements.

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 (loss). 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 operating segments and make resource allocation decisions. Unlike net income, our operating earnings measure is not a standard performance measure found in GAAP. However, since it is our segment measure of profitability presented in conformity with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 280 "Segment Reporting," it is not considered a non-GAAP financial measure requiring reconciliation pursuant to Securities and Exchange Commission ("SEC") guidance contained in Regulation G and Item 10(e) of Regulation S-K. We believe this measure is useful to others in that it allows them to evaluate segment operating performance using the same criteria our management and CODM use. Operating earnings represent segment earnings (loss) before certain unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, special charges, income taxes, and net income or loss attributable to noncontrolling interests.

Income tax expense, net corporate interest expense, amortization of customer-relationship intangible assets, and stock option expense are recurring components of our net income, but they are not considered part of our segment operating earnings (loss) because they are managed on a corporate-wide basis. Income tax expense is 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 affecting the Company as a whole. Amortization expense is a non-cash expense for customer-relationship intangible assets resulting from business combinations. 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. 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.

Special charges may arise from events (such as expenses related to restructurings, losses on subleases, etc.) that are not allocated to any particular segment since they historically have not regularly impacted our performance and are not expected to impact our future performance on a regular basis.

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.

Following is a reconciliation of segment operating (loss) 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):

 


Quarter ended

(in thousands, except percentages)

March 31,
2012

%
Margin

March 31,
2011

%
Margin

Operating (Loss) Earnings:





Americas

$

(512)


(1)

%

$

3,114


4

%

EMEA/AP

5,608


7

%

7,152


9

%

Broadspire

137


%

(3,160)


(5)

%

Legal Settlement Administration

10,683


22

%

16,998


28

%

Unallocated corporate and shared costs and credits, net

(1,524)


(1)

%

(350)


%

(Deduct) Add:





Net corporate interest expense

(2,169)


(1)

%

(4,136)


(1)

%

Stock option expense

(122)


%

(155)


%

Amortization expense

(1,598)


(1)

%

(1,499)


(1)

%

Special charges

(890)


%


%

Income taxes

(3,393)


(1)

%

(6,037)


(2)

%

Net (income) loss attributable to non-controlling interests

(155)


%

220


%

Net income attributable to shareholders of Crawford & Company

$

6,065


2

%

$

12,147


4

%






Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is the world's largest 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 System of Claims Solutions(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 Class A Common Stock than on the 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 approved by the holders of 75% of the Class A Common Stock, voting as a class.

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.




CRAWFORD  &  COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited

(In Thousands, Except Per Share Amounts and Percentages)














Three Months Ended March 31,

2012


2011

% Change








Revenues:












Revenues Before Reimbursements

$        267,753


$        285,038

(6%)


Reimbursements

19,593


19,070

3%


Total Revenues

287,346


304,108

(6%)








Costs and Expenses:












Costs of Services Provided, Before Reimbursements

199,402


206,942

(4%)


Reimbursements

19,593


19,070

3%


Total Costs of Services

218,995


226,012

(3%)








Selling, General, and Administrative Expenses

55,679


55,996

(1%)


Corporate Interest Expense, Net

2,169


4,136

(48%)


Special Charges

890


-

nm


Total Costs and Expenses

277,733


286,144

(3%)








Income Before Income Taxes

9,613


17,964

(46%)


Provision for Income Taxes

3,393


6,037

(44%)








Net Income

6,220


11,927

(48%)


Less:  Net Income (Loss) Attributable to Noncontrolling Interests

155


(220)

nm


Net Income Attributable to Shareholders of Crawford & Company

$            6,065


$          12,147

(50%)














Earnings Per Share - Basic:






Class A Common Stock

$              0.12


$              0.23

(48%)


Class B Common Stock

$              0.11


$              0.23

(52%)








Earnings Per Share - Diluted:






Class A Common Stock

$              0.12


$              0.23

(48%)


Class B Common Stock

$              0.11


$              0.23

(52%)








Cash Dividends Per Share:






Class A Common Stock

$              0.03


$              0.02

50%


Class B Common Stock

$              0.02


$              0.02

-%














nm = not meaningful














         CRAWFORD & COMPANY

    SUMMARY RESULTS BY OPERATING SEGMENT

Three Months Ended March 31,

Unaudited

(In Thousands, Except Percentages)
















Americas

%

EMEA/AP

%

Broadspire

%

Legal Settlement Administration

%



2012

2011

Change

2012

2011

Change

2012

2011

Change

2012

2011

Change






























Revenues Before Reimbursements

$77,524

$85,317

(9)%

$81,790

$79,775

3%

$60,389

$59,796

1%

$48,050

$60,150

(20)%
















Compensation & Benefits

52,013

56,006

(7)%

52,535

52,617

-%

33,589

34,714

(3)%

20,280

19,644

3%


% of Revenues Before Reimbursements

67%

66%


64%

66%


56%

58%


42%

33%

















Expenses Other than Reimbursements,














   Compensation & Benefits

26,023

26,197

(1)%

23,647

20,006

18%

26,663

28,242

(6)%

17,087

23,508

(27)%


% of Revenues Before Reimbursements

34%

31%


29%

25%


44%

47%


36%

39%

















Total Operating Expenses

78,036

82,203

(5)%

76,182

72,623

5%

60,252

62,956

(4)%

37,367

43,152

(13)%
















Operating (Loss) Earnings   (1)

$(512)

$3,114

(116)%

$5,608

$7,152

(22)%

$137

$(3,160)

104%

$10,683

$16,998

(37)%


% of Revenues Before Reimbursements

(1)%

4%


7%

9%


-%

(4)%


22%

28%













































(1) This is a segment financial measure representing segment earnings (loss) before certain unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, special charges, income taxes, and net income or loss attributable to noncontolling interests.  See pages 4 and 5 for additional information about segment operating earnings (loss).

















CRAWFORD & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2012 and December 31, 2011

(In Thousands, Except Par Values)





Unaudited


*



March 31,


December 31,

ASSETS

2012


2011






Current Assets:





Cash and Cash Equivalents

$                  47,423


$                  77,613


Accounts Receivable, Net

165,032


161,543


Unbilled Revenues, at Estimated Billable Amounts

121,963


107,494


Prepaid Expenses and Other Current Assets

23,253


22,836

Total Current Assets

357,671


369,486






Property and Equipment:





Property and Equipment

158,799


156,349


Less Accumulated Depreciation

(114,453)


(112,465)

Net Property and Equipment

44,346


43,884






Other Assets:





Goodwill

131,210


131,246


Intangible Assets Arising from Business Acquisitions, Net

94,437


96,392


Capitalized Software Costs, Net

61,623


60,332


Deferred Income Tax Assets

83,825


84,454


Other Noncurrent Assets

25,468


25,864

Total Other Assets

396,563


398,288






Total Assets

$                798,580


$                811,658











LIABILITIES AND SHAREHOLDERS' INVESTMENT









Current Liabilities:





Short-Term Borrowings

$                  22,118


$                    1,794


Accounts Payable

41,564


41,806


Accrued Compensation and Related Costs

62,123


96,440


Self-Insured Risks

18,018


18,817


Income Taxes Payable

1,152


292


Deferred Income Taxes

7,396


7,287


Deferred Rent

15,311


15,820


Other Accrued Liabilities

35,543


36,104


Deferred Revenues 

54,546


53,844


Mandatory Contributions Due to Pension Plan

18,400


13,800


Current Installments of Long-Term Debt and Capital Leases

378


410

Total Current Liabilities

276,549


286,414






Noncurrent Liabilities:





Long-Term Debt and Capital Leases, Less Current Installments

212,613


211,983


Deferred Revenues

27,053


27,856


Self-Insured Risks

10,642


10,114


Accrued Pension Liabilities, Less Current Mandatory Contributions

113,630


120,195


Other Noncurrent Liabilities

17,006


16,808

Total Noncurrent Liabilities

380,944


386,956






Shareholders' Investment:





Class A Common Stock, $1.00 Par Value

29,560


29,086


Class B Common Stock, $1.00 Par Value

24,697


24,697


Additional Paid-in Capital

33,017


33,969


Retained Earnings

214,008


209,323


Accumulated Other Comprehensive Loss

(165,013)


(163,603)

Shareholders' Investment Attributable to Shareholders of Crawford & Company

136,269


133,472






Noncontrolling Interests

4,818


4,816






Total Shareholders' Investment

141,087


138,288






Total Liabilities and Shareholders' Investment

$                798,580


$                811,658






* derived from the audited Consolidated Balance Sheet









  

CRAWFORD & COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In Thousands)




Three Months Ended March 31,




2012


2011








Cash Flows From Operating Activities:






Net Income 

$            6,220


$          11,927



Reconciliation of Net Income to Net Cash Used in Operating Activities:






      Depreciation and Amortization

8,023


7,723



      Stock-Based Compensation

404


370



     Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:






           Accounts Receivable, Net

(4,680)


(24,484)



           Unbilled Revenues, Net

(15,748)


(6,192)



           Accrued or Prepaid Income Taxes

814


3,113



           Accounts Payable and Accrued Liabilities

(29,064)


(17,845)



           Deferred Revenues

336


1,741



           Accrued Retirement Costs

(4,144)


(24,296)



           Prepaid Expenses and Other Operating Activities

(343)


(2,277)


Net Cash Provided By Operating Activities

(38,182)


(50,220)














Cash Flows From Investing Activities:






Acquisitions of Property and Equipment

(4,176)


(3,683)



Proceeds from Disposals of Property and Equipment

2


16



Capitalization of Computer Software Costs

(3,809)


(2,615)



Payments for Business Acquisitions, Net of Cash Acquired

-


(2,625)


Net Cash Used In Investing Activities

(7,983)


(8,907)














Cash Flows From Financing Activities:






Cash Dividends Paid

(1,380)


(1,069)



Shares Used to Settle Withholding Taxes Under Stock-Based Compensation Plans

(895)


(1,652)



Increases in Short-Term Borrowings

33,563


16,148



Payments on Short-Term Borrowings

(13,931)


(144)



Payments on Long-Term Debt and Capital Lease Obligations

(110)


(713)



Other Financing Activities

(30)


(6)


Net Cash Provided By Financing Activities

17,217


12,564








Effects of Exchange Rate Changes on Cash and Cash Equivalents

(1,242)


(245)








Decrease in Cash and Cash Equivalents

(30,190)


(46,808)


Cash and Cash Equivalents at Beginning of Year

77,613


93,540


Cash and Cash Equivalents at End of Period

$          47,423


$          46,732













 

SOURCE Crawford & Company

Bruce Swain, +1-404-300-1051, or Jeffrey T. Bowman, Chief Executive Officer, +1-404-300-1000