Press
Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319
(404) 300-1000
FOR IMMEDIATE RELEASE
Crawford & Company Reports 2016 Second Quarter
Results Reaffirms 2016 Guidance
ATLANTA, GA. (August 8, 2016) --
Crawford & Company (www.crawfordandcompany.com) (NYSE: CRDA and
CRDB), 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 second
quarter ended June 30, 2016.
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.
Second Quarter 2016 Summary
-
Revenues before reimbursements of $282.3
million, down from $304.4 million for the second quarter of
2015
-
Net income attributable to shareholders of $8.6
million, more than doubling net income of $4.1 million in the same
period last year
-
Restructuring and special charges of $3.5
million pretax
-
Diluted earnings per share of $0.16 for CRDA and
$0.14 for CRDB, compared with $0.08 for CRDA and $0.06 for CRDB in
the prior year quarter
-
Diluted earnings per share of $0.20 for CRDA and
$0.19 for CRDB on a non-GAAP basis in the 2016 period, before
restructuring and special charges, compared to $0.14 for CRDA and
$0.12 for CRDB in the prior year quarter
-
Consolidated operating earnings, a non-GAAP
financial measure, were $23.9 million in the 2016 second quarter,
compared with $17.7 million in the 2015 period
-
Consolidated adjusted EBITDA, a non-GAAP
financial measure, was $32.3 million in the 2016 second quarter,
compared with $26.5 million in the 2015 period.
Mr. Harsha V. Agadi, chief
executive officer of Crawford & Company, stated, "I am pleased
with our second quarter results as we delivered strong operating
earnings growth despite a challenging market environment where
revenues contracted due to the continued expected declines in our
Garden City Group combined with foreign exchange headwinds from a
stronger U.S. dollar. The cost reduction plan that we initiated
through last year has positioned Crawford to drive margin expansion
and more predictable results even in more difficult markets like
what we experienced through the second quarter. In fact, operating
earnings increased 35% as our consolidated operating margin
expanded 260 basis points year over year to 8.5% from the 2015
second quarter's level."
"Looking at our second quarter results in more detail, our
International segment showed the most improved performance as we
are nearly complete with the integration of the GAB Robins
acquisition. Broadspire delivered another strong quarter with
growing operating margins and steady, consistent operating
performance. The U.S. Services segment saw revenue declines related
to the large outsourced services project and a lack of weather
events, partially offset by continued growth in our U.S. Contractor
Connection service line. Lastly, GCG improved over 2016 first
quarter results and continues to manage the runoff of two major
projects very well."
Mr. Agadi concluded, "Our second
quarter results clearly demonstrate that we are on the road to
significant improvement given the great progress that we have made
streamlining our operations as we prepare Crawford for both the
opportunities and challenges that lie ahead. We plan on building
upon this momentum as we focus our team on delivering top line
growth while remaining vigilant on cost containment. The management
team and I remain focused on driving a culture of growth within the
Company and are excited by the opportunities in front of us and
optimistic about where Crawford is heading. Looking forward, we are
positioning our Company to create further long-term shareholder
value by focusing on profitable growth and leveraging the Company's
numerous global resources."
Segment Results for the Second Quarter
U.S. Services
U.S. Services revenues before
reimbursements were $58.8 million in the second quarter of 2016,
decreasing 12% from $66.9 million in the second quarter of 2015.
The revenue decrease was primarily due to a reduction in U.S.
Catastrophe Services and a reduction of weather-related case
volumes in U.S. Claims Field Operations partially offset by an
increase in U.S. Contractor Connection revenues. Operating earnings
were $9.6 million in the 2016 second quarter, compared with $9.8
million in the second quarter of 2015, representing operating
margins of 16% and 15% in the 2016 and 2015 periods,
respectively.
International
Second quarter 2016 revenues
before reimbursements for the International segment totaled $123.2
million, compared with $129.5 million in the 2015 second 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 second quarter compared with the prior year
period. International segment operating earnings were $11.0 million
in the 2016 second quarter, compared with $1.2 million in the 2015
second quarter. The segment's operating margin was 9% in the 2016
period as compared to 1% in the 2015 period. The increase in
operating margin for the 2016 quarter was a result of an
improvement in U.K. operating results and the benefits of cost
reduction initiatives implemented in 2015.
Broadspire
Broadspire segment revenues before
reimbursements were $75.1 million in the 2016 second quarter, up
from $73.7 million in the 2015 second quarter. The revenue increase
was due to increased claims management revenues and higher average
case values when compared with the 2015 period. Broadspire recorded
operating earnings of $6.5 million in the second quarter of 2016,
representing an operating margin of 9%, compared with $6.0 million,
or 8% of revenues, in the 2015 second quarter.
Garden City Group
Garden City Group revenues before
reimbursements were $25.2 million in the second quarter of 2016,
compared with $34.3 million in the same period of 2015. The
expected decrease in revenues was primarily due to declines in
volumes associated with certain large ongoing cases. Operating
earnings were $2.7 million in the 2016 second quarter as compared
to $3.7 million in the 2015 period, with the related operating
margin flat at 11% for both periods. At June 30, 2016 there was a
backlog of projects awarded totaling approximately $94.1 million as
compared to $88.0 million at June 30, 2015.
Unallocated Corporate and Shared Costs, Net
Unallocated corporate costs were
$5.9 million in the second quarter of 2016, compared with $3.0
million in the same period of 2015. The increased costs for the
three months of 2016 were due to an increase in defined benefit
pension expense and incentive compensation, partially offset by a
decrease in unallocated professional fees.
Restructuring and Special Charges
The Company recorded restructuring
and special charges of $3.5 million and $4.2 million in the 2016
and 2015 second quarters, respectively. Restructuring costs of $3.0
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 $0.5 million in 2016 were for certain
legal and professional fees. There were no special charges in the
2015 second quarter.
Balance Sheet and Cash Flow
Crawford & Company's
consolidated cash and cash equivalents position as of June 30,
2016 totaled $59.4 million compared with $76.1 million at
December 31, 2015.
The Company's operations provided
$11.5 million of cash during the first half of 2016, compared with
$10.2 million in the 2015 period. The improvement in cash provided
by operating activities in the first half of 2016 compared with
2015 was primarily due to improved net income partially offset by
an increase in working capital.
2016 Guidance
Crawford & Company is reaffirming guidance for
2016 as follows:
-
Consolidated revenues before
reimbursements between $1.05 and $1.10 billion;
-
After expected restructuring and
special charges, net income attributable to shareholders of
Crawford & Company between $24.0 and $30.0 million, or $0.48 to
$0.58 diluted earnings per CRDA share, and $0.40 to $0.50 diluted
earnings per CRDB share;
-
Consolidated operating earnings
between $80.0 and $90.0 million;
-
Consolidated adjusted EBITDA
between $120.0 and $130.0 million;
-
Before expected restructuring
and special charges, net income attributable to shareholders of
Crawford & Company on a non-GAAP basis between $36.0 and $42.0
million, or $0.67 to $0.77 diluted earnings per CRDA share, and
$0.59 to $0.69 diluted earnings per CRDB share.
The Company expects to incur
restructuring and special charges in 2016 totaling $15.6 million
pretax. This is comprised of approximately $5.1 million related to
the Centers and $10.5 million related to previously announced
restructuring plans and other special charges. As a result of
restructuring charges incurred for the Centers in 2015 and 2016,
the Company expects to achieve $10.7 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, August 8, 2016 at 3:00 p.m.
Eastern Time to discuss its second quarter 2016 results. The
conference call can be accessed live by dialing 1-800-374-2518
using passcode 90682749. 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 September 8, 2016. You
may dial 1-855-859-2056 to listen to the replay. The access code is
90682749.
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 |
|
Six months
ended |
|
Full
Year |
(in thousands) |
June 30, 2016 |
June 30, 2015 |
|
June 30, 2016 |
June 30, 2015 |
|
Guidance 2016 |
Operating earnings: |
|
|
|
|
|
|
|
U.S. Services |
$ |
9,579 |
|
$ |
9,835 |
|
|
$ |
18,633 |
|
$ |
13,996 |
|
|
|
International |
10,973 |
|
1,167 |
|
|
18,007 |
|
3,510 |
|
|
|
Broadspire |
6,529 |
|
6,003 |
|
|
15,234 |
|
9,546 |
|
|
|
Garden City Group |
2,691 |
|
3,721 |
|
|
4,186 |
|
8,672 |
|
|
|
Unallocated corporate and shared costs, net |
(5,889 |
) |
(3,043 |
) |
|
(10,507 |
) |
(7,345 |
) |
|
|
Consolidated operating earnings |
23,883 |
|
17,683 |
|
|
45,553 |
|
28,379 |
|
|
$ |
85,000 |
|
(Deduct) add: |
|
|
|
|
|
|
|
Net corporate interest expense |
(2,523 |
) |
(2,042 |
) |
|
(5,291 |
) |
(3,906 |
) |
|
(10,700 |
) |
Stock option expense |
(137 |
) |
(178 |
) |
|
(227 |
) |
(327 |
) |
|
(500 |
) |
Amortization expense |
(2,420 |
) |
(2,334 |
) |
|
(4,879 |
) |
(4,432 |
) |
|
(9,200 |
) |
Restructuring and special charges |
(3,526 |
) |
(4,242 |
) |
|
(5,943 |
) |
(5,305 |
) |
|
(15,600 |
) |
Income taxes |
(6,116 |
) |
(4,709 |
) |
|
(11,423 |
) |
(6,950 |
) |
|
(22,700 |
) |
Net (income) loss attributable to non-controlling
interests |
(534 |
) |
(124 |
) |
|
(533 |
) |
(419 |
) |
|
700 |
|
Net income attributable to shareholders of Crawford &
Company |
$ |
8,627 |
|
$ |
4,054 |
|
|
$ |
17,257 |
|
$ |
7,040 |
|
|
$ |
27,000 |
|
|
|
|
|
|
|
|
|
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 |
|
Six months
ended |
|
Full
Year |
(in thousands) |
June 30, 2016 |
June 30, 2015 |
|
June 30, 2016 |
June 30, 2015 |
|
Guidance 2016 |
Net income attributable to shareholders of Crawford &
Company |
$ |
8,627 |
|
$ |
4,054 |
|
|
$ |
17,257 |
|
$ |
7,040 |
|
|
$ |
27,000 |
|
Add: |
|
|
|
|
|
|
|
Depreciation and amortization |
10,264 |
|
10,592 |
|
|
20,558 |
|
21,407 |
|
|
45,000 |
|
Stock-based compensation |
1,228 |
|
876 |
|
|
1,957 |
|
1,280 |
|
|
4,000 |
|
Net corporate interest expense |
2,523 |
|
2,042 |
|
|
5,291 |
|
3,906 |
|
|
10,700 |
|
Restructuring and special charges |
3,526 |
|
4,242 |
|
|
5,943 |
|
5,305 |
|
|
15,600 |
|
Income taxes |
6,116 |
|
4,709 |
|
|
11,423 |
|
6,950 |
|
|
22,700 |
|
Adjusted EBITDA |
$ |
32,284 |
|
$ |
26,515 |
|
|
$ |
62,429 |
|
$ |
45,888 |
|
|
$ |
125,000 |
|
|
|
|
|
|
|
|
|
Further information regarding the
Company's operating results for the three months and six months
ended June 30, 2016, financial position as of June 30,
2016, and cash flows for the six months ended June 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 SolutionTM 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 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 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 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-2Q2016Excel-earnings-08-08-2016
press-release-Crawco-US-2Q2016-earnings-08-08-2016
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX 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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