Crawford & Company · NYSE:CRD.A
Crawford & — Q4 2013 Earnings Presentation
32 slides from Crawford &'s earnings presentation, Feb 26, 2014
Slide 1: Fourth Quarter and Full Year 2013 Earnings Conference Call
Crawford & Company FOURTH QUARTER AND FULL YEAR 2013 EARNINGS CONFERENCE CALL February 26, 2014
Slide 2: Forward-looking statements
• Forward-looking statements —This presentation contains forward-looking statements, including statements about the future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not statements of historical fact
Slide 3: Global Business Services Leader
3 • The world’s largest independent provider of global claims management solutions • Multiple globally recognized brand names: Crawford, Broadspire, GCG • Clients include multinational insurance carriers, brokers and local insurance firms as well as 200 of the Fortune 500 EMEA-A/P Broadspire Legal S
Slide 4: Today's Agenda
Today’s Agenda Welcome and Opening Comments Fourth Quarter and Full Year 2013 Financial Review Fourth Quarter and Full Year 2013 Operational Review Guidance and Strategic Initiatives
Slide 5: Consolidated Revenues and Operating Earnings
Consolidated Operating Earnings ($ in millions) Revenues ($ in millions) 5 Revenues • Compound annual growth rate of 3.7% • Improved diversification of revenue streams • Growth in Broadspire, Contractor Connection and Legal Settlement Administration Operating Earnings • Consolidated operating earnin
Slide 6: Full Year 2013 Business Summary
1,163 6 110.2 1,177 94.9 Revenues ($ in millions) Consolidated Operating Earnings ($ in millions) • Revenues of $1.163 billion • Consolidated operating earnings of $94.9 million • Diluted earnings per share of $0.93 for CRDA and $0.90 for CRDB • Operating cash flow of $77.8 million • Significant imp
Slide 7: Fourth Quarter 2013 Business Summary
284.9 313.0 20.2 38.9 7 Revenues ($ in millions) Consolidated Operating Earnings ($ in millions) Significant improvement in Broadspire performance Legal Settlement Administration involvement in Deepwater Horizon class action settlement project continues at reduced rate Flood claims in Thailand compl
Slide 8: Fourth Quarter and Full Year 2013 Financial Review
Fourth Quarter and Full Year 2013 Financial Review
Slide 9: Consolidated Income Statement, Fourth Quarter
Unaudited ($ in thousands, except per share amounts) Quarters Ended December 31, 2013 2012 % Change Revenues $284,879 $312,981 (9 )% Costs of Services 208,393 221,637 (6 )% Selling, General, and Administrative Expense 58,230 54,444 7 % Corporate Interest Expense, Net 1,661 1,822 (9 )% Special Charge
Slide 10: Americas Fourth Quarter Financials
Pro Forma 2013/2012 2013* 2013** 2012 % Change Revenues $ 81,507 $ 79,483 $ 93,453 (14.9 )% Total Operating Expenses 79,817 78,306 89,004 (12.0 )% Operating Earnings $ 1,690 $ 1,177 $ 4,449 (73.5 )% Operating Margin 2.1 % 1.5 % 4.8 % 85 .9 6. 5 95 .9 79.5 93.5 4.4 10 Revenues ($ in millions) Operati
Slide 11: U.S. Catastrophe Adjuster Activity
9. 1 33.4 85 .9 6. 5 5.0 1 .8 33.4 11 Revenues ($ in millions) Catastrophe Cases (In thousands) • Superstorm Sandy generated a large number of claims in the U.S. in the 2012 fourth quarter • CAT adjuster revenues of $5.0 million in fourth quarter of 2013 compared with $19.8 million in 2012 period •
Slide 12: EMEA/AP Fourth Quarter Financials
91.0 95.2 18.2 12.7 Pro Forma 2013/2012 2013* 2013** 2012 % Change Revenues $ 93,570 $ 90,975 $ 95,232 (4.5 )% Total Operating Expenses 80,813 78,303 77,018 1.7 % Operating Earnings $ 12,757 $ 12,672 $ 18,214 (30.4 )% Operating Margin 13.6 % 13.9 % 19.1 % 12 Operating Earnings ($ in millions) Revenu
Slide 13: Broadspire Fourth Quarter Financials
65.4 58.8 3.8 2013 2012 % Change Revenues $ 65,354 $ 58,848 11.1 % Total Operating Expenses 61,584 58,254 5.7 % Operating Earnings $ 3,770 $ 594 534.7 % Operating Margin 5.8 % 1.0 % 13 Revenues ($ in millions) Operating Earnings ($ in millions) Unaudited ($ in thousands) For the quarters ended Decem
Slide 14: Legal Settlement Administration Fourth Quarter Financials
49.1 65.4 18.2 8.0 2013 2012 % Change Revenues $ 49,067 $ 65,448 (25.0 )% Total Operating Expenses 41,029 47,278 (13.2 )% Operating Earnings $ 8,038 $ 18,170 (55.8 )% Operating Margin 16.4 % 27.8 % 14 Revenues ($ in millions) Operating Earnings ($ in millions) Unaudited ($ in thousands) For the quar
Slide 15: Balance Sheet Highlights
15 Unaudited ($ in thousands) December 31, 2013 December 31, 2012 Change Cash and cash equivalents $75,953 $71,157 $4,796 Accounts receivable, net 160,350 164,708 (4,358 ) Unbilled revenues, net 105,791 124,881 (19,090 ) Total receivables 266,141 289,589 (23,448 ) Goodwill 132,777 131,995 782 Deferr
Slide 16: Defined Benefit Pension Liabilities
Unaudited ($ in thousands) For the years ended December 31, $102,960 $168,216 $133,995 $165,030 $212,507 16 Defined Benefit Pension Liabilities
Slide 17: Consolidated Debt and Cash on Hand
17 Unaudited ($ in thousands) For the years ended December 31, *Net debt is defined by the Company as long-term debt, capital leases and short-term borrowings, net of cash and cash equivalents Consolidated Debt and Cash on Hand
Slide 18: Operating and Free Cash Flow
18 2013 2012 Variance Net Income Attributable to Shareholders of Crawford & Company $50,978 $48,888 $2,090 Depreciation and Other Non-Cash Operating Items 38,096 37,322 774 Unbilled and Billed Receivables Change 18,630 (22,922 ) 41,552 Working Capital Change (11,910 ) 43,041 (54,951 ) U.S. Pension C
Slide 19: Other Financial Highlights
19 Dividends: • During the fourth quarter, Crawford paid a regular quarterly dividend of $0.05 on CRDA and $0.04 on CRDB • For the year, Crawford paid dividends of $0.18 per share on CRDA and $0.14 per share on CRDB Share Repurchase: • During the fourth quarter, Crawford repurchased 229,086 shares o
Slide 20: Fourth Quarter and Full Year 2013 Operational Review
Fourth Quarter and Full Year 2013 Operational Review
Slide 21: Fourth Quarter Operational Review: Business Drivers
21 Revenues ($ in millions) Cases Received (In thousands) • Strong quarter-over-quarter improvement in Broadspire revenues and operating earnings • Deepwater Horizon class action settlement project revenues declined • EMEA/AP reflects completion of Thailand flood losses • Claims volume increases in
Slide 22: Americas Fourth Quarter Operational Review
22 U.S. Canada Latin America/ Caribbean Revenues by Geographic Region ($ in millions) Americas Cases Received (In thousands) U.S. Canada Latin America/ Caribbean U.S. Property and Casualty Superstorm Sandy drove prior year result Focus on expansion into specialty markets Continued growth of Contract
Slide 23: EMEA/AP Fourth Quarter Operational Review
23 U.K. CEMEA U.K. Asia-Pacific Asia-Pacific CEMEA Revenues by Geographic Region ($ in millions) EMEA/AP Cases Received (In thousands) EMEA/AP U.K. U.K. claims declined due to benign weather Continued recruitment of Global Technical Services (GTS) adjusters U.K. transformation project providing cost
Slide 24: Broadspire Fourth Quarter Operational Review
24 Revenues by Service Line ($ in millions) Broadspire Cases Received (In thousands) Risk Mgmt Info. Svcs. Other Medical Mgmt. Casualty Workers' Comp. Workers' Comp. Broadspire • Broadspire case volume increased 20% over prior year fourth quarter • Medical management revenues increased from market s
Slide 25: Legal Settlement Administration Operational Review
9. 1 25 Backlog ($ in millions) Legal Settlement Administration • Deepwater Horizon class action project continued to wind down • New business wins continued in both class action and bankruptcy space • Backlog at $108 million Fourth Quarter Operational Review Revenues ($ in millions) 65.4 49.1 108 1
Slide 26: 2014 Guidance
26 Crawford & Company is providing a guidance range for 2014 as follows: Year ending December 31, 2014 Low End High End Consolidated revenues before reimbursements $1.10 $1.13 billion Consolidated operating earnings $95.0 $103.0 million Consolidated cash provided by operating activities $60.0 $70.0
Slide 27: 2014 - 2016 Strategic Initiatives
27 • Grow business and increase revenues through broader market coverage, investment in future business platforms, and launch of new products • Create a global GTS powerhouse by adding world-class adjusters and further expanding our industry-leading breadth of services • Develop significant cost adv
Slide 28: Fourth Quarter and Full Year 2013 Appendix
Fourth Quarter and Full Year 2013 Appendix
Slide 29: Non-GAAP measures and reimbursements notes
29 Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comparable to other similarly-titled measurem
Slide 30: Quarterly Revenues, Costs of Services, and Operating Earnings
Quarter Ended Quarter Ended December 31, December 31, Unaudited ($ in thousands) 2013 2012 Revenues Before Reimbursements Total Revenues $ 306,720 $ 335,530 Reimbursements (21,841 ) (22,549 ) Revenues Before Reimbursements $ 284,879 $ 312,981 Costs of Services Before Reimbursements Total Costs of Se
Slide 31: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP Items (cont.) Unaudited ($ in thousands) 2009 2010 2011 2012 2013 Operating Earnings: Americas $ 29,394 $ 20,748 $ 20,007 $ 11,878 $ 18,532 EMEA/AP 23,401 24,828 28,096 48,481 32,158 Broadspire (1,602 ) (11,712 ) (11,417 ) 21 8,245 Legal Settlement Administration 13,130 47
Slide 32: Reconciliation of Non-GAAP Items: Quarterly Revenues and Net Debt
Reconciliation of Non-GAAP Items (cont.) 32 Quarterly Revenues and Net Debt Unaudited ($ in millions) 4Q 2013 3Q 2013 2Q 2013 1Q 2013 4Q 2012 Revenues Before Reimbursements Total Revenues $ 307 $ 313 $ 326 $ 307 $ 336 Reimbursements (22 ) (20 ) (27 ) (21 ) (23 ) Revenues Before Reimbursements $ 285