FINANCIAL AND OPERATING HIGHLIGHTS [unaudited]

(Dollars in millions, except percentages and per share amounts)

Year Ended December 31,

2012

 

2011

 

% Change

 

 

 

 

 

 

Revenues Before Reimbursements(1)

$1,176.7

 

 

$1,125.4

 

 

5%

 

Net Income Attributable to Shareholders of Crawford & Company

$48.9

 

 

$45.4

 

 

8%

 

Cash Provided by Operating Activities

$92.9

 

 

$36.7

 

 

153%

 

Cash Earnings per CRDB — Basic

$0.88

 

 

$0.84

 

 

5%

 

Earnings per CRDB Share — Diluted

$0.87

 

 

$0.83

 

 

5%

 

Return on Average Shareholders Investment

36.3%

 

 

40.7%

 

 

(4)%

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME [unaudited]

(In thousands, except per share amounts)

Year Ended December 31,

2012

 

2011

 

2010

 

 

 

 

 

 

Revenues from Services:

 

 

 

 

 

Revenues before reimbursements

$1,176,717

 

 

$1,125,355

 

 

$1,030,417

 

Reimbursements

89,421

 

 

86,007

 

 

80,384

 

Total Revenues

1,266,138

 

 

1,211,362

 

 

1,110,801

 

Costs and Expenses:

 

 

 

 

 

Costs of services provided, before reimbursements

844,927

 

 

831,922

 

 

758,863

 

Reimbursements

89,421

 

 

86,007

 

 

80,384

 

Total costs of services

934,348

 

 

917,929

 

 

839,247

 

Selling, general, and administrative expenses

228,411

 

 

221,470

 

 

202,626

 

Corporate interest expense, net of interest income of $967, $1,020, and $681, respectively

8,607

 

 

15,911

 

 

15,002

 

Special charges and credits

11,332

 

 

(2,379)

 

4,650

 

Goodwill and intangible asset impairment charges

 

 

 

 

10,788

 

Total Costs and Expenses

1,182,698

 

 

1,152,931

 

 

1,072,313

 

Income Before Income Taxes

83,440

 

 

58,431

 

 

38,488

 

Provision for Income Taxes

33,686

 

 

12,739

 

 

9,712

 

Net Income

49,754

 

 

45,692

 

 

28,776

 

Less: Net Income Attributable to Noncontrolling Interests

866

 

 

288

 

 

448

 

Net Income Attributable to Shareholders of Crawford & Company

$48,888

 

 

$45,404

 

 

$28,328

 

Earnings Per Share — Basic:

 

 

 

 

 

Class A Common Stock

$0.92

 

 

$0.86

 

 

$0.54

 

Class B Common Stock

$0.88

 

 

$0.84

 

 

$0.54

 

Earnings Per Share — Diluted:

 

 

 

 

 

Class A Common Stock

$0.91

 

 

$0.85

 

 

$0.53

 

Class B Common Stock

$0.87

 

 

$0.83

 

 

$0.53

 

Weighted-Average Shares Used to Compute Basic Earnings Per Share:

 

 

 

 

 

Class A Common Stock

29,536

 

 

28,820

 

 

27,967

 

Class B Common Stock

24,693

 

 

24,697

 

 

24,697

 

Weighted-Average Shares Used to Compute Diluted Earnings  Per Share:

 

 

 

 

 

Class A Common Stock

30,272

 

 

29,549

 

 

28,537

 

Class B Common Stock

24,693

 

 

24,697

 

 

24,697

 

Cash Dividends Per Share:

 

 

 

 

 

Class A Common Stock

$0.20

 

 

$0.10

 

 

$

 

Class B Common Stock

$0.16

 

 

$0.08

 

 

$

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [unaudited]

(In thousands)

Year Ended December 31,

2012

 

2011

 

2010

 

 

Net Income

$49,754

 

 

$45,692

 

 

$28,776

 

Other Comprehensive (Loss) Income:

 

 

 

 

 

Net foreign currency translation (loss) gain

(2,787)

 

2,009

 

 

1,594

 

Interest rate swap agreement loss reclassified into income, net of tax benefit of $253, $274, and $859, respectively

414

 

 

568

 

 

1,555

 

Interest rate swap agreement loss recognized during the period, net of tax benefit of $0, $67, and $754, respectively

 

 

(111)

 

(1,072)

Change in accumulated unrealized losses on pension benefit obligation, net of tax benefit of $14,826, $2,939, and $1,019, respectively

(33,594)

 

(2,543)

 

(709)

Other Comprehensive (Loss) Income

(35,967)

 

(77)

 

1,368

 

Comprehensive Income

13,787

 

 

45,615

 

 

30,144

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

777

 

 

(508)

 

735

 

Comprehensive Income Attributable to Shareholders of Crawford & Company

$13,010

 

 

$46,123

 

 

$29,409

 

CONDENSED CONSOLIDATED BALANCE SHEETS [unaudited]

(In thousands)

Year Ended December 31,

2012

 

2011

 

 

ASSETS

Current Assets:

 

 

 

Cash and cash equivalents

$71,157

 

 

$77,613

 

Accounts receivable, less allowance for doubtful accounts of $10,584 and $10,615, respectively

164,708

 

 

161,543

 

Unbilled revenues, at estimated billable amounts

124,881

 

 

107,494

 

Prepaid expenses and other current assets

26,019

 

 

22,899

 

Total Current Assets

386,765

 

 

369,549

 

Property and Equipment:

 

 

 

Property and equipment

155,359

 

 

156,349

 

Less accumulated depreciation

(109,312)

 

(112,465)

Net Property and Equipment

46,047

 

 

43,884

 

Other Assets:

 

 

 

Goodwill

131,995

 

 

131,246

 

Intangible assets arising from business acquisitions, net

89,027

 

 

96,392

 

Capitalized software costs, net

67,299

 

 

60,332

 

Deferred income tax assets

99,288

 

 

91,210

 

Other noncurrent assets

24,402

 

 

25,864

 

Total Other Assets

412,011

 

 

405,044

 

TOTAL ASSETS

$844,823

 

 

$818,477

 

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

Current Liabilities:

 

 

 

Short-term borrowings

$13,275

 

 

$1,794

 

Accounts payable

54,975

 

 

41,806

 

Accrued compensation and related costs

103,552

 

 

96,440

 

Self-insured risks

14,120

 

 

18,817

 

Income taxes payable

4,357

 

 

292

 

Deferred income taxes

16,267

 

 

7,622

 

Deferred rent

16,946

 

 

15,820

 

Other accrued liabilities

37,465

 

 

36,104

 

Deferred revenues

56,379

 

 

53,844

 

Mandatory Company contributions due to pension plan

18,862

 

 

13,800

 

Current installments of long-term debt and capital leases

838

 

 

410

 

Total Current Liabilities

337,036

 

 

286,749

 

Noncurrent Liabilities:

 

 

 

Long-term debt and capital leases, less current installments

152,293

 

 

211,983

 

Deferred revenues

26,438

 

 

27,856

 

Self-insured risks

13,893

 

 

10,114

 

Accrued pension liabilities, less current mandatory contributions

146,762

 

 

120,195

 

Other noncurrent liabilities

26,602

 

 

23,292

 

Total Noncurrent Liabilities

365,988

 

 

393,440

 

Shareholders’ Investment:

 

 

 

Class A common stock, $1.00 par value, 50,000 shares authorized; 29,335 and 29,086 shares issued and outstanding in 2012 and 2011, respectively

29,335

 

 

29,086

 

Class B common stock, $1.00 par value, 50,000 shares authorized; 24,690 and 24,697 shares issued and outstanding in 2012 and 2011, respectively

24,690

 

 

24,697

 

Additional paid-in capital

35,550

 

 

33,969

 

Retained earnings

246,105

 

 

209,323

 

Accumulated other comprehensive loss

(199,481)

 

(163,603)

Shareholders' Investment Attributable to Shareholders of Crawford & Company

136,199

 

 

133,472

 

Noncontrolling interests

5,600

 

 

4,816

 

Total Shareholders’ Investment

141,799

 

 

138,288

 

TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT

$844,823

 

 

$818,477

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [unaudited]

(In thousands)

Year Ended December 31,

2012

 

2011

 

2010

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net income

$49,754

 

 

$45,692

 

 

$28,776

 

Reconciliation of net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

32,796

 

 

31,818

 

 

30,599

 

Goodwill and intangible asset impairment charges

 

 

 

 

10,788

 

Arbitration award

 

 

(6,992)

 

 

Write-off of deferred financing costs on previous term loan

 

 

3,415

 

 

 

Deferred income taxes

19,355

 

 

(2,058)

 

2,710

 

Stock-based compensation costs

3,660

 

 

3,756

 

 

3,651

 

(Gain) loss on disposals of property and equipment, net

(136)

 

(143)

 

449

 

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

 

 

 

 

 

Accounts receivable, net

(4,197)

 

(13,594)

 

(372)

Unbilled revenues, net

(18,725)

 

18,099

 

 

(28,384)

Accrued or prepaid income taxes

(628)

 

 

284

 

 

963

 

Accounts payable and accrued liabilities

28,853

 

 

(6,383)

 

35,861

 

Deferred revenues

1,290

 

 

1,443

 

 

(8,830)

Accrued retirement costs

(15,639)

 

(36,633)

 

(47,844)

Prepaid expenses and other operating activities

(3,530)

 

(2,028)

 

(2,200)

Net cash provided by operating activities

92,853

 

 

36,676

 

 

26,167

 

Cash Flows from Investing Activities:

 

 

 

 

 

Acquisitions of property and equipment

(15,375)

 

(14,221)

 

(13,473)

Proceeds from disposals of property and equipment

47

 

 

417

 

 

51

 

Capitalization of computer software costs

(17,801)

 

(15,677)

 

(14,306)

Additional purchase price consideration for previous acquisition

 

 

 

 

(14,803)

Cash received in arbitration award

 

 

4,913

 

 

 

Payments for business acquisitions, net of cash acquired

(674)

 

(10,365)

 

 

Net cash used in investing activities

(33,803)

 

(34,933)

 

(42,531)

Cash Flows from Financing Activities:

 

 

 

 

 

Cash dividends paid

(9,880)

 

(4,872)

 

 

Payments related to shares received for withholding taxes under stock-based compensation plans

(1,307)

 

(1,653)

 

(703)

Proceeds from shares purchased under employee stock-based compensation plans

520

 

 

602

 

 

477

 

Repurchases of common stock

(2,840)

 

 

 

 

Increase in short-term borrowings and revolving credit agreement

42,174

 

 

59,753

 

 

33,965

 

Payments on short-term borrowings and revolving credit agreement

(91,412)

 

(55,951)

 

(33,960)

Proceeds from long-term borrowings

 

 

248,254

 

 

50,575

 

Payments on capital lease obligations and long-term debt

(1,583)

 

(260,004)

 

(8,760)

Capitalized loan costs

(161)

 

(3,702)

 

(1,856)

Dividends paid to noncontrolling interests

(429)

 

(391)

 

(218)

Net cash (used in) provided by financing activities

(64,918)

 

(17,964)

 

39,520

 

Effects of exchange rate changes on cash and cash equivalents

(588)

 

294

 

 

30

 

(Decrease) Increase in Cash and Cash Equivalents

(6,456)

 

(15,927)

 

23,186

 

Cash and Cash Equivalents at Beginning of Year

77,613

 

 

93,540

 

 

70,354

 

Cash and Cash Equivalents at End of Year

$71,157

 

 

$77,613

 

 

$93,540

 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ INVESTMENT [unaudited]

Common Stock

 

Additional Paid-In Capital

 

 

 

Accumulated Other Comprehensive Loss

 

Shareholders' Investment Attributable to

 

 

 

Total Shareholders’ Investment

(In thousands)

Class A Non-Voting

 

Class B Voting

 

 

Retained Earnings

 

 

 Shareholders of
Crawford &
Company

 

Noncontrolling Interests

 

 

Balance at January 1, 2010

$27,355

 

 

$24,697

 

 

$29,570

 

 

$140,463

 

 

$(165,403

)

 

$56,682

 

 

$4,604

 

 

$61,286

 

Net income

 

 

 

 

 

 

28,328

 

 

 

 

28,328

 

 

448

 

 

28,776

 

Other comprehensive income

 

 

 

 

 

 

 

 

1,081

 

 

1,081

 

 

287

 

 

1,368

 

Stock-based compensation

 

 

 

 

3,651

 

 

 

 

 

 

3,651

 

 

 

 

3,651

 

Shares issued in connection with stock-based compensation plans, net

647

 

 

 

 

(873

)

 

 

 

 

 

(226

)

 

 

 

(226

)

Increase in value of noncontrolling interest due to the acquisition of a controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

594

 

 

594

 

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

(218

)

 

(218

)

Balance at December 31, 2010

28,002

 

 

24,697

 

 

32,348

 

 

168,791

 

 

(164,322

)

 

89,516

 

 

5,715

 

 

95,231

 

Net income

 

 

 

 

 

 

45,404

 

 

 

 

45,404

 

 

288

 

 

45,692

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

719

 

 

719

 

 

(796

)

 

(77

)

Cash dividends paid

 

 

 

 

 

 

(4,872

)

 

 

 

(4,872

)

 

 

 

(4,872

)

Stock-based compensation

 

 

 

 

3,756

 

 

 

 

 

 

3,756

 

 

 

 

3,756

 

Shares issued in connection with stock-based compensation plans, net

1,084

 

 

 

 

(2,135

)

 

 

 

 

 

(1,051

)

 

 

 

(1,051

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

(391

)

 

(391

)

Balance at December 31, 2011

29,086

 

 

24,697

 

 

33,969

 

 

209,323

 

 

(163,603

)

 

133,472

 

 

4,816

 

 

138,288

 

Net income

 

 

 

 

 

 

48,888

 

 

 

 

48,888

 

 

866

 

 

49,754

 

Other comprehensive loss

 

 

 

 

 

 

 

 

(35,878

)

 

(35,878

)

 

(89

)

 

(35,967)

Cash dividends paid

 

 

 

 

 

 

(9,880

)

 

 

 

(9,880

)

 

 

 

(9,880

)

Stock-based compensation

 

 

 

 

3,660

 

 

 

 

 

 

3,660

 

 

 

 

3,660

 

Repurchases of common stock

(607

)

 

(7

)

 

 

 

(2,226

)

 

 

 

(2,840

)

 

 

 

(2,840

)

Shares issued in connection with stock-based compensation plans, net

856

 

 

 

 

(1,643

)

 

 

 

 

 

(787

)

 

 

 

(787

)

Change in noncontrolling interest due to acquisition of 100% of subsidiary

 

 

 

 

(436

)

 

 

 

 

 

(436

)

 

436

 

 

 

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

(429

)

 

(429

)

Balance at December 31, 2012

$29,335

 

 

$24,690

 

 

$35,550

 

 

$246,105

 

 

$(199,481

)

 

$136,199

 

 

$5,600

 

 

$141,799

 

SELECTED FINANCIAL DATA [unaudited]

The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and notes thereto contained in Item 8, “Financial Statements and Supplementary Data” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission.

(In thousands, except per share amounts and percentages)

Year Ended December 31,

2012

 

2011

 

2010

 

2009

 

2008

 

 

Revenues before Reimbursements

$1,176,717

 

 

$1,125,355

 

 

$1,030,417

 

 

$969,868

 

 

$1,048,582

 

Reimbursements

89,421

 

 

86,007

 

 

80,384

 

 

78,334

 

 

87,334

 

Total Revenues

1,266,138

 

 

1,211,362

 

 

1,110,801

 

 

1,048,202

 

 

1,135,916

 

Total Costs of Services

934,348

 

 

917,929

 

 

839,247

 

 

792,325

 

 

854,427

 

Americas Operating Earnings(1)

11,877

 

 

19,851

 

 

20,748

 

 

29,394

 

 

28,766

 

EMEA/AP Operating Earnings(1)

48,585

 

 

28,421

 

 

24,828

 

 

23,401

 

 

32,999

 

Broadspire Operating Earnings (Loss)(1)

27

 

 

(11,434)

 

(11,712)

 

(1,602)

 

3,526

 

Legal Settlement Administration Operating Earnings(1)

60,284

 

 

51,307

 

 

47,661

 

 

13,130

 

 

10,814

 

Unallocated Corporate and Shared Costs and Credits

(10,613)

 

(9,555)

 

(5,841)

 

(10,996)

 

(6,362)

Goodwill and Intangible Asset Impairment Charges

 

 

 

 

(10,788)

 

(140,945)

 

 

Net Corporate Interest Expense

(8,607)

 

(15,911)

 

(15,002)

 

(14,166)

 

(17,622)

Stock Option Expense

(408)

 

(450)

 

(761)

 

(914)

 

(861)

Amortization of Customer-Relationship Intangible Assets

(6,373)

 

(6,177)

 

(5,995)

 

(5,994)

 

(6,025)

Special Charges and Credits

(11,332)

 

2,379

 

 

(4,650)

 

(4,059)

 

(788)

Income Taxes

(33,686)

 

(12,739)

 

(9,712)

 

(2,618)

 

(11,564)

Net Income Attributable to Noncontrolling Interests

(866)

 

(288)

 

(448)

 

(314)

 

(624)

Net Income (Loss) Attributable to Shareholders of Crawford & Company

$48,888

 

 

$45,404

 

 

$28,328

 

 

$(115,683)

 

$32,259

 

Earnings (Loss) Per CRDB Share(2):

 

 

 

 

 

 

 

 

 

Basic

$0.88

 

 

$0.84

 

 

$0.54

 

 

$(2.23)

 

$0.63

 

Diluted

$0.87

 

 

$0.83

 

 

$0.53

 

 

$(2.23)

 

$0.62

 

Current Assets

$386,765

 

 

$369,549

 

 

$379,405

 

 

$325,715

 

 

$348,357

 

Total Assets

$844,823

 

 

$818,477

 

 

$820,674

 

 

$742,905

 

 

$895,248

 

Current Liabilities

$337,036

 

 

$286,749

 

 

$296,841

 

 

$258,998

 

 

$288,996

 

Long-Term Debt, Less Current Installments

$152,293

 

 

$211,983

 

 

$220,437

 

 

$173,061

 

 

$181,206

 

Total Debt

$166,406

 

 

$214,187

 

 

$223,328

 

 

$181,282

 

 

$196,856

 

Shareholders’ Investment Attributable to Shareholders of Crawford & Company

$136,199

 

 

$133,472

 

 

$89,516

 

 

$56,682

 

 

$175,551

 

Total Capital

$302,605

 

 

$347,659

 

 

$312,844

 

 

$237,964

 

 

$372,407

 

Current Ratio

1.1:1

 

1.3:1

 

1.3:1

 

1.3:1

 

1.2:1

Total Debt to Total Capital Ratio

55.0%

 

61.6%

 

71.4%

 

76.2%

 

52.9%

Return on Average Shareholders’ Investment

36.3%

 

40.7%

 

38.8%

 

(99.6)%

 

15.0%

Cash Provided by Operating Activities

$92,853

 

 

$36,676

 

 

$26,167

 

 

$51,664

 

 

$71,585

 

Cash Used in Investing Activities

$(33,803)

 

$(34,933)

 

$(42,531)

 

$(31,169)

 

$(28,036)

Cash (Used in) Provided by Financing Activities

$(64,918)

 

$(17,964)

 

$39,520

 

 

$(26,555)

 

$(12,830)

Shareholders’ Equity Per Diluted Share

$2.48

 

 

$2.46

 

 

$1.68

 

 

$1.09

 

 

$3.35

 

Cash Dividends Per Share:

 

 

 

 

 

 

 

 

 

CRDA

$0.20

 

 

$0.10

 

 

$

 

 

$

 

 

$

 

CRDB

$0.16

 

 

$0.08

 

 

$

 

 

$

 

 

$

 

Weighted-Average Shares and Share-Equivalents:

 

 

 

 

 

 

 

 

 

Basic

54,229

 

 

53,517

 

 

52,664

 

 

51,830

 

 

50,958

 

Diluted

54,965

 

 

54,246

 

 

53,234

 

 

51,830

 

 

52,342

 


Table 8 goes here...