Atlanta-based Crawford & Company announced its financial results for the third quarter ended Sept. 30.
Third quarter 2003 revenues before reimbursements totaled $172.2 million compared with $175.9 million in the 2002 third quarter. Third quarter 2003 net loss was ($3.7) million, or ($0.08) per fully diluted share, compared with net income of $5.6 million, or $0.11 per fully diluted share, for the 2002 third quarter. Net loss in the 2003 third quarter included an after-tax charge of $8.0 million, or $0.17 per share, under an agreement reached with the Department of Justice to resolve the investigation of the company’s billing practices.
Operating earnings (earnings before special charge/credit, net corporate interest and taxes) in the 2003 third quarter totaled $8.1 million compared with $10.1 million in the comparable 2002 quarter. Operating earnings in the 2003 nine-month period totaled $25.2 million compared with $26.9 million in the comparable 2002 period.
U.S. revenues before reimbursements were $117.7 million in the third quarter of 2003 compared with $128.8 million in the 2002 third quarter. Revenues from the insurance company market were $56.8 million in the 2003 third quarter compared with $65.7 million in the 2002 period, reflecting a continued softening in the company’s U.S. insurance company referrals for high-frequency, low-severity claims in the current quarter. Lower medical bill auditing revenues associated with the previously reported non-renewal of a contract with a major domestic insurer contributed $2.1 million of this decline.
Revenues from self-insured clients were $40.9 million in the 2003 third quarter compared with $47.4 million in the 2002 quarter, primarily reflecting declines in U.S. employment levels and associated injury rates which have contributed to a reduction in workers’ compensation claims. Class action services revenues were $19.9 million for the 2003 third quarter, compared with $15.7 million in the comparable year-ago quarter. Third quarter 2003 international revenues grew to $54.6 million from $47.1 million for the same period in 2002. This growth is partly due to the company’s third quarter 2002 acquisition of the loss adjusting business of Robertson and Company in Australia.
Grover Davis, chief executive officer of Crawford & Company, stated, “Our third quarter results reflect a continued industry-wide decline in property and casualty claims frequency. Conservative underwriting by our insurance company clients, including significant increases in policy deductibles, has contributed to a decline in property and casualty claims frequency, resulting in an overall 10 percent decline in claims referred to Crawford in the U.S. In addition, our self-insured market revenues in the U.S. were negatively affected by a reduction in workers’ compensation claims frequency due to the high U.S. unemployment rate, which is driving down private sector workplace injuries.
“While we continue to endure challenging industry circumstances, we successfully reduced our U.S. operating expenses over 7 percent in the current quarter in response to the decline in claims volume. However, our operating margin declined to less than 6 percent as compared to over 8 percent for the 2003 second quarter, as our U.S. claim referrals fell more than anticipated. The operating margins in our international operations improved in the third quarter to nearly 3 percent from 1 percent in the 2003 second quarter. We expect continued pressure on our international operating margins in the 2003 fourth quarter, but anticipate improved international operating margins beginning in the 2004 first quarter.”
Total revenues before reimbursements for the year-to-date period ended Sept. 30, were $515.8 million compared with $525.7 million in 2002. Operating earnings through September 2003 totaled $25.2 million compared with $26.9 million in 2002. Net income for the current year-to-date period totaled $5.6 million, or $0.11 per share, compared with $18.7 million, or $0.38 per share, reported in the prior year. Net income in 2002 included a payment received from a former vendor in full settlement of a business dispute of $3.8 million, net of related income tax expense, or $0.08 per share.
U.S. revenues before reimbursements for the 2003 nine-month period were $354.6 million compared with $387.1 million in 2002. International revenues before reimbursements were $161.2 million in 2003 compared with $138.6 million during 2002. Excluding the benefit of exchange rate fluctuations, international revenues would have been $145.6 million in the current year-to- date period.
Davis concluded, “We are very pleased with the growth in our class action services business this year and recorded record revenues during the 2003 third quarter. We benefited from the commencement of work on a significant new contract during the quarter and are aggressively pursuing other opportunities that should contribute to future revenue growth in this business. Overall, our cash and cash equivalents at September 30, 2003 have grown $5.2 million from the end of 2002 after reflecting a $10.0 million contribution to the company’s defined benefit pension plan during September 2003. We recently announced the closing of a new $70 million three-year revolving credit facility and the issuance of $50 million in seven-year 6.08% senior notes. This new financing gives the company added financial strength and greater working capital flexibility.
“We are also pleased to have recently formed an agreement to provide a customized claims handling program for a large U.S. personal lines insurer. This agreement will generate annual revenues of approximately $5 million beginning in the 2003 fourth quarter. This important new program coupled with the recent appointments of Crawford & Company to the preferred adjuster lists of several major property and casualty insurers should greatly strengthen our market penetration and enable us to capture a greater share of revenues when claim volumes increase.”
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