Document and Entity Information
Document and Entity Information (USD $) | ||||
3 Months Ended
Mar. 31, 2010 | Jun. 30, 2009
| Apr. 30, 2010
Class A common stock | Apr. 30, 2010
Class B common stock | |
Entity Registrant Name | CRAWFORD & CO | |||
Entity Central Index Key | 0000025475 | |||
Document Type | 10-Q | |||
Document Period End Date | 2010-03-31 | |||
Amendment Flag | false | |||
Document Fiscal Year Focus | 2,010 | |||
Document Fiscal Period Focus | Q1 | |||
Current Fiscal Year End Date | --12-31 | |||
Entity Well-known Seasoned Issuer | No | |||
Entity Voluntary Filers | No | |||
Entity Current Reporting Status | Yes | |||
Entity Filer Category | Accelerated Filer | |||
Entity Public Float | $109,660,997 | |||
Entity Common Stock, Shares Outstanding | 27,767,060 | 24,697,172 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenues: | ||
Revenues before reimbursements | $236,266 | $236,083 |
Reimbursements | 15,787 | 14,200 |
Total Revenues | 252,053 | 250,283 |
Costs and Expenses: | ||
Costs of services provided, before reimbursements | 176,546 | 175,162 |
Reimbursements | 15,787 | 14,200 |
Total cost of services | 192,333 | 189,362 |
Selling, general, and administrative expenses | 48,967 | 51,488 |
Corporate interest expense, net of interest income of $103 and $580, respectively | 4,137 | 3,485 |
Restructuring and other costs | 2,663 | 1,815 |
Total Costs and Expenses | 248,100 | 246,150 |
Income before Income Taxes | 3,953 | 4,133 |
Provision for Income Taxes | 893 | 1,120 |
Net Income | 3,060 | 3,013 |
Less: Net Income (Loss) Attributable to Noncontrolling Interest | 6 | (69) |
Net Income attributable to Crawford & Company | $3,054 | $3,082 |
Earnings Per Share, Based on Net Income Attributable to Crawford & Company: | ||
Basic | 0.06 | 0.06 |
Diluted | 0.06 | 0.06 |
Average Number of Shares Used to Compute: | ||
Basic Earnings Per Share | 52,387 | 51,370 |
Diluted Earnings Per Share | 52,915 | 52,688 |
1_Condensed Consolidated Statem
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Costs and Expenses: | ||
Interest income | $103 | $580 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | Mar. 31, 2010
| Dec. 31, 2009
| |||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $48,294 | $70,354 | [1] | ||||||||||||||||
Accounts receivable, less allowance for doubtful accounts of $10,604 and $11,983, respectively | 152,735 | 139,215 | [1] | ||||||||||||||||
Unbilled revenues, at estimated billable amounts | 98,910 | 93,796 | [1] | ||||||||||||||||
Prepaid expenses and other current assets | 21,563 | 22,350 | [1] | ||||||||||||||||
Total current assets | 321,502 | 325,715 | [1] | ||||||||||||||||
Property and Equipment: | |||||||||||||||||||
Property and equipment | 143,878 | 144,254 | [1] | ||||||||||||||||
Less accumulated depreciation | (102,673) | (102,108) | [1] | ||||||||||||||||
Net property and equipment | 41,205 | 42,146 | [1] | ||||||||||||||||
Other Assets: | |||||||||||||||||||
Goodwill | 123,104 | 123,169 | [1] | ||||||||||||||||
Intangible assets arising from business acquisitions, net | 102,716 | 104,409 | [1] | ||||||||||||||||
Capitalized software costs, net | 51,759 | 50,463 | [1] | ||||||||||||||||
Deferred income tax assets | 68,640 | 69,504 | [1] | ||||||||||||||||
Other noncurrent assets | 27,131 | 27,499 | [1] | ||||||||||||||||
Total other assets | 373,350 | 375,044 | [1] | ||||||||||||||||
TOTAL ASSETS | 736,057 | 742,905 | [1] | ||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term borrowings | 13,932 | 32 | [1] | ||||||||||||||||
Accounts payable | 33,349 | 35,449 | [1] | ||||||||||||||||
Accrued compensation and related costs | 59,212 | 70,871 | [1] | ||||||||||||||||
Deferred revenues | 57,224 | 53,664 | [1] | ||||||||||||||||
Self-insured risks | 17,191 | 18,475 | [1] | ||||||||||||||||
Other accrued liabilities | 51,192 | 47,318 | [1] | ||||||||||||||||
Mandatory company contributions due to pension plan | 15,000 | 25,000 | [1] | ||||||||||||||||
Current installments of long-term debt and capital leases | 2,318 | 8,189 | [1] | ||||||||||||||||
Total current liabilities | 249,418 | 258,998 | [1] | ||||||||||||||||
Noncurrent Liabilities: | |||||||||||||||||||
Long-term debt and capital leases, less current installments | 172,480 | 173,061 | [1] | ||||||||||||||||
Deferred revenues | 32,885 | 33,524 | [1] | ||||||||||||||||
Self-insured risks | 15,130 | 14,824 | [1] | ||||||||||||||||
Accrued pension liabilities, less current mandatory contributions | 187,417 | 187,507 | [1] | ||||||||||||||||
Other noncurrent liabilities | 14,641 | 13,705 | [1] | ||||||||||||||||
Total noncurrent liabilities | 422,553 | 422,621 | [1] | ||||||||||||||||
Shareholders' Investment: | |||||||||||||||||||
Additional paid-in capital | 29,232 | 29,570 | [1] | ||||||||||||||||
Retained earnings | 143,517 | 140,463 | [1] | ||||||||||||||||
Accumulated other comprehensive loss | (165,689) | (165,403) | [1] | ||||||||||||||||
Total Crawford & Company Shareholders' Investment | 59,524 | 56,682 | [1] | ||||||||||||||||
Noncontrolling interests | 4,562 | 4,604 | [1] | ||||||||||||||||
Total shareholders' investment | 64,086 | 61,286 | [1] | ||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT | 736,057 | 742,905 | [1] | ||||||||||||||||
Class A common stock | |||||||||||||||||||
Shareholders' Investment: | |||||||||||||||||||
Common stock value | 27,767 | 27,355 | [1] | ||||||||||||||||
Total shareholders' investment | 27,767 | 27,355 | [1] | ||||||||||||||||
Class B common stock | |||||||||||||||||||
Shareholders' Investment: | |||||||||||||||||||
Common stock value | 24,697 | 24,697 | [1] | ||||||||||||||||
Total shareholders' investment | $24,697 | $24,697 | [1] | ||||||||||||||||
[1]*derived from the audited Consolidated Balance Sheet. |
2_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | |||||||||||||||||||
In Thousands | Mar. 31, 2010
| Mar. 31, 2009
| |||||||||||||||||
Current Assets: | |||||||||||||||||||
Allowance for doubtful accounts | $10,604 | $11,983 | [1] | ||||||||||||||||
Class A common stock | |||||||||||||||||||
Shareholders' Investment: | |||||||||||||||||||
Common stock, par value | 1 | 1 | [1] | ||||||||||||||||
Common stock, shares authorized | 50,000 | 50,000 | [1] | ||||||||||||||||
Common stock, shares issued | 27,767 | 27,355 | [1] | ||||||||||||||||
Common stock, shares outstanding | 27,767 | 27,355 | [1] | ||||||||||||||||
Class B common stock | |||||||||||||||||||
Shareholders' Investment: | |||||||||||||||||||
Common stock, par value | 1 | 1 | [1] | ||||||||||||||||
Common stock, shares authorized | 50,000 | 50,000 | [1] | ||||||||||||||||
Common stock, shares issued | 24,697 | 24,697 | [1] | ||||||||||||||||
Common stock, shares outstanding | 24,697 | 24,697 | [1] | ||||||||||||||||
[1]*derived from the audited Consolidated Balance Sheet. |
3_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
Cash Flows From Operating Activities: | |||||||||||||||||||
Net income | $3,060 | $3,013 | |||||||||||||||||
Reconciliation of net income to net cash used in operating activities: | |||||||||||||||||||
Depreciation and amortization | 7,592 | 7,671 | |||||||||||||||||
Loss on sales of property and equipment, net | 18 | 20 | |||||||||||||||||
Stock-based compensation | 777 | 1,595 | |||||||||||||||||
Changes in operating assets and liabilities, net of effects of acquisition: | |||||||||||||||||||
Accounts receivable, net | (13,962) | 4,591 | |||||||||||||||||
Unbilled revenues, net | (5,877) | 135 | |||||||||||||||||
Accrued or prepaid income taxes | 3,486 | (1,579) | |||||||||||||||||
Accounts payable and accrued liabilities | (10,316) | (16,130) | |||||||||||||||||
Deferred revenues | 3,079 | (4,779) | |||||||||||||||||
Accrued retirement costs | (11,056) | (7,733) | |||||||||||||||||
Prepaid expenses and other operating activities | (602) | 1,214 | |||||||||||||||||
Net cash used in operating activities | (23,801) | (11,982) | |||||||||||||||||
Cash Flows From Investing Activities: | |||||||||||||||||||
Acquisitions of property and equipment | (2,035) | (2,438) | |||||||||||||||||
Proceeds from sales of property and equipment | 17 | 7 | |||||||||||||||||
Capitalization of computer software costs | (3,645) | (3,172) | |||||||||||||||||
Equity investment | (335) | ||||||||||||||||||
Net cash used in investing activities | (5,663) | (5,938) | |||||||||||||||||
Cash Flows From Financing Activities: | |||||||||||||||||||
Shares used to settle withholding taxes under stock-based compensation plans | (703) | (1,886) | |||||||||||||||||
Increases in short-term borrowings | 16,378 | 8,946 | |||||||||||||||||
Payments on short-term borrowings | (688) | (14,717) | |||||||||||||||||
Payments on long-term debt and capital lease obligations | (6,438) | (612) | |||||||||||||||||
Capitalized loan costs | (944) | ||||||||||||||||||
Other financing activities | (39) | 15 | |||||||||||||||||
Net cash provided by (used in) financing activities | 8,510 | (9,198) | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (1,106) | (3,480) | |||||||||||||||||
Decrease in cash and cash equivalents | (22,060) | (30,598) | |||||||||||||||||
Cash and cash equivalents at beginning of period | 70,354 | [1] | 73,124 | ||||||||||||||||
Cash and cash equivalents at end of period | $48,294 | $42,526 | |||||||||||||||||
[1]*derived from the audited Consolidated Balance Sheet. |
4_Condensed Consolidated Statem
Condensed Consolidated Statements of Shareholders Equity (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | Class A common stock
| Class B common stock
| Shareholders' Investment Attributable to Crawford & Company
| Additional Paid-In Capital
| Retained Earnings
| Accumulated Other Comprehensive Loss
| Noncontrolling Interests
| Total
| |||||||||||
Beginning Balance at Dec. 31, 2008 | $26,523 | [1] | $24,697 | [1] | $175,551 | [1] | $26,342 | [1] | $256,146 | [1] | ($158,157) | [1] | $4,808 | [1] | $180,359 | [1] | |||
Comprehensive income (loss) - Note 4 | (10,751) | 3,082 | (13,833) | (653) | (11,404) | ||||||||||||||
Stock-based compensation | 1,595 | 1,595 | 1,595 | ||||||||||||||||
Common stock activity, net | 626 | (1,886) | (2,512) | (1,886) | |||||||||||||||
Ending Balance at Mar. 31, 2009 | 27,149 | 24,697 | 164,509 | 25,425 | 259,228 | (171,990) | 4,155 | 168,664 | |||||||||||
Beginning Balance at Dec. 31, 2009 | 27,355 | [1] | 24,697 | [1] | 56,682 | [1] | 29,570 | [1] | 140,463 | [1] | (165,403) | [1] | 4,604 | [1] | 61,286 | [1] | |||
Comprehensive income (loss) - Note 4 | 2,768 | 3,054 | (286) | (3) | 2,765 | ||||||||||||||
Stock-based compensation | 777 | 777 | 777 | ||||||||||||||||
Dividends paid to noncontrolling interest | (39) | (39) | |||||||||||||||||
Common stock activity, net | 412 | (703) | (1,115) | (703) | |||||||||||||||
Ending Balance at Mar. 31, 2010 | $27,767 | $24,697 | $59,524 | $29,232 | $143,517 | ($165,689) | $4,562 | $64,086 | |||||||||||
[1]*derived from the audited Consolidated Balance Sheet. |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article10 of RegulationS-X promulgated by the United States Securities and Exchange Commission (the SEC). Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Operating results for the three months ended March31, 2010 are not necessarily indicative of the results that may be expected for the year ending December31, 2010 or for other future periods. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current presentation. Significant intercompany transactions have been eliminated in consolidation. The Condensed Consolidated Balance Sheet information presented herein as of December31, 2009 has been derived from the audited consolidated financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended December31, 2009. For variable interest entities (VIE), the Company determines when it should include the assets, liabilities, and results of operations of a VIE in its consolidated financial statements. The Company consolidates the assets of a rabbi trust, which is considered a VIE of the Company. The rabbi trust was created to fund the liabilities of the Companys deferred compensation plan. The Company is considered the primary beneficiary of the rabbi trust because the Company directs the activities of the trust and can use the assets of the trust to satisfy the liabilities of the Companys deferred compensation plan. At March31, 2010 and December31, 2009, the liabilities of the deferred compensation plan were $8,689,000 and $8,570,000, respectively, and the values of the assets held in the related rabbi trust were $13,673,000 and $13,551,000, respectively. These assets and liabilities are included in Other Noncurrent Assets and Other Noncurrent Liabilities on the Companys Condensed Consolidated Balance Sheets. |
Adoption of New Accounting Stan
Adoption of New Accounting Standards in 2010 | |
3 Months Ended
Mar. 31, 2010 | |
Adoption of New Accounting Standards in 2010 [Abstract] | |
Adoption of New Accounting Standards in 2010 | 2. Adoption of New Accounting Standards in 2010 Variable Interest Entities On January1, 2010, the Company adopted Financial Accounting Standards Boards (FASB) Accounting Standards Update (ASU) 2009-17, Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities (ASU 2009-17), which amended Accounting Standards Codification (ASC) 810, Consolidations, and other related guidance. ASU 2009-17 made certain changes to the guidance used to determine when an entity should consolidate a variable interest entity in its consolidated financial statements. Based on the status of the entities that are evaluated for consolidation in the Companys consolidated financial statements, the adoption of ASU 2009-17 did not impact the Companys results of operations, financial condition, or cash flows. Fair Value Disclosures On January21, 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair Value Measurements, which amends ASC 820, Fair Value Measurements and Disclosures, to add new requirements for disclosures about transfers into and out of Levels 1 and 2 of the fair value hierarchy and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements within the fair value hierarchy. This ASU also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This ASU was effective for the Company beginning January1, 2010, except for the requirements to provide the Level 3 activity of purchases, sales, issuance, and settlements, if any, which will be effective for the Company beginning January1, 2011. Since ASU 2010-06 is a disclosure-only standard, its adoption had no impact on the Companys results of operations, financial condition, or cash flows. For the three-month periods ended March 31, 2010 and 2009, the Company had no transactions requiring disclosure under ASU 2010-06. |
Pending Adoption of Recently Is
Pending Adoption of Recently Issued Accounting Standard | |
3 Months Ended
Mar. 31, 2010 | |
Pending Adoption of Recently Issued Accounting Standard [Abstract] | |
Pending Adoption of Recently Issued Accounting Standard | 3. Pending Adoption of Recently Issued Accounting Standard Multiple-Deliverable Revenue Arrangements On October7, 2009, the FASB issued ASU 2009-13, Multiple Revenue Arrangements a consensus of the FASB Emerging Issues Task Force (ASU 2009-13), which will supersede certain guidance in ASC 605-25, Revenue Recognition-Multiple Element Arrangements, and will require an entity to allocate arrangement consideration to all of its deliverables at the inception of an arrangement based on their relative selling prices (i.e., the relative-selling-price method). The use of the residual method of allocation will no longer be permitted in circumstances in which an entity recognized revenue for an arrangement with multiple deliverables subject to ASC 605-25. ASU 2009-13 will also require additional disclosures. The Company will adopt the provisions of ASU 2009-13 on January1, 2011. Based on the Companys current revenue arrangements, the adoption of ASU 2009-13 is not expected to have a material impact on the Companys financial condition, results of operations, or cash flows. Stock-based Compensation On March31, 2010, the Emerging Issues Task Force (EITF) of the FASB ratified the final consensus on EITF Issue 09-J, Impact of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Primarily Trades (Issue 09-J). Issue 09-J addresses whether an entity should classify a share-based payment award as equity or a liability if the awards exercise price is denominated in the currency in which the underlying security trades and that currency is different from the 1) entitys functional currency, 2) functional currency of the foreign operation for which the employee provides services, and 3) payroll currency of the employee. Under the existing guidance in ASC 718-10, Compensation-Stock Compensation, the Company does not classify any of its stock-based compensation as liabilities. Issue 09-J is effective for the Company on January1, 2011. However, the adoption of Issue 09-J is not expected to change the Companys current accounting for its stock-based compensation plans as equity awards since Issue 09-Js application contains an exception for share-based payments that, like the Companys, use exercise prices denominated in the currency of the market in which substantial portions of the entitys equity securities trade. |
Comprehensive Income
Comprehensive Income (Loss) | |
3 Months Ended
Mar. 31, 2010 | |
Comprehensive Income (Loss) [Abstract] | |
Comprehensive Income (Loss) | 4. Comprehensive Income (Loss) Comprehensive Income (Loss) for the three months ended March31, 2010 and 2009 was as follows: Three months ended March 31, 2010 Shareholders of Noncontrolling (in thousands) Crawford Company Interests Total Net Income $ 3,054 $ 6 $ 3,060 Other Comprehensive Income (Loss): Net foreign currency translation loss (1,573 ) (9 ) (1,582 ) Interest rate swap agreement, net of taxes: Loss reclassified into income 679 679 Loss recognized during period (926 ) (926 ) Amortization of retirement plans costs, net of taxes 1,534 1,534 Total Comprehensive Income (Loss) $ 2,768 $ (3 ) $ 2,765 Three months ended March 31, 2009 Shareholders of Noncontrolling (in thousands) Crawford Company Interests Total Net Income (Loss) $ 3,082 $ (69 ) $ 3,013 Other Comprehensive Income (Loss): Net foreign currency translation loss (15,360 ) (584 ) (15,944 ) Interest rate swap agreement, net of taxes: Loss reclassified into income 768 768 Loss recognized during period (481 ) (481 ) Amortization of retirement plans costs, net of taxes 1,240 1,240 Total Comprehensive Loss $ (10,751 ) $ (653 ) $ (11,404 ) |
Net Income per Common Share Att
Net Income per Common Share Attributable to Crawford & Company | |
3 Months Ended
Mar. 31, 2010 | |
Net Income per Common Share Attributable to Crawford & Company [Abstract] | |
Net Income per Common Share Attributable to Crawford & Company | 5. Net Income per Common Share Attributable to Crawford Company Both classes of the Companys common stock, Common Stock A and Common Stock B, share equally in the Companys earnings for purposes of computing earnings per share (EPS). The computations of basic and diluted net income per common share attributable to Crawford Company were as follows: Three months ended March 31, March 31, (in thousands, except earnings per share amounts) 2010 2009 Net income attributable to Crawford Company $ 3,054 $ 3,082 Weighted average common shares used to compute basic earnings per share 52,387 51,370 Dilutive effects of shares issuable under stock-based compensation plans 528 1,318 Weighted-average common share equivalents used to compute diluted earnings per share 52,915 52,688 Basic earnings per share $ 0.06 $ 0.06 Diluted earnings per share $ 0.06 $ 0.06 Weighted-average outstanding stock options to purchase approximately 2,241,000 and 1,843,000 shares of the Companys ClassA Common Stock were excluded from the computations of diluted EPS for the three months ended March31, 2010 and 2009, respectively, because their inclusion would have been antidilutive based on the average price of CRDA during those periods. |
Interest Rate Swap Agreements
Interest Rate Swap Agreements | |
3 Months Ended
Mar. 31, 2010 | |
Interest Rate Swap Agreements [Abstract] | |
Interest Rate Swap Agreements | 6. Interest Rate Swap Agreements The Company manages its exposure to the impact of interest rate changes by entering interest rate swap agreements. In May2007, the Company entered into a three-year interest rate swap agreement that effectively converted the LIBOR-based portion of the interest rate under the Companys Credit Agreement for a portion of its floating-rate debt to a fixed rate of 5.25%. The Company initially designated this interest rate swap as a cash flow hedge of exposure to changes in cash flows due to changes in interest rates on an equivalent amount of debt. The notional amount of the swap is reduced over its three-year term and was $80,000,000 at March31, 2010. In connection with the Fifth Amendment to the Companys Credit Agreement entered into in October 2009, this interest rate swap was discontinued as a cash flow hedge of exposure to changes in cash flows due to changes in interest rates. Accordingly, subsequent changes in the fair value of this swap agreement are recorded by the Company as a noninterest expense adjustment rather than a component of the Companys accumulated other comprehensive loss. Such amount was not material for the three months ended March31, 2010. Because it is still probable that the forecasted transactions that were hedged will occur, the amount in accumulated other comprehensive loss related to the interest rate swap agreement will be reclassified into earnings as an increase to interest expense over the remaining life of the interest rate swap agreement as the forecasted transactions occur. The pretax amount in accumulated other comprehensive loss was $594,000 and $1,593,000 at March31, 2010 and December31, 2009, respectively. In November2009, the Company entered into a two-year forward-starting interest rate swap agreement that is effective beginning on June30, 2010. This swap agreement effectively converts the LIBOR-based portion of the interest rate on an initial notional amount of $90,000,000 of the Companys floating-rate debt to a fixed rate of 3.05% plus the applicable credit spread. The Company designated this interest rate swap as a cash flow hedge of exposure to changes in cash flows due to changes in interest rates on an equivalent amount of debt. The notional amount of the swap will be reduced to $85,000,000 on March31, 2011 to match the expected repayment of the Companys outstanding debt. The Company does not believe there have been any material changes in the creditworthiness of the counterparties to this interest-rate swap agreement. At March31, 2010 and December31, 2009, the fair value of the interest rate swaps was a liability of $2,673,000 and $2,067,000, respectively. The amounts of gains/losses recognized in income/expense on the Companys interest rate hedge contract (ineffective portion excluded from any effectiveness testing) were not material for the three months ended March31, 2010 or 2009. The pre-tax amount expected to be reclassified from accumulated other comprehensive loss into earnings during the twelve months subsequent to March31, 2010 is approximately $1,310,000. The effective portions of the pre-tax losses on the Companys interest-rate swap |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | 7. Fair Value Measurements The following table presents the Companys assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy: Fair Value Measurements at March 31, 2010 Significant Other Significant Quoted Prices in Observable Unobservable Active Markets Inputs Inputs (in thousands) Total (Level 1) (Level 2) (Level 3) Assets: Money market funds (1) $ 1,589 $ 1,589 $ $ Liabilities: Derivative designated as hedging instrument: Interest rate swap (2) (1,990 ) (1,990 ) Derivative discontinued as hedging instrument: Interest rate swap (2) (683 ) (683 ) (1) The fair values of the money market funds were based on recently quoted market prices and reported transactions in an active marketplace. Money market funds are reported on the Companys Condensed Consolidated Balance Sheet as Cash and Cash Equivalents. (2) The fair values of the interest rate swaps were derived from a discounted cash flow analysis based on the terms of the contracts and the forward interest rate curve adjusted for the Companys credit risk. The fair values of the hedge instruments are either current or non-current Other Liabilities and/or Other Assets on the Companys Condensed Consolidated Balance Sheet based upon the term of the hedged item. Fair Value Disclosures The fair value of accounts payable and short-term borrowings approximates their respective carrying values due to the short-term maturities of these instruments. The carrying value of the Companys term note payable was $174,275,000 at March31, 2010. The Companys term note payable is held by a small number of lenders, and thus it trades infrequently. The Company estimates the fair value of its term note payable based on a discounted cash flow analysis based on current borrowing rates for new debt issues with similar credit quality. At March31, 2010, the Company estimated the value of its term note payable to be approximately $171.0 million. |
Defined Benefit Pension Plans
Defined Benefit Pension Plans | |
3 Months Ended
Mar. 31, 2010 | |
Defined Benefit Pension Plans [Abstract] | |
Defined Benefit Pension Plans | 8. Defined Benefit Pension Plans Net periodic benefit cost related to the Companys defined benefit pension plans for the three months ended March31, 2010 and 2009 included the following components: Three months ended March 31, March 31, (in thousands) 2010 2009 Service cost $ 620 $ 405 Interest cost 9,069 8,783 Expected return on assets (8,987 ) (7,241 ) Amortization of transition asset 11 55 Recognized net actuarial loss 2,657 1,859 Net periodic benefit cost $ 3,370 $ 3,861 For the three months ended March31, 2010, the Company made contributions to its underfunded U.S. and U.K. defined benefit pension plans of $11,230,000, compared to $3,684,000 for the comparable period in 2009. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes [Abstract] | |
Income Taxes | 9. Income Taxes The Companys consolidated effective income tax rate may change periodically due to changes in enacted tax rates, fluctuations in the mix of income earned from the Companys various domestic and international operations which are subject to income taxes at different rates, the Companys ability to utilize net operating loss and tax credit carryforwards, and amounts related to uncertain income tax positions. For the three months ended March31, 2010, discrete items had only a nominal effect on the effective income tax rate. At March31, 2010, the Company estimates that its effective annual income tax rate for 2010 will be approximately 22% before considering discrete items. The decrease in the Companys income tax expense in the first quarter of 2010 compared to the first quarter of 2009 was due primarily to an internal restructuring of certain international operations in the second quarter of 2009 that resulted in an ongoing reduction in foreign taxes, which was partially offset by the expiration of a research credit and changes in discrete items. |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information [Abstract] | |
Segment Information | 10. Segment Information Financial information for the three months ended March31, 2010 and 2009 related to the Companys reportable segments, including a reconciliation from segment operating earnings (loss)to the most directly comparable GAAP financial measure, is presented below: Three months ended March 31, March 31, (in thousands) 2010 2009 Revenues: U.S. Property Casualty $ 49,194 $ 55,294 International Operations 104,451 90,630 Broadspire 61,963 74,601 Legal Settlement Administration 20,658 15,558 Total Segment Revenues before Reimbursements 236,266 236,083 Reimbursements 15,787 14,200 Total Revenues $ 252,053 $ 250,283 Operating Earnings (Loss): U.S. Property Casualty $ 5,096 $ 6,161 International Operations 6,552 7,406 Broadspire (2,333 ) (1,954 ) Legal Settlement Administration 3,283 1,527 Total Segment Operating Earnings 12,598 13,140 Deduct: Unallocated corporate and shared cost, net (141 ) (1,976 ) Restructuring and other costs (2,663 ) (1,815 ) Amortization of customer-relationship intangible assets (1,500 ) (1,498 ) Stock option expense (204 ) (233 ) Net corporate interest expense (4,137 ) (3,485 ) Income before Income Taxes $ 3,953 $ 4,133 Intersegment transactions are not material for any period presented. Operating earnings is the primary financial performance measure used by the Companys senior management and chief operating decision maker to evaluate the financial performance of the Companys four operating segments. The Company believes this measure is useful to investors in that it allows investors to evaluate segment operating performance using the same criteria used by the Companys senior management. Operating earnings will differ from net income computed in accordance with GAAP since operating earnings exclude income tax expense, net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, certain other gains and expenses, and certain unallocated corporate and shared costs. Net income or loss attributable to noncontrolling interests has also been removed from segment operating earnings. Segment operating earnings include allocations of certain corporate overhead and shared costs. If the Company changes its allocation methods or changes the types of costs that are allocated to its four operating segments, prior period results are adjusted to reflect the current allocation process. Revenue by major service line for the U.S. Property Casualty and Broadspire segments is shown in the following table. It is not practicable to provide revenue by service line for the International Operations segment. Legal Settlement Administration considers all of its revenue to be derived from one service line. Three months end |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 11. Commitments and Contingencies Under the Companys Credit Agreement, the Company and its subsidiary guarantors obligations under the Credit Agreement are secured by liens on all of their respective personal property and mortgages over certain of their owned and leased properties. As part of the Companys Credit Agreement, the Company maintains a letter of credit facility to satisfy certain of its own contractual requirements. At March31, 2010, the aggregate amount committed under the facility was $19,569,000. In the normal course of the claims administration services business, the Company is sometimes named as a defendant in suits by insureds or claimants contesting decisions made by the Company or its clients with respect to the settlement of claims. Additionally, certain clients of the Company have, in the past, brought actions for indemnification on the basis of alleged negligence by the Company, its agents, or its employees in rendering service to clients. The majority of these known claims are of the type covered by insurance maintained by the Company. However, the Company is responsible for the deductibles and any self-insured retentions under various insurance coverages. In the opinion of Company management, adequate provisions have been made for such foreseeable risks. The Company is subject to numerous federal, state, and foreign employment laws, and from time to time the Company faces claims by its employees and former employees under such laws. In addition, the Company has become aware that certain employers are becoming subject to an increasing number of claims involving alleged violations of wage and hour laws. The outcome of any of these allegations is expected to be highly fact specific, and there has been a substantial amount of recent legislative and judicial activity pertaining to employment-related issues. Such claims or litigation involving the Company or any of the Companys current or former employees could divert managements time and attention from the Companys business operations and could potentially result in substantial costs of defense, settlement or other disposition, which could have a material adverse effect on the Companys results of operations, financial position, and cash flows. As previously disclosed, on October31, 2006, the Company completed its acquisition of BMSI from Platinum Equity, LLC (Platinum). BMSI and Platinum are together engaged in certain legal proceedings against the former owners of certain entities acquired by BMSI prior to the Companys acquisition of BMSI. Pursuant to the agreement under which the Company acquired BMSI (the Stock Purchase Agreement), Platinum has full responsibility to resolve all of these matters and is obligated to fully indemnify BMSI and the Company for all monetary payments that BMSI may be required to make as a result of any unfavorable outcomes related to these pre-existing legal proceedings. Pursuant thereto, Platinum has also agreed to indemnify the Company for any additional payments required under any purchase price adjustment mechanism, earnout, or similar provision in any of BMSIs purchase and sale agreements entered into prior to the Compa |
Losses on Sublease and Restruct
Losses on Sublease and Restructuring Charges | |
3 Months Ended
Mar. 31, 2010 | |
Losses on Sublease and Restructuring Charges [Abstract] | |
Losses on Sublease and Restructuring Charges | 12. Losses on Sublease and Restructuring Charges During October2009, the Company entered into a sublease agreement with respect to a portion of a leased office building in Plantation, Florida. At that time, the Company realized a pre-tax loss of $1,810,000 on that phase of the sublease. This sublease agreement provides the sublessor with options to sublease all or a portion of the remainder of the building at various dates in 2010. In February2010, the sublessor exercised one of its options for additional space in the building, and the Company recognized a pre-tax loss of approximately $2,663,000 on that phase of the sublease which is included in Restructuring and Other Costs on the Companys Condensed Consolidated Statement of Operations. For the space subleased in February2010, the Company expects to receive approximately $9,318,000 in additional sublease payments from the sublessor over the life of the sublease. If the sublessor exercises its remaining option, the Company would record an additional loss of approximately $658,000 in 2010 on that phase of the sublease, and the Company would receive additional sublease payments of approximately $5,323,000 over the life of the sublease. These sublease losses are not reported within the operating results for the Broadspire segment, but instead are reported as a corporate charge. Due to the subleases, during the first quarter of 2010 the Company relocated its Broadspire operations in Broward County Florida to another leased building. In the three months ended March31, 2009, the Company recorded a pretax restructuring charge of $1,815,000. The charge consisted of professional fees incurred in connection with the realignment of certain of the Companys legal entities in the U.S. and internationally. The realignment of these legal entities did not impact segment financial reporting. These realignment activities commenced in the fourth quarter of 2008. |