the STRENGTH of WORKING TOGETHER SM Fourth Quarter Fiscal 2008 Earnings Conference Call Monday, February 9, 2009 Exhibit 99.2 |
2 Fourth Quarter Earnings Review February 9, 2009 • Founded in 1941, Crawford is the largest independent global provider of claims management solutions and a fully integrated global provider of these solutions for the growing multi-national market. • Crawford is divided into four reporting segments that support the strategic positioning of the Company in a changing market place: – U.S. Property & Casualty • Serves the U.S. insurance company market – International Operations • Serves the global insurance industry and multinational corporations – Broadspire • Serves large national accounts, carriers and self-insured entities – Legal Settlement Administration • Provides administration for class action settlements and bankruptcy matters • The Company’s independence, global presence and diversified business lines are key competitive advantages which set Crawford apart from its competitors. |
3 Forward-looking Statements and Segment Operating Earnings 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 historical facts may be “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. 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, and the risks and uncertainties involved in forward-looking statements, please read Crawford & Company reports filed with the United States Securities and Exchange Commission and available at www.sec.gov or in the Investor Relations section of Crawford & Company’s website at www.crawfordandcompany.com. Segment Operating Earnings: Segment operating earnings represent earnings before net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, income tax expense, unallocated corporate and shared costs, and special credits and charges. On January 1, 2008 the Company’s Strategic Warranty Services unit was moved from the Legal Settlement Administration segment to the U.S. Property & Casualty segment. Prior period results for both segments have been restated to reflect this transfer. Segment revenues and expenses do not include reimbursements for out-of-pocket expenses. |
Agenda • Welcome • Overview of Global Economy • Highlights of 2008 Fiscal Year • Fourth Quarter Financial Review • Segment Operating Highlights • Outlook for Fiscal 2009 4 |
5 Fiscal 2008 Overview • Strong performance in a difficult operating environment Revenue growth of 8% over 2007 Net income double 2007 • Sustained growth internationally and in U.S. Property & Casualty offset declines in other businesses U.S. Property & Casualty revenue up 12.3% International revenue up 18.2% • Improved earnings per share to $0.62 from $0.32 Improved operating margins in all segments • Improvement in cash and financial flexibility Operating cash flow improved by $47.7 million Days sales outstanding in accounts receivable declined by 19 days 200 400 600 800 1000 1200 2008 2007 Revenue $ in millions 0 5 10 15 20 25 30 35 2008 2007 Net Income $ in millions $1,048 $975 $32.3 $16.1 |
the STRENGTH of WORKING TOGETHER SM Fourth Quarter 2008 Financial Review |
7 Fourth Quarter 2008 Overview • Strong performance in a difficult operating environment Revenue growth of 7.2% over 2007 quarter Net income increased 152.3% over 2007 quarter • Sustained growth internationally and in U.S. Property & Casualty offset declines in other businesses U.S. Property & Casualty revenue up 35.2% Catastrophe revenue at $11.3 million vs. $1.8 million in 2007 • Improved earnings per share to $0.16 from $0.07 Improved operating margins in U.S. Property & Casualty and International Operations Tax credits of $1.8 million, or $0.04 per share in 2008 Special credit of $0.01 per share in 2008 200 210 220 230 240 250 260 270 4Q 2008 4Q 2007 Revenue $ in millions 0 1 2 3 4 5 6 7 8 4Q 2008 4Q 2007 Net Income $ in millions $262.9 $245.2 $8.3 $3.3 |
8 Fourth Quarter 2008 Financials Quarter Ended December 31, 2008 2007 % Change Revenues: Revenues Before Reimbursements $262,889 $245,224 7% Reimbursements 17,756 21,261 -16% Total Revenues 280,645 266,485 5% Costs and Expenses: Cost of Services Provided, Before Reimbursements 196,481 186,203 6% Reimbursements 17,756 21,261 -16% Total Cost of Services 214,237 207,464 3% Selling, General, and Administrative Expenses 53,497 50,762 5% Corporate Interest Expense, Net 4,216 4,154 1% Restructuring Costs 3,300 - nm Total Costs and Expenses 275,250 262,380 5% Gain on Sale of Business 2,512 - nm Income Before Income Taxes 7,907 4,105 93% (Benefit) Provision for Income Taxes (430) 801 -154% Net Income $8,337 $3,304 152% Earnings Per Share - Basic and Diluted $0.16 $0.07 129% CRAWFORD & COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME In Thousands, Except Earnings Per Share and Percentages Unaudited |
8 8.5 9 9.5 10 10.5 11 4Q 2008 4Q 2007 Operating Earnings 9 60 70 80 90 100 110 4Q 2008 4Q 2007 Revenue $ in millions $ in millions Fourth Quarter 2008 Financials $109.6 $107.3 $10.9 $9.9 Operating earnings and margin improved on revenue gains Revenue increased 11.6% on a constant dollar basis Summary Results, International Operations For the quarters ended December 31, 2008 and 2007 in thousands except percentages Unaudited 2008 2007 % Change Revenues 109,551 $ 107,309 $ 2.1% Total Operating Expenses 98,685 97,459 1.3% Operating Earnings 10,866 $ 9,850 $ 10.3% Operating Margin 9.9% 9.2% |
-1 0 1 2 3 4 5 4Q 2008 4Q 2007 Operating Earnings 10 0 10 20 30 40 50 60 4Q 2008 4Q 2007 Revenue $ in millions $ in millions Fourth Quarter 2008 Financials $44.2 $59.8 ($0.5) $4.8 Operating earnings up significantly on revenue growth and technology-led operating efficiencies Catastrophe revenue up $9.5 million from hurricanes Gustav and Ike Cases up over 4% in quarter Summary Results, U.S. Property & Casualty For the quarters ended December 31, 2008 and 2007 in thousands except percentages Unaudited 2008 2007 Revenues 59,818 $ 44,239 $ 35.2% Total Operating Expenses 55,026 44,705 23.1% Operating Earnings 4,792 $ (466) $ nm Operating Margin 8.0% -1.1% % Change |
-3 -2 -1 0 1 2 4Q 2008 4Q 2007 Operating Earnings 11 40 50 60 70 80 90 4Q 2008 4Q 2007 Revenue $ in millions $ in millions Fourth Quarter 2008 Financials $75.6 $75.2 ($0.4) ($1.8) Operating margin and earnings decline due to lower worker’s compensation claim referrals Revenues stable despite economic conditions Summary Results, Broadspire For the quarters ended December 31, 2008 and 2007 in thousands except percentages Unaudited 2008 2007 Revenues 75,552 $ 75,239 $ 0.4% Total Operating Expenses 77,392 75,627 2.3% Operating Earnings (1,840) $ (388) $ nm Operating Margin -2.4% -0.5% % Change |
0 0.5 1 1.5 2 2.5 3 4Q 2008 4Q 2007 Operating Earnings 12 15 15.5 16 16.5 17 17.5 18 18.5 4Q 2008 4Q 2007 Revenue $ in millions $ in millions Fourth Quarter 2008 Financials $18.0 $18.4 $2.9 $2.3 Revenue and operating earnings decrease reflects slowdown in class action settlements Backlog of $42.0 million Summary Results, Legal Settlement Administration For the quarters ended December 31, 2008 and 2007 in thousands except percentages Unaudited 2007 Revenues 17,968 $ 18,437 $ -2.5% Total Operating Expenses 15,646 15,505 0.9% Operating Earnings 2,322 $ 2,932 $ -20.8% Operating Margin 12.9% 15.9% 2008 % Change |
13 Fourth Quarter 2008 Financials Crawford & Company Balance Sheet Highlights As of December 31, 2008 and December 31, 2007 in thousands, except percentages Unaudited December 31, December 31, 2008 2007 Change Cash, cash equivalents, and short-term investments $73,124 $50,855 $22,269 Accounts receivable, net 157,430 178,528 (21,098) Work in process 99,115 136,652 (37,537) Total receivables 256,545 315,180 (58,635) Deferred revenues, net 95,670 111,036 (15,366) Pension liabilities 179,542 76,977 102,565 Current portion of long-term debt, capital leases and short-term borrowings 15,650 31,864 (16,214) Long-term debt 181,206 183,449 (2,243) Total debt 196,856 215,313 (18,457) Total stockholders' equity 175,551 254,215 (78,664) Net debt* 123,732 164,458 (40,726) Total debt / capitalization 53% 46% *Net debt, a non-GAAP measure, is defined by the Company as long-term debt, capital leases and short-term borrowings, net of cash, cash equivalents, and short-term investments. |
14 Fourth Quarter 2008 Financials Crawford & Company Free Cash Flow (A non-GAAP financial measurement) For the years ended December 31, 2008 and 2007 In Thousands December 31, December 31, 2008 2007 Variance Net Income $32,259 $16,116 $16,143 Plus: Depreciation / Non-Cash Items 38,923 31,692 7,231 Less: Special Credits (2,512) (8,824) 6,312 Less: Working Capital Growth 20,221 (15,151) 35,372 Less: U.S. Pension Contributions (17,916) (549) (17,367) Operating Cash Flow 70,975 23,284 47,691 Less: Capital Expenditures (19,336) (21,553) 2,217 Less: Internally Developed Software (12,675) (6,556) (6,119) Less: Mandatory Principal Payments (2,100) (2,100) - Free Cash Flow (non-GAAP) $36,864 ($6,925) $43,789 |
the STRENGTH of WORKING TOGETHER SM Fourth Quarter and Fiscal 2008 Segment Highlights |
16 Fourth Quarter 2008 Highlights 120 130 140 150 160 170 4Q 2008 4Q 2007 International Claims Claims referred in 000s 144.9 167.7 • International Operations Strong global revenue growth of 11.6% before currency impacts Operating margin increased to 9.9% in 2008 from 9.2% in 2007 Claims referred decreased 13.6% due to absence of 2007 CAT claims Strong working capital management FX impact on fourth quarter revenues was negative 9.5% and for year was a positive 2.3% |
17 Fourth Quarter 2008 Highlights • U.S. Property & Casualty Revenue growth of 35.2% Operating margin increased to 8.0% in 2008 from (1.1%) in 2007 Catastrophe revenue up to $11.3 million from $1.8 million Technology-driven efficiencies realized Claims referred increased 4.0% due to increases in property and CAT related claims 75 80 85 90 95 100 105 4Q 2008 4Q 2007 U.S. P&C Claims Claims referred in 000s 102.9 98.9 |
18 Crawford U.S. Catastrophe (CAT) Activity 0 10 20 30 2008 2007 Cases 24.5 12.0 0 5 10 15 20 25 2008 2007 Revenues $22.9 $8.3 $ in millions Year ended Dec. 31: In 000s • U.S. Catastrophe 2008 reflects benefit from hurricanes Gustav and Ike Strong incremental margins generated from CAT adjuster revenues Technology and process improvements Outlook for coming year will be conservative |
40 45 50 55 60 65 70 4Q 2008 4Q 2007 Broadspire Claims 19 Fourth Quarter 2008 Highlights Claims referred in 000s 55.4 65.1 • Broadspire Revenue increase of 0.4% Operating losses of $1.8 million in the fourth quarter Year to date operating earnings of $3.5 million compared with $3.1 million in prior year RiskTech implementation underway 93% client retention rate Worker’s Comp market challenging as claims referred declined 15.0% Strong client retention and cross-selling partially offset run-off revenue decline |
20 Fourth Quarter 2008 Highlights • Legal Settlement Administration Revenue declined 2.5% due to slowdown in class action settlements Fourth quarter operating margin decreased to 12.9% from 15.9% in 2007 Full year operating margin increased to 14.4% in 2008 from 12.7% in 2007 Backlog of $42.0 million 20 25 30 35 40 45 50 55 4Q 2008 4Q 2007 Backlog Backlog in millions $42.0 $45.0 |
21 2009 Guidance • Full Year 2009: – Consolidated revenue before reimbursements between $960 million and $980 million – Consolidated operating earnings between $50.5 million and $55.8 million – After reflecting stock-based compensation expense, net corporate interest expense, customer-relationship intangible amortization expense, special credits and charges and income taxes, consolidated net income on a GAAP basis between $22.0 million and $25.0 million – Earnings per share of $.41 to $.47 – Guidance reflects the expected effect of stock market declines and economic slowing to date, which has negatively affected asset values in our defined benefit pension plans. The effect of this on 2009 guidance is estimated as a $16.9 million reduction in operating earnings, or $0.21 per share. – Guidance also reflects expected strengthening of the U.S. dollar against most major foreign currencies, resulting in a negative exchange rate impact. The anticipated effect of this on 2009 guidance is estimated at $93.3 million decline in revenue and $7.6 million reduction in operating earnings, or $0.09 per share. |
Revenue Bridge from 2008 Actual to 2009 Guidance Midpoint 22 Dollars in Millions Not to scale $21.3 ($6.6) ($93.3) 1,050 $ $1.048.6 1,000 $ $970.0 950 $ 2008 Net Sale Foreign Midpoint Revenues Organic of Intl. Currency 2009 Before Growth Business Impact Revenue Reimb. Guidance |
Operating Earnings Bridge from 2008 Actual to 2009 Guidance Midpoint 23 Dollars in Millions (not to scale) $8.6 ($7.6) 75 $ $69.1 ($16.9) $53.2 50 $ 35 $ 2008 Net Foreign Increased Midpoint Operating Organic Currency Pension 2009 Earnings Growth Impact Expense Revenue Guidance |
Earnings Per Share Bridge from 2008 Actual to 2009 Guidance Midpoint 24 Earnings Per Share (not to scale) 0.75 $ $0.05 ($0.09) $0.09 ($0.21) $0.62 0.50 $ ($0.02) $0.44 0.25 $ 2008 Operating Net Corp. Foreign Increased Other Midpoint Net Earnings Interest Currency Pension 2009 Income Increase Reduction Impact Expense EPS Per Share Guidance |
the STRENGTH of WORKING TOGETHER SM |