CRD.B (CRD.B) Q4 2012 Earnings Report, Transcript and Summary

Good afternoon. My name is Katrina, and I will be your conference facilitator for today. At this time, I would like to welcome everyone to the Crawford & Company fourth quarter 2012 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawfordandcompany.com under the Investor Relations section. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Wednesday, February 13, 2013. Some of the matters to be discussed in this conference call and in the supplementary financial presentation may include forward-looking statements that involve risks and uncertainties. These statements may include, but are not limited to, statements regarding the funded status of our defined benefit pension plan; our expectations related to future revenues and expenses; our long-term liquidity requirements; and our ability to pay dividends in the future. The company's actual results achieved in future quarters could differ materially from results that may be implied by such forward-looking statements. The company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of the call, or to reflect the occurrence of unanticipated events. In addition, you are reminded that operating results for any historical period are not necessarily indicative of results to be expected for any future period. For a complete discussion regarding factors which could affect the company's financial performance, please refer to the company's Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission, particularly the information under the headings: Business, Risk Factors, Legal Proceedings and Management Discussion and Analysis of Financial Conditions and Results of Operations as well as subsequent company filings, discussion and analysis of financial condition and results of operations. This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required, a reconciliation is provided for those measures to the most directly comparable GAAP measures. I would now like to introduce Mr. Jeffrey Bowman, President and Chief Executive Officer of Crawford & Company. Mr. Bowman, you may begin your conference.

Thank you, Katrina. A warm welcome to our investors, clients and employees this afternoon. I am Jeffrey Bowman, President and CEO of Crawford & Company. Joining me from the Global Executive Management team this afternoon are Bruce Swain, our CFO; and Allen Nelson, our General Counsel and Chief Administrative Officer. I will begin with some opening comments on our fourth quarter and full year 2012 results. Bruce will then review the fourth quarter and full year financials in more detail, which will be followed by a review of our business performance, comments on our strategic initiatives and conclude with our corporate focus and our initial 2013 guidance. I am very pleased to report that Crawford's global integrated business services produced record financial results for the full year 2012. We reported record revenues of $1.177 billion, growth of 40% and consolidated operating earnings of a record $110.2 million and our highest net income and diluted earnings per share since 1994, at $0.97 per share for CRDA and $0.94 for CRDB. We saw meaningful improvements in the operating performance of all of our business segments except the Americas where, as previously reported, lower numbers of claims affected results in the first half of the year. Nonetheless, Crawford was able to capitalize on global opportunities and events that enhanced our return to shareholders in 2012 and has positioned us well for 2013. Our fourth quarter 2012 consolidated operating earnings more than tripled last year's fourth quarter figures and were driven by our handling of claims from Superstorm Sandy, very strong results from our EMEA/AP and Legal Settlement Administration segments and a continued improvement in Broadspire's results. During the 2012 fourth quarter, we set new financial records for consolidated revenues, consolidated operating earnings and operating cash flow. The Americas segment benefited from claims activity during the 2012 fourth quarter resulting from Superstorm Sandy in the Northeast U.S., which exceeded our initial expectations heading into the quarter. Together with ongoing cost control measures as well as the implementation of innovative technology, this helped to generate strong improvement over the 2011 fourth quarter despite relatively weak industry-wide claims volumes which have persisted throughout 2012 in both the U.S. and Canada. Our EMEA/AP segment results during the quarter were largely driven by the ongoing handling of catastrophic flood losses in Thailand, although we also saw improvement in our core U.K. and CEMEA operations. In addition, we were completing assignments in Australia related to catastrophic events in 2010 and 2011. In the Broadspire segment, we recorded an operating profit for the 2012 fourth quarter and the full year, an improvement in operating performance of more than $11 million versus 2011. We have always said that improvement in Broadspire would be gradual. We remain focused on delivering strong operating performance in this business, and we are optimistic that we will show sustainable improvements in the upcoming year. During the 2012 fourth quarter, our Legal Settlement Administration segment was engaged responding to the Deep Water Horizon class action settlement, as well as securing a number of other meaningful class actions and bankruptcy matters, and finished the year with a record backlog. Our record performance this year is a tribute to the employees of Crawford, who have been steadily making our operations leaner, faster and smarter as we navigated through the difficult industry conditions of the past several years. In my 5 years as Chief Executive, a principal goal has been the rebalancing of Crawford's business operations to reflect changes in our industry. The 71-year history of Crawford is based in the business of handing claims, a vision Jim Crawford first put into practice in the 1940s. Today, however, our operating environment is unlike anything envisioned 70 years ago. Two areas of change stand out in this regard. First, the introduction and use of technology, which has transformed every aspect of our business, from tracking weather events globally to applying predictive analytics to anticipated claims volumes. This is a passion for Crawford. And second, the way in which Crawford has grown its business service offerings and capabilities. Today, Crawford's services complement the traditional processing of claims and give our clients diagnostic tools, process management support and incremental volume-handling capabilities. The Crawford System of Claims Solutions brings all of these elements together in a unique and integrated process that provides us with competitive advantage in the marketplace. The Crawford System of Claims Solutions is a phrase we use to describe the most comprehensive global integrated solution for corporate, insurer and reinsurer claims administration. The term integrated is fundamental to understanding how Crawford provides more than outsourced claims processing. Beyond Crawford's comprehensive claims processing, we have successfully grown our operations into the legal settlement and mega event arena with the Garden City Group, and we continue to grow our business process outsourcing (BPO) solutions, with examples that include Broadspire and our very successful Contractor Connection network. We offer client support across a wide range of services, including data management, medical management and consulting. And we help clients address the circumstances that can lead to claims in the first place, improving their experience and risk profiles. It's this balanced approach to our business, in terms of the portfolio of companies we manage and the integration of claims management and technology, that make Crawford best in class. We have made great strides in balance sheet management as an organization. During the year, we have reduced borrowings, improved free cash flow, increased our normal quarterly dividend and paid a special dividend in the fourth quarter. These actions and our plans for the future are all focused on a strong commitment as a management team to deliver shareholder value. That concludes my initial remarks, and I will discuss the business unit operations after Bruce has reviewed the financials. Bruce, would you please review the company's overall performance?

Company-wide revenues before reimbursements in the 2012 fourth quarter were a record $313 million, up 18% from $265.6 million in the prior year's fourth quarter. Our handling of claims from Superstorm Sandy in the Americas segment and strong results in our Legal Settlement Administration and EMEA/AP segments drove this improvement. Our net income attributable to shareholders of Crawford & Company totaled $17.9 million in the 2012 fourth quarter, up 299% over the $4.5 million in the 2011 period. Fourth quarter 2012 diluted earnings per share were $0.33 for CRDA and $0.32 for CRDB compared to earnings per share of $0.09 for CRDA and $0.08 for CRDB in the 2011 period. Consolidated operating earnings, a non-GAAP financial measure, totaled a record $38.9 million for the 2012 fourth quarter, nearly quadrupling the $10 million reported in the 2011 fourth quarter. During the 2012 fourth quarter, the company incurred a pre-tax special charge of $8.5 million related to a loss on a property sublease and North American severance costs. These special charges decreased earnings per share by $0.10 in the 2012 fourth quarter. During the prior year fourth quarter, the company recorded a special charge of $4.6 million consisting of a write-off of deferred financing costs related to the refinancing of our credit agreement and severance expenses. We also recorded a tax benefit of $5.5 million for foreign tax credits in that quarter. The net of these items increased earnings per share by $0.05 in the 2011 fourth quarter. The company selling, general and administrative expenses or SG&A totaled $54.4 million or 17.4% of revenues in the 2012 fourth quarter, down from $54.7 million or 20.6% of revenues in the prior year quarter. During 2012, the company paid a higher dividend on its CRDA common stock than on its CRDB shares. This dividend differential can sometimes result in different earnings per share for each class of stock, as it does in our case, due to the 2-class method of computing EPS as required by current accounting guidance. References to EPS in this call will generally be only for CRDB, as that is the more dilutive measure. Revenues from the Americas segment totaled $93.5 million in the 2012 fourth quarter, up 14% from the $82 million reported in last year's quarter. This increase was primarily due to the influx of claims from Superstorm Sandy. Operating earnings in our Americas segment were $4.4 million in the 2012 fourth quarter or 5% of revenues. This is compared with a small operating loss in the prior year quarter. Revenues generated by our catastrophe adjustors in the U.S. totaled $19.8 million in the 2012 fourth quarter, increasing from $9.1 million in the 2011 quarter. The increase in revenues was due to the surge in Superstorm Sandy-related catastrophe cases. EMEA/AP revenues increased 10% in the 2012 fourth quarter to $95.2 million from $86.2 million in the 2011 period. EMEA/AP operating earnings increased to $18.2 million during the 2012 fourth quarter, more than doubling last year's fourth quarter operating earnings of $8 million. The operating margin in this segment was 19% in the 2012 quarter, increasing from 9% in the 2011 fourth quarter. Our revenue and earnings improvement reflect catastrophe-related increases in our Asia-Pacific region, primarily in Thailand. Revenues from our Broadspire segment increased to $58.8 million in the 2012 fourth quarter, up 1% from $58.2 million in the prior year quarter. Operating earnings in Broadspire totaled $444,000, or 1% of revenues in the 2012 fourth quarter, improving substantially from the operating loss of $2.3 million or negative 4% of revenues in the 2011 fourth quarter. Legal Settlement Administration revenues. Comprised of class action and bankruptcy claims administration services as well as significant special project revenues, totaled $65.4 million in the 2012 fourth quarter, increasing 67% from the $39.2 million in the prior year quarter. This revenue increase was largely related to our work on the Deep Water Horizon class action settlement. Operating earnings totaled $18.2 million in the 2012 fourth quarter or 28% of revenues as compared to $8.8 million or 22% of revenues in the prior year period. Legal Settlement Administration continues to have a strong backlog of projects awarded, totaling a record $151.9 million at December 31, 2012, as compared to $64 million at December 31, 2011. Our cash and cash equivalent position at December 31, 2012 totaled $71.2 million as compared to $77.6 million at December 31, 2011. Our investment in unbilled and billed receivables has increased by $20.6 million during 2012, primarily as a result of growth in Asia-Pacific and Legal Settlement Administration. Our pension liabilities increased by $31.6 million for 2012 due to a year-over-year decline in discount rates used to determine the plan's liabilities at year end. Our total debt has decreased in 2012 by $47.8 million, reflecting very strong cash generation by the company that was used to repay outstanding borrowings under our revolving credit facility. We are very pleased with the overall financial condition at the end of 2012. Cash provided by operations totaled a record $92.9 million for 2012 compared to $36.7 million provided by operations in the prior year period. This $56.2 million improvement was primarily due to strong operating performance and lower cash payments for accounts payable on accrued expenses in 2012, as well as reductions in pension contributions and taxes paid. Driven by our continued gains in cash efficiency, free cash flow improved in 2012 by $54.8 million over the 2011 period. During the 2012 fourth quarter the company paid a regular quarterly dividend of $0.04 per share on its CRDA shares and $0.03 per share on its CRDB shares. In addition, the company paid a special dividend of $0.06 per share for each class of stock during the 2012 fourth quarter. For the year, the company has paid cash dividends of $0.20 per share for CRDA and $0.16 per share for CRDB, an increase of a 100% over dividend levels in 2011. For the 2012 fourth quarter, the company repurchased approximately 472,000 shares of CRDA under its share repurchase plan at an average cost of $4.82 per share. For the year, the company has repurchased approximately 608,000 shares of CRDA, 7,000 shares of CRDB, at an average cost of $4.63 and $3.83, respectively. Back to you, Jeff.

Thanks, Bruce. Results for 2012 reflected a number of weather-related catastrophic events. Crawford's ability to respond rapidly and efficiently with both highly qualified people and advanced technology affirmed our leadership position in our industry and demonstrated our capabilities to handle major events globally. The events of 2012 called on all of our resources, requiring us to manage the large number of claims generated by massive flooding in Thailand as well as tackling the large and complex claims that come with an urban event like Superstorm Sandy in the U.S. The breadth of our business portfolio was very evident in the strong performance of our Legal Settlement Administration operations, which reported double-digit revenue gains and operating earnings growth primarily as a result of the responsibility to the massive Deep Water Horizon class action project. Our global reach produced significant revenue in the Asia-Pacific area, underlining the expertise that guided Crawford resources committed in response to flooding in Thailand. This increase in international revenue more than offset lower volumes in our Americas property and casualty operations, especially considering the particularly low volume of claims we experienced in the first half of the year. Crawford's advanced technology and business solutions delivered results on the BPO side as well. In our Broadspire workers compensation operations, an emphasis on delivering services that help our clients effectively manage their cost of risk produced an important improvement, as operating revenues improved from an $11.4 million loss in 2011 to a small operating profit for 2012 on a 1.8 revenue expansion. Our record consolidated revenue performance for the quarter reflected a 14.8% increase in cases over the fourth quarter of 2011. We saw cases increase in the Americas, EMEA/AP and Broadspire, with particular growth in catastrophic cases, primarily as a result of Superstorm Sandy. Now let me turn to the outlook for each of our business units, starting with the Americas segment, which represented 28% of our consolidated revenue for the year. The Americas business was a study in contrast as claims frequency trends fell short of the 2011 in the first 3 quarters of the year only to be partially reversed by an influx of claims related to Superstorm Sandy in the fourth quarter, which was the worst storm to hit the Northeast since 1938. This also positively affected operating earnings in this segment, which jumped 60% from the 9 months close through year end. Our response to Sandy, which hit on October 29, involved approximately 600 adjustors on staff. We have estimated that we have handled approximately 3% to 4% of the total property claims related to Sandy. During the event, we used our command center to provide real-time performance information, and as of today, we have closed 90%-plus of the assignments. One major client implemented an end-to-end reporting process where all party details were captured within a database that allowed immediate access by Crawford's call center operations and, coupled with our command center, was able to pinpoint the claims locations that enabled our field adjusters to quickly respond to our client's insurance. That was a very positive experience for this client. In terms of Contractor Connection, our network was also very busy from Sandy in the fourth quarter and took more than 10,000 case referrals. We have had good growth in this business in the fourth quarter and the past year and have attracted a number of significant new consumer commitments that will be going live in the first quarter of 2013. In our casualty product line, we also saw growth in claims in quarter 4. This arises from new client wins and an increase in the number of transportation claims. With the retirement of Phil Porter, a 40-year veteran of the company, we are pleased to welcome, as of January 1, David Repinski as our new U.S. P&C CEO. David brings with him an immense amount of experience, which will help him implement our U.S. strategies. With respect to our Canadian business, our fourth quarter was below our expectations due to the continuing benign weather. We have implemented significant cost reductions in the 2012 fourth quarter in order to return this unit to a better operating performance in 2013. The EMEA/AP operations represented 31% of our consolidated revenue for 2012. Our focus over the past few years has been to create a sustainable client revenue base, and we have been successful this year. In the fourth quarter, our revenue grew in the Asia-Pacific region, primarily due to our ongoing response to the Thailand floods and growth in our Australian business. We reported a 10% increase in fourth quarter revenue over the prior year and a year-to-date increase of 8%. Over the past year, we have been implementing a U.K. transformation project and have started to see the benefits of this in our U.K. operations, with a number of significant client wins. Also, we have recruited more global technical service adjustors into the United Kingdom, in line with our global strategy. In our CEMEA operations in the fourth quarter, we saw a significant increase in high-frequency, low-severity claims volumes in several countries. We are very focused on continuing to improve the operating earnings in this region and are making good progress in the effort. Our Broadspire operation, which represented 21% of our consolidated revenue in 2012, reported a small gain for the fourth quarter and year, which is a significant breakthrough. Throughout the year, this business has shown very distinct progress and recovery within a weak economic environment. In this market environment, our worker's compensation claims volume for the year was up 10.3%, and we saw incremental volume from new customer wins. We expect to see continued improvement in Broadspire performance in 2013. In the fourth quarter, we appointed a new head of Sales for Broadspire as well as a new head of Client Analytics. This has been done to capitalize on our penetration of the Fortune 1000 companies. We believe strongly that Broadspire's solid market position, integrated service model and quality of service offer the market a truly competitive product and should be profitable as we move through 2013. We see the increased use of medical management services as an opportunity growing out of increased medical costs in the industry. Broadspire's internal ability to fully integrate all of our services -- claims management, medical management and medical bill review -- give us market-leading capabilities to provide innovative solutions and improve the bottom line for our customers. Our Broadspire strategy is supported by our global footprint. We have branded 24 Broadspire locations in our EMEA/AP segment to support our U.S. global multinational clients, enabling U.S. risk managers to have one point of access to the Broadspire and Crawford organization. As one example, Broadspire is currently handing the DePuy Hip Replacement Recall globally, and we have been chosen to manage requests for reimbursement of costs relating to the voluntary recall of the Stryker Rejuvenate and ABG II Modular-Neck Hip Stems on a worldwide basis. The ability to handle these complex assignments is an indication of our unique ability to leverage our global footprint to service multinational clients. Broadspire is an important contributor to the Crawford product line and global strategy. We are emphasizing the development of new business opportunities with an enhanced value proposition and target-market approach executed by the cross-selling of additional services and balancing our cost base over this period. The trend to outsourcing medical management is a positive for Broadspire. In summary, we remain encouraged by Broadspire's progress in 2012 and are excited about the 2013 prospects. We continue to be very pleased with the Legal Settlement Administration, or LSA, segment revenue and operating earnings this quarter. LSA represented 20% of our 2012 revenue. The fourth quarter results were ahead of our expectations as GCG has been heavily involved in providing administration services in the Deep Water Horizon class action resulting from the Gulf oil settlement. We expect to see solid performance from LSA for the coming year, although at a slightly reduced level. Our black book at the end of the 2012 fourth quarter was very strong, at a record $151.9 million. That concludes my comments on our business segments. Let me now turn to guidance and 2013 focus. On balance, we are seeing positive trends in our businesses and are optimistic about 2013. Our initial guidance for 2013 is as follows: consolidated revenue before reimbursements between $1.05 billion and $1.08 billion; consolidated operating earnings between $85 million and $93 million; consolidated cash provided by operating activities between $65 million and $70 million. After reflecting stock option expense, net corporate interest expense, customer relationship intangible asset amortization expense and income taxes, net income attributable to shareholders of Crawford and Company on a GAAP basis will be between $49 million and $54 million or $0.85 to $0.95 diluted earnings per CRDB share. Our fourth quarter performance reflects a number of encouraging results and trends. We continue to be very encouraged by the performance of GCG and very positive on the directional trend of Broadspire. As always, weather-driven claims volume can provide both positive and negative swings in our operations, which we saw in the fourth quarter in the U.S. and Far East. Looking forward, our goals in 2013 include the following: First, driving operational performance. Both EMEA/AP and Legal Settlement Administration reported very strong results in 2012 on the volumes generated by global weather events and the Deep Water Horizon class action settlement. We expect that the volumes provided by these events will continue into 2013, but at a lower level than in 2012, and we have offered 2013 annual guidance reflecting this expectation. Offsetting those trends, we have the opportunity for substantial improvement in 2 other business segments. Our Americas business reported a strong fourth quarter as claims related to Superstorm Sandy flowed through our operations. We expect this flow to continue into the first part of the coming year. Also, our Broadspire business reported improved results in 2012, moving from a substantial loss to a small operating profit. With cost savings, technology, process improvements and new client wins, we expect to improve Broadspire operating results over the coming year and return this business to a stronger earnings profile while maintaining our reputation for excellent client service. Secondly, strengthening our balance sheet. I'm particularly pleased that the financial base of this company is at its strongest point in many years, with reduced leverage and higher cash generation. Crawford has steadily reduced its borrowings, which have declined by 26% since 2010 to $166.4 million, positioning our business with a leaner and stronger foundation. In 2012, Crawford generated $92.9 million of cash from operations, compared with $36.7 million in 2011, principally due to growth in operating earnings and a continued focus on cash efficiency in all of our operations. We will remain disciplined in our approach to both our balance sheet and cash management and further improving our financial flexibility during the coming year. And third and last, improving total returns to shareholders. Crawford's stronger balance sheet and improved cash generation through operations supports both growth of dividends and continued share repurchases, which enhance shareholders' return. Crawford continued its quarterly dividend payments through the year and paid an additional special dividend of $0.06 per Class A and Class B share in the fourth quarter. In June 2012, our Board of Directors authorized the company to repurchase up to 2 million in shares in either Class A or B stock or both. And that authorization is effective until May 2015. With these actions and improved operating performance, we expect to continue to reward shareholders with increased dividends and share repurchases. Crawford enters 2013 leaner, faster, smarter and stronger. Our excellent worldwide management team is focused on core strategic and operational goals. Our employees understand the value that fosters improved performance for client and shareholders. Our 2012 results are tangible evidence of the benefit of having a diverse portfolio of operations in a volatile market. We expect to continue to expand market share, drive efficiencies and capitalize on the opportunities that present themselves in 2013, reflecting on our strong market position, our ongoing investment in efficiencies and innovative support services and the quality reputation of our business segments. We are optimistic about the opportunities in the coming year. On behalf of the entire management team, I would like to thank our employees for their hard work and dedication and their continuous effort towards exceptional service and improvement. We are encouraged by the range of opportunities in front of us. Our future is vibrant, and I look forward to delivering on our strategies in 2013. Let me also direct you to our corporate website, which has considerable additional information, including a year-in-review video for 2012. Thank you for your time, and we look forward to your questions. Operator, would you please explain the process for asking questions through our audio?

[Operator Instructions] Your first question comes from the line of Mark Hughes with SunTrust.

The legal settlement business, your backlog is up very sharply between Q3 and Q4. Could you give a little more detail on what's supporting that? And then I think you talked about revenue for this year being slightly reduced, perhaps. With that kind of backlog, why would we think a reduction would be in order?

Well, the -- it's Jeff, Mark. The volume has decreased within that unit. We had significant activity in the fourth quarter of last year, and that activity is slowing down over the period. So we've reflected in our guidance that decrease taking place.

The continued strength there, to what extent is that the Deep Water Horizon? How much of it is underlying assignments that -- some of what you've discussed there? How do we think about the sustainability of that going forward?

Hi, Mark. It's Bruce. Within the Deep Water Horizon case, we expect to be involved in that through the conclusion, and we think that it will be a meaningful project for us in '13, although at reduced levels as compared to '12, and ultimately, the revenues from that project, as the revenues from any project that we work on, are going to taper off and then end. We have been named on a couple of other good-sized assignments for that business that are kicking off that are going to help us in '13, and some little drift into '14 as well. So clearly, the results in that business have been driven by the mega event surrounding the Gulf, but even apart from that business -- that particular project, it's a great business with a strong reputation in the marketplace. And they are getting their fair share, or more, of the opportunities that came their way.

The EMEA/AP, the compensation expense, on a relative basis, was very low in the quarter. Were there some awards or bonuses that got paid in this quarter that boosted the profitability?

I'm not quite sure I understand the question. I mean, we had a sharp increase in revenues and relatively flat expenses. A lot of our revenue increase that we've have seen in EMEA/AP in the fourth quarter, as in the third quarter, was related to catastrophic events in the Asia-Pacific region, and we get good leverage off of those events on our existing cost base. So I think what you're seeing is the benefit that we get from large events that happen in the company if we're able to successfully hold our cost levels in line.

Yes. I guess I'm thinking -- I'm just looking, and if I've got these numbers right, revenue was relatively steady on the sequential basis in the fourth quarter, but your compensation expense was down $5 million, little less than that. So it looked like you got some very good leverage on that.

I think the issue is, when we have events happening, Mark, the contribution to the bottom line in volume situations should be at a higher margin. It's having that process set up. You don't have the fixed costs related to any of these catastrophe events, so everything becomes a variable cost, and that's something we're very focused on in the group.

The Sandy, how do you feel about the duration of those assignments? I think you've said in the past that some of these storms, they're happening in a more concentrated time period than they might have in years prior. How is Sandy playing out?

Exactly that way. We've invested a lot of time and money into the management and the operational process of not only catastrophe events, but our standard claim handling. And through the electronic management of claims coming into our corporation, the management of the command center, the logistical management of the adjustors, we have significantly reduced the time and process of the claims. At the end of the year -- well, I'll say as of really yesterday, we're about 90% closed on the assignments that we received for Sandy. And if you think that's about just over 12, 13 weeks out since the event began, that's a very significant change to what used to happen. But a lot of it is technology, a lot of it is working with our clients in advance to ensure that we have got the right processes in place to be able to effectively give the service that both the insured and our client require.

The tax rate for 2013, Bruce, what do you anticipate?

It will be in a range between, say, 32% and 35%.

And then what was the share count in the fourth quarter?

Had about 55,309,000.

And then I will ask one more question. I apologize, though. Broadspire business, how should we think about 2013, both top line and margin? I think you sort of touched on some factors, but how should we think about the growth there?

Well, I think we are winning new accounts. In the first quarter of this year, we've won 3 major accounts, which will be coming onboard February, March time. That follows on from assignments that we won in the fourth quarter of last year. So our reorganization of our sales team, our focus on global account management, cross-selling, is really beginning to start to play off. So we have fairly aggressive targets for our sales team within Broadspire. The improvement in profitability in Broadspire is down to several things: it's down to new sales, it's down to making sure the processes in the operation -- the claims operation are more efficient, and it's, therefore, making sure that we're delivering the products we need to the clients. But the key to it is new revenues, and we see a gain in the year being significant to that organization.

Your next question comes from the line of Adam Klauber with William Blair.

Couple of different questions. In legal settlement, again, you mentioned you had some new assignments. Are you winning some more class actions than you have recently?

We've won a couple of class actions recently. I mean, you'll be aware that the number of class actions being filed have been significantly down, but we are getting our fair share of those available. I mean, I can't go into individual cases, but we are winning claims.

And could you give us a sense on the duration of some of these recent wins? Are they going to be mainly 12-month events, or do you think -- and this is legal settlement again. Do they tend to be more 12-month, or will they span past 12 month?

That's a really difficult question to answer. I mean, a lot of them span multi-years, let alone individual years, and you tend to get a ramp up at the very beginning, when you win these. A great amount of activity takes place in noticing and liaison with the client. And then they sort of drift into a hold situation where it's pure maintenance. That's a difficult question. And then, if events happen during the period, they can spark up again and create additional events that we have to work on for the client. It's really, there's no one answer on that, there's many answers.

And as far as Hurricane Sandy, you mentioned you've already settled 90% of the claims. What percent of commercial claims have you settled?

Well, we've got a number of business interruption claims that are going to take a while to get through the system, obviously, depending on the format of the policies that they're insured under. But we've got -- most of the claim that are outstanding tend to be the high-value, long-term [ph] claims, where we've got our Executive General Adjustors working on them.

So those could span even more than 2013, or do you think most of them will be done in 2013?

Some could go into 2014. I mean, it depends on what the period of restatement is, et cetera, on the policy.

And then as far as your margin, if you look at the EBITDA margin, it's come up nicely over the last couple of years. Is there potential that you can still get further gains over the next 2, 3 years on that EBITDA margin?

Our goal is to have an operating earning margin in excess of 10% across the organization. I would say the answer, simply, is yes to the initial question, but we're working very hard on cost management within each of the business units, on operational efficiencies, and then obviously together with what the pricing programs that we're able to put in place, ensuring that not only we increase the number of clients, but we effectively get paid fairly within that very difficult market. But I think the key to it is that we are wining accounts and that you see the SG&A figure. In the figures that Bruce talked about, we decreased by about $300,000 our SG&A figures over the prior year, yet we increased our revenue significantly, and that is a figure we are very focused on.

Another question in Broadspire, I know you've been ramping up the medical management side to sell that on a third-party basis. Have any sales occurred in that segment?

Yes, absolutely.

And I guess, how is the pipeline looking there on the medical management side?

We have a pipeline we are working on at the moment. We won a large account recently. I can't announce who it is. We haven't finalized the details on it, but hopefully we'll be able to do that in the second quarter. But we have a number of opportunities, and we have won a number of opportunities, so we're quite excited about that.

How would you say the relative margins are on the medical management business versus overall Broadspire?

They're stronger. The medical management margins tend to be much higher than margins for day-to-day claims handling. So that said, in the unbundled market, which is how we characterize it, it's competitive as it is in most of our other markets. So stronger margin potential, but just as competitive a market.

And then you paid down a good chunk of debt in 2012. As you think about cash uses next or this year, you mentioned dividends, potential share repurchases. Are you also looking to buy back a fair amount of debt this year, maybe in similar size that you did in 2012?

We'll look at our priorities for cash, dividend and share repurchases are right up there. We'll have CapEx in call up to $32 million to $33 million range, similar to what we had in '12. We'll take excess cash and look at discretionary pension funding, repayment of debt. There could be small tuck-in acquisitions that are out there that may get paid for in cash, or we could borrow for that. We're pleased with where our leverage ratio is now. We're probably in about the 130% range, 1.3x EBITDA in debt, and that's a comfortable place for us to be. And we may delever a bit more depending on what other alternatives are for that cash. But we feel very good with the strength of our balance sheet right now, and if there are compelling opportunities that present themselves on the M&A front, we wouldn't be opposed to using the strength of our balance sheet in order to pursue them.

[Operator Instructions] And there are no further questions at this time.

Thank you for your time and questions this afternoon. I'd like to thank everyone for joining us and wish you a good rest of the day. Thank you.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6:00 PM today through 11:59 PM on February 25, 2013. The conference ID number for the replay is 94597751. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. Thank you. You may now disconnect.