Crawford & Company's CEO Discusses Q1 2013 Results - Earnings Call Transcript

May. 6.13 | About: Crawford & (CRD.B)

Crawford & Company (NYSE:CRD.B)

Q1 2013 Earnings Call

May 6, 2013 3:00 p.m. ET

Executives

Allen Nelson - Executive Vice President, General Counsel and Chief Administrative Officer

Jeffrey Bowman - President and Chief Executive Officer

Bruce Swain - Executive Vice President and Chief Financial Officer

Analysts

Mark Hughes - SunTrust Robinson Humphrey

Adam Klauber - William Blair and Company

Operator

Good afternoon. My name is Laurie and will be your conference facilitator today. At this time I would like to welcome everyone to the Crawford & Company first quarter 2013 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. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (Operator Instructions)

As a reminder this conference is being recorded today, Monday, May 06, 2013. Now I would like to introduce, Allen W. Nelson, Crawford & Company's General Counsel and Chief Administrative Officer.

Allen Nelson

Thank you, Laurie. Some of the matters to be discussed in the 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 maybe 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, reflect events or circumstances occurring on or 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 or 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, 2012, filed with the Securities and Exchange Commission, particularly the information under the heading, business risk factors, legal proceedings and management's discussion and analysis of financial conditions and results of operations, as well as subsequent company's filings with the SEC.

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. Jeff Bowman, President and Chief Executive Officer of Crawford & Company. Jeff, you may begin the conference.

Jeffrey Bowman

Thanks, Allen. 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 first quarter 2013 results. Bruce will then review the first quarter financials in more detail which will be followed a review of our business performance, comments on our strategic initiatives, and conclude with our corporate focus and our current 2013 guidance.

I am pleased that our first quarter was an improvement over the 2012 results and generally in line with our initial expectations. As reported this morning, our first quarter 2013 revenues increased 7% over 2012, reflecting continued improved performance in our EMEA, AP and legal settlement administration segment results, and the benefit of handling claims from super storm sandy which arose in the 2012 fourth quarter in our Americas segment.

Consolidated operating earnings grew 25% over 2012 as earnings from our Americas, LSA and EMEA, AP segments improved. On a GAAP basis, our net income increased 61% during the quarter. Within the Americas segment, our U.S. property and casualty business benefitted from the continued completion of super storm Sandy claims. Together, with ongoing cost control measures as well as the implementation of innovative technology, this helped U.S. property and casualty generate strong [profit] improvement over the 2012 first quarter.

We have seen claim assignments increase over the 2012 first quarter in both Canada and the USA. I will get into more detail in the business unit review. Our EMEA, AP segment results saw improvement in our core UK and CEMEA operations during the quarter, as a result of the business transformation project in the UK and initiatives to manage our cost base first implemented in 2012. We also continued to benefit from the claims handling due to the 2011 catastrophic flood losses in Thailand which are beginning to wind down.

In the Broadspire segment, we recorded an operating loss for the 2013 first quarter due to lower medical management reserves and reduced workers' compensation claims volumes. While these results are below our expectations, our plans to produce sustainable improved quarterly results are on track and our expectations are good for the second quarter and the balance of the year. During the 2013 quarter, we implemented a new software systems in our medical bill review unit, which we expect to improve our market leading product offering and provide tangible benefits to our clients.

I would also like to point out that Broadspire's new sales closure rate and client retention remained strong this year. We remain focused on delivering stronger operating performance in this business and are optimistic that we will show improvement that is both meaningful and sustainable during the remainder of the year. During the 2013 first quarter, our legal settlement administration segment continued to be engaged in responding to the Deepwater Horizon class action settlement. This quarter we secured a number of other meaningful class action and bankruptcy matters and finished the quarter with a very strong backlog of $135 million.

That concludes my initials remarks and I would discuss the business unit operations after Bruce has reviewed the financials. Bruce, would you please review the company's overall financial performance in the first quarter?

Bruce Swain

Companywide revenues before reimbursements in the 2013 first quarter were $286.3 million, up 7% from $267.8 million in the prior year's first quarter. Our handling of claims from super storm Sandy in the Americas segment and strong results in or legal settlement administration and EMEA, AP segments drove this improvement. Our net income attributable to Crawford & Company totaled $9.7 million in the 2013 first quarter, up 61% over the $6.1 million in the 2012 period.

First quarter 2013 diluted earnings per share were $0.18 for CRDA and $0.17 CRDB, compared to diluted earnings per share of $0.12 for CRDA and $0.11 for CRDB in the 2012 period. Consolidated operating earnings, a non-GAAP financial measure, totaled $18 million for the 2013 first quarter, up 25% over the $14.4 million reported in the 2012 first quarter. During the prior year first quarter, the company recorded a special charge of $0.9 million related to a project to outsource certain aspects of our U.S. technology infrastructure. There were no special charges during the 2013 first quarter.

Included in other income for the 2013 first quarter was a $2.3 million gain from the sale of the rights to a customer contract in Latin America. This amount is included in the Americas segment operating earnings. The company's selling, general and administrative expenses or SG&A totaled $59 million or 20.6% of revenues in the 2013 first quarter, up from $55.7 million or 20.8% of revenues in the prior year quarter primarily due to an increase in non-continuing professional fees.

Since 2011, the company has 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 due to the two class method of computing EPS as required by current accounting guidelines. 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 $84.2 million in 2013 first quarter, up 9% from the $77.5 million reported in last year's quarter. This increase was primarily due to the completion of claims from super storm Sandy. Operating earnings in our Americas segment were $3.2 million in the 2013 first quarter, or 4% of revenues. This is compared to an operating loss of $0.5 million in the prior year quarter. Revenues generated by our catastrophe adjusters in the U.S. totaled $10.8 million in the 2013 first quarter, increasing from $3.7 million in the 2012 quarter. The increase in revenues was due to the carryover of super storm Sandy related catastrophe cases into 2013.

EMEA, AP revenues increased 7% in the 2013 first quarter to $87.6 million, from $81.8 million in the 2012 period. Our revenue improvement reflects catastrophe related increases in our Asia Pacific region, primarily in Thailand and Australia and growth in CEMEA. EMEA, AP operating earnings increased $6.8 million during the 2013 quarter, an increase of 22% over last year's first quarter operating earnings of $5.6 million. The operating margin in this segment was 8% in the 2013 quarter, increasing from 7% from the 2012 first quarter.

Revenues from our Broadspire segment decreased to $57.8 million in the 2013 first quarter, down 4% from $60.4 million in the prior year quarter. The revenue decline reflects lower medical management revenues and a decrease in workers compensation claims. Broadspire recorded an operating loss of $1.8 million or negative 3% of revenues in the 2013 first quarter, declining from breakeven operating performance in the 2012 first quarter. Legal settlement administration revenues comprised of class action and bankruptcy claims administration services, as well as significant special project revenues totaled $56.7 million in the 2013 first quarter, increasing 18% from $48.1 million in the prior year quarter.

While we continue to be heavily engaged in the Deepwater Horizon special project, this revenue increase was largely related to our work on a number of other meaningful class action and bankruptcy matters during the quarter. Operating earnings totaled $12 million in the 2013 first quarter or 21% of revenues, as compared to $10.7 million or 22% of revenues in the prior year period. Legal settlement administration continues to have a strong backlog of projects awarded, totaling $135 million at March 31, 2013, as compared to $105 million at March 31, 2012.

Our cash and cash equivalent position at March 31, 2013 totaled $59.4 million as compared to $71.2 million at December 31, 2012. Our investment in unbilled billed receivables has increased by $14.4 million during the 2013 primarily as a result of growth in legal settlement administration in EMEA AP. Our pension liabilities decreased by $4.8 million reflecting cash contributions during the 2013 first quarter. Our total debt has increased in 2013 by $38.7 million reflecting our usual heavy cash usage in the first part of the year to fund incentive compensation payments, retirement plan contributions, and other costs, traditionally incurred at the start of the year.

Cash used in operations totaled $41.4 million for the 2013 first quarter, compared to $38.2 million used in operations in the prior year period. The company's operating cash needs typically peak during the first quarter and decline during the balance of the year. Free cash flow declined in the 2013 first quarter by $1.3 million from the 2012 period. Back to you Jeff.

Jeffrey Bowman

Thanks, Bruce. Results for the first quarter improved over the same quarter last year. Revenue increased by 7% and we saw improvement in our EMEA, AP business unit through the execution of cost reduction and business transformation programs in the UK. Operating earnings improvement in the Americas and the EMEA, AP are largely related to our response to global catastrophe. Our ability to respond rapidly and efficiently with both highly qualified people and advanced technology affirms our leadership position in our industry and demonstrates our capability to handle major events globally.

An important part of our strategy is investing in technology, innovation to deliver process improvement and increase speed, automation and analytics. These are all factors that our clients demand of us on a global, regional and local basis. We have also recruited teams into the specialty markets business in marine, aviation, and offshore energy. The recent acquisition of a controlling interest in the Lloyd Warwick International Corporation was a part of that strategy.

Our consolidated revenue improvement for the quarter reflected a 6% increase in cases over the first quarter of 2012. We saw case increases in the U.S., CEMEA and Broadspire's casualty business, with particular growth in U.S. catastrophe cases primarily as a result of super storm Sandy. We continue to be focused on strengthening our balance sheet through disciplined operating processes in our accounts receivable and unbilled revenue.

Let me now turn to the outlook for each of our business units. Starting with the Americas segment, which represents a 29% of our overall consolidated revenue for the quarter. Overall performance in both revenue and operating earnings improved greatly over the first quarter of 2012, as the Americas business continues to benefit from claims related to super storm Sandy. We were pleased with our response to Sandy, which hit on October 29, 2012. Crawford engaged approximately 600 adjusters and staff adjustors and staff during the peak in managing approximately 3% to 4% of the total property claims related to the storm. We currently have about 2,400 super storm Sandy claims open and active.

The completion of claims generated by Sandy and the one time gain from the sale of the customer contract in Latin America drove our operating earnings in the segment, which swung from a small loss in 2012 to a profit of $3.2 million this quarter. Also of note was that the contractor connection grew more than 30% in assignments, and revenue over the first quarter of 2012 with both current and new insurer and consume clients being contracted. Our contracted connection network was also very busy from Sandy in the first quarter and took more than 10,000 case referrals.

We have had a very good growth in this business in the first quarter and had a number of new consumer commitments go live in the first quarter of 2013. We also introduced a new service offering in accident and health and credit claims processing with a major insurer. This service is called Crawford Affinity, and I would note, it is a non-weather dependent product line. With respect to our Canadian business, our first quarter improved over the prior year. During the first quarter we won several large accounts from competitors which are being implemented in the second quarter. In addition, we have executed a number of cost reduction initiatives to achieve better operating margins over the remainder of the year.

The EMEA AP operations represented 31% of our consolidated revenues for the first quarter of 2013. In the first quarter our revenues grew in the Asia Pacific region primarily due to our ongoing response to the Thailand flood and growth in our Australian business. We successfully reported increases in first quarter revenue, operating earnings, and margins over the prior year in this segment. During 2012 we implemented a UK business transformation project and hence started to see the benefits of this in our UK operations during 2013. Our strategy has been to maintain our market share whilst changing the UK business mix and repositioning our casualty business to respond to market changes.

We have recruited more global technical services adjustors into the United Kingdom, in line with our global strategy to expand specialty markets. In our CEMEA operation in the first quarter, we saw a significant increase in higher frequency, low severity claims volumes in several countries. The CEMEA market is a mature, competitive market and we focused our revenue efforts on the third party administration activity, including Broadspire and specialty markets business. We are differentiating our strategy by country and are very focused on continuing to improve the operating earnings margin in this region.

The Asia Pacific division is developing business in an attractive, emerging market which has relatively buoyant economy. Our third party administration business is beginning to grow with a number of accident and health opportunities, where we are working with major insurance carriers and delivering customized claims handling processes. We are also continuing to develop our GTS adjustors in this region as well. Our Broadspire operation which represents a 20% of our consolidated revenues in the first quarter, reported a loss for the quarter as I mentioned earlier.

Although there was a small reduction in workers' compensation claims, we saw overall case volumes increase against the previous year's quarter. Compared to this fourth quarter of 2012, our workers' compensation claims are up 2.8% and total claims are up over 9%. 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 medial management services as an opportunity growing out of increased medical cost in the industry.

Broadspire's internal ability to fully integrate all 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. I cannot stress enough that our Broadspire strategy is supported by our global footprint. Recently at the annual RIMS conference in Los Angeles, we discussed with our clients our proven ability to provide U.S. multinational corporations a global solution. We now have 24 Broadspire locations in our EMEA AP segment to support our U.S. global clients, enabling U.S. risk managers to have one point of access to their global claims programs.

The ability to handle these complex assignments is an indication of our unique ability to leverage our global footprint and service multination 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 targeted market approach, executed by the cross-selling of additional services and balancing our cost base over this period.

During the first quarter, we were pleased with the execution of our sales and marketing plans in this segment. Both new sales wins and client retention were very strong and we have a growing pipeline of opportunities for the remaining quarters of the year. We continue to be very pleased with the legal settlement administration segment or LSA, revenue and operating earnings performance. LSA represented 20% of our first quarter's revenue. The first quarter results were slightly ahead of our expectations as GCG has been heavily involved in continuing to provide administration services in the Deepwater Horizon class action, resulting from the BP settlement.

However, we were pleased that our revenue growth during the quarter was generated from a number of other significant class action and bankruptcy cases, providing more balance to our results. We continue to expect to see a solid performance from LSA for the coming year, although at a reduced level from 2012 as claims activity declines in the Deepwater Horizon class action. Our backlog at the end of the 2013 first quarter was very strong at $135 million.

That concludes my comments on our business segments. Let me turn to our guidance and 2013 focus. After our first quarter results we are seeing positive trends in our business and remain optimistic about 2013. We are therefore reaffirming our guidance for 2013 as follows. Consolidated revenues before reimbursement between $1.05 billion and $1.08 billion. Consolidated operating earnings between $85 million and $98 million. Consolidated cash provided by operating activities between $65 million and $70 million and net income attributable to shareholders of Crawford & Company on a GAAP basis, between $49 million and $54 million or $0.85 to $0.95 diluted earnings per CRDB share.

Our first quarter performance reflects a number of encouraging results and trends. We continue to be very encouraged by the performance of the EMEA AP and legal settlement. I am positive on the directional trend of the Americas. We are also encouraged that the number of new clients we are winning in Broadspire. As always, weather driven claims volumes can provide both positive and negative swings in our operation which we saw in the first quarter in the U.S. and Far East.

Looking forward, our goals in 2013 include the following. Driving operating performance in both EMEA AP and legal settlement administration reported very strong results in the quarter on the volumes generated by global weather events and significant class action settlement. We expect the volumes provided by these events will continue but a lower level than the first quarter. And our 2013 annual guidance reflects that expectation. Offsetting those trends, we have the opportunity for substantial improvement in our two other business segments.

Our Americas business reported an improved first quarter as claims relating to super storm Sandy flowed through the operation. However, we are focused on generating sustainable, profitable known catastrophe related growth in this business. With planned continued cost savings, technology implementation, process improvements and new client wins, we expect to improve Broadspire's operating results over the coming quarters and return this business to a stronger earnings profile while our maintaining our reputation for excellent client service.

To strengthen our balance sheet, we remained disciplined in our approach to both our balance sheet and cash management. This is a fundamental strategy from which we will not waiver. We look at how conservative leverage has a competitive advantage in the marketplace, especially when compared to many of our privately owned peers who have leveraged balance sheets. Our conservative approach to leverage insures that we have the financial flexibility to invest in market leading solutions for our clients and respond to opportunities as they emerge.

Improving total return to shareholders. Crawford's stronger balance sheet and improved cash generation capability supports both growth of dividend and continued share repurchases which enhance shareholders return. Crawford continued its quarterly dividend payments in the quarter and we will continue to see stock repurchase opportunities under our June 2012 stock repurchase plan. With these actions and improved operating performance, we expect to continue to offer meaningful rewards to our shareholders. Crawford continues to make progress in 2013 and worldwide management team is focused on core strategic and operational goals.

Our first quarter results are evidence of the benefit of having diverse operations in a volatile market. We expect to continue to expand market share, invest in technology to deliver operational efficiencies and capitalize on the client opportunities that present themselves in the remainder of 2013. Reflecting on our strong market position, our ongoing investments in the efficiency and innovative support services, and the quality reputation of our business segments, we are optimistic about Crawford's opportunities in the coming year.

Thank you for your time and we look forward to your questions. Operator, will you please explain the process for asking questions to our audience.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Mark Hughes of SunTrust.

Mark Hughes - SunTrust Robinson Humphrey

The Broadspire business developments with case flow contract wins, you think the top line will be back in positive territory when we look at 2Q or later in the year?

Jeffrey Bowman

Yeah, we see some of the miss in the quarter as a timing issue. We have implemented new software. We has some short term pressure loading up some new clients in the medical bill review section, and we see that catching up in the second and third quarters. So we are concerned but we see a very positive situation coming up in medical bill review which was our largest miss in the quarter. Our new sales are ramping up. We have actually at the end of April, already hit our quarter two target and that is good news for the quarters going forward. We have had cost reductions in place as well. We are now beginning to see the benefit of those ring in.

If we look at the workers comp claims, we are down over Q1 '12 but we are up over Q4 '12. And I must admit the down against the Q1 '12 was -- the analysis we saw is, we took on a number of new programs last year in the first quarter, which put that figure up slightly. So we think while our volume is down there is a stabilization and a slight movement upwards. And all the new accounts will really support that.

Mark Hughes - SunTrust Robinson Humphrey

Yeah. How about in the U.S. P&C business? If you take out the storm contribution, how are the margins trending in that business? I think maybe the mix of cases has changed, perhaps. How is that influencing the profitability?

Bruce Swain

Hey, Mark, this is Bruce. We did see in the quarter some contribution from super storm Sandy, obviously. I think as the trend that we have seen in U.S. property and casualty and also our Canadian and UK operations for that matter is, a trend towards higher value claims being outsourced to companies like ours and many of the smaller value claims being handled telephonically or through direct repair facility. So we do see the mix moving more towards more complex claims as compared to where we were several years ago.

Mark Hughes - SunTrust Robinson Humphrey

In the EMEA AP segment, with the Thai flood revenue winding down a bit, how should we think about the top line there in coming quarters? Do you have a more difficult year-over-year comps that it will be hard to be in positive territory? Are new case counts supporting the revenue there? How is that going to shake out?

Bruce Swain

Yeah, one thing, as we think about EMEA AP this year within our guidance, we see EMEA EP is kind of steady as she goes. We expect operating improvement in the UK, and as Jeff mentioned, we had a really kind of a business transformation project that was occurring last year in 2012 in the UK. And they had better results in the first quarter this year and we expect their results to improve as we go through this year. And for our CEMEA, our European operations exclusive of the UK, for those operations to continue to provide good year-over-year figures as they did in the first quarter. That’s going to help make up to the fact that the contribution from the Thai flooding loss is going to diminish as we go throughout this year. So we think that within this segment, the mix of business will substantially offset the loss of the Thai business.

Jeffrey Bowman

And, Mark, on the Thailand issue, I mean we probably got round about 300 files that we are still working on there. And we see that taking approximately the next two quarters to work its way out of the system.

Mark Hughes - SunTrust Robinson Humphrey

Yes. Okay. And then Bruce, the $2.3 million gain, was that this quarter?

Bruce Swain

That was this quarter. That was in the 2013 first quarter.

Mark Hughes - SunTrust Robinson Humphrey

And that was a pretax within the EMEA AP, is that right?

Bruce Swain

No, it was part of the Americas operating earnings.

Mark Hughes - SunTrust Robinson Humphrey

And then was that, so would we assume that was taxed at the 34%?

Bruce Swain

Yeah.

Operator

(Operator Instructions) Your next question comes from the line of Adam Klauber of William Blair.

Adam Klauber - William Blair and Company

The revenue backlog from legal settlement has jumped nicely from $105 million to $135 million. Is the percentage from the Gulf claim, is that materially different now than it was a year ago, of the backlog?

Bruce Swain

I think it's probably fairly comparable.

Adam Klauber - William Blair and Company

Okay. And you alluded to, you've had some new wins there. Which area is that coming from?

Jeffrey Bowman

That’s coming from both the class action arena and the bankruptcy area.

Adam Klauber - William Blair and Company

Okay. So somewhat well spread out?

Jeffrey Bowman

Yeah. I mean we are seeing, if you like, a little bit of rebalancing where we are not as dependent in that business unit on the one project. But we are seeing some significant projects coming in to the division which is very good.

Adam Klauber - William Blair and Company

Okay. Great. And then in Broadspire, you mentioned that you have had some new client wins.

Jeffrey Bowman

Yes.

Adam Klauber - William Blair and Company

So does the ramp up from newer clients, does that ramp up incrementally as that relationship gets older, more seasoned?

Jeffrey Bowman

Yes, it does. I mean some of these new clients wins are quite large. We are bringing them on. There is a period of implementation to get the history loaded up to get the system in place. And some of those are one, two, three months. So we are very positive on both the wins we have had this quarter and the pipeline we have got for the future. We obviously don’t give names of the clients but they are some household names within there.

Adam Klauber - William Blair and Company

Right. But even once these systems are implemented, say the first quarter versus the fourth quarter it's implemented, does business tend to build up as that relationship matures?

Bruce Swain

It does, Adam. This is Bruce. It will build up over, say an 18 month period for a comp program and probably over a shorter period of time if you are just looking at a casualty or reliability program.

Adam Klauber - William Blair and Company

Okay.

Jeffrey Bowman

And Adam, it's still so that cross-selling of services that can go into those organizations as we get involved and may see the wide spectrum of services that we have as an organization and that grows the business as well.

Adam Klauber - William Blair and Company

Okay. And then also, you mentioned A&H, I think once or twice, and it sounds like that's newer potential area for you. Could that be significant and how long will that take to begin to show?

Jeffrey Bowman

Okay. I will turn on for that question in a conservative way. The answer is, yes it is a new business line for us in both the America's organization and the global organization, i.e. EMEA AP as well. We are working with a number of major insurers at the moment, putting in place the [spoke] programs for them, which are dealing with high severity, low value claims. And this is a process driven type of business. And we see this having very good, sticky factor into the organization for the future. And we are very excited about it as we get more and more involved with our clients from there.

Adam Klauber - William Blair and Company

Okay. But it sounds like it will take a little while to....

Jeffrey Bowman

Yeah, I mean this is not a -- clearly it's more a dimmer switch than it is a light switch.

Adam Klauber - William Blair and Company

Right. But it could be significant as we look down a couple years?

Jeffrey Bowman

Hopefully so.

Operator

(Operator Instructions) Your next question is a follow up from Mark Hughes with SunTrust.

Mark Hughes - SunTrust Robinson Humphrey

Updated estimates for cash flow for the year and then pension, how much you expect to contribute this year and what the GAAP pension expense ought to be this year compared to last year, if you could update on those measures.

Bruce Swain

Right. So from operating cash flow we are guiding $65 million to $70 million for this year, and that’s consistent with where we came out last quarter. Our pension contribution, in the U.S. we expect to be $19 million under the requirements of MAP 21. That’s compared to $13 million that we had last year. Our UK cash contributions to our defined benefit plans, they tend to run in the $6 million to $7 million range each year. When we look at our DB expense -- so that’s all the cash side. When you look at the DB expense this year, the expense is down slightly on a consolidated basis compared to last year, I think last year we were at about $3.6 million and this year will be at about $3.3 million. So pretty flat from an expense standpoint but our cash contributions are going to up a bit.

Mark Hughes - SunTrust Robinson Humphrey

Then how about the CapEx, any changes there?

Bruce Swain

I think about $32 million or so. So that’s probably a pretty consistent number going forward.

Operator

At this time there are no further questions. I will now turn the call to Mr. Bowman for any final remarks.

Jeffrey Bowman

Thank you. Thank you everyone for your time and questions this afternoon and I would like thank everyone for joining us. Have a great day and a good week. Thanks very much.

Operator

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6 p.m. today through 11:59 p.m. on May 28, 2013. The conference ID number for the replay is 52975389. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. Thank you and you may now disconnect.

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