Lindsey Morden troubles increase on U.S. losses

Adjuster Lindsey Morden (TSX: LM) is reporting increased losses for second-quarter 2003, despite revenue growth in most operations.The Toronto-based company says all segments except its Canadian group reported higher earnings in the quarter, but losses in its U.S. division led to an overall net loss of $2.6 million, or $0.19 per share. This compares with a net loss of $1.7 million, or $0.12 per share, in second-quarter 2002.The company fares better on a year-to-date comparison, with a net loss of $4.6 million, or $0.33 per share, this year versus $9.7 million, or $0.68 per share, last year. However, the first six months of 2002 were impacted by $11.1 million in legal settlement expenses not seen in 2003.The company’s revenue improved on a quarterly and year-to-date basis, up to $113.9 million for the second quarter 2003 (Q-2 2002: $110.0 million), and $225.0 million for the first six months of 2003 (2002: $220.0 million).Operating earnings were down to $1.1 million for the quarter (Q-2 2002: $4.4 million) and $2.9 million for the half-year (2002: $7.4 million).U.S. operations hampered overall performance, with an operating loss of $4.4 million in second-quarter 2003 versus earnings of $0.6 million for the same period last year. This comes from the third-party administration (TPA) operations, including newly-acquired RSKCo. Along with acquisition costs for RSKCo, the company blames poor revenue and the “rehabilitation” of key clients requiring additional servicing costs.The company is now in a negative free cash flow situation, to the tune of $1.8 million, versus positive free cash flow of $0.1 million in the second-quarter 2002.