Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Financial Statements:
Year-to-Date Unaudited Consolidated Statements of Income for the Six-Month
Periods ended June 30, 1996 and June 30, 1995:
(In Thousand of Dollars
Except Share and Per Share Data)
<TABLE>
<S> <C> <C>
1996 1995
Revenues $319,192 $299,512
Costs and Expenses:
Cost of services provided, less reimbursed expenses
of $15,868 in 1996 and $17,073 in 1995 229,996 216,527
Selling, general and administrative expense 54,574 56,075
Total costs and expenses 284,570 272,602
Income Before Income Taxes 34,622 26,910
Provision for Income Taxes 13,963 10,852
Net Income $20,659 $16,058
Earnings Per Share $0.60 $0.46
Weighted Average Shares Outstanding 34,207,508 34,889,009
Declared Dividends Per Share - Class A Common $0.30 $0.29
Declared Dividends Per Share - Class B Common $0.29 $0.27
</TABLE>
(See accompanying notes to condensed financial statements)
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 3
Quarterly Unaudited Consolidated Statements of Income for the Three-Month
Periods ended June 30, 1996 and June 30, 1995:
(In Thousand of Dollars
Except Share and Per Share Data)
<TABLE>
<S> <C> <C>
1996 1995
Revenues $157,629 $150,863
Costs and Expenses:
Cost of services provided, less reimbursed expenses
of $8,089 in 1996 and $8,695 in 1995 113,192 109,844
Selling, general and administrative expense 27,293 29,993
Total costs and expenses 140,485 139,837
Income Before Income Taxes 17,144 11,026
Provision for Income Taxes 6,916 4,446
Net Income $10,228 $6,580
Earnings Per Share $0.30 $0.19
Weighted Average Shares Outstanding 34,104,541 34,851,171
Declared Dividends Per Share - Class A Common $0.150 $0.145
Declared Dividends Per Share - Class B Common $0.145 $0.135
</TABLE>
(See accompanying notes to condensed financial statements)
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 4
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995:
(In Thousands of Dollars)
(Unaudited)
June 30 December 31
1996 1995
<TABLE>
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $45,816 $40,802
Short-term investments, at fair value 2,260 5,596
Accounts receivable, less allowance for doubtful
accounts of $10,611 in 1996 and $10,303 in 1995 113,644 111,636
Unbilled revenues, at estimated billable amounts 64,966 60,486
Prepaid income taxes 8,651 6,115
Prepaid expenses and other current assets 10,641 9,745
Total current assets 245,978 234,380
Property and Equipment:
Property and equipment, at cost: 124,074 121,307
Less accumulated depreciation and amortization (90,326) (84,859)
Net property and equipment 33,748 36,448
Other Assets:
Intangible assets arising from acquisitions, less
accumulated amortization of $8,508 in 1996
and $7,596 in 1995 54,281 55,731
Prepaid pension obligation 42,464 34,243
Other 6,621 6,181
Total other assets 103,366 96,155
TOTAL ASSETS $383,092 $366,983
</TABLE>
(See accompanying notes to condensed financial statements)
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 5
Consolidated Balance Sheets - (Continued)
(In Thousands of Dollars)
(Unaudited)
June 30 December 31
1996 1995
<TABLE>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings $9,174 $10,154
Accounts payable 10,837 12,366
Accrued compensation and related costs 33,674 26,764
Other accrued liabilities 35,655 29,394
Deferred revenues 15,653 15,504
Current installments of long-term debt 797 872
Total current liabilities 105,790 95,054
Noncurrent Liabilities:
Long-term debt, less current installments 8,827 9,412
Deferred income taxes 15,044 14,854
Deferred revenues 11,478 10,498
Postretirement medical benefit obligation 8,270 7,938
Self-insured risks 8,896 7,347
Other 1,827 1,020
Total noncurrent liabilities 54,342 51,069
Shareholders' Investment:
Class A Common Stock, $1.00 par value; 50,000,000
shares authorized; 16,841,441 and 17,229,986
shares issued in 1996 and 1995, respectively 16,841 17,230
Class B Common Stock, $1.00 par value; 50,000,000
shares authorized; 17,249,388 and 17,297,730
shares issued in 1996 and 1995, respectively 17,249 17,298
Retained earnings 193,002 189,294
Cumulative translation adjustment (4,132) (2,962)
Total shareholders' investment 222,960 220,860
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $383,092 $366,983
</TABLE>
(See accompanying notes to condensed financial statements)
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 6
Unaudited Consolidated Statements of Cash Flows for the Six-Month Periods Ended
June 30, 1996 and June 30, 1995:
(In Thousands of Dollars)
1996 1995
<TABLE>
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $20,659 $16,058
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 8,341 8,450
Deferred income taxes 1,214 4,159
Loss on sales of property and equipment 90 246
Changes in operating assets and liabilities:
Short-term investments 3,336 8,790
Accounts receivable, net (2,761) (4,913)
Unbilled revenues (4,728) (817)
Prepaid or accrued income taxes 252 (1,672)
Accounts payable and accrued liabilities 11,672 (9,411)
Deferred revenues 1,130 2,317
Prepaid expenses and other assets (12,011) (18,782)
Net cash provided by operating activities 27,194 4,425
Cash Flows From Investing Activities:
Acquisitions of property and equipment (4,371) (8,004)
Sales of property and equipment 115 92
Net cash used in investing activities (4,256) (7,912)
Cash Flows From Financing Activities:
Dividends paid (10,117) (9,774)
Repurchase of common stock (7,604) (3,512)
Issuance of common stock 330 724
Decrease in short-term borrowings (525) (775)
Increase in long-term debt 121 336
Net cash used in financing activities (17,795) (13,001)
Effect of exchange rate changes on cash and cash
equivalents (129) 169
Increase (Decrease) in cash and cash equivalents 5,014 (16,319)
Cash and cash equivalents at beginning of period 40,802 38,968
Cash and cash equivalents at end of period $45,816 $22,649
Cash payments for income taxes $13,026 $8,209
</TABLE>
(See accompanying notes to condensed financial statements)
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 7
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements included herein have been prepared
by the Registrant, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These condensed financial statements
should be read in conjunction with the financial statements and related notes
contained in the Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 1995.
In the opinion of management, the condensed financial statements
included herein contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position of the Registrant
as of June 30, 1996, and the results of its operations and cash flows for the
three- and six-month periods then ended.
2. The results of operations for the six-month period ended June, 1996, are
not necessarily indicative of the results to be expected during the balance
of the year ending December 31, 1996.
3. Net income per share is computed by dividing net income by the weighted
average number of shares outstanding during the respective periods. The
effect of common stock equivalents was less than 3% dilutive in both 1996 and
1995 and, therefore, the effect on primary earnings per share has not been
shown.
4. The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents for purposes of the
statements of cash flows.
5. Certain reclassifications of prior year amounts have been made in the
accompanying balance sheets to conform to the current year presentation. In
addition, costs associated with the Company's distributed branch computer
network totaling $11.4 million and $11.3 million for the respective 1996 and
1995 six-month periods, and $5.7 million and $5.6 million, respectively for
the 1996 and 1995 second quarter, were reclassified from selling, general and
administrative expenses to costs of services provided in the accompanying
statements of income.
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 8
PART 1 - FINANCIAL INFORMATION - (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
The Company's current assets at June 30, 1996, exceeded current liabilities
by $140.2 million, a slight increase from the working capital balance at
December 31, 1995. Cash and cash equivalents at June 30, 1996, totaled $45.8
million, an increase of $5.0 million from the balance at the end of 1995.
Short-term investments totaled $2.3 million at June 30, 1996, decreasing from
$5.6 million at December 31, 1995. Cash was generated primarily from
operating activities, while the principal uses of cash were for dividends
paid to shareholders, repurchases of common stock and acquisitions of property
and equipment. At June 30, 1996, the ratio of current assets to current
liabilities was 2.3 to 1 compared with 2.5 to 1 at the end of 1995.
During the first quarter of 1996, the Company completed its 1994 share
repurchase program and, under that program, has reacquired 1,165,900 shares
of its Class A Common Stock and 836,500 shares of its Class B Common Stock at
an average cost of $15.76 and $15.65 per share, respectively. Additionally,
during March of 1996, the Company announced a second share repurchase program
to acquire up to an aggregate of 2,000,000 shares of its Class A or Class B
Common Stock through open market purchases. Through June 30, 1996, the
Company has reacquired 124,000 shares of its Class A Common Stock and 37,000
shares of its Class B Common Stock at an average cost of $15.38 and $15.55
per share, respectively.
The Company maintains credit lines with banks in order to meet seasonal
working capital requirements of its foreign subsidiaries or other financing
needs that may arise. Short-term borrowings outstanding as of June 30, 1996,
totaled $9.2 million, as compared to $10.2 million at the end of 1995. The
Company believes that its current financial resources, together with funds
generated from operations and existing and potential long-term borrowing
capabilities, will be sufficient to maintain its current operations.
The Company does not engage in any hedging activities to compensate for the
effect of exchange rate fluctuations on the operating results of its foreign
subsidiaries. Foreign currency denominated debt is maintained primarily to
hedge the currency exposure of its net investment in foreign operations.
Shareholders' investment at June 30, 1996 was $223.0 million, compared with
$220.9 million at the end of 1995. Long-term debt totaled $8.8 million at
June 30, 1996, or approximately 4.0% of shareholders' investment.
Results of Operations
Revenues for the first half of 1996 were $319.2 million, increasing 6.6% from
the $299.5 million for the same period in 1995. Second quarter 1996 revenues
were $157.6 million, an increase of 4.5% compared with $150.9 million for the
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 9
Results of Operations - (Continued)
same period in 1995. Unit volume, measured principally by chargeable hours,
increased 4.6% and 1.8% during the first six months and second quarter of
1996, respectively. These increases were complemented by changes in the mix
of services and in the rates charged for those services, the combined effects
of which increased revenues by approximately 2.0% in the first half of 1996
and 2.7% in the second quarter.
The percentage of revenue derived from each of the Company's principal service
categories is shown in the following schedule:
Six-Month Period Three-Month Period
Ended June 30 Ended June 30
1996 1995 1996 1995
<TABLE>
<S> <C> <C> <C> <C>
Domestic Claims Services (including
Risk Management Services) 73.3% 71.9% 73.2% 71.3%
Domestic Disability Management
Services 13.9 16.1 13.9 15.5
International Operations 12.8 12.0 12.9 13.2
100.0% 100.0% 100.0% 100.0%
</TABLE>
Domestic revenues from claims services to insurance companies and risk
management services to self insured clients totaled $233.8 million for the
first half of 1996, increasing 8.5% over the $215.5 million reported in 1995.
Second quarter 1996 revenues totaled $115.4 million, an increase of 7.3% over
related 1995 revenues of $107.5 million. These increases are largely due to
an increase in weather-related claims resulting from the severe weather in
the United States during the first half of 1996, offset by continued weakness
in the domestic self-insured corporate market where revenues are substantially
unchanged compared to related prior year periods. Revenues from services
provided to an insurance holding company and its subsidiaries continued to
decline, from 12% of total revenues in 1995 to 10% in 1996. However, this
decline has been offset by services provided to other major insurers and
self-insured entities who have outsourced their claims services to the Company.
Total revenues from domestic claims services include $17.4 million produced
in the first six months of 1996 by the Company's catastrophe adjusters,
increasing $2.1 million over the first half of 1995. This increase reflects
the impact of winter storm related losses, as well as the completion of
Hurricane Opal property claims during the 1996 first quarter. In the second
quarter of 1996, revenues produced by the Company's catastrophe adjusters
totaled $9.0 million, as compared to $9.1 million in the 1995 second quarter.
Domestic revenues from disability management services, which serves both the
insurance company and self-insured markets, totaled $44.5 million for the
first half of 1996, a decrease of 7.7% from related 1995 revenues of $48.2
million. For the second quarter these revenues were $21.9 million,
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 10
Results of Operations - (Continued)
decreasing 6.7% from the $23.5 million reported in 1995. These declines
reflect the continued strong competition in the self-insured corporate market.
Revenues from the Company's international operations were $40.9 million in the
first half of 1996, a 14.2% increase over the $35.8 million for the same
period in 1995. This increase, largely generated during the 1996 first
quarter, is primarily due to the increase in claims volume from the harsh
winter experienced in the United Kingdom and the completion of Hurricanes Luis
and Marilyn property claims in the Caribbean. Second quarter 1996 revenues
totaled $20.3 million, increasing 2.0% over related 1995 revenues of $19.9
million.
The Company's most significant expense is the compensation of its employees,
including related payroll taxes and fringe benefits. Such expense
approximated 63.8% of revenues in the first half of 1996, unchanged from the
first six months of 1995, and 62.5% of revenues in the current quarter as
compared to 64.4% of second quarter 1995 revenues. Second quarter 1996
compensation expense increased only 1.4% over 1995 related costs, while
revenues increased 4.5% in the quarter.
Expenses other than compensation and related payroll taxes and fringe benefits
approximated 25.4% of revenues for the first six months of 1996, compared to
27.2% of revenues for the same period in 1995, and 26.6% of second quarter 1996
revenues, as compared to 28.3% of related 1995 revenues. As a result of the
Company's cost control efforts, such expenses declined .5% and 1.7% for the
six-month period and second quarter, respectively, while revenues increased
6.6% and 4.5%, respectively, over the related 1995 periods.
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 11
Review by Independent Public Accountants.
Arthur Andersen LLP, independent public accountants, has performed a review of
the interim financial information contained herein in accordance with
established professional standards and procedures for such a review and has
issued its report with respect thereto (see page 12).
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
Crawford & Company:
We have made a review of the accompanying condensed consolidated balance
sheet of CRAWFORD & COMPANY (a Georgia corporation) AND SUBSIDIARIES as of
June 30, 1996 and the related condensed consolidated statements of income for
the three-month and six-month periods ended June 30, 1996 and 1995 and the
related condensed consolidated statements of cash flows for the six-month
periods ended June 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of obtaining an understanding of
the system for the preparation of interim financial information, applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Crawford & Company and
subsidiaries as of December 31, 1995, and the related consolidated statements
of income, shareholders' investment and cashflows for the year then ended
(not presented separately herein), and in our report dated January 30, 1996, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1995 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
/s/Arthur Andersen LLP
Atlanta, Georgia
August 9, 1996
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 18, 1996, the Registrant held its Annual Meeting of
Shareholders. At the Annual Meeting, the Class B Shareholders,
the only class entitled to vote at the meeting, voted on (i) the
election of ten (10) directors for a one year term, (ii)
ratification of the 1996 Employee Stock Purchase Plan and (iii)
ratification of the selection of Arthur Andersen LLP as the
Registrant's auditor for the year ending December 31, 1996. The
results of that voting are as follows:
Election of Directors
<TABLE>
<S> <C> <S>
Name Votes For Votes Withheld
Virginia C. Crawford 16,306,736 96,254
Dennis A. Smith 16,313,974 89,016
Forrest L. Minix 16,312,519 90,471
J. Hicks Lanier 16,312,736 90,254
Charles Flather 16,312,736 90,254
Jesse S. Hall 16,312,586 90,404
Linda K. Crawford 16,302,940 100,050
Jesse C. Crawford 16,314,715 88,275
Larry L. Prince 16,312,536 90,454
John A. Williams 16,315,736 87,254
</TABLE>
Ratification of 1996 Employee Stock Purchase Plan
Votes For Votes Against Abstain Broker No Vote
14,545,996 120,528 298,113 1,438,353
Ratification of Appointment of Auditors
Votes For Votes Against Abstain
16,392,642 7,125 3,223
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
15.1 Letter from Arthur Andersen LLP
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the period
covered by this report.
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Crawford & Company
(Registrant)
Date: August 9, 1996 /s/D. A. Smith
D. A. Smith
Chairman of the Board and
Chief Executive Officer
Date: August 9, 1996 /s/D. R. Chapman
D. R. Chapman
Executive Vice President - Finance
(Principal Financial Officer)
Date: August 9, 1996 /s/J. F. Giblin
J. F. Giblin
Vice President and Controller
(Principal Accounting Officer)
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 16
INDEX TO EXHIBITS
Exhibit No. Description Sequential Page No.
15.1 Letter from Arthur Andersen LLP 17
27.1 Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000025475
<NAME> CRAWFORD & COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 45,816
<SECURITIES> 2,260
<RECEIVABLES> 189,221
<ALLOWANCES> 10,611
<INVENTORY> 0
<CURRENT-ASSETS> 245,978
<PP&E> 124,074
<DEPRECIATION> 90,326
<TOTAL-ASSETS> 383,092
<CURRENT-LIABILITIES> 105,790
<BONDS> 8,827
0
0
<COMMON> 34,090
<OTHER-SE> 188,870
<TOTAL-LIABILITY-AND-EQUITY> 383,092
<SALES> 0
<TOTAL-REVENUES> 319,192
<CGS> 0
<TOTAL-COSTS> 229,996
<OTHER-EXPENSES> 54,574
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 34,622
<INCOME-TAX> 13,963
<INCOME-CONTINUING> 20,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,659
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>
Form 10-Q Crawford & Company
Quarter Ended June 30, 1996 Page 17
Exhibit 15.1
To the Stockholders and
Board of Directors of
Crawford & Company:
We are aware that Crawford & Company has incorporated by reference in its
previously filed Registration Statement File No. 2-78989, Registration
Statement File No. 33-22595, Registration Statement File No. 33-47536,
Registration Statement File No. 33-36116, and Registration Statement File No.
333-2051, its Form 10-Q for the quarter ended June 30, 1996, which includes
our report dated August 9, 1996 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities
Act of 1933 (the "Act"), that report is not considered a part of the
Registration Statement prepared or certified by our firm or a report prepared
or certified by our firm within the meaning of Sections 7 and 11 of the Act.
/s/Arthur Andersen LLP
Atlanta, Georgia
August 9, 1996
