<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
---------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF TH
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
-----------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 1-10356.
-------
CRAWFORD & COMPANY
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-0506554
- ---------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
5620 Glenridge Dr., N.E., Atlanta, Georgia 30342
- --------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 256-0830 Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Class A Common Stock - $1.00 Par Value New York Stock Exchange
Class B Common Stock - $1.00 Par Value New York Stock Exchange
- -------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The aggregate market value of the voting stock held by nonaffiliates* of the
Registrant was $147,179,000 as of March 2, 1998, based upon the closing price as
reported on NYSE on such date.
*All shareholders, other than Directors, Executive Officers, and 10% beneficial
owners.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The number of shares outstanding of each of the Registrant's classes of common
stock, as of March 2, 1998, was:
Class A Common Stock - $1.00 Par Value - 23,873,073 Shares
Class B Common Stock - $1.00 Par Value - 25,461,070 Shares
- --------------------------------------------------------------------------------
Documents incorporated by reference:
(1) Annual Report to Shareholders for the Year Ended December 31, 1997, Part I -
Item 2; Part II - Items 5, 6, 7 and 8; Part IV - Item 14, and (2) Proxy
Statement for the Annual Meeting of Shareholders to be held April 23, 1998, Part
III -Items 10, 11, 12, and 13.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Crawford & Company (the "Registrant") is a worldwide insurance services firm
which provides claims adjusting and risk management information services to
insurance companies, self-insured corporations and governmental entities.
The Registrant is not owned by or affiliated with any insurance company. A forty
percent (40%) interest in the Registrant's non-U.S. operating subsidiaries is
owned by a subsidiary of Swiss Reinsurance Company (See "International
Operations", page 6).
DESCRIPTION OF SERVICES
The percentages of consolidated revenues derived from the Registrant's domestic
and international operations are shown in the following schedule:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Domestic Operations 78.9% 87.6% 86.1%
International Operations 21.1% 12.4% 13.9%
---- ---- ----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
DOMESTIC OPERATIONS. Domestic claims services are provided by the Registrant to
two different markets. Insurance companies, which represent the major source of
revenues, customarily manage their own claims administration function, but
require various partial services which the Registrant provides. The Registrant
also services clients which are self-insured or commercially insured through
alternative loss funding methods, and provides them the more complete range of
services they typically require, including the supervision of field locations,
information services and medical cost-containment.
The major elements of domestic claims administration services (which include the
partial services required by most property and casualty insurance company
clients as well as the expanded services required by self-insured clients) are
as follows:
Initial Reporting - the Registrant's XPressLink(SM)
service provides 24- hour receipt, acknowledgement,
---- and distribution of claims information
2
<PAGE> 3
through Electronic Data Interchange, customized
reporting and referral programs, call center
reporting, and facsimile receipt and distribution.
---- Investigation - the development of information
necessary to determine the cause and origin of loss.
---- Evaluation - the determination of the extent and
value of damage incurred and the coverage, liability
and compensability relating to the parties involved.
---- Disposition - the resolution of the claim, whether by
negotiation and settlement, by denial or by other
resolution.
Expanded services provided primarily, but not exclusively, to Registrant's
self-insured clients include the following:
---- Information Services - provides reports of detailed
claims information of both a statistical and
financial nature to self-insured corporations,
governmental entities and insurance companies. The
Registrant's basic information system is SISDATSM,
but the registrant also offers SISDAT+(SM), a risk
management information system which integrates the
basic information provided by the SISDAT(SM) system
with the on- line inquiry and flexible reporting
capabilities of Risk Sciences Group's SIGMA(SM)
system (discussed below).
---- Management - the coordination and supervision of all
parties involved in the claims settlement process,
including the adjusting personnel directly involved
in handling the claim. Typically, this management
function is performed by an independent
administrative unit within the Registrant which is
not involved in the initial investigation of a claim.
---- Auditing Services - the Registrant's provider and
hospital bill audit programs assist clients in
controlling medical costs associated with workers
compensation claims by comparing fees charged by
health care providers and hospitals with maximum fee
schedules prescribed by state workers compensation
regulations as well as usual and customary charges in
non-fee schedule states.
---- Medical Review Services - provides a broad range of
cost containment and utilization review services to
insurance companies, service organizations and
self-insured corporations involved in employee group
health insurance plans. These services, which are
designed to both control the cost and enhance the
efficient delivery of medical benefits, include
pre-admission review of hospitalizations, second
surgical opinions, concurrent hospital utilization
review, discharge planning, and the Early Medical
Management Intervention(SM) (EMMI(SM)) program which
provides services to actively control workers
3
<PAGE> 4
compensation medical and indemnity costs at the onset
of a claim through nurse screening for severity as
claims are received from XPressLink(SM) or directly
from the client. The Registrant also provides a
workers compensation PPO network through First Health
Group.
---- Vocational Services - provides vocational evaluation
in order to assess an injured employee's potential to
return to work. These services involve diagnostic
testing and occupational, personal and motivational
counseling of the employee. The Crawford Occupational
Re-Employment(SM) (CORE(SM)) program enlists the
services of our vocational, medical and employment
consultants to assist in the re-employment and
preparation of injured individuals to return to work.
---- Medical Case Management Services - are typically
provided by rehabilitation nurses who work closely
with attending physicians and other medical personnel
in order to expedite the injured person's physical
recovery and rehabilitation and maximize the
opportunity for the person to return to work. These
services also involve coordinating and monitoring
treatment plans and related costs to insure that such
treatment is appropriate and necessary in the
circumstances.
---- Elder Care - offers a full menu of elder care service
including comprehensive on-site assessments, complete
care coordination and on-going care monitoring. These
services are provided through experienced health care
professionals with an insight to local quality care
needs in Florida and New York to senior citizens and
their children, attorneys and trust officers.
The claims administration services described above are provided to clients for a
variety of different referral assignments which generally are classified as to
the underlying insured risk categories used by insurance companies. The major
categories are described below:
---- Automobile - relates to all types of losses involving
use of the automobile. Such losses include bodily
injury, physical damage, medical payments, collision,
fire, theft and comprehensive liability.
---- Property - relates to losses caused by physical
damage to commercial or residential real property and
certain types of personal property. Such losses
include those arising from fire, windstorm, or hail
damage to commercial and residential property,
burglary, robbery or theft of personal property and
damage to property under inland marine coverage.
---- Workers Compensation - relates to claims arising
under state and federal workers compensation laws.
4
<PAGE> 5
---- Public Liability - relates to a wide range of
non-automobile liability claims such as product
liability, owners, landlords and tenants' liabilities
and comprehensive general liability.
---- Catastrophe - covers all types of natural disasters,
such as hurricanes, earthquakes and floods, and
man-made disasters such as oil spills, chemical
releases, and explosions, where the Registrant
provides specially trained catastrophe teams to
handle claims, as well as to manage the recovery
efforts.
---- Class Action Support - relates to the administration
and field inspection requirements with respect to
product liability class action settlements.
ADDITIONAL RISK MANAGEMENT AND OTHER SERVICES. The Registrant provides the
following additional risk management and other related services, which support
and supplement the claims and casualty risk management services offered:
---- RISK SCIENCES GROUP, INC. - is a software
applications and consulting firm which is a
wholly-owned subsidiary of the Registrant. Risk
Sciences Group (RSG) provides customized
computer-based information systems and analytical
forecasting services to the risk management and
insurance industry. It manages the Registrant's basic
information systems SISDAT(SM) and SISDAT+(SM), and
has developed the SIGMA(SM) system, an on-line risk
management information system which supports multiple
sources of claims, locations, risk control, medical,
litigation, exposure and insurance policy
information. RSG serves a variety of clients with
specialized computer programs for long-term risk
management planning; data and systems integration;
development of historical claims/loss databases;
claims administration and management; regulatory
reporting; insurance and risk management cost
control; and actuarial and financial analysis
required for loss forecasting, reserve estimation and
financial reporting.
---- EDUCATION SERVICES - are provided by the Registrant's
Learning & Resource Center, whose principal objective
is to provide technical and management training to
the Registrant's employees in order to assure
consistent quality in the delivery of services to
clients. In addition, the Learning & Resource Center
markets its classrooms and correspondence courses in
many risk management subjects to outside clients.
5
<PAGE> 6
INTERNATIONAL OPERATIONS. International operations provided 21.1% of the
Registrant's 1997 revenues. In December 1996, an English subsidiary of the
Registrant (renamed Crawford-THG Limited) acquired all of the non-United States
operations of the Thomas Howell Group, a London, England based international
loss adjusting enterprise owned by a subsidiary of Swiss Reinsurance Company of
Zurich, Switzerland, which received stock in Crawford-THG Limited as
consideration for the transfer. Concurrently, all of the Registrant's non-U.S.
subsidiaries were transferred to Crawford-THG Limited, in which Registrant now
has a sixty percent (60%) interest and Swiss Reinsurance Company's subsidiary
has a forty percent (40%) interest.
Non-North American revenues and expenses were reported on a three-month delayed
basis until 1995. Such revenues and expenses are now reported on a two-month
delayed basis and, accordingly, the Registrant's December 31, 1997, 1996 and
1995 consolidated financial statements reflect the non-North American financial
position as of October 31, 1997, 1996 and 1995 and the results of non-North
American operations and cash flows for the 12-month periods ended October 31,
1997 and 1996, and the 13-month period ended October 31, 1995. This change had
no material effect on the Registrant's financial position, results of
operations, or cash flows. Because of the deferred reporting of non-North
American operations, the merger of the international operations of the
Registrant with those of Thomas Howell Group is not reflected in the December
31, 1996 consolidated financial statements.
The major services offered by the Registrant through its U.K. headquartered
international operations doing business outside of the U.S. under the name
Crawford-THG are listed below:
---- Property and Casualty - provides loss adjusting
services for property, general liability,
professional indemnity for directors and officers,
product liability and medical malpractice.
---- Oil, Energy & Engineering - provides loss adjusting
for oil, gas, petrochemicals, other energy risks,
utilities and mining industries, as well as marine
and off-shore risks.
---- Environmental Pollution - provides cost-containment
and claims management services with respect to
environmental related losses.
---- Construction - provides loss adjusting services under
contractors' all risk, engineering all risk, and
contractors' liability coverages. Additionally
evaluates machinery breakdown claims and provides
peripheral services including plant valuation and
loss prevention surveys.
---- Catastrophe - organizes major loss teams to provide
claims management and cost containment services
through proprietary information systems.
---- Marine - provides loss adjusting services for freight
carriers liability, loss investigations, recoveries,
salvage disposal, yacht and small craft, cargo,
container, discharge, draft, general average, load,
trailer and on/off live surveys, ship repairer
liability and port stevedore liability.
6
<PAGE> 7
----- Specie and Fine Art - provides loss adjusting
services under fine art dealers' block and jewelry
and furriers' block policies.
----- Entertainment Industry - provides a broad range of
loss adjusting services for television, commercial
and educational film production, and theater and live
events.
----- Aviation - manages salvage removal and sale and
provides loss adjusting services for hull related
risks, as well as cargo and legal liability, hangar
and airport owners'/operators' liability policies.
----- Banking, Financial and Political Risks - performs
loss adjusting functions under bankers blanket bond,
political risk, and financial contingency policies.
----- Livestock - performs loss adjusting on bloodstock,
liability/equestrian activity.
----- Security Consultancy - performs loss prevention and
bank surveys and adjusts cash-in-transit losses.
----- Reinsurance - provides external audits, portfolio
analyses, and management and marketing research.
Additionally provides underwriting review, cash
control and management of discontinued operations.
----- Medical and Vocational Case Management Services -
provides specialized return to work and expert
testimony services in the employer liability and auto
liability markets.
SERVICE DELIVERY - The Registrant's claims management services are offered
primarily through its more than 400 branch offices throughout the United States
and 300 offices in 50 countries throughout the rest of the world. In 1997 the
Registrant developed a Global Service Center in Atlanta to provide a centralized
claims administration facility which includes all of the services necessary to
handle low severity, high frequency claims in a more timely, cost effective
manner. Additionally, the Registrant is consolidating its U.S. offices in major
metropolitan areas into service centers, to reduce administrative expenses and
enhance the delivery of coordinated services.
The Registrant has branch profit-sharing agreements with most of its branch
managers in the United States under which those managers participate in the
profits of their respective branches. These agreements provide a formula for the
determination of branch office profits and specify the managers' participation
percentage, which is generally 40%.
7
<PAGE> 8
COMPETITION, EMPLOYMENT AND OTHER FACTORS
The claims services markets, both domestically and internationally, are highly
competitive and are composed of a large number of companies of varying size and
scope of services. These include large insurance companies and insurance
brokerage firms which, in addition to their primary services of insurance
underwriting or insurance brokerage, also provide services such as claims
administration, health and disability management, and risk management
information systems, which compete with services offered by the Registrant. Many
of these companies are larger than the Registrant in terms of annual revenues
and total assets; however, based on experience in the market, the Registrant
believes that few, if any, such organizations derive revenues from independent
claims administration activities which equal those of the Registrant.
The majority of property and casualty insurance companies maintain their own
staffs of salaried adjusters, with field adjusters located in those areas in
which the volume of claims justifies maintaining a salaried staff. These
companies utilize independent adjusters to service claims when the volume of
claims exceeds the capacity of their staffs and when claims arise in areas not
serviced by staff adjusters. The volume of property claim assignments referred
to the Registrant fluctuates primarily depending on the occurrence of severe
weather.
The United States insurance industry generally uses internal adjusting personnel
to make automobile claims adjustments by telephone and assigns the limited
function of appraising physical damage to outside service organizations, such as
the Registrant. The Registrant believes that such limited assignments from
automobile insurers may continue, reflecting a perception by insurance companies
that they can reduce adjusting expenses in amounts greater than the higher
losses associated with telephone adjusting. In certain instances, however,
insurers have attempted to reduce the fixed cost of their claims departments by
increasing outside assignments to independent firms such as the Registrant.
As insurance premiums have increased and corporate risk management personnel
have become more aware of alternative methods of financing losses, there has
been a trend toward higher retention levels of risk insurance or implementation
of self-insurance programs by large corporations and governmental
instrumentalities. These programs generally utilize an insurance company which
writes specialized policies that permit each client to select its own level of
risk retention, as well as permit certain risk management services to be
provided to the client by service companies independent of the insurance
company. In addition to providing full claims administration services for such
clients, the Registrant generally provides statistical data such as loss
experience analysis. The services are usually the subject of a contractual
agreement with the specialty insurance company or the self-insured client that
specifies the claims to be administered by the Registrant and the fee to be paid
for its services (generally a fixed rate per assignment within the various risk
classifications).
In addition to the large insurance companies and insurance brokerage firms, the
Registrant competes with a great number of smaller local and regional risk
management services firms located throughout the United States and
internationally. Many of these smaller firms have rate structures that are lower
than the Registrant's, but do not offer the broad spectrum of risk management
services which the Registrant provides and, although such firms may secure
business which has a local or regional
8
<PAGE> 9
source, the Registrant believes its broader scope of services and its large
number of geographically dispersed offices provide it with a competitive
advantage in securing business from national and international clients.
Much of the Registrant's operations are dependent on information technology in
the receipt, processing, disposition and archiving of claims and claim related
information. The Registrant has reviewed its systems and computer software
programs, and believes it will be able to modify or replace those of its systems
which might be impacted by the "Year 2000 problem" associated with the
capability to properly recognize and process date sensitive data beyond year
1999. Much of the Registrant's data is received from or distributed to its
clients and other third parties, and its ability to do so could be impacted by
system problems of those third parties over which the Registrant has no control.
The inability of the Registrant or its major trading partners to modify or
replace the Year 2000 non-compliant systems in a timely manner could have a
material impact on future financial results.
During 1997 and 1996 no single client contributed in excess of 10% of
Registrant's revenues. During 1995, revenues derived from services provided by
the Registrant to American International Group and its subsidiaries ("AIG") were
12% of total revenue. Revenues derived from AIG, an insurance holding company,
principally relate to claims administration services provided under the
high-risk retention programs described above. In addition, the Registrant also
provides disability management services and other risk management services to
AIG. The Registrant believes that its relationships with all its customers,
including AIG, are good.
At December 31, 1997, the total number of full-time employees was 7,656 compared
with 6,844 at December 31, 1996. The Registrant, through its Learning & Resource
Center, provides many of its employees with formal classroom training in basic
and advanced skills relating to claims administration and disability management
services. Such training is generally provided at the Registrant's education
facility in Atlanta, Georgia, although much of the material is also available
through correspondence courses. In many cases, employees are required to
complete these or other professional courses in order to qualify for promotion
from their existing positions.
In addition to this technical training, the Registrant also provides ongoing
professional education for certain of its management personnel on general
management, marketing and sales topics. These programs involve both in-house and
external resources.
ITEM 2. PROPERTIES
The Registrant's home office and educational facilities are owned by the
Registrant and located in Atlanta, Georgia. As of December 31, 1997, the
Registrant leased approximately 575 office locations under leases with remaining
terms ranging from a few months to ten years. The remainder of its office
locations are occupied under various short-term rental arrangements. The
Registrant also leases certain computer equipment. See Note 6 of Notes to
Consolidated Financial Statements included in the Registrant's 1997 Annual
Report to Shareholders filed herewith as Exhibit 13.1, which notes are
incorporated herein by reference.
9
<PAGE> 10
The Registrant owns or leases approximately 2,093 automobiles which are used by
the Registrant's field adjusters and certain of its management personnel in the
United States. Additional vehicles are owned or leased by the Registrant's
foreign subsidiaries for use by field and management personnel.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of the claims administration services business, the
Registrant is named as a defendant in suits by insureds or claimants contesting
decisions by the Registrant or its clients with respect to the settlement of
claims. Additionally, clients of the Registrant have brought actions for
indemnification on the basis of alleged negligence on the part of the
Registrant, its agents or employees in rendering service to clients. The
majority of these claims are of the type covered by insurance maintained by the
Registrant; however, the Registrant is self-insured for the deductibles under
its various insurance coverages. In the opinion of the Registrant, adequate
reserves have been provided for such self-insured risks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for a vote during the fourth
quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the names, positions held, and ages of each of the executive
officers of the Registrant:
<TABLE>
<CAPTION>
Name Office Age
---- ------ ---
<S> <C> <C>
D. A. Smith Chairman, President and Chief Executive Officer 48
A. L. Meyers, Jr. President - Claims Management Services 60
J. R. Bryant Executive Vice President - Business Development 47
D. R. Chapman Executive Vice President - Finance 58
J. F. Osten Senior Vice President - General Counsel & Corporate Secretary 56
B. J. Lobona Senior Vice President - Technology Planning and Development 48
G. P. Hodson Senior Vice President - Strategic Planning and Projects 51
W. L. Beach Senior Vice President - Chief Learning Officer 53
R. S. Elder Group Managing Director, Crawford-THG Limited 48
</TABLE>
Mr. Smith was appointed to his present position effective January 1, 1996. Prior
to January 1, 1996 and since November 1, 1994, he was President and Chief
Operating Officer. From August 1, 1992 to November 1, 1994, Mr. Smith was
President - Claims Services. From January 1, 1991 to August 1, 1992, Mr. Smith
was President of Crawford & Company International, Inc.
10
<PAGE> 11
Mr. Meyers was appointed to his present position effective August 1, 1995. He
had previously retired from the Company in April 1994, after having served as
General Manager of the Registrant's Fairfax, Virginia branch office since 1988.
During the period between his retirement and appointment to his present position
he served as a consultant and operations supervisor for the Registrant.
Mr. Bryant was appointed to his present position effective August 1, 1997. Prior
to August 1, 1997 and since August 1, 1995 he was President - Casualty Risk
Management Services. Prior to August 1, 1995 and since November 1, 1994, he was
President - Claims Services. From January 1, 1993 to November 1, 1994, he was
Vice President - National Sales Manager and from March 1989 to December 1992 he
was Regional Director - RMS for the Registrant's Midwest Region, becoming an
Assistant Vice President on July 1, 1990.
Mr. Chapman and Mr. Osten have been associated with the Registrant in management
capacities for more than five years and have held the positions indicated in the
above table for more than five years.
Mr. Lobona was hired by the Registrant July 1, 1996 as Director - Technical
Planning. He became Vice President - Technical Management February 1, 1997 and
Senior Vice President - Technical Planning and Development, his current
position, August 1, 1997. Prior to July 1996 he was Director, Eastern Operations
for Saros Corporation in Bellevue, Washington.
Mr. Hodson was appointed to his present position in September of 1997. From
April 1996 through August 1997 he was a Vice President in Casualty Operations.
From May 1995 to March 1996 he was the Southeast Regional Manager for the
Registrant, first as an Assistant Vice President and then as a Vice President.
Prior to May 1995 he was General Manager of the Registrant's Ft. Lauderdale,
Florida office.
Mr. Beach was hired by the Registrant as its Chief Learning Officer September
1996. For more than five years prior to that he was a partner of Southern
Consulting Group in Atlanta, Georgia.
Mr. Elder has held his current position since April 1997. Prior to being hired
by Crawford-THG Limited he was employed by G. E. Capital in the U.K. from August
1992 to October 1994 as Managing Director of G. E. Capital Fleet Services U.K.
and from October 1994 to March 1997 as Managing Director of G. E. Capital
Automotive Financial Services U.K.
Officers of the Registrant are appointed annually by the Board of Directors,
except for Mr. Elder who is appointed by the Board of Directors of Crawford-THG
Limited.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The information required by this Item is included on pages 40-41 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 1997
under the caption "Quarterly Financial Data" and is incorporated herein by
reference.
11
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included on page 39 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 1997, under the
caption "Selected Financial Data" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is included on pages 16-20 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 1997
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included on pages 21-41 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 1997
under the captions "Consolidated Statements of Income", "Consolidated Balance
Sheets", "Consolidated Statements of Shareholders' Investment", "Consolidated
Statements of Cash Flows", "Notes to Consolidated Financial Statements", and
"Quarterly Financial Data", and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is included on page 2 under the caption
"Nominee Information" of the Registrant's Proxy Statement for the Annual Meeting
of Shareholders to be held April 23, 1998, and is incorporated herein by
reference. For other information required by this Item, see "Executive Officers
of the Registrant" on pages 10-11 herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included on pages 4-9 under the
captions "Executive Compensation and Other Information", "Report of the Senior
Compensation and Stock Option Committee of the Board of Directors on Executive
Compensation", and "Compensation Committee Interlocks and Insider Participation"
and on page 15 under the caption "Five Year Comparative Stock Performance Graph"
of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held April 23, 1998, and is incorporated herein by reference.
12
<PAGE> 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is included on pages 10-14 under the
caption "Stock Ownership Information" of the Registrant's Proxy Statement for
the Annual Meeting of Shareholders to be held April 23, 1998, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included on page 14 under the caption
"Information with Respect to Certain Business Relationships" of the Registrant's
Proxy Statement for the Annual Meeting of Shareholders to be held April 23,
1998, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
The Registrant's 1997 Annual Report to Shareholders contains the
consolidated balance sheets as of December 31, 1997 and 1996, the
related consolidated statements of income, shareholders' investment and
cash flows for each of the three years in the period ended December 31,
1997, and the related report of Arthur Andersen LLP on the financial
statements. These financial statements and the report of Arthur
Andersen LLP are incorporated herein by reference and included as
Exhibit 13.1 to this Form 10-K. The financial statements, incorporated
by reference, include the following:
----- Consolidated Balance Sheets -- December 31, 1997 and
1996
----- Consolidated Statements of Income for the Years
Ended December 31, 1997, 1996 and 1995
----- Consolidated Statements of Shareholders' Investment
for the Years Ended December 31, 1997, 1996 and 1995
----- Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995
----- Notes to Consolidated Financial Statements -
December 31, 1997, 1996 and 1995
13
<PAGE> 14
2. Financial Statement Schedule
----- Report of Independent Public Accountants as to
Schedule
Schedule
Number
II Valuation and Qualifying Accounts for the Years
Ended December 31, 1997, 1996 and 1995
Schedules I and III through V not listed above have
been omitted because they are not applicable.
3. Exhibits filed with this report.
<TABLE>
<CAPTION>
Exhibit No. Document
<S> <C>
3.1 Restated Articles of Incorporation of the Registrant,
as amended (incorporated by reference to Exhibit 19.1
to the Registrant's quarterly report on Form 10-Q for
the quarter ended June 30, 1991).
3.2 Restated By-laws of the Registrant, as amended.
10.1 * Crawford & Company 1987 Stock Option Plan
(incorporated by reference to Exhibit 28(a) to the
Registration Statement on Form S-8, Registration No.
33- 22595).
10.2 * Amendment to Crawford & Company 1987 Stock Option
Plan (incorporated by reference to Appendix C on page
C-1 of the Registrant's Proxy Statement for the
Special Meeting of Shareholders held on July 24,
1990).
10.3 * Crawford & Company 1990 Stock Option Plan, as
amended (incorporated by reference to Exhibit 10.5 to
the Registrant's annual report on Form 10-K for the
year ended December 31, 1992).
10.4 * Crawford & Company 1997 Key Employee Stock Option
Plan (incorporated by reference to Appendix A on page
A-1 of the Registrant's Proxy Statement for the
Annual Meeting of Shareholders held on April 22,
1997).
10.5 * Crawford & Company 1997 Non-Employee Director Stock
Option Plan (incorporated by reference to Appendix B
on page B-1 of the Registrant's Proxy Statement for
the Annual meeting of Shareholders held on April 22,
1997).
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C>
10.6 * Amended and Restated Supplemental Executive
Retirement Plan (incorporated by reference to Exhibit
10.9 to the Registrant's annual report on Form 10-K
for the year ended December 31, 1993).
10.7 * Crawford & Company 1996 Employee Stock Purchase
Plan (incorporated by reference to Appendix A on page
A-1 of Registrant's Proxy Statement for the Annual
Meeting of Shareholders held on April 18, 1996).
10.8 * Amended and Restated Crawford & Company Medical
Reimbursement Plan (incorporated by reference to
Exhibit 10.9 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.9 * Discretionary Allowance Plan (incorporated by
reference to Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the year ended December 31,
1994).
10.10 * Deferred Compensation Plan (incorporated by
reference to Exhibit 10.11 to the Registrant's Annual
Report on Form 10-K for the year ended December 31,
1994).
11.1 Computation of Basic and Diluted Earnings Per Share
for the year ended December 31, 1997.
11.2 Computation of Basic and Diluted Earnings Per Share
for the year ended December 31, 1996.
11.3 Computation of Basic and Diluted Earnings Per Share
for the year ended December 31, 1995.
13.1 The Registrant's Annual Report to Shareholders for
the year ended December 31, 1997 (only those portions
incorporated herein by reference).
21.1 Subsidiaries of Crawford & Company.
23.1 Consent of Arthur Andersen LLP.
24.1-8 Powers of Attorney.
27.1 Financial Data Schedule. (for SEC use only)
27.2 Financial Data Schedule - Restated year ending 1996. (for SEC use only)
</TABLE>
* Management contract or compensatory plan required to be filed as an
exhibit pursuant to Item 601 of Regulation S-K.
(b) No reports on Form 8-K have been filed during the last quarter of the
year ended December 31, 1997.
(c) The Registrant has filed the Exhibits listed in Item 14(a)(3).
15
<PAGE> 16
(d) Separate financial statements of Crawford & Company have been omitted
since it is primarily an operating company. All subsidiaries included
in the consolidated financial statements are wholly-owned, except
Crawford-THG Limited and its subsidiaries.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date March 27, 1998 By:/s/D. A. Smith
--------------------- ------------------------------------
D. A. SMITH, Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
NAME AND TITLE
--------------
Date March 27, 1998 /s/D. A. Smith
--------------------- ---------------------------------------
D. A. SMITH, Chairman, President and Chief
Executive Officer (Principal Executive Officer)
and Director
Date March 25, 1998 /s/D. R. Chapman
--------------------- ----------------------------------------------
D. R. CHAPMAN, Executive Vice President-
Finance (Principal Financial Officer)
Date March 25, 1998 /s/J. F. Giblin
--------------------- ----------------------------------------------
J. F. GIBLIN, Vice President and Controller
(Principal Accounting Officer)
16
<PAGE> 17
NAME AND TITLE
Date March 27, 1998 *
-------------------- -------------------------------
FORREST L. MINIX, Director
Date March 27, 1998 *
-------------------- -------------------------------
J. HICKS LANIER, Director
Date March 27, 1998 *
-------------------- -------------------------------
CHARLES FLATHER, Director
Date March 27, 1998 *
-------------------- -------------------------------
LINDA K. CRAWFORD, Director
Date March 27, 1998 *
-------------------- -------------------------------
JESSE C. CRAWFORD, Director
Date March 27, 1998 *
-------------------- -------------------------------
LARRY L. PRINCE, Director
Date March 27, 1998 *
-------------------- -------------------------------
JOHN A. WILLIAMS, Director
Date March 27, 1998 *
-------------------- -------------------------------
E. JENNER WOOD, III, Director
Date March 27, 1998 By /s/Judd F. Osten
-------------------- -----------------------------------------
JUDD F. OSTEN - As attorney-in-fact for the
Directors above whose name an asterisk appears
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
Sequential
Page Number
Exhibit No. Description of Exhibit of Exhibit
----------- ---------------------- -----------
<S> <C> <C>
3.1 Restated Articles of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 19.1 to the
Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1991).
3.2 Restated By-laws of the Registrant, as amended.
10.1 Crawford & Company 1987 Stock Option Plan (incorporated
by reference to Exhibit 28(a) to the Registration Statement on
Form S-8, Registration No. 33-22595).
10.2 Amendment to Crawford & Company 1987 Stock Option Plan
(incorporated by reference to Appendix C on page C-1 of the
Registrant's Proxy Statement for the Special Meeting of
Shareholders held on July 24, 1990).
10.3 Crawford & Company 1990 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.5 to the Registrant's
annual report on Form 10-K for the year ended December 31,
1992).
10.4 Crawford & Company 1997 Key Employee Stock Option Plan
(incorporated by reference to Appendix A on page A-1 of the
Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 22, 1997).
10.5 Crawford & Company 1997 Non-Employee Director Stock
Option Plan (incorporated by reference to Appendix B on page
B-1 of the Registrant's Proxy Statement for the Annual
meeting of Shareholders held on April 22, 1997).
10.6 Amended and Restated Supplemental Executive Retirement
Plan (incorporated by reference to Exhibit 10.9 to the
Registrant's annual report on Form 10-K for the year ended
December 31, 1993).
10.7 Crawford & Company 1996 Employee Stock Purchase Plan
(incorporated by reference to Appendix A on page A-1 of
Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 18, 1996).
</TABLE>
<PAGE> 19
EXHIBIT INDEX
<TABLE>
Sequential
Page Number
Exhibit No. Description of Exhibit of Exhibit
---------- ---------------------- -----------
<S> <C> <C>
10.8 Amended and Restated Crawford & Company Medical
Reimbursement Plan (incorporated by reference to Exhibit 10.9
to the Registrant's annual report on Form 10-K for the year
ended December 31, 1994).
10.9 Discretionary Allowance Plan (incorporated by reference to
Exhibit 10.10 to the Registrant's annual report on Form 10-K
for the year ended December 31, 1994).
10.10 Deferred Compensation Plan (incorporated by reference to
Exhibit 10.11 to the Registrant's annual report on Form 10-K
for the year ended December 31, 1994).
11.1 Computation of Basic and Diluted Earnings Per Share for the
year ended December 31, 1997.
11.2 Computation of Basic and Diluted Earnings Per Share for the
year ended December 31, 1996.
11.3 Computation of Basic and Diluted Earnings Per Share for the
year ended December 31, 1995.
13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 1997 (only those portions incorporated
hereby by reference).
21.1 Subsidiaries of Crawford & Company.
23.1 Consent of Arthur Andersen LLP.
24.1-8 Powers of Attorney.
27.1 Financial Data Schedule (for SEC use only).
27.2 Financial Data Schedule - Restated year ending 1996. (for SEC use only)
</TABLE>
<PAGE> 20
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To Crawford & Company:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in Crawford & Company's annual report
to shareholders incorporated by reference in this Form 10-K and have issued our
report thereon dated January 30, 1998. Our audit was made for the purpose of
forming an opinion of those statements taken as a whole. The schedule listed in
Item 14(a)2 is the responsibility of the Company's management, is presented for
purposes of complying with the Securities and Exchange Commission's rules, and
is not part of the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 30, 1998
<PAGE> 21
SCHEDULE II
CRAWFORD & COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
Balance at Additions Additions Balance
Period Beginning (Deductions) at End
of Period from of
Allowances(2) Period
Charged Charged
to Costs to Other
and Accounts
Expenses (1)
<S> <C> <C> <C> <C> <C>
1997
Deducted in
Consolidated balance
sheets from accounts $11,692 $2,008 $4,596 $(1,494) $16,802
receivable ======= ====== ====== ======= =======
1996
Deducted in
Consolidated balance
sheets from accounts $10,303 $1,025 -- $ 364 $11,692
receivable ======= ====== ======= =======
1995
Deducted in
Consolidated balance
sheets from accounts $10,220 $ 193 -- $ (110) $10,303
receivable ======= ====== ======= =======
</TABLE>
(1) Represents adjustments to allowance for doubtful accounts receivable arising
from acquisitions.
(2) Represents uncollectible accounts written off, net of recoveries.
<PAGE> 1
EXHIBIT 3.2
RESTATED BY-LAWS
OF
CRAWFORD & COMPANY
(reflecting amendments made through April 23, 1998)
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the
shareholders for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held at such place,
either within or without the State of Georgia, on such date, and at such time,
as the Board of Directors or its Executive Committee may by resolution provide,
or if the Board of Directors or Executive Committee fails to provide for such
meeting by action by April 1 of any year, then such meeting shall be held at the
principal office of the Company in Atlanta, Georgia at 11:00 a.m. on the third
Tuesday in April of each year, if not a legal holiday under the laws of the
State of Georgia, and if a legal holiday, on the next succeeding business day.
The Board of Directors may specify by resolution prior to any special meeting of
shareholders held within the year that such meeting shall be in lieu of the
annual meeting.
Section 2. Special Meetings. Except as otherwise provided by
law, special meetings of the shareholders may be called by the Board of
Directors, or its Executive Committee, or by the Chairman of the Board, or by
the President, or by the holders of record of at least one-fourth (1/4) of the
outstanding stock entitled to vote at such meeting. Such meeting may be held in
such place, either within or without the State of Georgia, as is stated in the
call and notice thereof.
Section 3. Notice of Meeting. Written notice of each meeting
of shareholders, stating the date, time and place of the meeting, and describing
the purpose or purposes of the meeting if it is a special meeting, shall be
mailed to each shareholder entitled to vote at such meeting at such
shareholder's address shown on the Company's current record of shareholders not
less than ten (10) nor more than sixty (60) days prior to such meeting. If an
amendment to the Articles of Incorporation, a plan of merger or share exchange,
or a sale of assets of the Company is to be considered at any annual or special
meeting, the written notice shall state that consideration of such action is one
of the purposes of such meeting. A shareholder may waive notice of a meeting
before or after the meeting. The waiver must be in writing, must be signed by
the shareholder entitled to the notice, and must be delivered to the Company for
inclusion in the minutes or filing with the corporate records. A shareholder's
attendance at a meeting (1) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
objects to holding a meeting or transacting business at the meeting, and (2)
waives objection to consideration of a particular matter at the meeting, that is
not within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented. Neither the
business transacted at, nor the purpose of, any meeting need be stated in a
waiver of notice of a meeting, except that, with respect to a waiver of notice
of a meeting at which an amendment to the Articles of Incorporation, a plan of
merger or share exchange, sale of assets, or any other action that would entitle
the shareholder to dissenter's rights, is submitted to a vote of shareholders,
the same material that the Georgia Business Corporation Code would have required
to be sent to the shareholder in a notice of the meeting must
<PAGE> 2
be delivered to the shareholder prior to such shareholder's execution of the
waiver of notice, or the waiver itself must expressly waive the right to such
material.
Notice of any meeting may be given by or at the direction of
the Secretary or by the person or persons calling such meeting, if the Secretary
fails to give such notice within twenty (20) days after the call of a meeting.
No notice need be given of the new date, time or place of reconvening any
adjourned meeting, if the new date, time and place to which the meeting is
adjourned are announced at the adjourned meeting before adjournment, except
that, if a new record date for the adjourned meeting is or must be fixed under
the applicable provisions of the Georgia Business Corporation Code, notice of
the adjourned meeting must be given to persons who are shareholders as of the
new record date.
Section 4. Quorum. A majority in interest of the issued and
outstanding capital stock of the Company entitled to vote at any annual or
special meeting of shareholders and represented either in person or by proxy
shall constitute a quorum for the transaction of business at such annual or
special meeting. Once a share is represented for any purpose at a meeting other
than solely to object to holding the meeting or transacting business at the
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be (under the provisions of the Georgia Business Corporation Code) set for
that adjourned meeting. If a quorum shall not be present, the holders of a
majority of the stock represented may adjourn the meeting to some later time.
When a quorum is present, a vote of a majority of the stock represented in
person or by proxy shall determine any question, except as otherwise provided by
the Articles of Incorporation, these By-laws, or by law.
Section 5. Proxies. A shareholder may vote, execute consents,
waivers and releases and exercise any of his other rights, either in person or
by proxy duly executed in writing by the shareholder. A proxy for any meeting
shall be valid for any adjournment of such meeting.
Section 6. Record Date. The Board shall have power to close
the stock transfer books of the Company for a period not to exceed fifty (50)
days preceding the date of any meeting of shareholders, or the date for payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board may fix in advance a date, not exceeding seventy (70) days
preceding the date of any meeting of shareholders, or the date of the payment of
any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the shareholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case only such shareholders as shall be shareholders of record on the date so
fixed shall be entitled to such notices of, and to vote at, such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the Company after any such record date fixed as aforesaid.
<PAGE> 3
ARTICLE II
DIRECTORS
Section 1. Powers of Directors. The Board of Directors shall
have the management of the business of the Company, and, subject to any
restrictions imposed by law, by the charter, or by these By-Laws, may exercise
all the power of the corporation.
Section 2. Number and Term of Directors. The number of
Directors which shall constitute the full Board shall be eight (8), but the
number may be increased or decreased by amendment of these By-Laws either by the
Board of Directors or by the affirmative vote of a majority of the voting power
of the outstanding stock of the Company entitled to vote generally in the
election of Directors, voting as a class. At each annual meeting the
shareholders entitled to vote thereon shall elect the Directors, who shall serve
until their successors are elected and qualified; provided that the shareholders
entitled to vote thereon at any special meeting may remove any Director, with or
without cause, and may fill any vacancy created thereby. Any vacancy in the
Board of Directors occurring between meetings of the shareholders may be filled
by the vote of a majority of the remaining Directors, though less than a quorum.
Section 3. Meetings of the Directors. The Board may by
resolution provide for the time and place of regular meetings, and no notice
need be given of such regular meetings. Special meetings of the Directors may be
called by the full Board of Directors, by the Executive Committee of the Board
of Directors, by the Chairman of the Board, by the President, or by at least any
two (2) of the Directors. There shall be an annual meeting of the Board of
Directors at the place of and immediately following the annual meeting of
shareholders.
Section 4. Quorum. A majority of the number of Directors fixed
as herein provided or fixed as otherwise provided by law shall constitute a
quorum for the transaction of business at any meeting thereof. If a quorum shall
not be present, a majority of the Directors present at any such meeting may
adjourn the meeting to some later time.
Section 5. Action. When a quorum is present, the vote of a
majority of the Directors present shall be the act of the Board of Directors,
unless a greater vote is required by law, by the Articles of Incorporation or by
these By-Laws.
Section 6. Notice of Meetings. Notice of each meeting of the
Board shall be given by the Secretary by mailing the same at least five (5) days
before the meeting or by telephone or telegraph or in person at least two (2)
days before the meeting, to each Director, except that no notice need be given
of regular meetings fixed by the resolution of the Board. Any Director may waive
notice, either before or after any meeting, and shall be deemed to have waived
notice if he is present at the meeting. If the Secretary fails to give such
notice in the manner specified in the call, within five (5) days after receiving
notice of the call, the person or persons calling such meetings, or any person
designated by him or them may give such notice. Neither the business to be
transacted at or the purpose of any regular or special meeting of the Board need
be specified in the notice or waiver of notice of such meeting.
<PAGE> 4
Section 7. Committees. The Board may by resolution provide for
an Executive Committee and one or more other committees, each consisting of such
Directors as are designated by the Board. Any vacancy in such Committee may be
filled by the Board. Except as otherwise provided by law, by these By-Laws, or
by resolution of the full Board, such Executive Committee shall have and may
exercise the full powers of the Board of Directors during the interval between
the meetings of the Board and wherever by these By-Laws, or by resolution of the
shareholders, the Board of Directors is authorized to take action or to make a
determination, such action or determination may be taken or made by such
Executive Committee, unless these By-Laws or such resolution expressly require
that such action or determination be taken or made by the full Board of
Directors. The Executive Committee, or other Committee, shall by resolution fix
its own rules of procedure, and the time and place of its meetings, and the
person or persons who may call, and the method of call, of its meetings.
Section 8. Compensation. A fee for serving as a Director and
reimbursement for expenses for attendance at meetings of the Board of Directors
or any Committee thereof may be fixed by resolution of the full Board.
Section 9. Qualifications of Directors
(a) Corporate Officers. Except as provided in subsection (c)
below, no person who is or has been an officer of the Company shall be eligible
for nomination or renomination as a member of the Board of Directors of the
Company at any time after the earlier of the following occurrences: (i) such
person has attained the age of seventy (70), or (ii) the second anniversary of
the date of such person's retirement, resignation or removal as an officer of
the Company.
(b) Other Directors. Except as provided in subsection (c)
below, no person shall be eligible for nomination or renomination as a member of
the Board of Directors of the Company at any time after the earlier of the
following occurrences: (i) such person has attained the age of seventy (70), or
(ii) the second anniversary of the termination by retirement of the "Principal
Employment" (as hereinafter defined) of such person. As used herein, the term
"Principal Employment" means the principal employment, professional affiliation
or business activity as set forth in the Company's Proxy Statement dated March
24, 1986 (in the case of directors holding office on April 22, 1986) or the
first Proxy Statement of the Company that contains such information (in the case
of directors first elected after April 22, 1986).
(c) Exceptions. The provisions of subsections (a) and (b)
above shall not apply with respect to any person who, at the time of such
person's nomination or re-nomination as a member of the Board of Directors of
the Company, is the beneficial owner of ten percent (10%) or more of the voting
power of the outstanding stock of the Company entitled to vote generally in the
election of Directors.
Section 10. Honorary Directors. The Board of Directors shall
have the authority to appoint honorary members of the Board of Directors and to
further designate any such honorary member as an "Emeritus" officer of the
Company. It shall not be a requirement that any such honorary member be
qualified to be a member of the Board of Directors. An honorary member shall be
entitled to notice of and attendance at all meetings of the Board of Directors
and to participate in such meetings, except that such honorary member shall have
no voting rights nor shall such honorary member be included in determining a
quorum under Section 4.
<PAGE> 5
ARTICLE III
OFFICERS
Section 1. Officers. The officers of the Company shall consist
of a Chairman of the Board, a corporate President, one or more business unit
Presidents, one or more Vice Presidents, a Secretary, a Comptroller, a
Treasurer, and such other officers or assistant officers as may be elected by
the Board of Directors. Any two (2) or more offices may be held by the same
person. The Board may designate one or more Vice Presidents as Executive Vice
Presidents or Senior Vice Presidents, and may designate the order in which the
Vice Presidents may act.
Section 2. Chairman of the Board. Subject to the control of
the Board of Directors, the Chairman of the Board shall give supervision and
direction to the affairs of the Company, and shall be the chief executive
officer of the Company. He shall preside at all meetings of the shareholders and
of the Board of Directors.
Section 3. Corporate President. The corporate President shall
be the chief operating officer of the Company and shall give general supervision
and administrative direction to the affairs of the Company, subject to the
direction of the Board of Directors and Chairman of the Board.
Section 4. Business Unit President. A business unit President
shall be the chief operating officer of the designated major business unit of
the Corporation, reporting to the Chairman of the Board or the corporate
President, as the Board of Directors shall designate. Business units need not
have a President, and in the absence of such an officer, will be managed by one
or more Vice Presidents.
Section 5. Vice President. A Vice President shall have such
powers and perform such duties as the Board of Directors, corporate President,
or, in the case of the business unit Vice President, as that business unit
President may prescribe. A Vice President shall act in case of the absence or
disability of the corporate President or business unit President. If there is
more than one Vice President, such Vice Presidents shall act in the order of
precedence as set out by the Board of Directors, or in the absence of such
designation, as designated by the corporate President or business unit
President.
Section 6. Treasurer. The Treasurer shall receive and have the
custody of all moneys and securities of the Company, shall pay such dividends as
may be declared from time to time by the Board of Directors, and do and perform
all such duties as may be required of him by its Board of Directors, and such
other duties as usually devolve upon such officers.
Section 7. Comptroller. The Comptroller shall be responsible
for the maintenance of proper financial books and records of the Company.
Section 8. Secretary. The Secretary shall keep the minutes of
the meetings of the shareholders, the Directors, the Executive Committee, and
the other committees of the Board and shall have custody of the seal of the
Company.
<PAGE> 6
Section 9. Assistant Secretaries. The Assistant Secretaries,
in the order of their seniority, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary, and
shall perform such other duties as the Board of Directors shall prescribe.
Section 10. Assistant Treasurers. The Assistant Treasurers, in
the order of their seniority, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall perform such other duties as the Board of Directors shall prescribe.
Section 11. Other Duties and Authorities. Each officer,
employee and agent shall have such other duties and authorities as may be
conferred on them by the Board of Directors and, subject to any directions of
the Board, by the Chairman of the Board, the corporate President, and any
business unit President.
Section 12. Removal. Any officer may be removed at any time by
the Board of Directors and such vacancy may be filled by the Board of Directors.
A contract of employment for a definite term shall not prevent the removal of
any officer; but this provision shall not prevent the making of a contract of
employment with any officer and any officer removed in breach of his contract of
employment shall have a cause of action therefor.
Section 13. Salary. The salaries of all officers of the
Company shall be fixed by the Board of Directors or by a duly authorized
Committee of the Board.
ARTICLE IV
DEPOSITORIES, SIGNATURES AND SEAL
Section 1. Depositories. All funds of the Company shall be
deposited in the name of the Company in such depository or depositories as the
Board may designate and shall be drawn out on checks, drafts or other orders
signed by such officer, officers, agent or agents as the Board may from time to
time authorize.
Section 2. Contracts. All contracts and other instruments
shall be signed on behalf of the Company by such officer, officers, agent or
agents, as the Board may from time to time by resolution provide.
Section 3. Seal. The corporate seal of the Company shall be as
follows, or in such other form as the Board may from time to time by resolution
provide:
(Imprint of Seal)
If the seal is affixed to a document, the signature of the
Secretary or an Assistant Secretary shall attest the seal. The seal and its
attestation may be lithographed or otherwise printed on any document and shall
have, to the extent permitted by law, the same force and effect as if it had
been affixed and attested manually.
<PAGE> 7
ARTICLE V
STOCK TRANSFERS
Section 1. Form and Execution of Certificates. The
certificates of shares of capital stock of the Company shall be in such form as
may be approved by the Board of Directors and shall be signed by the Chairman of
the Board or the President and by the Secretary or any Assistant Secretary or
Treasurer or any Assistant Treasurer, provided that any such certificate may be
signed by the facsimile of the signature of either or both of such officers
imprinted thereon if the same is countersigned by a transfer agent of the
Company, and provided further that certificates bearing the facsimile of the
signature of such officers imprinted thereon shall be valid in all respects as
if such person or persons were still in office, even though such officer or
officers have died or otherwise ceased to be officers.
Section 2. Transfer of Shares. Shares of stock in the Company
shall be transferable only on the books of the Company by proper transfer signed
by the holder of record thereof or by a person duly authorized to sign for such
holder of record. The Company or its transfer agent shall be authorized to
refuse any transfer unless and until it is furnished such evidence as it may
reasonably require showing that the requested transfer is proper. Upon the
surrender of a certificate for transfer of shares of stock, such certificate
shall at once be conspicuously marked on its face "Cancelled" and filed with the
permanent stock records of the Company.
Section 3. Lost, Destroyed or Mutilated Certificates. The
Board may by resolution provide for the issuance of certificates in lieu of
lost, destroyed or mutilated certificates and may authorize such officer or
agent as it may designate to determine the sufficiency of the evidence of such
loss, destruction or mutilation and the sufficiency of any security furnished to
the Company and to determine whether such duplicate certificate should be
issued.
Section 4. Transfer Agent and Registrar. The Board may appoint
a transfer agent or agents and a registrar or registrars of transfers, and may
require that all stock certificates bear the signature of such transfer agent or
such transfer agent and registrar.
ARTICLE VI
INDEMNIFICATION
Section 1. The Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including court costs and
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
<PAGE> 8
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. The Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including court costs and attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Section 3. To the extent that a director, officer, employee or
agent of the Company shall be successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Sections 1 and 2 of this
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including court costs and attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this
Article (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in said Sections 1 and 2.
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the shareholders.
Section 5. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Company in advance of the final
disposition or such action, suit or proceeding as authorized by the Board of
Directors in the manner provided in Section 4 of this Article upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Company as authorized in this Article, and, if such person is
a director, upon receipt of a written affirmation of such director's good faith
belief that he or she has met the standards of conduct required by the Georgia
Business Corporation Code.
Section 6. The indemnification provided by this Article shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as
<PAGE> 9
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 7. The Board of Directors may authorize, by a vote of
a majority of the full Board, the Company to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under the provisions of this Article.
ARTICLE VII
AMENDMENT
Section 1. The Board of Directors or the shareholders entitled
to vote thereon shall have the power to alter, amend or repeal the By-laws or
adopt new by-laws. The shareholders may prescribe that any by-law or by-laws
adopted by them shall not be altered, amended or repealed by the Board of
Directors. Action by the Board of Directors with respect to by-laws shall be
taken by an affirmative vote of a majority of all directors then holding office.
An action by the shareholders with respect to by-laws shall be taken by the
affirmative vote of a majority of the shares then issued and outstanding and
entitled to vote.
<PAGE> 1
EXHIBIT 11.1
CRAWFORD & COMPANY AND SUBSIDIARIES
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GENERAL INFORMATION:
<S> <C> <C>
Net income $46,988,796
Weighted average common shares outstanding 49,565,519
Dilutive option shares outstanding at year-end 2,481,270
Option shares outstanding prior to exercise during year 1,014,912
Average exercise price per outstanding dilutive option share $ 12.30
Average market price per share $ 17.21
Average market price of shares issued upon exercise during year $ 17.98
BASIC EARNINGS PER SHARE:
Net income $46,988,796
Weighted average common shares outstanding 49,565,519
Basic earnings per share ($46,988,796 divided by 49,565,519) $ 0.95
===========
DILUTED EARNINGS PER SHARE:
Net income $46,988,796
-----------
Weighted average common shares outstanding 49,565,519
Dilutive options shares outstanding at year end 2,481,270
Shares repurchased at $17.21
(proceeds of $30,514,265 divided by $17.21) (1,773,022)
----------
Net additional shares issuable 708,248
Dilutive option shares outstanding from the
1996 Employee Stock Purchase Plan 27,261
Shares repurchased at $19.47
(proceeds of $364,970 divided by $19.47) (18,750)
----------
Net additional shares issuable 8,511
Option shares outstanding prior to exercise during year 1,014,912
Shares repurchased at $17.98
(proceeds of $10,962,312 divided by $17.98) (609,695)
----------
Net additional shares issuable 405,217
-----------
Diluted weighted average shares outstanding 50,687,495
-----------
Diluted earnings per share ($46,988,796 divided by 50,687,495) $ 0.93
===========
</TABLE>
<PAGE> 1
EXHIBIT 11.2
CRAWFORD & COMPANY AND SUBSIDIARIES
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1996*
<TABLE>
<CAPTION>
GENERAL INFORMATION:
<S> <C> <C>
Net income $42,810,215
Weighted average common shares outstanding 51,032,111
Dilutive option shares outstanding at year-end 1,405,917
Option shares outstanding prior to exercise during year 163,520
Average exercise price per outstanding dilutive option share $ 10.23
Average market price per share $ 11.88
Average market price of shares issued upon exercise during year $ 13.07
BASIC EARNINGS PER SHARE:
Net income $42,810,215
-----------
Weighted average common shares outstanding 51,032,111
Basic earnings per share ($42,810,215 divided by 51,032,011) $ 0.84
===========
DILUTED EARNINGS PER SHARE:
Net income $42,810,215
-----------
Weighted average common shares outstanding 51,032,111
Dilutive options shares outstanding at year end 1,405,917
Shares repurchased at $11.88
(proceeds of $14,387,878 divided by $11.88) (1,211,310)
----------
Net additional shares issuable 194,607
Dilutive option shares outstanding from the
1996 Employee Stock Purchase Plan 35,457
Shares repurchased at $13.07
(proceeds of $339,070 divided by $13.07) (25,939)
-----------
Net additional shares issuable 9,518
Option shares outstanding prior to exercise during year 163,520
Shares repurchased at $13.07
(proceeds of $1,474,447 divided by $13.07) (112,843)
-----------
Net additional shares issuable 50,677
----------
Contingently issuable shares related to convertible notes payable
issued November 30, 1994 809,730
----------
Diluted weighted average shares outstanding 52,096,643
Diluted earnings per share ($42,810,215 divided by 52,096,643) $ 0.82
==========
</TABLE>
* Restated to reflect the adoption of Statement of Financial Accounting
Standards No. 128 effective December 31, 1997.
<PAGE> 1
EXHIBIT 11.3
CRAWFORD & COMPANY AND SUBSIDIARIES
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1995*
<TABLE>
<CAPTION>
GENERAL INFORMATION:
<S> <C> <C>
Net income $36,020,000
Weighted average common shares outstanding 52,277,138
Dilutive option shares outstanding at year-end 1,263,510
Option shares outstanding prior to exercise during year 63,002
Average exercise price per outstanding dilutive option share $ 9.22
Average market price per share $ 10.55
Average market price of shares issued upon exercise during year $ 10.71
BASIC EARNINGS PER SHARE:
Net income $36,020,000
Weighted average common shares outstanding 52,277,138
-----------
Basic earnings per share ($36,020,000 divided by 52,277,138) $ 0.69
===========
DILUTED EARNINGS PER SHARE:
Net income $36,020,000
-----------
Weighted average common shares outstanding 52,277,138
Dilutive options shares outstanding at year end 1,263,510
Shares repurchased at $10.55
(proceeds of $11,651,497 divided by $10.55) (1,104,729)
---------
Net additional shares issuable 158,781
Option shares outstanding prior to exercise during year 63,002
Shares repurchased at $10.71
(proceeds of $382,839 divided by $10.71) (35,735)
----------
Net additional shares issuable 27,267
Contingently issuable shares related to convertible notes
payable issued November 30, 1994 772,651
-----------
Diluted weighted average shares outstanding 53,235,837
-----------
Diluted earnings per share ($36,020,000 divided by 53,235,837) $ 0.68
===========
</TABLE>
* Restated to reflect the adoption of Statement of Financial Accounting
Standards No. 128 effective December 31, 1997.
<PAGE> 1
EXHIBIT 13.1
FINANCIAL TABLE OF CONTENTS
<TABLE>
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS 16
CONSOLIDATED STATEMENTS OF INCOME 21
CONSOLIDATED BALANCE SHEETS 22
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT 24
CONSOLIDATED STATEMENTS OF CASH FLOWS 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 38
SELECTED FINANCIAL DATA 39
QUARTERLY FINANCIAL DATA (UNAUDITED) 40
DIRECTORS AND OFFICERS 42
</TABLE>
CRAWFORD & COMPANY 1997 ANNUAL REPORT 15
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At December 31, 1997, current assets exceeded current liabilities by
approximately $149.3 million, an increase of $13.1 million from the working
capital balance at December 31, 1996. Cash and cash equivalents at the end of
1997 totaled $55.4 million, compared to $55.5 million at the end of 1996. The
Company held no short-term investments at December 31, 1997 or December 31,
1996. Cash was generated primarily from operating activities, while the
principal uses of cash were for repurchases of common stock, dividends paid to
shareholders, and acquisitions of property and equipment. The ratio of current
assets to current liabilities was 2.2 to 1 at December 31, 1997 and 1996.
During 1996, the Company announced a share repurchase program to acquire up to
an aggregate of 3,000,000 shares of its Class A or Class B Common Stock through
open market purchases. Through October 28, 1997, the Company completed this
program by reacquiring 2,455,400 shares of its Class A Common Stock and 551,850
shares of its Class B Common Stock at an average cost of $15.01 and $14.79 per
share, respectively. On October 28, 1997, the Company's Board of Directors
authorized an additional share repurchase program of an aggregate of 3,000,000
shares of its Class A or Class B Common Stock through open market purchases.
Through December 31, 1997, the Company has reacquired 529,500 shares of its
Class A Common Stock and 36,700 shares of its Class B Common Stock at an average
cost of $20.43 and $20.44 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 December 31, 1997, totaled
$19.8 million, as compared to $8.4 million at the end of 1996, due to the
acquisition of THG. Since the acquisition, short-term borrowings have increased
$11.4 million, as the Company's foreign operations have expended cash for the
costs accrued in the first quarter restructuring charge. 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 the end of 1997 was $215.0 million, compared with
$221.5 million at the end of 1996. Long-term debt totaled $731,000 at December
31, 1997, compared to $376,000 at December 31, 1996.
16 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating results for the Company's domestic and international operations for
the years ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL TOTAL
1997 1996 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
in thousands of dollars, except percentages
<S> <C> <C> <C> <C> <C> <C>
Revenues $546,246 $555,257 $146,076 $ 78,368 $692,322 $633,625
Compensation and Benefits 341,684 355,110 92,528 48,251 434,212 403,361
% of Revenues 62.6% 63.9% 63.3% 61.5% 62.7% 63.6%
Expenses Other than Compensation and Benefits 123,231 130,973 49,695 27,321 172,926 158,294
% of Revenues 22.6% 23.6% 34.0% 34.9% 25.0% 25.0%
-------------------------------------------------------------------------
Pretax Income Before Restructuring
Charge and Minority Interest $ 81,331 $ 69,174 $ 3,853 $ 2,796 $ 85,184 $ 71,970
% of Revenues 14.9% 12.5% 2.6% 3.6% 12.3% 11.4%
=========================================================================
</TABLE>
Operating results for the Company's domestic and international operations for
the years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL TOTAL
1996 1995 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
in thousands of dollars, except percentages
<S> <C> <C> <C> <C> <C> <C>
Revenues $555,257 $523,367 $ 78,368 $ 84,210 $633,625 $607,577
Compensation and Benefits 355,110 338,221 48,251 50,752 403,361 388,973
% of Revenues 63.9% 64.6% 61.5% 60.3% 63.6% 64.0%
Expenses Other than Compensation and Benefits 130,973 127,778 27,321 30,446 158,294 158,224
% of Revenues 23.6% 24.4% 34.9% 36.1% 25.0% 26.1%
-------------------------------------------------------------------------
Pretax Income $ 69,174 $ 57,368 $ 2,796 $ 3,012 $ 71,970 $ 60,380
% of Revenues 12.5% 11.0% 3.6% 3.6% 11.4% 9.9%
=========================================================================
</TABLE>
Revenues for the years ended December 31, 1997, 1996 and 1995 were $692.3
million, $633.6 million and $607.6 million, respectively, an increase of 9.3%
from 1996 to 1997 and 4.3% from 1995 to 1996. Consolidated pretax income before
restructuring charge and minority interest increased 18.4% from 1996 to 1997 and
19.2% from 1995 to 1996. While revenues increased 9.3% from 1996 to 1997 and
4.3% from 1995 to 1996, corresponding expenses increased only 8.1% and 2.6% due
to efficiencies achieved in operating and support activities throughout the
Company.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 17
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Domestic Operations
Revenues
Domestic revenues from insurance companies and self-insured entities totaled
$546.2 million, $555.3 million and $523.4 million for the years ended December
31, 1997, 1996 and 1995, respectively, a decrease of 1.6% from 1996 to 1997 and
an increase of 6.1% from 1995 to 1996. Severe weather in the United States
during 1996 caused an increase in weather-related claims from 1995 to 1996 and a
decrease in those same claims from 1996 to 1997. Growth in claims volume from
insurers who have outsourced their claims handling functions to the Company has
been offset by continued weakness in the self-insured corporate market. Revenues
from services provided to an insurance holding company and its subsidiaries
continued to decline, from 12% of total revenues in 1995 to less than 10% in
1996 and 1997.
Domestic unit volume, measured principally by chargeable hours and excluding
acquisitions, decreased approximately 5.2% from 1996 to 1997 (of this volume
decrease, approximately 3.2% was due to declines in catastrophe revenues
discussed below). This decrease was partially offset by changes in the mix of
services provided and in the rates charged for those services, the combined
effects of which increased revenues by approximately 2.0% over the same period.
The Company's acquisition of the Thomas Howell Group-Americas unit based in the
United States increased domestic revenues by 1.6% from 1996 to 1997. Domestic
unit volume increased approximately 4.1% from 1995 to 1996. In addition, changes
in the mix of services provided and in the rates charged for those services
increased revenues by approximately 2.0% during 1996.
Revenues from domestic operations include $23.1 million, $41.0 million and $29.1
million in 1997, 1996 and 1995, respectively, in revenue from services provided
by the Company's catastrophe adjusters, principally to clients affected by
natural or man-made disasters, including hurricanes, floods, hail storms and oil
spills. The decrease from 1996 to 1997 was due to a decrease in weather-related
claims in 1997 compared to 1996.
Compensation and Fringe Benefits
The Company's most significant expense is the compensation of its employees,
including related payroll taxes and fringe benefits. Domestic compensation
expense has decreased as a percent of revenues from 64.6% in 1995, to 63.9% in
1996 and 62.6% in 1997. This decrease is due primarily to a reduction in
administrative compensation expense, resulting from a consolidation of
administrative support functions.
Domestic salaries and wages of personnel other than contract managers decreased
by 5.6% from 1996 to 1997, from $263.4 million in 1996 to $248.7 million in
1997, due to the consolidation of administrative support functions. Such
expenses increased by 3.6% from 1995 to 1996, from $254.3 million in 1995 to
$263.4 million in 1996, to support the 6.1% revenue growth in that same period.
Contract managers' compensation is based on the operating income of the offices
which they manage. Compensation of these managers totaled $39.9 million, $36.5
million and $28.5 million in 1997, 1996 and 1995, respectively, increasing 9.3%
and 28.1% from 1996 to 1997 and from 1995 to 1996, respectively.
Payroll taxes and fringe benefits for domestic operations totaled $53.0 million,
$55.2 million, and $55.4 million in 1997, 1996 and 1995, respectively, declining
each year due primarily to lower employee group medical costs.
Expenses Other than Compensation and Fringe Benefits
Domestic expenses other than compensation and related payroll taxes and fringe
benefits have declined as a percent of revenues from 24.4% in 1995, to 23.6% in
1996 and 22.6% in 1997. This decline is largely due to lower rent and occupancy
costs, as branch locations have been consolidated into campus environments and
excess space has been released.
18 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
International Operations
Revenues
Revenues from the Company's international operations totaled $146.1 million,
$78.4 million and $84.2 million in 1997, 1996 and 1995, respectively. The 86.4%
increase from 1996 to 1997 is primarily due to the acquisition of THG, with 10
months' results included in the year ended December 31, 1997, due to an
acquisition effective date of January 1, 1997, and a two-month delay in
reporting international results. The 6.9% decrease from 1995 to 1996 resulted
primarily from the Company's 1995 reporting change when the delay in reporting
international results was reduced from three to two months. Accordingly, 1995
international results reflected 13 months of activity as compared to 12 months
in 1996.
Compensation and Fringe Benefits
As a percent of revenues, compensation expense, including related payroll taxes
and fringe benefits, increased from 60.3% in 1995, to 61.5% in 1996 and 63.3% in
1997. Salaries and wages of international personnel increased as a percent of
revenues, from 52.5% in 1995, to 53.6% in 1996 and 54.4% in 1997. Payroll taxes
and fringe benefits also increased as a percent of revenues, from 7.8% in 1995,
to 7.9% in 1996 and 9.0% in 1997. The increase from 1996 to 1997 was due
primarily to more generous retirement programs maintained by the acquired THG
entities.
Expenses Other than Compensation and Fringe Benefits
Expenses other than compensation and related payroll taxes and fringe benefits
declined as a percent of revenues from 1995 to 1997, from 36.1% to 34.9% and
34.0%, respectively, with the 1995 to 1996 decline due to efficiencies gained
through integration of the Company's late 1994 acquisitions in the United
Kingdom and the 1996 to 1997 decline due to lower rent and occupancy costs
through the integration of former Crawford and former THG operations. These
expenses comprise a higher percentage of revenues than the Company's domestic
operations due primarily to amortization of intangible assets and higher
automobile, occupancy and interest costs.
Restructuring Charge
In connection with the acquisition of Thomas Howell Group, the Company recorded
a pretax charge of $13 million for personnel, facilities and other costs
associated with integration of the Company's international businesses. An
integration management plan was developed by teams from both companies with an
advisory board, steering committee and integration teams for each geographic
territory. The teams developed a timeline and a communications program,
identified specific leases to be terminated and redundant positions to be
eliminated. After reflecting income tax benefits of $4.3 million and minority
interest share of $3.5 million, this charge reduced Crawford's 1997 net income
by $5.2 million, or $0.10 per share.
Minority Interest
Minority interest benefit of $2.5 million was recorded in 1997, reflecting Swiss
Re's 40% minority interest in Crawford-THG Limited.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 19
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Factors That May Affect Future Results
The Company expects to incur significant costs during the next two to three
years to address the impact of the so-called Year 2000 problem on its
information systems. The Year 2000 problem, which is common to most
organizations, concerns the inability of information systems, primarily computer
software programs, to properly recognize and process date-sensitive information
as the year 2000 approaches. The Company believes it will be able to modify or
replace its affected systems in time to minimize any detrimental effects on
operations. The Company estimates this cost to be approximately $15 million over
the next two to three years, with approximately $9 million expected to be
incurred in 1998. Although this cost may be material to the Company's results of
operations in one or more fiscal quarters or years, the Company does not believe
it will have a material adverse impact on the long-term results of operations,
liquidity or consolidated financial position of the Company.
Certain information presented in Management's Discussion and Analysis of
Financial Condition and Results of Operations may include forward-looking
statements, the accuracy of which is subject to a number of risks and
assumptions. The Company's Form 10-K for the year ended December 31, 1997
discusses such risks and assumptions and other key factors that could cause
actual results to differ materially from those expressed in such forward-looking
statements. An additional risk factor is the Company's ability to timely and
efficiently address the Year 2000 problem.
20 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
in thousands of dollars, except share and per share data
<S> <C> <C> <C>
Revenues $ 692,322 $ 633,625 $ 607,577
-----------------------------------------
Costs and Expenses:
Costs of services provided, less reimbursed expenses of $40,218
in 1997, $33,218 in 1996 and $34,025 in 1995 496,613 451,512 439,029
Selling, general and administrative expenses 110,525 110,143 108,168
Restructuring charge 13,000 -- --
-----------------------------------------
620,138 561,655 547,197
-----------------------------------------
Income Before Income Taxes and Minority Interest 72,184 71,970 60,380
Provision for Income Taxes 27,697 29,160 24,360
-----------------------------------------
Income Before Minority Interest 44,487 42,810 36,020
Minority Interest in Loss of Joint Venture 2,502 -- --
-----------------------------------------
Net Income $ 46,989 $ 42,810 $ 36,020
=========================================
Net Income Per Share
Basic $ 0.95 $ 0.84 $ 0.69
=========================================
Diluted $ 0.93 $ 0.82 $ 0.68
=========================================
Cash Dividends Per Share:
Class A Common Stock $ 0.44 $ 0.40 $ 0.39
=========================================
Class B Common Stock $ 0.44 $ 0.39 $ 0.36
=========================================
Average Number of Shares Used in Net Income Per Share Calculations
Basic 49,565,519 51,032,111 52,277,138
=========================================
Diluted 50,687,495 52,096,643 53,235,837
=========================================
</TABLE>
The accompanying notes are an integral part of these statements.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 21
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 1996
- ---------------------------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 55,380 $ 55,485
Accounts receivable, less allowance for doubtful accounts
of $16,802 in 1997 and $11,692 in 1996 117,338 112,975
Unbilled revenues, at estimated billable amounts 87,688 68,593
Prepaid income taxes 981 2,677
Prepaid expenses and other current assets 12,558 7,166
-----------------------
Total current assets 273,945 246,896
-----------------------
Property and Equipment, at cost:
Furniture and fixtures 57,260 52,123
Data processing equipment 60,443 51,368
Automobiles 11,815 2,332
Buildings and improvements 17,889 15,979
Land 2,099 2,099
-----------------------
149,506 123,901
Less accumulated depreciation and amortization (110,314) (92,264)
-----------------------
Net property and equipment 39,192 31,637
-----------------------
Other Assets:
Intangible assets arising from acquisitions, less accumulated
amortization of $10,533 in 1997 and $8,768 in 1996 51,968 52,266
Prepaid pension obligation 45,972 41,405
Other 5,981 5,881
-----------------------
Total other assets 103,921 99,552
-----------------------
$ 417,058 $ 378,085
=======================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
22 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 9
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------
in thousands of dollars, except share and per share data
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings $ 19,812 $ 8,437
Accounts payable 19,956 13,329
Accrued compensation and related costs 26,616 30,811
Other accrued liabilities 41,419 32,645
Deferred revenues 16,241 16,300
Current installments of long-term debt 594 9,130
-----------------------
Total current liabilities 124,638 110,652
-----------------------
Noncurrent Liabilities:
Long-term debt, less current installments 731 376
Deferred income taxes 14,921 13,810
Deferred revenues 13,404 12,902
Postretirement medical benefit obligation 8,105 8,037
Self-insured risks 9,067 8,172
Minority interest 26,732 --
Other 4,455 2,600
-----------------------
Total noncurrent liabilities 77,415 45,897
-----------------------
Shareholders' Investment:
Class A Common Stock, $1.00 par value; 50,000,000 shares authorized;
23,915,727 and 24,392,393 shares issued in 1997 and 1996, respectively 23,916 24,392
Class B Common Stock, $1.00 par value; 50,000,000 shares authorized;
25,477,233 and 25,718,919 shares issued in 1997 and 1996, respectively 25,477 25,719
Retained earnings 174,973 173,708
Cumulative translation adjustment (9,361) (2,283)
-----------------------
Total shareholders' investment 215,005 221,536
-----------------------
$ 417,058 $ 378,085
=======================
</TABLE>
CRAWFORD & COMPANY 1997 ANNUAL REPORT 23
<PAGE> 10
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL CUMULATIVE
CLASS A CLASS B PAID-IN RETAINED TRANSLATION
FOR THE YEARS ENDED DECEMBER 31, NON-VOTING VOTING CAPITAL EARNINGS ADJUSTMENT
- ------------------------------------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C> <C> <C>
Balance at 12/31/94 $26,174 $26,370 $ -- $163,257 $(2,648)
Net income 36,020
Translation adjustment (314)
Cash dividends paid (19,541)
Shares repurchased (416) (501) (793) (7,706)
Stock options exercised, net 87 78 793
-----------------------------------------------------------
Balance at 12/31/95 25,845 25,947 -- 172,030 (2,962)
Net income 42,810
Translation adjustment 679
Cash dividends paid (20,095)
Shares repurchased (1,623) (335) (1,323) (21,037)
Stock options exercised, net 170 107 1,323
-----------------------------------------------------------
Balance at 12/31/96 24,392 25,719 -- 173,708 (2,283)
Net income 46,989
Translation adjustment (7,078)
Cash dividends paid (21,820)
Shares repurchased (1,775) (295) (11,300) (23,904)
Conversion of convertible debt 821 6,564
Stock options exercised, net 478 53 4,736
-----------------------------------------------------------
Balance at 12/31/97 $23,916 $25,477 $ -- $174,973 $(9,361)
===========================================================
</TABLE>
The accompanying notes are an integral part of these statements.
24 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 11
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 46,989 $ 42,810 $ 36,020
Reconciliation of net income to net cash provided
by operating activities:
Minority interest in loss of joint venture (2,502) -- --
Depreciation and amortization 15,423 15,716 16,865
Deferred income taxes 2,807 2,394 5,205
Loss on disposal of risk control unit -- 1,560 --
Loss on sales of property and equipment 277 434 928
Changes in operating assets and liabilities,
net of effects of acquisitions:
Short-term investments -- 5,596 13,170
Accounts receivable, net 12,643 5,231 (6,392)
Unbilled revenues 10,907 (4,586) (1,172)
Prepaid or accrued income taxes (1,628) (1,124) (462)
Accounts payable and accrued liabilities (8,413) 10,383 (2,368)
Deferred revenues 389 1,897 188
Prepaid expenses and other (10,757) (9,328) (14,681)
----------------------------------
Net cash provided by operating activities 66,135 70,983 47,301
----------------------------------
Cash Flows From Investing Activities:
Acquisitions of property and equipment (12,331) (7,473) (12,575)
Net assets of companies acquired, excluding cash -- (3,329) (4,998)
Proceeds from sales of property and equipment 1,053 350 137
----------------------------------
Net cash used in investing activities (11,278) (10,452) (17,436)
----------------------------------
Cash Flows From Financing Activities:
Dividends paid (21,820) (20,095) (19,541)
Repurchase of common stock (37,274) (24,318) (9,416)
Issuance of common stock 5,267 1,600 958
Increase (decrease) in short-term borrowings 1,878 (2,340) 684
Decrease in long-term debt (1,676) (677) (827)
----------------------------------
Net cash used in financing activities (53,625) (45,830) (28,142)
----------------------------------
Effect of exchange rate changes on cash and cash equivalents (1,337) (18) 111
----------------------------------
(Decrease) Increase in Cash and Cash Equivalents (105) 14,683 1,834
Cash and Cash Equivalents at Beginning of Year 55,485 40,802 38,968
----------------------------------
Cash and Cash Equivalents at End of Year $ 55,380 $ 55,485 $ 40,802
==================================
</TABLE>
The accompanying notes are an integral part of these statements.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 25
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF MAJOR ACCOUNTING AND REPORTING POLICIES
Nature of Operations
The Company is a worldwide insurance services firm which provides claims
services and risk management information services to insurance companies,
self-insured corporations and governmental entities. The majority of the
Company's revenues are derived from domestic claims services.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of all significant intercompany
transactions.
The financial statements of the Company's international claims adjusting firm,
Crawford-THG Limited, are included in the Company's consolidated financial
statements on a two-month delayed basis in order to provide sufficient time for
accumulation of Crawford-THG Limited's worldwide results. This reporting delay,
previously three months, was changed to two months during 1995. Accordingly, the
Company's December 31, 1997 and 1996 consolidated financial statements reflect
the financial position of Crawford-THG Limited as of October 31, 1997 and 1996,
respectively, and their results of operations and cash flows for the 12-month
periods ended October 31, 1997 and 1996 and the 13-month period ended October
31, 1995. This change had no material effect on the Company's financial
position, results of operations or cash flows.
Foreign Currency Translation
For operations outside the United States that prepare financial statements in
currencies other than the United States dollar, results from operations and cash
flows are translated at average exchange rates during the period, and assets and
liabilities are translated at end of period exchange rates. Resulting
translation adjustments are accumulated as a component of shareholders'
investment and excluded from net income.
Cash Flows
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.
Income Taxes
The Company accounts for certain income and expense items differently for
financial reporting and income tax purposes. Provisions for deferred taxes are
made in recognition of these temporary differences. The most significant
differences result from prepayment of pension costs, deferred recognition of
unbilled revenues, and the use of accelerated depreciation methods for income
tax purposes; and deferred revenue, self-insurance, employee compensation and
receivables valuation reserves provided for financial reporting purposes.
Net Income Per Share
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128
effective December 31, 1997. Basic earnings per share is computed based on the
weighted average number of total common shares outstanding of Class A and Class
B Common Stock during the respective years. Diluted earnings per share is
computed based on the weighted average number of total common shares outstanding
of Class A and Class B Common Stock, adjusted for dilutive common stock
equivalents. All prior period earnings per share amounts have been restated to
comply with SFAS No. 128.
Fair Value of Financial Instruments
The fair value of financial instruments classified as current assets or
liabilities, including cash and cash equivalents, receivables and accounts
payable, approximate carrying value due to the short-term maturity of the
instruments. The fair value of short-term and long-term debt approximates
carrying value based on their effective interest rates compared to current
market rates.
26 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Short-Term Investments
The Company generally invests its excess cash in short-term debt securities.
These securities are reported at their estimated fair value in the accompanying
financial statements, with unrealized holding gains and losses included in
earnings. No net unrealized holding gains were recognized during 1997. Net
unrealized holding gains of $11,000 and $277,000 were recognized during 1996 and
1995, respectively. Investments with maturities greater than three months are
classified as short-term investments. The Company held no short-term investments
at December 31, 1997 or 1996.
Property and Depreciation
The Company depreciates the cost of property and equipment over the estimated
useful lives of the related assets. The estimated useful lives and depreciation
methods for the principal property and equipment classifications are as follows:
<TABLE>
<CAPTION>
ESTIMATED
CLASSIFICATION USEFUL LIVES METHOD
- ----------------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures 3-10 years Straight-line and
double-declining balance
Data processing
equipment 3-5 years Straight-line
Automobiles 3-4 years Straight-line
Buildings and
improvements 7-40 years Straight-line
- ----------------------------------------------------------------------------
</TABLE>
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments are capitalized. The cost of property retired or sold and the
related accumulated depreciation are removed from the applicable accounts, and
the resulting gains and losses are reflected in the consolidated statements of
income.
Revenue Recognition
Revenue is recognized in unbilled revenues as services are provided. Deferred
revenues represent the unearned portion of fees derived from certain annual
fixed-rate claim service agreements.
Management's Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Self-Insured Risks
The Company self-insures certain insurable risks consisting primarily of
professional liability, employee medical and disability, workers' compensation
and auto liability.
Insurance coverage is obtained for catastrophic property and casualty exposures
(including professional liability on a claims-made basis), as well as those
risks required to be insured by law or contract. Provision for claims under the
self-insured program is recorded based on the Company's estimate of the
aggregate liability for claims incurred. At December 31, 1997 and 1996, accrued
self-insured risks totaled $15,440,000 and $16,305,000, respectively, including
current liabilities of $6,373,000 and $8,133,000, respectively.
Industry Concentration and Major Customer
Substantial portions of the Company's revenues and accounts receivable are
derived from the property and casualty insurance industry. Revenues from
services provided to an insurance holding company and its subsidiaries
approximated 12% of consolidated revenues in 1995.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 27
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
New Accounting Statements
In July 1997, the Financial Accounting Standards Board issued two new
statements. SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for reporting and display of "comprehensive income," which is the
total of net income and all other non-owner changes in stockholders' equity, and
its components. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company is in the process of
evaluating SFAS No. 130 and will adopt the standard in the first quarter of its
1998 fiscal year.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," supersedes SFAS Nos. 14, 18, 24 and 30 and establishes new
standards for segment reporting, using the "management approach," in which
reportable segments are based on the same criteria on which management
disaggregates a business for making operating decisions and assessing
performance. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. Financial statement disclosures for prior periods are required to be
restated. The Company is in the process of evaluating the disclosure
requirements and will adopt the standard for its 1998 fiscal year. The adoption
of SFAS No. 131 will have no impact on the Company's consolidated results of
operations, financial position or cash flows.
2. RETIREMENT PLANS
The Company and its subsidiaries sponsor various defined contribution and
defined benefit retirement plans covering substantially all employees. Employer
contributions under the Company's defined contribution plans are determined
annually, based on employee contributions, a percentage of each covered
employee's compensation, and the profitability of the Company. The cost of these
plans totaled $7,475,000, $5,900,000 and $3,493,000 in 1997, 1996 and 1995,
respectively.
Benefits payable under the Company's defined benefit plans are generally based
on career compensation. The Company's funding policy is to make cash
contributions in amounts sufficient to maintain the plans on an actuarially
sound basis, but not in excess of deductible amounts permitted under federal
income tax regulations. Plan assets are invested primarily in equity and fixed
income securities. Pension expense related to the defined benefit plans in 1997,
1996 and 1995 includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
Service costs of benefits $ 13,541 $ 10,118 $ 9,160
Interest costs on projected
benefit obligations 24,113 16,111 14,673
Actual return on plan assets (29,467) (17,914) (24,183)
Net amortization
and deferrals 1,848 1,351 10,572
----------------------------------
Pension expense $ 10,035 $ 9,666 $ 10,222
==================================
</TABLE>
28 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following schedule reconciles the funded status of the plans with amounts
reported in the Company's balance sheets at December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
Accumulated benefit obligation
at September 30:
Vested portion $ 273,820 $ 183,423
Nonvested portion 12,301 12,174
--------------------------
286,121 195,597
Effect of projected future compensation levels 38,353 26,443
--------------------------
Projected benefit obligation at September 30 324,474 222,040
Less fair market value of plan assets at
September 30 (382,477) (222,533)
--------------------------
Overfunding of projected benefit obligation (58,003) (493)
Contributions made in fourth quarter (1,887) (2,000)
Unrecognized net transition asset 318 397
Unrecognized net gain (loss) 15,837 (36,393)
--------------------------
Net prepaid pension cost (43,735) (38,489)
Less pension obligation included in other
accrued liabilities (2,237) (2,916)
--------------------------
Prepaid pension included in other assets $ (45,972) $ (41,405)
==========================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the projected benefit obligations ranged from 7.5% to 8% and 5% to
7%, respectively, at September 30, 1997 and 1996. The expected long-term rate of
return on plan assets used in determining net periodic pension costs ranged from
8% to 9.5% in both years.
3. POSTRETIREMENT MEDICAL BENEFITS
Certain retirees and a fixed number of long-term employees are entitled to
receive postretirement medical benefits under the Company's various medical
benefit plans. Net postretirement medical benefits expense for 1997, 1996 and
1995 includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
Service cost of benefits $ 18 $ 40 $ 40
Interest cost on Accumulated
Postretirement Benefit
Obligation (APBO) 484 594 594
Amortization of gain (107) -- --
--------------------------------
$ 395 $ 634 $ 634
================================
</TABLE>
The APBO at December 31, 1997 and 1996 was comprised of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
Retirees $4,777 $4,925
Eligible active participants 1,270 1,197
Other active participants 672 579
----------------------
6,719 6,701
Unrecognized net gain 1,386 1,336
----------------------
Postretirement medical benefit obligation
recognized in balance sheets $8,105 $8,037
======================
</TABLE>
The discount rate used in determining the APBO was 7.5% for 1997 and 1996. The
assumed rate of increase in the per capita costs of covered healthcare benefits
(the healthcare cost trend rate) was 8.0% in 1997 and 8.5% in 1996, decreasing
gradually to 5.0% by the year 2003.
The effect of increasing the healthcare cost trend rate by one percentage point
in each year would increase the APBO, which is unfunded, by approximately
$810,000 and the total service and interest cost components of the 1997 and 1996
net postretirement benefit cost by approximately $60,000.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 29
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INTANGIBLE ASSETS
Other assets include the following intangible assets (net of amortization)
arising from acquisitions:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
Amortized over fifteen years $ 847 $ 969
Amortized over twenty years 2,180 2,484
Amortized over forty years 48,941 48,813
------------------------
$51,968 $52,266
========================
</TABLE>
Goodwill in excess of associated expected operating cash flows is considered to
be impaired and is written down to fair value.
5. INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
Currently payable $ 24,890 $ 26,766 $ 19,155
Current deferred 1,662 3,471 (1,442)
Noncurrent deferred 1,145 (1,077) 6,647
---------------------------------------
$ 27,697 $ 29,160 $ 24,360
=======================================
</TABLE>
Cash payments for income taxes were $26,145,000 in 1997, $28,195,000 in 1996 and
$18,571,000 in 1995. The provisions for income taxes are reconciled to the
federal statutory rate of 35% in 1997, 1996 and 1995, as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
Federal income taxes at statutory rate $ 25,264 $ 25,190 $ 21,133
State income taxes, net of federal benefit 2,815 2,807 2,512
Other (382) 1,163 715
---------------------------------
$ 27,697 $ 29,160 $ 24,360
=================================
</TABLE>
The provisions for income taxes include foreign income taxes (benefit) of
$(2,284,000) in 1997, $1,641,000 in 1996 and $2,541,000 in 1995. The Company
does not provide for additional U.S. and foreign income taxes on undistributed
earnings considered to be permanently reinvested in its foreign subsidiaries. At
December 31, 1997, such undistributed earnings totaled $12,363,000.
Deferred income taxes consist of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
Accounts receivable reserves $ -- $ 1,019
Accrued compensation 3,715 4,844
Self-insured risks 6,203 5,648
Deferred revenues 10,808 11,159
Postretirement benefits 3,325 3,215
Other 1,881 3,965
--------------------------
Gross deferred tax assets 25,932 29,850
--------------------------
Accounts receivable reserves 85 --
Unbilled revenues 10,648 13,967
Depreciation and amortization 3,469 6,908
Prepaid pension obligation 25,348 19,714
Other 322 394
--------------------------
Gross deferred tax liabilities 39,872 40,983
--------------------------
Net deferred tax liability (13,940) (11,133)
Less noncurrent net deferred tax liability (14,921) (13,810)
--------------------------
Current net deferred tax asset $ 981 $ 2,677
==========================
</TABLE>
30 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LEASE COMMITMENTS AND OBLIGATIONS
The Company and its subsidiaries lease office space and certain computer
equipment under operating leases. In addition, the Company leases a major
portion of its automobile fleet under twelve-month operating leases that require
the Company to guarantee specified residual values and monthly rental payments
for up to two months after the end of the lease term. License and maintenance
costs related to the leased vehicles are paid by the Company. Rental expense for
all operating leases was $44,704,000 in 1997, $47,119,000 in 1996 and
$49,122,000 in 1995, including rental expense for automobile leases of
$12,085,000 in 1997, $11,551,000 in 1996 and $13,531,000 in 1995.
The Company also leases certain computer and office equipment under capital
leases with terms ranging from 24 to 60 months. The Company incurred $1,214,000
of such capital lease obligations in 1997, $162,000 in 1996 and none in 1995.
These transactions represent noncash investing and financing activities and
consequently have been excluded from the accompanying consolidated statements of
cash flows. At December 31, 1997, future minimum payments under capital leases
and non-cancelable operating leases with remaining terms of more than 12 months
were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
- ---------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
1998 $ 721 $ 25,020
1999 581 19,430
2000 56 13,494
2001 65 10,128
2002 44 7,157
Subsequent to 2002 15 28,471
-----------------------
Total minimum lease payments 1,482 $103,700
========
Less amounts representing interest (157)
------
Present value of future minimum
lease payments (see Note 10) $1,325
======
</TABLE>
7. FOREIGN OPERATIONS
The Company provides claims services through branch offices located in
approximately 50 countries outside the United States. Selected financial
information as of December 31, 1997, 1996 and 1995 covering the Company's
foreign operations is presented below:
<TABLE>
<CAPTION>
U.S. FOREIGN CONSOLIDATED
OPERATIONS OPERATIONS TOTALS
- ----------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
1997
Revenues $546,246 $146,076 $692,322
Pretax income before
restructuring charge
and minority interest 81,331 3,853 85,184
Total assets 240,271 176,787 417,058
1996
Revenues $555,257 $ 78,368 $633,625
Pretax income 69,174 2,796 71,970
Total assets 263,349 114,736 378,085
1995
Revenues $523,367 $ 84,210 $607,577
Pretax income 57,368 3,012 60,380
Total assets 256,417 110,566 366,983
- ----------------------------------------------------------------------------------
</TABLE>
CRAWFORD & COMPANY 1997 ANNUAL REPORT 31
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. ACQUISITIONS AND DISPOSITIONS
On December 19, 1996, the Company entered into an agreement with Swiss
Reinsurance Company (Swiss Re) to merge both companies' claims services firms
outside the United States into Crawford-THG Limited, in which the Company has a
60% controlling interest. The merger was accounted for as a partial sale of the
Company's 100% owned subsidiary, Crawford & Company International (CCI), to
Swiss Re and a partial acquisition of Swiss Re's 100% owned subsidiary, Thomas
Howell Group (THG), by the Company. No gain or loss was recognized on the
partial sale. Swiss Re's 40% interest in the equity and net income/loss of the
joint venture is reflected in the accompanying financial statements as minority
interest. The accompanying consolidated financial statements include the
financial position of the Company's interest in THG at December 31, 1997 and 10
months' operating results for the year then ended, due to an acquisition
effective date of January 1, 1997 and a two-month lag in reporting international
results. The consolidated financial statements exclude the financial position
and operating results of the Company's interest in THG at December 31, 1996.
The Company also acquired 100% of Swiss Re's THG-Americas unit based in the
United States for approximately $2,765,000 in cash. The Company acquired assets
with a fair market value of approximately $12,082,000 and assumed liabilities of
$9,317,000. This transaction was accounted for by the purchase method of
accounting. The December 31, 1996 consolidated financial statements reflect the
financial position of THG-Americas as of that date but do not include any
revenues or expenses related to THG-Americas' operations.
The following table presents unaudited pro forma operating results as if these
acquisitions had occurred on January 1, 1995. The pro forma information is based
on historical information and does not necessarily reflect the actual results
that would have occurred, nor is it necessarily indicative of future results of
operations of the combined enterprises.
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
unaudited-in thousands of
dollars, except per share data
<S> <C> <C> <C>
Revenues $ 710,062 $ 757,335 $ 727,526
=====================================
Net income before minority interest 54,420 44,764 33,103
Minority interest in net (income) loss (2,821) (2,717) 1,279
-------------------------------------
Net income $ 51,599 $ 42,047 $ 34,382
=====================================
Net income per share
Basic $ 1.04 $ 0.82 $ 0.66
=====================================
Diluted $ 1.02 $ 0.81 $ 0.65
=====================================
</TABLE>
The operating results of the acquired entities include certain non-recurring
expenses and restructuring charges. Had these charges not been incurred, pro
forma net income per share-basic would have been $1.04, $0.87 and $0.68 for
1997, 1996 and 1995, respectively; pro forma net income per share-diluted would
have been $1.02, $0.85, and $0.67 for 1997, 1996 and 1995, respectively.
On January 31, 1997, the Company disposed of its risk control unit. The 1996
consolidated statement of income includes a pretax charge of $1,560,000
($928,200 after tax or $0.02 per share) related to this transaction.
32 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. RESTRUCTURING CHARGE
In the first quarter of 1997, a pretax charge of $13,000,000 was recorded to
cover restructuring costs related to the acquisition of the Thomas Howell Group.
An integration management plan was developed by teams from both companies with
an advisory board, steering committee and integration teams for each geographic
territory. The teams developed a timeline and communications program, identified
specific leases to be terminated and redundant positions to be eliminated. The
charge included $4,937,000 for lease costs, $5,096,000 for employee separations,
and $2,967,000 for office relocations and other costs. The following table
displays the restructuring costs accrued and used in 1997, with the remaining
balance as of December 31, 1997:
<TABLE>
<CAPTION>
USED IN REMAINING
ACCRUED 1997 BALANCE
- ---------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C> <C>
Leases $ 4,937 $ 1,709 $ 3,228
Employee separations 5,096 2,850 2,246
Other 2,967 2,221 746
-------------------------------------
Total $13,000 $ 6,780 $ 6,220
=====================================
</TABLE>
The accrual for the restructuring charge is included in other accrued
liabilities in the accompanying consolidated balance sheets. Management believes
the remaining reserves are adequate to complete its plan. After reflecting
income tax benefits of $4,290,000 and minority interest share of $3,484,000,
this charge reduced the Company's 1997 net income by $5,226,000.
10. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
in thousands of dollars
<S> <C> <C>
Unsecured convertible loan notes issued in
connection with acquisition of foreign
subsidiary; non-interest bearing; converted
in December 1997 $ -- $ 8,188
6% loan notes issued in connection with
acquisition of foreign subsidiary; paid in
full in October 1997 -- 780
Loan note issued in connection with acquisition
of foreign subsidiary; non-interest bearing;
paid in full in January 1997 -- 57
Mortgage payable, secured by building; paid in
full in April 1997 -- 277
Capital leases (See Note 6) 1,325 204
----------------------
1,325 9,506
Less current installments (594) (9,130)
----------------------
$ 731 $ 376
======================
</TABLE>
The convertible loan notes were converted into 821,334 shares of Crawford Class
A Common Stock on December 1, 1997.
The Company maintains credit lines with banks in order to meet seasonal working
capital requirements or other financing needs that may arise. Short-term
borrowings totaled $19,812,000 and $8,437,000 at December 31, 1997 and 1996,
respectively. The weighted average interest rate on short-term borrowings was
5.6% during 1997 and 1996.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 33
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMON STOCK
The Company has two classes of Common Stock outstanding, Class A Common Stock
and Class B Common Stock. These two classes of stock have essentially identical
rights, except that shares of Class A Common Stock generally do not have any
voting rights. Under the Company's Articles of Incorporation, amended as of July
24, 1990, the Board of Directors may pay higher (but not lower) cash dividends
on the non-voting Class A Common Stock than on the voting Class B Common Stock.
On February 4, 1997, the Board of Directors declared a three-for-two stock split
on both the Class A Common Stock and Class B Common Stock. The split was
effected in the form of a 50% stock dividend on the outstanding shares of each
Class, paid on March 25, 1997 to stockholders of record on March 11, 1997. The
split resulted in the issuance of 8,104,354 shares of Class A Common Stock and
8,575,344 shares of Class B Common Stock. All share and per share amounts in the
accompanying financial statements and related notes have been restated to give
retroactive effect to this stock split.
Stock Compensation Plans
The Company applies APB Opinion 25 and related Interpretations in accounting for
its four stock-based compensation plans described below. Accordingly, no
compensation cost has been recognized for its fixed stock option plans and its
employee stock purchase plan. Had compensation cost for these stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------
in thousands of dollars, except per share data
<S> <C> <C> <C> <C>
Net income As reported $46,989 $42,810 $36,020
Pro forma 44,293 42,209 35,869
Earnings per
share-basic As reported $ 0.95 $ 0.84 $ 0.69
Pro forma 0.89 0.83 0.69
Earnings per
share-diluted As reported $ 0.93 $ 0.82 $ 0.68
Pro forma 0.87 0.81 0.67
- -------------------------------------------------------------------------------------
</TABLE>
Employee Stock Purchase Plan
Under the 1996 Employee Stock Purchase Plan, the Company is authorized to issue
up to 1,500,000 shares of its Class A Common Stock to its full-time employees in
the United States, nearly all of whom are eligible to participate. Under the
terms of the Plan, employees can choose each year to have up to $21,000 of their
annual earnings withheld to purchase the Company's Class A Common Stock. The
purchase price of the stock is 85% of the lesser of the closing price for a
share of stock on the first day of the purchase period or the last day of the
purchase period.
34 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of each employee purchase right was estimated using the
Black-Scholes option pricing model, with the following assumptions: dividend
yield of 2.6%; expected life of one year; expected volatility of 20%; and
risk-free interest rate of 5.0% in 1995 and 1996 and 5.2% in 1997. The weighted
average fair value of the purchase rights granted in 1997 and 1996 was $6 and
$5, respectively.
Fixed Stock Option Plans
The Company has three fixed Employee Stock Option Plans. Under these plans which
were established in 1997, 1990, and 1987, the Company may grant options for up
to 3,750,000 shares, 2,857,500 shares, and 675,000 shares, respectively, of
common stock to key employees. Options granted under the 1997 and 1990 Plans are
exercisable for one share of Class A Common Stock. Options granted under the
1987 Plan are exercisable for one share of Class A Common Stock and one share of
Class B Common Stock. Options are available for grant only under the most recent
plan. The exercise price of each option equals the market price of the Company's
stock on the date of grant, and an option's maximum term is 10 years. Options
are granted throughout the year and become exercisable according to provisions
outlined in the Plan's terms and conditions. The 1997 and 1990 Plans include
options granted as incentive stock options (ISO) and non-incentive stock options
(Non-ISO). During 1997 and 1996, 938,000 and 1,095,000 Non-ISOs were granted to
certain key executives. The 1997 Non-ISOs vest in full when the Company's stock
price closes above $27.30 for 10 consecutive trading days, and they expire in
2004. The 1996 Non-ISOs vested in full in 1997 when the Company's stock price
closed above $17.73 for 10 consecutive trading days, and they expire in 2003.
In February 1997, the Company adopted the 1997 Non-Employee Director Stock
Option Plan. The Company may grant up to 450,000 shares of Class A Common Stock
of the Company to its non-employee directors. The exercise price of each option
equals the market price of the Company's stock on the date of grant. Options are
granted to each eligible non-employee director as follows: (a) 15,000 shares on
the day of shareholder approval of the Plan; (b) 15,000 shares on the day of
first election to the Board after shareholder approval of the Plan; and (c)
3,000 shares on the day of re-election to the Board after shareholder approval
of the Plan. Options are immediately exercisable. Options terminate on the date
on which the optionee is no longer a non-employee director, if such date occurs
prior to the fifth anniversary of the grant date of the option, or ten years
from the grant date of the option, if the optionee remains a non-employee
director through such fifth anniversary. As of December 31, 1997, 120,000 shares
have been granted.
The fair value of each option granted in 1997 and 1996 under the 1997 and 1990
Plans is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions: dividend yield of 2.6%;
expected volatility of 20%; risk-free interest rates of 5.6% in 1995 and 1996
and 5.4% in 1997 (ISO) and 5.4% (Non-ISO); and expected option lives of 8.3
years (ISO) and 6.5 years (Non-ISO).
CRAWFORD & COMPANY 1997 ANNUAL REPORT 35
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Company's fixed stock option plans as of December
31, 1997, 1996 and 1995, and changes during the years ended on those dates is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- --------------------------------------------------------------------------------------------------------------------
in thousands of shares
<S> <C> <C> <C> <C> <C> <C>
Class A Common Stock (Non-Voting) Options
Outstanding, beginning of year 2,590 $12 1,592 $11 1,536 $11
Options granted 1,433 18 1,489 12 346 10
Options exercised (467) 11 (275) 9 (91) 6
Options forfeited (270) 12 (216) 11 (199) 12
-------------------------------------------------------------------
Outstanding, end of year 3,286 14 2,590 12 1,592 11
===== ===== =====
Exercisable, end of year 1,474 560 647
===== ===== =====
Weighted-average fair value of options
granted during the year
Incentive stock options $ 4 $ 3 $ 3
Nonincentive stock options 4 3 --
Class B Common Stock (Voting) Options
Outstanding, beginning of year 132 $ 9 344 $ 9 451 $ 8
Options granted -- -- -- -- -- --
Options exercised (66) 8 (206) 9 (80) 6
Options forfeited (4) 10 (6) 10 (27) 9
-------------------------------------------------------------------
Outstanding, end of year 62 10 132 9 344 9
===== ===== =====
Exercisable, end of year 62 132 344
===== ===== =====
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF NUMBER AVERAGE AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
PRICES AT 12/31/97 CONTRACTUAL LIFE PRICE AT 12/31/97 PRICE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Common Stock (Non-Voting) Options
$ 4 to 8 16 0.7 years $ 5 16 $ 5
9 to 12 856 6.6 11 360 11
13 to 17 1,500 8.5 13 1,098 13
18 to 20 914 9.8 20 -- --
-------------------------------------------------------------------
$ 4 to 20 3,286 8.3 14 1,474 12
===== =====
Class B Common Stock (Voting) Options
$ 4 to 8 15 0.6 years $ 5 15 $ 5
9 to 11 47 2.0 10 47 10
-------------------------------------------------------------------
$ 4 to 11 62 1.7 9 62 9
===== =====
</TABLE>
36 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. NET INCOME PER SHARE
The following reconciliation illustrates the numerators and denominators of the
basic and diluted net income per share computations shown on the consolidated
statements of income:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
in thousands of dollars, except per share data
<S> <C> <C> <C>
Basic net income per share computation
Numerator
Income available to common shareholders $46,989 $42,810 $36,020
Denominator
Weighted-average common shares outstanding 49,566 51,032 52,277
-----------------------------
Basic net income per share $ 0.95 $ 0.84 $ 0.69
=============================
Diluted net income per share computation
Numerator
Income available to common shareholders $46,989 $42,810 $36,020
Denominator
Weighted-average common shares outstanding 49,566 51,032 52,277
Option shares outstanding 1,121 255 186
Shares issuable under convertible debt -- 810 773
-----------------------------
50,687 52,097 53,236
-----------------------------
Diluted net income per share $ 0.93 $ 0.82 $ 0.68
=============================
</TABLE>
Options to purchase 913,500 shares of Class A Common Stock at $19.50 per share
were outstanding at the end of 1997 but were not included in the computation of
diluted net income per share because the options' exercise price was greater
than the average market price of the common shares; to include them would have
been antidilutive.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 37
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF CRAWFORD & COMPANY:
We have audited the consolidated balance sheets of Crawford & Company (a Georgia
corporation) and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of income, shareholders' investment, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Crawford & Company and
subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 30, 1998
38 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 25
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
in thousands of dollars, except per share data
<S> <C> <C> <C> <C> <C>
Revenues $ 692,322 $ 633,625 $ 607,577 $ 587,781 $ 576,298
Income before accounting changes 46,989 42,810 36,020 40,601 38,050
Income per share before
accounting changes
Basic 0.95 0.84 0.69 0.76 0.71
Diluted 0.93 0.82 0.68 0.75 0.70
Total assets 417,058 378,085 366,983 356,381 326,263
Long-term debt 731 376 9,412 9,962 734
Cash dividends per share
Class A Common Stock 0.44 0.40 0.39 0.37 0.35
Class B Common Stock 0.44 0.39 0.36 0.33 0.29
Weighted average
shares outstanding
Basic 49,565,519 51,032,111 52,277,138 53,585,244 53,976,672
Diluted 50,687,495 52,096,643 53,235,837 53,874,666 54,404,276
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All shares and per share amounts have been restated to reflect the
three-for-two stock split in 1997 (see Note 11) and the adoption of SFAS No. 128
effective December 31, 1997 (see Note 1).
Effective January 1, 1993, the Company adopted new accounting standards for
postretirement benefits other than pensions, other postemployment benefits and
income taxes, by reflecting the cumulative effects of the changes in income upon
adoption.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 39
<PAGE> 26
QUARTERLY FINANCIAL DATA (UNAUDITED)
DIVIDEND INFORMATION AND COMMON STOCK QUOTATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------
in thousands of dollars, except per share data
<S> <C> <C> <C>
First Quarter:
Revenues $165,951 $161,563 $148,649
Income before income taxes and minority interest 6,282 17,478 15,884
Minority interest 3,199 --
Net income 6,315 10,431 9,478
Net income per share-basic 0.13 0.20 0.18
Net income per share-diluted 0.12 0.20 0.17
Cash dividends per share:
Class A Common Stock 0.1100 0.1000 0.0967
Class B Common Stock 0.1100 0.0967 0.0900
Common stock quotations:
Class A-High 15.67 11.09 10.50
Class A-Low 14.25 9.67 9.67
Class B-High 15.92 11.42 10.57
Class B-Low 14.25 10.00 9.75
Second Quarter:
Revenues $182,569 $157,629 $150,863
Income before income taxes and minority interest 22,663 17,144 11,026
Minority interest (694) --
Net income 13,432 10,228 6,580
Net income per share-basic 0.27 0.20 0.13
Net income per share-diluted 0.27 0.20 0.13
Cash dividends per share:
Class A Common Stock 0.1100 0.1000 0.0967
Class B Common Stock 0.1100 0.0967 0.0900
Common stock quotations:
Class A-High 15.88 11.42 11.67
Class A-Low 13.63 10.17 10.33
Class B-High 17.38 11.59 11.83
Class B-Low 13.88 10.33 10.50
- -------------------------------------------------------------------------------------------
</TABLE>
The quotations listed in this table set forth the high and low closing prices
per share of Crawford & Company Class A Common Stock and Class B Common Stock,
respectively, as reported on the NYSE Composite Tape. All per share amounts and
common stock quotations have been restated to reflect the three-for-two stock
split in 1997 (see Note 11). Net income per share amounts have been restated to
reflect the adoption of SFAS No. 128 effective December 31, 1997 (see Note 1).
40 CRAWFORD & COMPANY 1997 ANNUAL REPORT
<PAGE> 27
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------
in thousands of dollars, except per share data
<S> <C> <C> <C>
Third Quarter:
Revenues $178,896 $154,897 $150,954
Income before income taxes and minority interest 25,555 18,189 15,806
Minority interest (702) -- --
Net income 14,886 10,855 9,431
Net income per share-basic 0.30 0.22 0.18
Net income per share-diluted 0.29 0.20 0.18
Cash dividends per share:
Class A Common Stock 0.1100 0.1000 0.0967
Class B Common Stock 0.1100 0.0967 0.0900
Common stock quotations:
Class A-High 20.94 14.09 11.50
Class A-Low 15.75 11.00 9.83
Class B-High 22.13 14.09 11.75
Class B-Low 17.00 11.00 9.92
Fourth Quarter:
Revenues $164,906 $159,536 $157,111
Income before income taxes and minority interest 17,684 19,159 17,664
Minority interest 699 -- --
Net income 12,356 11,296 10,531
Net income per share-basic 0.25 0.22 0.20
Net income per share-diluted 0.25 0.22 0.20
Cash dividends per share:
Class A Common Stock 0.1100 0.1000 0.0967
Class B Common Stock 0.1100 0.0967 0.0900
Common stock quotations:
Class A-High 21.00 14.50 10.75
Class A-Low 19.00 13.09 10.17
Class B-High 22.81 15.83 11.09
Class B-Low 20.25 13.17 10.17
- -------------------------------------------------------------------------------------------
</TABLE>
The approximate number of record holders of the Company's stock as of February
26, 1998: Class A-1,555 and Class B-1,038.
CRAWFORD & COMPANY 1997 ANNUAL REPORT 41
<PAGE> 1
EXHIBIT 21.1
CRAWFORD & COMPANY
LISTING OF SUBSIDIARY CORPORATIONS*
<TABLE>
<CAPTION>
Jurisdiction in
Subsidiary Which Organized
---------- ---------------
<S> <C>
Crawford & Company of California Delaware
Crawford & Company of Florida Delaware
Crawford & Company of Illinois Delaware
Crawford & Company of New York, Inc. New York
Crawford & Company Employment Services, Inc. Delaware
Risk Sciences Group, Inc. Delaware
Crawford & Company (Bermuda) Limited Bermuda
Crawford & Company HealthCare Management, Inc. Delaware
Crawford & Company International, Inc. Georgia
Crawford-THG Limited England
Crawford-THG (Canada) Limited Province of Ontario
</TABLE>
* Excludes subsidiaries which, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary as of the
year ended December 31, 1997.
<PAGE> 1
ARTHUR ANDERSEN LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included or incorporated by reference in this Form 10-K into Crawford &
Company's previously filed Registration Statement File Nos. 2-78989, 33-22595,
33-47536, 33-36116, 333-02051, 333-24425 and 333-24427.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 26, 1998
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ F. L. Minix
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ Jesse C. Crawford
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ Linda K. Crawford
<PAGE> 1
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ E. Jenner Wood, III
<PAGE> 1
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ J. Hicks Lanier
<PAGE> 1
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ Larry L. Prince
<PAGE> 1
EXHIBIT 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ Charles Flather
<PAGE> 1
EXHIBIT 24.8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director or
officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the
"Corporation"), hereby constitutes and appoints JUDD F. OSTEN and DONALD R.
CHAPMAN, and each of them, his or her true and lawful attorney-in-fact and agent
to sign (1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and (2) any other reports or registration statements to be
filed by the Corporation with the Securities and Exchange Commission and/or any
national securities exchange under the Securities Exchange Act of 1934, as
amended, and any and all amendments thereto, and any and all instruments and
documents filed as part of or in connection with any such reports or
registration statements or reports or amendments thereto; and in connection with
the foregoing, to do any and all acts and things and execute any and all
instrument which such attorneys-in-fact and agents may deem necessary or
advisable to enable this Corporation to comply with the securities laws of the
United States and of any State or other political subdivision thereof; hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any one
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of February, 1998.
/s/ John A. Williams
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CRAWFORD & COMPANY FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 55,380
<SECURITIES> 0
<RECEIVABLES> 205,026
<ALLOWANCES> 16,802
<INVENTORY> 0
<CURRENT-ASSETS> 273,945
<PP&E> 149,506
<DEPRECIATION> 110,314
<TOTAL-ASSETS> 417,058
<CURRENT-LIABILITIES> 124,638
<BONDS> 731
0
0
<COMMON> 49,393
<OTHER-SE> 165,612
<TOTAL-LIABILITY-AND-EQUITY> 417,058
<SALES> 0
<TOTAL-REVENUES> 692,322
<CGS> 0
<TOTAL-COSTS> 496,613
<OTHER-EXPENSES> 123,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 72,184
<INCOME-TAX> 27,697
<INCOME-CONTINUING> 46,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,989
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CRAWFORD & COMPANY FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 55,485
<SECURITIES> 0
<RECEIVABLES> 181,568
<ALLOWANCES> 11,692
<INVENTORY> 0
<CURRENT-ASSETS> 246,896
<PP&E> 123,901
<DEPRECIATION> 92,264
<TOTAL-ASSETS> 378,085
<CURRENT-LIABILITIES> 110,652
<BONDS> 376
0
0
<COMMON> 50,111
<OTHER-SE> 171,425
<TOTAL-LIABILITY-AND-EQUITY> 378,085
<SALES> 0
<TOTAL-REVENUES> 633,625
<CGS> 0
<TOTAL-COSTS> 451,512
<OTHER-EXPENSES> 110,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 71,970
<INCOME-TAX> 29,160
<INCOME-CONTINUING> 42,810
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,810
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.82
</TABLE>
