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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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[ ] 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.
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CRAWFORD & COMPANY
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(Exact name of Registrant as specified in its charter)
Georgia 58-0506554
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
5620 Glenridge Dr., N.E., Atlanta, Georgia 30342
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 256-0830
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Class A Common Stock - $1.00 Par Value New York Stock Exchange
Class B Common Stock - $1.00 Par Value New York Stock Exchange
- -------------------------------------- -----------------------
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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(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 $89,324,000 as of March 2, 1999, 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, 1999, was:
Class A Common Stock - $1.00 Par Value - 25,347,384 Shares
Class B Common Stock - $1.00 Par Value - 25,097,117 Shares
- --------------------------------------------------------------------------------
Documents incorporated by reference:
(1) Annual Report to Shareholders for the Year Ended December 31, 1998, 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 27,
1999, Part III -Items 10, 11, 12, and 13.
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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 was
owned by a subsidiary of Swiss Reinsurance Company until June, 1998 (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,
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Domestic Operations 74.8% 78.9% 87.6%
International Operations 25.2% 21.1% 12.4%
----- ----- -----
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 limited 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
limited 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
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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 means.
Expanded services provided primarily, but not exclusively, to Registrant's
self-insured clients include the following:
- Information Services - through the Registrant's information
system, SISDAT(SM), it provides reports of detailed claims
information of both a statistical and financial nature to
self-insured corporations, governmental entities and insurance
companies.
- 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.
- Managed Care 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, and
discharge planning. Early Intervention Services seek to
actively control workers 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.
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- 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.
Vocational, medical and employment consultants 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.
- Long-Term Care - offers a full menu of long-term care services
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,
primarily 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.
- 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,
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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 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.
- REPAIRNET(SM) - is a network of contractors which contract
with the Registrant to provide property damage repair services
at agreed contract rates for property damage losses. The
Registrant markets repairNet to property insurance companies
to facilitate earlier, more economical resolution of smaller
property damage claims under homeowner policies.
- EDUCATION SERVICES - are provided by the Registrant's Crawford
University. The primary purpose of the University is to
provide education and certification for professionals engaged
in service delivery for all lines of business to assure
consistent quality in our work products. In addition, the
University provides continuing education in support of career
paths, management and supervisory training, and the
opportunity to obtain professional certification through
IIA/CPCU. Clients have the opportunity to attend Crawford
University education programs and access the Crawford
University continuing education curriculum in a variety of
risk management subjects.
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INTERNATIONAL OPERATIONS. 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 the Registrant
retained a sixty percent (60%) interest and Swiss Reinsurance Company's
subsidiary received a forty percent (40%) interest. In June 1998, Swiss Re
exchanged its forty percent (40%) interest in Crawford-THG for 1,900,000 shares
of the Registrant's Class A Common Stock. All of the Registrant's principal
international operations are now wholly-owned by the Registrant. On July 13,
1998, the Registrant, through a wholly-owned subsidiary, acquired all of the
outstanding shares in Adjusters Canada Incorporated, a Canadian loss adjusting
company. On December 31, 1998, Adjusters Canada Incorporated and Crawford-THG
(Canada) Limited were amalgamated into Crawford Adjusters Canada Incorporated.
Non-North American revenues and expenses are reported on a two-month delayed
basis and, accordingly, the Registrant's December 31, 1998, 1997 and 1996
consolidated financial statements reflect the non-North American financial
position as of October 31, 1998, 1997 and 1996 and the results of non-North
American operations and cash flows for the 12-month periods ended October 31,
1998, 1997 and 1996. Because of the deferred reporting of non-North American
operations, the merger of the international operations of the Registrant with
those of the Thomas Howell Group was not reflected in the December 31, 1996
consolidated financial statements and only ten months results are included in
the December 31, 1997 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.
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- 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.
- 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, and
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.
The Registrant has a branch profit-sharing compensation policy covering most of
its branch managers in the United States, under which those managers participate
in the profits of their respective branches. This policy provides a formula for
the determination of branch office profits and pays the manager a percentage,
generally forty percent (40%), of those profits.
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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.
When 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 entities.
These programs generally utilize an insurance company which writes specialized
policies that permit each client to select its own level of risk retention, and
may permit certain risk management services to be provided to the client by
service companies independent of the insurance company or broker. 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).
These programs are sensitive to changes in premiums charged for full coverage
insurance. In softer insurance markets, as have been experienced in recent
years, these alternative risk programs tend to be less attractive to potential
clients and are replaced by full traditional insurance and, accordingly, reduce
the number of alternative risk programs in which the Registrant can participate.
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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 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 issue" 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 non-Year
2000 compliant systems in a timely manner could have a material impact on future
financial results.
At December 31, 1998, the total number of full-time employees was 7,658 compared
with 7,656 at December 31, 1997. The Registrant, through its Crawford
University, 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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND ANALYSTS' REPORTS
Certain written and oral statements made or incorporated by reference from time
to time by the Registrant in this report, other reports, filings with the
Securities and Exchange Commission, press releases, conferences, or otherwise,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate or imply future
results, performance or achievements. Forward-looking statements may be
identified, without limitation, by the use of such words as "anticipates",
"estimates", "expects", "intends", "plans", "predicts", "projects", "believes",
or words or phrases of similar meaning.
Forward-looking statements include risks and uncertainties which could cause
actual results or outcomes to differ materially from those expressed in the
forward-looking statements. In addition to other factors and matters discussed
elsewhere herein, some of the important factors that could
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cause actual results to differ materially from those discussed in the
forward-looking statements include the following:
- Changes in general economic conditions in the Registrant's
major markets, which include the United States, the United
Kingdom, and Canada, as well as, to a lesser extent, the other
areas throughout the world in which the Registrant does
business;
- Occurrences of weather related, natural and man-made
disasters;
- Changes in the degree to which property and casualty insurance
carriers outsource their claims handling functions;
- Decisions by major insurance carriers and underwriters and
brokers to expand their activities as third party
administrators and adjusters, which would directly compete
with the Registrant's business;
- Continued growth in product liability class actions and the
possibility that legislation may curtail or limit that growth;
- The growth of the alternative risk market and the use of
independent third party administrators such as the Registrant,
as opposed to administrators affiliated with brokers or
insurance carriers;
- Ability to develop or acquire information technology resources
to support and grow the Registrant's businesses;
- The ability to recruit, train, and retain qualified personnel;
- The cyclical nature of the Registrant's business and the
affect of general economic and weather conditions;
- The renewal of existing major contracts with clients and the
Registrant's ability to obtain such renewals and new contracts
on satisfactory financial terms;
- Unanticipated impact of Year 2000 issues, including the
failure of products from major suppliers to function properly
and the inability of trading partners to receive or transmit
data from or to the Registrant;
- Changes in accounting principles or application of such
principles to the Registrant's business;
- General risks associated with doing business outside the
United States, including without limitation, restrictions on
foreign-owned or controlled entities conducting loss adjusting
activities in those jurisdictions and currency restrictions;
and
- Any other factors referenced or incorporated by reference in
this report and any other report.
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The risks included above are not exhaustive. Other sections of this report may
include additional factors which could adversely impact the Registrant's
business and financial performance. Moreover, the Registrant operates in a very
competitive and rapidly changing environment. New risk factors emerge from time
to time, and it is not possible for management to predict all such risk factors,
nor can it asses the impact of known risk factors on the Registrant's business
or the extent to which any factor or combination of factors may cause actual
results to differ materially from those contained in any forward-looking
statement. The Registrant undertakes no obligation to revise or publicly release
the results of any revisions to forward-looking statements or to identify any
new risk factors which may arise. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of
actual future results.
Investors should also be aware that while the Registrant does, from time to
time, communicate with securities analysts, it is against the Registrant's
policy to disclose to them any material, non-public information or other
confidential commercial information. Accordingly, investors should not assume
that the Registrant agrees with any statement or report issued by any analyst
irrespective of the content of the statement or report. Furthermore, the
Registrant has a policy against issuing or confirming financial forecasts or
projections issued by others. Thus, to the extent that the reports issued by
securities analysts contain any projections, forecasts, or opinions, such
reports are not the responsibility of the Registrant.
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, 1998, the
Registrant leased approximately 550 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 5 of Notes to
Consolidated Financial Statements included in the Registrant's 1998 Annual
Report to Shareholders filed herewith as Exhibit 13.1, which notes are
incorporated herein by reference.
As of December 31, 1998, the Registrant owned or leased approximately 1,735
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.
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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 1998.
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>
F. L. Minix Chairman and Chief Executive Officer 71
A. L. Meyers, Jr. President and Chief Operating Officer 61
J. F. Giblin Executive Vice President - Finance 42
J. F. Osten Senior Vice President - General Counsel & Corporate Secretary 57
W. L. Beach Senior Vice President - Human Resources 54
R. S. Elder Group Managing Director, Crawford-THG Limited 49
</TABLE>
Mr. Minix served as Chairman and Chief Executive Officer of the Registrant for
more than five years until his retirement on January 1, 1996. He was retired
until he returned to that position on September 28, 1998.
Mr. Meyers was appointed to his present position effective September 28, 1998.
He served as President - Claims Management Services from August 1995 until March
1998. He had previously retired from the Company in April 1994, after having
served as Manager of the Registrant's Washington, D. C. branch office since
1977. During the period between his retirement in 1994 and appointment as
President - Claims Management Services in 1995, he served as a consultant and
operations supervisor for the Registrant.
Mr. Giblin has been with the Registrant for more than five years, serving as
Controller until his appointment to his present position in June, 1998.
Mr. Osten has been associated with the Registrant in management capacities for
more than five years and has held the positions indicated in the above table for
more than five years.
Mr. Beach was hired by the Registrant as its Chief Learning & Resources Officer
in 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.
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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, 1998
under the caption "Quarterly Financial Data (Unaudited), Dividend Information
and Common Stock Quotations" and is incorporated herein by reference.
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, 1998, 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 18-22 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 1998
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 23-41 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 1998
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 (Unaudited), Dividend Information and Common Stock
Quotations", 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 27, 1999, and is incorporated herein by
reference. For other information required by this Item, see "Executive Officers
of the Registrant" on page 12 herein.
13
<PAGE> 14
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included on pages 4-9 under the
captions "Executive Compensation and Other Information" and "Report of the
Senior Compensation and Stock Option Committee of the Board of Directors on
Executive Compensation" and on page 14 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 27, 1999, and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included on pages 10-13 under the
caption "Stock Ownership Information" of the Registrant's Proxy Statement for
the Annual Meeting of Shareholders to be held April 27, 1999, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included on page 13 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 27,
1999, 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 1998 Annual Report to Shareholders contains
the consolidated balance sheets as of December 31, 1998 and
1997, the related consolidated statements of income,
shareholders' investment and cash flows for each of the three
years in the period ended December 31, 1998, 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, 1998 and 1997
- Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997, and 1996
14
<PAGE> 15
- Consolidated Statements of Shareholders' Investment
for the Years Ended December 31, 1998, 1997 and 1996
- Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996
- Notes to Consolidated Financial Statements - December 31,
1998, 1997, and 1996
2. Financial Statement Schedule
- Report of Independent Public Accountants as to Schedule
<TABLE>
<CAPTION>
Schedule
Number
--------
<S> <C>
II Valuation and Qualifying Accounts for the Years Ended December 31, 1998, 1997, and 1996
Schedules I and III through V not listed above have been omitted because they are not applicable.
</TABLE>
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).
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
<S> <C>
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.
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).
13.1 The Registrant's Annual Report to Shareholders for the year ended December 31, 1998
(only those portions incorporated herein by reference).
21.1 Subsidiaries of Crawford & Company.
23.1 Consent of Arthur Andersen LLP.
24.1-7 Powers of Attorney.
27.1 Financial Data Schedule. (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, 1998.
(c) The Registrant has filed the Exhibits listed in Item 14(a)(3).
16
<PAGE> 17
(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.
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 25, 1999 By /s/ F. L. Minix
--------------- --------------------------------------
F. L. MINIX, Chairman 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 25, 1999 /s/ F. L. Minix
--------------- -----------------------------------------
F. L. MINIX, Chairman and Chief Executive
Officer (Principal Executive Officer) and
Director
Date March 25, 1999 /s/ J. F. Giblin
--------------- -----------------------------------------
J. F. GIBLIN, Executive Vice President-
Finance (Principal Financial Officer)
Date March 25, 1999 /s/ W. L. Hudson
--------------- -----------------------------------------
W. L. HUDSON, Senior Vice President and
Controller (Principal Accounting Officer)
17
<PAGE> 18
NAME AND TITLE
Date March 24, 1999 /s/ Archie Meyers, Jr.
--------------- -----------------------------------------
ARCHIE L. MEYERS, JR., Director
Date March 25, 1999 *
--------------- -----------------------------------------
J. HICKS LANIER, Director
Date March 25, 1999 *
--------------- -----------------------------------------
CHARLES FLATHER, Director
Date March 25, 1999 *
--------------- -----------------------------------------
LINDA K. CRAWFORD, Director
Date March 25, 1999 *
--------------- -----------------------------------------
JESSE C. CRAWFORD, Director
Date March 25, 1999 *
--------------- -----------------------------------------
LARRY L. PRINCE, Director
Date March 25, 1999 *
--------------- -----------------------------------------
JOHN A. WILLIAMS, Director
Date March 25, 1999 *
--------------- -----------------------------------------
E. JENNER WOOD, III, Director
Date March 25, 1999 By /s/ Judd F. Osten
--------------- -------------------------------------------
JUDD F. OSTEN - As attorney-in-fact for the
Directors above whose name an asterisk
appears.
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
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. 23-31
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. 32-36
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> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
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).
13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 1997 (only those portions incorporated
hereby by reference). 37-62
21.1 Subsidiaries of Crawford & Company. 63
23.1 Consent of Arthur Andersen LLP. 64
24.1-7 Powers of Attorney. 65-71
27.1 Financial Data Schedule. (For SEC use only)
</TABLE>
<PAGE> 21
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 29, 1999. 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 29, 1999
<PAGE> 22
SCHEDULE II
CRAWFORD & COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
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)
1998
Deducted in
consolidated balance
sheets from accounts $16,802 $2,780 $ 746 $ (982) $19,346
receivable ======= ====== ====== ====== =======
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 ======= ====== ======= =======
</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 February 2, 1999)
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
<PAGE> 2
Corporation Code would have required to be sent to the shareholder in a notice
of the meeting must 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.
Notwithstanding the foregoing, notice of any meeting of the
shareholders may be given by electronic or any other means to the extent that
delivery of such notice by those means is not precluded by the Georgia Business
Corporation Code or the rules and regulations of The New York Stock Exchange or
the United States Securities and Exchange Commission.
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. Unless otherwise provided in the
proxy, it shall confer discretionary authority to vote on any proposal by a
shareholder not included with the proxy materials accompanying the notice and
proxy if the Company did not have notice of that matter at least 120 days before
the date on which the Company first mailed its proxy materials for the prior
year's annual meeting of shareholders.
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
<PAGE> 3
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.
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 nine (9), 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
<PAGE> 4
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.
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 subsection (a) and (b) above shall
not apply to (i) 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; or (ii) Forrest L. Minix.
<PAGE> 5
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.
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.
<PAGE> 6
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.
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)
<PAGE> 7
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.
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
<PAGE> 8
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
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
<PAGE> 9
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 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 10.6
RESTATED AND
AS AMENDED THROUGH
FEBRUARY 2, 1999
CRAWFORD & COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AS AMENDED AND RESTATED AS OF FEBRUARY 2, 1999
Section 1
PURPOSE
Crawford & Company hereby amends and restates the Crawford & Company
Supplemental Executive Retirement Plan as originally effective as of January 1,
1986 and as thereafter amended. The primary purpose of this SERP is to provide a
supplemental retirement benefit to the Participants described in Exhibit A to
supplement the benefits payable to each of them under the Retirement Plan to the
extent such Retirement Plan benefits are limited by the application of Code
ss.ss. 401(a)(17) and 415.
Section 2
DEFINITIONS
The capitalized terms used in this SERP shall have the same meanings
assigned to those terms in the Retirement Plan except that the following terms
shall have the following meanings:
2.1 SERP - means this Crawford & Company Supplemental Executive
Retirement Plan, as amended from time to time.
2.2 Retirement Plan - means the Crawford & Company Retirement Plan and
Trust Agreement, as amended from time to time.
2.3 Deferred Compensation Plan - means the Crawford & Company Deferred
Compensation Plan, and any successor plan, as amended from time to time.
Section 3
PARTICIPATION
The Senior Compensation and Stock Option Committee of the Board of
Directors shall have the power to designate an executive as a Participant in
this SERP and such designations shall be reflected on Exhibit A to this SERP.
<PAGE> 2
Section 4
BENEFIT
4.1 SERP Benefit. A benefit shall be payable under this SERP to, or on
behalf of, each Participant, which benefit shall equal the excess, if any, of
(a) over (b) where
(a) equals the aggregate of the benefits which would have been payable
to him, or on his behalf, under (A) the Retirement Plan, plus (B) Restoration
Benefits under the Deferred Compensation Plan in the form elected by him, or his
Beneficiary, under the terms of the Retirement Plan and Deferred Compensation
Plan absent the limitations of Code ss.ss.401(a)(17) and 415, without regard to
when such executive became a participant; and
(b) equals the aggregate benefits actually payable to him, or on his
behalf, in such form under (A) the Retirement Plan, and (B) the Restoration
Benefits provisions of the Deferred Compensation Plan.
4.2 Payment. The benefit payable to, or on behalf of, a Participant
under this ss.4 shall be paid as of the same date, in the same benefit payment
form and to the same person as his benefit under the Retirement Plan or Deferred
Compensation Plan and no payment shall be made to, or on behalf of, a
Participant under this ss.4 unless and until a benefit is paid to him, or on his
behalf, under the Retirement Plan.
Section 5
SOURCE OF BENEFIT PAYMENTS
All benefits payable under the terms of this SERP shall be paid by
Crawford & Company from its general assets. No person shall have any right or
interest or claims whatsoever to the payment of a benefit under this SERP from
any person whomsoever other than Crawford & Company, and no Participant or
beneficiary shall have any right or interest whatsoever to the payment of a
benefit under this SERP which is superior in any manner to the right of any
other general and unsecured creditor of Crawford & Company.
Section 6
NOT A CONTRACT OF EMPLOYMENT
Participation in this SERP shall not grant to any Participant the right
to remain an employee for any specific term of employment or in any specific
capacity or at any specific rate of compensation.
<PAGE> 3
Section 7
NO ALIENATION OR ASSIGNMENT
A Participant or a beneficiary under this SERP shall have no right or
power to alienate, commute, anticipate or otherwise assign at law or equity all
or any portion of any benefit otherwise payable under this SERP, and the Senior
Compensation and Stock Option Committee of the Board of Directors shall have the
right in light of any such action to suspend temporarily or terminate
permanently the payment of benefits to, or on behalf of, any Participant or
beneficiary who attempts to do so.
Section 8
ERISA
Crawford & Company intends that this SERP come within the various
exceptions and exemptions of ERISA and for an unfunded deferred compensation
plan maintained primarily for a select group of management or highly compensated
employees within the meaning of ERISA ss. 201(2), ss. 302(a)(3) and ss.
401(a)(1) and any ambiguities in this SERP shall be construed to effect that
intent.
Section 9
ADMINISTRATION, AMENDMENT AND TERMINATION
Crawford & Company shall have all powers necessary to administer this
SERP in its absolute discretion and shall have the right, by action of the
Senior Compensation and Stock Option Committee of the Board of Directors, to
amend this SERP from time to time in any respect whatsoever and to terminate
this SERP at any time; provided, however, that any such amendment or termination
shall not be applied retroactively to deprive a Participant of benefits accrued
under this Plan to the date of such amendment or termination. This SERP shall be
binding on any successor in interest to Crawford & Company.
Section 10
CONSTRUCTION
This SERP shall be construed in accordance with the laws of the State
of Georgia, and the masculine shall include the feminine and the singular the
plural whenever appropriate.
<PAGE> 4
Section 11
EXECUTION
Crawford & Company, as the SERP sponsor, has executed this SERP to
evidence the adoption of this amendment and restatement by the Senior
Compensation and Stock Option Committee of its Board of Directors this 2nd day
of February, 1999.
CRAWFORD & COMPANY
By: /s/ F. L. Minix
Title: Chairman & CEO
<PAGE> 5
EXHIBIT A
CRAWFORD & COMPANY SUPPLEMENTAL RETIREMENT PLAN
AS AMENDED AND RESTATED EFFECTIVE
AS OF FEBRUARY 2, 1999
NAME OF PARTICIPANT
T. G. Germany
F. L. Minix
R. P. Albright
P. A. Bollinger
D. R. Chapman
J. F. Osten
D. A. Smith
J. F. Giblin
A. L. Meyers, Jr.
<PAGE> 1
EXHIBIT 13.1
FINANCIAL REVIEW
18 MANAGEMENT'S DISCUSSION AND ANALYSIS
23 CONSOLIDATED STATEMENTS OF INCOME
24 CONSOLIDATED BALANCE SHEETS
26 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
27 CONSOLIDATED STATEMENTS OF CASH FLOWS
28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
38 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
39 SELECTED FINANCIAL DATA
40 QUARTERLY FINANCIAL DATA (UNAUDITED)
42 DIRECTORS AND OFFICERS
<PAGE> 2
CRAWFORD & COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the consolidated financial
condition and results of operations of Crawford & Company. This discussion
should be read in conjunction with the Company's consolidated financial
statements and the accompanying footnotes.
RESULTS OF OPERATIONS
Operating results for the Company's domestic and international operations were
as follows:
<TABLE>
<CAPTION>
% CHANGE
FROM PRIOR YEAR
YEARS ENDED DECEMBER 31 1998 1997 1996 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Revenues:
Domestic $499,260 $546,246 $555,257 (8.6)% (1.6)%
International 168,011 146,076 78,368 15.0% 86.4%
-------- -------- --------
Total 667,271 692,322 633,625 (3.6)% 9.3%
Compensation & Benefits:
Domestic 313,918 341,684 355,110 (8.1)% (3.8)%
% of Revenues 62.9% 62.6% 63.9%
International 104,239 92,528 48,251 12.7% 91.8%
% of Revenues 62.0% 63.3% 61.5%
-------- -------- --------
Total 418,157 434,212 403,361 (3.7)% 7.6%
% of Revenues 62.7% 62.7% 63.7%
Expenses Other than Compensation & Benefits:
Domestic 121,169 122,294 130,973 (0.9)% (6.6)%
% of Revenues 24.3% 22.4% 23.6%
International 63,188 49,695 27,321 27.2% 81.9%
% of Revenues 37.6% 34.0% 34.9%
-------- -------- --------
Total 184,357 171,989 158,294 7.2% 8.7%
% of Revenues 27.6% 24.8% 25.0%
Pretax Income Before Unusual Items(1):
Domestic 64,173 82,268 69,174 (22.0)% 18.9%
% of Revenues 12.9% 15.1% 12.5%
International 584 3,853 2,796 (84.8)% 37.8%
% of Revenues 0.3% 2.6% 3.6%
-------- -------- --------
Total 64,757 86,121 71,970 (24.8)% 19.7%
% of Revenues 9.7% 12.4% 11.4%
</TABLE>
(1) Unusual items consist of Year 2000 expenses, restructuring charges and
minority interest.
The following discussion analyzes the Company's results reported by its two
business units, domestic operations and international operations. Expense
amounts discussed are excluding Year 2000 expenses, restructuring charges, and
minority interest.
18
<PAGE> 3
CRAWFORD & COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DOMESTIC OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues Domestic revenues declined 8.6% to $499.3 million for the year ended
December 31, 1998. Domestic revenues from insurance companies increased by 3%
during 1998 to $300.3 million. This gain was more than offset, however, by a
decline in revenues related to the winding down of a major class action project
and continued weakness in the self-insured market.
Revenue from the class action project declined from $48.9 million in 1997
to $10.9 million in 1998. The soft insurance market has contributed to the
weakness in the self-insured market, as self-insured entities have elected to
move to fully insured programs from alternative risk funding arrangements.
Revenues from self-insured entities, excluding the class action project,
declined 8% to $188.1 million in 1998.
Domestic unit volume, measured principally by cases received, decreased
3.0% from 1997 to 1998. Additionally, changes in the mix of services provided
and in the rates charged for those services had the combined effect of
decreasing revenues by approximately 5.6% in 1998 compared to 1997.
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 increased slightly, from 62.6% of
revenues in 1997 to 62.9% of revenues in 1998.
Domestic salaries and wages decreased by 6.2% from $288.7 million in 1997
to $270.8 million in 1998. This decline was due to fewer employees during the
year as compared to the prior year, as the Company reduced its U.S. workforce in
response to the decline in revenues.
Payroll taxes and fringe benefits for domestic operations decreased from
$53.0 million in 1997 to $43.1 million in 1998, as a result of fewer employees
and a reduction in pension expense due to favorable investment returns achieved
by the Company's pension plans in recent years.
Expenses Other than Compensation and Fringe Benefits Domestic expenses other
than compensation and related payroll taxes and fringe benefits increased as a
percent of revenues to 24.3% in 1998 from 22.4% in 1997. This increase was due
to higher personnel relocation costs, higher costs related to the Company's
self-insurance program, and one-time costs associated with converting to a new
medical bill auditing system.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenues Domestic revenues totaled $546.2 million and $555.3 million for the
years ended December 31, 1997 and 1996, respectively, a decrease of 1.6%. Growth
in claims from a major class action project was more than offset by weakness in
the self-insured corporate market.
Domestic unit volume, measured principally by cases received and
excluding acquisitions, decreased approximately 5.5% from 1996 to 1997. 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 2.3%. 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.
Compensation and Fringe Benefits Domestic compensation expense decreased as a
percent of revenues from 63.9% in 1996 to 62.6% in 1997. This decrease was due
primarily to a decline in administrative compensation expense, resulting from a
consolidation of administrative support functions.
Domestic salaries and wages decreased by 3.8% from 1996 to 1997, from
$299.9 million in 1996 to $288.7 million in 1997, due to the consolidation of
administrative support functions.
Payroll taxes and fringe benefits for domestic operations decreased to
$53.0 million in 1997 from $55.2 million in 1996, due to lower medical benefit
costs and fewer employees.
Expenses Other than Compensation and Fringe Benefits Domestic expenses other
than compensation and related payroll taxes and fringe benefits declined as a
percent of revenues, from 23.6% in 1996 to 22.4% in 1997. This decline was
largely due to lower rent and occupancy costs, as branch locations were
consolidated into campus environments.
19
<PAGE> 4
CRAWFORD & COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTERNATIONAL OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues Revenues from the Company's international operations totaled $168.0
million in 1998 and $146.1 million in 1997. The 15% increase in 1998 was
primarily due to the acquisitions of Adjusters Canada Incorporated ("ACI") and
the Thomas Howell Group ("THG"). The stronger U.S. dollar negatively impacted
revenues in 1998, reducing international revenue by approximately 6% from the
level that would have been reported without foreign currency fluctuations.
Compensation and Fringe Benefits As a percent of revenues, compensation expense,
including related payroll taxes and fringe benefits, decreased from 63.3% in
1997 to 62.0% in 1998, primarily due to continued efforts to eliminate
redundancies in the Company's United Kingdom operations (see "Restructuring
Charge" below).
Salaries and wages of international personnel decreased as a percent of
revenues, from 54.4% in 1997 to 53.3% in 1998. Payroll taxes and fringe benefits
also decreased as a percent of revenues, from 8.9% in 1997 to 8.7% in 1998.
These decreases were due to a decline in the number of employees as a result of
the U.K. restructuring program.
Expenses Other than Compensation and Fringe Benefits Expenses other than
compensation and related payroll taxes and fringe benefits increased as a
percent of revenues from 34.0% in 1997 to 37.6% in 1998. This increase was due
to higher professional fees associated with the restructuring of the Company's
U.K. operations and increased bad debt expense. Expenses other than compensation
and fringe benefits 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.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenues Revenues from the Company's international operations totaled $146.1
million and $78.4 million in 1997 and 1996. The 86.4% increase in 1997 was
primarily due to the THG acquisition, with ten months' results of THG being
included in 1997.
Compensation and Fringe Benefits As a percent of revenues, compensation expense,
including related payroll taxes and fringe benefits, increased from 61.5% in
1996 to 63.3% in 1997. Salaries and wages of international personnel increased
slightly as a percent of revenues, from 53.6% in 1996 to 54.4% in 1997. Payroll
taxes and fringe benefits also increased as a percent of revenues, from 7.9% in
1996 to 8.9% in 1997, 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 34.9% in 1996 to 34.0% in 1997. The decline was due to lower
rent and occupancy costs achieved through the integration of Crawford and former
THG operations.
Minority Interest Minority interest benefit of $1.2 million was recorded in
1998, compared to a benefit of $2.5 million in 1997. The minority interest
benefit reflects Swiss Re's 40% share in the losses of Crawford-THG Limited
through May 1998. In June 1998, the Company acquired Swiss Re's 40% interest,
and Crawford-THG Limited is now a wholly-owned subsidiary.
RESTRUCTURING CHARGES During the third quarter of 1998, the Company recorded a
pretax charge of $14.9 million related to the restructuring of its United
Kingdom and Canadian operations and the realignment of senior management
following the resignation of its former chairman and chief executive officer.
These restructuring programs resulted in the elimination of approximately 350
staff positions and the closing of 67 offices. After reflecting income tax
benefits of $5.2 million, this charge reduced the Company's 1998 net income by
$9.7 million or $0.19 per share.
In connection with the THG acquisition, the Company recorded a pretax
charge of $13 million in the first quarter of 1997 for personnel, facilities,
and other costs associated with integration of the Company's international
businesses. After reflecting income tax benefits of $4.3 million and minority
interest share of $3.5 million, this charge reduced 1997 net income by $5.2
million or $0.10 per share.
20
<PAGE> 5
CRAWFORD & COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION At December 31, 1998, current assets exceeded current
liabilities by approximately $110.6 million, a decrease of $43.6 million from
the working capital balance at December 31, 1997. Cash and cash equivalents at
the end of 1998 totaled $8.4 million, compared to $55.4 million at the end of
1997. Cash was generated primarily from operating activities, while the
principal uses of cash were for repurchases of common stock, dividends paid to
shareholders, the acquisition of ACI, acquisitions of property and equipment,
and the development of the Company's new claims management system.
The Company maintains credit lines with banks in order to meet seasonal
working capital requirements and other financing needs that may arise.
Short-term borrowings outstanding as of December 31, 1998 totaled $37.2 million,
increasing from $19.8 million at the end of 1997. 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 1998 was $240 million, compared
with $215 million at the end of 1997.
FACTORS THAT MAY AFFECT FUTURE RESULTS Certain of the statements contained in
this and other sections of this Annual Report are forward-looking. While
management believes that these statements are accurate, the Company's business
is dependent upon general economic conditions and various conditions specific to
its industry. Future trends and these factors could cause actual results to
differ materially from the forward-looking statements that have been made. In
particular, the following issues and uncertainties should be considered in
evaluating the Company's prospects:
Year 2000 The Company's project to remediate its computer systems to address the
Year 2000 issue is proceeding on schedule. The Year 2000 issue, which is common
to most organizations, concerns the inability of information systems, including
embedded chips, to properly distinguish the year 2000 from the year 1900. This
could result in a system failure or a temporary inability to process claims, to
make claims payments or to transact similar normal business activities.
The Company's Year 2000 project contains five primary remediation phases:
identification, assessment, repair, testing, and contingency planning.
Additionally, the Company prioritizes each information technology ("IT") and
non-IT system according to its criticality to the Company's operations. As of
February 28, 1999, the Company has completed the remediation of and placed into
production approximately 75% (determined on the basis of lines of code) of its
U.S. systems identified as critical. For the remainder of the U.S. critical
systems, the Company is either in the repair or testing phase. The Company plans
to have substantially all of these critical systems repaired and tested by March
31, 1999. During the third quarter of 1998, the Company began its contingency
planning efforts for the business functions dependent upon these critical
systems. The Company expects to complete these contingency plans by June 30,
1999. Except for personal computer and non-IT systems, the Company expects to
complete its remediation of non-critical systems (including development of
contingency plans, where appropriate) by June 30, 1999. With respect to personal
computer and non-IT systems (primarily telephones), the Company expects to
complete remediation or replacement by September 30, 1999.
The Company is also corresponding with vendors and business partners
regarding their Year 2000 readiness. Requests for verification of Year 2000
compliance have been sent to key vendors, and the Company is actively soliciting
responses from external parties identified as critical (e.g., telecommunications
providers). For critical external parties for which the Company is unable to
obtain satisfactory assurances of compliance, the Company intends to either
change suppliers or develop detailed contingency plans. The Company plans to
complete this process by June 30, 1999.
The Company has determined that the Year 2000 efforts required in its
international operations are significantly less than
21
<PAGE> 6
CRAWFORD & COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
those required in the U.S., primarily due to the use of newer systems
internationally. Remediation efforts in the international operations are
progressing, and the established deadlines for completion are similar to those
discussed above for domestic operations.
The Company has engaged an independent consultant to evaluate its Year
2000 project and to report on its findings to the Audit Committee of the
Company's Board of Directors.
The Company believes the most significant risks related to the project
are the ability to effectively remediate its U.S. claims management systems. The
worst-case scenario, a complete failure of these systems, would require the
Company to shift temporarily to a manual processing mode. Such a scenario could
significantly delay the processing, payment and reporting of claims and, thus,
the Company's revenue from such services. If the Company were forced to operate
in such a mode for an extended length of time, the adverse impact on the
Company's financial position and results of operations would likely be material.
However, the Company believes that its remediation efforts will reduce the risk
of such an occurrence to a very low level.
The total cost associated with the Year 2000 project is not expected to
be material to the Company's financial position. The Company estimates the total
cost of its Year 2000 compliance efforts to be approximately $12.5 million, with
approximately $8 million having been incurred through December 31, 1998. The
Company expects to incur approximately $4 million in 1999 and $0.5 million in
2000 in such costs.
Due to the general uncertainty inherent in the Year 2000 issue, resulting
in large part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have a material impact on the
Company's results of operations, liquidity or financial condition.
Euro On January 1, 1999, the euro was introduced as the official currency in
eleven European countries in which the Company operates. Companies and
individuals in those countries may now enter into transactions either in euros
or in the local currency. Management does not believe the introduction of the
euro will materially affect the Company's financial position or results of
operations.
Foreign Currency Exchange Due to recent acquisitions, a growing percentage
of the Company's revenues and expenses are transacted in foreign currencies. As
a result, the Company's international results of operations are subject to
foreign exchange rate fluctuations.
New Claims Management System During 1998, the Company began the development
of a new claims management system. As of December 31, 1998, approximately $10
million of internal and external costs have been capitalized in connection with
this development project. The server-based system, which is scheduled to be
completed by the end of 1999, is designed to streamline and automate the claims
intake, assignment, management, and reporting functions. The Company believes
the system will increase its competitive advantages, particularly in the
self-insured corporate market. However, if the system fails to function as
planned, it could adversely affect the Company's competitive position and
revenues.
22
<PAGE> 7
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
(in thousands, except per share data)
REVENUES $ 667,271 $ 692,322 $ 633,625
COSTS AND EXPENSES:
Costs of services provided, less reimbursed expenses of
$35,327 in 1998, $40,218 in 1997 and $33,218 in 1996 494,590 496,613 451,512
Selling, general, and administrative expenses 107,924 109,588 110,143
Year 2000 expenses 7,201 937 -
Restructuring charges 14,873 13,000 -
------------ ----------- -----------
624,588 620,138 561,655
------------ ----------- -----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 42,683 72,184 71,970
PROVISION FOR INCOME TAXES 16,395 27,697 29,160
------------ ----------- -----------
INCOME BEFORE MINORITY INTEREST 26,288 44,487 42,810
MINORITY INTEREST IN LOSS OF JOINT VENTURE 1,177 2,502 -
------------ ----------- -----------
NET INCOME $ 27,465 $ 46,989 $ 42,810
============ =========== ===========
NET INCOME PER SHARE:
Basic $ 0.55 $ 0.95 $ 0.84
============ =========== ===========
Diluted $ 0.54 $ 0.93 $ 0.82
============ =========== ===========
WEIGHTED-AVERAGE SHARES OUTSTANDING:
Basic 50,341 49,566 51,032
============ =========== ===========
Diluted 50,938 50,687 52,097
============ =========== ===========
CASH DIVIDENDS PER SHARE:
Class A Common Stock $ 0.50 $ 0.44 $ 0.40
============ =========== ===========
Class B Common Stock $ 0.50 $ 0.44 $ 0.39
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE> 8
CRAWFORD & COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 1997
-------------------------
<S> <C> <C>
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,423 $ 55,380
Accounts receivable, less allowance for doubtful accounts
of $19,346 in 1998 and $16,802 in 1997 134,094 117,926
Unbilled revenues, at estimated billable amounts 88,871 87,687
Deferred income tax assets 2,342 981
Prepaid expenses and other current assets 17,416 16,840
--------- ---------
TOTAL CURRENT ASSETS 251,146 278,814
--------- ---------
PROPERTY AND EQUIPMENT, AT COST:
Furniture and fixtures 59,693 57,261
Data processing equipment 63,733 60,443
Automobiles 8,229 11,815
Buildings and improvements 20,009 17,888
Land 2,409 2,099
--------- ---------
154,073 149,506
Less accumulated depreciation and amortization (111,130) (110,314)
--------- ---------
NET PROPERTY AND EQUIPMENT 42,943 39,192
--------- ---------
OTHER ASSETS:
Intangible assets arising from acquisitions, less accumulated amortization
of $12,434 in 1998 and $10,533 in 1997 64,092 51,968
Prepaid pension cost 55,377 52,912
Capitalized software costs 11,885 1,013
Other 7,826 4,967
--------- ---------
TOTAL OTHER ASSETS 139,180 110,860
--------- ---------
$ 433,269 $ 428,866
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
24
<PAGE> 9
CRAWFORD & COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 1997
-------------------------
<S> <C> <C>
(in thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term borrowings $ 37,196 $ 19,812
Accounts payable 21,971 19,956
Accrued compensation and related costs 24,219 30,898
Accrued restructuring costs 7,362 3,090
Other accrued liabilities 31,688 33,390
Deferred revenues 17,575 16,829
Current installments of long-term debt 563 594
--------- ---------
TOTAL CURRENT LIABILITIES 140,574 124,569
--------- ---------
NONCURRENT LIABILITIES:
Long-term debt, less current installments 1,854 731
Deferred income taxes 8,720 14,921
Deferred revenues 13,594 13,404
Postretirement medical benefit obligation 7,983 8,105
Self-insured risks 9,002 9,067
Minority interest - 33,672
Other 11,491 9,392
--------- ---------
Total noncurrent liabilities 52,644 89,292
--------- ---------
SHAREHOLDERS' INVESTMENT:
Class A Common Stock, $1.00 par value, 50,000 shares authorized;
25,735 and 23,916 shares issued in 1998 and 1997, respectively 25,735 23,916
Class B Common Stock, $1.00 par value, 50,000 shares authorized;
25,168 and 25,477 shares issued in 1998 and 1997, respectively 25,168 25,477
Additional paid-in capital 24,560 -
Retained earnings 172,958 174,973
Cumulative translation adjustment (8,370) (9,361)
--------- ---------
TOTAL SHAREHOLDERS' INVESTMENT 240,051 215,005
--------- ---------
$ 433,269 $ 428,866
========= =========
</TABLE>
25
<PAGE> 10
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Cumulative Total
Class A Class B Paid-In Retained Translation Shareholders'
Non-Voting Voting Capital Earnings Adjustment Investment
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
BALANCE AT 12/31/95 $ 25,845 $ 25,947 $ - $ 172,030 $(2,962) $ 220,860
Net income - - - 42,810 - 42,810
Translation adjustment - - - - 679 679
---------
Comprehensive income 43,489
Dividends paid - - - (20,095) - (20,095)
Shares repurchased (1,623) (335) (1,323) (21,037) - (24,318)
Stock options exercised 170 107 1,323 - - 1,600
-------- -------- -------- --------- ------- ---------
BALANCE AT 12/31/96 24,392 25,719 - 173,708 (2,283) 221,536
Net income - - - 46,989 - 46,989
Translation adjustment - - - - (7,078) (7,078)
---------
Comprehensive income 39,911
Dividends paid - - - (21,820) - (21,820)
Shares repurchased (1,775) (295) (11,300) (23,904) - (37,274)
Conversion of convertible debt 821 - 6,564 - - 7,385
Stock options exercised 478 53 4,736 - - 5,267
-------- -------- -------- --------- ------- ---------
BALANCE AT 12/31/97 23,916 25,477 - 174,973 (9,361) 215,005
Net income - - - 27,465 - 27,465
Translation adjustment - - - - 991 991
---------
Comprehensive income 28,456
Dividends paid - - - (25,126) - (25,126)
Shares repurchased (780) (333) (14,327) (4,354) - (19,794)
Stock options exercised 699 24 7,656 - - 8,379
Shares issued for acquisition
(Note 7) 1,900 - 31,231 - - 33,131
-------- -------- -------- --------- ------- ---------
BALANCE AT 12/31/98 $ 25,735 $ 25,168 $ 24,560 $ 172,958 $(8,370) $ 240,051
======== ======== ======== ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 11
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
(in thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 27,465 $ 46,989 $ 42,810
Reconciliation of net income to net cash provided by
operating activities:
Minority interest in loss of joint venture (1,177) (2,502) -
Depreciation and amortization 14,798 15,423 15,716
Deferred income taxes (9,662) 2,807 2,394
Loss on disposal of risk control unit - - 1,560
Loss on sales of property and equipment 300 277 434
Changes in operating assets and liabilities, net of effects of
acquisitions:
Short-term investments - - 5,596
Accounts receivable, net (13,513) 12,643 5,231
Unbilled revenues 6,138 10,907 (4,586)
Prepaid or accrued income taxes 3,713 (1,628) (1,124)
Accounts payable and accrued liabilities (7,453) (14,633) 10,383
Accrued restructuring costs 4,490 6,220 -
Deferred revenues 943 389 1,897
Prepaid expenses and other assets (5,106) (10,016) (9,067)
-------- -------- --------
Net cash provided by operating activities 20,936 66,876 71,244
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (13,814) (12,331) (7,473)
Acquisitions of businesses (16,259) - (3,329)
Capitalization of software costs (11,852) (741) (261)
Proceeds from sales of property and equipment 1,516 1,053 350
-------- -------- --------
Net cash used in investing activities (40,409) (12,019) (10,713)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (25,126) (21,820) (20,095)
Repurchase of common stock (19,794) (37,274) (24,318)
Proceeds from exercise of stock options 8,379 5,267 1,600
Increase (decrease) in short-term borrowings 10,887 1,878 (2,340)
Decrease in long-term debt (1,079) (1,676) (677)
-------- -------- --------
Net cash used in financing activities (26,733) (53,625) (45,830)
-------- -------- --------
Effects of exchange rate changes on cash and cash equivalents (751) (1,337) (18)
-------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (46,957) (105) 14,683
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 55,380 55,485 40,802
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,423 $ 55,380 $ 55,485
======== ======== ========
</TABLE>
27
<PAGE> 12
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING AND REPORTING POLICIES Nature of Operations and Industry
Concentration The Company is a global insurance services firm that provides
claims services and risk management information services to insurance companies,
self-insured corporations, and governmental entities. Substantial portions of
the Company's revenues and accounts receivable are derived from domestic claims
services provided to the property and casualty insurance industry.
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 subsidiaries outside North America are included in the
Company's consolidated financial statements on a two-month delayed basis in
order to provide sufficient time for accumulation of their results.
Prior Year Reclassifications Certain prior year amounts have been reclassified
to conform to the current year presentation.
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, 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.
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, approximates carrying value due
to the short-term maturity of the instruments. The fair value of short-term
borrowings and long-term debt approximates carrying value based on their
effective interest rates compared to current market rates.
Property and Depreciation The Company depreciates the cost of property and
equipment over the estimated useful lives of the related assets, primarily using
the straight-line method. The estimated useful lives for the principal property
and equipment classifications are as follows:
<TABLE>
<CAPTION>
ESTIMATED
CLASSIFICATION USEFUL LIVES
- --------------------------------------------------------------
<S> <C>
Furniture and fixtures 3-10 years
Data processing equipment 3-5 years
Automobiles 3-4 years
Buildings and improvements 7-40 years
</TABLE>
Capitalized Software Capitalized software included in other assets reflects
costs related to internally developed or purchased software that are capitalized
and amortized on a straight-line basis over periods ranging from three to five
years.
Intangible Assets Intangible assets arise from acquisitions and are amortized
using the straight-line method, primarily over 40 years. Management periodically
evaluates the recoverability of intangible assets. Intangible assets in excess
of associated expected operating cash flows are considered to be impaired and
are written down to fair value.
28
<PAGE> 13
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 made based on the Company's estimate of the
aggregate liability for claims incurred. At December 31, 1998 and 1997, accrued
self-insured risks totaled $21,168,000 and $19,722,000, respectively, including
current liabilities of $12,166,000 and $10,655,000, respectively.
Revenue Recognition Revenue is recognized in unbilled revenues as services are
provided. Deferred revenues represent the unearned portion of fees derived from
certain fixed-rate claim service agreements.
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 relate to prepaid pension cost, revenue recognition,
self-insurance, and employee compensation.
Earnings Per Share The Company adopted Statement of Financial Accounting
Standards ("SFAS") 128 effective December 31, 1997. Basic earnings per share is
computed based on the weighted-average number of total common shares outstanding
during the respective periods. Diluted earnings per share is computed based on
the weighted-average number of total common shares outstanding plus the dilutive
effect of outstanding stock options using the "treasury stock" method and
convertible debt.
Below is the calculation of basic and diluted net income per share:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
(in thousands, except per share data)
Net income available
to common shareholders $27,465 $46,989 $42,810
======= ======= =======
Weighted-average common
shares outstanding--Basic 50,341 49,566 51,032
Dilutive effect of:
Stock options 597 1,121 255
Convertible debt - - 810
------- ------- -------
Weighted-average common
shares outstanding--Diluted 50,938 50,687 52,097
======= ======= =======
Basic net income per share $ 0.55 $ 0.95 $ 0.84
======= ======= =======
Diluted net income per share $ 0.54 $ 0.93 $ 0.82
======= ======= =======
</TABLE>
Additional options to purchase 1,098,500 shares of Class A Common stock
at $18.25 to $19.50 per share were outstanding at December 31, 1998 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.
Comprehensive Income and Foreign Currency Translation The Company adopted SFAS
130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS 130
establishes standards for the reporting and display of "comprehensive income,"
which for the Company is the total of net income and foreign currency
translation adjustments. The Company reports comprehensive income in the
Consolidated Statement of Shareholders' Investment. The adoption of SFAS 130 had
no impact on the Company's financial position or results of operations.
For operations outside the United States that prepare financial
statements in currencies other than the U.S. 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 comprehensive income
and reported in shareholders' investment.
29
<PAGE> 14
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
New Accounting Pronouncements In June 1998, the Financial Accounting Standards
Board ("FASB") issued SFAS 133, "Accounting for Derivatives Instruments and
Hedging Activities." SFAS 133 establishes accounting and reporting standards
for derivative instruments. SFAS 133, which will be effective for the Company
in 2000, requires that entities recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Except for borrowing in foreign currencies, the Company does not presently
engage in any hedging activities to compensate for the effect of exchange rate
fluctuations on the net assets or operating results of its foreign
subsidiaries. As a result, the new standard is not expected to have a
significant effect on the Company's consolidated results of operations,
financial position or cash flows.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 establishes
guidelines for capitalizing such software costs. The Company will adopt SOP
98-1 effective January 1, 1999, with no material impact on the Company's
consolidated results of operations, financial position, or cash flows expected.
2. RETIREMENT PLANS In February 1998, the FASB issued SFAS 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits," which the Company
has adopted in the current year.
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 $6,007,000, $7,475,000 and $5,900,000 in 1998, 1997, and 1996,
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 applicable
income tax regulations. Plan assets are invested primarily in equity and fixed
income securities.
The following schedule reconciles the funded status of the plans with
amounts reported in the Company's balance sheets at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
----------------------
<S> <C> <C>
(in thousands)
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 324,474 $ 223,840
Service cost 13,243 9,931
Interest cost 25,912 17,871
Actuarial loss 46,238 1,596
Benefits paid (16,428) (10,467)
Acquisition of Crawford-THG -- 81,703
--------- ---------
Benefit obligation at end of year 393,439 324,474
--------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 382,477 224,576
Actual return on plan assets 19,658 60,101
Company contributions 8,267 13,384
Benefits paid (16,315) (10,355)
Acquisition of Crawford-THG -- 94,771
--------- ---------
Fair value of plan assets at end of year 394,087 382,477
--------- ---------
Funded status of plans 648 58,003
Unrecognized actuarial loss (gain) 57,212 (1,389)
Unrecognized prior service credit (243) (358)
Unrecognized net transition asset (5,931) (7,468)
Accrued contributions -- 1,887
--------- ---------
Net prepaid benefit cost 51,686 50,675
Less pension obligation included
in other accrued liabilities 3,691 2,237
--------- ---------
Prepaid pension cost included
in other assets $ 55,377 $ 52,912
========= =========
</TABLE>
30
<PAGE> 15
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assumptions used in accounting for the plans were:
<TABLE>
<CAPTION>
1998 1997
--------------------------
<S> <C> <C>
Discount rate 6% to 6.8% 7.5% to 8%
Expected return on plan assets 8% to 9.3% 8% to 9.5%
Rate of compensation increase 4% to 5.5% 5% to 7%
</TABLE>
Net periodic benefit cost related to the defined benefit plans in
1998, 1997, and 1996 included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
(in thousands)
Service cost $ 13,243 $ 9,931 $ 10,118
Interest cost 25,912 17,871 16,112
Expected return on assets (34,990) (21,104) (18,837)
Amortization (563) 628 72
Recognized net actuarial loss 156 2,003 2,201
-------- -------- --------
Net periodic benefit cost $ 3,758 $ 9,329 $ 9,666
======== ======== ========
</TABLE>
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. The status of the Company's
postretirement medical benefit obligation at December 31, 1998 and 1997 was:
<TABLE>
<CAPTION>
1998 1997
---------------------
<S> <C> <C>
(in thousands)
Postretirement medical benefit
obligation at beginning of year $ 6,719 $ 6,657
Service cost 19 18
Interest cost 488 484
Actuarial gain (1,037) (138)
Benefits paid (739) (302)
--------- ---------
Postretirement medical benefit
obligation at end of year 5,450 6,719
--------- ---------
Funded status of plan (5,450) (6,719)
Unrecognized actuarial gain (2,533) (1,386)
--------- ---------
Accrued postretirement medical
benefit obligation $ (7,983) $ (8,105)
========= =========
</TABLE>
The discount rate used in determining the postretirement medical benefit
obligation was 6.75% for 1998 and 7.5% for 1997.
Net periodic postretirement medical benefit cost includes the following
components:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
(in thousands)
Service cost $ 19 $ 18 $ 16
Interest cost 488 484 479
Recognized actuarial gain (111) (107) (109)
-------- -------- --------
Net periodic postretirement
medical benefit cost $ 396 $ 395 $ 386
======== ======== ========
</TABLE>
For measurement purposes, a 7% annual rate of increase in the per capita
cost of covered healthcare benefits (the healthcare cost trend rate) was assumed
for 1999. The rate was assumed to decrease gradually to 5% for 2002 and
thereafter.
Changing the healthcare cost trend rate by one percentage point would
have the following effects as of and for the year ended December 31, 1998:
<TABLE>
<CAPTION>
1% POINT 1% POINT
INCREASE DECREASE
----------------------
<S> <C> <C>
(in thousands)
Service cost $ 4 $ (3)
Interest cost 61 (54)
Postretirement medical
benefit obligation 874 (753)
</TABLE>
31
<PAGE> 16
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES The provisions (credits) for income taxes consist of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
(in thousands)
Current:
U.S. federal and state $ 24,328 $ 26,314 $ 25,125
Foreign 1,729 (1,424) 1,641
Deferred (9,662) 2,807 2,394
-------- -------- --------
$ 16,395 $ 27,697 $ 29,160
======== ======== ========
</TABLE>
Cash payments for income taxes were $21,493,000 in 1998, $26,145,000 in
1997, and $28,195,000 in 1996.
The provisions for income taxes are reconciled to the federal statutory
rate of 35% as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
(in thousands)
Federal income taxes
at statutory rate $ 14,939 $ 25,264 $ 25,190
State income taxes,
net of federal benefit 1,387 2,815 2,807
Other 69 (382) 1,163
-------- -------- --------
$ 16,395 $ 27,697 $ 29,160
======== ======== ========
</TABLE>
The Company does not provide for additional U.S. and foreign income taxes
on undistributed earnings of foreign subsidiaries because they are considered to
be permanently reinvested. At December 31, 1998, such undistributed earnings
totaled $35,500,000. If these earnings were not considered permanently
reinvested, deferred income taxes would have been provided. Such taxes, if
ultimately paid, may be recoverable as foreign tax credits in the United States.
Deferred income taxes consist of the following at December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
------------------------
<S> <C> <C>
(in thousands)
Accrued compensation $ 2,997 $ 3,715
Accrued restructuring costs 3,683 --
Self-insured risks 6,591 6,203
Deferred revenues 10,903 10,808
Postretirement benefits 3,065 3,325
Other 2,544 1,881
--------- ---------
Gross deferred tax assets 29,783 25,932
--------- ---------
Unbilled revenues 11,892 10,648
Depreciation and amortization 3,746 3,469
Prepaid pension cost 19,170 25,348
Other 1,353 407
--------- ---------
Gross deferred tax liabilities 36,161 39,872
--------- ---------
Net deferred tax liabilities (6,378) (13,940)
Less noncurrent net deferred tax liabilities (8,720) (14,921)
--------- ---------
Current net deferred tax assets $ 2,342 $ 981
========= =========
</TABLE>
5. INDEBTEDNESS AND COMMITMENTS The Company maintains credit lines with banks
in order to meet seasonal working capital requirements and other financing needs
that may arise. Short-term borrowings totaled $37.2 million and $19.8 million at
December 31, 1998 and 1997, respectively. The weighted-average interest rate on
short-term borrowings was 6.7% during 1998 and 5.6% during 1997.
The Company has mortgage and term loans payable maturing through 2003. At
December 31, 1998, these loans totaled $1,503,000, of which $204,000 is included
in current installments of long-term debt. The Company leases certain computer
and office equipment under capital leases with terms ranging from 24 to 60
months. At December 31, 1998 and 1997, the present value of future minimum
payments under these capital leases was $914,000 and $1,325,000, respectively,
of which $359,000 and $594,000, respectively, are included in current
installments of long-term debt.
32
<PAGE> 17
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company and its subsidiaries lease office space, certain computer
equipment, and its automobile fleet under operating leases. License and
maintenance costs related to the leased vehicles are paid by the Company. Rental
expense for all operating leases was $42,240,000 in 1998, $45,709,000 in 1997,
and $47,119,000 in 1996, including rental expense for automobile leases of
$12,306,000 in 1998, $13,090,000 in 1997, and $11,551,000 in 1996. At December
31, 1998, future minimum payments under non-cancelable operating leases with
terms of more than 12 months were as follows: 1999 - $34,076,000; 2000 -
$23,227,000; 2001 - $16,168,000; 2002 - $8,966,000; 2003 - $7,118,000; and
thereafter - $22,837,000.
6. SEGMENT AND GEOGRAPHIC INFORMATION The Company adopted SFAS 131,
"Disclosures About Segments of an Enterprise and Related Information," during
the fourth quarter of 1998. SFAS 131 requires the presentation of descriptive
information about reportable segments which is consistent with that used by
management to assess performance. Under SFAS 131, the Company has two reportable
segments, one which provides claims services through branch offices located in
the United States ("Domestic Operations") and the other which provides similar
services through branch offices located in 50 other countries ("International
Operations"). Intersegment sales are recorded at cost and are not material. The
Company measures segment profit based on income before taxes, nonrecurring
charges, and minority interest.
Financial information as of December 31, 1998, 1997 and 1996 covering the
Company's reportable segments is presented below:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL CONSOLIDATED
OPERATIONS OPERATIONS TOTALS
----------------------------------------
<S> <C> <C> <C>
(in thousands)
1998
Revenues $499,260 $168,011 $667,271
Pretax income before
Year 2000 expenses,
restructuring charges,
and minority interest 64,173 584 64,757
Depreciation and
amortization 9,719 5,079 14,798
Capital expenditures 21,569 4,097 25,666
Assets 243,805 189,464 433,269
Long-lived assets 122,557 59,566 182,123
- ------------------------------------------------------------------------------
<CAPTION>
1997
Revenues $546,246 $146,076 $692,322
Pretax income before
Year 2000 expenses,
restructuring charges,
and minority interest 82,268 3,853 86,121
Depreciation and
amortization 10,699 4,724 15,423
Capital expenditures 9,698 3,374 13,072
Assets 252,079 176,787 428,866
Long-lived assets 87,060 62,992 150,052
- ------------------------------------------------------------------------------
1996
Revenues $555,257 $ 78,368 $633,625
Pretax income 69,174 2,796 71,970
Depreciation and
amortization 12,797 2,919 15,716
Capital expenditures 6,597 1,137 7,734
Assets 263,349 114,736 378,085
Long-lived assets 75,543 55,646 131,189
- ------------------------------------------------------------------------------
</TABLE>
The Company's most significant international operations are in the United
Kingdom. Revenue in the United Kingdom was $87,404,000, $79,947,000, and
$29,440,000 in 1998, 1997, and 1996, respectively. Long-lived assets were
$6,572,000, $7,789,000, and $806,000 as of December 31, 1998, 1997, and 1996,
respectively.
33
<PAGE> 18
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. ACQUISITIONS AND DISPOSITIONS On July 31, 1998, the Company acquired all of
the outstanding shares of A.C.I. Adjusters Canada Incorporated ("ACI") for $16.3
million in cash. The Company acquired assets with a fair value of $30.1 million
and assumed liabilities of approximately $13.8 million. This transaction was
accounted for by the purchase method of accounting; ACI's operating results are
included in the consolidated statement of income from the acquisition date and
were not material. Goodwill related to the purchase was $13.8 million. The
initial purchase price may be increased based on future earnings of the acquired
entity.
In December 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 (Crawford-THG), in which the
Company had a 60% controlling interest after this initial transaction. The
merger was accounted for as a partial sale of the Company's 100%-owned
subsidiary, Crawford & Company International, Ltd., to Swiss Re and a partial
acquisition of Swiss Re's 100%-owned subsidiary, Thomas Howell Group, 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 as
minority interest through May 31, 1998. On June 1, 1998, the Company acquired
Swiss Re's 40% interest in Crawford-THG in exchange for 1.9 million shares of
the Company's Class A Common Stock. Crawford-THG is now a wholly-owned
subsidiary of the Company. This transaction was accounted for by the purchase
method of accounting. The shares issued were valued at $33.1 million, which
approximated the minority interest book value. Accordingly, no goodwill was
recorded related to this transaction.
The following table presents unaudited pro forma operating results as if
the December 1996 Swiss Re merger had occurred on January 1, 1996. 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>
1997 1996
----------------------
<S> <C> <C>
(in thousands, except per share data)
Revenues $ 710,062 $ 757,335
========= =========
Income before minority interest 54,420 44,764
Minority interest in joint venture (2,821) (2,717)
--------- ---------
Net income $ 51,599 $ 42,047
========= =========
Net income per share:
Basic $ 1.04 $ 0.82
========= =========
Diluted $ 1.02 $ 0.81
========= =========
</TABLE>
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
($928,000 after tax or $0.02 per share) related to this transaction.
34
<PAGE> 19
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RESTRUCTURING CHARGES During the third quarter of 1998, the Company recorded
a pretax charge of $14,873,000 related to the restructuring of its United
Kingdom and Canadian operations and the realignment of senior management
following the resignation of its former chairman and chief executive officer.
These restructuring programs resulted in the elimination of approximately 350
staff positions and the closing of 67 offices. After reflecting income tax
benefits of $5,181,000, this charge reduced the Company's 1998 net income by
$9,692,000 ($0.19 per share).
In connection with the THG acquisition, the Company recorded a pretax
charge of $13,000,000 in the first quarter of 1997 for personnel, facilities,
and other costs associated with integration of the Company's international
businesses. 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 ($0.10 per share).
The following is a rollforward of the Company's accrued restructuring
costs:
<TABLE>
<CAPTION>
EMPLOYEE
LEASES SEPARATION OTHER TOTAL
-------------------------------------------------------------
<S> <C> <C> <C> <C>
(in thousands)
BALANCE AT DECEMBER 31, 1996 $ -- $ -- $ -- $ --
Accrued 4,937 5,096 2,967 13,000
Acquired 1,137 671 -- 1,808
Utilized (1,709) (2,850) (2,221) (6,780)
-------- -------- -------- --------
BALANCE AT DECEMBER 31, 1997 4,365 2,917 746 8,028
Accrued 6,356 8,196 321 14,873
Acquired 371 763 -- 1,134
Utilized (2,292) (7,163) (1,067) (10,522)
-------- -------- -------- --------
BALANCE AT DECEMBER 31, 1998 8,800 4,713 -- 13,513
LESS NONCURRENT PORTION 5,459 692 -- 6,151
-------- -------- -------- --------
CURRENT PORTION OF ACCRUED RESTRUCTURING COSTS $ 3,341 $ 4,021 $ -- $ 7,362
======== ======== ======== ========
</TABLE>
The noncurrent portion of accrued restructuring costs consists primarily of
long-term lease obligations related to various offices, which the Company has
vacated and is currently attempting to sublease, and extended payments being
made under employee separation agreements. Management believes the remaining
reserves are adequate to complete its plan.
35
<PAGE> 20
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. 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, 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.
Stock Split In February 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 and 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.
Share Repurchases During 1996 and 1997, the Company completed an initial share
repurchase 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. In October 1997, the Company's Board of
Directors authorized an additional share repurchase program of an aggregate of
3,000,000 shares of Class A and Class B Common Stock through open market
purchases. Through December 31, 1998, the Company has reacquired 1,309,800
shares of its Class A Common Stock and 369,700 shares of its Class B Common
Stock at an average cost of $18.76 and $18.39 per share, respectively, under the
new program.
Employee Stock Purchase Plan Under the 1996 Employee Stock Purchase Plan, the
Company is authorized to issue up to 1,500,000 shares of Class A Common Stock to
its employees, 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. During 1998 and 1997, the Company issued 69,000 and 60,000
shares, respectively, to employees under this plan.
Stock Option Plans The Company has various stock option plans for employees and
directors, which provide for nonqualified and incentive stock option (ISO)
grants. The option exercise price cannot be less than the fair market value of
the Company's stock at the date of grant, and an option's maximum term is 10
years. Options generally vest ratably over five years or, with respect to
certain nonqualified options granted to key executives, upon the attainment of
specified prices of the Company's stock. At December 31, 1998, there were
1,346,000 shares available for future option grants under the plans.
The fair value of options is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Expected dividend yield 3.8% 2.6% 2.6%
Expected volatility 20% 20% 20%
Risk-free interest rates 4.5%-5.7% 5.4% 5.4%-5.6%
Expected life of options 5 years 6-8 years 6-8 years
</TABLE>
36
<PAGE> 21
CRAWFORD & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(in thousands of shares)
Outstanding, beginning of year 3,348 $ 14 2,722 $ 12 1,936 $ 11
Options granted 1,845 16 1,433 18 1,489 12
Options exercised (735) 12 (533) 11 (481) 9
Options forfeited (457) 18 (274) 12 (222) 11
----- ----- -----
Outstanding, end of year 4,001 15 3,348 14 2,722 12
===== ===== =====
Exercisable, end of year 1,075 1,536 692
===== ===== =====
Weighted-average fair value of options
granted during the year:
Incentive stock options $ 2.74 $ 3.91 $ 2.94
Nonqualified stock options 2.44 4.41 2.98
</TABLE>
Except for 34,000 options for Class B Common Stock, all of the
outstanding and exercisable options as of December 31, 1998 are for Class A
Common Stock.
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------- -------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF NUMBER AVERAGE AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
PRICES AT 12/31/98 CONTRACTUAL LIFE PRICE AT 12/31/98 PRICE
- ---------- ----------- ----------------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
$ 4 to 8 15 0.3 years $ 6 15 $ 6
9 to 12 641 5.6 11 365 11
13 to 17 2,246 8.9 14 673 13
18 to 20 1,099 9.0 19 22 19
----- -----
4 to 20 4,001 8.3 15 1,075 12
===== =====
</TABLE>
Pro Forma Information The Company applies APB Opinion 25 and related
Interpretations in accounting for its stock option and employee stock purchase
plans. Accordingly, no compensation cost has been recognized for these plans.
Had compensation cost for these plans been determined based on the fair value at
the grant dates for awards under those plans consistent with SFAS 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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
(in thousands, except per share data)
Net income As reported $ 27,465 $ 46,989 $ 42,810
Pro forma 25,621 44,293 42,209
Earnings per share-basic As reported 0.55 0.95 0.84
Pro forma 0.51 0.89 0.83
Earnings per share-diluted As reported 0.54 0.93 0.82
Pro forma 0.50 0.87 0.81
</TABLE>
37
<PAGE> 22
CRAWFORD & COMPANY
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO CRAWFORD & COMPANY:
We have audited the consolidated balance sheets of Crawford & Company (a Georgia
corporation) and subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of income, shareholders' investment, and cash flows for
each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/S/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 29, 1999
38
<PAGE> 23
CRAWFORD & COMPANY
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996 1995 1994
-----------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $667,271 $692,322 $633,625 $607,577 $587,781
Net Income 27,465 46,989 42,810 36,020 40,601
Net Income Per Share:
Basic 0.55 0.95 0.84 0.69 0.76
Diluted 0.54 0.93 0.82 0.68 0.75
Total Assets 433,269 428,866 378,085 366,983 356,381
Long-Term Debt 1,854 731 376 9,412 9,962
Cash Dividends Per Share:
Class A Common Stock 0.50 0.44 0.40 0.39 0.37
Class B Common Stock 0.50 0.44 0.39 0.36 0.33
Weighted-Average Shares Outstanding:
Basic 50,341 49,566 51,032 52,277 53,585
Diluted 50,938 50,687 52,097 53,236 53,875
</TABLE>
All share and per share amounts have been restated to reflect the three-for-two
stock split in 1997 (see Note 9) and the adoption of SFAS 128 effective December
31, 1997.
39
<PAGE> 24
CRAWFORD & COMPANY
QUARTERLY FINANCIAL DATA (UNAUDITED),
DIVIDEND INFORMATION AND COMMON STOCK QUOTATIONS
<TABLE>
<CAPTION>
FISCAL
1998 FIRST SECOND THIRD FOURTH YEAR
-------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $166,133 $170,028 $165,116 $165,994 $667,271
Income before income taxes
and minority interest 18,520 18,729 (4,548) 9,982 42,683
Minority interest in loss of joint venture 13 474 690 -- 1,177
Net income (loss) 11,420 12,014 (2,117) 6,148 27,465
Net income (loss) per share-basic(A) 0.23 0.24 (0.04) 0.12 0.55
Net income (loss) per share-diluted(A) 0.23 0.24 (0.04) 0.12 0.54(B)
Cash dividends per share:
Class A Common Stock 0.125 0.125 0.125 0.125 0.50
Class B Common Stock 0.125 0.125 0.125 0.125 0.50
Common stock quotations:
Class A-High(A) 19.75 19.50 19.00 16.13 19.75
Class A-Low(A) 17.75 18.38 16.25 12.06 12.06
Class B-High(A) 20.63 19.69 19.44 16.75 20.63
Class B-Low(A) 18.63 17.38 16.81 12.13 12.13
</TABLE>
(A) 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 9).
(B) Due to the method used in calculating per share data as prescribed by
SFAS 128, the quarterly per share data does not total to the full-year
per share data.
The approximate number of record holders of the Company's stock as of February
12,1999: Class A-1,663 and Class B-970.
40
<PAGE> 25
CRAWFORD & COMPANY
QUARTERLY FINANCIAL DATA (UNAUDITED),
DIVIDEND INFORMATION AND COMMON STOCK QUOTATIONS
<TABLE>
<CAPTION>
Fiscal
1997 First Second Third Fourth Year
-------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $165,951 $182,569 $178,896 $164,906 $692,322
Income before income taxes
and minority interest 6,282 22,663 25,555 17,684 72,184
Minority interest in loss of joint venture 3,199 (694) (702) 699 2,502
Net income 6,315 13,432 14,886 12,356 46,989
Net income per share-basic(A) 0.13 0.27 0.30 0.25 0.95
Net income per share-diluted(A) 0.12 0.27 0.29 0.25 0.93
Cash dividends per share:
Class A Common Stock 0.11 0.11 0.11 0.11 0.44
Class B Common Stock 0.11 0.11 0.11 0.11 0.44
Common stock quotations:
Class A-High(A) 15.67 15.88 20.94 21.00 21.00
Class A-Low(A) 14.25 13.63 15.75 19.00 13.63
Class B-High(A) 15.92 17.38 22.13 22.81 22.81
Class B-Low(A) 14.25 13.88 17.00 20.25 13.88
</TABLE>
41
<PAGE> 26
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
DIRECTORS EXECUTIVE OFFICERS
Forrest L. Minix F.L. Minix
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Archie L. Meyers, Jr. A.L. Meyers, Jr.
President and Chief Operating Officer President and Chief Operating Officer
Jesse C. Crawford R.S. Elder
President Group Managing Director
Crawford Communications, Inc. Crawford-THG Limited
Linda K. Crawford J.F. Giblin
Private Investor Executive Vice President
Chief Financial Officer
Charles Flather
Managing Partner J.F. Osten
Middlegreen Associates Senior Vice President
General Counsel & Secretary
J. Hicks Lanier
Chairman of the Board W.L. Beach
Oxford Industries, Inc. Senior Vice President
Chief Learning Officer
Larry L. Prince
Chairman and Chief Executive Officer
Genuine Parts Company
John A. Williams
Chairman of the Board
Post Properties, Inc.
E. Jenner Wood, III
Executive Vice President
Trust and Investment Services
SunTrust Banks, Inc.
Virginia C. Crawford
Ex-Officio Member and
Honorary Vice Chairman
</TABLE>
42
<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 Adjusters Canada Incorporated Canadian Federal
* 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, 1998.
</TABLE>
<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 22, 1999
<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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/s/ Jesse C. Crawford
<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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/s/ Linda K. 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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/s/ E. Jenner Wood, III
<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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/s/ J. Hicks Lanier
<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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/s/ Larry L. Prince
<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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/s/ Charles Flather
<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 JOHN F.
GIBLIN, 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, 1998; 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
2nd day of February, 1999.
/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, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,432
<SECURITIES> 0
<RECEIVABLES> 222,965
<ALLOWANCES> 19,346
<INVENTORY> 0
<CURRENT-ASSETS> 251,146
<PP&E> 154,073
<DEPRECIATION> 111,130
<TOTAL-ASSETS> 433,269
<CURRENT-LIABILITIES> 140,574
<BONDS> 1,854
0
0
<COMMON> 50,903
<OTHER-SE> 189,148
<TOTAL-LIABILITY-AND-EQUITY> 433,269
<SALES> 0
<TOTAL-REVENUES> 667,271
<CGS> 0
<TOTAL-COSTS> 494,590
<OTHER-EXPENSES> 129,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 42,683
<INCOME-TAX> 16,395
<INCOME-CONTINUING> 27,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,465
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.54
</TABLE>
