Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 6
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements included herein have been prepared by
the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These condensed financial statements should be read in
conjunction with the financial statements and related notes contained in the
Registrant's annual report on Form 10-K for the fiscal year ended December
31, 1994.
In the opinion of management, the condensed financial statements included
herein contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position of the Registrant as of
March 31, 1995, and the results of its operations and cash flows for the
three-month period then ended.
2. The results of operations for the three-month period ended March 31, 1995,
are not necessarily indicative of the results to be expected during the balance
of the year ending December 31, 1995.
3. Net income per share is computed by dividing net income by the weighted
average number of shares outstanding during the respective period. The effect
of common stock equivalents was less than 3% dilutive in both 1995 and 1994
and, therefore, the effect on primary earnings per share has not been shown.
4. The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents for purposes of the
Statements of Cash Flows.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 7
PART 1 - FINANCIAL INFORMATION - (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
The Company's current assets at March 31, 1995, exceeded current liabilities by
$117.8 million, a decrease of $8.3 million from the working capital balance at
December 31, 1994. Cash and cash equivalents at March 31, 1995, totaled $24.7
million, a decrease of $14.3 million from the balance at the end of 1994.
Short-term investments totaled $15.9 million at March 31, 1995, decreasing
from $18.8 million at December 31, 1994. The Company contributed $12.9 million
to its retirement trust in the first quarter of 1995, resulting in negative
cash flow from operations for the quarter of $1.5 million. This contribution
was the final contribution for the 1994 plan year, and represented the maximum
contribution deductible for U.S. income tax purposes on the Company's 1994
return. Other principal uses of cash during the quarter were for dividends
paid to shareholders, repurchases of common stock, acquisitions of property
and equipment and repayments of short-term borrowings. At March 31, 1995 and
December 31, 1994, the ratio of current assets to current liabilities was
2.1 to 1.
During 1994, the Company announced that it may, from time to time, purchase up
to an aggregate of 2,000,000 shares of its Class A and Class B Common Stock
through open market purchases. Through March 31, 1995, the Company has
reacquired 691,900 shares of its Class A Common Stock and 625,100 shares of its
Class B Common Stock at an average cost of $15.43 and $15.62 per share,
respectively.
The Company maintains credit lines with banks in order to meet seasonal working
capital requirements of its foreign subsidiaries or other financing needs that
may arise. Short-term borrowings outstanding as of March 31, 1995, totaled
$7.3 million, as compared to $9.1 million at the end of 1994.
Results of Operations
For the first three months of 1995, revenues were $148.6 million, down slightly
compared with $148.8 million for the same period in 1994. Unit volume,
measured principally by chargeable hours and excluding acquisitions, decreased
5.4% during the quarter. But this decrease was partially offset by changes in
the mix of services and in the rates charged for those services, the combined
effects of which increased revenues by approximately 1.5%. The Company's
fourth quarter 1994 acquisitions of the Brocklehurst Group and Arnold & Green
Ltd., two loss adjusting firms based in the United Kingdom, and the
acquisition of Finnamore & Partners, Ltd., a Canadian loss adjusting firm, in
the second quarter of 1994, increased revenues by 3.8% during the first
quarter of 1995.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 8
PART 1 - FINANCIAL INFORMATION - (Continued)
Domestic revenues from Claims Services to insurance companies and Risk
Management Services to self-insured clients totaled $108.0 million for the
first quarter of 1995, down 3.3% from first quarter 1994 revenues of $111.7
million. Revenues produced by the Company's catastrophe adjusters were $6.2
million. This was approximately $3.1 million less than castrophe revenues
reported in the first quarter of 1994, when the Company was involved in major
projects, including the Los Angeles earthquake and the handling of winter
storm losses in the Northeast. Revenues from the Company's claims
administration services to the self-insured corporate market were substantially
unchanged from related first quarter 1994 revenues.
Domestic revenues from HealthCare Management Services, which serves both the
insurance company and self-insured markets, totaled $24.7 million, a decrease
of 6.6% from the first quarter of 1994. The demand for these services
continues to be affected by regulatory changes and other medical cost
containment alternatives such as health maintenance organizations.
Revenues from the Company's international operations increased to $15.9 million
in the first quarter of 1995, from $10.7 million for the same period in 1994,
primarily as a result of the Company's 1994 acquisitions in the United
Kingdom and Canada.
The percentage of revenue derived from each of the Company's principal service
categories is shown in the following schedule:
Three-Month Period
Ended March 31
1995 1994
Domestic Claims Services (including Risk
Management Services) 72.7% 75.0%
Domestic HealthCare Management Services 16.6 17.8
International Operations 10.7 7.2
100.0% 100.0%
Effective January 1, 1995, the Company changed its method of reporting its
principal service categories to correspond with internal management reporting.
Accordingly, risk control and information consulting services, previously
disclosed as other risk management services, are now reported as a component of
domestic claims services, along with certain healthcare management services
which are closely aligned with the Company's risk management services.
International claims and healthcare managements services, previously reported
as components of claims services and healthcare management services, are now
reported as international operations.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 9
PART 1 - FINANCIAL INFORMATION - (Continued)
The Company's most significant expense is the compensation of its employees,
including related payroll taxes and fringe benefits. Such expense approximated
63.2% of revenues in the first quarter of 1995, compared to 65.1% for the
first three months of 1994. This decrease resulted primarily from reduced
incentive compensation and group medical expenses.
Expenses other than compensation and related payroll taxes and fringe benefits
approximated 26.1% of revenues for the first three months of 1995, compared to
23.6% of revenues for the same period in 1994. This increase resulted
principally from an increase in systems development costs associated with the
development of systems designed to enhance the Company's service delivery to
its clients.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 10
Review by Independent Public Accountants.
Arthur Andersen LLP, independent public accountants, has performed a review of
the interim financial information contained herein in accordance with
established professional standards and procedures for such a review and has
issued its report with respect thereto (see pages 11 and 12).
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Crawford & Company:
We have reviewed the accompanying condensed consolidated balance sheet of
CRAWFORD & COMPANY (a Georgia Corporation) AND SUBSIDIARIES as of March 31,
1995 and the related condensed consolidated statements of income for the
three-month periods ended March 31, 1995 and 1994, and the related condensed
consolidated statements of cash flows for the three-month periods ended
March 31, 1995 and 1994. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Crawford & Company and
subsidiaries as of December 31, 1994 (not presented herein), and in our report
dated January 31, 1995, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1994 is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/Arthur Andersen LLP
Atlanta, Georgia
May 8, 1995
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 12
To the Shareholders and the
Board of Directors of
Crawford & Company:
We are aware that Crawford & Company has incorporated by reference in its
previously filed Registration Statement File No. 2-78989, Registration
Statement File No. 33-22595, Registration Statement File No. 33-47536, and
Registration Statement File No. 33-36116 its Form 10-Q for the quarter ended
March 31, 1995, which includes our report dated May 8, 1995 covering the
unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933 (the "Act"), that report is not
considered a part of the Registration Statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
/s/Arthur Andersen LLP
Atlanta, Georgia
May 8, 1995
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the period
covered by this report.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1995 Page 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Crawford & Company
(Registrant)
Date: May 9, 1995 /s/ F. L. Minix
Chairman of the Board and
Chief Executive Officer
Date: May 9, 1995 /s/ D. R. Chapman
Executive Vice President - Finance
(Principal Financial Officer)
Date: May 9, 1995 /s/ J. F. Giblin
Vice President and Controller
(Principal Accounting Officer)