Form 10-Q Crawford & Company
Quarter Ended June 30, 1995 Page 7
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements included herein have been prepared
by the Registrant, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These condensed financial statements
should be read in conjunction with the financial statements and related notes
contained in the Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 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 June 30, 1995, and the results of its operations and cash
flows for the three and six-month periods then ended.
2. The results of operations for the six-month period ended June 30, 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 periods. 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 June 30, 1995 Page 8
PART 1 - FINANCIAL INFORMATION - (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
The Company's current assets at June 30, 1995, exceeded current liabilities
by $121.6 million, a decrease of $4.5 million from the working capital
balance at December 31, 1994. Cash and cash equivalents at June 30, 1995,
totaled $22.6 million, a decrease of $16.3 million from the balance at the
end of 1994. Short-term investments totaled $10.0 million at June 30, 1995,
decreasing from $18.8 million at December 31, 1994. Cash was generated
primarily from operating activities, while the principal uses of cash were
for dividends paid to shareholders, acquisitions of property and equipment
and repurchases of common stock. At June 30, 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 June 30, 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 June 30, 1995,
totaled $8.8 million, as compared to $9.1 million at the end of 1994.
Results of Operations
Revenues for the first half of 1995 were $299.5 million, compared with $296.6
million for the same period in 1994. For the second quarter of 1995,
revenues were $150.9 million, an increase of 2.1% compared with $147.8
million for the same period in 1994. Unit volume, measured principally by
chargeable hours and excluding acquisitions, decreased 5.8% and 6.2%, during
the first six months and second quarter of 1995, respectively, as compared
to related 1994 periods. But these decreases were 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 1.2% in the
first half of 1995 and .9% in the second quarter. 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 5.6% and 7.4%, during the first six
months and second quarter of 1995, respectively.
Form 10-Q Crawford & Company
Quarter Ended June 30, 1995 Page 9
PART 1 - FINANCIAL INFORMATION - (Continued)
Domestic revenues from Claims Services to insurance companies and Risk
Management Services to self-insured clients totaled $200.2 million for the
first half of 1995, down 1.1% from related 1994 revenues of $202.4 million.
Second quarter 1995 revenues totaled $98.4 million, a decrease of 1.6% from
the same period in 1994. These declines reflect lower claims frequency
throughout the property and casualty insurance industry and increased
competition in the self-insured corporate market. Revenues produced in the
first six months of 1995 by the Company's catastrophe adjusters were $15.3
million. This was approximately $5.6 million less than catastrophe revenues
reported in the first half of 1994, when the Company was involved in
completing major projects, including the Los Angeles earthquake and the
handling of winter storm losses in the Northeast. In the second quarter of
1995, revenues produced by the Company's catastrophe adjusters totaled $9.1
million, as compared to $11.6 million in the 1994 second quarter.
Domestic revenues from HealthCare Management Services, which serves both the
insurance company and self-insured markets, totaled $48.2 million for the
first half of 1995, a decrease of 6.9% from the first half of 1994. For the
second quarter these revenues were $23.5 million, decreasing from the $25.3
million reported in 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 $35.8
million in the first half of 1995, from $21.6 million for the same period in
1994. Second quarter 1995 revenues totaled $19.9 million, an increase of
82.6% over related 1994 revenues of $10.9 million. These increases result
primarily from the Company's late 1994 acquisitions in the United Kingdom
and strong Canadian growth.
The percentage of revenue derived from each of the Company's
principal service categories is shown in the following schedule:
Six-Month Period Three-Month Period
Ended June 30 Ended June 30
1995 1994 1995 1994
Domestic Claims Services (including
Risk Management Services) 71.9% 75.3% 71.4% 75.5%
Domestic HealthCare Management
Services 16.1 17.4 15.4 17.1
International Operations 12.0 7.3 13.2 7.4
100.0% 100.0% 100.0% 100.0%
Form 10-Q Crawford & Company
Quarter Ended June 30, 1995 Page 10
PART 1 - FINANCIAL INFORMATION - (Continued)
Results of Operations (continued)
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 management
services, previously reported as components of claims services and healthcare
management services, are now reported as international operations.
The Company's most significant expense is the compensation of its employees,
including related payroll taxes and fringe benefits. Such expense
approximated 63.8% of revenues in the first half of 1995, compared to 64.7%
for the first six months of 1994, and 64.4% of revenues in the current
quarter, unchanged as compared to the percentage of second quarter 1994
revenues. The decrease for the first half of 1995 is due primarily to
reduced incentive compensation and group medical expenses.
Expenses other than compensation and related payroll taxes and fringe
benefits approximated 27.2% of revenues for the first six months of 1995,
compared to 23.7% of revenues for the same period in 1994, and 28.3% of
second quarter 1995 revenues, as compared to 23.8% of related 1994 revenues.
These increases 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 and increases in other operating
costs related to the Company's late 1994 acquisitions in the United Kingdom.
Form 10-Q Crawford & Company
Quarter Ended June 30, 1995 Page 11
Review by Independent Public Accountants.
Arthur Andersen LLP, independent public accountants, has performed a review
of the interim financial information contained herein in accordance with
established professional standards and procedures for such a review and has
issued its report with respect thereto (see page 12).
Form 10-Q Crawford & Company
Quarter Ended June 30, 1995 Page 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
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 June 30,
1995 and the related condensed consolidated statements of income for the
three and six-month periods ended June 30, 1995 and the related condensed
consolidated statements of cash flows for the six-month periods ended
June 30, 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.
Arthur Andersen LLP
Atlanta, Georgia
August 11, 1995
Form 10-Q Crawford & Company
Quarter Ended June 30, 1995 Page 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 25, 1995, the Registrant held its Annual Meeting of
Shareholders. At the Annual Meeting, the Class B Shareholders,
the only class entitled to vote at the meeting, voted on the
election of ten (10) directors for a one year term. The results
of that voting are as follows:
Election of Directors
Name Votes For Votes Withheld
Virginia C. Crawford 16,904,428 12,594
Forrest L. Minix 16,904,717 12,305
J. Hicks Lanier 16,905,329 11,693
Charles Flather 16,905,329 11,693
Jesse S. Hall 16,905,229 11,793
Linda K. Crawford 16,903,805 13,217
Jesse C. Crawford 16,904,005 13,017
Larry L. Prince 16,902,064 14,958
William R. Goodell 16,901,314 15,708
Dennis A. Smith 16,904,447 12,575
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the period
covered by this report.
Form 10-Q Crawford & Company
Quarter Ended June 30, 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: August 11, 1995 F. L. Minix
Chairman of the Board and
Chief Executive Officer
Date: August 11, 1995 D. R. Chapman
Executive Vice President - Finance
(Principal Financial Officer)
Date: August 11, 1995 J. F. Giblin
Vice President and Controller
(Principal Accounting Officer)