Form 10-Q Crawford & Company
Quarter Ended September 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
September 30, 1995, and the results of its operations and cash flows for the
three and nine-month periods then ended.
2. The results of operations for the nine-month period ended September 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 September 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 September 30, 1995, exceeded current
liabilities by $125.8 million, a slight decrease from the working capital
balance at December 31, 1994. Cash and cash equivalents at September 30,
995, totaled $34.7 million, a decrease of $4.2 million from the balance at
the end of 1994. Short-term investments totaled $6.6 million at September 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, contributions to the Company's retirement
trust, acquisitions of property and equipment and repurchases of common stock.
At September 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 September 30, 1995, the Company
has reacquired 691,900 shares of its Class A Common Stock and 639,100 shares
of its Class B Common Stock at an average cost of $15.43 and $15.60 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 September 30,
1995, totaled $9.3 million, as compared to $9.1 million at the end of 1994.
The Company believes that its current financial resources, together with
funds generated from operations and existing short-term 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.
Results of Operations
Revenues for the first nine months of 1995 were $450.5 million, compared
with $445.7 million for the same period in 1994. For the third quarter of
1995, revenues were $151.0 million, an increase of 1.3% compared with $149.1
million for the same period in 1994. Unit volume, measured principally by
chargeable hours and excluding acquisitions, decreased 6.8% and 8.5% during
the first nine months and third quarter of 1995, respectively, as compared
to the related 1994 periods.
Form 10-Q Crawford & Company
Quarter Ended September 30, 1995 Page 9
PART 1 - FINANCIAL INFORMATION - (Continued)
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 1.8% in the first nine months of 1995 and
2.9% in the third 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 6.1% and 6.9% during the first nine months and third
quarter of 1995, respectively.
Domestic revenues from Claims Services to insurance companies and Risk
Management Services to self-insured clients totaled $301.3 million for the
first nine months of 1995, down 1.8% from related 1994 revenues of $306.8
million. Third quarter 1995 revenues totaled $101.1 million, a decrease of
3.2% 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 nine months of 1995 by the Company's catastrophe
adjusters were $22.0 million. This was approximately $6.7 million less than
catastrophe revenues reported in the first nine months of 1994, when the
Company was involved in completing major projects, including the Los Angeles
earthquake, the handling of winter storm losses in the Northeast United
States and chemical-related incidents. In the third quarter of 1995,
revenues produced by the Company's catastrophe adjusters totaled $6.7
million, as compared to $7.8 million in the 1994 third quarter.
Domestic revenues from HealthCare Management Services, which serves both the
insurance company and self-insured markets, totaled $70.6 million for the
first nine months of 1995, a decrease of 7.6% from the related period in
1994. For the third quarter these revenues were $22.5 million, decreasing
8.9% from the $24.7 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 as well as
increased competition in the self-insured corporate market.
Revenues from the Company's international operations increased to $56.6
million in the first nine months of 1995, from $33.8 million for the same
period in 1994. Third quarter 1995 revenues totaled $20.8 million, an
increase of 70.3% over related 1994 revenues of $12.2 million. These increases
resulted primarily from the Company's late 1994 acquisitions in the United
Kingdom and strong Canadian growth.
Form 10-Q Crawford & Company
Quarter Ended September 30, 1995 Page 10
PART 1 - FINANCIAL INFORMATION - (Continued)
The percentage of revenue derived from each of the Company's principal
service categories is shown in the following schedule:
Nine-Month Period Three-Month Period
Ended September 30 Ended September 30
1995 1994 1995 1994
Domestic Claims Services
(including Risk Management
Services) 71.7% 75.3% 71.4% 75.2%
Domestic HealthCare Management
Services 15.7 17.1 14.9 16.6
International Operations 12.6 7.6 13.7 8.2
100.0% 100.0% 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 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 64.0% of revenues in the first nine months of 1995, compared to
65.1% for the first nine months of 1994, and 64.4% of revenues in the current
quarter, compared to 65.8% of third quarter 1994 revenues. These decreases
were due primarily to reduced incentive compensation and group medical
expenses.
Expenses other than compensation and related payroll taxes and fringe
benefits approximated 26.5% of revenues for the first nine months of 1995,
compared to 23.0% of revenues for the same period in 1994, and 25.1% of third
quarter 1995 revenues, as compared to 21.6% 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 September 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 September 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
September 30, 1995 and the related condensed consolidated statements of
income for the three and nine-month periods ended September 30, 1995 and the
related condensed consolidated statements of cash flows for the nine-month
periods ended September 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
November 10, 1995
Form 10-Q Crawford & Company
Quarter Ended September 30, 1995 Page 13
PART II - OTHER INFORMATION
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 September 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: November 10, 1995
F. L. Minix
Chairman of the Board and
Chief Executive Officer
Date: November 10, 1995
D. R. Chapman
Executive Vice President - Finance
(Principal Financial Officer)
Date: November 10, 1995
J. F. Giblin
Vice President and Controller
(Principal Accounting Officer)