Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 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, 1995.
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, 1996, 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,
1996, are not necessarily indicative of the results to be expected during the
balance of the year ending December 31, 1996.
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 1996 and
1995 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.
5. Certain reclassifications of prior year amounts have been made in the
accompanying balance sheets to conform to the current year presentation. In
addition, costs associated with the Company's distributed branch computer
network totaling $5.7 million in both 1996 and 1995, were reclassified from
selling, general and administrative expenses to costs of services provided
in the accompanying statements of income.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 Page 7
PART 1 - FINANCIAL INFORMATION - (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
At March 31, 1996, current assets exceeded current liabilities by approximately
$136.8 million, a decrease of $2.5 million from the working capital balance
at December 31, 1995. Cash and cash equivalents at March 31, 1996 totaled
$50.8 million, increasing $10.0 million from the balance at the end of 1995.
Short-term investments totaled $3.4 million at March 31, 1996, decreasing
from $5.6 million at December 31, 1995. During the quarter, cash was generated
primarily from operating activities, while the principal uses of cash were
for repurchases of common stock, dividends paid to shareholders and
acquisitions of property and equipment. At March 31, 1996, the ratio of
current assets to current liabilities was 2.2 to 1 compared with 2.5 to 1 at
the end of 1995.
During the first quarter of 1996, the Company completed its 1994 share
repurchase program and, under that program, has reacquired 1,165,900 shares
of its Class A Common Stock and 836,500 shares of its Class B Common Stock
at an average cost of $15.76 and $15.65 per share, respectively. Additionally,
during March of 1996, the Company announced a second share repurchase program
to acquire up to an aggregate of 2,000,000 shares of its Class A or Class B
Common Stock through open market purchases. Through March 31, 1996, the
Company has reacquired 109,200 shares of its Class A Common Stock at an
average cost of $15.36.
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, 1996, totaled
$10.3 million, as compared to $10.2 million at the end of 1995. 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 March 31, 1996 was $219.1 million, compared with
$220.9 million at the end of 1995. Long-term debt totaled $8.9 million at
March 31, 1996, or approximately 4.1% of shareholders' investment.
Results of Operations
For the first three months of 1996, revenues were $161.6 million, increasing
8.7% from the $148.6 million for the same period in 1995. Unit volume,
measured principally by chargeable hours, increased 7.5% during the quarter.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 Page 8
Results of Operations - (Continued)
This increase was complemented 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%.
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
1996 1995
Domestic Claims Services (including Risk
Management Services) 73.3% 72.7%
Domestic Disability Management Services 14.0 16.6
International Operations 12.7 10.7
100.0% 100.0%
Domestic revenues from claims services to insurance companies and risk
management services to self-insured clients totaled $118.3 million for the
first quarter of 1996, increasing 9.5% over the $108.0 million reported in
1995. This growth was largely due to an increase in weather-related claims
resulting from the harsh winter in the United States during the first quarter,
offsetting continued weakness in the self-insured corporate market. Revenues
from services provided to an insurance holding company and its subsidiaries
continued to decline, from 12% of total revenues in 1995 to 10% in 1996.
However, this decline has been offset by services provided to other major
insurers and self-insured entities who have outsourced their claims services
to the Company. Revenues produced by the Company's catastrophe adjusters
were $8.4 million, increasing $2.1 million from the first quarter of 1995.
This increase also reflects the impact of winter storm related losses, as
well as the completion of Hurricane Opal property claims.
Domestic revenues from disability management services, which serves both the
insurance company and self-insured markets, totaled $22.7 million, a decrease
of 8.3% from first quarter of 1995 revenues of $24.7 million. This decline
reflects continued strong competition in the self-insured corporate market.
Revenues from the Company's international operations increased to $20.6
million for the first quarter of 1996, from $15.9 million for the same period
in 1995. This increase is primarily due to an increase in claims volume from
the harsh winter experienced in the United Kingdom and the completion of
Hurricanes Luis and Marilyn property claims in the Caribbean.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 Page 9
Results of Operations - (Continued)
The Company's most significant expense is the compensation of its employees,
including related payroll taxes and fringe benefits. Such expense approximated
64.9% of revenues in the first quarter of 1996, compared to 63.2% for the
first three months of 1995. This increase resulted primarily from higher
incentive compensation expense, which is based on growth in earnings.
Expenses other than compensation and related payroll taxes and fringe benefits
approximated 24.2% of revenues for the first three months of 1996, compared to
26.1% of revenues for the same period in 1995. As a result of the Company's
cost control efforts, such expenses increased less than 1% over the 1995
related costs, declining as a percentage of revenues due to an 8.7% increase
in revenues in the first quarter of 1996.
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 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 page 11).
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 Page 11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
Crawford & Company:
We have made a review the accompanying condensed consolidated balance sheet of
CRAWFORD & COMPANY (a Georgia corporation) AND SUBSIDIARIES as of March 31,
1996 and the related condensed consolidated statements of income and cash flows
for the three-month periods ended March 31, 1996 and 1995. 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 obtaining an understanding of
the system for the preparation of interim financial information, 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 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, 1995, and the related consolidated statements
of income, shareholders' investment and cashflows for the year then ended
(not presented separately herein), and in our report dated January 30, 1996,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1995 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 10, 1996
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 Page 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Crawford & Company 1996 Incentive Compensation Plan*
15.1 Letter from Arthur Andersen LLP
27.1 Financial Data Schedule
* Management contract or compensatory plan required to be
filed as an exhibit pursuant to Item 601 of Regulation S-K.
(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, 1996 Page 13
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 10, 1996 /s/D. A. Smith
D. A. Smith
Chairman of the Board and
Chief Executive Officer
Date: May 10, 1996 /s/D. R. Chapman
D. R. Chapman
Executive Vice President - Finance
(Principal Financial Officer)
Date: May 10, 1996 /s/J. F. Giblin
J. F. Giblin
Vice President and Controller
(Principal Accounting Officer)
Form 10-Q Crawford & Company
Quarter Ended March 31, 1996 Page 14
INDEX TO EXHIBITS
Exhibit No. Description Sequential Page No.
10.1 Crawford & Company 1996 Incentive 15 - 18
Compensation Plan
15.1 Letter from Arthur Andersen LLP 19
27.1 Financial Data Schedule (for SEC use only)