Form 10Q Crawford & Company Quarter Ended June 30, 1998 Page 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Financial Statements: Year-to-Date Unaudited Consolidated Statements of Income for the Six-Month Periods ended June 30, 1998 and June 30, 1997: (In Thousands of Dollars Except Share and Per Share Data) 1998 1997 Revenues $336,161 $348,520 Costs and Expenses: Cost of services provided, less reimbursed expenses of $18,590 in 1998 and $18,789 in 1997 246,361 249,615 Selling, general and administrative expenses 49,581 56,960 Year 2000 expenses 2,970 0 Restructuring charge 0 13,000 Total costs and expenses 298,912 319,575 Income Before Income Taxes and Minority Interest 37,249 28,945 Provision for Income Taxes 14,302 11,703 Income Before Minority Interest 22,947 17,242 Minority Interest in Loss of Joint Venture 487 2,505 Net Income $23,434 $19,747 Net Income Per Share Basic $0.47 $0.40 Diluted $0.47 $0.39 Average Number of Class A and Class B Common Shares used in Net Income per Share Calculations Basic 49,617,415 49,882,717 Diluted 50,319,289 51,289,222 Declared Dividends Per Share - Class A Common Stock $0.250 $0.220 Declared Dividends Per Share - Class B Common Stock $0.250 $0.220 (See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1998 Page 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Financial Statements: Year-to-Date Unaudited Consolidated Statements of Income for the Three-Month Periods ended June 30, 1998 and June 30, 1997: (In Thousands of Dollars Except Share and Per Share Data) 1998 1997 Revenues $170,028 $182,569 Costs and Expenses: Cost of services provided, less reimbursed expenses of $9,239 in 1998 and $10,214 in 1997 122,579 130,021 Selling, general and administrative expense 26,778 29,885 Year 2000 expenses 1,942 0 Total costs and expenses 151,299 159,906 Income Before Income Taxes and Minority Interest 18,729 22,663 Provision for Income Taxes 7,189 8,537 Income Before Minority Interest 11,540 14,126 Minority Interest in Loss of Joint Venture 474 (694) Net Income $12,014 $13,432 Net Income Per Share Basic $0.24 $0.27 Diluted $0.24 $0.27 Average Number of Class A and Class B Common Shares used in Net Income per Share Calculations Basic 49,912,441 49,736,992 Diluted 50,614,315 52,133,460 Declared Dividends Per Share - Class A Common Stock $0.125 $0.110 Declared Dividends Per Share - Class B Common Stock $0.125 $0.110 (See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1998 Page 4 Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997: (In Thousands of Dollars) (Unaudited) June 30 December 31 1998 1997 ASSETS Current Assets: Cash and cash equivalents $41,851 $55,380 Accounts receivable, less allowance for doubtful accounts of $17,014 in 1998 and $16,802 in 1997 121,186 117,338 Unbilled revenues, at estimated billable amounts 87,467 87,688 Prepaid income taxes 0 981 Prepaid expenses and other current assets 17,827 12,558 Total current assets 268,331 273,945 Property and Equipment: Property and equipment, at cost: 150,410 149,506 Less accumulated depreciation and amortization (110,163) (110,314) Net property and equipment 40,247 39,192 Other Assets: Intangible assets arising from acquisitions, less accumulated accumulated amortization of $11,572 in 1998 and $10,533 in 1997 50,870 51,968 Prepaid pension obligation 55,273 45,972 Other 13,131 5,981 Total other assets 119,274 103,921 TOTAL ASSETS $427,852 $417,058 (See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1998 Page 5 Consolidated Balance Sheets - (Continued) (In Thousands of Dollars) (Unaudited) June 30 December 31 1998 1997 LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Short-term borrowings $22,054 $19,812 Accounts payable 20,846 19,956 Accrued compensation and related costs 23,170 26,616 Other accrued liabilities 44,362 41,419 Deferred revenues 16,977 16,241 Current installments of long-term debt 447 594 Total current liabilities 127,856 124,638 Noncurrent Liabilities: Long-term debt, less current installments 659 731 Deferred income taxes 8,282 14,921 Deferred revenues 13,690 13,404 Postretirement medical benefit obligation 8,414 8,105 Self-insured risks 7,687 9,067 Minority interest 0 26,732 Other 5,572 4,455 Total noncurrent liabilities 44,304 77,415 Shareholders' Investment: Class A Common Stock, $1.00 par value; 50,000,000 shares authorized; 25,902,798 and 23,915,727 shares issued in 1998 and 1997, respectively 25,903 23,916 Class B Common Stock, $1.00 par value; 50,000,000 shares authorized; 25,337,627 and 25,477,233 shares issued in 1998 and 1997, respectively 25,338 25,477 Additional Paid-in-Capital 31,231 0 Retained earnings 180,748 174,973 Accumulated other comprehensive income (7,528) (9,361) Total shareholders' investment 255,692 215,005 TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $427,852 $417,058 (See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1998 Page 6 Unaudited Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 1998 and June 30, 1997: (In Thousands of Dollars) 1998 1997 Cash Flows From Operating Activities: Net income $23,434 $19,747 Reconciliation of net income to net cash provided by operating activities: Minority interest in income of joint venture (487) (2,505) Depreciation and amortization 7,566 8,028 Deferred income taxes 1,166 (6,363) (Gain)/loss on sales of property and equipment (614) 907 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable, net (5,204) 6,509 Unbilled revenues (950) 2,583 Prepaid or accrued income taxes 3,116 (1,900) Accounts payable and accrued liabilities (1,513) 12,931 Deferred revenues 791 393 Prepaid expenses and other assets (16,724) (9,775) Net cash provided by operating activities 10,581 30,555 Cash Flows From Investing Activities: Acquisitions of property and equipment (8,228) (6,293) Proceeds from sales of property and equipment 117 179 Net cash used in investing activities (8,111) (6,114) Cash Flows From Financing Activities: Dividends paid (12,357) (10,977) Repurchase of common stock (12,292) (11,265) Issuance of common stock 6,938 1,733 Increase in short-term borrowings 2,787 9,740 Decrease in long-term debt (188) (1,167) Net cash used in financing activities (15,112) (11,936) Effect of exchange rate changes on cash and cash equivalents (887) 3,353 (Decrease)/increase in cash and cash equivalents (13,529) 15,858 Cash and cash equivalents at beginning of period 55,380 55,485 Cash and cash equivalents at end of period $41,851 $71,343 Cash payments for income taxes $10,025 $14,260 (See accompanying notes to condensed financial statements)