1 ================================================================================ United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____ to ____ COMMISSION FILE NUMBER 1-10356 CRAWFORD & COMPANY (Exact name of Registrant as specified in its charter) GEORGIA 58-0506554 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5620 GLENRIDGE DRIVE, N.E. ATLANTA, GEORGIA 30342 (Address of principal executive offices) (Zip Code) (404) 256-0830 (Registrant's telephone number, including area code) ------------- Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of shares outstanding of each of the issuer's classes of common stock, as of April 28, 2000 was as follows: CLASS A COMMON STOCK, $1.00 PAR VALUE: 23,740,386 CLASS B COMMON STOCK, $1.00 PAR VALUE: 24,707,172 ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CRAWFORD AND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER ENDED ---------------------- MARCH 31, MARCH 31, 2000 1999 ---------------------- REVENUES $177,432 $172,621 COSTS AND EXPENSES: Cost of services provided, less reimbursed expenses of $8,089 in 2000 and $7,868 in 1999 127,993 127,514 Selling, general, and administrative expenses 30,716 27,539 Corporate interest, net 867 711 Amortization of goodwill 761 561 - ---------------------------------------------------------------------------------- TOTAL COSTS AND EXPENSES 160,337 156,325 - ---------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 17,095 16,296 PROVISION FOR INCOME TAXES 6,564 6,258 - ---------------------------------------------------------------------------------- NET INCOME $ 10,531 $ 10,038 ================================================================================== NET INCOME PER SHARE: BASIC $ 0.21 $ 0.20 DILUTED $ 0.21 $ 0.20 ================================================================================== WEIGHTED-AVERAGE SHARES OUTSTANDING: BASIC 50,034 50,614 DILUTED 50,164 50,740 ================================================================================== CASH DIVIDENDS PER SHARE: CLASS A COMMON STOCK $ 0.1375 $ 0.13 CLASS B COMMON STOCK $ 0.1375 $ 0.13 ================================================================================== (See accompanying notes to condensed consolidated financial statements) 2 3 CRAWFORD AND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) MARCH 31, DECEMBER 31, 2000 1999 - ------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------ CURRENT ASSETS: Cash and cash equivalents $ 13,115 $ 17,716 Accounts receivable, less allowance for doubtful accounts of $19,851 in 2000 and $20,182 in 1999 142,669 141,841 Unbilled revenues, at estimated billable amounts 92,916 91,039 Prepaid expenses and other current assets 16,555 17,240 - ------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS 265,255 267,836 - ------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT: Property and equipment, at cost 159,905 166,552 Less accumulated depreciation and amortization (112,438) (117,661) - ------------------------------------------------------------------------------------ NET PROPERTY AND EQUIPMENT 47,467 48,891 - ------------------------------------------------------------------------------------ OTHER ASSETS: Intangible assets arising from acquisitions, net 82,948 80,566 Prepaid pension cost 49,379 49,995 Capitalized software costs, net 20,358 18,449 Other 12,446 8,291 - ------------------------------------------------------------------------------------ TOTAL OTHER ASSETS 165,131 157,301 - ------------------------------------------------------------------------------------ TOTAL ASSETS $ 477,853 $ 474,028 ==================================================================================== (See accompanying notes to condensed consolidated financial statements) 3 4 CRAWFORD AND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED (IN THOUSANDS) (Unaudited) March 31, December 31, 2000 1999 - --------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' INVESTMENT - --------------------------------------------------------------------------------- CURRENT LIABILITIES: Short-term borrowings $ 49,140 $ 38,914 Accounts payable 28,448 29,575 Accrued compensation and related costs 20,119 23,825 Accrued restructuring charges 908 973 Self-insured risks 13,447 11,360 Other accrued liabilities 30,751 30,044 Deferred revenues 21,310 22,836 Current installments of long-term debt 315 463 - --------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 164,438 157,990 - --------------------------------------------------------------------------------- NONCURRENT LIABILITIES: Long-term debt, less current installments 37,088 16,053 Deferred income taxes 6,550 6,571 Deferred revenues 13,425 13,644 Postretirement medical benefit obligation 7,785 7,756 Self-insured risks 8,536 10,241 Other 10,775 11,494 - --------------------------------------------------------------------------------- TOTAL NONCURRENT LIABILITIES 84,159 65,759 - --------------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENT: Class A Common Stock, $1.00 par value; 50,000 shares authorized; 23,771 and 25,892 shares issued in 2000 and 1999, respectively 23,771 25,892 Class B Common Stock, $1.00 par value; 50,000 shares authorized; 24,712 and 24,826 shares issued in 2000 and 1999, respectively 24,712 24,826 Additional paid-in-capital 0 22,309 Retained earnings 189,275 185,975 Cumulative translation adjustment (8,502) (8,723) - --------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' INVESTMENT 229,256 250,279 - --------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 477,853 $ 474,028 ================================================================================= (See accompanying notes to condensed consolidated financial statements) 4 5 CRAWFORD AND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (IN THOUSANDS) THREE MONTHS ENDED ------------------------ MARCH 31, MARCH 31, 2000 1999 ------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,531 $ 10,038 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 4,980 4,199 Deferred income taxes (23) -- Loss on sales of property and equipment 361 26 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable, net (1,874) 4,212 Unbilled revenues (2,696) (3,558) Prepaid or accrued income taxes 3,009 6,050 Accounts payable and accrued liabilities (5,726) (4,635) Accrued restructuring charges (593) (3,728) Deferred revenues (1,509) 7,997 Prepaid expenses and other assets (2,357) 379 - ----------------------------------------------------------------------------------------- Net cash provided by operating activities 4,103 20,980 - ----------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment, net (2,976) (3,717) Capitalization of software costs (2,085) (1,308) Acquisition of businesses, net of cash acquired (3,595) (6,813) - ----------------------------------------------------------------------------------------- Net cash used in investing activities (8,656) (11,838) - ----------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (6,936) (6,612) Repurchase of common stock (25,271) (7,588) Proceeds from exercise of stock options 436 56 Increase in short-term borrowings 11,085 17,418 Proceeds from long-term borrowings 21,000 -- Payments on long-term debt (87) (535) - ----------------------------------------------------------------------------------------- Net cash provided by financing activities 227 2,739 - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- Effects of exchange rate changes on cash and cash equivalents (275) (240) - ----------------------------------------------------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,601) 11,641 Cash and Cash Equivalents at Beginning of Period 17,716 8,423 - ----------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,115 $ 20,064 ========================================================================================= (See accompanying notes to condensed consolidated financial statements) 5 6 CRAWFORD & COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The unaudited condensed financial statements included herein have been prepared 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. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain previously reported amounts have been reclassified to conform to the current presentation. These condensed financial statements should be read in conjunction with the financial statements and related notes contained in the Company's annual report on Form 10-K for the fiscal year ended December 31, 1999. 2. The results of operations for the quarter ended March 31, 2000 are not necessarily indicative of the results to be expected during the balance of the year ending December 31, 2000. 3. On March 3, 2000, the Company completed the acquisition of Greentree Investigations, Inc. ("Greentree") for a cash payment of $900,000. The Company acquired assets with a fair value of $1,611,601, including goodwill related to the purchase of $1,108,526, and assumed liabilities of $711,601. The purchase price may be increased based on future earnings of Greentree through April 3, 2005. This transaction was accounted for by the purchase method of accounting. 4. On March 9, 2000, the Company repurchased 1,900,000 shares of the Company's Class A Common Stock from a subsidiary of the Swiss Reinsurance Group ("Swiss Re") at a cost of $11.00 per share. The shares were originally issued in June of 1998 in connection with the acquisition of Swiss Re's 40% minority interest in Crawford's international subsidiary. This share repurchase was financed by a $21 million, five-year term loan with a fixed interest rate of 7.7%. 5. During the quarter ended March 31, 2000, the Company utilized $553,000 of its restructuring reserves for payments due to employee separations and lease terminations. As of March 31, 2000, remaining restructuring reserves were $4.6 million, $3.7 million of which is included in other noncurrent liabilities. The noncurrent portion of accrued restructuring costs consists primarily of long-term lease obligations related to various U.K. offices, which the Company has vacated and is currently attempting to sublease, and extended payments being made under employee separation agreements. Management periodically reviews the restructuring reserves and believes the remaining reserves are adequate to complete its plan. 6. Basic net income per share is computed based on the weighted-average number of total common shares outstanding during the respective periods. Diluted net income per share is computed based on the weighted-average number of total common shares outstanding plus the dilutive effect of outstanding stock options using the "treasury stock" method. 6 7 CRAWFORD & COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Below is the calculation of basic and diluted net income per share for the quarters ended March 31, 2000 and 1999: Quarter ended ------------- March 31, March 31, (In thousands, except per share data) 2000 1999 ============================================================================== Net income available to common shareholders $10,531 $10,038 ======= ======= Weighted-average common shares outstanding - Basic 50,034 50,614 Dilutive effect of stock options 130 126 ------- ------- Weighted-average common shares outstanding - Diluted 50,164 50,740 ======= ======= Basic net income per share $ 0.21 $ 0.20 ======= ======= Diluted net income per share $ 0.21 $ 0.20 ======= ======= - ------------------------------------------------------------------------------ Additional options to purchase 3,946,350 shares of Class A Common Stock at $11.25 to $19.50 per share were outstanding at March 31, 2000 but were not included in the computation of diluted net income per share because the options' exercise prices were greater than the average market price of the common shares; to include them would have been antidilutive. 7. Comprehensive income for the Company consists of net income and foreign currency translation adjustments. Comprehensive income (in thousands) totaled $10,752 and $9,229 for the quarters ended March 31, 2000 and 1999, respectively. 8. The Company has two reportable segments, one which provides claims services through branch offices located in the United States ("Domestic Operations") and the other which provides similar services through branch or representative offices located in 64 other countries ("International Operations"). Intersegment sales are recorded at cost and are not material. The Company measures segment profit based on operating income, defined as income before taxes, net corporate interest, and amortization of goodwill. 7 8 CRAWFORD & COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Financial information for the quarters ended March 31, 2000 and 1999 covering the Company's reportable segments is presented below: Quarter ended ------------- March 31, March 31, (In thousands) 2000 1999 - ---------------------------------------------------------------------------------- REVENUES: Domestic $128,392 $128,295 International 49,040 44,326 -------- -------- TOTAL REVENUES $177,432 $172,621 OPERATING INCOME: Domestic $ 13,429 $ 13,499 International 5,294 4,069 -------- -------- TOTAL OPERATING INCOME $ 18,723 $ 17,568 - ---------------------------------------------------------------------------------- 9. In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for Derivatives Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivative instruments. SFAS 133, which will be effective for the Company in 2001, requires that entities recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Except for borrowing in foreign currencies, the Company does not presently engage in any hedging activities to compensate for the effect of exchange rate fluctuations on the net assets or operating results of its foreign subsidiaries. As a result, the new standard is not expected to have a significant effect on the Company's consolidated results of operations, financial position, or cash flows. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion analyzing the Company's results reported by its two reportable segments: domestic operations and international operations. Expense amounts discussed are excluding net corporate interest and amortization of goodwill. RESULTS OF OPERATIONS Operating results for the Company's domestic and international operations for the quarters ended March 31, 2000 and 1999 are as follows: Quarter ended ------------- March 31, March 31, (In thousands) 2000 1999 - ---------------------------------------------------------------------------- REVENUES: Domestic $128,392 $128,295 International 49,040 44,326 -------- -------- TOTAL $177,432 $172,621 COMPENSATION & BENEFITS: Domestic $ 78,230 $ 80,824 % of Revenues 60.9% 63.0% International 30,678 27,105 % of Revenues 62.6% 61.1% -------- -------- TOTAL $108,908 $107,929 % of Revenues 61.3% 62.5% EXPENSES OTHER THAN COMPENSATION & BENEFITS: Domestic $ 36,733 $ 33,972 % of Revenues 28.6% 26.5% International 13,068 13,152 % of Revenues 26.6% 29.7% -------- -------- TOTAL $ 49,801 $ 47,124 % of Revenues 28.1% 27.3% OPERATING INCOME (1): Domestic $ 13,429 $ 13,499 % of Revenues 10.5% 10.5% International 5,294 4,069 % of Revenues 10.8% 9.2% -------- -------- TOTAL $ 18,723 $ 17,568 % of Revenues 10.6% 10.2% - ---------------------------------------------------------------------------- (1) Income before taxes, net corporate interest, and amortization of goodwill. 9 10 DOMESTIC OPERATIONS REVENUES Domestic revenues from insurance companies, self-insured entities, and class action services totaled $128.4 million for the quarter ended March 31, 2000, an increase of 0.1% from the $128.3 million reported for the same period in 1999. Domestic revenues from insurance companies decreased 9.2% to $64.2 million for the quarter ended March 31, 2000, reflecting sluggish claim referrals during the quarter. Revenues from self-insured entities increased 4.3% to $50.6 million in the first quarter of 2000, continuing the trend that began in the fourth quarter of 1999. The insurance market appears to be hardening, resulting in higher insurance premiums and making self-insurance more attractive to Crawford's corporate clients. Revenues from class action services increased 50.2% to $13.6 million in the quarter ended March 31, 2000, due to the award of several new class action administration and inspection contracts to the Company. Excluding the impact of class action services and acquired revenues, domestic unit volume, measured principally by cases received, decreased 15.5% in the first quarter of 2000 compared to the same period in 1999. This decrease was partially offset by a 10.8% revenue increase from changes in the mix of services provided and in the rates charged for those services, resulting in a net 4.7% decline in domestic revenues in the first quarter, excluding revenues from class action services and acquired revenues. Domestic insurance company referrals for high frequency, low severity claims declined in the quarter as the Company's insurance company clients chose to handle these claims telephonically to improve their short-term operating margins. This has resulted in an increase in the Company's average revenue per claim. New class action services contracts increased domestic revenues by 3.6% in the quarter, while the Company's acquisitions of PRISM Network Inc. in August 1999 and Greentree in March 2000 increased domestic revenues by 1.2%. COMPENSATION AND FRINGE BENEFITS The Company's most significant expense is the compensation of its employees, including related payroll taxes and fringe benefits. Domestic compensation expense as a percent of revenues decreased to 60.9% in the first quarter of 2000 as compared to 63.0% in the 1999 period. This decrease is due to the outsourcing of certain information technology functions and the Company's continuing efforts to grow revenues without expanding its employee base. Domestic salaries and wages decreased to $66.0 million for the first quarter of 2000 from $68.1 million for the first quarter of 1999. This decline is due to a reduction in staffing levels. Payroll taxes and fringe benefits for domestic operations totaled $12.2 million in the first quarter of 2000, decreasing 3.1% from 1999 costs of $12.7 million for the comparable period. This decrease is due to the reduction in staffing levels and lower pension expense. Pension expense in 2000 was lower due to higher interest rates and favorable investment returns. EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS Domestic expenses other than compensation and related payroll taxes and fringe benefits approximated 28.6% of revenues for the quarter ended March 31, 2000, up from 26.5% of revenues for the same period in 1999. This increase is due primarily to higher professional fees related to the outsourcing of certain information technology functions, higher costs related to the Company's self-insurance program, and increased bad debt expense. 10 11 INTERNATIONAL OPERATIONS REVENUES Revenues from the Company's international operations totaled $49.0 million for the first three months of 2000, a 10.6% increase from the $44.3 million reported in the first three months of 1999. This increase is largely due to increased referrals from new claims handling agreements entered into during the 1999 fourth quarter. Revenues are net of a 2.8% decline for the quarter ended March 31, 2000 due to the negative effect of a strong U.S. dollar. COMPENSATION AND FRINGE BENEFITS As a percent of revenues, compensation expense, including related payroll taxes and fringe benefits, increased to 62.6% for the first three months of 2000 from 61.1% in the same period in 1999. Salaries and wages of international personnel increased in the first quarter to 53.9% of revenue from 52.4% for the comparable period in 1999, due to an increase in staffing levels in the quarter to meet the anticipated demand for claims services under the new agreements. Payroll taxes and fringe benefits remained at 8.7% of revenues in the first quarter of 2000 and 1999. EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS Expenses other than compensation and related payroll taxes and fringe benefits were 26.6% and 29.7% of international revenues for the first quarter of 2000 and 1999, respectively. The decline is due to lower bad debt and office supply expense. FINANCIAL CONDITION At March 31, 2000, current assets exceeded current liabilities by approximately $100.8 million, a decrease of $9.0 million from the working capital balance at December 31, 1999. Cash and cash equivalents at March 31, 2000 totaled $13.1 million, a decrease of $4.6 million from the balance at the end of 1999. Cash was generated primarily from operating activities and short-term and long-term borrowings, while the principal uses of cash were for repurchases of common stock, dividends paid to shareholders, and acquisitions of businesses. During the first three months of 2000, the Company repurchased 2,147,000 shares of its Class A Common Stock and 129,000 shares of its Class B Common Stock at an average per share cost of $11.03 and $12.29, respectively. As of March 31, 2000, 829,900 shares remain to be repurchased under share repurchase programs authorized by the Company's Board of Directors. The Company maintains credit lines with banks in order to meet seasonal working capital requirements and other financing needs that may arise. Short-term borrowings outstanding as of March 31, 2000 totaled $49.1 million, as compared to $38.9 million at the end of 1999. In March 2000, the Company obtained a five-year, $21 million term loan with a fixed interest rate of 7.7% to finance the repurchase of 1.9 million shares of its Class A Common Stock. This new loan 11 12 increased the Company's long-term debt to $37.1 million as of March 31, 2000, compared to $16.1 million at December 31, 1999. The Company believes that its current financial resources, together with funds generated from operations and existing and potential 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 the Company's net investment in foreign operations. Shareholders' investment at March 31, 2000 was $229.3 million, compared with $250.3 million at December 31, 1999. The decrease is a result of the Company's share repurchase activity in the first quarter of 2000. FACTORS THAT MAY AFFECT FUTURE RESULTS FOREIGN CURRENCY EXCHANGE The Company's international operations expose the Company to foreign currency exchange rate changes that could impact translations of foreign-denominated assets and liabilities into U.S. dollars, and future earnings and cash flows from transactions denominated in different currencies. The Company's revenues from its international operations were 27.6% of total revenues for the three months ended March 31, 2000. Except for borrowing in foreign currencies, the Company does not presently engage in any hedging activities to compensate for the effect of exchange rate fluctuations on the net assets or operating results of its foreign subsidiaries. NEW CLAIMS MANAGEMENT SYSTEM During 1998, the Company began the development of a new claims management system. As of March 31, 2000, approximately $16 million of internal and external costs have been capitalized in connection with this development project. The server-based system, which is scheduled to be deployed during 2000, is designed to streamline and automate the claims intake, assignment, management, and reporting functions. The Company believes the system will increase its competitive advantages. However, if the system fails to function as planned, it could adversely affect the Company's competitive position and results of operations. FORWARD LOOKING STATEMENTS Certain information presented in Management's Discussion and Analysis of Financial Condition and Results of Operations may include forward-looking statements, the accuracy of which is subject to a number of risks and assumptions. The Company's Form 10-K for the year ended December 31, 1999, discusses such risks and assumptions and other key factors that could cause actual results to differ materially from those expressed in such forward-looking statements. 12 13 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK DERIVATIVES The Company has not entered into any transactions using derivative financial instruments or derivative commodity instruments. FOREIGN CURRENCY The operating results of the Company's foreign subsidiaries are affected by fluctuations in foreign currency exchange rates. Fluctuations in foreign currency exchange rates affect the stockholders' investment of the Company. Amounts invested in the Company's foreign subsidiaries are considered to be permanently invested and are translated into U.S. dollars at the exchange rates in effect at the end of the respective periods. The resulting translation adjustments are recorded in stockholders' investment as cumulative translation adjustments. The cumulative translation adjustment component of stockholders' investment has increased $221,000 during the first quarter of 2000. INTEREST RATES The Company is exposed to interest rate fluctuations on its borrowings. Depending on general economic conditions, the Company has typically used variable rate debt for short-term borrowings and fixed rate debt for longer-term borrowings. At March 31, 2000, the Company had $49.1 million in short-term loans outstanding with an average variable interest rate of 5.53%. Long-term debt consisted of the following (in thousands): Description Interest Rate Amount Maturity --------------------------------------------------------------------------------------------- Term Loans 6.8% $15,000 September 2004, interest payable quarterly 7.7% 21,000 March 2005, interest payable quarterly Mortgages secured by buildings 7.3% - 7.8% 832 Various dates through 2003 Capital lease obligations 571 ------- Total Debt 37,403 Less Current Installments (315) ------- Total Long-term debt $37,088 ======= With the exception of the capital lease obligations, the above loans carry a fixed rate of interest. 13 14 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 March 31, 2000, and the related condensed consolidated statements of income for the three-month periods ended March 31, 2000 and 1999 and the condensed consolidated statements of cash flows for the three-month periods ended March 31, 2000 and 1999. 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, 1999 (not presented herein), and, in our report dated January 28, 2000, 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, 1999, 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, 2000 14 15 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10.1 Crawford & Company 1997 Key Employee Stock Option Plan, as amended (incorporated by reference to Appendix A on page A-1 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2000) 15.1 Letter from Arthur Andersen LLP 27.1 Financial Data Schedule (For SEC use only) (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the period covered by this report. 15 16 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 12, 2000 /s/ Archie Meyers, Jr. ------------------------------------ Archie Meyers, Jr. Chairman and Chief Executive Officer (Principal Executive Officer) Date: May 12, 2000 /s/ John F. Giblin ------------------------------------ John F. Giblin Executive Vice President - Finance (Principal Financial Officer) Date: May 12, 2000 /s/ W. Bruce Swain ------------------------------------ W. Bruce Swain Senior Vice President and Controller (Principal Accounting Officer) 16 17 INDEX TO EXHIBITS Exhibit No. Description Sequential Page No. 10.1 Crawford & Company 1997 Key Employee Stock Option Plan, as amended (incorporated by reference to Appendix A on page A-1 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2000) 15.1 Letter from Arthur Andersen LLP 18 27.1 Financial Data Schedule (For SEC use only) 17