-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IaFQg2R7IqbgYYNWQwQ0G4+m93mRRwOIfyF7UabLSAC7AlgWPbG5NuC9Oi2YoT/o mUExkFNLpLFI9682X55K6Q== 0000025475-96-000007.txt : 19960813 0000025475-96-000007.hdr.sgml : 19960813 ACCESSION NUMBER: 0000025475-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRAWFORD & CO CENTRAL INDEX KEY: 0000025475 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 580506554 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10356 FILM NUMBER: 96608813 BUSINESS ADDRESS: STREET 1: 5620 GLENRIDGE DR NE CITY: ATLANTA STATE: GA ZIP: 30342 BUSINESS PHONE: 4042560830 MAIL ADDRESS: STREET 1: 5620 GLENRIDE DR CITY: ATLANTA STATE: GA ZIP: 30342 10-Q 1 Form 10-Q Crawford & Company Quarter Ended June 30, 1996 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, 1996 and June 30, 1995: (In Thousand of Dollars Except Share and Per Share Data) 1996 1995 Revenues $319,192 $299,512 Costs and Expenses: Cost of services provided, less reimbursed expenses of $15,868 in 1996 and $17,073 in 1995 229,996 216,527 Selling, general and administrative expense 54,574 56,075 Total costs and expenses 284,570 272,602 Income Before Income Taxes 34,622 26,910 Provision for Income Taxes 13,963 10,852 Net Income $20,659 $16,058 Earnings Per Share $0.60 $0.46 Weighted Average Shares Outstanding 34,207,508 34,889,009 Declared Dividends Per Share - Class A Common $0.30 $0.29 Declared Dividends Per Share - Class B Common $0.29 $0.27
(See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 3 Quarterly Unaudited Consolidated Statements of Income for the Three-Month Periods ended June 30, 1996 and June 30, 1995: (In Thousand of Dollars Except Share and Per Share Data) 1996 1995 Revenues $157,629 $150,863 Costs and Expenses: Cost of services provided, less reimbursed expenses of $8,089 in 1996 and $8,695 in 1995 113,192 109,844 Selling, general and administrative expense 27,293 29,993 Total costs and expenses 140,485 139,837 Income Before Income Taxes 17,144 11,026 Provision for Income Taxes 6,916 4,446 Net Income $10,228 $6,580 Earnings Per Share $0.30 $0.19 Weighted Average Shares Outstanding 34,104,541 34,851,171 Declared Dividends Per Share - Class A Common $0.150 $0.145 Declared Dividends Per Share - Class B Common $0.145 $0.135
(See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 4 Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995: (In Thousands of Dollars) (Unaudited) June 30 December 31 1996 1995 ASSETS Current Assets: Cash and cash equivalents $45,816 $40,802 Short-term investments, at fair value 2,260 5,596 Accounts receivable, less allowance for doubtful accounts of $10,611 in 1996 and $10,303 in 1995 113,644 111,636 Unbilled revenues, at estimated billable amounts 64,966 60,486 Prepaid income taxes 8,651 6,115 Prepaid expenses and other current assets 10,641 9,745 Total current assets 245,978 234,380 Property and Equipment: Property and equipment, at cost: 124,074 121,307 Less accumulated depreciation and amortization (90,326) (84,859) Net property and equipment 33,748 36,448 Other Assets: Intangible assets arising from acquisitions, less accumulated amortization of $8,508 in 1996 and $7,596 in 1995 54,281 55,731 Prepaid pension obligation 42,464 34,243 Other 6,621 6,181 Total other assets 103,366 96,155 TOTAL ASSETS $383,092 $366,983
(See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 5 Consolidated Balance Sheets - (Continued) (In Thousands of Dollars) (Unaudited) June 30 December 31 1996 1995 LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Short-term borrowings $9,174 $10,154 Accounts payable 10,837 12,366 Accrued compensation and related costs 33,674 26,764 Other accrued liabilities 35,655 29,394 Deferred revenues 15,653 15,504 Current installments of long-term debt 797 872 Total current liabilities 105,790 95,054 Noncurrent Liabilities: Long-term debt, less current installments 8,827 9,412 Deferred income taxes 15,044 14,854 Deferred revenues 11,478 10,498 Postretirement medical benefit obligation 8,270 7,938 Self-insured risks 8,896 7,347 Other 1,827 1,020 Total noncurrent liabilities 54,342 51,069 Shareholders' Investment: Class A Common Stock, $1.00 par value; 50,000,000 shares authorized; 16,841,441 and 17,229,986 shares issued in 1996 and 1995, respectively 16,841 17,230 Class B Common Stock, $1.00 par value; 50,000,000 shares authorized; 17,249,388 and 17,297,730 shares issued in 1996 and 1995, respectively 17,249 17,298 Retained earnings 193,002 189,294 Cumulative translation adjustment (4,132) (2,962) Total shareholders' investment 222,960 220,860 TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $383,092 $366,983
(See accompanying notes to condensed financial statements) Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 6 Unaudited Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 1996 and June 30, 1995: (In Thousands of Dollars) 1996 1995 Cash Flows From Operating Activities: Net income $20,659 $16,058 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 8,341 8,450 Deferred income taxes 1,214 4,159 Loss on sales of property and equipment 90 246 Changes in operating assets and liabilities: Short-term investments 3,336 8,790 Accounts receivable, net (2,761) (4,913) Unbilled revenues (4,728) (817) Prepaid or accrued income taxes 252 (1,672) Accounts payable and accrued liabilities 11,672 (9,411) Deferred revenues 1,130 2,317 Prepaid expenses and other assets (12,011) (18,782) Net cash provided by operating activities 27,194 4,425 Cash Flows From Investing Activities: Acquisitions of property and equipment (4,371) (8,004) Sales of property and equipment 115 92 Net cash used in investing activities (4,256) (7,912) Cash Flows From Financing Activities: Dividends paid (10,117) (9,774) Repurchase of common stock (7,604) (3,512) Issuance of common stock 330 724 Decrease in short-term borrowings (525) (775) Increase in long-term debt 121 336 Net cash used in financing activities (17,795) (13,001) Effect of exchange rate changes on cash and cash equivalents (129) 169 Increase (Decrease) in cash and cash equivalents 5,014 (16,319) Cash and cash equivalents at beginning of period 40,802 38,968 Cash and cash equivalents at end of period $45,816 $22,649 Cash payments for income taxes $13,026 $8,209
(See accompanying notes to condensed financial statements) EX-99 2 Form 10-Q Crawford & Company Quarter Ended June 30, 1996 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, 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 June 30, 1996, 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, 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 $11.4 million and $11.3 million for the respective 1996 and 1995 six-month periods, and $5.7 million and $5.6 million, respectively for the 1996 and 1995 second quarter, 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 June 30, 1996 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, 1996, exceeded current liabilities by $140.2 million, a slight increase from the working capital balance at December 31, 1995. Cash and cash equivalents at June 30, 1996, totaled $45.8 million, an increase of $5.0 million from the balance at the end of 1995. Short-term investments totaled $2.3 million at June 30, 1996, decreasing from $5.6 million at December 31, 1995. Cash was generated primarily from operating activities, while the principal uses of cash were for dividends paid to shareholders, repurchases of common stock and acquisitions of property and equipment. At June 30, 1996, the ratio of current assets to current liabilities was 2.3 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 June 30, 1996, the Company has reacquired 124,000 shares of its Class A Common Stock and 37,000 shares of its Class B Common Stock at an average cost of $15.38 and $15.55 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, 1996, totaled $9.2 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 June 30, 1996 was $223.0 million, compared with $220.9 million at the end of 1995. Long-term debt totaled $8.8 million at June 30, 1996, or approximately 4.0% of shareholders' investment. Results of Operations Revenues for the first half of 1996 were $319.2 million, increasing 6.6% from the $299.5 million for the same period in 1995. Second quarter 1996 revenues were $157.6 million, an increase of 4.5% compared with $150.9 million for the Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 9 Results of Operations - (Continued) same period in 1995. Unit volume, measured principally by chargeable hours, increased 4.6% and 1.8% during the first six months and second quarter of 1996, respectively. These increases were 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 2.0% in the first half of 1996 and 2.7% in the second quarter. 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 1996 1995 1996 1995 Domestic Claims Services (including Risk Management Services) 73.3% 71.9% 73.2% 71.3% Domestic Disability Management Services 13.9 16.1 13.9 15.5 International Operations 12.8 12.0 12.9 13.2 100.0% 100.0% 100.0% 100.0%
Domestic revenues from claims services to insurance companies and risk management services to self insured clients totaled $233.8 million for the first half of 1996, increasing 8.5% over the $215.5 million reported in 1995. Second quarter 1996 revenues totaled $115.4 million, an increase of 7.3% over related 1995 revenues of $107.5 million. These increases are largely due to an increase in weather-related claims resulting from the severe weather in the United States during the first half of 1996, offset by continued weakness in the domestic self-insured corporate market where revenues are substantially unchanged compared to related prior year periods. 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. Total revenues from domestic claims services include $17.4 million produced in the first six months of 1996 by the Company's catastrophe adjusters, increasing $2.1 million over the first half of 1995. This increase reflects the impact of winter storm related losses, as well as the completion of Hurricane Opal property claims during the 1996 first quarter. In the second quarter of 1996, revenues produced by the Company's catastrophe adjusters totaled $9.0 million, as compared to $9.1 million in the 1995 second quarter. Domestic revenues from disability management services, which serves both the insurance company and self-insured markets, totaled $44.5 million for the first half of 1996, a decrease of 7.7% from related 1995 revenues of $48.2 million. For the second quarter these revenues were $21.9 million, Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 10 Results of Operations - (Continued) decreasing 6.7% from the $23.5 million reported in 1995. These declines reflect the continued strong competition in the self-insured corporate market. Revenues from the Company's international operations were $40.9 million in the first half of 1996, a 14.2% increase over the $35.8 million for the same period in 1995. This increase, largely generated during the 1996 first quarter, is primarily due to the 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. Second quarter 1996 revenues totaled $20.3 million, increasing 2.0% over related 1995 revenues of $19.9 million. 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 1996, unchanged from the first six months of 1995, and 62.5% of revenues in the current quarter as compared to 64.4% of second quarter 1995 revenues. Second quarter 1996 compensation expense increased only 1.4% over 1995 related costs, while revenues increased 4.5% in the quarter. Expenses other than compensation and related payroll taxes and fringe benefits approximated 25.4% of revenues for the first six months of 1996, compared to 27.2% of revenues for the same period in 1995, and 26.6% of second quarter 1996 revenues, as compared to 28.3% of related 1995 revenues. As a result of the Company's cost control efforts, such expenses declined .5% and 1.7% for the six-month period and second quarter, respectively, while revenues increased 6.6% and 4.5%, respectively, over the related 1995 periods. Form 10-Q Crawford & Company Quarter Ended June 30, 1996 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, 1996 Page 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Crawford & Company: We have made a review of the accompanying condensed consolidated balance sheet of CRAWFORD & COMPANY (a Georgia corporation) AND SUBSIDIARIES as of June 30, 1996 and the related condensed consolidated statements of income for the three-month and six-month periods ended June 30, 1996 and 1995 and the related condensed consolidated statements of cash flows for the six-month periods ended June 30, 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 August 9, 1996 Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 13 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders On April 18, 1996, 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 (i) the election of ten (10) directors for a one year term, (ii) ratification of the 1996 Employee Stock Purchase Plan and (iii) ratification of the selection of Arthur Andersen LLP as the Registrant's auditor for the year ending December 31, 1996. The results of that voting are as follows: Election of Directors Name Votes For Votes Withheld Virginia C. Crawford 16,306,736 96,254 Dennis A. Smith 16,313,974 89,016 Forrest L. Minix 16,312,519 90,471 J. Hicks Lanier 16,312,736 90,254 Charles Flather 16,312,736 90,254 Jesse S. Hall 16,312,586 90,404 Linda K. Crawford 16,302,940 100,050 Jesse C. Crawford 16,314,715 88,275 Larry L. Prince 16,312,536 90,454 John A. Williams 16,315,736 87,254
Ratification of 1996 Employee Stock Purchase Plan Votes For Votes Against Abstain Broker No Vote 14,545,996 120,528 298,113 1,438,353 Ratification of Appointment of Auditors Votes For Votes Against Abstain 16,392,642 7,125 3,223 Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 15.1 Letter from 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, 1996 Page 15 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 9, 1996 /s/D. A. Smith D. A. Smith Chairman of the Board and Chief Executive Officer Date: August 9, 1996 /s/D. R. Chapman D. R. Chapman Executive Vice President - Finance (Principal Financial Officer) Date: August 9, 1996 /s/J. F. Giblin J. F. Giblin Vice President and Controller (Principal Accounting Officer) Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 16 INDEX TO EXHIBITS Exhibit No. Description Sequential Page No. 15.1 Letter from Arthur Andersen LLP 17 27.1 Financial Data Schedule (for SEC use only) EX-27 3
5 0000025475 CRAWFORD & COMPANY 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 45,816 2,260 189,221 10,611 0 245,978 124,074 90,326 383,092 105,790 8,827 0 0 34,090 188,870 383,092 0 319,192 0 229,996 54,574 0 0 34,622 13,963 20,659 0 0 0 20,659 .60 0
EX-15 4 Form 10-Q Crawford & Company Quarter Ended June 30, 1996 Page 17 Exhibit 15.1 To the Stockholders and Board of Directors of Crawford & Company: We are aware that Crawford & Company has incorporated by reference in its previously filed Registration Statement File No. 2-78989, Registration Statement File No. 33-22595, Registration Statement File No. 33-47536, Registration Statement File No. 33-36116, and Registration Statement File No. 333-2051, its Form 10-Q for the quarter ended June 30, 1996, which includes our report dated August 9, 1996 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), that report is not considered a part of the Registration Statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. /s/Arthur Andersen LLP Atlanta, Georgia August 9, 1996 -----END PRIVACY-ENHANCED MESSAGE-----