10-Q 1 g69248e10-q.txt CRAWFORD & COMPANY 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, 2001 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 30, 2001 was as follows: CLASS A COMMON STOCK, $1.00 PAR VALUE: 23,754,704 CLASS B COMMON STOCK, $1.00 PAR VALUE: 24,697,172 ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CRAWFORD & COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED ---------------------------- MARCH 31, MARCH 31, 2001 2000 ---------------------------- REVENUES $ 179,455 $ 177,432 COSTS AND EXPENSES: Cost of services provided, less reimbursed expenses of $8,721 in 2001 and $8,089 in 2000 133,489 127,993 Selling, general, and administrative expenses 30,665 30,716 Corporate interest, net 1,181 867 Amortization of goodwill 829 761 ------------------------------------------------------------------------------------------ TOTAL COSTS AND EXPENSES 166,164 160,337 ------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 13,291 17,095 PROVISION FOR INCOME TAXES 5,104 6,564 ------------------------------------------------------------------------------------------ NET INCOME $ 8,187 $ 10,531 ========================================================================================== NET INCOME PER SHARE: Basic $ 0.17 $ 0.21 Diluted $ 0.17 $ 0.21 ========================================================================================== WEIGHTED-AVERAGE SHARES OUTSTANDING: Basic 48,452 50,034 Diluted 48,525 50,164 ========================================================================================== CASH DIVIDENDS PER SHARE: Class A Common Stock $ 0.14 $ 0.1375 Class B Common Stock $ 0.14 $ 0.1375 ==========================================================================================
(See accompanying notes to condensed consolidated financial statements) 2 3 CRAWFORD & COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
(UNAUDITED) MARCH 31, DECEMBER 31, 2001 2000 ------------------------------------------------------------------------------------------- ASSETS ------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 23,259 $ 22,136 Accounts receivable, less allowance for doubtful accounts of $18,113 in 2001 and $17,335 in 2000 135,482 137,378 Unbilled revenues, at estimated billable amounts 92,342 87,067 Prepaid expenses and other current assets 16,846 17,144 ------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 267,929 263,725 ------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT: Property and equipment, at cost 148,505 149,842 Less accumulated depreciation (107,299) (107,045) ------------------------------------------------------------------------------------------- NET PROPERTY AND EQUIPMENT 41,206 42,797 ------------------------------------------------------------------------------------------- OTHER ASSETS: Intangible assets arising from acquisitions, net 82,023 82,599 Prepaid pension cost 45,964 47,633 Capitalized software costs, net 13,280 12,498 Other 12,300 9,099 ------------------------------------------------------------------------------------------- TOTAL OTHER ASSETS 153,567 151,829 ------------------------------------------------------------------------------------------- TOTAL ASSETS $ 462,702 $ 458,351 ===========================================================================================
(See accompanying notes to condensed consolidated financial statements) 3 4 CRAWFORD & COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED (IN THOUSANDS)
(UNAUDITED) MARCH 31, DECEMBER 31, 2001 2000 ------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' INVESTMENT ------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Short-term borrowings $ 47,879 $ 44,420 Accounts payable 27,370 25,628 Accrued compensation and related costs 21,159 25,366 Deferred revenues 21,556 23,353 Self-insured risks 11,020 10,379 Accrued income taxes 16,708 12,922 Other accrued liabilities 15,551 15,355 Current installments of long-term debt 230 216 ------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 161,473 157,639 ------------------------------------------------------------------------------------------- NONCURRENT LIABILITIES: Long-term debt, less current installments 36,544 36,662 Deferred revenues 13,369 13,598 Self-insured risks 11,596 11,346 Deferred income taxes 3,940 3,941 Postretirement medical benefit obligation 7,087 7,785 Other 9,701 9,613 ------------------------------------------------------------------------------------------- TOTAL NONCURRENT LIABILITIES 82,237 82,945 ------------------------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENT: Class A Common Stock, $1.00 par value; 50,000 shares authorized; 23,755 and 23,754 shares issued and outstanding in 2001 and 2000, respectively 23,755 23,754 Class B Common Stock, $1.00 par value; 50,000 shares authorized; 24,697 shares issued and outstanding in 2001 and 2000 24,697 24,697 Retained earnings 185,068 183,664 Accumulated other comprehensive income (14,528) (14,348) ------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' INVESTMENT 218,992 217,767 ------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 462,702 $ 458,351 ===========================================================================================
(See accompanying notes to condensed consolidated financial statements) 4 5 CRAWFORD & COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (IN THOUSANDS)
THREE MONTHS ENDED ----------------------------- MARCH 31, MARCH 31, 2001 2000 ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,187 $ 10,531 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 5,161 4,980 Deferred income taxes 6 (23) (Gain) loss on sales of property and equipment (14) 361 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable, net 2,712 (1,874) Unbilled revenues (5,207) (2,696) Accrued or prepaid income taxes 4,214 3,009 Accounts payable and accrued liabilities (3,027) (6,319) Deferred revenues (1,790) (1,509) Prepaid expenses and other assets (272) (2,357) ------------------------------------------------------------------------------------------ Net cash provided by operating activities 9,970 4,103 ------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment (3,148) (3,129) Acquisition of businesses, net of cash acquired (723) (3,595) Capitalization of computer software costs (1,216) (2,150) Proceeds from sales of property and equipment 83 218 ------------------------------------------------------------------------------------------ Net cash used in investing activities (5,004) (8,656) ------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (6,783) (6,936) Repurchase of common stock 0 (25,271) Proceeds from exercise of stock options 0 436 Increase in short-term borrowings, net of repayments 2,787 11,085 Increase in long-term borrowings 0 21,000 Payments on long-term debt (89) (87) ------------------------------------------------------------------------------------------ Net cash (used in) provided by financing activities (4,085) 227 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash and cash equivalents 242 (275) ------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,123 (4,601) Cash and cash equivalents at beginning of period 22,136 17,716 ------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,259 $ 13,115 ==========================================================================================
(See accompanying notes to condensed consolidated financial statements) 5 6 CRAWFORD & COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The unaudited condensed consolidated 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, 2000. 2. The results of operations for the quarter ended March 31, 2001 are not necessarily indicative of the results to be expected during the balance of the year ending December 31, 2001. 3. During the quarter ended March 31, 2001, the Company utilized $223,000 of its restructuring reserves for payments related to employee separations and lease terminations. As of March 31, 2001, remaining restructuring reserves were $2.5 million, $2.0 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 United Kingdom 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. 4. 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 quarter ended March 31, 2001 and 2000:
================================================================= Quarter ended ----------------------- March 31, March 31, (In thousands, except per share data) 2001 2000 ================================================================= Net income available to common shareholders $ 8,187 $ 10,531 ======== ======== Weighted-average common shares outstanding - Basic 48,452 50,034 Dilutive effect of stock options 73 130 -------- -------- Weighted-average common shares outstanding - Diluted 48,525 50,164 ======== ======== Basic net income per share $ 0.17 $ 0.21 ======== ======= Diluted net income per share $ 0.17 $ 0.21 ======== ======== =================================================================
Additional options to purchase 5,110,173 shares of Class A Common Stock at $10.00 to $19.50 per share were outstanding at March 31, 2001, 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. 5. Comprehensive income for the Company consists of the total of net income and foreign currency translation adjustments. Below is the calculation of comprehensive income for the quarter ended March 31, 2001 and 2000:
================================================================= Quarter ended ---------------------- March 31, March 31, (In thousands) 2001 2000 ================================================================= Net income $ 8,187 $ 10,531 Foreign currency translation adjustment (180) 221 -------- -------- Comprehensive income $ 8,007 $ 10,752 ======== ======== =================================================================
6. 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 amortization of goodwill, net corporate interest, and income taxes. 7 8 CRAWFORD & COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Financial information for the quarter ended March 31, 2001 and 2000 covering the Company's reportable segments is presented below:
================================================================= Quarter ended ------------------------- March 31, March 31 (In thousands) 2001 2000 ================================================================= Revenues: Domestic $ 131,470 $ 128,392 International 47,985 49,040 --------- --------- Total Revenues $ 179,455 $ 177,432 ========= ========= Operating Income: Domestic $ 11,096 $ 13,429 International 4,205 5,294 --------- --------- Total Operating Income $ 15,301 $ 18,723 ========= ========= =================================================================
7. The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," in 1998 and SFAS 138 as an amendment to SFAS 133 in 2000. SFAS 133 and 138 establish accounting and reporting standards for derivative instruments. SFAS 133 and 138, which were effective for the Company beginning January 1, 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 adoption of the new standard did not 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 Consolidated net income was $8.2 million and $10.5 million for the quarters ended March 31, 2001 and 2000, respectively. The following is a discussion and analysis of the consolidated financial condition and results of operations of the Company's results reported by its two reportable segments: domestic operations and international operations. Expense amounts discussed are excluding amortization of goodwill, net corporate interest, and income taxes. RESULTS OF OPERATIONS Operating results for the Company's domestic and international operations for the quarter ended March 31, 2001 and 2000 are as follows:
============================================================================== Quarter ended ----------------------------- March 31, March 31, (In thousands) 2001 2000 ============================================================================== REVENUES: Domestic $ 131,470 $ 128,392 International 47,985 49,040 ---------- ---------- TOTAL $ 179,455 $ 177,432 COMPENSATION & FRINGE BENEFITS: Domestic $ 81,559 $ 78,230 % of Revenues 62.1% 60.9% International 31,126 30,678 % of Revenues 64.9% 62.6% ---------- ---------- TOTAL $ 112,685 $ 108,908 % of Revenues 62.8% 61.3% EXPENSES OTHER THAN COMPENSATION & FRINGE BENEFITS: Domestic $ 38,815 $ 36,733 % of Revenues 29.5% 28.6% International 12,654 13,068 % of Revenues 26.3% 26.6% ---------- ---------- TOTAL $ 51,469 $ 49,801 % of Revenues 28.7% 28.1% ----------------------------- OPERATING INCOME (1): Domestic $ 11,096 $ 13,429 % of Revenues 8.4% 10.5% International 4,205 5,294 % of Revenues 8.8% 10.8% ---------- ---------- TOTAL $ 15,301 $ 18,723 % of Revenues 8.5% 10.6% ==============================================================================
(1) Income before amortization of goodwill, net corporate interest, and income taxes. 9 10 DOMESTIC OPERATIONS REVENUES Domestic revenues by market type for the quarter ended March 31, 2001 and 2000 are as follows:
================================================================================ Quarter ended --------------------------------------------- March 31, March 31, (In thousands) 2001 2000 Variance ================================================================================ Insurance companies $ 69,060 $ 64,174 7.6% Self-insured entities 50,138 50,637 (1.0%) Class action services 12,272 13,581 (9.6%) --------- --------- TOTAL DOMESTIC REVENUES $ 131,470 $ 128,392 2.4% ========= ========= ================================================================================
Revenues from insurance companies increased to $69.1 million, due to growth in managed care revenues resulting from the Company's strategic partnership with a large domestic insurance company and increased revenues from the expansion of surveillance services throughout the Company's branch network. Revenues from self-insured clients decreased slightly to $50.1 million in the quarter. Class action revenues, which can fluctuate based on the timing of project awards, decreased to $12.3 million in the quarter. The Company has been awarded several major class action projects which will contribute to its revenues over the next two quarters and a number of other potential awards are awaiting final court settlement. Case Volume Analysis Excluding the impact of class action services and acquired revenues, domestic unit volume, measured principally by cases received, decreased 6.6% in the first quarter of 2001 compared to the same period in 2000. This decrease was offset by a 9.0% revenue increase from changes in the mix of services provided and in the rates charged for those services, resulting in a net 2.4% increase in domestic revenues in the first quarter of 2001, excluding revenues from class action services and acquired revenues. The Company's domestic insurance company referrals for high frequency, low severity claims have declined during the quarter resulting in an increase in the Company's average revenue per claim. The decline in class action services decreased domestic revenues by 1.0% in the first quarter of 2001. The Company's acquisition of Greentree Investigations, Inc. in March 2000 (included in non-class action revenues) increased domestic revenues over the prior year period by 1.0% for the quarter ended March 31, 2001. 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 increased to 62.1% in the first quarter of 2001 as compared to 60.9% in 2000. Domestic salaries and wages increased to $68.1 million for the quarter ended March 31, 2001, from $66.0 million in the comparable 2000 period. This increase resulted primarily from merit salary increases and an increase in capacity in the Company's domestic operating units due to a lack of weather-related claims activity during the current quarter. Payroll taxes and fringe benefits for domestic operations totaled $13.5 million in the first quarter of 2001, increasing 10 11 10.0% from 2000 costs of $12.2 million for the comparable period. These increases are primarily due to higher costs related to the Company's self-insured medical program. EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS Domestic expenses other than compensation and related payroll taxes and fringe benefits approximated 29.5% of revenues for the quarter ended March 31, 2001, up from 28.6% of revenues for the same period in 2000. This increase is due primarily to higher professional fees related to outsourced functions in certain information technology units and higher outside processing fees in the Company's medical bill auditing unit due to a system outage. INTERNATIONAL OPERATIONS REVENUES Revenues from the Company's international operations decreased 2.2%, from $49.0 million in the first quarter of 2000 to $48.0 million in the first quarter of 2001. International unit volume, measured principally by cases received, increased 6.1% in the first quarter of 2001 compared to the same period in 2000. Small strategic acquisitions in France and Brazil increased international revenues by 2.2% for the quarter ended March 31, 2001. Revenues are net of a 9.4% decline during the quarter ended March 31, 2001, 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 64.9% for the quarter ended March 31, 2001 from 62.6% for the same period in 2000. Salaries and wages of international personnel increased in the quarter ended March 31, 2001 to 55.7% of revenues from 53.9% for the comparable period in 2000. This increase is primarily due to higher revenues in the prior year period from hurricane claims incurred in the 1999 fourth quarter. The 2000 fourth quarter had no such claims activity. Payroll taxes and fringe benefits increased as a percent of revenue to 9.2% for the quarter ended March 31, 2001, compared to 8.7% for the same period in 2000. EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS Expenses other than compensation and related payroll taxes and fringe benefits were 26.3% of international revenues for the quarter ended March 31, 2001, down from 26.6% for the same period in 2000. These decreases are due to reduced rent and occupancy costs and lower automobile expenses. FINANCIAL CONDITION At March 31, 2001 current assets exceeded current liabilities by approximately $106.5 million, an increase of $0.4 million from the working capital balance at December 31, 2000. Cash and cash equivalents at March 31, 2001 totaled $23.3 million, an increase of $1.1 million from the balance at the end of 2000. Cash was generated primarily from operating activities and short-term borrowings, while the principal uses of cash were for dividends paid to shareholders, 11 12 acquisitions of property and equipment, and investments in computer software. During the first quarter of 2001, the Company did not repurchase any of its Class A or Class B Common Stock. As of March 31, 2001, 705,863 shares remain to be repurchased under the share repurchase program 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, 2001 totaled $47.9 million, increasing from $44.4 million at the end of 2000. Long-term borrowings outstanding, excluding current installments, as of March 31, 2001 total $36.5 million, as compared to $36.7 million at the end of 2000. 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, 2001 was $219.0 million, compared with $217.8 million at December 31, 2000. FACTORS THAT MAY AFFECT FUTURE RESULTS 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, 2000, 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. CONTINGENCIES In the normal course of the claims administration services business, the Company is named as a defendant in suits by insureds or claimants contesting decisions by the Company or its clients with respect to the settlement of claims. Additionally, clients of the Company have brought actions for indemnification on the basis of alleged negligence on the part of the Company, its agents or employees in rendering service to clients. The majority of these claims are of the type covered by insurance maintained by the Company; however, the Company is self-insured for the deductibles under its various insurance coverages. In the opinion of the Company, adequate reserves have been provided for such self-insured risks. The Company has received federal grand jury subpoenas requesting certain business and financial records of the Company dating back to 1992. The Company has been advised that the subpoenas were issued in connection with an investigation into the Company's billings for services in its Domestic Claims Management and Healthcare Management Services branch offices. The Company is cooperating fully with the investigation. It is not possible to determine what effects, if any, this investigation might ultimately have on the Company's financial position or results of operations. 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 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 26.7% and 27.6% of total revenues at March 31, 2001 and 2000, respectively. 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. The Company measures currency earnings risk related to its international operations based on changes in foreign currency rates using a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings based on a hypothetical 10% change in currency exchange rates. Exchange rates and currency positions as of March 31, 2001 were used to perform the sensitivity analysis. Such analysis indicates that a hypothetical 10% change in foreign currency exchange rates would have decreased pretax income by approximately $0.3 million during the first three months of 2001, had the U.S. dollar exchange rate increased relative to the currencies with which the Company had exposure. INTEREST RATES The Company is exposed to interest rate fluctuations on certain of its variable rate borrowings. Depending on general economic conditions, the Company uses variable rate debt for short-term borrowings and fixed rate debt for long-term borrowings. At March 31, 2001, the Company had $47.9 million in short-term loans outstanding with an average variable interest rate of 6.2%. 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, 2001, and the related condensed consolidated statements of income and cash flows for the quarters ended March 31, 2001 and 2000. 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 auditing standards generally accepted in the United States, 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 accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Crawford & Company and subsidiaries as of December 31, 2000 (not presented separately herein), and in our report dated January 26, 2001, 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, 2000, 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 9, 2001 14 15 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 15.1 Letter from Arthur Andersen LLP (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 9, 2001 /s/ Grover L. Davis --------------------------------------- Grover L. Davis Chief Executive Officer (Principal Executive Officer) Date: May 9, 2001 /s/ John F. Giblin --------------------------------------- John F. Giblin Executive Vice President - Finance (Principal Financial Officer) Date: May 9, 2001 /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. 15.1 Letter from Arthur Andersen LLP 18
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