UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 9, 2015
CRAWFORD & COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
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1-10356 | | 58-0506554 |
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(Commission File Number) | | (IRS Employer Identification No.) |
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1001 Summit Blvd., Atlanta, Georgia | | 30319 |
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(Address of Principal Executive Offices) | | (Zip Code) |
(404) 300-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
TABLE OF CONTENTS
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ITEM 2.02. Results of Operations and Financial Condition |
ITEM 7.01. Regulation FD Disclosure |
ITEM 9.01. Financial Statements and Exhibits |
SIGNATURES |
EXHIBIT INDEX |
EX-99.1 |
EX-99.2 |
ITEM 2.02. Results of Operations and Financial Condition
On November 9, 2015, Crawford & Company (the "Company") issued a press release containing information about the Company's financial results for the third quarter 2015. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.
ITEM 7.01. Regulation FD Disclosure
The Company has made available on the Company's website at www.crawfordandcompany.com a presentation designed to enhance the information presented at its quarterly earnings conference call on Monday, November 9, 2015 at 3:00 p.m. Eastern Time. A copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein by this reference.
ITEM 9.01. Financial Statements and Exhibits
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(c) | | Exhibits | | |
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Exhibit No. | | Description |
99.1 | | Press Release dated November 9, 2015 |
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99.2 | | Slide Presentation |
The information contained in this current report on Form 8-K and in the accompanying exhibits shall not be incorporated by reference into any filing of the Company with the SEC, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing, unless expressly incorporated by specific reference to such filing. The information, including the exhibits hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| CRAWFORD & COMPANY (Registrant) | |
| By: | /s/ W. BRUCE SWAIN | |
| | W. Bruce Swain | |
| | Executive Vice President - Chief Financial Officer | |
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Dated: November 9, 2015
EXHIBIT INDEX
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Number | | Descriptions |
99.1 | | Press Release dated November 9, 2015 |
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99.2 | | Slide Presentation |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
FOR IMMEDIATE RELEASE
Crawford & Company Reports 2015 Third Quarter Results
Announces Further Restructuring and Revises 2015 Guidance
ATLANTA, GA. (November 9, 2015) -- Crawford & Company (www.crawfordandcompany.com) (NYSE: CRDA and CRDB), the world's largest independent provider of claims management solutions to insurance companies and self-insured entities, today announced its financial results for the third quarter ended September 30, 2015.
The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock (CRDA) than on the voting Class B Common Stock (CRDB), subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of CRDA must receive the same type and amount of consideration as holders of CRDB, unless different consideration is approved by the holders of 75% of CRDA, voting as a class.
Third Quarter 2015 Summary
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• | Revenues before reimbursements of $293.3 million, flat with $293.8 million for the third quarter of 2014 |
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• | Net (loss) income attributable to shareholders of $(0.9) million, down from $10.2 million in the same period last year |
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• | Diluted loss per share of $(0.01) for CRDA and $(0.03) for CRDB, after restructuring and special charges |
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• | Diluted earnings per share of $0.14 for CRDA and $0.12 for CRDB on a non-GAAP basis, before restructuring and special charges |
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• | Americas segment achieved 13% operating margin during third quarter 2015 |
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• | Broadspire segment delivered 9% revenue growth with operating margins at 10% during third quarter of 2015 |
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• | Overall consolidated results were also negatively impacted in the 2015 period by a lack of weather-related claims in the U.S. and EMEA/AP, the expected runoff of certain large projects in Legal Settlement Administration, and an increase in our effective tax rate |
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• | Incurred restructuring and special charges of $11.1 million |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
"I am very excited to be leading Crawford during this interim time period given the significant opportunity that I see on the horizon for our Company, employees, clients and shareholders. While the market backdrop remains a headwind to our financial results, I am extremely impressed with the strength of the Crawford brand globally as well as the feedback that I have received from our clients. As a result of our recent strategic review, we believe that we have an opportunity to transform Crawford into a company with more predictable business results and cash flows while reducing our dependence on severe weather," stated Mr. Harsha V. Agadi, interim Chief Executive Officer of Crawford & Company. "To achieve this goal, we have implemented a restructuring plan designed to remove approximately $25.0 to $28.0 million from the Company's expense base as we enter 2016. This plan is incremental to our previously announced restructuring plans that are targeting approximately $22.0 million in benefits in 2016 from the GAB Robins and EMEA/AP restructuring activities, the Americas segment restructuring and the Global Business Services Center in Manila that were previously announced."
Mr. Agadi continued, "Many of our businesses such as Broadspire and Contractor Connection have more predictable and consistent results. As we aggressively reduce administrative and back office expenses, we expect to drive margin expansion across our entire company without loss of competitiveness or revenue generation ability. We believe that this will position Crawford for healthy revenue growth and profitability assuming no improvement to the current challenging market backdrop. We are just beginning to see the benefits from our initial cost reduction plans from earlier in the year as our Americas segment exceeded its operating margin target of 10% in the third quarter with a 13% margin. Broadspire also delivered 10% operating margins, an increase of 200 basis points from the second quarter of this year. While our Legal Settlement Administration segment continues to work through the run off of a few large cases, which will remain a headwind to our results through the balance of the year and likely into 2016, we are also looking carefully at the segment expense base in this operation to identify opportunities to improve its profitability."
Mr. Agadi concluded, "While our overall results are not where they need to be, I am excited by the opportunities in 2016 and am optimistic about where our Company is heading. We believe that our cost reduction activities, when complete, will enable our businesses to achieve their operating margin targets in the current claim environment and provide an opportunity for significant profit contribution when claim volumes begin to grow. We are positioning our Company to create long-term shareholder value by focusing on profitable growth and leveraging the Company's numerous global resources."
Third Quarter 2015 Financial Results Compared to Prior Year Period
Third quarter 2015 consolidated revenues before reimbursements totaled $293.3 million, compared with $293.8 million for third quarter 2014. Third quarter 2015 net loss attributable to shareholders of Crawford & Company was $(0.9) million compared with net income of $10.2 million in the third quarter of 2014. Third quarter 2015 diluted loss per share was $(0.01) for CRDA and $(0.03) for CRDB, compared with diluted earnings per share of $0.19 for CRDA and $0.17 for CRDB in the prior year quarter. Consolidated operating earnings, a non-GAAP financial measure, were $23.1 million in the 2015 third quarter, compared with $22.9 million in the 2014 period.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
During the 2015 third quarter, the Company recorded restructuring and special charges of $11.1 million, or $0.15 per share. Restructuring charges of $6.1 million for the 2015 third quarter were comprised of costs associated with the ongoing implementation of its Global Business Services Center in Manila, Philippines, integration costs related to the GAB Robins acquisition and EMEA/AP restructuring activities, and other restructuring activities in the Americas segment. Special charges of $5.0 million for the quarter were incurred for certain legal and professional fees and employee separation costs. Before these restructuring and special charges, third quarter 2015 diluted earnings per share on a non-GAAP basis were $0.14 for CRDA and $0.12 for CRDB.
Segment Results
Americas
Americas revenues before reimbursements were $92.0 million in the third quarter of 2015, decreasing from $92.2 million in the third quarter of 2014. The slight decrease, resulting from a decrease in the U.S. Claims Field Operations service line revenues due to a reduction of weather-related case volumes, was substantially offset by an increase in the U.S. Catastrophe Services service line revenues resulting from an outsourcing project for a major U.S. insurance carrier and an increase in U.S. Contractor Connection revenues. Changes in foreign exchange rates reduced our Americas revenues by approximately 6% for the three months ended September 30, 2015. Operating earnings were $12.2 million in the 2015 third quarter, compared with $7.0 million in the third quarter of 2014, representing an operating margin of 13% and 8% in the 2015 and 2014 periods, respectively.
EMEA/AP
Third quarter 2015 revenues before reimbursements for the EMEA/AP segment totaled $98.3 million, compared with $86.2 million in the 2014 third quarter. This increase was due to the inclusion of $19.6 million in revenues from the acquisition of GAB Robins in the U.K. Changes in foreign exchange rates negatively impacted revenues in this segment by approximately 14% in the third quarter of 2015 compared with the prior year period. EMEA/AP operating earnings were $6.7 million in the 2015 third quarter, compared with $4.2 million in the 2014 quarter. The segment's operating margin was 7% in the 2015 period as compared to 5% in the 2014 quarter.
Broadspire
Broadspire segment revenues before reimbursements were $74.2 million in the 2015 third quarter, up from $68.2 million in the 2014 third quarter. Broadspire recorded operating earnings of $7.4 million in the third quarter of 2015, representing an operating margin of 10%, compared with $4.4 million, or 6% of revenues, in the 2014 third quarter. The overall increase in 2015 revenues was primarily due to organic growth, new clients, higher client retention, the transfer of accident and health cases from our U.S. Claims Field Services service line in the Americas segment, and increased medical management services referrals.
Legal Settlement Administration
Legal Settlement Administration revenues before reimbursements were $28.8 million in the third quarter of 2015, compared with $47.2 million in the same period of 2014. The decrease in revenues was primarily due to declines in volumes associated with several large cases. Operating earnings were $1.1 million in the 2015 third quarter as compared to $7.7 million in the 2014 period, with the related operating margin decreasing from 16% in the 2014 period to 4% in the 2015 period.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Unallocated Corporate and Shared Costs, Net
Unallocated corporate costs were $4.3 million in the third quarter of 2015, compared with $0.5 million in the same period of 2014. This increase was a result of settlement of a specific legal claim of $1.3 million in 2015. There was no such settlement in 2014. In addition, during the 2015 period these expenses increased $1.2 million due to higher self-insured expenses and $0.4 million due to U.S. defined benefit pension expense.
Balance Sheet and Cash Flow
Crawford & Company's consolidated cash and cash equivalents position as of September 30, 2015 totaled $58.3 million compared with $52.5 million at December 31, 2014.
The Company's operations provided $21.1 million of cash during the first nine months of 2015, compared with $44.2 million used during the first nine months of 2014. The $65.4 million improvement in cash provided by operating activities in the first nine months of 2015 compared with the 2014 period was primarily due to improved collections of accounts receivable and lower payments for accrued liabilities, including incentive compensation, offsetting the decline in net income.
The Company's effective tax rate increased during the third quarter and first nine months of 2015, as compared to the 2014 periods due primarily to lower pretax income, our inability to recognize tax benefits for certain international net operating losses, fluctuations in the mix of income earned, and changes in enacted tax rates. Current year losses in certain operations, including losses due to restructuring and special charges, are in jurisdictions with lower tax rates or where the losses are unable to be benefited.
2015 Guidance
Crawford & Company is revising its guidance for 2015 as follows:
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• | Consolidated revenues before reimbursements between $1.15 and $1.17 billion; |
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• | Consolidated operating earnings between $60.0 and $65.0 million; |
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• | Consolidated cash provided by operating activities between $20.0 and $30.0 million; |
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• | Before restructuring and special charges, net income attributable to shareholders of Crawford & Company between $20.0 and $25.0 million, or $0.39 to $0.48 diluted earnings per CRDA share, or $0.32 to $0.41 diluted earnings per CRDB share. |
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• | After restructuring and special charges, net (loss) income attributable to shareholders of Crawford & Company between $(4.0) and $1.0 million, or $(0.04) to $0.05 diluted (loss) earnings per CRDA share, or $(0.11) to $(0.02) diluted loss per CRDB share; |
In addition to the special charge of $5.0 million, the Company expects to incur pretax restructuring charges in 2015 totaling approximately $27.0 to $32.0 million. This is comprised of approximately $8.4 million for the integration of GAB Robins and restructuring in the EMEA/AP segment, $6.3 million related to the establishment of a Global Business Services Center in Manila, Philippines, and $2.3 million related to restructuring activities in the Americas segment. In addition, the Company expects to incur an additional restructuring charge of approximately $10.0 to $15.0 million during the 2015 fourth quarter to remove approximately $25.0 to $28.0 million of annual costs.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
To a significant extent, Crawford's business depends on case volumes. The Company cannot predict the future trend of case volumes for a number of reasons, including the fact that the frequency and severity of weather-related claims and the occurrence of natural and man-made disasters, which are a significant source of claims and revenue for the Company, are generally not subject to accurate forecasting.
In recent periods the Company has derived a material portion of its revenues and operating earnings from a limited number of client engagements and special projects within its Legal Settlement Administration segment, specifically its work on the gulf-related class action settlement. Although the Company continued to earn revenues from the Legal Settlement Administration projects in the third quarter 2015, these revenues, and related operating earnings, were at a reduced rate as compared to 2014. The projects continue to wind down, and the Company expects these revenues, and related operating earnings, to be at a reduced rate in all future periods. No assurances of timing of the project end dates and, therefore, continued revenues or operating earnings, can be provided. In the event the Company is unable to replace revenues and related operating earnings from these projects as they wind down, or upon the termination or other expiration thereof, with revenues and operating earnings from new projects and customers within this or other segments, there could be a material adverse effect on the Company's results of operations.
Conference Call
Crawford & Company's management will host a conference call with investors on Monday, November 9, 2015 at 3:00 p.m. Eastern Time to discuss third quarter 2015 results. The call will be recorded and available for replay through December 8, 2015. You may dial 1-855-859-2056 to listen to the replay. The access code is 33498436. Alternatively, please visit our web site at www.crawfordandcompany.com for a live audio web cast and related financial presentation.
Non-GAAP Presentation
In the normal course of business, our operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by our clients. Under GAAP, these out-of-pocket expenses and associated reimbursements are required to be included when reporting expenses and revenues, respectively, in our consolidated results of operations. In the foregoing discussion and analysis of segment results of operations, we do not include a gross up of segment expenses and revenues for these pass-through reimbursed expenses. The amounts of reimbursed expenses and related revenues offset each other in our results of operations with no impact to our net income or operating earnings. A reconciliation of revenues before reimbursements to consolidated revenues determined in accordance with GAAP is self-evident from the face of the accompanying unaudited condensed consolidated statements of income.
Operating earnings is the primary financial performance measure used by our senior management and chief operating decision maker ("CODM") to evaluate the financial performance of our Company and operating segments, and make resource allocation and certain compensation decisions. Unlike net income, segment operating earnings is not a standard performance measure found in GAAP. We believe this measure is useful to others in that it allows them to evaluate segment and consolidated operating performance using the same criteria used by our senior management and CODM. Consolidated operating earnings represent segment earnings including certain unallocated corporate and shared costs, but before net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, restructuring and special charges, income taxes, and net income or loss attributable to noncontrolling interests. The reconciliation of operating earnings to net (loss) income attributable to shareholders of Crawford & Company on a GAAP basis is presented below.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Unallocated corporate and shared costs represent expenses related to our chief executive officer and Board of Directors, certain provisions for bad debt allowances or subsequent recoveries such as those related to bankrupt clients, defined benefit pension costs or credits for our frozen U.S. pension plan, certain self-insurance costs and recoveries, and professional fees for corporate level projects that are not allocated to our individual operating segments but are included in our financial performance measure of consolidated operating earnings. Restructuring and special charges are non-core items not directly related to our normal business or operations, or our future performance.
Income taxes, net corporate interest expense, stock option expense, and amortization of customer-relationship intangible assets are recurring components of our net income, but they are not considered part of our consolidated or segment operating earnings because they are managed on a corporate-wide basis. Income taxes are calculated for the Company on a consolidated basis based on statutory rates in effect in the various jurisdictions in which we provide services, and varies significantly by jurisdiction. Net corporate interest expense results from capital structure decisions made by senior management and the Board of Directors and affecting the Company as a whole. Stock option expense represents the non-cash costs generally related to stock options and employee stock purchase plan expenses which are not allocated to our operating segments. Amortization expense is a non-cash expense for finite-lived customer-relationship and trade name intangible assets acquired in business combinations. None of these costs relate directly to the performance of our services or operating activities and, therefore, are excluded from segment operating earnings in order to better assess the results of each segment's operating activities on a consistent basis.
Following is a reconciliation of segment and consolidated operating earnings to net (loss) income attributable to shareholders of Crawford & Company on a GAAP basis and the related margins as a percentage of revenues before reimbursements for all periods presented (in thousands, except percentages):
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| Quarter ended | | Nine months ended |
| September 30, 2015 | % Margin | September 30, 2014 | % Margin | | September 30, 2015 | % Margin | September 30, 2014 | % Margin |
Operating Earnings: | | | | | | | | | |
Americas | $ | 12,163 |
| 13 | % | $ | 7,036 |
| 8 | % | | $ | 27,035 |
| 10 | % | $ | 22,112 |
| 8 | % |
EMEA/AP | 6,652 |
| 7 | % | 4,225 |
| 5 | % | | 9,286 |
| 3 | % | 10,435 |
| 4 | % |
Broadspire | 7,429 |
| 10 | % | 4,422 |
| 6 | % | | 16,972 |
| 8 | % | 9,140 |
| 5 | % |
Legal Settlement Administration | 1,141 |
| 4 | % | 7,668 |
| 16 | % | | 9,813 |
| 10 | % | 18,335 |
| 14 | % |
Unallocated corporate and shared costs, net | (4,297 | ) | (1 | )% | (500 | ) | — | % | | (11,639 | ) | (1 | )% | (2,190 | ) | — | % |
Consolidated Operating Earnings | 23,088 |
| 8 | % | 22,851 |
| 8 | % | | 51,467 |
| 6 | % | 57,832 |
| 7 | % |
Deduct: | | | | | | | | | |
Net corporate interest expense | (2,332 | ) | (1 | )% | (1,680 | ) | (1 | )% | | (6,238 | ) | (1 | )% | (4,532 | ) | (1 | )% |
Stock option expense | (30 | ) | — | % | (184 | ) | — | % | | (357 | ) | — | % | (680 | ) | — | % |
Amortization expense | (2,350 | ) | (1 | )% | (1,543 | ) | (1 | )% | | (6,782 | ) | (1 | )% | (4,746 | ) | (1 | )% |
Restructuring and special charges | (11,078 | ) | (4 | )% | — |
| — | % | | (16,383 | ) | (2 | )% | — |
| — | % |
Income taxes | (8,385 | ) | (3 | )% | (9,244 | ) | (3 | )% | | (15,335 | ) | (2 | )% | (20,494 | ) | (2 | )% |
Net loss (income) attributable to non-controlling interests | 230 |
| — | % | (8 | ) | — | % | | (189 | ) | — | % | (72 | ) | — | % |
Net (loss) income attributable to shareholders of Crawford & Company | $ | (857 | ) | — | % | $ | 10,192 |
| 3 | % | | $ | 6,183 |
| 1 | % | $ | 27,308 |
| 3 | % |
| | | | | | | | | |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Further information regarding the Company's operating results for the quarter and nine months ended September 30, 2015, financial position as of September 30, 2015, and cash flows for the nine months ended September 30, 2015 is shown on the attached unaudited condensed consolidated financial statements.
About Crawford & Company
Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is the world's largest (based on annual revenues) independent provider of claims management solutions to the risk management and insurance industry, as well as to self-insured entities, with an expansive global network serving clients in more than 70 countries. The Crawford SolutionSM offers comprehensive, integrated claims services, business process outsourcing and consulting services for major product lines including property and casualty claims management, workers' compensation claims and medical management, and legal settlement administration. The Company's shares are traded on the NYSE under the symbols CRDA and CRDB.
The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting CRDA than on the voting CRDB, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of CRDA must receive the same type and amount of consideration as holders of CRDB, unless different consideration is approved by the holders of 75% of CRDA, voting as a class.
Earnings per share may be different between CRDA and CRDB due to the payment of a higher per share dividend on CRDA than CRDB, and the impact that has on the earnings per share calculation according to generally accepted accounting principles.
FOR FURTHER INFORMATION REGARDING THIS PRESS RELEASE, PLEASE CALL BRUCE SWAIN AT (404) 300-1051.
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This press release contains forward-looking statements, including statements about the expected future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not historical facts may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company's present expectations. Accordingly, no one should place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Crawford & Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise or not arise after the date the forward-looking statements are made. For further information regarding Crawford & Company, including factors that could cause our actual financial condition, results or earnings to differ from those described in any forward-looking statements, please read Crawford & Company's reports filed with the SEC and available at www.sec.gov or in the Investor Relations section of Crawford & Company's website at www.crawfordandcompany.com. |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD, ATLANTA, GEORGIA 30319 (404) 300-1000
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
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Three Months Ended September 30, | 2015 | | 2014 | | % Change |
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Revenues: | | | | | |
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| | |
| | |
Revenues Before Reimbursements | $ | 293,335 |
| | $ | 293,831 |
| | — | % |
Reimbursements | 16,649 |
| | 21,079 |
| | (21 | )% |
Total Revenues | 309,984 |
| | 314,910 |
| | (2 | )% |
| | | | | |
Costs and Expenses: | | | | | |
| | | | | |
Costs of Services Provided, Before Reimbursements | 211,106 |
| | 213,442 |
| | (1 | )% |
Reimbursements | 16,649 |
| | 21,079 |
| | (21 | )% |
Total Costs of Services | 227,755 |
| | 234,521 |
| | (3 | )% |
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Selling, General, and Administrative Expenses | 61,738 |
| | 59,348 |
| | 4 | % |
Corporate Interest Expense, Net | 2,332 |
| | 1,680 |
| | 39 | % |
Restructuring and Special Charges | 11,078 |
| | — |
| | nm |
|
Total Costs and Expenses | 302,903 |
| | 295,549 |
| | 2 | % |
| | | | | |
Other Income | 217 |
| | 83 |
| | 161 | % |
| | | | | |
Income Before Income Taxes | 7,298 |
| | 19,444 |
| | (62 | )% |
Provision for Income Taxes | 8,385 |
| | 9,244 |
| | (9 | )% |
| | | | | |
Net (Loss) Income | (1,087 | ) | | 10,200 |
| | (111 | )% |
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Net Loss (Income) Attributable to Noncontrolling Interests | 230 |
| | (8 | ) | | nm |
|
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Net (Loss) Income Attributable to Shareholders of Crawford & Company | $ | (857 | ) | | $ | 10,192 |
| | (108 | )% |
| | | | | |
| | | | | |
(Loss) Earnings Per Share - Basic: | | | | | |
Class A Common Stock | $ | (0.01 | ) | | $ | 0.19 |
| | (105 | )% |
Class B Common Stock | $ | (0.03 | ) | | $ | 0.17 |
| | (118 | )% |
| | | | | |
(Loss) Earnings Per Share - Diluted: | | | | | |
Class A Common Stock | $ | (0.01 | ) | | $ | 0.19 |
| | (105 | )% |
Class B Common Stock | $ | (0.03 | ) | | $ | 0.17 |
| | (118 | )% |
| | | | | |
Cash Dividends Per Share: | | | | | |
Class A Common Stock | $ | 0.07 |
| | $ | 0.07 |
| | — | % |
Class B Common Stock | $ | 0.05 |
| | $ | 0.05 |
| | — | % |
| | | | | |
nm = not meaningful | | | | | |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD, ATLANTA, GEORGIA 30319 (404) 300-1000
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
|
| | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, | 2015 | | 2014 | | % Change |
| | | | | |
Revenues: | | | | | |
| |
| | |
| | |
Revenues Before Reimbursements | $ | 885,510 |
| | $ | 857,396 |
| | 3 | % |
Reimbursements | 55,506 |
| | 53,925 |
| | 3 | % |
Total Revenues | 941,016 |
| | 911,321 |
| | 3 | % |
| | | | | |
Costs and Expenses: | | | | | |
| | | | | |
Costs of Services Provided, Before Reimbursements | 662,537 |
| | 625,584 |
| | 6 | % |
Reimbursements | 55,506 |
| | 53,925 |
| | 3 | % |
Total Costs of Services | 718,043 |
| | 679,509 |
| | 6 | % |
| | | | | |
Selling, General, and Administrative Expenses | 179,346 |
| | 179,980 |
| | — | % |
Corporate Interest Expense, Net | 6,238 |
| | 4,532 |
| | 38 | % |
Restructuring and Special Charges | 16,383 |
| | — |
| | nm |
|
Total Costs and Expenses | 920,010 |
| | 864,021 |
| | 6 | % |
| | | | | |
Other Income | 701 |
| | 574 |
| | 22 | % |
| | | | | |
Income Before Income Taxes | 21,707 |
| | 47,874 |
| | (55 | )% |
Provision for Income Taxes | 15,335 |
| | 20,494 |
| | (25 | )% |
| | | | | |
Net Income | 6,372 |
| | 27,380 |
| | (77 | )% |
| | | | | |
Net Income Attributable to Noncontrolling Interests | (189 | ) | | (72 | ) | | nm |
|
| | | | | |
Net Income Attributable to Shareholders of Crawford & Company | $ | 6,183 |
| | $ | 27,308 |
| | (77 | )% |
| | | | | |
| | | | | |
Earnings Per Share - Basic: | | | | | |
Class A Common Stock | $ | 0.14 |
| | $ | 0.52 |
| | (73 | )% |
Class B Common Stock | $ | 0.08 |
| | $ | 0.48 |
| | (83 | )% |
| | | | | |
Earnings Per Share - Diluted: | | | | | |
Class A Common Stock | $ | 0.14 |
| | $ | 0.51 |
| | (73 | )% |
Class B Common Stock | $ | 0.08 |
| | $ | 0.47 |
| | (83 | )% |
| | | | | |
Cash Dividends Per Share: | | | | | |
Class A Common Stock | $ | 0.21 |
| | $ | 0.17 |
| | 24 | % |
Class B Common Stock | $ | 0.15 |
| | $ | 0.13 |
| | 15 | % |
| | | | | |
nm = not meaningful | | | | | |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD, ATLANTA, GEORGIA 30319 (404) 300-1000
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2015 and December 31, 2014
(In Thousands, Except Par Values) |
| | | | | | | |
| | | * |
| September 30, | | December 31, |
| 2015 | | 2014 |
ASSETS | | | |
| | | |
Current Assets: | | | |
Cash and Cash Equivalents | $ | 58,329 |
| | $ | 52,456 |
|
Accounts Receivable, Net | 178,571 |
| | 180,096 |
|
Unbilled Revenues, at Estimated Billable Amounts | 112,073 |
| | 103,163 |
|
Income Taxes Receivable | 2,779 |
| | 2,779 |
|
Prepaid Expenses and Other Current Assets | 26,070 |
| | 29,089 |
|
Total Current Assets | 377,822 |
| | 367,583 |
|
| | | |
Property and Equipment | 147,881 |
| | 143,273 |
|
Less Accumulated Depreciation | (106,752 | ) | | (102,414 | ) |
Net Property and Equipment | 41,129 |
| | 40,859 |
|
| | | |
Other Assets: | | | |
Goodwill | 142,762 |
| | 131,885 |
|
Intangible Assets Arising from Business Acquisitions, Net | 108,391 |
| | 75,895 |
|
Capitalized Software Costs, Net | 79,819 |
| | 75,536 |
|
Deferred Income Tax Assets | 68,658 |
| | 66,927 |
|
Other Noncurrent Assets | 35,605 |
| | 30,634 |
|
Total Other Assets | 435,235 |
| | 380,877 |
|
| | | |
Total Assets | $ | 854,186 |
| | $ | 789,319 |
|
| | | |
LIABILITIES AND SHAREHOLDERS' INVESTMENT | | | |
| | | |
Current Liabilities: | | | |
Short-Term Borrowings | $ | 6,566 |
| | $ | 2,002 |
|
Accounts Payable | 45,853 |
| | 48,597 |
|
Accrued Compensation and Related Costs | 63,494 |
| | 82,151 |
|
Self-Insured Risks | 15,381 |
| | 14,491 |
|
Income Taxes Payable | 11,860 |
| | 2,618 |
|
Deferred Income Taxes | 13,924 |
| | 14,523 |
|
Deferred Rent | 11,629 |
| | 13,576 |
|
Other Accrued Liabilities | 41,117 |
| | 35,784 |
|
Deferred Revenues | 46,725 |
| | 45,054 |
|
Current Installments of Long-Term Debt and Capital Leases | 1,808 |
| | 763 |
|
Total Current Liabilities | 258,357 |
| | 259,559 |
|
| | | |
Noncurrent Liabilities: | | | |
Long-Term Debt and Capital Leases, Less Current Installments | 250,519 |
| | 154,046 |
|
Deferred Revenues | 27,066 |
| | 26,706 |
|
Self-Insured Risks | 9,301 |
| | 10,041 |
|
Accrued Pension Liabilities | 115,122 |
| | 142,343 |
|
Other Noncurrent Liabilities | 17,000 |
| | 17,271 |
|
Total Noncurrent Liabilities | 419,008 |
| | 350,407 |
|
| | | |
Shareholders' Investment: | | | |
Class A Common Stock, $1.00 Par Value | 30,347 |
| | 30,497 |
|
Class B Common Stock, $1.00 Par Value | 24,690 |
| | 24,690 |
|
Additional Paid-in Capital | 41,813 |
| | 38,617 |
|
Retained Earnings | 294,193 |
| | 301,091 |
|
Accumulated Other Comprehensive Loss | (226,048 | ) | | (221,958 | ) |
Shareholders' Investment Attributable to Shareholders of Crawford & Company | 164,995 |
| | 172,937 |
|
Noncontrolling Interests | 11,826 |
| | 6,416 |
|
Total Shareholders' Investment | 176,821 |
| | 179,353 |
|
| | | |
Total Liabilities and Shareholders' Investment | $ | 854,186 |
| | $ | 789,319 |
|
* Derived from the audited Consolidated Balance Sheet
Press Release
`CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD, ATLANTA, GEORGIA 30319 (404) 300-1000
CRAWFORD & COMPANY
SUMMARY RESULTS BY OPERATING SEGMENT
Unaudited
(In Thousands, Except Percentages)
Three Months Ended September 30,
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Americas | % | EMEA/AP | % | Broadspire | % | Legal Settlement Administration | % |
| 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change |
| | | | | | | | | | | | |
Revenues Before Reimbursements | $ | 92,007 |
| $ | 92,181 |
| — | % | $ | 98,271 |
| $ | 86,173 |
| 14 | % | $ | 74,225 |
| $ | 68,242 |
| 9 | % | $ | 28,832 |
| $ | 47,235 |
| (39 | )% |
| | | | | | | | | | | | |
Direct Compensation, Fringe Benefits & Non-Employee Labor | 57,767 |
| 60,588 |
| (5 | )% | 61,815 |
| 59,987 |
| 3 | % | 39,062 |
| 37,371 |
| 5 | % | 21,448 |
| 31,991 |
| (33 | )% |
% of Revenues Before Reimbursements | 63 | % | 66 | % | | 63 | % | 70 | % | | 53 | % | 55 | % | | 74 | % | 68 | % | |
| | | | | | | | | | | | |
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 22,077 |
| 24,557 |
| (10 | )% | 29,804 |
| 21,961 |
| 36 | % | 27,734 |
| 26,449 |
| 5 | % | 6,243 |
| 7,576 |
| (18 | )% |
% of Revenues Before Reimbursements | 24 | % | 27 | % | | 30 | % | 25 | % | | 37 | % | 39 | % | | 22 | % | 16 | % | |
| | | | | | | | | | | | |
Total Operating Expenses | 79,844 |
| 85,145 |
| (6 | )% | 91,619 |
| 81,948 |
| 12 | % | 66,796 |
| 63,820 |
| 5 | % | 27,691 |
| 39,567 |
| (30 | )% |
| | | | | | | | | | | | |
Operating Earnings (1) | $ | 12,163 |
| $ | 7,036 |
| 73 | % | $ | 6,652 |
| $ | 4,225 |
| 57 | % | $ | 7,429 |
| $ | 4,422 |
| 68 | % | $ | 1,141 |
| $ | 7,668 |
| (85 | )% |
% of Revenues Before Reimbursements | 13 | % | 8 | % | | 7 | % | 5 | % | | 10 | % | 6 | % | | 4 | % | 16 | % | |
Nine Months Ended September 30,
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Americas | % | EMEA/AP | % | Broadspire | % | Legal Settlement Administration | % |
| 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change |
| | | | | | | | | | | | |
Revenues Before Reimbursements | $ | 280,664 |
| $ | 273,673 |
| 3 | % | $ | 286,725 |
| $ | 253,755 |
| 13 | % | $ | 217,590 |
| $ | 199,706 |
| 9 | % | $ | 100,531 |
| $ | 130,262 |
| (23 | )% |
| | | | | | | | | | | | |
Direct Compensation, Fringe Benefits & Non-Employee Labor | 183,462 |
| 176,256 |
| 4 | % | 188,131 |
| 178,793 |
| 5 | % | 118,012 |
| 112,478 |
| 5 | % | 70,773 |
| 90,977 |
| (22 | )% |
% of Revenues Before Reimbursements | 65 | % | 64 | % | | 66 | % | 70 | % | | 54 | % | 56 | % | | 70 | % | 70 | % | |
| | | | | | | | | | | | |
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 70,167 |
| 75,305 |
| (7 | )% | 89,308 |
| 64,527 |
| 38 | % | 82,606 |
| 78,088 |
| 6 | % | 19,945 |
| 20,950 |
| (5 | )% |
% of Revenues Before Reimbursements | 25 | % | 28 | % | | 31 | % | 25 | % | | 38 | % | 39 | % | | 20 | % | 16 | % | |
| | | | | | | | | | | | |
Total Operating Expenses | 253,629 |
| 251,561 |
| 1 | % | 277,439 |
| 243,320 |
| 14 | % | 200,618 |
| 190,566 |
| 5 | % | 90,718 |
| 111,927 |
| (19 | )% |
| | | | | | | | | | | | |
Operating Earnings (1) | $ | 27,035 |
| $ | 22,112 |
| 22 | % | $ | 9,286 |
| $ | 10,435 |
| (11 | )% | $ | 16,972 |
| $ | 9,140 |
| 86 | % | $ | 9,813 |
| $ | 18,335 |
| (46 | )% |
% of Revenues Before Reimbursements | 10 | % | 8 | % | | 3 | % | 4 | % | | 8 | % | 5 | % | | 10 | % | 14 | % | |
NOTE: "Direct Compensation, Fringe Benefits & Non-Employee Labor" and "Expenses Other Than Direct Compensation, Fringe Benefits & Non-Employee Labor" components are not comparable across
segments, but are comparable within each segment across periods.
(1) A non-GAAP financial measurement which represents net income attributable to the applicable reporting segment excluding income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, restructuring and special charges, and certain unallocated corporate and shared costs. See pages 5-6 for additional information about segment operating earnings.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD, ATLANTA, GEORGIA 30319 (404) 300-1000
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2015 and September 30, 2014
Unaudited
(In Thousands) |
| | | | | | | | |
| | 2015 | | 2014 |
Cash Flows From Operating Activities: | | | | |
Net Income | | $ | 6,372 |
| | $ | 27,380 |
|
Reconciliation of Net Income to Net Cash Provided By (Used In) Operating Activities: | | | | |
Depreciation and Amortization | | 32,219 |
| | 28,102 |
|
Stock-Based Compensation | | 2,369 |
| | 1,931 |
|
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions: | | | | |
Accounts Receivable, Net | | 14,190 |
| | (28,566 | ) |
Unbilled Revenues, Net | | (8,604 | ) | | (23,083 | ) |
Accrued or Prepaid Income Taxes | | 9,838 |
| | 9,777 |
|
Accounts Payable and Accrued Liabilities | | (31,247 | ) | | (36,470 | ) |
Deferred Revenues | | 1,064 |
| | 1,831 |
|
Accrued Retirement Costs | | (14,952 | ) | | (20,334 | ) |
Prepaid Expenses and Other Operating Activities | | 9,890 |
| | (4,816 | ) |
Net Cash Provided By (Used In) Operating Activities | | 21,139 |
| | (44,248 | ) |
| | | | |
Cash Flows From Investing Activities: | | | | |
Acquisitions of Property and Equipment | | (10,296 | ) | | (9,207 | ) |
Proceeds from Disposals of Property and Equipment | | — |
| | 1,289 |
|
Capitalization of Computer Software Costs | | (16,182 | ) | | (12,204 | ) |
Payments for Acquisitions, Net of Cash Acquired | | (68,259 | ) | | (3,324 | ) |
Cash Surrendered in Sale of Business | | — |
| | (1,554 | ) |
Net Cash Used In Investing Activities | | (94,737 | ) | | (25,000 | ) |
| | | | |
Cash Flows From Financing Activities: | | | | |
Cash Dividends Paid | | (10,151 | ) | | (8,353 | ) |
Payments Related to Shares Received for Withholding Taxes Under Stock-Based Compensation Plans | | (2 | ) | | (1,361 | ) |
Proceeds from Shares Purchased Under Employee Stock-Based Compensation Plans | | 1,196 |
| | 1,268 |
|
Repurchases of Common Stock | | (137 | ) | | (3,157 | ) |
Increases in Short-Term and Revolving Credit Facility Borrowings | | 126,032 |
| | 118,777 |
|
Payments on Short-Term and Revolving Credit Facility Borrowings | | (31,645 | ) | | (67,295 | ) |
Payments on Capital Lease Obligations | | (1,586 | ) | | (661 | ) |
Dividends Paid to Noncontrolling Interests | | (186 | ) | | — |
|
Other Financing Activities | | (4 | ) | | (410 | ) |
Net Cash Provided By Financing Activities | | 83,517 |
| | 38,808 |
|
| | | | |
Effects of Exchange Rate Changes on Cash and Cash Equivalents | | (4,046 | ) | | (771 | ) |
Increase (Decrease) in Cash and Cash Equivalents | | 5,873 |
| | (31,211 | ) |
Cash and Cash Equivalents at Beginning of Year | | 52,456 |
| | 75,953 |
|
Cash and Cash Equivalents at End of Period | | $ | 58,329 |
| | $ | 44,742 |
|
Third Quarter 2015 Earnings Conference Call November 9, 2015 Crawford & Company
PAGE 2 • Forward-Looking Statements —This presentation contains forward-looking statements, including statements about the expected future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not statements of historical fact may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company's present expectations. Accordingly, no one should place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Crawford & Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise or not arise after the date the forward-looking statements are made. Results for any interim period presented herein are not necessarily indicative of results to be expected for the full year or for any other future period. For further information regarding Crawford & Company, and the risks and uncertainties involved in forward-looking statements, please read Crawford & Company's reports filed with the Securities and Exchange Commission and available at www.sec.gov or in the Investor Relations section of Crawford & Company's website at www.crawfordandcompany.com. —Crawford's business is dependent, to a significant extent, on case volumes. The Company cannot predict the future trend of case volumes for a number of reasons, including the fact that the frequency and severity of weather-related claims and the occurrence of natural and man-made disasters, which are a significant source of cases and revenue for the Company, are generally not subject to accurate forecasting. —In recent periods the Company has derived a material portion of its revenues and operating earnings from a limited number of client engagements and special projects within its Legal Settlement Administration segment, specifically its work on the gulf-related class action settlement. These projects continue to wind down, and related revenues and operating earnings have been and are expected to continue to be at a reduced rate in future periods. • Revenues Before Reimbursements ("Revenues") —Revenues Before Reimbursements are referred to as "Revenues" in both consolidated and segment charts, bullets and tables throughout this presentation. • Segment and Consolidated Operating Earnings —Under the Financial Accounting Standards Board's Accounting Standards Codification ("ASC") Topic 280, "Segment Reporting," the Company has defined segment operating earnings as the primary measure used by the Company to evaluate the results of each of its four operating segments. Segment operating earnings exclude income taxes, interest expense, amortization of customer-relationship intangible assets, restructuring and special charges, stock option expense, earnings or loss attributable to non-controlling interests, and certain unallocated corporate and shared costs and credits. Consolidated operating earnings is the total of segment operating earnings and certain unallocated and shared costs and credits. • (Loss) Earnings Per Share —The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock (CRDA) than on the voting Class B Common Stock (CRDB), subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of CRDA must receive the same type and amount of consideration as holders of CRDB, unless different consideration is approved by the holders of 75% of CRDA, voting as a class. —In certain periods, the Company has paid a higher dividend on CRDA than on CRDB. This may result in a different earnings per share ("EPS") for each class of stock due to the two-class method of computing EPS as required by ASC Topic 260 - "Earnings Per Share". The two-class method is an earnings allocation method under which EPS is calculated for each class of common stock considering both dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period. • Non-GAAP Financial Information —For additional information about certain non-GAAP financial information presented herein, see the Appendix following this presentation. FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION
PAGE 3 • The world's largest independent provider of global claims management solutions • Multiple globally recognized brand names: Crawford, Broadspire, GCG • Clients include multinational insurance carriers, brokers and local insurance firms as well as 200 of the Fortune 500 GLOBAL BUSINESS SERVICES LEADER EMEA-A/P 1 Serves the U.K., European, Middle Eastern, African and Asia Pacific markets BROADSPIRE 3 Serves large national accounts, carriers and self-insured entities AMERICAS 2 Serves the U.S., Canadian and Latin American markets LEGAL SETTLEMENT ADMINISTRATION 4 Provides administration for class action settlements and bankruptcy matters
TODAY'S AGENDA --- Welcome and Opening Comments --- Third Quarter 2015 Financial Review --- Updated Guidance
PAGE 5 22.9 293 294 Revenues ($ in millions) Consolidated Operating Earnings (1) ($ in millions) • Harsha V. Agadi appointed as interim President and Chief Executive Officer • Extensive strategic business review undertaken to identify both cost and revenue synergies • $25 - $28 million restructuring plan initiated, incremental to the cost take-out plans announced previously • Renewed focus on profitability given the continued challenging market environment • Initial benefits realized in the third quarter as the Americas and Broadspire segments delivered operating margins of 13% and 10%, respectively • Legal Settlement Administration continues to experience run off of large projects creating a headwind to revenues and margins • Global Business Services Center initiative continues with Broadspire already showing benefits THIRD QUARTER 2015 BUSINESS SUMMARY 23.1 (1) See Appendix for non-GAAP explanation and reconciliation
PAGE 6 FOCUSED ON PROFITABILITY AND PREDICTABLE RESULTS Previously announced restructuring plans targeted to provide $22 million in cost savings • Headcount reduction in the Americas and the U.K. • Senior management realignment to improve execution • GBSC migration and GAB Robins integration $25 - $28 million restructuring plan announced November 2015 • Reduce overhead costs in central functions and business segments • Streamline senior management to reduce costs and further improve execution Restructuring opportunities being reviewed in the Legal Settlement Administration segment given continued run off of large projects Restructuring and special charges expected to total approximately $32 - $37 million in 2015 and $11 million in 2016
THIRD QUARTER 2015 Financial Review
PAGE 8 Unaudited ($ in thousands, except per share amounts) Three Months Ended September 30, 2015 2014 % Change Revenues Before Reimbursements $293,335 $293,831 — % Costs of Services Provided, Before Reimbursements 211,106 213,442 (1 )% Selling, General, and Administrative Expenses 61,738 59,348 4 % Corporate Interest Expense, Net 2,332 1,680 39 % Restructuring and Special Charges 11,078 — nm Total Costs and Expenses Before Reimbursements 286,254 274,470 4 % Other Income 217 83 161 % Income Before Income Taxes 7,298 19,444 (62 )% Provision for Income Taxes 8,385 9,244 (9 )% Net (Loss) Income (1,087 ) 10,200 (111 )% Net Loss (Income) Attributable to Noncontrolling Interests 230 (8 ) nm Net (Loss) Income Attributable to Shareholders of Crawford & Company ($857 ) $10,192 (108 )% (Loss) Earnings Per Share - Diluted: Class A Common Stock ($0.01 ) $0.19 (105 )% Class B Common Stock ($0.03 ) $0.17 (118 )% Cash Dividends per Share: Class A Common Stock $0.07 $0.07 — % Class B Common Stock $0.05 $0.05 — % STATEMENT OF OPERATIONS HIGHLIGHTS nm=not meaningful
PAGE 9 U.S. Canada Latin America/ Caribbean Revenues by Geographic Region ($ in millions) Americas Cases Received (In thousands) U.S. Canada Latin America/ Caribbean Operating Results (3Q 2015 v. 3Q 2014) • Revenues of $92.0 million versus $92.2 million • Exchange rates reduced revenues by 6.3% • Operating earnings of $12.2 million versus $7.0 million • Operating earnings margin of 13.2% versus 7.6% • Cases received of 151,381 versus 176,141; 2014 period included 10,500 affinity cases, now handled by the Broadspire segment U.S. Property and Casualty • Long-term outsourcing project to assist major U.S. insurer offset decline in weather-related cases • Cost reduction initiatives will continue through 2015 Canada • Revenues increased on constant dollar basis, but declined slightly due to negative exchange rate impact • Canadian Contractor Connection network expansion continued Latin America & Caribbean • Cost reduction initiatives will continue through 2015 • Exiting certain unprofitable business lines in Brazil AMERICAS SEGMENT HIGHLIGHTS
PAGE 10 9.1 85.9 6.5 19.5 12.3 7.3 Revenues ($ in millions) Catastrophe Cases (In thousands) U.S. Catastrophe (CAT) Adjuster Activity • CAT revenues in the 2015 period included $13.2 million under an outsourcing arrangement with a major U.S. insurer where the Company supplies adjusters to the client's location without corresponding case referrals • Revenues from this arrangement in the 2014 period were $6.0 million • Average CAT adjusters deployed of 458 in 3Q 2015 vs. 368 in 3Q 2014 AMERICAS SEGMENT HIGHLIGHTS (cont.) 6.0
PAGE 11 U.K. Europe U.K. Asia-Pacific Asia-Pacific Europe Revenues by Geographic Region ($ in millions) EMEA/AP Cases Received (In thousands) Operating Results (3Q 2015 v. 3Q 2014) • Revenues of $98.3 million versus $86.2 million • Exchange rates reduced revenues by 14.5% • Operating earnings of $6.7 million versus $4.2 million • Operating earnings margin of 6.8% versus 4.9% • Cases received of 141,870 versus 123,503 U.K. • U.K. acquisition of GAB Robins drove revenue and case growth • Restructuring initiatives benefited third quarter margin expansion Europe • Claims volume increased in third quarter from high frequency claims • Continued focus on improving operating performance Asia-Pacific • Strong operating results in Australia • Weak results in smaller country operations EMEA/AP SEGMENT HIGHLIGHTS
PAGE 12 Revenues by Service Line ($ in millions) Broadspire Cases Received (In thousands) Risk Mgmt Info. Svcs. Other Medical Mgmt. Casualty Workers' Comp. Workers' Comp. Operating Results (3Q 2015 v. 3Q 2014) • Revenues of $74.2 million versus $68.2 million • Operating earnings of $7.4 million versus $4.4 million • Operating earnings margin of 10.0% versus 6.5% • Cases received of 111,122 versus 94,707, including 16,900 accident & health cases in the 2015 period, previously handled by the Americas segment Broadspire • Strong growth in casualty claims • Medical management revenues increased from greater utilization • Disability and absence management services products continue to gain traction in the market BROADSPIRE SEGMENT HIGHLIGHTS
PAGE 13 Backlog ($ in millions) Operating Results (3Q 2015 v. 3Q 2014) • Revenues of $28.8 million versus $47.2 million • Operating earnings of $1.1 million versus $7.7 million • Operating earnings margin of 4.0% versus 16.2% • Backlog at $76 million versus $89 million Legal Settlement Administration • Deepwater Horizon class action settlement project continues to wind down • Focused on improving operating margin as industry continues to experience price compression • Maintain active new business pipeline • Cost reduction activities underway LEGAL SETTLEMENT ADMINISTRATION SEGMENT HIGHLIGHTS Revenues ($ in millions) 47.2 28.8 76 89
PAGE 14 Unaudited ($ in thousands) September 30, 2015 December 31, 2014 Change Cash and cash equivalents $58,329 $52,456 $5,873 Accounts receivable, net 178,571 180,096 (1,525 ) Unbilled revenues, net 112,073 103,163 8,910 Total receivables 290,644 283,259 7,385 Goodwill and intangible assets arising from business acquisitions 251,153 207,780 43,373 Deferred revenues 73,791 71,760 2,031 Pension liabilities 115,122 142,343 (27,221 ) Current portion of long-term debt, capital leases and short-term borrowings 8,374 2,765 5,609 Long-term debt, less current portion 250,519 154,046 96,473 Total debt 258,893 156,811 102,082 Total stockholders' equity attributable to Crawford & Company 164,995 172,937 (7,942 ) Net debt (1) 200,564 104,355 96,209 Total debt / capitalization 61 % 48 % (1) See Appendix for non-GAAP explanation and reconciliation BALANCE SHEET HIGHLIGHTS
PAGE 15 Unaudited ($ in thousands) 2015 2014 Variance Net Income Attributable to Shareholders of Crawford & Company $ 6,183 $ 27,308 $ (21,125 ) Depreciation and Other Non-Cash Operating Items 34,777 30,105 4,672 Unbilled and Billed Receivables Change 5,586 (51,649 ) 57,235 Working Capital Change (11,462 ) (29,958 ) 18,496 U.S. and U.K. Pension Contributions (13,945 ) (20,054 ) 6,109 Cash Flows from Operating Activities 21,139 (44,248 ) 65,387 Property & Equipment Purchases, net (10,296 ) (9,207 ) (1,089 ) Capitalized Software (internal and external costs) (16,182 ) (12,204 ) (3,978 ) Free Cash Flow (1) $ (5,339 ) $ (65,659 ) $ 60,320 For the nine months ended September 30, OPERATING AND FREE CASH FLOW (1) See Appendix for non-GAAP explanation
PAGE 16 $47 - $50 MILLION OF COST TAKE-OUT TARGETED Restructuring and Special Charges Totals: 2015 ~ $32,000 - $37,000 2016 ~ $11,000 $25,300 to $28,300 $47,400 to $50,400
PAGE 17 Crawford & Company is revising its guidance for 2015 as follows: YEAR ENDING DECEMBER 31, 2015 Low End High End Consolidated revenues before reimbursements $1.15 $1.17 billion Consolidated operating earnings $60.0 $65.0 million Consolidated cash provided by operating activities $20.0 $30.0 million Before restructuring and special charges, net income attributable to shareholders of Crawford & Company $20.0 $25.0 million Diluted earnings per share--CRDA $0.39 $0.48 per share Diluted earnings per share--CRDB $0.32 $0.41 per share After restructuring and special charges, net (loss) income attributable to shareholders of Crawford & Company $(4.0) $1.0 million Diluted (loss) earnings per share--CRDA $(0.04) $0.05 per share Diluted loss per share--CRDB $(0.11) $(0.02) per share 2015 GUIDANCE In addition to the special charge of $5.0 million, the Company expects to incur pretax restructuring charges in 2015 totaling approximately $27.0 to $32.0 million. This is comprised of approximately $8.4 million for the integration of GAB Robins and restructuring in the EMEA/AP segment, $6.3 million related to the establishment of a Global Business Services Center in Manila, Philippines, and $2.3 million related to restructuring activities in the Americas segment. In addition, the Company expects to incur an additional restructuring charge of approximately $10.0 to $15.0 million during the 2015 fourth quarter to remove approximately $25.0 to $28.0 million of annual costs.
PAGE 18 LOOKING TO 2016 Exhibit cost discipline Be more client centric • Deliver customized value propositions to clients • Increase the speed of doing business enterprise wide Continue to drive synergies in strategic initiatives
Appendix THIRD QUARTER 2015
PAGE 20 Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comparable to other similarly-titled measurements employed by other companies. Reimbursements for Out-of-Pocket Expenses In the normal course of our business, our operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by our clients. Under GAAP, these out-of-pocket expenses and associated reimbursements are required to be included when reporting expenses and revenues,respectively, in our consolidated results of operations. In this presentation, we do not believe it is informative to include in reported revenues the amounts of reimbursed expenses and related revenues, as they offset each other in our consolidated results of operations with no impact to our net income or operating earnings (loss). As a result, unless noted in this presentation, revenue and expense amounts exclude reimbursements for out-of-pocket expenses. The GAAP-required gross up of our revenues including these pass-through reimbursed expenses is self-evident in the accompanying reconciliation. Net Debt Net debt is computed as the sum of long-term debt, capital leases and short-term borrowings less cash and cash equivalents. Management believes that net debt is useful because it provides investors with an estimate of what the Company's debt would be if all available cash was used to pay down the debt of the Company. The measure is not meant to imply that management plans to use all available cash to pay down debt. Free Cash Flow Management believes free cash flow is useful to investors as it presents the amount of cash the Company has generated that can be used for other purposes, including additional contributions to the Company's defined benefit pension plans, discretionary prepayments of outstanding borrowings under our credit agreement, and return of capital to shareholders, among other purposes. It does not represent the residual cash flow of the Company available for discretionary expenditures. The reconciliation from Cash Flows from Operating Activities is provided on slide 15. Segment and Consolidated Operating Earnings Operating earnings is the primary financial performance measure used by our senior management and chief operating decision maker to evaluate the financial performance of our Company and operating segments, and make resource allocation and certain compensation decisions. Management believes operating earnings is useful to others in that it allows them to evaluate segment and consolidated operating performance using the same criteria our management and chief operating decision maker use. Consolidated operating earnings represent segment earnings including certain unallocated corporate and shared costs, but before net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, restructuring and special charges, income taxes, and net income or loss attributable to noncontrolling interests. Non-GAAP Adjusted Net Income and Diluted Earnings per Share Included in net (loss) income and (loss) earnings per share are restructuring and special charges, which arise from non-core items not directly related to our normal business or operations, or our future performance. Management believes it is useful to others to exclude these charges when comparing net (loss) income and diluted (loss) earnings per share across periods, as these charges are not from ordinary operations. APPENDIX: NON-GAAP FINANCIAL INFORMATION
PAGE 21 Quarter Ended Quarter Ended Full Year September 30, September 30, Guidance Unaudited ($ in thousands) 2015 2014 2015 * Revenues Before Reimbursements Total Revenues $ 309,984 $ 314,910 $ 1,240,000 Reimbursements (16,649 ) (21,079 ) (80,000 ) Revenues Before Reimbursements $ 293,335 $ 293,831 $ 1,160,000 Costs of Services Provided, Before Reimbursements Total Costs of Services $ 227,755 $ 234,521 Reimbursements (16,649 ) (21,079 ) Costs of Services Provided, Before Reimbursements $ 211,106 $ 213,442 Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Full Year September 30, September 30, Guidance Unaudited ($ in thousands) 2015 2014 2015 * Operating Earnings: Americas $ 12,163 $ 7,036 EMEA/AP 6,652 4,225 Broadspire 7,429 4,422 Legal Settlement Administration 1,141 7,668 Unallocated corporate and shared costs (4,297 ) (500 ) Consolidated Operating Earnings 23,088 22,851 62,500 Deduct: Net corporate interest expense (2,332 ) (1,680 ) (10,700 ) Stock option expense (30 ) (184 ) (500 ) Amortization expense (2,350 ) (1,543 ) (10,000 ) Restructuring and special charges (11,078 ) — (34,500 ) Income taxes (8,385 ) (9,244 ) (9,500 ) Net income (loss) attributable to non-controlling interests 230 (8 ) 200 Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (857 ) $ 10,192 $ (2,500 ) RECONCILIATION OF NON-GAAP ITEMS * Midpoints of Company's November 9, 2015 Guidance
PAGE 22 RECONCILIATION OF NON-GAAP ITEMS (cont.) Net Debt September 30, December 31, Unaudited ($ in thousands) 2015 2014 Net Debt Short-term borrowings $ 6,566 $ 2,002 Current installments of long-term debt and capital leases 1,808 763 Long-term debt and capital leases, less current installments 250,519 154,046 Total debt 258,893 156,811 Less: Cash and cash equivalents 58,329 52,456 Net debt $ 200,564 $ 104,355
PAGE 23 RECONCILIATION OF NON-GAAP ITEMS (cont.) Non-GAAP Adjusted Net Income and Diluted Earnings Per Share Three Months Ended September 30, 2015 Unaudited ($ in thousands) Income Before Taxes Tax Expense Net (Loss) Income Net (Loss) Income Attributable to Crawford & Company Diluted (Loss) Earnings per Share (CRDA) Diluted (Loss) Earnings per Share (CRDB) GAAP $ 7,298 $ 8,385 $ (1,087 ) $ (857 ) $ (0.01 ) $ (0.03 ) Add back: Restructuring and special charges 11,078 3,124 7,954 7,954 0.15 0.15 Non-GAAP Adjusted $ 18,376 $ 11,509 $ 6,867 $ 7,097 $ 0.14 $ 0.12 Full Year Guidance for 2015 * Unaudited ($ in thousands) Income Before Taxes Tax Expense Net (Loss) Income Net (Loss )Income Attributable to Crawford & Company Diluted Earnings per Share (CRDA) Diluted (Loss) Earnings per Share (CRDB) GAAP $ (2,300 ) $ — $ (2,300 ) $ (2,500 ) $ 0.01 $ (0.06 ) Add back: Restructuring and special charges 34,500 9,500 25,000 25,000 0.43 0.43 Non-GAAP Adjusted $ 32,200 $ 9,500 $ 22,700 $ 22,500 $ 0.44 $ 0.37 * Midpoints of Company's November 9, 2015 Guidance
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