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): March 10, 2016
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 March 10, 2016, Crawford & Company (the "Company") issued a press release containing information about the Company's financial results for the fourth 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 Thursday, March 10, 2016 at 1:00 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 March 10, 2016 |
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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: March 10, 2016
EXHIBIT INDEX
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Number | | Descriptions |
99.1 | | Press Release dated March 10, 2016 |
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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 Fourth Quarter and Annual Results
Issues 2016 Guidance
ATLANTA, GA. (March 10, 2016) -- Crawford & Company (www.crawfordandcompany.com) (NYSE: CRDA and CRDB), one of the world's largest independent providers of claims management solutions to insurance companies and self-insured entities, today announced its financial results for the fourth quarter and year ended December 31, 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.
Consolidated Results
Full Year 2015 Summary
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• | Revenues before reimbursements of $1.170 billion, a 2% increase over $1.143 billion in 2014 |
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• | Net loss attributable to shareholders of $(45.5) million, down from net income of $30.6 million in 2014 |
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• | Restructuring and special charges of $34.4 million pretax, or $0.46 per share for CRDA and CRDB |
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• | Goodwill impairment charges of $49.3 million pretax, or $0.86 per share for CRDA and CRDB |
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• | Diluted loss per share of $(0.79) for CRDA and $(0.87) for CRDB |
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• | Diluted earnings per share of $0.53 for CRDA and $0.45 for CRDB on a non-GAAP basis, before goodwill impairment, restructuring and special charges |
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• | Consolidated operating earnings, a non-GAAP financial measure, were $70.4 million in 2015, down from $73.1 million in 2014 |
Fourth Quarter 2015 Summary
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• | Revenues before reimbursements of $284.9 million, flat with $285.5 million for fourth quarter of 2014 |
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• | Net loss attributable to shareholders of $(51.7) million, down from net income of $3.3 million in the same period last year |
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• | Restructuring and special charges of $18.0 million pretax, or $0.25 per share for CRDA and CRDB |
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• | Goodwill impairment charges of $49.3 million pretax, or $0.86 per share for CRDA and CRDB |
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• | Diluted loss per share of $(0.93) for CRDA and $(0.95) for CRDB |
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• | Diluted earnings per share of $0.18 for CRDA and $0.16 for CRDB on a non-GAAP basis, before goodwill impairment, restructuring and special charges |
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• | Consolidated operating earnings, a non-GAAP financial measure, were $19.0 million in the 2015 fourth quarter, compared with $15.3 million in the 2014 period |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Mr. Harsha V. Agadi, interim chief executive officer of Crawford & Company, stated, "While the market backdrop continued to be challenging through the fourth quarter, we moved aggressively to execute our restructuring plan and removed over $25 million of cost from our expense base as we enter 2016. Early signs of success can be seen in our performance this quarter as our consolidated operating earnings increased 24% over the fourth quarter of 2014. We will continue to be vigilant and work to identify further opportunities for expense reduction as we remain laser focused on expanding margins."
Mr. Agadi continued, "Looking at our results for the fourth quarter in more detail, our U.S. Services segment continued to perform very well delivering strong revenue growth with operating margins reaching 14%, up 100 bps from the third quarter's level. We benefited from a large outsourced services project, continued growth in our U.S. Contractor Connection service line, and reduced expenses. Our Broadspire segment also continued to be a bright spot with robust revenue and earnings growth driven by increased casualty claim referrals, market share gains and the introduction of new products. Lastly, our Garden City Group and International segments continue to face headwinds. We remain committed to expanding margins through further cost reduction over the course of 2016."
Mr. Agadi concluded, "While our overall results are not yet where they need to be, I am very excited by the opportunities in front of us and am optimistic on the direction of our Company as we work to improve our profitability and uncover opportunities to grow revenues. Our cost reduction plans are expected to enable our businesses to achieve their target operating margins in the current claim environment while providing significant leverage as volumes grow. Looking forward, we are aggressively re-positioning our Company to deliver more predictable financial results and growth as we strive to create long-term shareholder value."
Fourth Quarter and Full Year 2015 Financial Results Compared to Prior Year
Fourth quarter 2015 consolidated revenues before reimbursements totaled $284.9 million, compared with $285.5 million for fourth quarter 2014. Fourth quarter 2015 net loss attributable to shareholders of Crawford & Company was $(51.7) million compared with net income of $3.3 million in the fourth quarter of 2014. Fourth quarter 2015 diluted loss per share was $(0.93) for CRDA and $(0.95) for CRDB, compared with diluted earnings per share of $0.07 for CRDA and $0.05 for CRDB in the prior year quarter. Before goodwill impairment, restructuring and special charges, fourth quarter 2015 diluted earnings per share on a non-GAAP basis were $0.18 for CRDA and $0.16 for CRDB. Consolidated operating earnings, a non-GAAP financial measure, were $19.0 million in the 2015 fourth quarter, compared with $15.3 million in the 2014 period.
Full year consolidated revenues before reimbursements were $1.170 billion in 2015, an increase of 2% compared with $1.143 billion for 2014. Net loss attributable to Crawford & Company was $(45.5) million in 2015, compared with net income of $30.6 million in 2014. Full year 2015 diluted loss per share was $(0.79) for CRDA and $(0.87) for CRDB, after goodwill impairment, restructuring and special charges, compared with diluted earnings per share of $0.57 for CRDA and $0.52 for CRDB in the prior year. Before the goodwill impairment, restructuring and special charges, diluted earnings per share on a non-GAAP basis were $0.53 for CRDA and $0.45 for CRDB. Consolidated operating earnings, a non-GAAP financial measure, were $70.4 million and $73.1 million in 2015 and 2014, respectively.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Segment Results for the Fourth Quarter and Full Year
In the fourth quarter of 2015, the Company realigned two of its reportable segments by moving its Canada and Latin America/Caribbean operations from the former Americas segment to the newly formed International segment, previously referred to as the EMEA/AP (Europe, Middle East, Africa, and Asia-Pacific) segment. The former Americas segment, without Canada and Latin America/Caribbean, is now the U.S. Services segment. The results of the former EMEA/AP and Americas segments are no longer reported separately. The results of prior periods have been revised to conform to the current presentation of our reportable segments. The change in reporting segments did not have any impact on previously reported consolidated financial results.
U.S. Services
U.S. Services revenues before reimbursements were $56.8 million in the fourth quarter of 2015, increasing 12% from $50.7 million in the fourth quarter of 2014. The revenue increase was primarily due to 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, partially offset by a reduction in weather-related cases in U.S. Claims Field Operations. Operating earnings were $7.9 million in the 2015 fourth quarter, compared with $1.3 million in the fourth quarter of 2014, representing operating margins of 14% and 2% in the 2015 and 2014 periods, respectively.
For the year, U.S. Services revenues before reimbursements increased 13% to $242.5 million in 2015 compared with $215.4 million in 2014. Operating earnings increased to $32.7 million in 2015, from $18.0 million in 2014, representing operating margins of 13% and 8% in 2015 and 2014, respectively.
International
Fourth quarter 2015 revenues before reimbursements for the International segment totaled $124.9 million, compared with $125.6 million in the 2014 fourth quarter. This decrease was due to a reduction in claim activity and changes in foreign exchange rates which negatively impacted revenues by approximately 13% in the fourth quarter compared with the prior year period, partially offset by the inclusion of $19.6 million in revenues from the fourth quarter 2014 acquisition of GAB Robins in the U.K. International segment operating earnings were $7.3 million in the 2015 fourth quarter, compared with $9.6 million in the 2014 quarter. The segment's operating margin was 6% in the 2015 period as compared to 8% in the 2014 quarter.
For the year, revenues before reimbursements in our International segment totaled $506.7 million in 2015, compared with $488.3 million in 2014. The increase in revenues from the GAB Robins acquisition was partially offset by negative foreign exchange rate impacts of approximately 13% in 2015 compared with 2014. International segment operating earnings were $18.8 million in 2015, compared with $25.3 million in 2014, representing operating margins of 4% in 2015 compared with 5% in 2014.
Broadspire
Broadspire segment revenues before reimbursements were $75.4 million in the 2015 fourth quarter, up from $69.2 million in the 2014 fourth quarter. The revenue increase was due to organic growth, new clients, higher client retention, the transfer of accident and health cases from our U.S. Services segment, and increased medical management services referrals. Broadspire recorded operating earnings of $7.0 million in the fourth quarter of 2015, representing an operating margin of 9%, compared with $6.3 million, or 9% of revenues, in the 2014 fourth quarter.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
For the year, Broadspire segment revenues before reimbursements increased 9% to $293.0 million in 2015 compared with $268.9 million in 2014. Broadspire recorded operating earnings of $24.0 million in 2015, or 8% of revenues, compared with $15.5 million, or 6% of revenues, in 2014.
Garden City Group
Garden City Group revenues before reimbursements were $27.7 million in the fourth quarter of 2015, compared with $40.0 million in the same period of 2014. The decrease in revenues was primarily due to declines in volumes associated with several large ongoing cases. Operating earnings were $1.7 million in the 2015 fourth quarter as compared to $4.5 million in the 2014 period, with the related operating margin decreasing from 11% in the 2014 period to 6% in the 2015 period.
For the year, Garden City Group revenues before reimbursements were $128.2 million in 2015, compared with $170.3 million in 2014. Operating earnings were $11.5 million in 2015, compared with $22.8 million in 2014, with the related operating margin decreasing to 9% in 2015 from 13% in 2014. At December 31, 2015 there was a backlog of projects awarded totaling approximately $81.0 million, compared with $102.0 million at December 31, 2014.
Unallocated Corporate and Shared Costs, Net
Unallocated corporate costs were $5.0 million in the fourth quarter of 2015, compared with $6.4 million in the same period of 2014. The decrease was primarily due to one time acquisition related costs in the 2014 period.
Unallocated corporate costs were $16.6 million in 2015, compared with $8.6 million in 2014. This increase was primarily due to a $3.7 million increase in unallocated professional fees, $2.4 million in higher self-insured expenses, increased U.S. defined benefit pension plan expense of $1.5 million, and the settlement of a specific legal claim.
Goodwill Impairment, Restructuring and Special Charges
The Company recognized goodwill impairment charges in the amount of $49.3 million related to its former EMEA/AP and Americas excluding U.S. Contractor Connection reporting units during 2015. The noncash goodwill impairment charge is not reflected in segment operating earnings. This impairment charge did not affect the Company's liquidity and had no effect on the Company's compliance with the financial covenants under its Credit Facility. During 2015, the Company also recorded restructuring and special charges of $34.4 million. There were no restructuring or special charges in 2014. Restructuring costs of $28.7 million were comprised of costs associated with the ongoing implementation of the Global Business Services Center in Manila, Philippines, integration costs related to the GAB Robins acquisition, and other restructuring costs in our operating segments and administrative areas. Special charges of $5.6 million were for certain legal and professional fees and employee separation costs.
The goodwill impairment referred to above was recognized during the 2015 fourth quarter. During the 2015 fourth quarter, the Company also recorded restructuring and special charges of $18.0 million. Restructuring charges of $17.3 million for the 2015 fourth quarter were comprised of costs associated with the ongoing implementation of the Global Business Services Center, integration costs related to the GAB Robins acquisition, and other restructuring activities in the operating segments and administrative areas. Special charges of $0.7 million for the quarter were incurred for certain legal and professional fees.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Balance Sheet and Cash Flow
Crawford & Company's consolidated cash and cash equivalents position as of December 31, 2015 totaled $76.1 million compared with $52.5 million at December 31, 2014.
The Company's operations provided $61.7 million of cash during 2015, compared with $6.6 million in 2014. The $55.0 million improvement in cash provided by operating activities in 2015 compared with 2014 was primarily due to improved collections of accounts receivable and lower payments for accrued liabilities including incentive compensation.
The Company's 2015 effective income tax rate was distortive, primarily due to the largely nondeductible goodwill impairment charge, our inability to recognize tax benefits for certain international net operating losses, and fluctuations in the mix of income earned. Additionally, 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.
2016 Guidance
Crawford & Company is issuing its initial guidance for 2016 as follows:
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• | Consolidated revenues before reimbursements between $1.05 and $1.10 billion; |
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• | Consolidated operating earnings between $80.0 and $90.0 million; |
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• | Before expected restructuring charges, net income attributable to shareholders of Crawford & Company on a non-GAAP basis between $36.0 and $42.0 million, or $0.67 to $0.77 diluted earnings per CRDA share, and $0.59 to $0.69 diluted earnings per CRDB share; and |
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• | After expected restructuring charges, net income attributable to shareholders of Crawford & Company between $24.0 and $30.0 million, or $0.48 to $0.58 diluted earnings per CRDA share, or $0.40 to $0.50 diluted earnings per CRDB share. |
The Company expects to incur restructuring charges in 2016 totaling $15.6 million pretax, or $0.19 in diluted earnings per share after tax. This is comprised of approximately $8.4 million related to the Global Business Services Centers, which should be partially offset by initial savings in 2016 of $8.0 million, and $7.2 million related to previously announced restructuring plans and special charges.
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 Garden City Group segment, specifically its work on the gulf-related class action settlement. Although the Company continued to earn revenues from the Garden City Group projects in 2015, these revenues, and related operating earnings, were at a reduced rate as compared to 2014. We expect activity on these projects to continue in 2016, although at further reduced rates.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
Conference Call
Crawford & Company's management will host a conference call with investors on Thursday, March 10, 2016 at 1:00 p.m. Eastern Time to discuss fourth quarter and full year 2015 results. The call will be recorded and available for replay through April 10, 2016. You may dial 1-855-859-2056 to listen to the replay. The access code is 90678408. 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 operations.
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, goodwill impairment, 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.
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. Goodwill impairment, restructuring and special charges are non-core items not directly related to our normal business or operations, or our future performance.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
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 | | Year ended |
| December 31, 2015 | % Margin | December 31, 2014 | % Margin | | December 31, 2015 | % Margin | December 31, 2014 | % Margin |
Operating earnings: | | | | | | | | | |
U.S. Services | $ | 7,865 |
| 14 | % | $ | 1,258 |
| 2 | % | | $ | 32,702 |
| 13 | % | $ | 18,039 |
| 8 | % |
International | 7,315 |
| 6 | % | 9,578 |
| 8 | % | | 18,799 |
| 4 | % | 25,344 |
| 5 | % |
Broadspire | 7,045 |
| 9 | % | 6,329 |
| 9 | % | | 24,017 |
| 8 | % | 15,469 |
| 6 | % |
Garden City Group | 1,694 |
| 6 | % | 4,514 |
| 11 | % | | 11,507 |
| 9 | % | 22,849 |
| 13 | % |
Unallocated corporate and shared costs, net | (4,966 | ) | (2 | )% | (6,392 | ) | (2 | )% | | (16,605 | ) | (1 | )% | (8,582 | ) | (1 | )% |
Consolidated operating earnings | 18,953 |
| 7 | % | 15,287 |
| 5 | % | | 70,420 |
| 6 | % | 73,119 |
| 6 | % |
(Deduct) add: | | | | | | | | | |
Net corporate interest expense | (2,145 | ) | (1 | )% | (1,499 | ) | (1 | )% | | (8,383 | ) | (1 | )% | (6,031 | ) | (1 | )% |
Stock option expense | (76 | ) | — | % | (179 | ) | — | % | | (433 | ) | — | % | (859 | ) | — | % |
Amortization expense | (2,886 | ) | (1 | )% | (1,595 | ) | (1 | )% | | (9,668 | ) | (1 | )% | (6,341 | ) | (1 | )% |
Goodwill impairment charges | (49,314 | ) | (17 | )% | — |
| | | (49,314 | ) | (4 | )% | — |
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Restructuring and special charges | (18,012 | ) | (6 | )% | — |
| — | % | | (34,395 | ) | (3 | )% | — |
| — | % |
Income taxes | 1,503 |
| 1 | % | (8,286 | ) | (3 | )% | | (13,832 | ) | (1 | )% | (28,780 | ) | (3 | )% |
Net loss (income) attributable to non-controlling interests | 306 |
| — | % | (412 | ) | — | % | | 117 |
| — | % | (484 | ) | — | % |
Net (loss) income attributable to shareholders of Crawford & Company | $ | (51,671 | ) | (18 | )% | $ | 3,316 |
| 1 | % | | $ | (45,488 | ) | (4 | )% | $ | 30,624 |
| 3 | % |
| | | | | | | | | |
Further information regarding the Company's operating results for the quarter and year ended December 31, 2015, financial position as of December 31, 2015, and cash flows for the year ended December 31, 2015 is shown on the attached unaudited condensed consolidated financial statements.
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD ATLANTA, GEORGIA 30319 (404) 300-1000
About Crawford & Company
Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is one of the world's largest independent providers 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 Class A Common Stock than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, 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 December 31, | 2015 | | 2014 | | % Change |
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Revenues: | | | | | |
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| | |
| | |
Revenues Before Reimbursements | $ | 284,875 |
| | $ | 285,455 |
| | — | % |
Reimbursements | 15,629 |
| | 20,187 |
| | (23 | )% |
Total Revenues | 300,504 |
| | 305,642 |
| | (2 | )% |
| | | | | |
Costs and Expenses: | | | | | |
| | | | | |
Costs of Services Provided, Before Reimbursements | 206,680 |
| | 215,118 |
| | (4 | )% |
Reimbursements | 15,629 |
| | 20,187 |
| | (23 | )% |
Total Costs of Services | 222,309 |
| | 235,305 |
| | (6 | )% |
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Selling, General, and Administrative Expenses | 62,256 |
| | 57,900 |
| | 8 | % |
Corporate Interest Expense, Net | 2,145 |
| | 1,499 |
| | 43 | % |
Goodwill Impairment Charges | 49,314 |
| | — |
| | nm |
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Restructuring and Special Charges | 18,012 |
| | — |
| | nm |
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Total Costs and Expenses | 354,036 |
| | 294,704 |
| | 20 | % |
| | | | | |
Other Income | 52 |
| | 1,076 |
| | (95 | )% |
| | | | | |
(Loss) Income Before Income Taxes | (53,480 | ) | | 12,014 |
| | (545 | )% |
(Benefit) Provision for Income Taxes | (1,503 | ) | | 8,286 |
| | (118 | )% |
| | | | | |
Net (Loss) Income | (51,977 | ) | | 3,728 |
| | (1,494 | )% |
| | | | | |
Net Loss (Income) Attributable to Noncontrolling Interests | 306 |
| | (412 | ) | | (174 | )% |
| | | | | |
Net (Loss) Income Attributable to Shareholders of Crawford & Company | $ | (51,671 | ) | | $ | 3,316 |
| | (1,658 | )% |
| | | | | |
| | | | | |
(Loss) Earnings Per Share - Basic: | | | | | |
Class A Common Stock | $ | (0.93 | ) | | $ | 0.07 |
| | (1,429 | )% |
Class B Common Stock | $ | (0.95 | ) | | $ | 0.05 |
| | (2,000 | )% |
| | | | | |
(Loss) Earnings Per Share - Diluted: | | | | | |
Class A Common Stock | $ | (0.93 | ) | | $ | 0.07 |
| | (1,429 | )% |
Class B Common Stock | $ | (0.95 | ) | | $ | 0.05 |
| | (2,000 | )% |
| | | | | |
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)
|
| | | | | | | | | | |
| | | | | |
Year Ended December 31, | 2015 | | 2014 | | % Change |
| | | | | |
Revenues: | | | | | |
| |
| | |
| | |
Revenues Before Reimbursements | $ | 1,170,385 |
| | $ | 1,142,851 |
| | 2 | % |
Reimbursements | 71,135 |
| | 74,112 |
| | (4 | )% |
Total Revenues | 1,241,520 |
| | 1,216,963 |
| | 2 | % |
| | | | | |
Costs and Expenses: | | | | | |
| | | | | |
Costs of Services Provided, Before Reimbursements | 869,217 |
| | 840,702 |
| | 3 | % |
Reimbursements | 71,135 |
| | 74,112 |
| | (4 | )% |
Total Costs of Services | 940,352 |
| | 914,814 |
| | 3 | % |
| | | | | |
Selling, General, and Administrative Expenses | 241,602 |
| | 237,880 |
| | 2 | % |
Corporate Interest Expense, Net | 8,383 |
| | 6,031 |
| | 39 | % |
Goodwill Impairment Charges | 49,314 |
| | — |
| | nm |
|
Restructuring and Special Charges | 34,395 |
| | — |
| | nm |
|
Total Costs and Expenses | 1,274,046 |
| | 1,158,725 |
| | 10 | % |
| | | | | |
Other Income | 753 |
| | 1,650 |
| | (54 | )% |
| | | | | |
(Loss) Income Before Income Taxes | (31,773 | ) | | 59,888 |
| | (153 | )% |
Provision for Income Taxes | 13,832 |
| | 28,780 |
| | (52 | )% |
| | | | | |
Net (Loss) Income | (45,605 | ) | | 31,108 |
| | (247 | )% |
| | | | | |
Net Loss (Income) Attributable to Noncontrolling Interests | 117 |
| | (484 | ) | | (124 | )% |
| | | | | |
Net (Loss) Income Attributable to Shareholders of Crawford & Company | $ | (45,488 | ) | | $ | 30,624 |
| | (249 | )% |
| | | | | |
| | | | | |
(Loss) Earnings Per Share - Basic: | | | | | |
Class A Common Stock | $ | (0.79 | ) | | $ | 0.58 |
| | (236 | )% |
Class B Common Stock | $ | (0.87 | ) | | $ | 0.52 |
| | (267 | )% |
| | | | | |
(Loss) Earnings Per Share - Diluted: | | | | | |
Class A Common Stock | $ | (0.79 | ) | | $ | 0.57 |
| | (239 | )% |
Class B Common Stock | $ | (0.87 | ) | | $ | 0.52 |
| | (267 | )% |
| | | | | |
Cash Dividends Per Share: | | | | | |
Class A Common Stock | $ | 0.28 |
| | $ | 0.24 |
| | 17 | % |
Class B Common Stock | $ | 0.20 |
| | $ | 0.18 |
| | 11 | % |
| | | | | |
nm = not meaningful | | | | | |
Press Release
CRAWFORD & COMPANY 1001 SUMMIT BOULEVARD, ATLANTA, GEORGIA 30319 (404) 300-1000
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 2015 and December 31, 2014
Unaudited
(In Thousands, Except Par Values) |
| | | | | | | |
| December 31, | | December 31, |
| 2015 | | 2014 |
ASSETS | | | |
| | | |
Current Assets: | | | |
Cash and Cash Equivalents | $ | 76,066 |
| | $ | 52,456 |
|
Accounts Receivable, Net | 164,596 |
| | 180,096 |
|
Unbilled Revenues, at Estimated Billable Amounts | 98,659 |
| | 103,163 |
|
Income Taxes Receivable | 4,255 |
| | 2,779 |
|
Prepaid Expenses and Other Current Assets | 26,601 |
| | 29,089 |
|
Total Current Assets | 370,177 |
| | 367,583 |
|
| | | |
Property and Equipment | 140,383 |
| | 143,273 |
|
Less Accumulated Depreciation | (102,331 | ) | | (102,414 | ) |
Net Property and Equipment | 38,052 |
| | 40,859 |
|
| | | |
Other Assets: | | | |
Goodwill | 95,616 |
| | 131,885 |
|
Intangible Assets Arising from Business Acquisitions, Net | 104,861 |
| | 75,895 |
|
Capitalized Software Costs, Net | 79,996 |
| | 75,536 |
|
Deferred Income Tax Assets | 47,371 |
| | 66,927 |
|
Other Noncurrent Assets | 47,333 |
| | 30,634 |
|
Total Other Assets | 375,177 |
| | 380,877 |
|
| | | |
Total Assets | $ | 783,406 |
| | $ | 789,319 |
|
| | | |
LIABILITIES AND SHAREHOLDERS' INVESTMENT | | | |
| | | |
Current Liabilities: | | | |
Short-Term Borrowings | $ | 19,958 |
| | $ | 2,002 |
|
Accounts Payable | 44,615 |
| | 48,597 |
|
Accrued Compensation and Related Costs | 68,843 |
| | 82,151 |
|
Self-Insured Risks | 14,122 |
| | 14,491 |
|
Income Taxes Payable | 4,419 |
| | 2,618 |
|
Deferred Income Taxes | — |
| | 14,523 |
|
Deferred Rent | 13,303 |
| | 13,576 |
|
Other Accrued Liabilities | 44,577 |
| | 35,784 |
|
Deferred Revenues | 46,552 |
| | 45,054 |
|
Current Installments of Capital Leases | 1,959 |
| | 763 |
|
Total Current Liabilities | 258,348 |
| | 259,559 |
|
| | | |
Noncurrent Liabilities: | | | |
Long-Term Debt and Capital Leases, Less Current Installments | 225,365 |
| | 154,046 |
|
Deferred Revenues | 26,592 |
| | 26,706 |
|
Self-Insured Risks | 9,354 |
| | 10,041 |
|
Accrued Pension Liabilities | 121,732 |
| | 142,343 |
|
Other Noncurrent Liabilities | 17,664 |
| | 17,271 |
|
Total Noncurrent Liabilities | 400,707 |
| | 350,407 |
|
| | | |
Shareholders' Investment: | | | |
Class A Common Stock, $1.00 Par Value | 30,537 |
| | 30,497 |
|
Class B Common Stock, $1.00 Par Value | 24,690 |
| | 24,690 |
|
Additional Paid-in Capital | 41,936 |
| | 38,617 |
|
Retained Earnings | 239,161 |
| | 301,091 |
|
Accumulated Other Comprehensive Loss | (222,631 | ) | | (221,958 | ) |
Shareholders' Investment Attributable to Shareholders of Crawford & Company | 113,693 |
| | 172,937 |
|
Noncontrolling Interests | 10,658 |
| | 6,416 |
|
Total Shareholders' Investment | 124,351 |
| | 179,353 |
|
| | | |
Total Liabilities and Shareholders' Investment | $ | 783,406 |
| | $ | 789,319 |
|
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 December 31,
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| U.S. Services | % | International | % | Broadspire | % | Garden City Group | % |
| 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change |
| | | | | | | | | | | | |
Revenues Before Reimbursements | $ | 56,805 |
| $ | 50,653 |
| 12 | % | $ | 124,944 |
| $ | 125,588 |
| (1 | )% | $ | 75,442 |
| $ | 69,184 |
| 9 | % | $ | 27,684 |
| $ | 40,030 |
| (31 | )% |
| | | | | | | | | | | | |
Direct Compensation, Fringe Benefits & Non-Employee Labor | 34,995 |
| 34,322 |
| 2 | % | 80,279 |
| 84,574 |
| (5 | )% | 41,157 |
| 37,255 |
| 10 | % | 19,590 |
| 26,648 |
| (26 | )% |
% of Revenues Before Reimbursements | 62 | % | 68 | % | | 64 | % | 67 | % | | 55 | % | 54 | % | | 71 | % | 67 | % | |
| | | | | | | | | | | | |
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 13,945 |
| 15,073 |
| (7 | )% | 37,350 |
| 31,436 |
| 19 | % | 27,240 |
| 25,600 |
| 6 | % | 6,400 |
| 8,868 |
| (28 | )% |
% of Revenues Before Reimbursements | 25 | % | 30 | % | | 30 | % | 25 | % | | 36 | % | 37 | % | | 23 | % | 22 | % | |
| | | | | | | | | | | | |
Total Operating Expenses | 48,940 |
| 49,395 |
| (1 | )% | 117,629 |
| 116,010 |
| 1 | % | 68,397 |
| 62,855 |
| 9 | % | 25,990 |
| 35,516 |
| (27 | )% |
| | | | | | | | | | | | |
Operating Earnings (1) | $ | 7,865 |
| $ | 1,258 |
| 525 | % | $ | 7,315 |
| $ | 9,578 |
| (24 | )% | $ | 7,045 |
| $ | 6,329 |
| 11 | % | $ | 1,694 |
| $ | 4,514 |
| (62 | )% |
% of Revenues Before Reimbursements | 14 | % | 2 | % | | 6 | % | 8 | % | | 9 | % | 9 | % | | 6 | % | 11 | % | |
Year Ended December 31,
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| U.S. Services | % | International | % | Broadspire | % | Garden City Group | % |
| 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change |
| | | | | | | | | | | | |
Revenues Before Reimbursements | $ | 242,488 |
| $ | 215,385 |
| 13 | % | $ | 506,650 |
| $ | 488,284 |
| 4 | % | $ | 293,032 |
| $ | 268,890 |
| 9 | % | $ | 128,215 |
| $ | 170,292 |
| (25 | )% |
| | | | | | | | | | | | |
Direct Compensation, Fringe Benefits & Non-Employee Labor | 149,742 |
| 133,935 |
| 12 | % | 337,125 |
| 340,010 |
| (1 | )% | 159,169 |
| 149,733 |
| 6 | % | 90,363 |
| 117,625 |
| (23 | )% |
% of Revenues Before Reimbursements | 62 | % | 62 | % | | 67 | % | 70 | % | | 54 | % | 56 | % | | 70 | % | 69 | % | |
| | | | | | | | | | | | |
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 60,044 |
| 63,411 |
| (5 | )% | 150,726 |
| 122,930 |
| 23 | % | 109,846 |
| 103,688 |
| 6 | % | 26,345 |
| 29,818 |
| (12 | )% |
% of Revenues Before Reimbursements | 25 | % | 29 | % | | 30 | % | 25 | % | | 37 | % | 39 | % | | 21 | % | 18 | % | |
| | | | | | | | | | | | |
Total Operating Expenses | 209,786 |
| 197,346 |
| 6 | % | 487,851 |
| 462,940 |
| 5 | % | 269,015 |
| 253,421 |
| 6 | % | 116,708 |
| 147,443 |
| (21 | )% |
| | | | | | | | | | | | |
Operating Earnings (1) | $ | 32,702 |
| $ | 18,039 |
| 81 | % | $ | 18,799 |
| $ | 25,344 |
| (26 | )% | $ | 24,017 |
| $ | 15,469 |
| 55 | % | $ | 11,507 |
| $ | 22,849 |
| (50 | )% |
% of Revenues Before Reimbursements | 13 | % | 8 | % | | 4 | % | 5 | % | | 8 | % | 6 | % | | 9 | % | 13 | % | |
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, goodwill impairment, restructuring and special charges, and certain unallocated corporate and shared costs. See pages 6-7 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
Year Ended December 31, 2015 and December 31, 2014
Unaudited
(In Thousands) |
| | | | | | | | |
| | 2015 | | 2014 |
Cash Flows From Operating Activities: | | | | |
Net (Loss) Income | | $ | (45,605 | ) | | $ | 31,108 |
|
Reconciliation of Net (Loss) Income to Net Cash Provided By Operating Activities: | | | | |
Depreciation and Amortization | | 43,498 |
| | 37,644 |
|
Impairment of Goodwill | | 49,314 |
| | — |
|
Deferred Income Taxes | | 4,120 |
| | 15,189 |
|
Gain on Former Corporate Headquarters Property | | — |
| | (836 | ) |
Stock-Based Compensation | | 3,229 |
| | 1,189 |
|
Gain on Disposals of Property and Equipment, Net | | (356 | ) | | (239 | ) |
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions: | | | | |
Accounts Receivable, Net | | 26,526 |
| | (24,358 | ) |
Unbilled Revenues, Net | | 3,053 |
| | (1,216 | ) |
Accrued or Prepaid Income Taxes | | 5,948 |
| | 3,099 |
|
Accounts Payable and Accrued Liabilities | | (21,151 | ) | | (23,100 | ) |
Deferred Revenues | | 363 |
| | (4,645 | ) |
Accrued Retirement Costs | | (16,402 | ) | | (18,497 | ) |
Prepaid Expenses and Other Operating Activities | | 9,118 |
| | (8,732 | ) |
Net Cash Provided By Operating Activities | | 61,655 |
| | 6,606 |
|
| | | | |
Cash Flows From Investing Activities: | | | | |
Acquisitions of Property and Equipment | | (12,144 | ) | | (12,485 | ) |
Proceeds from Disposals of Property and Equipment | | — |
| | 1,289 |
|
Capitalization of Computer Software Costs | | (20,775 | ) | | (16,712 | ) |
Proceeds from Former Corporate Headquarters Property | | — |
| | 836 |
|
Payments for Acquisitions, Net of Cash Acquired | | (68,259 | ) | | (3,141 | ) |
Cash Surrendered in Sale of Business | | — |
| | (1,554 | ) |
Net Cash Used In Investing Activities | | (101,178 | ) | | (31,767 | ) |
| | | | |
Cash Flows From Financing Activities: | | | | |
Cash Dividends Paid | | (13,511 | ) | | (11,717 | ) |
Payments Related to Shares Received for Withholding Taxes Under Stock-Based Compensation Plans | | (479 | ) | | (2,085 | ) |
Proceeds from Shares Purchased Under Employee Stock-Based Compensation Plans | | 1,320 |
| | 1,270 |
|
Repurchases of Common Stock | | (1,240 | ) | | (3,390 | ) |
Increases in Short-Term and Revolving Credit Facility Borrowings | | 147,509 |
| | 121,110 |
|
Payments on Short-Term and Revolving Credit Facility Borrowings | | (62,017 | ) | | (98,821 | ) |
Payments on Capital Lease Obligations | | (1,993 | ) | | (856 | ) |
Capitalized Loan Costs | | (1,299 | ) | | (218 | ) |
Dividends Paid to Noncontrolling Interests | | (401 | ) | | (761 | ) |
Net Cash Provided By Financing Activities | | 67,889 |
| | 4,532 |
|
| | | | |
Effects of Exchange Rate Changes on Cash and Cash Equivalents | | (4,756 | ) | | (2,868 | ) |
Increase (Decrease) in Cash and Cash Equivalents | | 23,610 |
| | (23,497 | ) |
Cash and Cash Equivalents at Beginning of Year | | 52,456 |
| | 75,953 |
|
Cash and Cash Equivalents at End of Year | | $ | 76,066 |
| | $ | 52,456 |
|
Fourth Quarter and Full Year 2015 Earnings Conference Call March 10, 2016 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 Garden City Group 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, goodwill impairment charges, 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. • Segment Realignment —In the fourth quarter of 2015, the Company realigned two of its reportable segments by moving its Canada and Latin America/Caribbean operations from the former Americas segment to the newly formed International segment, previously referred to as the EMEA/AP (Europe, Middle East, Africa, and Asia-Pacific) segment. The former Americas segment, without Canada and Latin America/Caribbean, is now the U.S. Services segment. The results of the former EMEA/AP and Americas segments are no longer reported separately. The results of prior periods have been revised to conform to the current presentation of our reportable segments. The change in reporting segments did not have any impact on previously reported consolidated financial results. • (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 than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, 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 • One of 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 INTERNATIONAL 1 Serves the U.K., Canada, Asia Pacific, and European and Latin American markets BROADSPIRE 3 Serves large national accounts, carriers and self-insured entities U.S. SERVICES 2 Serves the United States markets GARDEN CITY GROUP 4 Provides administration for class action settlements and bankruptcy matters
TODAY'S AGENDA --- Welcome and Opening Comments --- Fourth Quarter and Full Year 2015 Financial Review --- Guidance and Strategic Initiatives
PAGE 5 Revenues ($ in billions) Consolidated Operating Earnings (1) ($ in millions) • Fourth quarter operating earnings grew 24%, year over year, to $19.0 million driven by strong results from Broadspire and U.S. Services. • Full year 2015 operating earnings declined 4% to $70.4 million compared to $73.1 million in 2014. • U.S. Services revenues increased 12% in the fourth quarter and 13% for the full year 2015. Operating margins increased 500 bps, year over year, to 13.5% for the full year 2015. • Broadspire delivered revenue growth of 9% for the fourth quarter and full year 2015. Operating margins increased 200 bps, year over year, to 8.2% for the full year 2015. • International results impacted by challenging market conditions which reduced claim activity. • Garden City Group continues to manage the decline in several large projects presenting a headwind to results. Senior leadership transition successfully completed. • Global Business Services Center initiative continues -- expected to deliver improved customer service as well as lower costs. FOURTH QUARTER AND FULL YEAR 2015 BUSINESS SUMMARY (1) See Appendix for non-GAAP explanation and reconciliation
PAGE 6 DRIVE IMPROVED PROFITABILITY AND PREDICTABLE RESULTS $45 million in total cost savings identified and removed through two restructuring plans during 2015 • Headcount reduction in U.S. Services and the U.K. • Senior management realignment to improve execution • GBSC migration and GAB Robins integration • Reduce overhead costs in central functions and business segments • Streamline senior management to reduce costs and further improve execution Incremental expense reduction initiatives being explored • Restructuring opportunities currently being reviewed in the Garden City Group segment given continued run off of large projects • Supply chain cost efficiencies being aggressively targeted to drive further reductions Cost take out to drive margins in more volatile, weather-dependent service lines Goal to deliver predictable and consistent financial results, regardless of the market backdrop
FOURTH QUARTER AND FULL YEAR 2015 Financial Review
PAGE 8 Unaudited ($ in thousands, except per share amounts) Three Months Ended December 31, 2015 2014 % Change Revenues Before Reimbursements $284,875 $285,455 — % Costs of Services Provided, Before Reimbursements 206,680 215,118 (4 )% Selling, General, and Administrative Expenses 62,256 57,900 8 % Corporate Interest Expense, Net 2,145 1,499 43 % Goodwill Impairment Charges 49,314 — nm Restructuring and Special Charges 18,012 — nm Total Costs and Expenses Before Reimbursements 338,407 274,517 23 % Other Income 52 1,076 (95 )% (Loss) Income Before Income Taxes (53,480 ) 12,014 (545 )% (Benefit) Provision for Income Taxes (1,503 ) 8,286 (118 )% Net (Loss) Income (51,977 ) 3,728 (1,494 )% Net Loss (Income) Attributable to Noncontrolling Interests 306 (412 ) (174 )% Net (Loss) Income Attributable to Shareholders of Crawford & Company ($51,671 ) $3,316 (1,658 )% (Loss) Earnings Per Share - Diluted: Class A Common Stock ($0.93 ) $0.07 (1,429 )% Class B Common Stock ($0.95 ) $0.05 (2,000 )% Cash Dividends per Share: Class A Common Stock $0.07 $0.07 — % Class B Common Stock $0.05 $0.05 — % STATEMENT OF OPERATIONS HIGHLIGHTS nm=not meaningful
PAGE 9 NON-GAAP NET INCOME AND EARNINGS PER SHARE Unaudited ($ in thousands, except per share amounts) Net (Loss) Income Attributable to Crawford & Company Diluted (Loss) Earnings per CRDA Share Diluted (Loss) Earnings per CRDB Share Three Months Ended December 31, 2015 GAAP Earnings ($51,671 ) $ (0.93 ) $ (0.95 ) Non-GAAP Adjustments: Goodwill Impairment Charges, Net of Tax Benefits 47,608 0.86 0.86 Restructuring and Special Charges, Net of Tax Benefits 13,275 0.25 0.25 Non-GAAP Earnings $ 9,212 $ 0.18 $ 0.16 Three Months Ended December 31, 2014 GAAP Earnings (No Adjustments) $ 3,316 $ 0.07 $ 0.05
PAGE 10 Revenues by Service Line ($ in millions) Cases Received by Service Line (In thousands) Operating Results (4Q 2015 v. 4Q 2014) • Revenues of $56.8 million versus $50.7 million • Operating earnings of $7.9 million versus $1.3 million • Operating earnings margin of 13.8% versus 2.5% • Cases received of 91,471 versus 94,014; 2014 period included 12,900 affinity cases, now handled by the Broadspire segment Highlights • Long-term outsourcing project to assist major U.S. insurer offset decline in weather-related cases • Cost reduction initiatives helped drive margin improvement U.S. Catastrophe (CAT) Adjuster Activity • CAT revenues of $16.3 million versus $13.6 million • CAT revenues in the 2015 period included $11.9 million under an outsourcing arrangement with a major U.S. insurer. Revenues from this arrangement in the 2014 period were $11.2 million • Average CAT adjusters deployed of 441 in 4Q 2015 vs. 417 in 4Q 2014 U.S. SERVICES SEGMENT HIGHLIGHTS
PAGE 11 Revenues by Geographic Region ($ in millions) Operating Results (4Q 2015 v. 4Q 2014) • Revenues of $124.9 million versus $125.6 million • Exchange rates reduced revenues by 13% • Operating earnings of $7.3 million versus $9.6 million • Operating earnings margin of 5.9% versus 7.6% • Cases received of 184,853 versus 191,405 Regional Highlights • U.K. acquisition of GAB Robins drove revenue and case growth • Canadian revenues increased on constant dollar basis, but declined slightly due to negative exchange rate impact • Strong operating results in Australia driven by natural catastrophes • Europe and Rest of World claims volume decreased in fourth quarter due to a reduction in high frequency claims in Brazil, where we are exiting certain markets INTERNATIONAL SEGMENT HIGHLIGHTS International Cases Received (In thousands)
PAGE 12 Revenues by Service Line ($ in millions) Broadspire Cases Received (In thousands) Operating Results (4Q 2015 v. 4Q 2014) • Revenues of $75.4 million versus $69.2 million • Operating earnings of $7.0 million versus $6.3 million • Operating earnings margin of 9.3% versus 9.1% • Cases received of 108,547 versus 91,592, including 16,100 accident & health cases in the 2015 period, previously handled by the U.S. Services segment Highlights • Strong growth in casualty claims • Medical management revenues increased from greater utilization • Disability and absence management services products continue to gain traction in the market BROADSPIRE SEGMENT HIGHLIGHTS
PAGE 13 Backlog ($ in millions) Operating Results (4Q 2015 v. 4Q 2014) • Revenues of $27.7 million versus $40.0 million • Operating earnings of $1.7 million versus $4.5 million • Operating earnings margin of 6.1% versus 11.3% • Backlog at $81 million versus $102 million Highlights • Deepwater Horizon class action settlement project continues to wind down • Focused on improving operating margin • Cost reduction activities underway • Maintain active new business pipeline GARDEN CITY GROUP SEGMENT HIGHLIGHTS Revenues ($ in millions)
PAGE 14 Unaudited ($ in thousands) December 31, 2015 December 31, 2014 Change Cash and cash equivalents $76,066 $52,456 $23,610 Accounts receivable, net 164,596 180,096 (15,500 ) Unbilled revenues, net 98,659 103,163 (4,504 ) Total receivables 263,255 283,259 (20,004 ) Goodwill 95,616 131,885 (36,269 ) Intangible assets arising from business acquisitions, net 104,861 75,895 28,966 Goodwill and intangible assets arising from business acquisitions 200,477 207,780 (7,303 ) Deferred revenues 73,144 71,760 1,384 Pension liabilities 121,732 142,343 (20,611 ) Short-term borrowings and current portion of capital leases 21,917 2,765 19,152 Long-term debt, less current portion 225,365 154,046 71,319 Total debt 247,282 156,811 90,471 Total stockholders' equity attributable to Crawford & Company 113,693 172,937 (59,244 ) Net debt (1) 171,216 104,355 66,861 Total debt / capitalization 69 % 48 % (1) See Appendix for non-GAAP explanation and reconciliation BALANCE SHEET HIGHLIGHTS
PAGE 15 Unaudited ($ in thousands) 2015 2014 Variance Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (45,488 ) $ 30,624 $ (76,112 ) Impairment of Goodwill 49,314 — 49,314 Depreciation and Other Non-Cash Operating Items 50,374 54,267 (3,893 ) Unbilled and Billed Receivables Change 29,579 (25,574 ) 55,153 Working Capital Change (6,512 ) (30,824 ) 24,312 U.S. and U.K. Pension Contributions (15,612 ) (21,887 ) 6,275 Cash Flows from Operating Activities 61,655 6,606 55,049 Property & Equipment Purchases, net (12,144 ) (12,485 ) 341 Capitalized Software (internal and external costs) (20,775 ) (16,712 ) (4,063 ) Free Cash Flow (1) $ 28,736 $ (22,591 ) $ 51,327 For the year ended ended December 31, OPERATING AND FREE CASH FLOW (1) See Appendix for non-GAAP explanation
PAGE 16 Crawford & Company is issuing its initial guidance for 2016 as follows: YEAR ENDING DECEMBER 31, 2015 Low End High End Consolidated revenues before reimbursements $1.05 $1.10 billion Consolidated operating earnings $80.0 $90.0 million Before expected restructuring charges, net income attributable to shareholders of Crawford & Company $36.0 $42.0 million Diluted earnings per share--CRDA $0.67 $0.77 per share Diluted earnings per share--CRDB $0.59 $0.69 per share After expected restructuring charges, net income attributable to shareholders of Crawford & Company $24.0 $30.0 million Diluted earnings per share--CRDA $0.48 $0.58 per share Diluted earnings per share--CRDB $0.40 $0.50 per share 2016 GUIDANCE The Company expects to incur restructuring charges in 2016 totaling $15.6 million pretax, or $0.19 in diluted earnings per share after tax. This is comprised of approximately $8.4 million related to the Global Business Services Centers, which should be partially offset by initial savings in 2016 of $8.0 million, and $7.2 million related to previously announced restructuring plans and special charges.
PAGE 17 LOOKING TO 2016 Continue to exhibit cost discipline Be more client centric • Deliver customized value propositions to clients • Increase the speed of doing business enterprise wide Drive synergies in strategic initiatives Capitalize on cross-sell opportunities across the company
Appendix FULL YEAR 2015
PAGE 19 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, goodwill impairment charges, 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 goodwill impairment, 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 20 RECONCILIATION OF NON-GAAP ITEMS Full Year Revenues and Operating Earnings Unaudited ($ in millions) 2015 2014 Revenues Before Reimbursements Total Revenues $ 1,242 $ 1,217 Reimbursements (72 ) (74 ) Revenues Before Reimbursements $ 1,170 $ 1,143 Unaudited ($ in thousands) 2015 2014 Operating Earnings (Loss): U.S. Services $ 32,702 $ 18,039 International 18,799 25,344 Broadspire 24,017 15,469 Garden City Group 11,507 22,849 Unallocated corporate and shared costs and credits (16,605 ) (8,582 ) Consolidated Operating Earnings 70,420 73,119 (Deduct) add: Net corporate interest expense (8,383 ) (6,031 ) Stock option expense (433 ) (859 ) Amortization expense (9,668 ) (6,341 ) Goodwill impairment charges (49,314 ) — Restructuring and special charges (34,395 ) — Income taxes (13,832 ) (28,780 ) Net loss (income) attributable to non-controlling interests 117 (484 ) Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (45,488 ) $ 30,624
PAGE 21 Quarter Ended Quarter Ended Full Year December 31, December 31, Guidance Unaudited ($ in thousands) 2015 2014 2016 * Revenues Before Reimbursements Total Revenues $ 300,504 $ 305,642 $ 1,155,000 Reimbursements (15,629 ) (20,187 ) (80,000 ) Revenues Before Reimbursements $ 284,875 $ 285,455 $ 1,075,000 Costs of Services Provided, Before Reimbursements Total Costs of Services $ 222,309 $ 235,305 Reimbursements (15,629 ) (20,187 ) Costs of Services Provided, Before Reimbursements $ 206,680 $ 215,118 Fourth Quarter Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Full Year December 31, December 31, Guidance Unaudited ($ in thousands) 2015 2014 2016 * Operating Earnings: U.S. Services $ 7,865 $ 1,258 International 7,315 9,578 Broadspire 7,045 6,329 Garden City Group 1,694 4,514 Unallocated corporate and shared costs (4,966 ) (6,392 ) Consolidated Operating Earnings 18,953 15,287 85,000 (Deduct) add: Net corporate interest expense (2,145 ) (1,499 ) (10,700 ) Stock option expense (76 ) (179 ) (500 ) Amortization expense (2,886 ) (1,595 ) (10,000 ) Goodwill impairment charges (49,314 ) — — Restructuring and special charges (18,012 ) — (15,600 ) Income taxes 1,503 (8,286 ) (21,400 ) Net loss (income) attributable to non-controlling interests 306 (412 ) 200 Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (51,671 ) $ 3,316 $ 27,000 RECONCILIATION OF NON-GAAP ITEMS * Midpoints of Company's March 10, 2016 Guidance
PAGE 22 RECONCILIATION OF NON-GAAP ITEMS (cont.) Net Debt December 31, December 31, Unaudited ($ in thousands) 2015 2014 Net Debt Short-term borrowings $ 19,958 $ 2,002 Current installments of capital leases 1,959 763 Long-term debt and capital leases, less current installments 225,365 154,046 Total debt 247,282 156,811 Less: Cash and cash equivalents 76,066 52,456 Net debt $ 171,216 $ 104,355
PAGE 23 RECONCILIATION OF NON-GAAP ITEMS (cont.) Non-GAAP Adjusted Net Income and Diluted Earnings Per Share Three Months Ended December 31, 2015 Unaudited ($ in thousands) (Loss) Income Before Taxes Income Taxes Net (Loss) Income Net (Loss) Income Attributable to Crawford & Company Diluted (Loss) Earnings per CRDA Share Diluted (Loss) Earnings per CRDB Share GAAP $ (53,480 ) $ 1,503 $ (51,977 ) $ (51,671 ) $ (0.93 ) $ (0.95 ) Add back: Goodwill impairment charges 49,314 (1,706 ) 47,608 47,608 0.86 0.86 Restructuring and special charges 18,012 (4,737 ) 13,275 13,275 0.25 0.25 Non-GAAP Adjusted $ 13,846 $ (4,940 ) $ 8,906 $ 9,212 $ 0.18 $ 0.16 Year Ended December 31, 2015 Unaudited ($ in thousands) (Loss) Income Before Taxes Income Taxes Net (Loss) Income Net (Loss) Income Attributable to Crawford & Company Diluted (Loss) Earnings per CRDA Share Diluted (Loss) Earnings per CRDB Share GAAP $ (31,773 ) $ (13,832 ) $ (45,605 ) $ (45,488 ) $ (0.79 ) $ (0.87 ) Add back: Goodwill impairment charges 49,314 (1,706 ) 47,608 47,608 0.86 0.86 Restructuring and special charges 34,395 (9,046 ) 25,349 25,349 0.46 0.46 Non-GAAP Adjusted $ 51,936 $ (24,584 ) $ 27,352 $ 27,469 $ 0.53 $ 0.45
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