Crawford & Company Reports 2019 Third Quarter Results


NET INCOME UP SIGNIFICANTLY IN THIRD QUARTER

COMPANY ADJUSTS 2019 GUIDANCE

ATLANTA, Nov. 04, 2019 (GLOBE NEWSWIRE) -- Crawford & Company (www.crawco.com) (NYSE:  CRD-A  and CRD-B), the world’s largest publicly listed independent provider of claims management and outsourcing solutions to insurance companies and self-insured entities, today announced its financial results for the third quarter ended September 30, 2019.

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 (CRD-A) than on the voting Class B Common Stock (CRD-B), subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of CRD-A must receive the same type and amount of consideration as holders of CRD-B, unless different consideration is approved by the holders of 75% of CRD-A, voting as a class.

GAAP Consolidated Results Third Quarter 2019

  • Revenues before reimbursements of $254.7 million, compared with $255.0 million for the 2018 third quarter
     
  • Net income attributable to shareholders of $11.0 million, compared to $7.9 million in the same period last year
     
  • Diluted earnings per share of $0.21 for CRD-A and $0.19 for CRD-B, compared with $0.15 for CRD-A and $0.13 for CRD-B in the prior year third quarter

Non-GAAP Consolidated Results Third Quarter 2019

Non-GAAP results for 2019 have been presented on a constant dollar basis to 2018 and excluding the pretax arbitration and claim settlements of $1.2 million in the 2019 period. Non-GAAP consolidated results for the 2018 quarter exclude the loss on disposition of business line.

  • Revenues before reimbursements, on a non-GAAP basis, of $262.0 million, increasing 2.7% compared with $255.0 million for the 2018 third quarter
     
  • Net income attributable to shareholders, on a non-GAAP basis, totaled $12.1 million in the 2019 third quarter, up compared to $8.8 million in the same period last year
     
  • Diluted earnings per share, on a non-GAAP basis, of $0.23 for CRD-A and $0.21 for CRD-B in the 2019 third quarter, up from $0.17 for CRD-A and $0.15 for CRD-B in the prior year third quarter
     
  • Consolidated adjusted operating earnings, on a non-GAAP basis, were $24.0 million, or 9.2% of non-GAAP revenues, in the 2019 third quarter, up compared with $16.5 million, or 6.5% of revenues, in the 2018 third quarter
     
  • Consolidated adjusted EBITDA, a non-GAAP financial measure, was $32.5 million, or 12.4% of non-GAAP revenues, in the 2019 third quarter, up compared with $25.5 million, or 10.0% of revenues, in the 2018 period

Management Comments

Mr. Harsha V. Agadi, president and chief executive officer of Crawford & Company, stated, “For the 2019 third quarter, on a constant currency basis, we delivered 2.7% revenue growth and solid margin expansion, demonstrating an improving trend from the second quarter’s result. The velocity of new business wins across the Company, globally, continues to build as our investments in technology and new client solutions are resonating in the market. While I am excited with our new client wins and pace of business, our results are being impacted by more benign weather in the third quarter, continuing into the fourth quarter, and a slower than expected revenue ramp by new clients. While I am disappointed with the reduction in our full year 2019 guidance, I remain confident that our goal of delivering 5% revenue growth and 15% earnings growth, annually, is achievable in the medium-term.

As we have previously mentioned, the strategic investments that we have made in our sales teams to drive market share and in new product development to access large untapped markets continues to drive momentum in our business as can be seen in our new client wins where we have signed $85.1 million in annual revenue value, year to date, which provides solid visibility to future revenue and profit growth. As an example, our TPA segment has won 76 new clients through September with an estimated $32 million of revenue annually, which is only in the early stages of ramping up. We were also pleased with the new client wins in our Contractor Connection business where we entered agreements with major carriers in the U.S. and the U.K. during the quarter and also initiated a pilot program with a major Canadian carrier.

Weather has been a factor this quarter as global insured losses from catastrophes are estimated to be less that 50% of the level reported in the year ago third quarter. A clear focus of our management team is to reduce our reliance on severe weather in an effort to deliver more predictable financial results. To that end, we are focused on handling small and medium carriers’ claims on an outsourced basis which represents a large and untapped market opportunity and will ultimately increase the predictability of our revenues and cash flow. Claims management is our expertise, and we can offer an industry-leading end-to-end solution at a more effective cost to the client. Early signs of our success can be seen in our CCS segment where we onboarded a number of U.S. and U.K. carriers during the third quarter.

Another priority for our management team is the continued improvement in our cash generation while maintaining our expense discipline. Through the third quarter, we generated a $38.9 million improvement in free cash flow compared to the 2018 year to date period. We have been using this cash flow in part to strengthen our balance sheet and our leverage ratio of net funded debt to EBITDA is now below 1.5x. We have also been using our cash flow to buy back our shares as we continue to see our share price as very attractive. In the third quarter, we repurchased approximately 633 thousand shares for an average price of $9.62. Year to date, we have repurchased approximately 2.8 million shares, at an average price of $9.23.”

Mr. Agadi concluded, “While I am disappointed to be reducing our outlook for the remainder of the year, I am more confident than ever that our goal of delivering 5% revenue growth and 15% earnings growth, annually, is in sight.  Our new business wins and growing client revenue value provide visibility to improving financial results as we look to 2020. Additionally, our clients are seeing the many benefits that we can provide and are beginning to outsource large portions of their claims to Crawford which is an exciting growth opportunity that will ultimately help fuel our growth and reduce our reliance on severe weather.”

Segment Results for the Third Quarter

Crawford TPA Solutions

Crawford TPA Solutions segment revenues before reimbursements were $99.5 million in the 2019 third quarter, decreasing from $100.3 million in the 2018 third quarter. Absent foreign exchange rate fluctuations, revenues were $100.7 million, up from the prior year third quarter. Changes in foreign exchange rates resulted in a decrease in revenues of 1.2%, or $1.2 million, for the three months ended September 30, 2019, as compared with the 2018 period.

Excluding centralized indirect support costs, gross profit increased to $26.7 million, or a gross margin of 26.8% in 2019 from $26.5 million, or a gross margin of 26.5% in 2018, with slightly lower direct expenses as a percentage of revenues. After allocation of indirect costs, Crawford TPA Solutions recorded operating earnings of $9.3 million in the third quarter of 2019 representing an operating margin of 9.4% compared with $8.1 million, or 8.0% of revenues, in the 2018 third quarter.

Crawford Claims Solutions

Crawford Claims Solutions revenues before reimbursements were $86.3 million in the third quarter of 2019, increasing from $85.3 million in the third quarter of 2018 due to new clients in the U.S. and increases in the U.K. and Australia. Absent foreign currency rate fluctuations, third quarter 2019 revenues were $89.8 million up 5.3% from prior year third quarter.

Excluding centralized indirect support costs, gross profit increased to $19.8 million, or a gross margin of 22.9% in 2019 from $17.7 million, or a gross margin of 20.7% in 2018, due to an increase in new clients and expense reductions. After the allocation of indirect costs, operating earnings were $2.7 million in the 2019 third quarter compared with operating loss of $(0.1) million in the third quarter of 2018. These results represent an operating margin of 3.1% in the 2019 quarter and (0.2)% in the 2018 quarter.

Crawford Specialty Solutions

Crawford Specialty Solutions revenues before reimbursements were $68.9 million in the third quarter of 2019, down from $69.4 million in the same period of 2018. Absent foreign exchange rate fluctuations, revenues would have been $71.5 million for the three months ended September 30, 2019, increasing 3% over prior year revenues of $69.4 million. Changes in foreign exchange rates resulted in a decrease in revenues by 3.7%, or $2.6 million for the three months ended September 30, 2019, as compared with the 2018 period.

Excluding indirect support costs, gross profit decreased to $24.8 million, or a gross margin of 36.0%, in 2019 from $25.9 million, or a gross margin of 37.3%, in 2018, due to increased headcount to support client growth. After allocation of indirect costs, operating earnings were $13.3 million in the 2019 third quarter compared with $14.4 million in the 2018 period. The segment’s operating margin for the 2019 quarter was 19.3% as compared to 20.7% in the 2018 quarter.

Unallocated Corporate and Shared Costs and Credits, Net

Unallocated corporate costs, net were $1.6 million in the third quarter of 2019, compared with $5.8 million in the same period of 2018. The decrease for the three months ended September 30, 2019 was due to decreases in professional fees, self-insurance expense and other administrative costs, partially offset by an increase in defined benefit pension expense.

Arbitration and Claim Settlements

During the three months ended June 30, 2019, the Company recognized pretax charges in the amount of $11.4 million, or $0.15 per share after income taxes, related to an arbitration panel award to three of the four former executives of the Company's former Garden City Group associated with their departure from that company on December 31, 2015. During the three months ended September 30, 2019, the Company received a claim from the fourth former executive of the Garden City Group, which was settled for $1.2 million. The total expense for the nine months ended September 30, 2019 of $12.6 million, is classified as "Arbitration and claim settlements" on the Company's unaudited Condensed Consolidated Statements of Operations.

Balance Sheet and Cash Flow

The Company’s consolidated cash and cash equivalents position as of September 30, 2019, totaled $46.1 million, compared with $53.1 million at December 31, 2018. The Company’s total debt outstanding as of September 30, 2019, totaled $189.4 million, compared with $190.4 million at December 31, 2018.

The Company’s operations provided $42.3 million of cash during the 2019 period, compared with $16.0 million in the 2018 period. The $26.3 million increase in cash provided by operating activities was primarily due to better accounts receivable management and lower working capital requirements, including the positive cash flow impact of the Garden City Group disposal in June 2018, and a decrease in discretionary U.S. and U.K. pension contributions in 2019 compared to 2018. Free cash flow improved by $38.9 million over 2018 for the nine month period.

As expected, the Company made no contributions to its U.S defined benefit pension plan and $0.5 million to its U.K. plans for the 2019 nine month period, compared with contributions of $19.0 million and $4.2 million, respectively, in the 2018 nine month period.

During the nine months ended September 30, 2019, the Company repurchased 1,103,398 shares of CRD-A and 1,680,377 of CRD-B at an average cost of $9.33 and 9.16 per share, respectively.

2019 Guidance

As a result of benign weather continuing into the fourth quarter and slower than expected revenue contribution from new clients, the Company is adjusting its 2019 guidance as follows:

  • Consolidated revenues before reimbursements between $1.00 and $1.05 billion;
  • Net income attributable to shareholders of Crawford & Company between $32.0 and $35.0 million, or $0.63 to $0.68 diluted earnings per CRD-A share, and $0.55 to $0.60 diluted earnings per CRD-B share;
  • Non-GAAP net income attributable to shareholders of Crawford & Company, before arbitration and claim settlements, between $40.0 and $45.0 million, or $0.80 to $0.85 diluted earnings per CRD-A share, and $0.72 to $0.77 diluted earnings per CRD-B share;
  • Consolidated operating earnings between $82.5 and $87.5 million;
  • Consolidated adjusted EBITDA between $115.0 and $120.0 million.

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.

Conference Call

As previously announced, Crawford & Company will host a conference call on November 5, 2019 at 8:30 a.m. Eastern Time to discuss its third quarter 2019 results. The conference call can be accessed live by dialing 1-800-374-2518 and using Conference ID 8497263. A presentation for tomorrow’s call can also be found on the investor relations portion of the Company’s website, http://www.crawco.com. The call will be recorded and available for replay through December 5, 2019. You may dial 1-855-859-2056 to listen to the replay.

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 U.S. generally accepted accounting principles (“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, loss on disposition of business line, arbitration and claim settlements, income taxes, and net income or loss attributable to noncontrolling interests and redeemable noncontrolling interests.

Gross profit is defined as revenues less direct expenses which exclude indirect overhead expenses allocated to the business. Indirect expenses consist of centralized administrative support costs, regional and local shared services that are allocated to each segment based on usage.

Adjusted EBITDA is not a term defined by GAAP and as a result our measure of adjusted EBITDA might not be comparable to similarly titled measures used by other companies. However, adjusted EBITDA is used by management to evaluate, assess and benchmark our operational results. The Company believes that adjusted EBITDA is relevant and useful information widely used by analysts, investors and other interested parties. Adjusted EBITDA is defined as net income attributable to shareholders of the Company with recurring adjustments for depreciation and amortization, net corporate interest expense, income taxes and stock-based compensation expense and foreign exchange fluctuations. Additionally, adjustments for non-recurring expenses for arbitration and claim settlements, loss on disposition of business line and the disposed GCG business results have been included in the calculation of adjusted EBITDA.

Unallocated corporate and shared costs and credits include expenses and credits 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 unallocated professional fees, and certain self-insurance costs and recoveries that are not allocated to our individual operating segments.

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 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 vary significantly by jurisdiction. Net corporate interest expense results from capital structure decisions made by senior management and the Board of Directors, 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.

A significant portion of our operations are international. These international operations subject us to foreign exchange fluctuations. The following table illustrates revenue as a percentage of total revenue for the major currencies of the geographic areas that Crawford does business:

  Three Months Ended Nine Months Ended
(in thousands)September 30,
 2019
 September 30,
 2018
 September 30,
 2019
 September 30,
 2018
Geographic Area CurrencyUSD equivalent% of total USD equivalent% of total USD equivalent% of total USD equivalent% of total
U.S.USD$146,177 57.4% $143,144 56.1% $432,292 57.0% $466,541 57.8%
U.K.GBP30,844 12.1% 32,631 12.8% 93,967 12.4% 97,538 12.0%
CanadaCAD28,350 11.1% 29,158 11.4% 87,037 11.5% 92,454 11.5%
AustraliaAUD18,648 7.3% 18,859 7.4% 54,223 7.1% 53,838 6.7%
EuropeEUR13,816 5.4% 14,034 5.5% 40,002 5.3% 42,764 5.3%
Rest of WorldVarious16,842 6.6% 17,203 6.7% 51,095 6.7% 54,042 6.7%
Total Revenues, before reimbursements$254,677 100% $255,029 100% $758,616 100% $807,177 100%
             
             

Following is a reconciliation of segment and consolidated operating earnings to net income attributable to shareholders of Crawford & Company on a GAAP basis. The reconciliation of full year 2019 guidance is to the midpoint of the guidance range.

 Three months ended Nine months ended Midpoint
(in thousands)September 30, 2019September 30, 2018 September 30, 2019September 30, 2018 Guidance 2019
Operating earnings:       
Crawford TPA Solutions$9,347 $8,055  $21,106 $24,014   
Crawford Claims Solutions2,661 (135) 4,058 5,110   
Crawford Specialty Solutions13,301 14,363  38,108 34,423   
Unallocated corporate and shared costs, net(1,649)(5,798) (2,393)(7,316)  
Consolidated operating earnings23,660 16,485  60,879 56,231  $85,000 
(Deduct) Add:       
Net corporate interest expense(3,162)(2,398) (8,346)(7,402) (10,800)
Stock option expense(450)(393) (1,348)(1,355) (1,900)
Amortization expense(2,829)(2,786) (8,429)(8,342) (11,200)
Arbitration and claim settlements(1,200)  (12,552)  (12,552)
Loss on disposition of business line (1,201)  (18,996)  
Income taxes(5,328)(1,828) (11,120)(6,255) (16,000)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests355 17  713 159  952 
Net income attributable to shareholders of Crawford & Company$11,046 $7,896  $19,797 $14,040  $33,500 
        
        

Following is a reconciliation of net income attributable to shareholders of Crawford & Company on a GAAP basis to non-GAAP adjusted EBITDA. The reconciliation of full year 2019 guidance is to the midpoint of the guidance range.

 Three months ended Nine months ended Midpoint
(in thousands)September 30, 2019September 30, 2018 September 30, 2019September 30, 2018 Guidance 2019
Net income attributable to shareholders of Crawford & Company$11,046 $7,896  $19,797 $14,040  $33,500 
Add (Deduct):       
Depreciation and amortization10,236 10,644  30,086 33,284  40,648 
Stock-based compensation1,211 1,483  2,610 4,838  4,000 
Net corporate interest expense3,162 2,398  8,346 7,402  10,800 
Arbitration and claim settlements1,200   12,552   12,552 
Loss on disposition of business line 1,201   18,996   
Income taxes5,328 1,828  11,120 6,255  16,000 
Foreign exchange fluctuations272   816    
Removal of the impact of the disposed GCG business    1,007   
Non-GAAP adjusted EBITDA$32,455 $25,450  $85,327 $85,822  $117,500 
        
        

Following is a reconciliation of operating cash flow to free cash flow for the nine months ended September 30, 2019 and September 30, 2018:

Nine Months Ended
(in thousands)September 30, 2019 September 30, 2018 Change
Net Cash Provided by Operating Activities$42,325  $16,027  $26,298 
Less:     
Property & Equipment Purchases, net(5,664) (12,406) 6,742 
Capitalized Software (internal and external costs)(7,276) (13,098) 5,822 
Free Cash Flow$29,385  $(9,477) $38,862 
      
      

Following are the reconciliations of GAAP Revenue, Operating Earnings, Pretax Earnings, Net Income and Earnings Per Share to related non-GAAP Adjusted figures, which reflect 2019 on a constant dollar basis before arbitration and claim settlements and exclude the results of the disposal of the GCG business and the loss on disposition of business line for the three and nine months ended September 30, 2018.

Three months ended September 30, 2019
(in thousands)RevenuesNon-GAAP Operating earningsPretax earningsNet income attributable to Crawford & CompanyDiluted earnings per CRD-A shareDiluted earnings per CRD-B share
GAAP$254,677 $23,660 $16,019 $11,046 $0.21 $0.19 
Adjustments:      
Arbitration and claim settlements  1,200 887 0.02 0.02 
Foreign exchange fluctuations7,322 347 272 214   
Non-GAAP Adjusted$261,999 $24,007 $17,491 $12,147 $0.23 $0.21 
       


Three months ended September 30, 2018
(in thousands)RevenuesNon-GAAP Operating earningsPretax earningsNet income attributable to Crawford & CompanyDiluted earnings per CRD-A shareDiluted earnings per CRD-B share
GAAP$255,029 $16,485 $9,707 $7,896 $0.15 $0.13 
Adjustments:      
Loss on disposition of business line, net of tax of $303  1,201 898 0.02 0.02 
Non-GAAP Adjusted$255,029 $16,485 $10,908 $8,794 $0.17 $0.15 
       


Nine months ended September 30, 2019
(in thousands)RevenuesNon-GAAP Operating earningsPretax earningsNet income attributable to Crawford & CompanyDiluted earnings per CRD-A shareDiluted earnings per CRD-B share
GAAP$758,616 $60,878 $30,204 $19,797 $0.39 $0.33 
Adjustments:      
Arbitration and claim settlements  12,552 9,276 0.17 0.17 
Foreign exchange impacts19,501 939 816 463 0.01 0.01 
Non-GAAP Adjusted$778,117 $61,817 $43,572 $29,536 $0.57 $0.51 
       


Nine months ended September 30, 2018
(in thousands)RevenuesNon-GAAP Operating earningsPretax earningsNet income attributable to Crawford & CompanyDiluted earnings per CRD-A shareDiluted earnings per CRD-B share
GAAP$807,177 $56,231 $20,136 $140,040 $0.28 $0.22 
Adjustments:      
Loss on disposition of business line, net of tax of $4,796  18,996 14,200 0.25 0.25 
GCG business results(29,875)3,935 3,932 2,670 0.05 0.05 
Retained corporate overhead charged to GCG (2,925)(2,925)(1,986)(0.04)(0.04)
Non-GAAP Adjusted$777,302 $57,241 $40,139 $154,924 $0.54 $0.48 
       
       

Following is information regarding the weighted average shares used in the computation of basic and diluted earnings per share.

 Three months endedNine months ended
(in thousands)September 30, 2019September 30, 2018September 30, 2019September 30, 2018
Weighted-Average Shares Used to Compute Basic Earnings Per Share:    
Class A Common Stock30,645 30,713 30,701 30,829 
Class B Common Stock22,831 24,446 23,071 24,455 
Weighted-Average Shares Used to Compute Diluted Earnings Per Share:    
Class A Common Stock31,140 31,390 31,116 31,451 
Class B Common Stock22,831 24,446 23,071 24,455 
     
     

Further information regarding the Company’s operating results for the quarter and nine months ended September 30, 2019, and financial position as of September 30, 2019, and cash flows for the nine months ended September 30, 2019 is shown on the attached unaudited condensed consolidated financial statements.

About Crawford & Company

Based in Atlanta, Georgia, Crawford & Company (www.crawco.com) is the world's largest publicly listed independent provider of claims management and outsourcing 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 Company’s shares are traded on the NYSE under the symbols CRD-A and CRD-B. 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 CRD-A and CRD-B due to the payment of a higher per share dividend on CRD-A than CRD-B, 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.

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 and in the Investor Relations section of Crawford & Company’s website at www.crawco.com.
 

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)

Three Months Ended September 30,2019 2018 % Change
      
Revenues:     
Revenues Before Reimbursements$254,677  $255,029  %
Reimbursements11,165  9,834  14%
Total Revenues265,842  264,863  %
      
Costs and Expenses:     
Costs of Services Provided, Before Reimbursements180,849  179,238  1%
Reimbursements11,165  9,834  14%
Total Costs of Services192,014  189,072  2%
      
Selling, General, and Administrative Expenses52,564  63,247  (17)%
Corporate Interest Expense, Net3,162  2,398  32%
Arbitration and claim settlements1,200    nm 
Loss on Disposition of Business Line  1,201  nm 
Total Costs and Expenses248,940  255,918  (3)%
      
Other (Expense) Income(883) 762  (216)%
      
Income Before Income Taxes16,019  9,707  65%
Provision for Income Taxes5,328  1,828  191%
      
Net Income10,691  7,879  36%
      
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests355  17  1,988%
      
Net Income Attributable to Shareholders of Crawford & Company$11,046  $7,896  40%
      
Earnings Per Share - Basic:     
Class A Common Stock$0.22  $0.15  47%
Class B Common Stock$0.19  $0.13  46%
      
Earnings Per Share - Diluted:     
Class A Common Stock$0.21  $0.15  40%
Class B Common Stock$0.19  $0.13  46%
      
Cash Dividends Per Share:     
Class A Common Stock$0.07  $0.07  %
Class B Common Stock$0.05  $0.05  %
      

nm = not meaningful

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)

Nine Months Ended September 30,2019 2018 % Change
      
Revenues:     
Revenues Before Reimbursements$758,616  $807,177  (6)%
Reimbursements31,449  41,282  (24)%
Total Revenues790,065  848,459  (7)%
      
Costs and Expenses:     
Costs of Services Provided, Before Reimbursements533,664  574,380  (7)%
Reimbursements31,449  41,282  (24)%
Total Costs of Services565,113  615,662  (8)%
      
Selling, General, and Administrative Expenses171,407  188,907  (9)%
Corporate Interest Expense, Net8,346  7,402  13%
Arbitration and claim settlements12,552    nm 
Loss on Disposition of Business line  18,996  nm 
Total Costs and Expenses757,418  830,967  (9)%
      
Other (Expense) Income(2,443) 2,644  (192)%
      
Income Before Income Taxes30,204  20,136  50%
Provision for Income Taxes11,120  6,255  78%
      
Net Income19,084  13,881  37%
      
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests713  159  348%
      
Net Income Attributable to Shareholders of Crawford & Company$19,797  $14,040  41%
      
Earnings Per Share - Basic:     
Class A Common Stock$0.39  $0.28  39%
Class B Common Stock$0.33  $0.22  50%
      
Earnings Per Share - Diluted:     
Class A Common Stock$0.39  $0.28  39%
Class B Common Stock$0.33  $0.22  50%
      
Cash Dividends Per Share:     
Class A Common Stock$0.21  $0.21  %
Class B Common Stock$0.15  $0.15  %
      

nm = not meaningful

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2019 and December 31, 2018
Unaudited
(In Thousands, Except Par Values)

 September 30, December 31,
 2019 2018
ASSETS   
    
Current Assets:   
Cash and Cash Equivalents$46,101  $53,119 
Accounts Receivable, Net131,329  131,117 
Unbilled Revenues, at Estimated Billable Amounts115,672  108,291 
Income Taxes Receivable4,084  4,084 
Prepaid Expenses and Other Current Assets24,253  24,237 
Total Current Assets321,439  320,848 
    
Net Property and Equipment32,035  34,303 
    
Other Assets:   
Operating Lease Right-of-Use Asset, Net93,610   
Goodwill97,152  96,890 
Intangible Assets Arising from Business Acquisitions, Net76,529  85,023 
Capitalized Software Costs, Net66,352  72,210 
Deferred Income Tax Assets19,687  22,146 
Other Noncurrent Assets68,687  70,022 
Total Other Assets422,017  346,291 
    
Total Assets$775,491  $701,442 
    
LIABILITIES AND SHAREHOLDERS’ INVESTMENT   
    
Current Liabilities:   
Short-Term Borrowings$33,606  $23,195 
Accounts Payable31,178  37,834 
Operating Lease Liability30,073   
Accrued Compensation and Related Costs66,559  66,530 
Self-Insured Risks14,873  15,246 
Income Taxes Payable2,236  3,145 
Deferred Rent  15,919 
Other Accrued Liabilities37,242  32,391 
Deferred Revenues29,007  30,961 
Current Installments of Finance Leases13  89 
Total Current Liabilities244,787  225,310 
    
Noncurrent Liabilities:   
Long-Term Debt and Finance Leases, Less Current Installments155,761  167,126 
Operating Lease Liability78,371   
Deferred Revenues23,839  21,713 
Accrued Pension Liabilities71,093  74,323 
Other Noncurrent Liabilities29,761  32,024 
Total Noncurrent Liabilities358,825  295,186 
    
Redeemable Noncontrolling Interests4,846  5,500 
    
Shareholders’ Investment:   
Class A Common Stock, $1.00 Par Value30,420  30,927 
Class B Common Stock, $1.00 Par Value22,727  24,408 
Additional Paid-in Capital62,716  58,793 
Retained Earnings260,621  273,607 
Accumulated Other Comprehensive Loss(212,122) (216,447)
Shareholders’ Investment Attributable to Shareholders of Crawford & Company164,362  171,288 
Noncontrolling Interests2,671  4,158 
Total Shareholders’ Investment167,033  175,446 
    
Total Liabilities and Shareholders’ Investment$775,491  $701,442 
        

CRAWFORD & COMPANY
SUMMARY RESULTS BY OPERATING SEGMENT WITH DIRECT COMPENSATION AND OTHER EXPENSES
Unaudited
(In Thousands, Except Percentages)

Three Months Ended September 30,

 Crawford TPA Solutions%Crawford Claims Solutions%Crawford Specialty Solutions%
 20192018Change20192018Change20192018Change
          
Revenues Before Reimbursements$99,495 $100,271 (0.8)%$86,250 $85,332 1.1%$68,932 $69,426 (0.7)%
          
Direct Compensation, Fringe Benefits & Non-Employee Labor58,594 59,146 (0.9)%56,985 56,306 1.2%35,993 34,758 3.6%
% of Revenues Before Reimbursements58.9%59.0% 66.1%66.0% 52.2%50.1% 
          
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor31,554 33,070 (4.6)%26,604 29,161 (8.8)%19,638 20,305 (3.3)%
% of Revenues Before Reimbursements31.7%33.0% 30.8%34.2% 28.5%29.2% 
          
Total Operating Expenses90,148 92,216 (2.2)%83,589 85,467 (2.2)%55,631 55,063 1.0%
          
Operating Earnings (1)$9,347 $8,055 16.0%$2,661 $(135)(2,071.1)%$13,301 $14,363 (7.4)%
% of Revenues Before Reimbursements9.4%8.0% 3.1%(0.2)% 19.3%20.7% 

Nine Months Ended September 30,

 Crawford TPA Solutions%Crawford Claims Solutions%Crawford Specialty Solutions%
 20192018Change20192018Change20192018Change
          
Revenues Before Reimbursements$296,807 $303,152 (2.1)%$255,572 $268,888 (5.0)%$206,237 $235,137 (12.3)%
          
Direct Compensation, Fringe Benefits & Non-Employee Labor177,911 177,706 0.1%168,951 176,778 (4.4)%106,003 120,821 (12.3)%
% of Revenues Before Reimbursements59.9%58.6% 66.1%65.7% 51.4%51.4% 
          
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor97,790 101,432 (3.6)%82,563 87,000 (5.1)%62,126 79,893 (22.2)%
% of Revenues Before Reimbursements32.9%33.5% 32.3%32.4% 30.1%34.0% 
          
Total Operating Expenses275,701 279,138 (1.2)%251,514 263,778 (4.6)%168,129 200,714 (16.2)%
          
Operating Earnings (1)$21,106 $24,014 (12.1)%$4,058 $5,110 (20.6)%$38,108 $34,423 10.7%
% of Revenues Before Reimbursements7.1%7.9% 1.6%1.9% 18.5%14.6% 
                

(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, loss on disposition of business line, arbitration and claim settlements, and certain unallocated corporate and shared costs and credits. See pages 5-7 for additional information about segment operating earnings.

CRAWFORD & COMPANY
SUMMARY RESULTS BY OPERATING SEGMENT WITH DIRECT AND INDIRECT COSTS
Unaudited
(In Thousands, Except Percentages)

Three Months Ended September 30,

 Crawford TPA Solutions%Crawford Claims Solutions%Crawford Specialty Solutions%
 20192018Change20192018Change20192018Change
          
Revenues Before Reimbursements$99,495 $100,271 (0.8)%$86,250 $85,332 1.1%$68,932 $69,426 (0.7)%
          
Direct Expense72,785 73,738 (1.3)%66,498 67,635 (1.7)%44,130 43,503 1.4%
% of Revenues Before Reimbursements73.2%73.5% 77.1%79.3% 64.0%62.7% 
          
Segment Gross Profit26,710 26,533 0.7%19,752 17,697 11.6%24,802 25,923 (4.3)%
% of Revenues Before Reimbursements26.8%26.5% 22.9%20.7% 36.0%37.3% 
          
Indirect Costs17,363 18,478 (6.0)%17,091 17,832 (4.2)%11,501 11,560 (0.5)%
% of Revenues Before Reimbursements17.5%18.4% 19.8%20.9% 16.7%16.7% 
          
Operating Earnings (1)$9,347 $8,055 16.0%$2,661 $(135)(2,071.1)%$13,301 $14,363 (7.4)%
% of Revenues Before Reimbursements9.4%8.0% 3.1%(0.2)% 19.3%20.7% 

Nine Months Ended September 30,

 Crawford TPA Solutions%Crawford Claims Solutions%Crawford Specialty Solutions%
 20192018Change20192018Change20192018Change
          
Revenues Before Reimbursements$296,807 $303,152 (2.1)%$255,572 $268,888 (5.0)%$206,237 $235,137 (12.3)%
          
Direct Expense220,956 223,681 (1.2)%199,190 211,725 (5.9)%133,771 155,583 (14.0)%
% of Revenues Before Reimbursements74.4%73.8% 77.9%78.7% 64.9%66.2% 
          
Segment Gross Profit75,851 79,471 (4.6)%56,382 57,163 (1.4)%72,466 79,554 (8.9)%
% of Revenues Before Reimbursements25.6%26.2% 22.1%21.3% 35.1%33.8% 
          
Indirect Costs54,745 55,457 (1.3)%52,324 52,053 0.5%34,358 45,131 (23.9)%
% of Revenues Before Reimbursements18.4%18.3% 20.5%19.4% 16.7%19.2% 
          
Operating Earnings (1)$21,106 $24,014 (12.1)%$4,058 $5,110 (20.6)%$38,108 $34,423 10.7%
% of Revenues Before Reimbursements7.1%7.9% 1.6%1.9% 18.5%14.6% 
                

(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, loss on disposition of business line, arbitration and claim settlements and certain unallocated corporate and shared costs and credits. See pages 5-7  for additional information about segment operating earnings.

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2019 and September 30, 2018
Unaudited
(In Thousands)

  2019 2018
Cash Flows From Operating Activities:    
Net Income $19,084  $13,881 
Reconciliation of Net Income to Net Cash Provided by Operating Activities:    
Depreciation and Amortization 30,086  33,284 
Stock-Based Compensation Costs 2,610  4,838 
Loss on Disposition of Business Line   18,996 
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:    
Accounts Receivable, Net 1,108  12,811 
Unbilled Revenues, Net (8,740) (26,156)
Accrued or Prepaid Income Taxes 443  788 
Accounts Payable and Accrued Liabilities (4,361) (10,665)
Deferred Revenues 514  (2,068)
Accrued Retirement Costs 1,545  (26,486)
Prepaid Expenses and Other Operating Activities 36  (3,196)
Net Cash Provided by Operating Activities 42,325  16,027 
     
Cash Flows From Investing Activities:    
Acquisitions of Property and Equipment (5,664) (12,406)
Cash Proceeds from Disposition of Business Line   40,275 
Capitalization of Computer Software Costs (7,276) (13,098)
Payments for Business Acquisitions, Net of Cash Acquired (2,296) (2,500)
Other Investing Activities   (218)
Net Cash (Used in) Provided by Investing Activities (15,236) 12,053 
     
Cash Flows From Financing Activities:    
Cash Dividends Paid (9,894) (10,159)
Proceeds from Shares Purchased Under Employee Stock-Based Compensation Plans 1,909  1,301 
Repurchases of Common Stock (25,673) (7,715)
Increases in Short-Term and Revolving Credit Facility Borrowings 65,449  89,554 
Payments on Short-Term and Revolving Credit Facility Borrowings (64,962) (100,895)
Payments on Finance Lease Obligations (106) (361)
Dividends Paid to Noncontrolling Interests (458) (349)
Net Cash Used In Financing Activities (33,735) (28,624)
     
Effects of Exchange Rate Changes on Cash and Cash Equivalents (372) (128)
Decrease in Cash and Cash Equivalents (7,018) (672)
Cash and Cash Equivalents at Beginning of Year 53,119  54,011 
Cash and Cash Equivalents at End of Period $46,101  $53,339