Crawford & Company Reports 2020 Second Quarter Results

Operating Performance Highlights Resilience Of Company


ATLANTA, Aug. 03, 2020 (GLOBE NEWSWIRE) -- Crawford & Company® (NYSE: CRD-A and CRD-B), the world’s largest publicly listed independent provider of claims management and outsourcing solutions to carriers, brokers and corporates, today announced its financial results for the  second quarter ended June 30, 2020.

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
Second Quarter 2020

  • Revenues before reimbursements of $234.4 million, compared with $256.9 million for the 2019 second quarter

  • Net income attributable to shareholders of $5.9 million, compared with $2.6 million in the same period last year

  • Diluted earnings per share of $0.11 for CRD-A and $0.11 for CRD-B, compared with $0.06 for CRD-A and $0.04 for CRD-B in the prior year second quarter

Non-GAAP Consolidated Results
Second Quarter 2020

Non-GAAP results for the 2020 second quarter have been presented on a constant dollar basis to 2019 and exclude the non-cash income tax impact of the first quarter 2020 goodwill impairment of $2.2 million and the loss on disposition of business of $0.3 million. Non-GAAP consolidated results for the 2019 quarter exclude arbitration and claim settlements of $11.4 million.

  • Revenues before reimbursements, on a non-GAAP basis, of $240.2 million, compared with $256.9 million for the 2019 second quarter

  • Net income attributable to shareholders, on a non-GAAP basis, totaled $8.8 million in the 2020 second quarter, compared with $11.0 million in the same period last year

  • Diluted earnings per share, on a non-GAAP basis, of $0.16 for CRD-A and $0.16 for CRD-B in the 2020 second quarter, compared with $0.21 for CRD-A and $0.19 for CRD-B in the prior year second quarter

  • Consolidated adjusted operating earnings, on a non-GAAP basis, were $18.7 million, or 7.8% of non-GAAP revenues, in the 2020 second quarter, compared with $22.5 million, or 8.8% of revenues, in the 2019 second quarter

  • Consolidated adjusted EBITDA, a non-GAAP financial measure, was $25.9 million, or 10.8% of non-GAAP revenues, in the 2020 second quarter, compared with $31.2 million, or 12.1% of revenues, in the 2019 second quarter

Management Comments

Mr. Rohit Verma, chief executive officer of Crawford & Company, stated, “Our second quarter 2020 operating results were below 2019 levels, however, we consider the operating earnings of $18.7 million generated for the quarter to be a strong result considering the current global economic backdrop.  These operating earnings represent a significant improvement over the $7.0 million we reported in this year’s first quarter. While we saw weakness in our Broadspire business due to the economic downturn, our loss adjusting businesses capitalized on the new business wins over the last two years which had been suppressed due to lack of weather activity. Our momentum is strong, but could be dampened by the increasing COVID-19 infection rate in the U.S. and the possibility of future waves globally.”

Mr. Verma concluded, “I would like to thank all our employees and our customers. Our employees have demonstrated strong commitment to our purpose, enabling the highest level of service even in these difficult times. I am thankful to our customers who continue to place their confidence and trust in us, giving us the opportunity to live our purpose of restoring and enhancing, lives businesses and communities.”

Segment Results for the Second Quarter

Crawford TPA Solutions

Crawford TPA Solutions segment revenues before reimbursements were $86.7 million in the 2020 second quarter, decreasing from $99.5 million in the 2019 second quarter. Absent foreign currency rate fluctuations of $(0.9) million, second quarter 2020 revenues would have been $87.6 million, down 12.0% from prior year second quarter.

Excluding centralized indirect support costs, gross profit decreased to $19.8 million, or a gross margin of 22.8% in 2020 from $23.7 million, or a gross margin of 23.8% in 2019. After allocation of indirect costs, Crawford TPA Solutions recorded operating earnings of $3.2 million in the second quarter of 2020 representing an operating margin of 3.7% compared with $5.0 million, or 5.1% of revenues, in the 2019 second quarter.

Crawford Claims Solutions

Crawford Claims Solutions revenues before reimbursements were $81.5 million in the second quarter of 2020, decreasing from $86.0 million in the second quarter of 2019. Absent foreign currency rate fluctuations of $(2.8) million, second quarter 2020 revenues would have been $84.3 million, down 2.0% from the prior year second quarter.

Excluding centralized indirect support costs, gross profit decreased to $19.0 million, or a gross margin of 23.3% in 2020 from $19.6 million, or a gross margin of 22.7% in 2019. After the allocation of indirect costs, the segment had operating earnings of $2.8 million in the 2020 second quarter increasing over the $1.7 million in the second quarter of 2019. The operating margin was 3.4% in the 2020 quarter and 2.0% in the 2019 quarter.

Crawford Specialty Solutions

Crawford Specialty Solutions revenues before reimbursements were $66.2 million in the second quarter of 2020, down from $71.4 million in the same period of 2019. Absent foreign exchange rate fluctuations of $(2.2) million, revenues would have been $68.4 million for the three months ended June 30, 2020, decreasing 4.2% compared with prior year second quarter revenues.

Excluding indirect support costs, gross profit decreased to $25.1 million, or a gross margin of 37.9% in the 2020 quarter, from $25.2 million, or a gross margin of 35.3%, in the 2019 period. After allocation of indirect costs, operating earnings were $14.0 million in the 2020 second quarter increasing over the $12.6 million in the 2019 period. The segment’s operating margin for the 2020 quarter was 21.1% as compared with 17.7% in the 2019 quarter.

Unallocated Corporate and Shared Costs and Credits, Net

Unallocated corporate costs were $1.7 million in the second quarter of 2020, compared with credits of $3.2 million in the same period of 2019. The increase for the three months ended June 30, 2020 was due to CEO transition costs, severance costs, and an increase in self-insurance expenses, partially offset by a credit from the Canada Emergency Wage Subsidy and a decrease in defined benefit pension expense.

Income Tax Impact of First Quarter Goodwill Impairment

The Company recognized a non-cash goodwill impairment in the 2020 first quarter, totaling $17.7 million, related to its Crawford Claims Solutions segment. Due to the non-discrete income tax treatment of the goodwill impairment, the initial income tax benefit related to the impairment will normalize during the remainder of the year, resulting in a lower full year income tax benefit. During the 2020 second quarter, the impact of this treatment decreased the income tax benefit by $2.2 million, or $0.04 per share.

Subsequent Event

On June 12, 2020, the Company sold its 51% interest in Lloyd Warwick International for cash proceeds of $19.6 million and payment of $3.6 million intercompany indebtedness. Due to the two-month reporting lag for reporting its international results, this transaction will be recognized in the 2020 third quarter. Based on preliminary analysis we estimate this transaction will result in a gain between $10.0 to $12.0 million in the third quarter, or $0.19 to $0.23 per diluted share.

COVID-19

The Company estimates that COVID-19 negatively impacted its revenues in the range of $22.0 to $26.0 million for the three months ended June 30, 2020, and negatively impacted its revenues in the range of $25.0 to $29.0 million for the six months ended June 30, 2020. The Company expects the ongoing global economic slowdown resulting from COVID-19 could have a material impact to its results of operations, financial condition, and cash flow in one or more future quarters.

Balance Sheet and Cash Flow

The Company’s consolidated cash and cash equivalents position as of June 30, 2020, totaled $60.0 million, compared with $51.8 million at December 31, 2019. The Company’s total debt outstanding as of June 30, 2020, totaled $195.6 million, compared with $177.0 million at December 31, 2019.

The Company’s operations provided $12.0 million of cash during 2020, compared with $8.7 million provided in 2019. The increase in cash provided by operating activities was primarily due to improved collections in billed and unbilled receivables offset by an increase in pension contributions and lower operating earnings. Free cash flow decreased by $2.9 million compared with 2019, reflecting higher software development and capital expenditures in 2020 compared with 2019.

The Company made $3.0 million in contributions to its U.S. defined benefit pension plan and $0.3 million to its U.K. plans for 2020, compared with no contributions to the U.S. plan and $0.3 million to the U.K. plans in 2019.

During 2020, the Company repurchased 155,351 shares of CRD-A and 161,459 of CRD-B at an average cost of $8.42 per share. The total cost of share repurchases during 2020 was $2.7 million. The Company has placed a hold on its current share repurchase plan and did not repurchase any shares during the 2020 second quarter.

Conference Call

As previously announced, Crawford & Company will host a conference call on August 4, 2020 at 8:30 a.m. Eastern Time to discuss its second quarter 2020 results. The conference call can be accessed live by dialing 1-800-374-2518 and using Conference ID 3377243. 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 September 4, 2020. 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, goodwill impairment, restructuring costs, arbitration and claims settlement, loss on disposition of business, 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, stock-based compensation expense and foreign exchange fluctuations. Additionally, adjustments for non-recurring expenses for goodwill impairment, restructuring costs, arbitration and claim settlements and loss on disposition of business 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  Six Months Ended 
(in thousands) June 30,
2020
  June 30,
2019
  June 30,
2020
  June 30,
2019
 
Geographic AreaCurrencyUSD
equivalent
 % of total  USD
equivalent
 % of total  USD
equivalent
 % of total  USD
equivalent
 % of total 
U.S.USD$131,888  56.3% $146,525  57.0% $266,336  56.4% $286,115  56.5%
U.K.GBP 32,561  13.9%  31,534  12.3%  64,943  13.8%  63,123  12.8%
CanadaCAD 20,852  8.9%  28,803  11.2%  46,072  9.8%  58,687  12.1%
AustraliaAUD 18,779  8.0%  19,319  7.5%  34,324  7.3%  35,574  6.6%
EuropeEUR 14,019  6.0%  13,320  5.2%  27,408  5.8%  26,185  5.2%
Rest of WorldVarious 16,317  6.9%  17,380  6.8%  32,864  6.9%  34,255  6.8%
Total Revenues, before reimbursements$234,416  100.0% $256,881  100.0% $471,947  100.0% $503,939  100.0%
                             

Following is a reconciliation of segment and consolidated operating earnings to net income (loss) attributable to shareholders of Crawford & Company on a GAAP basis:

 Three months ended  Six months ended 
(in thousands)June 30, 2020 June 30, 2019  June 30, 2020 June 30, 2019 
Operating earnings:             
Crawford TPA Solutions$3,171 $5,026  $9,456 $11,759 
Crawford Claims Solutions 2,789  1,710   (890) 1,397 
Crawford Specialty Solutions 13,993  12,612   20,950  24,807 
Unallocated corporate and shared costs, net (1,709) 3,170   (4,259) (744)
Consolidated operating earnings 18,244  22,518   25,257  37,219 
(Deduct) add:             
Net corporate interest expense (2,452) (2,468)  (4,676) (5,184)
Stock option expense (286) (413)  (576) (898)
Amortization expense (2,732) (2,802)  (5,488) (5,600)
Goodwill impairment      (17,674)  
Restructuring costs      (5,714)  
Arbitration and claim settlements   (11,352)    (11,352)
Loss on disposition of business (341)    (341)  
Income tax (provision) benefit (6,311) (2,859)  2,175  (5,792)
Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests (224) 18   1,536  358 
Net income (loss) attributable to shareholders of Crawford & Company$5,898 $2,642  $(5,501)$8,751 
              

Following is a reconciliation of net income (loss) attributable to shareholders of Crawford & Company on a GAAP basis to non-GAAP adjusted EBITDA:

 Three months ended  Six months ended 
(in thousands)June 30, 2020 June 30, 2019  June 30, 2020 June 30, 2019 
Net income (loss) attributable to shareholders of Crawford & Company$5,898 $2,642  $(5,501)$8,751 
Add (Deduct):             
Depreciation and amortization 9,390  10,226   19,450  19,850 
Stock-based compensation 1,118  1,646   1,998  1,399 
Net corporate interest expense 2,452  2,468   4,676  5,184 
Goodwill impairment      17,674   
Restructuring costs      5,714   
Arbitration and claim settlements   11,352     11,352 
Loss on disposition of business 341     341   
Income tax provision (benefit) 6,311  2,859   (2,175) 5,792 
Foreign exchange fluctuations 358     374   
Non-GAAP adjusted EBITDA$25,868 $31,193  $42,551 $52,328 
              

Following is a reconciliation of operating cash flow to free cash flow for the six months ended June 30, 2020 and 2019:

Six months ended 
(in thousands)June 30, 2020  June 30, 2019  Change 
Net Cash Provided by Operating Activities$12,032  $8,739  $3,293 
Less:           
Property & Equipment Purchases, net (5,476)  (3,729)  (1,747)
Capitalized Software (internal and external costs) (8,823)  (4,369)  (4,454)
Free Cash Flow$(2,267) $641  $(2,908)
            

Following are the reconciliations of GAAP Revenue, Operating Earnings, Pretax Earnings (Loss), Net Income (Loss) and Earnings (Loss) Per Share to related non-GAAP Adjusted figures, which reflect 2020 on a constant dollar basis before goodwill impairment, restructuring costs, and loss on disposition of business and for 2019 exclude the results of the arbitration and claim settlements:

Three Months Ended June 30, 2020 
(in thousands)Revenues Non-GAAP
Operating
earnings
 Pretax earnings Net income
attributable to
Crawford &
Company(1)
 Diluted
earnings per
CRD-A
share(1)
 Diluted
earnings per
CRD-B
share(1)
 
GAAP$234,416 $18,244 $12,433 $5,898 $0.11 $0.11 
Adjustments:                  
Income tax impact of first quarter goodwill impairment       2,206  0.04  0.04 
Loss on disposition of business     341  265     
Foreign exchange fluctuations 5,832  407  358  384  0.01  0.01 
Non-GAAP Adjusted$240,248 $18,651 $13,132 $8,753 $0.16 $0.16 
                   


Three Months Ended June 30, 2019 
(in thousands)Revenues Non-GAAP
Operating
earnings
 Pretax earnings Net income
attributable to
Crawford &
Company
 Diluted
earnings per
CRD-A
share
 Diluted
earnings per
CRD-B
share
 
GAAP$256,881 $22,518 $5,483 $2,642 $0.06 $0.04 
Adjustments:                  
Arbitration and claim settlements     11,352  8,389  0.15  0.15 
Non-GAAP Adjusted$256,881 $22,518 $16,835 $11,031 $0.21 $0.19 
                   


Six Months Ended June 30, 2020 
(in thousands)Revenues Non-GAAP
Operating
earnings
 Pretax (loss)
income
 Net (loss) income
attributable to
Crawford &
Company(1)
 Diluted (loss)
earnings per
CRD-A
share(1)
 Diluted (loss)
earnings per
CRD-B
share(1)
 
GAAP$471,947 $25,257 $(9,212)$(5,501)$(0.10)$(0.12)
Adjustments:                  
Goodwill impairment     17,674  11,339  0.21  0.21 
Restructuring costs     5,714  3,263  0.06  0.06 
Loss on disposition of business     341  265  0.01  0.01 
Foreign exchange fluctuations 7,100  416  374  374  0.01  0.01 
Non-GAAP Adjusted$479,047 $25,673 $14,891 $9,740 $0.19 $0.17 
                   


Six Months Ended June 30, 2019 
(in thousands)Revenues Non-GAAP
Operating
earnings
 Pretax earnings Net income
attributable to
Crawford &
Company
 Diluted
earnings per
CRD-A
share
 Diluted
earnings per
CRD-B
share
 
GAAP$503,939 $37,219 $8,393 $8,751 $0.18 $0.14 
Adjustments:                  
Arbitration and claim settlements     11,352  8,389  0.15  0.15 
Non-GAAP Adjusted$503,939 $37,219 $19,745 $17,140 $0.33 $0.29 
                   

(1) The income tax impact of goodwill impairment is based on the estimated annual effective income tax rate. Due to the non-discrete income tax treatment of the first quarter goodwill impairment, the income tax benefit will normalize as income is earned during the remainder of the year, resulting in a lower full year income tax benefit.

Following is information regarding the weighted average shares used in the computation of basic and diluted earnings (loss) per share:

 Three months ended Six months ended 
(in thousands)June 30,
2020
 June 30,
2019
 June 30,
2020
 June 30,
2019
 
GAAP            
Weighted-Average Shares Used to Compute Basic Earnings (Loss) Per Share:            
Class A Common Stock 30,521  30,799  30,541  30,729 
Class B Common Stock 22,510  23,021  22,544  23,193 
Weighted-Average Shares Used to Compute Diluted Earnings (Loss) Per Share:            
Class A Common Stock 30,690  31,113  30,541  31,110 
Class B Common Stock 22,510  23,021  22,544  23,193 
             
Non-GAAP (2)            
Weighted-Average Shares Used to Compute Diluted Earnings Per Share:            
Class A Common Stock 30,690  31,113  30,747  31,110 
Class B Common Stock 22,510  23,021  22,544  23,193 
             

(2) The Company had a net loss for GAAP reporting for the six months ended June 30, 2020, resulting in no additional dilutive securities added to the basic weighted average shares in calculating diluted weighted average shares for GAAP reporting as their impact would be anti-dilutive. As the Company has Non-GAAP positive net income for the six months ended June 30, 2020, these dilutive securities were added back to calculate Non-GAAP earnings per share.

Further information regarding the Company’s operating results for the quarter ended June 30, 2020, financial position as of June 30, 2020, and cash flows for the quarter ended June 30, 2020, is shown on the attached unaudited condensed consolidated financial statements.

About Crawford & Company

Based in Atlanta, Crawford & Company (NYSE: CRD-A and CRD-B) is the world's largest publicly listed independent provider of claims management and outsourcing solutions to carriers, brokers and corporates 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. More information is available at www.crawco.com.

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 June 30, 2020  2019  % Change 
             
Revenues:            
Revenues Before Reimbursements $234,416  $256,881   (9)%
Reimbursements  8,459   10,965   (23)%
Total Revenues  242,875   267,846   (9)%
             
Costs and Expenses:            
Costs of Services Provided, Before Reimbursements  163,598   174,927   (6)%
Reimbursements  8,459   10,965   (23)%
Total Costs of Services  172,057   185,892   (7)%
             
Selling, General, and Administrative Expenses  55,508   60,184   (8)%
Corporate Interest Expense, Net  2,452   2,468   (1)%
Arbitration and Claim Settlements     11,352  nm 
Loss on Disposition of Business  341     nm 
Total Costs and Expenses  230,358   259,896   (11)%
             
Other Expense, net  (84)  (2,467)  (97)%
             
Income Before Income Taxes  12,433   5,483   127%
Provision for Income Taxes  6,311   2,859   121%
             
Net Income  6,122   2,624   133%
             
Net (Income) Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests  (224)  18   (1344)%
             
Net Income Attributable to Shareholders of Crawford & Company $5,898  $2,642   123%
             
Earnings Per Share - Basic:            
Class A Common Stock $0.11  $0.06   83%
Class B Common Stock $0.11  $0.04   175%
             
Earnings Per Share - Diluted:            
Class A Common Stock $0.11  $0.06   83%
Class B Common Stock $0.11  $0.04   175%
             
Cash Dividends Per Share:            
Class A Common Stock $0.03  $0.07   (57)%
Class B Common Stock $0.03  $0.05   (40)%
             

nm = not meaningful

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

Six Months Ended June 30, 2020  2019  % Change 
             
Revenues:            
Revenues Before Reimbursements $471,947  $503,939   (6)%
Reimbursements  16,974   20,284   (16)%
Total Revenues  488,921   524,223   (7)%
             
Costs and Expenses:            
Costs of Services Provided, Before Reimbursements  341,202   352,815   (3)%
Reimbursements  16,974   20,284   (16)%
Total Costs of Services  358,176   373,099   (4)%
             
Selling, General, and Administrative Expenses  111,262   118,843   (6)%
Corporate Interest Expense, Net  4,676   5,184   (10)%
Goodwill Impairment  17,674     nm 
Restructuring Costs  5,714     nm 
Arbitration and Claim Settlements     11,352  nm 
Loss on Disposition of Business  341     nm 
Total Costs and Expenses  497,843   508,478   (2)%
             
Other Expense, net  (290)  (1,560)  (81)%
             
(Loss) Income Before Income Taxes  (9,212)  14,185   (165)%
(Benefit) Provision for Income Taxes  (2,175)  5,792   (138)%
             
Net (Loss) Income  (7,037)  8,393   (184)%
             
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests  1,536   358   329%
             
Net (Loss) Income Attributable to Shareholders of Crawford & Company $(5,501) $8,751   (163)%
             
(Loss) Earnings Per Share - Basic:            
Class A Common Stock $(0.10) $0.18   (156)%
Class B Common Stock $(0.12) $0.14   (186)%
             
(Loss) Earnings Per Share - Diluted:            
Class A Common Stock $(0.10) $0.18   (156)%
Class B Common Stock $(0.12) $0.14   (186)%
             
Cash Dividends Per Share:            
Class A Common Stock $0.10  $0.14   (29)%
Class B Common Stock $0.08  $0.10   (20)%
             

nm = not meaningful

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2020 and December 31, 2019
Unaudited
(In Thousands, Except Par Values)

  June 30,  December 31, 
  2020  2019 
ASSETS        
         
Current Assets:        
Cash and Cash Equivalents $59,958  $51,802 
Accounts Receivable, Net  120,941   128,217 
Unbilled Revenues, at Estimated Billable Amounts  106,335   103,894 
Income Taxes Receivable  9,590   7,820 
Prepaid Expenses and Other Current Assets  23,470   23,476 
Total Current Assets  320,294   315,209 
         
Net Property and Equipment  30,924   31,425 
         
Other Assets:        
Operating Lease Right-of-Use Asset, Net  106,508   102,354 
Goodwill  62,086   80,642 
Intangible Assets Arising from Business Acquisitions, Net  68,815   75,083 
Capitalized Software Costs, Net  64,000   66,445 
Deferred Income Tax Assets  18,550   17,971 
Other Noncurrent Assets  76,159   70,884 
Total Other Assets  396,118   413,379 
         
Total Assets $747,336  $760,013 
         
LIABILITIES AND SHAREHOLDERS INVESTMENT        
         
Current Liabilities:        
Short-Term Borrowings $39,887  $28,531 
Accounts Payable  31,446   34,377 
Operating Lease Liability  30,027   30,765 
Accrued Compensation and Related Costs  59,625   68,499 
Self-Insured Risks  12,318   11,311 
Income Taxes Payable     3,030 
Other Accrued Liabilities  33,440   31,449 
Deferred Revenues  27,871   28,288 
Current Installments of Finance Leases  38   15 
Total Current Liabilities  234,652   236,265 
         
Noncurrent Liabilities:        
Long-Term Debt and Finance Leases, Less Current Installments  155,649   148,408 
Operating Lease Liability  93,109   87,064 
Deferred Revenues  23,850   24,080 
Accrued Pension Liabilities  58,388   65,909 
Other Noncurrent Liabilities  31,895   33,410 
Total Noncurrent Liabilities  362,891   358,871 
         
Redeemable Noncontrolling Interests  173   2,310 
         
Shareholders’ Investment:        
Class A Common Stock, $1.00 Par Value  30,523   30,610 
Class B Common Stock, $1.00 Par Value  22,510   22,671 
Additional Paid-in Capital  65,063   63,392 
Retained Earnings  236,234   249,551 
Accumulated Other Comprehensive Loss  (208,835)  (206,907)
Shareholders’ Investment Attributable to Shareholders of Crawford & Company  145,495   159,317 
Noncontrolling Interests  4,125   3,250 
Total Shareholders’ Investment  149,620   162,567 
         
Total Liabilities and Shareholders’ Investment $747,336  $760,013 
         


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

Three Months Ended June 30,

  Crawford TPA Solutions  %  Crawford Claims Solutions  %  Crawford Specialty Solutions  % 
  2020  2019  Change  2020  2019  Change  2020  2019  Change 
                                     
Revenues Before Reimbursements $86,725  $99,518   (12.9)% $81,451  $86,003   (5.3)% $66,240  $71,360   (7.2)%
                                     
Direct Compensation, Fringe Benefits & Non-Employee Labor  53,701   60,936   (11.9)%  52,054   56,065   (7.2)%  33,878   35,052   (3.3)%
                                     
% of Revenues Before Reimbursements  61.9%  61.2%      63.9%  65.2%      51.1%  49.1%    
                                     
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor  29,853   33,556   (11.0)%  26,608   28,228   (5.7)%  18,369   23,696   (22.5)%
                                     
% of Revenues Before Reimbursements  34.4%  33.7%      32.7%  32.8%      27.7%  33.2%    
                                     
Total Operating Expenses  83,554   94,492   (11.6)%  78,662   84,293   (6.7)%  52,247   58,748   (11.1)%
                                     
Operating Earnings (1) $3,171  $5,026   (36.9)% $2,789  $1,710   63.1% $13,993  $12,612   10.9%
                                     
% of Revenues Before Reimbursements  3.7%  5.1%      3.4%  2.0%      21.1%  17.7%    

Six Months Ended June 30,

  Crawford TPA Solutions  %  Crawford Claims Solutions  %  Crawford Specialty Solutions  % 
  2020  2019  Change  2020  2019  Change  2020  2019  Change 
                                     
Revenues Before Reimbursements $183,660  $197,312   (6.9)% $159,038  $169,322   (6.1)% $129,249  $137,305   (5.9)%
                                     
Direct Compensation, Fringe Benefits & Non-Employee Labor  112,630   119,317   (5.6)%  105,434   111,966   (5.8)%  69,749   70,010   (0.4)%
                                     
% of Revenues Before Reimbursements  61.3%  60.5%      66.3%  66.1%      54.0%  51.0%    
                                     
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor  61,574   66,236   (7.0)%  54,494   55,959   (2.6)%  38,550   42,488   (9.3)%
                                     
% of Revenues Before Reimbursements  33.5%  33.6%      34.3%  33.0%      29.8%  30.9%    
                                     
Total Operating Expenses  174,204   185,553   (6.1)%  159,928   167,925   (4.8)%  108,299   112,498   (3.7)%
                                     
Operating Earnings (1) $9,456  $11,759   (19.6)% $(890) $1,397   (163.7)% $20,950  $24,807   (15.5)%
                                     
% of Revenues Before Reimbursements  5.1%  6.0%      (0.6)%  0.8%      16.2%  18.1%    

(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 costs, loss on disposition of business, arbitration and claim settlements, and certain unallocated corporate and shared costs and credits. See page 4-5 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 June 30,

  Crawford TPA Solutions  %  Crawford Claims Solutions  %  Crawford Specialty Solutions  % 
  2020  2019  Change  2020  2019  Change  2020  2019  Change 
                                     
Revenues Before Reimbursements $86,725  $99,518   (12.9)% $81,451  $86,003   (5.3)% $66,240  $71,360   (7.2)%
                                     
Direct Expense  66,963   75,839   (11.7)%  62,447   66,451   (6.0)%  41,157   46,137   (10.8)%
                                     
% of Revenues Before Reimbursements  77.2%  76.2%      76.7%  77.3%      62.1%  64.7%    
                                     
Segment Gross Profit  19,762   23,679   (16.5)%  19,004   19,552   (2.8)%  25,083   25,223   (0.6)%
                                     
% of Revenues Before Reimbursements  22.8%  23.8%      23.3%  22.7%      37.9%  35.3%    
                                     
Indirect Costs  16,591   18,653   (11.1)%  16,215   17,842   (9.1)%  11,090   12,611   (12.1)%
                                     
% of Revenues Before Reimbursements  19.1%  18.7%      19.9%  20.7%      16.7%  17.7%    
                                     
Operating Earnings (1) $3,171  $5,026   (36.9)% $2,789  $1,710   63.1% $13,993  $12,612   10.9%
                                     
% of Revenues Before Reimbursements  3.7%  5.1%      3.4%  2.0%      21.1%  17.7%    

Six Months Ended June 30,

  Crawford TPA Solutions  %  Crawford Claims Solutions  %  Crawford Specialty Solutions  % 
  2020  2019  Change  2020  2019  Change  2020  2019  Change 
                                     
Revenues Before Reimbursements $183,660  $197,312   (6.9)% $159,038  $169,322   (6.1)% $129,249  $137,305   (5.9)%
                                     
Direct Expense  140,657   148,170   (5.1)%  126,247   132,693   (4.9)%  85,164   89,641   (5.0)%
                                     
% of Revenues Before Reimbursements  76.6%  75.1%      79.4%  78.4%      65.9%  65.3%    
                                     
Segment Gross Profit  43,003   49,142   (12.5)%  32,791   36,629   (10.5)%  44,085   47,664   (7.5)%
                                     
% of Revenues Before Reimbursements  23.4%  24.9%      20.6%  21.6%      34.1%  34.7%    
                                     
Indirect Costs  33,547   37,383   (10.3)%  33,681   35,232   (4.4)%  23,135   22,857   1.2%
                                     
% of Revenues Before Reimbursements  18.3%  18.9%      21.2%  20.8%      17.9%  16.6%    
                                     
Operating Earnings (1) $9,456  $11,759   (19.6)% $(890) $1,397   (163.7)% $20,950  $24,807   (15.5)%
                                     
% of Revenues Before Reimbursements  5.1%  6.0%      (0.6)%  0.8%      16.2%  18.1%    

(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 costs, loss on disposition of business, arbitration and claim settlements, and certain unallocated corporate and shared costs and credits. See page 4-5 for additional information about segment operating earnings

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year to Date Period Ended June 30, 2020 and June 30, 2019
Unaudited
(In Thousands)

  2020  2019 
Cash Flows From Operating Activities:        
Net (Loss) Income $(7,037) $8,393 
Reconciliation of Net (Loss) Income to Net Cash Provided by Operating Activities:        
Depreciation and Amortization  19,450   19,850 
Goodwill Impairment  17,674    
Stock-Based Compensation Costs  1,998   1,399 
Loss on Disposition of Business  341    
Arbitration and Claim Settlements     11,352 
Changes in Operating Assets and Liabilities:        
Accounts Receivable, Net  5,473   (4,086)
Unbilled Revenues, Net  (7,000)  (11,848)
Accrued or Prepaid Income Taxes  (6,806)  (563)
Accounts Payable and Accrued Liabilities  (3,405)  (16,048)
Deferred Revenues  (457)  962 
Accrued Retirement Costs  (4,975)  (343)
Prepaid Expenses and Other Operating Activities  (3,224)  (329)
Net Cash Provided by Operating Activities  12,032   8,739 
         
Cash Flows From Investing Activities:        
Acquisitions of Property and Equipment  (5,476)  (3,729)
Capitalization of Computer Software Costs  (8,823)  (4,369)
Proceeds from sale of business component  (87)   
Net Cash Used in Investing Activities  (14,386)  (8,098)
         
Cash Flows From Financing Activities:        
Cash Dividends Paid  (4,859)  (6,595)
Proceeds from Shares Purchased Under Employee Stock-Based Compensation Plans  10   850 
Repurchases of Common Stock  (2,666)  (19,585)
Cash paid for equity investments  (292)   
Increases in Revolving Credit Facility Borrowings  73,340   51,408 
Payments on Revolving Credit Facility Borrowings  (54,124)  (40,611)
Payments on Finance Lease Obligations  (10)  (53)
Capitalized Loan Costs     (8)
Dividends Paid to Noncontrolling Interests     (280)
Net Cash Provided by (Used In) Financing Activities  11,399   (14,874)
         
Effects of Exchange Rate Changes on Cash and Cash Equivalents  (889)  264 
Increase (Decrease) in Cash and Cash Equivalents  8,156   (13,969)
Cash and Cash Equivalents at Beginning of Year  51,802   53,119 
Cash and Cash Equivalents at End of Period $59,958  $39,150