8-K
CRAWFORD & CO (CRD-A)
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 4, 2021
CRAWFORD & COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
| 1-10356 | 58-0506554 |
|---|---|
| (Commission File Number) | (IRS Employer Identification No.) |
| 5335 Triangle Parkway, Peachtree Corners, Georgia | 30092 |
| (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:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock — $1.00 Par Value | CRD-A | New York Stock Exchange, Inc. |
| Class B Common Stock — $1.00 Par Value | CRD-B | New York Stock Exchange, Inc. |
Item 2.02. Results of Operations and Financial Condition
On March 4, 2021, Crawford & Company (the "Company") issued a press release containing information about the Company's financial results for the fourth quarter 2020. 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 https://ir.crawco.com a presentation designed to enhance the information presented at its quarterly earnings conference call on Friday, March 5, 2021 at 8:30 a.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
(d) The following exhibits are being filed herewith:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated March 4, 2021 |
| 99.2 | Slide Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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.
| CRAWFORD & COMPANY | ||
|---|---|---|
| (Registrant) | ||
| By: | /s/ W. BRUCE SWAIN | |
| W. Bruce Swain | ||
| Executive Vice President - | ||
| Chief Financial Officer | ||
| Dated: March 4, 2021 |
3
crda-ex991_6.htm
Exhibit 99.1
Crawford & Company®
5335 Triangle Parkway
Peachtree Corners, GA 30092
FOR IMMEDIATE RELEASE
CRAWFORD & COMPANY REPORTS 2020 FOURTH QUARTER AND FULL YEAR RESULTS
2020 FOURTH QUARTER RESULTS AIDED BY WEATHER CLAIMS
ATLANTA, (March 4, 2021) -- 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 corporations, today announced its financial results for the fourth quarter ended December 31, 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
Fourth Quarter 2020
| • | Revenues before reimbursements of $257.4 million, compared with $247.2 million for the 2019 fourth quarter |
|---|---|
| • | Net income attributable to shareholders of $9.4 million, compared with a loss of ($7.3) million in the same period last year |
| --- | --- |
| • | Diluted earnings per share of $0.18 for both CRD-A and CRD-B, compared with a loss of ($0.13) for CRD-A and ($0.15) for CRD-B in the prior year fourth quarter |
| --- | --- |
Non-GAAP Consolidated Results
Fourth Quarter 2020
Non-GAAP results for the 2020 fourth quarter have been presented on a constant dollar basis to 2019. These results exclude after-tax net restructuring and other costs of $1.7 million and the non-cash income tax impact of the first quarter 2020 goodwill impairment of $0.9 million, as explained further on page 4. Non-GAAP consolidated results for the 2019 quarter exclude a goodwill impairment of $13.1 million and valuation allowances of $2.0 million on certain deferred tax assets.
| • | Revenues before reimbursements, on a non-GAAP basis, of $254.0 million, compared with $247.2 million for the 2019 fourth quarter |
|---|---|
| • | Net income attributable to shareholders, on a non-GAAP basis, totaled $12.2 million in the 2020 fourth quarter, compared with $7.7 million in the same period last year |
| --- | --- |
| • | Diluted earnings per share, on a non-GAAP basis, of $0.23 for both CRD-A and CRD-B in the 2020 fourth quarter, compared with $0.15 for CRD-A and $0.13 for CRD-B in the prior year fourth quarter |
| --- | --- |
| • | Consolidated adjusted operating earnings, on a non-GAAP basis, were $18.8 million, or 7.4% of non-GAAP revenues, in the 2020 fourth quarter, compared with $16.7 million, or 6.8% of revenues, in the 2019 fourth quarter |
| --- | --- |
| • | Consolidated adjusted EBITDA, a non-GAAP financial measure, was $27.9 million, or 11.0% of non-GAAP revenues, in the 2020 fourth quarter, compared with $27.5 million, or 11.1% of revenues, in the 2019 fourth quarter |
| --- | --- |
GAAP Consolidated Result
Full Year 2020
| • | Revenues before reimbursements of $982.5 million in 2020, compared with $1.006 billion for 2019 |
|---|---|
| • | Net income attributable to shareholders of $28.3 million, compared with $12.5 million in 2019 |
| --- | --- |
| • | Diluted earnings per share of $0.54 for CRD-A and $0.52 for CRD-B, compared with $0.26 for CRD-A and $0.19 for CRD-B in 2019 |
| --- | --- |
Non-GAAP Consolidated Results
Full Year 2020
Non-GAAP results for 2020 full year have been presented on a constant dollar basis to 2019 and exclude the non-cash after-tax adjustments of goodwill impairment of $14.2 million, net restructuring and other costs of $4.9 million and gain on disposition of businesses of $10.8 million. Non-GAAP consolidated results for the 2019 full year exclude non-cash after-tax adjustments of a goodwill impairment of $13.1 million, arbitration and claim settlements of $9.3 million and tax valuation allowances on certain deferred tax assets of $2.0 million.
| • | Revenues before reimbursements, on a non-GAAP basis, of $988.3 million, compared with $1.006 billion for 2019 |
|---|---|
| • | Net income attributable to shareholders, on a non-GAAP basis, totaled $37.3 million in 2020 compared with $36.8 million last year |
| --- | --- |
| • | Diluted earnings per share, on a non-GAAP basis, of $0.71 for CRD-A and $0.69 for CRD-B in 2020, compared with $0.71 for CRD-A and $0.64 for CRD-B in the prior year |
| --- | --- |
| • | Consolidated adjusted operating earnings, on a non-GAAP basis, were $72.7 million, or 7.4% of non-GAAP revenues, in 2020, compared with $77.6 million, or 7.7% of revenues, in 2019 |
| --- | --- |
| • | Consolidated adjusted EBITDA, a non-GAAP financial measure, was $105.6 million, or 10.7% of non-GAAP revenues in 2020, compared with $112.0 million, or 11.1% of revenues, in 2019 |
| --- | --- |
Management Comments
Mr. Rohit Verma, chief executive officer of Crawford & Company, stated, “Crawford delivered fourth quarter and full year 2020 results that exceeded expectations, driven by the strength of our core business and the perseverance of our employees. We continued to expand our profitability, with revenue and operating earnings above fourth quarter 2019 levels. At the same time, we strengthened our balance sheet by reducing our net debt to its lowest level since 2013. Our earnings trajectory and strong balance sheet gave us more confidence in our capital allocation strategy allowing us to make two recent transactions, as we welcomed Crawford Carvallo and HBA Group in the fourth quarter, and to restart our stock buyback program in 2021.”
Mr. Verma concluded, “As we embark on 2021, we are confident in our outlook as the COVID-19 pandemic recedes and we see the benefits of our success from new and enhanced client wins. We have realigned our business to not only enhance our client service, but also drive clarity of executing revenue and profit expansion initiatives. Additionally, we will continue to transcend the challenges presented by the pandemic, by staying focused on our strategy, as well as our purpose of restoring and enhancing lives, businesses and communities. We look forward to the journey ahead and delivering further value to our shareholders.”
Segment Results for the Fourth Quarter and Full Year
Crawford Claims Solutions
Crawford Claims Solutions revenues before reimbursements were $99.0 million in the fourth quarter of 2020, increasing 17.5% from $84.3 million in the fourth quarter of 2019. Absent foreign currency rate fluctuations of $1.9 million, fourth quarter 2020 revenues would have been $97.1 million.
The segment had operating earnings of $8.0 million in the 2020 fourth quarter more than doubling the $3.6 million in the fourth quarter of 2019. The operating margin was 8.1% in the 2020 quarter and 4.2% in the 2019 quarter.
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Crawford Claims Solutions revenues before reimbursements were $356.4 million for the full year 2020, increasing 4.9% from $339.8 million in 2019. Absent foreign exchange rate fluctuations of $2.4 million, 2020 revenues would have been $358.8 million.
Operating earnings were $14.4 million in 2020 representing an operating margin of 4.0% compared with $7.6 million, or 2.2% of revenues, in 2019. Included in the 2020 operating earnings was a benefit of $0.8 million in the fourth quarter and $3.1 million for the year resulting from the Canada Emergency Wage Subsidy.
Crawford Specialty Solutions
Crawford Specialty Solutions revenues before reimbursements were $64.3 million in the fourth quarter of 2020, down 2.4% from $65.9 million in the same period of 2019. Absent foreign exchange rate fluctuations of $1.0 million, revenues would have been $63.3 million for the three months ended December 31, 2020.
Operating earnings were $14.2 million in the 2020 fourth quarter increasing 26.8% over the $11.2 million in the 2019 period. The segment’s operating margin for the 2020 quarter was 22.1% as compared with 17.0% in the 2019 quarter.
Crawford Specialty Solutions revenues before reimbursements were $261.1 million in 2020, down 4.1% from $272.1 million in 2019. Absent foreign exchange rate fluctuations of $2.4 million, revenues would have been $263.5 million for 2020.
Operating earnings were $52.6 million in 2020 compared with $49.3 million in 2019. The segment’s operating margin for 2020 was 20.1% as compared with 18.1% in 2019. Included in the 2020 operating earnings was a benefit of $0.6 million in the fourth quarter and $2.3 million for the year resulting from the Canada Emergency Wage Subsidy.
Crawford TPA Solutions
Crawford TPA Solutions segment revenues before reimbursements were $94.1 million in the 2020 fourth quarter, decreasing 3.0% from $97.0 million in the 2019 fourth quarter. Absent foreign currency rate fluctuations of $0.6 million, fourth quarter 2020 revenues would have been $93.6 million.
Crawford TPA Solutions recorded operating earnings of $7.6 million in the fourth quarter of 2020, representing an operating margin of 8.1%, increasing 25.4% over $6.1 million, or 6.3% of revenues, in the 2019 fourth quarter.
For the year, Crawford TPA Solutions revenues before reimbursements were $365.0 million decreasing 7.3% from $393.9 million in 2019. Absent foreign exchange rate fluctuations of $1.0 million, 2020 revenues were $366.0 million.
Crawford TPA Solutions recorded operating earnings of $21.5 million in 2020 representing an operating margin of 5.9% compared with $27.2 million, or 6.9% of revenues, in 2019. Included in the 2020 operating earnings was a benefit of $0.5 million in the fourth quarter and $1.6 million for the year resulting from the Canada Emergency Wage Subsidy.
Unallocated Corporate and Shared Costs and Credits, Net
Unallocated corporate costs were $11.3 million in the fourth quarter of 2020, compared with $4.1 million in the same period of 2019. The increase for the three months ended December 31, 2020 was primarily due to a $3.9 million increase in self-insurance and related legal costs, a $3.2 million increase in incentive compensation and a $2.9 million increase in professional fees and other unallocated expenses, partially offset by a $2.8 million credit from the Canada Emergency Wage Subsidy.
Unallocated corporate costs were $16.6 million in 2020, compared with $6.5 million in the same period of 2019. The increase for 2020 was due to a $4.4 million increase in self-insurance and related legal costs, CEO transition costs and other severance costs totaling $5.0 million, a $3.6 million increase in unallocated incentive compensation and a $3.9 million increase in professional fees and other unallocated expenses, partially offset by $6.8 million credit from the Canada Emergency Wage Subsidy.
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Restructuring and Other Costs, Net
The Company recognized pretax restructuring and other costs totaling $2.4 million in the 2020 fourth quarter and $8.1 million for the year, related primarily to severance and other termination costs in an effort to consolidate and streamline various functions of our workforce. For the 2020 fourth quarter, the restructuring and other costs are comprised of $3.7 million severance expense and related payroll taxes, $2.5 million asset impairment and lease termination cost, partially offset by a $1.1 million gain from fair value remeasurement of cost and equity method investments, a $1.2 million liquidation dividend from a cost method investment, and a $1.4 million gain from the sale of IP addresses.
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 normalized during the year, resulting in a lower full year income tax benefit. During the 2020 fourth quarter, the impact of this treatment decreased the income tax benefit by $0.9 million, or $0.02 per share.
Business Acquisitions
On October 1, 2020, the Company acquired most of the remaining 85% equity interests in Crawford Carvallo and its subsidiaries. Crawford Carvallo is a leading provider for loss adjusting, claims management solutions and legal services in Chile. The purchase price includes an initial lump-sum payment of $11.6 million and a maximum of $11.7 million payable over the next six years based on achieving certain EBITDA performance goals.
Subsequent Events
On November 1, 2020, the Company acquired 100% of HBA Group in Australia. HBA is a legal services provider that will complement the Company’s Crawford TPA Solutions segment in Australia. Due to the two-month reporting lag for reporting its international results, this transaction will be recognized in the 2021 first quarter. The purchase price includes an initial lump-sum payment of $4.1 million, net of working capital adjustment, and a maximum $3.2 million payable over the next four years based on achieving certain revenue and EBITDA performance goals.
In connection with the realignment of operating segment manager responsibilities subsequent to December 31, 2020, the Company has realigned its operating segments by moving to a reporting structure consisting of (1) Loss Adjusting, (2) TPA: Broadspire and (3) Platform Solutions. The Company's revised reportable segments, which will be effective for 2021 reporting, are comprised of the following:
| • | Loss Adjusting, which services the global property and casualty market. This is comprised of the previously reported Crawford Claims Solutions segment, excluding Networks and Crawford Legal Services, and the Global Technical Services service line previously reported within Crawford Specialty Solutions. |
|---|---|
| • | TPA: Broadspire, which provides third party administration for workers' compensation, auto and liability, disability absence management, medical management, and accident and health to corporations, brokers and insurers worldwide. This is comprised of the previously reported Broadspire segment and the Crawford Legal Services service line previously reported within the Crawford Claims Solutions segment. |
| --- | --- |
| • | Platform Solutions, which consists of Contractor Connection and Networks service lines. This is comprised of the previously reported Contractor Connection service line within Crawford Specialty Solutions and the Networks service line, which includes Catastrophe operations, WeGoLook, and certain international network businesses previously reported within the Crawford Claims Solutions segment. |
| --- | --- |
The succeeding interim and annual periods will disclose the reportable segments under the new basis with prior periods restated to reflect the change.
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COVID-19
The Company estimates that COVID-19 negatively impacted its revenues in the range of $45.0 to $55.0 million for the twelve months ended December 31, 2020 as compared with the 2019 period. 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 December 31, 2020, totaled $44.7 million, compared with $51.8 million at December 31, 2019. The Company’s total debt outstanding as of December 31, 2020, totaled $113.6 million, compared with $177.0 million at December 31, 2019.
The Company’s operations provided $93.2 million of cash during 2020, compared with $75.2 million provided in 2019. The increase in cash provided by operating activities was primarily due to deferred payroll tax filings of $13.0 million and a benefit from the Canada Emergency Wage Subsidy totaling $11.8 million. The Company incurred higher software development and capital expenditures in 2020, which partially offset the increase in cash flows from operations. Free cash flow was $55.8 million in 2020, an increase of $1.7 million as compared with the prior year total of $54.1 million.
The Company made $9.0 million in contributions to its U.S. defined benefit pension plan and $0.5 million to its U.K. plans for 2020, compared with no contributions to the U.S. plan and $0.7 million to the U.K. plans in 2019.
During 2020, the Company repurchased 155,351 shares of CRD-A and 161,459 shares 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 did not repurchase any shares during the 2020 fourth quarter. However, effective January 1, 2021, the Company has restarted its share repurchase program.
Conference Call
As previously announced, Crawford & Company will host a conference call on March 5, 2021 at 8:30 a.m. Eastern Time to discuss its fourth quarter 2020 results. The conference call can be accessed live by dialing 1-833-968-1973 and using Conference ID 1388329. A presentation for tomorrow’s call can also be found on the investor relations portion of the Company’s website, https://ir.crawco.com. The call will be recorded and available for replay through April 5, 2021. You may dial 1-800-585-8367 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 and other costs, arbitration and claims settlement, gain on disposition of businesses, income taxes and net income or loss attributable to noncontrolling interests and redeemable noncontrolling interests.
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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 gain on disposition of businesses 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:
| Year Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | December 31,<br>2019 | December 31,<br>2020 | December 31,<br>2019 | |||||||||||||
| Geographic Area | Currency | % of total | equivalent | % of total | equivalent | % of total | equivalent | % of total | ||||||||
| U.S. | 59.0 | % | 55.4 | % | 58.1 | % | 56.6 | % | ||||||||
| U.K. | 13.0 | % | 13.1 | % | 13.1 | % | 12.6 | % | ||||||||
| Canada | CAD | 8.1 | % | 11.1 | % | 9.1 | % | 11.4 | % | |||||||
| Australia | AUD | 7.3 | % | 6.6 | % | 7.4 | % | 7.0 | % | |||||||
| Europe | 5.4 | % | 5.7 | % | 5.5 | % | 5.4 | % | ||||||||
| Rest of World | Various | 7.2 | % | 8.1 | % | 6.8 | % | 7.0 | % | |||||||
| Total Revenues, before reimbursements | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in British Pounds.
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Following is a reconciliation of segment and consolidated operating earnings to net income attributable to shareholders of Crawford & Company on a GAAP basis:
| Three months ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||
| Operating earnings: | ||||||||||||
| Crawford Claims Solutions | $ | 8,046 | $ | 3,572 | $ | 14,375 | $ | 7,630 | ||||
| Crawford Specialty Solutions | 14,213 | 11,213 | 52,553 | 49,321 | ||||||||
| Crawford TPA Solutions | 7,606 | 6,067 | 21,476 | 27,173 | ||||||||
| Unallocated corporate and shared costs, net | (11,347 | ) | (4,122 | ) | (16,574 | ) | (6,515 | ) | ||||
| Consolidated operating earnings | 18,518 | 16,730 | 71,830 | 77,609 | ||||||||
| (Deduct) add: | ||||||||||||
| Net corporate interest expense | (1,648 | ) | (2,428 | ) | (7,923 | ) | (10,774 | ) | ||||
| Stock option expense | (89 | ) | (537 | ) | (1,122 | ) | (1,885 | ) | ||||
| Amortization expense | (2,500 | ) | (2,848 | ) | (11,653 | ) | (11,277 | ) | ||||
| Goodwill impairment | — | (17,484 | ) | (17,674 | ) | (17,484 | ) | |||||
| Restructuring and other costs, net | (2,419 | ) | — | (8,133 | ) | — | ||||||
| Arbitration and claim settlements | — | — | — | (12,552 | ) | |||||||
| Gain on disposition of businesses, net | — | — | 13,763 | — | ||||||||
| Tax valuation allowances | — | (1,991 | ) | — | (1,991 | ) | ||||||
| Income tax provision | (2,459 | ) | (1,000 | ) | (12,013 | ) | (12,120 | ) | ||||
| Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests | (3 | ) | 2,246 | 1,221 | 2,959 | |||||||
| Net income (loss) attributable to shareholders of Crawford & Company | $ | 9,400 | $ | (7,312 | ) | $ | 28,296 | $ | 12,485 |
Following is a reconciliation of net income attributable to shareholders of Crawford & Company on a GAAP basis to non-GAAP adjusted EBITDA:
| Three months ended | Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||
| Net income (loss) attributable to shareholders of Crawford & Company | $ | 9,400 | $ | (7,312 | ) | $ | 28,296 | $ | 12,485 | |
| Add (Deduct): | ||||||||||
| Depreciation and amortization | 9,961 | 10,427 | 40,111 | 40,513 | ||||||
| Stock-based compensation | 1,652 | 1,499 | 4,384 | 4,109 | ||||||
| Net corporate interest expense | 1,648 | 2,428 | 7,923 | 10,774 | ||||||
| Goodwill impairment | — | 17,484 | 17,674 | 17,484 | ||||||
| Restructuring and other costs, net | 2,419 | — | 8,133 | — | ||||||
| Arbitration and claim settlements | — | — | — | 12,552 | ||||||
| Gain on disposition of businesses, net | — | — | (13,763 | ) | — | |||||
| Tax valuation allowances | — | 1,991 | — | 1,991 | ||||||
| Income tax provision | 2,459 | 1,000 | 12,013 | 12,120 | ||||||
| Foreign exchange fluctuations | 347 | — | 863 | — | ||||||
| Non-GAAP adjusted EBITDA | $ | 27,886 | $ | 27,517 | $ | 105,634 | $ | 112,028 |
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Following is a reconciliation of operating cash flow to free cash flow for the twelve months ended December 31, 2020 and 2019:
| Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | December 31,<br><br><br>2020 | December 31, 2019 | Change | ||||||
| Net Cash Provided by Operating Activities | $ | 93,178 | $ | 75,216 | $ | 17,962 | |||
| Less: | |||||||||
| Property & Equipment Purchases, net | (14,226 | ) | (8,688 | ) | (5,538 | ) | |||
| Capitalized Software (internal and external costs) | (23,154 | ) | (12,436 | ) | (10,718 | ) | |||
| Free Cash Flow | $ | 55,798 | $ | 54,092 | $ | 1,706 |
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 2020 on a constant dollar basis before goodwill impairment, restructuring costs and gain on disposition of businesses and for 2019 exclude the results of the goodwill impairment and the arbitration and claim settlements:
| Three Months Ended December 31, 2020 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Revenues | Non-GAAP<br><br><br>Operating earnings | Pretax earnings | Net income<br><br><br>attributable to Crawford & Company^(1)^ | Diluted earnings per<br><br><br>CRD-A<br><br><br>share^(1)^ | Diluted earnings per<br><br><br>CRD-B<br><br><br>share^(1)^ | ||||||||||
| GAAP | $ | 257,421 | $ | 18,518 | $ | 11,862 | $ | 9,400 | $ | 0.18 | $ | 0.18 | ||||
| Adjustments: | ||||||||||||||||
| Income tax impact of first quarter goodwill impairment | — | — | — | 935 | 0.02 | 0.02 | ||||||||||
| Restructuring and other costs, net | — | — | 2,419 | 1,664 | 0.03 | 0.03 | ||||||||||
| Foreign exchange fluctuations | (3,459 | ) | 317 | 347 | 154 | — | — | |||||||||
| Non-GAAP Adjusted | $ | 253,962 | $ | 18,835 | $ | 14,628 | $ | 12,153 | $ | 0.23 | $ | 0.23 | ||||
| Three Months Ended December 31, 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 | $ | 247,186 | $ | 16,730 | $ | (6,567 | ) | $ | (7,312 | ) | $ | (0.13 | ) | $ | (0.15 | ) |
| Adjustments: | ||||||||||||||||
| Goodwill impairment | — | — | 17,484 | 13,057 | 0.24 | 0.24 | ||||||||||
| Tax valuation allowances | — | — | — | 1,991 | 0.04 | 0.04 | ||||||||||
| Non-GAAP Adjusted | $ | 247,186 | $ | 16,730 | $ | 10,917 | $ | 7,736 | $ | 0.15 | $ | 0.13 | ||||
| Year Ended December 31, 2020 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Revenues | Non-GAAP<br><br><br>Operating earnings | Pretax income | Net income attributable to Crawford & Company | Diluted earnings per<br><br><br>CRD-A<br><br><br>share | Diluted earnings per<br><br><br>CRD-B<br><br><br>share | ||||||||||
| GAAP | $ | 982,492 | $ | 71,830 | $ | 39,088 | $ | 28,296 | $ | 0.54 | $ | 0.52 | ||||
| Adjustments: | ||||||||||||||||
| Goodwill impairment | — | — | 17,674 | 14,209 | 0.27 | 0.27 | ||||||||||
| Restructuring and other costs, net | — | — | 8,133 | 4,927 | 0.09 | 0.09 | ||||||||||
| Gain on disposition of businesses, net | — | — | (13,763 | ) | (10,807 | ) | (0.20 | ) | (0.20 | ) | ||||||
| Foreign exchange fluctuations | 5,761 | 911 | 863 | 656 | 0.01 | 0.01 | ||||||||||
| Non-GAAP Adjusted | $ | 988,253 | $ | 72,741 | $ | 51,995 | $ | 37,281 | $ | 0.71 | $ | 0.69 |
Page 8 of 15
| Year Ended December 31, 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 | $ | 1,005,802 | $ | 77,609 | $ | 23,637 | $ | 12,485 | $ | 0.26 | $ | 0.19 |
| Adjustments: | ||||||||||||
| Goodwill impairment | — | — | 17,484 | 13,057 | 0.24 | 0.24 | ||||||
| Arbitration and claim settlements | — | — | 12,552 | 9,276 | 0.17 | 0.17 | ||||||
| Tax valuation allowances | — | — | — | 1,991 | 0.04 | 0.04 | ||||||
| Non-GAAP Adjusted | $ | 1,005,802 | $ | 77,609 | $ | 53,673 | $ | 36,809 | $ | 0.71 | $ | 0.64 |
^(1)^ The income tax impact of goodwill impairment was 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 normalized as income was 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 per share:
| Three months ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands) | December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||
| Weighted-Average Shares Used to Compute Basic Earnings Per Share: | ||||||||
| Class A Common Stock | 30,692 | 30,449 | 30,605 | 30,637 | ||||
| Class B Common Stock | 22,510 | 22,689 | 22,527 | 22,975 | ||||
| Weighted-Average Shares Used to Compute Diluted Earnings Per Share: | ||||||||
| Class A Common Stock | 30,981 | 30,449 | 30,857 | 31,090 | ||||
| Class B Common Stock | 22,510 | 22,689 | 22,527 | 22,975 |
Further information regarding the Company’s operating results for the quarter ended December 31, 2020, financial position as of December 31, 2020, and cash flows for the quarter ended December 31, 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 corporations 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.
TAG: Crawford-Financial, Crawford-Investor-News-and-Events
Page 9 of 15
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. |
|---|
Page 10 of 15
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
| Three Months Ended December 31, | 2020 | 2019 | % Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenues: | |||||||||
| Revenues Before Reimbursements | $ | 257,421 | $ | 247,186 | 4 | % | |||
| Reimbursements | 8,184 | 10,376 | (21 | )% | |||||
| Total Revenues | 265,605 | 257,562 | 3 | % | |||||
| Costs and Expenses: | |||||||||
| Costs of Services Provided, Before Reimbursements | 185,354 | 177,284 | 5 | % | |||||
| Reimbursements | 8,184 | 10,376 | (21 | )% | |||||
| Total Costs of Services | 193,538 | 187,660 | 3 | % | |||||
| Selling, General, and Administrative Expenses | 55,625 | 55,763 | (0 | )% | |||||
| Corporate Interest Expense, Net | 1,648 | 2,428 | (32 | )% | |||||
| Goodwill Impairment | — | 17,484 | (100 | )% | |||||
| Restructuring and Other Costs, Net | 2,419 | — | nm | ||||||
| Total Costs and Expenses | 253,230 | 263,335 | (4 | )% | |||||
| Other Expense, Net | (513 | ) | (794 | ) | (35 | )% | |||
| Income Before Income Taxes | 11,862 | (6,567 | ) | (281 | )% | ||||
| Provision for Income Taxes | 2,459 | 2,991 | (18 | )% | |||||
| Net Income (Loss) | 9,403 | (9,558 | ) | (198 | )% | ||||
| Net (Income) Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests | (3 | ) | 2,246 | (100 | )% | ||||
| Net Income (Loss) Attributable to Shareholders of Crawford & Company | $ | 9,400 | $ | (7,312 | ) | (229 | )% | ||
| Earnings (Loss) Per Share - Basic: | |||||||||
| Class A Common Stock | $ | 0.18 | $ | (0.13 | ) | (238 | )% | ||
| Class B Common Stock | $ | 0.18 | $ | (0.15 | ) | (220 | )% | ||
| Earnings (Loss) Per Share - Diluted: | |||||||||
| Class A Common Stock | $ | 0.18 | $ | (0.13 | ) | (238 | )% | ||
| Class B Common Stock | $ | 0.18 | $ | (0.15 | ) | (220 | )% | ||
| Cash Dividends Per Share: | |||||||||
| Class A Common Stock | $ | 0.05 | $ | 0.07 | (29 | )% | |||
| Class B Common Stock | $ | 0.05 | $ | 0.05 | — |
nm = not meaningful
Page 11 of 15
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
| Year Ended December 31, | 2020 | 2019 | % Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenues: | |||||||||
| Revenues Before Reimbursements | $ | 982,492 | $ | 1,005,802 | (2 | )% | |||
| Reimbursements | 33,703 | 41,825 | (19 | )% | |||||
| Total Revenues | 1,016,195 | 1,047,627 | (3 | )% | |||||
| Costs and Expenses: | |||||||||
| Costs of Services Provided, Before Reimbursements | 703,617 | 710,948 | (1 | )% | |||||
| Reimbursements | 33,703 | 41,825 | (19 | )% | |||||
| Total Costs of Services | 737,320 | 752,773 | (2 | )% | |||||
| Selling, General, and Administrative Expenses | 218,952 | 227,170 | (4 | )% | |||||
| Corporate Interest Expense, Net | 7,923 | 10,774 | (26 | )% | |||||
| Goodwill Impairment | 17,674 | 17,484 | 1 | % | |||||
| Arbitration and Claim Settlements | — | 12,552 | (100 | )% | |||||
| Restructuring and Other Costs, Net | 8,133 | — | nm | ||||||
| Gain on Disposition of Businesses, Net | (13,763 | ) | — | nm | |||||
| Total Costs and Expenses | 976,239 | 1,020,753 | (4 | )% | |||||
| Other Expense, Net | (868 | ) | (3,237 | ) | (73 | )% | |||
| Income Before Income Taxes | 39,088 | 23,637 | 65 | % | |||||
| Provision for Income Taxes | 12,013 | 14,111 | (15 | )% | |||||
| Net Income | 27,075 | 9,526 | 184 | % | |||||
| Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests | 1,221 | 2,959 | (59 | )% | |||||
| Net Income Attributable to Shareholders of Crawford & Company | $ | 28,296 | $ | 12,485 | 127 | % | |||
| Earnings Per Share - Basic: | |||||||||
| Class A Common Stock | $ | 0.54 | $ | 0.27 | 100 | % | |||
| Class B Common Stock | $ | 0.52 | $ | 0.19 | 174 | % | |||
| Earnings Per Share - Diluted: | |||||||||
| Class A Common Stock | $ | 0.54 | $ | 0.26 | 108 | % | |||
| Class B Common Stock | $ | 0.52 | $ | 0.19 | 174 | % | |||
| Cash Dividends Per Share: | |||||||||
| Class A Common Stock | $ | 0.19 | $ | 0.28 | (32 | )% | |||
| Class B Common Stock | $ | 0.17 | $ | 0.20 | (15 | )% |
nm = not meaningful
Page 12 of 15
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 2020 and December 31, 2019
Unaudited
(In Thousands, Except Par Values)
| December 31, | |||||
|---|---|---|---|---|---|
| 2019 | |||||
| ASSETS | |||||
| Current Assets: | |||||
| Cash and Cash Equivalents | 44,656 | $ | 51,802 | ||
| Accounts Receivable, Net | 123,060 | 128,217 | |||
| Unbilled Revenues, at Estimated Billable Amounts | 103,528 | 103,894 | |||
| Income Taxes Receivable | 1,269 | 7,820 | |||
| Prepaid Expenses and Other Current Assets | 29,490 | 23,476 | |||
| Total Current Assets | 302,003 | 315,209 | |||
| Net Property and Equipment | 36,402 | 31,425 | |||
| Other Assets: | |||||
| Operating Lease Right-of-Use Asset, Net | 109,315 | 102,354 | |||
| Goodwill | 66,537 | 80,642 | |||
| Intangible Assets Arising from Business Acquisitions, Net | 71,176 | 75,083 | |||
| Capitalized Software Costs, Net | 71,021 | 66,445 | |||
| Deferred Income Tax Assets | 25,595 | 17,971 | |||
| Other Noncurrent Assets | 70,935 | 70,884 | |||
| Total Other Assets | 414,579 | 413,379 | |||
| Total Assets | 752,984 | $ | 760,013 | ||
| LIABILITIES AND SHAREHOLDERS’ INVESTMENT | |||||
| Current Liabilities: | |||||
| Short-Term Borrowings | 1,837 | $ | 28,546 | ||
| Accounts Payable | 41,544 | 34,377 | |||
| Accrued Compensation and Related Costs | 81,848 | 68,499 | |||
| Self-Insured Risks | 11,390 | 11,311 | |||
| Income Taxes Payable | 5,822 | 3,030 | |||
| Operating Lease Liability | 32,745 | 30,765 | |||
| Other Accrued Liabilities | 40,375 | 31,449 | |||
| Deferred Revenues | 27,233 | 28,288 | |||
| Total Current Liabilities | 242,794 | 236,265 | |||
| Noncurrent Liabilities: | |||||
| Long-Term Debt and Finance Leases, Less Current Installments | 111,758 | 148,408 | |||
| Deferred Revenues | 24,136 | 24,080 | |||
| Accrued Pension Liabilities | 53,886 | 65,909 | |||
| Operating Lease Liability | 93,228 | 87,064 | |||
| Other Noncurrent Liabilities | 40,254 | 33,410 | |||
| Total Noncurrent Liabilities | 323,262 | 358,871 | |||
| Redeemable Noncontrolling Interests | - | 2,310 | |||
| Shareholders’ Investment: | |||||
| Class A Common Stock, 1.00 Par Value | 30,847 | 30,610 | |||
| Class B Common Stock, 1.00 Par Value | 22,510 | 22,671 | |||
| Additional Paid-in Capital | 67,193 | 63,392 | |||
| Retained Earnings | 265,245 | 249,551 | |||
| Accumulated Other Comprehensive Loss | (198,856 | ) | (206,907 | ) | |
| Shareholders’ Investment Attributable to Shareholders of Crawford & Company | 186,939 | 159,317 | |||
| Noncontrolling Interests | (11 | ) | 3,250 | ||
| Total Shareholders’ Investment | 186,928 | 162,567 | |||
| Total Liabilities and Shareholders’ Investment | 752,984 | $ | 760,013 |
All values are in US Dollars.
Page 13 of 15
CRAWFORD & COMPANY
SUMMARY RESULTS BY OPERATING SEGMENT WITH DIRECT COMPENSATION AND OTHER EXPENSES
Unaudited
(In Thousands, Except Percentages)
Three Months Ended December 31
| Crawford Claims Solutions | % | Crawford Specialty Solutions | % | Crawford TPA Solutions | % | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| Revenues Before Reimbursements | $ | 99,040 | $ | 84,265 | 17.5 | % | $ | 64,268 | $ | 65,872 | (2.4 | )% | $ | 94,113 | $ | 97,049 | (3.0 | )% | |||||||||
| Direct Compensation, Fringe Benefits & Non-Employee Labor | 67,509 | 54,688 | 23.4 | % | 33,229 | 35,773 | (7.1 | )% | 55,551 | 58,942 | (5.8 | )% | |||||||||||||||
| % of Revenues Before Reimbursements | 68.2 | % | 64.9 | % | 51.7 | % | 54.3 | % | 59.0 | % | 60.7 | % | |||||||||||||||
| Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 23,485 | 26,005 | (9.7 | )% | 16,826 | 18,886 | (10.9 | )% | 30,956 | 32,040 | (3.4 | )% | |||||||||||||||
| % of Revenues Before Reimbursements | 23.7 | % | 30.9 | % | 26.2 | % | 28.7 | % | 32.9 | % | 33.0 | % | |||||||||||||||
| Total Operating Expenses | 90,994 | 80,693 | 12.8 | % | 50,055 | 54,659 | (8.4 | )% | 86,507 | 90,982 | (4.9 | )% | |||||||||||||||
| Operating Earnings ^(1)^ | $ | 8,046 | $ | 3,572 | 125.3 | % | $ | 14,213 | $ | 11,213 | 26.8 | % | $ | 7,606 | $ | 6,067 | 25.4 | % | |||||||||
| % of Revenues Before Reimbursements | 8.1 | % | 4.2 | % | 22.1 | % | 17.0 | % | 8.1 | % | 6.3 | % |
Twelve Months Ended December 31,
| Crawford Claims Solutions | % | Crawford Specialty Solutions | % | Crawford TPA Solutions | % | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| Revenues Before Reimbursements | $ | 356,447 | $ | 339,837 | 4.9 | % | $ | 261,062 | $ | 272,109 | (4.1 | )% | $ | 364,983 | $ | 393,856 | (7.3 | )% | |||||||||
| Direct Compensation, Fringe Benefits & Non-Employee Labor | 238,616 | 223,639 | 6.7 | % | 135,906 | 141,776 | (4.1 | )% | 221,794 | 236,853 | (6.4 | )% | |||||||||||||||
| % of Revenues Before Reimbursements | 66.9 | % | 65.8 | % | 52.1 | % | 52.1 | % | 60.8 | % | 60.1 | % | |||||||||||||||
| Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 103,456 | 108,568 | (4.7 | )% | 72,603 | 81,012 | (10.4 | )% | 121,713 | 129,830 | (6.3 | )% | |||||||||||||||
| % of Revenues Before Reimbursements | 29.0 | % | 31.9 | % | 27.8 | % | 29.8 | % | 33.3 | % | 33.0 | % | |||||||||||||||
| Total Operating Expenses | 342,072 | 332,207 | 3.0 | % | 208,509 | 222,788 | (6.4 | )% | 343,507 | 366,683 | (6.3 | )% | |||||||||||||||
| Operating Earnings ^(1)^ | $ | 14,375 | $ | 7,630 | 88.4 | % | $ | 52,553 | $ | 49,321 | 6.6 | % | $ | 21,476 | $ | 27,173 | (21.0 | )% | |||||||||
| % of Revenues Before Reimbursements | 4.0 | % | 2.2 | % | 20.1 | % | 18.1 | % | 5.9 | % | 6.9 | % |
^(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, gain on disposition of businesses, arbitration and claim settlements, and certain unallocated corporate and shared costs and credits. See page 4-5 for additional information about segment operating earnings.
Page 14 of 15
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year to Date Period Ended December 31, 2020 and December 31, 2019
Unaudited
(In Thousands)
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| Cash Flows From Operating Activities: | ||||||
| Net income | $ | 27,075 | $ | 9,526 | ||
| Reconciliation of net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 40,111 | 40,513 | ||||
| Goodwill impairment | 17,674 | 17,484 | ||||
| Deferred income taxes | (9,005 | ) | 3,040 | |||
| (Gain) on disposition of businesses, net | (13,763 | ) | — | |||
| Stock-based compensation | 4,384 | 4,109 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable, net | 5,063 | 5,922 | ||||
| Unbilled revenues, net | (3,762 | ) | 5,302 | |||
| Accrued or prepaid income taxes | 9,311 | (5,985 | ) | |||
| Accounts payable and accrued liabilities | 31,775 | (6,946 | ) | |||
| Deferred revenues | (1,074 | ) | (281 | ) | ||
| Accrued retirement costs | (10,790 | ) | 3,387 | |||
| Prepaid expenses and other operating activities | (3,821 | ) | (855 | ) | ||
| Net cash provided by operating activities | 93,178 | 75,216 | ||||
| Cash Flows From Investing Activities: | ||||||
| Acquisitions of property and equipment | (14,226 | ) | (8,688 | ) | ||
| Capitalization of computer software costs | (23,154 | ) | (12,436 | ) | ||
| Cash proceeds from disposition of business, net of cash disposed | 19,968 | — | ||||
| Payments for business acquisitions, net of cash acquired | (9,983 | ) | (2,296 | ) | ||
| Other investing activities | 358 | — | ||||
| Net cash used in investing activities | (27,037 | ) | (23,420 | ) | ||
| Cash Flows From Financing Activities: | ||||||
| Cash dividends paid | (9,645 | ) | (13,171 | ) | ||
| Proceeds from shares purchased under employee stock-based compensation plans | (476 | ) | (827 | ) | ||
| Proceeds from shares purchased under employee stock-based compensation plans | 811 | 2,104 | ||||
| Repurchases of common stock | (2,666 | ) | (26,210 | ) | ||
| Payments for equity investments | (602 | ) | — | |||
| Increases in short-term and revolving credit facility borrowings | 108,142 | 66,197 | ||||
| Payments on short-term and revolving credit facility borrowings | (169,675 | ) | (80,948 | ) | ||
| Payments on finance lease obligations | (62 | ) | (93 | ) | ||
| Dividends paid to noncontrolling interests | (196 | ) | (458 | ) | ||
| Net cash used in financing activities | (74,369 | ) | (53,406 | ) | ||
| Effects of exchange rate changes on cash and cash equivalents | 1,082 | 293 | ||||
| Decrease in cash and cash equivalents | (7,146 | ) | (1,317 | ) | ||
| Cash and cash equivalents at beginning of year | 51,802 | 53,119 | ||||
| Cash and cash equivalents at end of period | $ | 44,656 | $ | 51,802 |
Page 15 of 15
Crawford & Company Fourth Quarter 2020 Earnings Conference Call CRD-A & CRD-B (NYSE)
Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Forward-Looking Statements and Additional Information 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 portion of Crawford & Company's website at https://ir.crawco.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.
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 three operating segments. Segment operating earnings represent segment earnings, including the direct and indirect costs of certain administrative functions required to operate our business, but excludes unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, goodwill impairment, certain tax valuation allowances, restructuring and other costs, arbitration and claim settlements, gain on disposition of businesses, income taxes and net income or loss attributable to noncontrolling interests and redeemable noncontrolling interests.
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 CRD-A than on CRD-B. 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.
Segment Gross Profit Segment gross profit is defined as revenues, less direct costs, which exclude indirect centralized administrative support costs 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.
Non-GAAP Financial Information For additional information about certain non-GAAP financial information presented herein, see the Appendix following this presentation.
BY GLOBAL SERVICE LINES $18 BILLION+ Claims managed annually AT A GLANCE BY GEOGRAPHY 36%⎹ Crawford Claims Solutions (P&C adjusting solutions) 27%⎹ Crawford Specialty Solutions (Global Technical Services & Contractor Connection) 37%⎹ Crawford TPA solutions (Broadspire) 58%⎹ US 9%⎹ Canada 13%⎹ UK 7% ⎹ Australia 12%⎹ Rest of the world Crawford & Company The world’s largest publicly listed independent provider of global claims management solutions 1.6 MILLION Claims handled 9,000 Total employees Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion OUR VISION: To be the leading provider and most trusted source for expert assistance, serving those who insure and self-insure the risks of businesses and communities anywhere in the world OUR PURPOSE: To restore and enhance lives, businesses, and communities OUR VALUES: RESTORE Respect, Empowerment, Sustainability, Training, One Crawford, Recognition, Entrepreneurial Spirit
(1) See appendix for non-GAAP explanation and reconciliation of non-GAAP measures Financial Highlights Full Year 2020 GAAP NON-GAAP¹ KEY METRICS¹ $982.5 MILLION Revenues before reimbursements $28.3 MILLION Net income $988.3 MILLION Revenues before reimbursements $68.9 MILLION Net Debt $105.6 MILLION Adjusted EBITDA 10.7% EBITDA margin $72.7 MILLION Operating earnings $0.54 EPS CRD-A Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion $93.2 MILLION Operating cash flow $0.52 EPS CRD-B
Weather Indicators Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Source: Met Office, Australian Government – Dept. of Home Affairs, Disaster Declaration FEMA, CAT IQ Source: Aon Global Catastrophic Recap. Note: Insured losses assumed to be 75% of the total economic losses compared to prior quarter
Economic Indicators Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Source: Federal Reserve Bank of St. Louis, U.S. Bureau of Labor Statistics, United States Census Bureau Jun-20 Apr-20 Oct-20 Aug-20 May-20 Jul-20 Sep-20 Nov-20 University of Michigan's consumer sentiment Business sentiment – ISM Manufacturing PMI US Business and Consumer Sentiment Notes: Miles driven, Housing starts, permits and Retail sales displayed are monthly averages for the quarter, Q4 Miles driven is for the month of Oct based on latest data available, Q4 Retail sales and Housing Starts (except for UK which is the total quarterly data) is the average of Oct and Nov based on latest data available. Recent data on UK housing starts is not available. US Unemployment rate, seasonally adjusted, Jan 2020 – Dec 2020 compared to prior quarter
7 Impact Across Our Global Service Lines (GSLs) Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Added $38 million of revenue from top carrier clients in 2020 WeGoLook saw the highest ever look volume in 2020, driven by improved client uptake Launched new digital solutions across all our operations Contractor Connection Traction with new carrier clients in the US delivered the strongest second half in recent history Increased average daily assignment levels year over year GTS Positioned to continue benefitting from BI claims Made strategic hires in the US and internationally US client retention for 2020 was 96% Claims volume increasing but still behind 2019 Increased disability and COVID-19 claims in the US in Q4 Fourth Quarter and Full Year 2020 Performance (1) "OE” reflects operating earnings.
Evolving Crawford's Strategy for Long-Term Growth Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Strategic evolution to reimagine claims ecosystem LOSS ADJUSTING TPA PLATFORMS
9 Customer Excellence Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Maintained and exceeded pre-pandemic client service delivery levels Client responses
24% 1.11x $0.19 Proactively manage capital allocation across the business and adapt to reflect the new economic reality increase in operating cash flow over last year net funded debt-to-EBITDA, a seven-year low leverage ratio CASH FLOW 2020 Strong financial position with ample liquidity Reinstated share repurchase program as a component of our capital allocation strategy Our Capital Allocation Strategy $93M $0.17 per share dividends paid for CRD-A in 2020 per share dividends paid for CRD-B in 2020 Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion $37M capital expenditures in 2020
Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Market Expansion Crawford Carvallo Acquired Crawford Carvallo in 2020, establishing Crawford as the largest loss adjusting company in Latin America Extending our market position through recent acquisitions and innovative solutions HBA Group Acquired HBA Group in 2020, a legal services provider which complements the Crawford TPA Solutions segment in Australia and the larger Asia region Asservio Launched Asservio in 2021, a bold innovation that will support the digital transformation of property claims Improves efficiency, accuracy and consistency in the estimating process
Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion Supporting Our Global Workforce Prioritizing the Safety and Well-Being of our Workforce Formed a global incident response team and modified sick leave policies Weekly health and safety updates globally Physical and mental health and wellness programs across various countries Working parents support group on Intranet
Inclusion and Diversity Launched Office of Inclusion and Diversity and an Employee Advisory Council Established two Employee Resource Groups aligned with our purpose Delivered unconscious bias training to our staff and the leadership team
Human Capital Development Conducted an employee pulse survey and COVID-19 response surveys Promoting an environment where employees are empowered to grow, emboldened to act and inspired to innovate through internal programs and initiatives Continuing to demonstrate our resilience despite the significant challenges presented by COVID-19
(1) See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. 13 Fourth Quarter 2020 Financial Summary Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
Highlights Weather-related claims in the US drove revenue increase Increases in case volume driven by WeGoLook Operating earnings more than double prior year quarter
Operating Results (4Q 2020 v. 4Q 2019) Revenues of $99.0 million versus $84.3 million Constant dollar revenues of $97.1 million Gross profit of $22.0 million versus $20.3 million Gross profit margin of 22.2% versus 24.1% Operating earnings of $8.0 million versus $3.6 million Operating margin of 8.1% versus 4.2%
14 Crawford Claims Solutions Segment Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
Highlights Contractor Connection Traction with new carrier clients in the US delivered the strongest second half in recent history Increased average daily assignment levels year over year GTS Positioned to continue benefitting from BI claims Made strategic hires in the US and internationally
Operating Results (4Q 2020 v. 4Q 2019) Revenues of $64.3 million versus $65.9 million Constant dollar revenues of $63.3 million Gross profit of $24.3 million versus $22.9 million Gross profit margin of 37.8% versus 34.8% Operating earnings of $14.2 million versus $11.2 million Operating margin of 22.1% versus 17.0% 15 Crawford Specialty Solutions Segment Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
16
Highlights Claims volume increasing but still behind 2019 Increased disability and COVID-19 claims in the US in Q4
Operating Results (4Q 2020 v. 4Q 2019) Revenues of $94.1 million versus $97.0 million Constant dollar revenues of $93.6 million Gross profit of $24.4 million versus $23.8 million Gross profit margin of 25.9% versus 24.6% Operating earnings of $7.6 million versus $6.1 million Operating margin of 8.1% versus 6.3%
Crawford TPA Solutions Segment Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
Additional Financial Matters Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
(1) See Appendix for non-GAAP explanation and reconciliation
18 Balance Sheet Highlights Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
19 Net Debt and Pension Liability Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion $68.9 million $53.9 million Net debt at $68.9 million, the lowest level since 2013 Pension liability at $53.9 million, the lowest level since before the Financial Crisis $171.2 million $121.7 million
(1) See Appendix for non-GAAP explanation and reconciliation
20 For the year to date periods ended December 31, Operating And Free Cash Flow Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
21 Employee Health & Safety
Protect our workforce first and foremost Customer Excellence
Provide best-in-class service to our clients regardless of the global environment Brands, Relationships & Differentiation Strengthen industry leadership through our innovations and market leading solutions Future Growth
Deliver superior results for our shareholders 2021 Priorities Introduction | External Factors | Segment Highlights | New Business Momentum | Disciplined Capital Allocation | Our Workforce | Financial Results | Conclusion
Crawford & Company The world’s largest publicly listed independent provider of global claims management and outsourcing solutions.
Appendix: Non-GAAP Financial Information 23
Appendix: Non-GAAP Financial Information 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. As a result, unless noted in this presentation, revenue and expense amounts exclude reimbursements for out-of-pocket expenses. 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. 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 and credits, but before net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, goodwill impairment, certain tax valuation allowances, restructuring and other costs, arbitration and claim settlements, gain on disposition of businesses, income taxes and net income or loss attributable to noncontrolling interests.
Appendix: Non-GAAP Financial Information (cont.) Segment and Consolidated Gross Profit 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 Adjusted EBITDA is used by management to evaluate, assess and benchmark our operational results and 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, certain tax valuation allowances, restructuring and other costs, gain on disposition of businesses, and arbitration and claim settlements have been included in the calculation of adjusted EBITDA. 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. Adjusted Revenue, Operating Earnings, Pretax Earnings, Net Income, Diluted Earnings per Share and EBITDA Included in non-GAAP adjusted measurements as an add back or subtraction to GAAP measurements, are impacts of the goodwill impairment, restructuring and other costs, gain on disposition of businesses, arbitration and claim settlements, and foreign exchange impacts, 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 exclude these charges when comparing net income and diluted earnings per share across periods, as these charges are not from ordinary operations.
26 Crawford Claims Solutions Segment
Highlights $38 million of added revenue from top US carrier clients in 2020 Highest ever look volume in 2020 for WeGoLook, driven by improved client uptake Launched new digital solutions across all our operations
Operating Results (FY 2020 v. FY 2019) Revenues of $356.4 million versus $339.8 million Constant dollar revenues of $358.8 million Gross profit of $77.5 million versus $76.7 million Gross profit margin of 21.7% versus 22.6% Operating earnings of $14.4 million versus $7.6 million Operating margin of 4.0% versus 2.2%
27 Crawford Specialty Solutions Segment
Highlights Launched cutting-edge estimate review platform in Contractor Connection Focused on expanding through recruitment of teams and M&A in GTS Solid margin expansion during 2020
Operating Results (FY 2020 v. FY 2019) Revenues of $261.1 million versus $272.1 million Constant dollar revenues of $263.5 million Gross profit of $96.6 million versus $95.4 million Gross profit margin of 37.0% versus 35.1% Operating earnings of $52.6 million versus $49.3 million Operating margin of 20.1% versus 18.1%
28 Crawford TPA Solutions Segment
Highlights Ongoing investment in new technologies and client service capabilities US client retention for 2020 was 96% Focused on digitization and developing integrated solutions for our global clients
Operating Results (FY 2020 v. FY 2019) Revenues of $365.0 million versus $393.9 million Constant dollar revenues of $366.0 million Gross profit of $87.7 million versus $99.7 million Gross profit margin of 24.0% versus 25.3% Operating earnings of $21.5 million versus $27.2 million Operating margin of 5.9% versus 6.9%
Total Revenues Before Reimbursements by Major Currency The following table illustrates revenue as a percentage of total revenue in the major currencies of the geographic areas in which Crawford does business:
Reconciliation of Non-GAAP Items Revenues, Costs of Services Provided, and Operating Earnings
Reconciliation of Non-GAAP Items (cont.) Adjusted EBITDA
Reconciliation of Non-GAAP Items (cont.) Net Debt
Reconciliation of Non-GAAP Items (cont.) Segment Gross Profit
Reconciliation of Fourth Quarter Non-GAAP Results