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): August 3, 2020
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 August 3, 2020, Crawford & Company (the "Company") issued a press release containing information about the Company's financial results for the second 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 www.crawco.com a presentation designed to enhance the information presented at its quarterly earnings conference call on Tuesday, August 4, 2020 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 August 3, 2020 |
| 99.2 | Slide Presentation |
The information contained in this current report on Form 8-K and in the accompanying exhibits shall not be incorporated by reference into any filing of the Company with the SEC, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing, unless expressly incorporated by specific reference to such filing. The information, including the exhibits hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CRAWFORD & COMPANY | ||
|---|---|---|
| (Registrant) | ||
| By: | /s/ W. BRUCE SWAIN | |
| W. Bruce Swain | ||
| Executive Vice President - | ||
| Chief Financial Officer | ||
| Dated: August 3, 2020 |
3
crda-ex991_6.htm
Exhibit 99.1
Crawford & Company®
5335 Triangle Parkway
Peachtree Corners, GA 30092
FOR IMMEDIATE RELEASE
CRAWFORD & COMPANY REPORTS 2020 SECOND QUARTER RESULTS
OPERATING PERFORMANCE HIGHLIGHTS RESILIENCE OF COMPANY
ATLANTA, (August 3, 2020) -- 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.
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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.
Page 3 of 15
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.
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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:
| Six Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | June 30,<br>2019 | June 30,<br>2020 | June 30,<br>2019 | |||||||||||||
| Geographic Area | Currency | % of total | equivalent | % of total | equivalent | % of total | equivalent | % of total | ||||||||
| U.S. | 56.3 | % | 57.0 | % | 56.4 | % | 56.5 | % | ||||||||
| U.K. | 13.9 | % | 12.3 | % | 13.8 | % | 12.8 | % | ||||||||
| Canada | CAD | 8.9 | % | 11.2 | % | 9.8 | % | 12.1 | % | |||||||
| Australia | AUD | 8.0 | % | 7.5 | % | 7.3 | % | 6.6 | % | |||||||
| Europe | 6.0 | % | 5.2 | % | 5.8 | % | 5.2 | % | ||||||||
| Rest of World | Various | 6.9 | % | 6.8 | % | 6.9 | % | 6.8 | % | |||||||
| 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 (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 |
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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<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 | $ | 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<br><br><br>Operating earnings | Pretax (loss) income | Net (loss) income attributable to Crawford & Company^(1)^ | Diluted (loss) earnings per<br><br><br>CRD-A<br><br><br>share^(1)^ | Diluted (loss) earnings per<br><br><br>CRD-B<br><br><br>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 |
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| 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.
Page 8 of 15
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. |
|---|
Page 9 of 15
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
Page 10 of 15
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
Page 11 of 15
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2020 and December 31, 2019
Unaudited
(In Thousands, Except Par Values)
| December 31, | |||||
|---|---|---|---|---|---|
| 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 |
All values are in US Dollars.
Page 12 of 15
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.
Page 13 of 15
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
Page 14 of 15
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 |
Page 15 of 15
crda-ex992_196.pptx.htm
Crawford & Company Second Quarter 2020 Earnings Conference Call
Forward-Looking Statements and Additional Information Introduction Forward-Looking Statements This presentation contains forward-looking statements, including statements about the expected future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not statements of historical fact may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company's present expectations. Accordingly, no one should place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Crawford & Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise or not arise after the date the forward-looking statements are made. Results for any interim period presented herein are not necessarily indicative of results to be expected for the full year or for any other future period. For further information regarding Crawford & Company, and the risks and uncertainties involved in forward-looking statements, please read Crawford & Company's reports filed with the Securities and Exchange Commission and available at www.sec.gov or in the Investor Relations section of Crawford & Company's website at www.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, restructuring costs, loss on disposition of business, arbitration and claim settlements, 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.
1.6 Million Claims handled worldwide $18+ Billion Claims managed annually CRD-A & CRD-B Traded on NYSE 9,000 Total employees The world’s largest publicly listed independent provider of global claims management solutions. Organized across global service lines: P&C adjusting solutions (Crawford Claims Solutions) Large and complex claims (Global Technical Services) Global TPA solutions (Broadspire) Managed repair services (Contractor Connection) Introduction Crawford & Company
Introduction Non-GAAP (1) See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. Second Quarter 2020 Financial Highlights GAAP $ 234.4 Million Revenues before reimbursements $ 5.9 Million Net income attributable to shareholders $ 240.2 Million Revenues before reimbursements 1 $ 18.7 Million Adjusted operating earnings 1 7.8% Adjusted operating margin 1 $ 25.9 Million Consolidated adjusted EBITDA 1 10.8% EBITDA as % of revenue 1
External Factors Weather And Economic Indicators A return to normal weather activity allowed the Company to capitalize on recent client wins We remain cautiously optimistic about the Company’s financial performance in light of the COVID-19 pandemic Catastrophic weather activity led to new business from several new large carriers Benefited from increased volume of business interruption (BI) claims in U.K. and event cancellation claims in U.K. and Europe Reduced business activity caused a slowdown in the TPA business and Canada
Impact Across Our Global Service Lines (GSLs) Claims Volume Crawford Specialty Solutions Contractor Connection Crawford TPA Solutions Crawford Claims Solutions Momentum building from new clients, with first $1 million month in June from our major carrier win Decreased economic activity is a headwind for our TPA business Dallas claims facility is operational, expanding to fully utilize its capacity before fall WeGoLook saw the highest number of assignments in June than ever before Onboarded an additional top ten carrier in June and are receiving assignments GTS Increase in COVID-related claims for workers’ compensation from two healthcare clients Use of telemedicine during the quarter provided additional revenue stream Increased frequency of cyber claims across Asia and Europe Saw largest amount of monthly assignments in May in the business’s history Implementing our largest U.S. program win to date Growth driven by a rise in claims tied to event cancellations and COVID-19
Customer Excellence New Business Momentum Continued RFP activity, winning $23.6 million of new business Sales Pipeline Net Promoter Score Collected 238 NPS scores, marking the record for a single quarter, with an overall score of 40 New and Renewal Business Activity TPA saw several new business wins totaling $11.2 million in annualized revenue and 97% renewal rate from existing business CCS is continuing to ramp the new major carrier win from the first quarter Contractor Connection saw renewed contracts from top clients in U.S. and Canada GTS saw annual renewal revenue of $5.3 million in U.S. Over $250 million of new business in the pipeline Continued sales momentum, gaining traction from all-size carriers Signifies a high level of customer satisfaction
Disciplined Capital Allocation Our Capital Allocation Strategy Strong financial position with liquidity surpassing expectations Continuing to evaluate share repurchases as a component of our capital allocation strategy Low leverage ratio of 1.57x EBITDA Increased dividend to $0.04 per share for CRD-A and CRD-B Increased operating cash flow by 40% over last year’s levels
COVID-19 Workforce Client Impact Diversity & Inclusion Market Leadership Remain committed to protecting the safety and well-being of our workforce allowing them to successfully serve our clients Continue to deliver on our mission and promise to be there for our clients when they need to lean on us the most Foster a safe and inclusive working environment where employees can be authentic and offer unique experiences and perspectives Prioritize growth, people and system readiness, and fiscal responsibility to further advance our competitive position Update On Our Response To COVID-19 Continuing to demonstrate our resilience despite the significant challenges presented by COVID-19
(1) See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. Financial Results Second Quarter 2020 Financial Summary Quarter Ended June 30, June 30, ($ in millions, except per share amounts) 2020 2019 % Change Revenues $234.4 $256.9 (9)% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $240.2 $256.9 (7)% Net Income Attributable to Shareholders of Crawford & Company $5.9 $2.6 123% Diluted Earnings per Share CRD-A $0.11 $0.06 83% CRD-B $0.11 $0.04 175% Non-GAAP Diluted Earnings per Share 1 CRD-A $0.16 $0.21 (24)% CRD-B $0.16 $0.19 (16)% Adjusted Operating Earnings 1 $18.7 $22.5 (17)% Adjusted Operating Margin 1 7.8% 8.8% (100)bps Adjusted EBITDA 1 $25.9 $31.2 (17)% Adjusted EBITDA Margin 1 10.8% 12.1% (130)bps
Financial Results Crawford TPA Solutions Segment Highlights Three months ended (in thousands, except percentages) June 30, 2020 June 30, 2019 Variance 2020 Based on 2019 rates Variance Revenues $86,725 $99,518 (12.9%) $87,603 (12.0%) Direct expenses 66,963 75,840 (11.7%) 67,556 (10.9%) Gross profit 19,762 23,678 (16.5%) 20,047 (15.3%) Indirect expenses 16,591 18,652 (11.0%) 16,835 (9.7%) Operating earnings $3,171 $5,026 (36.9%) $3,212 (36.1%) Gross profit margin 22.8% 23.8% (1.0%) 22.9% (0.9%) Operating margin 3.7% 5.1% (1.4%) 3.7% (1.4%) Total cases received 183,420 197,013 (6.9%) Full time equivalent employees 3,047 3,170 (3.9%) Operating Results (2Q 2020 v. 2Q 2019) Revenues of $86.7 million versus $99.5 million Constant dollar revenues of $87.6 million Gross profit of $19.8 million versus $23.7 million Gross profit margin of 22.8% versus 23.8% Operating earnings of $3.2 million versus $5.0 million Operating margin of 3.7% versus 5.1% Highlights Renewed 97% of our revenue YTD COVID-19 prompted service innovation and increased use of telemedicine services Advancing technology solutions
Financial Results Crawford Claims Solutions Segment Highlights Three months ended (in thousands, except percentages) June 30, 2020 June 30, 2019 Variance 2020 Based on 2019 rates Variance Revenues $81,451 $86,003 (5.3%) $84,252 (2.0%) Direct expenses 62,447 66,450 (6.0%) 64,347 (3.2%) Gross profit 19,004 19,553 (2.8%) 19,905 1.8% Indirect expenses 16,215 17,843 (9.1%) 16,861 (5.5%) Operating earnings $2,789 $1,710 63.1% $3,044 78.0% Gross profit margin 23.3% 22.7% 0.6% 23.6% 0.9% Operating margin 3.4% 2.0% 1.4% 3.6% 1.6% Total cases received 109,212 121,794 (10.3%) Full time equivalent employees 2,787 2,899 (3.9%) Operating Results (2Q 2020 v. 2Q 2019) Revenues of $81.5 million versus $86.0 million Constant dollar revenues of $84.3 million Gross profit of $19.0 million versus $19.6 million Gross profit margin of 23.3% versus 22.7% Operating earnings of $2.8 million versus $1.7 million Operating margin of 3.4% versus 2.0% Highlights Continuing to ramp up major carrier win from the first quarter Strong performance in U.S. and U.K. Providing data driven, topical, and actionable insights to market Enhanced digital platform
Financial Results Crawford Specialty Solutions Segment Highlights Three months ended (in thousands, except percentages) June 30, 2020 June 30, 2019 Variance 2020 Based on 2019 rates Variance Revenues $66,240 $71,360 (7.2%) $68,393 (4.2%) Direct expenses 41,157 46,137 (10.8%) 42,585 (7.7%) Gross profit 25,083 25,223 (0.6%) 25,808 2.3% Indirect expenses 11,090 12,611 (12.1%) 11,535 (8.5%) Operating earnings $13,993 $12,612 10.9% $14,273 13.2% Gross profit margin 37.9% 35.3% 2.6% 37.7% 2.4% Operating margin 21.1% 17.7% 3.4% 20.9% 3.2% Total cases received 75,866 83,650 (9.3%) Full time equivalent employees 1,404 1,476 (4.9%) Operating Results (2Q 2020 v. 2Q 2019) Revenues of $66.2 million versus $71.4 million Constant dollar revenues of $68.4 million Gross profit of $25.1 million versus $25.2 million Gross profit margin of 37.9% versus 35.3% Operating earnings of $14.0 million versus $12.6 million Operating margin of 21.1% versus 17.7% Highlights GTS Implementing largest U.S. program to date Pursuing large scale BI opportunities Contractor Connection Saw largest monthly assignments in May in the business’s history Onboarded a top ten carrier in June Enhanced decontamination services and launched a new commercial property modification service Actively recruiting adjuster teams globally
Additional Financial Matters in the Second Quarter 2020 Financial Results Estimate negative impact on revenues of $22 to $26 million Expect ongoing global economic slowdown from the pandemic may impact results in one or more future quarters Income Tax Impact of First Quarter Goodwill Impairment Recognized non-cash goodwill impairment charge in the first quarter Unallocated Corporate and Shared Costs Canada Emergency Wage Subsidy Unallocated corporate costs of $1.7 million Sold 51% Stake in Lloyd Warwick International (LWI) Sold for initial cash proceeds of $23.2 million Increase driven by CEO transition costs, severance, and self-insurance expenses Estimated COVID-19 Impact on Revenues Second quarter operating earnings includes a total of $4.3 million in benefits from the Canada Emergency Wage Subsidy Expect to result in net gain of $10 to $12 million, transaction will be recognized in third quarter 2020 Decreased income tax benefit by $2.2 million, or $0.04 per share during the second quarter
(1) See Appendix for non-GAAP explanation and reconciliation Financial Results Balance Sheet Highlights Unaudited ($ in thousands) June 30, 2020 December 31, 2019 December 31, 2019 December 31, 2018 Change Change Cash and cash equivalents $ 59,958 $ 51,802 $ 8,156 Accounts receivable, net 120,941 128,217 (7,276 ) Unbilled revenues, net 106,335 103,894 2,441 Total receivables 227,276 232,111 (4,835 ) Goodwill 62,086 80,642 (18,556 ) Intangible assets arising from business acquisitions, net 68,815 75,083 (6,268 ) Deferred revenues 51,721 52,368 (647) Pension liabilities 58,388 65,909 (7,521 ) Short-term borrowings and current portion of finance leases 39,925 28,546 11,379 Long-term debt, less current portion 155,649 148,408 7,241 Total debt 195,574 176,954 18,620 Total stockholders' equity attributable to Crawford & Company 145,495 159,317 (13,822 ) Net debt 1 135,616 125,152 10,464
(1) See Appendix for non-GAAP explanation and reconciliation Financial Results Operating And Free Cash Flow Unaudited ($ in thousands) 2020 2019 2019 2018 Change Change Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (5,501) $ 8,751 $ (14,252 ) Goodwill Impairment 17,674 — 17,674 Arbitration and Claim Settlements — 11,352 (11,352 ) Loss on Disposition of Business 341 — 341 Depreciation and Other Non-Cash Operating Items 19,912 20,891 (979 ) Billed Receivables Change 5,473 (4,086 ) 9,559 Unbilled Receivables Change (7,000 ) (11,848 ) 4,848 Change in Accrued Compensation and 401K (13,959 ) (10,401 ) (3,558 ) Change in Accrued and Prepaid Income Taxes (6,806 ) (563 ) (6,243 ) Other Working Capital Changes 5,054 (5,012 ) 10,066 U.S. and U.K. Pension Contributions (3,156 ) (345 ) (2,811 ) Cash Flows from Operating Activities 12,032 8,739 (3,293 ) Property & Equipment Purchases, net (5,476 ) (3,279 ) (1,747 ) Capitalized Software (internal and external costs) (8,823 ) (4,369 ) (4,454 ) Free Cash Flow1 $ (2,267 ) $ 641 $ (2,908 ) For the year to date periods ended June 30,
2020 Priorities Conclusion 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 Maintain industry leadership through our innovations and market leading solutions Future Growth Deliver superior results for our shareholders
9,000 50,000+ 70 $18B+ Employees Field Resources Countries Claims Managed Annually Crawford & Company The world’s largest publicly listed independent provider of global claims management and outsourcing solutions.
Appendix: Non-GAAP Financial Information
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, restructuring costs, loss on disposition of business, arbitration and claim settlements, 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 and stock-based compensation expense and foreign exchange fluctuations. Additionally, adjustments for non-recurring expenses for goodwill impairment, restructuring costs, loss on disposition of business, 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 costs, loss on disposition of business, 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.
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: Three Months Ended Six Months Ended (in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Geographic Area Currency USD 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% Canada CAD 20,852 8.9% 28,803 11.2% 46,072 9.8% 58,687 12.1% Australia AUD 18,779 8.0% 19,319 7.5% 34,324 7.3% 35,574 6.6% Europe EUR 14,019 6.0% 13,320 5.2% 27,408 5.8% 26,185 5.2% Rest of World Various 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%
Reconciliation of Non-GAAP Items Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Quarter Ended Quarter Ended June 30, December 31, June 30, December 31, Unaudited ($ in thousands) 2020 2019 2019 2018 Revenues Before Reimbursements Total Revenues $ 234,416 $ 256,881 Reimbursements (8,459 ) (10,965 ) Revenues Before Reimbursements $ 242,875 $ 267,846 Costs of Services Provided, Before Reimbursements Total Costs of Services $ 163,598 $ 174,927 Reimbursements (8,459 ) (10,965 ) Costs of Services Provided, Before Reimbursements $ 172,057 $ 185,892 Quarter Ended Quarter Ended Quarter Ended Quarter Ended June 30, December 31, June 30, December 31, Unaudited ($ in thousands) 2020 2019 2019 2018 Operating Earnings: Crawford TPA Solutions $ 3,171 $ 5,026 Crawford Claims Solutions 2,789 1,710 Crawford Specialty Solutions 13,993 12,612 Unallocated corporate and shared costs and credits, net (1,709 ) 3,170 Consolidated Operating Earnings 18,244 22,518 (Deduct) Add: Net corporate interest expense (2,452 ) (2,468 ) Stock option expense (286 ) (413 ) Amortization expense (2,732 ) (2,802 ) Arbitration and claim settlements — (11,352 ) Loss on disposition of business (341 ) — Income tax provision (6,311 ) (2,859 ) Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests (224 ) 18 Net Income Attributable to Shareholders of Crawford & Company $ 5,898 $ 2,642
Reconciliation of Non-GAAP Items (cont.) Adjusted EBITDA Quarter Ended Quarter Ended June 30, December 31, June 30, December 31, Unaudited ($ in thousands) 2020 2019 2019 2018 Net income attributable to shareholders of Crawford & Company $ 5,898 $ 2,642 Add: Depreciation and amortization 9,390 10,226 Stock-based compensation 1,118 1,646 Net corporate interest expense 2,452 2,468 Arbitration and claim settlements — 11,352 Loss on disposition of business 341 — Income tax provision 6,311 2,859 Foreign exchange impacts 358 — Adjusted EBITDA $ 25,868 $ 31,193
Reconciliation of Non-GAAP Items (cont.) Net Debt June 30, December 31, December 31, December 31, Unaudited ($ in thousands) 2020 2019 2019 2018 Net Debt Short-term borrowings $ 39,887 $ 28,531 Current installments of capital leases 38 15 Long-term debt and capital leases, less current installments 155,649 148,408 Total debt 195,574 176,954 Less: Cash and cash equivalents 59,958 51,802 Net debt $ 135,616 $ 125,152
Reconciliation of Non-GAAP Items (cont.) Segment Gross Profit Three months ended Three months ended ($ in thousands) June 30, 2020 December 31, 2019 June 30, 2019 December 31, 2018 Segment gross profit: Crawford TPA Solutions $ 19,762 $ 23,678 Crawford Claims Solutions 19,004 19,553 Crawford Specialty Solutions 25,083 25,223 Segment gross profit 63,849 68,454 Segment indirect costs: Crawford TPA Solutions (16,591 ) (18,652 ) Crawford Claims Solutions (16,215 ) (17,843 ) Crawford Specialty Solutions (11,090 ) (12,611 ) Unallocated corporate and shared costs, net (1,709 ) 3,170 Consolidated operating earnings 18,244 22,518 Net corporate interest expense (2,452 ) (2,468 ) Stock option expense (286 ) (413 ) Amortization expense (2,732 ) (2,802 ) Arbitration and claim settlements — (11,352 ) Loss on disposition of business (341 ) — Income tax provision (6,311 ) (2,859 ) Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests (224 ) 18 Net income attributable to shareholders of Crawford & Company $ 5,898 $ 2,642
Reconciliation of Second Quarter Non-GAAP Results Three Months Ended June 30, 2020 Unaudited ($ in thousands) Revenues Revenues Non-GAAP Operating Earnings Non-GAAP Operating Earnings Pretax Earnings Pretax (Loss) Earnings Net Income Attributable to Crawford & Company Net (Loss) Income Attributable to Crawford & Company Diluted Earnings per CRD-A Share Diluted (Loss) Earnings per CRD-A Share Diluted Earnings per CRD-B Share Diluted (Loss) Earnings per CRD-B Share 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 Unaudited ($ in thousands) Revenues Revenues Non-GAAP Operating Earnings Non-GAAP Operating Earnings Pretax Earnings Pretax Earnings Net Income Attributable to Crawford & Company Net Income Attributable to Crawford & Company Diluted Earnings per CRD-A Share Diluted Earnings per CRD-A Share Diluted Earnings per CRD-B 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