Crawford & Co 10-Q for FY2020 Q1

Crawford & Co (CRD-A)

10-Q 2020-05-05 For: 2020-03-31

Added on April 06, 2026

About this 10-Q

Crawford & Co filed this 10-Q on May 5, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $246.05M; down 4.0% from $256.38M a year earlier
Net loss: $11.4M; compared with net income of $6.11M a year earlier

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	Georgia		58-0506554
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	5335 Triangle Parkway
	Peachtree Corners, Georgia		30092
	(Address of principal executive offices)		(Zip Code)



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.



Large accelerated filer	o	Accelerated filer	þ
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o



		Page
Part I. Financial Information

Item 1.	Financial Statements:	3

	Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2020 and 2019	3

	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the three months months ended March 31, 2020 and 2019	4

	Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2020 and December 31, 2019	5

	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2020 and 2019	7

	Condensed Consolidated Statements of Shareholders' Investment (unaudited) as of and for the three months ended March 31, 2020 and 2019	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

	Report of Independent Registered Public Accounting Firm	27

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

Part II. Other Information

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 6.	Exhibits	46

Signatures		47



	Three Months Ended March 31,
(In thousands, except per share amounts)	2020			2019
Revenues:

Revenues before reimbursements	$	237,531		$	247,058
Reimbursements	8,515			9,319
Total Revenues	246,046			256,377

Costs and Expenses:

Costs of services provided, before reimbursements	177,604			177,888
Reimbursements	8,515			9,319
Total costs of services	186,119			187,207

Selling, general, and administrative expenses	55,754			58,659

Corporate interest expense, net of interest income of $111 and $350, respectively	2,224			2,716

Goodwill impairment	17,674			—

Restructuring costs	5,714			—

Total Costs and Expenses	267,485			248,582

Other (Expense) Income, net	(206		)	907

(Loss) Income Before Income Taxes	(21,645		)	8,702

(Benefit) Provision for Income Taxes	(8,486		)	2,933

Net (Loss) Income	(13,159		)	5,769

Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests	1,760			340

Net (Loss) Income Attributable to Shareholders of Crawford & Company	$	(11,399	)	$	6,109

(Loss) Earnings Per Share - Basic:
Class A Common Stock	$	(0.21	)	$	0.12
Class B Common Stock	$	(0.23	)	$	0.10

(Loss) Earnings Per Share - Diluted:
Class A Common Stock	$	(0.21	)	$	0.12
Class B Common Stock	$	(0.23	)	$	0.10

Weighted-Average Shares Used to Compute Basic Earnings Per Share:
Class A Common Stock	30,562			30,658
Class B Common Stock	22,578			23,367

Weighted-Average Shares Used to Compute Diluted Earnings Per Share:
Class A Common Stock	30,562			31,106
Class B Common Stock	22,578			23,367



x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended March 31,
(In thousands)	2020			2019

Net (Loss) Income	$	(13,159	)	$	5,769

Other Comprehensive (Loss) Income:
Net foreign currency translation (loss) gain, net of tax of $0 and $0, respectively	(3,472		)	3,046

Amortization of actuarial losses for retirement plans included in net periodic pension cost, net of tax of $651 and $690, respectively	1,928			2,011

Other Comprehensive (Loss) Income	(1,544		)	5,057

Comprehensive (Loss) Income	(14,703		)	10,826

Comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests	1,759			356

Comprehensive (Loss) Income Attributable to Shareholders of Crawford & Company	$	(12,944	)	$	11,182



			*
(In thousands)	March 31, 2020		December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	83,110	$	51,802
Accounts receivable, less allowance for doubtful accounts of $9,374 and $9,348, respectively	121,230		128,217
Unbilled revenues, at estimated billable amounts	108,898		103,894
Income taxes receivable	13,289		7,820
Prepaid expenses and other current assets	23,470		23,476
Total Current Assets	349,997		315,209
Net Property and Equipment	30,680		31,425
Other Assets:
Operating lease right-of-use assets, net	108,974		102,354
Goodwill	62,883		80,642
Intangible assets arising from business acquisitions, net	72,625		75,083
Capitalized software costs, net	65,850		66,445
Deferred income tax assets	19,221		17,971
Other noncurrent assets	71,442		70,884
Total Other Assets	400,995		413,379
TOTAL ASSETS	$	781,672	$	760,013



				*
(In thousands, except par value amounts)	March 31, 2020			December 31, 2019
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings	$	39,784		$	28,531
Accounts payable	33,335			34,377
Accrued compensation and related costs	58,140			68,499
Self-insured risks	10,594			11,311
Income taxes payable	—			3,030
Operating lease liabilities	29,277			30,765
Other accrued liabilities	35,948			31,449
Deferred revenues	31,265			28,288
Current installments of finance leases	38			15
Total Current Liabilities	238,381			236,265
Noncurrent Liabilities:
Long-term debt and finance leases, less current installments	187,271			148,408
Operating lease liabilities	95,522			87,064
Deferred revenues	24,042			24,080
Accrued pension liabilities	60,548			65,909
Other noncurrent liabilities	31,677			33,410
Total Noncurrent Liabilities	399,060			358,871
Redeemable Noncontrolling Interests	430			2,310
Shareholders' Investment:
Class A common stock, $1.00 par value; 50,000 shares authorized; 30,519 and 30,610 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	30,519			30,610
Class B common stock, $1.00 par value; 50,000 shares authorized; 22,510 and 22,671 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	22,510			22,671
Additional paid-in capital	63,949			63,392
Retained earnings	231,927			249,551
Accumulated other comprehensive loss	(207,876		)	(206,907		)
Shareholders' Investment Attributable to Shareholders of Crawford & Company	141,029			159,317
Noncontrolling interests	2,772			3,250
Total Shareholders' Investment	143,801			162,567
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT	$	781,672		$	760,013



	Common Stock												Accumulated			Shareholders' Investment Attributable to
2020	Class A Non-Voting			Class B Voting			Additional Paid-In Capital			Retained Earnings			Other Comprehensive Loss			Shareholders of Crawford & Company			Noncontrolling Interests			Total Shareholders' Investment
Balance at January 1, 2020	$	30,610		$	22,671		$	63,392		$	249,551		$	(206,907	)	$	159,317		$	3,250		$	162,567
Net loss ⁽¹⁾	—			—			—			(11,399		)	—			(11,399		)	120			(11,279		)
Other comprehensive loss	—			—			—			—			(1,545		)	(1,545		)	1			(1,544		)
Cash dividends paid (Class A - $0.07 per share, Class B - $0.05 per share)	—			—			—			(3,268		)	—			(3,268		)	—			(3,268		)
Stock-based compensation	—			—			880			—			—			880			—			880
Repurchases of common stock	(155		)	(161		)	—			(2,350		)	—			(2,666		)	—			(2,666		)
Shares issued in connection with stock-based compensation plans, net	64			—			(54		)	—			—			10			—			10
Increase in value of noncontrolling interest due to acquisition	—			—			(269		)	—			576			307			(599		)	(292		)
Adoption of Topic 326	—			—			—			(607		)	—			(607		)	—			(607		)
Balance at March 31, 2020	$	30,519		$	22,510		$	63,949		$	231,927		$	(207,876	)	$	141,029		$	2,772		$	143,801



	Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
U.S.	$	31,428	$	33,936
U.K.	15,345		16,371
Canada	10,139		12,121
Australia	9,945		10,519
Europe	6,961		6,465
Rest of World	3,769		3,907
Total Crawford Claims Solutions Revenues before Reimbursements	$	77,587	$	83,319



	Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
(in thousands)	Claims Management Services		Medical Management Services		Total		Claims Management Services		Medical Management Services		Total
U.S.	$	36,024	$	42,069	$	78,093	$	36,313	$	40,883	$	77,196
U.K.	2,865		—		2,865		2,530		—		2,530
Canada	7,463		—		7,463		9,372		—		9,372
Europe and Rest of World	8,514		—		8,514		8,696		—		8,696
Total Crawford TPA Solutions Revenues before Reimbursements	$	54,866	$	42,069	$	96,935	$	56,911	$	40,883	$	97,794



(In Thousands)
Customer Contract Liabilities	Deferred Revenue
Balance at January 1, 2020	$	52,368
Quarterly additions	22,226
Revenue recognized from the prior periods	(14,293		)
Revenue recognized from current quarter additions	(4,994		)
Balance as of March 31, 2020	$	55,307



(in thousands)	Classification on Balance Sheet	March 31, 2020			December 31, 2019
Assets:
Operating lease	Operating lease right-of-use assets, net	$	108,974		$	102,354
Liabilities:
Current operating lease liabilities	Current operating lease liabilities	29,277			30,765
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	95,522			87,064
Total operating lease liabilities		$	124,799		$	117,829

Weighted-Average Remaining Lease Term		6.14 years			5.72 years
Weighted-Average Discount Rate⁽¹⁾		5.3		%	5.4		%



	Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
(in thousands)	Global Technical Services		Contractor Connection		Total		Global Technical Services		Contractor Connection		Total
U.S.	$	9,601	$	15,326	$	24,927	$	10,271	$	18,187	$	28,458
U.K.	12,015		2,157		14,172		11,157		1,531		12,688
Canada	6,137		1,481		7,618		6,711		1,680		8,391
Australia	4,848		130		4,978		5,143		174		5,317
Europe	5,152		7		5,159		4,759		—		4,759
Rest of World	6,155		—		6,155		6,332		—		6,332
Total Crawford Specialty Solutions Revenues before Reimbursements	$	43,908	$	19,101	$	63,009	$	44,373	$	21,572	$	65,945



(in thousands)	March 31, 2020
2020	$	25,883
2021	32,656
2022	20,461
2023	14,540
2024	11,289
Thereafter	43,035
Total undiscounted lease payments	147,864
Less imputed interest	(23,064		)
Present value of future lease payments	$	124,799



	Three Months Ended
(in thousands)	March 31, 2020	March 31, 2019
Shares underlying stock options excluded	1,904	931
Performance stock grants excluded because performance conditions have not been met ⁽¹⁾	932	1,144


⁽¹⁾	Compensation cost is recognized for these performance stock grants based on expected achievement rates; however, no consideration is given to these performance stock grants when calculating diluted earnings per share until the performance measurements have been achieved.



	Three Months Ended March 31, 2020
(in thousands)	Foreign currency translation adjustments			Retirement liabilities ⁽¹⁾			AOCL attributable to shareholders of Crawford & Company
Beginning balance	$	(35,850	)	$	(171,057	)	$	(206,907	)
Other comprehensive loss before reclassifications	(3,473		)	—			(3,473		)
Amounts reclassified from accumulated other comprehensive income	—			1,928			1,928
Net current period other comprehensive (loss) income	(3,473		)	1,928			(1,545		)
Acquisition of noncontrolling interest	576			—			576
Ending balance	$	(38,747	)	$	(169,129	)	$	(207,876	)


⁽¹⁾	Retirement liabilities reclassified to net income are related to the amortization of actuarial losses and are included in "Other (Expense) Income, net" in the Company's unaudited Condensed Consolidated Statements of Operations. See Note 6, "Defined Benefit Pension Plans" for additional details.



			Fair Value Measurements at March 31, 2020
					Significant Other		Significant
			Quoted Prices in		Observable		Unobservable
			Active Markets		Inputs		Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds ⁽¹⁾	$	10,021	$	10,021	$	—	$	—

Liabilities:
Contingent earnout liability ⁽²⁾	440		—		—		440


⁽¹⁾	The fair values of the money market funds were based on recently quoted market prices and reported transactions in an active marketplace. Money market funds are included in the Company's unaudited Condensed Consolidated Balance Sheets as "Cash and cash equivalents."


•	a decline in cases referred to us for any reason, including changes in the degree to which property and casualty insurance carriers outsource their claims handling functions,


•	the impact of global pandemics, such as COVID-19, on claim volumes,


•	changes in regulations and practices of various governmental authorities,


•	our ability to successfully integrate the operations of acquired businesses,


•	regulatory changes related to funding of defined benefit pension plans,


•	our U.S., U.K. and other international defined benefit pension plans and our future funding obligations thereunder,


•	our ability to complete any transaction involving the acquisition or disposition of assets on terms and at times acceptable to us,


•	our ability to identify new revenue sources not tied to the insurance underwriting cycle,


•	our ability to develop or acquire information technology resources to support and grow our business,


•	our ability to renew existing contracts with clients on satisfactory terms,


•	our ability to collect amounts due from our clients and others,


•	continued availability of funding under our financing agreements,


•	general risks associated with doing business outside the U.S., including changes in tax rates,


•	our ability to comply with the covenants in our financing or other agreements,


•	changes in the frequency or severity of man-made or natural disasters,


•	the ability of our third-party service providers, used for certain aspects of our internal business functions, to meet expected service levels,