Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-10356.
CRAWFORD & COMPANY
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-0506554
- ----------------------------------------------------- --------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
5620 Glenridge Dr., N.E., Atlanta, Georgia 30342
- ----------------------------------------------------- --------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 256-0830
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Class A Common Stock - $1.00 Par Value New York Stock Exchange
Class B Common Stock - $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
----------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting stock held by
nonaffiliates* of the Registrant was $124,221,536 as of June 28, 2002, based
upon the closing price as reported on NYSE on such date. *All shareholders,
other than Directors, Executive Officers, and 10% beneficial owners.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of March 20, 2003, was:
Class A Common Stock - $1.00 Par Value - 23,925,383 Shares
Class B Common Stock - $1.00 Par Value - 24,697,172 Shares
Documents incorporated by reference:
(1) Annual Report to Shareholders for the Year Ended December 31, 2002, Part II
- - Items 5, 6, 7, 7A and 8; Part IV - Item 15, and
(2) Proxy Statement for the Annual Meeting of Shareholders to be held April 29,
2003, Part III -Items 10, 11, 12, and 13.
PART I
ITEM 1. BUSINESS
Crawford & Company (the "Registrant"), founded in 1941, is the world's largest
(based on annual revenues) independent provider of claims management solutions
to insurance companies and self-insured entities, with a global network of more
than 700 offices in 67 countries. Major service lines include workers'
compensation claims administration and healthcare management services, property
and casualty claims management, class action services and risk management
information services.
DESCRIPTION OF SERVICES
The percentages of consolidated revenues before reimbursements, derived from the
Registrant's U. S. and international operations are shown in the following
schedule:
Years Ended December 31,
---------------------------------
2002 2001 2000
---- ---- ----
U. S. Operations 72.7% 73.7% 72.9%
International Operations 27.3% 26.3% 27.1%
----- ----- -----
100.0% 100.0% 100.0%
====== ====== ======
U.S. OPERATIONS. Claims management services are provided by the Registrant in
the United States to three different markets. Insurance companies, which
represent the major source of revenues, customarily manage their own claims
administration function, but require limited services which the Registrant
provides. The Registrant services clients in the self-insured or commercially
insured market through alternative loss funding methods, and provides them with
a more complete range of services, including the supervision of field locations,
information services and medical cost-containment. The Registrant also performs
administrative services for class actions settlements including those for
product liability, bankruptcy noticing and distribution, and other legal
settlements.
The major elements of U.S. claims management services (which include the limited
services required by most property and casualty insurance company clients as
well as the expanded services required by self-insured clients) are:
- Initial Reporting - the Registrant's XPressLink(SM) service
provides 24-hour receipt, acknowledgment, and distribution of
claims information through Electronic Data Interchange,
customized reporting and referral programs, call center
reporting, and facsimile receipt and distribution.
2
- Investigation - the development of information necessary to
determine the cause and origin of loss.
- Evaluation - the determination of the extent and value of
damage incurred and the coverage, liability, and
compensability relating to the parties involved.
- Disposition - the resolution of the claim, whether by
negotiation and settlement, by denial, or by other means.
Expanded services provided primarily, but not exclusively, to the Registrant's
self-insured clients include:
- Information Services - through the Registrant's information
system, SISDAT(SM), it provides reports of detailed claims
information of both a statistical and financial nature to
self-insured entities and insurance companies.
- Management - the coordination and supervision of all parties
involved in the claims settlement process, including the
adjusting personnel directly involved in handling the claim.
Typically, this management function is performed by an
independent administrative unit within the Registrant which is
not involved in the initial investigation of a claim.
- Auditing Services - the Registrant's provider and hospital
bill audit programs assist clients in controlling medical
costs associated with workers' compensation and liability
claims by comparing fees charged by health care providers and
hospitals with maximum fee schedules prescribed by statutory
regulations as well as usual and customary charges in
non-fee-schedule states. The Registrant also provides a
preferred provider organization through an affiliation with
the First Health Group.
- Managed Care Services - provides a broad range of cost
containment and utilization review services to insurance
companies, service organizations and self-insured
corporations. These services, which are designed to both
control the cost and enhance the efficient delivery of medical
benefits, include early medical intervention, triage,
assessment, case management, PPO channeling, and bill review.
- Vocational Services - provides vocational evaluation in order
to assess an injured employee's potential to return to work.
These services involve diagnostic testing and occupational,
personal and motivational counseling of the employee.
Vocational, medical and employment consultants assist in the
re-employment and preparation of injured individuals to return
to work.
3
- Medical Case Management Services - are typically provided by
rehabilitation nurses who work closely with attending
physicians and other medical personnel in order to expedite
the injured person's physical recovery and rehabilitation and
maximize the opportunity for the person to return to work.
These services also involve coordinating and monitoring
treatment plans and related costs to insure that such
treatment is appropriate and necessary in the circumstances.
- Long-Term Care - offers a full menu of long-term care services
including comprehensive on-site assessments, complete care
coordination, and on-going care monitoring. These services are
provided through experienced health care professionals with an
insight to local quality care needs and are offered primarily
to senior citizens and their children, attorneys, and trust
officers.
The claims administration services described above are provided to clients for a
variety of different referral assignments which generally are classified as to
the underlying insured risk categories used by insurance companies. The major
categories are described below:
- Automobile - relates to all types of losses involving use of
the automobile. Such losses include bodily injury, physical
damage, medical payments, collision, fire, theft, and
comprehensive liability.
- Property - relates to losses caused by physical damage to
commercial or residential real property and certain types of
personal property. Such losses include those arising from
fire, windstorm, or hail damage to commercial and residential
property, burglary, robbery or theft of personal property, and
damage to property under inland marine coverage.
- Workers' Compensation - relates to claims arising under state
and federal workers' compensation laws.
- Public Liability - relates to a wide range of non-automobile
liability claims such as product liability; owners',
landlords' and tenants' liabilities; and comprehensive general
liability.
- Catastrophe - covers all types of natural disasters, such as
hurricanes, earthquakes and floods, and man-made disasters
such as oil spills, chemical releases, and explosions, where
the Registrant provides specially trained catastrophe teams to
handle claims, as well as to manage the recovery efforts.
- Surveillance and Forensic Investigation - provides discrete
surveillance operations to confirm suspicious claims and
forensic cause and origin investigations.
4
The major elements of class action services are as follows:
- Administration - provided by The Garden City Group, Inc.
("GCG"), a wholly owned subsidiary of the Registrant, acquired
by the Registrant in January of 1999. GCG handles the
administrative functions related to securities, product
liability and other class action settlements, including
qualifying class members, dispensing payments, and
administering the settlement funds. With the field operations
of the Registrant, GCG and the Registrant offer comprehensive
programs to integrate the field inspection and administrative
functions in a single source for product liability class
action settlements.
- Inspection - the determination of the extent and value of
damage incurred, liability, and compensability primarily
related to product liability class action settlements.
ADDITIONAL RISK MANAGEMENT AND OTHER SERVICES. The Registrant provides the
following additional risk management and other related services, which support
and supplement the claims and risk management services offered:
- Risk Sciences Group, Inc. ("RSG"), a wholly-owned subsidiary
of the Registrant, is a software applications and consulting
firm. RSG provides customized computer-based information
systems and analytical forecasting services to the risk
management and insurance industry. It manages the Registrant's
basic information systems, SISDAT(SM), and has developed the
SIGMA ENCORE (SM) system, an on-line risk management
information system which supports multiple sources of claims,
locations, risk control, medical, litigation, exposure, and
insurance policy information. RSG serves a variety of clients
with specialized computer programs for long-term risk
management planning, data and systems integration, development
of historical claims/loss databases, claims administration and
management, regulatory reporting, insurance and risk
management cost control, and actuarial and financial analysis
required for loss forecasting, reserve estimation and
financial reporting.
- The PRISM Network, Inc., a wholly-owned subsidiary of the
Registrant acquired in August of 1999, contracts with a
network of contractors ("Contractor Connection(SM)") to
provide property damage repair services at agreed contract
rates for property damage losses. The Registrant and The PRISM
Network, Inc. market Contractor Connection to property and
casualty insurance companies to facilitate faster, more
economical resolution of smaller property damage claims under
home-owner policies.
5
- Education Services are provided by Crawford University, an
internal program that provides education for professionals
engaged in service delivery for all lines of business to
assure consistent quality in the Registrant's work products.
In addition, the University provides continuing education in
support of career paths, management and supervisory training,
and the opportunity to obtain professional certification
through IIA/CPCU. Clients have the opportunity to attend
Crawford University education programs and access the Crawford
University continuing education curriculum in a variety of
risk management subjects.
INTERNATIONAL OPERATIONS. Substantially all of the Registrant's international
revenues are derived from the insurance company market. The Registrant divides
its operations outside the United States into four geographic regions: the
Americas (excluding the U.S.); the United Kingdom; Continental Europe, which
also includes the Middle East and Africa; and Asia/Pacific, which includes
Australia. The major services offered by the Registrant through its
international operations are listed below:
- Property and Casualty - provides loss adjusting services for
property, general liability, professional indemnity for
directors and officers, product liability and medical
malpractice.
- Oil, Energy & Engineering - provides loss adjusting for oil,
gas, petrochemicals, other energy risks, utilities and mining
industries, as well as marine and off-shore risks.
- Environmental Pollution - provides cost-containment and claims
management services with respect to environmental related
losses.
- Construction - provides loss adjusting services under
contractors' all risk, engineering all risk, and contractors'
liability coverages. Additionally, evaluates machinery
breakdown claims and provides peripheral services including
plant valuation and loss prevention surveys.
- Catastrophe - organizes major loss teams to provide claims
management and cost containment services through proprietary
information systems.
- Class Action Administration - handles the administrative
functions related to product liability and other class action
settlements, including qualifying class members, dispersing
payments, and administering the settlement funds.
- Marine - provides loss adjusting services for freight carriers
liability, loss investigations, recoveries, salvage disposal,
yacht
6
and small craft, cargo, container, discharge, draft, general
average, load, trailer and on/off live surveys, ship repairer
liability and port stevedore liability.
- Specie and Fine Art - provides loss adjusting services under
fine art dealers' block and jewelry and furriers' block
policies.
- Entertainment Industry - provides a broad range of loss
adjusting services for television, commercial and educational
film production, and theater and live events.
- Aviation - manages salvage removal and sale and provides loss
adjusting services for hull related risks, as well as cargo
and legal liability, hangar and airport owners'/operators'
liability policies.
- Banking, Financial and Political Risks - performs loss
adjusting functions under bankers blanket bond, political
risk, and financial contingency policies.
- Livestock - performs loss adjusting on bloodstock, and
liability/equestrian activity.
- Security Consultancy - performs loss prevention and bank
surveys and adjusts cash-in-transit losses.
- Reinsurance - provides external audits, portfolio analyses,
and management and marketing research. Additionally provides
underwriting review, cash control and management of
discontinued operations.
- Medical and Vocational Case Management Services - provides
specialized return to work and expert testimony services in
the employer liability and auto liability markets.
During the 2002 fiscal year, a subsidiary of the Registrant acquired the
operations of Robertson & Company Group in Australia, a multi-line adjusting
company.
Revenues and expenses outside of North America and the Caribbean are reported on
a two-month delayed basis and, accordingly, the Registrant's December 31, 2002,
2001, and 2000 consolidated financial statements reflect the non-North American
financial position as of October 31, 2002, 2001, and 2000, respectively, and the
results of non-North American operations and cash flows for the 12-month periods
ended October 31, 2002, 2001, and 2000, respectively.
SERVICE DELIVERY - The Registrant's claims management services are offered
primarily through its more than 400 branch offices throughout the United States
and approximately 300 offices in 66 countries throughout the rest of the world.
7
The Registrant has a branch profit-sharing compensation policy covering most of
its branch managers in the United States, under which those managers participate
in the profits of their respective branches. This policy provides a formula for
the determination of branch office profits and pays the manager a percentage,
generally forty percent (40%), of those profits.
COMPETITION, EMPLOYMENT AND OTHER FACTORS
The claims services markets, both in the U. S. and internationally, are highly
competitive and are composed of a large number of companies of varying size and
scope of services. These include large insurance companies and insurance
brokerage firms which, in addition to their primary services of insurance
underwriting or insurance brokerage, also provide services such as claims
administration, health and disability management, and risk management
information systems, which compete with services offered by the Registrant. Many
of these companies are larger than the Registrant in terms of annual revenues
and total assets; however, based on experience in the market, the Registrant
believes that few, if any, such organizations derive revenues from independent
claims administration activities which equal those of the Registrant.
The majority of property and casualty insurance companies maintain their own
staffs of salaried adjusters, with field adjusters located in those areas in
which the volume of claims justifies maintaining a salaried staff. These
companies utilize independent adjusters to service claims when the volume of
claims exceeds the capacity of their staffs and when claims arise in areas not
serviced by staff adjusters. The volume of property claim assignments referred
to the Registrant fluctuates primarily depending on the occurrence of severe
weather.
The United States insurance industry generally uses internal adjusting personnel
to make automobile and smaller property damage claims adjustments by telephone
and may assign the limited function of appraising physical damage to outside
service organizations, such as the Registrant. The Registrant believes that such
limited assignments from automobile and property insurers may continue,
reflecting a perception by insurance companies that they can reduce adjusting
expenses in amounts greater than the higher losses associated with telephone
adjusting. In certain instances, however, insurers have attempted to reduce the
fixed cost of their claims departments by increasing outside assignments to
independent firms such as the Registrant.
When insurance premiums have increased and corporate risk management personnel
have become more aware of alternative methods of financing losses (alternative
risk programs), there has been a trend toward higher retention levels of risk
insurance or implementation of self-insurance programs by large corporations and
governmental entities. These alternative risk programs generally utilize an
insurance company which writes specialized policies that permit each client to
select its own level of risk retention, and may permit certain risk management
services to be provided to the client by service companies independent of the
insurance company or broker. In addition to providing full claims administration
services for such clients, the Registrant generally provides statistical data
such as loss experience analysis. The services are usually the subject of a
contractual agreement with the specialty insurance company or the self-insured
client that specifies the claims to be administered by the Registrant and the
fee to be paid for its services (generally a fixed rate per assignment within
the various risk classifications). These alternative risk programs are sensitive
to changes in premiums charged for full coverage
8
insurance. In softer insurance markets, as were experienced during the 1990's,
these alternative risk programs tend to be less attractive to potential clients
and are replaced by full traditional insurance and, accordingly, reduce the
number of alternative risk programs in which the Registrant can participate.
In addition to large insurance companies and insurance brokerage firms, the
Registrant competes with a great number of smaller local and regional risk
management services firms located throughout the United States and
internationally. Many of these smaller firms have rate structures that are lower
than the Registrant's, but do not offer the broad spectrum of risk management
services which the Registrant provides and, although such firms may secure
business which has a local or regional source, the Registrant believes its
broader scope of services and its large number of geographically dispersed
offices provide it with a competitive advantage in securing business from
national and international clients. There are also national independent
companies who provide a similar broad spectrum of risk management services and
who directly compete with the Registrant.
At December 31, 2002, the total number of full-time equivalent employees was
8,269 compared with 8,569 at December 31, 2001. In addition, the Registrant has
available a significant number of on-call employees as and when the demand for
services requires. The Registrant, through Crawford University, provides many of
its employees with formal classroom training in basic and advanced skills
relating to claims administration and healthcare management services. Such
training is generally provided at the Registrant's education facility in
Atlanta, Georgia, although much of the material is also available through
correspondence courses and the Internet. In many cases, employees are required
to complete these or other professional courses in order to qualify for
promotion from their existing positions.
In addition to technical training through Crawford University, the Registrant
also provides ongoing professional education for certain of its management
personnel on general management, marketing, and sales topics. These programs
involve both in-house and external resources.
Special Note Regarding Forward-Looking Statements and Analysts' Reports
Certain written and oral statements made or incorporated by reference from time
to time by the Registrant in this report, other reports, filings with the
Securities and Exchange Commission, press releases, conferences, or otherwise,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate or imply future
results, performance or achievements. Forward-looking statements may be
identified, without limitation, by the use of such words as "anticipates",
"estimates", "expects", "intends", "plans", "predicts", "projects", "believes",
or words or phrases of similar meaning.
Forward-looking statements include risks and uncertainties which could cause
actual results or outcomes to differ materially from those expressed in the
forward-looking statements. In addition to other factors and matters discussed
elsewhere herein, some of the important factors that could cause actual results
to differ materially from those discussed in the forward-looking statements
include the following:
9
- Changes in general economic conditions in the Registrant's
major geographic markets, which include the United States, the
United Kingdom, and Canada, as well as, to a lesser extent,
the other areas throughout the world in which the Registrant
does business;
- Occurrences of weather-related, natural and man-made
disasters;
- Changes in the degree to which property and casualty insurance
carriers outsource their claims handling functions;
- Decisions by major insurance carriers and underwriters and
brokers to expand their activities as third party
administrators and adjusters, which would directly compete
with the Registrant's business;
- Continued growth in product liability and securities class
actions and the possibility that legislation may curtail or
limit that growth;
- The growth of the alternative risk program and the use of
independent third party administrators such as the Registrant,
as opposed to administrators affiliated with brokers or
insurance carriers;
- Ability to develop or acquire information technology resources
to support and grow the Registrant's businesses;
- The ability to recruit, train, and retain qualified personnel;
- The renewal of existing major contracts with clients and the
Registrant's ability to obtain such renewals and new contracts
on satisfactory financial terms and the credit worthiness of
its major clients;
- Changes in accounting principles or application of such
principles to the Registrant's business;
- General risks associated with doing business outside the
United States, including without limitation, restrictions on
foreign-owned or controlled entities conducting loss adjusting
activities in those jurisdictions, exchange rate fluctuations
and currency restrictions;
- The outcome of the federal investigation discussed under "ITEM
3. LEGAL PROCEEDINGS" below; and
- Any other factors referenced or incorporated by reference in
this report and any other publicly filed report.
The risks included above are not exhaustive. Other sections of this report may
include additional factors which could adversely impact the Registrant's
business and financial performance. Moreover, the Registrant operates in a very
competitive and rapidly changing environment. New risk factors emerge from time
to time, and it is not possible for management to predict all such risk factors,
nor can it assess the impact of known risk factors on the Registrant's business
or the
10
extent to which any factor or combination of factors may cause actual results to
differ materially from those contained in any forward-looking statement. The
Registrant undertakes no obligation to revise or publicly release the results of
any revisions to forward-looking statements or to identify any new risk factors
which may arise. Given these risks and uncertainties, investors should not place
undue reliance on forward-looking statements as a prediction of actual future
results.
Investors should also be aware that while the Registrant does, from time to
time, communicate with securities analysts, it is against the Registrant's
policy to disclose to them any material, non-public information or other
confidential commercial information. Accordingly, investors should not assume
that the Registrant agrees with any statement or report issued by any analyst
irrespective of the content of the statement or report. Furthermore, the
Registrant has a policy against issuing or confirming financial forecasts or
projections issued by others. Thus, to the extent that the reports issued by
securities analysts contain any projections, forecasts, or opinions, such
reports are not the responsibility of the Registrant.
Available Information
The Registrant's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and amendments to reports filed pursuant to Section
13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are
available on our website at www.crawfordandcompany.com via a link to a third
party website with SEC filings. These reports are made available at no cost.
ITEM 2. PROPERTIES
The Registrant's home office and educational facilities are owned by the
Registrant and located in Atlanta, Georgia. Registrant also owns its Canadian
home office facility located in Kitchener, Ontario and an additional office
location in Stockport, England. As of December 31, 2002, the Registrant leased
approximately 593 office locations under leases with remaining terms ranging
from a few months to ten years. The remainder of its office locations are
occupied under various short-term rental arrangements.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of the claims administration services business, the
Registrant is named as a defendant in suits by insureds or claimants contesting
decisions by the Registrant or its clients with respect to the settlement of
claims. Additionally, clients of the Registrant have brought actions for
indemnification on the basis of alleged negligence on the part of the
Registrant, its agents or its employees in rendering service to clients. The
majority of these claims are of the type covered by insurance maintained by the
Registrant; however, the Registrant is self-insured for the deductibles under
its various insurance coverages. In the opinion of the Registrant, adequate
reserves have been provided for such self-insured risks.
In 2000, the Registrant received federal grand jury subpoenas requesting certain
business and financial records dating back to 1992. Additional document requests
and grand jury subpoenas
11
were received in 2001 and continued to be received in 2002. The Registrant has
been advised by the U.S. Department of Justice Fraud Section that the subpoenas
issued by the Fraud Section and local U.S. Attorney offices were issued in
connection with a nationwide investigation into the billings for services in
some of the Registrant's U.S. Claims Management and Healthcare Management
Services branch offices. The Registrant is cooperating fully with the
government's inquiry and has retained outside counsel to conduct an internal
investigation into its billing practices under the direction of the Board of
Directors. In addition, the Registrant has issued written corporate billing
policies in order to clarify its billing practices and eliminate inconsistencies
in their application, and continues to strengthen its internal audit and branch
inspection procedures.
The Registrant cannot predict when the government's investigation will be
completed, its ultimate outcome or its effect on the Registrant's financial
condition or results of operations. However, the investigation could cause
disruption in the delivery of the Registrant's services, and ultimately result
in the imposition of civil, administrative or criminal fines or sanctions, as
well as potential reimbursements to clients and loss of existing or prospective
clients or business opportunities. Any such result could have a material adverse
effect on the Registrant's financial condition and results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for a vote during the fourth
quarter of 2002.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the names, positions held, and ages of each of the executive
officers of the Registrant:
Name Office Age
---- ------ ---
G. L. Davis Chairman, President and Chief Executive Officer 51
J. T. Bowman President - Crawford & Company International, Inc. 49
S. V. Festa Executive Vice President - Risk Management Services 43
J. F. Giblin Executive Vice President - Finance 46
Victoria Holland Executive Vice President - Healthcare Management Services 58
J. F. Osten Executive Vice President - General Counsel & Corporate Secretary 61
H. L. Rogers Executive Vice President - Claims Management Services 46
W. L. Beach Senior Vice President - Human Resources 58
Mr. Davis was appointed Chairman of the Board effective October 28, 2002, Chief
Executive Officer effective April 1, 2001 and was President and Chief Operating
Officer from July 27,
12
1999. From November 1, 1998 to July 27, 1999 he was Senior Vice President of the
Claims Management Services product line, a position he also held from August 1,
1997 to April 1, 1998. From April 2, 1998 to October 31, 1998 Mr. Davis was
Manager of the Registrant's Dallas Service Center. From May of 1996 to August of
1997 he was Vice President - National Sales Manager for Claims Management
Services and from July 1994 to May of 1996 he was a Regional Manager in Claims
Management Services operations, first as an Assistant Vice President and then
Vice President.
Mr. Bowman was appointed to his present position effective April 1, 2001. From
August of 1997, first as a Vice President and then in August 1999 as a Senior
Vice President, he was Regional Managing Director - Americas. From January 1,
1996 to August, 1997 he was Vice President in charge of International Strategic
Planning.
Mr. Festa was appointed to his present position with the Registrant on July 27,
1999. Prior to July 1999 and from November 1998 he was Senior Vice President -
Risk Management Services. From April 1998 to November 1998, he was a Vice
President and Director of the Registrant's Risk Management Service Centers.
Prior to April 1998 and for more than five years Mr. Festa was involved in the
operations of the Registrant's Risk Management Services product line first as an
Operations Supervisor, then in June of 1996 as an Assistant Vice President and
in August of 1997 as a Vice President.
Mr. Giblin has been with the Registrant for more than five years, serving as
Controller until his appointment to his present position in June 1998.
Ms. Holland was appointed to her present position with the Registrant on July
27, 1999. From August 1, 1997 to July 27, 1999, she was a Senior Vice President
in the Healthcare Management Services product line. Prior to August 1997 and for
more than five years, Ms. Holland was a Vice President in the Healthcare
Management Services product line.
Mr. Osten had served in this position with the Registrant for more than five
years, but ended his employment with the Registrant as of January 15, 2003.
Mr. Rogers was appointed to his present position with the Registrant on May 1,
2002. Prior to May 1, 2002 and from April 15, 2001 he was Executive Vice
President - Business Solutions Group. Prior to April, 2001 and from July 27,
1999 he was Executive Vice President - Property & Catastrophe Services and from
November 1998 he was Senior Vice President - Property & Catastrophe Services.
From February 1, 1997 to November 1, 1998, he was a Vice President in
Catastrophe Services operations and from April 1, 1996 to February, 1997 he was
an Assistant Vice President in Catastrophe Services operations.
Mr. Beach was hired by the Registrant as its Chief Learning & Resources Officer
in September 1996 and was appointed Senior Vice President - Human Resources in
October of 1997. For more than five years prior to that, he was a partner of
Southern Consulting Group in Atlanta, Georgia.
Officers of the Registrant are appointed annually by the Board of Directors of
the Registrant, except for Mr. Bowman, who is appointed by the Board of
Directors of Crawford & Company International, Inc.
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The information required by this Item is included on page 52 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 2002, under the
caption "Quarterly Financial Data (unaudited), Dividend Information and Common
Stock Quotations" and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included on page 51 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 2002, under the
caption "Selected Financial Data" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is included on pages 18-28 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 2002,
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this Item is included on page 27 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 2002, under the
caption "Market Risk" and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included on pages 29-52 of the
Registrant's Annual Report to Shareholders for the year ended December 31, 2002,
under the captions "Consolidated Statements of Income", "Consolidated Balance
Sheets", "Consolidated Statements of Shareholders' Investment", "Consolidated
Statements of Cash Flows", "Notes to Consolidated Financial Statements",
"Quarterly Financial Data (unaudited), Dividend Information and Common Stock
Quotations", and "Report of Ernst & Young LLP, Independent Auditors", and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 23, 2002, the Registrant determined not to renew the engagement of its
independent auditors, Arthur Andersen LLP ("Andersen"), and appointed Ernst &
Young LLP ("Ernst & Young") as its new independent auditors, effective
immediately. This determination followed
14
Registrant's decision to seek proposals from independent auditors to audit
Registrant's financial statements for the fiscal year ending December 31, 2002.
The decision not to renew the engagement of Andersen and to retain Ernst & Young
was approved by Registrant's Board of Directors upon the recommendation of its
Audit Committee.
Andersen's reports on the Registrant's consolidated financial statements for the
fiscal years ended December 31, 2000 and December 31, 2001 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles.
During the Registrant's two most recent fiscal years that Andersen was engaged
as independent auditor, there were no disagreements with Andersen on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Andersen's satisfaction,
would have caused it to make reference to the subject matter in connection with
its report on the Registrant's consolidated financial statements for such years;
and there were no reportable events, as listed in Item 304(a)(1)(v) of
Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is included on page 2 under the caption
"Nominee Information" of the Registrant's Proxy Statement for the Annual Meeting
of Shareholders to be held April 29, 2003, and is incorporated herein by
reference. For other information required by this Item, see "Executive Officers
of the Registrant" on pages 12-13 herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included on pages 4-8 under the
captions "Executive Compensation and Other Information" and "Report of the
Senior Compensation and Stock Option Committee of the Board of Directors on
Executive Compensation" and on page 13 under the caption "Five Year Comparative
Stock Performance Graph" of the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held April 29, 2003, and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included on pages 9-11 under the
caption "Stock Ownership Information" of the Registrant's Proxy Statement for
the Annual Meeting of Shareholders to be held April 29, 2003, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included on page 11 under the caption
"Information with Respect to Certain Business Relationships" of the Registrant's
Proxy Statement for the Annual Meeting of Shareholders to be held April 29,
2003, and is incorporated herein by reference.
15
ITEM 14. CONTROLS AND PROCEDURES
As required by SEC rules, the Registrant has evaluated the effectiveness of the
design and operation of its disclosure controls and procedures within 90 days of
the filing of this annual report. This evaluation was carried out under the
supervision and with the participation of the Registrant's management, including
its principal executive officer and principal financial officer. Based on this
evaluation, these officers have concluded that the design and operation of the
Registrant's disclosure controls and procedures are effective. There were no
significant changes to its internal controls or in other factors that could
significantly affect internal controls subsequent to the date of their
evaluation.
Disclosure controls and procedures are the Registrant's controls and other
procedures that are designed to ensure that information required to be disclosed
by it in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Registrant in the reports that it files under
the Exchange Act is accumulated and communicated to its management, including
its principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
The Registrant's 2002 Annual Report to Shareholders contains
the consolidated balance sheets as of December 31, 2002 and
2001, the related consolidated statements of income,
shareholders' investment and cash flows for each of the three
years in the period ended December 31, 2002, and the related
reports of Ernst & Young LLP and Arthur Andersen LLP on the
financial statements. These financial statements and the
reports of Ernst & Young LLP and Arthur Andersen LLP are
incorporated herein by reference and included as Exhibit 13.1
to this Form 10-K. The financial statements, incorporated by
reference, include the following:
- Consolidated Balance Sheets as of December 31, 2002
and 2001
- Consolidated Statements of Income for the Years Ended
December 31, 2002, 2001, and 2000
- Consolidated Statements of Shareholders' Investment
for the Years Ended December 31, 2002, 2001, and 2000
- Consolidated Statements of Cash Flows for the Years
Ended December 31, 2002, 2001, and 2000
16
- Notes to Consolidated Financial Statements - December
31, 2002, 2001, and 2000
2. Financial Statement Schedule
- Schedule Number V - Valuation and Qualifying Accounts
- Information required by this schedule is included
on page 35 of the Registrant's Annual Report to
Shareholders for the year ended December 31, 2002,
and is incorporated herein by reference.
Schedules I through IV and VI not listed above have
been omitted because they are not applicable.
3. Exhibits filed with this report.
Exhibit No. Document
----------- --------
3.1 Restated Articles of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 19.1 to the
Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1991).
3.2 Restated By-laws of the Registrant, as amended.
10.1* Crawford & Company 1990 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.5 to the Registrant's
annual report on Form 10-K for the year ended December 31,
1992).
10.2* Crawford & Company 1997 Key Employee Stock Option Plan, as
amended (incorporated by reference to Appendix A on page A-1
of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 25, 2000).
10.3* Crawford & Company 1997 Non-Employee Director Stock Option
Plan (incorporated by reference to Appendix B on page B-1 of
the Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 22, 1997).
10.4* Amended and Restated Supplemental Executive Retirement Plan.
10.5* Crawford & Company 1996 Employee Stock Purchase Plan
(incorporated by reference to Appendix A on page A-1 of
Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 18, 1996).
17
10.6* Amended and Restated Crawford & Company Medical Reimbursement
Plan (incorporated by reference to Exhibit 10.9 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.7* Discretionary Allowance Plan (incorporated by reference to
Exhibit 10.10 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994).
10.8* Deferred Compensation Plan (incorporated by reference to
Exhibit 10.11 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994).
10.9* Crawford & Company 1996 Incentive Compensation Plan, as
amended (incorporated by reference to Exhibit 10.11 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999).
13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 2002 (only those portions incorporated
herein by reference).
21.1 Subsidiaries of Crawford & Company.
23.1 Consent of Ernst & Young LLP.
24.1-7 Powers of Attorney.
99.1 Certification pursuant to 18 U.S.C. Section 1850, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification pursuant to 18 U.S.C. Section 1850, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contract or compensatory plan required to be filed as an
exhibit pursuant to Item 601 of Regulation S-K.
(b) No reports on Form 8-K were filed during the last quarter of the year
ended December 31, 2002.
(c) The Registrant has filed the Exhibits listed in Item 14(a)(3).
(d) Separate financial statements of Crawford & Company have been omitted
since it is primarily an operating company. All significant
subsidiaries included in the consolidated financial statements are
wholly-owned.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRAWFORD & COMPANY
Date March 24, 2003 By /s/ Grover L. Davis
--------------------- -------------------------------------
GROVER L. DAVIS., Chairman
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
NAME AND TITLE
-------------------------------------
Date March 24, 2003 /s/ Grover L. Davis
--------------------- -------------------------------------
GROVER L. DAVIS, Chairman and Chief
Executive Officer (Principal Executive
Officer) and Director
Date March 24, 2003 /s/ J. F. Giblin
--------------------- -------------------------------------
J. F. GIBLIN, Executive Vice
President-Finance
(Principal Financial Officer)
Date March 24, 2003 /s/ W. B. Swain
--------------------- -------------------------------------
W. B. SWAIN, Senior Vice President and
Controller (Principal Accounting
Officer)
19
NAME AND TITLE
--------------------------------------
Date March 24, 2003 *
--------------------- -------------------------------------
J. HICKS LANIER, Director
Date March 24, 2003 *
--------------------- -------------------------------------
CHARLES FLATHER, Director
Date March 24, 2003 *
--------------------- -------------------------------------
LINDA K. CRAWFORD, Director
Date March 24, 2003 *
--------------------- -------------------------------------
JESSE C. CRAWFORD, Director
Date March 24, 2003 *
--------------------- -------------------------------------
LARRY L. PRINCE, Director
Date March 24, 2003 *
--------------------- -------------------------------------
JOHN A. WILLIAMS, Director
Date March 24, 2003 *
--------------------- -------------------------------------
E. JENNER WOOD, III, Director
Date March 24, 2003 By /s/ Peter J. Rescigno
------------------------------------
*Peter J. Rescigno - As attorney-in-
fact for the Directors above whose
name an asterisk appears.
20
CERTIFICATION
I, Grover L. Davis, certify that:
1. I have reviewed this annual report on Form 10-K of Crawford &
Company;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a. Designed such disclosure controls and procedures to
ensure that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b. Evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date"); and
c. Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the Registrant's auditors and
the audit committee of Registrant's board of directors (or persons performing
the equivalent functions):
a. All significant deficiencies in the design or
operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report financial
data and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have
indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 24, 2003 /s/ Grover L. Davis
--------------------------------------------
Grover L. Davis
Chairman and Chief Executive Officer
(Principal Executive Officer)
21
CERTIFICATION
I, John F. Giblin, certify that:
1. I have reviewed this annual report on Form 10-K of Crawford &
Company;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a. Designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b. Evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date"); and
c. Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the Registrant's auditors and
the audit committee of Registrant's board of directors (or persons performing
the equivalent functions):
a. All significant deficiencies in the design or
operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report financial
data and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have
indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 24, 2003 /s/ J. F. Giblin
------------------------------------------
John F. Giblin
Executive Vice President - Finance
(Principal Financial Officer)
22
EXHIBIT INDEX
Sequential
Page Number
Exhibit No. Description of Exhibit of Exhibit
----------- ---------------------- -----------
3.1 Restated Articles of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 19.1 to the
Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1991).
3.2 Restated By-laws of the Registrant, as amended. 25-33
10.1 Crawford & Company 1990 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.5 to the Registrant's
annual report on Form 10-K for the year ended December 31,
1992).
10.2 Crawford & Company 1997 Key Employee Stock Option Plan, as
amended (incorporated by reference to Appendix A on page A-1
of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 25, 2000).
10.3 Crawford & Company 1997 Non-Employee Director Stock Option
Plan (incorporated by reference to Appendix B on page B-1 of
the Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 22, 1997).
10.4 Amended and Restated Supplemental Executive Retirement Plan. 34-38
10.5 Crawford & Company 1996 Employee Stock Purchase Plan
(incorporated by reference to Appendix A on page A-1 of
Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 18, 1996).
10.6 Amended and Restated Crawford & Company Medical Reimbursement
Plan (incorporated by reference to Exhibit 10.9 to the
Registrant's annual report on Form 10-K for the year ended
December 31, 1994).
10.7.1 Discretionary Allowance Plan (incorporated by reference to
Exhibit 10.10 to the Registrant's annual report on Form 10-K
for the year ended December 31, 1994).
10.8 Deferred Compensation Plan (incorporated by reference to
Exhibit 10.11 to the Registrant's annual report on Form 10-K
for the year ended December 31, 1994).
23
EXHIBIT INDEX
Sequential
Page Number
Exhibit No. Description of Exhibit of Exhibit
----------- ---------------------- -----------
10.9 Crawford & Company 1996 Incentive Compensation Plan, as
amended (incorporated by reference to Exhibit 10.11 to the
Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 2002 (only those portions incorporated
hereby by reference). 39-74
21.1 Subsidiaries of Crawford & Company. 75
23.1 Consent of Ernst & Young LLP. 76
24.1-7 Powers of Attorney. 77-83
99.1 Certification by Chief Executive Officer 84
99.2 Certification by Chief Financial Officer 85
24