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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, 2004
[ ] 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
or organization) Identification Number)
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:
Name of each exchange on which
Title of each class 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
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(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 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 ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
The aggregate market value of the voting and non-voting stock held by
nonaffiliates* of the Registrant was $96,830,678 as of June 30, 2004, 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 11, 2005, was:
Class A Common Stock - $1.00 Par Value - 24,180,992 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, 2004,
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 26,
2005, Part III -Items 10, 11, 12, 13, and 14.
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 63 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 United States ("U.S.") and international operations are shown in
the following schedule:
Years Ended December 31,
--------------------------------
2004 2003 2002
------ ------ ------
U.S. Operations 65.2% 68.3% 72.7%
International Operations 34.8% 31.7% 27.3%
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
U.S. OPERATIONS. Claims management services are provided by the Registrant in
the U. S. 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, primarily
the field investigation and evaluation of property and casualty insurance
claims. 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. In addition to the field investigation and
evaluation of their claims, the Registrant may also provide initial loss
reporting services for their claimants, loss mitigation services such as medical
case management and vocational rehabilitation, administration of trust funds
established to pay claims and risk management information services. The
Registrant also performs administrative services for class actions settlements,
including those settlements for product liability, bankruptcy noticing and
distribution, and other legal settlements, by identifying and qualifying class
members, determining and dispensing settlement payments, and administering the
settlement funds.
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 Loss 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.
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- 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 as to a claimant or an
insured.
- Subrogation - the negotiation with, and recovering funds from, third
parties or insurers responsible for the loss.
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 medical 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 medical
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.
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- 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
ensure 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, or major types of loss, used by
insurance companies. The major risk 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.
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 1999.
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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,
including 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 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
homeowner policies.
- 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.
5
INTERNATIONAL OPERATIONS. Substantially all of the Registrant's international
revenues are derived from the insurance company market where the Registrant
provides field investigation and evaluation of property and casualty insurance
claims. 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 elements of international
claims management services are substantially the same as those provided by the
Registrant to its U. S. property and casualty insurance company clients. The
major services offered by the Registrant through its international operations
are provided to clients for a variety of different referral assignments which
are generally classified as to the underlying risk categories, or major types of
loss, used by insurance companies. The major risk categories are described
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
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.
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- 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.
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, 2004,
2003, and 2002 consolidated financial statements reflect the non-North American
financial position as of October 31, 2004, 2003, and 2002, respectively, and the
results of non-North American operations and cash flows for the 12-month periods
ended October 31, 2004, 2003, and 2002, respectively.
SERVICE DELIVERY - The Registrant's claims management services are offered
primarily through its more than 400 branch offices throughout the U. S. and
approximately 300 offices in 62 countries throughout the rest of the world.
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, healthcare 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, of 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. An insurance
company's decision to retain an independent adjusting
7
firm and the selection of a particular firm typically depends on a number of
factors, including geographic location, complexity of the underlying claim, the
firm's reputation and financial strength, and the in-house capacity of the
insurance company. These companies utilize independent adjusters to service
claims when the volume of claims exceeds the capacity of their staffs, when
claims arise in areas not serviced by staff adjusters, and when claims require
specialized knowledge to handle. The volume of property claim assignments
referred to the Registrant fluctuates in part depending on the occurrence of
severe weather and environmental disasters. The Registrant tries to mitigate
this risk through the geographic spread of its operations and through the
development and marketing of services which are not affected by weather related
events.
The U. S. 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 adjusting
companies, 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.
During a hard insurance underwriting market, insurance companies become very
selective in the risks they underwrite and insurance premiums and policy
deductibles increase. This results in a reduction in industry-wide claims
volumes, which reduces claim referrals to the Registrant unless the Registrant
can offset the decline in claim referrals with growth in its market share.
During hard insurance markets, corporate risk management personnel have become
more aware of alternative methods of financing losses (alternative risk
programs), creating a trend toward higher retention levels of risk insurance or
implementation of self-insurance programs by large corporations and governmental
entities which give the Registrant certain opportunities in the self-insured
market. 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 insurance.
In softer insurance markets, where insurance premium and deductible levels are
generally in decline, as were experienced during the 1990's, industry-wide claim
volumes generally increase, which should increase claim referrals to the
Registrant. However, during soft insurance markets, 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 claims
management services firms located
8
throughout the U. S. 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 claims management services which the Registrant provides and,
although such firms may secure business which has a local or regional source,
the Registrant believes its quality product offering, broader scope of services,
and its large number of geographically dispersed offices provide it with a
competitive advantage in securing business from U. S. and international clients.
There are also national independent companies that provide a similar broad
spectrum of claims management services and who directly compete with the
Registrant.
At December 31, 2004, the total number of full-time equivalent employees was
7,421 compared with 7,663 at December 31, 2003. 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:
- - Changes in general economic conditions in the Registrant's major
geographic markets, which include the U. S., U. K., 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 overall employment levels and associated workplace injury rates
in the U. S.;
9
- - Changes in the degree to which property and casualty insurance carriers
outsource their claims handling functions;
- - Decisions by major insurance carriers, 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 ability to identify new revenue sources not directly tied to the
insurance underwriting cycle;
- - The growth of alternative risk programs 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 business;
- - The ability to recruit, train, and retain qualified personnel, including
retaining a sufficient number of on-call claims adjusters to respond to
catastrophic events that may, singularly or in combination, significantly
increase our customers' needs for adjusters;
- - 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 U. S., including
without limitation, restrictions on foreign-owned or controlled entities
conducting loss adjusting activities in those jurisdictions, exchange rate
fluctuations, expropriation of assets, and currency restrictions;
- - The outcome of the items under "ITEM 3. LEGAL PROCEEDINGS" below;
- - Changes in law, particularly as related to tort reform and changes in the
states' workers' compensation laws; 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
10
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 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.
The Registrant's Corporate Governance Guidelines, Committee Charters, and Code
of Business Conduct are available on its website at www.crawfordandcompany.com
and are available without charge in print to any shareholder who makes a request
by writing to Corporate Secretary, Legal Department, Crawford & Company, 5620
Glenridge Drive, N.E., Atlanta, Georgia 30342.
ITEM 2. PROPERTIES
The Registrant's home office and educational facilities are owned by the
Registrant and located in Atlanta, Georgia. The Registrant also owns its
Canadian home office facility located in Kitchener, Ontario and an additional
office location in Stockport, England. As of December 31, 2004, the Registrant
leased approximately 421 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
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for the deductibles under its various insurance coverages. In the opinion of the
Registrant, adequate reserves have been provided for such self-insured risks.
The Registrant has received a subpoena from the State of New York, Office of the
Attorney General requesting various documents relating to the Registrant's
operations. The Registrant is responding to the subpoena and does not know if
the Office of the Attorney General will request further documents. The
Registrant cannot predict when the Attorney General's investigation will be
completed, its ultimate outcome or its effect on the Registrant's financial
condition, results of operations, or cash flows, if any.
The Registrant has received two related federal grand jury subpoenas which the
Registrant understands have been issued as part of a possible conflicts of
interest investigation involving a public entity client of one of the
Registrant's New York offices for Risk Management Services and Healthcare
Management. The Registrant has completed its response to both of these
subpoenas. These subpoenas do not relate to the billing practices of the
Registrant. The Registrant cannot predict when the government's investigation
will be completed, its ultimate outcome or its effect on the Registrant's
financial condition, results of operations, or cash flows including the effect,
if any, on the Registrant's contract with the client. Although the loss of
revenues from this client would not be material to the Registrant's financial
condition, results of operations, or cash flows, the investigation could result
in the imposition of civil, administrative or criminal fines or sanctions.
The Registrant has received notice and anticipates that it will be the subject
of an audit under California Labor Code Sections 129 and 129.5 by the Audit
Unit, Division of Workers' Compensation, Department of Industrial Relations,
State of California ("Audit Unit"). The Audit Unit seeks to audit workers'
compensation files which the Registrant handled on behalf of its clients in the
Registrant's El Segundo, California office in 2001 and 2002. This audit relates
to a previous audit that the Registrant underwent in El Segundo in 2000 wherein
the Registrant agreed to the imposition of a civil penalty pursuant to
California Labor Code Section 129.5 and submission to this current follow-up
audit, among other items. With respect to this current audit, the Registrant
cannot predict when it will be completed, its ultimate outcome, or its effect on
the Registrant's financial condition, results of operations, or cash flows.
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 2004.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS, AND ISSUER PURCHASE OF EQUITY SECURITIES
The information required by this Item is included in the Registrant's Annual
Report to Shareholders for the year ended December 31, 2004, under the caption
"Quarterly Financial Data (unaudited), Dividend Information and Common Stock
Quotations" and is incorporated herein by reference.
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ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included in the Registrant's Annual
Report to Shareholders for the year ended December 31, 2004, 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 in the Registrant's Annual
Report to Shareholders for the year ended December 31, 2004, 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 in the Registrant's Annual
Report to Shareholders for the year ended December 31, 2004, 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 in the Registrant's Annual
Report to Shareholders for the year ended December 31, 2004, 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 Independent Registered Public Accounting Firm on the Consolidated
Financial Statements", and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE 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 as of December
31, 2004. 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.
13
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.
MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING
The management of the Registrant is responsible for establishing and maintaining
adequate internal controls over financial reporting. Internal controls over
financial reporting are defined in Rule 13a-15(f) or 15d-15(f) promulgated under
the Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the Registrant's principal executive and principal financial
officers and effected by the Registrant's board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the assets of the Registrant;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the
Registrant; and
- Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Registrant's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal controls over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The Registrant's management assessed the effectiveness of the Registrant's
internal controls over financial reporting as of December 31, 2004. In making
this assessment, the Registrant's management used the criteria set forth by the
Committee of Sponsoring Organizations of the Trendway Commission ("COSO") in
Internal Control-Integrated Framework and the Public Company Accounting
Oversight Board ("PCAOB").
Based on the Registrant's assessment, management believes that, as of December
31, 2004, the Registrant's internal controls over financial reporting are
effective based on those criteria.
14
The Registrant's independent auditors have issued an audit report on our
assessment of the Registrant's internal control over financial reporting. This
report is included in the Registrant's Annual Report to Shareholders for the
year ended December 31, 2004, under the caption "Report of Independent
Registered Public Accounting Firm on Management's Assessment of Internal Control
Over Financial Reporting."
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information required by this Item is included under the caption "Nominee
Information" of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held April 26, 2005, and is incorporated herein by reference.
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
---- ------ ---
T. W. Crawford President and Chief Executive Officer 61
J. T. Bowman President - Crawford & Company International, Inc. 51
J. F. Giblin Executive Vice President - Finance 48
K. B. Frawley Executive Vice President - Financial Administrative Services 53
P. G. Porter Senior Vice President - Claims Management Services 54
L. A. Mattingly Senior Vice President - Healthcare Management Services 58
R. R. Kulbick Senior Vice President - Risk Management Services 56
R. J. Cormican Senior Vice President - Compliance, Quality and Training 57
P. J. Rescigno Senior Vice President - General Counsel & Corporate Secretary 47
W. L. Beach Senior Vice President - Human Resources 60
Mr. Crawford was appointed President and Chief Executive Officer of the
Registrant on September 1, 2004. Prior to joining the Registrant from June 1998
until his retirement in January 2003 he was President of the Retail Distribution
division of Prudential Financial, Inc., and from May 2004 until September 2004
he was Chairman of The Bodie Group, Inc., a business consulting firm.
Mr. Bowman was appointed to his present position effective April 1, 2001. From
August 1997 to July, 1999 he was Vice President, Regional Managing Director -
Americas and from August 1999 to April 1, 2001 he was Senior Vice President,
Regional Managing Director - Americas.
Mr. Giblin has held his present position with the Registrant for more than five
years.
15
Mr. Frawley was appointed to his present position with the Registrant on
February 23, 2005. Prior to joining the Registrant and since 1996 he was Chief
Compliance Officer - Insurance Division for Prudential Financial, Inc.
Mr. Porter was appointed to his current position January 19, 2005 and was
interim Senior Vice President - Claims Management from December 15, 2004. Prior
to that and from May 1, 2001 he was Senior Vice President in charge of business
development for Claims Management Services. Prior to that and from 1998 he was
Vice President - Business Development.
Mr. Mattingly was appointed to his present position November 1, 2004. Prior to
joining the Registrant and since 1999 he was President and Chief Executive
Officer of Mednet Connect a software and service company specializing in the
workers' compensation medical review software business.
Mr. Kulbick was appointed to his present position November 1, 2004. Prior to
joining the Registrant from March 2004 to October 2004 he was Senior Vice
President in charge of implementing new products and enhancing current products
for ESIS, Inc., a third party administrator. Prior to March 2004 and from June
1997 he was Chief Executive Officer of RSKCo, Inc., a total risk services
company.
Mr. Cormican was appointed to his present position February 15, 2005. Prior to
joining the Registrant from August 2002 until February 2005 he was Senior Vice
President and Chief Financial Officer of AssuranceAmerica Corporation, an
insurance holding company. Prior to August 2002 and from 1997 he was Vice
President - Agent Operations for Prudential Property and Casualty Company.
Mr. Rescigno was appointed to his present position with the Registrant on
September 1, 2004. Prior to that and from August 1, 2003 he was Vice President -
General Counsel and prior to that and from February 1, 2003 he was Assistant
Vice President - Assistant General Counsel. Since January 16, 2003 he has served
as Corporate Secretary. From June 15, 2000 to February 1, 2003 he was the
Registrant's Assistant General Counsel. Prior to June 15, 2000 he was Counsel
for GAB Robins North America, Inc.
Mr. Beach has held his present position with the Registrant for more than five
years.
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., a wholly owned subsidiary
of the Registrant.
Registrant has adopted a Code of Business Conduct for its CEO, CFO, principal
accounting officer and all other officers, directors and employees of the
Registrant. The Code of Business Conduct is available at
www.crawfordandcompany.com and any amendment or waiver of this Code of Business
Conduct shall be posted within four business days on this website. The Code of
Business Conduct may also be obtained without charge by writing to Corporate
Secretary, Legal Department, Crawford & Company, 5620 Glenridge Drive, N.E.,
Atlanta, Georgia 30342.
16
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included under the captions "Executive
Compensation and Other Information" of the Registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held April 26, 2005, and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The information required by this Item is included under the caption "Stock
Ownership Information" of the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held April 26, 2005, and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included 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 26, 2005, and
is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information regarding principal accounting fees and services is included under
the caption "Fees Paid to Ernst & Young LLP" of the Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held April 26, 2005, and is
incorporated hereby by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1. Financial Statements
The Registrant's 2004 Annual Report to Shareholders contains the
Consolidated Balance Sheets as of December 31, 2004 and 2003, the
related Consolidated Statements of Income, Shareholders' Investment
and Cash Flows for each of the three years in the period ended
December 31, 2004, and the related reports of Ernst & Young LLP.
These financial statements and the reports of Ernst & Young LLP are
incorporated herein by reference and included in Exhibit 13.1 to
this Form 10-K. The financial statements, incorporated by reference,
include the following:
- Consolidated Balance Sheets as of December 31, 2004 and 2003
- Consolidated Statements of Income for the Years Ended December
31, 2004, 2003, and 2002
17
- Consolidated Statements of Shareholders' Investment for the
Years Ended December 31, 2004, 2003, and 2002
- Consolidated Statements of Cash Flows for the Years Ended
December 31, 2004, 2003, and 2002
- Notes to Consolidated Financial Statements - December 31,
2004, 2003, and 2002
2. Financial Statement Schedule
- Schedule II - Valuation and Qualifying Accounts - Information
required by this schedule is included on page 41 of the
Registrant's Annual Report to Shareholders for the year ended
December 31, 2004, and is incorporated herein by reference.
Schedules I and III through V 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 (incorporated
by reference to Exhibit 3.2 of the Registrant's annual report
on Form 10-K for the year ended December 31, 2003).
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).
18
10.4 * Amended and Restated Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2004).
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 * 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 (As Amended and Restated as of
January 1, 2003) (incorporated by reference to Exhibit 10.2 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2003).
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).
10.10* Crawford & Company Executive Stock Bonus Plan (incorporated by
reference to Appendix A of the Registrant's Proxy Statement
for the Annual Meeting of Shareholders held on April 26,
2005).
10.11 Revolving Credit Agreement dated as of September 30, 2003.
10.12 Note Purchase Agreement dated as of September 30, 2003.
13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 2004 (only those portions incorporated
herein by reference).
14.1 Crawford & Company Code of Business Conduct (incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 2003).
21.1 Subsidiaries of Crawford & Company.
23.1 Consent of Ernst & Young LLP.
24.1-8 Powers of Attorney.
19
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1850, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 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) The Registrant has filed the Exhibits listed in Item 15(a)3.
(c) 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.
20
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 14, 2005 By /s/ Thomas W. Crawford
-------------------------------
THOMAS W. CRAWFORD, President
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 14, 2005 /s/ Thomas W. Crawford
-------------------------------
THOMAS W. CRAWFORD, President
and Chief Executive Officer
(Principal Executive Officer)
Date March 14, 2005 /s/ J. F. Giblin
-------------------------------
J. F. GIBLIN, Executive Vice
President-Finance (Principal
Financial Officer)
Date March 14, 2005 /s/ W. B. Swain
-------------------------------
W. B. SWAIN, Senior Vice
President and Controller
(Principal Accounting Officer)
21
NAME AND TITLE
Date March 14, 2005 *
-------------------------------
J. HICKS LANIER, Director
Date March 14, 2005 *
-------------------------------
JESSE C. CRAWFORD, Director
Date March 14, 2005 *
-------------------------------
LARRY L. PRINCE,, Director
Date March 14, 2005 *
-------------------------------
JOHN A. WILLIAMS, Director
Date March 14, 2005 *
-------------------------------
E. JENNER WOOD, III, Director
Date March 14, 2005 *
-------------------------------
CLARENCE H. RIDLEY, Director
Date March 14, 2005 *
-------------------------------
ROBERT T. JOHNSON, Director
Date March 14, 2005 *
-------------------------------
JAMES D. EDWARDS, Director
Date March 14, 2005 *By /s/ Peter J. Rescigno
-------------------------------
Peter J. Rescigno - As
attorney-in-fact for the
Directors above whose name an
asterisk appears.
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 (incorporated
by reference to Exhibit 3.2 of the Registrant's annual
report on Form 10-K for the year ended December 31, 2003).
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
(incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004).
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 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).
23
EXHIBIT INDEX
Sequential
Page Number
Exhibit No. Description of Exhibit of Exhibit
- ----------- ---------------------- -----------
10.8 Deferred Compensation Plan (As Amended and Restated as of
January 1, 2003) (incorporated by reference to Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003).
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).
10.10 Crawford & Company Executive Stock Bonus Plan (incorporated
by reference to Appendix A of the Registrant's Proxy
Statement for the Annual Meeting of Shareholders held on
April 26, 2005).
10.11 Revolving Credit Agreement dated as of September 30, 2003. 26-123
10.12 Note Purchase Agreement dated as of September 30, 2003. 124-221
13.1 The Registrant's Annual Report to Shareholders for the year
ended December 31, 2004 (only those portions incorporated
hereby by reference). 222-267
14.1 Crawford & Company Code of Business Conduct (incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 2003).
21.1 Subsidiaries of Crawford & Company. 268
23.1 Consent of Ernst & Young LLP. 269
24.1-8 Powers of Attorney. 270-277
31.1 Certification by Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. 278
31.2 Certification by Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. 280
24
EXHIBIT INDEX
Sequential
Page Number
Exhibit No. Description of Exhibit of Exhibit
- ----------- ---------------------- -----------
32.1 Certification pursuant to 18 U.S.C. Section 1850, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 282
32.2 Certification pursuant to 18 U.S.C. Section 1850, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 283
25