Back to GetFilings.com





================================================================================
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 2005
OR
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)

5620 GLENRIDGE DRIVE, N.E.
ATLANTA, GEORGIA 30342
(Address of principal executive offices) (Zip Code)

(404) 256-0830
(Registrant's telephone number, including area code)

_______________________

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 Rule 12b-2 of the Exchange Act).

YES [X] NO [ ]

The number of shares outstanding of each of the issuer's classes of common
stock, as of April 30, 2005 was as follows:

CLASS A COMMON STOCK, $1.00 PAR VALUE: 24,185,792
CLASS B COMMON STOCK, $1.00 PAR VALUE: 24,697,172

================================================================================



CRAWFORD & COMPANY
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 2005

INDEX



Page
----

Part I. Financial Information

Item 1. Financial Statements:

Condensed Consolidated Statements of Income (unaudited)
Quarter ended March 31, 2005 and 2004....................... 3

Condensed Consolidated Balance Sheets
March 31, 2005 (unaudited) and December 31, 2004............ 4

Condensed Consolidated Statements of Cash Flows (unaudited)
Quarter ended March 31, 2005 and 2004....................... 6

Notes to Condensed Consolidated Financial
Statements (unaudited)...................................... 7

Report of Independent Registered Public Accounting Firm........ 15

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16

Item 3. Quantitative and Qualitative Disclosure of Market Risk......... 27

Item 4. Controls and Procedures........................................ 28

Part II. Other Information

Item 1. Legal Proceedings.............................................. 29

Item 6. Exhibits....................................................... 29


2


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)



QUARTER ENDED
----------------------
MARCH 31, MARCH 31,
2005 2004
--------- ---------

REVENUES:

Revenues before reimbursements $184,334 $169,855
Reimbursements 15,309 14,881

-------- --------
TOTAL REVENUES 199,643 184,736
-------- --------

COSTS AND EXPENSES:

Cost of services provided, before reimbursements 144,919 131,125
Reimbursements 15,309 14,881
-------- --------
Cost of Services 160,228 146,006

Selling, general, and administrative expenses 34,234 33,636

Corporate interest expense, net of interest income
of $182 and $135, respectively 1,527 1,337

-------- --------
TOTAL COSTS AND EXPENSES 195,989 180,979
-------- --------

INCOME BEFORE INCOME TAXES 3,654 3,757

PROVISION FOR INCOME TAXES 1,293 1,368
-------- --------

NET INCOME $ 2,361 $ 2,389
======== ========

NET INCOME PER SHARE:
Basic $ 0.05 $ 0.05
Diluted $ 0.05 $ 0.05
======== ========

WEIGHTED-AVERAGE SHARES OUTSTANDING:
Basic 48,872 48,724
Diluted 49,381 48,869
======== ========

CASH DIVIDENDS PER SHARE:
Class A Common Stock $ 0.06 $ 0.06
Class B Common Stock $ 0.06 $ 0.06
======== ========


(See accompanying notes to condensed consolidated financial statements)

3


CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)



(UNAUDITED) *
MARCH 31, DECEMBER 31,
2005 2004
----------- ------------

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 25,638 $ 43,571
Accounts receivable, less allowance for doubtful
accounts of $22,349 in 2005 and $21,859 in 2004 178,531 176,187
Unbilled revenues, at estimated billable amounts 102,076 103,586
Prepaid expenses and other current assets 19,678 21,363
--------- ---------
TOTAL CURRENT ASSETS 325,923 344,707
--------- ---------

PROPERTY AND EQUIPMENT:
Property and equipment, at cost 154,783 154,922
Less accumulated depreciation (119,938) (120,079)
--------- ---------
NET PROPERTY AND EQUIPMENT 34,845 34,843
--------- ---------

OTHER ASSETS:
Intangible assets arising from acquisitions, net 110,233 109,410
Capitalized software costs, net 32,476 32,550
Deferred income tax asset, net 32,191 32,172
Other 19,252 17,578
--------- ---------
TOTAL OTHER ASSETS 194,152 191,710
--------- ---------

TOTAL ASSETS $ 554,920 $ 571,260
========= =========


* derived from the audited Consolidated Balance Sheet.

(See accompanying notes to condensed consolidated financial statements)

4


CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(IN THOUSANDS)



(UNAUDITED) *
MARCH 31, DECEMBER 31,
2005 2004
----------- ------------

LIABILITIES AND SHAREHOLDERS' INVESTMENT

CURRENT LIABILITIES:
Short-term borrowings $ 39,915 $ 37,401
Accounts payable 39,303 41,730
Accrued compensation and related costs 35,849 45,961
Deferred revenues 23,418 22,682
Self-insured risks 20,020 18,976
Accrued income taxes 17,108 22,760
Other accrued liabilities 21,090 22,913
Current installments of long-term debt 1,787 1,900
--------- ---------
TOTAL CURRENT LIABILITIES 198,490 214,323
--------- ---------

NONCURRENT LIABILITIES:
Long-term debt, less current installments 50,564 50,875
Deferred revenues 10,081 10,179
Self-insured risks 8,386 10,958
Minimum pension liabilities 75,230 73,893
Postretirement medical benefit obligation 5,544 5,544
Other 10,119 10,655
--------- ---------
TOTAL NONCURRENT LIABILITIES 159,924 162,104
--------- ---------

SHAREHOLDERS' INVESTMENT:
Class A common stock, $1.00 par value; 50,000 shares
authorized; 24,186 and 24,157 shares issued and
outstanding in 2005 and 2004, respectively 24,186 24,157
Class B common stock, $1.00 par value; 50,000
shares authorized; 24,697 shares issued and
outstanding in 2005 and 2004 24,697 24,697
Additional paid-in capital 1,673 1,441
Retained earnings 200,641 201,213
Accumulated other comprehensive loss (54,691) (56,675)
--------- ---------
TOTAL SHAREHOLDERS' INVESTMENT 196,506 194,833
--------- ---------

TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 554,920 $ 571,260
========= =========


* derived from the audited Consolidated Balance Sheet.

(See accompanying notes to condensed consolidated financial statements)

5


CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)



QUARTER ENDED
-----------------------
MARCH 31, MARCH 31,
2005 2004
--------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,361 $ 2,389
Reconciliation of net income to net cash used in
operating activities:
Depreciation and amortization 4,801 4,377
Deferred income taxes 26 (107)
Loss on sales of property and equipment 31 19
Stock-based compensation 63 -
Changes in operating assets and liabilities:
Accounts receivable, net (785) (2,723)
Unbilled revenues 2,954 (3,600)
Accrued or prepaid income taxes (5,705) 1,241
Accounts payable and accrued liabilities (12,435) (6,581)
Deferred revenues 499 776
Accrued pension costs (3,903) (3,717)
Prepaid expenses and other assets 291 (589)
-------- --------
Net cash used in operating activities (11,802) (8,515)
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (2,991) (2,144)
Capitalization of computer software costs (1,508) (1,649)
Additional payments for prior acquisition (90) (106)
Proceeds from sales of property and equipment 129 12
-------- --------
Net cash used in investing activities (4,460) (3,887)
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,933) (2,923)
Proceeds from exercise of stock options 261 -
Increases in short-term borrowings 1,663 4,326
Payments on short-term borrowings (593) (4,184)
Payments on long-term debt and capital lease obligations (513) (342)
Capitalized loan costs - 33
-------- --------
Net cash used in financing activities (2,115) (3,090)
-------- --------
Effect of exchange rate changes on cash and cash equivalents 444 852
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (17,933) (14,640)
Cash and cash equivalents at beginning of period 43,571 45,805
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,638 $ 31,165
======== ========


(See accompanying notes to condensed consolidated financial statements)

6


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements of Crawford & Company
(the "Company") included herein have been prepared pursuant to the rules and
regulations of the United States ("U.S.") Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, except as disclosed herein, there has been no material
change in the information disclosed in the notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004. The condensed consolidated balance sheet as of December
31, 2004 presented herein was derived from the audited consolidated balance
sheet included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004.

In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain previously reported amounts have been reclassified to conform to the
current presentation. Client collateral deposits in the amount of approximately
$4.2 million as of March 31, 2004 and January 1, 2004 were reclassified to
consistently report these deposits which were previously not included in Cash
and Cash Equivalents in the accompanying Condensed Consolidated Statement of
Cash Flows for the quarter ended March 31, 2004. Also, amounts outstanding under
certain bank overdraft facilities of approximately $4.1 million as of March 31,
2004 were reclassified in order to consistently report these amounts which were
previously not reported as a reduction of Cash and Cash Equivalents in the
accompanying Condensed Consolidated Statement of Cash Flows for the quarter
ended March 31, 2004.

The results of operations for the three months ended March 31, 2005 are not
necessarily indicative of the results to be expected during the balance of the
year ending December 31, 2005. These condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and related notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004.

The preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. There have
been no material changes to the Company's critical accounting policies and
estimates, as disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004.

7


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2. NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 123 (revised 2004), "Share
Based Payments" ("SFAS 123R"), which is a revision of SFAS 123, "Accounting for
Stock Compensation." SFAS 123R supersedes SFAS 123 and Accounting Principles
Board ("APB") Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25")
and amends SFAS 95, "Statement of Cash Flows."

Generally, the approach in SFAS 123R is similar to the approach described in
SFAS 123. However, SFAS 123R requires companies to measure compensation cost for
all share-based payments based on the fair value of the shares, including
employee stock options. Pro forma disclosure will not be permitted under SFAS
123R. When originally issued, SFAS 123R was to be effective for public companies
for the first interim or annual periods beginning after June 15, 2005. However,
in April 2005 the SEC amended Regulation S-X to allow public companies that had
not yet adopted SFAS 123R to delay adoption of the Standard until the beginning
of the first annual period beginning after June 15, 2005. Accordingly, the
Company expects to adopt SFAS 123R at the beginning of 2006.

SFAS 123R permits public companies to adopt its requirements using one of two
methods: 1) a "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the requirements of
SFAS 123R for all share-based payments granted after the effective date, and (b)
based on the requirements of SFAS 123 for all awards granted to employees prior
to the effective date of SFAS 123R that remain unvested on the effective date,
or 2) a "modified retrospective" method which includes the requirements of the
modified prospective method described above, but also permits companies to
restate based on the amounts previously recognized under SFAS 123 for purposes
of pro forma disclosures either (a) all prior periods presented or (b) prior
interim periods of the year of adoption. The Company plans to adopt SFAS 123R
using the "modified prospective" method.

As permitted by SFAS 123, the Company currently accounts for share-based
payments to employees using APB 25's intrinsic value method. Under APB 25, the
Company recognizes compensation cost for stock grants, but generally recognizes
no compensation cost for its employee stock option and employee stock purchase
plans due to the terms of those plans. Accordingly, the adoption of SFAS 123R's
fair value method will have an impact on the Company's results of operations,
although it will have no impact on the Company's financial position. The impact
of adoption of SFAS 123R cannot be predicted at this time because it will depend
on levels of share-based payments granted in the future. However, had the
Company adopted SFAS 123R in prior periods, the impact of that Standard would
have approximated the impact of SFAS 123 as described in the disclosure of pro
forma net income and earnings per share under "Accounting for Stock-Based
Compensation" in Note 5 to these condensed consolidated financial statements.
Based on employee stock options issued through March 31, 2005, adoption of SFAS
123R at the beginning of 2006, and use of the "modified prospective" method, the
Company expects the adoption of SFAS 123R to reduce net income by approximately
$826,000 in the year of adoption, or $0.02 per share.

8


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

SFAS 123R also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow, rather than as an
operating cash flow as required under current generally accepted accounting
principles. Any additional impact on the Company's future net income or cash
flows cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future and on employee exercises of stock
options.

In December 2004, the FASB issued FASB Staff Position 109-2, "Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004." The FASB issued this Staff Position to
provide accounting and disclosure guidance for the repatriation provision of the
American Jobs Creation Act of 2004 ("the Act") which allows a special one-time
dividends received deduction on the repatriation of certain foreign earnings to
a U.S. tax payer. The related SFAS 109 requires companies to recognize in the
period of enactment the effect of changes in the tax law. However, the FASB
believes the Treasury Department will subsequently provide needed clarification
on key elements of the repatriation provision of the Act. For purposes of
applying SFAS 109, FASB Staff Position 109-2 permitted a delayed implementation
of the repatriation provision of the Act beyond the financial reporting period
of enactment (2004) so that companies could properly evaluate the effect of the
Act (and any forthcoming clarifications) on any plan for reinvestment or
repatriation of foreign earnings. Accordingly, the Company has not recognized
any potential impact of the repatriation provision of the Act in its financial
statements. Generally, it is the Company's policy to consider undistributed
earnings of foreign subsidiaries to be indefinitely reinvested. Until the
necessary clarifications are subsequently issued by the Treasury Department, the
Company cannot reasonably determine if it will continue to indefinitely reinvest
the earnings of its foreign subsidiaries. Consequently, the Company cannot
currently estimate a potential range of any related income tax effects or impact
on its financial position, results of operations, or cash flows.

3. NET INCOME PER SHARE

Basic net income per share is computed based on the weighted-average number of
total common shares outstanding during the respective periods. Diluted net
income per share is computed based on the weighted-average number of total
common shares outstanding plus the dilutive effect of outstanding stock options,
shares issuable under employee stock purchase plans, and contingently issuable
shares under the stock bonus program, if any, using the "treasury stock" method.

9


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Below is the calculation of basic and diluted net income per share for the
quarters ended March 31, 2005 and 2004:



Quarter ended
----------------------
March 31, March 31,
(in thousands, except per share data) 2005 2004
- ---------------------------------------------------- --------- ---------

Net income available to common shareholders $ 2,361 $ 2,389
======== ========

Weighted-average common shares outstanding - Basic 48,872 48,724
Dilutive effect of stock-based compensation 509 145
-------- --------
Weighted-average common shares outstanding - Diluted 49,381 48,869
======== ========

Basic net income per share $ 0.05 $ 0.05
======== ========
Diluted net income per share $ 0.05 $ 0.05
======== ========


Additional options to purchase 3,285,910 shares of the Company's Class A common
stock at exercise prices ranging from $7.05 to $19.50 per share were outstanding
at March 31, 2005, but were not included in the computation of diluted net
income per share because the options' exercise prices were greater than the
average market price of the common shares. To include them would have been
antidilutive.

4. COMPREHENSIVE INCOME

Comprehensive income for the Company consists of the total of net income and
foreign currency translation adjustments. Below is the calculation of
comprehensive income for the quarters ended March 31, 2005 and 2004:



Quarter ended
-------------------------
March 31, March 31,
(in thousands) 2005 2004
- --------------------------------------- --------- ---------

Net income $2,361 $2,389
Foreign currency translation adjustment 1,984 3,056
------ ------
Comprehensive income $4,345 $5,445
====== ======


5. ACCOUNTING FOR STOCK-BASED COMPENSATION

As permitted by SFAS 123, the Company accounts for stock-based compensation
utilizing the intrinsic value method in accordance with the provisions of APB 25
and related interpretations.

10


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Accordingly, no compensation cost has been recognized for the Company's stock
option plans because the exercise prices of the stock options equal the market
prices of the underlying stock on the dates of grant. The Company's employee
stock purchase plans are also considered noncompensatory under APB 25.

During the 2005 first quarter, the Company's Board of Directors approved the
creation of a new executive stock bonus plan (the "Plan") as described in Note
11 "Subsequent Events" to the Company's consolidated financial statements
included in its Annual Report on Form 10-K for the year ended December 31, 2004.
From the Plan's 2005 inception through March 31, 2005, the Company recognized
pretax compensation cost of approximately $63,000 for the new Plan. Compensation
cost for each subsequent quarter in 2005 is estimated to approximate the amount
recognized during the first quarter of 2005, but could vary based on potential
changes in the quoted price of the Company's Class A common stock, achievement
rates for the corporate and participant goals contained in the Plan, and
participant attrition rates.

Had compensation cost for the stock-based compensation plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with SFAS 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below:



Quarter ended
-------------------------
March 31, March 31,
(in thousands, except per share data) 2005 2004
- ------------------------------------------------- --------- ---------

Net income as reported $ 2,361 $2,389

Add: Stock-based employee compensation expense
included in reported net income, net of tax 41 -

Less: Stock-based compensation expense
using the fair value method, net of tax (346) (190)
------- ------

Pro forma net income $ 2,056 $2,199
======= ======

Net income per share - basic:
As reported $ 0.05 $ 0.05
======= ======
Pro forma $ 0.04 $ 0.05
======= ======

Net income per share - diluted:
As reported $ 0.05 $ 0.05
======= ======
Pro forma $ 0.04 $ 0.05
======= ======


11


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The fair value of options is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:



Quarter ended
----------------------
March 31, March 31,
2005 2004
-------- ---------

Expected dividend yield 3.3% 3.4%
Expected volatility 36% 34%
Risk-free interest rate 4.1% 3.8%
Expected life of options 7 years 8 years


6. RETIREMENT PLANS

The Company and its subsidiaries sponsor various defined benefit and defined
contribution retirement plans covering substantially all employees. Effective
December 31, 2002, the Company elected to freeze its U.S. defined benefit
pension plan and replace it with a discretionary, non-contributory defined
contribution plan. Net periodic benefit cost related to the U.S. and United
Kingdom ("U.K.") defined benefit pension plans for the quarters ended March 31,
2005 and 2004 included the following components:



Quarter ended
----------------------
March 31, March 31,
(in thousands) 2005 2004
- ----------------------------- -------- ---------

Service cost $ 514 $ 430
Interest cost 7,843 7,485
Expected return on assets (8,118) (7,757)
Recognized net actuarial loss 1,875 1,757
------- -------
Net periodic benefit cost $ 2,114 $ 1,915
======= =======


The Company is not required to make any contributions to its frozen U.S. defined
benefit pension plan during 2005. During the quarter ended March 31, 2005, cash
contributions of approximately $537,000 were made to the Company's U.K. defined
benefit pension plans.

7. SEGMENT INFORMATION

The Company has two reportable segments, one which provides claims services
through branch offices located in the United States ("U.S. Operations") and the
other which provides similar

12


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

services through branch or representative offices located in 63 other countries
("International Operations"). The Company's reportable segments represent
components of the business for which separate financial information is available
that is evaluated regularly by the chief decision maker in deciding how to
allocate resources and in assessing performance.

Intersegment sales are recorded at cost and are not material. The Company
measures segment profit based on operating earnings, defined as earnings before
net corporate interest expense and income taxes. Financial information for the
quarters ended March 31, 2005 and 2004 covering the Company's reportable
segments is presented below:



Quarter ended
----------------------
March 31, March 31,
(in thousands) 2005 2004
- ----------------------------------------- --------- ---------

REVENUES:
U.S. $112,507 $109,313
International 71,827 60,542
-------- --------
TOTAL REVENUES BEFORE REIMBURSEMENTS $184,334 $169,855
======== ========

OPERATING EARNINGS:
U.S. $ 1,836 $ 2,892
International 3,345 2,202
-------- --------
TOTAL OPERATING EARNINGS $ 5,181 $ 5,094
======== ========


8. ACQUISITIONS

During the quarter ended March 31, 2005, the Company made an additional payment
of approximately $90,000 to the former owner of Greentree Investigations, Inc.
pursuant to a purchase agreement entered into in 2000. Additional contingent
payments due under this agreement may be made based on revenues through March
2005.

9. COMMITMENTS AND CONTINGENCIES

The Company normally structures its acquisitions to include earnout payments,
which are contingent upon the acquired entity reaching certain revenue and
operating earnings targets. The amount of the contingent payments and length of
the earnout period varies for each acquisition, and the ultimate payments when
made will vary, as they are dependent on future events.

Based on projected levels of revenues and operating earnings, additional
payments under existing earnout agreements approximate $3.8 million through
2009, as follows:



2005 2006 2007 2008 2009
- ------- ------- ------- ---------- --------

$31,000 $84,000 $84,000 $3,316,000 $285,000


13


CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

In the normal course of the claims administration services business, the Company
is named as a defendant in suits by insureds or claimants contesting decisions
made by the Company or its clients with respect to the settlement of claims.
Additionally, clients of the Company have brought actions for indemnification on
the basis of alleged negligence by the Company, 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 Company. However, the Company is
self-insured for the deductibles under various insurance coverages. In the
opinion of Company management, adequate reserves have been provided for such
self-insured risks.

The Company has received two related federal grand jury subpoenas which the
Company understands have been issued as part of a possible conflicts of interest
investigation involving a public entity client of one of the Company's New York
offices for Risk Management Services and Healthcare Management. The Company has
completed its responses to both of these subpoenas. These subpoenas do not
relate to the billing practices of the Company. The Company cannot predict when
the government's investigation will be completed, its ultimate outcome or its
effect on the Company's financial condition, results of operations, or cash
flows, including the effect, if any, on the contract with the client. Although
the loss of revenues from this client would not be material to the Company's
financial condition, results of operations, and cash flows, the investigation
could result in the imposition of civil, administrative or criminal fines or
sanctions.

The Company has received a subpoena from the State of New York, Office of the
Attorney General, requesting various documents relating to the Company's
operations. The subpoena does not apply to the operations of the Company's
international segment or the GCG class action administration unit. The Company
has responded to the subpoena. The Company cannot predict when the Attorney
General's investigation will be completed, its ultimate outcome or its effect on
the Company's financial condition, results of operations, or cash flows.

The Company 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 Company handled on behalf of clients in its El Segundo,
California office in 2001 and 2002. This audit relates to a previous audit that
the Company underwent in El Segundo in 2000 wherein the Company 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 Company cannot predict when it will be completed, its
ultimate outcome, or its effect on the Company's financial condition, results of
operations, or cash flows.

14


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
Crawford & Company:

We have reviewed the accompanying condensed consolidated balance sheet of
Crawford & Company (a Georgia corporation) as of March 31, 2005, and the related
condensed consolidated statements of income and cash flows for the three-month
periods ended March 31, 2005 and 2004. These financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight Board, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with U.S. generally accepted accounting
principles.

We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of Crawford & Company as of December 31, 2004, and the related
consolidated statements of income and cash flows for the year then ended (not
presented herein) and in our report dated March 11, 2005, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 2004, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Atlanta, Georgia
May 3, 2005

15


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

BUSINESS OVERVIEW

Crawford & Company provides claims management services to insurance companies,
self-insured entities and class action settlement funds. 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.

Insurance companies, which represent the major source of our revenues,
customarily manage their own claims administration function but require limited
services which we provide, primarily field investigation and evaluation of
property and casualty insurance claims. Self-insured entities typically require
a broader range of services from us. In addition to field investigation and
evaluation of their claims, we may also provide initial loss reporting services
for their claimants, loss mitigation services such as medical case management
and vocational rehabilitation, risk management information services, and
administration of the trust funds established to pay their claims. Finally, we
also perform the administrative functions related to securities, product
liability, bankruptcy and other class action settlements, including identifying
and qualifying class members, determining and dispensing settlement payments,
and administering the settlement funds.

The claims management services market, both in the United States ("U.S.") and
internationally, is highly competitive and comprised of a large number of
companies of varying size and scope of services. The demand from insurance
companies and self-insured entities for services provided by independent claims
service firms like us is largely dependent on industry-wide claims volumes,
which are affected by the insurance underwriting cycle, weather-related events,
general economic activity, and overall employment levels and associated
workplace injury rates.

We generally earn our revenues on an individual fee per claim basis.
Accordingly, the volume of claim referrals to us is a key driver of our
revenues. When the insurance underwriting market is soft, insurance companies
are generally more aggressive in the risks they underwrite, and insurance
premiums and policy deductibles decline. This usually results in an increase in
industry-wide claim referrals which will increase claim referrals to us provided
we maintain at least our existing share of the overall claim services market.
During a hard insurance underwriting market, as we have experienced since the
September 11, 2001 terrorist attacks, insurance companies become very selective
in the risks they underwrite, and insurance premiums and policy deductibles
increase, sometimes dramatically. This results in a reduction in industry-wide
claims volumes, which reduces claims referrals to us unless we can offset the
decline in claim referrals with growth in our share of the overall claims
services market. Our ability to grow our market share in such a highly
fragmented, competitive market is primarily dependent on the delivery of
superior quality service and effective, properly focused sales efforts.

RESULTS OF OPERATIONS

Consolidated net income was approximately $2.4 million for the quarters ended
March 31, 2005 and 2004.

Operating earnings is one of the key performance measures used by our senior
management and chief decision maker to evaluate the performance of our business
and make resource allocation

16


decisions. We believe this measure is useful to investors in that it allows them
to evaluate our performance using the same criteria our management uses.
Operating earnings (earnings before net corporate interest expense and income
taxes) during the quarter ended March 31, 2005, totaled $5.2 million compared
with $5.1 million in the comparable 2004 period. Following is a reconciliation
of consolidated net income on a GAAP (generally accepted accounting principles)
basis to operating earnings for the quarters ended March 31, 2005 and 2004 and
the related margins as a percentage of revenues before reimbursements:



Quarter ended
------------------------------------------
March % March %
(in thousands) 31, 2005 Margin 31, 2004 Margin
- --------------------------------- -------- ------ -------- ------

Net income $2,361 1.3% $2,389 1.4%
Add:
Net corporate interest expense 1,527 0.8 1,337 0.8
Income taxes 1,293 0.7 1,368 0.8
------ --- ------ ---
Operating earnings $5,181 2.8% $5,094 3.0%
====== === ====== ===


The following is a discussion and analysis of the results of operations of our
two reportable segments, U.S. operations and international operations, and our
consolidated financial condition. Our reportable segments represent components
of our business for which separate financial information is available that is
evaluated regularly by our chief decision maker in deciding how to allocate
resources and in assessing performance. Revenue amounts discussed exclude
reimbursements for out-of-pocket expenses. Expense amounts discussed exclude
reimbursed out-of-pocket expenses, net corporate interest expense, and income
taxes.

Our discussion and analysis of operating expenses is comprised of two
components. Compensation and Fringe Benefits includes all compensation, payroll
taxes, and benefits provided to our employees which, as a service company,
represents our most significant and variable expense. Expenses Other than
Reimbursements, Compensation and Fringe Benefits include outsourced services,
office rent and occupancy costs, other office operating expenses, amortization
and depreciation, and cost of risk. This discussion should be read in
conjunction with our unaudited condensed consolidated financial statements and
the accompanying notes.

17


Operating results for our U.S. and international operations for the quarters
ended March 31, 2005 and 2004 were as follows:



Quarter ended
-----------------------
March 31, March 31,
(in thousands) 2005 2004
- -------------------------------------------------- --------- ---------

REVENUES BEFORE REIMBURSEMENTS:
U.S. $ 112,507 $ 109,313
International 71,827 60,542
--------- ---------
TOTAL $ 184,334 $ 169,855

COMPENSATION & FRINGE BENEFITS:
U.S. $ 72,116 $ 69,367
% of Revenues 64.1% 63.5%
International 50,545 42,420
% of Revenues 70.3% 70.1%
--------- ---------
TOTAL $ 122,661 $ 111,787
% of Revenues 66.6% 65.8%

EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION &
FRINGE BENEFITS:
U.S. $ 38,555 $ 37,054
% of Revenues 34.3% 33.9%
International 17,937 15,920
% of Revenues 25.0% 26.3%
--------- ---------
TOTAL $ 56,492 $ 52,974
% of Revenues 30.6% 31.2%

OPERATING EARNINGS (1):
U.S. $ 1,836 $ 2,892
% of Revenues 1.6% 2.6%
International 3,345 2,202
% of Revenues 4.7% 3.6%
--------- ---------
TOTAL $ 5,181 $ 5,094
% of Revenues 2.8% 3.0%


(1) Earnings before net corporate interest expense and income taxes.

18



U.S. OPERATIONS

REVENUES

U.S. revenues before reimbursements, by market type, for the quarters ended
March 31, 2005 and 2004 were as follows:



Quarter ended
-------------------------------
March 31, March 31,
(in thousands) 2005 2004 Variance
- -------------------------------------------- --------- --------- --------

Insurance companies $ 53,979 $ 50,453 7.0%
Self-insured entities 39,340 40,409 (2.6%)
Class action services 19,188 18,451 4.0%
--------- ---------
TOTAL U.S. REVENUES BEFORE REIMBURSEMENTS $ 112,507 $ 109,313 2.9%
========= =========


Revenues from insurance companies increased 7.0% to $54.0 million for the
quarter ended March 31, 2005, compared to $50.5 million for the same quarter in
2004, due to a $3.9 million increase in revenues generated by our catastrophe
adjusters involved in finalizing claims resulting from the hurricanes which
struck the U.S. during 2004. Revenues from our catastrophe adjusters totaled
$6.6 million in the quarter ended March 31, 2005 compared to $2.8 million in the
same quarter of 2004. Revenues from self-insured entities decreased 2.6%, to
$39.3 million for the quarter ended March 31, 2005, compared to $40.4 million
for the same quarter in 2004, due primarily to a reduction in claim referrals
from our existing clients. See the following analysis of U.S. cases received.
Class action services revenues, including administration and inspection
services, increased 4.0% to $19.2 million in the quarter ended March 31, 2005,
compared to $18.5 million for the same quarter in 2004. These revenues can
fluctuate significantly depending on the timing and size of project awards.

Case Volume Analysis

Excluding the impact of class action services, which has project-based revenues
that are not denominated by individual cases, U.S. unit volume, measured
principally by cases received, decreased 0.1% in the first quarter of 2005
compared to the same 2004 quarter. This decrease was offset by a 2.3% revenue
increase from changes in the mix of services provided and in the rates charged
for those services, resulting in a net 2.2% increase in U.S. revenues for the
first quarter of 2005 compared to the same quarter in 2004, excluding revenues
from class action services. Growth in class action services increased U.S.
revenues by 0.7% in the quarter ended March 31, 2005, compared to the same
quarter in 2004.

19



Excluding the impact of class action services, U.S. unit volume by major service
line, as measured by cases received, for the quarters ended March 31, 2005 and
2004 was as follows:



Quarter ended
--------------------------------
March 31, March 31,
(whole numbers) 2005 2004 Variance
- ------------------------------ --------- --------- --------

Casualty 47,581 52,026 (8.5%)
Property 48,557 40,973 18.5%
Vehicle 32,929 33,940 (3.0%)
Workers' Compensation 36,016 39,590 (9.0%)
Other 5,889 4,688 25.6%
------- -------
TOTAL U.S. CASES RECEIVED 170,972 171,217 (0.1%)
======= =======


The increase in property claims was due to the residual impact from the four
hurricanes that struck Florida and other southeastern states during August and
September of 2004. The decline in vehicle claims was due to a decline in
referrals of high-frequency, low-severity claims from our insurance company
clients. Conservative underwriting by insurance companies, including significant
increases in policy deductibles, contributed to an industry-wide decline in
property and casualty claims frequency, exclusive of hurricane-related claims.
Our decline in workers' compensation and casualty claim referrals was due to a
reduction in claims from our existing clients and reflected a continued weakness
in U.S. employment levels and associated workplace injuries.

COMPENSATION AND FRINGE BENEFITS

Our most significant expense was the compensation of employees, including
related payroll taxes and fringe benefits. U.S. compensation expense as a
percent of revenues increased to 64.1% in the first quarter of 2005 as compared
to 63.5% in the 2004 quarter, due to higher compensation expense in our
catastrophe unit associated with reinspections and supplemental damage
appraisals on hurricane-related claims and an increase in operating capacity in
our GCG class action administration unit. There was an average of 4,304
full-time equivalent employees in the first quarter of 2005 compared to an
average of 4,190 in the 2004 period. There was an average of 96 more catastrophe
adjusters employed in the first quarter of 2005 as compared to the 2004 period.

U.S. salaries and wages totaled $58.0 million for the quarter ended March 31,
2005, increasing 5.2% from $55.2 million in the same 2004 quarter. This increase
reflected higher compensation expense for our catastrophe adjusters involved in
finalizing hurricane-related claims. Payroll taxes and fringe benefits for U.S.
operations totaled $14.1 million in the first quarter of 2005, decreasing 1.0%
from 2004 first quarter expenses of $14.2 million. This decrease was primarily
due to lower self-insured workers' compensation cost and a reduction in
retirement expenses.

EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION AND FRINGE BENEFITS

U.S. expenses other than reimbursements, compensation and related payroll taxes
and fringe benefits were 34.3% of revenues for the quarter ended March 31, 2005,
up from 33.9% for the same quarter in 2004. This increase reflected higher legal
expenses related to audits of workers'

20



compensation claims files in the State of California and the subpoena we
received last December from the New York Attorney General's office, and
temporary staffing expenses associated with finalizing hurricane-related claims.

REIMBURSEMENTS

Reimbursements in our U.S. operations were $8.6 million and $8.8 million for the
quarters ended March 31, 2005 and 2004, respectively.

INTERNATIONAL OPERATIONS

REVENUES

Substantially all international revenues were derived from the insurance company
market. Revenues before reimbursements from our international operations
increased 18.6%, from $60.5 million in the first quarter of 2004 to $71.8
million in the first quarter of 2005. International unit volume, measured
principally by cases received, increased 27.4% in the first quarter of 2005
compared to the same quarter in 2004. Our third quarter 2004 acquisition of the
net assets of Cabinet Mayoussier, Cabinet Tricaud, and TMA in France increased
international revenues by 2.0% in the 2005 first quarter. Revenues per claim
decreased 18.1% due to changes in the mix of services provided and in the rates
charged for those services. Growth in high-frequency, low-severity claim
referrals in the United Kingdom ("U.K.") and Continental Europe, Middle East and
Africa ("CEMEA") from new contracts entered into during 2004 reduced the average
revenue per claim in the 2005 first quarter. Revenues reflected a 7.3% increase
during the three months ended March 31, 2005 due to the positive effect of a
weak U.S. dollar, primarily as compared to the British pound and the euro.

International unit volume by region for the quarters ended March 31, 2005 and
2004 was as follows:



Quarter ended
--------------------------------
March 31, March 31,
(whole numbers) 2005 2004 Variance
- ------------------------------------ --------- --------- --------

United Kingdom 41,355 24,372 69.7%
Americas 29,381 28,135 4.4%
CEMEA 25,622 21,042 21.8%
Asia/Pacific 9,867 9,838 0.3%
------- ------
TOTAL INTERNATIONAL CASES RECEIVED 106,225 83,387 27.4%
======= ======


The increases in the U.K. and CEMEA were largely due to an increase in claims
received from new contracts entered into during 2004. The increase in the
Americas was primarily due to weather-related claims in the Caribbean during the
2005 first quarter.

COMPENSATION AND FRINGE BENEFITS

As a percent of revenues, compensation expense, including related payroll taxes
and fringe

21



benefits, increased slightly to 70.3% for the quarter ended March 31, 2005 from
70.1% for the same quarter in 2004, primarily due to staff increases in the U.K.
and CEMEA to handle claims referred under new contracts entered into during
2004. There was an average of 3,239 full-time equivalent employees in the first
quarter of 2005 (including approximately 41 full-time equivalent employees added
by our acquisitions in France) compared to an average of 3,092 in the same 2004
quarter.

Salaries and wages of international personnel increased 18.9% to $42.2 million
for the quarter ended March 31, 2005, from $35.4 million in the comparable 2004
quarter. Payroll taxes and fringe benefits for international operations
increased 20.2% to $8.4 million for the quarter ended March 31, 2005, compared
to $7.0 million for the same quarter in 2004. The increases in these costs were
largely the result of staffing increases in the U.K. and CEMEA and a decline in
the value of the U.S. dollar against other major currencies, primarily the
British pound and the euro.

EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION AND FRINGE BENEFITS

Expenses other than compensation and related payroll taxes and fringe benefits
decreased as a percent of revenues from 26.3% for the quarter ended March 31,
2004 to 25.0% for the 2005 quarter due primarily to an increase in profit
sharing earned during the 2005 first quarter from a third-party entity that we
provided claims adjusters to on an outsourced basis.

REIMBURSEMENTS

Reimbursements in our international operations increased to $6.7 million for the
quarter ended March 31, 2005 from $6.1 million in the comparable 2004 quarter.
This increase was primarily due to a decline in the value of the U.S. dollar
against other major currencies, primarily the British pound and the euro.



NET CORPORATE INTEREST EXPENSE AND INCOME TAXES

Net corporate interest expense was $1.5 million and $1.3 million for the
quarters ended March 31, 2005 and 2004, respectively.

Our effective tax rate was 35.4% and 36.4% of pretax income for the quarters
ended March 31, 2005 and 2004, respectively. Taxes on income totaled $1.3
million for the quarter ended March 31, 2005, as compared to $1.4 million for
the 2004 period. We perform a quarterly evaluation of our effective tax rate
expected for the year. Based on operating results through the first three months
of 2005 and a projection of operating results for the remainder of the year, we
estimate that our effective tax rate will be 35.4% for calendar year 2005. The
change in our estimated effective tax rate for 2005 was primarily due to a
change in the mix of income expected from our various international operations.

LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION

At March 31, 2005, current assets exceeded current liabilities by approximately
$127.4 million, a decrease of $3.0 million from the working capital balance at
December 31, 2004. Cash and cash equivalents at March 31, 2005 totaled $25.6
million, a decrease of $17.9 million from the balance at December 31, 2004. Cash
used in operations during the 2005 first quarter totaled

22



$11.8 million and was primarily due to payments of accrued incentive
compensation, annual contributions to our U.S. defined contribution pension
plan, increased income tax payments, and a lag in collecting receivables
generated from hurricane-related claims handled in 2004 and 2005. Other
significant uses of cash during the 2005 first quarter included dividends paid
to shareholders, acquisitions of property and equipment, and investments in
computer software.

Cash dividends paid to shareholders approximated 124.2% of net income in the
first quarter of 2005, compared to 122.4% for the same period in 2004. Our Board
of Directors declares cash dividends to shareholders each quarter based on an
assessment of current and projected earnings and cash flows.

During the first quarter of 2005, we did not repurchase any of the Company's
Class A or Class B common stock. As of March 31, 2005, 705,863 shares are
eligible to be repurchased under the discretionary 1999 share repurchase program
authorized by our Board of Directors. We believe it is unlikely that we will
repurchase shares under this program in the foreseeable future due to the
decline in the funded status of our defined benefit pension plans.

We maintain a $70.0 million committed revolving credit line with a syndication
of banks in order to meet seasonal working capital requirements and other
financing needs that may arise. This committed revolving credit line expires in
October 2006. We expect to renew our revolving credit line on or before October
2006 on terms similar to those under the current commitment. As a component of
this credit line, we maintain a letter of credit facility to satisfy certain
contractual obligations. Including $12.2 million committed under the letter of
credit facility, the balance of our unused line of credit totaled $22.0 million
at March 31, 2005. Our short-term debt obligations typically peak during the
first quarter and generally decline during the balance of the year. Short-term
borrowings outstanding, including bank overdraft facilities, as of March 31,
2005 totaled $39.9 million, increasing from $37.4 million at December 31, 2004.
Long-term borrowings outstanding, excluding current installments, as of March
31, 2005 totaled $50.6 million compared to $50.9 million at December 31, 2004.
We have historically used the proceeds from our long-term borrowings to finance
business acquisitions, primarily in our international segment. Please refer to
the Debt Covenants discussion under the Factors that May Affect Future Results
section of this report for a further discussion of our borrowing capabilities.
We believe that our current financial resources, together with funds generated
from operations and existing and potential borrowing capabilities, will be
sufficient to maintain our current operations for the next twelve months.

We have not engaged in any hedging activities to compensate for the effect of
exchange rate fluctuations on the operating results of our foreign subsidiaries.
Foreign currency denominated debt serves to hedge the currency exposure of our
net investment in foreign operations.

Shareholders' investment at March 31, 2005 was $196.5 million, compared with
$194.8 million at December 31, 2004. This increase was a result of net income
and a positive foreign currency translation adjustment, net of dividends paid to
shareholders during the first quarter of 2005.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations addresses our condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
U.S. The preparation of these

23



financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates these estimates and judgments based upon
historical experience and on various other factors that are believed to be
reasonable under the circumstances. The results of these evaluations form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. There have been no
material changes to our critical policies and estimates since December 31, 2004.

For a complete discussion regarding the application of our critical accounting
policies, see our Annual Report on Form 10-K for the year ended December 31,
2004 filed with the Securities and Exchange Commission, under the heading
"Critical Accounting Policies and Estimates" in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section.

FACTORS THAT MAY AFFECT FUTURE RESULTS

FORWARD LOOKING STATEMENTS

Certain information presented in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" may include forward-looking
statements, the accuracy of which is subject to a number of risks, uncertainties
and assumptions. Our Annual Report on Form 10-K for the year ended December 31,
2004 discusses such risks, uncertainties and assumptions and other key factors
that could cause actual results to differ materially from those expressed in
such forward-looking statements.

LEGAL PROCEEDINGS

As disclosed in Note 9, "Commitments and Contingencies," to the condensed
consolidated financial statements, we have potential exposure to certain legal
and regulatory matters.

CONTINGENT PAYMENTS

We normally structure acquisitions to include earnout payments, which are
contingent upon the acquired entity reaching certain revenue and operating
earnings targets. The amount of the contingent payments and length of the
earnout period varies for each acquisition, and the ultimate payments when made
will vary, as they are dependent on future events. Based on projected levels of
revenues and operating earnings, additional payments under existing earnout
agreements would approximate $3.8 million through 2009, as follows: 2005 -
$31,000; 2006 - $84,000; 2007 - $84,000; 2008 - $3,316,000; and 2009 - $285,000.

At March 31, 2005, we have committed $12.2 million under letters of credit to
satisfy certain contractual requirements. As noted in our discussion of Debt
Covenants, these letter of credit commitments were outstanding under our $70.0
million Revolving Credit Agreement.

24



DEBT COVENANTS

In October 2003, we entered into a committed $70.0 million revolving credit line
pursuant to a revolving credit agreement (the "Revolving Credit Agreement") and
issued $50.0 million in 6.08% senior notes pursuant to a notes purchase
agreement (the "Notes Purchase Agreement"). As of March 31, 2005, there was
$35.8 million outstanding on the revolving credit line with an average variable
interest rate of 5.16%. In addition, letters of credit of $12.2 million were
also outstanding under this revolving credit line. The $50.0 million senior
notes have scheduled principal repayments of approximately $5.6 million
beginning October 2006 and continuing semi-annually through 2009 with the final
payment due April 2010. The stock of Crawford & Company International, Inc. is
pledged as security under these agreements and our U.S. subsidiaries have
guaranteed our obligations under these agreements.

Both of these agreements contain various provisions which require us to maintain
defined leverage ratios, fixed charge coverage ratios, and minimum net worth
thresholds. We must maintain, on a rolling four quarter basis, a leverage ratio
of consolidated debt to earnings before interest, income taxes, depreciation,
amortization, certain non-recurring charges, and the capitalization of
internally developed software costs ("EBITDA") of no more than 2.50 times
EBITDA. This ratio is reduced to a maximum allowable of 2.25 times EBITDA at
September 30, 2005 and thereafter. We must also maintain a fixed charge coverage
ratio of EBITDA less depreciation and amortization plus lease expense ("EBITR")
to total fixed charges, consisting of interest expense and lease expense, of no
less than 1.50 times fixed charges. Additionally, we are required to maintain a
minimum net worth equal to $135,516,350 plus 50% of our cumulative positive
consolidated net income earned after December 31, 2002 plus 100% of the net
proceeds from any equity offering, subject to certain terms and conditions. For
purposes of determining minimum net worth, any non-cash adjustments after
December 31, 2002 related to our pension fund liabilities, goodwill, or foreign
currency translations are excluded.

We were in compliance with these debt covenants as of March 31, 2005. If we do
not meet the covenant requirements in the future, we would be in default under
these agreements. In such an event, we would need to obtain a waiver of the
default or repay the outstanding indebtedness under the agreements. If we could
not obtain a waiver on satisfactory terms, we could be required to renegotiate
this indebtedness. Any such renegotiations could result in less favorable terms,
including higher interest rates and accelerated payments. Based upon our
business plan for 2005, we expect to remain in compliance with the financial
covenants contained in the Revolving Credit Agreement and the Notes Purchase
Agreement throughout 2005. However, there can be no assurance that our actual
financial results will match our planned results or that we will not violate the
covenants.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 123 (revised 2004), "Share
Based Payments" ("SFAS 123R"), which is a revision of SFAS 123, "Accounting for
Stock Compensation." SFAS 123R supersedes SFAS 123 and Accounting Principles
Board ("APB") Opinion 25 "Accounting for Stock Issued to Employees" ("APB 25")
and amends SFAS 95, "Statement of Cash Flows."

25



Generally, the approach in SFAS 123R is similar to the approach described in
SFAS 123. However, SFAS 123R requires companies to measure compensation cost for
all share-based payments based on the fair value of the shares, including
employee stock options. Pro forma disclosure will not be permitted under SFAS
123R. When originally issued, SFAS 123R was to be effective for public companies
for the first interim or annual periods beginning after June 15, 2005. However,
in April 2005 the SEC amended Regulation S-X to allow public companies that had
not yet adopted SFAS 123R to delay adoption of the Statement until the beginning
of the first annual period beginning after June 15, 2005. Accordingly, we expect
to adopt SFAS 123R at the beginning of 2006.

SFAS 123R permits public companies to adopt its requirements using one of two
methods: 1) a "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the requirements of
SFAS 123R for all share-based payments granted after the effective date, and (b)
based on the requirements of SFAS 123 for all awards granted to employees prior
to the effective date of SFAS 123R that remain unvested on the effective date,
or 2) a "modified retrospective" method which includes the requirements of the
modified prospective method described above, but also permits companies to
restate based on the amounts previously recognized under SFAS 123 for purposes
of pro forma disclosures either (a) all prior periods presented or (b) prior
interim periods of the year of adoption. We plan to adopt SFAS 123R using the
"modified prospective" method.

As permitted by SFAS 123, we currently account for share-based payments to our
employees using APB 25's intrinsic value method. Under APB 25, we recognize
compensation cost for stock grants, but we generally recognize no compensation
cost for our employee stock option and employee stock purchase plans due to the
terms of those plans. Accordingly, the adoption of SFAS 123R's fair value method
will have an impact on our results of operations, although it will have no
impact on our financial position. The impact of adoption of SFAS 123R cannot be
predicted at this time because it will depend on levels of share-based payments
granted in the future. However, had we adopted SFAS 123R in prior periods, the
impact of that Standard would have approximated the impact of SFAS 123 as
described in the disclosure of pro forma net income and earnings per share under
"Accounting for Stock-Based Compensation" in Note 5 to the condensed
consolidated financial statements. Based on employee stock options issued
through March 31, 2005, adoption of SFAS 123R at the beginning of 2006, and use
of the "modified prospective" method, we expect the adoption of SFAS 123R to
reduce net income by approximately $826,000 in the year of adoption, or $0.02
per share.

SFAS 123R also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow, rather than as an
operating cash flow as required under current generally accepted accounting
principles. Any additional impact on our future net income or cash flows cannot
be predicted at this time because it will depend on levels of share-based
payments granted in the future and on employee exercises of stock options.

In December 2004, the FASB issued FASB Staff Position 109-2, "Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004." The FASB issued this Staff Position to
provide accounting and disclosure guidance for the repatriation provision of the
American Jobs Creation Act of 2004 ("the Act") which allows a special one-time
dividends received deduction on the repatriation of certain foreign earnings to
a U.S. tax payer. The related SFAS 109 requires companies to recognize in the
period of enactment the effect of changes in the tax law. However, the FASB
believes the

26



Treasury Department will subsequently provide needed clarification on key
elements of the repatriation provision of the Act. For purposes of applying SFAS
109, FASB Staff Position 109-2 permitted a delayed implementation of the
repatriation provision of the Act beyond the financial reporting period of
enactment (2004) so that companies could properly evaluate the effect of the Act
(and any forthcoming clarifications) on any plan for reinvestment or
repatriation of foreign earnings. Accordingly, we have not recognized any
potential impact of the repatriation provision of the Act in our financial
statements. Generally, it is our policy to consider undistributed earnings of
foreign subsidiaries to be indefinitely reinvested. Until the necessary
clarifications are subsequently issued by the Treasury Department, we cannot
reasonably determine if we will continue to indefinitely reinvest the earnings
of our foreign subsidiaries. Consequently, we cannot currently estimate a
potential range of any related income tax effects or impact on our financial
position, results of operations, or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

DERIVATIVES

We did not enter into any transactions using derivative financial instruments or
derivative commodity instruments during the quarter ended March 31, 2005.

FOREIGN CURRENCY EXCHANGE

Our international operations expose us to foreign currency exchange rate changes
that can impact translations of foreign-denominated assets and liabilities into
U.S. dollars and future earnings and cash flows from transactions denominated in
different currencies. Revenues from our international operations were 39.0% and
35.6% of total revenues for the quarters ending March 31, 2005 and 2004,
respectively. Except for borrowing in foreign currencies, we have not engaged in
any hedging activities to compensate for the effect of exchange rate
fluctuations on the net assets or operating results of our foreign subsidiaries.

We measure currency earnings risk related to our international operations based
on changes in foreign currency rates using a sensitivity analysis. The
sensitivity analysis measures the potential loss in earnings based on a
hypothetical 10% change in currency exchange rates. Exchange rates and currency
positions as of March 31, 2005 were used to perform the sensitivity analysis.
Such analysis indicates that a hypothetical 10% change in foreign currency
exchange rates would have increased or decreased pretax income by approximately
$191,000, or less than $0.01 per share, during the first three months of 2005,
had the U.S. dollar exchange rate increased or decreased relative to the
currencies with which we had exposure.

INTEREST RATES

We are exposed to interest rate fluctuations on certain of our variable rate
borrowings. Depending on general economic conditions, we use variable rate debt
for short-term borrowings and fixed rate debt for long-term borrowings. At March
31, 2005, we had $39.9 million in short-term borrowings outstanding, including
bank overdraft facilities, with an average variable interest rate of 5.16%. If
the average interest rate increased or decreased by 1%, the impact to pretax
income for the three months ended March 31, 2005 would have been approximately
$96,000, or less than $0.01 per share.

27



Changes in the projected benefit obligations of our defined benefit pension
plans are largely dependent on changes in prevailing interest rates as of the
measurement dates we use to value these obligations under SFAS 87. If our
assumption for the discount rate changed by 0.25%, representing either an
increase or decrease in the rate, the projected benefit obligation of our U.S.
and U.K. defined benefit plans would have changed by approximately $19.0
million. The impact of this change to pretax income for the quarter ended March
31, 2005 would have been approximately $453,000, or $0.01 per share.

CREDIT RISK

We process payments for claims settlements, primarily on behalf of our
self-insured clients. The liability for the settlement cost of claims processed,
which is generally pre-funded, remains with the client. Accordingly, we do not
incur significant credit risk in the performance of these services.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures. This evaluation was carried out under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer. Based on this evaluation, the chief executive officer and
chief financial officer have concluded that the design and operation of our
disclosure controls and procedures are effective.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no significant changes in our internal controls over financial
reporting during the period covered by this report that materially affected, or
are reasonably likely to materially affect, our internal controls over financial
reporting.

28



PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Subsequent to our filing of Form 10-K for the year ended December 31, 2004,
developments identified below have occurred in the following legal proceeding.
For information on other legal matters, see Note 9, "Commitments and
Contingencies" to the condensed consolidated financial statements included in
this Form 10-Q.

Regarding the subpoena we received from the State of New York, Office of the
Attorney General requesting various documents relating to our operations, the
subpoena does not apply to the operations of our international division or our
GCG class action administration unit. We have responded to the subpoena. We
cannot predict when the Attorney General's investigation will be completed, its
ultimate outcome or its effect on our financial condition, results of
operations, or cash flows, if any.

ITEM 6. EXHIBITS

See Index to Exhibits on page 31.

29



SIGNATURES

Pursuant to the requirements 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
(Registrant)

Date: May 3, 2005 /s/ Thomas W. Crawford
-----------------------------------------------
Thomas W. Crawford
President and Chief Executive Officer
(Principal Executive Officer) and Director

Date: May 3, 2005 /s/ John F. Giblin
-------------------------------------------
John F. Giblin
Executive Vice President - Finance
(Principal Financial Officer)

Date: May 3, 2005 /s/ W. Bruce Swain
-------------------------------------------
W. Bruce Swain
Senior Vice President and Controller
(Principal Accounting Officer)

30



INDEX TO EXHIBITS



Exhibit
No. Description Page
- ------- ----------- ----

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 3.1 to the Registrant's quarterly report on Form
10-Q for the quarter ended March 31, 2004) -

10.1 Change of Control and Severance Agreement with Thomas W. Crawford,
President and Chief Executive Officer of the Company (incorporated by
reference to the Registrant's Report on Form 8-K filed February 4,
2005) -

10.2 Change of Control and Severance Agreement with Kevin Frawley, Executive
Vice President of the Company (incorporated by reference to the
Registrant's Report on Form 8-K filed March 4, 2005) -

15.1 Letter from Ernst & Young LLP 32

31.1 Certification of principal executive officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 33

31.2 Certification of principal financial officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 34

32.1 Certification of principal executive officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 35

32.2 Certification of principal financial officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 36


31