Crawford & Company® 2021 Form 10-K
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Technology
+ People
Solving claims challenges through
innovation and expertise
There’s more
to us than claims
For over 80 years, Crawford & Company® has led the industry through a
relentless investment in people and the innovative tools that empower
them. This unique combination enables us to provide unrivaled claims
management solutions to the insurance industry.
Company profile
Based in Atlanta, Crawford & Company®
(NYSE: CRD-A and CRD-B) is the world’s
largest publicly-listed independent provider
of claims management and outsourcing
solutions to brokers, carriers and
corporations with an expansive network
of experts serving clients in more than
70 countries. Our innovative portfolio of
technology-driven solutions is leading the
industry and advancing our purpose to
restore lives, businesses and communities
across the globe.
Working together to
build a better tomorrow
Crawford’s footprint and capabilities span the globe, empowering us to restore
lives, businesses and communities wherever losses occur. Serving communities in
need is an integral part of our purpose, culture and RESTORE values. Every day,
we strive to make a positive social and environmental impact everywhere we do
business. Our inaugural Global Citizenship Report will be released in 2022, and we
are excited to share our progress on the programs and initiatives that bring us one
step closer to our environmental, social, and corporate governance objectives.
Message from the
CEO & President
To our shareholders:
2021 was a landmark year for Crawford & Company.
resources and opportunities to connect with one
We celebrated our 80th anniversary and achieved
another. In the UK, we established Wellbeing Week,
record revenue growth.1 We are incredibly proud
which brought employees together in support
of our employees’ hard work and dedication in a
of their mental health. In the U.S., we expanded
challenging environment. Our impressive top-line
our Diversity Equity & Inclusion (DEI) initiatives,
growth underscores the strength of our technology
launching our PRIDE employee resource group
and people-focused go-to-market strategy.
(ERG) to support our LGBTQ+ colleagues. PRIDE
We honored our history with a week-long, global
80th anniversary celebration that included activities
that were both festive and educational in nature.
We were humbled by the many employees of all
tenures, geographies and areas of the business as
they shared what being part of the Crawford family
meant to them.
We achieved our highest revenue ever for a quarter
and a full year in Crawford’s history.1 The year
ended with revenue of $1.1 billion representing 12%
growth over 2020 and 10% over 2019. Our growth
spanned service lines as we deepened relationships
with our top-five carrier clients, expanded our
bench of experts, gained market share in our core
operations and scaled our offerings in Platform
Solutions. Another contributor to this success was
our focus on M&A, as we welcomed edjuster Inc.,
Praxis Consulting and BosBoon Expertise Group
B.V. to the Crawford family. These investments
strengthened our service offerings and global
footprint while supporting our three strategic pillars:
quality that sets the industry benchmark, expertise
that is deep and eminent and digital that simplifies.
We supported our employees with additional
joins our two established ERGs: RISE for multi-
ethnic employees, and ZEAL, for female colleagues.
Acknowledging that DEI issues take many forms
across cultures and geographies, we launched the
Global Diversity Council to ensure that employees
receive the right support wherever they are. We
were also pleased to announce the election of
Michelle Jarrard to non-executive board chair;
she is the first female to chair Crawford’s Board
and builds on the legacy of Virginia Crawford, the
company’s first female director. And in 2022, we
will release our first Global Citizenship Report
that further details our efforts to give back to our
communities and be responsible stewards of our
world.
In 2021, we began building the foundation of a new
Crawford culture, which is empowering, inclusive
and oriented to a growth mindset. This will define
a Crawford way of doing business and create a
coveted Crawford experience for our employees
and customers. We believe this will be a significant
differentiator for us and will underpin our strategic
execution. In support of this cultural shift, we
implemented training for managers across the globe
and received positive feedback from our employees.
1 Adjusted for the 2018 sale of Garden City Group.
We also embarked on a strategy refresh developing
headwinds in others. We have adjusted to take
a new envisioned future, brand promise, strategic
advantage of emerging trends and blunt the impact
pillars, and mindsets and enablers, all of which
of the pandemic. We believe that if we continue to
will help us achieve our purpose to restore
prioritize the health and wellbeing of our people
lives, businesses and communities. Our refresh
while focusing on our growth strategy, Crawford will
was brought to life in our Technology + People
thrive. We look forward to bolstering the success
marketing campaign, which is reflected in our
we enjoyed last year by continuing to deliver on our
enhanced website and other marketing initiatives.
purpose and envisioned future while striving for
We are extremely proud of the success we
achieved for our company and clients in 2021. We
Sincerely,
service excellence for our clients.
employed new ways of working, expanded our
digital capabilities and built our relationships far
and wide with our employees, clients and partners.
While we see progress towards normalcy in some
regions, we continue to confront pandemic-related
Rohit Verma
Chief Executive Officer
Joseph Blanco
President
2021 Financial
Overview
(dollars in millions, except per share amounts) (unaudited)
FOR THE YEARS ENDED DECEMBER 31,
Revenues Before Reimbursements
Net Income Attributable to Shareholders of Crawford & Company
Consolidated Adjusted Operating Earnings(1)
Consolidated Adjusted EBITDA(1)
Operating Cash Flow
Diluted Earnings per Share – CRD-A
Diluted Earnings per Share – CRD-B
Return on Average Shareholders’ Investment
2021
2020
$ 1,102.0
$ 982.5
$ 30.7
$ 62.5
$ 98.3
$ 54.3
$ 0.57
$ 0.57
15.4%
$ 28.3
$ 71.8
$ 104.8
$ 93.2
$ 0.54
$ 0.52
16.3%
Percentage of Total Company Revenues Before Reimbursement by Business Segment
43.2%
Crawford Loss Adjusting
36.1%
Crawford TPA Solutions
20.7%
Crawford Platform Solutions
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
$1,029.6
$1,041.1
$1,005.8
$982.5
$1,102.0
Revenue Before
Reimbursements
(dollars in millions)
1,688.2
1,697.6
1,599.8
1,561.8
1,653.1
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
$94.6
$89.5
$77.6
$71.8
$62.5
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
$182.3
$171.3
$159.3
$186.9
$212.0
Consolidated Adjusted
Operating Earnings (1)
(dollars in millions)
Shareholders’ Investment Attributable
to Shareholders of Crawford & Company
(dollars in millions)
$171.1
$137.2
$125.1
$68.9
$121.8
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
$13.7
$13.5
$13.2
$9.6
$12.7
Cases Received
(in thousands)
Net Debt(1)
(dollars in millions)
Total Cash Dividends Paid
(dollars in millions)
(1) Measurements of financial performance not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comparable to other similarly-titled measurements employed by other companies. For additional information about the non-GAAP financial information presented herein click here to see the appendix and annual press releases shown on our website. All periods exclude the impact of the disposed GCG business.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
(cid:4) 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
(State or other jurisdiction of incorporation or organization)
5335 Triangle Parkway, Peachtree Corners, Georgia
(Address of principal executive offices)
58-0506554
(I.R.S. Employer Identification Number)
30092
(Zip Code)
Registrant's telephone number, including area code
(404) 300-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock — $1.00 Par Value
Class B Common Stock — $1.00 Par Value
Trading Symbol(s)
CRD-A
CRD-B
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:4) No (cid:3)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:3)
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 (cid:3) No (cid:4)
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes (cid:3) No (cid:4)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer", "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer (cid:4)
Accelerated filer (cid:3)
Non-accelerated filer (cid:4)
Smaller reporting company (cid:4) Emerging growth company (cid:4)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards pursuant to Section 13(a) of the Exchange Act. (cid:4)
Indicate by check mark whether the registrant has filed a report on attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:3)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:4) No (cid:3)
The aggregate market value of the Registrant's voting and non-voting common stock held by non-affiliates of the Registrant was $235,362,286 as of June 30, 2021,
based upon the closing prices of such stock as reported on the NYSE on such date. For purposes hereof, beneficial ownership is determined under rules adopted
pursuant to Section 13 of the Securities Exchange Act of 1934, and excludes voting and non-voting common stock beneficially owned by the directors and executive
officers of the Registrant, some of whom may not be deemed to be affiliates upon judicial determination.
The number of shares outstanding of each class of the Registrant's common stock, as of March 7, 2022, was:
Class A Common Stock — $1.00 Par Value — 31,084,613 Shares
Class B Common Stock — $1.00 Par Value — 20,811,962 Shares
Documents incorporated by reference:
Portions of the Registrant's proxy statement for its 2021 annual shareholders' meeting, which proxy statement will be filed within 120 days of the Registrant's year end,
are incorporated by reference into Part III hereof.
CRAWFORD & COMPANY
FORM 10-K
For The Year Ended December 31, 2021
Table of Contents
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity
Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
PART IV
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
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We use the terms "Crawford", "the Company", "the Registrant", "we", "us" and "our" to refer to the business of Crawford &
Company, its subsidiaries, and variable interest entities.
Cautionary Statement Concerning Forward-Looking Statements
This report contains and incorporates by reference forward-looking statements within the meaning of that term in the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act
of 1934. Statements contained or incorporated by reference in this report that are not statements of historical fact are forward-looking
statements made pursuant to the "safe harbor" provisions thereof. These statements may relate to, among other things, our expected
future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses, expectations
regarding our anticipated contributions to our underfunded defined benefit pension plans, collectability of our billed and unbilled
accounts receivable, financial results from our recent acquisitions, our continued compliance with the financial and other covenants
contained in our financing agreements, and our other long-term capital resource and liquidity requirements. These statements may also
relate to our business strategies, goals and expectations concerning our market position, future operations, margins, case volumes,
profitability, contingencies, liquidity position, and capital resources. The words "anticipate", "believe", "could", "would", "should",
"estimate", "expect", "intend", "may", "plan", "goal", "strategy", "predict", "project", "will" and similar terms and phrases, or the
negatives thereof, identify forward-looking statements in this report and in the statements incorporated by reference in this report.
These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors" and elsewhere in this
report and those described from time to time in our other reports filed with the Securities and Exchange Commission.
Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these
assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could prove to be incorrect.
Our operations and the forward-looking statements related to our operations involve risks and uncertainties, many of which are outside
our control, and any one of which, or a combination of which, could materially adversely affect our financial condition and results of
operations, and whether the forward-looking statements ultimately prove to be correct. As a result, undue reliance should not be
placed on any forward-looking statements. Actual results and trends in the future may differ materially from those suggested or
implied by the forward-looking statements. Forward-looking statements speak only as of the date they are made and we undertake no
obligation to publicly update any of these forward-looking statements in light of new information or future events.
ITEM 1.
BUSINESS
PART I
Headquartered in Atlanta, Georgia, and founded in 1941, the Company is the world's largest publicly listed independent provider
of claims management and outsourcing solutions to carriers, brokers and corporations with an expansive global network serving
clients in more than 70 countries. For the year ended December 31, 2021, the Company reported total revenues before reimbursements
of $1.102 billion.
Shares of the Company's two classes of common stock are traded on the New York Stock Exchange ("NYSE") under the symbols
CRD-A and CRD-B, respectively. The Company's two classes of stock are substantially identical, except with respect to voting rights
and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B
Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common
Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is
approved by the holders of 75% of the Class A Common Stock, voting as a class.
DESCRIPTION OF SERVICES
The Company delivers services to its clients through a global service line reporting structure consisting of three operating
segments as follows:
•
•
•
Crawford Loss Adjusting, which services the global property and casualty market, provides claims management services
globally to insurance carriers and self-insured entities related to property and casualty losses.
Crawford TPA Solutions, which trades under the Broadspire brand in North America, provides third party administration
for workers' compensation, auto and liability, disability absence management, medical management, and accident and
health to corporations, brokers and insurers worldwide.
Crawford Platform Solutions provides services to the global property and casualty insurance company markets through
service lines known as Contractor Connection and Network Services.
A significant portion of our revenues is derived from international operations. For a discussion of certain risks attendant to
international operations, see Item 1A, "Risk Factors."
CRAWFORD LOSS ADJUSTING. The Crawford Loss Adjusting segment accounted for 43.2% of the Company's revenues before
reimbursements in 2021. Crawford Loss Adjusting provides claims management and adjusting services globally to insurance carriers
and self-insured entities related to property and casualty losses caused by physical damage to commercial and residential real property,
certain types of personal property and marine losses. Crawford Loss Adjusting revenues are substantially derived from the insurance
carrier market. Insurance companies customarily manage their own claims administration and adjusting functions, but often rely upon
third-parties for certain services which the Company provides, primarily with respect to field investigation and the evaluation and
resolution of property and casualty insurance claims. This segment also includes Global Technical Services, which provides claims
management services to insurance companies and self-insured entities related to large, complex losses with technical adjusting and
industry experts servicing a broad range of industries, including commercial property, forensic accounting, transportation, retail,
building and construction, cyber and energy. Global Technical Services is a group of skilled adjusters with technical training and
specialized expertise, such as in forensics, engineering, accounting, or chemistry, with relationships spanning the insurance industry
and Fortune 1000 corporations
Claims management and adjusting services offered by our Crawford Loss Adjusting segment are provided to clients pursuant to a
variety of different referral assignments which generally are classified by the underlying insured risk categories used by insurance
companies. These major risk categories are:
•
•
•
•
Property — losses caused by physical damage to commercial or residential real property and certain types of personal
property
Public Liability — a wide range of non-automobile liability claims such as product liability; owners, landlords and tenants
liabilities; and comprehensive general liability
Automobile — all types of losses involving use of an automobile, including bodily injury, physical damage, medical
payments, collision, fire, theft, and comprehensive liability
Marine — losses relating to hull, machinery and cargo
1
Edjuster is a technology-enabled, end-to-end contents services provider and platform that provides technology driven contents
claims handling solutions, including field inventory services, desk valuation services, and contents valuation solutions for insurer
clients.
CRAWFORD TPA SOLUTIONS. Our Crawford TPA Solutions segment, which operates under the Broadspire brand name in North
America, is a leading third party administrator that provides services to the global casualty and disability insurance and self-insured
markets. This segment accounted for 36.1% of the Company's revenues before reimbursements in 2021.
Through the Crawford TPA Solutions segment, the Company provides a complete range of claims and risk management services
to corporations in the self-insured or commercially-insured marketplace inclusive of brokers and insurance companies. In addition to
desktop claim adjusting and evaluation of claims, Crawford TPA Solutions also offers initial loss reporting services for claimants; loss
mitigation services, such as medical bill review, medical case management and vocational rehabilitation; legal services, risk
management information services; and administration of loss funds established to pay claims. Crawford TPA Solutions services are
provided through two major service lines:
•
•
The Claims Management service line includes workers' compensation, liability, property, accident & health, and disability
claims management. Accident & health claims programs include accidental death and dismemberment, business travel,
life, disability, critical illness and credit protection claims programs. Disability and leave management services include the
handling of short and long term disability, FMLA (Federal Medical Leave Act), ADA (Americans with Disabilities Act)
and state leave claims designed to increase employee productivity and contain costs. Claims management services also
includes legal services, risk management information and consultative analytical services.
The Medical Management service line integrates evidence-based criteria, clinical expertise, and advanced technology into
the claims process to achieve optimal outcomes for employees in a cost-effective manner. Case managers provide
administration services by proactively managing medical treatment for employees while facilitating an understanding of
and participation in their rehabilitation process. These programs assist our client employees' recovery in a quick, cost-
effective method. Medical bill review services provide analysis of medical charges for clients' claims to identify
opportunities for savings from fee schedules for usual and customary practices. Physician review services include a
diverse panel of specialized physician reviewers that evaluate the medical necessity of medical services as well as causal
relation determination while also supporting timely return to work for employees.
CRAWFORD PLATFORM SOLUTIONS. The Crawford Platform Solutions segment accounted for 20.7% of the Company's
revenues before reimbursements in 2021. Crawford Platform Solutions provides services to the global property and casualty insurance
company markets through service lines known as Contractor Connection and Networks.
•
•
Contractor Connection provides a managed repair service using the largest independently managed contractor network in
the industry, with approximately 6,000 credentialed residential and commercial contractors. This innovative service
provides a customer-centric solution for a wide range of loss types from high-frequency, low-complexity claims to large
complex repairs, optimizing the time and work process needed to resolve property claims. Contractor Connection supports
our business process outsourcing strategy by providing high-quality outsourced contractor management to national and
regional personal and commercial insurance carriers as well as directly to consumer markets.
Networks consists of the following service lines: Catastrophe operations, which provides services to insurance companies
on losses caused by all types of natural disasters, such as fires, hailstorms, hurricanes, earthquakes and floods, and man-
made disasters such as oil spills, chemical releases, and explosions; WeGoLook, which provides a variety of on-demand
inspection, verification, and other task-specific field services for businesses and consumers through a mobile platform of
independent contractors; and Praxis Consulting, which provides outsourced subrogation claims management and recovery
services in the U.S.
CUSTOMER CONCENTRATION
From time to time, we derive a material portion of our revenues from a limited number of clients. No single customer accounts for
10% or more of our consolidated revenues for the years ended December 31, 2021, 2020, or 2019. However, for each of the years
ended December 31, 2021 and 2020, three customers in our Crawford Platform Solutions segment each represented in excess of 10%
of its revenue. For the year ended December 2019, our Crawford Platform Solutions segment derived in excess of 10% of its revenue
from one customer.
In the event we are not able to retain these significant relationships, or replace any lost revenues from such relationships, revenues
and operating earnings within this segment could be materially adversely affected.
2
INTELLECTUAL PROPERTY AND TRADEMARKS
Our intellectual property portfolio is an important asset which we seek to expand and protect globally through a combination of
trademarks, trade names, copyrights and trade secrets. We own a number of active trademark applications and registrations which
expire at various times. As the laws of many countries do not protect intellectual property to the same extent as the laws of the U.S.,
we cannot ensure that we will be able to adequately protect our intellectual property assets outside of the U.S. The failure to protect
our intellectual property assets could have a material adverse effect on our business; however, the loss of any single patent, trademark
or service mark, taken alone, would not have a material adverse effect on any of our segments or on the Company as a whole.
SERVICE DELIVERY
Our claims management services are offered primarily through a global network serving clients in more than 70 countries.
Contractor Connection services are offered by providing high-quality outsourced contractor management to national, regional and
international clients. Catastrophe services are offered through a network of adjusters who are available to respond to natural and man-
made catastrophic events. WeGoLook services are offered through a mobile platform of independent contractors.
COMPETITION
The global claims management services market is highly competitive and comprised of a large number of companies that vary in
size and that offer a varied 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, among other
things, the insurance underwriting cycle, weather-related events, general economic activity, overall employment levels and workplace
injury rates. Demand is also impacted by decisions insurance companies and self-insured entities make with respect to the level of
claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. In addition,
our ability to retain clients and maintain or increase case referrals is also dependent in part on our ability to continue to provide high-
quality, competitively priced services and effective sales efforts.
The Company competes with a substantial number of smaller local and regional claims management services firms. Many of
these smaller firms have rate structures that are lower than the Company's or may, in certain markets, have local knowledge which
provides a competitive advantage. We do not believe these smaller firms offer the broad spectrum of claims management services in
the range of locations the Company provides and, although such firms may secure business which has a local or regional source, the
Company believes its quality product offerings, broader scope of services, and geographically dispersed offices provide us with an
overall competitive advantage in securing business from both U.S. and international clients. There are also national and global
independent companies, some of which are larger than the Company, that provide a similar broad spectrum of claims management
services and who directly compete with the Company.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE ("ESG")
As a world leader in its segment, Crawford operates under the highest ethical and corporate governance standards. Our Company
is committed to doing its part in promoting sustainable use of resources and an inclusive and safe workplace for our employees. In the
following sections, we list some of our initiatives in the environmental, social, and governance areas.
HUMAN CAPITAL
Human Capital is a key component to our success. Our culture is reflected in our RESTORE values of Respect, Empowerment,
Sustainability, Training, One Crawford, Recognition and Entrepreneurial Spirit. These values define our desired culture, and influence
organizational behavior, decision-making and our priorities.
Employee Profile
Crawford & Company is committed to the health, safety and growth of our people and providing quality services to our clients as
we deliver on our purpose: Restoring and Enhancing Lives, Businesses and Communities. As of December 31, 2021, we had
approximately 9,400 employees operating in 70 countries. 92% of our global employees are full-time. Approximately 80% of our
workforce is concentrated in the United States ("U.S."), Canada, United Kingdom (“U.K.”), Australia and the Philippines. Women
comprised 55% of our global workforce, 50% of our country-president roles, 32% of our global senior management team and 53% of
our people management roles. With respect to our employees in the U.S., the percentage of our employees that identified as Black,
Hispanic/Latino and Asian were 16%, 10% and 4% respectively.
3
Employee Hiring and Retention Practices
Diversity and inclusion are core to our values and instrumental in delivering stronger business growth. We are committed to
recruiting the most qualified people for the job regardless of gender, ethnicity or other protected traits and to comply fully with all
domestic, foreign and local laws relating to discrimination in the workplace. Additionally, we believe in providing opportunities for
career progression for our people and as such, we have set a goal of filling 70% of open positions with internal talent. We are
committed to improving the diversity of our workforce. We launched our Office of Inclusion & Diversity in early 2020 and
subsequently formed a global diversity council to work with our executive and country leadership teams to enhance our inclusion and
diversity policies and practices.
Diversity, Equity, and Inclusion
Our Diversity, Equity, and Inclusion (DEI) philosophy fosters a safe and inclusive environment where we hear and respect our
employees’ unique perspectives and experiences. Our Office of Inclusion & Diversity continued its focus on three strategic pillars:
Consciousness, Capabilities and Culture. Our journey in 2021 consisted of launching programs and initiatives centered around our
strategic pillars aimed at fueling our employees, clients and communities with purpose, passion and opportunities for inclusion and
equity.
In 2021, one of our goals was to measure ourselves against certain baselines of diversity and inclusion. To measure our workforce
representation, we designed a Diversity Dashboard to glean insights from data on gender representation globally and race
representation in the U.S. In the U.S., our representation of Black and African American employees (16%) is higher compared to the
United States Bureau of Labor statistics (12%). Additionally, we have long recognized the value of maintaining an inclusive board of
directors and management team. Currently, we have over 50% representation of women and minorities on our ten-member board and
proudly join other leading companies who have taken the important step of including at least three female directors. In May 2021, we
also announced the appointment of Michelle Jarrard, a Board member, as the first female, non-executive chair of our Board of
Directors. To measure inclusion, we introduced four new items in our 2021 Employee Pulse Survey administered to all Crawford
employees globally. The survey items revealed the state of current employee sentiment around DEI. In the survey, 85% of the
respondents indicated that they do not experience bias due to their personal identity. The 85% favorable response rate to this question
is 11% higher than the Financial Services Insurance Norm which we use to benchmark all pulse survey data. Additionally, 83%
endorsed senior leadership’s support of DEI initiatives. As a baseline and first-time survey response on these survey items, these
numbers reflect that our culture and people programs in place are creating an inclusive workplace although, as with any organization,
there is room for improvement.
To ensure that our leaders model fairness and inclusivity in their behaviors, Unconscious Bias training was completed by the CEO
and the executive team members and mandated for all 1,340 managers globally as well as the individual contributors in the U.S. We
also introduced Allyship training where employees investigated concepts of power, privilege, and personal access to opportunity.
We are proud of having a diverse workforce and remain committed to improving the percentage of women and minorities across
our operations.
Employee Wellness
At Crawford, we believe our ability to deliver on our purpose of Restoring and Enhancing Lives, Businesses and Communities is
directly linked to the well-being of our workforce. As such, we provide a variety of comprehensive benefit programs that are designed
to support the physical, mental and financial well-being of our people. Examples of such programs include: formal wellness programs
with fitness challenges and incentives for prioritizing physical exercise and accessing preventive care services; company-paid flu
shots; employee assistance programs; group healthcare and telemedicine programs; discounts for gym memberships; company-
sponsored retirement savings plans; financial education webinars; tuition assistance and college scholarships for children of
employees; and programs that support work-life balance such as remote work arrangements, flex-time, paid-time off, and parental
leave.
4
The global COVID-19 pandemic continues to provide opportunities for us to demonstrate our commitment to the health and
safety of our workforce. As an example, in 2021 we contracted with Headspace to provide all global employees with access to the
Headspace App (at no cost to employees) as a way to encourage our people to focus on self-care and build resilience through
mindfulness, regular exercise and good sleep habits. Our global incident response team continuously monitors internal COVID cases
and exposures, local COVID case counts, hospital admission and mortality rates to aid our operational decision making, which is
focused on customers while keeping the health & safety of our people as our top priority. 80% of our non-essential workforce
continues to work-from-home. The Company procures personal protective equipment ("PPE") for those roles deemed as “essential
workers” and adjusts safety protocols for field employees as needed to protect themselves, our clients and the communities where we
perform work and we regularly deliver health and safety updates to our global workforce. Additionally, we provided vaccination
education materials to employees and encourage employees to get vaccinations to help them protect themselves, their family members
and our communities. Our sick leave policies ensure employees who became ill, self-isolated or need to quarantine continue to receive
pay. We modified paid-leave policies to allow employees to take time off to receive a COVID vaccination or booster and recover from
any side effects. We continue to actively monitor the pandemic and remain committed to providing a positive, purposeful working
experience for our employees that is reflective of our purpose and values.
Employee Engagement
As the COVID-19 pandemic entered its second year, employee engagement became an essential people strategy to combat
workforce exhaustion and exodus. Over the past year, employees have faced a powerful storm in the form of a global pandemic.
Throughout all of this, employee engagement and wellbeing continued to be a top priority for us. We increased employee
communication at all levels and across all geographies, the benefits of which were reflected in favorable overall results in the 2021
Employee Pulse survey.
The survey had an 82% response rate (7,104 employees) clearly demonstrating our employees’ desire to voice their views. We
introduced new questions on three vitally important areas – inclusion and diversity, growth mindset and empowerment. These three
cultural enablers are critical to our collective success, and employee sentiment allowed us to understand the current state and define
future goals for augmenting the overall employment experience. The survey showed that 93% of respondents trust Crawford’s
leadership to respond effectively to the COVID crisis; 86% respondents believe that their managers are invested in their well-being
and 86% have the tools/resources to productively work from home.
Employee Development
Training is not only a core value today but also a key component of Crawford's heritage. Employee development continues to be
of strategic importance in 2021. We required our adjusters and other employees to build capabilities for strengthening their core skills,
navigating disruptions and re-inventing themselves. Throughout 2021, we provided classes for our adjusters and other employees to
develop and enrich their professional skills and obtain certifications. For example, we conducted four Residential Property Loss
Adjusting classes and two Commercial Property Loss Adjusting classes for our adjusters. Through these classes, adjusters were not
only exposed to the technical aspect of claims handling but also trained on critical success behaviors such as empathy and compassion
– attributes we consider crucial for becoming a world-class claims professional. Our adjusters in the U.S. completed eighty-four
Property Technical Certification programs and thirty-six professional designations such as Associate in Claims (AIC), Associate in
Risk Management (ARM) and Chartered Property Casualty Underwriter (CPCU) offered by The Institutes. Additionally, we made
significant investment in training adjusters in our Crawford Networks unit and held sixty-two classes and trained 1,634 adjusters.
In May 2021, we rolled out a 12-month learning journey called Manager Acceleration Program (MAP) for Crawford’s 1,340
(approximate) managers globally to enhance their management capability. MAP consists of a high-impact, comprehensive curriculum
designed to help managers reach their full leadership potential and master skills for motivating, empowering, and successfully
managing teams. In this learning journey, managers experience a blend of courses through online, self-paced and virtual instructor-led
delivery formats. The content is both behavior and skill based and leverages premier educational providers such as LinkedIn Learning
and Franklin Covey.
In a world where virtual training has become an easily accessible, flexible, and safe option for learners, our proprietary learning
platform, KMC OnDemand (KMC) became an important source of on-line training for technical and professional development
courses. In 2021, our learners spent approximately 33,600 hours on KMC with an average of 2,800 hours per month. We also trained
7,386 unique learners for an average of 4.55 hours per learner. The wide spectrum of KMC courses on loss adjusting, liability and
workers compensation are also offered to our clients and other adjusters in the industry. In 2021, we trained 794 client learners and
184 non-Crawford adjusters on KMC. Additionally, KMC contains a robust catalog of courses that are Continuing Education (CE)
accredited and in 2021 we processed 965 CE requests. LinkedIn Learning became a popular learning platform for our employees to
develop their professional skills and in 2021 our employees world-wide completed 10,000 (approximate) courses.
5
Crawford embraces diversity, inclusion, and personal growth with initiatives such as Women Lead, a leadership exploration, and
nine-month development program designed to support our female team members in their career goals through high-impact e-learning
and networking opportunities. This program is in its sixth year and nearly 100 female employees participated in 2021. Crawford
monitors participants’ satisfaction at the end of each instructor-led course and 90% received satisfactory feedback at the most recent
courses.
AVAILABLE INFORMATION
The Company is required to file annual, quarterly and current reports, proxy statements and other information with the Securities
and Exchange Commission ("SEC").
The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments
to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 are available free of charge on our
website, www.crawco.com through the "SEC/Edgar Filings" link located under the "Investors" tab, as soon as reasonably practicable
after these reports are electronically filed or furnished to the SEC. The information contained on, or hyperlinked from, our website is
not a part of, nor is it incorporated by reference into, this Annual Report on Form 10-K. In addition, the SEC maintains an Internet site
that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at
http://www.sec.gov. Copies of the Company's Annual Report will also be made available, free of charge, upon written request to
Corporate Secretary, Legal Department, Crawford & Company, 5335 Triangle Parkway, Peachtree Corners, Georgia, 30092.
ITEM 1A.
RISK FACTORS
You should carefully consider the risks described below, together with the other information contained or incorporated by
reference in this Annual Report on Form 10-K and in our other filings with the SEC from time to time when evaluating our business
and prospects. Any of the events discussed in the risk factors below may occur, and our business, results of operations or financial
condition could be materially adversely affected. Additional risks and uncertainties not presently known to us, or that we currently
deem immaterial, may also materially adversely affect our financial condition or results of operations.
MARKET CONDITIONS
We depend on claim volumes for a significant portion of our revenues. Claim volumes are not subject to accurate forecasting,
and a decline in claim volumes may materially adversely affect our financial condition and results of operations.
Because we depend on claim volume for revenue streams, a reduction in claim referrals for any reason may materially adversely
impact our results of operations and financial condition. We are unable to predict claim volumes for several reasons, including the
following:
•
changes in the degree to which property and casualty insurance carriers or self-insured entities outsource, or intend to
outsource, their claims handling functions are generally not disclosed in advance;
• we cannot predict the length or timing of any insurance cycle;
•
•
changes in the overall employment levels and associated workplace injury rates could impact the number of total claims
and our claim volumes and are not subject to accurate forecasting;
the frequency and severity of weather-related, natural, and man-made disasters, which are a significant source of claims
for us, are also generally not subject to accurate forecasting;
potential consolidation of clients in the markets we operate could impact the volume of claims referred to us;
•
• major insurance carriers, underwriters, and brokers could elect to expand their activities as administrators and adjusters,
which would directly compete with our business; and
• we may not desire to or be able to renew existing major contracts with clients.
If our claim volume referrals decline for any of the foregoing, or any other reason, our revenues may decline, which could
materially adversely affect our financial condition and results of operations.
6
Our results of operations have been adversely affected and could in the future be materially adversely impacted by the COVID-
19 coronavirus pandemic.
The global spread of the COVID-19 coronavirus created significant volatility, uncertainty and economic disruption. The extent to
which the COVID-19 pandemic impacts our business, operations and financial results continues to depend on numerous evolving
factors that we may not be able to accurately predict, including:
•
•
•
•
•
•
•
•
•
•
the duration and scope of the pandemic;
governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;
the impact of the pandemic on economic activity and actions taken in response;
the effect on our clients and client demand for our services and solutions, both during and after the pandemic;
our ability to sell and provide our services and solutions, including as a result of travel restrictions and employees
working from home;
the ability of our clients to pay for our services and solutions;
the impact on our third party vendors;
any closures of our and our clients’ offices and facilities;
any restrictions on our ability to provide services at a claim site or the location of a claimant whether for purposes of
evaluating the claim, managing the repair or delivering services, and
how quickly and to what extent normal economic and operating conditions can resume.
The closure of offices or restrictions inhibiting our employees’ ability to travel or interact with claimants and access claim sites,
has disrupted, and could in the future disrupt our ability to provide our services and solutions and result in, among other things,
terminations of client contracts, delay in our ability to perform services, an altering of the mix of services requested by clients and
claimants, and other losses of revenue. Clients may also slow down decision making, delay planned work or seek to terminate existing
agreements. Any of these events could cause or contribute to the risks and uncertainties enumerated in this Annual Report and could
materially adversely affect our business, financial condition and results of operations.
In recent periods, we have derived a material amount of our revenues from a limited number of clients. If we are not able to
retain these clients or replace these revenues, our financial condition and results of operations could be materially adversely
affected.
From time to time, we derive a material portion of our revenues from a limited number of clients. No single customer accounts for
10% or more of our consolidated revenues for the years ended December 31, 2021, 2020, or 2019. However, for each of the years
ended December 31, 2021 and 2020, three customers in our Crawford Platform Solutions segment each represented in excess of 10%
of its revenue. For the year ended December 2019, our Crawford Platform Solutions segment derived in excess of 10% of its revenue
from one customer.
In the event we are not able to retain these significant relationships, or replace any lost revenues from such relationships, revenues
and operating earnings within this segment could be materially adversely affected.
7
TECHNOLOGY AND DATA SECURITY
We manage a large amount of highly sensitive and confidential consumer information including personally identifiable
information, protected health information and financial information. Unauthorized access to, alteration or disclosure of this
data, whether as a result of criminal conduct, advances in computer hacking or otherwise, could result in a material loss of
business, substantial legal liability or significant harm to our reputation.
We manage a large amount of highly sensitive and confidential consumer information including personally identifiable
information, protected health information and financial information. A security or privacy incident impacting data processed or stored
in our own facilities or data maintained, processed or stored by our service providers, including cloud service providers, could
compromise the confidentiality, integrity or availability of this information. Unauthorized access to or disclosure of sensitive and
confidential information stored by us or our service providers may occur through break-ins, breaches of a secure network by an
unauthorized party, systems and technology failures, failed internet processes, theft or misuse or other misconduct. It is also possible
that unauthorized access to or disclosure of such sensitive and confidential information may be obtained through accidental or
malicious failure to follow security policies or controls by us or our employees or our service providers. If there were an inadvertent
disclosure of confidential consumer information, or if a third party were to gain unauthorized access to the confidential information,
our operations could be disrupted, our reputation could be damaged and we could be subject to claims or other liabilities, regulatory
investigations, or fines. In addition, such perceived or actual unauthorized disclosure of the information we collect or breach of our
security could damage our reputation, result in the loss of customers and harm our business.
We are subject to increased frequency and complexity of cybersecurity attacks. Our failure to effectively identify such attacks
or quickly recover from such attacks could materially adversely affect our business, results of operations, and financial
condition.
Malicious technology-related events, such as cyberattacks, computer hacking, computer viruses, ransomware, worms and other
destructive or disruptive software and other attempts to gain access to confidential or personal data, denial of service attacks and other
malicious activities are becoming increasingly diverse and sophisticated and the incidence of these events is on the rise worldwide and
highlights the need for continual and effective cybersecurity awareness and education. Our business, which involves the collection,
use, transmission and other processing of data, may make us and our clients and business partners attractive targets of hackers, denial
of service attacks, malicious code, phishing attacks, ransomware attacks, and other threat actors, including malicious insiders (such as
employees and prior employees), which may result in security incidents, including the unauthorized access, misuse, loss, corruption,
inaccessibility, or destruction of this data (including personal, confidential and sensitive data), unavailability of services, or other
adverse events.
We have made investments in our information security policies, procedures and technical controls and routinely engage a third
party to assess the maturity of our information security program against the NIST Cybersecurity Framework. However, we may not be
able to prevent a cybersecurity breach due to the increasing sophistication and frequency of such attacks. All employees receive
security awareness training including communication of processes for reporting a potential security incident. We have a robust Cyber
Incident Response Plan in place which provides a documented framework for handling high severity security and privacy incidents
and facilitates coordination across multiple parts of the Company and with external expertise when necessary. Additionally, we have
existing procedures to determine the potential materiality of a cybersecurity incident. These procedures include reporting protocols to
and oversight from our Board of Directors. We also have disclosure controls and insider trading restrictions that would apply in the
event of a material cybersecurity incident, and we routinely perform simulations and drills at both a technical and management level.
Notwithstanding these measures, we cannot provide any assurance that we will always be able to prevent or mitigate a cybersecurity
attack. These types of cybersecurity attacks and incidents can give rise to a variety of losses and costs, including legal exposure and
regulatory fines, damages to reputation, and others.
8
Increasing regulatory focus on privacy issues and expanding laws could impact our business models and expose us to
increased liability.
U.S. privacy and data security laws apply to our various businesses. We also do business globally in countries that have stringent
data protection laws that may be inconsistent across jurisdictions and are subject to evolving and differing interpretations.
Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store,
share and transmit personal data. Globally, new and evolving laws, such as the General Data Protection Regulation (“GDPR”) in
Europe and the U.K., the California Consumer Privacy Act ("CCPA") in California, and industry self-regulatory codes have been
enacted and more are being considered that may affect our ability to respond to customer requests under the laws, and to implement
our business models effectively. These requirements, among others, may force us to bear the burden of more onerous obligations in
our contracts. Any perception of our practices, products or services as a violation of individual privacy rights may subject us to public
criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all
of which could disrupt our business and expose us to increased liability. Additionally, we collect, process and store information at the
direction of and on behalf of our customers and if our customers fail to comply with contractual obligations or applicable laws, it
could result in litigation or reputational harm to us.
Transferring personal information across international borders is becoming increasingly complex. The mechanisms that we and
many other companies rely upon for European data transfers are being updated following recent rulings by the Court of Justice for the
European Union ("CJEU"). We are closely monitoring developments related to requirements for transferring personal data outside the
European Union ("EU"), including those which may be impacted by Brexit. These requirements may result in an increase in the
obligations required to provide our services in the EU or in sanctions and fines for non-compliance. Several other countries, including
Brazil, China, Canada and Australia, have also established specific legal requirements for cross-border transfers of personal
information. These developments in Europe and elsewhere could harm our business, results of operations, and financial condition.
We may not be able to develop or acquire necessary IT resources to support and grow our business, and disruptive
technologies could impact the volume and pricing of our products. Our failure to address these risks could materially
adversely affect our business, results of operations, and financial condition.
We have made substantial investments in software and related technologies that are critical to the core operations of our business.
These IT resources will require future maintenance and enhancements, potentially at substantial costs. Additionally, these IT resources
may become obsolete in the future and require replacement, potentially at substantial costs. We may not be able to develop, acquire
replacement resources or identify new technology resources necessary to support and grow our business.
In addition, we could face changes in our markets due to disruptive technologies that could impact the volume and pricing of our
products, or introduce changes to the insurance claims management processes which could negatively impact our volume of case
referrals. Our failure to address these risks, or to do so in a timely manner or at a cost considered reasonable by us, could materially
adversely affect our business, results of operations, and financial condition.
If we do not protect our proprietary information and technology resources and prevent third parties from making
unauthorized use of our proprietary information, intellectual property, and technology, our financial results could be harmed.
We rely on a combination of trademark, trade name, copyright and trade secret laws to protect our proprietary information,
intellectual property, and technology. However, all of these measures afford only limited protection and may be challenged,
invalidated or circumvented by third parties. Third parties may copy aspects of our processes, products or materials, or otherwise
obtain and use our proprietary information without authorization. Unauthorized copying or use of our intellectual property or
proprietary information could materially adversely affect our financial condition and results of operations. Third parties may also
develop similar or superior technology independently, including by designing around any of our proprietary technology. Furthermore,
the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we
may be subject to unauthorized use of our intellectual property in those countries. Any legal action that we may bring to protect
intellectual property and proprietary information could be unsuccessful, expensive and may distract management from day-to-day
operations.
9
We currently operate on multiple proprietary and commercial software platforms to support our service offerings and internal
corporate systems. The failure or obsolescence of any of these platforms, if not remediated or replaced, could materially
adversely affect our business, results of operations, and financial condition.
We currently utilize multiple software platforms to support our service offerings. We believe certain of these software platforms
distinguish our service offerings from our competitors. The failure of one or more of our software platforms to function properly, or
the failure of these platforms to remain competitive, could materially adversely affect our business, results of operations, and financial
condition. In addition, the cost to replace such systems may not generate a commensurate benefit.
BUSINESS AND OPERATIONS
A significant portion of our operations are international. These international operations subject us to political, legal,
operational, exchange rate and other risks not generally present in U.S. operations, which could materially negatively affect
those operations or our business.
Our international operations subject us to political, legal, operational, financial, exchange rate and other risks that we do not face
in our domestic operations. Many of these operations are substantially smaller than our U.S. operations and as such are at risk of
generating operating losses due to lack of scale. We face, among other risks, the risk of discriminatory regulation; nationalization or
expropriation of assets; changes in both domestic and foreign laws regarding taxation, trade and investment abroad; pandemics such as
coronavirus; potential loss of proprietary information due to piracy, misappropriation or laws that may be less protective of our
intellectual property rights; or price controls and exchange controls or other restrictions that could prevent us from transferring funds
from these operations out of the countries in which they were earned or converting local currencies we hold into U.S. dollars or other
currencies.
For example, although we do not have direct exposure from the Russia/Ukraine conflict, we are aware of its potential negative
impact to adjacent economies which could lower claim activity across our network of offices in Europe and increase our exposure to
cyber attacks.
International operations also subject us to numerous additional laws and regulations that are in addition to, or may be different
from, those affecting U.S. businesses, such as those related to labor, employment, worker health and safety, antitrust and competition,
trade restriction, environmental protection, consumer protection, import/export and anti-corruption, including but not limited to the
Foreign Corrupt Practices Act ("FCPA"). Although we have put into place policies and procedures aimed at ensuring legal and
regulatory compliance, our employees, subcontractors, and agents could inadvertently or intentionally take actions that violate any of
these requirements. Violations of these regulations could impact our ability to conduct business, or subject us to criminal or civil
enforcement actions, any of which could have a material adverse effect on our business, financial condition or results of operations.
We currently, and from time to time in the future may, outsource a portion of our internal business functions to third-party
providers. Outsourcing these functions has significant risks, and our failure to manage these risks successfully could
materially adversely affect our business, results of operations, and financial condition.
We currently, and from time to time in the future may, outsource significant portions of our internal business functions to third-
party providers. Third-party providers may not comply on a timely basis with all of our requirements, or may not provide us with an
acceptable level of service. In addition, our reliance on third-party providers could have significant negative consequences, including
significant disruptions in our operations and significantly increased costs to undertake our operations, either of which could damage
our relationships with our customers. As a result of our outsourcing activities, it may also be more difficult for us to recruit and retain
qualified employees for our business needs at any time. Our failure to successfully outsource any material portion of our business
functions could materially adversely affect our business, results of operations, and financial condition.
10
Natural or manmade disasters or other acts of violence may affect the markets in which we operate, our clients and our service
delivery.
Our business may be negatively affected by instability, disruption or destruction in the many geographic regions where we
operate. Natural or manmade disasters, including storm, flood, fire, earthquake, pandemics and other regional or global health crises,
as well as war, terrorism, riot, civil insurrection or social unrest, may cause damage to our facilities or disrupt our services. This
includes our shared services centers which exist in international geographies. Specifically, we continue to increase employees and
processes performed by our Global Business Service Center located in the Philippines. Our crisis management procedures, business
continuity plans and disaster recovery capabilities may not be effective at preventing or mitigating the effects of such disasters,
particularly in the case of a catastrophic event. These events may pose significant security risks to our employees, the facilities where
they work, our operations, electricity and other utilities, communications, travel and network services and the disruption of any or all
of them could materially adversely affect our financial results.
We are, and may become, party to lawsuits or other claims or investigations that could adversely impact our business.
In the normal course of the claims administration services business, we are from time to time named as a defendant in suits by
insureds or claimants contesting decisions by us or our clients with respect to the settlement of claims. Additionally, our clients have
in the past brought, and may, in the future bring, claims for indemnification on the basis of alleged actions on our part or on the part of
our agents or our employees in rendering services to clients. There can be no assurance that additional lawsuits will not be filed
against us. There also can be no assurance that any such lawsuits will not have a disruptive impact upon the operation of our business,
that the defense of the lawsuits will not consume the time and attention of our senior management and financial resources or that the
resolution of any such litigation will not have a material adverse effect on our business, financial condition and results of operations.
We are also subject to numerous federal, state, and foreign labor, employment, worker health and safety, antitrust and
competition, environmental and consumer protection, import/export, anti-corruption, and other laws. From time to time, we face
claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts with
such employees or former employees. Such claims, investigations, and any litigation involving the Company could divert
management's time and attention from business operations and could potentially result in substantial costs of defense, settlement or
other disposition, which could have a material adverse effect on our results of operations and financial condition.
The costs of compliance with sustainability or other environmental, social responsibility or governance laws, regulations, or
policies, including investor and client-driven policies and standards, could adversely affect our business.
As a non–manufacturing service business, we have to date been less impacted from laws and regulations related to sustainability
concerns or other environmental, social responsibility or governance laws, regulations, or policies. However, we could incur ESG-
related costs indirectly through our customers or shareholders. Increasingly our customers and shareholders expect that we meet
social responsibility, sustainability or other business policies or standards, which may be more restrictive than current laws and
regulations, before they commence, or continue, doing business with us. Our compliance with these policies and related requirements
could be costly, and our failure to comply could adversely affect our business relationships or reputation.
LIQUIDITY AND CAPITAL
Our U.S. qualified defined benefit pension plan (the "U.S. Qualified Plan") is underfunded. Future funding requirements,
including those imposed by any further regulatory changes, could restrict cash available for our operating, financing, and
investing requirements.
At the end of the most recent measurement periods for our U.S. Qualified Plan, the projected benefit obligation was underfunded
by $15.2 million. In recent years we have made voluntary contributions to this plan, but we do not expect to make any discretionary
contributions to the U.S. Qualified Plan in the next fiscal year. Volatility in the capital markets, mortality changes and future
legislation may have a negative impact on our pension plans, which may further increase the underfunded portion and our attendant
funding obligations. Any future contributions to our underfunded defined benefit pension plan could reduce our liquidity, restrict
available cash for our operating, financing, and investing needs and may materially adversely affect our financial condition and our
ability to deploy capital to other opportunities. Any decision to terminate the plan and settle the defined-benefit pension obligation
would result in a non-cash charge within the consolidated statements of operations related to unrecognized actuarial losses in
accumulated other comprehensive income, which totals $190.9 million as of December 31, 2021.
11
While we do not anticipate any contribution in 2022, we intend to comply with any future funding requirements through the use
of cash from operations. However, there can be no assurance that we will generate enough cash to do so. Our inability to fund these
obligations through cash from operations could require us to seek funding from other sources, including through additional borrowings
under our Credit Facility (defined below), if available, proceeds from debt or equity financings, or asset sales. There can be no
assurance that we would be able to obtain any such external funding in amounts, at times and on terms that we deem commercially
reasonable, in order for us to meet these obligations. Furthermore, any of the foregoing could materially increase our outstanding debt
or debt service requirements, or dilute the value of the holdings of our current shareholders, as the case may be. Our inability to
comply with any funding obligations in a timely manner could materially adversely affect our financial condition.
We have debt covenants in our credit facility that require us to maintain compliance with certain financial ratios and other
requirements. If we are not able to maintain compliance with these requirements, all of our outstanding debt could become
immediately due and payable.
We are party to a credit facility, effective as of November 5, 2021, with Bank of America, N.A., Wells Fargo Bank, N.A., Truist
Bank, and the other lenders a party thereto, (the "Credit Facility"). The Credit Facility consists of a $450 million revolving credit
facility, with a letter of credit subcommitment of $125 million. The available borrowing capacity under the Credit Facility totaled
$260.2 million on December 31, 2021. The Credit Facility contains various representations, warranties and covenants, including
covenants limiting liens, indebtedness, guarantees, mergers and consolidations, substantial asset sales, investments and loans, sale and
leasebacks, restrictions on dividends and distributions, and other fundamental changes in our business. Additionally, the Credit
Facility contains covenants requiring us to remain in compliance with a maximum leverage ratio and a minimum interest coverage
ratio.
If we do not maintain compliance with the covenant requirements, we may be in default under the Credit Facility. In such an
event, the lenders under the Credit Facility would generally have the right to declare all then-outstanding amounts thereunder
immediately due and payable. If we could not obtain a required waiver on satisfactory terms, we could be required to renegotiate the
terms of the Credit Facility or immediately repay this indebtedness. Any such renegotiation could result in less favorable terms,
including additional fees, higher interest rates and accelerated payments, and would necessitate significant time and attention of
management, which could divert their focus from business operations. Any required payment may necessitate the sale of assets or
other uses of resources that we do not believe would be in our best interests. While we do not presently expect to be in violation of any
of these requirements, no assurances can be given that we will be able to continue to comply with them in the future. Any failure to
continue to comply with such requirements could materially adversely affect our borrowing ability and access to liquidity, and thus
our overall financial condition, as well as our ability to operate our business. We do not believe there is significant risk to our debt
covenants when LIBOR is replaced with an alternative reference rate in the future. We have no current hedged transactions, and our
Credit Facility establishes a rate replacement mechanism when LIBOR is no longer quoted.
In recent periods we have incurred impairment charges that reduced the carrying value of our intangible assets and goodwill;
in the future we may be required to incur additional impairment charges on a portion of or all of the carrying value of our
intangible assets and goodwill, which may adversely affect our financial condition and results of operations.
Each year, and more frequently on an interim basis if appropriate, we are required by ASC Topic 350, "Intangibles--Goodwill and
Other," to assess the carrying value of our indefinite lived intangible assets and goodwill to determine whether the carrying value of
those assets is impaired. Such assessment and determination involves significant judgments to estimate the fair value of our reporting
units, including estimating future cash flows, near term and long term revenue growth, and determining appropriate discount rates,
among other assumptions. We intend to continue to monitor the performance of our reporting units and, should actual operating
earnings consistently fall below forecasted operating earnings, we will perform an interim goodwill impairment analysis. Any such
charges could materially adversely affect our financial results in the periods in which they are recorded.
Control by a principal shareholder could adversely affect the Company and our other shareholders.
As of December 31, 2021, Jesse C. Crawford, a member of our Board of Directors, and the father of Jesse C. Crawford, Jr., who
is also a member of the Board of Directors, beneficially owned approximately 62% of our outstanding voting Class B Common Stock.
As a result, he has the ability to control substantially all matters submitted to our shareholders for approval, including the election and
removal of directors. He also has the ability to control our management and affairs. As of December 31, 2021, Mr. Crawford also
beneficially owned approximately 35% of our outstanding non-voting Class A Common Stock. This concentration of ownership of our
stock may delay or prevent a change in control; impede a merger, consolidation, takeover, or other business combination involving us;
discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us; reduce the liquidity, and
thus the trading price, of our stock; or result in other actions that may be opposed by, or not be in the best interests of, the Company
and our other shareholders.
12
COMPETITION AND EMPLOYEES
We operate in highly competitive markets and face intense competition from both established entities and new entrants into
those markets. Potential consolidation in our industry can also create stronger competition. Our failure to compete effectively
may adversely affect us.
Our ability to retain clients and maintain and increase case referrals is also dependent in part on our ability to continue to provide
high-quality, competitively priced services and effective sales efforts.
The global claims management services market is highly competitive and comprised of a large number of companies that vary in
size and that offer a varied 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, among other
things, the insurance underwriting cycle, weather-related events, general economic activity, overall employment levels, and workplace
injury rates. We are also impacted by decisions insurance companies and self-insured entities make with respect to the level of claims
outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters.
We also face competition from potential new entrants into the global claims management services market, in addition to
traditional competitors. Potential consolidation in our industry can also create stronger competition. Our inability to react to such
competition could negatively impact our volume of case referrals and results of operations.
We may not be able to recruit, train, and retain qualified personnel, including retaining enough qualified and experienced on-
call claims adjusters, to respond to catastrophic events that may, singularly or in combination, significantly increase our
clients' needs for claims adjusters.
Our catastrophe-related work and revenues can fluctuate dramatically based on the frequency and severity of natural and man-
made disasters. When such events happen, our clients usually require a sudden and substantial increase in the need for catastrophic
claims services, which can strain our capacity. Our internal resources are sometimes not sufficient to meet these sudden and
substantial increases in demand. When these situations occur, we must retain outside adjusters (temporary employees and contractors)
to increase our capacity. There can be no assurance that we will be able to retain such outside adjusters with the requisite
qualifications, at the times needed or on terms that we believe are economically reasonable. Insurance companies and other loss
adjusting firms also aggressively compete for the same pool of outside adjusters, who often command high prices for their services at
such times of peak demand. Such competition could reduce availability, increase our costs and reduce our revenues. Our failure to
timely, efficiently, and competently provide these services to our clients could result in reduced revenues, loss of customer goodwill
and a negative impact on our results of operations.
We compete for nurses and other case management professionals in the healthcare industry, which may increase our labor
costs and reduce profitability.
Our Crawford TPA Solutions business competes with the general healthcare industry in recruiting qualified nurses, other case
management professionals and other talent. In some markets, the scarcity of nurses and other medical support personnel has become a
significant operating issue to healthcare providers. Such competition could reduce availability, increase our costs and reduce our
revenues. This shortage may require us to increase wages and benefits to recruit and retain qualified nurses and other healthcare
professionals. Our failure to recruit and retain qualified management, nurses, and other healthcare professionals, or to control labor
costs could result in reduced revenues, loss of customer goodwill and a material negative impact on our results of operations.
We face challenges caused by our aging workforce and we may not be able to recruit, train, and retain adequate replacements
for our qualified and skilled employees.
Many of the nurses and adjusters in our industry, including those that we employ directly, are approaching retirement age. As
these experienced employees retire, we may have difficulty recruiting new employees with comparable qualifications and experience,
and we may be unable to transfer our employees’ institutional knowledge successfully to new qualified employees. Any such failures
would be exacerbated at times of peak demand and could cause us to rely more heavily on outside nurses and adjusters. Our failure to
recruit and train new employees and to ensure they obtain the adequate qualifications and experience could result in reduced revenues,
loss of customer goodwill and a material negative impact on our results of operations.
13
We are subject to inflation risks which could increase our wages, benefits, and other costs which may result in decreased
profitability.
We are impacted by inflationary increases in wages, benefits and other costs. In all countries in which we operate, wage and
benefit inflation, whether driven by competition for talent, or ordinary course pay increases and other inflationary pressure, may
increase our cost of providing services and reduce our profitability. Furthermore, as a result of our global operations, wage increases
in emerging markets may increase at a faster rate than wages in the U.S. and other developed markets, which increases our exposure to
inflation risks. If we are not able to pass increased wage and other costs resulting from inflation onto our clients or charge premium
prices when justified by market demand, our profitability may decline.
The risks described above are not the only ones we face, but are the ones currently deemed the most material by us based on
available information. New risks may emerge from time to time, and it is not possible for management to predict all such risks, nor
can we assess the impact of known risks on our 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.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
As of December 31, 2021, the Company owned an office in Kitchener, Ontario. Subsequent to December 31, 2021 this property
was sold. As of December 31, 2021, the Company leased approximately 230 other office locations under various leases with varying
terms. For additional information on the Company's significant operating leases and subleases, see Note 6 "Lease Commitments" of
our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Other office locations
are occupied under various short-term rental arrangements. The Company generally believes that its office locations are sufficient for
its operations and that, if it were necessary to obtain different or additional office locations, such locations would be available at times,
and on commercially reasonable terms, as would be necessary for the conduct of its business. No assurances can be given, however,
that the Company would be able to obtain such office locations as and when needed, or on terms it considered to be reasonable, if at
all.
ITEM 3.
LEGAL PROCEEDINGS
In the normal course of the claims administration services business, the Company is from time to time named as a defendant in
suits by insureds or claimants contesting decisions by the Company or its clients with respect to the settlement of claims. Additionally,
clients of the Company have, in the past, brought and may, in the future, bring claims for indemnification on the basis of alleged
actions on the part of 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 responsible for the deductibles and self-insured
retentions under its various insurance coverages. In the opinion of the Company, adequate provisions have been provided for such
known risks. No assurances can be provided, however, that the result of any such action, claim or proceeding, now known or
occurring in the future, will not result in a material adverse effect on our business, financial condition or results of operations.
The Company is also subject to numerous federal, state, and foreign labor, employment, worker health and safety, antitrust and
competition, environmental and consumer protection, import/export, anti-corruption, and other laws. From time to time the Company
faces claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts
with such employees or former employees.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
14
PART II
ITEM 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
Shares of the Company's two classes of common stock are traded on the NYSE under the symbols CRD-A and CRD-B,
respectively. The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's
ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock, subject to
certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the
same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the
holders of 75% of the Class A Common Stock, voting as a class.
The number of record holders of each class of the Company's common stock as of December 31, 2021 was as follows: CRD-A —
3,038 and CRD-B — 360.
Effective May 9, 2019, the Company's Board of Directors authorized the repurchase of up to 2,000,000 shares of CRD-A or
CRD-B (or a combination of the two) through December 31, 2020 (the “2019 Repurchase Authorization”). On December 10, 2020,
the Company's Board of Directors extended the termination date of the 2019 Repurchase Authorization to December 31, 2021. At
December 31, 2021, the Company had no remaining authorization to repurchase any shares under the 2019 Repurchase Authorization.
Effective November 4, 2021, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of CRD-A or
CRD-B (or a combination of the two) through December 31, 2023 (the “2021 Repurchase Authorization”). At December 31, 2021, the
Company had remaining authorization to repurchase 413,317 shares under the 2021 Repurchase Authorization.
15
The following graph and table show the value as of December 31, 2021 of a $100 investment in the Company's Class A and Class
B common stock as of December 31, 2016 as compared to a similar investment in each of (i) the S&P 500 Index, and (ii) the S&P 500
Property-Casualty Insurance Index, in each case on a total return basis assuming the reinvestment of all dividends. We caution you not
to draw any conclusions from the data in this performance graph, as past results do not necessarily indicate future performance.
TOTAL RETURN TO SHAREHOLDERS
(Includes reinvestment of dividends)
Company / Index
Crawford & Company (Class A)
Crawford & Company (Class B)
S&P 500 Index
S&P Property-Casualty Insurance Index
Base
Period
2016
100.00
100.00
100.00
100.00
2017
92.92
78.17
119.42
113.82
INDEXED RETURNS
YEARS ENDED DECEMBER 31,
2020
2018
100.54
74.81
111.97
98.83
2019
133.27
86.14
144.31
124.83
88.08
62.56
167.77
121.00
2021
91.60
66.81
212.89
155.86
The foregoing graph and table are not, and shall not be deemed to be, filed as part of the Company's Annual Report on Form 10-
K. Such graph and table do not constitute soliciting material and should not be deemed filed or incorporated by reference into any
filing of the Company under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent specifically
incorporated by reference therein by the Company.
ITEM 6.
[RESERVED]
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended
to help the reader understand Crawford & Company, our operations, and our business environment. This MD&A is provided as a
supplement to — and should be read in conjunction with — our audited consolidated financial statements and the accompanying notes
thereto contained in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. As described in
Note 1, "Significant Accounting and Reporting Policies," of those accompanying audited consolidated financial statements, financial
results from our operations outside of the U.S., Canada, the Caribbean, and certain subsidiaries in the Philippines, are reported and
consolidated on a two-month delayed basis in accordance with the provisions of ASC 810, "Consolidation," in order to provide
sufficient time for accumulation of their results. Accordingly, the Company's December 31, 2021, 2020, and 2019 consolidated
financial statements include the financial position of such operations as of October 31, 2021 and 2020, respectively, and the results of
their operations and cash flows for the fiscal periods ended October 31, 2021, 2020 and 2019, respectively.
16
Business Overview
Based in Atlanta, Georgia, Crawford & Company (www.crawco.com) is the world's largest publicly listed independent provider
of claims management and outsourcing solutions to carriers, brokers and corporations with an expansive global network serving
clients in more than 70 countries. Shares of the Company's two classes of common stock are traded on the NYSE under the symbols
CRD-A and CRD-B, respectively. The Company's two classes of stock are substantially identical, except with respect to voting rights
and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B
Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common
Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is
approved by the holders of 75% of the Class A Common Stock, voting as a class.
As of January 1, 2021, the Company realigned its operating segment manager responsibilities and reorganized its global service
line structure to consist of Crawford Loss Adjusting, Crawford TPA Solutions, and Crawford Platform Solutions. The Company's
revised reportable segments are comprised of the following:
•
•
•
Crawford Loss Adjusting, which services the global property and casualty market. This is comprised of the previously
reported Crawford Claims Solutions segment, excluding both Networks (as defined below) and Crawford Legal Services,
and including the Global Technical Services service line previously reported within Crawford Specialty Solutions.
Crawford TPA Solutions, which provides third party administration for workers' compensation, auto and liability,
disability absence management, medical management, and accident and health to corporations, brokers and insurers
worldwide. This is comprised of the previously reported Crawford TPA Solutions segment and the Crawford Legal
Services service line previously reported within the Crawford Claims Solutions segment.
Crawford Platform Solutions, which consists of the Contractor Connection and Networks service lines and serves the
global property and casualty insurance company markets. This is comprised of the previously reported Contractor
Connection service line within Crawford Platform Solutions and the Networks service line, which includes Catastrophe
operations, WeGoLook, Praxis Consulting, and certain international network businesses previously reported within the
Crawford Claims Solutions segment.
As discussed in more detail in subsequent sections of this MD&A, we have three reportable segments: Crawford Loss Adjusting,
Crawford TPA Solutions, and Crawford Platform Solutions. Our three reportable segments represent components of the Company for
which separate financial information is available, and which is evaluated regularly by our chief operating decision maker ("CODM")
in deciding how to allocate resources and in assessing operating performance. Crawford Loss Adjusting serves the global property and
casualty insurance company markets. Crawford TPA Solutions serves the global casualty, disability and self-insurance marketplace
worldwide. Crawford Platform Solutions serves the global property and casualty insurance company markets.
Insurance companies rely on us for certain services such as field investigation and the evaluation of property and casualty
insurance claims. Self-insured entities typically rely on us for a broader range of services. In addition to field investigation and claims
evaluation, we may also provide initial loss reporting services for their claimants, loss mitigation services such as medical bill review,
medical case management and vocational rehabilitation, risk management information services, and loss fund administration to pay
their claims. Our Contractor Connection service line in our Crawford Platform Solutions segment provides a managed contractor
network to insurance carriers and consumer markets.
The global claims management services market is highly competitive and comprised of a large number of companies that vary in
size and that offer a varied 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, among other
things, the insurance underwriting cycle, weather-related events, general economic activity, overall employment levels and workplace
injury rates. Demand is also impacted by decisions insurance companies and self-insured entities make with respect to the level of
claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. In addition,
our ability to retain clients and maintain or increase case referrals is also dependent in part on our ability to continue to provide high-
quality, competitively priced services and effective sales efforts.
We typically earn our revenues on an individual fee-per-claim basis for claims management services we provide to insurance
companies and self-insured entities. Accordingly, the volume of claim referrals to us is a key driver of our revenues. Generally, fees
are earned over time on cases as services are provided, which generally occurs in the period the case is assigned to us, although
sometimes a portion or substantially all of the revenues generated by a specific case assignment will be earned in subsequent periods.
We cannot predict the future trend of case volumes for a number of reasons, including the frequency and severity of weather-related
cases and the occurrence of natural and man-made disasters, which are a significant source of cases for us and are not subject to
accurate forecasting.
17
Executive Summary
Results of Operations
Consolidated revenues before reimbursements were $1.102 billion in 2021, an increase of 12.2% compared with $982.5 million in
2020. Net income attributable to Crawford & Company was $30.7 million in 2021, compared with $28.3 million in 2020.
Consolidated revenues before reimbursements increased $119.5 million, or 12.2%, in 2021 due to an increase in Hurricane Ida
activity in the U.S. in our Crawford Loss Adjusting and Crawford Platform Solutions segments, an increase in new client growth in
our Crawford Platform Solutions segment, and an increase in our Crawford TPA Solutions segment. Changes in foreign exchange
rates increased our consolidated revenues before reimbursements by $29.9 million, or 3.1%, for 2021 as compared with the prior year.
Excluding the change in foreign exchange rates, consolidated revenues before reimbursements increased $89.6 million, or 9.1%
compared with 2020.
(in thousands, except percentages)
Revenues:
Crawford Loss Adjusting
Crawford TPA Solutions
Crawford Platform Solutions
Total revenues before reimbursements
Reimbursements
Total Revenues
Year Ended
December 31,
2021
December 31,
2020
% Change
Year Ended
Based on exchange rates for
year ended
December 31, 2020
December 31,
2021
% Change
$
$
475,587 $
397,964
228,481
1,102,032
37,199
1,139,231 $
438,492
371,391
172,609
982,492
33,703
1,016,195
8.5% $
7.2%
32.4%
12.2%
10.4%
12.1% $
454,461
391,129
226,550
1,072,140
35,858
1,107,998
3.6%
5.3%
31.3%
9.1%
6.4%
9.0%
Revenues from the Crawford Loss Adjusting segment increased in 2021 due to an increase in weather-related cases resulting from
Hurricane Ida in the U.S. Revenues from the Crawford TPA Solutions segment increased for the year due to growth in the U.S. and
revenues from recent acquisitions, partially offset by continued weakness as a result of the economic impact of COVID-19 in Canada
and Europe. Revenues from the Crawford Platform Solutions segment increased primarily due to an increase in Hurricane Ida related
cases in the U.S. and new client growth. There was a net $24.1 million positive increase in total company revenues in 2021 as a result
of acquisitions and dispositions in 2020 and 2021. See Note 3, “Business Acquisitions and Dispositions” of our accompanying
consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion about this activity.
We have experienced continued recovery from the negative economic impact of COVID-19 in 2021, particularly in the U.S.,
compared to the significant reductions experienced in the prior year, where revenues were down in the range of $45.0 to $55.0 million
as a result of the economic impacts of COVID-19. Due to ongoing negative impacts in multiple regions, it is uncertain whether such
recovery can be sustained and continue. The economic impact from COVID-19 could have a material impact on our results of
operations, financial condition, and cash flows in one or more future periods. In addition, it is possible that changes in economic
conditions and steps taken by international, federal, state and/or local governments in response to COVID-19 could have negative
impacts, including labor shortages which could increase compensation costs and other expenses, unless mitigated by government
assistance programs to corporations.
Overall, there was an increase in cases received of 5.8% in 2021 compared with 2020, primarily due to the increase in Hurricane
Ida activity in the U.S. As a result of the impact from the COVID-19 pandemic, cases received in future periods could be materially
negatively impacted, unless offset by the impact of cases received from new clients or weather-related activity.
Cases received are presented below by segment:
Year Ended December 31,
Crawford Loss Adjusting
Crawford TPA Solutions
Crawford Platform Solutions
Total Crawford Cases Received
2021
2020
Variance
361,528
762,837
528,685
1,653,050
337,981
779,123
444,651
1,561,755
7.0%
(2.1)%
18.9%
5.8%
18
Segment operating earnings (a measure of segment operating performance used by our management that is defined and discussed
in more detail below) increased in our Crawford Platform Solutions operating segment, partially offset by decreases in our Crawford
Loss Adjusting and Crawford TPA Solutions operating segments.
Although operating earnings is the primary financial performance measure used by our senior management and CODM to
evaluate the financial performance of our operating segments and make resource allocation and certain compensation decisions, we
believe that a non-GAAP discussion and analysis of segment gross profit is also helpful in understanding the results of our segment
operations excluding indirect centralized administrative support costs. Our discussion and analysis of segment gross profit includes the
revenues and direct expenses of each segment.
In the Crawford Loss Adjusting segment, operating earnings decreased from $41.1 million, or 9.4% of revenues before
reimbursements in 2020, to $23.0 million, or 4.8% of revenues before reimbursements in 2021, primarily due to losses in certain
international operations and an increase in compensation expense. There was a $1.7 million expense benefit in 2021 as a result of the
Canada Emergency Wage Subsidy ("CEWS") and a benefit of $5.2 million in 2020. Excluding indirect support costs, gross profit
decreased from $118.9 million, or 27.1% of revenues before reimbursements in 2020, to $106.7 million, or 22.4% of revenues before
reimbursements in 2021.
In the Crawford TPA Solutions segment, operating earnings decreased from $20.5 million, or 5.5% of revenues before
reimbursements in 2020, to $17.6 million, or 4.4% of revenues before reimbursements in 2021, primarily due to the continued impact
of COVID-19 in Canada and Europe. There was a $0.7 million expense benefit in 2021 as a result of the CEWS and a benefit of $1.6
million in 2020. Excluding indirect support costs, gross profit decreased from $76.7 million, or 20.6% of revenues before
reimbursements in 2020, to $75.9 million, or 19.1% of revenues before reimbursements in 2021.
In the Crawford Platform Solutions segment, operating earnings increased from $27.7 million, or 16.0% of revenues before
reimbursements in 2020, to $36.3 million, or 15.9% of revenues before reimbursements in 2021, primarily due to the increase in
revenues. Excluding indirect support costs, gross profit increased from $43.6 million, or 25.3% of revenues before reimbursements in
2020, to $57.5 million, or 25.1% of revenues before reimbursements in 2021.
Cost of services provided, before reimbursements, increased $106.6 million, or 15.2% for 2021 compared with 2020. This
increase was primarily due to an increase in compensation expense, including incentive compensation and other costs in each of our
operating segments resulting from the higher revenues, the change in foreign exchange rates, and the impact of recent acquisitions.
Selling, general, and administrative ("SG&A") expenses increased $25.9 million, or 11.8%, in 2021, as compared with 2020. This
increase was due to an increase in compensation expense, including incentive compensation, an increase in centralized data processing
costs and professional fees, the change in foreign exchange rates, and the impact of recent acquisitions.
The Canadian government enacted the CEWS in 2020 to provide a wage subsidy to employers that suffered reductions in revenue
resulting from the COVID-19 pandemic. We met the eligibility criteria to receive the wage subsidy in 2020 and 2021, We received a
benefit totaling $5.9 million in 2021 and $13.8 million in 2020, due to the negative economic impact of COVID-19 in that country.
This subsidy is recorded as a credit within Direct Compensation, Fringe Benefits and Non-Employee Labor and is included in "Costs
of services provided, before reimbursements” or “Selling, general, and administrative expenses” on the Company's unaudited
Condensed Consolidated Statements of Operations, depending on classification of the employees. We do not expect any benefit from
this subsidy in future periods.
On October 4, 2021, we acquired BosBoon Expertise Group B.V. ("BosBoon"), a Netherlands-based specialist loss adjusting
company. The acquisition supports our strategic aim of strengthening our expertise in all key territories in which we operate. BosBoon
offers a specialist range of loss adjusting services which will be added to the existing Crawford Global Technical Services proposition
in the Netherlands. The purchase price includes an initial cash consideration of $2.1 million, before working capital adjustment, and a
maximum $1.9 million payable over the next two years based on achieving certain financial and nonfinancial goals, as defined in the
purchase agreement.
On October 1, 2021, we acquired 100% of Praxis Consulting, Inc. ("Praxis"), an established subrogation claims service provider
in the U.S. This acquisition allows us to expand our footprint in the U.S. subrogation claims market. The purchase price includes an
initial cash consideration of $21.5 million, working capital adjustment payable of $0.7 million, a deferred payment of $20.0 million in
February 2022, and a maximum $10.0 million payable over the next two years based on achieving certain revenue performance goals,
as defined in the purchase agreement.
19
On August 23, 2021, we acquired 100% of edjuster Inc. in Canada and its U.S. subsidiary (collectively "edjuster"). Edjuster is a
technology-enabled, end-to-end contents services provider and platform. This acquisition will enable us to expand our capability in the
North American claims contents services market. The purchase price included an initial cash payment of $20.9 million, working
capital adjustment payable of $0.4 million, and an earn-out potential up to $13.3 million in cash based on the achievement of certain
EBITDA performance goals over two one-year periods, beginning January 2022.
On November 1, 2020, we acquired 100% of HBA Group in Australia. The HBA Group is a legal services provider that will
complement the Company’s Crawford TPA Solutions segment in Australia. The purchase price included an initial cash payment of
$4.0 million, net of working capital adjustment, and a maximum $3.2 million payable in cash over the next four years based on
achieving certain revenue and EBITDA performance goals as set forth in the purchase agreement. The financial results of certain of
the Company’s international subsidiaries, including HBA Group, are included in the Company’s consolidated financial statements on
a two-month delayed basis. Accordingly, the acquisition of HBA was reported as of January 1, 2021.
On October 1, 2020, we acquired most of the remaining 85% equity interests in Crawford Carvallo and its subsidiaries. Crawford
Carvallo is a leading provider of loss adjusting, claims management solutions and legal services in Chile. The Company held a 15%
interest in Crawford Carvallo prior to this acquisition. The purchase price includes an initial cash payment of $11.6 million and a
maximum of $11.7 million payable over the next six years based on achieving certain EBITDA performance goals as set forth in the
purchase agreement.
These acquisitions were funded primarily through additional borrowings under the Company's credit facility. See Note 3,
“Business Acquisitions and Dispositions” of our accompanying consolidated financial statements included in Item 8 of this Annual
Report on Form 10-K for further discussion about these transactions.
During 2020, we recognized a pretax gain on disposal totaling $13.8 million related to the sale of the Lloyd Warwick
International (“LWI”) business in our Crawford Loss Adjusting segment, net of a loss on the disposal of Crawford Compliance. The
gain on disposal is presented in the Consolidated Statements of Operations as a separate item "Gain on disposition of businesses, net."
There was no gain on disposal in 2021 or 2019.
We recognized a pretax non-cash goodwill impairment in the 2020 first quarter totaling $17.7 million related to our former
Crawford Claims Solutions reporting unit. This expense was partially offset by a $1.8 million reduction in income tax expense and
$1.7 million credit in noncontrolling interest expense. In 2019, we recognized a non-cash goodwill impairment totaling $17.5 million,
also related to our former Crawford Claims Solutions segment. This charge was partially offset by a $2.2 million reduction in income
tax expense and $2.2 million credit in noncontrolling interest expense. There was no goodwill impairment in 2021.
We recognized pretax restructuring costs totaling $8.1 million in 2020, related primarily to severance and other termination costs
in an effort to consolidate and streamline various functions of our workforce. The restructuring and other costs are comprised of $9.4
million severance expense and related payroll taxes, $2.5 million in asset impairment and lease termination costs, partially offset by a
$1.1 million gain from fair value remeasurement of a cost method investment, $1.2 million in liquidation dividends from a cost
method investment, and a $1.4 million gain from sale of IP addresses. This pretax expense is presented in the Consolidated Statements
of Operations as a separate charge "Restructuring and Other Costs, Net." See Note 16, “Restructuring and Other Costs, Net” of our
accompanying consolidated financial statements for further discussion about these transactions. There were no restructuring costs in
2019 or 2021.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
The Company took advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits, which deferred the
payment of 2020 payroll tax withholdings in the U.S., totaling $13.0 million, to be paid in equal installments at the end of 2021 and
2022. As of December 31, 2021, we have made the first installment of $6.5 million.
In 2019 we recognized $12.6 million for an arbitration settlement related to additional payments awarded to former executives of
our former Garden City Group related to their departure in 2015. There are no other potential claimants related to this matter. This
pretax expense is presented in the Consolidated Statements of Operations as a separate charge "Arbitration and claim settlements."
Segment Operating Earnings
We believe that a discussion and analysis of the segment operating earnings of our three operating segments is helpful in
understanding the results of our operations. Operating earnings is our segment measure of profitability presented in conformity with
the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 280 "Segment Reporting."
Operating earnings is the primary financial performance measure used by our senior management and CODM to evaluate the financial
performance of our operating segments and make resource allocation and certain compensation decisions.
20
We believe operating earnings is a measure that is useful to others in that it allows them to evaluate segment operating
performance using the same criteria used by our senior management and CODM. Segment operating earnings represent segment
earnings, including the direct and indirect costs of certain administrative functions required to operate our business, but excludes
unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-
relationship intangible assets, goodwill impairment, restructuring and other costs, gain on disposition of businesses, arbitration and
claim settlements, income taxes, and net income or loss attributable to noncontrolling interests and redeemable noncontrolling
interests.
Administrative functions such as finance, human resources, information technology, quality and compliance, exist in both a
centralized shared-service arrangement and within certain operations. Each of these functions are managed by centralized management
and we allocate the costs of those services to the segments as indirect costs based on usage.
In addition, we believe that a non-GAAP discussion and analysis of segment gross profit is helpful in understanding the results of
our segment operations, excluding indirect centralized administrative support costs. Our discussion and analysis of segment gross
profit includes the revenues and direct expenses of each segment. Segment gross profit is defined as revenues, less direct costs, which
exclude indirect centralized administrative support costs allocated to the business.
Income taxes, net corporate interest expense, stock option expense, and amortization of customer-relationship intangible assets
are recurring components of our net income, but they are not considered part of our segment operating earnings because they are
managed on a corporate-wide basis. Income taxes are calculated for the Company on a consolidated basis based on statutory rates in
effect in the various jurisdictions in which we provide services, and vary significantly by jurisdiction. Net corporate interest expense
results from capital structure decisions made by senior management and the Board of Directors, affecting the Company as a whole.
Stock option expense represents the non-cash costs generally related to stock options and employee stock purchase plan expenses
which are not allocated to our operating segments. Amortization expense is a non-cash expense for finite-lived customer-relationship
and trade name intangible assets acquired in business combinations. None of these costs relate directly to the performance of our
services or operating activities and, therefore, are excluded from segment operating earnings in order to better assess the results of
each segment's operating activities on a consistent basis.
Unallocated corporate and shared costs and credits include expenses and credits related to our chief executive officer and Board
of Directors, certain provisions for bad debt allowances or subsequent recoveries such as those related to bankrupt clients, defined
benefit pension costs or credits for our frozen U.S. pension plan, certain unallocated professional fees, and certain self-insurance costs
and recoveries that are not allocated to our individual operating segments.
Restructuring and other costs, as well as gain on disposition of businesses, goodwill impairment, and arbitration and claim
settlements arise from time to time from events (such as internal restructurings, losses on subleases, establishment of new operations,
and asset impairments) that are not allocated to any particular segment since they historically have not regularly impacted our
performance and are not expected to impact our future performance on a regular basis.
Additional discussion and analysis of our income taxes, net corporate interest expense, stock option expense, amortization of
customer-relationship intangible assets, unallocated corporate and shared costs, goodwill impairment, restructuring and other costs,
gain on disposition of businesses, and arbitration and claim settlements follows the discussion and analysis of the results of operations
of our three operating segments.
Segment Revenues
In the normal course of business, our operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by
our clients. Under GAAP, these out-of-pocket expenses and associated reimbursements are required to be included when reporting
expenses and revenues, respectively, in our consolidated results of operations as the Company is considered the principal in these
transactions. In the discussion and analysis of results of operations which follows, we do not include a gross up of expenses and
revenues for these pass-through reimbursed expenses. The amounts of reimbursed expenses and related revenues offset each other in
our results of operations with no impact to our net income or operating earnings. A reconciliation of revenues before reimbursements
to consolidated revenues determined in accordance with GAAP is self-evident from the face of the accompanying statements of
operations. Unless noted in the following discussion and analysis, revenue amounts exclude reimbursements for out-of-pocket
expenses.
Our segment results are impacted by changes in foreign exchange rates. We believe that a non-GAAP discussion and analysis of
segment revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate, is
helpful in understanding the results of our segment operations.
21
Segment Expenses
Our discussion and analysis of segment operating expenses is comprised of two components: "Direct Compensation, Fringe
Benefits & Non-Employee Labor" and "Expenses Other Than Direct Compensation, Fringe Benefits & Non-Employee Labor."
"Direct Compensation, Fringe Benefits & Non-Employee Labor" includes direct compensation, payroll taxes, and benefits
provided to the employees of each segment, as well as payments to outsourced service providers that augment our staff in each
segment. As a service company, these costs represent our most significant and variable operating expenses.
Costs of administrative functions, including direct compensation, payroll taxes, and benefits, are managed centrally and
considered indirect costs. The allocated centralized indirect administrative support costs of our shared-services infrastructure are
allocated to each segment based on usage and reflected within "Expenses Other Than Direct Compensation, Fringe Benefits & Non-
Employee Labor" of each segment.
In addition to allocated corporate and shared costs, "Expenses Other Than Direct Compensation, Fringe Benefits & Non-
Employee Labor" includes travel and entertainment, office rent and occupancy costs, automobile expenses, office operating expenses,
data processing costs, cost of risk, professional fees, and amortization and depreciation expense other than amortization of customer-
relationship intangible assets.
Unless noted in the following discussion and analysis, revenue amounts exclude reimbursements for out-of-pocket expenses and
expense amounts exclude reimbursed out-of-pocket expenses.
22
Operating results for our segments reconciled to income before income taxes and net income attributable to shareholders of
Crawford & Company are as shown in the following table.
Year Ended December 31,
Revenues Before Reimbursements:
Crawford Loss Adjusting
Crawford TPA Solutions
Crawford Platform Solutions
Total, before reimbursements
Reimbursements
Total Revenues
Direct Compensation, Fringe Benefits & Non-Employee
Labor:
Crawford Loss Adjusting
% of related revenues before reimbursements
Crawford TPA Solutions
% of related revenues before reimbursements
Crawford Platform Solutions
% of related revenues before reimbursements
Total
% of Revenues before reimbursements
Expenses Other than Direct Compensation, Fringe Benefits &
Non-Employee Labor:
Crawford Loss Adjusting
% of related revenues before reimbursements
Crawford TPA Solutions
% of related revenues before reimbursements
Crawford Platform Solutions
% of related revenues before reimbursements
Total, before reimbursements
% of Revenues before reimbursements
Reimbursements
Total
% of Revenues
Segment Operating Earnings:
Crawford Loss Adjusting
% of related revenues before reimbursements
Crawford TPA Solutions
% of related revenues before reimbursements
Crawford Platform Solutions
% of related revenues before reimbursements
(Deduct) Add:
Unallocated corporate and shared costs and credits, net
Net corporate interest expense
Stock option expense
Amortization of customer-relationship intangible assets
Goodwill impairment
Restructuring and other costs, net
Arbitration and claim settlements
Gain on disposition of businesses, net
Income Before Income Taxes
Income taxes
Net Income
Net loss attributable to noncontrolling interests and
redeemable noncontrolling interests
Net Income Attributable to Shareholders of Crawford &
Company
nm = not meaningful
2021
2020
(In thousands, except percentages)
2019
$
475,587
397,964
228,481
1,102,032
37,199
$ 1,139,231
$
438,491
371,392
172,609
982,492
33,703
$ 1,016,195
$
457,484
397,626
150,692
1,005,802
41,825
$ 1,047,627
$
315,158
$
269,817
$
284,900
66.3%
256,845
64.5%
149,201
65.3%
61.5%
234,179
63.1%
108,707
63.0%
62.3%
246,886
62.1%
89,067
59.1%
$
721,204
$
612,703
$
620,853
65.4%
62.4%
61.7%
$
137,439
$
127,570
$
142,459
28.9%
123,552
31.0%
42,946
18.8%
$
303,937
$
$
$
$
27.6%
37,199
341,136
29.9%
22,990
4.8%
17,567
4.4%
36,334
15.9%
(14,386)
(6,559)
(1,053)
(11,029)
—
—
—
—
43,864
(13,316)
30,548
$
$
29.1%
116,706
31.5%
36,252
21.0%
280,528
28.6%
33,703
314,231
30.9%
41,104
9.4%
20,507
5.5%
27,650
16.0%
(17,431)
(7,923)
(1,122)
(11,653)
(17,674)
(8,133)
—
13,763
39,088
(12,013)
27,075
31.1%
122,234
30.8%
34,948
23.2%
299,641
29.8%
41,825
341,466
32.6%
30,125
6.6%
28,506
7.2%
26,677
17.7%
(7,699)
(10,774)
(1,885)
(11,277)
(17,484)
—
(12,552)
—
23,637
(14,111)
9,526
% Change from Prior Year
2021
2020
8.5%
7.2%
32.4%
12.2%
10.4%
12.1%
16.8%
9.7%
37.3%
17.7%
7.7%
5.9%
18.5%
(4.2)%
(6.6)%
14.5%
(2.3)%
(19.4)%
(3.0)%
(5.3)%
(5.1)%
22.1%
(1.3)%
(10.5)%
(4.5)%
3.7%
8.3%
(6.4)%
10.4%
(19.4)%
(44.1)%
36.4%
(14.3)%
(28.1)%
31.4%
3.6%
(17.5)%
(17.2)%
(6.1)%
(5.4)%
nm
nm
nm
nm
12.2%
10.8%
12.8%
126.4%
(26.5)%
(40.5)%
3.3%
1.1%
nm
nm
nm
65.4%
(14.9)%
184.2%
144
1,221
2,959
(88.2)%
(58.7)%
$
30,692
$
28,296
$
12,485
8.5%
126.6%
23
YEAR ENDED DECEMBER 31, 2021 COMPARED WITH YEAR ENDED DECEMBER 31, 2020
CRAWFORD LOSS ADJUSTING SEGMENT
Operating Earnings
Our Crawford Loss Adjusting segment reported operating earnings of $23.0 million, or 4.8% of revenues before reimbursements
in 2021, as compared with $41.1 million, or 9.4% of revenues before reimbursements in 2020. Operating earnings decreased from
2020 to 2021 primarily due to losses in certain international operations and an increase in compensation expense. Additionally, there
was a $1.7 million expense benefit in 2021 as a result of the Canada Emergency Wage Subsidy (“CEWS”), and a benefit of $5.2
million in 2020.
Excluding centralized indirect support costs, gross profit decreased from $118.9 million, or 27.1% of revenues before
reimbursements in 2020, to $106.7 million, or 22.4% of revenues before reimbursements in 2021. This decrease is primarily due to
losses in certain international operations and an increase in compensation expense.
Operating results for our Crawford Loss Adjusting segment, including gross profit, are as shown in the following table:
In thousands (except percentages)
Year Ended December 31,
Revenues
Direct expenses
Gross profit
Indirect expenses
Total Crawford Loss Adjusting Operating Earnings
Gross profit margin
Operating margin
Revenues before Reimbursements
Based on actual exchange rates
2020
$ 438,491
319,637
118,854
77,750
41,104
2021
$ 475,587
368,932
106,655
83,665
22,990
$
$
22.4%
4.8%
27.1%
9.4%
Variance
Based on exchange rates
for December 31, 2020
2021
Variance
8.5% $ 454,461
352,517
15.4%
101,944
(10.3)%
79,704
7.6%
(44.1)% $
22,240
(4.7)%
(4.6)%
22.4%
4.9%
3.6%
10.3%
(14.2)%
2.5%
(45.9)%
(4.7)%
(4.5)%
Crawford Loss Adjusting revenues are primarily derived from the global property and casualty insurance company markets in the
U.S., U.K., Canada, Australia, Europe and Rest of World. Crawford Loss Adjusting revenues before reimbursements by major region,
based on actual exchange rates and using a constant exchange rate were as follows:
In thousands (except percentages)
Year Ended December 31,
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Based on actual exchange rates
2020
2021
Variance
Based on exchange rates
for December 31, 2020
2021
Variance
$ 158,451 $ 128,342
105,446
55,552
69,407
48,732
31,012
102,326
54,675
72,751
52,488
34,896
23.5% $ 158,451
95,168
(3.0)%
51,164
(1.6)%
65,505
4.8%
49,711
7.7%
34,462
12.5%
23.5%
(9.7)%
(7.9)%
(5.6)%
2.0%
11.1%
Total Crawford Loss Adjusting Revenues before
Reimbursements
$ 475,587 $ 438,491
8.5% $ 454,461
3.6%
Revenues before reimbursements from our Crawford Loss Adjusting segment totaled $475.6 million in 2021 compared with
$438.5 million in 2020. This increase was primarily due to an increase in weather-related cases resulting from Hurricane Ida in the
U.S. and new client growth. Changes in foreign exchange rates resulted in an increase of our Crawford Loss Adjusting segment
revenues by approximately 4.9% or $21.1 million for 2021. Absent foreign exchange rate fluctuations, Crawford Loss Adjusting
segment revenues would have been $454.5 million for 2021. There was a $1.0 million increase, or 0.2%, in Crawford Loss Adjusting
revenues in 2021 as a result of acquisitions and dispositions. Revenues were positively impacted by an increase in unit volumes,
measured principally by cases received, which increased revenues 7.0% in 2021 compared with 2020. Changes in product mix and in
the rates charged for those services accounted for a 3.6% revenue decrease for 2021 compared with the 2020 period.
24
The increase in revenues in the U.S. was due to the increase in weather-related case activity in 2021 and new client growth. Based
on constant foreign exchange rates, there was a decrease in revenues in the U.K. in 2021 period, compared with 2020, primarily due to
the Lloyd Warwick International ("LWI") disposition in June 2020 and a change in the mix of services provided. There was a decrease
in revenues in Australia due to a decrease in weather-related cases in 2021. Revenues in Canada decreased in 2021 due to the
continued negative economic impact of COVID-19. There was an increase in revenues in Europe in the 2021 period due to a change in
the mix of services provided. There was an increase in revenues in Rest of World in the 2021 period, primarily due to the acquisition
in Chile in October 2020, partially offset by a decrease in Asia.
Reimbursed Expenses Included in Total Revenues
Reimbursements for out-of-pocket expenses incurred in our Crawford Loss Adjusting segment, which are included in total
Company revenues, were $23.1 million in 2021 compared with $24.9 million in 2020. The decrease in reimbursed expenses was due
to a decreased use of third parties in the 2021 period.
Case Volume Analysis
Crawford Loss Adjusting unit volumes by underlying case category, as measured by cases received, for 2021 and 2020 were as
follows:
Year Ended December 31,
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total Crawford Loss Adjusting Cases Received
2021
2020
Variance
150,739
70,397
29,990
43,887
34,289
32,226
361,528
146,224
58,069
29,039
46,670
34,739
23,240
337,981
3.1%
21.2%
3.3%
(6.0)%
(1.3)%
38.7%
7.0%
Overall, there was an increase in cases received of 7.0% in 2021, compared with the 2020 period. There was an increase in U.S.
case volumes in 2021 due to the increase in weather-related activity and the change in the mix of services provided. The U.K. case
volumes were higher in 2021 due to an increase in high-frequency, low-severity cases due to an increase in new clients. There was an
increase in cases in Canada in 2021 due to an increase in high-frequency, low-severity cases, partially offset by the ongoing impact of
COVID-19. There was a decrease in cases in Australia due to a reduction in weather-related case activity in the current period. There
was a slight decrease in cases received in Europe in 2021 due to a change in the mix of services provided. There was an increase in
cases received in the 2021 period in Rest of World primarily due to our 2020 acquisition in Chile.
As a result of the economic contraction from the COVID-19 pandemic, cases received in future periods could be materially
negatively impacted, unless offset by the impact of cases received from new client programs or weather-related activity.
Direct Compensation, Fringe Benefits & Non-Employee Labor
The most significant expense in our Crawford Loss Adjusting segment is the compensation of employees, including related
payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. Crawford Loss Adjusting direct
compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 66.3%
for 2021 and 61.5% for 2020. The dollar amount of these expenses increased from $269.8 million in 2020 to $315.2 million in 2021.
This increase was due to the increased revenues, higher incentive compensation expense, change in foreign exchange rates, and recent
acquisitions. The increase in the percentage of revenues before reimbursements was because the increase in costs to support the new
client growth and increase in incentive compensation was higher than the increase in revenues. Additionally, there was a $1.7 million
and $5.2 million expense benefit in 2021 and 2020, respectively, as a result of CEWS.
There was an average of 3,491 FTEs in 2021 compared with an average of 3,327 FTEs in 2020.
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor
Crawford Loss Adjusting segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee
labor increased from $127.6 million in 2020 to $137.4 million in 2021, but decreased slightly as a percent of segment revenues from
29.1% in 2020 to 28.9% in 2021. The increase in costs was due to technology investments, an increase in the allowance for credit
losses, and an increase in administrative support costs in 2021. Costs were lower in 2020 due to COVID-19 cost reduction initiatives
that resulted in lower travel and entertainment and other administrative expenses.
25
CRAWFORD TPA SOLUTIONS SEGMENT
Operating Earnings
Our Crawford TPA Solutions segment, which operates under the Broadspire brand in North America, reported operating earnings
of $17.6 million, or 4.4% of revenues before reimbursements in 2021, as compared to $20.5 million, or 5.5% of revenues before
reimbursements in 2020. This decrease was due to the continued negative impact of COVID-19 in Canada and Europe, partially offset
by an increase in revenues in the U.S. and U.K. There was a $0.7 million expense benefit in 2021 as a result of CEWS, and a benefit
of $1.6 million in 2020.
Excluding centralized indirect support costs, gross profit decreased from $76.7 million, or 20.6% of revenues before
reimbursements in 2020, to $75.9 million, or 19.1% of revenues before reimbursements in 2021, due to the continued negative impact
of COVID-19 in Canada and Europe, partially offset by an increase in revenues in the U.S. and U.K.
Operating results for our Crawford TPA Solutions segment, including gross profit, are as shown in the following table:
In thousands (except percentages)
Year Ended December 31,
Revenues
Direct expenses
Gross profit
Indirect expenses
Total Crawford TPA Solutions Operating Earnings
Gross profit margin
Operating margin
Revenues before Reimbursements
Based on actual exchange rates
2020
$ 371,392
294,727
76,665
56,158
20,507
2021
$ 397,964
322,036
75,928
58,361
17,567
$
$
19.1%
4.4%
20.6%
5.5%
Variance
Based on exchange rates
for December 31, 2020
2021
Variance
7.2% $ 391,129
316,069
9.3%
75,060
(1.0)%
56,991
3.9%
18,069
(14.3)% $
(1.5)%
(1.1)%
19.2%
4.6%
5.3%
7.2%
(2.1)%
1.5%
(11.9)%
(1.4)%
(0.9)%
Crawford TPA Solutions revenues are from the global casualty and disability insurance and self-insured markets in the U.S.,
U.K., Canada, and Europe and Rest of World. Revenues before reimbursements by major region, based on actual exchange rates and
using a constant exchange rate were as follows:
In thousands (except percentages)
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Based on actual exchange rates
2020
2021
Variance
Based on exchange rates
for December 31, 2020
Variance
2021
$ 301,035 $ 293,448
16,530
22,673
38,741
22,693
18,307
55,929
2.6% $ 301,035
21,087
17,125
51,882
37.3%
(19.3)%
44.4%
2.6%
27.6%
(24.5)%
33.9%
Total Crawford TPA Solutions Revenues before
Reimbursements
$ 397,964 $ 371,392
7.2% $ 391,129
5.3%
Revenues before reimbursements from our Crawford TPA Solutions totaled $398.0 million in 2021, compared with $371.4
million in 2020. This increase was primarily due to an increase in U.S. and U.K. revenues and a $18.9 million, or 5.1%, increase in
revenues due to recent acquisitions. Changes in foreign exchange rates increased our Crawford TPA Solutions segment revenues by
$6.8 million, or approximately 1.9%, for 2021. Absent foreign exchange rate fluctuations, Crawford TPA Solutions segment revenues
would have been $391.1 million in 2021. Revenues were negatively impacted by a decrease in unit volumes, measured principally by
cases received, of 2.1% in 2021 compared with 2020. Changes in product mix and in the rates charged for those services accounted for
a 2.3% revenue increase for 2021 compared with 2020.
The increase in revenues in the U.S. for 2021 was due to an increase in the mix of services provided as business activity continued
to improve from the impact of COVID-19 economic conditions that were present in the prior year. Based on constant foreign
exchange rates, there was an increase in revenues in the U.K. in 2021 due to client case volume increases in our legal services business
line. Revenues in Canada decreased in the current year as a result of continued negative COVID-19 economic conditions and the 2020
exit from a service line in that country. Revenues increased in Europe and Rest of World in 2021 primarily due to recent acquisitions
in Chile and Australia which strengthened our legal services offerings in those countries, which offset declines in Europe.
26
Reimbursed Expenses Included in Total Revenues
Reimbursements for out-of-pocket expenses incurred in our Crawford TPA Solutions segment which are included in total
Company revenue increased to $10.8 million in 2021 from $7.5 million in 2020. The increase in reimbursed expenses in the 2021
period was due to the increased revenues and increased use of third parties from the recent acquisitions.
Case Volume Analysis
Crawford TPA Solutions unit volumes, as measured by cases received, by region for 2021 and 2020 were as follows:
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford TPA Solutions Cases Received
2021
2020
Variance
490,653
59,399
32,465
180,320
762,837
476,238
49,550
60,451
192,884
779,123
3.0%
19.9%
(46.3)%
(6.5)%
(2.1)%
Overall case volumes were 2.1% lower in 2021 compared with 2020 due to decreases in Canada and Europe, partially offset by an
increase in the U.S. and U.K. The increase in the U.S. was due to the general economic recovery and business growth in Disability.
The increase in the U.K. was due to an increase in high-frequency, low-severity liability cases. The decrease in Canada was primarily
due to the continued negative impact from COVID-19 and the 2020 exit from a service line in that country. The decrease in cases in
Europe and Rest of World was due to a decrease in high-frequency, low-complexity cases received in Europe, partially offset by a
6,300 increase in cases from recent acquisitions.
Crawford TPA Solutions unit volumes, particularly in the U.S., are sensitive to overall employment levels and workplace reported
injuries. As a result of the uncertainty from the COVID-19 pandemic in the U.S. and other geographic regions, future case referrals
could be materially negatively impacted unless offset by new client programs.
Direct Compensation, Fringe Benefits & Non-Employee Labor
The most significant expense in our Crawford TPA Solutions segment is the compensation of employees, including related
payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our
employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of Crawford TPA Solutions segment
revenues before reimbursements, increased from 63.1% in 2020 to 64.5% in 2021. The total dollar amount of these expenses increased
from $234.2 million in 2020 to $256.8 million in 2021. This increase was due to an increase in average full-time equivalent employees
related to the higher revenues and recent acquisitions. The increase in expense as a percent of revenues before reimbursements is due
to increased compensation, including incentive compensation, and higher compensation expense in our legal services service line,
which increased at a higher rate than revenues. There was a benefit of $0.7 million in 2021 and $1.6 million in 2020 as a result of the
CEWS.
There was an average of 3,579 FTEs in this segment in 2021, an increase from an average of 3,128 FTEs in the 2020 period. The
increase in employees was due to 430 FTEs from recent acquisitions and the higher revenues.
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor
Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased in the Crawford
TPA Solutions segment from $116.7 million in 2020 to $123.6 million in 2021, but decreased slightly as a percent of revenues before
reimbursements from 31.5% in 2020 to 31.0% in the 2021 period. The increase in amount was due to higher revenues, recent
acquisitions and the change in exchange rates. The slight decrease as a percent of revenues was due to increased revenues in the U.S.
27
CRAWFORD PLATFORM SOLUTIONS
Operating Earnings
Crawford Platform Solutions recorded operating earnings of $36.3 million in 2021, or 15.9% of revenues before reimbursements,
compared with operating earnings of $27.7 million in 2020, or 16.0% of revenues before reimbursements. The increase in operating
earnings in 2021 was due to an increase in weather-related cases in our Networks service line resulting from an increase in Hurricane
Ida case activity and new client growth in 2021. There was a $0.2 million expense benefit in 2021 as a result of CEWS, and a benefit
of $0.3 million in 2020.
Excluding indirect support costs, gross profit increased from $43.6 million, or 25.3% of revenues before reimbursements in 2020,
to $57.5 million, or 25.1% of revenues before reimbursements in 2021, as a result of the Networks revenue increase in the U.S., a
change in the mix of services provided in the U.K., and the absence of client start-up expenses that were present in 2020.
Operating results for our Crawford Platform Solutions segment, including gross profit, are as shown in the following table:
In thousands (except percentages)
Year Ended December 31,
Revenues
Direct expenses
Gross profit
Indirect expenses
Total Crawford Platform Solutions Operating Earnings $
Gross profit margin
Operating margin
Based on actual exchange rates
2020
$ 172,609
128,990
43,619
15,969
27,650
2021
$ 228,481
171,020
57,461
21,127
36,334
$
25.1%
15.9%
25.3%
16.0%
Variance
Based on exchange rates
for December 31, 2020
2021
Variance
32.4% $ 226,550
169,724
32.6%
56,826
31.7%
20,786
32.3%
36,040
31.4% $
(0.2)%
(0.1)%
25.1%
15.9%
31.3%
31.6%
30.3%
30.2%
30.3%
(0.2)%
(0.1)%
Revenues before Reimbursements
Crawford Platform Solutions segment revenues are primarily derived from the global property and casualty insurance company
markets in the U.S., U.K., Canada, Europe and Rest of World. Revenues before reimbursements by major region, based on actual
exchange rates, using a constant exchange rate, were as follows:
In thousands (except percentages)
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
$
Variance
Based on actual exchange rates
2020
149,030
6,698
10,937
5,944
2021
199,299 $
9,644
11,963
7,575
33.7% $
44.0%
9.4%
27.4%
Variance
Based on exchange rates for
December 31, 2020
2021
199,299
8,976
11,191
7,084
33.7%
34.0%
2.3%
19.2%
Total Crawford Platform Solutions Revenues before
Reimbursements
$
228,481 $
172,609
32.4% $
226,550
31.3%
Revenues before reimbursements from our Crawford Platform Solutions segment totaled $228.5 million in 2021, compared with
$172.6 million in 2020. This increase was primarily due to an increase in Hurricane Ida case volumes in the U.S. and an increase in
new client growth. Changes in foreign exchange rates resulted in an increase of our Crawford Platform Solutions segment revenues by
approximately 1.1%, or $1.9 million for 2021. Excluding the change in foreign exchange rates, Crawford Platform Solutions segment
revenues before reimbursements totaled $226.6 million. There was a $4.2 million increase, or 2.4%, in Crawford Platform Solutions
revenues in 2021 as a result of acquisitions and dispositions.
28
There was an increase in segment unit volume, measured principally by cases received, of 18.9% in 2021 compared with 2020.
9.7% of this increase was due to an increase of 42,900 high-frequency, low-severity cases received in our WeGoLook service line.
Excluding these WeGoLook cases, there was an increase in segment unit volume of 41,100, or 9.2% of the increase in Crawford
Platform Solutions cases received. Revenues in our U.S. Crawford Platform Solutions segment include revenues from a new client and
expanding services from an existing client where we provide staff augmentation for our clients, which resulted in $22.7 million of
increased revenues in 2021, or a 13.2% increase in Crawford Platform Solutions revenue. The revenues from these clients do not
typically result in cases received. Excluding the impact of the WeGoLook case increase, changes in product mix and in the rates
charged for those services accounted for an 6.5% revenue increase for 2021 compared with 2020.
The increase in revenues in the U.S. for 2021 was due to an increase in weather-related case activity and an increase in new client
growth. On a constant currency basis, there was a revenue increase in the U.K. in 2021 due to an increase in our Contractor
Connection service line, driven by increased cases received and expanding new services. Revenues in Canada increased in 2021 due to
an increase in new clients, partially offset by the negative impact of COVID-19. There was a revenue increase in Europe and Rest of
World due to new client growth.
Reimbursed Expenses Included in Total Revenues
Reimbursements for out-of-pocket expenses incurred in our Crawford Platform Solutions were $3.3 million in 2021, increasing
from $1.2 million in 2020. The increase in the 2021 period was consistent with the increase in revenues.
Case Volume Analysis
Crawford Platform Solutions unit volumes by geographic region, as measured by cases received, for 2021 and 2020 were as
follows:
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford Platform Solutions Cases Received
2021
2020
Variance
430,730
12,882
64,979
20,094
528,685
365,468
10,309
50,895
17,979
444,651
17.9%
25.0%
27.7%
11.8%
18.9%
Overall case volumes were 18.9% higher in 2021 compared with 2020 due to increases in all regions. 9.7% of the increase was
due to an increase of 42,900 high-frequency, low-severity cases received in our WeGoLook service line. Excluding these WeGoLook
cases, there was an increase in segment unit volume of 41,100, or 9.2% in Crawford Platform Solutions cases received in 2021.
The increase in U.S. case volumes in 2021 was primarily due to an increase in Hurricane Ida case activity. A portion of the
increase in revenues in the U.S. is the result of new client growth, however the revenues generated for these clients consist of us
providing dedicated employees which is not measured by cases, and accordingly there is no increase in cases received to match the
increase in revenues. The increase in cases in Canada is due to an increase in new clients in our Contractor Connection service line.
The U.K. case volumes were higher in 2021 due to an increase in assignments to our Contractor Connection service line. Cases
received in Rest of World were higher in 2021 due to new client growth.
As a result of the impact from the COVID-19 pandemic, cases received in future periods could be materially negatively impacted,
unless offset by the impact of cases received from new client programs or weather-related activity.
Direct Compensation, Fringe Benefits & Non-Employee Labor
The most significant expense in our Crawford Platform Solutions segment is the compensation of employees, including related
payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our
employees. Crawford Platform Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of the
related revenues before reimbursements, was 65.3% in 2021 and 63.0% in 2020. The amount of these expenses increased from $108.7
million in 2020 to $149.2 million in 2021. The increase in costs was due to the higher revenues in the current year and increased
employees to support new client growth. The increase in the percentage of revenues before reimbursements in the current year was
due to the change in product mix and higher compensation expense to support the new client growth. There was a benefit of $0.2
million in 2021 and a benefit of $0.3 million in 2020 as a result of the CEWS.
Average FTEs in this segment totaled 1,337 in 2021, compared to an average of 1,086 FTEs in 2020.
29
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor
Crawford Platform Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-
employee labor decreased as a percent of segment revenues before reimbursements from $36.3 million, or 21.0% of revenues before
reimbursements in 2020, to $42.9 million, or 18.8% of revenues before reimbursements in 2021. The increase in overall expenses was
due to the increased revenues. The decrease in the expense as a percent of revenues before reimbursements in 2021 is due to the higher
revenues and a decrease in administrative support costs.
YEAR ENDED DECEMBER 31, 2020 COMPARED WITH YEAR ENDED DECEMBER 31, 2019
CRAWFORD LOSS ADJUSTING SEGMENT
Operating Earnings
Our Crawford Loss Adjusting segment reported operating earnings of $41.1 million, or 9.4% of revenues before reimbursements
in 2020, as compared with $30.1 million, or 6.6% of revenues before reimbursements in 2019. Operating earnings increased from
2019 to 2020 primarily due to an increase in weather-related cases and new client growth in the U.S. and a reduction in administrative
support expenses, partially offset by the negative economic impact of COVID-19. There was a $5.2 million expense benefit in 2020 as
a result of the CEWS.
Excluding centralized indirect support costs, gross profit increased from $116.8 million, or 25.5% of revenues before
reimbursements in 2019, to $118.9 million, or 27.1% of revenues before reimbursements in 2020, due primarily to cost reduction
initiatives in 2020.
Operating results for our Crawford Loss Adjusting segment, including gross profit, are as shown in the following table:
In thousands (except percentages)
Year Ended December 31,
Revenues
Direct expenses
Gross profit
Indirect expenses
Total Crawford Loss Adjusting Operating Earnings
Gross profit margin
Operating margin
Revenues before Reimbursements
Variance
Based on actual exchange rates
2020
$438,491
319,637
118,854
77,750
$41,104
2019
$457,484
340,657
116,827
86,702
$30,125
(4.2)%
(6.2)%
1.7%
(10.3)%
36.4%
Variance
Based on exchange rates
for December 31, 2019
2020
$443,000
324,700
118,300
77,823
$40,477
(3.2)%
(4.7)%
1.3%
(10.2)%
34.4%
27.1%
9.4%
25.5%
6.6%
1.6%
2.8%
26.7%
9.1%
1.2%
2.5%
Crawford Loss Adjusting revenues before reimbursements by major region, based on actual exchange rates and using a constant
exchange rate were as follows:
In thousands (except percentages)
Year Ended December 31,
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Based on actual exchange rates
2019
2020
Variance
Based on exchange rates for
December 31, 2019
2020
Variance
$ 128,342 $ 130,735
104,308
70,948
67,689
47,326
36,478
105,446
55,552
69,407
48,732
31,012
(1.8)% $ 128,342
105,341
1.1%
56,126
(21.7)%
71,655
2.5%
49,108
3.0%
32,428
(15.0)%
(1.8)%
1.0%
(20.9)%
5.9%
3.8%
(11.1)%
Total Crawford Loss Adjusting Revenues before
Reimbursements
$ 438,491 $ 457,484
(4.2)% $ 443,000
(3.2)%
30
Revenues before reimbursements from our Crawford Loss Adjusting segment totaled $438.5 million in 2020 compared with
$457.5 million in 2019. This decrease was primarily due to the negative economic impacts of the COVID-19 pandemic. Changes in
foreign exchange rates resulted in a decrease of our Crawford Loss Adjusting segment revenues by approximately 1.0%, or $4.5
million for 2020. Absent foreign exchange rate fluctuations, Crawford Claims Solutions segment revenues would have been $443.0
million for 2020. Revenues were negatively impacted by a decrease in unit volumes, measured principally by cases received, which
decreased revenues 4.8% in 2020 compared with 2019. Changes in product mix and in the rates charged for those services accounted
for a 1.6% revenue increase for 2020 compared with the 2019 period.
There was a decrease in revenues in the U.S. for 2020 due to the negative economic impact of COVID-19 pandemic, partially
offset by an increase in in weather-related activity. Based on constant foreign exchange rates, there was a slight increase in revenues in
the U.K. for 2020 compared with 2019 due to an increase in new clients and expanding new services. Revenues in Canada decreased
in 2020 compared with the 2019 period due to the impact of COVID-19. There was a revenue increase in Australia due to an increase
in weather-related case activity in 2020. The increase in revenues in Europe was also due to an increase in weather-related activity.
The decrease in revenues in Rest of World for 2020 compared with 2019 was due to a reduction in weather-related case activity in
Asia and Latin America.
Reimbursed Expenses Included in Total Revenues
Reimbursements for out-of-pocket expenses incurred in our Crawford Loss Adjusting segment, which are included in total
Company revenues, were $24.9 million in 2020 compared to $28.9 million in 2019. The 2020 decrease was due to the decreased
revenues and the 2020 disposal of LWI.
Case Volume Analysis
Crawford Loss Adjusting unit volumes by underlying case category, as measured by cases received, for 2020 and 2019 were as
follows:
Year Ended December 31,
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total Crawford Loss Adjusting Cases Received
2020
2019
Variance
146,180
58,069
29,039
46,670
34,739
23,240
337,937
152,000
54,946
45,946
39,577
33,185
29,198
354,852
(3.8)%
5.7%
(36.8)%
17.9%
4.7%
(20.4)%
(4.8)%
Overall, there was a 4.8% decrease in cases received in the Crawford Loss Adjusting segment in 2020 compared to 2019. The
decrease in U.S. case volumes was due to lower weather-related activity and a change in the mix of cases received in 2020. The U.K.
case volumes were higher in the 2020 period due to a change in the mix of services provided. There was a reduction in cases in
Canada in 2020 due to the negative impact of COVID-19. The increase in cases in Australia was due to an increase in weather-related
case activity in 2020. There was an increase in cases received in Europe due to increased high-frequency, low-complexity property
cases. The decrease in cases in Rest of World was due to a decline in high-frequency, low-complexity property cases in Asia and a
reduction in weather-related case activity in Latin America.
Direct Compensation, Fringe Benefits & Non-Employee Labor
The most significant expense in our Crawford Loss Adjusting segment is the compensation of employees, including related
payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. Crawford Loss Adjusting direct
compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 61.5%
for 2020 and 62.3% for 2019. The decrease was primarily due to improved staff utilization in 2020.
The dollar amount of these expenses decreased from $284.9 million in 2019 to $269.8 million in 2020. There was an average of
3,327 FTEs in 2020 compared with an average of 3,429 FTEs in 2019. The decrease in expenses and FTEs in 2020 was primarily due
to the reduction in employees related to the lower revenues in the current period resulting from the pandemic. There was a $5.2
million expense benefit in 2020 as a result of the CEWS.
31
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor
Crawford Loss Adjusting segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee
labor decreased from $142.5 million in 2019 to $127.6 million in 2020, and decreased as a percent of segment revenues from 31.1% in
2019 to 29.1% in 2020. The decrease in expenses was due to the decline in revenues and the change in foreign exchange rates. The
decrease in expense as a percent of revenues was due to cost reduction initiatives that resulted in lower travel and entertainment
expense and lower administrative support costs in the 2020 period.
CRAWFORD TPA SOLUTIONS
Operating Earnings
Our Crawford TPA Solutions segment reported operating earnings of $20.5 million, or 5.5% of revenues before reimbursements
in 2020, as compared with $28.5 million, or 7.2% of revenues before reimbursements in 2019. The decrease in operating earnings for
the 2020 period was due to lower revenues resulting from the negative economic impact of COVID-19 in the U.S. and Canada, partly
offset by lower administrative costs. There was a $1.6 million benefit in 2020 as a result of the CEWS.
Excluding centralized indirect support costs, gross profit decreased from $89.3 million, or 22.5% of revenues before
reimbursements in 2019, to $76.7 million, or 20.6% of revenues before reimbursements in 2020, due primarily to the revenue decline.
Operating results for our Crawford TPA Solutions segment, including gross profit, are as shown in the following table:
In thousands (except percentages)
Year Ended December 31,
Revenues
Direct expenses
Gross profit
Indirect expenses
Total Crawford TPA Solutions Operating Earnings
Gross profit margin
Operating margin
Revenues before Reimbursements
Based on actual exchange rates
2020
$371,392
294,727
76,665
56,158
$20,507
2019
$397,626
308,350
89,276
60,770
$28,506
Variance
(6.6)%
(4.4)%
(14.1)%
(7.6)%
(28.1)%
Variance
Based on exchange rates
for December 31, 2019
2020
$372,622
293,991
78,631
55,838
$22,793
(6.3)%
(4.7)%
(11.9)%
(8.1)%
(20.0)%
20.6%
5.5%
22.5%
7.2%
(1.9)%
(1.7)%
21.1%
6.1%
(1.4)%
(1.1)%
Crawford TPA Solutions revenues before reimbursements by major region, based on actual exchange rates and using a constant
exchange rate were as follows:
In thousands (except percentages)
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford TPA Solutions Revenues before
Reimbursements
Based on actual exchange rates
2019
2020
Variance
Based on exchange rates for
December 31, 2019
2020
Variance
$ 293,448 $ 315,241
16,340
27,827
38,218
16,530
22,673
38,741
(6.9)% $ 293,448
16,473
1.2%
22,922
(18.5)%
39,779
1.4%
(6.9)%
0.8%
(17.6)%
4.1%
$ 371,392 $ 397,626
(6.6)% $ 372,622
(6.3)%
Revenues before reimbursements from our Crawford TPA Solutions totaled $371.4 million in 2020, compared with $397.6
million in 2019. Changes in foreign exchange rates decreased our Crawford TPA Solutions segment revenues by $1.2 million, or
approximately 0.3%, for 2020. Absent foreign exchange rate fluctuations, Crawford TPA Solutions segment revenues would have
been $372.6 million in 2020. Revenues were negatively impacted by a decrease in unit volumes, measured principally by cases
received, of 5.3% in 2020 compared with 2019. Changes in product mix and in the rates charged for those services accounted for a
1.0% revenue decrease for 2020 compared with the 2019 period.
32
The decrease in revenues in the U.S. for 2020 was due to a decrease in case volumes as a result of COVID-19 economic
conditions and a reduction in Medical Management utilization. Based on constant foreign exchange rates, there was a slight increase
in revenues in the U.K. for 2020 due to a change in the mix of services provided. Revenues in Canada decreased due to a decrease in
case volumes as a result of COVID-19 economic conditions. Revenues increased in Europe and Rest of World due to the 2020 fourth
quarter acquisition in Chile, partially offset by a change in the mix of services provided in Europe.
Reimbursed Expenses Included in Total Revenues
Reimbursements for out-of-pocket expenses incurred in our Crawford TPA Solutions segment which are included in total
Company revenues decreased to $7.5 million in 2020 from $11.8 million in 2019. This was due the decrease in revenues in the 2020
period.
Case Volume Analysis
Crawford TPA Solutions unit volumes, as measured by cases received, by region for 2020 and 2019 were as follows:
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford TPA Solutions Cases Received
2020
2019
Variance
476,238
49,550
60,451
192,884
779,123
489,951
45,513
73,385
213,842
822,691
(2.8)%
8.9%
(17.6)%
(9.8)%
(5.3)%
Overall case volumes were 5.3% lower in 2020 compared with 2019 due to decrease in the U.S., Canada and Europe. The
reduction in cases in the U.S. was primarily driven by COVID-19 economic conditions that affected Claims Management, Medical
Management, and Accident & Health case volumes. There was an increase in the U.K. due to an increase in high-frequency, low-
severity cases from new clients. Canada case volumes were negatively impacted by COVID-19. The decrease in cases in Europe and
Rest of World was due to a decrease in high-frequency, low-complexity cases received in Europe.
Direct Compensation, Fringe Benefits & Non-Employee Labor
The most significant expense in our Crawford TPA Solutions segment is the compensation of employees, including related
payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our
employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of Crawford TPA Solutions segment
revenues before reimbursements, increased from 62.1% in 2019 to 63.1% in 2020. The U.S. dollar amount of these expenses
decreased from $246.9 million in 2019 to $234.2 million in 2020. This reduction in the amount was due to the decline in revenues in
2020. The increase in expense as a percent of revenues before reimbursements is because the decrease in expense did not offset the
decrease in revenues. There was a $1.6 million benefit in 2020 as a result of the CEWS.
There was an average of 3,128 FTEs in this segment in 2020, a decrease from an average of 3,156 FTEs in the 2019 period. The
decrease in employees was due to cost reduction initiatives in light of the decrease in revenues.
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor
Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased in the Crawford
TPA Solutions segment from $122.2 million in 2019 to $116.7 million in 2020, but increased as a percent of revenues before
reimbursements from 30.8% in 2019 to 31.5% in the 2020 period. The decrease in amount was due to lower revenues and expense
controls implemented in 2020, but the increase as a percent of revenues was due to the lower revenues.
CRAWFORD PLATFORM SOLUTIONS
Operating Earnings
Crawford Platform Solutions recorded operating earnings of $27.7 million in 2020, or 16.0% of revenues before reimbursements,
compared with operating earnings of $26.7 million in 2019, or 17.7% of revenues before reimbursements. The increase in operating
earnings in 2020 was due to the increase in revenues in the U.S. There was a benefit of $0.3 million in 2020 as a result of the CEWS.
33
Excluding indirect support costs, gross profit increased from $41.9 million, or 27.8% of revenues before reimbursements in 2019,
to $43.6 million, but decreased as a percent of revenues before reimbursements in 2020 to 25.3%, due primarily to start-up expenses to
support new client growth in 2020.
Operating results for our Crawford Platform Solutions segment, including gross profit, are as shown in the following table:
In thousands (except percentages)
Year Ended December 31,
Revenues
Direct expenses
Gross profit
Indirect expenses
Total Crawford Platform Solutions Operating Earnings
Based on actual exchange rates
2020
$172,609
128,990
43,619
15,969
$27,650
2019
$150,692
108,748
41,944
15,267
$26,677
Variance
14.5%
18.6%
4.0%
4.6%
3.6%
Variance
Based on exchange rates
for December 31, 2019
2020
$172,631
128,246
44,385
16,458
$27,927
14.6%
17.9%
5.8%
7.8%
4.7%
Gross profit margin
Operating margin
Revenues before Reimbursements
25.3%
16.0%
27.8%
17.7%
(2.5)%
(1.7)%
25.7%
16.2%
(2.1)%
(1.5)%
Crawford Platform Solutions segment revenues before reimbursements by major region, based on actual exchange rates, using a
constant exchange rate, were as follows:
In thousands (except percentages)
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Based on actual exchange rates
2019
2020
Variance
Based on exchange rates for
December 31, 2019
2020
Variance
$
(In thousands)
149,030 $
6,697
10,938
5,944
123,251
5,665
15,664
6,112
20.9% $
18.2%
(30.2)%
(2.7)%
149,030
6,661
11,015
5,925
20.9%
17.6%
(29.7)%
(3.1)%
Total Crawford Platform Solutions Revenues before
Reimbursements
$
172,609 $
150,692
14.5% $
172,631
14.6%
Crawford Platform Solutions segment revenues before reimbursements increased 14.5% to $172.6 million in 2020 compared with
$150.7 million in 2019. Changes in foreign exchange rates resulted in a slight decrease of our Crawford Platform Solutions segment
revenues by approximately 0.1% for 2020.
Excluding the change in foreign exchange rates, Crawford Platform Solutions segment revenues before reimbursements increased
by $21.9 million, or 14.6%, compared with 2019, primarily due to an increase in the U.S. due to to increased weather-related activity
and new client growth. Revenues in our U.S. Crawford Platform Solutions segment include revenues from a new client and expanding
services from an existing client where we provide staff augmentation for the client, which resulted in $20.9 million of increased
revenues in 2020, or a 13.9% increase in Crawford Platform Solutions revenue. The revenues from this client does not typically result
in cases received.
Overall case volumes were 5.3% higher for 2020 compared with 2019. Changes in product mix and in the rates charged for those
services accounted for a 0.8% revenue increase for 2020 compared with 2019.
The increase in revenues in the U.S. in 2020, compared with 2019, was due to increased weather-related activity and new client
growth. On a constant dollar basis, there was a revenue increase in the U.K. in the 2020 period due to an increase in our Contractor
Connection service line. Revenues in Canada decreased in 2020 compared with 2019 due to the negative impact of COVID-19. There
was a revenue decrease in Europe and Rest of World due to a reduction in high frequency, low severity cases in 2020.
Reimbursed Expenses Included in Total Revenues
Reimbursements for out-of-pocket expenses incurred in our Crawford Platform Solutions segment were $1.2 million in 2020,
increasing from $1.1 million in 2019, due to the increase in revenues.
34
Case Volume Analysis
Crawford Platform Solutions unit volumes by geographic region, as measured by cases received, for 2020 and 2019 were as
follows:
Year Ended December 31,
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford Platform Solutions Cases Received
2020
2019
Variance
365,462
10,309
50,883
17,979
444,633
338,245
9,371
55,577
19,040
422,233
8.0%
10.0%
(8.4)%
(5.6)%
5.3%
Overall, there was an 5.3% increase in cases received in 2020 compared with 2019. This increase was due to an increase of
23,000 high-frequency, low-severity cases received in our WeGoLook service line. Excluding these WeGoLook cases, there was a
slight decrease in segment unit volume of 600, or 0.1% in Crawford Platform Solutions cases received in 2021.
The increase in U.S. case volumes in 2020 was due to an increase in weather-related cases and new client growth. A portion of
the increase in revenues in the U.S. is the result of new client growth, however the revenues generated for these clients consist of us
providing dedicated employees which is not measured by cases, and accordingly there is no increase in cases received to match the
increase in revenues. The U.K. case volumes were higher in the 2020 period due to an increase in our Contractor Connection service
line. The decrease in Canada was due to the negative impact of COVID-19 in that country. The decrease in Europe and Rest of World
was due to a change in the mix of services provided in Europe and Asia.
Direct Compensation, Fringe Benefits & Non-Employee Labor
The most significant expense in our Crawford Platform Solutions segment is the compensation of employees, including related
payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our
employees. Crawford Platform Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of the
related revenues before reimbursements, increased from 59.1% in 2019 to 63.0% in 2020. The amount of these expenses increased
from $89.1 million in 2019 to $108.7 million in 2020. This increase was due to an increase in staff and compensation expense to
support client growth. There was a benefit of $0.3 million in 2020 as a result of the CEWS. Average FTEs in this segment totaled
1,086 in 2020, compared to an average of 1,048 FTEs in 2019.
Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor
Crawford Platform Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-
employee labor increased from $34.9 million in 2019 to $36.3 million in 2020, although decreased as a percent of segment revenues
before reimbursements from 23.2% in 2019 to 21.0% in 2020. The increase in the amount was due to increased office expenses and
technology investments related to new client growth, but the decrease in the percent of revenues before reimbursements was due to the
increase in revenues.
35
EXPENSES AND CREDITS EXCLUDED FROM SEGMENT OPERATING EARNINGS
Income Taxes
Our consolidated effective income tax rate for financial reporting purposes may change periodically due to changes in enacted tax
rates, changes in tax law, fluctuations in the mix of income earned from our various domestic and international operations, which are
subject to income taxes at different rates, our ability to utilize loss and tax credit carryforwards, and amounts related to uncertain
income tax positions. Income tax provisions totaled $13.3 million, $12.0 million, and $14.1 million for 2021, 2020, and 2019,
respectively. Our effective tax rate for financial reporting purposes was 30.4%, 30.7%, and 59.7% for 2021, 2020, and 2019,
respectively. The Company's effective income tax rate in 2021 was impacted by enacted foreign tax rate changes, change in valuation
allowances for certain jurisdictions, and deferred taxes attributable to certain undistributed foreign earnings that are no longer
permanently reinvested. The Company's effective income tax rate in 2020 was impacted by goodwill impairment, disposals and
liquidations of businesses, and deferred taxes attributable to certain undistributed foreign earnings that are no longer permanently
reinvested. The Company's effective income tax rate in 2019 was impacted by goodwill impairment, arbitration and claim settlements,
and valuation allowances established on certain state net operating loss carryforwards and foreign tax credits. Based on our 2022
operating plans, we anticipate our effective tax rate for financial reporting purposes in 2022 to be in the 29% to 31% range before
considering any discrete items and assuming no material changes to tax law and policy in the material jurisdictions in which we
operate.
Net Corporate Interest Expense
Net corporate interest expense consists of interest expense that we incur on our short- and long-term borrowings, partially offset
by interest income we earn on available cash balances and short-term investments. These amounts vary based on interest rates,
borrowings outstanding, and the amounts of invested cash. Corporate interest expense totaled $7.0 million, $8.2 million, and $11.5
million for 2021, 2020, and 2019, respectively. Corporate interest income totaled $0.4 million, $0.3 million, and $0.7 million in 2021,
2020, and 2019, respectively. We pay interest on borrowings under our Credit Facility based on variable rates. Our level of interest
expense is dependent on the future direction of interest rates as well as the level of outstanding borrowings relative to prior periods.
The weighted average interest rates under our Credit Facility were 2.2%, 2.8%, and 4.0% for the years ending December 31, 2021,
2020, and 2019, respectively.
Stock Option Expense
Stock option expense, a component of stock-based compensation, is comprised of non-cash expenses related to stock options
granted under our various stock option and employee stock purchase plans. Stock option expense is not allocated to our operating
segments. Stock option expense of $1.1 million, $1.1 million and $1.9 million was recognized during 2021, 2020, and 2019,
respectively. Other stock-based compensation expense related to our Executive Stock Bonus Plan and our Omnibus Stock and
Incentive Plan (pursuant to which we have authority to grant performance shares and restricted shares) is charged to our operating
segments and included in the determination of segment operating earnings or loss.
Amortization of Customer-Relationship Intangible Assets
Amortization of customer-relationship intangible assets represents the non-cash amortization expense for finite-lived customer-
relationship and trade name intangible assets. Amortization expense associated with these intangible assets totaled $11.0 million,
$11.7 million, and $11.3 million in 2021, 2020, and 2019, respectively. This amortization is included in "Selling, general and
administrative expenses" in our Consolidated Statements of Operations.
Unallocated Corporate and Shared Costs, Net
Certain unallocated costs and credits are excluded from the determination of segment operating earnings. These unallocated
corporate and shared costs and credits represent costs of our frozen U.S. defined benefit pension plan, expenses for our chief executive
officer and our Board of Directors, certain adjustments to our self-insured liabilities, certain unallocated professional fees, and certain
adjustments and recoveries to our allowances for doubtful accounts receivable. From time to time, we evaluate which corporate costs
and credits are appropriately allocated to one or more of our operating segments. If changes are made to our allocation methodology,
prior period allocations are revised to conform to our then-current allocation methodology.
Unallocated corporate and shared costs and credits were $14.4 million, $17.4 million, and $7.7 million in 2021, 2020, and 2019,
respectively. The decrease for 2021 was due to a $2.3 million decrease in self-insurance and related legal costs, $5.0 million in
severance and other transition costs in 2020 that were not present in 2021, and a $2.7 million decrease in pension expense, partially
offset by a $3.6 million lower credit from the CEWS, and a $3.4 million increase in other unallocated costs.
36
The increase in costs in 2020 compared with 2019 was due to a $4.4 million increase in self-insurance and related legal costs,
severance and other transition costs totaling $5.0 million, a $3.6 million increase in incentive compensation, and a $3.5 million
increase in professional fees and other unallocated expenses, partially offset by a $6.8 million credit from the CEWS.
Goodwill and Intangible Asset Impairments
We recognized a pretax non-cash goodwill impairment in 2020 totaling $17.7 million related to our former Crawford Claims
Solutions reporting unit. This expense was partially offset by a $1.8 million reduction in income tax expense and $1.7 million credit in
noncontrolling interest expense. We also recognized a non-cash goodwill impairment in 2019 totaling $17.5 million related to our
former Crawford Claims Solutions reporting unit, which was partially offset by a $2.2 million reduction in income tax expense and
$2.2 million credit in noncontrolling interest expense. There was no goodwill impairment in 2021. See the "Critical Accounting
Policies" in Item 7 and Note 4, "Goodwill and Intangible Assets" of our accompanying consolidated financial statements included in
Item 8 of this Annual Report on Form 10-K for further discussion about goodwill impairments.
Restructuring and Other Costs, Net
We recognized pretax restructuring and other costs totaling $8.1 million in 2020, related primarily to severance and other
termination costs in an effort to consolidate and streamline various functions of our workforce. The restructuring and other costs are
comprised of $9.4 million in severance expense and related payroll taxes, $2.5 million in asset impairment and lease termination costs,
partially offset by a $1.1 million gain from fair value remeasurement of cost and equity method investments, a $1.2 million liquidation
dividend from a cost method investment, and a $1.4 million gain from the sale of IP addresses. There were no restructuring costs in
2021 or 2019. See Note 16, "Restructuring and Other Costs, Net" of our accompanying consolidated financial statements included in
Item 8 of this Annual Report on Form 10-K for further discussion about the restructuring and other costs.
Gain on Disposition of Businesses, Net
During 2020, we recognized a pretax gain on disposal totaling $13.8 million related to the disposal of the LWI business in our
former Crawford Claims Solution reporting unit, net of a loss on the disposal of Crawford Compliance. The gain on disposal is
presented in the Consolidated Statements of Operations as a separate item "Gain on disposition of businesses, net". There was no gain
on disposal of businesses in 2021 or 2019. See Note 3, “Business Acquisitions and Dispositions” of our accompanying consolidated
financial statements for further discussion about these transactions.
Arbitration and Claim Settlements
In 2019 we recognized $12.6 million for an arbitration settlement related to additional payments awarded to former executives of
our former Garden City Group related to their departure in 2015. There are no other potential claimants related to this matter. This
pretax expense is presented in the Consolidated Statements of Operations as a separate charge "Arbitration and claim settlements."
Liquidity, Capital Resources, and Financial Condition
We fund our working capital requirements, capital expenditures, share repurchases, and acquisitions from net cash provided by
operating activities and borrowings under bank credit facilities.
On November 5, 2021, the Company and certain of its subsidiaries (Crawford & Company Risk Services Investments Limited
(the "UK Borrower"), Crawford & Company (Canada) Inc. (the "Canadian Borrower") and Crawford & Company (Australia) Pty. Ltd,
(the "Australian Borrower"), collectively known with the Company, as the "Borrowers") entered into a Credit Facility (the " Credit
Facility"), which replaced our prior credit agreement, dated as of December 8, 2011, as subsequently amended.
The Credit Facility consists of a $450.0 million revolving credit facility, with a letter of credit subcommitment of $125.0 million.
The Credit Facility contains sublimits of $250.0 million for borrowings by the UK Borrower, $125.0 million for borrowings by the
Canadian Borrower, and $75.0 million for borrowings by the Australian Borrower. The Credit Facility matures, and all amounts
outstanding thereunder, will be due and payable on November 5, 2026.
37
Borrowings under the Credit Facility may be made in U.S. dollars, Euros, the currencies of Canada, Japan, Australia or United
Kingdom and, subject to the terms of the Credit Facility, other currencies. Borrowings under the Credit Facility bear interest, at the
option of the applicable Borrower, based on the Base Rate (as defined below) or a Eurocurrency Rate or an alternative reference rate,
in each case plus an applicable interest margin based on the Company's leverage ratio (as defined below), provided that borrowings in
foreign currencies may be at an alternative reference rate. The Credit Facility defines Benchmark Replacement to encompass accepted
alternative reference rates when the London Interbank Offered Rate ("LIBOR") is no longer quoted. The Credit Facility defines
alternative reference rates for non-U.S. Dollar currencies as Alternative Currency Term Rates or Alternative Currency Daily Rates.
The interest margin for Eurocurrency Rate or alternative reference rate loans ranges from 1.00% to 1.625% and for Base Rate loans
ranges from 0.00% to 0.625%. Base Rate is defined as the highest of (a) the Federal Funds Rate, as published by the Federal Reserve
Bank of New York, plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of
America as its “prime rate” and (c) the Eurocurrency rate plus 1.00%, subject to interest rate floors, with a minimum rate of zero. The
weighted average interest rates under our Credit Facility were 2.2%, 2.8%, and 4.0% for the years ending December 31, 2021, 2020,
and 2019, respectively.
At December 31, 2021, a total of $175.0 million of short-term and long-term debt was outstanding, and there was an undrawn
amount of $11.3 million under the letters of credit subcommitment of the Credit Facility. These letter of credit commitments were for
the Company's own obligations. Including the amounts committed under the letters of credit subcommitment, the available borrowing
capacity under the Credit Facility totaled $260.2 million at December 31, 2021.
The obligations of the Borrowers under the Credit Facility are guaranteed by each existing material domestic subsidiary of the
Company, certain other domestic subsidiaries of the Company and certain existing material foreign subsidiaries of the Company that
are disregarded entities for U.S. income tax purposes (each such foreign subsidiary, a "Disregarded Foreign Subsidiary"), and such
obligations are required to be guaranteed by each subsequently acquired or formed material domestic subsidiary and Disregarded
Foreign Subsidiary (each, a "Guarantor"), and the obligations of the Borrowers other than the Company ("Foreign Borrowers") for
which the Company is not the primary obligor are also guaranteed by the Company. In addition, (i) the Borrowers’ obligations under
the Credit Facility are secured by a first priority lien (subject to liens permitted by the Credit Facility) on substantially all of the
personal property of the Company and the Guarantors as set forth in the Security and Pledge Agreement and (ii) the obligations of the
Foreign Borrowers are secured by a first priority lien on 100% of the capital stock of the Foreign Borrowers.
The representations, covenants and events of default in the Credit Facility are customary for financing transactions of this nature,
including required compliance with a minimum fixed charge coverage ratio and a maximum interest coverage ratio (each as defined
below).
We have two principal financial covenants in our Credit Facility. The consolidated leverage ratio, defined as the ratio of (i)
consolidated total funded debt minus unrestricted cash to (ii) consolidated EBITDA, must not be greater 4.50 to 1.00 at the end of
each fiscal quarter. Also, the consolidated interest coverage ratio, defined as the ratio of (a) consolidated EBITDA to (b) consolidated
interest expense, must not be less than 2.50 to 1.00 for the four-quarter period ending at the end of each fiscal quarter.
At December 31, 2021, the Company was in compliance with the financial covenants under the Credit Facility. Our leverage ratio
was 1.66 and 1.11 as of December 31, 2021 and December 31, 2020, respectively, and our interest coverage ratio was 15.01 as of
December 31, 2021. Interest coverage ratio was not a financial covenant under our previous credit facility in place at December 31,
2020. If the Company does not meet the covenant requirements in the future, it would be in default under the Credit Facility. Upon the
occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights
under the Credit Facility and ancillary documents.
We are not aware of any additional restrictions placed on us, or being considered to be placed on us, related to our ability to
access capital, such as borrowings under the Credit Facility. We do not rely on repurchase agreements or the commercial paper market
to meet our short-term or long-term funding needs. For additional information on the key covenants contained in our Credit Facility,
see "Other Matters Concerning Liquidity and Capital Resources" below.
We continue the ongoing monitoring of our customers' ability to pay us for the services that we provide to them. Based on
historical results, we currently believe there is a low likelihood that write-offs of our existing accounts receivable will have a material
impact on our financial results. However, if one or more of our key customers files bankruptcy or otherwise becomes unable to make
required payments to us, or if overall economic conditions deteriorate, we may need to make material provisions in the future to
increase our allowance for accounts receivable.
38
The operations of each of our reporting segments expose us to a number of risks, including 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, as well as the risk of changes in tax rates or tariffs on earnings or services
provided outside the U.S. Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results.
Decreases in the value of the U.S. dollar compared with the other functional currencies in certain of the locations in which we do
business positively impacted our revenues and operating earnings in 2021, but a stronger U.S. dollar negatively impacted revenues and
operating earnings in 2020 and 2019. We cannot predict the impact that foreign currency exchange rates may have on our future
revenues or operating earnings.
At December 31, 2021, our working capital balance (current assets less current liabilities) was approximately $42.1 million,
compared with $59.2 million at December 31, 2020. The decrease in working capital was primarily due to a deferred payment on our
recent Praxis acquisition, an increase in short term borrowings, and increased accrued incentive compensation, offset by increases in
cash, accounts receivable, and unbilled revenues. Cash and cash equivalents at the end of 2021 totaled $53.2 million, compared with
$44.7 million at the end of 2020.
Cash and cash equivalents, excluding restricted cash, as of December 31, 2021 consisted of $19.0 million held in the U.S. and
$34.2 million held in our foreign subsidiaries. All of the cash and cash equivalents held by our foreign subsidiaries is available for
general corporate purposes. The Company generally does not provide for additional U.S. and foreign income taxes on undistributed
earnings of foreign subsidiaries because they are considered to be indefinitely reinvested. During 2021 and 2020, the Company
changed its permanent reinvestment assertion on a portion of prior year undistributed earnings for certain foreign operations and
accrued deferred taxes attributable to these earnings. The remaining historical earnings and future foreign earnings are expected to
remain permanently reinvested and will be used to provide working capital for these operations, fund defined benefit pension plan
obligations, repay non-U.S. debt, and fund capital improvements and future acquisitions.
However, if at a future date or time funds that remain permanently reinvested are necessary for our operations in the U.S. or we
otherwise believe it is in our best interests to repatriate all or a portion of such funds, we may be required to accrue and pay taxes to
repatriate these funds. No assurances can be provided as to the amount or timing thereof, the tax consequences related thereto, or the
ultimate impact any such action may have on our results of operations or financial condition. We have estimated that we have book
over tax basis differences of approximately $90.3 million. Due to withholding tax, basis computations, and other related tax
considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.
Cash Provided by Operating Activities
Cash provided by operating activities totaled $54.3 million in 2021 compared to $93.2 million in 2020. The $38.9 million
decrease in cash provided by operating activities was primarily due to an increase in the change in billed and unbilled accounts
receivable of $16.8 million, $12.7 million higher income tax payments, $19.5 million payroll tax payments previously deferred under
the CARES Act, and higher CEWS in the prior year. In 2020, we deferred payroll tax filings of $13.0 million as allowed by the
CARES Act, and in 2021 we paid $6.5 million of that deferred total. We have received a cash inflow of $7.9 million related to the
CEWS in 2021, compared to $11.8 million in 2020. Interest payments were $5.6 million in 2021, and tax payments, net of refunds,
were $24.9 million in 2021.
Cash provided by operating activities increased by $18.0 million in 2020, from $75.2 million in 2019 to $93.2 million in 2020.
This increase in cash provided by operating activities was primarily due to deferred payroll tax filings in the U.S. and the CEWS in
2020, compared with the same period of 2019. We have deferred payroll tax filings of $13.0 million as allowed by the CARES Act,
which will be paid in 2021 and 2022. We received a cash inflow of $11.8 million related to the CEWS in the 2020 period. Interest
payments on our debt were $7.2 million in 2020, and tax payments, net of refunds, were $12.2 million in 2020.
Cash Used in Investing Activities
Cash used in investing activities, primarily for acquisitions, capital expenditures and capitalized software, increased by $43.8
million in 2020, from $27.0 million in 2020 to $70.8 million in 2021. In 2021, we acquired HBA Group for $3.8 million, edjuster for
$19.0 million, Praxis for $22.2 million and BosBoon for $2.1 million, each amount net of cash acquired. In 2020, we made an
acquisition in Chile for $10.0 million and also sold LWI for $20.3 million in proceeds. These transactions are discussed in Note 3,
"Business Acquisitions and Dispositions" included in Item 8 of this Annual Report on Form 10-K. These increases in cash used for
2021 were partially offset by the settlement of certain company-owned life insurance policies of $6.5 million and a $6.4 million
decrease in capital expenditures. In 2021, cash used to acquire property and equipment and capitalized software, including
capitalization of costs for internally developed software, was $31.0 million compared with $37.4 million in 2020. We forecast that our
property and equipment additions in 2022, including capitalized software, will approximate $30 to $35 million.
39
Cash used in investing activities, primarily for acquisitions of property and equipment and capitalized software, increased by $3.6
million in 2020, from $23.4 million in 2019 to $27.0 million in 2020. The increase in cash used for 2020 was due to an increase in
capital expenditures in 2020 to support initiatives in our operating segments and $10.0 million for the Chile acquisition, partially
offset by proceeds of $20.3 million from the sale of LWI. Cash used to acquire property and equipment and capitalized software,
including capitalization of costs for internally developed software, was $37.4 million in 2020 compared with $21.1 million in 2019.
Cash Provided by (Used in) Financing Activities
Cash provided by financing activities was $24.7 million in 2021, compared with cash used of $74.4 million in 2020. In 2021, we
borrowed $113.3 million in short-term borrowings for capital expenditures, share repurchases, and acquisitions and we repaid a total
of $52.3 million. The increase in net borrowings in 2021 was primarily due to our increased acquisition activity. We used cash to pay
cash dividends totaling $12.7 million in 2021, we repurchased shares of $19.1 million, we incurred $2.3 million in capitalized costs
related to our Credit Facility, and we received shares of CRD-A stock that were surrendered by employees to settle $1.4 million of
withholding taxes owed on the issuance of restricted and performance shares.
Cash used in financing activities was $74.4 million in 2020, compared with $53.4 million used in 2019. In 2020, we borrowed
$108.1 million in short-term borrowings for working capital needs and we repaid a total of $169.7 million. The decrease in borrowings
in 2020 was primarily due to proceeds from the LWI disposition and the increase in operating cash flow used to repay borrowings. We
used cash to pay cash dividends totaling $9.6 million in 2020, we repurchased shares of $2.7 million, and we received shares of CRD-
A stock that were surrendered by employees to settle $0.5 million of withholding taxes owed on the issuance of restricted and
performance shares.
Other Matters Concerning Liquidity and Capital Resources
Our short-term debt obligations typically peak during the first quarter of each year due to the payment of incentive compensation
awards, contributions to retirement plans, and certain other recurring payments, and generally decline during the balance of the year.
However, certain events, such as the COVID-19 pandemic, could impact the level and timing of our short-term debt obligations in the
future. Our maximum month-end short-term debt obligations were $16.5 million and $39.9 million in 2021 and 2020, respectively.
Our average month-end short-term debt obligations were $7.8 million and $28.0 million in 2021 and 2020, respectively. The
outstanding balance of our short-term borrowings, excluding outstanding but undrawn letters of credit under our Credit Facility, was
$10.7 million and $1.8 million at December 31, 2021 and 2020, respectively. The balance in short-term borrowings at December 31,
2021 primarily represents amounts under our revolving Credit Facility that we expect, but are not required, to repay in the next twelve
months. We have historically used the proceeds from our long-term borrowings to finance, among other things, business acquisitions.
Our liquidity is defined as cash on hand and borrowing capacity based on our trailing twelve month EBITDA, as defined under
our Credit Facility. Excluding restricted cash, at December 31, 2021, we had $53.2 million of cash on hand and, based on trailing
twelve month EBITDA, additional borrowing capacity of $260.2 million, resulting in total liquidity of $313.5 million at December 31,
2021. In response to the COVID-19 pandemic, during 2020 we took a number of steps to enhance our liquidity including temporarily
reducing our planned capital expenditures, pausing our discretionary U.S. defined benefit pension plan contributions until later in the
year, suspending share repurchases under our 10b5-1 repurchase plan, and adjusting our employment levels through furloughs and
reductions in force. None of these actions were taken in 2021. We have not applied for governmental loans to support the Company’s
operations but took advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits during 2020. In
addition, there are numerous international legislative responses that we have evaluated, such as the Canadian Emergency Wage
Subsidy program where we have received a benefit during 2020 and 2021, among other enactments.
Based on our financial plans, we expect to be able to remain in compliance with all required covenants throughout 2022. Our
compliance with the consolidated total leverage ratio and consolidated interest coverage ratio is particularly sensitive to changes in our
EBITDA, and if our financial plans for 2022 or other future periods do not meet our current projections, we could fail to remain in
compliance with these financial covenants in our Credit Facility.
Our compliance with the consolidated total leverage ratio covenant is also sensitive to changes in our level of consolidated total
funded debt, as defined in our Credit Facility. In addition to short- and long-term borrowings, capital leases, and bank overdrafts,
among other things, consolidated total funded debt includes letters of credit, the need for which can fluctuate based on our business
requirements. An increase in borrowings under our Credit Facility could negatively impact our leverage ratio, unless those increased
borrowings are offset by a corresponding increase in our EBITDA. In addition, a reduction in EBITDA in the future could limit our
ability to utilize available credit under the Credit Facility, which could negatively impact our ability to fund our current operations or
make needed capital investments.
40
Our compliance with the consolidated interest ratio covenant, which measures our ability to pay interest expense is also sensitive
to the level of debt outstanding and interest rates. A decrease in EBITDA could negatively impact our interest coverage ratio, as could
increases in our interest expense. If we do not manage those items carefully, we could be in default under the Credit Facility, which
would negatively impact our ability to fund our current operations or make needed capital investments.
We believe 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 12 months.
Material Cash Commitments
As of December 31, 2021, the impact that our material cash commitments, including estimated interest payments, are expected to
have on our liquidity and cash flow in future periods is as follows:
(Note references in the following table refer to the note in the accompanying consolidated financial statements in Item 8 of this
Annual Report on Form 10-K).
One Year or
Less
1 to 3
Years
3 to 5
Years
After 5 Years
Total
Payments Due by Period
Operating lease commitments (Note 6)
Long-term debt, including current portions (Note 5) (1)
Finance lease and other obligations (Note 5) (1)
Deferred cash payments related to acquisitions (Note 3)
Total, before interest payments
Estimated interest payments under Credit Facility
Total material cash commitments
$
$
29,944 $
10,616
88
21,168
61,816
6,790
68,606 $
(1) Assumes principal amounts are repaid at maturity and not refinanced.
40,788 $
—
312
—
41,100
15,723
56,823 $
(In thousands)
27,137 $
163,978
25
—
191,140
14,953
206,093 $
35,427
—
—
—
35,427
—
35,427
$
$
133,296
174,594
425
21,168
329,483
37,466
366,949
Borrowings under our Credit Facility bear interest at a variable rate, based on a Eurocurrency Rate, an alternative reference rate or
a Base Rate, in either case plus an applicable margin. The Credit Facility defines Benchmark Replacement to encompass accepted
alternative reference rates when the LIBOR rate is no longer quoted. Long-term debt refers to the required principal repayment at
maturity of the Credit Facility, and may differ significantly from estimates, due to, among other things, actual amounts outstanding at
maturity or any refinancings prior to such date. Interest amounts are based on projected borrowings under our Credit Facility and
interest rates in effect on December 31, 2021, and the actual interest payments may differ significantly from estimates due to, among
other things, changes in outstanding borrowings and prevailing interest rates in the future.
At December 31, 2021, we had approximately $3.8 million of unrecognized income tax benefits related to uncertain tax positions.
We cannot reasonably estimate when all of these unrecognized income tax benefits may be settled. We do not expect material
reductions to unrecognized income tax benefits within the next 12 months.
Gross deferred income tax liabilities as of December 31, 2021 were approximately $62.3 million. This amount is not included in
the contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities are
calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis, which will
result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of
these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, we
believe scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling would not
relate to liquidity needs.
41
Defined Benefit Pension Funding and Cost
We sponsor a qualified defined benefit pension plan in the U.S., (the "U.S. Qualified Plan") three defined benefit plans in the
U.K. (the "U.K. Plans"), and defined benefit pension plans in the Netherlands, Norway, Germany, and the Philippines (the "other
international plans"). Future cash funding of our defined benefit pension plans will depend largely on future investment performance,
interest rates, changes to mortality tables, and regulatory requirements. Effective December 31, 2002, we froze our U.S. Qualified
Plan. The aggregate deficit in the funded status of the U.S. Plan and other international plans totaled $17.9 million and $53.9 million
at the end of 2021 and 2020, respectively. The 2021 decrease in the unfunded deficit of our defined benefit pension plans primarily
resulted from actuarial gains in the year. In 2021, we made contributions of $9.0 million to our U.S Qualified Plan and $0.7 million to
our U.K. Plans. In 2020, we made contributions of $9.0 million to our U.S. Qualified Plan and $0.5 million to our U.K. Plans. The
U.K. Plans were in a funded status totaling $30.3 million and $36.8 million at the end of 2021 and 2020, respectively, with the fair
value of plan assets exceeding the projected benefit obligation. There was a $6.5 million decrease during 2021 in the net prepaid
pension balances of the U.K. defined benefit plans.
Our frozen U.S. Qualified Plan was underfunded by $15.2 million at December 31, 2021 based on an accumulated benefit
obligation of $403.3 million. Crawford does not expect to make any discretionary contributions to the U.S. Qualified Plan for 2022.
Funding requirements are no longer as sensitive to changes in the discount rate used to determine the present value of projected
benefits payable under the U.S. Qualified plan. Volatility in the capital markets, mortality changes and future legislation may have a
negative impact on our pension plans, which may further increase the underfunded portion and our attendant funding obligations.
Expected and required contributions to our underfunded defined benefit pension plans will reduce our liquidity, restrict available cash
for our operating, financing, and investing needs and may materially adversely affect our financial condition and our ability to deploy
capital to other opportunities.
Commercial Commitments
As a component of our Credit Facility, we maintain a letter of credit facility to satisfy certain contractual obligations. At
December 31, 2021, the issued, but undrawn, letters of credit totaled approximately $11.3 million. These letters of credit are typically
renewed annually, but unless renewed, will expire as follows:
Standby Letters of Credit
$
11,277 $
— $
— $
— $
11,277
One Year or
Less
Amount of Commitment Expiration per Period
1 to 3 Years
3 to 5 Years
After 5 Years
Total
(In thousands)
Changes in Financial Condition
The following addresses changes in our financial condition not addressed elsewhere in this MD&A.
Significant changes on our Consolidated Balance Sheet as of December 31, 2021, compared with our Consolidated Balance Sheet
as of December 31, 2020, were as follows:
• Accounts receivable increased by $5.5 million, excluding the impacts of business acquisitions and dispositions, as well as the
impacts from foreign currency exchange, in 2021 compared with 2020. The increase was primarily due to increased
receivables within Crawford Loss Adjusting and Platform Solutions in the U.S as a result of Hurricane Ida activity, as well as
increases in the U.K. and Australia.
• Unbilled revenues increased $10.0 million, excluding the impacts of business acquisitions and dispositions, as well as the
impacts from foreign currency exchange. The increase was primarily due to an increase in Crawford Loss Adjusting and
Platform Solutions related to the increase in weather-related activity in the U.S. and an increase in the U.K.
• Accounts Payable and Accrued Liabilities increased $13.5 million, excluding the impacts of business acquisitions and
dispositions, as well as the impacts from foreign currency exchange. The increase was primarily due to $12.1 million higher
accrued employee compensation and incentive compensation, and an increase due to the timing of accounts payable
payments, offset by a payment of $6.5 million on a deferred payroll tax filing in the U.S. as allowed by the CARES Act.
42
Critical Accounting Policies and Estimates
This MD&A addresses our consolidated financial statements, which are prepared in accordance with U.S. GAAP. The preparation
of these financial statements requires us 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, we evaluate these estimates and judgments based upon historical
experience and various other factors that we believe are reasonable under then-existing 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.
We believe the following critical accounting policies require significant judgments and estimates in the preparation of our
consolidated financial statements. Changes in these underlying estimates could potentially materially affect consolidated results of
operations, financial position and cash flows in the period of change. Although some variability is inherent in these estimates, the
amounts provided for are based on the best information available to us and we believe these estimates are reasonable.
We have discussed the following critical accounting policies and estimates with the Audit Committee of our Board of Directors,
and the Audit Committee has reviewed our related disclosure in this MD&A.
Revenue Recognition
Our revenues are primarily comprised of claims processing or program administration fees. Fees for professional services are
recognized as unbilled revenues at estimated collectible amounts at the time such services are rendered. Substantially all unbilled
revenues are billed within one year. Out-of-pocket costs incurred in administering a claim are typically passed on to our clients and
included in our revenues under GAAP. Deferred revenues represent the estimated unearned portion of fees related to future services to
be performed under certain fixed-fee service arrangements. Deferred revenues are recognized into revenues based on the estimated
rate at which the services are provided. These rates are primarily based on an evaluation of historical claim closing rates by major
claim type. Additionally, recent claim closing rates are evaluated for a significant deterioration or improvement in the longer-term
historical closing rates used.
Our fixed-fee service arrangements typically require us to handle claims on either a one- or two-year basis, or for the lifetime of
the claim. In cases where we handle a claim on a non-lifetime basis, we typically receive an additional fee on each anniversary date
that the claim remains open. For service arrangements where we provide services for the life of the claim, we are only paid one fee for
the life of the claim, regardless of the duration of the claim. As a result, our deferred revenues for claims handled for one or two years
are not as sensitive to changes in claim closing rates since the revenues are recognized in the near future, and additional fees are
generated for handling long-lived claims. Deferred revenues for lifetime claim handling are considered more sensitive to changes in
claim closing rates since we are obligated to handle these claims to their conclusion with no additional fees received for long-lived
claims. For all fixed fee service arrangements, revenues are recognized over the expected service periods, by type of claim.
Based upon our historical averages, we close approximately 99% of all cases referred to us under lifetime claim service
arrangements within five years from the date of referral. Also, within that five-year period, the percentage of cases remaining open in
any one particular year has remained relatively consistent from period to period. Each quarter we evaluate our historical case closing
rates by type of claim and make adjustments as necessary. Any changes in estimates are recognized in the period in which they are
determined.
As of December 31, 2021, deferred revenues related to lifetime claim handling arrangements approximated $38.0 million. If the
rate at which we close cases changes, the amount of revenues recognized within a period could be affected. In addition, given the
competitive environment in which we operate, we may be unable to raise our prices to offset the additional expense associated with
handling longer-lived claims should such case closing rates change. The change in our first-year case closing rates over the last ten
years has ranged from a decrease of 3.3% to an increase of 2.2%, and has averaged a decrease of 0.1%. A 1.0% change is a reasonably
likely change in our estimate based on historical data. Absent an increase in per-claim fees from our clients, a 1.0% decrease in claim
closing rates for lifetime claims would have resulted in the deferral of additional revenues of approximately $1.3 million, $1.3 million,
and $1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. If our average claim closing rates for lifetime
claims increased by 1.0%, we would have recognized additional revenues of approximately $1.3 million, $1.2 million, and $1.3
million in 2021, 2020 and 2019, respectively.
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We often sell multiple types of claims processing and different levels of processing depending on the complexity of the claims
within a contract. We also typically provide a menu of offerings from which the customer chooses to purchase or not at their
discretion. The price of each service is separate and distinct and provides a separate and distinct value to the customer. Pricing is
consistent for each service irrespective of the other service(s) or quantities requested by the customer. For example, if we provide
claims processing for auto and general liability, those services are priced and delivered independently.
Allowance for Expected Credit Losses
We maintain allowances for expected credit losses resulting from the inability of our clients to make required payments and for
adjustments to invoiced amounts. Losses resulting from the inability of clients to make required payments are accounted for as bad
debt expense, while adjustments to invoices are accounted for as reductions to revenues. These allowances are established by using
historical write-off or adjustment information intended to determine future loss expectations and by considering the current credit
worthiness of our clients, any known specific collection problems, and our assessment of current industry conditions. Actual
experience may differ significantly from historical or expected loss results. Each quarter, we evaluate the adequacy of the assumptions
used in determining these allowances and make adjustments as necessary. Changes in estimates are recognized in the period in which
they are determined. Historically, our estimates have been materially accurate.
As of December 31, 2021 and 2020, our allowance for expected credit losses totaled $8.8 million and $9.5 million, or
approximately 6.1% and 7.1% of gross billed receivables at December 31, 2021 and 2020, respectively. If the financial condition of
our clients deteriorates, resulting in an inability to make required payments to us, or if economic conditions deteriorate, additional
allowances may be deemed to be appropriate or required. If the allowance for expected credit losses changed by 1.0% of gross billed
receivables, reflecting either an increase or decrease in expected future write-offs, the impact to consolidated pretax income would
have been approximately $1.4 million, $1.3 million, and $1.4 million in 2021, 2020, and 2019, respectively.
Valuation of Goodwill, Indefinite-Lived Intangible Assets, and Other Long-Lived Assets
We regularly evaluate whether events and circumstances have occurred which indicate that the carrying amounts of goodwill,
indefinite-lived intangible assets, or other long-lived assets have been impaired. Goodwill is an asset that represents the excess of the
purchase price over the fair value of the separately identifiable net assets (tangible and intangible) acquired in certain business
combinations. Our indefinite-lived intangible assets consist of trade names associated with acquired businesses. Goodwill and
indefinite-lived intangible assets are not amortized, but are subject to impairment testing at least annually. When factors indicate that
such assets should be evaluated for possible impairment between the scheduled annual impairment tests, we perform an interim
impairment test. Our other long-lived assets consist primarily of property and equipment, deferred income tax assets, capitalized
software, and amortizable intangible assets related to customer relationships, technology, and trade names with finite lives. Other
long-lived assets are evaluated for impairment when impairment indicators are identified.
In the annual impairment analysis of goodwill, we compare the carrying value of our reporting units, including goodwill, to the
estimated fair values of those reporting units as determined by a combination of the income approach, specifically discounting future
projected cash flows, and the market approach, specifically the Guideline Public Company Method, as described in more detail in
Note 1, "Significant Accounting and Reporting Policies," of our accompanying consolidated financial statements in Item 8 of this
Annual Report on Form 10-K. We perform an interim impairment analysis of goodwill when an event occurs or circumstances change
between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value. The estimated
fair values of our reporting units are based upon certain assumptions made by us. The estimated fair values of our reporting units are
reconciled to the Company's total market capitalization, including an estimated implied control premium, as determined by its stock
price in order to assist in evaluating the reasonableness of the estimated fair values of each of the reporting units.
Goodwill impairment testing is performed on a reporting unit basis. If the fair value of the reporting unit exceeds its carrying
value, including goodwill, goodwill is considered not impaired. If the carrying value of a reporting unit exceeds its fair value, an
impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that
reporting unit. The loss recognized cannot subsequently be reversed.
We have the option to perform a qualitative assessment of goodwill prior to completing the quantitative analysis described above
to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill.
If we conclude that this is the case, we perform the quantitative analysis discussed above.
During 2021, the Company performed its goodwill impairment testing. The estimated fair value of each reporting unit tested
exceeds their carrying value by a significant margin. The Company intends to continue to monitor the performance of its reporting
units for potential indicators of impairment. If impairment indicators exist, the Company will perform an interim goodwill impairment
analysis.
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The key assumptions used in estimating the fair value of our reporting units utilizing the income approach include the discount
rate and the terminal growth rate. The discount rates utilized in estimating the fair value of our reporting units in 2021 range between
12.5% and 15.0%, reflecting our assessment of a market participant's view of the risks associated with the projected cash flows. The
terminal growth rate used in the analysis was 2.0%. The assumptions used in estimating the fair values are based on currently
available data and management's best estimates of revenues and cash flows and, accordingly, a change in market conditions or other
factors could have a material effect on the estimated values. There are inherent uncertainties related to the assumptions used and to
management's application of these assumptions.
During the first quarter of 2020, the Company identified a goodwill impairment indicator in its former Crawford Claims Solutions
reporting unit as a result of lower operating results and the overall decline in market conditions as a result of the COVID-19 pandemic.
As a result, the Company recognized a goodwill impairment of $17.7 million, reducing the goodwill carrying value of the former
Crawford Claims Solutions to $0 as of March 31, 2020.
The indefinite-lived intangible assets consisting of the Crawford TPA Solutions and SLS trade names, with carrying values of
$29.1 million and $1.8 million, respectively, are also evaluated for potential impairment on an annual basis or when indicators of
potential impairment are identified. SLS operates in the Crawford Loss Adjusting International segment within the U.K. Based on our
2021 analysis, we do not believe these trade names are impaired. The indefinite-lived intangible asset impairment test involves
estimating the fair value using an internally prepared discounted cash flow analysis. The fair values of the Company's trade names are
established using the relief-from-royalty method, a form of the income approach. This method recognizes that, by virtue of owning the
trade name as opposed to licensing it, a company or reporting unit is relieved from paying a royalty, usually expressed as a percentage
of net sales, for the asset's use. The present value of the after-tax costs savings (i.e., royalty relief) at an appropriate discount rate
including a tax amortization benefit indicates the value of the trade name. We determined the discount rate based on our performance
compared to similar market participants, factored by risk in forecasting using a modified capital asset pricing model.
The values of the Broadspire and SLS trade names are each sensitive to changes in the assumptions used above, however the
estimated fair value of our Broadspire and SLS trade names exceed their carrying value. We will continue to monitor the value of
these trade names for potential indicators of impairment.
Defined Benefit Pension Plans
We sponsor various defined benefit pension plans in the U.S. and U.K. that cover a substantial number of current and former
employees in each location. Certain other employees located in the Netherlands, Norway, Germany, and the Philippines have
retirement benefits that are accounted for as defined benefit pension plans under GAAP. We utilize the services of independent
actuaries to help us estimate our pension obligations and measure pension costs. Our U.S. Qualified Plan was frozen on December 31,
2002. Our U.K. Plans were closed to new employees as of October 31, 1997, but existing participants may still accrue additional
limited benefits based on salary levels existing at the close date. Benefits payable under our U.S. Qualified Plan are generally based on
career compensation; however, no additional benefits accrue on our frozen U.S. Qualified Plan after December 31, 2002. Benefits
payable under the U.K. Plans are generally based on an employee's salary at the time the applicable plan was closed. Our funding
policy is to make cash contributions in amounts sufficient to maintain the plans on an actuarially sound basis, but not in excess of
amounts deductible under applicable income tax regulations. Note 8, "Retirement Plans," of our accompanying consolidated financial
statements included in Item 8 of this Annual Report on Form 10-K provides details about the assumptions used in determining the
funded status of the plans, the unrecognized actuarial gain/(loss), the components of net periodic benefit cost, benefit payments
expected to be made in the future and plan asset allocations.
Investment objectives for the Company's U.S. and U.K. pension plan assets are to:
•
•
•
ensure availability of funds for payment of plan benefits as they become due;
provide for a reasonable amount of long-term growth of capital, without undue exposure to volatility, and protect the assets
from erosion of purchasing power; and
provide investment results that meet or exceed the plans' actuarially assumed long-term rate of return.
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The long-term goal for the U.S. and U.K. defined benefit pension plans is to reach fully-funded status and to maintain that status.
The investment policies contemplate the plans' asset return requirements and risk tolerances changing over time. Accordingly,
reallocation of the portfolios' mix of return-seeking assets and liability-hedging assets will be performed as the plans' funded status
improves. In conjunction with our investment policies we have rebalanced the U.S. and U.K. defined benefit pension plans' target
allocation mix from an equity-weighted to a fixed-income weighted investment strategy, as we have made cash contributions to the
plan and the plans' funded status has improved.
The rules for pension accounting are complex and the assumptions used can produce volatility in our results, financial condition
and liquidity. Our pension expense is primarily a function of the value of our plan assets and the discount rate used to measure our
pension liability at a single point in time at the end of our fiscal year (the measurement date). Both of these factors are significantly
influenced by the stock and bond markets, which are subject to volatility.
In addition to expense volatility, we are required to record mark-to-market adjustments to our balance sheet on an annual basis for
the net funded status of our pension plans. These adjustments have fluctuated significantly over the past several years and, like our
pension expense, are a result of the discount rate and value of our plan assets at each measurement date, as well as periodic changes to
mortality tables used to estimate the life expectancy of plan participants. The funded status of our plans may also impact our liquidity,
as changes to funding laws in the U.S. may require higher funding levels for our pension plans.
The principal assumptions used in accounting for our defined benefit pension plans are the discount rate, the expected long-term
return on plan assets, and the mortality expectations for plan participants. The discount rate assumptions reflect the rates at which the
benefit obligations could be effectively settled. Our discount rates were determined with the assistance of actuaries, who calculate the
yield on a theoretical portfolio of high-grade corporate bonds (rated Aa or better) with cash flows that generally match our expected
benefit payments in future years. At December 31, 2021, the discount rate used to compute the benefit obligations of the U.S. and
U.K. defined benefit pension plans were 2.76% and 1.82%, respectively.
The estimated average rate of return on plan assets is a long-term, forward-looking assumption that also materially affects our
pension cost. It is required to be the expected future long-term rate of earnings on plan assets. Our pension plan assets are invested
primarily in collective funds. As part of our strategy to manage future pension costs and net funded status volatility, we have
transitioned to a liability-driven investment strategy with a greater concentration of fixed-income securities as described above.
Establishing the expected future rate of investment return on our pension assets is a judgmental matter. Management considers the
following factors in determining this assumption:
•
•
•
the duration of our pension plan liabilities, which drives the investment strategy we can employ with our pension plan assets;
the types of investment classes in which we invest our pension plan assets and the expected return we can reasonably expect
those investment classes to earn over time; and
the investment returns we can reasonably expect our investment management program to achieve in excess of the returns we
could expect if investments were made strictly in indexed funds.
We review the expected long-term rate of return on an annual basis and revise it as appropriate. To support our conclusions, we
periodically commission asset/liability studies performed by third-party professional investment advisors and actuaries to assist us in
our reviews. These studies project our estimated future pension payments and evaluate the efficiency of the allocation of our pension
plan assets into various investment categories. These studies also generate probability-adjusted expected future returns on those assets.
As a result of the transition to a liability-driven investment strategy described previously, the expected long-term rates of return on
plan assets assumption used to determine 2022 net periodic pension cost are estimated to be 4.80% and 2.40% for the U.S. and U.K.
plans, respectively.
We review our employee demographic assumptions annually and update the assumptions as necessary. During 2021, we revised
the mortality assumptions for the U.S. plans to incorporate the new mortality tables issued by the Society of Actuaries, adjusted to
reflect Company-specific experience and future expectations. This resulted in a $1.2 million decrease in the projected benefit
obligation for the U.S. plans.
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Pension expense is also affected by the accounting policy used to determine the value of plan assets at the measurement date. We
apply our expected return on plan assets using fair market value as of the annual measurement date. The fair market value method
results in greater volatility to our pension expense than the calculated value method. The amounts recognized in the balance sheet
reflect a snapshot of the state of our long-term pension liabilities at the plan measurement date and the effect of mark-to-market
accounting on plan assets. At December 31, 2021, we recorded an increase to equity through other comprehensive income ("OCI") of
$1.6 million (net of tax at the applicable jurisdictional rate) to reflect unrealized actuarial gains during 2021. At December 31, 2020,
we recorded a decrease to equity through OCI of $5.0 million (net of tax at the applicable jurisdictional rate) to reflect unrealized
actuarial losses during 2020. Those changes are subject to amortization over future years and may be reflected in future income
statements.
Cumulative unrecognized actuarial losses for all plans were $251.6 million through December 31, 2021, compared with $264.2
million through December 31, 2020. These unrecognized losses reflect changes in the discount rates, differences between expected
and actual asset returns, and changes to mortality expectations for plan participants, which are being amortized over future periods.
These unrecognized losses may be recovered in future periods through actuarial gains. However, unless the minimum amount required
to be amortized is below a corridor amount equal to 10.0% of the greater of the projected benefit obligation or the market-related
value of plan assets, these unrecognized actuarial losses are required to be amortized and recognized in future periods. For example,
projected pension plan expense includes $10.2 million of amortization of these actuarial losses in 2022 versus $10.4 million in 2021
and $10.8 million in 2020.
Net periodic pension expense for our defined benefit pension plans is sensitive to changes in the underlying assumptions for the
expected rates of return on plan assets and the discount rates used to determine the present value of projected benefits payable under
the plans. If our assumptions for the expected returns on plan assets of our U.S. and U.K. defined benefit pension plans changed by
0.50%, representing either an increase or decrease in expected returns, the impact to 2021 consolidated pretax income would have
been approximately $3.5 million. If our assumptions for the discount rates used to determine the present value of projected benefits
payable under the plans changed by 0.25%, representing either an increase or decrease in interest rates used to value pension plan
liabilities, holding all other assumptions constant, the projected benefit obligations of our U.S. and U.K. defined benefit pension plans
would have changed by approximately $20.1 million, and the impact to 2021 consolidated pretax income would have been
approximately $0.3 million. Net periodic pension expense is also sensitive to mortality assumptions. If the life expectancy of pension
plan participants in our U.S. Qualified Plan was to increase by one year compared to current assumptions, our pension obligations
would have changed by $14.7 million and our annual pension cost would have changed by $0.7 million, respectively.
We estimate the service and interest components of net periodic benefit cost for U.S. and international pension and other
postretirement benefits. This approach discounts the individual expected cash flows underlying the service cost and interest cost using
the applicable spot rates derived from the yield curve used to discount the cash flows used to measure the benefit obligation. For the
pension plans, the weighted average spot rates used to determine interest costs were 2.18% for the Company’s U.S. plan and 1.68%
for the U.K. plans.
Income Taxes
We account for certain income and expense items differently for financial reporting and income tax purposes. Provisions for
deferred taxes are made in recognition of these temporary differences. The most significant differences relate to accrued compensation
and pensions, depreciation and amortization.
For financial reporting purposes in accordance with the liability method of accounting for income taxes, the provision for income
taxes is the sum of income taxes both currently payable and deferred. Currently payable income taxes represent the liability related to
our income tax returns for the current year, while the net deferred tax expense or benefit represents the change in the balance of
deferred tax assets or liabilities as reported on our consolidated balance sheets that are not related to balances in "Accumulated other
comprehensive loss." The changes in deferred tax assets and liabilities are determined based upon changes between the basis of assets
and liabilities for financial reporting purposes and the basis of assets and liabilities for income tax purposes, multiplied by the enacted
statutory tax rates for the year in which we estimate these differences will reverse. We must estimate the timing of the reversal of
temporary differences, as well as whether taxable income in future periods will be sufficient to fully recognize any gross deferred tax
assets.
Other factors which influence our effective tax rate used for financial reporting purposes include changes in enacted statutory tax
rates, changes in tax law or policy, changes in the composition of taxable income from the countries in which we operate, our ability
to utilize net operating loss and tax credit carryforwards, and changes in unrecognized tax benefits.
47
Our effective tax rate, defined as our provision for income taxes divided by income before income taxes, for financial reporting
purposes in 2021, 2020, and 2019 was 30.4%, 30.7%, and 59.7%, respectively. If our effective tax rate used for financial reporting
purposes changed by 1.0%, we would have recognized an increase or decrease to income taxes of approximately $0.4 million, $0.4
million and $0.2 million for the years ended December 31, 2021, 2020, and 2019, respectively. Our effective tax rate for financial
reporting purposes is expected to range between 29% and 31% in 2022 before considering any unknown discrete items and assuming
no changes in tax law or policy in the material jurisdictions in which we operate.
It is possible that future changes in the tax laws of jurisdictions in which we operate, including but not limited to changes in tax
law or policy, could have a significant impact on U.S.-based multinational companies such as our Company. At this time, we cannot
predict the likelihood or details of any such changes or their specific potential impact on our Company.
Our most significant deferred tax assets are related to the unfunded liability of our defined benefit pension plans, tax credit
carryforwards and net operating loss ("NOL") carryforwards. The tax deduction for defined benefit pension plans generally occurs
upon funding of plan liabilities. Assuming that the estimated minimum funding requirements for the defined benefit pension plans and
the income projections are met, the deferred tax asset should be realized.
In accordance with GAAP, we have considered the four possible sources of taxable income that may be available to realize a tax
benefit for deductible temporary differences and carryforwards and have a $13.4 million valuation allowance on certain net operating
loss and tax credit carryforwards in our international and domestic operations. For our remaining deferred tax assets, we believe that it
is more likely than not that we will realize these assets based on our forecast of future taxable income and tax planning strategies that
are available to the Company. Future changes in the valuation allowance, if required, should not affect our liquidity or our compliance
with any existing debt covenants.
Our tax credit carryforwards primarily consist of $1.5 million of U.S. foreign tax credit ("FTC") carryforwards, of which $0.9
million expire in 2022. Companies that cannot credit all the foreign taxes paid or deemed paid in a particular tax year because their
foreign taxes exceed their FTC limitation are allowed to carry their excess taxes back to the preceding tax year and then forward to the
ten succeeding years. Utilization of our FTCs is dependent upon sufficient U.S. regular taxable income and foreign source income in
the relevant foreign tax credit basket, which is impacted by the interaction of overall domestic and overall foreign loss rules. Based on
our projections of income through 2022, we expect to fully utilize all but $0.8 million of the FTC carryforwards before expiration, for
which a valuation allowance is recorded, after consideration of the four sources of taxable income.
The NOL carryforwards for which a valuation allowance is not recorded primarily consists of $16.1 million of U.K. NOL
carryforwards and $4.3 million of state NOL carryforwards generated by our domestic companies. In the U.K., NOL carryforwards
have an unlimited life. Based on our evaluation of sources of taxable income, we expect to utilize all but $1.0 million of the U.K. NOL
carryforwards. For the remaining $15.1 million, we concluded that it was more likely than not that we should be able to utilize our
U.K. NOL carryforwards.
In order to fully utilize these state NOL carryforwards, our domestic operations must generate taxable income prior to the
expiration of the carryforwards. After consideration of the four sources of taxable income, we concluded that it was more likely than
not that the Company should be able to utilize its state NOL carryforwards in the majority of jurisdictions before expiration. However,
there were certain filing groups and jurisdictions that the Company does not expect to fully utilize its state NOL carryforwards before
expiration. For those jurisdictions, we concluded that it was not more likely than not that the Company should be able to utilize its
state NOL carryforwards and a valuation allowance was recorded. The valuation allowance against state NOL carryforwards was $0.4
million and $2.2 million for the periods ended December 31, 2021 and 2020, respectively.
The remaining NOL carryforwards were generated by certain foreign jurisdictions and are generally offset by full valuation
allowances.
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Self-Insured Risks
We self-insure certain insurable risks consisting primarily of professional liability, auto liability, employee medical, disability,
and workers' compensation. Insurance coverage is obtained for catastrophic property and casualty exposures, including professional
liability on a claims-made basis, and those risks required to be insured by law or contract. Most of these self-insured risks are in the
U.S. Provisions for claims incurred under self-insured programs are made based on our estimates of the aggregate liabilities for claims
incurred, including estimated legal fees, losses that have occurred but have not been reported to us, and the adverse developments on
reported losses. These estimated liabilities are calculated based on historical claim payment experience, the expected life of the claims,
and other factors considered relevant to the claims. The liabilities for claims incurred under our self-insured workers' compensation
and employee disability programs are discounted at the prevailing risk-free rate for government issues of an appropriate duration. All
other self-insured liabilities are undiscounted. Each quarter we evaluate the adequacy of the assumptions used in developing these
estimated liabilities and make adjustments as necessary. Changes in estimates are recognized in the period in which they are
determined. Historically, our estimates have been materially accurate.
As of December 31, 2021 and 2020, our estimated liabilities for self-insured risks totaled $26.2 million and $25.0 million,
respectively. The estimated liability is most sensitive to changes in the ultimate liability for a claim and, if applicable, the interest rate
used to discount the liability. We believe our provisions for self-insured losses are adequate to cover the expected cost of losses
incurred. However, these provisions are estimates and amounts ultimately settled may be significantly greater or less than the
provisions established. We used a discount rate of 1.2% to determine the present value of our self-insured workers' compensation
liabilities as of December 31, 2021. If the average discount rate was decreased or increased by 1.0%, reflecting either an increase or
decrease in underlying interest rates, our estimated liabilities for these self-insured risks at December 31, 2021 would have been
impacted by approximately $0.6 million, resulting in an equivalent increase or decrease to 2021 consolidated pretax income.
Business Combinations
The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at
their estimated fair values as of the acquisition date. Goodwill is recorded as the excess of the fair value of consideration transferred,
including any contingent consideration, over the fair value of the net assets acquired. We estimate the fair values of identifiable
intangible assets, including customer relationships, tradenames, and developed technology, on valuations that require management to
make significant judgments, estimates, and assumptions, such as the expected future cash flows to be derived from the intangible
assets based on projected revenues, EBITDA, customer attribution rates, and royalty rates. Additionally, we make assumptions related
to discount rates that reflect the risk factors associated with future cash flows, and estimates of useful lives.
We measure and recognize contingent consideration at fair value as of the acquisition date based on a Monte Carlo simulation
model. These fair value measurements require the use of significant judgments, estimates, and assumptions, including projected
financial results such as projected revenues and EBITDA, discount rates, and volatility during the contingent consideration earnout
period. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest financial
projections and input from management, with any change in the fair value estimate recorded in earnings in that period. Increases or
decreases in the fair value of contingent consideration liabilities resulting from changes in the estimates or assumptions could
materially impact the financial statements. See Note 3 “Business Acquisitions and Dispositions” of our accompanying consolidated
financial statements for additional information on our acquisitions and Note 12 “Fair Value Measurements” of our accompanying
consolidated financial statements for additional information on our contingent consideration liabilities.
New Accounting Standards
See Note 1, "Significant Accounting and Reporting Policies," of our accompanying consolidated financial statements in Item 8 of
this Annual Report on Form 10-K for a description of recent accounting pronouncements including the dates, or expected dates of
adoption, and effects, or expected effects, on our disclosures, results of operations, financial condition and cash flows.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our operations expose us to various market risks, primarily from changes in foreign currency exchange rates and interest rates.
Our objective is to identify and understand these risks and implement strategies to manage them. When evaluating potential strategies,
we consider the fundamentals of each market and the underlying accounting and business implications. To implement our various
strategies, we may enter into various hedging or similar transactions. The sensitivity analyses we present below do not consider the
effect of possible adverse changes in the general economy, nor do they consider additional actions we may take from time to time in
the future to mitigate our exposure to these or other market risks. There can be no assurance of the manner in which we will manage or
continue to manage any risks in the future or that any of our efforts will be successful.
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Foreign Currency Exchange Rate Risk
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 before reimbursements from our international operations included in each of our operating segments were
40.2%, 41.9%, and 43.4% of consolidated revenues before reimbursements for 2021, 2020, and 2019, respectively. We do not
presently engage in any hedging activities to compensate for the effect of potential currency exchange rate fluctuations on the net
assets or operating results of our foreign subsidiaries. The following table illustrates revenue as a percentage of total revenue for the
major currencies of the geographic areas in which Crawford does business:
Year Ended December 31,
(in thousands, except percentages)
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total Revenues, before reimbursements
USD
GBP
CAD
AUD
EUR
2021
USD
equivalent
$
658,785
134,663
84,945
105,633
54,136
63,870
$ 1,102,032
% of total
2020
USD
equivalent
% of total
59.8% $
12.2%
7.7%
9.6%
4.9%
5.8%
$
570,820
128,674
89,162
80,589
54,122
59,125
982,492
58.1%
13.1%
9.1%
8.2%
5.5%
6.0%
We measure foreign currency exchange rate risk based on changes in foreign currency exchange rates using a sensitivity analysis.
The sensitivity analysis measures the potential change in earnings based on a hypothetical 10.0% change in currency exchange rates.
Exchange rates and currency positions as of December 31, 2021 were used to perform the sensitivity analysis. Such analysis indicated
that a hypothetical 10.0% change in foreign currency exchange rates would have increased or decreased consolidated pretax income
during 2021 by approximately $0.4 million had the U.S. dollar exchange rate increased or decreased relative to the currencies to which
we had exposure.
Interest Rate Risk
Borrowings under the Credit Facility bear interest at a variable rate, based on Eurocurrency Rate, and alternative reference rate or
a Base Rate (as defined), at our option. The Credit Facility defines Eurocurrency Rate to encompass accepted alternative reference
rates for certain currencies where a LIBOR rate is no longer quoted. As a result, we have market risk exposure to changes in interest
rates. Based on the amounts of our floating rate debt at December 31, 2021 and December 31, 2020, if market interest rates had
increased or decreased an average of 100 basis points our pretax interest expense would have changed by $1.8 million and $1.1
million in 2021 and 2020, respectively. We determined these amounts by considering the impact of the hypothetical change in interest
rates on our borrowing costs.
Changes in the projected benefit obligations of our defined benefit pension plans are largely dependent on changes in prevailing
interest rates as of the plans' respective measurement dates, which are used to value these obligations under ASC 715, "Compensation-
-Retirement Benefits." If our assumptions for the discount rates used to determine the present value of the projected benefit
obligations changed by 0.25%, representing either an increase or decrease in the discount rate, the projected benefit obligations,
holding all other assumptions constant, of our U.S. and U.K. defined benefit pension plans would have changed by approximately
$20.1 million at December 31, 2021. The impact of this change to December 31, 2021 consolidated pretax income would have been
approximately $0.3 million.
Periodic pension cost for our defined benefit pension plans is impacted primarily by changes in long-term interest rates whereas
interest expense for our variable-rate borrowings is impacted more directly by changes in short-term interest rates. To the extent
changes in interest rates on our variable-rate borrowings move in the same direction as changes in the discount rates used for our
defined benefit pension plans, changes in our interest expense on our borrowings would be offset to some degree by changes in our
defined benefit pension cost. We are unable to quantify the extent of any such offset.
Inflation Risk
An increase in inflation could affect our business in several ways. Inflation increases expenses for labor and other operating costs,
potentially putting pressure on our profitability if such costs cannot be passed through to our customers. Inflation could also lead to
increased costs for losses and loss adjustment expenses in our Crawford Loss Adjusting and Platform Solution segments. Prolonged
and elevated inflation could adversely affect the financial markets and the economy generally, and may force governments to pursue a
restrictive fiscal and monetary policy, which could constrain overall economic activity or inhibit our revenue growth opportunities.
50
Credit Risk Related to Performing Certain Services for Our Clients
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.
51
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Investment
Notes to Consolidated Financial Statements
Management’s Statement on Responsibility for Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Page
53
54
55
57
58
59
101
102
52
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended December 31,
Revenues from Services:
Revenues before reimbursements
Reimbursements
Total Revenues
Costs and Expenses:
Costs of services provided, before reimbursements
Reimbursements
Total costs of services
Selling, general, and administrative expenses
Corporate interest expense, net of interest income of $424, $264 and $745,
respectively
Goodwill impairment
Arbitration and claim settlements
Restructuring and other costs, net
Gain on disposition of businesses, net
Total Costs and Expenses
Other Income (Loss)
Income Before Income Taxes
Provision for Income Taxes
Net Income
Net Loss Attributable to Noncontrolling Interests and Redeemable
Noncontrolling Interests
Net Income Attributable to Shareholders of Crawford & Company
Earnings Per Share - Basic:
Class A Common Stock
Class B Common Stock
Earnings Per Share - Diluted:
Class A Common Stock
Class B Common Stock
Weighted-Average Shares Used to Compute Basic Earnings Per Share:
Class A Common Stock
Class B Common Stock
Weighted-Average Shares Used to Compute Diluted Earnings Per
Share:
Class A Common Stock
Class B Common Stock
Cash Dividends Per Share:
Class A Common Stock
Class B Common Stock
2021
2020
2019
$
$
1,102,032
37,199
1,139,231
$
982,492
33,703
1,016,195
1,005,802
41,825
1,047,627
810,231
37,199
847,430
244,850
6,559
—
—
—
—
1,098,839
3,472
43,864
13,316
30,548
144
30,692
0.58
0.58
0.57
0.57
30,760
22,237
31,743
22,237
$
$
$
$
$
703,617
33,703
737,320
218,952
7,923
17,674
—
8,133
(13,763)
976,239
(868)
39,088
12,013
27,075
1,221
28,296
0.54
0.52
0.54
0.52
30,605
22,527
30,857
22,527
$
$
$
$
$
0.24
0.24
$
$
0.19
0.17
$
$
710,948
41,825
752,773
227,170
10,774
17,484
12,552
—
—
1,020,753
(3,237)
23,637
14,111
9,526
2,959
12,485
0.27
0.19
0.26
0.19
30,637
22,975
31,090
22,975
0.28
0.20
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
53
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended December 31,
Net Income
Other Comprehensive Income:
Net foreign currency translation gain (loss), net of tax benefit of $0, $0
and $0, respectively
Amounts reclassified into net income for defined benefit pension plans,
net of tax provision of $2,691, $2,693, and $2,682, respectively
Net unrealized gain (loss) on defined benefit plans arising during the year,
net of tax (provision) benefit of ($541), $1,655, and ($649), respectively
Other Comprehensive Income
Comprehensive Income
Comprehensive loss attributable to noncontrolling interests and
redeemable noncontrolling interests
Comprehensive Income Attributable to Shareholders of Crawford &
Company
2021
2020
2019
$
30,548
$
27,075
$
9,526
9,024
7,765
1,618
18,407
48,955
152
4,281
7,959
(4,966)
7,274
34,349
1,535
(180)
8,002
1,036
8,858
18,384
3,641
$
49,107
$
35,884
$
22,025
The accompanying notes are an integral part of these consolidated financial statements.
54
CRAWFORD & COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
Current Assets:
ASSETS
2021
2020
Cash and cash equivalents
Accounts receivable, less allowance for expected credit losses of $8,768 and $9,464,
respectively
Unbilled revenues, at estimated billable amounts
Income taxes receivable
Prepaid expenses and other current assets
Total Current Assets
Net Property and Equipment
Other Assets:
Operating lease right-of-use asset, net
Goodwill
Intangible assets arising from business acquisitions, net
Capitalized software costs, net
Deferred income tax assets
Other noncurrent assets
Total Other Assets
TOTAL ASSETS
$
53,228
$
44,656
134,458
118,722
4,936
34,576
345,920
33,721
99,369
116,526
97,571
75,802
21,266
62,464
472,998
852,639
$
123,060
103,528
1,269
29,490
302,003
36,402
109,315
66,537
71,176
71,021
25,595
70,935
414,579
752,984
$
The accompanying notes are an integral part of these consolidated financial statements.
55
CRAWFORD & COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
December 31,
Current Liabilities:
LIABILITIES AND SHAREHOLDERS' INVESTMENT
2021
2020
Short-term borrowings
Accounts payable
Accrued compensation and related costs
Self-insured risks
Income taxes payable
Operating lease liability
Other accrued liabilities
Deferred revenues
Total Current Liabilities
Noncurrent Liabilities:
Long-term debt and finance leases, less current installments
Deferred revenues
Accrued pension liabilities
Operating lease liability
Other noncurrent liabilities
Total Noncurrent Liabilities
Shareholders' Investment:
Class A common stock, $1.00 par value, 50,000 shares authorized; 30,996 and 30,847
shares issued and outstanding, respectively
Class B common stock, $1.00 par value, 50,000 shares authorized; 20,812 and 22,510
shares issued and outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Shareholders' Investment Attributable to Shareholders of Crawford & Company
Noncontrolling interests
Total Shareholders' Investment
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT
$
$
$
10,704
48,470
96,018
13,222
1,200
25,238
76,884
32,119
303,855
164,315
23,786
17,892
88,408
42,986
337,387
1,837
41,544
81,848
11,390
5,822
32,745
40,375
27,233
242,794
111,758
24,136
53,886
93,228
40,254
323,262
30,996
30,847
20,812
74,229
266,369
(180,441)
211,965
(568)
211,397
852,639
$
22,510
67,193
265,245
(198,856)
186,939
(11)
186,928
752,984
The accompanying notes are an integral part of these consolidated financial statements.
56
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2021
2020
2019
$
30,548
$
27,075
$
9,526
Year Ended December 31,
Cash Flows from Operating Activities:
Net income
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization
Goodwill impairment
Deferred income taxes
Gain on disposition of businesses, net
Stock-based compensation costs
Changes in operating assets and liabilities, net of effects of acquisitions
and dispositions:
Accounts receivable, net
Unbilled revenues, net
Accrued or prepaid income taxes
Accounts payable and accrued liabilities
Deferred revenues
Accrued retirement costs
Prepaid expenses and other operating activities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Acquisitions of property and equipment
Capitalization of computer software costs
Cash proceeds from disposition of business line
Payments for business acquisitions, net of cash acquired
Proceeds from settlement of life insurance policies
Other investing activities
Net cash used in investing activities
Cash Flows from Financing Activities:
Cash dividends paid
Payments related to shares received for withholding taxes under stock-
based compensation plans
Proceeds from shares purchased under employee stock-based
compensation plans
Repurchases of common stock
Payments of contingent consideration on acquisitions
Payments for equity investments
Increases in short-term and revolving credit facility borrowings
Payments on short-term and revolving credit facility borrowings
Payments on finance lease obligations
Capitalized loan costs
Dividends paid to noncontrolling interests
Net cash provided by (used in) financing activities
Effects of exchange rate changes on cash and cash equivalents
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year
Cash, Cash Equivalents, and Restricted Cash at End of Year
$
40,176
—
(2,992)
—
7,585
(5,475)
(9,979)
(7,232)
13,470
3,562
(15,478)
136
54,321
(9,225)
(21,729)
—
(46,398)
6,526
—
(70,826)
(12,663)
(1,411)
1,648
(19,134)
(1,544)
(106)
113,312
(52,306)
(432)
(2,302)
(405)
24,657
881
9,033
44,656
53,689
40,111
17,674
(9,005)
(13,763)
4,384
5,063
(3,762)
9,311
31,775
(1,074)
(10,790)
(3,821)
93,178
(14,226)
(23,154)
19,968
(9,983)
—
358
(27,037)
40,513
17,484
3,040
—
4,109
5,922
5,302
(5,985)
(6,946)
(281)
3,387
(855)
75,216
(8,688)
(12,436)
—
(2,296)
—
—
(23,420)
(9,645)
(13,171)
(476)
(827)
811
(2,666)
—
(602)
108,142
(169,675)
(62)
—
(196)
(74,369)
1,082
(7,146)
51,802
44,656
$
$
2,104
(26,210)
—
—
66,197
(80,948)
(93)
—
(458)
(53,406)
293
(1,317)
53,119
51,802
The accompanying notes are an integral part of these consolidated financial statements.
57
CRAWFORD & COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands)
Common Stock
Class A
Non-Voting
Class B
Voting
Additional
Paid-In
Capital
Retained
Earnings
Balance at December 31, 2018
$
Net income (1)
Other comprehensive loss
Cash dividends paid (Class A - $0.28 per
share, Class B - $0.20 per share)
Stock-based compensation
Repurchases of common stock
Shares issued in connection with stock-based
compensation plans, net
Dividends paid to noncontrolling interests
Balance at December 31, 2019
Net income (1)
Other comprehensive income (loss)
Cash dividends paid (Class A - $0.19 per
share, Class B - $0.17 per share)
Stock-based compensation
Repurchases of common stock
Shares issued in connection with stock-based
compensation plans, net
Decrease in value of noncontrolling interest
due to acquisition
Increase in value of noncontrolling interest
due to disposition
Adoption of Topic 326
Dividends paid to noncontrolling interests
Balance at December 31, 2020
Net income
Other comprehensive income (loss)
Cash dividends paid (Class A - $0.24 per
share, Class B - $0.24 per share)
Stock-based compensation
Repurchases of common stock
Shares issued in connection with stock-
based compensation plans, net
Decrease in value of noncontrolling interest
due to acquisition
Dividends paid to noncontrolling interests
Balance at December 31, 2021
$
30,927 $
—
—
$
24,408
—
—
$
58,793
—
—
—
—
(1,103)
786
—
30,610
—
—
—
—
(155)
392
—
—
—
—
30,847
—
—
—
—
(531)
680
—
—
(1,737)
—
—
22,671
—
—
—
—
(161)
—
—
—
—
—
22,510
—
—
—
—
(1,698)
—
—
4,109
—
490
—
63,392
—
—
—
4,384
—
(57)
(526)
—
—
—
67,193
—
—
—
7,585
—
(443)
—
—
30,996 $
—
—
20,812
$
(106)
—
74,229
$
273,607
12,485
—
(13,171)
—
(23,370)
—
—
249,551
28,296
—
(9,645)
—
(2,350)
—
—
—
(607)
—
265,245
30,692
—
(12,663)
—
(16,905)
—
—
—
266,369
Accumulated
Other
Comprehensive
(Loss) Income
$
(216,447) $
—
9,540
—
—
—
—
—
(206,907)
—
7,588
—
—
—
—
576
(113)
—
—
(198,856)
—
18,415
—
—
—
—
—
—
$
(180,441) $
Shareholders'
Investment
Attributable to
Shareholders
of Crawford
& Company
Noncontrolling
Interests
Total
Shareholders'
Investment
$
171,288
12,485
9,540
$
4,158
232
(682)
(13,171)
4,109
(26,210)
1,276
—
159,317
28,296
7,588
(9,645)
4,384
(2,666)
335
50
(113)
(607)
—
186,939
30,692
18,415
(12,663)
7,585
(19,134)
237
—
—
—
—
(458)
3,250
1,037
(314)
—
—
—
—
(151)
(3,637)
—
(196)
(11)
(144)
(8)
—
—
—
—
(106)
—
211,965
$
—
(405)
(568) $
175,446
12,717
8,858
(13,171)
4,109
(26,210)
1,276
(458)
162,567
29,333
7,274
(9,645)
4,384
(2,666)
335
(101)
(3,750)
(607)
(196)
186,928
30,548
18,407
(12,663)
7,585
(19,134)
237
(106)
(405)
211,397
The accompanying notes are an integral part of these consolidated financial statements.
(1)
The total net income presented in the consolidated statement of shareholders' investment for the years ended December 31, 2019 and December 31, 2020
excludes $3,191 and $2,258 respectively, in net loss attributable to the redeemable noncontrolling interests.
58
Notes to Consolidated Financial Statements
1. Significant Accounting and Reporting Policies
Nature of Operations
Based in Atlanta, Georgia, Crawford & Company ("Crawford" or "the Company") is the world's largest publicly listed
independent provider of claims management and outsourcing solutions to carriers, brokers and corporations with an expansive global
network serving clients in more than 70 countries. Shares of the Company's two classes of common stock are traded on the New York
Stock Exchange ("NYSE") under the symbols CRD-A and CRD-B, respectively. The Company's two classes of stock are substantially
identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting Class A
Common Stock than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or
similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B
Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, voting as a class.
The Company's website is www.crawco.com. The information contained on, or hyperlinked from, the Company's website is not a part
of, and is not incorporated by reference into, this report.
Principles of Consolidation
The accompanying consolidated financial statements were prepared in accordance with generally accepted accounting principles
in the U.S. ("GAAP") and include the accounts of the Company, its majority-owned subsidiaries, and variable interest entities in
which the Company is deemed to be the primary beneficiary. Significant intercompany transactions are eliminated in consolidation.
Financial results from the Company's operations outside of the U.S., Canada, the Caribbean, and certain subsidiaries in the
Philippines, are reported and consolidated on a two-month delayed basis in accordance with the provisions of Accounting Standards
Codification ("ASC") 810, "Consolidation," in order to provide sufficient time for accumulation of their results. Accordingly, the
Company's December 31, 2021, 2020, and 2019 consolidated financial statements include the financial position of such operations as
of October 31, 2021 and 2020, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31,
2021, 2020, and 2019, respectively.
The Company has controlling ownership interests in several entities that are not wholly-owned by the Company. The financial
results and financial positions of these controlled entities are included in the Company's consolidated financial statements, including
the controlling interests, noncontrolling interests, and redeemable noncontrolling interests. The noncontrolling interests and
redeemable noncontrolling interests represent the equity interests in these entities that are not attributable, either directly or indirectly,
to the Company. On the Company's Consolidated Statements of Operations, net income or loss is separately attributed to the
controlling interests and noncontrolling interests and redeemable noncontrolling interests.
Noncontrolling interests represent the minority shareholders' share of the net income or loss and shareholders' investment in
consolidated subsidiaries. Noncontrolling interests are presented as a component of shareholders' investment in the Consolidated
Balance Sheets and reflect the initial fair value of these investments by noncontrolling shareholders, along with their proportionate
share of the income or loss of the subsidiaries, less any dividends or distributions.
The Company consolidates the results of a variable interest entity ("VIE") when it is determined to be the primary beneficiary. In
accordance with GAAP, in determining whether the Company is the primary beneficiary of a VIE for financial reporting purposes, it
considers whether it has the power to direct the activities of the VIE that most significantly impact the economic performance of the
VIE and whether it has the obligation to absorb losses or the right to receive returns that would be significant to the VIE.
The Company sold its 51% interest in Lloyd Warwick International Limited ("LWI") to a third party in June 2020. Prior to the
sale, LWI was considered a VIE of the Company. As the primary beneficiary of LWI, the Company consolidated the results of LWI
because of its controlling ownership interest and because Crawford had the obligation to absorb LWI's losses through the additional
financial support that Crawford may be obligated to provide. As a result of the sale, LWI is no longer considered a VIE of the
Company, and the Company no longer consolidates the results of LWI nor is obligated to provide financial support to LWI. See Note
3, “Business Acquisitions and Dispositions” of our accompanying consolidated financial statements for further discussion related to
the sale of the Company’s interest in LWI.
59
The Company consolidates the liabilities of its deferred compensation plan and the related assets, which are held in a rabbi trust
and also considered a VIE of the Company. The rabbi trust was created to fund the liabilities of the Company's deferred compensation
plan. The Company is considered the primary beneficiary of the rabbi trust because the Company directs the activities of the trust and
can use the assets of the trust to satisfy the liabilities of the Company's deferred compensation plan. At December 31, 2021 and 2020,
the liabilities of this deferred compensation plan were $7,060,000 and $7,961,000, respectively, which represented obligations of the
Company rather than of the rabbi trust, and the values of the assets held in the related rabbi trust were $9,925,000 and $16,323,000,
respectively. These liabilities and assets are included in "Other noncurrent liabilities" and "Other noncurrent assets" on the Company's
Consolidated Balance Sheets, respectively.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
The Company has not applied for governmental loans from the CARES Act or any other governmental programs to support the
Company’s U.S. operations. The Company took advantage of certain aspects of the CARES Act such as the deferral of payroll tax
deposits during 2020. The Company deferred payroll tax filings of $13,000,000 in 2020 as allowed by the CARES Act, and paid
$6,500,000 of that deferred total in 2021.
The Canadian government enacted the Canada Emergency Wage Subsidy (“CEWS”) in 2020 to provide a wage subsidy to
employers that suffered reductions in revenue resulting from the COVID-19 pandemic. The Company met the eligibility criteria to
receive the wage subsidy in 2020 and 2021. The wage subsidy is included in "Costs of services provided, before reimbursements” or
“Selling, general, and administrative expenses” on the Consolidated Statements of Operations, depending on the location of the
employees, and is recorded as a reduction of compensation expense. In 2021 and 2020, the Company recognized $5,850,000 and
$13,830,000, respectively, as a reduction of compensation expense as a result of this subsidy.
Reportable Segment Change
As described in Note 13, in January 2021, the Company reorganized its global service line structure to consist of Crawford Loss
Adjusting, Crawford TPA Solutions, and Crawford Platform Solutions. Certain prior year amounts among the Company's reportable
segments have been reclassified to conform to the current presentation. These reclassifications had no effect on the Company's
reported consolidated results.
Management's Use of Estimates
The preparation of financial statements in conformity with GAAP 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 materially from
those estimates.
Revenue Recognition
Revenues are recognized when control of the promised services are transferred to the Company's customers in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are recognized net of any
sales, use or value added taxes collected from customers, which are subsequently remitted to governmental authorities. As the
Company completes its performance obligations, it has an unconditional right to consideration as outlined in the Company's contracts.
The Company's Crawford Loss Adjusting segment generates revenue for claims management and adjusting services globally to
insurance companies and self-insured entities related to property and casualty losses caused by physical damage to commercial and
residential real property, certain types of personal property and marine losses. This segment also includes the Global Technical
Services service line, which generates revenues for claims management services provided to insurance companies and self-insured
entities related to large, complex losses with technical adjusting and industry experts. The Company's Crawford TPA Solutions
segment is a third party administrator that generates revenue through its Claims Management and Medical Management service lines.
The Company's Crawford Platform Solutions segment principally generates revenues through its Contractor Connection and Networks
service lines. The Contractor Connection service line generates revenue through its independently managed contractor network, with
approximately 6,000 credentialed residential and commercial contractors. See Note 2, “Revenue Recognition” for further discussion
on the Company’s revenue recognition policies.
Intersegment sales are recorded at cost and are not material.
60
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. The
fair value of cash and cash equivalents approximates carrying value due to their short-term nature. At December 31, 2021 and
December 31, 2020, cash and cash equivalents included time deposits of approximately $1,054,000 and $1,473,000, respectively, that
were in financial institutions outside the U.S.
Cash balances that are legally restricted as to usage or withdrawal are separately included in "Prepaid expenses and other current
assets" within the Consolidated Balance Sheets. The following table provides a reconciliation of cash, cash equivalents and restricted
cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown within the Consolidated
Statement of Cash Flows:
Year Ended December 31,
2021
2020
(In thousands)
2019
Cash and cash equivalents
Restricted cash within prepaid expenses and other current assets
Total cash, cash equivalents and restricted cash
$
$
53,228
461
53,689
$
$
44,656
—
44,656
$
$
51,802
—
51,802
Accounts Receivable and Allowance for Expected Credit Losses
The Company extends credit based on an evaluation of a client's financial condition and, generally, collateral is not required.
Accounts receivable are typically due upon receipt of the invoice and are stated on the Company's Consolidated Balance Sheets at
amounts due from clients net of an estimated allowance for expected credit losses. Accounts outstanding longer than the contractual
payment terms are considered past due. The fair value of accounts receivable approximates book value due to their short-term
contractual stipulations.
The Company maintains an allowance for expected credit losses resulting primarily from the inability of clients to make required
payments. Such losses are accounted for as bad debt expense. These allowances are established using historical write-off or
adjustment information to project future experience and by considering the current creditworthiness of clients, any known specific
collection problems, and an assessment of current industry and economic conditions. Actual experience may differ significantly from
historical or expected loss results. The Company writes off accounts receivable when they become uncollectible, and any payments
subsequently received are accounted for as recoveries.
A summary of the activities in the allowance for expected credit losses for the years ended December 31, 2021, 2020, and 2019 is
as follows:
Allowance for credit losses, January 1
Add/ (Deduct):
Adoption of Topic 326
Provision for bad debt expense
Write-offs, net of recoveries
Adjustments for business acquisitions and dispositions
Currency translation and other changes
Allowance for credit losses, December 31
2021
2020
(In thousands)
2019
9,464
$
9,348
$
9,625
—
448
(958)
(110)
(76)
8,768
$
(464)
1,504
(908)
(111)
95
9,464
$
—
1,588
(81)
—
(1,784)
9,348
$
$
Goodwill, Indefinite-Lived Intangible Assets, and Other Long-Lived Assets
Goodwill is an asset that represents the excess of the purchase price over the fair value of the separately identifiable net assets
(tangible and intangible) acquired in business combinations. Indefinite-lived intangible assets consist of trade names associated with
acquired businesses. Goodwill and indefinite-lived intangible assets are not amortized, but are subject to impairment testing at least
annually. Other long-lived assets consist primarily of property and equipment, deferred income tax assets, capitalized software, and
amortizable intangible assets related to customer relationships, technology, and trade names with finite lives. Other long-lived assets
are evaluated for impairment when impairment indicators are identified.
61
Subsequent to a business acquisition in which goodwill and indefinite-lived intangibles are recorded, post-acquisition accounting
requires that both be tested to determine whether there has been an impairment. The Company performs an impairment test of
goodwill and indefinite-lived intangible assets at least annually on October 1 of each year. The Company regularly evaluates whether
events and circumstances have occurred which indicate potential impairment of goodwill or indefinite-lived intangible assets. When
factors indicate that such assets should be evaluated for possible impairment between the scheduled annual impairment tests, the
Company performs an interim impairment test.
Goodwill impairment testing is performed on a reporting unit basis. If the fair value of the reporting unit exceeds its carrying
value, including goodwill, goodwill is considered not impaired. If the carrying value of a reporting unit exceeds its fair value, an
impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that
reporting unit. The loss recognized cannot subsequently be reversed.
The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit as
determined utilizing a combination of the income and market approaches. The income approach, which is a level 3 fair value
measurement, is based on projected debt-free cash flow which is discounted to the present value using discount factors that consider
the timing and risk of the cash flows. The market approach is based on the Guideline Public Company Method, which uses market
pricing metrics to select multiples to value the Company's reporting units. The resulting estimated fair values of the combined
reporting units are reconciled to the Company's market capitalization including an estimated implied control premium. The Company
believes that the combination of these approaches is appropriate because it provides a fair value estimate based upon the combination
of the reporting unit's expected long-term operating cash flow performance and multiples with which similar publicly traded
companies are valued. The Company weights the income and market approaches equally.
During 2021, the Company performed its goodwill impairment testing. The estimated fair value of each reporting unit tested
exceed their carrying value by a significant margin. The Company intends to continue to monitor the performance of its reporting
units for potential indicators of impairment. If impairment indicators exist, the Company will perform an interim goodwill impairment
analysis.
The key assumptions used in estimating the fair value of our reporting units utilizing the income approach include the discount
rate and the terminal growth rate. The discount rates utilized in estimating the fair value of our reporting units in 2021 range between
12.5% and 15.0%, reflecting the Company's assessment of a market participant's view of the risks associated with the projected cash
flows. The terminal growth rate used in the analysis was 2.0%. The assumptions used in estimating the fair values are based on
currently available data and management's best estimates of revenues and cash flows and, accordingly, a change in market conditions
or other factors could have a material effect on the estimated values. There are inherent uncertainties related to the assumptions used
and to management's application of these assumptions.
During the first quarter of 2020, the Company identified a goodwill impairment indicator in its former Crawford Claims Solutions
reporting unit as a result of lower operating results and the overall decline in market conditions as a result of the COVID-19 pandemic.
As a result, the Company recognized a goodwill impairment of $17,674,000, reducing the goodwill carrying value of the former
Crawford Claims Solutions reporting unit to $0 as of March 31, 2020. During the fourth quarter of 2019, the Company performed its
annual impairment testing on all reporting units. The Company recognized a non-cash goodwill impairment charge in 2019 of
$17,484,000 related to the valuation of its former Crawford Claims Solutions segment, due to lower forecasts in that reporting unit.
If changes to the Company's reporting structure impact the composition of its reporting units, existing goodwill is reallocated to
the revised reporting units based on their relative estimated fair values as determined by a combination of the income and market
approaches. If all of the assets and liabilities of an acquired business are assigned to a specific reporting unit, the goodwill associated
with that acquisition is assigned to that reporting unit at acquisition unless another reporting unit is also expected to benefit from the
acquisition.
For impairment testing of indefinite-lived intangible assets, the carrying value is compared with the estimated fair value, which is
estimated based on the present value of the after-tax cash flows attributable solely to the asset. If carrying value exceeds the estimated
fair value, an impairment is recognized based on the excess. The fair values of the Company's trade names are established using the
relief-from-royalty method, a form of the income approach. This method recognizes that, by virtue of owning the trade name as
opposed to licensing it, a company or reporting unit is relieved from paying a royalty, usually expressed as a percentage of net sales,
for the asset's use. The present value of the after-tax costs savings (i.e., royalty relief) at an appropriate discount rate including a tax
amortization benefit indicates the value of the trade name. The Company determined the discount rate based on its performance
compared to similar market participants, factored by risk in forecasting using a modified capital asset pricing model.
62
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. The Company depreciates the cost of property and
equipment, including assets recorded under finance leases, over the shorter of the remaining lease term or the estimated useful lives of
the related assets, primarily using the straight-line method. The estimated useful lives for property and equipment classifications are as
follows:
Classification
Furniture and fixtures
Data processing equipment
Automobiles and other
Buildings and improvements
Estimated Useful Lives
3-10 years
3-5 years
3-4 years
7-40 years
Property and equipment, including assets under finance leases, consisted of the following at December 31, 2021 and 2020:
December 31,
Land
Buildings and improvements
Furniture and fixtures
Data processing equipment
Automobiles
Total property and equipment
Less accumulated depreciation
Net property and equipment
2021
2020
(In thousands)
— $
32,053
26,196
55,058
271
113,578
(79,857)
33,721
$
338
32,087
28,264
64,781
314
125,784
(89,382)
36,402
$
$
At December 31, 2021, an office building in Canada and related property and equipment with a net carrying value of $1,209,000
was classified as held for sale. This group of assets was included as part of "Prepaid expenses and other current assets" within the
Consolidated Balance Sheets.
Depreciation on property and equipment, including property under finance leases and amortization of leasehold improvements,
was $12,481,000, $11,750,000, and $11,363,000 for the years ended December 31, 2021, 2020, and 2019, respectively.
Capitalized Software
Capitalized software costs reflect costs related to internally developed or purchased software used by the Company that has
expected future economic benefits. Certain internal and external costs incurred during the application development stage are
capitalized. Costs incurred during the preliminary project and post implementation stages, including training and maintenance costs,
are expensed as incurred. The majority of these capitalized software costs consist of internal payroll costs and external payments for
software development, purchases and related services. These capitalized software costs are typically amortized over periods ranging
from three to ten years, depending on the estimated life of each software application. Amortization expense for capitalized software
was $16,667,000, $16,709,000, and $17,873,000 for the years ended December 31, 2021, 2020, and 2019, respectively.
63
Self-Insured Risks
The Company self-insures certain risks consisting primarily of professional liability, auto liability, and employee medical,
disability, and workers' compensation liability. Insurance coverage is obtained for catastrophic property and casualty exposures,
including professional liability on a claims-made basis, and those risks required to be insured by law or contract. Most of these self-
insured risks are in the U.S. Provisions for claims under the self-insured programs are made based on the Company's estimates of the
aggregate liabilities for claims incurred, including estimated legal fees, losses that have occurred but have not been reported to the
Company, and for adverse developments on reported losses. The estimated liabilities are calculated based on historical claims
experience, the expected lives of the claims, and other factors considered relevant by management. Changes in these estimates may
occur as additional information becomes available. The Company believes its provisions for self-insured losses are adequate to cover
the expected cost of losses incurred. However, these provisions are estimates and amounts ultimately settled may be significantly
greater or less than the provisions established. The estimated liabilities for claims incurred under the Company's self-insured workers'
compensation and employee disability programs are discounted at the prevailing risk-free interest rate for U.S. government securities
of an appropriate duration. All other self-insured liabilities are undiscounted. At December 31, 2021 and 2020, accrued liabilities for
self-insured risks totaled $26,226,000 and $25,004,000, respectively, including current liabilities of $13,222,000 and $11,390,000,
respectively. The noncurrent liabilities are included in "Other noncurrent liabilities" on the Company's Consolidated Balance Sheets.
Income Taxes
The Company accounts for certain income and expense items differently for financial reporting and income tax purposes.
Provisions for deferred taxes are made in recognition of these temporary differences. The most significant differences relate to accrued
compensation, pension plans, self-insurance, and depreciation and amortization.
For financial reporting purposes, the provision for income taxes is the sum of income taxes both currently payable and payable on
a deferred basis. Currently payable income taxes represent the liability related to the income tax returns for the current year, while the
net deferred tax expense or benefit represents the change in the balance of deferred income tax assets or liabilities as reported on the
Company's Consolidated Balance Sheets that are not related to balances in "Accumulated other comprehensive loss." The changes in
deferred income tax assets and liabilities are determined based upon changes in the differences between the basis of assets and
liabilities for financial reporting purposes and the basis of assets and liabilities for income tax purposes, measured by the enacted
statutory tax rates in effect for the year in which the Company estimates these differences will reverse. The Company must estimate
the timing of the reversal of temporary differences, as well as whether taxable income in future periods will be sufficient to fully
recognize any gross deferred tax assets. A valuation allowance is provided when it is deemed more-likely-than-not that some portion
or all of a deferred tax asset will not be realized.
Other factors which influence the effective tax rate used for financial reporting purposes include changes in enacted statutory tax
rates, changes in tax law or policy, changes in the composition of taxable income from the countries in which it operates, the
Company's ability to utilize net operating loss and tax credit carryforwards, and changes in unrecognized tax benefits. See Note 7,
"Income Taxes" for further discussion.
Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy
election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide
for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for
GILTI in the year the tax is incurred.
Sales and Other Taxes
In certain jurisdictions, both in the U.S. and internationally, various governments and taxing authorities require the Company to
assess and collect sales and other taxes, such as value added taxes, on certain services that the Company renders and bills to its
customers. The majority of the Company's revenues are not currently subject to these types of taxes. These taxes are not recorded as
additional revenues or expenses in the Company's Consolidated Statements of Operations, but are recorded on the Consolidated
Balance Sheets as pass-through amounts until remitted.
Foreign Currency
Foreign currency transactions for the years ended December 31, 2021, 2020 and 2019 resulted in net losses of $515,000,
$219,000 and $243,000, respectively.
64
For operations outside the U.S. whose functional currency is other than the U.S. dollar, results of operations and cash flows are
translated into U.S. dollars at average exchange rates during the period, and assets and liabilities are translated at end-of-period
exchange rates. The resulting translation adjustments, on a net basis, are included in "Other Comprehensive Income" in the Company's
Consolidated Statements of Comprehensive Income, and the accumulated translation adjustment is reported as a component of
"Accumulated other comprehensive loss" in the Company's Consolidated Balance Sheets.
Advertising Costs
Advertising costs are expensed in the period in which the costs are incurred. Advertising expenses were $877,000, $990,000, and
$2,394,000, respectively, for the years ended December 31, 2021, 2020 and 2019. As several conventions were cancelled as a result of
the COVID-19 pandemic, the Company’s advertising costs decreased in 2020 and 2021.
Adoption of New Accounting Standards
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" together with its
subsequent related amendments in 2018 and 2019, collectively referred to as Topic 326. Topic 326 replaces the incurred loss
methodology to record credit losses with a methodology that reflects the expected credit losses for financial assets not accounted for at
fair value, including trade receivables, with gains and losses recognized through income. The Company estimates its expected credit
losses based on past experience, current conditions and reasonable and supportable forecasts affecting collectability of these assets.
We evaluate the risks related to our trade receivables and contract assets by considering customer type, geography, and aging. Topic
326 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company
adopted Topic 326 on January 1, 2020 using a modified retrospective approach. As a result of adopting Topic 326, the Company
recognized a cumulative effect adjustment to decrease the opening balance of retained earnings by $607,000.
The Company has included assumptions related to expected credit losses from the impact of the COVID-19 pandemic in its
results of operations for the years ended December 31, 2021 and 2020.
Compensation-Retirement Benefits: Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic
715-20)." This update modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement
plans. This update removes certain disclosure requirements including, but not limited to, the amounts in accumulated other
comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year and the amount
and timing of plan assets expected to be returned to the employer. This update requires the disclosure of the weighted-average interest
crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for
significant gains and losses related to changes in the benefit obligation for the period. This update also clarifies requirements for
entities that provide aggregate disclosures for two or more plans. The update is effective for annual periods beginning after December
15, 2020, and interim periods thereafter. Early adoption is permitted. The Company adopted this guidance on January 1, 2021 with no
material impact on its disclosures related to its retirement plans.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.”
ASU 2019-12 amends ASC 740 to simplify the accounting for income taxes by removing certain exceptions for foreign equity
investments, intraperiod allocations and interim calculations, and adding guidance to reduce complexity in the accounting standard
under the FASB’s simplification initiative. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Upon
adoption, the amendments in ASU 2019-12 should be applied on a prospective basis to all periods presented. The Company adopted
this guidance on January 1, 2021 with no material impact on its results of operations, financial condition or cash flows.
65
Pending Adoption of Recently Issued Accounting Standards
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure
contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for
fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact of the
adoption of the new guidance.
2.
Revenue Recognition
Revenue from Contracts with Customers
Revenues are recognized when control of the promised services are transferred to the Company's customers in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are recognized net of any
sales, use or value added taxes collected from customers, which are subsequently remitted to governmental authorities. As the
Company completes its performance obligations which are identified below, it has an unconditional right to consideration as outlined
in the Company's contracts. Generally the Company's accounts receivable are expected to be collected in less than two months.
The Company's Crawford Loss Adjusting segment generates revenue for claims management services provided to insurance
companies and self-insured entities related to property and casualty losses caused by physical damage to commercial and residential
real property and certain types of personal property. This segment also generates revenues for claims management services provided
to insurance companies and self-insured entities related to large, complex losses with technical adjusting and industry experts
servicing a broad range of industries. The Company charges on a time and expense incurred basis or fee-per-claim basis for each
optional purchase of the claims management services exercised by its customer. Revenue is recognized over time as the performance
obligations are satisfied through the effort expended to research, investigate, evaluate, document and report the claim and control of
these services is transferred to the customer. Revenue is recognized based on the claim type for fixed fee claims applied utilizing a
portfolio approach based on time elapsed for these claims. For claims billed on a time and expense incurred basis, which are
considered variable consideration, the Company recognizes revenue at the amount in which it has the right to invoice for services
performed. These methods of revenue recognition are the most accurate depiction of the transfer of the claims management services to
the customer. Task assignment services are single optional purchase performance obligations which are generally satisfied at a point in
time when the control of the service is transferred to the customer. Therefore, revenue is recognized when the customer receives the
service requested.
The following table presents Crawford Loss Adjusting revenues before reimbursements disaggregated by geography for the years
ended December 31, 2021 and 2020.
Year Ended December 31,
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total Crawford Loss Adjusting Revenues before Reimbursements
(In thousands)
2021
2020
$
$
158,451
102,326
54,675
72,751
52,488
34,896
475,587
$
$
128,342
105,446
55,552
69,407
48,732
31,012
438,491
The Company's Crawford TPA Solutions segment is a third party administrator that generates revenue through its Claims
Management and Medical Management service lines.
66
The Claims Management service line includes Workers' Compensation, Liability, Property and Disability Claims Management.
This service line also performs additional services such as Accident & Health claims programs, including affinity type claims, and
disability and leave management services. Each claim referred by the customer is considered an additional optional purchase of claims
management services under the agreement with the customer. The transaction price is readily available from the contract and is fixed
for each service. Revenue is recognized over time as services are provided as the performance obligations are satisfied through the
effort expended to research, investigate, evaluate, document, and report the claim and control of these services are transferred to the
customer. Revenue is recognized based on historical claim closure rates and claim type applied utilizing a portfolio approach based on
time elapsed for these claims as the Company believes this is the most accurate depiction of the transfer of the claims management
services to its customer. This service line also provides Legal Services and Risk Management Information Services. For non-claim
services, revenue is recognized over time as services are provided and control of these services are transferred to the customer.
Revenue is recognized as time elapses as this is the most accurate depiction of the transfer of the service to the customer.
The Company's obligation to manage claims under the Claims Management service line can range from less than one year, on a
one- or two-year basis or for the lifetime of the claim. Under certain claims management agreements, the Company receives
consideration from a customer at contract inception prior to completion of transferring services to the customer, however, it would
begin performing services immediately. The period between a customer’s payment of consideration and the completion of the
promised services could be greater than one year. There is no difference between the amount of promised consideration and the cash
selling price of the promised services. The fee is billed upfront by the Company in order to provide customers with simplified and
predictable ways of purchasing its services and it is customary to invoice service fees when the claim is assigned. The Company
considered whether a significant financing component exists and determined that there is not a significant financing component at the
contract level. See further discussion below related to deferred revenues related to Claims Management.
The Medical Management service line offers case managers who provide administration services by proactively managing
medical treatment for claimants while facilitating an understanding of and participation in their rehabilitation process. Revenue for
Medical Management services is recognized over time as the performance obligations are satisfied through the effort expended to
manage the medical treatment for claimants and control of these services are transferred to the customer. Medical Management
services are generally billed based on time incurred, are considered variable consideration, and revenue is recognized at the amount in
which the Company has the right to invoice for services performed. This method of revenue recognition is the most accurate depiction
of the transfer of the Medical Management service to the customer. Medical Management services also includes medical bill review
services, which provide an analysis of medical charges for clients’ claims to identify opportunities for savings. Medical bill review
services revenues are recognized over time as control of the service is transferred to the customer. Revenue is recognized based upon
the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the
service to the customer.
The following table presents Crawford TPA Solutions revenues before reimbursements disaggregated by service line and
geography for the years ended December 31, 2021 and 2020.
(in thousands)
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford TPA Solutions
Revenues before Reimbursements
Year Ended December 31, 2021
Medical
Management
Services
Claims
Management
Services
Total
Claims
Management
Services
Year Ended December 31, 2020
Medical
Management
Services
$
151,342 $
22,693
18,307
55,929
149,693 $ 301,035
22,693
18,307
55,929
—
—
—
$
143,944 $
16,530
22,673
38,741
149,504 $
—
—
—
Total
293,448
16,530
22,673
38,741
$
248,271 $
149,693 $ 397,964
$
221,888 $
149,504 $
371,392
The Company's Crawford Platform Solutions segment principally generates revenues through its Contractor Connection and
Networks service lines.
The Contractor Connection service line generates revenue through its independently managed contractor network. Contractor
Connection primarily generates revenue by receiving a fee for each project that is sold by its network of contractors. Revenue is
recognized at a point in time once the consumer accepts the contractor's proposal as Contractor Connection’s performance obligation
of referring projects to its contractors has been completed and the Company is entitled to consideration at that time. The contractor
takes control of the service upon the consumer’s acceptance of the contractor’s proposal.
67
The Networks service line generates revenues for claims management services provided to insurance companies and self-insured
entities related to property, casualty and catastrophic losses. Networks also generates revenue by providing on-demand inspection,
verification and other task specific field services for businesses and consumers as well as by providing subrogation services. Revenue
for claims management and inspection, verification, and other services is recognized over time as the performance obligations are
satisfied through the effort expended to research, investigate, evaluate, document and report the claim and control of these services is
transferred to the customer. Revenue is recognized based on the claim type for fixed fee claims, applied utilizing a portfolio approach
based on time elapsed for these claims. For claims billed on a time and expense incurred basis, which are considered variable
consideration, the Company recognizes revenue at the amount in which it has the right to invoice for services performed. Revenues for
subrogation claims management and recovery services are recognized at a point in time. These methods of revenue recognition are the
most accurate depiction of the transfer of the claims management services to the customer.
The following table presents Crawford Platform Solutions revenues before reimbursements disaggregated by service line and
geography for the years ended December 31, 2021 and 2020.
Year Ended December 31, 2021
Year Ended December 31, 2020
(in thousands)
U.S.
U.K.
Canada
Europe and Rest of World
Total Crawford
Platform Solutions
Revenues before
Reimbursements
Contractor
Connection
$
Network
Business
Subro-
gation
Total
Contractor
Connection
Network
Business
Subro-
gation
70,250 $ 124,727 $
9,624
7,644
1,809
20
4,319
5,766
4,322 $ 199,299 $
—
—
—
9,644
11,963
7,575
71,005 $
6,612
6,080
977
78,025 $
86
4,857
4,967
Total
— $ 149,030
6,698
—
10,937
—
5,944
—
$
89,327 $ 134,832 $
4,322 $ 228,481 $
84,674 $
87,935 $
— $ 172,609
In the normal course of business, the Company incurs certain out-of-pocket expenses that are thereafter reimbursed by its
customers. The Company controls the promised good or service before it is transferred to its customer, therefore it is a principal in the
transaction. These out-of-pocket expenses and associated reimbursements are reported on a gross basis within expenses and revenues,
respectively, in the Company's Consolidated Statements of Operations.
Arrangements with Multiple Performance Obligations
For claims management services, the Company typically has one performance obligation; however, it also provides the customer
with an option to acquire additional services. The Company sells multiple types of claims processing and different levels of processing
depending on the complexity of the claims. The Company typically provides a menu of offerings from which the customer chooses to
purchase at their option. The price of each service is separate and distinct and provides a separate and distinct value to the customer.
Pricing is consistent for each service irrespective of the other services or quantities requested by the customer. For example, if the
Company provides claims processing for both auto and general liability, those services are priced and delivered independently.
Contract Balances
The timing of revenue recognition, billings and cash collections result in billed accounts receivables, contract assets (reported as
unbilled revenues at estimated billable amounts) and contract liabilities (reported as deferred revenues) on the Company’s
Consolidated Balance Sheets. Unbilled revenues is a contract asset for revenue that has been recognized in advance of billing the
customer, resulting from professional services delivered that we expect and are entitled to receive as consideration under certain
contracts. Billing requirements vary by contract but substantially all unbilled revenues are billed within one year.
When the Company receives consideration from a customer prior to transferring services to the customer under the terms of
certain claims management agreements, it records deferred revenues on the Company’s Consolidated Balance Sheets, which
represents a contract liability. These fixed-fee service agreements typically result from the Crawford TPA Solutions segment and
require the Company to handle claims on either a one- or two-year basis, or for the lifetime of the claim. In cases where it handles a
claim on a non-lifetime basis, the Company typically receives an additional fee on each anniversary date that the claim remains open.
For service agreements where it provides services for the life of the claim, the Company is paid one upfront fee regardless of the
duration of the claim. The Company recognizes deferred revenues as revenues as it performs services and transfers control of the
services to the customer and satisfies the performance obligation which it determines utilizing a portfolio approach.
68
The Company's deferred revenues for claims handled for one or two years are not as sensitive to changes in claim closing rates
since the performance obligations are satisfied within a fixed length of time. Deferred revenues for lifetime claim handling are more
sensitive to changes in claim closing rates since the Company is obligated to handle these claims to conclusion with no additional fees
received for long-lived claims. As of December 31, 2021, deferred revenues related to lifetime claim handling arrangements
approximated $38.0 million. For all fixed fee service agreements, revenues are recognized over the expected service periods, by type
of claim. Based upon its historical averages, the Company closes approximately 99% of all cases referred to it under lifetime claim
service agreements within five years from the date of referral. Also, within that five-year period, the percentage of cases remaining
open in any one particular year has remained relatively consistent from period to period. Each quarter the Company evaluates its
historical case closing rates by type of claim utilizing a portfolio approach and makes adjustments to deferred revenues as necessary.
As a portfolio approach is utilized to recognize deferred revenues, any changes in estimates will impact timing of revenue recognition
and any changes in estimates are recognized in the period in which they are determined.
The table below presents the deferred revenues balance as of January 1, 2021 and the significant activity affecting deferred
revenues during the year ended December 31, 2021:
(In Thousands)
Customer Contract Liabilities:
Balance at January 1, 2021
Annual additions
Revenue recognized from prior periods
Revenue recognized from current year additions
Deferred revenue from acquisition
Other adjustments
Balance as of December 31, 2021
Remaining Performance Obligations
Deferred Revenue
51,369
78,028
(30,108)
(40,897)
659
(3,146)
55,905
$
$
As of December 31, 2021, the Company had $89,553,000 of remaining performance obligations related to claims and non-claims
services in which the price is fixed. Remaining performance obligations consist of deferred revenues as well as certain unbilled
receivables that are considered contract assets. The Company expects to recognize approximately 70% of our remaining performance
obligations as revenues within one year and the remaining balance thereafter. See the discussion below regarding the practical
expedients elected for the disclosure of remaining performance obligations.
Costs to Obtain a Contract
The Company has a sales incentive compensation program where remuneration is based on the revenues recognized in the period
and does not represent an incremental cost to the Company which provides a future benefit expected to be longer than one year. As a
result, this remuneration would not meet the criteria to be capitalized and presented as a contract asset on the Company's Consolidated
Balance Sheets.
Practical Expedients Elected
As a practical expedient, the Company does not adjust the consideration in a contract for the effects of a significant financing
component it expects, at contract inception, when the period between a customer’s payment of consideration and the transfer of
promised services to the customer will be one year or less.
For claims management services that are billed on a time and expense incurred or per unit basis and revenue is recognized over
time, the Company recognizes revenue at the amount to which it has the right to invoice for services performed.
The Company does not disclose the value of remaining performance obligations for (i) contracts for which it recognizes revenue
at the amount to which it has the right to invoice for services performed, and (ii) contracts with variable consideration allocated
entirely to a single performance obligation.
69
3. Business Acquisitions and Dispositions
Crawford Compliance Inc. Disposition
On June 1, 2020, the Company sold its 51% interest in Crawford Compliance Inc. to a third party in exchange for a note
receivable. The Company recognized a loss on the disposal of this entity of $912,000 in 2020. The results of Crawford Compliance
Inc. were not material to the Company.
Lloyd Warwick International Disposition
On June 12, 2020, the Company sold its 51% interest in Lloyd Warwick International (“LWI”) to a third party for cash proceeds
of $19,600,000 and payment of $3,600,000 to settle intercompany indebtedness. The Company recognized an additional $700,000
related to net working capital adjustments under the terms of the acquisition agreement, which increased the purchase price to
$20,300,000. The Company recognized a total gain of $14,700,000 ($11,700,000 net of tax) on the disposition for the year ended
December 31, 2020.
WeGoLook, LLC Acquisition
On July 21, 2020, the Company acquired the remaining 15% membership interests of WeGoLook, LLC for $310,000. The
Company accounted for this subsequent acquisition as an equity transaction in accordance with ASC 810-10, “Consolidation”. The
non-compete agreements with the former minority members were terminated under the terms of the purchase agreement. As a result,
the Company recognized $1,100,000 of accelerated amortization on the non-compete agreement in 2020.
Crawford Carvallo Acquisition
On October 1, 2020, the Company acquired most of the remaining 85% equity interests in Crawford Carvallo ("Carvallo") and its
subsidiaries. Crawford Carvallo is a leading provider of loss adjusting, claims management solutions and legal services in Chile. The
Company held a 15% interest in Crawford Carvallo prior to this acquisition. In 2020, the Company recognized a pretax gain of
$1,099,000 from the remeasurement of the previously held noncontrolling interest to the $3,047,000 fair value.
The acquisition was funded primarily through additional borrowings under the Company's credit facility. The purchase price
includes an initial cash payment of $11,583,000 and a maximum of $11,700,000 payable over the next six years based on achievement
of certain EBITDA performance goals as set forth in the purchase agreement. The acquisition accounting is based on the fair value of
the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. At the
acquisition date, the fair value of the contingent consideration payable was estimated to be $5,808,000. At December 31, 2021, there
were no material changes in the range of expected outcomes or the fair value of the contingent consideration from the acquisition date.
Significant assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were not
limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the applicable
discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be
reasonable. However, actual results may differ from these estimates.
Final acquisition accounting for this acquisition was completed as of December 31, 2021. Adjustments recorded during the year
ended December 31, 2021 include an additional goodwill and deferred tax liability of $2,237,000. The financial results of certain of
the Company’s international subsidiaries, including Crawford Carvallo, are included in the Company’s consolidated financial
statements on a two-month delayed basis. Crawford Carvallo reported $21,185,000 of revenue in the Loss Adjusting and TPA
Solutions segments during the year ended December 31, 2021. Goodwill is attributable to the synergies of the work force in place and
business resources as a result of the combination of the companies. The Company does not expect that goodwill attributable to the
acquisition will be deductible for tax purposes.
HBA Group Acquisition
On November 1, 2020, the Company acquired 100% of HBA Group and its subsidiaries ("HBA") in Australia. HBA is a legal
services provider that will complement the Company’s Crawford TPA Solutions segment in Australia.
70
The acquisition was funded primarily through additional borrowings under the Company's credit facility. The purchase price
includes an initial cash payment of $4,026,000 and a maximum of $3,200,000 payable over the next four years based on achievement
of certain revenue and EBITDA performance goals as set forth in the purchase agreement. The acquisition accounting is based on the
fair value of the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date.
At the acquisition date, the fair value of the contingent consideration payable was estimated to be $2,409,000. At December 31, 2021,
there were no material changes in the range of expected outcomes or the fair value of the contingent consideration from the acquisition
date. Significant assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were
not limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the
applicable discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes
to be reasonable. However, actual results may differ from these estimates.
The Company is in the process of finalizing the review of deferred tax liabilities in connection with the acquisition. As additional
information becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the
measurement period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions
and inputs to incorporate additional information obtained subsequent to the closing of the transaction related to facts and
circumstances that existed as of the acquisition date.
The financial results of certain of the Company’s international subsidiaries, including HBA, are included in the Company’s
consolidated financial statements on a two-month delayed basis. HBA reported $8,800,000 of revenue in the TPA Solutions segment
during the year ended December 31, 2021. Goodwill is attributable to the synergies of the work force in place and business resources
as a result of the combination of the companies. The Company does not expect that goodwill attributable to the acquisition will be
deductible for tax purposes.
edjuster Inc. Acquisition
On August 23, 2021, the Company acquired 100% of edjuster Inc. in Canada and its U.S. subsidiary (collectively "edjuster").
Edjuster is a technology-enabled, end-to-end contents services provider and platform. This acquisition will enable the Company to
expand its capability in the North American claims contents services market.
The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The purchase price
included an initial cash payment of $20,875,000, a working capital adjustment payable of $433,000, and an earn-out potential up to
$13,334,000 based on the achievement of certain EBITDA performance goals over two one-year periods, beginning January 2022.
The acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired and
liabilities assumed as of the acquisition date. At the acquisition date, the fair value of the contingent consideration payable was
estimated to be $2,437,000. At December 31, 2021, there were no material changes in the range of expected outcomes and the fair
value of the contingent consideration from the acquisition date. Significant assumptions and estimates used in the valuation of
intangible assets and contingent consideration included, but were not limited to future expected cash flows, including projected
revenues and expenses, estimated customer attrition rates, and the applicable discount rates. These assumptions and estimates were
level 3 inputs and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these
estimates.
The Company is in the process of reviewing the fair value of the assets and liabilities assumed, including, but not limited to
accounts receivable, unbilled revenue, intangible assets, accrued expenses, tax liabilities and goodwill. As additional information
becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the measurement
period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to
incorporate additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed
as of the acquisition date.
edjuster reported $5,000,000 of revenue in the Crawford Loss Adjusting segment during the year ended December 31, 2021.
Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of the
companies. The Company does not expect that goodwill attributable to the acquisition will be deductible for tax purposes.
Praxis Consulting Inc. Acquisition
On October 1, 2021, the Company acquired 100% of Praxis Consulting Inc. ("Praxis"), and an established subrogation claims
service provider in the U.S. The acquisition allows the Company to expand its footprint in the U.S. subrogation claims market.
71
The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The purchase price
included a cash payment of $21,544,000, a working capital adjustment payable of $735,000, a deferred cash payment of $20,000,000
payable in February 2022, and an earn-out potential up to $10,000,000 based on the achievement of certain revenue performance goals
over two one-year periods, beginning February 2022. The acquisition accounting is based on the fair value of the acquisition
consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. At the acquisition date, the
fair value of the contingent consideration payable was estimated to be $4,068,000. At December 31, 2021, there were no material
changes in the range of expected outcomes and the fair value of the contingent consideration from the acquisition date. Significant
assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were not limited to
future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the applicable discount
rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be reasonable.
However, actual results may differ from these estimates.
The Company is in the process of reviewing the fair value of the assets and liabilities assumed, including, but not limited to
accounts receivable, intangible assets, accrued expenses, tax liabilities and goodwill. As additional information becomes available, the
Company may further revise its preliminary acquisition accounting during the remainder of the measurement period, which will not
exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to incorporate additional
information obtained subsequent to the closing of the transaction related to facts and circumstances that existed as of the acquisition
date.
Praxis reported $4,300,000 of revenue in the Networks service line within the Crawford Platform Solutions segment during the
year ended December 31, 2021. Goodwill is attributable to the synergies of the work force in place and business resources as a result
of the combination of the companies. The Company expects that goodwill attributable to the acquisition will be deductible for tax
purposes.
BosBoon Expertise Group B.V. Acquisition
On October 1, 2021, the Company acquired BosBoon Expertise Group B.V. ("BosBoon"), a specialist loss adjusting company
based in the Netherlands. The acquisition supports the Company's strategic aim of strengthening its expertise in all key territories in
which it operates. BosBoon offers a specialist range of loss adjusting services which will be added to the existing loss adjusting
proposition in the Netherlands.
The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The purchase price
included an initial cash payment of $2,066,000, net of working capital adjustments, and an earn-out potential up to $1,854,000 based
on the achievement of EBITDA performance goal and other nonfinancial milestones over two one-year periods, beginning January
2022. The acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired
and liabilities assumed as of the acquisition date. At the acquisition date, the fair value of the contingent consideration payable was
estimated to be $568,000. At December 31, 2021, there were no material changes in the range of expected outcomes and the fair value
of the contingent consideration from the acquisition date. Significant assumptions and estimates used in the valuation of intangible
assets and contingent consideration included, but were not limited to future expected cash flows, including projected revenues and
expenses, estimated customer attrition rates, and the applicable discount rates. These assumptions and estimates were level 3 inputs
and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.
The Company is in the process of reviewing the fair value of the assets and liabilities assumed, including, but not limited to
accounts receivable, unbilled revenue, intangible assets, accrued expenses, tax liabilities and goodwill. As additional information
becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the measurement
period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to
incorporate additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed
as of the acquisition date.
The financial results of certain of the Company’s international subsidiaries, including BosBoon, are included in the Company’s
consolidated financial statements on a two-month delayed basis. The result of BosBoon are reported in the Crawford Loss Adjusting
segment. Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of
the companies. The Company does not expect that goodwill attributable to the acquisition will be deductible for tax purposes.
72
Fair Value of Assets Acquired and Liabilities Assumed
Assets acquired and liabilities assumed as of acquisition date are presented in the following table:
Crawford
Carvallo
October 1, 2020
HBA Group
November 1, 2020
edjuster Inc.
August 23, 2021
(In thousands)
Praxis Consulting
Inc.
October 1, 2021
BosBoon Expertise
Group B.V.
October 1, 2021
Tangible assets
Cash and cash equivalents
Accounts receivable
Unbilled revenues
Right-of-use lease assets
Other assets
Total tangible assets
Intangible assets
Customer relationships
Developed technology
Non-compete agreements
Tradenames
Goodwill
Total intangible assets
Total assets acquired
Liabilities assumed
Current liabilities
Operating lease liabilities
Tax liabilities
Total liabilities assumed
Net assets acquired before
noncontrolling interest
Noncontrolling interest
Net assets acquired after
noncontrolling interest
Purchase price (cash)
Fair value of noncontrolling interest
previously held
Deferred purchase consideration
payable
Fair value of contingent consideration
Fair value of total consideration
transferred
$
$
$
1,599 $
3,631
3,237
8,743
4,660
21,870
4,118
1,300
1,600
300
7,738
15,056
36,926
4,657
8,743
2,599
15,999
20,927
489
240 $
1,081
598
1,502
205
3,626
1,574
—
—
—
6,245
7,819
11,445
2,532
1,502
976
5,010
6,435
—
1,723 $
1,518
1,531
418
1,520
6,710
— $
119
—
430
316
865
5,346
2,673
157
1,101
12,799
22,076
28,786
2,066
418
2,557
5,041
23,745
—
20,000
1,500
225
2,125
26,195
50,045
50,910
4,133
430
—
4,563
46,347
—
20,438 $
6,435 $
23,745 $
46,347 $
11,583 $
4,026 $
20,875 $
21,544 $
3,047
—
5,808
—
—
2,409
—
433
2,437
—
20,735
4,068
—
469
597
586
75
1,727
1,384
—
—
346
1,571
3,301
5,028
1,430
586
378
2,394
2,634
—
2,634
2,066
—
—
568
$
20,438 $
6,435 $
23,745 $
46,347 $
2,634
Acquired intangible assets include customer relationships, tradenames and developed technologies. Intangible assets were valued
using the multi-period excess earnings or the relief-from-royalty methods, both are forms of the income approach which utilizes a
forecast of future cash flows generated from the use of each asset. The following table shows the preliminary fair values assigned to
identifiable intangible assets:
Fair Value
(In thousands)
Weighted-Average Amortization Period
(Years)
Amortizable tangible assets
Customer relationships
Developed technology
Non-compete agreements
Tradenames
Total amortizable intangible assets
$
$
73
32,422
5,473
1,982
3,872
43,749
15
10
8
7
4.
Goodwill and Intangible Assets
Goodwill
The following table shows the changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020:
Balance at December 31, 2019:
Goodwill
Accumulated impairment losses
Net goodwill
2020 Activity:
Goodwill of acquired businesses
Impairment of goodwill
Goodwill of disposed business
Foreign currency effects
Balance at December 31, 2020:
Goodwill
Accumulated impairment losses
Net goodwill
2021 Activity:
Goodwill of acquired businesses
Adjustments to prior acquisitions
Foreign currency effects
Balance at December 31, 2021:
Goodwill
Accumulated impairment losses
Net goodwill
Loss Adjusting
Crawford TPA
Solutions
Platform
Solutions
(In thousands)
Total
$
$
86,025
(50,587)
35,438
$
168,734
(159,424)
9,310
$
44,381
(8,487)
35,894
299,140
(218,498)
80,642
2,644
(17,674)
(1,990)
79
86,758
(68,261)
18,497
14,371
1,074
358
2,857
—
—
12
171,603
(159,424)
12,179
6,244
1,163
452
—
—
—
(33)
44,348
(8,487)
35,861
26,195
—
132
5,501
(17,674)
(1,990)
58
302,709
(236,172)
66,537
46,810
2,237
942
102,561
(68,261)
34,300
$
179,462
(159,424)
20,038
$
$
70,675
(8,487)
62,188
$
352,698
(236,172)
116,526
The Company recognized a non-cash goodwill impairment charge during the year ended December 31, 2020 totaling $17,674,000
related to the valuation of its former Crawford Claims Solutions reporting unit as a result of lower operating results and the overall
decline in market conditions as a result of the COVID-19 pandemic. The Company recognized a non-cash goodwill impairment in the
former Crawford Claims Solution reporting unit of $17,484,000 during the year ended December 31, 2019 due to lower forecasts in
that reporting unit. These impairment charges did not affect the Company's liquidity and had no effect on the Company's compliance
with the financial covenants under its Credit Facility.
74
Intangible Assets
The following is a summary of finite-lived intangible assets acquired through business acquisitions as of December 31, 2021 and
2020:
December 31, 2021:
Customer relationships
Technology-based
Trade name
Other
Total
December 31, 2020:
Customer relationships
Technology-based
Trade name
Other
Total
Gross
Carrying
Amount
Accumulated
Amortization
(In thousands, except years)
Net
Carrying
Value
$
$
$
$
160,652
22,293
6,393
7,944
197,283
131,948
18,183
3,123
5,794
159,048
$
$
$
$
(111,241) $
(11,547)
(2,169)
(5,706)
(130,663) $
(101,319) $
(10,174)
(1,737)
(5,489)
(118,719) $
49,411
10,746
4,224
2,238
66,619
30,629
8,009
1,386
305
40,329
Weighted-
Average
Amortization
Period
9.3 years
6.4 years
7.0 years
4.6 years
8.2 years
3.3 years
6.5 years
6.0 years
10.1 years
6.7 years
Amortization of finite-lived intangible assets was $11,029,000, $11,653,000, and $11,277,000 for the years ended December 31,
2021, 2020, and 2019, respectively. These amortization expenses were excluded from segment operating earnings (see Note 13,
"Segment and Geographic Information"). Intangible assets subject to amortization are amortized on a straight-line basis over lives
ranging from 2 to 20 years.
At December 31, 2021, annual estimated aggregate amortization expense for intangible assets subject to amortization for the next
five years is as follows:
Year Ending December 31,
2022
2023
2024
2025
2026
Annual
Amortization
Expense
(In thousands)
$
8,224
7,874
7,715
7,438
7,146
The following is a summary of indefinite-lived intangible assets at December 31, 2021 and 2020:
December 31, 2021:
Trade names
December 31, 2020:
Trade names
Gross Carrying
Amount
Accumulated
Impairments
(In thousands)
Net Carrying
Value
$
$
32,608
32,503
$
$
(1,656) $
30,952
(1,656) $
30,847
75
5. Short-Term and Long-Term Debt, Including Finance Leases
Long-term debt consisted of the following at December 31, 2021 and 2020:
December 31,
Credit Facility
Finance lease and other obligations
Total long-term debt and finance leases
Less: portion of Credit Facility classified as short-term
Less: current installments of finance leases and other obligations
Total long-term debt and finance leases, less current installments
2021
2020
(In thousands)
174,594
425
175,019
(10,616)
(88)
164,315
$
$
112,855
740
113,595
(1,570)
(267)
111,758
$
$
On November 5, 2021, the Company, its subsidiaries Crawford & Company Risk Services Investments Limited (the "U.K.
Borrower"), Crawford & Company (Canada) Inc. (the "Canadian Borrower") and Crawford & Company (Australia) Pty. Ltd. (the
"Australian Borrower") (the Company, together with such subsidiaries, as borrowers (the "Borrowers")), Bank of America, N.A., as
administrative agent and a lender ("Bank of America"), Wells Fargo Bank, National Association and Truist Bank as co-syndication
agents and lenders, HSBC Bank USA, National Association and PNC Bank, N.A., as co-documentation agents and lenders, and the
other lenders party thereto, entered into a Credit Facility (the "Credit Facility"), which replaced our prior agreement, dated as of
December 8, 2011, by and among, inter alia, the Borrowers, Wells Fargo and the other lenders from time to time party thereto, as
subsequently amended. In connection with the Credit Facility, the Company, the Company’s guarantor subsidiaries party thereto and
Bank of America entered into an Security and Pledge Agreement (the "Security and Pledge Agreement") and a Guaranty Agreement
(the "Guaranty Agreement"), each dated as of the date of the Credit Facility.
The Credit Facility consists of a $450,000,000 revolving credit facility, with a letter of credit subcommitment of $125,000,000.
The Credit Facility contains sublimits of $250,000,000 for borrowings by the U.K. Borrower, $125,000,000 for borrowings by the
Canadian Borrower, and $75,000,000 for borrowings by the Australian Borrower. The Credit Facility matures, and all amounts
outstanding thereunder, will be due and payable on November 5, 2026. Borrowings under the Credit Facility may be made in U.S.
dollars, Euros, the currencies of Canada, Japan, Australia or United Kingdom and, subject to the terms of the Credit Facility, other
currencies.
Borrowings under the Credit Facility bear interest, at the option of the applicable Borrower, based on the Base Rate (as defined
below) or a Eurocurrency Rate or an alternative reference rate, in each case plus an applicable interest margin based on the Company's
leverage ratio (as defined below), provided that borrowings in foreign currencies may bear interest based on alternative reference rate.
The Credit Facility defines Benchmark Replacement to encompass accepted alternative reference rates when the London Interbank
Offered Rate (“LIBOR”) is no longer quoted. The Credit Facility defines alternative reference rates for non-U.S. Dollar currencies as
Alternative Currency Term Rates or Alternative Currency Daily Rates. The interest margin for Eurocurrency Rate or alternative
reference rate loans ranges from 1.00% to 1.625% and for Base Rate loans ranges from 0.00% to 0.625%. Base Rate is defined as the
highest of (a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, (b) the rate of interest in
effect for such day as publicly announced from time to time by Bank of America as its “prime rate” and (c) The Eurocurrency rate
plus 1.00%, subject to interest rate floors, with a minimum rate of zero.
At December 31, 2021, a total of $174,594,000 was outstanding and there was an undrawn amount of $11,277,000 under the
letters of credit subcommitment of the Credit Facility. These letter of credit commitments were for the Company's own obligations.
Including the amounts committed under the letters of credit subcommitment, the available borrowing capacity under the Credit
Facility totaled $260,242,000 at December 31, 2021.
The obligations of the Borrowers under the Credit Facility are guaranteed by each existing material domestic subsidiary of the
Company, certain other domestic subsidiaries of the Company and certain existing material foreign subsidiaries of the Company that
are disregarded entities for U.S. income tax purposes (each such foreign subsidiary, a "Disregarded Foreign Subsidiary"), and such
obligations are required to be guaranteed by each subsequently acquired or formed material domestic subsidiary and Disregarded
Foreign Subsidiary (each, a "Guarantor"), and the obligations of the Borrowers other than the Company ("Foreign Borrowers") for
which the Company is not the primary obligor are also guaranteed by the Company. In addition, (i) the Borrowers’ obligations under
the Credit Facility are secured by a first priority lien (subject to liens permitted by the Credit Facility) on substantially all of the
personal property of the Company and the Guarantors as set forth in the Security and Pledge Agreement and (ii) the obligations of the
Foreign Borrowers are secured by a first priority lien on 100% of the capital stock of the Foreign Borrowers.
The representations, covenants and events of default in the Credit Facility are customary for financing transactions of this nature,
including required compliance with a minimum interest coverage ratio and a maximum leverage ratio (each as defined below).
76
Under the Credit Facility, the consolidated total leverage ratio, defined as the ratio of (i) consolidated total funded debt minus
unrestricted cash (generally cash held in the U.S., U.K., Canada and Australia) to (ii) consolidated EBITDA, must not be greater 4.50
to 1.00 at the end of each fiscal quarter. Also, the consolidated interest coverage ratio, defined as the ratio of (a) consolidated EBITDA
to (b) consolidated interest expense, must not be less than 2.50 to 1.00 for the four-quarter period ending at the end of each fiscal
quarter.
At December 31, 2021, the Company was in compliance with the financial covenants under the Credit Facility. If the Company
does not meet the covenant requirements in the future, it would be in default under the Credit Facility. Upon the occurrence of an
event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Credit
Facility and ancillary loan documents.
Short-term borrowings under the Credit Facility totaled $10,616,000 and $1,570,000 at December 31, 2021 and 2020,
respectively. The Company expects, but is not required, to repay all of such short-term borrowings at December 31, 2021 in 2022.
The Company's finance leases are primarily comprised of equipment leases with terms ranging from 24 to 60 months.
Interest expense, including amortization of capitalized loan costs, on the Company's short-term and long-term borrowings was
$6,983,000, $8,187,000, and $11,519,000 for the years ended December 31, 2021, 2020, and 2019, respectively. Interest paid on the
Company's short-term and long-term borrowings was $5,631,000, $7,152,000, and $10,470,000 for the years ended December 31,
2021, 2020, and 2019, respectively.
Principal repayments of long-term debt, including current portions, finance leases and other obligations, as of December 31, 2021
are expected to be as follows, assuming no prepayments or extensions beyond the stated maturity:
Year Ending December 31,
2022
2023
2024
2025
2026
Total
6. Lease Commitments
Long-term Debt
Finance Lease and
Other Obligations
(In thousands)
Total
$
$
10,616
—
—
—
163,978
174,594
$
$
88
264
48
25
—
425
$
$
10,704
264
48
25
163,978
175,019
The Company determines if an arrangement is a lease at inception. The Company's and its subsidiaries' leases include office
space, computer equipment, and automobiles under operating and finance leases. These lease agreements have remaining lease terms
of 1 to 11 years. Some of these lease agreements include options to extend the leases for up to 6 years, options to terminate the leases
within 1 year, rental escalation clauses and periodic adjustments for inflation, all of which are considered in the determination of lease
payments. These lease agreements do not contain any material residual value guarantees or material restrictive covenants.
For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease liability at the present
value of the fixed lease payments over the term. Variable lease payments are not included in the calculation of the right-of-use asset
and lease liability. The Company does not separate nonlease components from lease components and instead accounts for each as a
single lease component for all classes of its assets. The Company applies a portfolio approach to effectively account for the right-of-
use asset and lease liability for certain equipment leases.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the
Company's leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental
borrowing rate to discount the lease payments based on information available at lease commencement.
77
The Company's finance leases are not material as of the year ended December 31, 2021 and are excluded from the disclosures
below. The following table presents the lease-related assets and liabilities recorded on the Company's Consolidated Balance Sheets
related to its operating leases:
(in thousands)
Assets:
Operating lease
Liabilities:
Current operating lease liabilities
Noncurrent operating lease liabilities
Total operating lease liabilities
Weighted-Average Remaining Lease Term
Weighted-Average Discount Rate
Classification on Balance Sheet
December 31,
2021
December 31,
2020
Operating lease right-of-use assets, net
Current operating lease liabilities
Noncurrent operating lease liabilities
$
$
99,369
$
109,315
25,238
88,408
113,646
$
32,745
93,228
125,973
6.16 years
6.30 years
5.1%
5.3%
The components of operating lease costs within the Company's Consolidated Statements of Operations consisted of the following:
(in thousands)
Operating lease cost
Variable lease cost
Sublease income
Supplemental cash flow information related to operating leases were as follows:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Right-of-use assets obtained in exchange for lease obligations
Year Ended
December 31, 2021
December 31, 2020
38,492 $
5,177
3,875
38,242
8,037
4,090
Year Ended
December 31, 2021
December 31, 2020
40,251 $
22,168 $
37,091
40,535
$
$
$
Future undiscounted operating lease payments reconciled to total operating lease liabilities are as follows:
(in thousands)
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease payments
Less imputed interest
Present value of future lease payments
December 31, 2021
$
$
29,944
22,745
18,043
14,278
12,859
35,427
133,296
(19,650)
113,646
The Company has entered into operating lease agreements that have not yet commenced as of December 31, 2021 with legally
binding minimum lease payments of $2,268,000. The leases are expected to commence during the three months ended March 31,
2022, and have lease terms of 5 years.
78
7.
Income Taxes
Income before income taxes consisted of the following:
Year Ended December 31,
U.S.
Foreign
Income before income taxes
The provision for income taxes consisted of the following:
Year Ended December 31,
Current:
U.S. federal and state
Foreign
Deferred:
U.S. federal and state
Foreign
Provision for income taxes
2021
2020
(In thousands)
2019
$
$
$
$
39,569
4,295
43,864
2021
11,070
5,238
(126)
(2,866)
13,316
$
$
$
$
(1,029) $
40,117
39,088
$
(1,472)
25,109
23,637
2020
(In thousands)
2019
12,561
8,457
(8,870)
(135)
12,013
$
$
1,546
9,525
1,643
1,397
14,111
Net cash payments for income taxes were $24,936,000, $12,216,000, and $16,996,000 in 2021, 2020, and 2019, respectively.
The provision for income taxes is reconciled to the federal statutory income tax rate of 21% in 2021, 2020, and 2019, as follows:
Year Ended December 31,
Federal income taxes at statutory rate
State income taxes, net of federal benefit
Goodwill impairment
Foreign taxes
Change in valuation allowance
Research and development credits
Foreign tax credits
Nondeductible meals and entertainment
Change in permanent reinvestment assertion
Disposals and liquidations of businesses
Global intangible low-tax income, net of credits
Foreign-derived intangible income deduction
Tax rate changes
Other
Provision for income taxes
2021
2020
(In thousands)
2019
$
$
9,211
2,310
—
2,896
(1,185)
(436)
(1,083)
254
627
—
531
(94)
(431)
716
13,316
$
$
8,208
325
2,322
3,328
(374)
(1,001)
(1,150)
377
776
(935)
(54)
(115)
(359)
665
12,013
$
$
4,964
505
1,883
2,276
3,919
(626)
(283)
724
—
—
892
(315)
486
(314)
14,111
The Company's consolidated effective income tax rate may change periodically due to changes in enacted statutory tax rates,
changes in tax law or policy, changes in the composition of taxable income from the countries in which it operates, the Company's
ability to utilize net operating loss and tax credit carryforwards, and changes in unrecognized tax benefits.
The Company’s effective income tax rate in 2021 was impacted by enacted foreign tax rate changes, change in valuation
allowances for certain jurisdictions, and deferred taxes attributable to certain undistributed foreign earnings that are no longer
permanently reinvested. The Company's effective income tax rate in 2020 was impacted by goodwill impairment charges, disposals
and liquidations of businesses, and deferred taxes attributable to undistributed foreign earnings that are no longer permanently
reinvested. The Company's effective income tax rate in 2019 was impacted by goodwill impairment charges, arbitration and claim
settlements, and valuation allowance establishment on certain state net operating losses.
79
During 2021 and 2020, the Company released its permanent reinvestment position on a portion of prior year undistributed
earnings for certain foreign operations and accrued deferred taxes attributable to these earnings. Beyond these earnings we have not
changed the reinvestment assertion on our undistributed earnings or other outside basis differences of our remaining foreign
subsidiaries. Excluding the change in position for certain foreign operations, no additional income or withholding taxes have been
provided for indefinitely reinvested undistributed foreign earnings, other than those previously taxed nor have any taxes been provided
for outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. We
have estimated that we have book over tax basis differences of approximately $90,269,000. Due to withholding tax, basis
computations, and other related tax considerations, it is not practicable to estimate any taxes to be provided on outside basis
differences at this time.
Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy
election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide
for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for
GILTI in the year the tax is incurred.
Deferred income taxes consisted of the following at December 31, 2021 and 2020:
2021
2020
Accounts receivable allowance
Accrued compensation
Accrued pension liabilities
Self-insured risks
Deferred revenues
Interest
Tax credit carryforwards
Loss carryforwards
Lease liability
Other
Gross deferred income tax assets
Unbilled revenues
Accrued pension liabilities
Repatriated earnings
Depreciation and amortization
Lease right-of-use asset
Gross deferred income tax liabilities
Net deferred income tax assets before valuation allowances
Valuation allowance
Net deferred income tax assets
Amounts recognized in the Consolidated Balance Sheets consist of:
Long-term deferred income tax assets included in "Deferred income tax assets"
Long-term deferred income tax liabilities included in "Other noncurrent liabilities"
Net deferred income tax assets
$
$
$
$
(In thousands)
1,386
16,182
—
5,280
5,045
2,907
3,326
28,122
28,547
2,218
93,013
6,290
2,491
937
27,593
24,958
62,269
30,744
(14,114)
16,630
$
21,266
(4,636)
16,630
$
1,019
14,655
4,950
5,746
5,376
2,419
7,090
22,805
31,435
2,158
97,653
5,311
—
776
23,474
27,513
57,074
40,579
(16,579)
24,000
25,595
(1,595)
24,000
At December 31, 2021, the Company had deferred tax assets related to loss carryforwards of $28,352,000, before netting of
unrecognized tax benefits of $244,000. An estimated $22,288,000 of the deferred tax assets will not expire, and $6,064,000 will expire
over the next 20 years if not utilized by the Company.
Changes in the Company's deferred tax valuation allowance are recorded as adjustments to the provision for income taxes. An
analysis of the Company's deferred tax asset valuation allowances is as follows for the years ended December 31, 2021, 2020, and
2019.
Balance, beginning of year
Other changes
Balance, end of year
2021
2020
(In thousands)
2019
$
$
16,579
(2,465)
14,114
$
$
28,128
(11,549)
16,579
$
$
25,654
2,264
28,128
80
Changes to the valuation allowance for the year ended December 31, 2021 were primarily due to anticipated expiration of certain
foreign tax credits after consideration of the four sources of taxable income and losses in certain of the Company's international
operations, net of releases for certain state NOLs. Changes to the valuation allowance for the year ended December 31, 2020 were
primarily due to anticipated expiration of certain foreign tax credits after consideration of the four sources of taxable income and
disposals and liquidations of businesses, net of losses in certain of the Company’s international operations. Changes to the valuation
allowance for the year ended December 31, 2019 were primarily due to anticipated expiration of certain state NOLs after
consideration of the four sources of taxable income and losses in certain of the Company’s international operations.
A reconciliation of the beginning and ending balance of unrecognized income tax benefits follows:
Balance at December 31, 2018
Additions for tax provisions related to the current year
Additions for tax positions related to prior years
Reductions for tax positions related to the prior year
Reductions for settlements
Lapses of applicable statutes of limitation
Balance at December 31, 2019
Additions for tax provisions related to the current year
Additions for tax positions related to prior years
Reductions for tax positions related to prior years
Reductions for settlements
Lapses of applicable statutes of limitation
Balance at December 31, 2020
Reductions for tax positions related to prior years
Reductions for settlements
Currency translation adjustment
Balance at December 31, 2021
(In thousands)
7,401
515
646
(113)
(2,642)
(520)
5,287
92
2
(505)
(516)
(582)
3,778
(11)
(21)
4
3,750
$
$
$
$
The Company accrues interest and, if applicable, penalties related to unrecognized tax benefits in income taxes. Total accrued
interest expense at December 31, 2021, 2020, and 2019, was $119,000, $107,000, and $256,000, respectively.
Included in the total unrecognized tax benefits at December 31, 2021, 2020, and 2019 were $669,000, $713,000, and $1,940,000,
respectively, of tax benefits that, if recognized, would affect the effective income tax rate.
The Company conducts business in a number of countries and, as a result, files U.S. federal and various state and foreign
jurisdiction income tax returns. In the normal course of business, the Company is subject to examination by various taxing
jurisdictions throughout the world, including Canada, the U.K., and the U.S. With few exceptions, the Company is no longer subject to
income tax examinations for years before 2011.
Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, including interest
and penalties, have been provided for any adjustments that are expected to result from those years.
The Company does not expect any material reductions to unrecognized income tax benefits within the next 12 months as a result
of projected resolutions of income tax uncertainties.
8. Retirement Plans
The Company and its subsidiaries sponsor various retirement plans. Substantially all employees in the U.S. and certain employees
outside the U.S. are covered under the Company's defined contribution plans. Certain employees, retirees, and eligible dependents are
also covered under the Company's defined benefit pension plans.
Employer contributions under the Company's defined contribution plans are determined annually based on employee
contributions, a percentage of each covered employee's compensation, and years of service. The Company's cost for defined
contribution plans totaled $25,595,000, $23,641,000, and $25,226,000 in 2021, 2020, and 2019, respectively.
81
The Company sponsors a qualified defined benefit pension plan in the U.S. (the "U.S. Qualified Plan") and three defined benefit
pension plans in the U.K. (the "U.K. Plans"). Effective December 31, 2002, the Company elected to freeze its U.S. Qualified Plan.
Benefits payable under the Company's U.S. Qualified Plan are generally based on career compensation; however, no additional
benefits have accrued on this plan since December 31, 2002. The Company's U.K. Plans were closed to new participants as of October
31, 1997, but existing participants may still accrue additional limited benefits based on salary amounts in effect at the time the relevant
plan was closed. Benefits payable under the U.K. Plans are generally based on an employee's final salary at the time the plan was
closed. Benefits paid under the U.K. Plans are also subject to adjustments for the effects of inflation. The actuarial present value of the
projected benefit payments under the U.K. Plans are based on the employees' expected dates of separation by retirement.
The Bipartisan Budget Act of 2015 ("BBA2015") included pension funding reform which greatly reduced the contributions
required to the U.S. Qualified Plan. Required contributions may be triggered in future years as the impact of the BBA2015 pension
funding reform is phased out. The Company made voluntary contributions of $9,000,000 to the U.S. Qualified Plan in 2021 and 2020,
respectively. The Company did not make a discretionary contribution in 2019 because it made an additional voluntary contribution of
$10,000,000 in 2018 which generated a one-time U.S. tax benefit. Currently, the Company does not plan to make any discretionary
contributions to the U.S. Qualified Plan or the U.K. Plans in 2022.
Certain other employees located in the Netherlands, Norway, Germany, and the Philippines (referred to herein as the "other
international plans") have retirement benefits that are accounted for as defined benefit pension plans under GAAP.
External trusts are maintained to hold assets of the Company's U.S. Qualified Plan, U.K. Plans, and other international plans. The
Company's funding policy is to make cash contributions in amounts at least sufficient to meet regulatory funding requirements and, in
certain instances, to make contributions in excess thereof if such contributions would otherwise be in accordance with the Company's
capital allocation plans. Assets of the plans are measured at fair value at the end of each reporting period, but the plan assets are not
separately recorded on the Company's Consolidated Balance Sheets. Instead, the funded or unfunded status of the Company's U.S.
Qualified Plan, U.K. Plans, and other international plans are recorded in "Accrued pension liabilities" or "Other noncurrent assets" on
the Company's Consolidated Balance Sheets based on the projected benefit obligations less the fair values of the plans' assets.
The majority of the Company's defined benefit pension plans have projected benefit obligations in excess of the fair value of plan
assets. For these plans, the projected benefit obligations and the fair value of plan assets were as follows as of December 31, 2021 and
2020:
December 31,
Projected benefit obligations
Fair value of plans' assets
$
2021
2020
(In thousands)
448,487
427,670
$
494,273
437,234
Certain of the Company's U.K. Plans have fair values of plan assets that exceed the projected benefit obligations. For these plans,
the projected benefit obligations and the fair value of plan assets were as follows as of December 31, 2021 and 2020:
December 31,
Projected benefit obligations
Fair value of plans' assets
$
2021
2020
(In thousands)
281,828
312,119
$
267,200
303,957
In addition, the Company sponsors two frozen nonqualified, unfunded defined benefit pension plans for certain employees and
retirees, which are based on career compensation. These plans were frozen effective December 31, 2002. The liabilities of these plans,
which equal their projected benefit obligations, are included in "Other accrued liabilities" and "Other noncurrent liabilities" on the
Company's Consolidated Balance Sheets based on the expected timing of funding these obligations, since they are funded as needed
from Company assets.
82
A reconciliation of the beginning and ending balances of the projected benefit obligations and the fair value of plans' assets for the
Company's defined benefit pension plans as of the plans' most recent measurement dates is as follows:
Year Ended December 31,
Projected Benefit Obligations:
Beginning of measurement period
Service cost
Interest cost
Employee contributions
Actuarial (gain) loss
Plan settlements
Plan amendments
Benefits paid
Foreign currency effects
End of measurement period
Fair Value of Plans' Assets:
Beginning of measurement period
Actual return on plans' assets
Employer contributions
Employee contributions
Plan settlements
Benefits paid
Foreign currency effects
End of measurement period
Overfunded/(Unfunded) Status
2021
2020
(In thousands)
$
$
761,473
1,208
11,321
36
(10,034)
(249)
(1,663)
(48,465)
16,688
730,315
741,191
18,490
9,892
36
(249)
(48,465)
18,894
739,789
9,474
$
$
748,258
1,295
16,643
35
49,938
(1,450)
—
(55,150)
1,904
761,473
714,017
71,446
10,446
35
(1,450)
(55,150)
1,847
741,191
(20,282)
Due to the frozen status of the U.S. Qualified Plan and the closed status of the U.K. Plans, the accumulated benefit obligations
and the projected benefit obligations are not materially different.
The funded status of the Company's defined benefit pension plans recognized in the Consolidated Balance Sheets at December 31
consisted of:
December 31,
U.S. Qualified Plan
Other international plans
Subtotal, included in "Accrued pension liabilities"
U.K. prepaid pension asset included in "Other noncurrent assets"
Unfunded status of nonqualified defined benefit deferred pension plans included in
"Other accrued liabilities"
Unfunded status of nonqualified defined benefit pension plans included in "Other
noncurrent liabilities"
Total (overfunded)/underfunded status
Accumulated other comprehensive loss, before income taxes
2021
2020
(In thousands)
$
$
$
$
15,181
2,710
17,891
(30,291)
293
2,633
(9,474) $
(251,629) $
51,645
2,241
53,886
(36,757)
316
2,837
20,282
(264,244)
A fixed number of U.S. employees, retirees, and eligible dependents were previously covered under a frozen post-retirement
medical benefits plan and are now provided Company-subsidized premiums for participation in health care exchanges. The liabilities
for this plan are included in the Company's self-insured risks liabilities and are not material. This plan was frozen effective December
31, 2002.
83
The following tables set forth the changes in accumulated other comprehensive loss during 2021 and 2020 for the Company's
defined benefit retirement plans and post-retirement medical benefits plan on a combined basis:
Net unrecognized actuarial (loss) gain, December 31, 2019
Amortization of net loss (gain)
Net loss arising during the year
Currency translation
Net unrecognized actuarial loss, December 31, 2020
Amortization of net loss
Net gain arising during the year
Currency translation
Net unrecognized actuarial loss, December 31, 2021
Defined Benefit
Pension Plans
Post-Retirement
Medical
Benefits Plan
(In thousands)
$
$
(268,427)
10,804
(6,510)
(111)
(264,244)
10,455
4,939
(2,779)
(251,629)
$
$
152
(152)
—
—
—
—
—
—
—
Unrecognized losses reflect changes in the discount rates and differences between expected and actual asset returns, which are
being amortized over future periods. These unrecognized losses may be recovered in future periods through actuarial gains. However,
unless the minimum amount required to be amortized is below a corridor amount equal to 10.0% of the greater of the projected benefit
obligation or the market-related value of plan assets, these unrecognized actuarial losses are required to be amortized and recognized
in future periods. Net unrecognized actuarial losses included in accumulated other comprehensive loss and expected to be recognized
in net periodic benefit costs during the year ending December 31, 2022 for the U.S. and U.K. defined benefit pension plans are
$10,056,000 ($7,476,000 net of tax).
Pension expense is affected by the accounting policy used to determine the value of plan assets at the measurement date. The
Company applies the expected return on plan assets using fair market value as of the annual measurement date. The fair market value
method results in greater volatility to pension expense than the calculated value method. The amounts recognized in the Consolidated
Balance Sheets reflect the fair value of the Company's long-term pension liabilities at the plan measurement date and the fair value of
plan assets as of the balance sheet date.
Net periodic benefit (credit) cost related to all of the Company's defined benefit pension plans recognized in the Company's
Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019 included the following components:
Year Ended December 31,
Service cost
Interest cost
Expected return on assets
Amortization of actuarial loss
Net periodic benefit (credit) cost
2021
2020
(In thousands)
2019
$
$
$
1,208
11,321
(25,248)
10,455
(2,264) $
1,295
16,643
(28,016)
10,804
726
$
$
1,278
22,376
(29,654)
10,837
4,837
Benefit cost for the U.S. Qualified Plan does not include service cost since the plan is frozen. For the years ended December 31,
2021, 2020 and 2019, the non-service components of net periodic pension (benefits)/costs of $(3,472,000), $(569,000) and
$3,559,000, respectively, are included in "Other (Income) Loss" on the Consolidated Statement of Operations.
Over the next ten years, the following benefit payments are expected to be required to be made from the Company's U.S. and
U.K. defined benefit pension plans:
Year Ending December 31,
2022
2023
2024
2025
2026
2027-2031
84
$
Expected Benefit
Payments
(In thousands)
40,980
40,973
40,855
40,792
40,610
197,809
The Company reviews its employee demographic assumptions annually and updates the assumptions as necessary. The Company
updates the mortality assumptions for the U.S. plans to incorporate the current mortality tables issued by the Society of Actuaries,
adjusted to reflect the Company's specific experience and future expectations. This resulted in a $1,176,000 decrease in the projected
benefit obligation for the U.S. plans for the year ended December 31, 2021. Certain assumptions used in computing the benefit
obligations and net periodic benefit cost for the U.S. and U.K. defined benefit pension plans were as follows:
U.S. Qualified Plan:
Discount rate used to compute benefit obligations
Discount rate used to compute periodic benefit cost
Expected long-term rates of return on plans' assets
U.K. Defined Benefit Plans:
Discount rate used to compute benefit obligations
Discount rate used to compute periodic benefit cost
Expected long-term rates of return on plans' assets
2021
2020
2.76%
2.38%
4.70%
2021
2020
1.82%
1.60%
2.10%
2.38%
3.15%
4.70%
1.60%
1.93%
2.54%
The discount rate assumptions reflect the rates at which the Company believes the benefit obligations could be effectively settled.
The discount rates were determined based on the yield for a portfolio of investment grade corporate bonds with maturity dates
matched to the estimated future payments of the plans' benefit obligations.
The Company estimates the service and interest components of net periodic benefit cost for its U.S. and international pension and
other postretirement benefits. This estimation approach discounts the individual expected cash flows underlying the service cost and
interest cost using the applicable spot rates derived from the yield curve used to discount the cash flows used to measure the benefit
obligation. For the pension plans, the weighted average spot rates used to determine 2022 interest costs are estimated to be 2.18% for
the U.S. Qualified plan and 1.68% for the U.K. plans.
The expected long-term rates of return on plan assets were based on the plans' asset mix, historical returns on equity securities and
fixed income investments, and an assessment of expected future returns. The expected long-term rates of return on plan assets
assumption used to determine 2022 net periodic pension cost are estimated to be 4.80% and 2.40% for the U.S. Qualified Plan and
U.K. plans, respectively. If actual long-term rates of return differ from those assumed or if the Company used materially different
assumptions, actual funding obligations could differ materially from these estimates. Due to the frozen status of the U.S. plan and
closed status of the U.K. plans, increases in compensation rates are not material to the computations of benefit obligations or net
periodic benefit cost.
Plans' Assets
Asset allocations at the respective measurement dates, by asset category, for the Company's U.S. and U.K. qualified defined
benefit pension plans were as follows:
December 31,
Equity securities
Fixed income securities
Alternative strategies
Cash, cash equivalents and short-term investment funds
Total asset allocation
U.S. Qualified Plan
U.K. Plans
2021
2020
2021
2020
16.9%
65.5%
5.7%
11.9%
100.0%
23.4%
67.2%
6.2%
3.2%
100.0%
—
66.2%
23.1%
10.7%
100.0%
17.9%
68.3%
13.0%
0.8%
100.0%
Investment objectives for the Company's U.S. and U.K. pension plan assets are to ensure availability of funds for payment of plan
benefits as they become due; provide for a reasonable amount of long-term growth of capital, without undue exposure to volatility;
protect the assets from erosion of purchasing power; and provide investment results that meet or exceed the plans' actuarially assumed
long-term rate of return.
Alternative strategies include funds that invest in derivative instruments such as futures, forward contracts, options and swaps,
hedge funds, and funds that invest in real estate. These investments are used to help manage risks.
The long-term goal for the U.S. and U.K. plans is to reach fully-funded status and to maintain that status. The investment policies
recognize that the plans' asset return requirements and risk tolerances will change over time. Accordingly, reallocation of the
portfolios' mix of return-seeking assets and liability-hedging assets will be performed as the plans' funded status improves.
85
See Note 12, "Fair Value Measurements" for the fair value disclosures of the U.S. and U.K. qualified defined benefit pension plan
assets. The assets of the Company's other international plans are primarily insurance contracts, which are measured at contract value
and are not measured at fair value. Obligations of the U.S. nonqualified plans are paid from Company assets.
9. Common Stock and Earnings per Share
Shares of the Company's two classes of common stock are traded on the NYSE under the symbols CRD-A and CRD-B,
respectively. The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's
ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock, subject to
certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the
same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the
holders of 75% of the Class A Common Stock, voting as a class. As described in Note 11, "Stock-Based Compensation," certain
shares of CRD-A are issued with restrictions under incentive compensation plans.
Effective May 9, 2019, the Company's Board of Directors authorized the repurchase of up to 2,000,000 shares of CRD-A or
CRD-B (or a combination of the two) through December 31, 2020 (the "2019 Repurchase Authorization"). On December 10, 2020, the
Company’s Board of Directors extended the termination date of the Company’s 2019 share repurchase authorization to December 31,
2021. Under the 2019 Repurchase Authorization, repurchases may be made for cash, in the open market or privately negotiated
transactions at such times and for such prices as management deems appropriate, subject to applicable contractual and regulatory
restrictions.
In 2021 the Company had repurchased 530,598 shares of CRD-A and 111,499 shares of CRD-B at an average cost of $9.63 and
$8.68, respectively. At December 31, 2021, the Company had no remaining authorized share repurchases under the 2019 Repurchase
Authorization.
Effective November 4, 2021, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of CRD-A or
CRD-B (or a combination of the two) through December 31, 2023 (the “2021 Repurchase Authorization”).
Through December 31, 2021, the Company had repurchased no shares of CRD-A and 1,586,683 shares of CRD-B at an average
cost of $8.23 under the 2021 Repurchase Authorization. At December 31, 2021, the Company had remaining authorization to
repurchase 413,317 shares under the 2021 Repurchase Authorization.
Net Income Attributable to Shareholders of Crawford & Company per Common Share
The Company computes earnings per share of CRD-A and CRD-B using the two-class method, which allocates the undistributed
earnings for each period to each class on a proportionate basis. The Company's Board of Directors has the right, but not the obligation,
to declare higher dividends on CRD-A than on CRD-B, subject to certain limitations. In periods when the dividend is the same for
CRD-A and CRD-B or when no dividends are declared or paid to either class, the two-class method generally will yield the same
earnings per share for CRD-A and CRD-B. During 2021, the Board of Directors declared an equal dividend on CRD-A and CRD-B,
while during 2020 and 2019, the Board of Directors declared a higher dividend on CRD-A than on CRD-B.
The computations of basic net income attributable to shareholders of Crawford & Company per common share were as follows:
Year Ended December 31,
Earnings per share - basic:
Numerator:
Allocation of undistributed earnings
Dividends paid
Net income available to common shareholders, basic
Denominator:
Weighted-average common shares outstanding,
basic
Earnings per share - basic
2021
2020
2019
CRD-A
CRD-B
CRD-A
CRD-B
CRD-A
CRD-B
(In thousands, except earnings per share)
$
10,464 $
7,376
17,840
7,565 $
5,287
12,852
10,743 $
5,815
16,558
7,908 $
3,830
11,738
(392) $
8,592
8,200
(294)
4,579
4,285
30,760
22,237
30,605
22,527
$
0.58 $
0.58 $
0.54 $
0.52 $
30,637
0.27
$
22,975
0.19
86
The computations of diluted net income attributable to shareholders of Crawford & Company per common share were as follows:
Year Ended December 31,
Earnings per share - diluted:
Numerator:
Allocation of undistributed earnings
Dividends paid
Net income available to common shareholders,
diluted
Denominator:
Weighted-average common shares outstanding,
basic
Weighted-average effect of dilutive securities(1)
Weighted-average number of shares outstanding,
diluted
Earnings per share - diluted
2021
2020
2019
CRD-A
CRD-B
CRD-A
CRD-B
CRD-A
CRD-B
(In thousands, except earnings (loss) per share)
$
10,602 $
7,376
7,427 $
5,287
10,781 $
5,815
7,870 $
3,830
(394) $
8,592
(292)
4,579
17,978
12,714
16,596
11,700
8,198
4,287
30,760
983
22,237
—
30,605
252
22,527
—
30,637
453
22,975
—
31,743
22,237
30,857
22,527
$
0.57 $
0.57 $
0.54 $
0.52 $
31,090
0.26
$
22,975
0.19
Listed below are the shares excluded from the denominator in the above computation of diluted earnings per share for CRD-A
because their inclusion would have been anti-dilutive:
Year Ended December 31,
Shares underlying stock options excluded due to the options' respective
exercise prices being greater than the average stock price during the period
Performance stock grants excluded because performance conditions had not
been met(1)
2021
2020
(In thousands)
2019
838
335
1,996
578
622
717
(1) Compensation cost is recognized for these performance stock grants based on expected achievement rates; however no
consideration is given for these performance stock grants when calculating earnings per share until the performance
measurements are actually achieved.
87
10. Accumulated Other Comprehensive Loss
Comprehensive income (loss) for the Company consists of the total of net income, foreign currency translation adjustments, and
accrued pension and retiree medical liability adjustments. Foreign currency translation adjustments include net unrealized
gain/(losses) from intra-entity loans that are long-term in nature of $383,000, $(5,165,000), and $(928,000) for the years ended
December 31, 2021, 2020, and 2019, respectively. The changes in components of "Accumulated other comprehensive loss"
("AOCL"), net of taxes and noncontrolling interests, included in the Company's Consolidated Balance Sheets were as follows:
Foreign currency
translation
adjustments
Retirement
liabilities
(In thousands)
AOCL
attributable to
shareholders of
Crawford &
Company
Balance at December 31, 2019
Other comprehensive income before reclassifications
Unrealized net losses arising during the year
Amounts reclassified from accumulated other comprehensive income to
net income (1)
Net current period other comprehensive income
Acquisition/Disposition of noncontrolling interest
Balance at December 31, 2020
Other comprehensive income before reclassifications
Unrealized net gains arising during the year
Amounts reclassified from accumulated other comprehensive income
to net income (1)
Net current period other comprehensive income
Balance at December 31, 2021
$
$
(35,850) $
4,595
—
(171,057) $
—
(4,966)
—
4,595
463
(30,792)
9,032
—
7,959
2,993
—
(168,064)
—
1,618
—
9,032
(21,760) $
7,765
9,383
(158,681) $
(206,907)
4,595
(4,966)
7,959
7,588
463
(198,856)
9,032
1,618
7,765
18,415
(180,441)
(1) Retirement liabilities reclassified to net income are related to the amortization of actuarial losses and are included in "Selling,
general, and administrative expenses" in the Company's Consolidated Statements of Operations. See Note 8, "Retirement Plans"
for additional details.
Other comprehensive loss amounts attributable to noncontrolling interests shown in the Company's Consolidated Statements of
Shareholders' Investment are foreign currency translation adjustments.
11. Stock-Based Compensation
The Company has various stock-based incentive compensation plans for its employees and members of its Board of Directors.
Only shares of CRD-A can be issued under these plans. The fair value of an equity award is estimated on the grant date without regard
to service or performance conditions. The fair value is recognized as compensation expense over the requisite service period for all
awards that vest. When recognizing compensation expense, estimates are made for the number of awards that are expected to vest, and
subsequent adjustments are made to reflect both changes in the number of shares expected to vest and actual vesting. Compensation
expense recognized at the end of any year equals at least the portion of the grant-date value of an award that has vested at that date.
The pretax compensation expense recognized for all stock-based compensation plans was $7,585,000, $4,384,000, and
$4,109,000 for the years ended December 31, 2021, 2020, and 2019, respectively. During 2021, there was an increase in performance
awards, which resulted in the increased stock-based compensation for the year as compared to 2020 and 2019.
The total income tax benefit recognized in the Consolidated Statements of Operations for stock-based compensation arrangements
was approximately $1,767,000, $947,000, and $888,000 for the years ended December 31, 2021, 2020, and 2019, respectively. Some
of the Company's stock-based compensation awards are granted under plans which are designed not to be taxable as compensation to
the recipient based on tax laws of the U.S. or other applicable country. Accordingly, the Company does not recognize tax benefits on
all of its stock-based compensation expense. Adjustments to additional paid-in capital for differences between deductions taken on its
income tax returns related to stock-based compensation plans and the related income tax benefits previously recognized for financial
reporting purposes were not significant in any year.
88
Stock Options
The Company has granted nonqualified and incentive stock options to key employees and directors. All stock options are for
shares of CRD-A. Option awards are granted with an exercise price equal to the fair market value of the Company's stock on the date
of grant. The Company's stock option plans have been approved by shareholders, and the Company's Board of Directors is authorized
to make specific grants of stock options under active plans. Employee stock options typically are subject to graded vesting over three
years (33% each year) and have a typical life of ten years. Compensation cost for stock options is recognized on an accelerated basis
over the requisite service period for the entire award. For the years ended December 31, 2021, 2020 and 2019, compensation expense
of $375,000, $617,000, and $1,397,000, respectively, was recognized for employee stock option awards.
A summary of option activity as of December 31, 2021, 2020 and 2019, and changes during each year, is presented below:
Outstanding at December 31, 2018
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2019
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2020
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2021
Vested and Exercisable at December 31, 2021
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(In thousands)
$
$
$
8.60
9.70
5.91
9.24
9.13
8.73
—
9.05
9.01
—
—
8.90
8.99
9.02
8.1 years $
667
7.9 years
3,969
7.4 years
114
6.5 years $
6.0 years $
143
80
Shares
(In thousands)
1,294
591
(111)
(80)
1,694
660
—
(458)
1,896
—
—
(278)
1,618
1,208
There were no stock options granted in 2021. The weighted average grant date fair value of stock options granted during the year
ended December 31, 2020 and 2019 was $2.29 and $2.57, respectively. No options were exercised in 2021 or 2020. Options vested in
2021 and 2019 had an intrinsic value of $31,000 and $446,000, respectively. Options that vested in 2020 had no intrinsic value. The
fair value of options that vested in 2021, 2020 and 2019 was $860,000, $1,084,000, and $1,000,000, respectively.
At December 31, 2021, the unrecognized compensation cost related to unvested employee stock options was $162,000. Directors'
stock options had no unrecognized compensation cost since directors' options vest upon grant, and the grant-date fair values were fully
expensed on the grant date.
The fair value of each option was estimated on the date of grant using the Black-Scholes-Merton option-pricing formula, with the
following weighted average assumptions. There were no stock options granted in 2021:
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected term of options
2021
2020
2019
—
—
—
—
3.02%
35.48%
1.38%
7 years
3.80%
36.73%
2.56%
7 years
The expected dividend yield used for 2020 was based on the Company's historical dividend yield. The expected volatility of the
price of CRD-A was based on historical realized volatility. The risk-free interest rate was based on the U.S. Treasury Daily Yield
Curve Rate on the grant date, with a term equal to the expected term used in the pricing formula. The expected term of the option took
into account both the contractual term of the option and the effects of expected exercise behavior.
89
Performance-Based Stock Grants
Performance share grants are from time to time made to certain key employees of the Company. Such grants entitle employees to
earn shares of CRD-A upon the achievement of certain individual and/or corporate objectives. Grants of performance shares are made
at the discretion of the Company's Board of Directors, or the Board's Compensation Committee, and are subject to graded or cliff
vesting over three-year periods. Shares are not issued until the vesting requirements have been met. Dividends are not paid or accrued
on unvested/unissued shares. The grant-date fair value of a performance share grant is based on the market value of CRD-A on the
date of grant, reduced for the present value of any dividends expected to be paid on CRD-A prior to the vesting of the award.
Compensation expense for each award is recognized ratably from the grant date to the vesting date for each tranche.
On September 23, 2020, deeming the existing performance based cliff awards granted in 2019 and 2020 to be unattainable, the
Compensation Committee cancelled the existing awards and approved a new plan based on Total Shareholder Return (“TSR”), a
market condition. The 2019 replacement awards were targeted to achieve 50% of the original award it was replacing and set to vest on
December 31, 2021. The 2020 replacement awards were targeted to achieve 100% of the original award it was replacing, with a
vesting date of December 31, 2022.
TSR is defined as dividends paid during the measurement period plus share price appreciation. Share price appreciation is
measured by using the 20 day trading day volume weighted average price at the start of the measurement period as the baseline,
compared against the highest consecutive 20 day trading day volume weighted average price for the period between January 1, 2021
and the vesting date for the 2019 replacement awards and between January 1, 2022 and the vesting date for the 2020 replacement
awards. Depending on the TSR, the number of shares earned can be between 50% and 200% of the targeted shares granted. If the TSR
is below 10% for the 2019 replacement awards, or 20% for the 2020 replacement awards, then no shares vest. The 2019 replacement
awards vested at 200% of the targeted shares, resulting in 135,309 incremental shares vested and issued at December 31, 2021. These
incremental awards are presented as shares granted and vested during 2021 in the rollforward below.
The cancellation and reissuance of these awards was treated as a Type III modification, where no cumulative expense is
recognized prior to the cancellation as it was deemed improbable to vest. Expense of the modified award will be recorded ratably over
the service life, based on the valuation determined by utilizing a Monte Carlo simulation. At the time of modification, employees were
given an option to elect a cash payout at the vesting date, also based on a component of TSR. This one-time election had to be
determined within 30 days of the grant date. Any awards where the cash payout option was elected were recorded as liability awards,
which are included on the Company's Consolidated Balance Sheets in "Accrued compensation and related costs."
A summary of the status of the Company's nonvested performance shares as of December 31, 2021, 2020 and 2019, and changes
during each year, is presented below:
Nonvested at December 31, 2018
Granted
Vested
Forfeited or unearned
Nonvested at December 31, 2019
Granted
Vested
Forfeited or unearned
Nonvested at December 31, 2020
Granted
Vested
Forfeited or unearned
Nonvested at December 31, 2021
Shares
988,837
626,776
(214,824)
(427,010)
973,779
1,616,902
(224,681)
(1,466,729)
899,271
935,825
(507,191)
(151,514)
1,176,391
$
$
Weighted-Average
Grant-Date
Fair Value
8.07
8.87
8.49
8.34
8.38
8.01
8.33
8.10
8.19
8.38
8.85
6.52
8.25
The total fair value of the performance shares that vested in 2021, 2020, and 2019 was $4,487,000, $1,871,000, and $1,823,000,
respectively.
90
Compensation expense recognized for all performance shares totaled $5,712,000, $2,382,000, and $1,082,000 for the years ended
December 31, 2021, 2020 and 2019, respectively. Compensation cost for these awards is net of estimated or actual award forfeitures.
Certain performance awards vest ratably, from grant date to vesting date of their respective tranches, without cumulative earnings per
share targets. As of December 31, 2021, there was an estimated $5,180,000 of unearned compensation cost for nonvested performance
shares. This unearned compensation cost is expected to be fully recognized by the end of 2023.
Restricted Shares
The Company's Board of Directors may elect to issue restricted shares of CRD-A in lieu of, or in addition to, cash payments to
certain key employees. Employees receiving these shares are subject to restrictions on their ability to transfer the shares. Such
restrictions generally lapse ratably over vesting periods ranging from several months to five years. The grant-date fair value of a
restricted share of CRD-A is based on the market value of the stock on the date of grant. Compensation cost is recognized on an
accelerated basis over the requisite service period.
A summary of the status of the Company's restricted shares of CRD-A as of December 31, 2021, 2020 and 2019 and changes
during each year, is presented below:
Nonvested at December 31, 2018
Granted
Vested
Forfeited or unearned
Nonvested at December 31, 2019
Granted
Vested
Forfeited or unearned
Nonvested at December 31, 2020
Granted
Vested
Forfeited or unearned
Nonvested at December 31, 2021
Shares
Weighted-Average
Grant-Date Fair
Value
72,109
149,496
(108,610)
(31,387)
81,608
117,279
(119,327)
—
79,560
94,654
(138,635)
(10,579)
25,000
$
$
7.76
9.38
9.04
9.55
8.35
8.34
8.52
—
8.08
9.03
8.91
8.99
7.23
Compensation expense recognized for all restricted shares for the years ended December 31, 2021, 2020, and 2019 was $906,000,
$942,000, and $1,205,000, respectively. As of December 31, 2021, there was $104,000 of total unearned compensation cost related to
nonvested restricted shares which is expected to be recognized by December 31, 2022.
Employee Stock Purchase Plans
The Company has three employee stock purchase plans: the U.S. Plan, the U.K. Plan, and the International Plan. Eligible
employees in Canada, Puerto Rico, and the U.S. Virgin Islands may also participate in the U.S. Plan. The International Plan is for
eligible employees located in certain other countries who are not covered by the U.S. Plan or the U.K. Plan. All plans are
compensatory.
For all plans, the requisite service period is the period of time over which the employees contribute to the plans through payroll
withholdings. For purposes of recognizing compensation expense, estimates are made for the total withholdings expected over the
entire withholding period. The market price of a share of stock at the beginning of the withholding period is then used to estimate the
total number of shares that will be purchased using the total estimated withholdings. Compensation cost is recognized ratably over the
withholding period.
Under the U.S. Plan, the Company is authorized to issue up to 1,200,000 shares of CRD-A to eligible employees. Participating
employees can elect to have up to 85% of $25,000 of their eligible annual earnings withheld to purchase shares at the end of the one-
year withholding period which starts each July 1 and ends the following June 30. The purchase price of the stock is 85% of the lesser
of the closing price of a share of such stock on the first day or the last day of the withholding period. Participating employees may
cease payroll withholdings during the withholding period and/or request a refund of all amounts withheld before any shares are
purchased.
91
During the years ended December 31, 2021, 2020 and 2019, a total of 155,293, 114,408, and 131,100 shares, respectively, of
CRD-A were issued under the U.S. employee stock purchase plan to the Company's employees at average purchase prices of $6.77,
$6.71, and $7.38 in 2021, 2020, and 2019, respectively. At December 31, 2021, an estimated 128,000 shares will be issued and
purchased under the U.S. Plan in 2022. During the years ended December 31, 2021, 2020, and 2019, compensation expense of
$349,000, $343,000, and $277,000, respectively, was recognized for the U.S. employee stock purchase plan.
Under the U.K. Plan, the Company is authorized to issue up to 1,200,000 shares of CRD-A. Under the U.K. Plan, eligible
employees can elect to have up to £250 withheld from payroll each month to purchase shares after the end of a three-year savings
period. The purchase price of a share of stock is 85% of the market price of the stock at a date prior to the grant date as determined
under the U.K. Plan. Participating employees may cease payroll withholdings and/or request a refund of all amounts withheld before
any shares are purchased.
At December 31, 2021, an estimated 196,000 shares will be eligible for purchase under the U.K. Plan at the end of the current
withholding periods. This estimate is subject to change based on future fluctuations in the value of the British pound against the U.S.
dollar, future changes in the market price of CRD-A, and future employee participation rates. The purchase price per share of CRD-A
under the U.K. Plan ranges from $6.64 to $8.47. For the years ended December 31, 2021, 2020, and 2019, compensation expense of
$241,000, $163,000, and $148,000, respectively, was recognized for the U.K. Plan. During 2021, 2020, and 2019, a total of 76,457
shares, 2,061 shares, and 289,901 shares, respectively, of CRD-A were issued under the U.K. Plan.
Under the International Plan, up to 1,000,000 shares of CRD-A may be issued. Participating employees can elect to have up to
$21,250 of their eligible annual earnings withheld to purchase up to 5,000 shares of CRD-A at the end of the one-year withholding
period which starts each July 1 and ends the following June 30. The purchase price of the stock is 85% of the lesser of the closing
price for a share of such stock on the first day or the last day of the withholding period. Participating employees may cease payroll
withholdings during the withholding period and/or request a refund of all amounts withheld before any shares are purchased. During
2021, 2020, and 2019, 4,080, 4,051, and 4,264 shares, respectively, were issued under the International Plan. Compensation expense
was immaterial for this plan in all three years.
12. Fair Value Measurements
GAAP defines fair value as the price that would be received to sell an asset or to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.
Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to
maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair
value are as follows:
•
•
•
Level 1— Observable inputs that reflect quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1. The Company values assets and liabilities
included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets
and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that
use significant unobservable inputs.
Recurring Fair Value Measurements
The following table presents the Company's financial assets and liabilities that are measured at fair value on a recurring basis,
excluding assets related to the Company's defined benefit pension plans, categorized using the fair value hierarchy:
December 31,
Assets:
Money market funds (1)
Liabilities:
Contingent earnout liability (2)
Quoted
Prices in
Active Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
2021
Significant
Unobservable
Inputs
(Level 3)
(In thousands)
Total
$
10,028 $
— $
— $
10,028
—
—
12,556
12,556
92
December 31,
Assets:
Money market funds (1)
Liabilities:
Contingent earnout liability (2)
Level 1
Level 2
Level 3
Total
(In thousands)
2020
$
10,026 $
— $
— $
10,026
—
—
6,151
6,151
(1) The fair values of the money market funds were based on recently quoted market prices and reported transactions in an active
marketplace. Money market funds are included on the Company's Consolidated Balance Sheets in "Cash and cash equivalents."
(2) The contingent earnout liability relates to businesses acquired in 2021 and 2020. See Note 3, "Business Acquisitions and
Dispositions" for more information. The Level 3 fair value of the contingent earnout liability was estimated using internally-
prepared revenue and EBITDA projections, and discount rates determined using a combination of observable and unobservable
market data. The fair value of the contingent earnout liability is included in "Other accrued liabilities" and "Other noncurrent
liabilities" on the Company's Consolidated Balance Sheets, based upon the term of the contingent earnout agreement.
The following table summarizes the change in the fair value of the Company's contingent earnout consideration balance:
December 31,
2021
2020
Acquisition-related contingent consideration, beginning of the year
Fair value of contingent consideration upon acquisition
Change in fair value of contingent consideration
Settlement of contingent consideration
Acquisition-related contingent consideration, end of the year
$
$
$
(In thousands)
6,151
9,482
650
(1,683)
14,600
$
454
5,808
(111)
—
6,151
As of December 31, 2021, the earnout liability of $2,044,000 for the 2021 earnout period in connection with our acquisitions of
Crawford Carvallo and HBA Group is based on the actual achievement of performance targets and is no longer subject to fair value
measurement and was accordingly transferred out of Level 3. Changes in fair value of contingent consideration are included in "Other
Income/(Loss)" on the Consolidated Statement of Operations.
Fair Value Disclosures
The categorization of assets and liabilities within the fair value hierarchy and the measurement techniques are reviewed quarterly.
Any transfers between levels are deemed to have occurred at the end of the quarter.
The fair values of accounts receivable, unbilled revenues, accounts payable and short-term borrowings approximate their
respective carrying values due to the short-term maturities of the instruments. The interest rate on the Company's variable rate long-
term debt resets at least every 90 days; therefore, the recorded value approximates fair value. These assets and liabilities are measured
within Level 2 of the fair value hierarchy.
Nonrecurring Fair Value Disclosures
During 2020, the Company impaired and expensed goodwill of $17,674,000. During 2019, the Company impaired and expensed
goodwill of $17,484,000. See Note 1, "Significant Accounting and Reporting Policies" and Note 4, "Goodwill and Intangible Assets,"
where discussed in more detail.
Fair Value Measurements for Defined Benefit Pension Plan Assets
The fair value hierarchy is also applied to certain other assets that indirectly impact the Company's consolidated financial
statements. Assets contributed by the Company to its defined benefit pension plans become the property of the individual plans. Even
though the Company no longer has control over these assets, it is indirectly impacted by subsequent fair value adjustments to these
assets. The actual return on these assets impacts the Company's future net periodic benefit cost, as well as amounts recognized in its
Consolidated Balance Sheets. The Company uses the fair value hierarchy to measure the fair value of assets held by its U.S. and U.K.
defined benefit pension plans.
93
The following table summarizes the level within the fair value hierarchy used to determine the fair value of the Company's
pension plan assets for its U.S Qualified Plan at December 31, 2021 and 2020:
December 31,
2021
Level 1
Level 2
Level 3
Total
Level 1
(In thousands)
2020
Level 2
Level 3
Total
Asset Category:
Cash and cash equivalents
Short-term investment funds
Common Collective Equity
funds:
U.S.
International
Common Collective Fixed
Income Funds and Fixed
Income Securities:
U.S.
International
Alternative strategy funds
Total Plan Assets
Other plan liabilities, net (a)
Net Plan Assets
$ 20,706 $
— $
—
25,569
— $ 20,706
25,569
—
$ 2,861
—
$
— $
9,827
— $
—
2,861
9,827
—
—
40,191
25,879
—
—
40,191
25,879
—
—
66,145
28,529
—
—
66,145
28,529
39,304
—
—
186,542
29,300
8,784
— 225,846
29,300
—
22,198
13,414
389,689
$ 60,010 $ 316,265 $ 13,414
(1,522)
$ 388,167
36,007
—
—
$ 38,868
207,219
28,501
9,248
349,469
—
—
15,938
$ 15,938
$
243,226
28,501
25,186
404,275
(7,336)
396,939
$
(a) net amounts payable for unsettled security transactions.
The following table summarizes the level within the fair value hierarchy used to determine the fair value of the Company's
pension plan assets for its U.K. plans at December 31, 2021 and 2020:
December 31,
Asset Category:
Cash and cash equivalents
Common Collective Equity funds:
U.S.
International
Common Collective Fixed Income
Funds and Fixed Income
Securities:
Short-term Investment funds:
Government securities
Alternative strategy funds
Real estate funds
Total
Level 1
Level 2
Level 3
Total
2021
Level 1
(In thousands)
2020
Level 2
Level 3
Total
$ 33,518 $
— $
— $ 33,511 $ 2,613 $
— $
— $
2,613
—
—
—
—
—
—
—
—
—
—
44,461
7,510
—
—
44,461
7,510
— 64,704
— 141,870
56,883
— 162,276
42,564
—
34,958
—
—
—
$ 37,414 $ 263,457 $ 11,255 $ 312,119 $ 2,613 $ 291,769
— 64,704
— 141,870
— 60,779
11,255
— 11,255
3,896
—
—
—
—
9,572
9,572
162,276
42,564
34,958
9,572
$ 303,954
$
Short-term investment funds consist primarily of funds with a maturity of 60 days or less and are valued at amortized cost which
approximates fair value.
Equity securities consist primarily of common collective funds (Level 2). Common collective funds are valued at the net asset
value per share multiplied by the number of shares held as of the measurement date.
94
Fixed income securities consist of money market funds, government securities, corporate bonds and debt securities, mortgage-
backed securities and other common collective funds. Government securities are valued by third-party pricing sources and are valued
daily in an active market (Level 1). Corporate bonds are valued using either the yields currently available on comparable securities of
issuers with similar credit ratings or using a discounted cash flows approach that utilizes observable inputs, such as current yields of
similar instruments, and includes adjustments for valuation adjustments from internal pricing models which use observable inputs
such as issuer details, interest rates, yield curves, default rates and quoted prices for similar assets (Level 2). Mortgage-backed
securities are valued by pricing service providers that use broker-dealer quotations or valuation estimates from their internal pricing
models (Level 2). Other common collective funds are valued at the net asset value per share multiplied by the number of shares held
as of the measurement date (Level 2).
Alternative strategy funds valued at the net asset value per share multiplied by the number of shares held as of the measurement
date (Level 2). Alternative strategy funds may include derivative instruments such as futures, forward contracts, options and swaps
and are used to help manage risks. Derivative instruments are generally valued by the investment managers or in certain instances by
third party pricing sources (Level 2) or may, due to the inherent uncertainty of valuation for those investments, differ significantly
from the values that would have been used had a ready market for the investments existed, and the differences could be material
(Level 3).
Real estate funds are primarily property unit trusts whose values are primarily reported by the fund manager and are based on
valuation of the underlying investments which include inputs such as cost, discounted cash flows, independent appraisals and market-
based comparable data (Level 3). The fair values may, due to the inherent uncertainty of valuation for those investments, differ
significantly from the values that would have been used had a ready market for the investments existed, and the differences could be
material.
Changes in fair value related to assets still held at the reporting date are included in "Accumulated Other Comprehensive Loss" on
the Consolidated Balance Sheet. The following table provides a reconciliation of the beginning and ending balance of Level 3 assets
within the Company's U.S. and U.K. pension plans during the years ended December 31, 2021 and 2020:
Balance at December 31, 2019
Actual return on plan assets:
Related to assets still held at the reporting date
Balance at December 31, 2020
Actual return on plan assets:
Related to assets still held at the reporting date
Purchases, sales and settlements, net
Balance at December 31, 2021
13. Segment and Geographic Information
U.S
U.K.
(in thousands)
14,766
$
1,172
15,938
3,575
(6,099)
13,414
$
9,735
(163)
9,572
1,683
—
11,255
$
$
In connection with the realignment of operating segment manager responsibilities in January 2021, the Company has realigned its
operating segments by moving to a global service line reporting structure consisting of Loss Adjusting, TPA: Broadspire and Platform
Solutions. The Company's revised reportable segments are comprised of the following:
•
•
•
Loss Adjusting, which services the global property and casualty market. This is comprised of the previously reported
Crawford Claims Solutions segment, excluding Networks (as defined below) and Crawford Legal Services, and the Global
Technical Services service line previously reported within Crawford Specialty Solutions.
TPA: Broadspire, which provides third party administration for workers' compensation, auto and liability, disability absence
management, medical management, and accident and health to corporations, brokers and insurers worldwide. This is
comprised of the previously reported Broadspire segment and the Crawford Legal Services service line previously reported
within the Crawford Claims Solutions segment.
Platform Solutions, which consists of Contractor Connection and Networks service lines. This is comprised of the previously
reported Contractor Connection service line within Crawford Specialty Solutions and the Networks service line, which
includes Catastrophe operations, WeGoLook, and certain international network businesses previously reported within the
Crawford Claims Solutions segment.
95
The prior periods have been restated to reflect the change in reportable segments.
The Crawford Loss Adjusting and Crawford TPA Solutions reportable segments represent the aggregation of certain geographic
operating segments within those service lines.
The Company's three reportable segments represent components of the business for which separate financial information is
available, and which is evaluated regularly by the CODM. The segments, organized based upon the nature of services, are: Crawford
Loss Adjusting, which primarily serves the global property and casualty insurance company markets; Crawford TPA Solutions, which
serves the global casualty, disability and self-insurance marketplace; and Crawford Platform Solutions which serves the global
property and casualty insurance company markets. Intersegment sales are recorded at cost and are not material.
Operating earnings is the primary financial performance measure used by the Company's senior management and the CODM to
evaluate the financial performance of the Company's three reportable segments and make resource allocation decisions. The Company
believes this measure is useful to investors in that it allows them to evaluate segment operating performance using the same criteria
used by the Company's senior management and CODM. Operating earnings will differ from net income computed in accordance with
GAAP since operating earnings represent segment earnings before certain unallocated corporate and shared costs and credits, net
corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, goodwill impairment,
restructuring and other costs, gain on disposition of business line, arbitration and claim settlements, income taxes, and net income or
loss attributable to noncontrolling interests and redeemable noncontrolling interests.
Segment operating earnings includes allocations of certain corporate and shared costs. If the Company changes its allocation
methods or changes the types of costs that are allocated to its three reportable segments, prior period amounts presented in the current
period financial statements are adjusted to conform to the current allocation process.
In the normal course of its business, the Company sometimes pays for certain out-of-pocket expenses that are thereafter
reimbursed by its clients. Under GAAP, these out-of-pocket expenses and associated reimbursements are required to be included when
reporting expenses and revenues, respectively, in the Company's consolidated results of operations. However, in evaluating segment
results, Company management excludes these reimbursements and related expenses from segment results, as they offset each other.
Financial information as of and for the years ended December 31, 2021, 2020, and 2019 related to the Company's reportable
segments is presented below.
2021
Revenues before reimbursements
Segment operating earnings
Depreciation and amortization (1)
Assets (2)
2020
Revenues before reimbursements
Segment operating earnings
Depreciation and amortization (1)
Assets (2)
2019
Revenues before reimbursements
Segment operating earnings
Depreciation and amortization (1)
Assets (2)
Crawford
Loss Adjusting
Crawford
TPA
Solutions
Crawford
Platform
Solutions
(In thousands)
$
$
$
$
$
$
475,587
22,990
2,884
246,360
438,491
41,104
2,405
197,918
457,484
30,125
3,405
232,172
$
$
$
397,964
17,567
7,966
97,282
371,392
20,507
9,451
94,771
397,626
28,506
10,267
89,333
$
$
$
228,481
36,334
3,793
123,635
172,609
27,650
2,647
71,612
150,692
26,677
2,576
66,331
Total
1,102,032
76,891
14,643
467,277
982,492
89,261
14,503
364,301
1,005,802
85,308
16,248
387,836
(1) Excludes amortization expense of finite-lived customer relationships and trade name intangible assets.
(2) Consists of accounts receivable, less allowance for expected credit losses, unbilled revenues, at estimated billable amounts,
goodwill and intangible assets arising from business acquisitions, net.
Revenues by geographic region and major service line for the Crawford Loss Adjusting, Crawford TPA Solutions and Crawford
Platform Solutions segments are shown in Note 2, "Revenue Recognition."
96
Capital expenditures for the years ended December 31, 2021, 2020, and 2019 are shown in the following table:
Year Ended December 31,
Crawford Loss Adjusting
Crawford TPA Solutions
Crawford Platform Solutions
Corporate
Total capital expenditures
2021
2020
(In thousands)
2019
$
$
3,598
8,765
3,681
14,910
30,954
$
$
1,229
6,982
12,099
17,070
37,380
$
$
1,625
4,331
2,746
12,422
21,124
The total of the Company's reportable segments' revenues before reimbursements reconciled to total consolidated revenues for the
years ended December 31, 2021, 2020, and 2019 was as follows:
Year Ended December 31,
Segments' revenues before reimbursements
Reimbursements
Total consolidated revenues
2021
2020
(In thousands)
$
$
1,102,032
37,199
1,139,231
$
$
982,492
33,703
1,016,195
$
$
2019
1,005,802
41,825
1,047,627
The Company's reportable segments' total operating earnings reconciled to consolidated income before income taxes for the years
ended December 31, 2021, 2020, and 2019 were as follows:
Year Ended December 31,
Operating earnings of all reportable segments
Unallocated corporate and shared costs and credits
Net corporate interest expense
Stock option expense
Amortization of acquisition-related intangible assets
Goodwill and intangible asset impairment charges
Arbitration and claim settlements
Restructuring and other costs, net
Gain on disposition of businesses, net
Income before income taxes
2021
2020
(In thousands)
2019
$
$
76,891
(14,386)
(6,559)
(1,053)
(11,029)
—
—
—
—
43,864
$
$
89,261
(17,431)
(7,923)
(1,122)
(11,653)
(17,674)
—
(8,133)
13,763
39,088
$
$
85,308
(7,699)
(10,774)
(1,885)
(11,277)
(17,484)
(12,552)
—
—
23,637
The Company's reportable segments' total assets reconciled to consolidated total assets of the Company at 2021 and 2020 are
presented in the following table:
December 31,
Assets of reportable segments
Corporate assets:
Cash and cash equivalents
Income taxes receivable
Prepaid expenses and other current assets
Net property and equipment
Operating lease right-of-use asset, net
Capitalized software costs, net
Deferred income tax assets
Other noncurrent assets
Total corporate assets
Total assets
2021
2020
(In thousands)
467,277
$
53,228
4,936
34,576
33,721
99,369
75,802
21,266
62,464
385,362
852,639
$
364,301
44,656
1,269
29,490
36,402
109,315
71,021
25,595
70,935
388,683
752,984
$
$
97
Revenues and long-lived assets for the U.S., U.K. and Canada are set out below as these countries are material for geographical
area disclosure. For the purposes of these geographic area disclosures, long-lived assets consist of the net property and equipment,
capitalized software costs, net and operating lease right-of-use, net line items on the Company's Consolidated Balance Sheets and
excludes intangible assets and goodwill.
2021
Revenues before reimbursements
Long-lived assets
2020
Revenues before reimbursements
Long-lived assets
2019
Revenues before reimbursements
Long-lived assets
14. Client Funds
U.S.
U.K.
Canada
(In thousands)
All Other
International
Total
Company
$
658,785
145,061
$
134,663
15,923
$
84,945
19,579
$
223,639
28,329
$
1,102,032
208,892
570,820
151,906
569,205
140,560
128,674
20,290
126,337
20,749
89,162
14,404
114,438
17,999
193,836
30,138
195,822
20,916
982,492
216,738
1,005,802
200,224
The Company maintains funds in custodial accounts at financial institutions to administer claims for certain clients. These funds
are not available for the Company's general operating activities and, as such, have not been recorded in the accompanying
Consolidated Balance Sheets. The amount of these funds totaled $555,821,000 and $537,531,000 at December 31, 2021 and 2020,
respectively.
15. Commitments and Contingencies
As part of the Company's Credit Facility, the Company maintains a letter of credit facility to satisfy certain of its own contractual
requirements. At December 31, 2021, the aggregate committed amount of letters of credit outstanding under the facility was
$11,277,000.
From time to time, the Company enters into certain agreements for the purchase or sale of assets or businesses that contain
provisions that may require the Company to make additional payments in the future depending upon the achievement of specified
operating results of the acquired company, or provide the Company with an option or similar right to purchase additional assets.
In the normal course of its business, the Company is sometimes named as a defendant or responsible party in suits or other actions
by insureds or claimants contesting decisions made by the Company or its clients with respect to the settlement of claims.
Additionally, certain clients of the Company have in the past brought, and may, in the future bring, claims for indemnification on the
basis of alleged actions by the Company, its agents, or its employees in rendering services to clients. The majority of these claims are
of the type covered by insurance maintained by the Company. However, the Company is responsible for the deductibles and self-
insured retentions under various insurance coverages. In the opinion of Company management, adequate provisions have been made
for such known and probable risks. No assurances can be provided, however, that the result of any such action, claim or proceeding,
now known or occurring in the future, will not result in a material adverse effect on our business, financial condition or results of
operations.
The Company is subject to numerous federal, state, and foreign labor, employment, worker health and safety, antitrust and
competition, environmental and consumer protection, import/export, anti-corruption, and other laws. From time to time the Company
faces claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts
with such employees or former employees. Such claims, investigations, and any litigation involving the Company could divert
management's time and attention from the Company's business operations and could potentially result in substantial costs of defense,
settlement or other disposition, which could have a material adverse effect on the Company's results of operations, financial position,
and cash flows. In the opinion of Company management, adequate provisions have been made for any items that are probable and
reasonably estimable.
In 2019 the Company recognized $12,552,000 for an arbitration settlement related to additional payments awarded to former
executives of its former Garden City Group related to their departure in 2015. There are no other potential claimants related to this
matter. This pretax expense is presented in the Consolidated Statements of Operations as a separate charge "Arbitration and claim
settlements."
98
16. Restructuring and Other Costs, Net
The Company incurred net restructuring and other costs of $8,133,000 in 2020. There were no restructuring and other costs in
2021 or 2019. Restructuring costs incurred during the year ended December 31, 2020 were predominantly comprised of severance
costs, asset impairments, and lease termination costs. Severance and other termination costs relate to efforts to consolidate and
streamline various functions of our workforce, both in operations and administrative functions. Asset impairments, including costs
incurred for obsolete software, relate to decisions to close certain operations, and lease termination costs related to the exiting of
certain leased facilities. These costs were partially offset by certain non-operating credits that occurred related to a cost method
investment and sale of internet protocol addresses. The following table shows the costs incurred by type of restructuring activity:
Year ended December 31
2021
2020
(In thousands)
2019
Severance benefits
Asset impairments and lease termination costs
Gain on fair value remeasurement of cost and equity method investments
Liquidation dividend from a cost method investment
Gain on sale of internet protocol addresses
Total restructuring and other costs, net
$
$
— $
—
—
—
—
— $
9,350
2,538
(1,099)
(1,247)
(1,409)
8,133
$
$
As of December 31, 2021, the following liabilities remained on the Company's Consolidated Balance Sheets related to
restructuring charges recorded in 2020. The rollforwards of these costs to December 31, 2021 were as follows:
Restructuring Charges
Balance at December 31, 2019
Additions
Adjustments to accruals
Cash payments
Balance at December 31, 2020
Additions
Adjustments to accruals
Cash payments
Balance at December 31, 2021
Accrued compensation
and related costs
Other accrued
liabilities
Total
342
9,112
(453)
(5,632)
3,369
—
(561)
(2,520)
288
$
$
472
648
(472)
(58)
590
—
27
(489)
128
$
—
—
—
—
—
—
814
9,760
(925)
(5,690)
3,959
—
(534)
(3,009)
416
99
17. Subsequent Events
Segment Realignment
In connection with the realignment of management responsibilities subsequent to January 1, 2022, the Company has realigned its
operating segments by moving to a geographic reporting structure consisting of North America Loss Adjusting, International
Operations, Broadspire, and Platform Solutions. The Company's revised reportable segments are comprised of the following:
•
•
•
•
North America Loss Adjusting, which services the North American property and casualty market. This is comprised of the
previously reported Crawford Loss Adjusting segment in the U.S. and Canada, including Global Technical Services and
edjuster. The Canadian operations will include all operations within that country, including those previously reported
within the Crawford TPA Solutions and Crawford Platform Solutions segments.
International Operations, which services the global property and casualty market outside North America. This is
comprised of the previously reported Crawford Loss Adjusting segment outside of North America, including Crawford
Legal Services which was previously within the Crawford TPA Solutions segment. The International Operations will
include all operations within the respective countries, including those previously reported within the Crawford TPA
Solutions and Crawford Platform Solutions segments.
Broadspire, which provides third party administration for workers' compensation, auto and liability, disability absence
management, medical management, and accident and health to corporations, brokers and insurers in the U.S.
Platform Solutions, which consists of the Contractor Connection, Networks, and Subrogation service lines in the U.S. The
Networks service line includes Catastrophe operations and WeGoLook.
The succeeding interim and annual periods will disclose the reportable segments under the new basis with prior periods restated to
reflect the change.
Asset Disposition
The Company sold its Canadian head office building in Kitchener, Ontario Canada in the first quarter of 2022 for $3.1 million and
expects to recognize an estimated pretax gain on disposal of $1.8 million.
Repurchase Authorization
On February 10, 2022, the Company's Board of Directors authorized the addition of 5,000,000 shares of CRD-A or CRD-B (or a
combination of the two) to its 2021 Repurchase Authorization which had a remaining authorization to purchase 413,317 shares at
December 31, 2021. Under the new repurchase program, repurchases may be made through December 31, 2023 in the open market or
privately negotiated transactions at such times and for such prices as management deems appropriate, subject to applicable regulatory
guidelines. The new authorization does not obligate Crawford to acquire any stock, and purchases may be commenced or suspended at
any time based on market conditions and other factors that the Company deems appropriate.
100
Management's Statement on Responsibility for Financial Reporting
The management of Crawford & Company is responsible for the integrity and objectivity of the financial information in this
Annual Report on Form 10-K. The consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States, using informed judgments and estimates where appropriate.
The Company maintains a system of internal accounting policies, procedures, and controls designed to provide reasonable, but
not absolute, assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's
authorization. The internal accounting control system is augmented by a program of internal audits and reviews by management,
written policies and guidelines, and the careful selection and training of qualified personnel.
The Audit Committee of the Board of Directors, comprised solely of outside directors, is responsible for monitoring the
Company's accounting and financial reporting practices. The Audit Committee meets regularly with management, the internal
auditors, and the independent auditors to review the work of each and to assure that each performs its responsibilities. The
independent registered public accounting firm, Ernst & Young LLP, was selected by the Audit Committee of the Board of Directors.
Both the internal auditors and Ernst & Young LLP have unrestricted access to the Audit Committee allowing open discussion, without
management present, on the quality of financial reporting and the adequacy of accounting, disclosure and financial reporting controls.
/s/ Rohit Verma
Rohit Verma
Chief Executive Officer
/s/ W. Bruce Swain
W. Bruce Swain
Executive Vice President – Chief Financial Officer
/s/ Dalerick M. Carden
Dalerick M. Carden
Senior Vice President, Corporate Controller,
and Chief Accounting Officer
March 14, 2022
101
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Crawford & Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Crawford & Company (the Company) as of December 31, 2021
and 2020, the related consolidated statements of operations, comprehensive income, cash flows, and shareholders' investment for each
of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)
and our report dated March 14, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,
by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Description of
the Matter
Revenue Recognition for Lifetime Claim Handling
At December 31, 2021, the Company’s deferred revenues related to lifetime claim handling arrangements was
approximately $38 million. As discussed in Note 2 to the consolidated financial statements, revenue is
recognized over time as the related services are provided and performance obligations are satisfied. Revenue is
recognized based on historical claim closure rates and claim type based on time elapsed for these claims,
utilizing a portfolio approach. When the Company receives consideration from a customer prior to transferring
services to the customer under the terms of certain claims management agreements, it records deferred
revenues, which represents a contract liability.
Auditing the estimate of the revenues recognized and related deferred revenues related to lifetime claim
handling was complex based on the judgments necessary to evaluate the model used and the related estimates
involved in determining the appropriate timing of revenue recognition. In particular, judgments and estimates
include, the utilization of a portfolio approach to evaluate the timing of lifetime claim handling revenues, the
level of aggregation of claim types and historical claim closure rates, and the expectation that historical claim
closure rates are reflective of future claim closure rates. Changes in these methods or estimates can have a
significant impact on the timing of revenue recognition.
102
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the
Company’s review of the recognition of lifetime claim handling revenues. For example, we tested controls over
management’s review of the portfolio approach, the significant assumptions used, such as claim closure rates
and claim type, and the completeness and accuracy of the data used in the deferred revenue calculation.
Description of
the Matter
How We
Addressed the
Matter in Our
Audit
To test the Company’s lifetime claim handling revenues recognized, we performed audit procedures that
included, among others, validating the completeness and accuracy of the aggregation of closure rates by claim
type and testing the accuracy of the deferred revenue calculation. We assessed the historical accuracy of the
claim closure rates used in the Company’s revenue model and evaluated the historical accuracy of
management’s estimates by comparing such estimate to subsequent actual results. We also performed a
sensitivity analysis of the claim closure rate assumptions to evaluate the impact that changes in these
assumptions would have on lifetime claim handling revenues recognized.
Valuation of Intangible Assets and Contingent Consideration Liabilities Resulting from the Acquisition of
edjuster Inc. and Praxis Consulting, Inc.
As described in Note 3 to the consolidated financial statements, the Company acquired edjuster Inc. (“edjuster”)
and Praxis Consulting, Inc. (“Praxis”) for initial cash consideration of $21.3 million and $42.3 million,
respectively, and future contingent earnout payments of up to $13.3 million and $10 million, respectively. The
Company accounted for the business combinations by recognizing the assets acquired and liabilities assumed at
their estimated acquisition date fair values. Among the assets acquired, the Company recognized intangible
assets of $20 million related to Praxis customer relationships. Additionally, the Company recognized contingent
consideration liabilities of $6.5 million in total for edjuster and Praxis.
Auditing the Company’s accounting for these business combinations was complex and subjective due to the
significant estimation required by management to determine the fair values of the Praxis customer relationships
and the contingent consideration liabilities for edjuster and Praxis. The Company used the income approach to
estimate the fair value of the customer relationships and a Monte Carlo simulation model to estimate the fair
value of the contingent consideration liabilities. The significant assumptions used to estimate the fair value of
the customer relationship intangible assets and contingent consideration liabilities included projected revenues,
existing customer attrition rates, projected EBITDA, discount rates, and volatility during the contingent
consideration earnout period. These significant assumptions are forward-looking and could be affected by
future economic and market conditions.
We tested the Company’s controls over review of the fair values of the customer relationship intangible assets
and contingent consideration liabilities. This included testing controls over management’s review of the
projected results, customer attrition rates, discount rates and volatility during the contingent consideration
earnout period.
To test the fair values of the customer relationship intangible assets and contingent consideration liabilities, we
performed audit procedures that included, among others, assessing valuation methodologies and testing the
significant assumptions and underlying data used by the Company. For example, we evaluated the
reasonableness of management’s projected revenues, customer attrition rates, and EBITDA margins used in the
fair value estimates by comparing those assumptions to the historical results of the acquired businesses and to
current industry, market, and economic forecasts. We also involved our valuation specialists to evaluate the
valuation methodologies and reasonableness of the discount rates and volatility assumptions used in the
estimates. As part of this evaluation, we compared discount rates and volatility assumptions to market data. In
addition, we performed sensitivity analyses on the significant assumptions to evaluate the change in the fair
values of the customer relationship intangible assets and contingent consideration liabilities that would result
from the changes in assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Atlanta, Georgia
March 14, 2022
103
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Registrant maintains a set of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934 (the "Exchange Act"), designed to ensure that information required to be disclosed by the Registrant
in reports that it files or submits under the Exchange Act is recorded, processed, summarized or reported within the time periods
specified in SEC rules and regulations.
Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their
nature, can provide only reasonable assurance regarding management's control objectives. The Company's management, including the
Chief Executive Officer and the Chief Financial Officer, does not expect that our disclosure controls and procedures can prevent all
possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the
Company have been detected. Judgments in decision-making can be faulty and breakdowns can occur because of simple errors or
mistakes. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of
controls is based in part upon certain assumptions about the likelihood of future events, and while our disclosure controls and
procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the
inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.
The Registrant's management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Registrant's disclosure controls and procedures as of December 31, 2021. Based on that evaluation, the
Registrant's Chief Executive Officer and Chief Financial Officer concluded that the Registrant's disclosure controls and procedures
were effective as of December 31, 2021.
Report of Management on Internal Control over Financial Reporting
The management of Crawford & Company is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial
reporting is a process designed 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. The Company's internal
control over financial reporting includes those policies and procedures that:
(i)
(ii)
(iii)
pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the
Company's assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are made
only in accordance with authorizations of the Company's management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also,
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.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2021. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on this assessment, management
determined that the Company maintained effective internal control over financial reporting as of December 31, 2021.
104
Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the
internal controls of Praxis Consulting, edjuster, and HBA Group, which are included in the 2021 consolidated financial statements of
the Company and constituted 11.9% of total assets as of December 31, 2021 and 1.6% and (0.3%) of revenues and net income,
respectively, for the year then ended, including acquired intangibles.
The Company's independent registered public accounting firm, Ernst & Young LLP, is appointed by the Audit Committee. Ernst
& Young LLP has audited and reported on the consolidated financial statements of Crawford & Company and the Company's
internal control over financial reporting, each as contained in this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Registrant's internal control over financial reporting during the quarter ended December 31, 2021
that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
105
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Crawford & Company
Opinion on Internal Control Over Financial Reporting
We have audited Crawford & Company’s internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Crawford & Company (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
As indicated in the accompanying Report of Management on Internal Control over Financial Reporting, management’s assessment of
and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Praxis
Consulting, Inc., edjuster Inc., and HBA Group, which are included in the 2021 consolidated financial statements of the Company and
constituted 11.9% of total assets as of December 31, 2021 and 1.6% and (0.3%) of revenues and net income, respectively, for the year
then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal
control over financial reporting of Praxis Consulting, Inc., edjuster Inc., and HBA Group.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of
operations, comprehensive income, cash flows, and shareholders' investment for each of the three years in the period ended December
31, 2021, and the related notes and our report dated March 14, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) 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 company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 14, 2022
106
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this Item will be included under the captions "Election of Directors — Nominee Information", "Section
16(a) Beneficial Ownership Reporting Compliance," "Executive Officers," "Corporate Governance—Standing Committees and
Attendance at Board and Committee Meetings," and "Corporate Governance — Corporate Governance Guidelines, Committee
Charters and Code of Business Conduct" of the Registrant's Proxy Statement for its 2022 Annual Meeting of Shareholders (the "Proxy
Statement") to be filed within 120 days after December 31, 2021, and is incorporated herein by reference.
The Registrant has adopted a Code of Business Conduct and Ethics for its CEO, CFO, principal accounting officer and all other
officers, directors and employees of the Registrant. The Code of Business Conduct and Ethics, as well as the Registrant's Corporate
Governance Guidelines and Committee Charters, are available at www.crawco.com. Any amendment or waiver of the Code of
Business Conduct and Ethics will be posted on this website within four business days after the effectiveness thereof. The Code of
Business Conduct and Ethics may also be obtained without charge by writing to Corporate Secretary, Legal Department, Crawford &
Company, 5335 Triangle Parkway, Peachtree Corners, Georgia, 30092.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item will be included under the captions "Compensation Discussion and Analysis," "Summary
Compensation Table," "Employment and Change in Control Arrangements," "Corporate Governance—Director Compensation,"
"Report of the Compensation Committee of the Board of Directors on Executive Compensation," and "Compensation Committee
Interlocks and Insider Participation" of the Registrant's Proxy Statement, 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 will be included under the captions "Stock Ownership Information" and "Equity
Compensation Plans" of the Registrant's Proxy Statement, and is incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will be included under the captions "Information with Respect to Certain Business
Relationships and Related Transactions" and "Corporate Governance - Director Independence" of the Registrant's Proxy Statement,
and is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding principal accountant fees and services will be included under the caption "Ratification of Independent
Auditor — Fees Paid to Ernst & Young LLP" of the Registrant's Proxy Statement, and is incorporated herein by reference.
107
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1. Financial Statements
The financial statements listed below and the related report of Ernst & Young LLP are incorporated herein by reference and
included in Item 8 of this Annual Report on Form 10-K:
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020, and 2019
Consolidated Statements of Shareholders' Investment for the Years Ended December 31, 2021, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019
•
•
•
•
•
• Notes to Consolidated Financial Statements
2. Financial Statement Schedule
•
Schedule II — Valuation and Qualifying Accounts — Information required by this schedule is included under the caption
"Accounts Receivable and Allowance for Expected Credit Losses " in Note 1 and also in Note 7, "Income Taxes" to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, and is incorporated herein by
reference.
Other schedules have been omitted because they are not applicable.
3. Exhibits filed with this report.
Exhibit No.
Document
3.1
3.2
4.1
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2021).
Restated By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3.1 of the Registrant's Current
Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2021).
Description of Registrant’s Securities.
Crawford & Company Non-Employee Director Stock Plan, as amended (incorporated by reference to Appendix B to
the Registrant’s Proxy Statement for the Annual Meeting of Shareholders held on May 8, 2019).
Crawford & Company Supplemental Executive Retirement Plan as amended and restated December 20, 2007,
effective as of January 1, 2007 (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2007).
Crawford & Company Deferred Compensation Plan, as amended and restated as of January 1, 2017.
Crawford & Company amended and restated Executive Stock Bonus Plan (incorporated by reference to Exhibit 99.1
to the Registrant's Registration statement on Form S-8 (File No. 333-199915) filed with the Securities and Exchange
Commission on November 6, 2014).
Form of Restricted Share Unit Award under the Registrant's 2016 Omnibus Stock and Incentive Plan.
Form of Performance Share Unit Award under the Registrant's 2016 Omnibus Stock and Incentive Plan.
Crawford & Company 2016 Omnibus Stock and Incentive Plan, as amended (incorporated by reference to Appendix
C to the Registrant’s Proxy Statement for the Annual Meeting of Shareholders held on May 8, 2019).
Crawford & Company 2016 Management Team Incentive Compensation Plan (incorporated by reference to
Appendix C to the Registrant’s Proxy Statement for the Annual Meeting of Shareholders held on May 11, 2016).
Terms of Employment Agreement between W. Bruce Swain, Jr. and the Registrant, dated October 29, 2020
(incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2020).
Terms of Employment Agreement between Larry Thomas and the Registrant, dated October 28, 2020 (incorporated
by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30,
2020).
Terms of Employment Agreement between Michael J. Hoberman and the Registrant, dated February 6, 2021.
108
Exhibit No.
10.12*
10.13*
10.14
10.15
10.16
10.17
21.1
23.1
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Document
Executive Employment Agreement, dated as of April 23, 2020, by and between Joseph Blanco and Crawford &
Company (incorporated by reference to Exhibit 10.3 to the Registrants’ Current Report on Form 8-K filed on April
27, 2020).
Employment Agreement between Rohit Verma and the Registrant dated April 23, 2020 (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Reporting on Form 8-K filed on April 27, 2020).
Credit Agreement, dated as of November 5, 2021, among Crawford & Company, Crawford & Risk Services
Investments Limited, Crawford & Company (Canada) Inc., and Crawford & Company (Australia) Pty. Ltd., as
borrowers, the lenders party thereto, Bank of America, N.A., as Administrative Agent, Australian Security Trustee,
UK Security Trustee, Swing Line Lender and an L/C Issuer, and the other Swing Line Lenders from time to time
party hereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2021).
Pledge and Security Agreement, dated as of November 5, 2021, by and among the Company, the Company's
guarantor subsidiaries party thereto and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021).
Guaranty Agreement, dated as of November 5, 2021, by Crawford & Company, the Company's guarantor
subsidiaries party thereto and Bank of America N.A. (incorporated by reference to Exhibit 10.3 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2021).
Director Compensation Summary Term Sheet.
Subsidiaries of Crawford & Company.
Consent of Independent Registered Public Accounting Firm.
Certification of the Chief Executive Officer pursuant to Rule 13a-19(a).
Certification of the Chief Financial Officer pursuant to Rule 13a-19(a).
Certification of the Chief Executive Officer pursuant to Section 1350.
Certification of the Chief Financial Officer pursuant to Section 1350.
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because
XBRL tags are embedded within the Inline XBRL document.
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation
S-K.
ITEM 16. FORM 10-K SUMMARY
None.
109
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.
Date March 14, 2022
By
/s/ Rohit Verma
ROHIT VERMA, Chief Executive Officer
CRAWFORD & COMPANY
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, 2022
/s/ Rohit Verma
ROHIT VERMA, Chief Executive Officer (Principal Executive Officer) and Director
Date March 14, 2022
/s/ Joseph O. Blanco
JOSEPH O. BLANCO, President and Director
Date March 14, 2022
/s/ W. Bruce Swain
W. BRUCE SWAIN, Executive Vice President - Chief Financial Officer (Principal Financial
Officer)
Date March 14, 2022
/s/ Dalerick M. Carden
DALERICK M. CARDEN, Senior Vice President and Controller (Principal Accounting Officer)
Date March 14, 2022
/s/ Dame Inga K. Beale
DAME INGA K. BEALE, Director
Date March 14, 2022
/s/ Jesse C. Crawford
JESSE C. CRAWFORD, Director
Date March 14, 2022
/s/ Jesse C. Crawford, Jr.
JESSE C. CRAWFORD, JR, Director
Date March 14, 2022
/s/ Lisa G. Hannusch
LISA G. HANNUSCH, Director
Date March 14, 2022
/s/ Michelle E. Jarrard
MICHELLE E. JARRARD, Director
Date March 14, 2022
/s/ Charles H. Ogburn
CHARLES H. OGBURN, Director
Date March 14, 2022
/s/ Rahul Patel
RAHUL PATEL, Director
Date March 14, 2022
/s/ D. Richard Williams
D. RICHARD WILLIAMS, Director
110
Director Compensation Summary Term Sheet
Exhibit 10.17
During calendar year 2021, each non-employee member of the Board was entitled to receive an aggregate of $140,000
in cash and restricted stock. The cash portion of the compensation was paid quarterly in $12,500 increments. The
remainder of such compensation was paid in restricted shares of the Company’s Class A common stock, and vested
on December 31, 2021 to individuals who were on the Board on December 31, 2021.
In addition to the foregoing, for 2021 each non-employee director was entitled to receive $1,500 for each Board or
committee meeting attended. Further, the Chairman of each of the Executive Committee, the Governance Committee,
and the Compensation Committee was paid an additional retainer of $2,500 per quarter. The Chairman of the Audit
Committee was paid a retainer of $4,250 per quarter. In addition to the amounts set forth above, the Chairman of the
Board was entitled to receive a retainer of $100,000, payable quarterly. During the first half of 2021 the retainer was
paid in restricted shares of the Company’s Class A Common Stock pursuant to the terms of the Crawford & Company
Non-Employee Director Stock Plan. During the second half of 2021 the retainer was paid in quarterly cash payments.
During calendar year 2022, each non-employee member of the Board is entitled to receive an aggregate of $140,000
in cash and restricted stock. The cash portion of the compensation will be paid quarterly in $12,500 increments. The
remainder of such compensation will be paid in restricted shares of the Company’s Class A common stock, and will
vest on December 31, 2022 to individuals who are on the Board on December 31, 2022.
In addition to the foregoing, for 2022 each non-employee director is entitled to receive $1,500 for each Board or
committee meeting attended. Further, the Chairman of each of the Executive Committee, the Governance Committee,
and the Compensation Committee is paid an additional retainer of $2,500 per quarter. The Chairman of the Audit
Committee is paid a retainer of $4,250 per quarter. In addition to the amounts set forth above, the Chairman of the
Board is entitled to receive a retainer of $100,000, payable quarterly in cash payments.
SUBSIDIARIES *
Subsidiary
Crawford & Company International, Inc.
Broadspire Services, Inc.
WeGoLook, LLC
Risk Sciences Group, Inc.
Crawford & Company Adjusters Limited
Crawford & Company Adjusters (UK) Limited
Crawford & Company (Canada), Inc.
Crawford & Company (Australia) Pty Limited
Crawford & Company EMEA/A-P Holdings Limited
Crawford & Company Financial Services Ltd.
Crawford & Company Risk Services Investments Ltd
Exhibit 21.1
Jurisdiction in
Which Organized
Georgia
Delaware
Oklahoma
Delaware
England
England
Canada
Australia
United Kingdom
Cayman Islands
United Kingdom
* Excludes subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary for the year ended December 31, 2021.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-87465) pertaining to the Crawford & Company U.K.
Sharesave Scheme,
(2) Registration Statement (Form S-8 No. 333-125557) pertaining to the Crawford & Company
Executive Stock Bonus Plan,
(3) Registration Statement (Form S-8 No. 333-140310) pertaining to the Crawford & Company U.K.
Sharesave Scheme,
(4) Registration Statement (Form S-3/A No. 333-142569) pertaining to the registration of Crawford
& Company common stock,
(5) Registration Statement (Form S-8 No. 333-157896) pertaining to the Crawford & Company 2007
Non-Employee Director Stock Option Plan,
(6) Registration Statement (Form S-8 No. 333-161278) pertaining to the Crawford & Company
International Employee Stock Purchase Plan,
(7) Registration Statement (Form S-8 No. 333-161279) pertaining to the Crawford & Company
Non-Employee Director Stock Plan,
(8) Registration Statement (Form S-8 No. 333-161280) pertaining to the Crawford & Company
Executive Stock Bonus Plan,
(9) Registration Statement (Form S-8 No. 333-190373) pertaining to the Crawford & Company U.K.
Sharesave Scheme,
(10) Registration Statement (Form S-8 No. 333-199915) pertaining to the Crawford & Company
Executive Stock Bonus Plan,
(11) Registration Statement (Form S-8 No. 333-213010) pertaining to the Crawford & Company 2016
Omnibus Stock and Incentive Plan and the Crawford & Company 2016 Employee Stock
Purchase Plan,
(12) Registration Statement (Form S-8 No. 333-228178) pertaining to the Crawford & Company U.K.
Sharesave Scheme, as Amended, and
(13) Registration Statement (Form S-8 No. 333-240324) pertaining to the 2019 Crawford & Company
U.K. Sharesave Scheme;
of our reports dated March 14, 2022, with respect to the consolidated financial statements of Crawford &
Company and the effectiveness of internal control over financial reporting of Crawford & Company included
in this Annual Report (Form 10-K) of Crawford & Company for the year ended December 31, 2021.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 14, 2022
SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Rohit Verma, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Crawford & Company;
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Date: March 14, 2022
/s/ Rohit Verma
Rohit Verma
Chief Executive Officer
(Principal Executive Officer)
(cid:3)
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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Crawford & Company (the "Company") on Form 10-K for the period ended December 31,
2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Rohit Verma, Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78m or 780(d)); and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 14, 2022
/s/ Rohit Verma
Rohit Verma
Chief Executive Officer
(Principal Executive Officer)
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CORPORATE INFORMATION
Corporate Headquarters
5335 Triangle Parkway, NW
Peachtree Corners, GA 30092
+1 404.300.1000
Inquiries
Individuals seeking financial data should contact:
W. Bruce Swain
Investor Relations
Chief Financial Officer
+1 404.300.1051
Form 10-K
A copy of the Company’s annual report on Form 10-K
as filed with the Securities and Exchange Commission is
available without charge upon request to:
Tami Stevenson
General Counsel
Crawford & Company
5335 Triangle Parkway NW
Peachtree Corners, GA 30092
+1 954.882.9359
Our Form 10-K is also available online at either
www.sec.gov or in the Investor Relations section at
www.crawco.com
Annual Meeting
The Annual Meeting of shareholders will be held at 2 p.m. on
May 13, 2022, at the corporate headquarters of: Crawford &
Company 5335 Triangle Parkway, NW Peachtree Corners,
GA 30092 +1 404.300.1000
Company Stock
Shares of the Company’s two classes of common stock are
traded on the NYSE under the symbols CRD-A and CRD-B,
respectively. The Company’s two classes of stock are
substantially identical, except with respect to voting rights
and the Company’s ability to pay greater cash dividends on
the non-voting Class A Common Stock than on the voting
Class B Common Stock, subject to certain limitations. In
addition, with respect to mergers or similar transactions,
holders of Class A Common Stock must receive the same
type and amount of consideration as holders of Class B
Common Stock, unless different consideration is approved
by the holders of 75 percent of the Class A Common Stock,
voting as a class.
Transfer Agent
EQ Shareowner Services
P.O. Box 64854
St. Paul, MN 55164-0854
+1 800.468.9716
www.shareowneronline.com
Internet Address
www.crawco.com
Certifications
In 2021, Crawford & Company’s chief executive officer
(CEO) provided to the New York Stock Exchange the annual
CEO certification regarding Crawford’s compliance with
the New York Stock Exchange’s corporate governance
listing standards. In addition, Crawford’s CEO and chief
financial officer filed with the U.S. Securities and Exchange
Commission all required certifications regarding the quality
of Crawford’s public disclosures in its fiscal 2021 reports.
Financial Information
The financial information contained herein should not be
considered a substitute for the Company’s audited financial
statements, inclusive of footnotes and Management’s
Discussion and Analysis of Financial Condition and Results
of Operations, included in the Company’s annual report
on Form 10-K, as filed with the Securities and Exchange
Commission.
The Form 10-K also contains detailed discussions of certain
major uncertainties, contingencies, risks, and other issues
the Company faces. A copy of the Form 10-K including
the full financial statements, can be obtained by calling +1
404.300.1021 or accessing it online at either www.sec.gov
or in the Investor Relations section at www.crawco.com.
Forward-Looking Statements
This report contains forward-looking statements,
including statements about the future financial condition,
results of operations and earnings outlook of Crawford &
Company. Statements, both qualitative and quantitative,
that are not statements of historical fact may be “forward-
looking statements” as defined in the Private Securities
Litigation Reform Act of 1995 and other securities laws.
Forward-looking statements involve a number of risks
and uncertainties that could cause actual results to
differ materially from historical experience or Crawford
& Company’s present expectations. Accordingly, no
one should place undue reliance on forward-looking
statements, which speak only as of the date on which they
are made. Crawford & Company does not undertake to
update forward-looking statements to reflect the impact of
circumstances or events that may arise or not arise after the
date the forward-looking statements are made. For further
information regarding Crawford & Company, and the risks
and uncertainties involved in forward-looking statements,
please read Crawford & Company’s reports filed with
the SEC and available at www.sec.gov or in the Investor
Relations section of Crawford & Company’s website at
www.crawco.com.
Crawford & Company
5335 Triangle Parkway, NW
Peachtree Corners, GA 30092
An equal opportunity employer
www.crawco.com