PART I Item 1. Business Crawford & Company is a global leader in claims management and outsourcing solutions, operating across four main segments worldwide 2023 Revenue Contribution by Segment | Segment | Revenue Contribution (before reimbursements) | | :--- | :--- | | North America Loss Adjusting | 23.9% | | International Operations | 30.2% | | Broadspire | 28.1% | | Platform Solutions | 17.8% | - The company delivers claims management and outsourcing solutions to carriers, brokers, and corporations through a global network serving clients in more than 70 countries546 - As of December 31, 2023, the company had approximately 10,200 employees, with women comprising 57% of the global workforce, 28% of country-president roles, and 51% of people management roles599 - The company's culture is defined by its RESTORE values: Respect, Empowerment, Sustainability, Training, One Crawford, Recognition, and Entrepreneurial Spirit573 Item 1A. Risk Factors The company faces diverse risks including unpredictable claim volumes, client concentration, cybersecurity threats, underfunded pension obligations, and competitive market pressures - The company's revenue is highly dependent on unpredictable claim volumes, influenced by factors like weather events, insurance outsourcing trends, and economic conditions609641 - A material portion of revenues is derived from a limited number of clients within the Platform Solutions and International Operations segments, posing a concentration risk581642 - The company is subject to increasingly frequent and complex cybersecurity attacks, where a security breach could compromise sensitive consumer data, leading to business loss, legal liability, and reputational damage612613583 - The U.S. qualified defined benefit pension plan is underfunded by $22.3 million, and future funding requirements could restrict cash available for operations and investments253254 - The company's credit facility contains covenants requiring compliance with financial ratios like maximum leverage and minimum interest coverage, where failure to comply could result in the acceleration of outstanding debt1512566 Item 1C. Cybersecurity The company manages cybersecurity risks through a global program aligned with NIST, overseen by the CISO and Audit Committee, with no material incidents in the last three years - The company has a global cybersecurity and privacy program to assess, identify, and manage cybersecurity risks, utilizing the NIST Cybersecurity Framework177 - Cybersecurity governance involves a CISO, CIO, CPO, a Cybersecurity and Privacy Council of senior management, and primary oversight from the Audit Committee of the Board of Directors185186 - Cybersecurity risks are integrated into the global Enterprise Risk Management (ERM) program, with regular reporting to the Audit and Governance Committees179183 - In the last three fiscal years, the company has not experienced any material cybersecurity incidents, and related expenses have been immaterial184 PART II Item 5. Market for the Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities The company's NYSE-traded Class A and B common stocks underperformed key indices over five years, with an active share repurchase program in place Comparison of Five-Year Cumulative Total Return | Company / Index | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Crawford & Company (Class A) | 100.00 | 132.56 | 87.61 | 91.11 | 69.89 | 170.78 | | Crawford & Company (Class B) | 100.00 | 115.15 | 83.62 | 89.32 | 65.60 | 167.05 | | S&P 500 Index | 100.00 | 131.49 | 155.68 | 200.38 | 164.09 | 207.23 | | S&P Property-Casualty Insurance Index | 100.00 | 125.87 | 133.84 | 157.27 | 186.95 | 207.05 | - As of December 31, 2023, the company had remaining authorization to repurchase 1,499,419 shares of its common stock through December 31, 202497 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition and operational results, covering segment performance, liquidity, capital resources, and critical accounting policies Executive Summary Consolidated revenues grew 6.5% to $1.267 billion in 2023, with net income recovering to $30.6 million from a prior year loss due to goodwill impairment Consolidated Revenues Before Reimbursements (in thousands) | Segment | 2023 | 2022 | Variance (%) | | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $303,629 | $274,755 | 10.5% | | International Operations | $382,393 | $357,452 | 7.0% | | Broadspire | $355,650 | $313,564 | 13.4% | | Platform Solutions | $225,459 | $243,711 | (7.5)% | | Total | $1,267,131 | $1,189,482 | 6.5% | - Net income attributable to the company was $30.6 million in 2023, compared to a net loss of $(18.3) million in 2022, which included a non-cash goodwill impairment of $36.8 million675707 - Total cases received decreased by 5.0% in 2023, primarily due to a reduction in high-frequency, low-severity cases that generated minimal revenue in 2022709710 Results of Operations This section provides a detailed comparative analysis of the company's segment-level operational performance, including revenues, expenses, and operating earnings Liquidity, Capital Resources, and Financial Condition The company's liquidity improved in 2023 with increased operating cash flow and compliance with debt covenants, maintaining $290.5 million in total liquidity Cash Flow Summary (in millions) | Cash Flow Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $103.8 | $27.6 | $54.3 | | Net cash used in investing activities | $(36.6) | $(57.9) | $(70.8) | | Net cash (used in) provided by financing activities | $(54.7) | $25.9 | $24.7 | - The company's Credit Facility consists of a $450 million revolving credit facility maturing in November 2026, with $209.1 million outstanding and $232.1 million of available borrowing capacity at December 31, 2023256123553 Key Debt Covenant Ratios | Ratio | Dec 31, 2023 | Dec 31, 2022 | Requirement | | :--- | :--- | :--- | :--- | | Leverage Ratio | 1.60 | 2.16 | Not > 4.50 to 1.00 | | Interest Coverage Ratio | 5.99 | 9.70 | Not < 2.50 to 1.00 | - Total liquidity at December 31, 2023 was $290.5 million, comprising $58.4 million of cash on hand and $232.1 million of additional borrowing capacity160 Critical Accounting Policies and Estimates Critical accounting policies involve significant estimates for revenue recognition, goodwill valuation, defined benefit pension plans, credit losses, and deferred tax assets - For lifetime claim handling arrangements, revenue is deferred and recognized over the expected service period based on historical claim closing rates, where a 1.0% change would have impacted 2023 revenues by approximately $0.5 million202203 - Goodwill is tested for impairment annually using income and market approaches, with key assumptions for the 2023 test including discount rates of 12.0%-13.5% and a terminal growth rate of 2.0%, resulting in no impairment in 2023 but a $36.8 million impairment in 2022221224225 - Pension expense is highly sensitive to assumptions, where a 0.50% change in the expected return on plan assets would have impacted 2023 pretax income by approximately $2.2 million, and a 0.25% change in the discount rate would have impacted the benefit obligation by $9.3 million237 - The company maintains a valuation allowance of $29.6 million against certain deferred tax assets, primarily related to net operating loss carryforwards in international and domestic operations, as of December 31, 2023241 Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations, interest rate changes affecting debt and pensions, and inflation impacting operating costs - Revenues from international operations were 37.8% of consolidated revenues in 2023, where a hypothetical 10% change in foreign currency exchange rates would have impacted 2023 consolidated pretax income by approximately $1.2 million277278 - The company has market risk exposure from variable-rate debt, where a 1.00% average change in market interest rates would have changed 2023 pretax interest expense by $2.1 million308 - Pension obligations are sensitive to interest rate changes, where a 0.25% change in the discount rate would have altered the projected benefit obligations of the U.S. and U.K. plans by approximately $9.3 million at year-end 2023279 - Inflation poses a risk by increasing expenses for labor and other operating costs, which could pressure profitability if these costs cannot be passed through to customers280309 Item 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021-2023, including statements of operations, balance sheets, cash flows, and detailed notes Consolidated Statements of Operations Highlights (in thousands) | Line Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,316,919 | $1,231,226 | $1,139,231 | | Goodwill Impairment | $0 | $36,808 | $0 | | Income Before Income Taxes | $47,357 | $5,046 | $43,864 | | Net Income (Loss) Attributable to Shareholders | $30,609 | $(18,305) | $30,692 | | Diluted EPS (Class A) | $0.61 | $(0.37) | $0.57 | Consolidated Balance Sheets Highlights (in thousands) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $369,346 | $351,267 | | Goodwill | $76,724 | $76,622 | | Total Assets | $799,199 | $791,507 | | Total Current Liabilities | $299,292 | $279,487 | | Long-term debt and finance leases | $194,335 | $211,810 | | Total Shareholders' Investment | $139,831 | $123,378 | | Total Liabilities and Shareholders' Investment | $799,199 | $791,507 | Notes to Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, business acquisitions, segment information, debt, income taxes, and fair value measurements
Crawford(CRD_A) - 2023 Q4 - Annual Report