PART I Item 1. Business Crawford & Company is the world's largest publicly listed independent provider of claims management and outsourcing solutions, operating globally through four segments - Crawford & Company is the world's largest publicly listed independent provider of claims management and outsourcing solutions, reporting total revenues before reimbursements of $1.267 billion for the year ended December 31, 2023124 - The company's business is highly competitive and demand is largely dependent on industry-wide claims volumes, which are affected by unpredictable factors like weather events, economic activity, and client outsourcing decisions132 - As of December 31, 2023, the company had approximately 10,200 employees, with women comprising 57% of the global workforce. The company has implemented various employee development programs, including the Manager Acceleration Program (MAP) and the Crawford Emerging Leaders Program140171535 Operating Segments and 2023 Revenue Contribution | Segment | Description | 2023 Revenue % | | :--- | :--- | :--- | | North America Loss Adjusting | Claims management for property & casualty in the U.S. and Canada | 23.9% | | International Operations | Claims management for property & casualty outside North America | 30.2% | | Broadspire | Third-party administration for casualty, disability, and self-insured markets in the U.S. | 28.1% | | Platform Solutions | Services including Contractor Connection, Networks, and Subrogation in the U.S. | 17.8% | Item 1A. Risk Factors The company faces significant risks from unpredictable claim volumes, cybersecurity threats, international operations, underfunded pension plans, and intense competition for skilled employees - A significant portion of revenue depends on claim volumes, which are not accurately forecastable and can be affected by weather, economic conditions, and client outsourcing decisions144174 - The company faces cybersecurity risks from increasingly sophisticated attacks. A security breach could compromise sensitive consumer information, leading to business loss, legal liability, and reputational damage148177207 - International operations expose the company to political, legal, and exchange rate risks. These operations are subject to numerous laws, and violations could lead to significant penalties182183212 - The U.S. qualified defined benefit pension plan is underfunded by $22.3 million. Future funding requirements could restrict cash available for operations and investments190220 - The company must comply with financial covenants in its credit facility, such as a maximum leverage ratio and a minimum interest coverage ratio. Failure to comply could result in the acceleration of outstanding debt191222 - The business is highly competitive, and failure to attract and retain skilled employees, particularly in response to catastrophic events or an aging workforce, could harm operations198226259 Item 1C. Cybersecurity The company maintains a global cybersecurity and privacy program aligned with NIST and ERM, overseen by the Audit Committee, with no material incidents reported in the last three fiscal years - The company has a global cybersecurity program to assess, identify, and manage threats, utilizing the NIST Cybersecurity Framework and integrating risks into its overall ERM program202262 - Cybersecurity governance is managed by the CISO, CIO, and CPO, with oversight from the Audit Committee of the Board of Directors, which receives quarterly updates236265 - The company employs various measures to manage cybersecurity risks, including ongoing employee awareness training, periodic phishing tests, and annual external evaluations of its program203 - In the last three fiscal years, the company has not experienced any material cybersecurity incidents, and related expenses have been immaterial235 Item 2. Properties As of December 31, 2023, the company leased 206 office locations globally, deemed sufficient for current operations - The company leases 206 office locations globally under various terms and believes these facilities are sufficient for its operational needs239 Item 3. Legal Proceedings The company is periodically involved in lawsuits related to claims administration, with most claims covered by insurance and adequate provisions made - The company is periodically named as a defendant in lawsuits arising from its claims administration services. Management believes adequate provisions have been made for these known risks, most of which are covered by insurance240 PART II Item 5. Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities The company's Class A and B common stocks trade on the NYSE, with an authorized share repurchase program and performance compared to market indices - The company's two classes of common stock, CRD-A (non-voting) and CRD-B (voting), are traded on the New York Stock Exchange (NYSE)273 - A share repurchase program is authorized through December 31, 2024. As of December 31, 2023, there was remaining authorization to repurchase 1,499,419 shares274 Indexed Returns (Value of $100 Investment on Dec 31, 2018) | Company / Index | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Crawford & Co (Class A) | 100.00 | 132.56 | 87.61 | 91.11 | 69.89 | 170.78 | | Crawford & Co (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 Ins. Index | 100.00 | 125.87 | 133.84 | 157.27 | 186.95 | 207.05 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, consolidated revenues grew 6.5% to $1.267 billion, with net income recovering to $30.6 million from a 2022 loss, driven by segment growth and improved liquidity, while critical accounting policies include revenue recognition and goodwill impairment - The increase in 2023 revenue was driven by new client growth in North America Loss Adjusting, International Operations, and Broadspire, along with pricing increases across all segments. This was partially offset by a weather-related revenue reduction in the Platform Solutions segment253254 - The significant improvement in net income for 2023 compared to 2022 is largely due to the absence of the $36.8 million non-cash goodwill impairment charge and $11.8 million in income tax reserves that were recorded in 2022283290 - The company's liquidity at December 31, 2023, was $290.5 million, consisting of $58.4 million in cash and $232.1 million in additional borrowing capacity. Management believes this is sufficient to maintain operations for the next 12 months473525 Consolidated Financial Highlights (2023 vs. 2022) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues before reimbursements | $1,267.1M | $1,189.5M | 6.5% | | Net Income (Loss) Attributable to Shareholders | $30.6M | ($18.3M) | 267.2% | Results of Operations In 2023, revenues grew 6.5% driven by strong segment performance, though Platform Solutions declined, while operating earnings improved significantly, contrasting with a $36.8 million goodwill impairment in 2022 - A non-cash goodwill impairment of $36.8 million was recorded in Q3 2022, impacting North America Loss Adjusting ($3.4M), International Operations ($22.7M), and Platform Solutions ($10.7M). No goodwill impairment occurred in 2023290 - Selling, general, and administrative (SG&A) expenses increased by 12.0% in 2023 due to higher compensation, self-insurance costs, professional fees, contingent earnout adjustments, and the absence of a 2022 gain on the sale of the Canadian head office257 Revenues Before Reimbursements by Segment (2023 vs. 2022) | Segment | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | 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% | Segment Operating Earnings (Loss) (2023 vs. 2022) | Segment | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $23,185 | $19,108 | 21.3% | | International Operations | $11,181 | ($12,946) | 186.4% | | Broadspire | $41,873 | $27,021 | 55.0% | | Platform Solutions | $28,541 | $35,746 | (20.2)% | Liquidity, Capital Resources, and Financial Condition The company's liquidity, primarily from operations and a $450 million credit facility, significantly improved in 2023, with cash from operations reaching $103.8 million, and the company remained compliant with all debt covenants - The company's primary sources of liquidity are cash from operations and a $450 million revolving credit facility that matures in November 2026461462 - At December 31, 2023, the company had $209.1 million of debt outstanding and $232.1 million of available borrowing capacity under its Credit Facility463 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 | Debt Covenant Compliance | Covenant | Requirement | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | :--- | | Leverage Ratio | Not > 4.50 to 1.00 | 1.60 | 2.16 | | Interest Coverage Ratio | Not < 2.50 to 1.00 | 5.99 | 9.70 | Critical Accounting Policies and Estimates Critical accounting policies involve significant judgment in revenue recognition for lifetime claims, annual impairment testing of goodwill, assumptions for defined benefit pension plans, and estimating liabilities for self-insured risks - Deferred revenues, primarily in the Broadspire segment for lifetime claim handling, are sensitive to historical claim closing rates. A 1.0% decrease in these rates would have resulted in an additional revenue deferral of approximately $0.5 million in 2023949597 - Goodwill and indefinite-lived intangible assets are tested for impairment annually (or more frequently if indicators exist) by comparing the carrying value of reporting units to their estimated fair values, determined through income and market approaches71135 - In 2023, goodwill impairment testing was performed, and the estimated fair value of each reporting unit exceeded its carrying value. Key assumptions included discount rates of 12.0%-13.5% and a terminal growth rate of 2.0%73 - Accounting for defined benefit pension plans requires significant assumptions for discount rates and expected long-term return on assets. A 0.50% change in the expected return on plan assets would have impacted 2023 pretax income by approximately $2.2 million111516544 - The company self-insures certain risks like professional liability and workers' compensation. Estimated liabilities for these risks totaled $51.7 million as of December 31, 2023550562 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 comprehensive notes detailing accounting policies, debt, and retirement plans, along with the independent auditor's report Consolidated Financial Statements For 2023, total revenues reached $1.317 billion, with net income attributable to shareholders at $30.6 million, a significant recovery from a $18.3 million net loss in 2022, and operating cash flow substantially increased to $103.8 million Consolidated Statement of Operations Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,316,919 | $1,231,226 | $1,139,231 | | 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 Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $58,363 | $46,007 | | 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, less current installments | $194,335 | $211,810 | | Total Shareholders' Investment | $139,831 | $123,378 | Consolidated Statement of Cash Flows Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $103,790 | $27,634 | $54,321 | | Net cash used in investing activities | ($36,596) | ($57,876) | ($70,826) | | Net cash (used in) provided by financing activities | ($54,680) | $25,940 | $24,657 | Notes to Consolidated Financial Statements These notes detail accounting policies, including revenue recognition, business acquisitions, goodwill impairment, debt facilities, lease commitments, tax rates, and defined benefit pension plan assumptions - Revenue Recognition: Revenue is recognized over time as services are performed. For fixed-fee claims, revenue is recognized utilizing a portfolio approach based on historical claim closure rates. For time and expense claims, revenue is recognized as the company has the right to invoice3751 - Business Acquisitions: The company completed several acquisitions, including edjuster Inc. (2021), Praxis Consulting (2021), and R.P. van Dijk B.V. (2022), which expanded its capabilities in contents services, subrogation, and bodily injury loss adjusting, respectively4581647 - Goodwill Impairment: In 2022, the company recognized a non-cash pretax goodwill impairment of $36.8 million due to reduced forecasts and higher interest rates. No impairment was recorded in 202386 - Debt: The company has a $450 million revolving credit facility maturing in 2026. At year-end 2023, $209 million was outstanding, with a weighted average interest rate of 6.6%839864 - Retirement Plans: The U.S. Qualified Pension Plan was underfunded by $22.3 million at year-end 2023. The U.K. plans were overfunded by $10.9 million. Key assumptions for 2023 benefit obligations were discount rates of 4.94% (U.S.) and 5.78% (U.K.)505530682 Item 9A. Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2023, having remediated a material weakness in IT general controls identified in 2022, with the independent auditor issuing an unqualified opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023805 - A material weakness related to IT general controls in the United Kingdom, which was identified as of December 31, 2022, was successfully remediated during 2023784809 - Based on its assessment using the COSO framework, management determined that the company's internal control over financial reporting was effective as of December 31, 2023783 PART III Items 10, 11, 12, 13, and 14 Information for Items 10 through 14, covering directors, executive compensation, security ownership, and related matters, is incorporated by reference from the forthcoming 2024 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees and Services is incorporated by reference from the company's forthcoming 2024 Proxy Statement792794830 PART IV Item 15. Exhibits, Financial Statement Schedules This section lists all financial statements and exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications - This section lists all financial statements and exhibits filed with the Form 10-K, including the consolidated financial statements from Item 8797 - Filed exhibits include key documents such as the Restated Articles of Incorporation, By-laws, various employee compensation plans, the Credit Agreement, and CEO/CFO certifications798823
Crawford(CRD_B) - 2023 Q4 - Annual Report