Document


 
 
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
for the quarterly period ended June 30, 2019
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
for the transition period from ____ to ____
Commission file number 1-10356
CRAWFORD & COMPANY
(Exact name of Registrant as specified in its charter)
 
Georgia
 
58-0506554
 
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
5335 Triangle Parkway
 
 
 
 
Peachtree Corners, Georgia
 
30092
 
 
(Address of principal executive offices)
 
(Zip Code)
 
(404) 300-1000
(Registrant's telephone number, including area code)
____________________________________________________________
 
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock — $1.00 Par Value

CRD-A
New York Stock Exchange, Inc.
Class B Common Stock — $1.00 Par Value

CRD-B
New York Stock Exchange, Inc.

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 þ          No o
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 (Section 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 þ          No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
o
 
Accelerated filer
þ
Non-accelerated filer
o
 
Smaller reporting company
o
 
 
 
Emerging growth company
o
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. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o          No þ
The number of shares outstanding of each class of the Registrant's common stock, as of July 30, 2019, was as follows:

Class A Common Stock, $1.00 par value: 30,804,934
Class B Common Stock, $1.00 par value: 22,883,374
 
 




CRAWFORD & COMPANY
Quarterly Report on Form 10-Q
Quarter Ended June 30, 2019

Table of Contents
 
 
 
 
 
Page
Part I. Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months and six months ended June 30, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Part I — Financial Information

Item 1. Financial Statements
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
 
Three Months Ended June 30,
(In thousands, except per share amounts)
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Revenues before reimbursements
$
256,881

 
$
279,044

Reimbursements
10,965

 
14,165

Total Revenues
267,846

 
293,209

 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
Costs of services provided, before reimbursements
174,927

 
197,523

Reimbursements
10,965

 
14,165

Total costs of services
185,892

 
211,688

 
 
 
 
Selling, general, and administrative expenses
60,184

 
64,000

 
 
 
 
Corporate interest expense, net of interest income of $295 and $749, respectively
2,468

 
2,440

 
 
 
 
Arbitration settlement charges
11,352

 

 
 
 
 
Loss on disposition of business line

 
17,795

 
 
 
 
Total Costs and Expenses
259,896

 
295,923

 
 
 
 
Other (Loss) Income, net
(2,467
)
 
747

 
 
 
 
Income (Loss) Before Income Taxes
5,483

 
(1,967
)
 
 
 
 
Provision for Income Taxes
2,859

 
461

 
 
 
 
Net Income (Loss)
2,624

 
(2,428
)
 
 
 
 
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
18

 
3

 
 
 
 
Net Income (Loss) Attributable to Shareholders of Crawford & Company
$
2,642

 
$
(2,425
)
 
 
 
 
Earnings (Loss) Per Share - Basic:
 
 
 
Class A Common Stock
$
0.06

 
$
(0.04
)
Class B Common Stock
$
0.04

 
$
(0.06
)
 
 
 
 
Earnings (Loss) Per Share - Diluted:
 
 
 
Class A Common Stock
$
0.06

 
$
(0.04
)
Class B Common Stock
$
0.04

 
$
(0.06
)
 
 
 
 
Weighted-Average Shares Used to Compute Basic Earnings Per Share:
 
 
 
Class A Common Stock
30,799

 
30,580

Class B Common Stock
23,021

 
24,448

 
 
 
 
Weighted-Average Shares Used to Compute Diluted Earnings Per Share:
 
 
 
Class A Common Stock
31,113

 
30,580

Class B Common Stock
23,021

 
24,448


(See accompanying notes to condensed consolidated financial statements)


3



CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
 
Six Months Ended June 30,
(In thousands, except per share amounts)
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Revenues before reimbursements
$
503,939

 
$
552,148

Reimbursements
20,284

 
31,448

Total Revenues
524,223

 
583,596

 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
Costs of services provided, before reimbursements
352,815

 
395,142

Reimbursements
20,284

 
31,448

Total costs of services
373,099

 
426,590

 
 
 
 
Selling, general, and administrative expenses
118,843

 
125,660

 
 
 
 
Corporate interest expense, net of interest income of $645 and $1,172, respectively
5,184

 
5,004

 
 
 
 
Arbitration settlement charges
11,352

 

 
 
 
 
Loss on disposition of business line

 
17,795

 
 
 
 
Total Costs and Expenses
508,478

 
575,049

 
 
 
 
Other (Loss) Income, net
(1,560
)
 
1,882

 
 
 
 
Income Before Income Taxes
14,185

 
10,429

 
 
 
 
Provision for Income Taxes
5,792

 
4,427

 
 
 
 
Net Income
8,393

 
6,002

 
 
 
 
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
358

 
142

 
 
 
 
Net Income Attributable to Shareholders of Crawford & Company
$
8,751

 
$
6,144

 
 
 
 
Earnings Per Share - Basic:
 
 
 
Class A Common Stock
$
0.18

 
$
0.13

Class B Common Stock
$
0.14

 
$
0.09

 
 
 
 
Earnings Per Share - Diluted:
 
 
 
Class A Common Stock
$
0.18

 
$
0.13

Class B Common Stock
$
0.14

 
$
0.09

 
 
 
 
Weighted-Average Shares Used to Compute Basic Earnings Per Share:
 
 
 
Class A Common Stock
30,729

 
30,888

Class B Common Stock
23,193

 
24,460

 
 
 
 
Weighted-Average Shares Used to Compute Diluted Earnings Per Share:
 
 
 
Class A Common Stock
31,110

 
31,470

Class B Common Stock
23,193

 
24,460


(See accompanying notes to condensed consolidated financial statements)

4



CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unaudited

 
Three Months Ended June 30,
(In thousands)
2019
 
2018
 
 
 
 
Net Income (Loss)
$
2,624

 
$
(2,428
)
 
 
 
 
Other Comprehensive (Loss) Income:
 
 
 
Net foreign currency translation loss, net of tax of $0 and $0, respectively
(2,650
)
 
(6,143
)
 
 
 
 
Amortization of actuarial losses for retirement plans included in net periodic pension cost, net of tax of $661 and $689, respectively
1,981

 
2,073

 
 
 
 
Other Comprehensive Loss
(669
)
 
(4,070
)
 
 
 
 
Comprehensive Income (Loss)
1,955

 
(6,498
)
 
 
 
 
Comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests
426

 
36

 
 
 
 
Comprehensive Income (Loss) Attributable to Shareholders of Crawford & Company
$
2,381

 
$
(6,462
)
 
 
 
 
 
Six Months Ended June 30,
(In thousands)
2019
 
2018
 
 
 
 
Net Income
$
8,393

 
$
6,002

 
 
 
 
Other Comprehensive Income:
 
 
 
Net foreign currency translation income, net of tax of $0 and $0, respectively
396

 
1,397

 
 
 
 
Amortization of actuarial losses for retirement plans included in net periodic pension cost, net of tax of $1,351 and $1,627, respectively
3,992

 
3,702

 
 
 
 
Other Comprehensive Income
4,388

 
5,099

 
 
 
 
Comprehensive Income
12,781

 
11,101

 
 
 
 
Comprehensive loss (income) attributable to noncontrolling interests and redeemable noncontrolling interests
782

 
(54
)
 
 
 
 
Comprehensive Income Attributable to Shareholders of Crawford & Company
$
13,563

 
$
11,047


(See accompanying notes to condensed consolidated financial statements)

5



CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited

 
 
 
*
(In thousands)
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
39,150

 
$
53,119

Accounts receivable, less allowance for doubtful accounts of $8,901 and $9,625, respectively
137,175

 
131,117

Unbilled revenues, at estimated billable amounts
120,920

 
108,291

Income taxes receivable
4,093

 
4,084

Prepaid expenses and other current assets
22,304

 
24,237

Total Current Assets
323,642

 
320,848

Net Property and Equipment
31,678

 
34,303

Other Assets:
 
 
 
Operating lease right-of-use assets, net
102,078

 

Goodwill
97,186

 
96,890

Intangible assets arising from business acquisitions, net
79,950

 
85,023

Capitalized software costs, net
68,436

 
72,210

Deferred income tax assets
20,545

 
22,146

Other noncurrent assets
70,725

 
70,022

Total Other Assets
438,920

 
346,291

TOTAL ASSETS
$
794,240

 
$
701,442

*    Derived from the audited Consolidated Balance Sheet
(See accompanying notes to condensed consolidated financial statements)

6




CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS — CONTINUED
Unaudited

 
 
 
*
(In thousands, except par value amounts)
June 30,
2019
 
December 31,
2018
LIABILITIES AND SHAREHOLDERS' INVESTMENT
 
 
 
Current Liabilities:
 
 
 
Short-term borrowings
$
36,629

 
$
23,195

Accounts payable
31,970

 
37,834

Accrued compensation and related costs
56,390

 
66,530

Self-insured risks
13,906

 
15,246

Income taxes payable
1,012

 
3,145

Deferred rent

 
15,919

Operating lease liabilities
29,697

 

Other accrued liabilities
45,435

 
32,391

Deferred revenues
29,931

 
30,961

Current installments of finance leases
24

 
89

Total Current Liabilities
244,994

 
225,310

Noncurrent Liabilities:
 
 
 
Long-term debt and finance leases, less current installments
166,155

 
167,126

Operating lease liabilities
87,453

 

Deferred revenues
23,750

 
21,713

Accrued pension liabilities
72,130

 
74,323

Other noncurrent liabilities
30,242

 
32,024

Total Noncurrent Liabilities
379,730

 
295,186

Redeemable Noncontrolling Interests
5,117

 
5,500

Shareholders' Investment:
 
 
 
Class A common stock, $1.00 par value; 50,000 shares authorized; 30,667 and 30,927 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
30,667

 
30,927

Class B common stock, $1.00 par value; 50,000 shares authorized; 22,958 and 24,408 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
22,958

 
24,408

Additional paid-in capital
60,601

 
58,793

Retained earnings
258,329

 
273,607

Accumulated other comprehensive loss
(211,634
)
 
(216,447
)
Shareholders' Investment Attributable to Shareholders of Crawford & Company
160,921

 
171,288

Noncontrolling interests
3,478

 
4,158

Total Shareholders' Investment
164,399

 
175,446

TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT
$
794,240

 
$
701,442

*    Derived from the audited Consolidated Balance Sheet
(See accompanying notes to condensed consolidated financial statements)

7



CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
 
Six Months Ended June 30,
(In thousands)
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
Net income
$
8,393

 
$
6,002

Reconciliation of net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
19,850

 
22,640

Arbitration settlement charges
11,352

 

Stock-based compensation
1,399

 
3,355

Loss on disposition of business line

 
17,795

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(4,086
)
 
(539
)
Unbilled revenues, net
(11,848
)
 
(28,346
)
Accrued or prepaid income taxes
(563
)
 
250

Accounts payable and accrued liabilities
(16,048
)
 
(19,985
)
Deferred revenues
962

 
(390
)
Accrued retirement costs
(343
)
 
(12,932
)
Prepaid expenses and other operating activities
(329
)
 
(6,549
)
Net cash provided by (used in) operating activities
8,739

 
(18,699
)
 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Acquisitions of property and equipment
(3,729
)
 
(9,538
)
Cash proceeds from disposition of business line

 
41,165

Capitalization of computer software costs
(4,369
)
 
(8,270
)
Net cash (used in) provided by investing activities
(8,098
)
 
23,357

 
 
 
 
Cash Flows From Financing Activities:
 
 
 
Cash dividends paid
(6,595
)
 
(6,784
)
Proceeds from shares purchased under employee stock-based compensation plans
850

 
323

Repurchases of common stock
(19,585
)
 
(5,570
)
Increases in short-term and revolving credit facility borrowings
51,408

 
63,547

Payments on short-term and revolving credit facility borrowings
(40,611
)
 
(63,978
)
Payments on finance lease obligations
(61
)
 
(320
)
Dividends paid to noncontrolling interests
(280
)
 
(167
)
Net cash used in financing activities
(14,874
)
 
(12,949
)
Effects of exchange rate changes on cash and cash equivalents
264

 
603

Decrease in cash and cash equivalents
(13,969
)
 
(7,688
)
Cash and cash equivalents at beginning of year
53,119

 
54,011

Cash and cash equivalents at end of period
$
39,150

 
$
46,323

(See accompanying notes to condensed consolidated financial statements)

8



CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
Unaudited
(In thousands, except per share amounts)
 
Common Stock
 
 
 
 
 
Accumulated
 
Shareholders' Investment Attributable to
 
 
 
 
2019
Class A
Non-Voting
 
Class B
Voting
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Other
Comprehensive
Loss
 
Shareholders of
Crawford &
Company
 
Noncontrolling
Interests
 
Total
Shareholders' Investment
Balance at January 1, 2019
$
30,927

 
$
24,408

 
$
58,793

 
$
273,607

 
$
(216,447
)
 
$
171,288

 
$
4,158

 
$
175,446

Net income (1)






6,109



 
6,109

 
37

 
6,146

Other comprehensive income (loss)








5,073

 
5,073

 
(16
)
 
5,057

Cash dividends paid (Class A - $0.07 per share, Class B - $0.05 per share)






(3,282
)


 
(3,282
)
 

 
(3,282
)
Stock-based compensation




(247
)




 
(247
)
 

 
(247
)
Repurchases of common stock
(421
)

(1,377
)



(14,620
)


 
(16,418
)
 

 
(16,418
)
Common stock activity, net
115




(225
)




 
(110
)
 

 
(110
)
Dividends paid to noncontrolling interests









 

 
(84
)
 
(84
)
Balance at March 31, 2019
$
30,621

 
$
23,031

 
$
58,321

 
$
261,814

 
$
(211,374
)
 
$
162,413

 
$
4,095

 
$
166,508

Net income (1)






2,642



 
2,642

 
(12
)
 
2,630

Other comprehensive loss








(260
)
 
(260
)
 
(409
)
 
(669
)
Cash dividends paid (Class A - $0.07 per share, Class B - $0.05 per share)






(3,313
)


 
(3,313
)
 

 
(3,313
)
Stock-based compensation




1,646





 
1,646

 

 
1,646

Repurchases of common stock
(280
)

(73
)



(2,814
)


 
(3,167
)
 

 
(3,167
)
Common stock activity, net
326




634





 
960

 

 
960

Dividends paid to noncontrolling interests









 

 
(196
)
 
(196
)
Balance at June 30, 2019
$
30,667

 
$
22,958

 
$
60,601

 
$
258,329

 
$
(211,634
)
 
$
160,921

 
$
3,478

 
$
164,399


(1)The total net income presented in the condensed consolidated statements of shareholders' investment for the three months ended March 31, and June 30, 2019 excludes $377 and $6, respectively, in net loss attributable to the redeemable noncontrolling interests.
 
Common Stock
 
 
 
 
 
Accumulated
Shareholders' Investment Attributable to
 
 
 
 
2018
Class A
Non-Voting
 
Class B
Voting
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Other
Comprehensive
Loss
 
 Shareholders of
Crawford &
Company
 
Noncontrolling
Interests
 
Total
Shareholders' Investment
Balance at January 1, 2018
$
31,439

 
$
24,502

 
$
53,170

 
$
269,686

 
$
(196,477
)
 
$
182,320

 
$
4,644

 
$
186,964

Net income (1)






8,569



 
8,569

 
188

 
8,757

Other comprehensive income








8,940

 
8,940

 
229

 
9,169

Cash dividends paid (Class A - $0.07 per share, Class B - $0.05 per share)






(3,421
)


 
(3,421
)
 

 
(3,421
)
Stock-based compensation




1,565





 
1,565

 

 
1,565

Repurchases of common stock
(1,012
)

(54
)



(7,794
)


 
(8,860
)
 

 
(8,860
)
Common stock activity, net
102




(88
)




 
14

 

 
14

Cumulative-effect adjustment of ASC 606






642



 
642

 

 
642

Balance at March 31, 2018
$
30,529

 
$
24,448

 
$
54,647

 
$
267,682

 
$
(187,537
)
 
$
189,769

 
$
5,061

 
$
194,830

Net income (1)






(2,425
)


 
(2,425
)
 
305

 
(2,120
)
Other comprehensive income








(4,037
)
 
(4,037
)
 
(33
)
 
(4,070
)
Cash dividends paid (Class A - $0.07 per share, Class B - $0.05 per share)






(3,363
)


 
(3,363
)
 

 
(3,363
)
Stock-based compensation




1,790





 
1,790

 

 
1,790

Common stock activity, net
69




240





 
309

 

 
309

Dividends paid to noncontrolling interests









 

 
(167
)
 
(167
)
Balance at June 30, 2018
$
30,598

 
$
24,448

 
$
56,677

 
$
261,894

 
$
(191,574
)
 
$
182,043

 
$
5,166

 
$
187,209


(1) The total net income presented in the condensed consolidated statements of shareholders' investment for the three months ended March 31, and June 30, 2018 excludes $327 and $308, respectively, in net loss attributable to the redeemable noncontrolling interests.
(See accompanying notes to condensed consolidated financial statements)

9

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

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 the risk management and insurance industry, as well as to self-insured entities, 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.

1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the "SEC"). Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The Company's operating results for the three months and six months ended and financial position as of June 30, 2019 are not necessarily indicative of the results or financial position that may be expected for the year ending December 31, 2019 or for other future periods. The 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 (fiscal year-end of October 31) as permitted by GAAP in order to provide sufficient time for accumulation of their results.
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, and 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. In the opinion of management, all adjustments (consisting only of normal recurring accruals and adjustments) considered necessary for a fair presentation have been included. There have been no material changes to our significant accounting policies and estimates from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 other than as disclosed herein.
Certain prior period amounts among the segments have been reclassified to conform to the current presentation. These reclassifications had no effect on the Company's reported consolidated results. Significant intercompany transactions have been eliminated in consolidation.
The Condensed Consolidated Balance Sheet information presented herein as of December 31, 2018 has been derived from the audited consolidated financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
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 variable interest entity ("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 June 30, 2019 and December 31, 2018, the liabilities of the deferred compensation plan were $8,765,000 and $8,914,000, 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 $16,545,000 and $16,402,000, respectively. These liabilities and assets are included in "Other noncurrent liabilities" and "Other noncurrent assets," respectively, on the Company's unaudited Condensed Consolidated Balance Sheets.
The Company owns 51% of the capital stock of Lloyd Warwick International Limited ("LWI"). The Company has also agreed to provide financial support to LWI of up to approximately $10,000,000. Because of this controlling financial interest, and because Crawford has the obligation to absorb certain of LWI's losses through the additional financial support that LWI may require, LWI is considered a VIE of the Company. LWI also does not meet the business scope exception, as Crawford provides more than half of its financial support, and because LWI lacks sufficient equity at risk to permit it to carry on its activities without this additional financial support. Creditors of LWI have no recourse to Crawford's general credit. Accordingly, Crawford is considered the primary beneficiary and consolidates LWI. Total assets and liabilities of LWI as of June 30, 2019 were $13,061,000 and $9,724,000, respectively. Total assets and liabilities of LWI as of December 31, 2018 were $12,232,000 and $10,423,000, respectively. Included in LWI's total liabilities is a loan from Crawford of $5,259,000 and $6,934,000 as of June 30, 2019 and December 31, 2018, respectively.
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 unaudited Condensed 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. Noncontrolling interests that are redeemable at the option of the holder are presented outside of shareholders' investment as "Redeemable Noncontrolling Interests" and are recorded at either their initial fair value plus any profits or losses or estimated redemption value if an adjustment is required.

2. Recently Issued Accounting Standards
Adoption of New Accounting Standards
Financial Accounting for Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Financial Accounting for Leases" together with its subsequent related amendments in 2018 and 2019, collectively referred to as Topic 842. Under Topic 842, a lessee is required to recognize assets and liabilities for leases with lease terms of more than 12 months. Topic 842 also requires disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The Company adopted Topic 842 as of January 1, 2019 ("transition date") using the modified retrospective approach and as a result did not adjust the comparative period financial information or make the Topic 842 required lease disclosures for periods before the transition date. The Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification, lease term and initial direct costs as well as the practical expedient to choose not to separate nonlease components from lease components and instead account for each as a single lease component for all classes of its assets. As a result of adopting Topic 842, the Company recognized operating lease right-of-use assets of $107.3 million and current and noncurrent operating lease liabilities of $33.0 million and $89.3 million, respectively, and reversed deferred rents of $15.0 million on its unaudited Condensed Consolidated Balance Sheets. The adoption of Topic 842 resulted in no material impact to the Company's results of operations or cash flows and did not impact the Company's compliance with the financial covenants under its credit facility. See Note 4, "Lease Commitments" for further discussion on the Company's leases.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This update allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act ("Tax Act"), from accumulated other comprehensive income (loss) to retained earnings. This update is effective for annual periods beginning after December 15, 2018, and interim periods thereafter. The Company adopted this ASU for the period ended March 31, 2019 and elected not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive loss to retained earnings.


10

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Pending Adoption of Recently Issued 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 expected credit loss methodology incorporates past experience, current conditions and reasonable and supportable forecasts affecting collectability of these assets. Topic 326 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company plans to adopt Topic 326 on January 1, 2020 using a modified retrospective approach. The Company is currently evaluating the effect Topic 326 may have on its results of operations, financial condition and cash flows.
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820).” This update amends the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, by removing and modifying certain disclosure requirements and adding others. This update removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. This update requires the disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Further, this update clarifies that transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities are required to be disclosed. These updates are effective for annual periods beginning after December 15, 2019, and interim periods thereafter. Early adoption is permitted and early adoption of any removed or modified disclosures upon issuance of this update is permitted while delaying adoption of the additional disclosures until the effective date. The Company is currently evaluating the effect this ASU will have on its Fair Value Measurements disclosure.
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 is currently evaluating the effect this ASU will have on its Retirement Plans disclosure.
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract
In August 2018, the FASB issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40).” This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. This update also requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. Further, this update requires the presentation of the expense in the statement of income, the presentation of the costs on the statement of financial position and the classification of payments in the statement of cash flows related to capitalized implementation costs to be treated the same as the fees of the associated hosting arrangement. The update is effective for annual periods beginning after December 15, 2019, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the effect this ASU will have on its results of operations, financial condition and cash flows.



11

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

3. Revenue Recognition
As of January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606 using the modified retrospective method for those contracts which were not substantially completed as of the transition date. The reported results for the three and six months ended June 30, 2019 and 2018 reflect the application of ASC 606.
Revenue from Contracts with Customers
Revenues are recognized when control of the promised services is 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, in accordance with the underlying payment terms.
The Company's Crawford Claims Solutions segment generates revenue for adjusting services provided to insurance companies and self-insured entities related to property, casualty and catastrophe losses caused by physical damage to commercial and residential real property and certain types of personal property. The Company charges on a 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 historical claim closure rates and 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. The Company also generates revenue by providing on-demand inspection, verification and other task specific field services for businesses and consumers. 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 Claims Solutions revenues before reimbursements disaggregated by geography for the three months and six months ended June 30, 2019:
 
Three Months Ended June 30, 2019
(in thousands)
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total
Total Crawford Claims Solutions Revenues before Reimbursements
$
33,825

$
15,831

$
12,147

$
12,815

$
7,371

$
4,014

$
86,003

 
Six Months Ended June 30, 2019
(in thousands)
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total
Total Crawford Claims Solutions Revenues before Reimbursements
$
67,761

$
32,202

$
24,268

$
23,334

$
13,836

$
7,921

$
169,322


The Company's Crawford TPA Solutions: Broadspire segment is a third party administrator that generates revenue through its Claims Management and Medical Management service lines.

12

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

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 is 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 Risk Management Information Services. For non-claim services, revenue is recognized over time as services are provided and control of these services is 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 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.
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 is 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 bill review services 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 TPA Solutions: Broadspire revenues before reimbursements disaggregated by service line and geography for the three months and six months ended June 30, 2019:
 
Three Months Ended June 30, 2019
(in thousands)
U.S.
U.K.
Canada
Europe and Rest of World
Total
Claims Management Services
$
36,035

$
2,983

$
7,884

$
8,832

$
55,734

Medical Management Services
43,784




43,784

Total Crawford TPA Solutions: Broadspire Revenues before Reimbursements
$
79,819

$
2,983

$
7,884

$
8,832

$
99,518

 
Six Months Ended June 30, 2019
(in thousands)
U.S.
U.K.
Canada
Europe and Rest of World
Total
Claims Management Services
$
72,348

$
5,513

$
17,256

$
17,528

$
112,645

Medical Management Services
84,667




84,667

Total Crawford TPA Solutions: Broadspire Revenues before Reimbursements
$
157,015

$
5,513

$
17,256

$
17,528

$
197,312



13

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

The Company's Crawford Specialty Solutions segment principally generates revenues through its Global Technical Services and Contractor Connection service lines. The Garden City Group business, which was part of Crawford Specialty Solutions, was disposed of as of June 15, 2018. See Note 13, "Disposition of Business Line" for further discussion about this transaction.
The Global Technical Services service line 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. 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 historical claim closure rates and 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.
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.
The following table presents Crawford Specialty Solutions revenues before reimbursements disaggregated by service line and geography for the three months and six months ended June 30, 2019:
 
Three Months Ended June 30, 2019
(in thousands)
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total
Global Technical Services
$
10,414

$
11,561

$
6,517

$
5,802

$
4,893

$
6,078

$
45,265

Contractor Connection
22,467

1,159

2,255

213

1


26,095

Total Crawford Specialty Solutions Revenues before Reimbursements
$
32,881

$
12,720

$
8,772

$
6,015

$
4,894

$
6,078

$
71,360

 
Six Months Ended June 30, 2019
(in thousands)
U.S.
U.K.
Canada
Australia
Europe
Rest of World
Total
Global Technical Services
$
20,685

$
22,718

$
13,228

$
10,945

$
9,652

$
12,410

$
89,638

Contractor Connection
40,654

2,690

3,935

387

1


47,667

Total Crawford Specialty Solutions Revenues before Reimbursements
$
61,339

$
25,408

$
17,163

$
11,332

$
9,653

$
12,410

$
137,305

In the normal course of business, the Company's operating segments incur 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 unaudited Condensed 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 lines 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 its 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.

14

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

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 unaudited Condensed 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 the Company expects and is 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 unaudited Condensed Consolidated Balance Sheets, which represents a contract liability. These fixed-fee service agreements typically result from the Crawford TPA Solutions: Broadspire 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.
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. 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 98% 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, 2019 and the significant activity affecting deferred revenues during the six months ended June 30, 2019:
(In Thousands)
 
Customer Contract Liabilities
Deferred Revenue
Balance at January 1, 2019
$
52,673

    Quarterly additions
20,790

    Revenue recognized from the prior periods
(13,871
)
    Revenue recognized from current quarter additions
(5,485
)
Balance as of March 31, 2019
54,107

    Quarterly additions
18,536

    Revenue recognized from the prior periods
(12,640
)
    Revenue recognized from current quarter additions
(6,322
)
Balance as of June 30, 2019
53,681

Remaining Performance Obligations
As of June 30, 2019, the Company had $93.9 million 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.

15

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

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 and would meet the criteria to be capitalized and presented as a contract asset on the Company's unaudited Condensed 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.
4. Lease Commitments
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 12 years. Some of these lease agreements include options to extend the leases for up to 5 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.
The Company, as sublessor, subleases certain office space which mostly consists of a two-building office complex in Plantation, Florida in which the terms of the primary lease and the related subleases end in December 2021. Under all of its executed sublease arrangements, the sublessees are obligated to pay the Company sublease payments of $2.1 million during the remainder of 2019, $4.0 million in 2020, $3.9 million in 2021 and $0.1 million in 2022.

16

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

The Company's finance leases are not material for the three months or six months ended or as of June 30, 2019 and are excluded from the disclosures below. The following table presents the lease-related assets and liabilities recorded on the Company's unaudited Condensed Consolidated Balance Sheets related to its operating leases:
    
(in thousands)
Classification on Balance Sheet
June 30, 2019
Assets:
 
 
Operating lease
Operating lease right-of-use assets, net
$
102,078

Liabilities:
 
 
Current operating lease liabilities
Current operating lease liabilities
29,697

Noncurrent operating lease liabilities
Noncurrent operating lease liabilities
87,453

Total operating lease liabilities
 
$
117,150

 
 
 
Weighted-Average Remaining Lease Term
 
5.63 years

Weighted-Average Discount Rate (1)
 
5.4
%
(1)    Upon adoption of Topic 842, discount rates used for existing leases were established at the transition date.
The components of operating lease costs within the Company's unaudited Condensed Consolidated Statements of Operations consisted of the following for the three months and six months ended June 30, 2019:
    
 
Three Months Ended
Six Months Ended
(in thousands)
June 30, 2019
June 30, 2019
Operating lease cost
$
9,718

$
19,112

Variable lease cost
1,762

3,771

Sublease income
1,029

1,972

Supplemental cash flow information related to operating leases for the three months and six months ended June 30, 2019 were as follows:
 
Three Months Ended
Six Months Ended
(in thousands)
June 30, 2019
June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
     Operating cash flows for operating leases
$
9,818

$
19,414

 
 
 
Right-of-use assets obtained in exchange for lease obligations  (1)
$
7,796

$
12,016

(1)    The six months ended June 30, 2019 amount excludes $122.3 million of right-of-use assets recognized upon adoption of Topic 842.

17

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Future undiscounted operating lease payments reconciled to total operating lease liabilities are as follows:
(in thousands)
June 30, 2019
2019
$
18,644

2020
30,294

2021
25,856

2022
15,952

2023
11,384

Thereafter
34,760

Total undiscounted lease payments
136,890

Less imputed interest
(19,740
)
Present value of future lease payments
$
117,150


5. Income Taxes
The Company's consolidated effective income tax rate may change periodically due to changes in enacted tax rates, fluctuations in the mix of income earned from the Company's various domestic and international operations, which are subject to income taxes at different rates, the Company's ability to utilize net operating loss and tax credit carryforwards, and amounts related to uncertain income tax positions. The provision for income taxes on consolidated income before income taxes totaled $2.9 million and $0.5 million for the three months ended June 30, 2019 and 2018, respectively. The provision for income taxes on consolidated income before income taxes totaled $5.8 million and $4.4 million for the six months ended June 30, 2019 and 2018, respectively. The overall effective tax rate decreased to 40.8% for the six months ended June 30, 2019 compared with 42.4% for the 2018 period due to the impact of the sale of the Garden City Group business (the “GCG Business”) in 2018, and an arbitration settlement in 2019. See Note 13, "Disposition of Business Line" and Note 11, "Commitments and Contingencies" for further discussion of these items.

6. Defined Benefit Pension Plans
Net periodic cost (benefit) related to all of the Company's defined benefit pension plans recognized in the Company's unaudited Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2019 and 2018 included the following components:
 
Three Months Ended
 
Six Months Ended
(in thousands)
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Service cost
$
356

 
$
382

 
$
672

 
$
745

Interest cost
5,614

 
5,462

 
11,198

 
10,735

Expected return on assets
(7,372
)
 
(8,992
)
 
(14,843
)
 
(17,760
)
Amortization of actuarial loss
2,662

 
2,812

 
5,384

 
5,422

Net periodic cost (benefit)
$
1,260

 
$
(336
)
 
$
2,411

 
$
(858
)
For the three months ended June 30, 2019 and 2018, the non-service components of net periodic pension costs of $904,000 of expense and $718,000 of income, respectively, are included in "Other (Loss) Income, net" on the unaudited Condensed Consolidated Statement of Operations. For the six months ended June 30, 2019 and 2018, the non-service components of net periodic pension costs of $1,739,000 of expense and $1,603,000 of income, respectively, are included in "Other (Loss) Income, net" on the unaudited Condensed Consolidated Statement of Operations. For the six month period ended June 30, 2019, the Company made no contributions to the U.S. defined benefit pension plan and contributions of $345,000 to the U.K. defined benefit pension plans, compared with contributions of $6,000,000 and $2,824,000, respectively, in the comparable 2018 period.

18

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

7. Net Income (Loss) Attributable to Shareholders of Crawford & Company per Common Share
The Company computes earnings per share of its non-voting Class A Common Stock ("CRD-A") and voting Class B Common Stock ("CRD-B") using the two-class method, which allocates the undistributed earnings in 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 the CRD-A shares than on the CRD-B shares, 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 the first two quarters of 2019 and 2018, 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:
 
Three Months Ended
 
Six Months Ended
 
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
(in thousands, except per share amounts)
CRD-A
CRD-B
 
CRD-A
CRD-B
 
CRD-A
CRD-B
 
CRD-A
CRD-B
Earnings (loss) per share - basic:
 
 
 
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Allocation of undistributed (loss) earnings
$
(384
)
$
(287
)
 
$
(3,216
)
$
(2,572
)
 
$
1,229

$
927

 
$
(357
)
$
(283
)
Dividends paid
2,161

1,152

 
2,141

1,222

 
4,291

2,304

 
4,338

2,446

Net income (loss) attributable to common shareholders, basic
$
1,777

$
865

 
$
(1,075
)
$
(1,350
)
 
$
5,520

$
3,231

 
$
3,981

$
2,163






 




 




 




Denominator:




 




 




 




Weighted-average common shares outstanding, basic
30,799

23,021

 
30,580

24,448

 
30,729

23,193

 
30,888

24,460

Earnings (loss) per share - basic
$
0.06

$
0.04

 
$
(0.04
)
$
(0.06
)
 
$
0.18

$
0.14

 
$
0.13

$
0.09

The computations of diluted net income attributable to shareholders of Crawford & Company per common share were as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
(in thousands, except per share amounts)
CRD-A
CRD-B
 
CRD-A
CRD-B
 
CRD-A
CRD-B
 
CRD-A
CRD-B
Earnings (loss) per share - diluted:
 
 
 
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Allocation of undistributed (loss) earnings
$
(385
)
$
(286
)
 
$
(3,216
)
$
(2,572
)
 
$
1,235

$
921

 
$
(360
)
$
(280
)
Dividends paid
2,161

1,152

 
2,141

1,222

 
4,291

2,304

 
4,338

2,446

Net income (loss) attributable to common shareholders, diluted
$
1,776

$
866

 
$
(1,075
)
$
(1,350
)
 
$
5,526

$
3,225

 
$
3,978

$
2,166

 
 
 
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding, basic
30,799

23,021

 
30,580

24,448

 
30,729

23,193

 
30,888

24,460

Weighted-average effect of dilutive securities
314


 


 
381


 
582


Weighted-average common shares outstanding, diluted
31,113

23,021

 
30,580

24,448

 
31,110

23,193

 
31,470

24,460

Earnings (loss) per share - diluted
$
0.06

$
0.04

 
$
(0.04
)
$
(0.06
)
 
$
0.18

$
0.14

 
$
0.13

$
0.09


19

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Listed below are the shares excluded from the denominator in the preceding computation of diluted earnings per share for CRD-A because their inclusion would have been antidilutive:
 
Three Months Ended
 
Six Months Ended
(in thousands)
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Shares underlying stock options excluded
1,585

 
1,246

 
1,439

 
1,143

Performance stock grants excluded because performance conditions have not been met (1)
1,111

 
817

 
1,018

 
817

(1) 
Compensation cost is recognized for these performance stock grants based on expected achievement rates; however, no consideration is given to these performance stock grants when calculating diluted earnings per share until the performance measurements have been achieved.
The following table details shares issued during the three months and six months ended June 30, 2019 and June 30, 2018. These shares are included from their dates of issuance in the weighted-average common shares used to compute basic and diluted earnings per share for CRD-A in the table above. There were no shares of CRD-B issued during any of these periods.
 
Three Months Ended
 
Six Months Ended
(in thousands)
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
CRD-A issued under Non-Employee Director Stock Plan
9

 
7

 
85

 
106

CRD-A issued under the U.K. ShareSave Scheme
257

 
51

 
266

 
54

CRD-A issued under Executive Stock Bonus Plan

 
10

 
30

 
10

CRD-A issued under 2016 Omnibus Stock and Incentive Plan
59

 

 
59

 

The Company's share repurchase authorization, approved in July 2017 (the "2017 Repurchase Authorization"), provided the Company with the ability to repurchase up to 2,000,000 shares of CRD-A or CRD-B (or both). The 2017 Repurchase Authorization was terminated on May 8, 2019.
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"). 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. At June 30, 2019, the Company had remaining authorization to repurchase 1,647,570 shares under the 2019 Repurchase Authorization.
During the three months ended June 30, 2019, the Company repurchased 280,079 shares of CRD-A and 72,351 shares of CRD-B at an average cost of $9.07 and $8.81, respectively. During the three months ended June 30, 2018, the Company did not repurchase any shares of CRD-A or CRD-B.
During the six months ended June 30, 2019, the Company repurchased 701,506 shares of CRD-A and 1,449,240 shares of CRD-B at an average cost of $9.11 for each class, of which 421,427 shares of CRD-A and 1,376,889 shares of CRD-B were purchased pursuant to a stock purchase agreement authorized by the Board of Directors separate from the 2017 Repurchase Authorization and the 2019 Repurchase Authorization. During the six months ended June 30, 2018, the Company repurchased 1,011,958 shares of CRD-A and 53,888 shares of CRD-B at an average cost of $8.28 and $8.96, respectively.

20

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

8. Accumulated Other Comprehensive Loss
Comprehensive income for the Company consists of the total of net income, foreign currency translation adjustments, and accrued pension and retiree medical liability adjustments. The changes in components of "Accumulated other comprehensive loss" ("AOCL"), net of taxes and noncontrolling interests, included in the Company's unaudited condensed consolidated financial statements were as follows:
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
(in thousands)
Foreign currency translation adjustments
 
Retirement liabilities (1)
 
AOCL attributable to shareholders of Crawford & Company
 
Foreign currency translation adjustments
 
Retirement liabilities (1)
 
AOCL attributable to shareholders of Crawford & Company
Beginning balance
$
(33,290
)
 
$
(178,084
)
 
$
(211,374
)
 
$
(36,352
)
 
$
(180,095
)
 
$
(216,447
)
Other comprehensive (loss) income before reclassifications
(2,241
)
 

 
(2,241
)
 
821

 

 
821

Amounts reclassified from accumulated other comprehensive income

 
1,981

 
1,981

 

 
3,992

 
3,992

Net current period other comprehensive (loss) income
(2,241
)

1,981


(260
)
 
821

 
3,992

 
4,813

Ending balance
$
(35,531
)

$
(176,103
)

$
(211,634
)
 
$
(35,531
)
 
$
(176,103
)
 
$
(211,634
)
 
 
 
 
 
 
 
 
 
 
 
 

 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
(in thousands)
Foreign currency translation adjustments
 
Retirement liabilities (1)
 
AOCL attributable to shareholders of Crawford & Company
 
Foreign currency translation adjustments
 
Retirement liabilities (1)
 
AOCL attributable to shareholders of Crawford & Company
Beginning balance
$
(19,009
)
 
$
(168,528
)
 
$
(187,537
)
 
$
(26,320
)
 
$
(170,157
)
 
$
(196,477
)
Other comprehensive (loss) income before reclassifications
(6,110
)
 

 
(6,110
)
 
1,201

 

 
1,201

Amounts reclassified from accumulated other comprehensive income

 
2,073

 
2,073

 

 
3,702

 
3,702

Net current period other comprehensive (loss) income
(6,110
)
 
2,073

 
(4,037
)
 
1,201

 
3,702

 
4,903

Ending balance
$
(25,119
)
 
$
(166,455
)
 
$
(191,574
)
 
$
(25,119
)
 
$
(166,455
)
 
$
(191,574
)
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
Retirement liabilities reclassified to net income are related to the amortization of actuarial losses and are included in "Other Income (Loss), net" in the Company's unaudited Condensed Consolidated Statements of Operations. See Note 6, "Defined Benefit Pension Plans" for additional details.
The other comprehensive loss amounts attributable to noncontrolling interests presented in the Company's unaudited Condensed Consolidated Statements of Shareholders' Investment are foreign currency translation adjustments.


21

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

9. Fair Value Measurements
The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
 
 
 
Fair Value Measurements at June 30, 2019
 
 
 
 
 
Significant Other
 
Significant
 
 
 
Quoted Prices in
 
Observable