Crawford & Company, the world's largest publicly listed independent provider of claims management solutions to insurance companies and self-insured entities, announced its financial results for the fourth quarter and year ended December 31, 2016.

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 CRD-A must receive the same type and amount of consideration as holders of CRD-B, unless different consideration is approved by the holders of 75% of CRD-A, voting as a class.

Consolidated Results
Full Year 2016 Summary

• Revenues before reimbursements of $1.109 billion, compared with $1.170 billion in 2015

• Net income attributable to shareholders of $36.0 million compared to a net loss of $(45.5) million in 2015

• Diluted earnings per share of $0.67 for CRD-A and $0.60 for CRD-B, compared with $(0.79) for CRD-A and $(0.87) for CRD-B in the prior year

• Diluted earnings per share of $0.79 for CRD-A and $0.71 for CRD-B on a non-GAAP basis in 2016, before goodwill impairment, restructuring and special charges, compared to $0.53 for CRD-A and $0.45 for CRD-B in the prior year

• Consolidated operating earnings, a non-GAAP financial measure, were $92.1 million or 8.3% of revenues in 2016, up from $70.4 million or 6.0% of revenues in 2015

• Consolidated adjusted EBITDA, a non-GAAP financial measure, was $126.2 million or 11.4% of revenues in 2016, up from $107.2 million or 9.2% of revenues in 2015

• Record net cash provided by operating activities of $98.9 million, increasing 60% over 2015

Fourth Quarter 2016 Summary

• Revenues before reimbursements of $272.4 million, compared with $284.9 million for the 2015 period

• Net income attributable to shareholders of $7.8 million compared to a net loss of $(51.7) million in the same period last year

• Diluted earnings per share of $0.14 for CRD-A and $0.13 for CRD-B, compared with $(0.93) for CRD-A and $(0.95) for CRD-B in the prior year quarter

• Diluted earnings per share of $0.17 for CRD-A and $0.15 for CRD-B on a non-GAAP basis in the 2016 quarter, before goodwill impairment, restructuring and special charges, compared to $0.18 for CRD-A and $0.16 for CRD-B in the prior year quarter

• Consolidated operating earnings, a non-GAAP financial measure, were $20.3 million or 7.4% of revenues in the 2016 fourth quarter, compared with $19.0 million or 6.7% of revenues in the 2015 period

• Consolidated adjusted EBITDA, a non-GAAP financial measure, was $29.1 million or 10.7% of revenues in the 2016 fourth quarter, compared with $28.4 million or 10.0% of revenues in the 2015 period

Mr. Harsha V. Agadi, chief executive officer of Crawford & Company, stated, "Our vigilant focus on expense reduction positioned Crawford to deliver another strong quarter of operating margin expansion and earnings growth despite a difficult revenue environment. As a result, fourth quarter operating earnings grew 7%, driven by 80bps of consolidated operating margin expansion. For the full year 2016, our consolidated operating margin expanded by 230bps to 8.3%, firmly positioning the Company to achieve our medium term goal of delivering 10% operating margins in the future. For the full year, this margin expansion contributed to 31% consolidated operating earnings growth and the related diluted CRD-A and CRD-B earnings per share growth of 49% and 58%, respectively, before restructuring and special charges. Additionally, the Company generated record cash flows from operating activities of $98.9 million during 2016.

"We took a significant step in the fourth quarter in providing an innovative platform to serve the lower value claims market with the execution of a purchase agreement to acquire a majority interest in WeGoLook®, LLC, with the transaction closing in January 2017. WeGoLook provides Crawford with an economical, high quality, customized, fast and efficient inspection service that addresses the needs of a variety of subsectors within our industry. Importantly, this acquisition further expands our presence into adjacent markets and is intended to reduce the Company's dependence on severe weather, positioning Crawford to deliver more predictable financial results and revenue growth over time."

Mr. Agadi concluded, "2016 was a year of great progress as we delivered improved financial results and took significant steps to prepare Crawford for the challenges that lie ahead. Furthermore, some of the revenue headwinds that we have experienced, such as the runoff of large projects in our Garden City Group segment, are set to ease as we enter 2017. We will build on this momentum, and our focus will remain on generating organic growth while maintaining our cost vigilance. My team and I continue to be energized by the opportunity we see at Crawford, and we strive to unleash the Company's global potential and transform our business for the future."

Segment Results for the Fourth Quarter and Full Year

U.S. Services

U.S. Services revenues before reimbursements were $57.4 million in the fourth quarter of 2016, increasing 1% from $56.8 million in the fourth quarter of 2015. Operating earnings were $7.7 million in the 2016 fourth quarter, compared with $7.9 million in the fourth quarter of 2015, representing operating margins of 13% in the 2016 period and 14% in the 2015 period.

For the year, U.S. Services revenues before reimbursements decreased 5% to $231.2 million in 2016 compared with $242.5 million in 2015. Operating earnings increased to $35.7 million in 2016, from $32.7 million in 2015, representing operating margins of 15% and 13% in 2016 and 2015, respectively.

International

Fourth quarter 2016 revenues before reimbursements for the International segment totaled $117.5 million, compared with $124.9 million in the 2015 fourth quarter. This decrease was primarily due to changes in foreign exchange rates which negatively impacted revenues by approximately 4%, or $6.1 million, in the period. International segment operating earnings were $11.3 million in the 2016 fourth quarter, compared with $7.3 million in the 2015 fourth quarter. The segment's operating margin was 10% in the 2016 period compared with 6% in the 2015 period.

For the year, revenues before reimbursements in our International segment totaled $479.9 million in 2016, compared with $506.7 million in 2015. The decrease in revenue was the result of changes in foreign exchange rates of 6% or $29.6 million in 2016 compared with 2015. International segment operating earnings were $42.5 million in 2016, compared with $18.8 million in 2015, representing operating margins of 9% in 2016 compared with 4% in 2015.

Broadspire

Broadspire segment revenues before reimbursements were $74.0 million in the 2016 fourth quarter, down from $75.4 million in the 2015 fourth quarter. Broadspire recorded operating earnings of $6.5 million in the fourth quarter of 2016, representing an operating margin of 9%, compared with $7.0 million, or 9% of revenues, in the 2015 fourth quarter.

For the year, Broadspire segment revenues before reimbursements increased 3% to $302.0 million in 2016 compared with $293.0 million in 2015. Broadspire recorded operating earnings of $30.0 million in 2016, or 10% of revenues, compared with $24.0 million, or 8% of revenues, in 2015.

Garden City Group

Garden City Group revenues before reimbursements were $23.6 million in the fourth quarter of 2016, compared with $27.7 million in the same period of 2015. Operating earnings were $1.3 million in the 2016 fourth quarter compared with $1.7 million in the 2015 period. The segment's operating margin for the 2016 quarter was 6% in both the 2016 and 2015 periods.

For the year, Garden City Group revenues before reimbursements were $96.2 million in 2016, compared with $128.2 million in 2015. Operating earnings were $7.8 million in 2016, compared with $11.5 million in 2015, with the related operating margin decreasing to 8% in 2016 from 9% in 2015. At December 31, 2016 there was a backlog of projects awarded totaling approximately $81.0 million, the same as at December 31, 2015.

Unallocated Corporate and Shared Costs, Net

Unallocated corporate costs were $6.5 million in the fourth quarter of 2016, compared with $5.0 million in the same period of 2015. The increased costs for the fourth quarter of 2016 were due to an increase in professional fees and defined benefit pension expense, partially offset by a decrease in self-insured expenses.

Unallocated corporate costs were $24.0 million in 2016, compared with $16.6 million in 2015. The increase in 2016 compared with 2015 was due to an increase in U.S. defined benefit plan expense, unallocated professional fees, and incentive compensation.

Goodwill Impairment, Restructuring and Special Charges

The Company recorded restructuring and special charges of $2.1 million and $18.0 million in the 2016 and 2015 fourth quarters, respectively. Restructuring costs of $2.0 million in the 2016 quarter were comprised of costs associated with the ongoing implementation of our Global Business Services Center and Global Technology Services Center, integration costs related to the GAB Robins acquisition, cease use charges and asset impairment charges. Special charges in the 2016 quarter were for certain legal and professional fees.

The Company recorded restructuring and special charges of $9.5 million and $34.4 million in the 2016 and 2015 full year periods, respectively. Restructuring costs of $8.6 million in 2016 were comprised of costs associated with the ongoing implementation of the Centers, integration costs related to the GAB Robins acquisition, cease use charges and asset impairment charges. Special charges of $0.9 million in 2016 were for certain legal and professional fees.

The Company recognized goodwill impairment charges in the amount of $49.3 million in the 2015 fourth quarter and 2015 full year. The noncash goodwill impairment charges were not reflected in segment operating earnings. No goodwill impairment charges were recorded in 2016.

Balance Sheet and Cash Flow

The Company's consolidated cash and cash equivalents position as of December 31, 2016 totaled $81.6 million compared with $76.1 million at December 31, 2015.

The Company's operations provided a record $98.9 million of cash during 2016, compared with $61.7 million in 2015. The 60% improvement in cash provided by operating activities in 2016 compared with 2015 was primarily due to increased net income and a decrease in working capital requirements.

2017 Guidance

Crawford & Company is issuing its initial guidance for 2017 as follows:

• Consolidated revenues before reimbursements between $1.10 and $1.13 billion;

• After expected restructuring and special charges, net income attributable to shareholders of Crawford & Company between $34.0 and $39.0 million, or $0.63 to $0.73 diluted earnings per CRD-A share, and $0.55 to $0.65 diluted earnings per CRD-B share;

• Consolidated operating earnings between $90.0 and $100.0 million;

• Consolidated adjusted EBITDA between $130.0 and $140.0 million;

• Before expected restructuring and special charges, net income attributable to shareholders of Crawford & Company on a non-GAAP basis between $43.0 and $48.0 million, or $0.78 to $0.88 diluted earnings per CRD-A share, and $0.71 to $0.81 diluted earnings per CRD-B share.

The Company expects to incur restructuring and special charges in 2017 totaling approximately $13.0 million pretax. This is expected to be comprised of $3.0 million related to the Centers and $10.0 million related to other restructuring activities.

To a significant extent, Crawford's business depends on case volumes. The Company cannot predict the future trend of case volumes for a number of reasons, including the fact that the frequency and severity of weather-related claims and the occurrence of natural and man-made disasters, which are a significant source of claims and revenue for the Company, are generally not subject to accurate forecasting.