United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		for the quarterly period ended September 30, 2009

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		(I.R.S. Employer
incorporation or organization)		Identification No.)
1001 Summit Boulevard
Atlanta, Georgia		30319
(Address of principal executive offices)		(Zip Code)

(404) 300-1000
(Registrant’s telephone number, including area code)

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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes o     No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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 of the Registrant’s classes of common stock as of October 31, 2009 was as follows:

Class A Common Stock, $1.00 par value: 27,355,390
Class B Common Stock, $1.00 par value: 24,697,172

 

 

CRAWFORD & COMPANY
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2009
Index

				Page
Part I. Financial Information
Item 1. Financial Statements:
		Condensed Consolidated Statements of Operations (unaudited) Nine months ended September 30, 2009 and 2008			3
		Condensed Consolidated Statements of Operations (unaudited) Three months ended September 30, 2009 and 2008			4
		Condensed Consolidated Balance Sheets (unaudited) September 30, 2009 and December 31, 2008			5
		Condensed Consolidated Statements of Cash Flows (unaudited) Nine months ended September 30, 2009 and 2008			7
		Condensed Consolidated Statements of Shareholders’ Investment (unaudited) As of and for the three-month and nine-month periods ended September 30, 2009 and 2008			8
		Notes to Condensed Consolidated Financial Statements (unaudited)			9
		Report of Independent Registered Public Accounting Firm			28
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			52
Item 4.		Controls and Procedures			52
Part II. Other Information
Item 1.		Legal Proceedings			53
Item 1.A.		Risk Factors			53
Item 6.		Exhibits			53
Signatures					53
EX-10.2
EX-15
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-99.1
EX-99.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Part 1 — Financial Information

Item 1.		Financial Statements

CRAWFORD & COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands, except earnings per share amounts)

		Nine months ended September 30,
		2009				2008
Revenues:
Revenues before reimbursements		$	731,499			$	785,693
Reimbursements			59,284				69,578
Total Revenues			790,783				855,271
Costs and Expenses:
Costs of services provided, before reimbursements			538,451				572,743
Reimbursements			59,284				69,578
Total cost of services			597,735				642,321
Selling, general, and administrative expenses			159,737				163,313
Corporate interest expense, net of interest income of $1,208 and $1,436, respectively			10,251				13,406
Restructuring costs			1,815				—
Goodwill and intangible asset impairment charges			140,945				—
Total Costs and Expenses			910,483				819,040
(Loss) Income before Income Taxes			(119,700	)			36,231
Provision for Income Taxes			4,576				11,994
Net (Loss) Income			(124,276	)			24,237
Less: Net Income Attributable to Noncontrolling Interests			276				315
Net (Loss) Income Attributable to Crawford & Company		$	(124,552	)		$	23,922
(Loss) Earnings Per Share, Based on Net (Loss) Income Attributable to Crawford & Company:
Basic and Diluted		$	(2.41	)		$	0.47
Average Number of Shares Used to Compute:
Basic (Loss) Earnings Per Share			51,755				50,870
Diluted (Loss) Earnings Per Share			51,755				51,275

(See accompanying notes to condensed consolidated financial statements)

CRAWFORD & COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands, except earnings per share amounts)

		Three months ended September 30,
		2009				2008
Revenues:
Revenues before reimbursements		$	245,752			$	266,916
Reimbursements			23,105				24,416
Total Revenues			268,857				291,332
Costs and Expenses:
Costs of services provided, before reimbursements			179,405				196,329
Reimbursements			23,105				24,416
Total cost of services			202,510				220,745
Selling, general, and administrative expenses			53,835				56,606
Corporate interest expense, net of interest income of $142 and $551, respectively			3,126				4,334
Goodwill and intangible asset impairment charges			46,945				—
Total Costs and Expenses			306,416				281,685
(Loss) Income before Income Taxes			(37,559	)			9,647
Provision for Income Taxes			1,841				2,564
Net (Loss) Income			(39,400	)			7,083
Less: Net Income Attributable to Noncontrolling Interests			110				161
Net (Loss) Income Attributable to Crawford & Company		$	(39,510	)		$	6,922
(Loss) Earnings Per Share, Based on Net (Loss) Income Attributable to Crawford & Company:
Basic		$	(0.76	)		$	0.14
Diluted		$	(0.76	)		$	0.13
Average Number of Shares Used to Compute:
Basic (Loss) Earnings Per Share			52,011				50,994
Diluted (Loss) Earnings Per Share			52,011				52,022

(See accompanying notes to condensed consolidated financial statements)

CRAWFORD & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)

						*
		September 30,				December 31,
		2009				2008
ASSETS
Current Assets:
Cash and cash equivalents		$	55,089			$	73,124
Accounts receivable, less allowance for doubtful accounts of $12,394 and $12,341, respectively			161,507				157,430
Unbilled revenues, at estimated billable amounts			102,521				99,115
Prepaid expenses and other current assets			22,725				18,688
Total current assets			341,842				348,357
Property and Equipment:
Property and equipment			146,601				140,399
Less accumulated depreciation			(104,189	)			(95,785	)
Net property and equipment			42,412				44,614
Other Assets:
Goodwill			119,760				251,897
Intangible assets arising from business acquisitions, net			106,007				111,389
Capitalized software costs, net			48,803				46,296
Deferred income tax asset, net			65,952				67,695
Other noncurrent assets			24,693				25,000
Total other assets			365,215				502,277
TOTAL ASSETS		$	749,469			$	895,248

*		derived from the audited Consolidated Balance Sheet.

(See accompanying notes to condensed consolidated financial statements)

CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS — CONTINUED
Unaudited
(In thousands, except par value amounts)

						*
		September 30,				December 31,
		2009				2008
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Short-term borrowings		$	11,327			$	13,366
Accounts payable			34,457				40,711
Accrued compensation and related costs			69,227				77,802
Deferred revenues			59,312				59,679
Self-insured risks			18,807				17,939
Accrued income taxes			7,513				9,937
Other accrued liabilities			52,990				56,978
Current installments of long-term debt and capital leases			2,296				2,284
Total current liabilities			255,929				278,696
Noncurrent Liabilities:
Long-term debt and capital leases, less current installments			179,494				181,206
Deferred revenues			35,824				42,795
Self-insured risks			16,492				18,531
Accrued pension liabilities			173,077				179,542
Other noncurrent liabilities			13,504				14,119
Total noncurrent liabilities			418,391				436,193
Shareholders’ Investment:
Class A common stock, $1.00 par value; 50,000 shares authorized; 27,355 and 26,523 shares issued and outstanding at September 30, 2009 and 2008, respectively			27,355				26,523
Class B common stock, $1.00 par value; 50,000 shares authorized; 24,697 shares issued and outstanding at September 30, 2009 and 2008			24,697				24,697
Additional paid-in capital			27,178				26,342
Retained earnings			131,594				256,146
Accumulated other comprehensive loss			(140,272	)			(158,157	)
Total Crawford & Company Shareholders’ Investment			70,552				175,551
Noncontrolling interests			4,597				4,808
Total shareholders’ investment			75,149				180,359
TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT		$	749,469			$	895,248

*		derived from the audited Consolidated Balance Sheet.

(See accompanying notes to condensed consolidated financial statements)

CRAWFORD & COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)

		Nine months ended September 30,
		2009				2008
Cash Flows From Operating Activities:
Net (loss) income		$	(124,276	)		$	24,237
Reconciliation of net (loss) income to net cash provided by operating activities:
Depreciation and amortization			23,102				22,737
Goodwill and intangible asset impairment charges			140,945				—
Loss on sales of property and equipment, net			54				67
Stock-based compensation			3,118				4,345
Changes in operating assets and liabilities, net of effects of disposition:
Accounts receivable, net			2,626				2,003
Unbilled revenues, net			2,105				3,903
Accrued or prepaid income taxes			(4,139	)			6,609
Accounts payable and accrued liabilities			(15,686	)			11,062
Deferred revenues			(7,791	)			(13,845	)
Accrued retirement costs			(5,728	)			(23,435	)
Prepaid expenses and other operating activities			(4,539	)			(4,249	)
Net cash provided by operating activities			9,791				33,434
Cash Flows From Investing Activities:
Acquisitions of property and equipment			(6,418	)			(10,368	)
Proceeds from sales of property and equipment			72				631
Capitalization of computer software costs			(10,775	)			(11,518	)
Other investing activities			(1,089	)			(204	)
Net cash used in investing activities			(18,210	)			(21,459	)
Cash Flows From Financing Activities:
Shares used to settle withholding taxes under stock-based compensation plans			(1,903	)			(20	)
Proceeds from exercises of stock options/ESPP plans			453				2,016
Increases in short-term borrowings			24,022				35,425
Payments on short-term borrowings			(30,986	)			(41,289	)
Payments on long-term debt and capital lease obligations			(1,837	)			(1,970	)
Capitalized loan costs			(944	)			—
Other financing activities			(274	)			(309	)
Net cash used in financing activities			(11,469	)			(6,147	)
Effect of exchange rate changes on cash and cash equivalents			1,853				136
Change in cash and cash equivalents			(18,035	)			5,964
Cash and cash equivalents at beginning of year			73,124				50,855
Cash and cash equivalents at end of period		$	55,089			$	56,819

(See accompanying notes to condensed consolidated financial statements)

CRAWFORD & COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ INVESTMENT
Unaudited
(In thousands)

																		Accumulated
		Common Stock								Additional								Other								Total
		Class A				Class B				Paid-In				Retained				Comprehensive				Noncontrolling				Shareholders’
		Non-Voting				Voting				Capital				Earnings				Loss				Interests				Investment
Balance at January 1, 2009 *		$	26,523			$	24,697			$	26,342			$	256,146			$	(158,157	)		$	4,808			$	180,359
Comprehensive (loss) — Note 5			—				—				—				3,082				(13,833	)			(653	)			(11,404	)
Stock-based compensation			—				—				1,595				—				—				—				1,595
Common stock activity, net			626				—				(2,512	)			—				—				—				(1,886	)
Balance at March 31, 2009			27,149				24,697				25,425				259,228				(171,990	)			4,155				168,664
Comprehensive (loss) — Note 5			—				—				—				(88,124	)			13,368				394				(74,362	)
Stock-based compensation			—				—				1,246				—				—				—				1,246
Common stock activity, net			70				—				(59	)			—				—				—				11
Balance at June 30, 2009			27,219				24,697				26,612				171,104				(158,622	)			4,549				95,559
Comprehensive (loss) — Note 5			—				—								(39,510	)			18,350				322				(20,838	)
Dividends paid to noncontrolling interests			—				—								—				—				(274	)			(274	)
Stock-based compensation			—				—				277				—				—				—				277
Common stock activity, net			136				—				289				—				—				—				425
Balance at September 30, 2009		$	27,355			$	24,697			$	27,178			$	131,594			$	(140,272	)		$	4,597			$	75,149

																		Accumulated
		Common Stock								Additional								Other								Total
		Class A				Class B				Paid-In				Retained				Comprehensive				Noncontrolling				Shareholders’
		Non-Voting				Voting				Capital				Earnings				Loss				Interests				Investment
Balance at January 1, 2008 *		$	25,935			$	24,697			$	19,057			$	223,793			$	(39,267	)		$	5,046			$	259,261
Comprehensive income — Note 5			—				—				—				9,068				(5,686	)			(57	)			3,325
Adoption of ASC 715-20-65-1			—				—				—				94				—				—				94
Dividends paid to noncontrolling interests			—				—				—				—				—				(90	)			(90	)
Stock-based compensation			—				—				962				—				—				—				962
Common stock activity, net			256				—				(276	)			—				—				—				(20	)
Balance at March 31, 2008			26,191				24,697				19,743				232,955				(44,953	)			4,899				263,532
Comprehensive income — Note 5			—				—				—				7,932				4,134				245				12,311
Stock-based compensation			—				—				1,872				—				—				—				1,872
Common stock activity, net			1				—				4				—				—				—				5
Balance at June 30, 2008			26,192				24,697				21,619				240,887				(40,819	)			5,144				277,720
Comprehensive income — Note 5			—				—				—				6,922				(1,197	)			19				5,744
Dividends paid to noncontrolling interests			—				—				—				—				—				(219	)			(219	)
Stock-based compensation			—				—				1,511				—				—				—				1,511
Common stock activity, net			318				—				1,692				—				—				—				2,010
Balance at September 30, 2008		$	26,510			$	24,697			$	24,822			$	247,809			$	(42,016	)		$	4,944			$	286,766

*		derived from the audited Consolidated Balance Sheets.

(See accompanying notes to condensed consolidated financial statements)

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Crawford & Company (the “Company”) have been prepared in accordance with 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 generally accepted accounting principles for complete financial statements. Significant intercompany transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current presentation. Operating results for the three months and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009 or for other future periods.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

The financial statements of the Company’s international subsidiaries, other than those in Canada and the Caribbean, are included in the Company’s consolidated financial statements on a two-month delayed basis as permitted by GAAP in order to provide sufficient time for accumulation of their results.

For variable interest entities (“VIE”), the Company determines when it should include the assets, liabilities, noncontrolling interests, and results of operations of a VIE in its consolidated financial statements. The Company consolidates the liabilities of its deferred compensation plan and the related assets, which are held in a rabbi trust and considered a VIE of the Company. At September 30, 2009 and December 31, 2008, the liabilities of this deferred compensation plan were $8,527,000 and $7,621,000, respectively, and the values of the assets held in the related rabbi trust were $13,439,000 and $12,985,000, respectively. These assets and liabilities are included in Other Noncurrent Assets and Other Noncurrent Liabilities on the Company’s Consolidated Balance Sheets. Transactions between this VIE and the Company were not material to the Company’s results of operations or cash flows for the three months or nine months ended September 30, 2009 or 2008.

The Company has controlling ownership interests in several entities that are not wholly-owned by the Company. The financial results and financial positions of these controlled entities are included in the Company’s consolidated financial statements, for both the controlling interests and the noncontrolling interests. The noncontrolling interests represent the equity interests (formerly referred to as minority interests) in these entities that are not attributable, either directly or indirectly, to the Company. Noncontrolling interests are reported as a separate component of the Company’s Shareholders’ Investment. On the Company’s Consolidated

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Statements of Operations, net income (or loss) is attributed to the controlling interests and the noncontrolling interests separately.

The Condensed Consolidated Balance Sheet information presented herein as of December 31, 2008 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, 2008.

Accounting Standards Codification

With the issuance of Financial Accounting Standards Board (“FASB”) Statement No. 168, “The FASB Accounting Standards Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting Principles,” the FASB approved its codification (the “Codification”) as the single source of authoritative GAAP for nongovernmental entities in the United States (“U.S.”) for interim and annual periods ending after September 15, 2009. As a result, on July 1, 2009 the Company adopted ASC Topic 105, “Generally Accepted Accounting Principles,” as updated by Accounting Standards Update (“ASU”) No. 2009-1, “Topic 105-Generally Accepted Accounting Principles,” to establish the Codification as the Company’s source of authoritative GAAP. The Codification also considers rules and interpretive releases of the SEC under authority of U.S. federal securities laws as additional sources of authoritative GAAP for SEC registrants. The Codification superseded all then-existing non-SEC accounting and reporting standards. However, at its initial effective date of July 1, 2009, the purpose of the Codification was to reorganize existing GAAP into a consistent and logical structure. The Codification did not create new GAAP.

References to the superseded standards in the Company’s condensed consolidated financial statements have been replaced by references to the Codification. In the Codification, ASC referencing is in the following numerical format: XXX-YY-ZZ-PP, where XXX represents the Topic number, YY represents the Subtopic number, ZZ represents the Subsection number, and PP represents the paragraph number. Subsequent standard-setting activity will be issued in ASUs, referenced as follows: YYYY-XX, where YYYY is the year issued and XX represents the sequential number for each ASU issued in that year. An ASU will serve as a transient document during the time between issuance of the ASU and the date the new or revised guidance becomes completely effective; once effective, the Codification will reflect all necessary amendments for the new or revised guidance.

On August 18, 2009, the SEC issued interpretive guidance FR-80, “Commission Guidance Regarding the Financial Accounting Standards Board’s Accounting Standards Codification” (“FR-80”). With the issuance of FR-80, the SEC formally recognized the FASB’s Codification as the single source of authoritative U.S. accounting and reporting standards applicable for all nongovernmental entities, with the exception of guidance issued by the SEC.

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2. Impairment Testing and Noncash Charges for Goodwill and Intangible Asset

Due to declines in then-current and forecasted operating results for the Company’s Broadspire reportable segment and reporting unit (“Broadspire”), the impact that declining U.S. employment levels have had on Broadspire’s revenue, and the weakness in the Company’s stock prices, the Company recorded a preliminary noncash goodwill impairment charge of $94,000,000 in connection with the preparation of its unaudited condensed consolidated financial statements for the three months and six months ended June 30, 2009, as previously disclosed. In connection with the preparation of the Company’s unaudited condensed consolidated financial statements for the three months and nine months ended September 30, 2009, the Company completed this goodwill impairment analysis for Broadspire and determined, for the reasons described below, that all of Broadspire’s remaining goodwill was impaired, resulting in an additional noncash goodwill impairment charge of $46,345,000. The additional charge resulted from finalizing the fair values assigned to other assets and liabilities in order to determine the implied fair value of goodwill, and from a further reduction in the future forecasted cash flows of Broadspire from the forecasts used to determine the preliminary impairment charge. These goodwill impairment charges are not deductible by the Company for income tax purposes. Also, it was determined during the quarter ended September 30, 2009 that the value of a trade name indefinite-lived intangible asset used in a small portion of the Broadspire reporting unit was totally impaired. Accordingly, the Company recorded a pre-tax impairment charge of $600,000, or approximately $382,500 after tax, to recognize the impairment of this trade name intangible asset.

The first step of the goodwill impairment testing and measurement process involved estimating the fair value of the reporting unit using an internally prepared discounted cash flow analysis. The discount rate utilized in estimating the fair value of Broadspire was 14%, reflecting management’s assessment of a market participant’s view of the risks associated with the projected cash flows. The terminal growth rate used in the analysis was 3%. The results of Step 1 of the process indicated potential impairment of the goodwill balance, as the book value of Broadspire exceeded its estimated fair value. As a result, management performed Step 2 of the process to quantify the amount of the goodwill impairment. In this step, the estimated fair value of Broadspire was allocated among its respective assets and liabilities in order to determine an implied value of goodwill, in a manner similar to the calculations performed in the accounting for a business combination. The allocation process was performed only for purposes of measuring goodwill impairment, and not to adjust the carrying values of recognized tangible assets or liabilities. Accordingly, no impairment charge or carrying value adjustment was made to the basis of any tangible asset or liability as a result of this process. Management also updated its impairment review of other intangible assets, and no further impairment was identified other than as previously noted.

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

3. Adoption of New Accounting Standards

Expanded Disclosure for Derivative Instruments and Hedging Activities

On January 1, 2009, the Company adopted ASC 815-10-50, “Derivatives and Hedging-Overall-Disclosure,” which requires expanded disclosures about an entity’s derivative instruments and hedging activities, including requirements that interim financial statements include certain disclosures for derivative instruments. ASC 815-10-50 did not change any accounting requirements, but instead relates only to disclosures. Since this new guidance relates only to disclosures, its adoption did not have any impact on the Company’s results of operations, financial condition, or cash flows. See Note 7 “Interest Rate Swap Agreement” and Note 8 “Fair Value Measurements.”

Noncontrolling Interests in Consolidated Financial Statements

On January 1, 2009, the Company adopted ASC 810-10-65-1, “Consolidation-Overall-Transition and Open Effective Date Information,” which revised the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under this new guidance, noncontrolling interests are considered equity and the practice of classifying minority interests within a mezzanine section of the balance sheet was eliminated. Net (loss) income encompasses the total (loss) income of all consolidated subsidiaries and there is separate disclosure on the face of the statement of operations of the attribution of that (loss) income between the controlling and noncontrolling interests. Increases and decreases in the noncontrolling ownership interest amounts are accounted for as equity transactions. Any future issuance of noncontrolling interests that causes the controlling interest to lose control and deconsolidate a subsidiary will be accounted for by full gain or loss recognition. Upon adoption, ASC 810-10-65-1 was applied retroactively to all previous financial statements and increased Shareholders’ Investment on January 1, 2009 by $4,808,000. The adoption of ASC 810-10-65-1 was not material to the Company’s results of operations or cash flows.

Business Combinations

On January 1, 2009, the Company adopted ASC 805, “Business Combinations.” ASC 805 changed many well-established business combination accounting practices and significantly affected how acquisition transactions are reflected in the financial statements. ASC 805 changed the accounting treatment for certain acquisition-related activities that occur after its adoption including 1) recording contingent consideration at the acquisition date at fair value, 2) expensing acquisition-related costs as incurred, and 3) expensing restructuring costs associated with the acquired business. ASC 805 also introduced certain new disclosure requirements. Since ASC 805 uses an expanded definition of a business, the Company was required to evaluate its reporting units at adoption. The adoption of ASC 805 did not have an impact on the Company’s consolidated financial statements. However, it could have a significant impact on the accounting for any future acquisitions.

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Share-Based Payments As Participating Securities for EPS Calculations

On January 1, 2009, the Company adopted ASC 260-10-45-60, “Earnings Per Share-Overall-Other Presentation Matters.” Under this guidance, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities, and as such they are included in the computation of basic earnings per share (“EPS”) using the two-class method. Upon adoption, all prior-period EPS data were adjusted retrospectively to conform to the provisions of ASC 260-10-45-60. The Company’s restricted grants of Class A Common Stock made under its Executive Stock Bonus Plan provide for the payment of nonforfeitable dividends, should any be declared and paid by the Company, during any vesting period for the restricted stock grants. As such, these unvested restricted stock grants are now considered participating securities and thus the two-class method of computing EPS applies to the Company upon adoption of the new guidance. The impact of ASC 260-10-45-60 on the Company’s basic and diluted EPS calculations for any time period depends upon the number of restricted stock grants outstanding for the period. For the three-month and nine-month periods ended September 30, 2008, retroactive adoption of this new guidance did not change basic or diluted EPS from the amounts reported before the adoption.

Interim Disclosures About Fair Value of Financial Instruments

On April 1, 2009, the Company adopted ASC 820-10-50, “Fair Value Measurements and Disclosures-Overall-Disclosure.” This guidance extends certain disclosure requirements about the fair value of financial instruments to interim financial statements of publicly traded companies. Disclosures are now required for the fair value of all financial instruments (recognized or unrecognized), except for those specifically excluded by the guidance, when practicable to do so. Since ASC 820-10-50 relates to disclosures only, its adoption on April 1, 2009 did not have an impact on the Company’s results of operations, financial position, or cash flows. See Note 8, “Fair Value Measurements.”

Subsequent Events

On June 30, 2009, the Company adopted ASC 855, “Subsequent Events.” ASC 855 provides authoritative accounting and disclosure guidance for events occurring subsequent to the financial statement date. Prior to ASC 855, this subject was only addressed in the U.S. by existing auditing standards. The guidance in ASC 855 is similar to the existing guidance found in the auditing standards with some exceptions that are not intended to result in significant changes in the accounting and disclosure for subsequent events. For the Company’s unaudited condensed consolidated financial statements and related notes as of and for the three months and nine months ended September 30, 2009 contained in this Quarterly Report on Form 10-Q, the Company has evaluated subsequent events through November 9, 2009. This date is the issuance date of the financial statements and the date the Company’s Quarterly Report on Form 10-Q was electronically transmitted to the U.S. Securities and Exchange Commission.

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

4. Pending Adoption of Recently Issued Accounting Standards

Issued Subsequent to the Effective Date of the Codification

Measuring Liabilities at Fair Value

On August 28, 2009, ASU 2009-05 was issued by the FASB. ASU 2009-05 will amend ASC 820-10, “Fair Value Measurements and Disclosures-Overall,” by providing additional guidance clarifying the measurement of liabilities at fair value. When a quoted price in an active market for the identical liability is not available, the amendments in ASU 2009-05 will require that the fair value of a liability be measured using one or more of the listed valuation techniques that should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. In addition, the amendments in ASU 2009-05 clarify that when estimating the fair value of a liability, an entity is not required to include a separate input or adjustment to other inputs to the existence of a restriction that prevents the transfer of the liability. The Company adopted the provisions of ASU 2009-05 on October 1, 2009. Its adoption did not have a material impact on the Company’s financial condition, results of operations, or cash flows.

Multiple-Deliverable Revenue Arrangements

On October 7, 2009, the FASB issued ASU 2009-13, which will supersede certain guidance in ASC 605-25, “Revenue Recognition-Multiple Element Arrangements,” and will require an entity to allocate arrangement consideration to all of its deliverables at the inception of an arrangement based on their relative selling prices (i.e., the relative-selling-price method). The use of the residual method of allocation will no longer be permitted in circumstances in which an entity recognized revenue for an arrangement with multiple deliverables subject to ASC 605-25. ASU 2009-13 will also require additional disclosures. The Company will adopt the provisions of ASU 2009-13 on January 1, 2011. Based on the Company’s current revenue arrangements, the adoption of ASU 2009-13 is not expected to have a material impact on the Company’s financial condition, results of operations, or cash flows.

Issued Prior to the Effective Date of the Codification

Employers’ Disclosures About Postretirement Benefit Plan Assets

ASC 715-10-50, “Compensation-Retirement Benefits,” will require additional disclosures about assets held in an employer’s defined benefit pension or other postretirement plan. ASC 715-10-50 will replace many of the disclosures currently required under GAAP and require disclosure of the fair value of each major asset category. Disclosure will also be required for the level within the fair value hierarchy of each major category of plan assets, using the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures.” Employers will be required to reconcile the beginning and ending balances of plan assets with fair values measured using significant unobservable inputs (Level 3), separately presenting changes during the period attributable to a) actual return on plan assets, b) purchases, sales, and settlements (net), and c) transfers in and out of Level 3. ASC 715-10-50 will be

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

effective beginning with the Company’s December 31, 2009 annual disclosures related to its defined benefit pension plans. The Company’s other postretirement plans are not funded, thus the disclosure provisions of ASC 715-10-50 will not apply to those plans. Since ASC 715-10-50 relates only to disclosures, its adoption will not have an impact on the Company results of operations, financial condition, or cash flows.

SFAS 167

On June 12, 2009, the FASB issued SFAS 167, “Amendments to FASB Interpretation No. 46-R” (“SFAS 167”). SFAS 167 is currently not included in the Codification. SFAS 167 will make certain changes to the guidance used to determine when an entity should consolidate a variable interest entity in its consolidated financial statements. SFAS 167 will be effective for the Company on January 1, 2010. Based on the current status of the entities that are evaluated under existing guidance for consolidation in the Company’s consolidated financial statements, the Company does not expect the adoption of SFAS 167 to have a material impact on its results of operations, financial condition, or cash flows.

5. Comprehensive (Loss) Income

Comprehensive (loss) income for the nine months ended September 30, 2009 and 2008 was as follows:

		Nine months ended September 30, 2009
		Shareholders of				Noncontrolling
(in thousands)		Crawford & Company				Interests				Total
Net (Loss) Income		$	(124,552	)		$	276			$	(124,276	)
Other Comprehensive Income (Loss):
Net foreign currency translation gain (loss)			12,683				(213	)			12,470
Interest rate swap agreement, net of taxes:
Loss reclassified into income			2,090				—				2,090
Loss recognized during period			(608	)			—				(608	)
Amortization of retirement plans costs, net of taxes			3,720				—				3,720
Total Comprehensive (Loss) Income		$	(106,667	)		$	63			$	(106,604	)

		Nine months ended September 30, 2008
		Shareholders of				Noncontrolling
(in thousands)		Crawford & Company				Interests				Total
Net Income		$	23,922			$	315			$	24,237
Other Comprehensive Income (Loss):
Net foreign currency translation loss			(5,212	)			(108	)			(5,320	)
Interest rate swap agreement, net of taxes:
Loss reclassified into income			1,204				—				1,204
Loss recognized during period			(736	)			—				(736	)
Amortization of retirement plans costs, net of taxes			1,995				—				1,995
Total Comprehensive Income		$	21,173			$	207			$	21,380

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Comprehensive (loss) income for the three months ended September 30, 2009 and 2008 was as follows:

		Three months ended September 30, 2009
		Shareholders of				Noncontrolling
(in thousands)		Crawford & Company				Interests				Total
Net (Loss) Income		$	(39,510	)		$	110			$	(39,400	)
Other Comprehensive Income (Loss):
Net foreign currency translation gain			16,610				212				16,822
Interest rate swap agreement, net of taxes:
Loss reclassified into income			642				—				642
Loss recognized during period			(142	)			—				(142	)
Amortization of retirement plans costs, net of taxes			1,240				—				1,240
Total Comprehensive (Loss) Income		$	(21,160	)		$	322			$	(20,838	)

		Three months ended September 30, 2008
		Shareholders of				Noncontrolling
(in thousands)		Crawford & Company				Interests				Total
Net Income		$	6,922			$	161			$	7,083
Other Comprehensive Income (Loss):
Net foreign currency translation loss			(2,412	)			(142	)			(2,554	)
Interest rate swap agreement, net of taxes:
Loss reclassified into income			487				—				487
Gain recognized during period			63				—				63
Amortization of retirement plans costs, net of taxes			665				—				665
Total Comprehensive Income		$	5,725			$	19			$	5,744

6. Net (Loss) Income Attributable to Crawford & Company per Common Share

Both classes of the Company’s common stock, Common Stock Class A (“CRDA”) and Common Stock Class B (“CRDB”), share equally in the Company’s earnings for purposes of computing EPS.

The computations of basic and diluted net (loss) income attributable to Crawford & Company per common share, after giving effect to the adoption of ASC 260-10-45-60, “Earnings Per Share-Overall-Other Presentation Matters,” were as follows:

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

		Three months ended									Nine months ended
		Sept. 30,				Sept. 30,					Sept. 30,				Sept. 30,
In thousands, except (loss) earnings per share		2009				2008					2009				2008
Net (loss) income attributable to Crawford & Company		$	(39,510	)		$	6,922				$	(124,552	)		$	23,922
Weighted average common shares used to compute basic (loss) earnings per share			52,011				50,994					51,755				50,870
Dilutive effects of stock-based compensation plans			(a	)			1,028					(a	)			405
Weighted-average common share equivalents used to compute diluted (loss) earnings per share			52,011				52,022					51,755				51,275
Basic (loss) earnings per share		$	(0.76	)		$	0.14				$	(2.41	)		$	0.47
Diluted (loss) earnings per share		$	(0.76	)		$	0.13				$	(2.41	)		$	0.47

(a)		For the three months and nine months ended September 30, 2009, the Company excluded from its loss per share calculations all common share equivalents because their effect was anti-dilutive. The weighted-average of these common share equivalents totaled approximately 634,000 shares and 861,000 shares for the three months and nine months ended September 30, 2009, respectively. These common share equivalents excluded weighted-average stock options of approximately 2,435,000 and 2,507,000 for the three months and nine months ended September 30, 2009, respectively, because the stock options were anti-dilutive based on the average price of the Company’s Class A Common Stock during those periods.

Performance stock grants of 353,000 shares of the Company’s Class A common stock were excluded from the computation of EPS at September 30, 2009 because the expected performance conditions had not been met as of September 30, 2009. Compensation cost is recognized for these performance stock grants based on expected achievement rates, however no consideration is given for these performance stock grants when calculating EPS until the performance measurements have actually been achieved. The performance goals for these 353,000 performance stock grants are currently expected to be achieved at the end of 2010.

Weighted-average outstanding stock options to purchase approximately 661,000 and 2,030,000 shares of the Company’s Class A Common Stock were excluded from the computations of diluted EPS for the three months and nine months ended September 30, 2008, respectively, because their inclusion would have been antidilutive based on the average price of CRDA during those periods.

7. Interest Rate Swap Agreement

In May 2007, the Company entered into a three-year interest rate swap agreement that effectively converts the LIBOR-based portion of the interest rate under the Company’s Credit Agreement for a portion of its floating-rate debt to a fixed rate of 5.25%. The Company

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

designated the interest rate swap as a cash flow hedge of exposure to changes in cash flows due to changes in interest rates on an equivalent amount of debt. The notional amount of the swap is reduced over its three-year term and was $80,000,000 at September 30, 2009. The Company is exposed to counterparty credit risk for nonperformance and, in the event of nonperformance, to market risk for changes in interest rates. The Company attempts to manage exposure to counterparty credit risk primarily by selecting a counterparty only if it meets certain credit and other financial standards. The Company believes there have been no material changes in the creditworthiness of the counterparty to its interest-rate swap agreement.

The Company reports the effective portion of the change in fair value of the derivative instrument as a component of its accumulated other comprehensive loss and reclassifies that portion into earnings in the same period during which the hedged transaction affects earnings. The Company recognizes the ineffective portion of the hedge, if any, in current earnings during the period of change. Amounts that are reclassified into earnings from accumulated other comprehensive loss and the ineffective portion of the hedge, if any, are reported on the same statement of operations line item as the original hedged item. The Company includes the fair value of the hedge in either current or non-current other liabilities and/or other assets on the balance sheet based upon the term of the hedged item. See Note 8, “Fair Value Measurements.”

The effective portion of the pre-tax losses on the Company’s interest-rate swap derivative instrument is categorized in the table below:

		Loss Recognized in Other								Loss Reclassified from
		Comprehensive Loss								Accumulated OCL into
		(“OCL”) on Derivative -								Income - Effective Portion
(in thousands)		Effective Portion								(1)
Three months ended September 30,		2009				2008				2009				2008
Cash Flow Hedging Relationship:
Interest rate hedge		$	201			$	243			$	951			$	939

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

										Loss Reclassified from
		Loss Recognized in OCL								Accumulated OCL into
		on Derivative - Effective								Income - Effective Portion
(in thousands)		Portion								(1)
Nine months ended September 30,		2009				2008				2009				2008
Cash Flow Hedging Relationship:
Interest rate hedge		$	990			$	1,262			$	3,409			$	2,066

(1)		The losses reclassified from accumulated other comprehensive loss into income (effective portion) are reported in Net Corporate Interest Expense on the Company’s Consolidated Statements of Operations.

The amounts of gains/losses recognized in income/expense on the Company’s interest rate hedge contract (ineffective portion excluded from any effectiveness testing) were not material for the three month or nine month periods ended September 30, 2009 or September 30, 2008.

The balances and changes in accumulated other comprehensive loss related to the effective portion of the Company’s interest rate hedge for the three-month and nine-month periods ended September 30, 2009 and 2008 were as follows:

		Three months ended
		Sept. 30,				Sept. 30,
(in thousands)		2009				2008
Amount in accumulated other comprehensive loss at beginning of period for effective portion of interest rate hedge, net of tax		$	(2,303	)		$	(2,545	)
Loss reclassified into income, net of tax			642				487
(Loss) Gain recognized during period, net of tax			(142	)			63
Amount in accumulated other comprehensive loss at end of period for effective portion of interest rate hedge, net of tax		$	(1,803	)		$	(1,995	)

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

		Nine months ended
		Sept. 30,				Sept. 30,
(in thousands)		2009				2008
Amount in accumulated other comprehensive loss at beginning of period for effective portion of interest rate hedge, net of tax		$	(3,285	)		$	(2,463	)
Loss reclassified into income, net of tax			2,090				1,204
Loss recognized during period, net of tax			(608	)			(736	)
Amount in accumulated other comprehensive loss at end of period for effective portion of interest rate hedge, net of tax		$	(1,803	)		$	(1,995	)

For the twelve months subsequent to September 30, 2009, the pre-tax amount expected to be reclassified from accumulated other comprehensive loss into earnings is approximately $2,652,000.

The Company’s interest rate swap agreement contains a provision providing that if the Company is in default under its Credit Agreement (described below), the Company may also be deemed to be in default under its interest rate swap agreement. If there was such a default, the Company could be required to contemporaneously settle some or all of the obligations under the interest rate swap agreement at values determined at the time of default. At September 30, 2009, no such default existed, and the Company had no assets posted as collateral under its interest rate swap agreement.

8. Fair Value Measurements

The fair value hierarchy has three levels of inputs to determine fair value, each of which is based on the reliability of the inputs used to determine fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The fair values of the Company’s assets and liabilities at September 30, 2009 that are carried at fair value on the Company’s balance sheet were categorized as follows:

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

						Fair Value Measurements at Sept. 30, 2009
(in thousands)		Total				(Level 1)				(Level 2)				(Level 3)
Assets:
Money market funds (1)		$	2,686			$	2,686
Liabilities:
Derivatives designated as hedging instruments under SFAS 133:
Interest rate contract-current (2)		$	2,652							$	2,652

Fair Value Disclosures

The fair value of accounts payable and short-term borrowings approximates their carrying values due to the short-term maturities of these instruments.

The carrying value of the Company’s term note payable was $181,200,000  at September 30, 2009. The Company’s term note payable is held by a small number of lenders, and thus it trades infrequently. The Company estimates the fair value of its term note payable based on a discounted cash flow analysis based on current borrowing rates for new debt issues with similar credit quality. At September 30, 2009, the Company estimated the value of its term note payable to be approximately $175.0 million. As disclosed in Note 13, “Amendment to Credit Agreement,” the Company has the ability to repurchase and retire up to $25.0 million of its term note payable through December 31, 2010.

9. Defined Benefit Pension Plans

Net periodic benefit cost (credit) related to the Company’s defined benefit pension plans for the three months and nine months ended September 30, 2009 and 2008 included the following pre-tax components:

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

		Three months ended									Nine months ended
		Sept. 30,				Sept. 30,					Sept. 30,				Sept. 30,
(in thousands)		2009				2008					2009				2008
Service cost		$	433			$	748				$	1,228			$	2,295
Interest cost			8,970				9,323					26,423				27,945
Expected return on assets			(7,420	)			(11,384	)				(21,793	)			(34,096	)
Amortization of transition asset			59				73					166				218
Recognized net actuarial loss			1,885				961					5,587				2,886
Net periodic benefit cost (credit)		$	3,927			$	(279	)			$	11,611			$	(752	)

For the three and nine month periods ended September 30, 2009, the Company made contributions to its underfunded U.S. and U.K. defined benefit pension plans of $3,842,000 and $11,237,000, respectively, compared to $13,645,000 and $19,869,000, respectively, for the comparable periods in 2008.

10. Income Taxes

The Company’s consolidated effective income tax rate changes periodically due to changes in enacted tax rates, fluctuations in the mix of taxable income earned from the various jurisdictions in which the Company operates, the Company’s ability to utilize net operating loss carryforwards in certain of its subsidiaries, and amounts related to uncertain income tax positions. The Company’s effective income tax rate for financial reporting purposes differs from the statutory income tax rate due primarily to the goodwill impairment charge, described in Note 2 above, which is not deductible for income tax purposes.

11. Segment Information

The Company’s four reportable operating segments are: U.S. Property & Casualty which serves the property and casualty insurance company market in the U.S., International Operations which serves the property and casualty insurance company markets outside the U.S., Broadspire which serves the U.S. self-insurance marketplace, and Legal Settlement Administration which serves the class action settlement and bankruptcy markets. The Company’s reportable segments represent components of the business for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Operating earnings (loss) is the Company’s segment measure of profit or loss required to be disclosed by ASC 280, “Segment Reporting.” Operating earnings is the primary financial performance measure used by the Company’s senior management and chief operating decision maker to evaluate the financial performance of the Company’s four operating segments. The Company believes this measure is useful in that it allows others to evaluate segment operating performance using the same criteria used by the Company’s senior management. Operating earnings will differ from net income computed in accordance with GAAP since operating earnings exclude net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, unallocated corporate and shared costs, net income attributable to noncontrolling interests, and certain other gains and expenses.

Financial information for the three months and nine months ended September 30, 2009 and 2008 related to the Company’s reportable segments, including a reconciliation from segment operating earnings (loss) to the most directly comparable GAAP financial measure, is presented below:

		Three months ended									Nine months ended
		September 30,				September 30,					September 30,				September 30,
(in thousands)		2009				2008					2009				2008
Revenues:
U.S. Property & Casualty		$	52,253			$	56,227				$	161,852			$	156,935
International Operations			101,725				115,362					288,724				335,505
Broadspire			70,430				76,911					218,087				236,289
Legal Settlement Administration			21,344				18,416					62,836				56,964
Total Segment Revenues before Reimbursements			245,752				266,916					731,499				785,693
Reimbursements			23,105				24,416					59,284				69,578
Total Revenues		$	268,857			$	291,332				$	790,783			$	855,271
Operating Earnings (Loss):
U.S. Property & Casualty		$	4,862			$	6,781				$	17,250			$	17,822
International Operations			7,258				8,594					22,943				28,027
Broadspire			(1,171	)			1,079					(3,731	)			5,366
Legal Settlement Administration			4,097				2,853					9,911				8,492
Total Segment Operating Earnings			15,046				19,307					46,373				59,707
Add/(deduct):
Net income attributable to noncontrolling interests			110				161					276				315
Unallocated corporate and shared cost, net			(878	)			(3,737	)				(8,148	)			(5,147	)
Restructuring costs			—				—					(1,815	)			—
Goodwill/intangible asset impairment charges			(46,945	)			—					(140,945	)			—
Amortization of customer-relationship intangible assets			(1,500	)			(1,507	)				(4,494	)			(4,521	)
Stock option expense			(266	)			(243	)				(696	)			(717	)
Net corporate interest expense			(3,126	)			(4,334	)				(10,251	)			(13,406	)
(Loss) Income before Income Taxes		$	(37,559	)		$	9,647				$	(119,700	)		$	36,231

     Intersegment transactions are not material for any period presented.

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

12. Commitments and Contingencies

In the past, the Company has structured certain acquisitions to include earnout payments, which are typically contingent upon the acquired entity reaching certain revenue and operating earnings targets. The amount of any contingent payments and length of the earnout period have varied for each acquisition, and the ultimate payments, when and if made, vary since they depend on future events. At September 30, 2009, all measurement periods covered by existing earnout agreements have ended and the Company can tentatively calculate amounts due under these agreements. At September 30, 2009, the Company estimates that it will make cash payments of approximately $5,434,000 in the fourth quarter of 2009 and $858,000 in the second quarter of 2010, based on currency exchange rates on September 30, 2009. At September 30, 2009, these amounts are included as components of Goodwill and Other Accrued Liabilities (current) on the Company’s Unaudited Condensed Consolidated Balance sheet.

As part of the Company’s Credit Agreement, the Company maintains a $50,000,000 letter of credit facility to satisfy certain of its contractual requirements. At September 30, 2009, the aggregate amount of issued but undrawn letters of credit under the facility was $19,569,000.

In the normal course of the claims administration services business, the Company is sometimes named as a defendant in suits by insureds or claimants contesting decisions made by the Company or its clients with respect to the settlement of claims. Additionally, certain clients of the Company have in the past brought actions for indemnification by the Company, its agents, or its employees in rendering service to clients. The majority of these claims are of the type covered by insurance maintained by the Company. However, the Company is self-insured for the deductibles under various insurance coverages. In the opinion of Company management, adequate provisions have been made for such self-insured risks. The Company is also subject to numerous federal, state, and foreign employment laws, and from time to time the Company faces claims by its employees and former employees under such laws.

As previously disclosed, on October 31, 2006, the Company completed its acquisition of Broadspire Management Services, Inc. (“BMSI”) from Platinum Equity, LLC (“Platinum”). BMSI and Platinum are together engaged in certain legal proceedings against the former owners of certain entities acquired by BMSI prior to the Company’s October 31, 2006 acquisition of BMSI. Pursuant to the agreement under which the Company acquired BMSI (the “Stock Purchase Agreement”), Platinum has full responsibility to resolve all of these matters and is obligated to fully indemnify BMSI and the Company for all monetary payments that BMSI may be required to make as a result of any unfavorable outcomes related to these pre-existing legal proceedings. Pursuant thereto, Platinum has also agreed to indemnify the Company for any additional payments required under any purchase price adjustment mechanism, earnout, or similar provision in any of BMSI’s purchase and sale agreements entered into prior to the Company’s acquisition of BMSI. In the event of an unfavorable outcome in which Platinum does not indemnify the Company under the terms of the Stock Purchase Agreement, the Company may be responsible for funding any such unfavorable outcomes. At this time, the Company’s management does not believe the Company will be responsible for the funding of

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

any of these matters. The Company has not recognized any loss contingencies or related indemnification assets for these matters in its consolidated financial statements.

Separately, the Company and Platinum have agreed to arbitration regarding the application of the purchase price adjustment mechanism contained in the Stock Purchase Agreement. The Company has received a notice from Platinum which disputes the Purchaser’s Statement (as defined in the Stock Purchase Agreement) delivered by the Company to Platinum and also asserts that Platinum is owed amounts thereunder. The Company is contesting this notice and has asserted its belief that it is owed a certain amount thereunder. At the present time, the Company is unable to determine any possible outcome of this dispute. Because all of the goodwill in the Broadspire segment is impaired, as disclosed in Note 2, “Impairment Testing and Noncash Charges for Goodwill and Intangible Asset,” any required payment or recovery will result in a nontaxable charge or credit to the Company’s results of operations.

13. Amendment to Credit Agreement

In February 2009, the Company entered into a “Fourth Amendment to Credit Agreement and First Amendment to Pledge Agreement” (the “Fourth Amendment”). The Fourth Amendment amended, among other things, the Company’s Credit Agreement dated October 31, 2006 (the “Credit Agreement”). The Fourth Amendment provided the Company with additional flexibility to enhance certain operational and financial aspects of its business, including, among other things, undertaking an internal corporate realignment of certain of the Company’s subsidiaries. A substantial portion of the realignment was completed in connection with the execution of the Fourth Amendment. This corporate realignment did not impact the composition of the Company’s four operating segments. Among other things, the Fourth Amendment provided the Company with the ability to repurchase and retire, from time to time through December 2010, up to $25.0 million of its outstanding term debt under its Credit Agreement. The Fourth Amendment did not change the base interest rate, interest rate spreads, financial covenants or other key terms of the Credit Agreement. See Note 15, “Subsequent Events.”

14. Restructuring Charge

During the first quarter of 2009, the Company recorded a pretax restructuring charge of $1,815,000. The charge consisted of professional fees incurred in connection with the realignment of certain of the Company’s legal entities in the U.S. and internationally. The realignment of these legal entities did not impact segment financial reporting. These realignment activities commenced in the fourth quarter of 2008.

15. Subsequent Events

Fifth Amendment to Credit Agreement

On October 27, 2009, the Company entered into the Fifth Amendment To Credit Agreement (the “Fifth Amendment”).

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Fifth Amendment affected the following changes to the Company’s Credit Agreement, among others:

	•		providing the Company the option, subject to its receipt of additional commitments, to increase the revolving commitment amount or incur additional term loans under the Credit Agreement of up to a maximum of $50.0 million in aggregate;
	•		extending the revolving credit termination date to October 30, 2013, which is coterminous with the term loan maturity date thereunder;
	•		modifying the restricted payments basket by eliminating the “Restricted Payments Coverage Ratio” (as defined) test and allowing certain payments, such as the payment of dividends, among other items, in certain amounts in any four-quarter period depending upon the Company’s pro forma Leverage Ratio (as defined);
	•		increasing the Applicable Margin (as defined);
	•		imposing a LIBOR floor of 2.0% on all loans under the Credit Agreement;
	•		modifying the applicable margin for revolving loans and term loans and the applicable commitment fee percentage;
	•		increasing the unsecured indebtedness basket from $5.0 million to $200 million, provided that 50% of the proceeds thereof are applied as a mandatory prepayment to the term loans and revolving loans, in that order under the Credit Agreement; and
	•		modifying the maximum leverage ratio, defined as the ratio of consolidated debt to earnings before interest expense, income taxes, depreciation, amortization, stock-based compensation expense, and certain other charges (“EBITDA”), to no more than (i) 3.25 to 1.00 through March 31, 2011, (ii) 3.00 to 1.00 from June 30 2011 through March 31, 2012, (iii) 2.75 to 1.00 from June 30, 2012 through September 30, 2012, and (iv) 2.50 to 1.00 from December 31, 2012.

In connection with the Fifth Amendment, the Company’s interest rate swap agreement (described in Note 7) is no longer designated as a cash flow hedge of exposure to changes in cash flows due to change in interest rates. Accordingly, any future changes in the fair value of the Company’s interest rate swap agreement will be recorded by the Company as an expense adjustment rather than a component of the Company’s accumulated other comprehensive loss. Also, at September 30, 2009, a pretax loss of $2,652,000 on the interest rate swap agreement is a $1,803,000 after-tax component of the Company’s accumulated other comprehensive loss. Because it is still probable that the forecasted transactions that were hedged will occur, this loss on the interest rate swap agreement will be reclassified into earnings as an increase to interest expense over the remaining life of the interest rate swap agreement as the forecasted transactions occur.

Sublease

During October 2009, the Company entered into an agreement to sublease a portion of its leased Broadspire office building located in Plantation, Florida. The agreement provides the subtenant with options to sublease additional space in the building at various dates in 2010. The sublease is for the remaining term of the

CRAWFORD & COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

lease. In connection therewith, the Company expects to record a loss on the current sublease of approximately $1,800,000 in the fourth quarter of 2009. Should the subtenant exercise some or all of its options to sublease additional space in the building, the Company estimates that it would recognize additional sublease losses of up to $2,600,000 in 2010. The Company expects net cash savings over the term of the sublease ranging from approximately $10,200,000 to $13,000,000, depending on whether the subtenant exercises some or all of its options for additional space in the building.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
Crawford & Company:

We have reviewed the condensed consolidated balance sheet of Crawford & Company as of September 30, 2009, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended September 30, 2009 and 2008, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2009 and 2008. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Crawford & Company as of December 31, 2008, and the related consolidated statements of income, shareholders’ investment and comprehensive income, and cash flows for the year then ended (not presented herein) and in our report dated March 9, 2009, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company’s adoption of Financial Accounting Standards Board No. 157, Fair Value Measurements (codified in FASB ASC Topic 820, Fair Value Measurements and Disclosures). As described in Note 1, in 2009 Crawford & Company adopted Financial Accounting Standards Board No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51(codified in FASB ASC Topic 810, Consolidation) on a retrospective basis resulting in revision of the December 31, 2008 consolidated balance sheet. We have not audited and reported on the revised balance sheet reflecting the adoption of Financial Accounting Standards Board Statement No.160.

In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Atlanta, Georgia
November 9, 2009

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Concerning Forward-Looking Statements

This report contains and incorporates by reference forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Exchange Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Statements contained in this report that are not historical in nature are forward-looking statements made pursuant to the “safe harbor” provisions thereof. These statements are included throughout this report and relate to, among other things, discussions regarding reductions of our operating expenses in our Broadspire segment, anticipated contributions to our underfunded defined benefit pension plans, collectibility of our billed and unbilled accounts receivable, projections regarding payments under existing earnout agreements, discussions regarding our continued compliance with the financial and other covenants contained in our financing agreements and other long-term liquidity requirements. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins, case volumes, profitability, contingencies, and capital resources. The words “anticipate”, “believe”, “could”, “would”, “should”, “estimate”, “expect”, “intend”, “may”, “plan”, “goal”, “strategy”, “predict”, “project”, “will” and similar terms and phrases identify certain forward-looking statements in this report.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. These forward-looking statements involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our financial condition, cash flows or results of operations and whether the forward-looking statements ultimately prove to be correct. Included among, but not limited to, the risks and uncertainties we face are:

	•		declines in the volume of cases referred to us for many of our service lines,
	•		changes in global economic conditions,
	•		changes in interest rates,
	•		changes in foreign currency exchange rates,
	•		changes in regulations and practices of various governmental authorities,
	•		changes in our competitive environment,
	•		changes in the financial condition of our clients,
	•		the performance of sublessors under certain subleases related to our leased properties,
	•		regulatory changes related to funding of defined benefit pension plans,
	•		the fact that our U.S. and U.K. defined benefit pension plans are significantly underfunded and our future funding obligations thereunder,
	•		changes in the degree to which property and casualty insurance carriers outsource their claims handling functions,
	•		changes in overall employment levels and associated workplace injury rates in the U. S.,
	•		our ability to identify new revenue sources not tied to the insurance underwriting cycle,
	•		our ability to develop or acquire information technology resources to support and grow our business,
	•		our ability to attract and retain qualified personnel,
	•		our ability to retain clients and renew existing major contracts with clients on satisfactory financial terms,

	•		our ability to collect accounts receivable from our clients and others,
	•		continued availability of funding and compliance with the covenants under our financing agreements,
	•		general risks associated with doing business outside the U.S.,
	•		our ability to comply with any applicable debtor or other covenant in our financing or other agreements,
	•		possible legislation or changes in market conditions that may curtail or limit growth in product liability and securities class actions,
	•		man-made disasters and natural disasters,
	•		our failure to complete the implementation of RiskTech on schedule, and
	•		further impairments of goodwill or our other indefinite-lived intangible assets.

As a result, you should not place undue reliance on any forward-looking statements.

Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements. Forward-looking statements speak only as of the date they are made and we undertake no obligation to publicly update any of these forward-looking statements in light of new information or future events.

Business Overview

Based in Atlanta, Georgia, Crawford & Company is the world’s largest independent provider of claims management solutions to insurance companies and self-insured entities, with a global network of more than 700 locations in 63 countries. Our major service lines include property and casualty claims management, integrated claims and medical management for workers’ compensation, legal settlement administration including class action and bankruptcy claims administration, warranty inspections, and risk management information services. We have two classes of common stock traded on the New York Stock Exchange, Class A Common Stock and Class B Common Stock, which trade under the symbols CRDA and CRDB, respectively.

Insurance companies, which represent the major source of our global revenues, customarily manage their own claims administration function but often rely on third parties for certain services which we provide, primarily field investigation and the evaluation of property and casualty insurance claims. We also conduct inspections of building component products related to warranty and product performance claims.

Self-insured entities typically rely on us for a broader range of services. In addition to field investigation and evaluation of their claims, we may also provide initial loss reporting services for their claimants, loss mitigation services such as medical case management and vocational rehabilitation, risk management information services, and administration of trust funds established to pay their claims.

We also perform legal settlement administration services related to securities, product liability, and other class action settlements and bankruptcies, including identifying and qualifying class members, determining and dispensing settlement payments, and administering the settlement funds. Such services are generally referred to by us as class action services.

The claims management services market, both in the U.S. and internationally, is highly competitive and comprised of a large number of companies of varying size and offering a varied

scope of services. The demand from insurance companies and self-insured entities for services provided by independent claims service firms like us is largely dependent on industry-wide claims volumes, which are affected by, among other things, the insurance underwriting cycle, weather-related events, general economic activity, overall employment levels, and associated workplace injury rates. Accordingly, we are limited in our ability to predict case volumes that may be referred to us in the future. In addition, our ability to retain clients and maintain and increase case referrals is also dependent in part on our ability to continue to provide high-quality, competitively priced services.

We generally earn our revenues on an individual fee-per-claim basis for claims management services we provide to property and casualty insurance companies and self-insured entities. Accordingly, the volume of claim referrals to us is a key driver of our revenues, although sometimes a portion or substantially all of the revenue will be earned in periods after a claim is initially referred to us. Industry-wide claims volume in general will vary depending upon the insurance underwriting cycle.

In the insurance industry, the underwriting cycle is often said to be in either a “soft” or “hard” market. A soft market generally results when insurance companies focus more on increasing their premium income and focus less on controlling underwriting risks. A soft market often occurs in conjunction with strong financial markets. Insurance companies can derive a significant portion of their earnings from their investment portfolios, and when financial markets are strong, their focus may turn to collecting more premium income to invest under the assumption that increased investment income and gains will offset higher claim costs that usually result from relaxed underwriting standards. Due to competition in the industry during a soft market, insurance companies usually concentrate on growing their premium base by increasing the number of policies in-force instead of raising individual policy premiums. When the insurance underwriting market is soft, insurance companies are generally more aggressive in the risks they underwrite, and insurance premiums and policy deductibles typically decline. This usually results in an increase in industry-wide claim referrals which generally will increase claim referrals to us provided that we are able to maintain our existing market share.

A transition from a soft to a hard market is usually caused by one or two key factors, or sometimes a combination of both: weak financial markets or unacceptable losses from policy holders. When investments held by insurance companies begin to perform poorly, insurance companies typically turn their focus to attempting to better control underwriting risks and claim costs. However, even if financial markets perform well, the relaxed underwriting standards in a soft market can lead to unacceptable increases in the frequency and cost of claims, especially in geographic areas that are prone to frequent weather-related catastrophes. Either of these factors will usually lead the insurance industry to transition to a hard market. During a hard insurance underwriting market, insurance companies generally become more selective in the risks they underwrite, and insurance premiums and policy deductibles typically increase, sometimes quite dramatically. This usually results in a reduction in industry-wide claim volumes, which generally reduces claim referrals to us unless we are able to offset the decline in claim referrals with growth in our market share.

We are also impacted by decisions insurance companies and other clients may make to change the level of claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. Our ability to grow our market share in a highly fragmented and competitive market is primarily dependent on the delivery of superior quality service and effective sales efforts.

The legal settlement administration market is also highly competitive but comprised of a smaller number of specialized entities. The demand for legal settlement administration services is generally not directly tied to or affected by the insurance underwriting cycle. The demand for these services is largely dependent on the volume of securities and product liability class action settlements, the volume of Chapter 11 bankruptcy filings and the resulting settlements, and general economic conditions. Our revenues for legal settlement administration services are generally project-based and we earn these revenues as we perform individual tasks and deliver the outputs as outlined in each project.

Results of Consolidated Operations and Noncash Charges for Goodwill and Intangible Asset

Consolidated net loss attributable to Crawford & Company for the three months and nine months ended September 30, 2009 was $(39.5 million), or loss per share of $(0.76), and $(124.6 million), or loss per share of $(2.41), respectively. Excluding a noncash goodwill and an intangible asset impairment charge totaling $46.9 million ($46.7 million after tax), or $(0.90) per share, in the third quarter of 2009 and $140.9 million, or $(2.72) per share, for the nine months ended September 30, 2009, net income attributable to Crawford & Company was $7.2 million and $6.9 million for the three months ended September 30, 2009 and 2008, respectively, and $16.2 million and $23.9 million for the nine months ended September 30, 2009 and 2008, respectively. Consolidated net loss for the nine months ended September 30, 2009 also included a pre-tax charge of $1.8 million, or $1.2 million after income tax, for professional fees incurred in connection with the previously announced realignment of certain of our legal entities in the U.S. and internationally.

In addition to the goodwill and intangible asset impairment charges, the decrease in our consolidated results of operations during the three months and nine months ended September 30, 2009 compared to the same periods in 2008 was driven primarily by lower revenues in our Broadspire segment, higher costs for our defined benefit pension plans, the negative impact from a stronger U.S. dollar on the results of our International Operations segment, and the restructuring costs incurred in the first quarter of 2009. In addition, results for the three months ended September 30, 2009 were also negatively impacted by lower revenues in our U.S. Property & Casualty segment compared to the same period in 2008.

As previously disclosed, due to declines in current and forecasted operating results for our Broadspire reportable segment and reporting unit, the impact that declining U.S. employment levels have had on Broadspire’s revenue, and the weakness in our stock prices, we recorded a preliminary noncash goodwill impairment charge of $94.0 million in connection with the preparation of our unaudited condensed consolidated financial statements for the three months and six months ended June 30, 2009. In connection with the preparation of our unaudited condensed consolidated financial statements for the three months and nine months ended September 30, 2009, we completed this interim goodwill impairment analysis and determined that all of Broadspire’s remaining goodwill was impaired, resulting in an additional noncash goodwill impairment charge of $46.3 million. These goodwill impairment charges are not deductible for income tax purposes. Also, it was determined during the quarter ended September 30, 2009 that the value of a trade name indefinite-lived intangible asset used in a small portion of the Broadspire reporting unit was totally impaired. Accordingly, we recorded a pre-tax impairment charge of $600,000, or approximately $383,000 after tax, to recognize the impairment of the trade name intangible asset. These impairment charges are not reflected in Broadspire’s segment operating loss.

The goodwill and intangible asset impairment charges described above did not result in the violation of any covenants in our Credit Agreement.

Use of Non-GAAP Financial Performance Measure

Operating earnings is our segment measure of profit required to be disclosed by Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting,” as discussed in Note 11 to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Operating earnings is the primary financial performance measure used by our senior management and chief operating decision maker to evaluate the financial performance of our operating segments and make resource allocation decisions. We believe this measure is useful to others in that it allows them to evaluate segment operating performance using the same criteria our management uses. Operating earnings represent earnings attributable to Crawford & Company excluding income tax expense, net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, certain other gains and expenses, and certain unallocated corporate and shared costs.

Income tax expense, net corporate interest expense, amortization of customer-relationship intangible assets, and stock option expense are recurring components of our net (loss) income, but they are not considered part of our segment operating earnings because they are managed on a corporate-wide basis. Income taxes are based on statutory rates in effect in each of the jurisdictions where we provide services, and vary throughout the world. Net corporate interest expense results from company-wide capital structure decisions made by management. Amortization expense relates to non-cash amortization expense of customer-relationship intangible assets resulting from business combinations. Stock option expense is the non-cash cost generally related to historically granted stock options and costs related to our employee stock purchase plans. None of these costs relates directly to the performance of our services or operating activities and, therefore, are excluded from segment operating earnings in order to better assess the results of our segment operating activities on a consistent basis.

Certain other gains and expenses arise from events (such as restructuring costs or a goodwill impairment charge) that are not considered part of our segment operating earnings since they historically have not regularly impacted our performance and are not expected to impact our future performance on a regular basis.

Unallocated corporate and shared costs for the three-month and nine-month periods ended September 30, 2009 and 2008 primarily represented expenses related to our CEO and Board of Directors, certain provisions for bad debt allowances or subsequent recoveries such as those related to bankrupt clients, defined benefit pension costs for our frozen U.S. pension plan, and certain self-insurance costs and recoveries that are not allocated to our individual operating segments.

With the exception of income taxes, net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, unallocated corporate and shared costs, and certain other gains and expenses, our results of operations are discussed and analyzed by our four operating segments: U.S. Property & Casualty, International Operations, Broadspire, and Legal Settlement Administration. The discussion and analysis of the results of our four operating segments follows the sections on income taxes, net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, unallocated corporate and shared costs, restructuring costs, and goodwill and intangible asset impairment charges.

Income Taxes

Our consolidated effective income tax rate for financial reporting purposes changes periodically due to changes in enacted tax rates, fluctuations in the mix of taxable income earned from our various domestic and international operations, our ability to utilize net operating loss carryforwards in certain of our subsidiaries, and amounts related to uncertain income tax positions. At September 30, 2009, we estimate that our effective annual income tax rate for 2009 will be approximately 23%, excluding the nondeductible noncash goodwill impairment charge of $140.3 million.

Income tax expense totaled $4.6 million and $12.0 million for the nine months ended September 30, 2009 and 2008, respectively. As a percentage of pre-tax income, excluding the noncash goodwill impairment charge, income tax expense including discrete items was 22.2% and 33.4% for the nine months ended September 30, 2009 and 2008, respectively. The percentage decrease in 2009 was due primarily to changes in the mix of taxable income earned from our domestic and international operations and enacted tax legislation impacting the current year. For the nine months ended September 30, 2009 and 2008, discrete items of $492,000 and $655,000, respectively, decreased our effective income tax rate by 2.3% and 1.8%, respectively.

Net Corporate Interest Expense

Net corporate interest expense is comprised of interest expense that we incur on our short- and long-term borrowings, partially offset by interest income we earn on available cash and cash equivalents. These amounts vary based on interest rates, borrowings outstanding, and the amounts of invested cash and cash equivalents. Interest expense is also impacted by our interest rate swap agreement that we entered into in May 2007. Corporate interest expense totaled $3.3 million and $4.9 million for the three months ended September 30, 2009 and 2008, respectively, and $11.5 million and $14.8 million for the nine months ended September 30, 2009 and 2008, respectively. Interest income totaled $142,000 and $551,000 for the three months ended September 30, 2009 and 2008, respectively, and $1.2 million and $1.4 million for the nine months ended September 30, 2009 and 2008, respectively.

Amortization of Customer-Relationship Intangible Assets

Amortization of customer-relationship intangible assets represents the non-cash amortization expense for customer-relationship intangible assets acquired as part of our 2006 acquisitions of Broadspire Management Services, Inc. and Specialty Liability Services, Ltd. Amortization expense associated with these intangible assets totaled approximately $1.5 million for each of the three-month periods ended September 30, 2009 and 2008, and $4.5 million for each of the nine-month periods ended September 30, 2009 and 2008. This amortization is included in SG&A expenses in our unaudited condensed consolidated statements of operations.

Stock Option Expense

Stock option expense, a component of stock-based compensation, is comprised of non-cash expenses related to stock options granted under our various stock option and employee stock purchase plans. Stock option expense is not allocated to our operating segments. Other stock-based compensation expense related to our executive stock bonus plan (performance shares and restricted shares) is charged to our operating segments and included in the determination of segment operating earnings or loss. Stock option expense of $266,000 and $243,000 was recognized during the three months ended September 30, 2009 and 2008, respectively, and $696,000 and $717,000 was recognized for the nine months ended September 30, 2009 and 2008, respectively.