The Company computes (loss) earnings per share of CRDA and CRDB using the two-class method, which allocates the undistributed (loss) earnings for each period to each class on a proportionate basis. The Company's Board of Directors has the right, but not the obligation, to declare higher dividends on the non-voting CRDA shares than on the voting CRDB shares, subject to certain limitations. In periods when the dividend is the same for CRDA and CRDB or when no dividends are declared or paid to either class, the two-class method generally will yield the same (loss) earnings per share for CRDA and CRDB.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand Crawford & Company, our operations, and our business environment. This MD&A is provided as a supplement to - and should be read in conjunction with - our audited consolidated financial statements and the accompanying notes thereto contained in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. As described in Note 1, "Significant Accounting and Reporting Policies," of those accompanying audited consolidated financial statements, financial results from our operations outside of the U.S., Canada, the Caribbean, and certain subsidiaries in the Philippines, are reported and consolidated on a two-month delayed basis in accordance with the provisions of ASC 810, "Consolidation," in order to provide sufficient time for accumulation of their results. Accordingly, the Company's December 31, 2015, 2014, and 2013 consolidated financial statements include the financial position of such operations as of October 31, 2015 and 2014, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31, 2015, 2014 and 2013, respectively.
Based in Atlanta, Georgia, Crawford & Company (www.crawfordandcompany.com) is one of the world's largest independent providers of claims management solutions to the risk management and insurance industry, as well as to self-insured entities, with an expansive global network serving clients in more than 70 countries. The Crawford SolutionSM offers comprehensive, integrated claims services, business process outsourcing and consulting services for major product lines including property and casualty claims management, workers' compensation claims and medical management, and legal settlement administration.
As discussed in more detail in subsequent sections of this MD&A, we have four operating segments: U.S. Services, International, Broadspire, and Garden City Group. Our four operating segments represent components of our Company for which separate financial information is available, and which is evaluated regularly by our chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing operating performance. In the fourth quarter of 2015, the Company realigned two of its reportable segments by moving its Canada and Latin America/Caribbean operations from the former Americas segment to the newly formed International segment, previously referred to as the EMEA/AP (Europe, Middle East, Africa, and Asia-Pacific) segment. The former Americas segment, without Canada and Latin America/Caribbean, is now the U.S. Services segment. The results of the former EMEA/AP and Americas segments are no longer reported separately. U.S. Services primarily serves the property and casualty insurance company markets in the U.S. International serves the property and casualty insurance company and self-insurance markets outside the U.S. Broadspire serves the U.S. self-insurance marketplace. Garden City Group serves the class action, regulatory, mass tort, bankruptcy, and other legal administration markets, primarily in the U.S. The results of prior periods have been revised to conform to the current presentation of our reportable segments. The change in reporting segments did not have any impact on previously reported consolidated financial results.
Self-insured entities typically rely on us for a broader range of services. In addition to field investigation and claims evaluation, we may also provide initial loss reporting services for their claimants, loss mitigation services such as medical bill review, medical case management and vocational rehabilitation, risk management information services, and trust fund administration to pay their claims.
The global claims management services market is highly competitive and comprised of a large number of companies of varying size and that offer 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 workplace injury rates. Demand is also impacted by decisions insurance companies and self-insured entities may make with respect to the level of claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. In addition, our ability to retain clients and maintain or increase case referrals is also dependent in part on our ability to continue to provide high-quality, competitively priced services and effective sales efforts.
The legal settlement administration market within which our Garden City Group segment operates is also highly competitive but is 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 bankruptcy filings and the resulting settlements, volume of mass torts and general economic conditions. Our revenues for legal settlement administration services are largely project-based and we earn these revenues as we perform individual tasks and deliver the outputs as outlined in each project.
In 2014, we established a wholly-owned global business services center in Manila, Philippines. We have subsequently expanded the capabilities of the center to include Information Technology services performed in Pune, India (the "Centers"). The Centers provide us venues for global consolidation of certain business functions, shared services, and currently outsourced processes. The Centers, which are expected to be phased in through 2018, are expected to allow us to continue to strengthen our client service, realize additional operational efficiencies, and invest in new capabilities for growth. Operations in the Centers are expected to deliver cumulative expense savings of approximately $60 million through 2019 and annual cost savings of approximately $20 million per year thereafter. To achieve these savings, we expect to record charges totaling approximately $20 million through 2018. An initial charge of $4.4 million was incurred in 2015, which was partially offset by initial savings in 2015 of approximately $2 million. We expect to record charges of $8.4 million in 2016, which should be partially offset by combined savings in 2016 of $8 million. No assurances can be provided of our ability to timely or cost effectively complete and ramp up operations at the Centers, or to achieve expected cost savings on a timely basis, or at all.
Consolidated revenues before reimbursements were $1.170 billion in 2015, an increase of 2.4% compared with $1.143 billion in 2014. Net loss attributable to Crawford & Company was $(45.5) million in 2015, compared with net income of $30.6 million in 2014 and $51.0 million in 2013. During 2015, the Company recorded restructuring and special charges of $34.4 million. The Company also recorded non-cash goodwill impairment charges of $49.3 million in 2015. There were no similar charges in 2014 or 2013.
In the U.S. Services segment, operating earnings improved from 2014 to 2015 due to continued growth in our U.S. Contractor Connection managed repair network, growth in U.S. Catastrophe Services primarily due to an outsourcing project for a major U.S. insurance carrier, and cost reduction initiatives in 2015. These increases were partially offset by a reduction in weather related cases in the U.S. Claims Field Operations in 2015.
Operating earnings in our International segment declined in 2015 compared to 2014, due to a reduction in weather-related claim activity and decline in high-frequency, low-complexity claims in the U.K. and Asia-Pacific in 2015, and the negative impact of changes in foreign exchange rates.
Broadspire's operating earnings improved each year from 2013 to 2015. The improvements were due to higher revenues from both new and existing clients, and improved control over operating expenses.
As expected, Garden City Group's operating earnings declined in 2015 compared to 2014, reflecting a decline in revenues from certain special projects. The Garden City Group had lower revenues in 2015 from the Deepwater Horizon class action settlement project and another non-Gulf related special project, compared with 2014. Operating earnings were higher in this segment in both 2014 and 2013, compared with 2015, due to these special projects.
Income taxes, net corporate interest expense, stock option expense, and amortization of customer-relationship intangible assets are recurring components of our net income, but they are not considered part of our segment operating earnings because they are managed on a corporate-wide basis. Income taxes are calculated for the Company on a consolidated basis based on statutory rates in effect in the various jurisdictions in which we provide services, and vary significantly by jurisdiction. Net corporate interest expense results from capital structure decisions made by senior management and the Board of Directors and affecting the Company as a whole. Stock option expense represents the non-cash costs generally related to stock options and employee stock purchase plan expenses which are not allocated to our operating segments. Amortization expense is a non-cash expense for customer-relationship intangible assets acquired in business combinations. None of these costs relate 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 each segment's operating activities on a consistent basis.
Restructuring and special charges arise from time to time from events (such as internal restructurings, losses on subleases, arbitration awards, and debt refinancings) that are not allocated to any particular segment since they historically have not regularly impacted our performance and are not expected to impact our future performance on a regular basis.
YEAR ENDED DECEMBER 31, 2015 COMPARED WITH YEAR ENDED DECEMBER 31, 2014
U.S. Contractor Connection revenues increased 17.4% in 2015 compared with 2014 primarily due to the ongoing expansion of this service as an alternative property claims service solution as insurance carriers continued the trend of moving high-frequency, low-complexity property cases directly to managed repair networks. There was also an increase in the average fee per claim in 2015 compared to 2014.
U.S. Services unit volumes by underlying case category, as measured by cases received, for 2015 and 2014 were as follows:
The 2015 decrease in U.S. Claims Services cases was primarily due to the transfer of affinity claims to our Broadspire segment, and fewer cases in our U.S. Claims Field Operations service line due to a reduction in weather-related activity and a reduction in high-frequency, low-complexity vehicle appraisals. Approximately 39,000 affinity cases were included in U.S. Claims Field Operations cases received in 2014. The previously described outsourcing project involved the Company providing adjusters to work on the client's premises; accordingly, there are no associated case volumes referred to the Company for these revenues. The increases in U.S. Technical Services and U.S. Catastrophe Services were due to cases received from new clients in 2015. Excluding the affinity cases from the 2014 case volumes, the decrease in U.S. Services cases received would have been 2.8% for 2015 compared with 2014.
The most significant expense in our U.S. Services segment is the compensation of employees, including related payroll taxes and fringe benefits, and the payments to outsourced service providers that augment our staff. U.S. Services direct compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 61.8% for 2015 and 62.2% for 2014. The decrease was due to the impact of certain cost reduction initiatives in 2015 and improved staff utilization.
U.S. Services segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased from $63.4 million in 2014 to $60.0 million in 2015, and as a percent of segment revenues, decreased from 29.4% in 2014 to 24.7% in 2015. These decreases were primarily due to the impact of a reduction of office locations in the U.S. and related administrative cost reductions.
International segment operating earnings decreased to $18.8 million in 2015, a decrease of 25.8% from 2014 operating earnings of $25.3 million. The operating margin decreased from 5.2% in 2014 to 3.7% in 2015. The decline in operating earnings was due to a reduction in weather-related claim activity and a decline in high-frequency, low-complexity claims in the U.K. and Asia-Pacific in 2015, and the negative impact of changes in foreign exchange rates.
The increase in revenues in the U.K. for 2015 compared with 2014 was due to the acquisition of GAB Robins, which accounted for $79.9 million in revenues for the year ended December 31, 2015, or a 16.4% positive variance in segment revenues for 2015 compared with 2014. Excluding the impact of the GAB Robins acquisition and exchange rate fluctuations, revenues in the U.K. declined to $114.9 million in 2015 due to a continued decline in the general property market as well as a general decline in high-frequency, low-complexity cases.
The lower revenues in Canada were primarily due to exchange rate fluctuations, as the U.S. dollar strengthened against the Canadian dollar. On a constant-dollar basis, revenues in Canada would have been $127.5 million in 2015, a 1.3% decrease from 2014 due to a slight decline in weather-related cases.
Revenues decreased in Asia-Pacific due to the negative impact from exchange rates and a reduction in high volume, low complexity cases in Singapore and China, partially offset by an increase in weather-related activity in Australia in 2015. On a constant-dollar basis, revenues in Asia-Pacific would have been $122.0 million in 2015, a 9.2% increase over 2014, due primarily to an increase in weather-related cases in Australia.
The lower revenues in Europe and Rest of World were also primarily due to exchange rate fluctuations. On a constant-dollar basis, revenues in Europe and Rest of World would have been $124.2 million in 2015, a 4.5% increase from 2014, due primarily to expanding insurer contracts in Scandinavia.
Reimbursements for out-of-pocket expenses incurred in our International segment which are included in total Company revenues decreased to $30.3 million in 2015 from $30.9 million in 2014. This decrease was primarily due to a decline in claims from weather-related activity in the U.K., largely offset by reimbursements from cases associated with the GAB Robins acquisition and increased cases due to weather-related events in Australia.
Overall case volumes were 2.2% higher in 2015 compared with 2014. The U.K. case volumes include the impact of the GAB Robins acquisition, which accounted for 54,100 cases in 2015. Excluding the acquisition, U.K. case volumes were down 14.7% as compared with 2014, primarily due to a continued decline in the general property market as well as a general decline in high-frequency, low-complexity cases. The decrease in Canada cases was primarily due to a decline in weather related cases from existing clients compared with 2014. The decrease in Asia-Pacific cases was due to a decline in high-frequency, low-complexity cases in Singapore and China, partially offset by an increase in weather-related cases in Australia. The decrease in case volumes in Europe and Rest of World was primarily due to a reduction in high-frequency, low-complexity cases in Brazil where we are exiting the affinity, mass market, and vehicle services lines in that country, partially offset by increases in European operations in Spain, Germany, and Scandinavia, due to expanding insurer contracts. Excluding the cases from the GAB Robins acquisition, International cases received would have decreased 4.9% for 2015 compared with 2014.
Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of International segment revenues before reimbursements, decreased from 69.6% in 2014 to 66.5% in 2015. The percentage decrease primarily reflected changes in the mix of services provided. Excluding the impact of the GAB Robins contractor repair revenue, direct compensation, fringe benefits, and non-employee labor expenses would have been 71.0% of segment revenues in 2015. This increase is due to reduced utilization of our U.K. staff in 2015 and the impact of the GAB Robins integration. The dollar amount of these expenses decreased in 2015 by $2.9 million due to cost reduction initiatives implemented in 2015 and changes in foreign exchange rates, partially offset by increased costs from the GAB Robins acquisition. There was an average of 4,690 International FTEs in 2015, an increase from 4,294 FTEs in 2014 due to an increase in the U.K. from the GAB Robins acquisition, partially offset by a decrease in FTEs in Canada, Asia-Pacific, and Europe and Rest of World.
Broadspire recorded operating earnings of $24.0 million in 2015, or 8.2% of revenues, compared with operating earnings of $15.5 million in 2014, or 5.8% of revenues. Operating earnings improved from 2014 to 2015 due to higher revenues and improved control over operating expenses.
Broadspire segment revenues are primarily derived from workers' compensation, disability, and liability claims management, medical management services, such as medical bill review, medical case management and vocational rehabilitation for workers' compensation, and risk management information services provided to the U.S. self-insured marketplace. Beginning January 1, 2015, the affinity business previously handled by our U.S. Claims Services service line in the U.S. Services segment was rebranded as accident and health services and is now in our Broadspire segment. These revenues were $5.4 million in 2015, and are included in the workers' compensation, disability, and liability claims management service line. Broadspire revenues before reimbursements by major service line were as follows:
The most significant expense in our Broadspire segment is the compensation of employees, including related payroll taxes and fringe benefits, and the payments to outsourced service providers that augment the functions performed by our employees. Broadspire direct compensation, fringe benefits, and non-employee labor expense, as a percent of the related revenues before reimbursements, decreased to 54.3% in 2015 compared with 55.7% in 2014. The decline as a percent of revenues was due to improved employee utilization. The amount of these expenses increased from $149.7 million in 2014 to $159.2 million in 2015 due to the growth in revenues. Average FTEs totaled 1,910 in 2015, up from 1,697 FTEs in 2014. The increase in employees was due to the conversion of certain outsourced contractors to full time employees in the Center and the transfer of employees handling accident and health cases from the U.S. Services segment.
Broadspire segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased as a percent of segment revenues before reimbursements to 37.5% in 2015 from 38.5% in 2014. This decrease was due to expense growth being less than the growth in revenues in 2015. Total 2015 expenses increased by $6.2 million compared with 2014, due to the growth in revenues.
The nature and volume of work performed in our Garden City Group segment typically requires more reimbursable out-of-pocket expenditures than our other operating segments. Reimbursements for out-of-pocket expenses incurred in our Garden City Group segment, which are included in total Company revenues, may vary materially from year to year depending on the amount and types of projects and were $28.4 million in 2015, decreasing from $29.7 million in 2014. This decrease was due to a lower volume of case administration work for settlements in 2015.
Garden City Group direct compensation expense, fringe benefits, and non-employee labor expenses, as a percent of segment revenues before reimbursements, increased to 70.5% in 2015 compared with 69.1% in 2014. The increase as a percent of revenues was due to lower employee utilization in 2015 as a result of the reduced revenues. The dollar amount of related expenses declined to $90.4 million in 2015 compared with $117.6 million in 2014. The decrease was primarily due to reduced activity associated with the further reduction in revenues from the special projects discussed above. There was an average of 709 FTEs in 2015, compared with an average of 805 in 2014, decreasing due to the decreased revenues.
Garden City Group expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased 11.6% to $26.3 million in 2015 from $29.8 million in 2014, but increased as a percent of related segment revenues before reimbursements to 20.5% in 2015 from 17.5% in 2014. The dollar amount of these expenses decreased due to reduced activity associated with the reduction in revenues in 2015. The increase in expenses as a percent of revenues before reimbursements was due to the reduction in variable expenses being less than the reduction in revenues in 2015. During 2014, we reduced a contingent consideration liability from a previous acquisition by $2.0 million after concluding the consideration would not be paid. We also impaired and expensed the $1.3 million net book value of a customer list obtained in that acquisition during 2014.
Operating earnings for our U.S. Services segment increased from $11.9 million in 2013 to $18.0 million in 2014, representing an operating margin of 8.4% in 2014 compared with 5.8% in 2013. The operating earnings increase of 51.7% from 2013 to 2014 was due to continued growth in our U.S. Contractor Connection managed repair network, and an increase in revenues in the U.S. Catastrophe Services service line resulting from an outsourcing project for a major U.S. insurance carrier. These increases were partially offset by the reduction in earnings due to a reduction in weather related cases in the U.S. from superstorm Sandy.
For the year ended December 31, 2014 compared with the year ended December 31, 2013, revenues were positively impacted by segment unit volume, measured principally by cases received, which increased by 5.3% during this period. In addition, an overall favorable change in the mix of services provided and in the rates charged for those services also increased revenues by approximately 0.3% in 2014 compared with 2013.
The decline in revenues in U.S. Claims Services primarily resulted from a lack of major weather-related events in 2014 and a reduction in workers' compensation cases (which are now handled solely by our Broadspire segment), partially offset by increased revenues in our U.S. Catastrophe Services service line from an outsourcing project for a major U.S. insurance carrier. The overall decline in U.S. Claims Services revenue was offset by increases in revenues from U.S. Contractor Connection. U.S. Contractor Connection revenues increased due to the ongoing expansion of this service as an alternative property claims service solution as insurance carriers continued the trend of moving high-frequency, low-complexity property cases directly to managed repair networks. U.S. Contractor Connection revenues were also positively impacted by a price increase that was effective on July 1, 2013, which is reflected in all of 2014.
The dollar amount of these expenses increased from $132.3 million in 2013 to $133.9 million in 2014. This increase was due to an increase in staff to handle the growth in revenues. There was an average of 1,403 FTEs (including 317 catastrophe adjusters) in 2014 compared with an average of 1,388 (including 197 catastrophe adjusters) in 2013.
U.S. Services expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased from $59.8 million in 2013 to $63.4 million in 2014, primarily due to increases in centralized administrative costs, amortization for internally developed software and self-insured professional liability expenses. The remaining increase was due to the continued investment in the start-up operations of our Specialty Markets service line, and increases related to U.S. Contractor Connection due to the growth in revenues.
International operating earnings decreased to $25.3 million in 2014, a decrease of 34.7% from 2013 operating earnings of $38.8 million. The operating margin decreased from 7.9% in 2013 to 5.2% in 2014. The decline in operating earnings was principally due to increased expenses in 2014 related to the continued investment in the start-up operations of our Specialty Markets service line. This was partially offset by higher revenues and operating earnings in Canada due to the impact of case volume increases resulting from business growth in 2014 from both insurer markets and our expanding Canadian Contractor Connection managed repair network. The decline in International operating earnings was also due to the inclusion in 2013 of revenues and operating earnings from claims handling activity originating from the 2011 Thailand floods, flooding and bush fires in Australia, and a $900,000 performance bonus from a client in Europe. Also negatively impacting operating earnings comparisons was a $2.3 million gain from the sale of the rights to a customer contract in Latin America in 2013, compared to a $0.4 million gain from the contingent consideration provision of the same agreement during 2014.
The revenue increase in Canada was primarily due to an increase in cases received from both new and existing clients, market share increases in 2014, and growth in Canada's Contractor Connection service line. There was also an increase in desk-adjusted case assignments in both corporate self-insured and insurer markets in the current year.
International unit volume, measured by cases received, increased 11.3% in 2014 compared with 2013, and increased 10.8% when cases from our South African subsidiary are removed from 2013 for comparison purposes. Revenues decreased by 8.6% from changes in the mix of services provided and in the rates charged for those services, primarily due to the decline in Thailand revenues and the additional high-frequency, low-complexity case volumes in Europe and Rest of World, net of increases in the U.K. and Canada. The disposal of our South African subsidiary reduced revenue by 1.6%, while revenues resulting from the 2013 acquisition of Lloyd Warwick International Limited and the 2014 acquisition of Buckley Scott Holdings Limited increased revenues by 1.2%.
International unit volumes by region for 2014 and 2013 were as follows:
The 2014 increase in cases in Canada was primarily due to increases in high-frequency, low-complexity automotive and affinity cases. Our Canada operations also experienced an increase in market share in 2014 compared with 2013, growth in the Contractor Connection business, and growth in its desk-adjusted case assignments in both corporate self-insured and insurer markets.
The increase in Europe and Rest of World cases, especially in Sweden, Norway and Spain, was primarily due to expanding insurer contracts. There were also increases in high-frequency, low-complexity automotive and property cases in Brazil, which resulted in a reduced average fee per case within the region compared to the prior year.
As a percent of segment revenues before reimbursements, direct compensation expenses, fringe benefits, and non-employee labor increased to 69.6% in 2014 from 68.2% in 2013, and the dollar amount of these expenses increased in 2014 by $6.9 million. These increases primarily reflected changes in the mix of services provided and lower utilization of our staff within Asia-Pacific after the Thailand flood claims work was completed. There was an average of 4,294 International FTEs in 2014, a decrease from 4,332 in 2013 primarily due to a decline in FTEs in the U.K.
Broadspire unit volumes by major underlying case category, as measured by cases received, for 2014 and 2013 were as follows:
Broadspire segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased as a percent of segment revenues before reimbursements to 38.5% in 2014 from 40.1% in 2013. This decrease is because many of the fixed costs within the segment will not increase proportionately with an increase in revenues. Total 2014 expenses increased by $3.0 million compared with 2013, due to an increase in amortization for internally developed software and other expenses related to the growth in revenues.
As expected, Garden City Group revenues in 2014 declined compared with 2013 levels primarily because of lower revenues from the Deepwater Horizon class action settlement special project and a few other large projects.
Garden City Group direct compensation expense, fringe benefits, and non-employee labor, as a percent of segment revenues before reimbursements, increased to 69.1% in 2014, compared with 65.3% in 2013. The amount of related expenses declined to $117.6 million in 2014 compared with $143.0 million in 2013. The decreased amounts were primarily due to lower utilization of outsourced service providers because of the reduced activity associated with the Deepwater Horizon special project. There was an average of 805 FTEs in 2014, compared with an average of 690 in 2013. The increase in full-time equivalent employees resulted from the hiring of some previously temporary employees where it was cost effective to do so.
Our consolidated effective income tax rate for financial reporting purposes may change periodically due to changes in enacted tax rates, fluctuations in the mix of income earned from our various domestic and international operations, which are subject to income taxes at different rates, our ability to utilize loss and tax credit carryforwards, and amounts related to uncertain income tax positions. Income tax provisions totaled $13.8 million, $28.8 million, and $29.8 million for 2015, 2014, and 2013, respectively. Our effective tax rate for financial reporting purposes was (43.5)%, 48.1%, and 36.7% for 2015, 2014, and 2013, respectively. The Company's 2015 effective income tax rate was distortive, primarily due to the largely nondeductible goodwill impairment charge, our inability to recognize tax benefits for certain international net operating losses, and fluctuations in the mix of income earned. Additionally, current year losses in certain operations, including losses due to restructuring and special charges, are in jurisdictions with lower tax rates or where the losses are unable to be benefited. Based on our 2016 operating plans, we anticipate our effective tax rate for financial reporting purposes in 2016 to be in the 40% to 42% range before considering any discrete items.
Net corporate interest expense consists of interest expense that we incur on our short- and long-term borrowings, partially offset by interest income we earn on available cash balances and short-term investments. These amounts vary based on interest rates, borrowings outstanding, the effect of any interest rate swaps, and the amounts of invested cash. Corporate interest expense totaled $9.0 million, $6.8 million, and $7.2 million for 2015, 2014, and 2013, respectively. The increase in interest expense in 2015 was due to the increased borrowings related to the GAB Robins acquisition. Corporate interest income was relatively consistent in each year, totaling $0.6 million, $0.8 million, and $0.8 million in 2015, 2014, and 2013, respectively. We pay interest on borrowings under our Credit Facility based on variable rates. Whether we can expect to see future reductions in interest expense compared with prior periods is dependent on the future direction of interest rates as well as the level of outstanding borrowings relative to prior periods.
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. Stock option expense of $0.4 million, $0.9 million and $0.9 million was recognized during 2015, 2014, and 2013, respectively. Other stock-based compensation expense related to our Executive Stock Bonus Plan (pursuant to which we have authority to grant performance shares and restricted shares) is charged to our operating segments and included in the determination of segment operating earnings or loss.
Goodwill impairment charges for 2015 were $49.3 million. There were no goodwill impairment charges in 2014 or 2013. See Note 1, "Significant Accounting and Reporting Policies" and Note 3, "Goodwill and Intangible Assets" of our accompanying audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion about the 2015 goodwill impairment charges.
Total restructuring and special charges for 2015 were $34.4 million. There were no restructuring or special charges in 2014 or 2013. See Note 16, "Restructuring and Special Charges" of our accompanying audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion about the 2015 restructuring and special charges.
At December 31, 2015 and 2014, a total of $243.7 million and $155.0 million, respectively, was outstanding under the Credit Facility. In addition, undrawn commitments under letters of credit totaling $17.2 million and $17.5 million were outstanding at December 31, 2015 and 2014, respectively, under the letters of credit subfacility of the Credit Facility. These letter of credit commitments were for the Company's own obligations. Including the amounts committed under the letters of credit subfacility, the available borrowing capacity under the Credit Facility totaled $142.4 million and $149.1 million at December 31, 2015 and 2014, respectively. The 2014 available balance took into consideration the $78.4 million in debt incurred by the UK Borrower to complete the GAB Robins acquisition which was not on the Company's balance sheet at December 31, 2014.
Under the Credit Facility as amended, the fixed charge coverage ratio, defined as the ratio of (i)(A) consolidated earnings before interest expense, income taxes, depreciation, amortization, stock-based compensation expense, and certain other charges and expenses ("EBITDA") minus (B) aggregate income taxes to the extent paid in cash minus (C) unfinanced capital expenditures to (ii) the sum of: (A) consolidated interest expense to the extent paid (or required to be paid) in cash, plus (B) the aggregate of all scheduled payments of principal on funded debt (including the principal component of payments made in respect of capital lease obligations) required to have been made (whether or not such payments are actually made), plus (C) the aggregate of all restricted payments (as defined) paid, plus (D) the aggregate of all earnouts paid or required to be paid, must not be less than 1.25 to 1.00 for the four-quarter period ending at the end of each fiscal quarter.
Also under the Credit Facility as amended in 2015, the leverage ratio, as of the last day of any fiscal quarter, defined as the ratio of (i) consolidated total funded debt minus unrestricted cash to (ii) consolidated EBITDA, must not be greater than 3.75 to 1.00 through September 30, 2016, with step-downs to 3.50 to 1.00 thereafter for fiscal quarters ending December 31, 2016 through September 30, 2017 and to 3.25 to 1.00 for fiscal quarters thereafter.
We are not aware of any additional restrictions placed on us, or being considered to be placed on us, related to our ability to access capital, such as borrowings under the Credit Facility. We do not rely on repurchase agreements or the commercial paper market to meet our short-term or long-term funding needs. For additional information on the key covenants contained in our Credit Facility, see "Other Matters Concerning Liquidity and Capital Resources" below. At December 31, 2015, we were in compliance with all of the covenants in our Credit Facility.
At December 31, 2015, our working capital balance (current assets less current liabilities) was approximately $111.8 million, compared with $108.0 million at December 31, 2014. The increase in working capital was due to decreases in accounts payable and accrued compensation and related costs. Cash and cash equivalents at the end of 2015 totaled $76.1 million, compared with $52.5 million at the end of 2014.
Cash used in investing activities decreased by $1.8 million in 2014, from $33.5 million in 2013 to $31.8 million in 2014. Cash used to acquire property and equipment and capitalized software, including capitalization of costs for internally developed software, was $29.2 million in 2014 compared with $31.0 million in 2013.
Cash used in financing activities was $4.5 million in 2014. We paid quarterly and special cash dividends totaling $11.7 million and repurchased $3.4 million of our common stock. We borrowed $121.1 million in short-term borrowings during the year for working capital needs, and we repaid a total of $98.8 million in short-term borrowings and $0.9 million in long-term debt and capital lease obligations. Also in 2014, we received shares of our Class A common stock that were surrendered by employees to settle $2.1 million of withholding taxes owed on the issuance of restricted and performance shares.
Our short-term debt obligations typically peak during the first quarter of each year due to the payment of incentive compensation awards, contributions to retirement plans, and certain other recurring payments, and generally decline during the balance of the year. Our maximum month-end short-term debt obligations were $20.0 million and $104.3 million in 2015 and 2014, respectively. Our average month-end short-term debt obligations were $9.8 million and $59.9 million in 2015 and 2014, respectively. The outstanding balance of our short-term borrowings, excluding outstanding but undrawn letters of credit under our Credit Facility, was $20.0 million and $2.0 million at December 31, 2015 and 2014, respectively. The balance in short-term borrowings at December 31, 2015 represents amounts under our revolving Credit Facility that we expect, but are not required, to repay in the next twelve months. We have historically used the proceeds from our long-term borrowings to finance, among other things, business acquisitions.
As of December 31, 2015, the impact that our contractual obligations, including estimated interest payments, are expected to have on our liquidity and cash flow in future periods is as follows:
At December 31, 2015, we had approximately $6.2 million of unrecognized income tax benefits related to uncertain tax positions. We cannot reasonably estimate when all of these unrecognized income tax benefits may be settled. We expect $0.2 million in reductions to unrecognized income tax benefits within the next 12 months as a result of projected resolutions of income tax uncertainties.
Gross deferred income tax liabilities as of December 31, 2015 were approximately $82.5 million. This amount is not included in the contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, we believe scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling would not relate to liquidity needs.
Our frozen U.S. Qualified Plan was underfunded by $120.5 million at December 31, 2015 based on an accumulated benefit obligation of $501.2 million. Although the Bipartisan Budget Act of 2015 ("BBA2015") included pension funding reform which greatly reduced the contributions required to the U.S. Plan, Crawford plans to contribute $9.0 million per annum to the U.S. Plan for the next three fiscal years to improve the funded status of the plan and minimize future required contributions. Required contributions are still anticipated in future years as the impact of the BBA2015 funding reform is phased out. We estimate that we will make the following annual minimum contributions over the next five years to our frozen U.S. Qualified Plan:
Funding requirements are no longer as sensitive to changes in the expected rate of return on plan assets and the discount rate used to determine the present value of projected benefits payable under the plan as they were prior to 2008. In addition to BBA2015 legislation discussed above, pension funding has been governed by rules under the Pension Protection Act of 2006, as amended by the Worker, Retiree and Employer Recovery Act of 2008, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, and the Moving Ahead for Progress in the 21st Century Act, and the Highway Transportation Funding Act of 2014. Volatility in the capital markets and future legislation may have a negative impact on our U.S. and U.K. pension plans, which may further increase the underfunded portion of our pension plans and our attendant funding obligations. Expected and required contributions to our underfunded defined benefit pension plans will reduce our liquidity, restrict available cash for our operating, financing, and investing needs and may materially adversely affect our financial condition and our ability to deploy capital to other opportunities.
Significant changes on our consolidated balance sheet as of December 31, 2015, compared with our consolidated balance sheet as of December 31, 2014, were as follows:
Prepaid expenses and other current assets and other noncurrent assets increased by $14.2 million in 2015 compared with 2014 primarily due to an increase of $11.7 million in the net prepaid pension balances of two U.K. defined benefit plans that are in an overfunded position, and a $2.9 million increase in the value of our Canadian cross currency basis swap.
Noncurrent deferred income tax assets decreased by $19.6 million primarily due to the tax impact of the adjustments to retirement liabilities recorded in accumulated other comprehensive loss, and the adoption of ASU 2015-17, requiring all deferred tax assets and liabilities, along with any related valuation allowance, to be classified as noncurrent on the balance sheet. Current deferred income tax liabilities decreased $14.5 million due to the adoption of ASU 2015-17.
As of December 31, 2015, deferred revenues related to lifetime claim handling arrangements approximated $45.1 million. If the rate at which we close cases changes, the amount of revenues recognized within a period could be affected. In addition, given the competitive environment in which we operate, we may be unable to raise our prices to offset the additional expense associated with handling longer-lived claims should such case closing rates change. The change in our first-year case closing rates over the last ten years has ranged from a decrease of 3.5% to an increase of 4.8%, and has averaged a decrease of 0.4%. A 1.0% change is a reasonably likely change in our estimate based on historical data. Absent an increase in per-claim fees from our clients, a 1.0% decrease in claim closing rates for lifetime claims could result in the deferral of additional revenues of approximately $1.4 million for each of the years ended December 31, 2015, 2014, and 2013. If our average claim closing rates for lifetime claims increased by 1.0%, we could recognize additional revenues of approximately $1.3 million for the years ended December 31, 2015 and 2014, and $1.4 million for the year ended December 31, 2013.
As of December 31, 2015 and 2014, our allowance for doubtful accounts totaled $13.1 million and $11.0 million, or approximately 7.4% and 5.7% of gross billed receivables at December 31, 2015 and 2014, respectively. If the financial condition of our clients deteriorates, resulting in an inability to make required payments to us, or if economic conditions deteriorate, additional allowances may be deemed to be appropriate or required. If the allowance for doubtful accounts changed by 1.0% of gross billed receivables, reflecting either an increase or decrease in expected future write-offs, the impact to consolidated pretax income would have been approximately $1.8 million in 2015, $1.9 million in 2014, and $1.7 million in 2013.
Goodwill impairment testing is a two-step process performed on a reporting unit basis. As determined in the step 1 analysis, if the fair value of the reporting unit exceeds its carrying value, goodwill is not deemed impaired. If the fair value of a reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill following a hypothetical acquisition accounting process. This hypothetical acquisition accounting process is applied only for the purpose of determining whether goodwill must be reduced; it is not used to adjust the carrying values of other assets or liabilities. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill, and it cannot subsequently be reversed.
For goodwill impairment testing purposes, in 2014 and 2015 prior to the realignment of reporting segments, we analyzed the following reporting units: U.S. Contractor Connection, Americas excluding U.S. Contractor Connection, Broadspire, Garden City Group, and the former EMEA/AP segment.
As a result, step 2 of the goodwill impairment analysis was required for the EMEA/AP and Americas excluding U.S. Contractor Connection reporting units, and goodwill impairments of $38.1 million and $11.2 million, respectively, were recognized during the year ended December 31, 2015. The estimated fair values as calculated in our step 1 goodwill impairment analysis for all of our other reporting units exceeded the carrying values of the reporting units.
We also performed goodwill impairment testing on our reporting units after the realignment of reporting segments. No further impairment was indicated, as the fair value of these reporting units exceeded the carrying value in the post-realignment step 1 analysis.
We review the expected long-term rate of return on an annual basis and revise it as appropriate. To support our conclusions, we periodically commission asset/liability studies performed by third-party professional investment advisors and actuaries to assist us in our reviews. These studies project our estimated future pension payments and evaluate the efficiency of the allocation of our pension plan assets into various investment categories. These studies also generate probability-adjusted expected future returns on those assets. As a result of the transition to a liability-driven investment strategy described previously, the expected long-term rates of return on plan assets assumption used to determine 2016 net periodic pension cost were estimated to be 6.50% and 5.60% for the U.S. and U.K. plans, respectively.
Net periodic pension expense for our defined benefit pension plans is sensitive to changes in the underlying assumptions for the expected rates of return on plan assets and the discount rates used to determine the present value of projected benefits payable under the plans. If our assumptions for the expected returns on plan assets of our U.S. and U.K. defined benefit pension plans changed by 0.5%, representing either an increase or decrease in expected returns, the impact to 2015 consolidated pretax income would have been approximately $3.3 million. If our assumptions for the discount rates used to determine the present value of projected benefits payable under the plans changed by 0.25%, representing either an increase or decrease in interest rates used to value pension plan liabilities, the impact to 2015 consolidated pretax income would have been approximately $0.7 million.
It is possible that future changes in the tax laws of jurisdictions in which we operate could have a significant impact on U.S.-based multinational companies such as our Company. At this time we cannot predict the likelihood or details of any such changes or their specific potential impact on our Company.
The NOL carryforwards for which a valuation allowance is not recorded primarily consists of $11.7 million of U.K. NOL carryforwards and $8.5 million of state NOL carryforwards generated by our domestic companies.
In the U.K., NOL carryforwards have an unlimited life; therefore, we did not consider available tax planning strategies. Based on our projections of income, we expect to fully utilize the U.K. NOL carryforwards. Accordingly, we concluded that it was more likely than not that we should be able to utilize our U.K. NOL carryforwards.
As of December 31, 2015 and 2014, our estimated liabilities for self-insured risks totaled $23.5 million and $24.5 million, respectively. The estimated liability is most sensitive to changes in the ultimate liability for a claim and, if applicable, the interest rate used to discount the liability. We believe our provisions for self-insured losses are adequate to cover the expected net cost of losses incurred. However, these provisions are estimates and amounts ultimately settled may be significantly greater or less than the provisions established. We used a discount rate of 1.67% to determine the present value of our self-insured workers' compensation liabilities as of December 31, 2015. If the average discount rate was reduced by 1.0% or increased by 1.0%, reflecting either an increase or decrease in underlying interest rates, our estimated liabilities for these self-insured risks at December 31, 2015 would have been impacted by approximately $412,000, resulting in an increase or decrease to 2015 consolidated net income of approximately $253,000.
The accompanying consolidated financial statements were prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") and include the accounts of the Company, its majority-owned subsidiaries, and variable interest entities in which the Company is deemed to be the primary beneficiary. Significant intercompany transactions are eliminated in consolidation. Financial results from the Company's operations outside of the U.S., Canada, and the Caribbean, and from certain subsidiaries in the Philippines, are reported and consolidated on a two-month delayed basis in accordance with the provisions of Accounting Standards Codification ("ASC") 810, "Consolidation," in order to provide sufficient time for accumulation of their results. Accordingly, the Company's December 31, 2015, 2014, and 2013 consolidated financial statements include the financial position of such operations as of October 31, 2015 and 2014, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31, 2015, 2014, and 2013, respectively.
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, including both the controlling interests and the noncontrolling interests. The noncontrolling interests represent the equity 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 Statements of Operations, net income or loss is attributed to the controlling interests and the noncontrolling interests separately.
The Company's four operating segments represent components of the Company for which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing operating performance. In the fourth quarter of 2015, the Company realigned two of its reportable segments by moving its Canada and Latin America/Caribbean operations from the former Americas segment to the newly created International segment, which was formerly referred to as the EMEA/AP (Europe, Middle East, Africa, and Asia-Pacific) segment. The results of the former EMEA/AP segment are no longer reported separately. The former Americas segment, without Canada and Latin America/Caribbean, is now the U.S. Services segment. The results of the former Americas segment are no longer reported separately. U.S. Services primarily serves the property and casualty insurance company markets in the U.S. International serves the property and casualty insurance company and self-insurance markets outside the U.S. Broadspire serves the U.S. self-insurance marketplace. Garden City Group (the segment was formerly called "Legal Settlement Administration") serves the securities, bankruptcy, and other legal settlements markets, primarily in the U.S. The results of prior periods have been revised to conform to the current presentation of the Company's reportable segments. The change in reportable segments did not have any impact on previously reported consolidated financial results.
Deferred revenues represent the estimated unearned portion of fees derived from certain fixed-rate claim service agreements. The Company's fixed-fee service arrangements typically call for the Company to handle claims on either a one- or two-year basis, or for the lifetime of the claim. In cases where the claim is handled on a non-lifetime basis, an additional fee is typically received on each anniversary date that the claim remains open. For service arrangements where the Company provides services for the life of the claim, the Company receives only one fee for the life of the claim, regardless of the duration of the claim. Deferred revenues are recognized into revenues based on the estimated rate at which the services are provided. These rates are primarily based on a historical evaluation of actual claim durations by major line of coverage, and assumptions based on average case closure rates and pricing for each claim type.
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. The fair value of cash and cash equivalents approximates book value due to their short-term nature. At December 31, 2015, cash and cash equivalents included time deposits of approximately $1,374,000 that were in financial institutions outside the U.S.
For the years ended December 31, 2015, 2014, and 2013, the Company's adjustments to revenues associated with client invoice adjustments totaled $2,704,000, $1,786,000, and $2,812,000, respectively.
Subsequent to a business acquisition in which goodwill and indefinite-lived intangibles are recorded as assets, post-acquisition accounting requires that both be tested to determine whether there has been an impairment. The Company performs an impairment test of goodwill and indefinite-lived intangible assets at least annually on October 1 of each year. The Company regularly evaluates whether events and circumstances have occurred which indicate potential impairment of goodwill or indefinite-lived intangible assets. When factors indicate that such assets should be evaluated for possible impairment between the scheduled annual impairment tests, the Company performs an interim impairment test.
For goodwill impairment testing purposes, in 2014 and 2015 prior to the realignment of reporting segments, the Company analyzed the following reporting units: U.S. Contractor Connection, Americas excluding U.S. Contractor Connection, Broadspire, Garden City Group, and the former EMEA/AP segment.
If changes to the Company's reporting structure impact the composition of its reporting units, existing goodwill is reallocated to the revised reporting units based on their relative estimated fair values as determined by a combination of the income and market approaches. If all of the assets and liabilities of an acquired business are assigned to a specific reporting unit, then the goodwill associated with that acquisition is assigned to that reporting unit at acquisition unless another reporting unit is also expected to benefit from the acquisition. Since no goodwill remained in the former Americas excluding U.S. Contractor Connection reporting unit at the time of the reporting segment realignment, no additional goodwill was allocated to the International reporting segment.
Property and equipment, including assets under capital leases, consisted of the following at December 31, 2015 and 2014:
Additions to property and equipment under capital leases, which are excluded from acquisitions of property and equipment in the Company's Statements of Cash Flows, totaled $1,283,000, $21,000, and $340,000 for 2015, 2014, and 2013, respectively.
Depreciation on property and equipment, including property under capital leases and amortization of leasehold improvements, was $17,715,000, $16,606,000, and $15,446,000 for the years ended December 31, 2015, 2014, and 2013, respectively.
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-17, "Balance Sheet Classification of Deferred Taxes." ASU 2015-17, requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only present one net noncurrent deferred tax asset or liability. The Company elected to early adopt this standard on a prospective basis for the period ended December 31, 2015. As a result of adoption, deferred tax assets and liabilities, which have been netted jurisdictionally, are shown as noncurrent in the Company's Consolidated Balance Sheet for 2015. The prior period was not retrospectively adjusted.
In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." Under ASU 2014-8, only disposals that represent a strategic shift that has (or will have) a major effect on the entity's results and operations would qualify as discontinued operations. In addition, the ASU (1) expands the disclosure requirements for disposals that meet the definition of a discontinued operation, (2) requires entities to disclose information about disposals of individually significant components, and (3) defines "discontinued operations" similarly to how it is defined under International Financial Reporting Standards 2, "Non-current Assets Held for Sale and Discontinued Operations." The standard became effective in the first quarter of 2015 for public organizations with calendar year-ends. The Company adopted the standard effective in the first quarter 2015, although it had no impact on the Company's results of operations, financial condition and cash flows for the fiscal year ended December 31, 2015.
In April 2015, FASB issued ASU 2015-05, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." This ASU amended guidance on internal use software to clarify how customers in cloud computing arrangements should determine whether the arrangement includes a software license. The new guidance specifies that these licenses should be accounted for as licenses of intangible assets. The guidance is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2015. The Company is currently evaluating the effect this standard may have on its results of operations, financial condition and cash flows.
In February 2015, FASB issued ASU 2015-02, "Consolidation (topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 focuses on the consolidation evaluation for reporting organizations (public and private companies) that are required to evaluate whether they should consolidate certain legal entities. The standard is effective for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the effect this standard may have on its results of operations, financial condition and cash flows.
Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern
In May 2014, FASB issued ASU 2014-09, "Revenue from Contracts with Customers." Under ASU 2014-09, companies will be required to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and modify guidance for multiple-element arrangements. In August 2015, the FASB issued ASU 2015-14, which deferred by one year the effective date of ASU 2014-09. The one year deferral of the effective date of this standard changes the effective date for the Company to January 1, 2018. Early adoption is permitted, but not before the original effective date. The Company is currently evaluating the effect this standard may have on its results of operations, financial condition and cash flows.
The following table summarizes the preliminary purchase price allocation to the tangible and intangible assets acquired and liabilities assumed and noncontrolling interests in the GAB Robins acquisition included in the Company's consolidated financial statements on the two-month delayed basis as discussed above:
Intangible assets acquired include customer relationships, trademarks, internally developed software and non-compete agreements. The intangibles acquired are made up largely of customer relationships of $38,210,000 being amortized over an estimated life of 14 years, and the remaining assets listed above are being amortized over periods ranging from two to five years. For the year ended December 31, 2015, the Company recognized amortization expense of $3,394,000 in its consolidated financial statements related to these intangibles. Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of the companies. The Company does not expect that goodwill attributable to the acquisition will be deductible for tax purposes. For the year ended December 31, 2015, GAB Robins accounted for $79,750,000 of the Company's consolidated revenues before reimbursements. The results of GAB Robins are reported in the International segment. For the year ended December 31, 2015, GAB Robins contribution to the Company's earnings and earnings per share were not material and as such, no pro forma financial information is required to be presented.
In March 2013, the Company acquired 51% of the capital stock of LWI, a specialist loss consulting company based in London which offers onshore and offshore energy expertise. This acquisition increases Crawford's ability to handle offshore claims and reiterates the Company's focus on offering market leading expertise in specialist and technical services. Crawford has leveraged this acquisition to further grow its market share in the Oil and Energy sector, expanding LWI's capabilities in this highly complex market.
The Company sold its 74.9% ownership interest in Crawford South Africa in February 2014 to the noncontrolling interest holder at net book value. Net assets sold were $2,542,000, including cash of $1,554,000. The Company recognized a loss on the disposal of this entity of $474,000 in 2013. The results of Crawford South Africa were not material to the Company.
As discussed in Note 1, "Significant Accounting and Reporting Policies," the Company recognized goodwill impairments in the EMEA/AP and Americas excluding U.S. Contractor Connection reporting units of $38,138,000 and $11,176,000, respectively during the year ended December 31, 2015. Also as discussed in Note 1, in the fourth quarter of 2015, the Company realigned two of its reportable segments. As a result, goodwill totaling $5,711,000 that was impaired related to the Canada and Latin America/Caribbean businesses was reclassified to the International reporting segment for presentation purposes in the above table.
The $49,314,000 noncash goodwill impairment charge is not reflected in International or U.S. Services operating earnings. This impairment charge did not affect the Company's liquidity and had no effect on the Company's compliance with the financial covenants under its Credit Facility.
Amortization of finite-lived intangible assets was $10,410,000, $7,084,000, and $7,127,000 for the years ended December 31, 2015, 2014, and 2013, respectively. For the years ended December 31, 2015, 2014, and 2013, amortization expense for finite-lived customer relationships and trade name intangible assets in the amounts of $9,668,000, $6,341,000, and $6,385,000, respectively, were excluded from segment operating earnings (see Note 13, "Segment and Geographic Information"). The amortization expense for the technology-based intangible assets is included in segment operating earnings. Intangible assets subject to amortization are amortized on a straight-line basis over lives ranging from 2 to 15 years.
At December 31, 2015, annual estimated aggregate amortization expense for intangible assets subject to amortization is as follows:
Long-term debt consisted of the following at December 31, 2015 and 2014:
At December 31, 2015 and 2014, a total of $243,667,000 and $155,002,000, respectively, was outstanding under the Credit Facility. In addition, undrawn commitments under letters of credit totaling $17,211,000 and $17,511,000 were outstanding at December 31, 2015 and 2014, respectively, under the letters of credit subfacility of the Credit Facility. These letter of credit commitments were for the Company's own obligations. Including the amounts committed under the letters of credit subfacility, the available borrowing capacity under the Credit Facility totaled $142,413,000 and $149,134,000 at December 31, 2015 and 2014, respectively. The 2014 available balance took into consideration the $78,355,000 in debt incurred by the UK Borrower to complete the GAB Robins acquisition which was not on the Company's balance sheet at December 31, 2014.
Under the Credit Facility as amended in 2015, the fixed charge coverage ratio, defined as the ratio of (i)(A) consolidated earnings before interest expense, income taxes, depreciation, amortization, stock-based compensation expense, and certain other charges and expenses ("EBITDA") minus (B) aggregate income taxes to the extent paid in cash minus (C) unfinanced capital expenditures to (ii) the sum of: (A) consolidated interest expense to the extent paid (or required to be paid) in cash, plus (B) the aggregate of all scheduled payments of principal on funded debt (including the principal component of payments made in respect of capital lease obligations) required to have been made (whether or not such payments are actually made), plus (C) the aggregate of all restricted payments (as defined) paid, plus (D) the aggregate of all earnouts paid or required to be paid, must not be less than 1.25 to 1.00 for the four-quarter period ending at the end of each fiscal quarter.
Interest expense, including any impact from the Company's cross currency basis swap and amortization of capitalized loan costs, on the Company's short-term and long-term borrowings was $8,983,000, $6,812,000, and $7,191,000 for the years ended December 31, 2015, 2014, and 2013, respectively. Interest paid on the Company's short-term and long-term borrowings was $7,973,000, $5,880,000, and $6,379,000 for the years ended December 31, 2015, 2014, and 2013, respectively.
In February 2011, the Company entered into a U.S. dollar and Canadian dollar ("CAD") cross currency basis swap with an initial notional amount of CAD34,749,000 as an economic hedge to an intercompany note payable to the U.S. parent by a Canadian subsidiary. The cross currency basis swap requires the Canadian subsidiary to deliver quarterly payments of CAD589,000 to the counterparty and entitles the U.S. parent to receive quarterly payments of U.S. $593,000. The Canadian subsidiary also makes interest payments to the counterparty based on 3-month Canada Bankers Acceptances plus a spread, and the U.S. parent receives payments based on U.S. 3-month LIBOR. The cross currency basis swap expires on September 30, 2025. The Company has elected to not designate this swap as a hedge of the intercompany note from the Canadian subsidiary. Accordingly, changes in the fair value of this swap, as well as changes in the value of the intercompany note, are recorded as gains or losses in "Selling, general and administrative expenses" in the Company's Consolidated Statements of Operations over the term of the swap and are expected to substantially offset one another. The changes in the fair value of the cross currency basis swap will not exactly offset changes in the value of the intercompany note, as the fair value of this swap is determined based on forward rates while the value of the intercompany note is determined based on end of period spot rates. The net gains and losses for the years ended December 31, 2015, 2014, and 2013 were not material. The Company believes there have been no material changes in the creditworthiness of the counterparty to this cross currency basis swap agreement and believes the risk of nonperformance by such party is minimal.
Effective June 24, 2015, the Company entered into 10-year operating leases for approximately 16,000 square feet of office space in London, England, for its International segment as a replacement and consolidation of certain of its London facilities. The Company has total lease payments associated with the leases of approximately $15,000,000 subject to market rate adjustments on the fifth anniversary of the lease commitment date. Additionally, the Company is responsible for certain value-added taxes and operating expenses, which are excluded from the table above.
In January 2013, the Company entered into a 10-year operating lease for approximately 24,000 square feet of office space in Berkeley Heights, NJ, primarily for its Broadspire segment. The lease began July 1, 2013. Total lease payments over the remaining lease term are approximately $5,379,000. Additionally, the Company is responsible for certain related real estate taxes and operating expenses, which are excluded from the table above.
On March 16, 2010, the Company entered into an 11-year operating lease for the lease of approximately 44,000 square feet of office space in Lake Success, New York, for use as its Garden City Group segment's corporate headquarters. The lease, as amended, includes a total of approximately 67,000 square feet. Total lease payments over the remaining lease term are approximately $12,017,000. Additionally, the Company is responsible for certain related real estate taxes and operating expenses, which are excluded from the table above.
Included in the acquired commitments of Broadspire Management Services, Inc. was a long-term operating lease for a two-building office complex in Plantation, Florida. The term of this lease ends in December 2021. Total lease payments over the remaining lease term are approximately $26,644,000. A majority of this office space was subleased at December 31, 2015. Under executed sublease arrangements at December 31, 2015, the sublessors are obligated to pay the Company minimum sublease payments as follows:
The Company's consolidated effective income tax rate may change periodically due to changes in enacted tax rates, fluctuations in the mix of income earned from the Company's various domestic and international operations, which are subject to income taxes at different rates, the Company's ability to utilize net operating losses and tax credit carryforwards, and amounts related to uncertain income tax positions. The Company's 2015 effective income tax rate was distortive, primarily due to the largely nondeductible goodwill impairment charge, the Company's inability to recognize tax benefits for certain international net operating losses, and fluctuations in the mix of income earned. Additionally, 2015 losses in certain operations, including losses due to restructuring and special charges, were in jurisdictions with lower tax rates or where the losses are unable to be benefited. The tax rate changes in 2014 and 2015 were primarily due to state tax rate changes. The fiscal year 2013 tax rate change was primarily due to the U.K. Finance Bill 2013 that was enacted in 2013.
Deferred income taxes consisted of the following at December 31, 2015 and 2014:
Changes to the valuation allowance for the years ended December 31, 2015, 2014, and 2013 were primarily due to losses in certain of the Company's international operations.
The Company accrues interest and, if applicable, penalties related to unrecognized tax benefits in income taxes. Total accrued interest expense at December 31, 2015, 2014, and 2013, was $31,000, $104,000, and $134,000, respectively.
The Company expects $193,000 in reductions to unrecognized income tax benefits within the next 12 months as a result of projected resolutions of income tax uncertainties.
Employer contributions under the Company's defined contribution plans are determined annually based on employee contributions, a percentage of each covered employee's compensation, and years of service. The Company's cost for defined contribution plans totaled $23,652,000, $24,249,000, and $21,507,000 in 2015, 2014, and 2013, respectively.
The Bipartisan Budget Act of 2015 ("BBA2015") included pension funding reform which greatly reduced the contributions required to the U.S. Plan, including resulting in no contributions being required in fiscal 2015. Required contributions are anticipated in future years as the impact of the BBA2015 pension funding reform is phased out. Currently, Crawford plans to contribute $9,000,000 per annum to the U.S. Plan for the next three fiscal years to improve the funded status of the plan and minimize future required contributions.The Company expects to make contributions of approximately $9,000,000 to its U.S. Qualified Plan and $6,300,000 to its U.K. Plans in 2016.
Certain other employees located in the Netherlands, Norway, Germany, and the Philippines (referred to herein as the "other international plans") have retirement benefits that are accounted for as defined benefit pension plans under GAAP. During 2015, a majority of the employees covered under the defined benefit pension plan in the Netherlands elected to convert to a newly created defined contribution plan effective January 1, 2015. This was accounted for as a curtailment of the defined benefit pension plan which resulted in the reduction of the projected benefit obligation in the amount of $5,500,000, a reduction of the deferred tax asset of $1,400,000, and a reduction in accumulated other comprehensive loss of $4,100,000. This change resulted in a reduction in Net Periodic Pension Costs of $673,000 in 2015. This reduction was substantially offset by an increase in defined contribution expense.
In addition, the Company sponsors two frozen nonqualified, unfunded defined benefit pension plans for certain employees and retirees, which are based on career compensation. These plans were frozen effective December 31, 2002. The liabilities of these plans, which equal their projected benefit obligations, are included in "Other accrued liabilities" and "Other noncurrent liabilities" on the Company's Consolidated Balance Sheets based on these expected timing of funding these obligations, since they are funded as needed from Company assets.
Unrecognized losses reflect changes in the discount rates and differences between expected and actual asset returns, which are being amortized over future periods. These unrecognized losses may be recovered in future periods through actuarial gains. However, unless the minimum amount required to be amortized is below a corridor amount equal to 10.0% of the greater of the projected benefit obligation or the market-related value of plan assets, these unrecognized actuarial losses are required to be amortized and recognized in future periods. Net unrecognized actuarial losses included in accumulated other comprehensive loss and expected to be recognized in net periodic benefit costs during the year ending December 31, 2016 for the U.S. and U.K. defined benefit pension plans are $12,963,000 ($8,542,000 net of tax).
Pension expense is affected by the accounting policy used to determine the value of plan assets at the measurement date. The Company applies the expected return on plan assets using fair market value as of the annual measurement date. The fair market value method results in greater volatility to pension expense than the calculated value method. The amounts recognized in the Consolidated Balance Sheets reflect a snapshot of the state of the Company's long-term pension liabilities at the plan measurement date and the effect of mark-to-market accounting on plan assets. Net periodic benefit cost related to all of the Company's defined benefit pension plans recognized in the Company's Consolidated Statements of Operations for the years ended December 31, 2015, 2014, and 2013 included the following components:
The Company reviews its employee demographic assumptions annually and updates the assumptions as necessary. During 2015, the Company revised the mortality assumptions for the U.S. plans to incorporate the new set of mortality tables issued by the Society of Actuaries, adjusted to reflect the Company's specific experience and future expectations. This resulted in a $10,500,000 decrease in the projected benefit obligation for the U.S. plans. Certain assumptions used in computing the benefit obligations and net periodic benefit cost for the U.S. and U.K. defined benefit pension plans were as follows:
The discount rate assumptions reflect the rates at which the Company believes the benefit obligations could be effectively settled. The discount rates were determined based on the yield for a portfolio of investment grade corporate bonds with maturity dates matched to the estimated future payments of the plans' benefit obligations. The expected long-term rates of return on plan assets were based on the plans' asset mix, historical returns on equity securities and fixed income investments, and an assessment of expected future returns. The expected long-term rates of return on plan assets assumption used to determine 2016 net periodic pension cost are estimated to be 6.50% and 5.60% for the U.S. and U.K. plans, respectively. If actual long-term rates of return differ from those assumed or if the Company used materially different assumptions, actual funding obligations could differ materially from these estimates. Due to the frozen status of the U.S. plan and closed status of the U.K. plans, increases in compensation rates are not material to the computations of benefit obligations or net periodic benefit cost.
The Company's share repurchase authorization, approved in August 2014, provides the Company with the ability to repurchase up to 2,000,000 shares of CRDA or CRDB (or both) through July 2017 (the "2014 Repurchase Authorization"). Under the 2014 Repurchase Authorization, repurchases may be made in open market or privately negotiated transactions at such times and for such prices as management deems appropriate, subject to applicable contractual and regulatory restrictions.
The computations of diluted net (loss) income attributable to shareholders of Crawford & Company per common share were as follows:
Listed below are the shares excluded from the denominator in the above computation of diluted (loss) earnings per share for CRDA because their inclusion would have been antidilutive:
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 earnings per share until the performance measurements have actually been achieved. As of December 31, 2015, these performance measurements had not been achieved.
The total income tax benefit recognized in the Consolidated Statements of Operations for stock-based compensation arrangements was approximately $921,000, $311,000, and $1,338,000 for the years ended December 31, 2015, 2014, and 2013, respectively. Some of the Company's stock-based compensation awards are granted under plans which are designed not to be taxable as compensation to the recipient based on tax laws of the U.S. or other applicable country. Accordingly, the Company does not recognize tax benefits on all of its stock-based compensation expense. Adjustments to additional paid-in capital for differences between deductions taken on its income tax returns related to stock-based compensation plans and the related income tax benefits previously recognized for financial reporting purposes were not significant in any year.
The Company has granted nonqualified and incentive stock options to key employees and directors. All stock options are for shares of CRDA. Option awards are granted with an exercise price equal to the fair market value of the Company's stock on the date of grant. The Company's stock option plans have been approved by shareholders, and the Company's Board of Directors is authorized to make specific grants of stock options under active plans. Employee stock options typically are subject to graded vesting over three years (33% each year) and have a typical life of ten years. Compensation cost for stock options is recognized on an accrual basis over the requisite service period for the entire award. For the years ended December 31, 2015, 2014, and 2013, compensation expense of $25,000, $474,000, and $640,000, respectively, was recognized for employee stock option awards.
No stock options were granted in 2015 or 2014. The weighted average grant date fair value of stock options granted during the year ended December 31, 2013 was $1.86. Options exercised in 2015, 2014, and 2013 had an intrinsic value of $199,000, $1,622,000, and $49,000, respectively. The fair value of options that vested in 2015 was $0. The fair value of options that vested in 2014 was $846,000. No options vested in 2013.
At December 31, 2015, the unrecognized compensation cost related to unvested employee stock options was $19,000. Directors' stock options had no unrecognized compensation cost since directors' options vest upon grant, and the grant-date fair values were fully expensed on grant date.
Compensation expense (credit) recognized for all performance shares totaled $1,911,000, $(518,000), and $2,223,000 for the years ended December 31, 2015, 2014 and 2013, respectively. Compensation cost for these awards is net of estimated or actual award forfeitures. The credit in compensation expense for the year ended December 31, 2014 resulted from reductions in expense related to cliff vesting shares granted in 2014, 2013, and 2012, as the Company determined that the performance conditions for these shares were not likely to be met. Each of these awards required the Company to achieve cumulative earnings per share targets over a three-year period. Certain performance awards vest ratably over three years, without cumulative earnings per share targets. As of December 31, 2015, there was an estimated $1,166,000 of unearned compensation cost for nonvested performance shares. This unearned compensation cost is expected to be fully recognized by the end of 2017.
Since the U.S. Plan involves a look-back option, the calculation of compensation cost is separated into two components. The first component is calculated as 15% (the employee discount) of a nonvested share of CRDA. The second component involves using the Black-Scholes-Merton option-pricing formula to value a one year option to purchase 85% of a share of CRDA. This value is adjusted to reflect the effect of any estimated dividends that the employee will not receive during the life of the option component.
For purposes of calculating the compensation expense for shares issuable under the U.K. Plan, the fair value of a share is equal to 15% (the employee discount) of the market price of a share of CRDA at the beginning of the withholding period.
At December 31, 2015, an estimated 314,000 shares will be eligible for purchase under the U.K. Plan at the end of the current withholding periods. This estimate is subject to change based on future fluctuations in the value of the British pound against the U.S. dollar, future changes in the market price of CRDA, and future employee participation rates. The purchase price per share of CRDA under the U.K. Plan ranges from $3.23 to $6.22. For the years ended December 31, 2015, 2014, and 2013, compensation expense of $123,000, $126,000, and $110,000, respectively, was recognized for the U.K. Plan. During 2015, 2014, and 2013, a total of 104,267 shares, 264,998, shares and 495,968 shares, respectively, of CRDA were issued under the U.K. Plan.
Under the International Plan, up to 1,000,000 shares of CRDA may be issued. Participating employees can elect to have up to $21,250 of their eligible annual earnings withheld to purchase up to 5,000 shares of CRDA at the end of the one-year withholding period which starts each July 1 and ends the following June 30. The purchase price of the stock is 85% of the lesser of the closing price for a share of such stock on the first day or the last day of the withholding period. Participating employees may cease payroll withholdings during the withholding period and/or request a refund of all amounts withheld before any shares are purchased. During 2015, 2014, and 2013, 6,916, 11,900, and 10,794 shares, respectively, were issued under the International Plan. Compensation expense was immaterial for this plan in all three years.
GAAP defines fair value as the price that would be received to sell an asset or to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
The fair value of the Company's cross currency basis swap was derived from a discounted cash flow analysis based on the terms of the swap and the forward curves for foreign currency rates and interest rates adjusted for the counterparty's credit risk. The fair value of this cross currency basis swap is included in "Other noncurrent assets" on the Company's Consolidated Balance Sheets, based upon the term of the cross currency basis swap.
There were no transfers of assets between fair value levels during the years ended December 31, 2015 or 2014. The categorization of assets and liabilities within the fair value hierarchy and the measurement techniques are reviewed quarterly. Any transfers between levels are deemed to have occurred at the end of the quarter.
The following table summarizes the level within the fair value hierarchy used to determine the fair value of the Company's pension plan assets for its U.S. plan at December 31, 2015 and 2014:
Alternative strategy funds consist of funds invested in listings on active exchanges (Level 1) and amounts in funds valued at the net asset value per share multiplied by the number of shares held as of the measurement date (Level 2). Alternative strategy funds may include derivative instruments such as futures, forward contracts, options and swaps and are used to help manage risks. Derivative instruments are generally valued by the investment managers or in certain instances by third party pricing sources (Level 2).
Real estate funds are primarily property unit trusts whose values are primarily reported by the fund manager and are based on valuation of the underlying investments which include inputs such as cost, discounted cash flows, independent appraisals and market-based comparable data (Level 3). The fair values may, due to the inherent uncertainty of valuation for those investments, differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
The following table provides a reconciliation of the beginning and ending balance of Level 3 assets within the Company's U.K. pension plan during the years ended December 31, 2015 and 2014:
Operating earnings is the primary financial performance measure used by the Company's senior management and the CODM to evaluate the financial performance of the Company's four operating segments and make resource allocation decisions. The Company believes this measure is useful to investors in that it allows them to evaluate segment operating performance using the same criteria used by the Company's senior management and CODM. Operating earnings will differ from net income computed in accordance with GAAP since operating earnings represent segment earnings before certain unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, goodwill impairment, restructuring and special charges, income taxes, and net income or loss attributable to noncontrolling interests.
Financial information as of and for the years ended December 31, 2015, 2014, and 2013 related to the Company's reportable segments is presented below.
Substantially all revenues earned in the Broadspire and Garden City Group segments are earned in the U.S. Substantially all of the revenues earned in the International segment are earned outside of the U.S.
The Company's reportable segments' total operating earnings reconciled to consolidated income before income taxes for the years ended December 31, 2015, 2014, and 2013 were as follows:
The Company's reportable segments' total assets reconciled to consolidated total assets of the Company at December 31, 2015 and 2014 are presented in the following table. All foreign-denominated cash and cash equivalents are reported within the International segment, while all U.S. cash and cash equivalents are reported as corporate assets in the following table:
The Company is subject to numerous federal, state, and foreign labor, employment, worker health and safety, antitrust and competition, environmental and consumer protection, import/export, anti-corruption, and other laws, and from time to time the Company faces claims and investigations by employees, former employees, and governmental entities under such laws. Such claims, investigations, and any litigation involving the Company could divert management's time and attention from the Company's business operations and could potentially result in substantial costs of defense, settlement or other disposition, which could have a material adverse effect on the Company's results of operations, financial position, and cash flows. In the opinion of Company management, adequate provisions have been made for any items that are probable and reasonably estimable.
We recorded total restructuring and special charges for the year ended December 31, 2015 of $34,395,000. There were no restructuring and special charges during the years ended December 31, 2014 or 2013.
Restructuring charges for the year ended December 31, 2015 of $28,736,000 were recorded related to the ongoing implementation of the Company's Global Business Services Center (the "Center") in Manila, Philippines, integration costs related to the GAB Robins acquisition and other International segment restructuring, and restructuring activities in other areas.
Costs associated with the Center were primarily for severance costs and professional fees. Integration costs related to the GAB Robins acquisition and International segment restructuring were predominantly comprised of severance costs, lease costs, and to a lesser extent professional fees and other costs. The restructuring charges in U.S. Services and Administrative restructuring costs were for severance. Cease use loss is comprised of the estimated loss on leased properties that the Company is no longer occupying and is aggressively marketing for sublease. Impairment of assets relates to decisions to close certain operations.We expect to incur an additional $22,800,000 in restructuring and special charges related to these plans.
The Company may pay a higher dividend on CRDA than on CRDB. This dividend differential can result in different (loss) earnings per share for each class of stock due to the two-class method of computing (loss) earnings per share as required by current accounting guidance. CRDB generally presents a more dilutive measure.
The Company recognized goodwill impairment in the amount of $49.3 million related to its International and U.S. Services excluding U.S. Contractor Connection reporting units in the fourth quarter of 2015. See Note 3, "Goodwill and Intangible Assets," in the audited consolidated financial statements contained in this Item 8. This charge was largely nondeductible for income tax purposes. The provision for income taxes in the fourth quarter of 2015 included additional benefit due to changes in the mix of income and the goodwill impairment.
The provision for income taxes in the fourth quarter of 2014 included additional expenses due to the Company's inability to recognize the tax benefits from net operating losses in certain international operations, and the revaluation of the Company's net U.S. deferred tax assets resulting from a decrease in state income tax rates, an increase in the partially disallowable meals and entertainment expense, and certain other adjustments and changes in estimates.