As of December 31, 2018, the Company owned an office in Kitchener, Ontario. As of December 31, 2018, the Company leased approximately 270 other office locations under various leases with varying terms. For additional information on the Company's significant operating leases and subleases, see Note 6 "Commitments Under Operating Leases" of our accompanying audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Other office locations are occupied under various short-term rental arrangements. The Company generally believes that its office locations are sufficient for its operations and that, if it were necessary to obtain different or additional office locations, such locations would be available at times, and on commercially reasonable terms, as would be necessary for the conduct of its business. No assurances can be given, however, that the Company would be able to obtain such office locations as and when needed, or on terms it considered to be reasonable, if at all.
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, 2018, 2017, and 2016 consolidated financial statements include the financial position of such operations as of October 31, 2018 and 2017, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31, 2018, 2017 and 2016, respectively.
We initiated various restructuring plans through 2017 that were intended to, among other things, reduce overhead costs in certain functions and in our business segments, and streamline senior management to reduce costs and further improve execution. These plans included restructuring and integration costs and other special charges discussed in Note 17, "Restructuring and Special Charges" to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Restructuring and special charges, inclusive of costs related to the establishment and phase-in of the Centers, for these and other similar plans totaled $11.6 million in 2017 and $5.7 million in 2016. We reported no restructuring and special charges in 2018 and we do not anticipate any restructuring and special charges in 2019.
Consolidated revenues before reimbursements were $1.071 billion in 2018, a decrease of 3.2% compared with $1.106 billion in 2017. Net income attributable to Crawford & Company was $26.0 million in 2018, compared with $27.7 million in 2017. During 2018, the Company did not record any restructuring and special charges, compared to $12.1 million in 2017. During 2018, the Company recorded a loss on disposition of business line totaling $20.3 million.
In the Crawford Claims Solutions segment, operating earnings declined primarily due to an increase in centralized indirect administrative support costs during 2018. Excluding indirect support costs, gross profit improved from $75.7 million, or 20.7% of revenues before reimbursements in 2017, to $76.9 million, or 21.3% of revenues before reimbursements in 2018, due primarily to cost reductions in Canada and lower compensation costs in 2018 compared to 2017 related to the hurricane activity in the U.S.
Crawford Specialty Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased as a percent of segment revenues before reimbursements to 32.1% in 2018 from 36.3% in 2017, and the dollar amount of these expenses also decreased by $29.3 million. Expenses decreased by 2.4% in 2018 due to the change in the operating model in the U.K. contractor repair business discussed above. The remaining decrease in both the amount and the percent of segment revenues was due to the Garden City Group disposal and a reduction in advertising costs in our Contractor Connection service line during 2018.
Revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:
Revenues before reimbursements from our Crawford TPA Solutions: Broadspire segment totaled $390.6 million in 2017 compared with $382.7 million in 2016. Changes in foreign exchange rates resulted in a decrease of our Crawford TPA Solutions: Broadspire segment revenues by approximately 0.1%, or $0.4 million, for 2017 as compared with the 2016 period. Absent foreign exchange rate fluctuations, Crawford TPA Solutions: Broadspire segment revenues would have been $391.0 million for the 2017 period. Revenues were positively impacted by an increase in unit volumes, measured principally by cases received, which increased revenues 1.8% in 2017 compared with 2016. Changes in product mix and in the rates charged for those services accounted for a 0.4% revenue increase for 2017 compared with 2016.
As of December 31, 2018, 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:
As of December 31, 2018, deferred revenues related to lifetime claim handling arrangements approximated $39.7 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 3.3% to an increase of 2.2%, and has averaged a decrease of 0.2%. 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 would have resulted in the deferral of additional revenues of approximately $1.3 million for the year ended December 31, 2018, $1.4 million for the year ended December 31, 2017, and $1.5 million for the year ended December 31, 2016. If our average claim closing rates for lifetime claims increased by 1.0%, we would have recognized additional revenues of approximately $1.3 million for the year ended December 31, 2018, $1.3 million for the year ended December 31, 2017, and $1.1 million for the year ended December 31, 2016.
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, 2018, cash and cash equivalents included time deposits of approximately $1,554,000 that were in financial institutions outside the U.S.
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers" together with its subsequent related amendments in 2015 and 2016, collectively referred to as ASC 606. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. This new standard is effective for annual periods beginning after December 15, 2017, including interim periods within those reporting periods. ASC 606 supersedes the revenue recognition requirements in ASC 605 “Revenue Recognition,” and requires entities to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted ASC 606 as of January 1, 2018 (“transition date”) using the modified retrospective transition method, and applied the new guidance to contracts not substantially completed at the transition date. As a result of adopting ASC 606, the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2018.
During the year ended December 31, 2018, the Company recognized an impairment of $1,056,000 related to an indefinite-lived trade name due to a combination of achieving less than forecasted revenue compared to previous modeled results and further reduced forecasted revenue associated with the trade name. The noncash trade name impairment charge did not impact the Company’s segment operating earnings.
The Company's 2017 effective income tax rate was impacted by the Tax Cuts and Jobs Act (the "Tax Act") in the U.S. and international restructuring activities. On December 22, 2017, the Tax Act was enacted. The changes include, but are not limited to: a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, creation of a new minimum tax on global intangible low taxed income (“GILTI”), and a one-time U.S. tax liability on those earnings which have not previously been repatriated to the U.S. (the “Transition Tax”) as a result of the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system. In connection with our initial analysis of the impact of the Tax Act, we recorded a provisional estimate in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”) of net tax expense of $3.8 million, in the period ended December 31, 2017. This expense consisted of provisional estimates of $7.6 million net expense for the Transition Tax, which we estimated would be fully offset by foreign tax credit carryforwards, and $3.8 million net benefit for remeasurement of our domestic deferred tax balances for the corporate rate reduction. At December 31, 2017, the Company had not fully completed its accounting for the tax effects of enactment of the Tax Act in accordance with SAB 118.
Certain of the Company's U.K. Plans have fair values of plan assets that exceed the projected benefit obligations. For these plans, the projected benefit obligations and the fair value of plan assets were as follows as of December 31, 2018 and 2017:
The Company has granted nonqualified and incentive stock options to key employees and directors. All stock options are for shares of CRD-A. 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 accelerated basis over the requisite service period for the entire award. For the years ended December 31, 2018, 2017, and 2016, compensation expense of $1,253,000, $1,233,000, and $280,000, respectively, was recognized for employee stock option awards.
The Company maintains funds in custodial accounts at financial institutions to administer claims for certain clients. These funds are not available for the Company's general operating activities and, as such, have not been recorded in the accompanying Consolidated Balance Sheets. The amount of these funds totaled $464,524,000 and $480,026,000 at December 31, 2018 and 2017, respectively. In addition, the Garden City Group service line which was disposed on June 15, 2018, in the Crawford Specialty Solutions segment administered funds in noncustodial accounts at financial institutions that totaled $542,635,000 at December 31, 2017.