Ct Healthmarket via BizWire
07-21-2003, 03:40 PM
RICHMOND, Va.--(BUSINESS WIRE)--July 21, 2003--Hilb, Rogal and
Hamilton Company (NYSE: HRH), the world's ninth largest insurance and
risk management intermediary, reported today record financial results
for the second quarter and six months ended June 30, 2003.
For the second quarter, total revenues were $139.5 million,
compared with $95.7 million a year ago, an increase of 45.8%.
Commissions and fees rose 45.5% to $137.9 million during the quarter,
compared with $94.7 million during the same period last year,
reflecting acquisitions--primarily the addition of Hobbs Group, LLC
(Hobbs)--, new business, and a continued positive rate environment.
Net income for the quarter was $19.1 million, or $0.52 per share,
compared with $12.5 million, or $0.40 per share, a year ago, an
increase of 52.5%. In calculating the per share amount, the dilutive
shares for the quarter increased 14.1%, reflecting shares issuable for
acquisition-related contingent payments--primarily Hobbs--and shares
issued over the past twelve months for acquisitions and a public
offering.
For the first six months, total revenues rose 44.0% to $281.5
million from $195.6 million a year ago. Commissions and fees increased
43.9% to $278.4 million from $193.4 million last year, reflecting the
same trends identified above for the quarter, in addition to higher
contingent and override commissions, which are heavily weighted in the
first quarter. Net income for the six months was $37.2 million, or
$1.03 per share, compared with $31.6 million, or $1.00 per share, in
2002, an increase of 17.5%. Net income before non-operating losses, a
one-time retirement benefit charge in 2003, and the cumulative effect
of a 2002 revenue recognition accounting change was $40.4 million, or
$1.12 per share, compared with $27.8 million, or $0.88 per share, a
year ago, an increase of 45.3%. The per share amount for the six
months is based on a 12.1% higher dilutive share count than the prior
year due to similar factors as noted above for the quarter.
Organic growth, defined as the change in commissions and fees
before the effect of acquisitions and divestitures, was 5.9% for the
second quarter and 8.6% for the six months. While organic growth may
vary on a quarterly basis, the company reaffirms its full year 2003
guidance of 9% to 11% for organic growth, which, beginning in the
third quarter, will include revenues generated by Hobbs, whose organic
growth was 16.4% for the first six months of 2003.
The operating margin for the second quarter was 26.6%, compared
with 24.7% for the previous year's quarter. For the six months, the
operating margin increased to 27.7% in 2003 from 26.4% in 2002. The
increases reflect higher contingent and override commissions as a
percentage of revenues, strong margin performance by Hobbs in the
second quarter, and productivity and efficiency improvements from
HRH's Best Practices program. Continued incremental margin improvement
remains one of HRH's key financial objectives.
Martin L. (Mell) Vaughan, III, chairman and chief executive
officer said, "HRH's strong second quarter results were marked by
continued revenue and earnings growth and margin improvement. In
addition, with its outstanding performance, Hobbs has maximized the
earn-out in one year--subject to formal verification--allowing us to
proceed with the blending of our companies. We have completed three
acquisitions during the year and are confident we will meet our 2003
goal of $30 to $50 million in annual revenues from acquisitions.
Meanwhile, we also accomplished the CEO transition as planned,
including informative meetings with the management of recently
acquired agencies and with the investment community.
"During the quarter, we also made notable progress in each of the
three areas previously identified as key priorities: sales culture and
productivity, five-year plan execution, and new products and programs.
A highlight of the quarter was the establishment of an excess and
surplus lines wholesale business. To head the new operation, we were
fortunate to attract Bryan W. Sanders, an experienced insurance
professional who brings talent and enthusiasm to the venture."
Vaughan concluded, "We remain dedicated to helping our clients
effectively manage risk in markets that, on balance, remain favorable,
through our skilled risk management and resourceful placement
capabilities. While we are actively investing in talent and products
for current and future growth, we believe that our full year 2003
results will easily meet our key long-term goal of sustaining 15% to
20% growth in annual operating earnings per share."
The company cautions readers that the statements contained herein
regarding the company's future operations and business prospects are
forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based upon management's current
knowledge and assumptions about future events and involve risks and
uncertainties that could cause actual results to differ materially
from anticipated results. For more details on factors that could
affect expectations, see the company's Annual Report on Form 10-K for
the year ended December 31, 2002, as filed with the Securities and
Exchange Commission.
Hilb, Rogal and Hamilton Company is the nation's seventh largest
insurance and risk management intermediary. With offices located
throughout the United States, HRH assists clients in managing their
risks in areas such as property and casualty, employee benefits and
many other areas of specialized exposure. The company is traded on the
New York Stock Exchange, symbol HRH, and is ranked as the ninth
largest insurance and risk management intermediary in the world.
Additional information about HRH may be found at www.hrh.com.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL ANALYSIS
(In thousands, except per share data)
THREE MONTHS SIX MONTHS ENDED
ENDED
6/30/03 6/30/02 6/30/03 6/30/02
-----------------------------------
(Unaudited) (Unaudited)
Revenues
Commissions and fees $137,868 $94,739 $278,367 $193,387
Investment income 820 460 1,479 974
Other 846 518 1,679 1,210
-----------------------------------
139,534 95,717 281,525 195,571
Operating expenses
Compensation and employee
benefits 75,846 52,795 151,659 106,054
Other operating expenses 24,275 17,717 47,431 34,555
Depreciation expense 2,292 1,730 4,580 3,440
Amortization of intangibles 2,203 563 4,356 1,085
Interest expense 2,746 1,819 5,539 3,703
Retirement benefit(a) -- -- 5,195 --
-----------------------------------
107,362 74,624 218,760 148,837
-----------------------------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 32,172 21,093 62,765 46,734
Income taxes 13,107 8,591 25,602 19,048
-----------------------------------
Income before cumulative effect
of accounting change 19,065 12,502 37,163 27,686
Cumulative effect of accounting
change, net of tax(b) -- -- -- 3,944
-----------------------------------
NET INCOME $19,065 $12,502 $37,163 $31,630
===================================
Net Income Per Share - Basic:
Income before cumulative effect
of accounting change $0.56 $0.44 $1.10 $0.98
Cumulative effect of accounting
change, net of tax(b) -- -- -- 0.14
-----------------------------------
Net income $0.56 $0.44 $1.10 $1.12
===================================
Net Income Per Share - Assuming
Dilution:
Income before cumulative effect
of accounting change $0.52 $0.40 $1.03 $0.88
Cumulative effect of accounting
change, net of tax(b) -- -- -- 0.12
-----------------------------------
Net income $0.52 $0.40 $1.03 $1.00
===================================
Dividends Per Share $0.0925 $0.0900 $0.1825 $0.1775
===================================
Weighted Average Number
of Shares Outstanding:
Basic 33,911 28,255 33,796 28,221
===================================
Assuming Dilution 36,880 32,332 36,187 32,268
===================================
(a) The company recorded a one-time retirement benefit charge for
the quarter ended March 31, 2003, representing a contractual
retirement benefit for Andrew L. Rogal, the company's former
chairman and chief executive officer.
(b) Effective January 1, 2002, the company changed its revenue
recognition policy for commissions on premiums billed by
insurance carriers on middle-market property and casualty
business from when received to the later of effective date of
insurance coverage or billing date.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
JUNE 30, DEC. 31,
2003 2002(c)
------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $171,578 $134,692
Receivables (net) 231,715 201,364
Prepaid expenses and other 14,167 21,509
------------------
TOTAL CURRENT ASSETS 417,460 357,565
PROPERTY & EQUIPMENT (NET) 21,234 20,386
INTANGIBLE ASSETS (NET) 478,888 441,973
OTHER ASSETS 12,096 13,100
------------------
$929,678 $833,024
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $287,529 $235,057
Accounts payable 11,920 10,115
Accrued expenses 25,446 39,142
Premium deposits and credits due customers 34,507 33,998
Current portion of long-term debt 20,491 5,733
------------------
TOTAL CURRENT LIABILITIES 379,893 324,045
LONG-TERM DEBT 161,123 177,151
OTHER LONG-TERM LIABILITIES 31,571 21,180
SHAREHOLDERS' EQUITY
Common Stock (outstanding 34,032 and 33,484
shares, respectively) 183,233 168,558
Retained earnings 173,977 143,005
Accumulated other comprehensive income (loss) (119) (915)
------------------
357,091 310,648
------------------
$929,678 $833,024
==================
(c) Reclassified to conform to current year presentation.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
This press release contains references to financial measures
that exclude certain charges and non-recurring items. The
company believes that these adjusted financial measures
provide additional measures of performance that investors
can use in evaluating the company's performance between
reporting periods. The schedule below provides a
reconciliation of these financial measures to those
prepared in accordance with accounting principles
generally accepted in the United States (GAAP).
NET INCOME PER
SHARE ASSUMING
NET INCOME DILUTION
THREE MONTHS THREE MONTHS
ENDED ENDED
6/30/03 6/30/02 6/30/03 6/30/02
--------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME $19,065 $12,502 $0.52 $0.40
Excluding:
Non-operating losses, net of tax 32 122 -- --
--------------------------------
OPERATING NET INCOME $19,097 $12,624 $0.52 $0.40
================================
OPERATING MARGIN OPERATING REVENUE
THREE MONTHS ENDED THREE MONTHS ENDED
6/30/03 6/30/02 6/30/03 6/30/02
--------------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME / REVENUE
$19,065 $12,502 $139,534 $95,717
Excluding:
Non-operating losses 56 206 56 206
Amortization of intangibles 2,203 563 -- --
Interest expense 2,746 1,819 -- --
Income taxes 13,107 8,591 -- --
--------------------------------------
OPERATING MARGIN / REVENUE
$37,177 $23,681 $139,590 $95,923
======================================
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
NET INCOME PER
SHARE ASSUMING
NET INCOME DILUTION
SIX MONTHS ENDED SIX MONTHS ENDED
6/30/03 6/30/02 6/30/03 6/30/02
---------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME $37,163 $31,630 $1.03 $1.00
Excluding:
Non-operating losses, net of tax 78 124 -- --
Retirement benefit, net of tax 3,169 -- 0.09 --
Cumulative effect of
accounting change, net of tax -- (3,944) -- (0.12)
---------------------------------
OPERATING NET INCOME $40,410 $27,810 $1.12 $0.88
=================================
OPERATING MARGIN OPERATING REVENUE
SIX MONTHS ENDED SIX MONTHS ENDED
6/30/03 6/30/02 6/30/03 6/30/02
--------------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME / REVENUE
$37,163 $31,630 $281,525 $195,571
Excluding:
Non-operating losses 131 209 131 209
Amortization of intangibles 4,356 1,085 -- --
Interest expense 5,539 3,703 -- --
Retirement benefit 5,195 -- -- --
Income taxes 25,602 19,048 -- --
Cumulative effect of
accounting change, net of
tax -- (3,944) -- --
--------------------------------------
OPERATING MARGIN / REVENUE
$77,986 $51,731 $281,656 $195,780
======================================
Hamilton Company (NYSE: HRH), the world's ninth largest insurance and
risk management intermediary, reported today record financial results
for the second quarter and six months ended June 30, 2003.
For the second quarter, total revenues were $139.5 million,
compared with $95.7 million a year ago, an increase of 45.8%.
Commissions and fees rose 45.5% to $137.9 million during the quarter,
compared with $94.7 million during the same period last year,
reflecting acquisitions--primarily the addition of Hobbs Group, LLC
(Hobbs)--, new business, and a continued positive rate environment.
Net income for the quarter was $19.1 million, or $0.52 per share,
compared with $12.5 million, or $0.40 per share, a year ago, an
increase of 52.5%. In calculating the per share amount, the dilutive
shares for the quarter increased 14.1%, reflecting shares issuable for
acquisition-related contingent payments--primarily Hobbs--and shares
issued over the past twelve months for acquisitions and a public
offering.
For the first six months, total revenues rose 44.0% to $281.5
million from $195.6 million a year ago. Commissions and fees increased
43.9% to $278.4 million from $193.4 million last year, reflecting the
same trends identified above for the quarter, in addition to higher
contingent and override commissions, which are heavily weighted in the
first quarter. Net income for the six months was $37.2 million, or
$1.03 per share, compared with $31.6 million, or $1.00 per share, in
2002, an increase of 17.5%. Net income before non-operating losses, a
one-time retirement benefit charge in 2003, and the cumulative effect
of a 2002 revenue recognition accounting change was $40.4 million, or
$1.12 per share, compared with $27.8 million, or $0.88 per share, a
year ago, an increase of 45.3%. The per share amount for the six
months is based on a 12.1% higher dilutive share count than the prior
year due to similar factors as noted above for the quarter.
Organic growth, defined as the change in commissions and fees
before the effect of acquisitions and divestitures, was 5.9% for the
second quarter and 8.6% for the six months. While organic growth may
vary on a quarterly basis, the company reaffirms its full year 2003
guidance of 9% to 11% for organic growth, which, beginning in the
third quarter, will include revenues generated by Hobbs, whose organic
growth was 16.4% for the first six months of 2003.
The operating margin for the second quarter was 26.6%, compared
with 24.7% for the previous year's quarter. For the six months, the
operating margin increased to 27.7% in 2003 from 26.4% in 2002. The
increases reflect higher contingent and override commissions as a
percentage of revenues, strong margin performance by Hobbs in the
second quarter, and productivity and efficiency improvements from
HRH's Best Practices program. Continued incremental margin improvement
remains one of HRH's key financial objectives.
Martin L. (Mell) Vaughan, III, chairman and chief executive
officer said, "HRH's strong second quarter results were marked by
continued revenue and earnings growth and margin improvement. In
addition, with its outstanding performance, Hobbs has maximized the
earn-out in one year--subject to formal verification--allowing us to
proceed with the blending of our companies. We have completed three
acquisitions during the year and are confident we will meet our 2003
goal of $30 to $50 million in annual revenues from acquisitions.
Meanwhile, we also accomplished the CEO transition as planned,
including informative meetings with the management of recently
acquired agencies and with the investment community.
"During the quarter, we also made notable progress in each of the
three areas previously identified as key priorities: sales culture and
productivity, five-year plan execution, and new products and programs.
A highlight of the quarter was the establishment of an excess and
surplus lines wholesale business. To head the new operation, we were
fortunate to attract Bryan W. Sanders, an experienced insurance
professional who brings talent and enthusiasm to the venture."
Vaughan concluded, "We remain dedicated to helping our clients
effectively manage risk in markets that, on balance, remain favorable,
through our skilled risk management and resourceful placement
capabilities. While we are actively investing in talent and products
for current and future growth, we believe that our full year 2003
results will easily meet our key long-term goal of sustaining 15% to
20% growth in annual operating earnings per share."
The company cautions readers that the statements contained herein
regarding the company's future operations and business prospects are
forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based upon management's current
knowledge and assumptions about future events and involve risks and
uncertainties that could cause actual results to differ materially
from anticipated results. For more details on factors that could
affect expectations, see the company's Annual Report on Form 10-K for
the year ended December 31, 2002, as filed with the Securities and
Exchange Commission.
Hilb, Rogal and Hamilton Company is the nation's seventh largest
insurance and risk management intermediary. With offices located
throughout the United States, HRH assists clients in managing their
risks in areas such as property and casualty, employee benefits and
many other areas of specialized exposure. The company is traded on the
New York Stock Exchange, symbol HRH, and is ranked as the ninth
largest insurance and risk management intermediary in the world.
Additional information about HRH may be found at www.hrh.com.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL ANALYSIS
(In thousands, except per share data)
THREE MONTHS SIX MONTHS ENDED
ENDED
6/30/03 6/30/02 6/30/03 6/30/02
-----------------------------------
(Unaudited) (Unaudited)
Revenues
Commissions and fees $137,868 $94,739 $278,367 $193,387
Investment income 820 460 1,479 974
Other 846 518 1,679 1,210
-----------------------------------
139,534 95,717 281,525 195,571
Operating expenses
Compensation and employee
benefits 75,846 52,795 151,659 106,054
Other operating expenses 24,275 17,717 47,431 34,555
Depreciation expense 2,292 1,730 4,580 3,440
Amortization of intangibles 2,203 563 4,356 1,085
Interest expense 2,746 1,819 5,539 3,703
Retirement benefit(a) -- -- 5,195 --
-----------------------------------
107,362 74,624 218,760 148,837
-----------------------------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 32,172 21,093 62,765 46,734
Income taxes 13,107 8,591 25,602 19,048
-----------------------------------
Income before cumulative effect
of accounting change 19,065 12,502 37,163 27,686
Cumulative effect of accounting
change, net of tax(b) -- -- -- 3,944
-----------------------------------
NET INCOME $19,065 $12,502 $37,163 $31,630
===================================
Net Income Per Share - Basic:
Income before cumulative effect
of accounting change $0.56 $0.44 $1.10 $0.98
Cumulative effect of accounting
change, net of tax(b) -- -- -- 0.14
-----------------------------------
Net income $0.56 $0.44 $1.10 $1.12
===================================
Net Income Per Share - Assuming
Dilution:
Income before cumulative effect
of accounting change $0.52 $0.40 $1.03 $0.88
Cumulative effect of accounting
change, net of tax(b) -- -- -- 0.12
-----------------------------------
Net income $0.52 $0.40 $1.03 $1.00
===================================
Dividends Per Share $0.0925 $0.0900 $0.1825 $0.1775
===================================
Weighted Average Number
of Shares Outstanding:
Basic 33,911 28,255 33,796 28,221
===================================
Assuming Dilution 36,880 32,332 36,187 32,268
===================================
(a) The company recorded a one-time retirement benefit charge for
the quarter ended March 31, 2003, representing a contractual
retirement benefit for Andrew L. Rogal, the company's former
chairman and chief executive officer.
(b) Effective January 1, 2002, the company changed its revenue
recognition policy for commissions on premiums billed by
insurance carriers on middle-market property and casualty
business from when received to the later of effective date of
insurance coverage or billing date.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
JUNE 30, DEC. 31,
2003 2002(c)
------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $171,578 $134,692
Receivables (net) 231,715 201,364
Prepaid expenses and other 14,167 21,509
------------------
TOTAL CURRENT ASSETS 417,460 357,565
PROPERTY & EQUIPMENT (NET) 21,234 20,386
INTANGIBLE ASSETS (NET) 478,888 441,973
OTHER ASSETS 12,096 13,100
------------------
$929,678 $833,024
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $287,529 $235,057
Accounts payable 11,920 10,115
Accrued expenses 25,446 39,142
Premium deposits and credits due customers 34,507 33,998
Current portion of long-term debt 20,491 5,733
------------------
TOTAL CURRENT LIABILITIES 379,893 324,045
LONG-TERM DEBT 161,123 177,151
OTHER LONG-TERM LIABILITIES 31,571 21,180
SHAREHOLDERS' EQUITY
Common Stock (outstanding 34,032 and 33,484
shares, respectively) 183,233 168,558
Retained earnings 173,977 143,005
Accumulated other comprehensive income (loss) (119) (915)
------------------
357,091 310,648
------------------
$929,678 $833,024
==================
(c) Reclassified to conform to current year presentation.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
This press release contains references to financial measures
that exclude certain charges and non-recurring items. The
company believes that these adjusted financial measures
provide additional measures of performance that investors
can use in evaluating the company's performance between
reporting periods. The schedule below provides a
reconciliation of these financial measures to those
prepared in accordance with accounting principles
generally accepted in the United States (GAAP).
NET INCOME PER
SHARE ASSUMING
NET INCOME DILUTION
THREE MONTHS THREE MONTHS
ENDED ENDED
6/30/03 6/30/02 6/30/03 6/30/02
--------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME $19,065 $12,502 $0.52 $0.40
Excluding:
Non-operating losses, net of tax 32 122 -- --
--------------------------------
OPERATING NET INCOME $19,097 $12,624 $0.52 $0.40
================================
OPERATING MARGIN OPERATING REVENUE
THREE MONTHS ENDED THREE MONTHS ENDED
6/30/03 6/30/02 6/30/03 6/30/02
--------------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME / REVENUE
$19,065 $12,502 $139,534 $95,717
Excluding:
Non-operating losses 56 206 56 206
Amortization of intangibles 2,203 563 -- --
Interest expense 2,746 1,819 -- --
Income taxes 13,107 8,591 -- --
--------------------------------------
OPERATING MARGIN / REVENUE
$37,177 $23,681 $139,590 $95,923
======================================
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
NET INCOME PER
SHARE ASSUMING
NET INCOME DILUTION
SIX MONTHS ENDED SIX MONTHS ENDED
6/30/03 6/30/02 6/30/03 6/30/02
---------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME $37,163 $31,630 $1.03 $1.00
Excluding:
Non-operating losses, net of tax 78 124 -- --
Retirement benefit, net of tax 3,169 -- 0.09 --
Cumulative effect of
accounting change, net of tax -- (3,944) -- (0.12)
---------------------------------
OPERATING NET INCOME $40,410 $27,810 $1.12 $0.88
=================================
OPERATING MARGIN OPERATING REVENUE
SIX MONTHS ENDED SIX MONTHS ENDED
6/30/03 6/30/02 6/30/03 6/30/02
--------------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME / REVENUE
$37,163 $31,630 $281,525 $195,571
Excluding:
Non-operating losses 131 209 131 209
Amortization of intangibles 4,356 1,085 -- --
Interest expense 5,539 3,703 -- --
Retirement benefit 5,195 -- -- --
Income taxes 25,602 19,048 -- --
Cumulative effect of
accounting change, net of
tax -- (3,944) -- --
--------------------------------------
OPERATING MARGIN / REVENUE
$77,986 $51,731 $281,656 $195,780
======================================
