-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pz92S0m0o5KDVRf1waPvOWdgmGO5dZ8Pc3tX+wbOZLhTycnaYk0ApvRWQfo+bgXn x8AEykidpyCnHucv99Ro8w== 0001157523-03-006075.txt : 20031030 0001157523-03-006075.hdr.sgml : 20031030 20031030093220 ACCESSION NUMBER: 0001157523-03-006075 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031030 ITEM INFORMATION: FILED AS OF DATE: 20031030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUB INTERNATIONAL LTD CENTRAL INDEX KEY: 0001133016 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 364412416 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31310 FILM NUMBER: 03965254 BUSINESS ADDRESS: STREET 1: 214 KING STREET WEST STREET 2: SUITE 314 CITY: ONTARIO STATE: A6 ZIP: 00000 BUSINESS PHONE: 4169795866 MAIL ADDRESS: STREET 1: 214 KING STREET WEST STREET 2: SUITE 314 CITY: ONTARIO STATE: A6 ZIP: 00000 8-K 1 a4505231.txt HUB INTL LTD 8-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): October 30, 2003 HUB INTERNATIONAL LIMITED -------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) ONTARIO --------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-31310 36-4412416 - -------------------------------------------------------------------------------- (Commission File Number) (I.R.S. Employer Identification No.) 55 EAST JACKSON BOULEVARD, CHICAGO, IL 60604 ------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (877) 402-6601 ------------------------------------------------- (Registrant's Telephone Number, Including Area Code) n/a ------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 12. Results of Operations and Financial Condition On October 30, 2003, Hub International Limited issued a press release announcing its unaudited third quarter financial results for the quarter ended September 30, 2003. A copy of the press release is attached to this Report as Exhibit 99.1 and is incorporated herein by reference. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. HUB INTERNATIONAL LIMITED (Registrant) Date: October 30, 2003 By: /s/ W. Kirk James ---------------------------------- Name: W. Kirk James Title: Vice President, Secretary and General Counsel 3 Exhibit Index Exhibit No. Description - ----------- ------------- 99.1 Press release dated October 30, 2003 4 EX-99 3 a4505231ex991.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Hub International Posts Strong Growth for Third Quarter 2003; Company Narrows Guidance to Lower End of Published Range CHICAGO--(BUSINESS WIRE)--Oct. 30, 2003--Hub International Limited (NYSE:HBG)(TSX:HBG): Highlights: -- Strong growth despite decline in financial institutions business in the U.S. -- Revenue increases 31% in quarter, 33% YTD -- Net earnings grow 26% in quarter, 23% YTD -- Diluted EPS totals $0.22 for quarter; $0.81 YTD -- Organic growth totals 11% for quarter, 13% YTD -- Full-year diluted EPS anticipated at lower end of $1.13-$1.18 guidance range Hub International Limited (NYSE/TSX:HBG) today reported a 31% increase in revenue and 26% growth of net earnings for the third quarter ended September 30, 2003, due to both organic growth of 11% and the impact of acquisitions. Diluted earnings per share increased 16% to $0.22 from $0.19 in the prior year third quarter. All financials are reported in U.S. dollars. "We achieved strong organic growth in most of our regional hubs during the quarter," said Martin P. Hughes, Chairman and Chief Executive Officer. "In Canada, we posted organic growth of 24% - a solid 10% growth rate after removing the impact of foreign currency exchange. In the United States, organic growth was a disappointing 1%, but that seemingly low level was skewed by a sharp decline in a single financial institutions product line. Absent that individual product impact, U.S. organic growth would have been approximately 11%. "One of our financial institutions products - creditor-placed insurance - suffered from the convergence of several external factors. Due in part to poor economic conditions, many banks tightened their credit practices, leading to an acceleration of policy cancellations. Although policy cancellations are a normal component of this product line, the pace of policy cancellations in the third quarter accelerated abnormally, leading to a significant drop in revenue and profit for this product line." Hughes noted that Hub has not lost any of its financial institution relationships for this product line, but also noted that the change in bank credit practices will impact this line of business through the fourth quarter of 2003 and into the first quarter of 2004, after which it is expected to return to its historically profitable level. Third Quarter Earnings Rise 26% on 31% Revenue Increase In the third quarter ended September 30, 2003, revenue increased 31% to $64.7 million from $49.6 million a year earlier, reflecting both an organic growth rate of 11% and the benefits of an active acquisition program. A stronger Canadian dollar added 6 percentage points to organic growth. In the third quarter, U.S. operations represented 59% and Canadian operations represented 41% of total revenue. Organic growth, roughly the equivalent of same-store sales, was a solid 11% in the third quarter, including a 1% growth rate in the United States and a 24% growth rate in Canada. Absent currency exchange effects, the Canadian organic growth rate was 10% and consolidated organic growth was 5%. In the United States, the negative impact of the financial institutions business reduced organic growth by approximately $2.5 million or 10 percentage points; otherwise, U.S. organic growth would have been approximately 11%. Core commission income grew 30% to $60.8 million from $46.9 million in the prior year quarter, reflecting an organic growth rate of 9% - or 3% after removing the impact of foreign currency exchange. Contingent commissions and volume overrides, which are additional payments from insurers based on profitability and volume, grew 145% to $1.9 million from $0.8 million. U.S. revenue increased 34% to $38.0 million from $28.3 million. Core commission income grew 34% to $35.0 million, including a negative organic growth rate of 2%, while contingent commissions and volume overrides increased 126% to $1.6 million from $0.7 million. Canadian revenue increased 26% to $26.7 million from $21.3 million, with 14% of the growth rate attributable to a stronger Canadian dollar. Core commission income grew 24% to $25.8 million, including organic growth of 23%, while contingent commissions and volume overrides increased 348% to $0.3 million from $0.1 million. Compensation increased both nominally and as a percentage of revenue, climbing to 57% in the third quarter of 2003 from 54% in the same period of 2002. A significant portion of the negative trend resulted from the fact that compensation in the creditor-placed insurance business is fixed, for the most part, and as a result did not mirror the decline in revenue in that line of business for the quarter. Selling, occupancy and administration expense held steady as a percentage of revenue - 22% in the third quarter in both years. Net earnings before income taxes grew 17% to $10.0 million from $8.6 million, leading to a small decline in the pre-tax margin to 16% from 17% a year earlier. The tax rate declined to 32% from 37% a year earlier, reflecting in part the non-taxable nature of proceeds from a company-owned life insurance policy. Net earnings rose 26% to $6.8 million, or $0.22 per diluted share, from $5.4 million, or $0.19 per diluted share. The current year earnings included a non-taxable receipt of $1.0 million ($0.03 per share) in company-owned life insurance proceeds. Excluding this item, diluted earnings per share were $0.19 for both periods. Weighted average shares outstanding (diluted) increased 7% to 33.8 million from 31.7 million a year earlier. The increase in shares resulted mostly from shares issued for acquisitions and compensation programs. Nine-Month Earnings Rise 23% on 33% Revenue Increase For the nine months ended September 30, revenue increased 33% to $207.7 million from $156.3 million a year earlier, reflecting both an organic growth rate of 13% and the benefits of an active acquisition program. A stronger Canadian dollar added 5 percentage points to organic growth. In the first nine months of 2003, U.S. operations represented 62% of total revenue, and Canadian operations represented 38% of revenue. Organic growth was a solid 13% in the first nine months of 2003, including a 6% growth rate in the United States and a 22% growth rate in Canada. Absent currency exchange effects, the Canadian organic growth rate was 11% and the consolidated organic growth rate was 8%. Core commission income grew 32% to $184.7 million from $140.5 million, reflecting an organic growth rate of 12% - or 7% after removing the impact of foreign currency exchange. Contingent commissions and volume overrides, which are additional payments from insurers based on profitability and volume, grew 68% to $17.2 million from $10.2 million. U.S. revenue increased 39% to $127.9 million from $92.0 million. Core commission income grew 37% to $111.3 million, including organic growth of 4%, while contingent commissions and volume overrides increased 91% to $12.6 million from $6.6 million. Canadian revenue increased 24% to $79.8 million from $64.3 million, with 11% of the growth rate attributable to a stronger Canadian dollar versus the prior year period. Core commission income grew 24% to $73.4 million from $59.3 million, including organic growth of 22%, while contingent commissions and volume overrides increased 27% to $4.6 million from $3.6 million. Compensation increased both nominally and as a percentage of revenue, climbing to 55% of revenue in the first nine months of 2003 from 54% in the same period of 2002. The growth in compensation as a percentage of revenue resulted primarily from the negative impact of creditor-placed insurance. Selling, occupancy and administration expense declined as a percentage of revenue to 20% from 21% in the first nine months of 2002. Net earnings before income taxes grew 32% to $39.9 million from $30.4 million, leading to a stable pre-tax margin of 19% in both 2003 and 2002. Due in part to the non-taxable gain on the sale of insurance subsidiaries last year, Hub's tax rate increased to 35% from 31% in 2002. Net earnings grew 23% to $25.8 million in the first nine months of 2003 from $21.1 million a year earlier, leading to a net margin decline to 12% in 2003 from 13% in the same period of 2002. Diluted earnings per share grew 3% to $0.81 in the first nine months of 2003 from $0.79 a year earlier, including the $0.09 per share gain on the sale of insurance subsidiaries in 2002 and $0.03 per share of life insurance proceeds in 2003. Excluding these items, diluted earnings per share increased 11%. Weighted average (diluted) shares outstanding increased 16% to 33.9 million from 29.1 million, reflecting the company's 2002 IPO and issuance of shares for acquisitions and compensation programs. Company Outlook Hughes noted that third quarter results presented a complex mix of positive and negative developments, most of them positive. However, recent trends suggest continued weak results from creditor-placed insurance into the first quarter of 2004 and an industry-wide slowing of organic growth rates. Combining these factors into its budgets, Hub now anticipates full-year diluted earnings for 2003 at the lower end of its previously announced $1.13-$1.18 guidance range. In 2002, full-year diluted earnings reached $1.06 per share, including a one-time gain of $0.09 per share on the sale of two insurance subsidiaries. Excluding that one-time gain, Hub's 2002 diluted earnings per share were $0.97. Company Schedules Conference Call and Webcast The company will discuss third quarter results and updated guidance on a conference call scheduled for 9:30 a.m. (CST), 10:30 a.m. (EST) on Thursday, October 30, 2003. The call may be accessed via the internet by logging onto www.hubinternational.com and will be available for replay for 90 days on Hub's website, www.hubinternational.com. Participants can access the teleconference by calling 800.901.5213, passcode 96135042. Headquartered in Chicago, IL, Hub International is a leading North American insurance brokerage that provides a broad array of property and casualty, life and health, employee benefits, investment and risk management products and services through offices located in the United States and Canada. This press release may contain forward-looking statements which reflect our current views with respect to future events and financial performance. These forward-looking statements relate, among other things, to our plans and objectives for future operations and are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to, risks associated with implementing our business strategies, identifying and consummating acquisitions, integrating acquired brokerages, attaining greater market share, developing and implementing effective information technology systems, recruiting and retaining qualified employees, fluctuations in the premiums charged by insurance companies with corresponding fluctuations in our premium-based revenue, any loss of services of key executives, industry consolidation, increased competition in the industry, fluctuations in the demand for insurance products and the passage of new legislation subjecting our business to regulation in jurisdictions where we operate. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Additional information regarding these risks and other factors that could cause Hub International's actual results to differ materially from our expectations is contained in the company's filings with the Securities and Exchange Commission and Canadian Securities Commissions. Except as otherwise required by federal securities laws, Hub International undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. HUB INTERNATIONAL LIMITED Consolidated Organic Growth For the three and nine months ended September 30, 2003 (in thousands of U.S. dollars, except percentages) Net Adjustments Revenue For ----------------- Total (Acquisitions) Organic Third quarter Total Growth And Growth 2003 2002 Change($) (%) Disposals (%) -------------------------------------------------------- Total - ----- Commission Income $60,772 $46,872 $13,900 30% $(9,663) 9% Contingent Commissions and Volume Overrides 1,884 767 1,117 145% 8 146% Other Income 2,015 1,913 102 5% (98) 0% -------------------------------------------------------- Total $64,671 $49,552 $15,119 31% $(9,753) 11% -------------------------------------------------------- USA - --- Commission Income $35,031 $26,188 $8,843 34% $(9,330) -2% Contingent Commissions and Volume Overrides 1,580 700 880 126% 9 127% Other Income 1,369 1,409 (40) -3% (98) -10% -------------------------------------------------------- Total $37,980 $28,297 $9,683 34% $(9,419) 1% -------------------------------------------------------- Canada - ------ Commission Income $25,741 $20,684 $5,057 24% $(333) 23% Contingent Commissions and Volume Overrides 304 67 237 348% (1) 347% Other Income 646 504 142 28% - 28% -------------------------------------------------------- Total $26,691 $21,255 $5,436 26% $(334) 24% -------------------------------------------------------- Net Adjustments Revenue For ----------------- Total (Acquisitions) Organic First nine months Total Growth And Growth 2003 2002 Change($) (%) Disposals (%) -------------------------------------------------------- Total - ----- Commission Income $184,755 $140,498 $44,257 32% $(27,944) 12% Contingent Commissions and Volume Overrides 17,150 10,198 6,952 68% (2,849) 40% Other Income 5,798 5,636 162 3% (314) -3% -------------------------------------------------------- Total $207,703 $156,332 $51,371 33% $(31,107) 13% -------------------------------------------------------- USA - --- Commission Income $111,324 $81,198 $30,126 37% $(26,999) 4% Contingent Commissions and Volume Overrides 12,575 6,588 5,987 91% (2,769) 49% Other Income 4,032 4,211 (179) -4% (319) -12% -------------------------------------------------------- Total $127,931 $91,997 $35,934 39% $(30,087) 6% -------------------------------------------------------- Canada - ------ Commission Income $73,431 $59,300 $14,131 24% $(945) 22% Contingent Commissions and Volume Overrides 4,575 3,610 965 27% (80) 25% Other Income 1,766 1,425 341 24% 5 24% -------------------------------------------------------- Total $79,772 $64,335 $15,437 24% $(1,020) 22% -------------------------------------------------------- HUB INTERNATIONAL LIMITED Consolidated Statements of Earnings For the three months and nine months ended September 30, 2003 and 2002 (in thousands of U.S. dollars, except per share amounts) Third quarter First nine months 2003 2002 2003 2002 -------------------------------------------- (Unaudited)(Unaudited)(Unaudited)(Unaudited) Revenue Commission income $60,772 $46,872 $184,755 $140,498 Contingent commissions and volume overrides 1,884 767 17,150 10,198 Other 2,015 1,913 5,798 5,636 -------------------------------------------- 64,671 49,552 207,703 156,332 -------------------------------------------- Expenses Compensation 36,855 26,612 113,744 84,126 Selling, occupancy and administration 13,974 11,103 40,888 33,357 Depreciation 1,551 1,444 4,462 4,078 Interest expense 1,269 1,110 4,152 6,208 Intangible asset amortization 840 389 2,397 1,147 (Gain) on disposal of property, equipment and other assets (290) (6) (281) (2,578) Loss/(gain) on put option liability 73 (270) (167) (948) Non-cash stock based compensation 1,355 583 3,575 583 Proceeds from life insurance (1,000) - (1,000) - -------------------------------------------- 54,627 40,965 167,770 125,973 -------------------------------------------- Net earnings before income taxes 10,044 8,587 39,933 30,359 -------------------------------------------- Provision for income tax expense (benefit) Current 6,074 4,831 15,339 10,845 Future (2,850) (1,666) (1,239) (1,559) -------------------------------------------- 3,224 3,165 14,100 9,286 -------------------------------------------- Net earnings 6,820 5,422 25,833 21,073 Interest on subordinated convertible debentures 471 460 1,414 2,063 Cash in lieu of dividends on restricted share units 36 - 76 - -------------------------------------------- Diluted net earnings $7,327 $5,882 $27,323 $23,136 ============================================ Earnings per share Basic $0.23 $0.21 $0.88 $0.96 Diluted $0.22 $0.19 $0.81 $0.79 Weighted average shares outstanding - Basic (000's) 29,327 26,416 29,326 22,060 Weighted average shares outstanding - Diluted (000's) 33,830 31,696 33,927 29,139 HUB INTERNATIONAL LIMITED Consolidated Balance Sheets As of September 30, 2003 and December 31, 2002 (in thousands of U.S. dollars) 2003 2002 --------- --------- (Unaudited) Assets Current assets: Cash and cash equivalents $79,061 $40,642 Trust cash 43,975 53,648 Accounts and other receivables 106,334 136,573 Income taxes receivable 458 2,153 Future income taxes 4,786 3,324 Prepaid expenses 1,889 1,587 --------- --------- Total current assets 236,503 237,927 Goodwill 298,550 281,712 Other intangible assets 42,673 44,164 Property and equipment 23,894 21,298 Future income taxes 5,600 3,715 Other assets 6,986 8,060 --------- --------- Total assets $614,206 $596,876 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $156,625 $187,034 Contingent consideration payable - 8,423 Income taxes payable 959 1,198 Future income taxes 762 1,164 Current portion long-term debt and capital leases 3,582 3,029 --------- --------- Total current liabilities 161,928 200,848 Long-term debt and capital leases 84,152 69,009 Subordinated convertible debentures 35,000 35,000 Future income taxes 9,658 7,745 --------- --------- Total liabilities 290,738 312,602 --------- --------- Commitments and Contingencies Shareholders' equity Share capital 247,110 235,197 Issuable shares 50 13,743 Contributed surplus 3,979 1,234 Cumulative translation account 19,133 2,185 Retained earnings 53,196 31,915 --------- --------- Total shareholders' equity 323,468 284,274 --------- --------- Total liabilities and shareholders' equity $614,206 $596,876 ========= ========= HUB INTERNATIONAL LIMITED Consolidated Statements of Cash Flows For the three months and nine months ended September 30, 2003 and 2002 (in thousands of U.S. dollars) Third quarter First nine months -------------------------------------------- 2003 2002 2003 2002 -------------------------------------------- (Unaudited)(Unaudited)(Unaudited)(Unaudited) Operating activities Net earnings $6,820 $5,422 $25,833 $21,073 Items not affecting working capital: Amortization and depreciation 2,391 1,833 6,859 5,225 (Gain) on disposal of property, equipment and other assets (290) (6) (281) (2,578) Loss/(gain) on put option liability 73 (270) (167) (948) Non-cash stock based compensation 1,355 583 3,575 583 Future income taxes (2,850) (1,666) (1,239) (1,559) Non-cash working capital items Trust cash 106 (639) 9,673 5,025 Accounts and other receivables 50,028 37,773 38,626 17,482 Prepaid expenses 283 (650) (185) (348) Accounts payable and accrued liabilities (44,340) (36,760) (38,463) (39,171) Other assets 129 - (2,191) - Income taxes 4,165 2,986 1,318 2,231 -------------------------------------------- Net cash flows from operating activities 17,870 8,606 43,358 7,015 -------------------------------------------- Investing activities Property and equipment - purchases (1,547) (1,155) (4,589) (2,798) Property and equipment - proceeds on sale 17 - 44 - Proceeds from investment held for sale - - - 43,521 Purchase of subsidiaries, net of cash received 452 (3,245) (11,935) (4,553) Sale of subsidiaries 613 18 1,064 2,029 Other assets 176 103 (539) 117 -------------------------------------------- Net cash flows from (used for) investing activities (289) (4,279) (15,955) 38,316 -------------------------------------------- Financing activities Bank debt - - - (55,000) Long-term debt - advances 250 14,101 65,250 14,101 Long-term debt and capital leases - repayments (688) (4,503) (52,184) (46,609) Subordinated convertible debenture - repayment - - - (26,800) Share capital - issued for cash, net of issue costs (28) 7 (59) 88,098 Proceeds from sale of executive purchase plan shares 222 - 222 - Dividends paid (1,514) (1,263) (4,552) (3,213) -------------------------------------------- Net cash flows from (used for) financing activities (1,758) 8,342 8,677 (29,423) -------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 160 - 2,339 - -------------------------------------------- Change in cash and cash equivalents 15,983 12,669 38,419 15,908 Cash and cash equivalents - Beginning of period 63,078 30,218 40,642 26,979 -------------------------------------------- Cash and cash equivalents - End of period $79,061 $42,887 $79,061 $42,887 ============================================ CONTACT: Hub International Limited Dennis J. Pauls, 312-279-4880 (Media Contact) dpauls@hubinternational.com or Rosenbaum Advisors Michael Rosenbaum, 847-749-1010 (Investor Contact) -----END PRIVACY-ENHANCED MESSAGE-----