-----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, AFx4vtInwmO4f3gJFisCScM7J00cHRnhegLasyZVWwtAxVeCr5xECAosBHoBPZzS 2I2gm5pdfZk5oN+wR2dmaA== 0000079282-99-000025.txt : 19991110 0000079282-99-000025.hdr.sgml : 19991110 ACCESSION NUMBER: 0000079282-99-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWN & BROWN INC CENTRAL INDEX KEY: 0000079282 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 590864469 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13619 FILM NUMBER: 99743950 BUSINESS ADDRESS: STREET 1: 220 S RIDGEWOOD AVE CITY: DAYTONA BEACH STATE: FL ZIP: 32114 BUSINESS PHONE: 9042529601 MAIL ADDRESS: STREET 1: 220 S RIDGEWOOD AVENUE CITY: DAYTONA BEACH STATE: FL ZIP: 32114 FORMER COMPANY: FORMER CONFORMED NAME: POE & BROWN INC DATE OF NAME CHANGE: 19930827 FORMER COMPANY: FORMER CONFORMED NAME: POE & ASSOCIATES INC DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999. or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ________________ Commission file number 0-7201. BROWN & BROWN, INC. (Exact name of Registrant as specified in its charter) Florida 59-0864469 ______________________________ ______________________ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 220 S. Ridgewood Ave., Daytona Beach, FL 32115 ________________________________________ ____________ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (904) 252-9601 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ The number of shares of the Registrant's common stock, $.10 par value, outstanding as of November 1, 1999 was 13,601,330.
BROWN & BROWN, INC. INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 ________________________________________ PAGE ____ PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 1999 and 1998 3 Condensed Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities and Use of Proceeds 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14
ITEM 1: FINANCIAL STATEMENTS
BROWN & BROWN, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) For the three months For the nine months ended September 30, ended September 30, 1999 1998 1999 1998 REVENUES (Restated) (Restated) Commissions and fees $42,024 $38,667 $128,476 $114,105 Investment income 754 901 1,897 2,495 Other income 617 54 731 9 Total revenues 43,395 39,622 131,104 116,609 EXPENSES Employee compensation and benefits 22,057 20,596 67,453 60,199 Other operating expenses 7,810 7,382 24,848 23,714 Amortization 1,905 1,645 5,525 4,344 Interest 103 144 390 412 _______ _______ ________ ________ Total expenses 31,875 29,767 98,216 88,669 _______ _______ ________ ________ Income before income taxes 11,520 9,855 32,888 27,940 Income taxes 4,437 3,795 12,876 10,939 _______ _______ ________ ________ NET INCOME $ 7,083 $ 6,060 $ 20,012 $ 17,001 ======= ======== ======== ======== Other comprehensive income, net of tax: Unrealized gain (loss) on securities: Unrealized holding loss, net of tax benefit of $446 and $598 for the three-month periods ended September 30, 1999 and 1998, respectively, and net of tax benefit of $474 and $2,030 for the nine-month periods ended September 30, 1999 and 1998, respectively (697) (916) (741) (3,248) _______ _______ ________ ________ Comprehensive Income $ 6,386 $ 5,144 $ 19,271 $ 13,753 ======= ======= ======== ======== Basic and diluted earnings per share $ 0.52 $ 0.44 $ 1.47 $ 1.25 ======= ======= ======== ======== Dividend declared per share $ 0.13 $ 0.11 $ 0.35 $ 0.31 ======= ======= ======== ======== Diluted shares outstanding 13,606 13,643 13,637 13,575 See notes to condensed consolidated financial statements.
BROWN & BROWN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) (Restated) September 30, December 31, 1999 1998 ASSETS Cash and cash equivalents $ 35,805 $ 42,773 Short-term investments 452 775 Premiums, commissions and fees receivable 61,221 69,667 Other current assets 6,946 9,840 ________ ________ Total current assets 104,424 123,055 Fixed assets, net 13,932 13,757 Intangible assets, net 90,021 79,483 Investments 9,274 10,503 Other assets 4,636 4,906 ________ ________ Total assets $222,287 $231,704 ======== ======== LIABILITIES Premiums payable to insurance companies $ 83,734 $ 90,125 Premium deposits and credits due customers 7,524 8,379 Accounts payable and accrued expenses 18,094 16,865 Current portion of long-term debt 3,403 4,960 ________ ________ Total current liabilities 112,755 120,329 Long-term debt 3,276 17,267 Deferred income taxes 1,930 2,403 Other liabilities 6,689 7,829 ________ ________ Total liabilities 124,650 147,828 ________ ________ SHAREHOLDERS' EQUITY Common stock, par value $.10 per share: authorized 70,000 shares; issued 13,607 shares at 1999 and 13,665 shares at 1998 1,361 1,367 Retained earnings 91,477 76,969 Accumulated other comprehensive income 4,799 5,540 ________ ________ Total shareholders' equity 97,637 83,876 ________ ________ Total liabilities and shareholders' equity $222,287 $231,704 ======== ======== See notes to condensed consolidated financial statements.
BROWN & BROWN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the nine months ended September 30, _______________________________________ 1999 1998 ____ ____ (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net income $20,012 $17,001 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,078 2,617 Amortization 5,525 4,343 Compensation expense under performance stock plan 948 520 Net gains on sales of investments, fixed assets and customer accounts (215) (6) Premiums, commissions and fees receivable, decrease 8,446 2,403 Other assets, decrease (increase) 2,128 (1,479) Premiums payable to insurance companies, (decrease) increase (6,391) 6,546 Premium deposits and credits due customers, (decrease) (855) (100) Accounts payable and accrued expenses, increase 1,229 697 Other liabilities, (decrease) increase (1,270) 604 _______ _______ NET CASH PROVIDED BY OPERATING ACTIVITIES 32,635 33,146 _______ _______ CASH FLOWS FROM INVESTING ACTIVITIES Additions to fixed assets (3,326) (3,083) Payments for businesses acquired, net of cash acquired (15,574) (27,109) Proceeds from sales of fixed assets and customer accounts 224 213 Purchases of investments (120) (1,117) Proceeds from sales of investments 598 754 _______ _______ NET CASH USED IN INVESTING ACTIVITIES (18,198) (30,342) _______ ________ CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt (16,825) (7,596) Proceeds from long-term debt - 42 Exercise of stock options and issuances of stock 1,664 1,278 Purchases of stock (1,152) (8,835) Shareholder distributions from pooled entities (623) - Cash dividends paid (4,469) (4,009) ______ _______ NET CASH USED IN FINANCING ACTIVITIES (21,405) (19,120) _______ _______ Net decrease in cash and cash equivalents (6,968) (16,316) Cash and cash equivalents at beginning of period 42,773 49,310 _______ _______ CASH AND CASH EQUIVALENTS AT END OF PERIOD $35,805 $32,994 ======= ======= See notes to condensed consolidated financial statements.
BROWN & BROWN, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) SEPTEMBER 30, 1999 NOTE 1 - BASIS OF FINANCIAL REPORTING The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. As more fully described in Note 3 - Acquisitions, the accompanying financial statements for all periods presented have been restated to show the effect of the acquisition of Ampher Insurance, Inc. and Ross Insurance of Florida, Inc. effective July 20, 1999. Certain amounts at December 31, 1998 have been reclassified to be consistent with the current period presentation. Results of operations for the three- and nine-month periods ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. NOTE 2 - BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share is based upon the weighted average number of shares outstanding. Diluted earnings per share is adjusted for the dilutive effect of stock options and other stock equivalents. Earnings per share for the Company is the same on both a basic and a diluted basis. NOTE 3 - ACQUISITIONS 1999 Purchases _______________ During the third quarter of 1999, the Company acquired substantially all of the assets of Burns, Harrelson & Burns Insurance Agency, and Tomborello Insurance Services, both of Phoenix, Arizona, in addition to acquiring one book of business. During the second quarter of 1999, the Company acquired substantially all of the assets of one general insurance agency in addition to acquiring several books of business. During the first quarter of 1999, the Company acquired substantially all of the assets of the Daytona Beach, Florida office of Hilb, Rogal & Hamilton Company; The Insurance Center of Roswell, Inc. in Roswell, New Mexico; and Chancy-Stoutamire, Inc., with offices in Monticello and Perry, Florida. The Company also acquired all of the outstanding shares of the Bill Williams Agency, Inc. of St. Petersburg, Florida in the first quarter of 1999. These acquisitions have been accounted for using the purchase method of accounting. Pro forma results of operations for the three- and nine-month periods ended September 30, 1999 and September 30, 1998 resulting from these acquisitions are not materially different from the results of operations as reported. The results of operations for the acquired companies have been combined with those of the Company since their respective acquisition dates. 1998 Purchases ______________ During the third quarter of 1998, the Company acquired substantially all of the assets of MacMillan-Buchanan Insurance Agency, of Melbourne, Florida; Lake Sumter Insurance, of Wildwood, Florida; Franchini Consolidated Agency, of Albuquerque, New Mexico; Gulfcoast Commercial Insurance, of Naples, Florida; and KRB & Associates, of Houston, Texas. During the second quarter of 1998, the Company acquired substantially all Of the assets of the John F. Phillips Insurance Agency, of Prescott, Arizona; Harris Insurance Services, of Las Vegas, Nevada; the Fordham Agency, of St. Petersburg, Florida; Alderman, Click & Co., of Princeton, New Jersey; Zel Schwanz & Associates, of Phoenix, Arizona; and the Fort Lauderdale, Florida office of Hilb, Rogal and Hamilton Company. During the first quarter of 1998, the Company acquired substantially all of the assets of Arizona General Insurance of Tucson, Arizona; Boynton Brothers Insurance of Perth Amboy, New Jersey; Great Northern Insurance of Phoenix, Arizona; and the Heine-Miles Insurance Agency of Phoenix, Arizona. These acquisitions have also been accounted for using the purchase method of accounting. The results of operations for the acquired companies have been combined with those of the Company since their respective acquisition dates. If the acquisitions had occurred at the beginning of the 1998 reporting period, the Company's results of operations would have been as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the 1998 reporting period.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998 (Unaudited) (In thousands, except per share data) Operating revenue $121,970 Income before income taxes 28,303 Net income 17,265 Earnings per share $ 1.27
1999 Poolings _____________ During the third quarter of 1999, the Company issued 167,328 shares of its common stock in exchange for all of the outstanding stock of Ampher Insurance, Inc. and Ross Insurance of Florida, Inc., related entities located in Sunrise, Florida. This acquisition has been recorded using the pooling-of-interests method of accounting. The acquisition was treated as a material transaction and the Company's consolidated financial statements have been restated for this transaction for all prior periods. 1998 Poolings _____________ During the third quarter of 1998, the Company issued 92,188 shares of its common stock in exchange for all of the outstanding stock of Jerry F. Nichols & Associates, located in Naples, Florida. During the quarter, the Company also issued 65,131 shares of its common stock for all of the outstanding stock of Boulton Agency, Inc., located in Miami, Florida. During the second quarter of 1998, the Company issued 278,765 shares of its common stock for all of the outstanding stock of Daniel-James Insurance Agency, Inc., an Ohio corporation with offices in Perrysburg, Ohio and Indianapolis, Indiana, and for all of the outstanding membership interests of Becky-Lou Realty Limited, an Ohio limited liability company with offices in Perrysburg, Ohio. During the first quarter of 1998, the Company issued 22,500 shares of its common stock for all of the outstanding stock of Thim Insurance Agency, Inc., an Arizona corporation. These acquisitions have been recorded using the pooling-of-interests method of accounting. The Daniel-James Insurance Agency, Inc. acquisition was determined to be a material transaction and the Company's consolidated financial statements have been restated for this transaction for all prior periods. The other three pooling acquisitions were determined to be immaterial and the Company's consolidated financial statements have not been restated for these transactions. NOTE 4 - LONG-TERM DEBT The Company continues to maintain its credit agreement with a major insurance company under which $4 million (the maximum amount available for borrowings) was outstanding at September 30, 1999, at an interest rate equal to the prime lending rate plus one percent (9.25% at September 30, 1999). In accordance with the amendment to the loan agreement dated August 1, 1998, the available amount will decrease by $1 million each August beginning in 2000. The Company also has a revolving credit facility with a national banking institution that provides for available borrowings of up to $50 million, with a maturity date of October 15, 2000. As of September 30, 1999, there were no borrowings against this line of credit. NOTE 5 - CONTINGENCIES The Company is not a party to any legal proceedings other than various claims and lawsuits arising in the normal course of business. Management of the Company does not believe that any such claims or lawsuits will have a material effect on the Company's financial condition or results of operations. NOTE 6 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For the nine-month period ended September 30, _____________________________________________ (in thousands) 1999 1998 ____ ____ Cash paid during the period for: Interest $ 446 $ 745 Income taxes 12,021 10,371
The Company's significant non-cash investing and financing activities are as follows: For the nine-month period ended September 30, _____________________________________________ (in thousands) 1999 1998 ____ ____ Unrealized depreciation of available-for-sale securities net of tax benefit of $474 for 1999 and $2,030 in 1998 $ (741) $(3,248) Long-term debt incurred for acquisition of customer accounts 1,277 3,463 Notes received on the sale of fixed assets and customer accounts 714 1,011 Common stock issued in acquisitions 6,228 16,945
NOTE 7 - SEGMENT INFORMATION The Company's business is divided into four divisions: the Retail Division, which markets and sells a broad range of insurance products to commercial, professional and individual clients; the National Programs Division, which develops and administers property and casualty insurance and employee benefits coverage solutions for professional and commercial groups and trade associations nationwide; the Service Division, which provides insurance-related services such as third-party administration and consultation for workers' compensation and employee benefit self-insurance markets; and the Brokerage Division, which markets and sells excess and surplus commercial insurance primarily through non-affiliated independent agents and brokers. The Company conducts all of its operations in the United States. Summarized financial information concerning the Company's reportable segments is shown in the following table. The "Other" column includes corporate-related items and, as it relates to segment profit, income and expense not allocated to reportable segments.
(in thousands) Nine Months Ended September 30, 1999: Retail Programs Service Brokerage Other Total ______________________________________________________________________________ Total Revenues $ 92,159 $17,857 $11,174 $10,690 $ (776) $131,104 Interest and other investment income 1,370 899 165 265 (802) 1,897 Interest expense 745 - - - (355) 390 Depreciation and amortization 6,308 1,087 292 718 198 8,603 Income (loss) before income taxes 20,847 5,418 1,839 3,714 1,070 32,888 Total assets 147,446 58,652 6,092 25,344 (15,247) 222,287 Capital expenditures 2,338 312 323 181 172 3,326 ______________________________________________________________________________ Nine Months Ended September 30, 1998: Retail Programs Service Brokerage Other Total ______________________________________________________________________________ Total Revenues $ 77,124 $20,009 $10,253 $ 9,997 $ (774) $116,609 Interest and other investment income 1,146 1,332 152 301 (436) 2,495 Interest expense 28 - - 12 372 412 Depreciation and amortization 4,858 1,012 237 697 156 6,960 Income (loss) before income taxes 16,883 6,831 1,835 3,604 (1,213) 27,940 Total assets 123,783 59,247 5,285 23,863 (1,177) 211,001 Capital expenditures 2,172 455 262 153 41 3,083 ______________________________________________________________________________
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS _____________________ NET INCOME. Net income for the third quarter of 1999 was $7,083,000, or $.52 per share, compared with net income in the third quarter of 1998 of $6,060,000, or $.44 per share, a 17% increase. Net income for the nine months ended September 30, 1999 was $20,012,000, or $1.47 per share, compared with 1998 same-period net income of $17,001,000, or $1.25 per share, an 18% increase. COMMISSIONS AND FEES. Commissions and fees for the third quarter of 1999 increased $3,357,000, or 9%, from the same period in 1998. Approximately $2,672,000 of this increase represents revenues from acquired agencies, with the remainder due to new business production. Commissions and fees for the nine months ended September 30, 1999 were $128,476,000 compared to $114,105,000 for the same period in 1998, a 13% increase. The 1999 increase is due to approximately $12,836,000 of revenue from acquired agencies, with the remainder due to new business production. INVESTMENT INCOME. Investment income for the three- and nine-month periods ended September 30, 1999 decreased $147,000 and $598,000, respectively, from the same periods in 1998 primarily due to a decrease in available cash to invest. OTHER INCOME. Other income primarily includes gains and losses from the sale of customer accounts and other assets. Other income for the third quarter ended September 30, 1999 increased $563,000 over the same period in 1998, due to the sale of certain customer accounts. Other income for the nine-month period ended September 30, 1999 increased $722,000 over the same period in 1998, due primarily to the disposition of the assets of the Company's Charlotte, North Carolina office in the first quarter of 1998, which resulted in a loss of $518,000. EMPLOYEE COMPENSATION AND BENEFITS. Employee compensation and benefits increased 7% and 12%, respectively, during the three- and nine-month periods ended September 30, 1999 over the same periods in 1998. These increases primarily relate to the addition of new employees as a result of acquisitions. Employee compensation and benefits as a percentage of total revenue decreased to 51% in both the three- and nine-month periods ended September 30, 1999, compared to 52% for each of the same periods in 1998. OTHER OPERATING EXPENSES. Other operating expenses for the third quarter of 1999 increased $428,000, or 6%, over the same period in 1998, primarily due to acquisitions. Other operating expenses increased $1,134,000, or 5%, for the nine months ended September 30, 1999, compared to the same period in 1998, primarily due to acquisitions. Other operating expenses as a percentage of total revenue decreased to 18% in the third quarter of 1999, compared to 19% in the same period in 1998, and decreased to 19% for the nine months ended September 30, 1999, compared to 20% in the same period in 1998. AMORTIZATION. Amortization increased $260,000, or 16%, and $1,181,000, or 27%, for the three- and nine-month periods ended September 30, 1999, respectively, over the same periods in 1998, primarily due to increased amortization from acquisitions. INTEREST. Interest decreased $41,000, or 28%, for the third quarter of 1999 over the same period in 1998. Interest decreased $22,000, or 5%, for the nine months ended September 30, 1999 compared to the same period in 1998, primarily due to decreased levels of debt. LIQUIDITY AND CAPITAL RESOURCES ________________________________ The Company's cash and cash equivalents of $35,805,000 at September 30, 1999 decreased by $6,968,000 from $42,773,000 at December 31, 1998. For the nine-month period ended September 30, 1999, operating activities provided $32,635,000 of cash. From both this amount and existing cash balances, $16,825,000 was used for payments on long-term debt, $15,574,000 was used to acquire businesses, $4,469,000 was used for payments of dividends, and $3,326,000 was used for additions to fixed assets. The current ratio at September 30, 1999 was 0.93, compared to 1.03 as of December 31, 1998. The Company has a revolving credit agreement with a major insurance company under which up to $4 million presently may be borrowed at an interest rate equal to the prime lending rate plus one percent (9.25% at September 30, 1999). The amount of available credit will decrease by $1 million each year beginning in August 2000 until the facility expires in August 2003. As of September 30, 1999, the maximum amount of borrowings was outstanding. The Company also has a revolving credit facility with a national banking institution that provides for available borrowings of up to $50 million, with a maturity date of October, 2000. As of September 30, 1999, there were no borrowings against this line of credit. The Company believes that its existing cash, cash equivalents, short-term investments portfolio, funds generated from operations and available credit facility borrowings are sufficient to satisfy its normal financial needs. YEAR 2000 DATE CONVERSION _________________________ Year 2000 issues relate to system failures or errors resulting from computer programs and embedded computer chips that utilize dates with only two digits instead of four digits to represent a year. A data field with two digits representing a year may result in an error or failure due to the system's inability to recognize "00" as the year 2000. The Company has evaluated and identified the risks of failure of its information and financial systems that may be adversely affected by Year 2000 issues. Earlier this year, the Company concluded that it must be "core compliant" with respect to the operations of its agency management system and all attendant hardware, software and communications systems. As defined by the Company, core compliance means (i) the ability for the agency management system and related systems to correctly process information in their usual and intended manner on and after January 1, 2000, and (ii) the ability to accurately retrieve information that is stored in the system prior to January 1, 2000. The Company has substantially completed the testing and implementation of its core compliance strategy. To date, approximately $550,000 has been expended in systems upgrades directly relating to Year 2000 issues. Any additional amounts needed to finalize any remaining upgrades are not expected to be material in nature. Based on its assessments and testing, the Company believes that it will not experience any material disruption as a result of Year 2000 issues in processing information, interfacing with key vendors, or with processing orders and billing. However, the Year 2000 issue creates risk for the Company from unforeseen problems in its own computer systems and from systems of third parties on which the Company relies. Accordingly, the Company has requested assurances from software vendors from which it has purchased or from which it may purchase software that the software sold to the Company will continue to correctly process date information through 2000 and beyond. In addition, the Company has questioned its independent brokers and insurance carriers as to their progress in identifying and addressing problems that their computer systems may experience in correctly processing date information as the year 2000 approaches and thereafter. However, there are no assurances that the Company will identify all date-handling problems in its business systems or that the Company will be able to successfully remedy Year 2000 compliance issues that are discovered. To the extent that the Company is unable to resolve its Year 2000 issues prior to January 1, 2000, operating results could be adversely affected. In addition, the Company could be adversely affected if other entities (e.g., insurance carriers and independent agents through which the Company brokers business) not affiliated with the Company do not appropriately address their own Year 2000 compliance issues in advance of their occurrence. There is also risk that insureds may attempt to recover damages from the Company if their insurance policies procured with the assistance of the Company are believed by such insureds to cover Year 2000-related claims, but do not do so. The impact of these potential legal disputes cannot be reasonably estimated. The Company has developed a contingency plan for dealing with Year 2000 issues that could surface in a particular office or offices. That plan involves shifting the information systems functions from the affected office to another Company office that will be specially equipped and staffed to absorb the additional responsibilities. However, there can be no assurance that Year 2000 issues will not have a material adverse effect on the Company's business, results of operation or financial condition. FORWARD-LOOKING STATEMENTS __________________________ From time to time, the Company may publish "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or make oral statements that constitute forward-looking statements. These forward-looking statements may relate to such matters as anticipated financial performance of future revenues or earnings, business prospects, projected acquisitions or ventures, new products or services, anticipated market performance, compliance costs, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company cautions readers that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. These risks and uncertainties, many of which are beyond the Company's control, include, but are not limited to: (i) competition from existing insurance agencies and new participants and their effect on pricing of premiums; (ii) changes in regulatory requirements that could affect the cost of doing business; (iii) legal developments affecting the litigation experience of the insurance industry; (iv) the volatility of the securities markets; (v) the potential occurrence of a major natural disaster in certain areas of the State of Florida, where the Company's business is concentrated, and (vi) general economic conditions. The Company does not undertake any obligation to publicly update or revise any forward-looking statements. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest, foreign currency exchange rates, and equity prices. The Company is exposed to market risk through its revolving credit line and some of its investments; however, such risk is not considered to be material as of September 30, 1999. BROWN & BROWN, INC. ___________________ PART II - OTHER INFORMATION ___________________________ ITEM 1 - LEGAL PROCEEDINGS The Company is involved in various pending or threatened proceedings by or against the Company or one or more of its subsidiaries which involve routine litigation relating to insurance risks placed by the Company, and other contractual matters. The Company's management does not believe that any such pending or threatened proceedings will have a material adverse effect on the Company's financial position or results or operations. ITEM 2 - CHANGE IN SECURITIES AND USE OF PROCEEDS Effective July 20, 1999, the Company acquired all of the outstanding shares of two related entities - Ampher Insurance, Inc. (Ampher) and Ross Insurance of Florida, Inc. (Ross). In exchange for all of the outstanding stock of Ampher and Ross, the Company issued 167,328 shares of the Company's common stock to the former shareholders of those agencies. The Company's shares were offered and sold privately and no underwriting was involved. The Company issued the shares without registration under the Securities Act of 1993 (the "Act"). The Company relied upon the exemptions set forth in Section 4(2) of the Act and Rule 506 of Regulation D, promulgated thereunder. In the transaction, the Company (i) made available to the purchasers the information required by Rule 502(b) of Regulation D, (ii) did not offer the shares by means of any advertisement, general solicitation or other means proscribed by Rule 502(c) of Regulation D, (iii) informed the purchasers of the limitations on resale of the shares and placed an appropriate restrictive legend on the share certificates, and (iv) filed a notice on Form D with the Securities and Exchange Commission within 15 days after the sale. The Company shares were offered privately by the Company to fewer than 35 purchasers and the Company reasonably believed that each purchaser (or representative of such purchaser) had such knowledge and experience in financial and business matters that he was capable of evaluating the merits and risks of the prospective investment. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit 3a - Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3a to Form 10-Q for the quarter ended March 31, 1999) Exhibit 3b - Amended and Restated Bylaws (incorporated by reference to Exhibit 3b to Form 10-K for the year ended December 31, 1996) Exhibit 4b - Rights Agreement, dated as of July 30, 1999, between the Company and First Union National Bank, as Rights Agent (incorporated by reference to Exhibit 4.1 to Form 8-K filed on August 2, 1999). Exhibit 10k - Rights Agreement, dated as of July 30, 1999, between the Company and First Union National Bank, as Rights Agent (incorporated by reference to Exhibit 4.1 to Form 8-K filed on August 2, 1999). Exhibit 11 - Statement re: Computation of Basic and Diluted Earnings Per Share Exhibit 27 - Financial Data Schedule (for SEC use only) (b) The Company filed a report on Form 8-K on August 2, 1999 to reflect the Company's adoption of a Shareholder Rights Plan on July 29, 1999. No financial statements were filed as part of the report. 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 thereunto duly authorized. BROWN & BROWN, INC. Date: November 5, 1999 /S/ JEFFREY R. PARO _____________________________________ Jeffrey R. Paro, Vice President, Chief Financial Officer and Treasurer (duly authorized officer, principal financial officer and principal accounting officer) EX-11 2
Exhibit 11 - Statement Re: Computation of Basic and Diluted Earnings Per Share (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 1999 1998 1999 1998 BASIC EARNINGS PER SHARE Net Income $ 7,083 $ 6,060 $20,012 $17,001 ======== ======= ======= ======= Weighted average shares outstanding 13,604 13,643 13,636 13,575 ======= ======= ======= ======= Basic earnings per share $ .52 $ .44 $ 1.47 $ 1.25 ======== ======= ======= ======= DILUTED EARNINGS PER SHARE Weighted average number of shares outstanding 13,604 13,643 13,636 13,575 ________ _______ _______ _______ Net effect of dilutive stock options, based on the treasury stock method 2 - 1 - ________ ________ _______ ________ Total diluted shares used in computation 13,606 13,643 13,637 13,575 ======== ======= ======= ======= Diluted earnings per share $ .52 $ .44 $ 1.47 $ 1.25 ======== ======= ======= =========
EX-27 3
5 This Schedule contains summary financial information extracted from the financial statements of Brown & Brown, Inc. for the nine months ended September 30, 1999, and is qualified in its entirety by reference to such financial statements. 1000 9-MOS DEC-31-1999 SEP-30-1999 35,805 9,726 61,221 0 0 104,424 36,386 22,454 222,287 112,755 0 0 0 1,361 96,276 222,287 0 131,104 0 98,216 0 0 5,915 32,888 12,876 20,012 0 0 0 20,012 .52 .52
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