-----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, THzUQoPSy9VEwiMRRvo8hnRkineeOovHq+0fnUDyGjsb9iRDnxGN/LpeNaZ0wbEV 9k34YO8ZGsi/OYQ7rhPEAA== 0000814898-96-000015.txt : 19961101 0000814898-96-000015.hdr.sgml : 19961101 ACCESSION NUMBER: 0000814898-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961031 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILB ROGAL & HAMILTON CO /VA/ CENTRAL INDEX KEY: 0000814898 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 541194795 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15981 FILM NUMBER: 96650849 BUSINESS ADDRESS: STREET 1: 4235 INNSLAKE DR CITY: GLEN ALLEN STATE: VA ZIP: 23060 BUSINESS PHONE: 8047476500 MAIL ADDRESS: STREET 1: P O BOX 1220 CITY: GLEN ALLEN STATE: VA ZIP: 23060 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1996 Commission file number 0-15981 HILB, ROGAL AND HAMILTON COMPANY (Exact name of registrant as specified in its charter) Virginia 54-1194795 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 1220, Glen, Allen, VA 23060-1220 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (804) 747-6500 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 1996 Common stock, no par value 13,503,377 (This document contains 12 pages) HILB, ROGAL AND HAMILTON COMPANY INDEX Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statement of Consolidated Income for the three months and nine months ended September 30, 1996 and 1995 3 Consolidated Balance Sheet, September 30, 1996 and December 31, 1995 4 Statement of Consolidated Shareholders' Equity for the nine months ended September 30, 1996 and 1995 5 Statement of Consolidated Cash Flows for the nine months ended September 30, 1996 and 1995 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-10 Exhibits to Part I Exhibit 11 - Computation of Earnings Per Share 11 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 Exhibit 11 - See Part I 12 STATEMENT OF CONSOLIDATED INCOME HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995 Revenues Commissions and fees $37,725,220 $35,775,585 $116,493,506 $106,995,550 Investment and other income 590,206 619,280 2,833,746 5,427,298 ----------- ----------- ------------ ------------ 38,315,426 36,394,865 119,327,252 112,422,848 Operating expenses Compensation and employee benefits 21,756,235 20,700,611 65,871,369 61,872,170 Other operating expenses 10,710,825 9,702,191 30,314,437 27,278,034 Amortization of intangibles 1,891,994 1,861,407 5,558,598 5,182,985 Interest expense 300,905 95,435 762,364 324,126 ----------- ----------- ------------ ----------- 34,659,959 32,359,644 102,506,768 94,657,315 INCOME BEFORE ----------- ----------- ------------ ----------- INCOME TAXES 3,655,467 4,035,221 16,820,484 17,765,533 Income taxes 1,414,999 1,645,750 6,743,495 7,138,296 ----------- ----------- ------------ ----------- NET INCOME $ 2,240,468 $ 2,389,471 $ 10,076,989 $ 10,627,237 =========== =========== ============ ============ NET INCOME PER COMMON SHARE $0.17 $0.17 $0.75 $0.73 ===== ===== ===== ===== Dividends per Common Share $0.15 $0.14 $0.45 $0.42 ===== ===== ===== ===== Weighted Average Number of Shares Outstanding 13,284,736 14,373,977 13,512,855 14,616,701 ========== ========== ========== ==========
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) SEPTEMBER 30, DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS Cash and cash equivalents $ 21,131,935 $ 17,020,706 Investments 6,094,597 11,154,673 Receivables: Premiums, less allowance for doubtful accounts of $2,250,000 and $1,772,000, respectively 39,239,429 41,707,706 Other 4,624,248 4,794,396 ------------ ------------ 43,863,677 46,502,102 Prepaid expenses and other current assets 5,609,157 3,937,964 ------------ ------------ TOTAL CURRENT ASSETS 76,699,366 78,615,445 INVESTMENTS 5,895,000 4,300,000 PROPERTY AND EQUIPMENT (NET) 15,060,143 13,700,260 INTANGIBLE ASSETS Expiration rights 67,838,344 68,345,441 Goodwill 25,872,182 24,432,875 Noncompetition agreements 10,722,226 9,888,798 ------------ ------------ 104,432,752 102,667,114 Less accumulated amortization 40,343,254 41,812,787 ------------ ------------ 64,089,498 60,854,327 OTHER ASSETS 4,400,306 5,778,932 ------------ ------------ $166,144,313 $163,248,964 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Premiums payable to insurance companies $ 68,872,563 $ 69,481,803 Accounts payable and accrued expenses 7,815,502 8,040,022 Premium deposits and credits due customers 7,671,258 8,062,626 Current portion of long-term debt 1,295,430 1,755,238 ------------ ------------ TOTAL CURRENT LIABILITIES 85,654,753 87,339,689 LONG-TERM DEBT 17,619,960 11,749,848 OTHER LONG-TERM LIABILITIES 8,109,018 7,513,537 SHAREHOLDERS' EQUITY Common Stock, no par value; authorized 50,000,000 shares; outstanding 13,243,553 and 13,706,764 shares, respectively 23,981,692 29,903,900 Retained earnings 30,778,890 26,741,990 ------------ ------------ 54,760,582 56,645,890 ------------ ------------ $166,144,313 $163,248,964 ============ ============ See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) Common Stock Retained Earnings Balance at January 1, 1996 $ 29,903,900 $26,741,990 Issuance of 145,558 shares of Common Stock 1,987,725 Purchase of 580,900 shares of Common Stock (7,932,056) Payment of dividends (6,040,089) Other 22,123 Net income 10,076,989 ------------ ----------- Balance at September 30, 1996 $ 23,981,692 $30,778,890 ============ =========== Balance at January 1, 1995 $ 43,426,295 $23,003,861 Issuance of 318,126 share of Common Stock 3,815,196 Purchase of 870,320 shares of Common Stock (10,897,688) Payment of dividends (6,111,211) Other 63,306 119,097 Net income 10,627,237 ------------ ----------- Balance at September 30, 1995 $ 36,407,109 $27,638,984 ============ =========== See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) NINE MONTHS ENDED SEPT. 30, 1996 SEPT. 30, 1995 OPERATING ACTIVITIES Net income $ 10,076,989 $ 10,627,237 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,396,073 1,996,719 Amortization of intangible assets 5,558,598 5,182,985 Provision for losses on accounts receivable 657,872 675,674 Gain on sale o f assets (1,313,731) (3,029,881) ------------ ------------ 17,375,801 15,452,734 Changes in operating assets and liabilities net of effects from insurance agency acquisitions: (Increase) decrease in accounts receivable 2,158,638 (3,441,511) Increase in prepaid expenses (1,660,845) (206,079) Increase (decrease) in premiums payable to insurance companies (1,039,171) 5,066,086 Decrease in premium deposits and customer credits (391,368) (630,860) Decrease in accounts payable and accrued expenses (581,400) (2,805,900) Other operating activities 1,303,587 713,042 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 17,165,242 14,147,512 INVESTING ACTIVITIES Proceeds from maturities of held- to-maturity investments 9,726,943 20,263,298 Purchase of investments (6,261,867) (7,399,402) Purchase of property and equipment (3,592,783) (2,746,152) Purchase of insurance agencies, net of cash acquired (5,400,998) (4,827,594) Proceeds from sale of assets 1,245,195 3,000,326 Other investing activities 192,235 195,920 ____________ ___________ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,091,275) 8,486,396 FINANCING ACTIVITIES Proceeds from long-term debt 17,200,000 24,912,500 Principal payments on long-term debt (12,200,228) (24,871,117) Proceeds from issuance of Common Stock 5,100 Repurchase of Common Stock (7,932,056) (10,897,688) Dividends (6,040,088) (6,111,211) Other financing activities 9,634 120,097 NET CASH USED IN FINANCING ------------ ------------ ACTIVITIES (8,962,738) (16,842,319) ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS 4,111,229 5,791,589 Cash and cash equivalents at beginning of period 17,020,706 12,615,132 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,131,935 $ 18,406,721 ============ ============ See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES September 30, 1996 (UNAUDITED) NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to 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. Operating results for the nine month period ended September 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 1995. NOTE B--INCOME TAXES The Company (except for pooled entities prior to acquisition and its Canadian subsidiary) files a consolidated federal income tax return. Deferred taxes result from temporary differences between the reporting for income tax and financial statement purposes primarily related to bad debt expense, depreciation expense, basis differences in intangible assets, deferred compensation arrangements and the recognition of net operating loss carryforwards from pooled entities. NOTE C--ACQUISITIONS During the first nine months of 1996, the Company acquired certain assets and liabilities of 11 insurance agencies for $6,138,000 ($3,748,000 in cash, $411,000 in guaranteed future payments and 144,848 shares of Common Stock) in purchase accounting transactions. Proforma revenues and net income are not material to the consolidated financial statements. NOTE D--SALE OF ASSETS During the nine months ended September 30, 1996 and 1995, the Company sold certain insurance accounts and other assets resulting in gains of approximately $1,314,000 and $3,030,000, respectively, including $92,000 and $68,000 in the third quarters of 1996 and 1995, respectively. These amounts are included in other revenues in the statement of consolidated income. Revenues, expenses and assets of these operations were not material to the consolidated financial statements. NOTE E--SUBSEQUENT EVENT Effective October 1, 1996, the Company acquired certain assets and liabilities of three insurance agencies for $9,563,000 ($3,109,000 in cash, $2,326,000 in guaranteed future payments and 306,761 shares of Common Stock) in purchase accounting transactions. Proforma revenues and net income are not material to the consolidated financial statements. HILB, ROGAL AND HAMILTON COMPANY (THE "COMPANY") MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: For the three months ended September 30, 1996, commissions and fees were $37.7 million, an increase of 5.4% from commissions and fees of $35.8 million during the comparable period of the prior year. Approximately $2.1 million of commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $0.3 million from the sale of certain offices and accounts in late 1995 and 1996. Investment and other income was $0.6 million for the three months ended September 30, 1996 which was comparable to the corresponding period of the prior year. Expenses increased by $2.3 million or 7.1%. Increases include $1.1 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses increased approximately $1.0 million due in part to the aforementioned purchase acquisitions. Interest expense increased by $0.2 million due to increased borrowings related to the stock repurchase and agency acquisition programs. The Company's overall tax rate of 38.7% for the three months ended September 30, 1996, was relatively comparable to the rate of 40.8% for the same period of the prior year. For the nine months ended September 30, 1996, commissions and fees were $116.5 million, an increase of 8.9% from commissions and fees of $107.0 million during the comparable period of the prior year. Approximately $10.0 million of commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $1.4 million from the sale of certain offices and accounts in 1995 and early 1996. Investment and other income decreased $2.6 million or 47.8% from the prior year primarily due to the gain on the sale of substantially all of the operating assets of the Green Bay, Wisconsin office during May 1995 which resulted in a gain of approximately $2.1 million. Expenses increased by $7.8 million or 8.3%. Increases include $4.8 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses and amortization of intangibles increased approximately $3.0 million and $0.4 million, respectively, primarily due to the aforementioned purchase acquisitions. Interest expense increased by $0.4 million due to increased borrowings related to the stock repurchase and agency acquisition programs. The Company's overall tax rate of 40.1% for the nine months ended September 30, 1996, was relatively comparable to the rate of 40.2% for the same period of the prior year. The timing of contingent commissions, policy renewals and acquisitions may cause revenues, expenses and net income to vary significantly from quarter to quarter. As a result of the factors described above, operating results for the nine months ended September 30, 1996 should not be considered indicative of the results that may be expected for the entire year ending December 31, 1996. Liquidity and Capital Resources: Net cash provided by operations totaled $17.2 million and $14.1 million for the nine months ended September 30, 1996 and 1995, respectively, and is primarily dependent upon the timing of the collection of insurance premiums from clients and payment of those premiums to the appropriate insurance underwriters. The Company has historically generated sufficient funds internally to finance capital expenditures for personal property and equipment. Real properties acquired for offices of the Company are generally financed by long-term mortgages. Cash expenditures for the acquisition of property and equipment were $3.6 million and $2.7 million for the nine months ended September 30, 1996 and 1995, respectively. The timing and extent of the purchase of investments is dependent upon cash needs and yields on alternate investments and cash equivalents. The purchase of insurance agencies accounted for under the purchase method of accounting utilized cash of $5.4 million and $4.8 million in the nine months ended September 30, 1996 and 1995, respectively. In addition, a portion of the purchase price in such acquisitions may be paid through Common Stock and deferred cash payments. The Company did not have any material capital expenditure commitments as of September 30, 1996. Cash proceeds from the sale of accounts and other assets amounted to $1.2 million and $3.0 million in the nine months ended September 30, 1996 and 1995, respectively. Financing activities utilized cash of $9.0 million and $16.8 million in the nine months ended September 30, 1996 and 1995, respectively. The Company has consistently made scheduled debt payments and annually increased its dividend rate. In addition, during the nine months ended September 30, 1996 and 1995, the Company repurchased 580,900 and 870,320, respectively, shares of its Common Stock under a stock repurchase program. The Company is currently authorized to purchase an additional 644,000 shares and expects to continue to repurchase shares during the remainder of 1996. The Company anticipates the continuance of its dividend policy. The Company has a bank credit agreement for $20.0 million under loans due through 2001. At September 30, 1996, there were loans of $15.0 million outstanding under the agreement. The Company had a current ratio (current assets to current liabilities) of 0.90 to 1.00 as of September 30, 1996. Shareholders' equity of $54.8 million at September 30, 1996, is decreased from $56.6 million at December 31, 1995, and the debt to equity ratio of 0.32 to 1.00 is increased from the ratio at December 31, 1995 of 0.21 to 1.00 due to the stock buyback program and increased borrowings under the aforementioned bank credit agreement. The Company believes that cash generated from operations, together with proceeds from borrowings, will provide sufficient funds to meet the Company's short and long-term funding needs. PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits - 11 Computation of per share earnings b) No reports on Form 8-K have been filed during the nine months ended September 30, 1996. SIGNATURE 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. Hilb, Rogal and Hamilton Company (Registrant) Date October 31, 1996 By: /s/ Robert H. Hilb Chairman (Principal Executive Officer) Date October 31, 1996 By: /s/ Timothy J. Korman Executive Vice President-Finance (Principal Financial Officer) Date October 31, 1996 By: /s/ Carolyn Jones Vice President and Controller (Chief Accounting Officer) EX-11 2 11 HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Quarter Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 PRIMARY: Average shares outstanding 13,284,736 14,373,977 13,512,855 14,616,701 Net effect of dilutive stock options -- based on the treasury stock method using average fair value 19,336 13,036 26,245 6,734 ---------- ---------- ---------- ---------- Average number of shares as adjusted 13,304,072 14,387,013 13,539,100 14,623,435 ========== ========== =========== =========== Net income $2,240,468 $2,389,471 $10,076,989 $10,627,237 ========== ========== =========== =========== Per share amount $.17 $.17 $.74 $.73 ==== ==== ==== ==== FULLY DILUTED: Average shares outstanding 13,284,736 14,373,977 13,512,855 14,616,701 Net effect of dilutive stock options -- based on the treasury stock method using the end of period value, if higher than average fair value 22,328 28,078 26,245 27,674 ---------- ---------- ---------- ---------- Average number of shares as adjusted 13,307,064 14,402,055 13,539,100 14,644,375 ========== ========== =========== =========== Net income $2,240,468 $2,389,471 $10,076,989 $10,627,237 ========== ========== =========== =========== Per share amount $.17 $.17 $.74 $.73 ==== ==== ==== ==== Note:The per share amounts for each period presented above do not necessarily support amounts in the statement of consolidated income because common stock equivalents are less than 3% dilutive. EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10Q FOR HILB, ROGAL AND HAMILTON COMPANY FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 SEP-30-1996 21,131,935 6,094,597 46,113,677 2,250,000 0 76,699,366 36,891,631 21,831,488 166,144,313 85,654,753 17,619,960 23,981,692 0 0 30,778,890 166,144,313 0 119,327,252 0 0 101,744,404 0 762,364 16,820,484 6,743,495 10,076,989 0 0 0 10,076,989 .75 .75
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