-----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, Ga8S1Xtt4OvGYPjFnweiB4NZu1mH2DX2N4aNr3Wktxep9Z5S5Wp/mtcCSDXOf3YS rVkU3e00CuyHp+1WTEWBGA== 0000814898-97-000003.txt : 19970506 0000814898-97-000003.hdr.sgml : 19970506 ACCESSION NUMBER: 0000814898-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970505 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: 97595433 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 March 31, 1997 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 May 5, 1997 Common stock, no par value 13,160,939 (This document contains 11 pages) HILB, ROGAL AND HAMILTON COMPANY INDEX Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statement of Consolidated Income for the three months ended March 31,1997 and 1996 3 Consolidated Balance Sheet March 31, 1997 and December 31, 1996 4 Statement of Consolidated Shareholders' Equity for the three months ended March 31,1997 and 1996 5 Statement of Consolidated Cash Flows for the three months ended March 31, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 Exhibits to Part I Exhibit 11 - Computation of Earnings Per Share 10 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Exhibit 11 - See Part I STATEMENT OF CONSOLIDATED INCOME HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 Revenues Commissions and fees $47,265,029 $41,929,002 Investment and other income 647,807 1,146,567 ----------- ----------- 47,912,836 43,075,569 Operating expenses Compensation and employee benefits 24,969,374 22,620,910 Other operating expenses 11,211,778 9,691,358 Amortization of intangibles 2,130,018 1,792,341 Interest expense 517,718 231,895 ----------- ---------- 38,828,888 34,336,504 ----------- ---------- INCOME BEFORE INCOME TAXES 9,083,948 8,739,065 Income taxes 3,677,232 3,576,750 ----------- ---------- NET INCOME $ 5,406,716 $ 5,162,315 =========== =========== NET INCOME PER SHARE $0.41 $0.38 ===== ===== Dividends $0.155 $0.15 ====== ===== Weighted Average Number of Shares of Common Stock Outstanding 13,313,423 13,729,596 ========== ========== See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) MARCH 31, DECEMBER 31, 1997 1996 ASSETS CURRENT ASSETS Cash and cash equivalents $ 26,262,940 $ 19,774,374 Investments 6,332,129 5,088,020 Receivables: Premiums, less allowance for doubtful accounts of $2,596,000 and $2,445,000, respectively 37,660,605 41,453,677 Other 5,542,013 6,122,612 ---------- ---------- 43,202,618 47,576,289 Prepaid expenses and other current assets 2,872,303 3,816,819 ---------- ---------- TOTAL CURRENT ASSETS 78,669,990 76,255,502 INVESTMENTS 5,445,000 6,185,686 PROPERTY AND EQUIPMENT (NET) 16,050,295 16,092,075 INTANGIBLE ASSETS Expiration rights 81,767,250 76,402,292 Goodwill 32,850,631 32,718,982 Noncompetition agreements 12,046,278 11,421,278 ----------- ----------- 126,664,159 120,542,552 Less accumulated amortization 42,660,642 40,536,482 ----------- ----------- 84,003,517 80,006,070 OTHER ASSETS 2,956,191 2,936,014 ----------- ----------- $187,124,993 $181,475,347 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Premiums payable to insurance companies $ 66,011,175 $ 66,527,381 Accounts payable and accrued expenses 10,988,927 11,401,805 Premium deposits and credits due customers 11,381,358 8,837,483 Current portion of long-term debt 2,792,677 2,345,059 ------------ ------------ TOTAL CURRENT LIABILITIES 91,174,137 89,111,728 LONG-TERM DEBT 29,228,526 27,195,571 OTHER LONG-TERM LIABILITIES 9,858,507 9,869,777 SHAREHOLDERS' EQUITY Common Stock, no par value; authorized 50,000,000 shares; outstanding 13,195,626 and 13,320,577 shares, respectively 23,484,341 25,266,279 Retained earnings 33,379,482 30,031,992 ----------- ---------- 56,863,823 55,298,271 ----------- ---------- $187,124,993 $181,475,347 ============ ============ 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, 1997 $25,266,279 $30,031,992 Issuance of 28,205 shares of Common Stock 338,100 Purchase of 152,486 shares of Common Stock (2,059,051) Payment of dividends (2,059,226) Other (60,987) Net income 5,406,716 ------------ ------------ Balance at March 31, 1997 $23,484,341 $33,379,482 ============ ============ Balance at January 1, 1996 $29,903,900 $26,741,990 Issuance of 72,848 shares of Common Stock 990,300 Purchase of 183,200 shares of Common Stock (2,512,954) Payment of dividends (2,044,188) Other 15,591 Net income 5,162,315 ------------ ------------ Balance at March 31, 1996 $28,396,837 $29,860,117 ============ ============ See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 OPERATING ACTIVITIES Net income $ 5,406,716 $ 5,162,315 Adjustments to reconcile net income to net cash provided by operating activities: 882,859 747,315 Depreciation and amortization Amortization of intangible assets 2,130,018 1,792,341 Provision for losses on accounts receivable 221,460 274,965 Gain on sale of assets (88,825) (502,587) ------------ ----------- 8,552,228 7,474,349 ============ =========== Changes in operating assets and liabilities Net of effects from insurance agency acquisitions: Decrease in accounts receivable 4,285,297 3,947,181 Decrease in prepaid expenses 958,362 1,484,061 Decrease in premiums payable to insurance companies (516,423) (2,816,060) Increase (decrease) in premium deposits and customer credits 2,373,162 (719,373) Decrease in accounts payable and accrued expenses (439,868) (502,424) Other operating activities (203,360) 1,076,618 ------------ ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 15,009,398 9,944,352 INVESTING ACTIVITIES Proceeds from maturities of held-to-maturity investments 496,576 3,560,000 Purchase of investments (1,000,000) (4,027,743) Purchase of property and equipment (501,616) (1,799,523) Purchase of insurance agencies, net of cash acquired (4,110,405) (2,242,683) Proceeds from sale of assets 92,868 466,144 Other investing activities 14,924 127,703 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (5,007,653) (3,916,102) FINANCING ACTIVITIES Proceeds from long-term debt 1,000,000 Principal payments on long-term debt (433,002) (595,619) Proceeds from issuance of Common Stock 38,100 Repurchase of Common Stock (2,059,051) (2,512,954) Dividends (2,059,226) (2,044,188) ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (3,513,179) (5,152,761) INCREASE IN CASH AND CASH EQUIVALENTS 6,488,566 875,489 Cash and cash equivalents at beginning of period 19,774,374 17,020,706 CASH AND CASH EQUIVALENTS AT END OF ------------ ----------- PERIOD $26,262,940 $17,896,195 ============ ============ See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES March 31, 1997 (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 three month period ended March 31, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 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, 1996. NOTE B--INCOME TAXES The Company (except for 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 three months of 1997, the Company acquired certain assets and liabilities of three insurance agencies for $5,920,000 ($3,814,000 in cash, $1,806,000 in deferred cash payments and 22,305 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 three months ended March 31, 1997 and 1996, the Company sold certain insurance accounts and other assets resulting in gains of approximately $89,000 and $503,000, 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. 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 March 31, 1997, commissions and fees were $47.3 million, an increase of 12.7% from commissions and fees of $41.9 million during the comparable period of the prior year. Approximately $5.3 million of core commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $0.4 million from the sale of certain offices and accounts in 1996 and decreases of $0.7 million in commissions derived from contingency arrangements with insurance companies. Core commissions and fees from operations owned during both periods increased 3.3%. Investment and other income decreased 43.5% from the prior year. These amounts include gains from the sale of certain insurance accounts and other assets of $0.1 million and $0.5 million in 1997 and 1996, respectively. Expenses increased by $4.5 million or 13.1%. Increases include $2.3 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses and amortization of intangibles increased approximately $1.8 million and $0.3 million, respectively, primarily due to the aforementioned purchase acquisitions. The Company's overall tax rate of 40.5% for the three months ended March 31, 1997, was relatively comparable to the rate of 40.9% 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 three months ended March 31, 1997 should not be considered indicative of the results that may be expected for the entire year ending December 31, 1997. Liquidity and Capital Resources: Net cash provided by operations totaled $15.0 million and $9.9 million for the three months ended March 31, 1997 and 1996, 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. Cash expenditures for the acquisition of property and equipment were $0.5 million and $1.8 million for the three months ended March 31, 1997 and 1996, 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 $4.1 million and $2.2 million in the three months ended March 31, 1997 and 1996, respectively. Cash expenditures for such insurance agency acquisitions have been primarily funded through operations and long-term borrowings. In addition, a portion of the purchase price in such acquisitions may be paid through Common Stock and deferred cash payments. Cash proceeds form the sale of accounts and other assets amounted to $0.1 million and $0.5 million in the three months ended March 31, 1997 and 1996, respectively. The Company did not have any material capital expenditure commitments as of March 31, 1997. Financing activities utilized cash of $3.5 million and $5.2 million in the three months ended March 31, 1997 and 1996, respectively, as the Company made scheduled debt repayments and annually increased its dividend rate. In addition, during the three months ended March 31, 1997 and 1996, the Company repurchased 152,486 and 183,200, respectively, shares of its Common Stock under a stock repurchase program. The Company is currently authorized to purchase an additional 270,000 shares and expects to continue to repurchase shares during the remainder of 1997. The Company anticipates the continuance of its dividend policy. The Company has a bank credit agreement for $30.0 million under loans due through 2001. At March 31, 1997, there were loans of $24.0 million outstanding under the agreement. The Company had a current ratio (current assets to current liabilities) of 0.86 to 1.00 as of March 31, 1997. Shareholders' equity of $56.9 million at March 31, 1997, is improved from $55.3 million at December 31, 1996, and the debt to equity ratio of 0.51 to 1.00 is increased from the ratio at December 31, 1996 of 0.49 to 1.00 due to net income offset by the impact of the aforementioned purchase of Common Stock of the Company. 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 three months ended March 31, 1997. 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 May 5, 1997 By: /s/ Robert H. Hilb Chairman (Principal Executive Officer) Date May 5, 1997 By: /s/ Timothy J. Korman Executive Vice President-Finance (Principal Financial Officer) Date May 5, 1997 By: /s/ Carolyn Jones Vice President and Controller (Chief Accounting Officer) EX-11 2 HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Three Months Ended March 31, 1997 1996 PRIMARY: Average shares outstanding 13,313,423 13,729,596 Net effect of dilutive stock options -- based on the treasury stock method using average fair value 22,585 30,940 Net effect of guaranteed future shares to be issued in connection with an agency acquisition 27,523 Net effect of future shares to be issued in connection with an agency acquisition contingent upon performance 110,092 ---------- ---------- Average number of shares as adjusted 13,473,623 13,760,536 ========== ========== Net income $5,406,716 $5,162,315 ========== ========== Per share amount $.40 $.38 ==== ==== FULLY DILUTED: Average shares outstanding 13,313,423 13,729,596 Net effect of dilutive stock options -- based on the treasury stock method using the end of period fair value, if higher than average fair value 37,648 41,634 Net effect of guaranteed future shares to be issued in connection with an agency acquisition 27,523 Net effect of future shares to be issued in connection with an agency acquisition contingent upon performance 220,184 ---------- ---------- Average number of shares as adjusted 13,598,778 13,771,230 ========== ========== Net income $5,406,716 $5,162,315 ========== ========== Per share amount $.40 $.37 ==== ==== Note: The per share amounts presented for each period 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 MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 MAR-31-1997 26,262,940 6,332,129 45,798,618 2,596,000 0 78,669,990 38,107,628 22,057,333 187,124,993 91,174,137 29,228,526 23,484,341 0 0 33,379,482 187,124,993 0 47,912,836 0 0 38,311,170 0 517,718 9,083,948 3,677,232 5,406,716 0 0 0 5,406,716 .41 .41
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