-----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, NmvCUeusnnqCmmgZWW2gPSSLsvRvvdwzYkI1zWCbg20GddnGC5im+p47WNgHEQTn RvjgdfOCyziKortCAmdxPw== 0000814898-97-000006.txt : 19971110 0000814898-97-000006.hdr.sgml : 19971110 ACCESSION NUMBER: 0000814898-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971107 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: SEC FILE NUMBER: 000-15981 FILM NUMBER: 97710574 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 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, 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 office) (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, 1997 Common stock, no par value 12,803,549 (This document contains 13 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 30,1997 and 1996 3 Consolidated Balance Sheet, September 30, 1997 and December 31, 1996 4 Statement of Consolidated Shareholders' Equity for the nine months ended September 30, 1997 and 1996 5 Statement of Consolidated Cash Flows for the nine months ended September 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7-8 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Exhibits to Part I Exhibit 11 - Computation of Earnings Per Share 12 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Exhibit 11 - See Part I 13 STATEMENT OF CONSOLIDATED INCOME HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996 -------------- -------------- -------------- -------------- Revenues Commissions $40,800,479 $37,725,220 $129,752,606 $116,493,506 and fees Investment and other income 1,049,030 590,206 4,332,858 2,833,746 ----------- ---------- ------------ ------------ 41,849,509 38,315,426 134,085,464 119,327,252 Operating expenses Compensation and employee benefits 23,696,665 21,756,235 72,564,190 65,871,369 Other operating 11,212,453 10,710,825 34,133,162 30,314,437 expenses Amortization of intangibles 1,992,481 1,891,994 6,218,190 5,558,598 Interest expense 486,627 300,905 1,518,797 762,364 ---------- ---------- ----------- ----------- 37,388,226 34,659,959 114,434,339 102,506,768 ---------- ---------- ----------- ----------- INCOME BEFORE INCOME TAXES 4,461,283 3,655,467 19,651,125 16,820,484 Income taxes 1,894,996 1,414,999 8,141,050 6,743,495 ---------- ---------- ----------- ----------- NET INCOME $2,566,287 $2,240,468 $11,510,075 $10,076,989 ========== ========== =========== =========== NET INCOME PER COMMON SHARE $0.20 $0.17 $0.88 $0.75 ========== ========== =========== =========== Dividends per Common Share $0.155 $0.15 $0.465 $0.45 ========== ========== =========== =========== Weighted Average Number of Shares Outstanding 12,964,842 13,284,736 13,148,200 13,512,855 ========== ========== =========== ===========
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) SEPTEMBER 30, DECEMBER 31, 1997 1996 ASSETS ------------- ------------ CURRENT ASSETS Cash and cash equivalents $28,583,905 $19,774,374 Investments 4,266,543 5,088,020 Receivables: Premiums, less allowance for doubtful accounts of $2,640,000 and $2,445,000, respectively 40,045,691 41,453,677 Other 6,938,784 6,122,612 ------------ ------------ 46,984,475 47,576,289 Prepaid expenses and other current assets 3,488,885 3,816,819 ------------ ------------ TOTAL CURRENT ASSETS 83,323,808 76,255,502 INVESTMENTS 5,045,000 6,185,686 PROPERTY AND EQUIPMENT (NET) 12,579,245 16,092,075 INTANGIBLE ASSETS Expiration rights 78,479,708 76,402,292 Goodwill 31,693,182 32,718,982 Noncompetition agreements 11,831,853 11,421,278 ------------ ------------ 122,004,743 120,542,552 Less accumulated amortization 42,915,072 40,536,482 ------------ ------------ 79,089,671 80,006,070 OTHER ASSETS 5,344,783 2,936,014 ------------ ------------ $185,382,507 $181,475,347 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Premiums payable to insurance $ 68,565,875 $ 66,527,381 companies Accounts payable and accrued expenses 12,554,526 11,401,805 Premium deposits and credits due customers 9,831,842 8,837,483 Current portion of long-term debt 1,921,695 2,345,059 ----------- ------------ TOTAL CURRENT LIABILITIES 92,873,938 89,111,728 LONG-TERM DEBT 28,756,813 27,195,571 OTHER LONG-TERM LIABILITIES 10,489,289 9,869,777 SHAREHOLDERS' EQUITY Common Stock, no par value; authorized 50,000,000 shares; outstanding 12,860,139 and 13,320,577 shares, respectively 17,756,515 25,266,279 Retained earnings 35,505,952 30,031,992 ------------ ----------- 53,262,467 55,298,271 ------------ ----------- $185,382,507 $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 108,396 shares of Common Stock 1,440,066 Purchase of 568,164 shares of Common Stock (8,892,550) (6,036,115) Payment of dividends Other (57,280) Net income 11,510,075 ----------- ----------- Balance at September 30, 1997 $17,756,515 $35,505,952 ============ =========== 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 =========== =========== See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) NINE MONTHS ENDED SEPT. 30, 1997 SEPT. 30, 1996 OPERATING ACTIVITIES Net income $11,510,075 $10,076,989 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,711,765 2,396,073 Amortization of intangible assets 6,218,190 5,558,598 ----------- ----------- Net income plus amortization and depreciation 20,440,030 18,031,660 Provision for losses on accounts receivable 578,624 657,872 Gain on sale of assets (2,379,824) (1,313,731) Changes in operating assets and liabilities net of effects from insurance agency acquisitions: (Increase) decrease in accounts receivable (60,371) 2,158,638 Increase (decrease) in prepaid expenses 332,614 (1,660,845) Increase (decrease) in premiums payable to insurance companies 2,780,618 (1,039,171) Increase (decrease) in premium deposits and credits 882,145 (391,368) Increase (decrease) in accounts payable and accrued expenses 701,111 (581,400) Other operating activities 1,603,381 1,303,587 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 24,878,328 17,165,242 INVESTING ACTIVITIES Proceeds from maturities of held- to-maturity investments 4,376,174 9,726,943 Purchase of investments (2,414,012) (6,261,867) Purchase of property and equipment (1,589,070) (3,592,783) Purchase of insurance agencies, net of cash acquired (7,274,617) (5,400,998) Proceeds from sale of assets 5,778,635 1,245,195 Other investing activities 114,169 192,235 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,008,721) (4,091,275) FINANCING ACTIVITIES Proceeds from long-term debt 3,004,220 17,200,000 Principal payments on long-term debt (3,775,697) (12,200,228) Repurchase of Common Stock (8,892,550) (7,932,056) Dividends (6,036,115) (6,040,089) Other financing activities 640,066 9,635 ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (15,060,076) (8,962,738) ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 8,809,531 4,111,229 Cash and cash equivalents at beginning of period 19,774,374 17,020,706 CASH AND CASH EQUIVLENTS AT END OF PERIOD $28,583,905 $21,131,935 =========== =========== See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES September 30, 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 nine month period ended September 30, 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-ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) has issued FASB Statement No. 128 "Earnings per Share" which establishes new guidelines for the calculation of and disclosures regarding earnings per share. The Company will adopt the provisions of Statement No. 128 during the fourth quarter of 1997 and at that time will be required to present basic and diluted earnings per share and to restate all prior periods. The calculation of basic earnings per share is expected to be comparable to net income per common share which is currently presented by the Company in accordance with Opinion No. 15 of the Accounting Principles Board. NOTE C--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 D--ACQUISITIONS During the first nine months of 1997, the Company acquired certain assets and liabilities of five insurance agencies for $6,557,000 ($3,951,000 in cash, $1,806,000 in guaranteed future payments and 53,333 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 AND SUBSIDIARIES September 30, 1997 (UNAUDITED) NOTE E--SALE OF ASSETS During the nine months ended September 30, 1997 and 1996, the Company sold certain insurance accounts and other assets resulting in gains of approximately $2,380,000 and $1,314,000, respectively, including $301,000 and $92,000 in the third quarters of 1997 and 1996, 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 F--SUBSEQUENT EVENT Effective October 1, 1997, the Company acquired certain assets and liabilities of two insurance agencies for $2,565,000 ($1,978,000 in cash and $587,000 in guaranteed future payments) 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, 1997, commissions and fees were $40.8 million, an increase of 8.2% from commissions and fees of $37.7 million during the comparable period of the prior year. Approximately $5.0 million of commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $2.6 million from the sale of certain offices and accounts in late 1996 and 1997. Core commissions and fees from continuing operations increased 3.0%. Investment and other income was $1.0 million for the three months ended September 30, 1997 an increase of $0.5 million including a $0.2 million increase in nonrecurring gains from the sale of assets. Expenses increased by $2.7 million or 7.9%. Increases include $1.9 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses and amortization of intangibles increased approximately $0.5 million and $0.1 million due primarily 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 for the three months ended September 30, 1997 was 42.5% versus 38.7% for the same period of the prior year. This increase is primarily due to a modest increase in the anticipated corporate effective tax rate due to higher earnings. For the nine months ended September 30, 1997, commissions and fees were $130.0 million, an increase of 11.4% from commissions and fees of $116.5 million during the comparable period of the prior year. Approximately $15.1 million of commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $4.1 million from the sale of certain offices and accounts in 1996 and early 1997. Core commissions and fees from continuing operations increased 3.2%. Investment and other income increased $1.5 million or 52.9% from the prior year primarily due to a $1.1 million increase in nonrecurring gains from the sale of assets. Expenses increased by $11.9 million or 11.6%. Increases include $6.7 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses and amortization of intangibles increased approximately $3.8 million and $0.7 million, respectively, primarily due to the aforementioned purchase acquisitions and consulting fees totaling $1.0 million associated with the Company's strategic plan. Interest expense increased by $0.8 million due to increased borrowings related to the stock repurchase and agency acquisition programs. The Company's overall tax rate of 41.4% for the nine months ended September 30, 1997, was relatively comparable to the rate of 40.1% for the same period of the prior year and reflects a modest increase in the anticipated corporate effective tax rate due to higher earnings. 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, 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 $24.9 million and $17.2 million for the nine months ended September 30, 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 $1.6 million and $3.6 million for the nine months ended September 30, 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 $7.3 million and $5.4 million in the nine months ended September 30, 1997 and 1996, respectively. Cash expenditures for such agency acquisitions have been funded primarily through operations and from 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 from the sale of accounts and other assets amounted to $5.8 million and $1.2 million in the nine months ended September 30, 1997 and 1996, respectively. The Company did not have any material capital expenditure commitments as of September 30, 1997. Financing activities utilized cash of $15.1 million and $9.0 million in the nine months ended September 30, 1997 and 1996, respectively. The Company has consistently made scheduled debt payments and annually increased its dividend rate. In addition, during the nine months ended September 30, 1997 and 1996, the Company repurchased 568,164 and 580,900, respectively, shares of its Common Stock under a stock repurchase program. The Company is currently authorized to purchase an additional 855,000 shares and expects to continue to repurchase shares during the remainder of 1997. The Company does not anticipate any change in the current dividend rate in the foreseeable future. The Company has a bank credit agreement for $30.0 million under loans due in 2002. At September 30, 1997, there were loans of $26.0 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, 1997. Shareholders' equity of $53.3 million at September 30, 1997, is decreased from $55.3 million at December 31, 1996, and the debt to equity ratio of 0.54 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 and an increase in borrowings under the bank credit agreement used for insurance agency acquisitions and the repurchase of Common Stock. 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, 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 November 6, 1997 By: /s/ Andrew L. Rogal President and Chief Executive Officer (Principal Executive Officer) Date November 6, 1997 By: /s/ Carolyn Jones Senior Vice President-Finance (Principal Financial Officer) Date November 6, 1997 By: /s/ Robert W. Blanton, Jr. Assistant 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 Quarter Ended Nine Months Ended September 30, September 30, ----------------------------------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- PRIMARY: Average shares outstanding 12,964,842 13,284,736 13,148,200 13,512,855 Net effect of dilutive stock options -- based on the treasury stock method using average fair value 156,391 19,336 75,448 26,245 Net effect of guaranteed future shares to be issued in connection with an agency acquisition 130,647 130,647 ----------- ---------- --------- ---------- Average number of shares as adjusted 13,251,880 13,304,072 13,354,295 13,539,100 =========== ========== =========== =========== Net income $2,566,287 $2,240,468 $11,510,075 $10,076,989 =========== ========== =========== =========== Per share amount $.19 $.17 $.86 $.74 ==== ==== ==== ==== FULLY DILUTED: Average shares outstanding 12,964,842 13,284,736 13,148,200 13,512,855 Net effect of dilutive stock options -- based on the treasury stock method using the end of period value, if higher than average fair value 242,558 22,328 211,314 26,245 Net effect of guaranteed future shares to be issued in connection with an agency acquisition 130,647 130,647 ----------- ---------- --------- ---------- Average number of shares as adjusted 13,338,047 13,307,064 13,490,161 13,539,100 =========== ========== ========== ========== Net income $2,566,287 $2,240,468 $11,510,075 $10,076,989 =========== ========== =========== =========== Per share amount $.19 $.17 $.85 $.74 ==== ==== ==== ==== 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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1997 SEP-30-1997 28,583,905 4,266,543 49,624,475 2,640,000 0 83,323,808 34,204,383 21,625,138 185,382,507 92,873,938 28,756,813 17,756,515 0 0 35,505,952 185,382,507 0 134,085,464 0 0 112,915,542 0 1,518,797 19,651,125 8,141,050 11,510,075 0 0 0 11,510,075 .88 .88
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