-----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, GdaUrDELALpvtfvXPs7feS2Sqs4vMFlJcAblZOHrpUH7YPfyClARi/02aIpnNIAH XLzZ7SFN/dURJR+mbDP8/A== 0001002105-02-000102.txt : 20020814 0001002105-02-000102.hdr.sgml : 20020814 20020814142157 ACCESSION NUMBER: 0001002105-02-000102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 02734600 BUSINESS ADDRESS: STREET 1: THE HILB, ROGAL AND HAMILTON BUILDING STREET 2: 4951 LAKE BROOK DRIVE, SUITE 500 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 hrh10q.txt FORM 10-Q FOR JUNE 30, 2002 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 2002 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.) 4951 Lake Brook Drive, Suite 500, Glen Allen, VA 23060 - ------------------------------------------------------- -------------- (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 July 31, 2002 - ------------------------------- ---------------------------- Common stock, no par value 29,362,646 HILB, ROGAL AND HAMILTON COMPANY INDEX ----- Page ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statement of Consolidated Income for the three months and six months ended June 30, 2002 and 2001 3 Consolidated Balance Sheet, June 30, 2002 and December 31, 2001 4 Statement of Consolidated Shareholders' Equity for the six months ended June 30, 2002 and 2001 5 Statement of Consolidated Cash Flows for the six months ended June 30, 2002 and 2001 6 Notes to Consolidated Financial Statements 7-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15-19 Item 3. Qualitative and Quantitative Disclosures About Market Risk 19 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 20 Item 6. Exhibits and Reports on Form 8-K 20-21 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS STATEMENT OF CONSOLIDATED INCOME HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2002 JUNE 30, 2001 ------------- ------------- ------------- ------------- Revenues Commissions and fees $94,739,300 $74,302,275 $193,387,386 $151,305,181 Investment income 459,780 668,604 973,628 1,296,387 Other 518,198 2,818,736 1,210,060 3,099,774 ----------- ----------- ------------ ------------ 95,717,278 77,789,615 195,571,074 155,701,342 Operating expenses Compensation and employee benefits 52,794,699 42,754,692 106,053,719 85,523,913 Other operating expenses 17,717,009 14,035,720 34,555,565 28,414,966 Depreciation 1,729,843 1,538,519 3,440,443 3,020,344 Amortization of intangibles 562,980 3,446,099 1,084,598 6,770,602 Interest expense 1,819,236 2,353,562 3,702,610 4,659,571 ----------- ----------- ------------ ------------ 74,623,767 64,128,592 148,836,935 128,389,396 ----------- ----------- ------------ ------------ INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 21,093,511 13,661,023 46,734,139 27,311,946 Income taxes 8,591,021 5,874,240 19,048,411 11,744,137 ----------- ----------- ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 12,502,490 7,786,783 27,685,728 15,567,809 Cumulative effect of accounting change, net of tax - - 3,944,484 - ----------- ----------- ------------ ------------ NET INCOME $12,502,490 $ 7,786,783 $ 31,630,212 $ 15,567,809 =========== =========== ============ ============ Net Income Per Share - Basic: Income before cumulative effect of accounting change $0.44 $0.29 $0.98 $0.58 Cumulative effect of accounting change, net of tax - - 0.14 - ----- ----- ----- ----- Net income $0.44 $0.29 $1.12 $0.58 ===== ===== ===== ===== Net Income Per Share - Assuming Dilution: Income before cumulative effect of accounting change $0.40 $0.26 $0.88 $0.53 Cumulative effect of accounting change, net of tax - - 0.12 - ----- ----- ----- ----- Net income $0.40 $0.26 $1.00 $0.53 ===== ===== ===== =====
See notes to consolidated financial statements. 3 CONSOLIDATED BALANCE SHEET HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
JUNE 30, DECEMBER 31, 2002 2001 ---- ---- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $ 59,139,354 $ 51,580,095 Investments 2,387,137 3,499,421 Receivables: Premiums and commissions, less allowance for doubtful accounts of $3,540,071 and $3,374,285, respectively 118,107,312 116,219,367 Other 23,795,498 17,672,780 ------------ ------------- 141,902,810 133,892,147 Prepaid expenses and other current assets 8,500,969 8,435,944 ------------ ------------- TOTAL CURRENT ASSETS 211,930,270 197,407,607 INVESTMENTS 1,179,284 1,335,798 PROPERTY AND EQUIPMENT, NET 18,162,909 19,484,705 GOODWILL 301,434,047 286,554,839 OTHER INTANGIBLE ASSETS 33,606,884 33,516,884 Less accumulated amortization 54,754,117 53,821,407 ------------ ------------- 280,286,814 266,250,316 OTHER ASSETS 9,180,755 9,764,122 ------------ ------------- $520,740,032 $494,242,548 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Premiums payable to insurance companies $172,698,354 $169,501,575 Accounts payable 7,865,561 7,303,804 Accrued expenses 18,067,235 20,302,435 Premium deposits and credits due customers 28,125,801 20,940,410 Current portion of long-term debt 5,604,780 6,996,423 ------------ ------------- TOTAL CURRENT LIABILITIES 232,361,731 225,044,647 LONG-TERM DEBT 103,270,821 114,443,224 OTHER LONG-TERM LIABILITIES 12,943,973 11,953,338 SHAREHOLDERS' EQUITY Common Stock, no par value; authorized 50,000,000 shares; outstanding 28,591,280 and 28,310,568 shares, respectively 58,084,333 55,542,485 Retained earnings 115,170,830 88,604,274 Accumulated other comprehensive income (loss): Unrealized loss on derivative contracts, net of deferred tax benefit of $914,000 and $955,000, respectively (1,370,530) (1,433,296) Other 278,874 87,876 ------------ ------------- 172,163,507 142,801,339 ------------ ------------- $520,740,032 $494,242,548 ============ =============
See notes to consolidated financial statements. 4 STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
ACCUMULATED OTHER COMMON RETAINED COMPREHENSIVE STOCK EARNINGS INCOME (LOSS) ---------- -------- ------------- Balance at January 1, 2002 $55,542,485 $ 88,604,274 $(1,345,420) Issuance of 280,712 shares of Common Stock 2,541,848 Payment of dividends ($.1775 per share) (5,063,656) Net income 31,630,212 Derivative gain arising during 2002, net of tax 62,766 Other _ _ 190,998 ----------- ------------- ------------ Balance at June 30, 2002 $58,084,333 $115,170,830 $(1,091,656) =========== ============= ============ Balance at January 1, 2001 $22,361,312 $65,860,654 $ - Issuance of 619,958 shares of Common Stock 9,647,864 Payment of dividends ($.1725 per share) (4,663,613) Net income 15,567,809 Cumulative effect of accounting change related to derivatives, net of tax (516,600) Derivative loss arising during 2001, net of tax _ _ (342,994) ----------- ----------- ----------- Balance at June 30, 2001 $32,009,176 $76,764,850 $ (859,594) =========== =========== ===========
See notes to consolidated financial statements. 5 STATEMENT OF CONSOLIDATED CASH FLOWS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2002 JUNE 30, 2001 ------------- ------------- OPERATING ACTIVITIES Net income $ 31,630,212 $ 15,567,809 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax (3,944,484) - Depreciation 3,440,443 3,020,344 Amortization of intangible assets 1,084,598 6,770,602 ------------ ------------ Net income plus amortization, depreciation and cumulative effect of accounting change, net of tax 32,210,769 25,358,755 Provision for losses on accounts receivable 584,252 447,709 Provision for deferred income taxes 1,913,655 - (Gain) loss on sale of assets 209,498 (2,622,580) Changes in operating assets and liabilities net of effects from insurance agency acquisitions and dispositions: (Increase) decrease in accounts receivable (1,972,808) 7,730,400 (Increase) decrease in prepaid expenses (274,074) 1,060,273 Increase (decrease) in premiums payable to insurance companies 1,377,091 (2,856,059) Increase in premium deposits and credits due customers 7,174,391 3,836,702 Increase in accounts payable 357,267 133,337 Decrease in accrued expense (2,621,379) (5,973,169) Other operating activities (2,598,126) 1,840,332 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 36,360,536 28,955,700 INVESTING ACTIVITIES Proceeds from maturities of held-to-maturity investments 1,879,064 357,867 Purchase of investments (589,756) (321,465) Purchase of property and equipment (2,314,310) (2,752,960) Purchase of insurance agencies, net of cash acquired (11,890,811) (19,270,964) Proceeds from sale of assets 475,329 4,285,672 Other investing activities 192,005 (134,622) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (12,248,479) (17,836,472) FINANCING ACTIVITIES Proceeds from long-term debt - 25,235,950 Principal payments on long-term debt (12,851,039) (9,868,330) Proceeds from issuance of Common Stock 1,361,897 1,873,823 Dividends (5,063,656) (4,663,614) ------------ ------------ NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (16,552,798) 12,577,829 ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS 7,559,259 23,697,057 Cash and cash equivalents at beginning of period 51,580,095 28,880,784 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 59,139,354 $ 52,577,841 ============ ============
See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Hilb, Rogal and Hamilton Company (the Company) have been prepared in accordance with accounting principles generally accepted in the United States 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 six month period ended June 30, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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, 2001. Certain amounts for the prior period have been reclassified to conform to current year presentation. NOTE B--CHANGES IN ACCOUNTING METHOD Effective January 1, 2002, the Company changed its method of accounting for commissions on premiums billed and collected directly by insurance carriers on its middle-market property and casualty business. Prior to 2002, this revenue was recognized when received. Beginning January 1, 2002, this revenue is recorded on the later of the billing date or the effective date, consistent with the revenue recognition policy for agency billed business. This is the predominant practice followed in the industry. Management believes that this new methodology is preferable and that it better matches the income with the related expenses. For the three months ended June 30, 2002, the effect of this change was to increase net income by $0.9 million ($0.03 per share). For the six months ended June 30, 2002, the effect of this change was to increase net income by $5.5 million ($0.17 per share), which included the cumulative effect adjustment of $3.9 million ($0.12 per share), net of income taxes of $2.6 million. No prior period pro forma amounts have been presented to reflect the effect of retroactive application of the change as it is not practical for the Company to compute prior period pro forma amounts due to the lack of prior period data. NOTE C--INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations" (Statement 141), and No. 142, "Goodwill and Other Intangible Assets" (Statement 142). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also included guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001. Under Statement 142, goodwill will no 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE C--INTANGIBLE ASSETS-Continued longer be amortized but will be subject to annual impairment tests. Intangible assets with finite lives will continue to be amortized over their useful lives. The Company adopted Statement 142 effective January 1, 2002. The Company has tested goodwill for impairment using the two-step process prescribed in Statement 142. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company completed the first of the required impairment tests of goodwill as of January 1, 2002. No impairment charge resulted from this test. The following table provides a reconciliation of the June 30, 2002 and 2001 reported net income to adjusted net income had Statement 142 been applied as of January 1, 2001.
For the Three Months Ended For the Six Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- Net Income - as reported $12,502,490 $ 7,786,783 $31,630,212 $15,567,809 Goodwill amortization, net of tax - 2,080,092 - 4,068,554 ----------- ------------ ----------- ------------- Adjusted net income $12,502,490 $ 9,866,875 $31,630,212 $19,636,363 =========== =========== =========== =========== Net Income Per Share - Basic: Net income - as reported $0.44 $0.29 $1.12 $0.58 Goodwill amortization, net of tax - 0.08 - 0.15 ------ ------ ----- ----- Adjusted net income $0.44 $0.37 $1.12 $0.73 ====== ======= ===== ===== Net Income Per Share - Assuming Dilution: Net income - as reported $0.40 $0.26 $1.00 $0.53 Goodwill amortization, net of tax - 0.07 - 0.13 ------ ------ ------ ----- Adjusted net income $0.40 $0.33 $1.00 $0.66 ====== ====== ====== =====
8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE C--INTANGIBLE ASSETS-Continued Intangible assets consist of the following:
As of June 30, 2002 As of December 31, 2001 ------------------- ----------------------- Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization ------ ------------ ------ ------------ Amortizable intangible assets: Expiration rights $4,950,000 $4,623,000 $5,085,000 $4,601,000 Non-compete agreements 28,157,000 7,055,000 27,932,000 6,138,000 Tradename 500,000 63,000 500,000 53,000 --------- ----------- ----------- ----------- ----------- Total $33,607,000 $11,741,000 $33,517,000 $10,792,000 =========== =========== =========== =========== Indefinite-lived intangible assets: Goodwill, net $258,421,000 $243,526,000
Aggregate amortization expense for the six months ended June 30, 2002 and 2001 was $1,085,000 and $6,771,000, respectively. Estimated amortization expense: For year ended December 31, 2002 $2,187,000 For year ended December 31, 2003 1,965,000 For year ended December 31, 2004 1,857,000 For year ended December 31, 2005 1,801,000 For year ended December 31, 2006 1,791,000 For year ended December 31, 2007 1,789,000 The changes in the net carrying amount of goodwill for the six months ended June 30, 2002, are as follows: Balance as of December 31, 2001 $243,526,000 Goodwill acquired 15,037,000 Goodwill disposed (142,000) ------------- Balance as of June 30, 2002 $ 258,421,000 ============= 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE D--INCOME TAXES Deferred taxes result from temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The Company's effective rate varies from the statutory rate primarily due to state income taxes and non-deductible amortization. NOTE E--ACQUISITIONS During the first six months of 2002, the Company acquired certain assets and liabilities of four insurance agencies for approximately $8,473,000 ($7,986,000 in cash and $487,000 in guaranteed future payments) in purchase accounting transactions. The purchase price may be increased based on agency profitability per the contracts. These acquisitions are not material to the consolidated financial statements individually or in aggregate. NOTE F--SALE OF ASSETS AND OTHER GAINS During the six months ended June 30, 2002 and 2001, the Company sold certain insurance accounts and other assets resulting in a loss of approximately $209,000 and a gain of $2,623,000, respectively, including a $206,000 loss and a $2,584,000 gain during the second quarters of 2002 and 2001, respectively. Revenues, expenses and assets related to these dispositions were not material to the consolidated financial statements. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE G--NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share.
THREE MONTHS ENDED SIX MONTHS ENDED June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001 ------------- ------------- ------------- ------------- Numerator for basic net income per share - net income $12,502,490 $ 7,786,783 $31,630,211 $15,567,809 Effect of dilutive securities: 5.25% convertible debenture 272,785 271,251 545,178 542,134 ----------- ----------- ----------- ----------- Numerator for dilutive net income per share - net income available after assumed conversions $12,775,275 $ 8,058,034 $32,175,389 $16,109,943 =========== =========== =========== =========== Denominator Weighted average shares 28,229,270 26,887,510 28,188,886 26,724,312 Effect of guaranteed future shares to be issued in connection with agency acquisitions 25,552 43,886 32,387 49,372 ----------- ----------- ----------- ----------- Denominator for basic net income per share 28,254,822 26,931,396 28,221,273 26,773,684 Effect of dilutive securities: Employee stock options 1,060,328 734,046 1,045,016 709,104 Employee non-vested stock 165,958 99,286 158,434 87,902 Contingent stock - acquisitions 38,111 36,536 29,869 24,152 5.25% convertible debenture 2,813,187 2,813,186 2,813,187 2,813,186 ----------- ----------- ----------- ----------- Dilutive potential common shares 4,077,584 3,683,054 4,046,506 3,634,344 ----------- ----------- ----------- ----------- Denominator for diluted net income per share - adjusted weighted average shares and assumed conversions 32,332,406 30,614,450 32,267,779 30,408,028 =========== =========== =========== =========== Net Income Per Share: Basic $0.44 $0.29 $1.12 $0.58 ===== ===== ===== ===== Assuming Dilution $0.40 $0.26 $1.00 $0.53 ===== ===== ===== =====
11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE H--SUBSEQUENT EVENT On July 1, 2002 the Company acquired all of the issued and outstanding membership interest units of Hobbs Group, LLC ("Hobbs") other than those owned by Hobbs IRA Corp. ("HIRAC"), and all of the issued and outstanding capital stock of HIRAC pursuant to a Purchase Agreement, dated May 10, 2002, by and among the Company, Hobbs, the members of Hobbs (other than HIRAC) and the shareholders of HIRAC. This acquisition allows the Company to expand its capabilities in the upper middle-market. In addition, Hobbs will provide the Company with additional market presence and expertise in the employee benefits services area and an entrance into executive benefits. Hobbs will also bring increased depth to the geographic reach of the Company's existing national platform. The amount the Company paid in connection with the acquisition consisted of approximately $114.2 million in cash, which included the Company's assumption and retirement of certain debt of Hobbs, and the issuance to the members of Hobbs (other than HIRAC) and the shareholders of HIRAC of an aggregate of 719,729 shares of the Company's common stock ("Common Stock"). In addition, the Company has agreed to pay up to approximately $101.9 million in cash and shares of Common Stock contingent on Hobbs' achieving certain financial performance goals within the next two years. The Company has further agreed to assume and satisfy certain existing earn-out and deferred compensation obligations of Hobbs from Hobbs' prior acquisitions estimated to approximate a net present value of $30 million. The Company's statement of consolidated income does not include any results of operations from Hobbs as the acquisition was consummated on July 1, 2002. The following unaudited pro forma results of operations of the Company give effect to the acquisition of Hobbs as though the transaction had occurred on January 1, 2002 and 2001, respectively. 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE H--SUBSEQUENT EVENT-Continued
Three Months Ended Six Months Ended June 30 June 30 2002 2001 2002 2001 ---- ---- ---- ---- Total Revenues $121,864,000 $100,490,000 $246,516,000 $200,284,000 Income before cumulative effect of accounting change and extraordinary item $ 13,318,000 $ 9,297,000 $ 30,146,000 $ 18,117,000 ============= ============== ============= ============= Net Income $ 12,907,000 $ 9,297,000 $ 33,680,000 $ 18,117,000 ============= ============== ============= ============= Income per share before cumulative effect of accounting change and extraordinary item: Basic $0.46 $0.34 $1.04 $0.66 ===== ===== ===== ===== Assuming Dilution $0.41 $0.31 $0.93 $0.60 ===== ===== ===== ===== Net Income Per Share: Basic $0.45 $0.34 $1.16 $0.66 ===== ===== ===== ===== Assuming Dilution $0.40 $0.31 $1.04 $0.60 ===== ===== ===== =====
The pro forma results for the three and six months ended June 30, 2002 include an extraordinary loss of $0.4 million related to Hobbs' debt extinguishment. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 2002 (UNAUDITED) NOTE H--SUBSEQUENT EVENT-Continued In addition, on July 1, 2002, the Company entered into a Second Amended and Restated Credit Agreement (the Amended Credit Agreement), dated as of July 1, 2002. The Amended Credit Agreement amends and restates an Amended and Restated Credit Agreement, dated as of April 6, 2001, and provides for a credit facility of up to an aggregate of $290.0 million. In particular, the Amended Credit Agreement maintains the availability to the Company of a revolving credit facility in the aggregate principal amount of $100.0 million and a term loan facility with an aggregate principal amount of $190.0 million. Pursuant to the Amended Credit Agreement, the increased term loan facility was made available to finance the cash payment in connection with the Hobbs acquisition and for working capital and general corporate purposes. 14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: - --------------------- Three Months Ended June 30, 2002 Net income for the three months ended June 30, 2002 was $12.5 million, or $0.40 per share, compared with $7.8 million, or $0.26 per share for the comparable period last year. Excluding net non-recurring gains and adjusting amortization to a pro forma basis in 2001 as if the new accounting standards related to goodwill had been adopted as of January 1, 2001, net income was $12.6 million for the quarter, a 51.3% increase from $8.3 million last year. Net income per share on the same basis was $0.40, compared with $0.28 last year. See "Note C - Intangible Assets" of Notes to Consolidated Financial Statements. Commissions and fees were $94.7 million, an increase of 27.5% from commissions and fees of $74.3 million during the comparable period of the prior year. Approximately $12.5 million of commissions were derived from purchase acquisitions of new insurance agencies. This increase was offset by decreases of approximately $0.5 million from the sale of certain offices and accounts in 2002 and 2001. Excluding the effect of acquisitions and dispositions, commissions and fees increased 11.3%. This reflects new business production and continued industry-wide premium increases. Other income decreased $2.3 million primarily due to the sale of an agency and certain insurance accounts in 2001. Expenses for the quarter increased $10.5 million or 16.4%. Compensation and benefits, other operating expenses and depreciation expense increased $10.0 million, $3.7 million and $0.2 million, respectively, primarily due to purchase acquisitions of insurance agencies and increased revenue production. Amortization of intangibles decreased approximately $2.9 million due primarily to the adoption of Statement 142. Interest expense decreased by $0.5 million due to decreased bank borrowings and decreased interest rates. The Company's overall tax rate for the three months ended June 30, 2002 was 40.8% compared to 43.0% for the same period of the prior year. The decrease is primarily related to the non-amortization of goodwill resulting from the adoption of Statement 142. Six Months Ended June 30, 2002 For the six months ended June 30, 2002, net income was $31.6 million, or $1.00 per share, compared to $15.6 million, or $0.53 per share last year. Excluding the effect of gains and the 2002 cumulative effect of an accounting change relating to revenue recognition and adjusting 2001 amortization to a pro forma basis, net income was $27.8 million, or $0.88 per share, up from $18.1 million or $0.61 per share a year ago. Commissions and fees were $193.4 million, an increase of 27.8% from commissions and fees of $151.3 million during the comparable period of the prior year. Approximately $27.9 million of 15 commissions were derived from purchase acquisitions of new insurance agencies. This increase was offset by decreases of approximately $1.4 million from the sale of certain offices and accounts in 2002 and 2001. Commissions and fees, excluding the effect of acquisitions and dispositions, increased 10.3%. This increase principally reflects new business production, firming premium levels and higher non-standard commissions. Investment income decreased $0.3 million, or 24.8%, primarily due to a lower interest rate environment. Other income decreased $1.9 million or 61.0% from the prior year primarily due to the net impact of nonrecurring gains from the sale of an agency, certain insurance accounts and other assets. Expenses increased by $20.4 million or 15.9%. Increases include $20.5 million in compensation and benefits, $6.1 million in other operating expenses and $0.4 million of depreciation expense, due primarily to purchase acquisitions of new insurance agencies and increased revenue production. Amortization of intangibles decreased approximately $5.7 million due primarily to the adoption of Statement 142. Interest expense decreased by $1.0 million due to decreased bank borrowings and by declines in interest rates. The Company's overall tax rate was 40.8% for the six months ended June 30, 2002 compared to the rate of 43.0% for the six months ended June 30, 2001. The decrease was primarily related to the non-amortization of goodwill resulting from adoption of Statement 142. For the three months ended June 30, 2002, net income as a percentage of revenues did not vary significantly from the three months ended March 31, 2002. Commission income was lower during the second quarter due to lower contingent commissions, the majority of which are historically received during the first quarter. The timing of contingent commissions, policy renewals, acquisitions and dispositions 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 six months ended June 30, 2002 should not be considered indicative of the results that may be expected for the entire year ending December 31, 2002. Liquidity and Capital Resources: - ------------------------------- Net cash provided by operations totaled $36.4 million and $29.0 million for the six months ended June 30, 2002 and 2001, 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 property and equipment. Cash expenditures for the acquisition of property and equipment were $2.3 million and $2.8 million for the six months ended June 30, 2002 and 2001, respectively. The timing and extent of the purchase and sale of investments is dependent upon cash needs and yields on alternate investments and cash equivalents. The purchase of insurance 16 agencies accounted for under the purchase method of accounting utilized cash of $11.9 million and $19.3 million in the six months ended June 30, 2002 and 2001, 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 the Company's Common Stock and deferred cash payments. Cash proceeds from the sale of accounts and other assets amounted to $0.5 million and $4.3 million in the six months ended June 30, 2002 and 2001, respectively. The Company did not have any material capital expenditure commitments as of June 30, 2002. Financing activities utilized cash of $16.6 million and provided cash of $12.6 million in the six months ended June 30, 2002 and 2001, respectively. The Company has consistently made scheduled debt payments and annually increased its dividend rate. The Company is currently authorized to purchase an additional 748,200 shares. The Company anticipates the continuance of its dividend policy. As of June 30, 2002, the Company had a bank credit agreement for $140.0 million under which loans are due in various amounts through 2004 and 5.25% Convertible Subordinated Debentures with a $32.0 million face value due 2014. At June 30, 2002, there were loans of $70.0 million outstanding under the bank agreement, with $70.0 million available under the revolving portion of the facility for future borrowings. Subsequent to the end of the quarter, the Company signed the Second Amended and Restated Credit Agreement (Amended Credit Agreement). The new agreement amends and restates an Amended and Restated Credit Agreement dated April 6, 2001. The new agreement provides a $190.0 million term loan facility under which borrowings are due in various amounts through 2007 including $152.4 million due 2007. The Amended Credit Agreement also maintains the availability to the Company of a revolving credit facility in the aggregate principal amount of $100.0 million. The proceeds were used in part, to fund the cash portion of the Hobbs Group, LLC acquisition. Subsequent to amending the credit agreement and closing the acquisition of Hobbs Group, LLC, the Company had loans of $190.0 million outstanding under the Amended Credit Agreement, with $100.0 million available under the revolving portion of the facility. The Amended Credit Agreement contains certain covenants that restrict, or may have the effect of restricting, the payment of dividends or distributions, and the purchase or redemption by the Company of its capital stock. Management does not believe that the restrictions contained in the Amended Credit Agreement will, in the foreseeable future, adversely affect the Company's ability to pay cash dividends at the current dividend rate. The Company had a current ratio (current assets to current liabilities) of 0.91 to 1.00 as of June 30, 2002. Shareholders' equity of $172.2 million at June 30, 2002, is improved from $142.8 million at December 31, 2001. The debt to equity ratio of 0.60 to 1.00 is decreased from the ratio at December 31, 2001 of 0.80 to 1.00 due to the issuance of Common Stock, decreased borrowings and increased net income. 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. 17 Business Acquisition - -------------------- On July 1, 2002 the Company acquired all of the issued and outstanding membership interest units of Hobbs Group, LLC ("Hobbs") other than those owned by Hobbs IRA Corp. ("HIRAC"), and all of the issued and outstanding capital stock of HIRAC pursuant to a Purchase Agreement, dated May 10, 2002, by and among the Company, Hobbs, the members of Hobbs (other than HIRAC) and the shareholders of HIRAC. Hobbs, which is based in Atlanta, Georgia, is one of the nation's premier independent insurance brokers serving upper middle-market and top-tier clients and provides property and casualty insurance brokerage, risk management, executive compensation and employee benefits services. This acquisition allows the Company to expand its capabilities in the upper middle-market. In addition, Hobbs will provide the Company with additional market presence and expertise in the employee benefits services area and an entrance into executive benefits. Hobbs will also bring increased depth to the geographic reach of the Company's existing national platform. The amount the Company paid in connection with the acquisition consisted of approximately $114.2 million in cash, which included the Company's assumption and retirement of certain debt of Hobbs, and the issuance to the members of Hobbs (other than HIRAC) and the shareholders of HIRAC of an aggregate of 719,729 shares of the Company's Common Stock. In addition, the Company has agreed to pay up to approximately $101.9 million in cash and shares of Common Stock contingent on Hobbs' achieving certain financial performance goals within the next two years. The Company has further agreed to assume and satisfy certain existing earn-out and deferred compensation obligations of Hobbs from Hobbs' prior acquisitions estimated to approximate a net present value of $30 million. In addition, on July 1, 2002, the Company granted 625,000 stock options to key employees of Hobbs. The options have an exercise price equal to the fair market value at date of grant, expire in seven years and vest at a rate of 25% a year for four years. Market Risk - ----------- The Company has certain investments and utilizes (on a limited basis) derivative financial instruments which are subject to market risk; however, the Company believes that exposure to market risk associated with these instruments is not material. New Accounting Standard - ----------------------- The Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (Statement 142), effective January 1, 2002, which, among other things, ends the practice of amortizing goodwill. Net income for the quarter ended June 30, 2001 would have increased by $0.07 and $0.13 per share, respectively, on a pro forma basis, assuming adoption of Statement 142 as of January 1, 2001. The Company has tested goodwill for impairment using the 18 two-step process prescribed in Statement 142. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company completed the first of the required impairment tests of goodwill as of January 1, 2002. No impairment charge resulted from this test. Change in Accounting Principle - ------------------------------ Effective January 1, 2002, the Company changed its method of accounting for commissions on premiums billed and collected directly by insurance carriers on its middle-market property and casualty business. Prior to 2002, this revenue was recognized when received. Beginning January 1, 2002, this revenue is recorded on the later of the billing date or the effective date, consistent with the revenue recognition policy for agency billed business. This is the predominant practice followed in the industry. Management believes that this new methodology is preferable and that it better matches the income with the related expenses. For the three months ended June 30, 2002, the effect of this change was to increase net income by $0.9 million ($0.30 per share). For the six months ended June 30, 2002, the effect of this change was to increase net income by $5.5 million ($0.17 per share), which included the cumulative effect adjustment of $3.9 million ($0.12 per share), net of income taxes of $2.6 million. No prior period pro forma amounts have been presented to reflect the effect of retroactive application of the change as it is not practical for the Company to compute prior period pro forma amounts due to the lack of prior period data. Forward-Looking Statements - -------------------------- The Company cautions readers that the foregoing discussion and analysis includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by that Act. These forward-looking statements are believed by the Company to be reasonable based upon management's current knowledge and assumptions about future events, but are subject to the uncertainties generally inherent in any such forward-looking statement, including factors discussed above as well as other factors that may generally affect the Company's business, financial condition or operating results. Reference is made to the discussion of "Forward-Looking Statements" contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, regarding important risk factors and uncertainties that could cause actual results, performance or achievements to differ materially from future results, performance or achievements expressed or implied in any forward-looking statement made by or on behalf of the Company. Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is set forth under the caption "Market Risk" in Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations. 19 PART II - OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Information required by this item was previously reported in the Company's Form 10-Q for the quarter ended March 31, 2002. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Exhibit No. Document ----------- -------- 10.1 Second Amended and Restated Credit Agreement, dated as of July 1, 2002, among the Company, as Borrower; the lenders named therein; Wachovia Bank, National Association (formerly known as First Union National Bank), as administrative agent; PNC Bank, National Association, as documentation agent; and Bank of America Securities, LLC, as syndication agent (incorporated by reference to Exhibit 99.7 to the Company's Form 8-K dated July 16, 2002, File No. 0-15981) 10.2 Senior Executive Employment Agreement with Thomas A. Golub entered into May 10, 2002 (incorporated by reference to Exhibit 99.3 to the Company's Form 8-K dated July 16, 2002, File No. 0-15981) 10.3 Amended and Restated Consulting Agreement between the Company and Robert H. Hilb 99.1 Certification Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 99.2 Certification Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 b) Reports on Form 8-K 20 (i) The Company filed a Current Report on Form 8-K with the Securities and Exchange Commission on May 13, 2002. The Form 8-K reported items 5 and 7 and attached as an exhibit and incorporated by reference a press release that announced the signing of a definitive agreement under which the Company would acquire Hobbs Group, LLC (Hobbs), for a combination of cash and stock, with a fixed amount of $142.0 million payable at closing, up to an additional $102.0 million on Hobbs' attaining certain financial goals within the next two years and the assumption of existing earnouts from Hobbs' prior acquisitions, estimated to be a new present value of $30.0 million. (ii) The Company filed a current Report on Form 8-K with the Securities and Exchange Commission on July 16, 2002. The Form 8-K which was dated July 1, 2002, reported items 2 and 7 and announced the consummation of the Hobbs acquisition and included as exhibits (i) the audited financial statements of Hobbs for the years ended December 31, 2001, 2000 and 1999, (ii) unaudited financial statements of Hobbs as of March 31, 2002 and 2001, (iii) pro forma condensed combined balance sheet of the Company giving effect to the acquisition as if the acquisition had occurred on March 31, 2002 and (iv) pro forma condensed combined statements of income for the three months ended March 31, 2002 and the year ended December 31, 2001 giving effect to the acquisition as if the acquisition had occurred January 1, 2001. 21 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. Hilb, Rogal and Hamilton Company -------------------------------- (Registrant) Date August 14, 2002 By: /s/ Andrew L. Rogal ---------------------------- ----------------------------- Chairman and Chief Executive Officer (Principal Executive Officer) Date August 14, 2002 By: /s/ Carolyn Jones ---------------------------- ----------------------------- Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date August 14, 2002 By: /s/ Robert W. Blanton, Jr. ---------------------------- ----------------------------- Vice President and Controller (Chief Accounting Officer) 22 HILB, ROGAL AND HAMILTON COMPANY EXHIBIT INDEX
Exhibit No. Document ----------- -------- 10.1 Second Amended and Restated Credit Agreement, dated as of July 1, 2002, among the Company, as Borrower; the lenders named therein; Wachovia Bank, National Association (formerly known as First Union National Bank), as administrative agent; PNC Bank, National Association, as documentation agent; and Bank of America Securities, LLC, as syndication agent (incorporated by reference to Exhibit 99.7 to the Company's Form 8-K dated July 16, 2002, File No. 0-15981) 10.2 Senior Executive Employment Agreement with Thomas A. Golub entered into May 10, 2002 (incorporated by reference to Exhibit 99.3 to the Company's Form 8-K dated July 16, 2002, File No. 0-15981) 10.3 Amended and Restated Consulting Agreement between the Company and Robert H. Hilb 99.1 Certification Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 99.2 Certification Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
EX-10 3 ex10-3.txt EXHIBIT 10.3 Exhibit 10.3 AMENDED AND RESTATED CONSULTING AGREEMENT THIS AMENDED AND RESTATED CONSULTING AGREEMENT is made and entered into as of July 15, 2002, by and between HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation (the "Company"), and ROBERT H. HILB, an Illinois resident ("Consultant"). RECITALS A. The Company is engaged in the insurance business and prior to the date hereof, Consultant served as the Chief Executive Officer of the Company. B. Consultant was initially hired as a consultant on June 1, 1997, for a term of three (3) years. C. Consultant's term was extended to May 31, 2003, by amendment on November 29, 1999. D. The Company desires to continue to receive the benefit of Consultant's business expertise, knowledge regarding the insurance industry and extensive experience with the operations of the Company, and Consultant desires to assist the Company in its endeavors by providing consulting services to the Company pursuant to the terms and conditions set forth in this Agreement. AGREEMENT In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Consulting Services. The Company and Consultant agree that Consultant shall provide the Company with his personal and unique consulting services as requested by the Board of Directors and/or the Chief Executive Officer of the Company. Consultant's consulting services may include advising members of the Company's management team on matters relating to strategic planning, mergers and acquisitions opportunities, financing for the Company and other matters as may be requested from time to time. The services are not expected to exceed twenty (20) hours per month, on average. 2. Compensation and Reimbursement of Expenses. As the total consideration for the services provided by Consultant hereunder, the Company shall pay Seven Thousand Dollars ($7,000.00) per month payable on the first day of each month through May 2003, thereafter, during the Term of this Agreement Company shall pay Consultant Nine Thousand Dollars ($9,000.00) per month, payable on the first day of each month. The Company shall reimburse Consultant for all reasonable expenses incurred by him while providing consulting services to the Company; provided that, all requests submitted by Consultant for reimbursement by the Company shall be supported by original receipts and such additional documentation as is reasonably required by the Company. 3. Term. The term of this Agreement shall continue (unless sooner terminated by death) until May 31, 2006, after which it will continue, if desired by the Company's Board of Directors and Consultant, on a month-to-month basis. 4. Independent Contractor. Consultant's relationship to the Company shall be that of an independent contractor retained on a consulting basis. Nothing in this Agreement shall be construed as creating any type of agency relationship including, without limitation, that of employer and employee between the Company and Consultant. Consultant is not an agent of the Company and has no authority to execute or deliver or to accept any agreement on behalf of the Company. 5. Office Space. You will be provided office space and secretarial support to enable you to carry out your duties under this Agreement. 6. Nonsolicitation. Consultant agrees that during the period he is providing consulting services to the Company and for a period of two (2) years after the date this Agreement terminates, whether or not during the term of this Agreement, he will not hire any person who was employed by the Company within the twelve-month period preceding the date of such hiring, or solicit, entice, persuade or induce, directly or indirectly, any person or entity doing business with the Company to terminate such relationship. Consultant acknowledges that the Company will be irrevocably damaged if the provisions of this Section 6 are not specifically enforced. Accordingly, Consultant agrees that, in addition to any other relief to which the Company may be entitled, the Company will be entitled to seek and obtain injunctive relief from a court of competent jurisdiction for the purpose of restraining Consultant from any actual or threatened breach of this Section 6. 7. Survival. The obligations of Consultant contained in Section 6 hereof shall survive the termination of this Agreement. 8. Binding Effect. This Agreement shall be binding upon the parties, their heirs, legal representatives, successors, and assigns. 9. Entire Agreement. This Agreement supersedes all agreements previously made between the parties relating to its subject matter. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. -2- 10. Notices. All notices or other documents under this Agreement shall be in writing and delivered personally or mailed by certified mail, postage prepaid, addressed to the parties at their last known addresses. 11. Severability. The unenforceability, invalidity or illegality of any of the provisions of this Agreement will not render the other provisions unenforceable, invalid or illegal. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. HILB, ROGAL AND HAMILTON COMPANY ROBERT H. HILB By /s/Andrew L. Rogal /s/Robert H. Hilb --------------------------------------- ----------------------------------- Andrew L. Rogal, Chief Executive Officer Robert H. Hilb -3- EX-99 4 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 STATEMENT OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Form 10-Q of Hilb, Rogal and Hamilton Company for the quarter ended June 30, 2002, I, Andrew L. Rogal, Chairman and Chief Executive Officer of Hilb, Rogal and Hamilton Company, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (a) such Form 10-Q for the quarter ended June 30, 2002 fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in such Form 10-Q for the quarter ended June 30, 2002 fairly presents, in all material respects, the consolidated financial condition and results of operations of Hilb, Rogal and Hamilton Company and its subsidiaries as of and for the periods presented in such Form 10-Q. By:/s/Andrew L. Rogal Date: August 14, 2002 ------------------------------------- ----------------- Andrew L. Rogal Chairman and Chief Executive Officer < EX-99 5 ex99-2.txt EXHIBIT 99.2 Exhibit 99.2 STATEMENT OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Form 10-Q of Hilb, Rogal and Hamilton Company for the quarter ended June 30, 2002, I, Carolyn Jones, Senior Vice President and Chief Financial Officer of Hilb, Rogal and Hamilton Company, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (a) such Form 10-Q for the quarter ended June 30, 2002 fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in such Form 10-Q for the quarter ended June 30, 2002 fairly presents, in all material respects, the consolidated financial condition and results of operations of Hilb, Rogal and Hamilton Company and its subsidiaries as of and for the periods presented in such Form 10-Q. By: /s/Carolyn Jones Date: August 14, 2002 -------------------------------------- ----------------- Carolyn Jones Senior Vice President and Chief Financial Officer
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