EX-99 3 ex99.htm Exhibit 99.1

Exhibit 99.1


Press  Release


Hilb, Rogal and Hamilton Company

Contact:  Carolyn Jones

4951 Lake Brook Drive, Suite 500

Phone:

(804) 747-3108

Glen Allen, Virginia 23060

Fax:

(804) 747-6046


     FOR IMMEDIATE RELEASE


July 21, 2003


HILB, ROGAL AND HAMILTON COMPANY REPORTS

 RECORD SECOND QUARTER RESULTS


RICHMOND, Va.-- Hilb, Rogal and Hamilton Company (NYSE: HRH), the world's ninth largest insurance and risk intermediary, reported today record financial results for the second quarter and six months ended June 30, 2003.


For the second quarter, total revenues were $139.5 million, compared with $95.7 million a year ago, an increase of 45.8%.  Commissions and fees rose 45.5% to $137.9 million during the quarter, compared with $94.7 million during the same period last year, reflecting acquisitions--primarily the addition of Hobbs Group, LLC (Hobbs)--, new business, and a continued positive rate environment.   Net income for the quarter was $19.1 million, or $0.52 per share, compared with $12.5 million, or $0.40 per share, a year ago, an increase of 52.5%.  In calculating the per share amount, the dilutive shares for the quarter increased 14.1%, reflecting shares issuable for acquisition-related contingent payments -- primarily Hobbs -- and shares issued over the past twelve months for acquisitions and a public offering.


For the first six months, total revenues rose 44.0% to $281.5 million from $195.6 million a year ago.  Commissions and fees increased 43.9% to $278.4 million from $193.4 million last year, reflecting the same trends identified above for the quarter, in addition to higher contingent and override commissions, which are heavily weighted in the first quarter.  Net income for the six months was $37.2 million, or $1.03 per share, compared with $31.6 million, or $1.00 per share, in 2002, an increase of 17.5%.  Net income before non-operating losses, a one-time retirement benefit charge in 2003, and the cumulative effect of a 2002 revenue recognition accounting change was $40.4 million, or $1.12 per share, compared with $27.8 million, or $0.88 per share, a year ago, an increase of 45.3%.  The per share amount for the six months is based on a 12.1% higher dilutive share count than the prior year due to similar factors as noted above for the quarter.


Organic growth, defined as the change in commissions and fees before the effect of acquisitions and divestitures, was 5.9% for the second quarter and 8.6% for the six months. While organic growth may vary on a quarterly basis, the company reaffirms its full year 2003 guidance of 9% to 11% for organic growth, which, beginning in the third quarter, will include revenues generated by Hobbs, whose organic growth was 16.4% for the first six months of 2003.


The operating margin for the second quarter was 26.6%, compared with 24.7% for the previous year's quarter.  For the six months, the operating margin increased to 27.7% in 2003 from 26.4% in 2002.  The increases reflect higher contingent and override commissions as a percentage of revenues, strong margin performance by Hobbs in the second quarter, and productivity and efficiency improvements from HRH’s Best Practices program.  Continued incremental margin improvement remains one of HRH's key financial objectives.



(CONTINUED)

HILB, ROGAL AND HAMILTON COMPANY REPORTS

 RECORD SECOND QUARTER RESULTS – Continued


Martin L. (Mell) Vaughan, III, chairman and chief executive officer said, "HRH's strong second quarter results were marked by continued revenue and earnings growth and margin improvement. In addition, with its outstanding performance, Hobbs has maximized the earn-out in one year--subject to formal verification--allowing us to proceed with the blending of our companies. We have completed three acquisitions during the year and are confident we will meet our 2003 goal of $30 to $50 million in annual revenues from acquisitions.  Meanwhile, we also accomplished the CEO transition as planned, including informative meetings with the management of recently acquired agencies and with the investment community. 


"During the quarter, we also made notable progress in each of the three areas previously identified as key priorities:  sales culture and productivity, five-year plan execution, and new products and programs.  A highlight of the quarter was the establishment of an excess and surplus lines wholesale business.  To head the new operation, we were fortunate to attract Bryan W. Sanders, an experienced insurance professional who brings talent and enthusiasm to the venture."


Vaughan concluded, "We remain dedicated to helping our clients effectively manage risk in markets that, on balance, remain favorable, through our skilled risk management and resourceful placement capabilities.  While we are actively investing in talent and products for current and future growth, we believe that our full year 2003 results will easily meet our key long-term goal of sustaining 15% to 20% growth in annual operating earnings per share."  


The company cautions readers that the statements contained herein regarding the company’s future operations and business prospects are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from anticipated results.  For more details on factors that could affect expectations, see the company’s Annual Report on Form 10-K for the year ended December 31, 2002, as filed with the Securities and Exchange Commission.


Hilb, Rogal and Hamilton Company is the nation’s seventh largest insurance and risk management intermediary.  With offices located throughout the United States, HRH assists clients in managing their risks in areas such as property and casualty, employee benefits and many other areas of specialized exposure.  The company is traded on the New York Stock Exchange, symbol HRH, and is ranked as the ninth largest insurance and risk management intermediary in the world. Additional information about HRH may be found at www.hrh.com.











(CONTINUED)


HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

COMPARATIVE FINANCIAL ANALYSIS

(In thousands, except per share data)



 

THREE MONTHS ENDED

SIX MONTHS ENDED

 

6/30/03

6/30/02

6/30/03

6/30/02

 

(Unaudited)

(Unaudited)

Revenues



  

  Commissions and fees

$137,868

$ 94,739

$278,367

$193,387

  Investment income

820

460

1,479

974

  Other

846

518

1,679

1,210

 

139,534

95,717

281,525

195,571

Operating expenses





  Compensation and employee benefits

75,846

52,795

151,659

106,054

  Other operating expenses

24,275

17,717

47,431

34,555

  Depreciation expense

2,292

1,730

4,580

3,440

  Amortization of intangibles

2,203

  563

4,356

1,085

  Interest expense

2,746

1,819

5,539

3,703

  Retirement benefit1

--

--

5,195

--

 

107,362

74,624

218,760

148,837

INCOME BEFORE INCOME TAXES AND





  CUMULATIVE EFFECT OF ACCOUNTING





  CHANGE

32,172

21,093

62,765

46,734

Income taxes

13,107

8,591

25,602

19,048

Income before cumulative effect

  of accounting change


19,065


12,502


37,163


27,686

Cumulative effect of accounting change, net of tax2

--

--

--

3,944

NET INCOME

$ 19,065

$ 12,502

$ 37,163

$ 31,630

 



  

Net Income Per Share - Basic:

    

  Income before cumulative effect

    of accounting change


$0.56


$0.44


$1.10


$0.98

  Cumulative effect of accounting change, net of tax2

--

--

--

0.14

  Net income

$0.56

$0.44

$1.10

$1.12

     

Net Income Per Share – Assuming Dilution:

    

  Income before cumulative effect

    of accounting change


$0.52


$0.40


$1.03


$0.88

  Cumulative effect of accounting change, net of tax2

--

--

--

0.12

  Net income

$0.52

$0.40

$1.03

$1.00

     

Dividends Per Share

$0.0925

$0.0900

$0.1825

$0.1775

     

Weighted Average Number

    

  of Shares Outstanding:

    

    Basic

33,911

28,255

33,796

28,221

    Assuming Dilution

36,880

32,332

36,187

32,268

     

________________

1

 The company recorded a one-time retirement benefit charge for the quarter ended March 31, 2003, representing a contractual retirement benefit for Andrew L. Rogal, the company’s former chairman and chief executive officer.

2

 Effective January 1, 2002, the company changed its revenue recognition policy for commissions on premiums billed by insurance carriers on middle-market property and casualty business from when received to the later of effective date of insurance coverage or billing date.


HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands)


 

 

JUNE 30,

DECEMBER 31,

 

2003

20021

 

 

(Unaudited)


ASSETS

CURRENT ASSETS



   Cash and cash equivalents

$171,578

$134,692

   Receivables (net)

231,715

201,364

   Prepaid expenses and other

14,167

21,509

      TOTAL CURRENT ASSETS

417,460

357,565

 



PROPERTY & EQUIPMENT (NET)

21,234

20,386

 



INTANGIBLE ASSETS (NET)

478,888

441,973

 



OTHER ASSETS

12,096

13,100

 

$929,678

$833,024

 



LIABILITIES AND SHAREHOLDERS’ EQUITY



CURRENT LIABILITIES



   Premiums payable to insurance companies

$287,529

$235,057

   Accounts payable

11,920

10,115

   Accrued expenses

25,446

39,142

   Premium deposits and credits due customers

34,507

33,998

   Current portion of long-term debt

20,491

5,733

      TOTAL CURRENT LIABILITIES

379,893

324,045

 



LONG-TERM DEBT

161,123

177,151

 



OTHER LONG-TERM LIABILITIES

31,571

21,180

 



SHAREHOLDERS’ EQUITY



   Common Stock (outstanding 34,032 and 33,484



     shares, respectively)

183,233

168,558

   Retained earnings

173,977

143,005

   Accumulated other comprehensive income (loss)

(119)

(915)

 

357,091

310,648

 

$929,678

$833,024

 



________________

1

 Reclassified to conform to current year presentation.


HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

GAAP MEASURES RECONCILIATION

(In thousands, except per share data)


This press release contains references to financial measures that exclude certain charges and non-recurring items. The company believes that these adjusted financial measures provide additional measures of performance that investors can use in evaluating the company’s performance between reporting periods. The schedule below provides a reconciliation of these financial measures to those prepared in accordance with accounting principles generally accepted in the United States (GAAP).



 


NET INCOME

NET INCOME PER SHARE ASSUMING DILUTION

 

THREE MONTHS ENDED

THREE MONTHS ENDED

 

6/30/03

6/30/02

6/30/03

6/30/02

 

(Unaudited)

(Unaudited)

 



  

GAAP NET INCOME

$19,065

$12,502

$0.52

$0.40

  Excluding:





   Non-operating losses, net of tax

32

122

--

--

OPERATING NET INCOME

$19,097

$12,624

$0.52

$0.40

 




 


 

OPERATING MARGIN

OPERATING REVENUE

 

THREE MONTHS ENDED

THREE MONTHS ENDED

 

6/30/03

6/30/02

6/30/03

6/30/02

 

(Unaudited)

(Unaudited)

 




 

GAAP NET INCOME / REVENUE


$19,065


$12,502


$139,534


$95,717

  Excluding:





   Non-operating losses

56

206

56

206

   Amortization of  intangibles

2,203

563

--

--

   Interest expense

2,746

1,819

--

--

   Income taxes

13,107

8,591

--

--

OPERATING MARGIN / REVENUE


$37,177


$23,681


$139,590


$95,923

 




 



HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

GAAP MEASURES RECONCILIATION

(In thousands, except per share data)


 


NET INCOME

NET INCOME PER SHARE ASSUMING DILUTION

 

SIX MONTHS ENDED

SIX MONTHS ENDED

 

6/30/03

6/30/02

6/30/03

6/30/02

 

(Unaudited)

(Unaudited)

 



  

GAAP NET INCOME

$37,163

$31,630

$1.03

$1.00

  Excluding:





   Non-operating losses, net of tax

78

124

--

--

   Retirement benefit, net of tax

3,169

--

0.09

--

   Cumulative effect of

    accounting change, net of tax


--


(3,944)


--


(0.12)

OPERATING NET INCOME

$40,410

$27,810

$1.12

$0.88

 




 


 

OPERATING MARGIN

OPERATING REVENUE

 

SIX MONTHS ENDED

SIX MONTHS ENDED

 

6/30/03

6/30/02

6/30/03

6/30/02

 

(Unaudited)

(Unaudited)

 




 

GAAP NET INCOME / REVENUE


$37,163


$31,630


$281,525


$195,571

  Excluding:





   Non-operating losses

131

209

131

209

   Amortization of  intangibles

4,356

1,085

--

--

   Interest expense

5,539

3,703

--

--

   Retirement benefit

5,195

--

--

--

   Income taxes

25,602

19,048

--

--

   Cumulative effect of

    accounting change, net of tax


--


(3,944)


--


--

OPERATING MARGIN / REVENUE


$77,986


$51,731


$281,656


$195,780