DAYTONA BEACH, FL--(Marketwired - October 20, 2016) - Brown & Brown, Inc. (NYSE: BRO) (the "Company") today announced its unaudited financial results for the third quarter of 2016.
Revenues for the third quarter of 2016 under U.S. generally accepted accounting principles ("GAAP") were $462.3 million, increasing $30.1 million, or 7.0%, as compared to the third quarter of the prior year, with Organic Revenue (as defined below) increasing by 4.3%. Net income was $71.4 million, increasing by 5.8%, and diluted earnings per share were $0.50, increasing by 6.4%, as compared to the third quarter of the prior year. Excluding the impact of changes in acquisition earn-out payables, our diluted earnings per share - adjusted (as defined below) increased by 10.6% to $0.52.
Revenues for the nine months ended September 30, 2016 under GAAP were $1,333.0 million, increasing $77.1 million, or 6.1%, as compared to the same period of 2015, with Organic Revenue (as defined below) increasing by 2.8%. Net income was $199.8 million, increasing by 7.7%, and diluted earnings per share for the nine months ended September 30, 2016 were $1.41, an increase of $0.12, or 9.3%, as compared to the first nine months of 2015. Excluding the impact of changes in acquisition earn-out payables, our diluted earnings per share - adjusted (as defined below) increased by 10.8% to $1.44.
J. Powell Brown, President and Chief Executive Officer of the Company noted, "It was a good quarter and we are pleased with the solid results, which showed continued improvement over the prior year and was delivered from the hard work of our great team."
As announced on October 12, 2016, the Company's Board of Directors declared a regular quarterly cash dividend of $0.1350 per share, which is an increase of 10.2% over the prior year to be paid on November 9, 2016, to shareholders of record on October 28, 2016.
Brown & Brown, Inc.
INTERNAL GROWTH SCHEDULE
Organic Revenue Growth (1)
Three Months Ended September 30, 2016 and 2015
(in millions, unaudited)
Organic
Revenue
Three Months Ended Change Acquisition Growth(1)
9/30/2016 9/30/2015 $ % Revenues $ %
--------- --------- ----- ---- ----------- ----- --------
Retail(2) $ 223.7 $ 211.6 $12.1 5.7% $ 6.2 $ 5.9 2.8%
National
Programs 121.0 113.1 7.9 7.0% - 7.9 7.0%
Wholesale
Brokerage 66.2 53.8 12.4 23.0% 8.8 3.6 6.7%
Services 39.6 36.7 2.9 7.9% 2.3 0.6 1.6%
--------- --------- ----- ---- ----------- ----- --------
Total Core
Comm. and Fees $ 450.5 $ 415.2 $35.3 8.5% $ 17.3 $18.0 4.3%
--------- --------- ----- ---- ----------- ----- --------
Brown & Brown, Inc.
INTERNAL GROWTH SCHEDULE
Organic Revenue Growth (1)
Nine Months Ended September 30, 2016 and 2015
(in millions, unaudited)
Organic
Revenue
Nine Months Ended Change Acquisition Growth(1)
9/30/2016 9/30/2015 $ % Revenues $ %
--------- --------- ----- ---- ----------- ----- --------
Retail(2) $ 662.5 $ 624.4 $38.1 6.1% $ 27.1 $11.0 1.8%
National
Programs 320.7 307.3 13.4 4.4% 1.7 11.7 3.8%
Wholesale
Brokerage 173.3 153.8 19.5 12.7% 12.1 7.4 4.8%
Services 117.7 107.8 9.9 9.2% 6.6 3.3 3.1%
--------- --------- ----- ---- ----------- ----- --------
Total Core
Comm. and Fees $ 1,274.2 $ 1,193.3 $80.9 6.8% $ 47.5 $33.4 2.8%
--------- --------- ----- ---- ----------- ----- --------
(1) "Organic Revenue" is defined as total commissions and fees less (i) the
first twelve months of commission and fee revenues generated from
acquisitions, less (ii) profit-sharing contingent commissions (revenues
from insurance companies based upon the volume and the growth and/or
profitability of the business placed with such companies during the
prior year - "Contingents"), less (iii) guaranteed supplemental
commissions (commissions from insurance companies based solely upon the
volume of the business placed with such companies during the current
year - "GSCs"), and less (iv) divested business (net commissions and
fees generated from offices, books of business sold by the Company) with
the associated revenue removed from the corresponding period of the
prior year.
(2) The Retail Segment includes commissions and fees, which will be reported
in the "Other" column of the Segment Information in the Notes to the
Condensed Consolidated Financial Statements on the Company's Form 10-Q,
which includes corporate and consolidation items.
Brown & Brown, Inc.
RECONCILIATION OF INTERNAL GROWTH SCHEDULE
TO TOTAL COMMISSIONS AND FEES
Included in the Consolidated Statements of Income
Three and Nine Months Ended September 30, 2016 and 2015
(in millions, unaudited)
Three Months Ended Nine Months Ended
9/30/2016 9/30/2015 9/30/2016 9/30/2015
---------- ---------- ---------- ----------
Total Core Commissions and Fees $ 450.5 $ 415.2 $ 1,274.2 $ 1,193.3
Profit-Sharing Contingent
Commissions 8.2 12.1 46.6 45.7
Guaranteed Supplemental
Commissions 3.1 2.5 8.9 8.1
Divested Businesses - 2.1 - 5.8
---------- ---------- ---------- ----------
Total Commissions and Fees $ 461.8 $ 431.9 $ 1,329.7 $ 1,252.9
---------- ---------- ---------- ----------
In order to arrive at results that are more comparable to the prior year we exclude the change in estimated acquisition earn-out payables. Our diluted earnings per share - adjusted (as defined below) were $0.52 for the three months ended September 30, 2016, increasing 10.6% over the third quarter of the prior year. For the nine months ended September 30, 2016, diluted earnings per share - adjusted were $1.44 compared to $1.30 in the same period of the prior year, increasing 10.8%.
Brown & Brown, Inc.
GAAP EARNINGS PER SHARE RECONCILIATION TO
EARNINGS PER SHARE - ADJUSTED
Three Months Ended September 30, 2016 and 2015
(unaudited)
Three Months Ended Change
9/30/2016 9/30/2015 $ %
--------- --------- ------- ------
GAAP earnings per share - as reported $ 0.50 $ 0.47 $ 0.03 6.4%
Change in estimated acquisition earn-
out payables 0.02 - 0.02
--------- --------- -------
Diluted earnings per share - adjusted $ 0.52 $ 0.47 $ 0.05 10.6%
--------- --------- -------
Brown & Brown, Inc.
GAAP EARNINGS PER SHARE RECONCILIATION TO
EARNINGS PER SHARE - ADJUSTED
Nine Months Ended September 30, 2016 and 2015
(unaudited)
Nine Months Ended Change
9/30/2016 9/30/2015 $ %
--------- --------- ------- ------
GAAP earnings per share - as reported $ 1.41 $ 1.29 $ 0.12 9.3%
Change in estimated acquisition earn-
out payables 0.03 0.01 0.02
--------- --------- -------
Diluted earnings per share - adjusted $ 1.44 $ 1.30 $ 0.14 10.8%
--------- --------- -------
In order to provide a better understanding of our business, we evaluate EBITDAC (as defined below) performance. EBITDAC for the third quarter of 2016 was $157.3 million, an increase of $6.6 million or 4.4%, compared to the third quarter of the prior year. The EBITDAC margin (as defined below) decreased from 34.9% in the third quarter of 2015 to 34.0% in the third quarter of 2016, mainly due to a decrease in Contingents and GSCs during the third quarter of 2016 and certain investments in technology. For the nine months ended September 30, 2016, EBITDAC increased by 6.1%, as compared to the first nine months of 2015, and our EBITDAC margin (as defined below) slightly decreased for the first nine months of 2016 as compared to the first nine months of 2015.
Brown & Brown, Inc.
GAAP RECONCILIATION -
INCOME BEFORE INCOME TAXES TO EBITDAC(3)
Three and Nine Months Ended September 30, 2016 and 2015
(in millions, unaudited)
Three Months Ended Nine Months Ended
9/30/2016 9/30/2015 9/30/2016 9/30/2015
--------- --------- --------- ---------
Income before income taxes $ 116.8 $ 112.9 $ 328.5 $ 307.6
Amortization 21.8 22.2 65.0 65.4
Depreciation 5.2 5.2 15.9 15.6
Interest 9.9 9.9 29.6 29.4
Change in estimated
acquisition earn-out
payables 3.6 0.5 6.8 2.2
--------- --------- --------- ---------
EBITDAC $ 157.3 $ 150.7 $ 445.8 $ 420.2
EBITDAC margin(4) 34.0% 34.9% 33.4% 33.5%
(3) "EBITDAC" is defined as income before interest, income taxes,
depreciation, amortization and the change in estimated acquisition earn-
out payables.
(4) "EBITDAC margin" is defined as EBITDAC divided by total revenues.
Brown & Brown, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
For the three months For the nine months
ended September 30, ended September 30,
-------------------- --------------------
2016 2015 2016 2015
--------- --------- --------- ---------
REVENUES
Commissions and fees $ 461.8 $ 431.9 $ 1,329.7 $ 1,252.9
Investment income 0.1 0.2 1.1 0.7
Other income, net 0.4 0.1 2.2 2.3
--------- --------- --------- ---------
Total revenues 462.3 432.2 1,333.0 1,255.9
--------- --------- --------- ---------
EXPENSES
Employee compensation and
benefits 237.7 216.1 692.9 645.4
Other operating expenses 67.7 66.1 197.5 191.6
Gain on disposal (0.4) (0.7) (3.2) (1.3)
Amortization 21.8 22.2 65.0 65.4
Depreciation 5.2 5.2 15.9 15.6
Interest 9.9 9.9 29.6 29.4
Change in estimated acquisition
earn-out payables 3.6 0.5 6.8 2.2
--------- --------- --------- ---------
Total expenses 345.5 319.3 1,004.5 948.3
--------- --------- --------- ---------
Income before income taxes 116.8 112.9 328.5 307.6
Income taxes 45.4 45.4 128.7 122.1
--------- --------- --------- ---------
Net income $ 71.4 $ 67.5 $ 199.8 $ 185.5
========= ========= ========= =========
Net income per share:
Basic $ 0.51 $ 0.48 $ 1.43 $ 1.31
========= ========= ========= =========
Diluted $ 0.50 $ 0.47 $ 1.41 $ 1.29
========= ========= ========= =========
Weighted average number of
shares outstanding - in
thousands:
Basic 136,461 137,684 136,002 138,181
========= ========= ========= =========
Diluted 138,182 140,041 137,584 140,446
========= ========= ========= =========
Dividends declared per share $ 0.12 $ 0.11 $ 0.37 $ 0.33
========= ========= ========= =========
Brown & Brown, Inc.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data, unaudited)
September 30, December 31,
2016 2015
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 488.7 $ 443.4
Restricted cash and investments 278.3 229.8
Short-term investments 13.3 13.7
Premiums, commissions and fees receivable 469.4 433.8
Reinsurance recoverable 332.0 32.0
Prepaid reinsurance premiums 334.0 309.6
Deferred income taxes 17.0 24.6
Other current assets 42.0 50.4
------------- -------------
Total current assets 1,974.7 1,537.3
Fixed assets, net 77.8 81.8
Goodwill 2,674.4 2,586.7
Amortizable intangible assets, net 726.4 744.7
Investments 26.3 18.1
Other assets 44.8 35.9
------------- -------------
Total assets $ 5,524.4 $ 5,004.5
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Premiums payable to insurance companies $ 619.1 $ 574.7
Losses and loss adjustment reserve 332.0 32.0
Unearned premiums 334.0 309.6
Premium deposits and credits due customers 111.0 83.1
Accounts payable 56.2 63.9
Accrued expenses and other liabilities 171.2 192.2
Current portion of long-term debt 80.5 73.1
------------- -------------
Total current liabilities 1,704.0 1,328.6
Long-term debt 1,031.7 1,071.6
Deferred income taxes, net 376.7 360.9
Other liabilities 87.2 93.6
Shareholders' equity:
Common stock, par value $0.10 per share;
authorized 280,000 shares; issued 148,110
shares and outstanding 140,317 shares at
2016, issued 146,415 shares and outstanding
138,985 shares at 2015 14.8 14.6
Additional paid-in capital 464.0 426.6
Treasury stock, at cost 7,794 and 7,430
shares at 2016 and 2015, respectively - in
thousands (250.0) (238.8)
Retained earnings 2,096.0 1,947.4
------------- -------------
Total shareholders' equity 2,324.8 2,149.8
------------- -------------
Total liabilities and shareholders' equity $ 5,524.4 $ 5,004.5
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Conference call, webcast and slide presentation
A conference call to discuss the results of the third quarter of 2016 will be held on Friday, October 21, 2016 at 8:00 AM (EDT). The Company may refer to a slide presentation during its conference call. You can access the webcast and the slides from the "Investor Relations" section of the Company's website at www.bbinsurance.com.
About Brown & Brown
Brown & Brown, Inc., through its subsidiaries, offers a broad range of insurance products and services. Additionally, certain Brown & Brown subsidiaries offer a variety of risk management, third-party administration, and other services. Serving business, public entity, individual, trade and professional association clients nationwide, the Company is ranked by Business Insurance magazine as the United States' sixth largest independent insurance intermediary. The Company's Web address is www.bbinsurance.com.
Forward-looking statements
This press release may contain certain statements relating to future results which are forward-looking statements, including those relating to the Company's anticipated financial results for the third quarter of 2016. These statements are not historical facts, but instead represent only the Company's current belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results, financial condition and achievements may differ, possibly materially, from the anticipated results, financial condition and achievements contemplated by these forward-looking statements. These risks and uncertainties include, but are not limited to, the Company's determination as it finalizes its financial results for the third quarter of 2016 that its financial results differ from the current preliminary unaudited numbers set forth herein; fluctuations in the Company's stock's market price; fluctuations in operating results and cash flows; material adverse changes in economic conditions in the markets we serve and in the general economy; downward commercial property and casualty premium pressures; future regulatory actions and conditions in the states in which the Company conducts business; competition from others in the insurance agency, wholesale brokerage, insurance programs and service business; the integration of the Company's operations with those of businesses or assets the Company has acquired or may acquire in the future and the failure to realize the expected benefits of such integration; the potential occurrence of a disaster that affects certain areas including, but not limited to, the States of California, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Michigan, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia and/or Washington, where significant portions of the Company's business are conducted; and other factors that the Company may not have currently identified or quantified, and other risks, relevant factors and uncertainties identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, and the Company's other filings with the Securities and Exchange Commission. All forward-looking statements made herein are made only as of the date of this release, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.
Non-GAAP supplemental financial information
This press release contains references to non-GAAP financial measures as defined in Regulation G of SEC rules, including Organic Revenue, Earnings Per Share - Adjusted, EBITDAC and EBITDAC margin. A reconciliation of this supplemental non-GAAP financial information to the Company's GAAP information is contained in this earnings release. We present such non-GAAP supplemental financial information, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company's operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be considered in addition to, not in lieu of, the Company's condensed consolidated financial statements.
R. Andrew Watts
Chief Financial Officer
(386) 239-5770
