Hilb Rogal & Hobbs Company Reports Results for 2005 Fourth Quarter and Year.RICHMOND Richmond, cities, United States Richmond. 1 City (1990 pop. 87,425), Contra Costa co., W Calif., on San Pablo Bay, an inlet of San Francisco Bay; inc. 1905. , Va. -- Hilb Rogal & Hobbs Hobbs, city (1990 pop. 29,115), Lea co., SE N.Mex.; inc. 1929. With the discovery (c.1928) of oil and natural gas in the area, Hobbs became one of the last great oil boomtowns in the United States. It remains a major shipping and trading center for oil-well supplies. Company (NYSE NYSE See: New York Stock Exchange :HRH HRH abbr. Her (or His) Royal Highness HRH Her (or His) Royal Highness HRH abbr (= His (or Her) Royal Highness) → S.A.R. ), the world's tenth Tenth can mean: In mathematics:
See: Financial intermediary intermediary See financial intermediary. , today reported financial results for the fourth quarter and year ended December December: see month. 31, 2005. For the quarter, total revenues were $164.0 million, compared with $159.9 million in the 2004 fourth quarter, an increase of 2.6%. Commissions and fees rose 1.4% to $158.2 million during the quarter, compared with $156.0 million during the same period of 2004. The increase reflects acquisitions and new business, partially offset by the decline in property and casualty premium rates, lower retention rates primarily related to producer culling culling removal of inferior animals from a group of breeding stock. The removal is premature, i.e. before completion of its life span, disposal of an animal from a herd or other group. , and the elimination of national override An arrangement whereby commissions are made by sales managers based upon the sales made by their subordinate sales representatives. A term found in an agreement between a real estate agent and a property owner whereby the agent keeps the right to receive a commission for the sale of commissions. Net income for the quarter was $19.5 million, or $0.54 per share, compared with $15.3 million a year ago, or $0.42 per share, an increase of 27.4%. Fourth quarter operating net income increased 6.7% to $18.1 million, or $0.50 per share, compared with $17.0 million, or $0.47 per share, a year ago. Operating net income for the 2005 quarter reflected a lower than normal tax rate, the elimination of national override commissions, and higher than normal investment in sales and service talent. For the year ended December 31, 2005, total revenues rose 8.8% to $673.9 million from $619.6 million a year ago. Commissions and fees increased 7.9% to $658.0 million from $609.7 million last year. The increase in revenues benefited from acquisitions, partially offset by declining premium rates, lower retention rates primarily from the culling of producers, and the elimination of national override commissions. Net income for the year was $56.2 million, or $1.55 per share, compared with $81.4 million, or $2.23 per share, in 2004, a decrease of 31.0%. Net income included a $42.3 million charge (the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. amount was $26.3 million, or $0.73 per share) for previously announced regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. settlements, primarily the company's settlement with the Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). Attorney General and related legal and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. . Operating net income for the full year 2005 was $80.8 million, or $2.23 per share, compared with $83.8 million, or $2.30 per share, a year ago, a decrease of 3.6 %. Operating net income benefited from higher revenues and a slightly lower tax rate, offset by higher legal, compliance and claims expenses, increased investment in new sales and service talent, and the elimination of national override commissions. Legal, compliance and claims expenses for 2005 increased $7.0 million compared with the prior year. These expenditures primarily related to settled and pending regulatory and legal matters as well as the protection of restrictive covenants Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. in employment contracts and compliance with Section 404 of the Sarbanes-Oxley Act See SOX. , net of insurance recoveries on contested claims. Organic growth is defined as the change in commissions and fees before the effect of acquisitions and divestitures. Excluding contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the and override commissions, organic growth was 0.5% for the fourth quarter and (0.7)% for the year. Including contingent and override commissions, organic growth was (0.9)% for the fourth quarter and (1.1)% for the year. Declining premium rates, lower retention primarily related to a large number of producers culled over the past 18 months, and quarterly variability in renewals offset record new business production and slowed organic growth. The operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the 2005 fourth quarter was 22.6%, compared with 22.4% for the 2004 fourth quarter. For the year, the operating margin decreased to 25.0% for 2005 from 26.5% for 2004. The margin decline for the year was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the continued investment in sales and service talent, higher legal, compliance and claims expenses, and the elimination of national override commissions. Martin L. (Mell v. i. & t. 1. To mix; to meddle. n. 1. Honey. 1. A mill. ) Vaughan Vaughan , Henry Known as "the Silurist." 1622-1695. Welsh metaphysical poet whose works include Silex Scintillans (1650-1655). Noun 1. , III, chairman and chief executive officer, said, "In 2005, we took decisive steps towards resolving most of the regulatory and legal uncertainties, through a series of voluntary and negotiated steps that reaffirmed our responsibilities to our clients. Simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics , we welcomed to HRH an unprecedented number of insurance brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. executives and professionals who were attracted to our strategy, business model and culture. Although we know it will take 12 to 24 months for these new additions to become fully productive, we believe this extraordinary talent provides a once in a generation opportunity to strengthen HRH's prospects for sustaining long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth, despite related short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. pressure on margins and earnings. In 2006, as we serve our middle-market The term middle-market may refer to either a type of newspaper or a type of company. A middle-market newspaper is one that attempts to cater to readers who want some entertainment value from their newspaper as well as adequate serious coverage of significant news and major account clients with distinction and substantially enhanced resources, the company's highest priorities are to rebuild organic growth and sustain solid operating margins." F. Michael Crowley Michael Crowley is an American journalist, and currently senior editor and columnist at The New Republic magazine. He is also a frequent contributor to GQ magazine, Slate.com, the Readers Digest, and the Washington City Paper. , president, added, "The innovations put in place over the past two years, including a new sales model, national practices and major account teams, and centers of excellence for claims and service are serving us extremely well, evidenced by record new business production in 2005. Having filled most of our openings for leaders and experts and having upgraded our sales force through a culling program which is nearly completed, we intend to continue selectively adding proven producers and support staff. Meanwhile, our operating focus in 2006 is on developing and applying best practices in the form of tools, expertise, and training that will support aggressive sales productivity and retention objectives." Mr. Vaughan concluded, "Our executive team is now at its full strength. The promotions of Mike Crowley Mike Crowley (born July 4, 1975 in Bloomington, Minnesota) is a retired American professional ice hockey player. Beginning his hockey career with the University of Minnesota, Crowley was drafted 140th overall by the Philadelphia Flyers in the 1993 NHL Entry Draft, while still to president, Hank hank n. 1. A coil or loop. 2. Nautical A ring on a stay attached to the head of a jib or staysail. 3. A looped bundle, as of yarn. Watkins Watkins may refer to:
Origination Cork. Creedon may refer to:
Frank J. Beard (born May 1, 1939) is an American golfer. Beard was born in Dallas, Texas. He attended the University of Florida. as vice president and head of property and casualty insurance will help us drive organic growth--our highest priority as we look to 2006 and beyond. Our company-wide talent, supported by effective sales, service delivery, and compensation models, has never been more aligned with our mission: superior stewardship stewardship the occupation of being a steward or custodian. Referring to animals it implies the caring sort of relationship based on an acceptance of the need to include the rights of animals in overall plans to maintain financial viability. of our clients' interests, profitability and growth, and building value for our shareholders." Hilb Rogal & Hobbs Company is the eighth largest insurance and risk management intermediary in the U.S. and tenth largest in the world. From offices throughout the U.S. and in London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. , HRH assists clients in managing risks in property and casualty, employee benefits and many other areas of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. exposure. The company is traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. , symbol HRH. Additional information about HRH, including instructions for the quarterly conference call, may be found at www.hrh.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. The company cautions readers that the statements about the company's future operations and business prospects are forward-looking statements and are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. 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. Risk factors and uncertainties that might cause such a difference include, but are not limited to, the following: the company's commission revenues are highly dependent on premium rates charged by insurance underwriters, which are subject to fluctuation Fluctuation A price or interest rate change. based on the prevailing economic conditions and competitive factors that affect insurance underwriters; the level of contingent commissions Contingent commissions is a term used in the American insurance industry for any kind of broker's commission which is contingent upon some event occurring (instead of a commission paid on the sale itself). In the UK this form of payment is known as Overriders. is difficult to predict and any material decrease in the company's collection of them is likely to have an adverse impact on operating results; the company has eliminated national override agreements commissions effective for business written on or after January January: see month. 1, 2005, and it is uncertain whether additional contingent commissions payable to the company will offset the loss of such revenues; the company's failure to recruit RECRUIT. A newly made soldier. , retain, train and integrate quality producers may have an adverse effect on the company; the company may be subject to increasing costs arising from errors and omissions errors and omissions n. short-hand for malpractice insurance which gives physicians, attorneys, architects, accountants and other professionals coverage for claims by patients and clients for alleged professional errors and omissions which amount to negligence. claims against the company; the company's growth has been enhanced through acquisitions, which may or may not be available on acceptable terms in the future and which, if consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. , may or may not be advantageous to the company; the company's failure to integrate an acquired insurance agency efficiently may have an adverse effect on the company; the general level of economic activity can have a substantial impact on revenues that is difficult to predict; a strong economic period may not necessarily result in higher revenues if the volume of insurance business brought about by favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. economic conditions is offset by premium rates that have declined in response to increased competitive conditions; a decline in the company's ability to obtain new financing and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. current borrowings may adversely effect the company's borrowing costs and financial flexibility; if the company is unable to respond in a timely and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. manner to rapid technological change in the insurance intermediary industry, there may be a resulting adverse effect on business and operating results; the company is subject to governmental regulation which may adversely impact operating results and/or growth; the business practices and broker compensation arrangements of the company and the insurance intermediary industry are subject to uncertainty due to investigations by various governmental authorities and related private litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; costs incurred related to investigations, private litigation and class actions are uncertain and difficult to predict; and quarterly and annual variations in the company's commissions and fees that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected impacts on the company's results of operations. For more details on factors that could affect expectations, see the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2004 and other reports from time to time filed with or furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the Securities and Exchange Commission.
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL ANALYSIS
(In thousands, except per share data)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
------------------------------------
(Unaudited) (Unaudited)
Revenues
Commissions and fees $158,204 $155,968 $658,012 $609,660
Investment income 2,360 1,077 6,581 3,176
Other 3,458 2,876 9,292 6,767
------------------------------------
164,022 159,921 673,885 619,603
Operating expenses
Compensation and employee
benefits 90,884 88,713 365,481 333,057
Other operating expenses 32,279 31,984 127,702 112,274
Depreciation 2,008 2,228 8,410 8,693
Amortization of intangibles 4,558 4,723 18,755 13,848
Interest expense 4,146 2,828 16,243 10,288
Regulatory charge and related
costs(1) - - 42,320 -
Severance charge(2) - - 1,303 -
Integration costs(3) - 106 764 1,909
Loss on extinguishment of
debt(4) - 1,557 - 1,557
------------------------------------
133,875 132,139 580,978 481,626
------------------------------------
INCOME BEFORE INCOME TAXES 30,147 27,782 92,907 137,977
Income taxes 10,624 12,455 36,707 56,563
------------------------------------
NET INCOME $19,523 $15,327 $56,200 $81,414
====================================
Net Income Per Share:
Basic $0.55 $0.43 $1.57 $2.27
====================================
Assuming Dilution $0.54 $0.42 $1.55 $2.23
====================================
Dividends Per Share $0.1150 $0.1050 $0.4500 $0.4075
====================================
Weighted Average Shares
Outstanding:
Basic 35,759 35,963 35,756 35,833
====================================
Assuming Dilution 36,376 36,544 36,314 36,493
====================================
(1) The company recorded a regulatory charge representing the
Connecticut settlement, related legal and administrative costs, and
estimated costs for related pending regulatory matters.
(2) The company recorded a severance charge for the quarter ended June
30, 2005, representing an estimated severance benefit for Robert B.
Lockhart, the company's former president and chief operating officer,
who resigned in May 2005.
(3) Integration costs represent one-time costs including severance and
other employee-related costs, facility and lease termination costs and
branding expenses.
(4) The company recorded a one-time loss on the extinguishment of its
Second Amended and Restated Credit Agreement, which included various
financing and professional costs previously deferred and certain
lending fees associated with obtaining the company's new credit
facility.
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
DECEMBER 31,
2005 2004
-----------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $224,471 $210,470
Receivables (net) 253,088 240,421
Prepaid expenses and other 37,888 24,586
----------------------
TOTAL CURRENT ASSETS 515,447 475,477
PROPERTY & EQUIPMENT (NET) 24,765 24,024
INTANGIBLE ASSETS (NET) 763,536 757,942
OTHER ASSETS 26,019 20,556
----------------------
$1,329,767 $1,277,999
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $339,088 $315,130
Accounts payable 16,150 13,417
Accrued expenses 49,618 48,192
Premium deposits and credits due customers 40,454 48,287
Current portion of long-term debt 12,511 16,248
----------------------
TOTAL CURRENT LIABILITIES 457,821 441,274
LONG-TERM DEBT 251,507 265,384
DEFERRED INCOME TAXES 23,307 32,292
OTHER LONG-TERM LIABILITIES 50,875 31,893
SHAREHOLDERS' EQUITY
Common Stock (outstanding 35,955 and 35,886
shares, respectively) 233,292 233,785
Retained earnings 312,040 271,978
Accumulated other comprehensive income 925 1,393
----------------------
546,257 507,156
----------------------
$1,329,767 $1,277,999
======================
HILB ROGAL & HOBBS 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. The schedule below provides a reconciliation of these
financial measures to those prepared in accordance with United States
generally accepted accounting principles (GAAP).
NET INCOME
PER SHARE
ASSUMING
NET INCOME DILUTION
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
----------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME $19,523 $15,327 $0.54 $0.42
Excluding:
Non-operating (gains) losses,
net of tax(1) (1,388) 675 (0.04) 0.02
Integration costs, net of tax - 64 - -
Loss on extinguishment of debt,
net of tax - 934 - 0.03
----------------------------
OPERATING NET INCOME $18,135 $17,000 $0.50 $0.47
============================
OPERATING MARGIN OPERATING REVENUE
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
----------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME / REVENUE $19,523 $15,327 $164,022 $159,921
Excluding:
Non-operating (gains) losses(1) (2,313) (1,516) (2,313) (1,516)
Amortization of intangibles 4,558 4,723 - -
Interest expense 4,146 2,828 - -
Integration costs - 106 - -
Loss on extinguishment of debt - 1,557 - -
Income taxes 10,624 12,455 - -
----------------------------------
OPERATING MARGIN / REVENUE $36,538 $35,480 $161,709 $158,405
==================================
(1) In 2004, the company recorded a $2.2 million tax expense on
non-operating gains of $1.5 million due to permanent tax differences
on the corresponding assets.
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
NET INCOME
PER SHARE
ASSUMING
NET INCOME DILUTION
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
----------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME $56,200 $81,414 $1.55 $2.23
Excluding:
Non-operating (gains) losses,
net of tax(1) (2,910) 336 (0.08) 0.01
Regulatory charge and related
costs, net of tax 26,292 - 0.73 -
Severance charge, net of tax 782 - 0.02 -
Integration costs, net of tax 459 1,145 0.01 0.03
Loss on extinguishment of debt,
net of tax - 934 - 0.03
----------------------------
OPERATING NET INCOME $80,823 $83,829 $2.23 $2.30
============================
OPERATING MARGIN OPERATING REVENUE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
------------------------------------
(Unaudited) (Unaudited)
GAAP NET INCOME / REVENUE $56,200 $81,414 $673,885 $619,603
Excluding:
Non-operating gains(1) (5,104) (2,076) (5,104) (2,076)
Amortization of intangibles 18,755 13,848 - -
Interest expense 16,243 10,288 - -
Regulatory charge and related
costs 42,320 - - -
Severance charge 1,303 - - -
Integration costs 764 1,909 - -
Loss on extinguishment of debt - 1,557 - -
Income taxes 36,707 56,563 - -
------------------------------------
OPERATING MARGIN / REVENUE $167,188 $163,503 $668,781 $617,527
====================================
(1) In 2004, the company recorded a $2.4 million tax expense on
non-operating gains of $2.1 million due to permanent tax differences
on the corresponding assets.
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands)
ORGANIC GROWTH
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
-----------------------------------------------
(Unaudited) (Unaudited)
GAAP COMMISSIONS AND
FEES $158,204 $155,968 $658,012 $609,660
Commissions and fees
from acquired agencies,
net of divestitures (3,653) - (54,829) -
-----------------------------------------------
COMMISSIONS AND FEES,
EXCLUDING THE EFFECT
OF REVENUES FROM
ACQUIRED/DIVESTED
AGENCIES $154,551 $155,968 $603,183 $609,660
===============================================
ORGANIC GROWTH,
NET OF CONTINGENT AND OVERRIDE COMMISSIONS
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
------------------------------------------
(Unaudited) (Unaudited)
GAAP COMMISSIONS AND FEES $158,204 $155,968 $658,012 $609,660
Contingent and override
commissions (911) (2,931) (48,544) (42,367)
Commissions and fees from
acquired agencies, net of
divestitures (3,533) - (46,101) -
COMMISSIONS AND FEES, NET
OF CONTINGENT AND OVERRIDE
COMMISSIONS, EXCLUDING
THE EFFECT OF REVENUES
FROM ACQUIRED/DIVESTED
AGENCIES
-----------------------------------------
$153,760 $153,037 $563,367 $567,293
=========================================
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion