USI Holdings Corporation Reports First Quarter Results and Other Matters.BRIARCLIFF Briarcliff may refer to: Places
Historically under English Law, a manor was a parcel of land granted by the king to a lord or other high ranking person. Incident to every manor was the right of the lord to hold a court called the court baron, which was organized to , N.Y. -- USI Holdings Corporation ("USI" or the "Company"), (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :USIH) today reported financial results for the first quarter ended March 31, 2006. Certain amounts have been reclassified and presented in all periods as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. to reflect the decisions announced in 2004 and in 2005 to sell seven operating entities. A printer friendly version of this release is available on our website at http://www.usi.biz biz n. Informal Business. biz Noun Informal business Noun 1. . Highlights: For the quarter ended March 31, 2006 as compared to the same quarter in 2005: --Consolidated revenues increased 12.0% to $136.6 million, substantially all attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to acquisitions --Consolidated net commissions and fees (excluding 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. ) increased 12.1%, including organic growth of 1.2% --Adopted FAS 123(R) and recorded $0.8 million in compensation expense related to the Company's stock option and employee stock purchase plans, identified as "stock option expense" in the statements of operations --Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the , before income tax expense increased to $13.6 million from $3.5 million --Operating margin decreased to 20.5% from 20.9% --Excluding the impact of stock option expense, operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased by 0.2%, to 21.1% from 20.9% --Closed on a new $285 million senior secured credit facility --Announced a new stock repurchase plan stock repurchase plan 1. See buyback. 2. See self-tender. , allowing the Company to purchase up to $20 million of its common stock in 2006 --Acquired three books of business expected to add $1.6 million of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenues
Three Months Ended
(Dollars in Thousands, Expect Per Share March 31
Data) -------------------------------
2006 2005 % Change
-------- -------- ---------
GAAP Financial Measures:
Revenues:
Net commissions and fees ("NCF") $114,956 $102,505 12.1%
Contingents and overrides 18,753 18,001 4.2%
Interest income 1,360 664 104.8%
Other income 1,559 842 85.2%
-------- --------
Total revenues 136,628 122,012 12.0%
-------- --------
Expenses:
Operating expenses 108,593 108,660 (0.1)%
Amortization 7,902 6,753 17.0%
Interest 4,488 3,100 44.8%
Early extinguishment of debt 2,093 -- N/M
-------- --------
Total expenses 123,076 118,513 3.9%
-------- --------
Operating Results:
Income from continuing operations
before income tax expense $ 13,552 $ 3,499 287.3%
Per Share Data-Diluted:
Income from continuing operations $ 0.13 $ 0.04 225.0%
Net income $ 0.13 $ 0.02 550.0%
Non-GAAP Financial Measures (1):
Operating income 28,053 25,504 10.0%
Operating margin 20.5% 20.9% (1.9)%
Income from continuing operations plus
amortization, excluding identified
adjustments on a diluted per share
basis $ 0.30 $ 0.29 3.4%
NCF organic growth 1.2%
Total revenue organic growth 1.8%
(1) Refer to Non-GAAP financial measures-Purpose and Use and related
reconciliations included in this release.
The revenue increase for the quarter includes the net impact of $12.4 million from acquisitions and divestitures completed in the last twelve months. On an organic basis, net commissions and fees (excluding contingent commissions) increased $1.2 million, or 1.2% for the quarter compared to the same period last year. In 2005, the Company concluded its previously announced margin improvement plan. For the three months ended March 31, 2005, the Company recorded $4.0 million in expenses, before income taxes, for employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and related benefits, facilities closures, contract terminations Defense procurement: the cessation or cancellation, in whole or in part, of work under a prime contract or a subcontract thereunder for the convenience of, or at the option of, the government, or due to failure of the contractor to perform in accordance with the terms of the contract (default). and the amendment of sales professionals' compensation agreements. Also in the first quarter of 2005, the Company recorded $8.1 million in expenses, before income taxes, associated with the SGP SGP Singapore (ISO Country code) SGP Schering-Plough (stock symbol) SGP Stability and Growth Pact SGP Southern Great Plains SGP Staatkundig Gereformeerde Partij SGP Speedway Grand Prix acquisition. There were no such similar expenses in the first quarter of 2006. The operating margin (operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. as a percentage of total revenues) for the quarter was 20.5% on $28.1 million of operating income, compared to 20.9% on $25.5 million of operating income for the same period in 2005. The operating margin decrease for the first quarter of 2006 was due principally to the decrease in operating margin in our 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. benefits segment and to the impact of $0.8 million in stock option expense, somewhat offset by the improvement in our insurance brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. segment, where the operating margin increased by 1.1% compared to the first quarter of 2005. The increase in the insurance brokerage segment is attributable to the positive impacts of the 2005 margin improvement efforts and to acquisitions, as well as organic growth of revenues of 2.6%, including organic growth in NCF See National Cristina Foundation. of 1.8%. Operating margin in the insurance brokerage segment also benefited from an increase in interest and other income (other income consists primarily of premium finance revenues), which were each positively impacted by higher interest rates, offset by the relatively smaller contribution of contingent commissions to operating income. The 35.3% decrease in operating margin in the specialized benefits segment was primarily due to enrollment timing this year compared to a record first quarter of 2005 for that business. In March 2006, the Company closed on a new $285 million senior secured credit facility, consisting of a $210 million term loan and a $75 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, with final maturities in 2011. In addition, the Company restructured several financial covenants and other limitations as part of the new facility to enhance financial and operating flexibility. Proceeds from the new term loan facility drawn on the closing date were used to 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. all outstanding amounts under the prior credit facility and amounts under the new revolving credit facility will be used for general corporate purposes. In connection with this transaction, the Company recorded expense of $2.1 million to write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. the unamortized deferred financing costs on the prior credit facility. Also in March, 2006, the Board of Directors approved a share repurchase plan share repurchase plan A corporation's plan for buying back a predetermined number of its own shares in the open market. Institution of a share repurchase plan derives from management's view that the company has limited outside investment opportunities and that allows the Company to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. shares of its common stock up to the limits set forth in the new credit facility. The Company may purchase up to $20 million worth of its common stock in 2006. David L. Eslick, Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. noted, "We are pleased with our first quarter results. In the first quarter of 2005, our workplace benefits segment had a record quarter for enrollments, whereas this year was more reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of a typical first quarter and illustrates the uneven nature of that business where timing of enrollments can create significant quarterly fluctuations. Our Insurance Brokerage segment showed solid improvement in the first quarter where, excluding the impact of stock option expense, our operating margin improved from 2005 by 140 basis points to 28.7%. Insurance Brokerage NCF grew organically 1.8% for the quarter versus a negative 2.5% for the fourth quarter 2005. Our benefits revenue growth once again balanced the softness on the property and casualty side, highlighted by a strong 6.9% organic growth in our retail benefits brokerage business. Lastly, we are very pleased with the additional flexibility the new credit facility and the expanded stock repurchase plan gives us to meet our performance goals going forward." USI will hold a conference call and audio webcast to review the results at 8:30 AM (ET) on Tuesday Tuesday: see week. , May 9, 2006. To access the audio webcast, please visit USI's website at www.usi.biz on May 9, 2006 and follow the link. To access the conference call, dial toll-free 800-798-2864 or 617-614-6206 for international callers and use passcode 54782240, five minutes before the teleconference. A replay of the conference call will be available on the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the USI website (www.usi.biz) or by dialing 888-286-8010 and using access code 82587459. This press release contains certain statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future results which are 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. within the meaning of that term as found in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are not historical facts, but instead represent USI's belief regarding future events, many of which, by their nature, are inherently uncertain and outside of USI's control. It is possible that USI's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Further information concerning USI and its business, including factors that potentially could materially affect USI's financial results, are contained in USI's filings with the Securities and Exchange Commission. Some factors include: USI's ability to grow revenues organically and expand its margins; successful consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. and integration of acquisitions; the insurance brokerage business is subject to a great deal of uncertainty due to the investigations into its business practices 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. ; resolution of 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. issues and other claims, including 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; the passage of new legislation 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. disclosure arrangements with insurance companies affecting our business; determinations of effectiveness of internal controls over financial reporting and disclosure controls and procedures; USI's ability to attract and retain key sales and management professionals; USI's level of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. and debt service requirements; downward commercial property and casualty premium pressures; the competitive environment; future expenses for integration and margin improvement efforts; and general economic conditions around the country. USI's ability to grow has been largely attributable to 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 USI. All forward-looking statements included in this press release are made only as of the date of this press release, and USI does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or that subsequently occur or of which USI hereafter In the future. The term hereafter is always used to indicate a future time—to the exclusion of both the past and present—in legal documents, statutes, and other similar papers. becomes aware. This press release includes supplemental financial information which contains references to non-GAAP financial measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this financial information to generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") information follows. USI presents such non-GAAP supplemental financial information because such information is of interest to the investment community owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de the fact that it provides additional meaningful methods of evaluating certain aspects of USI'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 viewed in addition to, not in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. , USI's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statements of operations for the three months ended March 31, 2006 and 2005. About USI Holdings Corporation Founded in 1994, USI is a leading distributor of insurance and financial products and services to businesses throughout the United States. USI is headquartered in Briarcliff Manor, NY, and operates out of 68 offices in 19 states. Additional information about USI, including instructions for the quarterly conference call, may be found at www.usi.biz.
USI Holdings Corporation and Subsidiaries
Consolidated Statements of Operations
Three Months Ended
March 31,
2006 2005
----------- -----------
(Amounts in Thousands,
Except Per Share Data)
Revenues:
Net commissions and fees $114,956 $102,505
Contingents and overrides 18,753 18,001
Interest income 1,360 664
Other income 1,559 842
----------- -----------
Total Revenues 136,628 122,012
Expenses:
Compensation and employee benefits 75,491 80,940
Non-cash stock-based compensation:
Restricted stock awards 695 318
Stock option expense 823 -
Other operating expenses 29,085 25,074
Amortization of intangible assets 7,902 6,753
Depreciation 2,499 2,328
Interest 4,488 3,100
Early extinguishment of debt 2,093 -
----------- -----------
Total Expenses 123,076 118,513
----------- -----------
Income from continuing operations
before income tax expense 13,552 3,499
Income tax expense 5,832 1,514
----------- -----------
Income From Continuing Operations 7,720 1,985
Loss from discontinued operations, net - (1,010)
----------- -----------
Net Income $7,720 $975
=========== ===========
Per Share Data - Basic and Diluted:
Basic:
Income from continuing operations $0.14 $0.04
Loss from discontinued operations, net 0.00 (0.02)
----------- -----------
Net Income Per Common Share $0.14 $0.02
=========== ===========
Diluted:
Income from continuing operations $0.13 $0.04
Loss from discontinued operations, net 0.00 (0.02)
----------- -----------
Net Income Per Common Share $0.13 $0.02
=========== ===========
Weighted-Average Number of Shares Outstanding:
Basic 56,799 53,928
Diluted 57,792 54,302
USI Holdings Corporation and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
2006 2005
----------- ------------
(Amounts in Thousands,
Except Per Share Data)
Assets
Current assets:
Cash and cash equivalents $29,073 $27,289
Fiduciary funds--restricted 110,258 103,887
Premiums and commissions receivable, net of
allowance for bad debts and cancellations
of $7,362 and $7,300, respectively 218,680 244,372
Other 24,213 25,048
Deferred tax asset 11,827 14,887
Current assets held for discontinued
operations 3,489 4,843
----------- ------------
Total current assets 397,540 420,326
Goodwill 404,081 405,490
Expiration rights 316,606 312,382
Other intangible assets 49,938 50,800
Accumulated amortization (205,441) (197,539)
----------- ------------
Expiration rights and other intangible
assets, net 161,103 165,643
Property and equipment, net 28,689 28,475
Other assets 3,764 3,840
----------- ------------
Total Assets $995,177 $1,023,774
=========== ============
Liabilities and Stockholders' Equity
Current liabilities:
Premiums payable to insurance companies $234,970 $259,286
Accrued expenses 69,270 77,120
Current portion of long-term debt 15,757 11,470
Other 10,990 16,829
----------- ------------
Total current liabilities 330,987 364,705
Long-term debt 221,469 225,062
Deferred tax liability 15,753 16,237
Other liabilities 6,526 7,789
----------- ------------
Total Liabilities 574,735 613,793
Stockholders' equity:
Common stock--voting--par $.01, 300,000
shares authorized; 58,547 and 58,308
shares issued, respectively 585 583
Additional paid-in capital 667,098 663,436
Accumulated deficit (238,353) (246,073)
Less treasury stock at cost, 683 and 620
shares, respectively (8,888) (7,965)
----------- ------------
Total Stockholders' Equity 420,442 409,981
----------- ------------
Total Liabilities and Stockholders' Equity $995,177 $1,023,774
=========== ============
USI Holdings Corporation and Subsidiaries Non-GAAP Financial Measures - Purpose and Use USI defines Operating Income as revenues, less compensation and employee benefits, non-cash stock-based compensation, other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and depreciation. Compensation and employee benefits and other operating expenses are adjusted to exclude expenses related to USI's margin improvement plan (announced in the fourth quarter of 2004 and concluded in the fourth quarter of 2005 to reduce ongoing operating expenses) and acquisition integration efforts (expenses incurred during the integration of acquired companies), which USI's management does not consider indicative indicative: see mood. of the Company's run-rate, or normal operating expenses. USI presents Operating Income because management believes that it is a relevant and useful indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of operating profitability. Management believes that Operating Income is relevant owing to USI's leveraged approach to its capital structure and resulting significant amount of interest expense and to USI's acquisition strategy which creates significant amortization and other expenses not directly associated with the core operations of the Company and which are specifically aimed at eliminating redundant Repetitive. See redundancy. real estate, positions and other costs. Additionally, management believes that investors in its stock use Operating Income to compare USI's ability to generate operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. with its peers and for valuation purposes. Operating Margin (Operating Income as a percentage of total revenues) is presented because management believes that it is a relevant and useful indicator of operating efficiency. USI uses Operating Income and Operating Margin in budgeting and evaluating operating company operating company A business that engages in transactions with outsiders. performance. These financial measures should not be considered as an alternative to other financial measures determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. USI presents Income from continuing operations plus amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. on an absolute and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. per share basis because management believes that it is a relevant and useful indicator of its ability to generate working capital. Management believes that income from continuing operations plus amortization of intangible assets is relevant owing to the significant amount of amortization of intangible assets resulting from accounting for all acquisitions using the purchase method of accounting. Additionally, management believes that investors in its stock use income from continuing operations plus amortization of intangible assets to compare USI with its peers and for valuation purposes. This financial measure should not be considered as an alternative to other financial measures determined in accordance with GAAP. USI presents Income from continuing operations plus amortization of intangible assets, operating income and operating margin, excluding the impact of the identified adjustments because management believes that it is useful in understanding operating profitability compared to other periods presented. Additionally, management believes that investors in its stock use income from continuing operations plus amortization of intangible assets, operating income and operating margin, excluding the impact of the identified adjustments on an absolute and diluted per share basis, to compare USI with its peers, for valuation purposes and as an indicator of operating performance. This financial measure should not be considered as an alternative to other financial measures determined in accordance with GAAP. USI presents organic revenue growth (decline) because management believes that it is useful in understanding organic revenue growth/decline compared to prior periods presented. Organic revenue growth (decline) is calculated by excluding the current period's total revenues attributable to acquisitions and the prior period's total revenues from divested businesses during the twelve months following acquisition or divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). . Additionally, management believes that investors in its stock use organic revenue growth (decline) to compare USI with its peers and to measure growth in revenues attributable to the Company's ability to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on its sales and client retention strategies. The financial measure should not be considered as an alternative to other financial measures determined in accordance with GAAP.
USI Holdings Corporation and Subsidiaries
Non-GAAP Financial Measures
Reconciliation of Operating Income, Operating Margin and Income from
Continuing Operations plus Amortization of Intangible Assets
For the Three Months
Ended March 31,
--------------------
2006 2005
---------- ---------
(Dollars in Thousands)
Total Revenues $136,628 $122,012
Compensation and employee benefits 75,491 68,782
Non-cash stock-based compensation:
Restricted stock awards 695 318
Stock option expense 823 -
Other operating expenses 29,067 25,080
Depreciation 2,499 2,328
---------- ---------
Operating Income 28,053 25,504
Operating Margin 20.5% 20.9%
Amortization of intangible assets 7,902 6,753
Interest 4,488 3,100
Early extinguishment of debt 2,093 -
Margin improvement plan expenses (a) - 4,030
Acquisition integration expenses (a) 18 8,122
---------- ---------
Income from continuing operations before income
tax expense 13,552 3,499
Income tax expense 5,832 1,514
---------- ---------
Income from continuing operations 7,720 1,985
Addback: Amortization of intangible assets 7,902 6,753
---------- ---------
Income from continuing operations plus
amortization of intangible assets $15,622 $8,738
========== =========
(a) Amounts are included in compensation and employee benefits and
other operating expenses in the Consolidated Statements of Operations.
USI Holdings Corporation
Non-GAAP Financial Measures
Reconciliation of Operating Income, Operating Margin and Income from
Continuing Operations plus Amortization of Intangible Assets,
Excluding Identified Adjustments
Identified Adjustments:
Effective January 1, 2006, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123(R). Accordingly,
beginning in the first quarter, the Company recorded expenses of $0.8
million related to its stock option and employee stock purchase plans.
Additionally, in the first quarter of 2006, the Company recorded $2.1
million of expense for an early extinguishment of debt related to its
new credit facility. There were no such similar expenses in 2005. All
adjustments noted above are referred to as "Identified Adjustments."
For the Three Months Ended
March 31,
----------------------------------
2006
Excluding
2006 As Identified Identified
Reported Adjustments Adjustments
--------- ----------- ------------
(Dollars in Thousands)
Revenues $136,628 $- $136,628
Compensation and employee benefits 75,491 - 75,491
Non-cash stock-based compensation:
Restricted stock awards 695 - 695
Stock option expense 823 (823) -
Other operating expenses 29,067 - 29,067
Depreciation 2,499 - 2,499
--------- ----------- ------------
Operating Income 28,053 823 28,876
Operating Margin 20.5% 21.1%
Amortization of intangible assets 7,902 - 7,902
Interest 4,488 - 4,488
Early extinguishment of debt 2,093 (2,093) -
Acquisition integration expenses (a) 18 (18) -
--------- ----------- ------------
Total Expenses 123,076 (2,934) 120,142
--------- ----------- ------------
Income from continuing operations
before income tax expense 13,552 2,934 16,486
Income tax expense 5,832 1,262 7,094
--------- ----------- ------------
Income from continuing operations 7,720 1,672 9,392
Addback: Amortization of intangible
assets 7,902 - 7,902
--------- ----------- ------------
Income from continuing operations
plus amortization of intangible
assets $15,622 $1,672 $17,294
========= =========== ============
Per Share Data - Diluted:
Income From Continuing Operations $0.13 $0.03 $0.16
Addback: Amortization of intangible
assets 0.14 - 0.14
--------- ----------- ------------
Income from continuing operations
plus amortization of intangible
assets $0.27 $0.03 $0.30
========= =========== ============
(a) Amounts are included in other operating expenses in the
Consolidated Statements of Operations.
USI Holdings Corporation
Non-GAAP Financial Measures
Reconciliation of Operating Income, Operating Margin and Income from
Continuing Operations plus Amortization of Intangible Assets,
Excluding Identified Adjustments
Identified Adjustments:
In December 2004, USI announced that it had approved a plan to take
steps to reduce ongoing operating expenses. As a result of these
actions, for the three months ended March 31, 2005, the Company
recorded expenses of $4.0 million. The expenses were comprised of
restructuring of sales professionals' employment agreements, employee
severance and related benefits and lease termination costs.
Additionally, in the three months ended March 31, 2005, the Company
recorded expenses of $8.1 million related to the acquisition of
Summit Global Partners. There were no such similar adjustments for the
three months ended March 31, 2006. All adjustments noted above are
referred to as "Identified Adjustments."
For the Three Months Ended
March 31,
----------------------------------
2005
Excluding
2005 As Identified Identified
Reported Adjustments Adjustments
--------- ----------- ------------
(Dollars in Thousands, Except per
Share Amounts)
Total revenues $122,012 $- $122,012
Compensation and employee benefits 68,782 - 68,782
Non-cash stock-based compensation,
restricted stock awards 318 - 318
Other operating expenses 25,080 - 25,080
Depreciation 2,328 - 2,328
--------- ----------- ------------
Operating Income 25,504 - 25,504
--------- ----------- ------------
Operating Margin 20.9% 20.9%
Amortization of intangible assets 6,753 - 6,753
Interest 3,100 - 3,100
Margin improvement plan expenses (a) 4,030 (4,030) -
Acquisition Integration expenses (a) 8,122 (8,122) -
--------- ----------- ------------
Total Expenses 118,513 (12,152) 106,361
--------- ----------- ------------
Income from continuing operations
before income tax expense 3,499 12,152 15,651
Income tax expense 1,514 5,153 6,667
--------- ----------- ------------
Income from continuing operations 1,985 6,999 8,984
Addback: Amortization of intangible
assets 6,753 - 6,753
--------- ----------- ------------
Income from continuing operations
plus amortization of intangible
assets $8,738 $6,999 $15,737
========= =========== ============
Per Share Data - Diluted:
Income From Continuing Operations $0.03 $0.13 $0.17
Addback: Amortization of intangible
assets 0.13 - 0.12
--------- ----------- ------------
Income from continuing operations
plus amortization of intangible
assets $0.16 $0.13 $0.29
========= =========== ============
(a) Amounts are included in compensation and employee benefits and
other operating expenses in the Consolidated Statements of Operations.
USI Holdings Corporation and Subsidiaries
Summary Statements of Operations by Segment
Specialized
Insurance Benefits
(Amounts in Thousands) Brokerage Services Corporate Total
--------- ----------- --------- ---------
For the three months ended
March 31:
2006
----------------------------
Revenues $129,635 $6,922 $71 $136,628
--------- ----------- --------- ---------
Compensation and employee
benefits 68,631 4,310 2,550 75,491
Other operating expenses 21,327 3,867 3,891 29,085
Non-cash stock-based
compensation:
Restricted stock awards 562 11 122 695
Stock option expense 390 30 403 823
Depreciation 1,924 235 340 2,499
Amortization 7,104 798 - 7,902
Interest expense 207 105 4,176 4,488
Early extinguishment of debt - - 2,093 2,093
--------- ----------- --------- ---------
Income(loss) from continuing
operations, before income
taxes 29,490 (2,434) (13,504) 13,552
--------- ----------- --------- ---------
Add back:
Amortization 7,104 798 - 7,902
Interest expense 207 105 4,176 4,488
Early extinguishment of debt - - 2,093 2,093
Acquisition integration
expense 18 - - 18
--------- ----------- --------- ---------
Operating income (loss) $36,819 $(1,531) $(7,235) $28,053
--------- ----------- --------- ---------
Operating margin 28.4% -22.1% NM 20.5%
2005
----------------------------
Revenues $115,049 $6,703 $260 $122,012
--------- ----------- --------- ---------
Compensation and employee
benefits 72,900 3,416 4,624 80,940
Other operating expenses 19,118 2,353 3,603 25,074
Non-cash stock-based
compensation, restricted
stock awards 245 7 66 318
Depreciation 1,845 121 362 2,328
Amortization 6,069 684 - 6,753
Interest expense 288 104 2,708 3,100
--------- ----------- --------- ---------
Income(loss) from continuing
operations, before income
taxes 14,584 18 (11,103) 3,499
--------- ----------- --------- ---------
Add back:
Acquisition integration and
margin improvement plan
expenses 10,518 82 1,552 12,152
Amortization 6,069 684 - 6,753
Interest expense 288 104 2,708 3,100
--------- ----------- --------- ---------
Operating income (loss) $31,459 $888 $(6,843) $25,504
--------- ----------- --------- ---------
Operating margin 27.3% 13.2% NM 20.9%
USI Holdings Corporation and Subsidiaries
Non-GAAP Financial Measures
Reconciliation of Organic Revenue Growth/(Decline)
For the Three Months Ended March 31
---------------------------------------------------------
Adjustment
Revenues Change for Net Organic
------------------- ---------------- Acquired Growth/
2006 2005 Amount Percent Businesses (Decline)
--------- --------- -------- ------- ---------- ---------
Consolidated (Dollars in
------------- Thousands)
Net
Commissions
and Fees -
Property &
Casualty $65,320 $61,033 $4,287 7.0% $(4,930) -1.1%
Net
Commissions
and Fees -
Benefits 49,636 41,472 8,164 19.7% (6,297) 4.5%
--------- --------- -------- ----------
Total Net
Commissions
and Fees 114,956 102,505 12,451 12.1% (11,227) 1.2%
--------- --------- -------- ----------
Contingents
and
Overrides 18,753 18,001 752 4.2% (988) -1.3%
Other Income 2,919 1,506 1,413 93.8% (166) 82.8%
------------------- ---------------- ---------- ---------
Total
Revenues $136,628 $122,012 $14,616 12.0% $(12,381) 1.8%
=================== ================ ========== =========
Insurance
Brokerage
-------------
Net
Commissions
and Fees -
Property &
Casualty $65,320 $61,033 $4,287 7.0% $(4,930) -1.1%
Net
Commissions
and Fees -
Benefits 42,715 34,789 7,926 22.8% (5,528) 6.9%
--------- --------- -------- ----------
Total Net
Commissions
and Fees 108,035 95,822 12,213 12.7% (10,458) 1.8%
--------- --------- -------- ----------
Contingents
and
Overrides 18,753 17,983 770 4.3% (947) -1.0%
Other Income 2,847 1,244 1,603 128.9% (166) 115.5%
------------------- ---------------- ---------- ---------
Total
Revenues $129,635 $115,049 $14,586 12.7% $(11,571) 2.6%
=================== ================ ========== =========
Specialized
Benefits
Services
-------------
Net
Commissions
and Fees -
Benefits $6,921 $6,683 $238 3.6% $(769) -7.9%
Contingents
and
Overrides - 18 (18) - (41) -327.8%
Other Income 1 2 (1) -50.0% - -50.0%
------------------- ---------------- ---------- ---------
Total
Revenues $6,922 $6,703 $219 3.3% $(810) -8.8%
=================== ================ ========== =========
Corporate
-------------
Other Income $71 $260 $(189) -72.7% $- -72.7%
------------------- ---------------- ---------- ---------
Total
Revenues $71 $260 $(189) -72.7% $- -72.7%
=================== ================ ========== =========
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