11
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-7201.
POE & BROWN, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-0864469
_______________________________ _______________________________
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
220 S. Ridgewood Ave., Daytona Beach, FL 32114
________________________________________ ___________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 252-9601
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
ninety (90) days. Yes X No
___ ___
The number of shares of the Registrant's common stock, $.10 par
value, outstanding as of May 7, 1997, was 8,700,834.
<PAGE 2>
POE & BROWN, INC.
Index to Form 10-Q
For The Quarter Ended March 31, 1997
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Page
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PART I. FINANCIAL INFORRMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income for the
three months ended March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheets as of March 31,
1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows for
the three months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
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ITEM 1: FINANCIAL STATEMENTS
POE & BROWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
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<CAPTION>
For the three months
ended March 31,
1997 1996
____ ____
<S> <C> <C>
REVENUES
Commissions and fees $32,713 $29,750
Investment income 807 841
Other income 462 135
________ _______
Total revenues 33,982 30,726
EXPENSES
Employee compensation and benefits 16,838 15,468
Other operating expenses 7,157 6,604
Interest and amortization 1,353 1,367
_______ _______
Total expenses 25,348 23,439
_______ _______
Income before income taxes 8,634 7,287
Income taxes 3,410 2,842
_______ ______
NET INCOME $ 5,224 $ 4,445
======= =======
Net income per share $ 0.60 $ 0.51
======= =======
Dividends declared per share $ .13 $ .12
======= =======
Weighted average number of shares outstanding 8,665 8,714
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
POE & BROWN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) (Audited)
March 31, December 31,
1997 1996
____ ____
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 47,695 $ 31,786
Short-term investments 1,120 1,087
Premiums, commissions and fees receivable 55,017 62,940
Other current assets 6,815 7,307
________ ________
Total current assets 110,647 103,120
Fixed assets, net 12,066 12,085
Intangible assets, net 52,395 50,167
Investments 9,538 11,288
Other assets 3,230 3,083
________ ________
Total assets $187,876 $179,743
======== ========
LIABILITIES
Premiums payable to insurance companies $ 76,057 $ 73,570
Premium deposits and credits due customers 7,039 7,329
Accounts payable and accrued expenses 12,882 11,130
Current portion of long-term debt 6,818 5,365
________ ________
Total current liabilities 102,796 97,394
Long-term debt 5,524 5,300
Deferred income taxes 2,967 3,603
Other liabilities 6,322 6,160
________ ________
Total liabilities 117,609 112,457
________ ________
SHAREHOLDERS' EQUITY
Common stock, par value $.10 per
share: authorized 18,000 shares;
issued 8,657 shares at 1997 and
8,656 at 1996 866 866
Additional paid-in capital 1,663 1,671
Retained earnings 62,336 58,238
Net unrealized appreciation of
available-for-sale securities, net of
tax effect of $3,527 in 1997 and
$4,163 in 1996 5,402 6,511
________ ________
Total shareholders' equity 70,267 67,286
________ ________
Total liabilities and shareholders'
equity $187,876 $179,743
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE 5>
<TABLE>
<CATION>
POE & BROWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
For the three months ended March 31,
1997 1996
____ ____
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,224 $ 4,445
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,903 1,841
Net gains on sales of investments, fixed assets
and customer accounts (429) (123)
Premiums, commissions and fees receivable, decrease 7,923 2,214
Other assets, decrease (increase) 538 (1,012)
Premiums payable to insurance companies, increase 2,487 6,331
Premium deposits and credits due customers,
(decrease) increase (290) 684
Accounts payable and accrued expenses, increase 1,752 1,330
Other liabilities, increase 162 121
_______ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES 19,270 15,831
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (713) (1,092)
Payments for businesses acquired, net of
cash acquired (1,646) (4,657)
Proceeds from sales of fixed assets and
customer accounts 238 131
Purchases of investments (29) (297)
Proceeds from sales of investments ---- 194
_______ _______
NET CASH USED IN INVESTING ACTIVITIES (2,150) (5,721)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on long-term debt (78) (52)
Net exercise of stock options and issuances
(repurchases) of stock (8) 11
Cash dividends paid (1,125) (1,042)
_______ _______
NET CASH USED IN FINANCING ACTIVITIES (1,211) (1,083)
_______ _______
Net increase in cash and cash equivalents 15,909 9,027
Cash and cash equivalents at beginning of period 31,786 28,350
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $47,695 $37,377
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE 6>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 - Basis of Financial Reporting
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions for
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. For further information, refer to the
consolidated financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Results of operations for the three-month period ended
March 31, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
Note 2 - Net Income Per Share
Net income per share is based upon the weighted average
number of shares outstanding, adjusted for the dilutive effect of
stock options, which is the same on both a primary and a fully-
diluted basis.
In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 128 "Earnings Per Share," (SFAS 128). SFAS 128
establishes new standards for computing and presenting earnings
per share (EPS). Specifically, SFAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS,
requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is
effective for financial statements issued for periods ending
after December 15, 1997; earlier application is not permitted.
EPS for the Company for the periods ended March 31, 1997 and
March 31, 1996 computed under SFAS 128 would not be different
than that previously computed.
Note 3 - Acquisitions
During the first quarter of 1997, the Company
acquired substantially all of the assets of Dade Underwriters
Insurance Agency of Aventura, Florida and Willits Insurance
Agency of Ft. Lauderdale, Florida. During the first quarter of 1996,
the Company acquired a majority interest in Florida Intracoastal
Underwriters, Limited Company of Miami Lakes, Florida. These acquisitions
have been accounted for using the purchase method of accounting. Pro forma
results of operations for the three-month periods ended March 31, 1996 and
1997 resulting from these acquisitions were not materially
different from the results of operations as reported. The
results of operations for the acquired companies have been
combined with those of the Company since their respective
acquisition dates.
Note 4 - Long-Term Debt
The Company continues to maintain its credit agreement with a major
insurance company under which $5 million (the maximum amount available
for borrowings) was outstanding at March 31, 1997, at an
<PAGE 7>
interest rate equal to the prime lending rate plus one percent. The
available amount will decrease by $1 million each August, as described
in Note 7 to the consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
In November 1994, the Company entered into a
revolving credit facility with a national banking institution
which provides for available borrowings of up to $10 million. As
of March 31, 1997, there were no borrowings against this line of
credit.
Note 5 - Contingencies
The Company is not a party to any legal proceedings other
than various claims and lawsuits arising in the normal course of
business. Management of the Company does not believe that any
such claims or lawsuits will have a material effect on the
Company's financial condition or results of operations.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Income. Net income for the first quarter of 1997
was $5,224,000, or $.60 per share, compared with net income in the first
quarter of 1996 of $4,445,000, or $.51 per share, an 18% increase.
Commissions and Fees. Commissions and fees for the
first quarter of 1997 increased $2,963,000, or 10% from
the same period in 1996. Approximately $1,262,000 of this
increase represents revenues from acquired agencies with the
remainder due to new business production.
Investment Income. Investment income for the first
quarter of 1997 decreased $34,000 from the same period in
1996 primarily due to changes in interest rate returns.
Other Income. Other income primarily includes gains
and losses from the sale of customer accounts and other assets.
Other income for the three-month period ended March 31, 1997
increased $327,000 over the same period in 1996.
Employee Compensation and Benefits. Employee
compensation and benefits increased 9% during the first quarter
of 1997 over the same period in 1996. This increase primarily
relates to a net increase in commissions and fees and merit pay
increases. Employee compensation and benefits as a percentage of
total revenue remained constant at 50% in both the first quarter
of 1996 and in the first quarter of 1997.
Other Operating Expenses. Other operating expenses for
the first quarter of 1997 increased $553,000, or 8%, over the same period
in 1996 primary due to increases in advertising expenses and general
reserves. Other operating expenses as a percentage of total revenue remained
constant at 21% in both the first quarter of 1996 and in the first quarter of
1997.
<PAGE 8>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents of
$47,695,000 at March 31, 1997 increased by $15,909,000 from $31,786,000
at December 31, 1996. During the first quarter of 1997, $19,720,000 of
cash was provided primarily from operating activities. Of this amount,
$1,646,000 was used to acquire businesses, $713,000 for additions to fixed
assets, and the remainder primarily to pay dividends on the Company's common
stock. The current ratio at March 31, 1997 was 1.08 compared to 1.06
as of December 31, 1996.
The Company has a revolving credit agreement
with a major insurance company under which up to $5 million
presently may be borrowed at an interest rate equal to the prime
lending rate plus one percent. The amount of available credit
decreases by $1 million each August through the year 2001, when
it will expire. As of March 31, 1997, the maximum amount of
borrowings was outstanding. In November 1994, the Company
entered into a revolving credit facility with a national banking
institution that provides for available borrowings of up to $10
million. As of March 31, 1997, there were no borrowings against
this line of credit. The Company believes that its existing
cash, cash equivalents, short-term investments portfolio, funds
generated from operations, and available credit facility
borrowings are sufficient to satisfy its normal financial needs.
<PAGE 9>
POE & BROWN, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is involved in various pending or
threatened proceedings by or against the Company or one or more
of its subsidiaries which involve routine litigation relating to
insurance risks placed by the Company and other contractual
matters. The Company's management does not believe that any of
such pending or threatened proceedings will have a material
adverse effect on the Company's financial position or results of
operations.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Exhibit 3a - Articles of Incorporation (incorporated by
reference to Exhibit 3a to Form 10-K for
the year ended December 31, 1994)
Exhibit 3b - Amended and Restated Bylaws (incorporated by
reference to Exhibit 3b to Form 10-K for the
year ended December 31, 1996)
Exhibit 11 - Statement re: Computation of Earnings Per
Share
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) There were no reports filed on Form 8-K during the quarter ended
March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
POE & BROWN, INC.
Date: May 8, 1997 /S/ WILLIAM A. ZIMMER
_______________________________
William A. Zimmer
Chief Financial Officer and Treasurer
(duly authorized officer, principal
financial officer and principal
accounting officer)
Exhibit 11 - Statement Re: Computation of Earnings Per Share (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
____ ____
<S> <C> <C>
Average shares outstanding 8,655 8,682
Net effect of dilutive stock options, based
on the treasury stock method 10 32
______ ______
Total shares used in computation 8,665 8,714
====== ======
Net income $5,224 4,445
====== ======
Net income per share $ .60 $ .51
====== ======
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<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements of Poe & Brown, Inc. for the three months ended March 31,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 47,695
<SECURITIES> 1,120
<RECEIVABLES> 55,017
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 110,647
<PP&E> 25,663
<DEPRECIATION> 13,597
<TOTAL-ASSETS> 187,876
<CURRENT-LIABILITIES> 102,796
<BONDS> 0
0
0
<COMMON> 866
<OTHER-SE> 5,402
<TOTAL-LIABILITY-AND-EQUITY> 187,876
<SALES> 0
<TOTAL-REVENUES> 33,982
<CGS> 0
<TOTAL-COSTS> 25,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179
<INCOME-PRETAX> 8,634
<INCOME-TAX> 3,410
<INCOME-CONTINUING> 5,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,224
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
