FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission file number 0-15981
HILB, ROGAL AND HAMILTON COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1194795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 1220, Glen, Allen, VA 23060-1220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 747-6500
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 1934during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 5, 1995
Common stock, no par value 14,732,026
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Consolidated Income
for the three months ended
March 31, 1995 and 1994 3
Consolidated Balance Sheet
March 31, 1995 and December
31, 1994 4
Statement of Consolidated Cash Flows
for the three months ended March
31, 1995 and 1994 5
Notes to Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7-8
Exhibits to Part I
Exhibit 11 - Computation of Earnings
Per Share 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Exhibit 11 - See Part I
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
(Restated)
Revenues
Commissions and fees $38,081,734 $37,693,248
Investment income 512,748 338,779
Other 761,655 1,299,792
----------- -----------
39,356,137 39,331,819
Operating expenses
Compensation and employee
benefits 20,599,309 20,949,795
Other operating expenses 8,752,895 8,703,966
Amortization of intangibles 1,648,058 1,681,144
Interest expense 110,237 191,636
----------- -----------
31,110,499 31,526,541
----------- -----------
INCOME BEFORE INCOME TAXES 8,245,638 7,805,278
Income taxes 3,298,255 3,074,249
----------- -----------
NET INCOME $ 4,947,383 $ 4,731,029
=========== ===========
NET INCOME PER SHARE $0.34 $0.32
===== =====
Dividends $0.14 $0.12
===== =====
Weighted Average Number of
Shares Outstanding 14,757,450 14,802,162
========== ==========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
MARCH 31, DECEMBER 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,069,902 $ 12,615,132
Investments 27,753,702 23,131,550
Receivables:
Premiums, less allowance for doubtful
accounts of $1,993,000 and $2,348,000,
respectively 35,920,902 39,261,731
Other 5,385,966 6,635,856
------------ ------------
41,306,868 45,897,587
Prepaid expenses and other current assets 2,668,944 3,262,743
------------ ------------
TOTAL CURRENT ASSETS 84,799,416 84,907,012
INVESTMENTS 8,220,000 9,470,000
PROPERTY AND EQUIPMENT (NET) 12,310,113 12,426,949
INTANGIBLE ASSETS
Expiration rights 59,603,673 57,742,996
Goodwill 16,992,695 16,480,408
Noncompetition agreements 9,603,414 9,603,414
------------ -----------
86,199,782 83,826,818
Less accumulated amortization 36,704,966 35,097,409
------------ -----------
49,494,816 48,729,409
OTHER ASSETS 3,582,109 3,361,425
------------ -----------
$158,406,454 $158,894,795
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 64,996,844 $ 65,361,846
Accounts payable and accrued expenses 7,912,631 8,438,709
Premium deposits and credits due customers 6,579,385 8,847,097
Current portion of long-term debt 2,935,322 4,499,378
------------ -----------
TOTAL CURRENT LIABILITIES 82,424,182 87,147,030
LONG-TERM DEBT 2,961,780 3,173,405
OTHER LONG-TERM LIABILITIES 2,859,807 2,144,204
SHAREHOLDERS' EQUITY
Common Stock, no par value;
authorized 50,000,000 shares;
outstanding 14,759,524 and 14,679,464
shares, respectively 44,282,775 43,426,295
Retained earnings 25,877,910 23,003,861
------------ ------------
70,160,685 66,430,156
------------ ------------
$158,406,454 $158,894,795
============ ============
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
(Restated)
OPERATING ACTIVITIES
Net income $ 4,947,383 $ 4,731,029
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 638,807 745,344
Amortization of intangible assets 1,648,058 1,681,144
Provision for losses on accounts
receivable 147,559 145,413
Gain on sale of assets (605,452) (1,099,798)
------------ ------------
6,776,355 6,203,132
Changes in operating assets and
liabilities net of effects from
insurance agency acquisitions:
Decrease in accounts receivable 5,133,936 5,951,484
Decrease in prepaid expenses 596,095 1,050,197
Decrease in premiums payable to
insurance companies (1,230,535) (6,276,415)
Increase (decrease) in premium
deposits and customer credits (2,267,712) 874,572
Increase (decrease) in accounts
payable and accrued expenses (734,006) 1,884,396
Other operating activities (223,800) (23,805)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,050,333 9,663,561
INVESTING ACTIVITIES
Proceeds from maturities of investments 3,140,000 3,941,505
Purchase of investments (6,512,152) (7,430,000)
Purchase of property and equipment (491,026) (535,067)
Purchase of insurance agencies, net of
cash acquired 536,437 (239,958)
Proceeds from sale of assets 587,345 617,036
Other investing activities (1,346) 97,668
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES (2,740,742) (3,548,816)
FINANCING ACTIVITIES
Proceeds from long-term debt 10,000,000
Principal payments on long-term debt (12,216,093) (2,391,023)
Proceeds from issuance of Common Stock 5,100 16,500
Repurchase of Common Stock (570,495) (466,250)
Dividends (2,073,333) (1,718,002)
Other financing activities 23,945
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (4,854,821) (4,534,830)
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 454,770 1,579,915
Cash and cash equivalents at beginning
of period 12,615,132 14,420,351
------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 13,069,902 $ 16,000,266
============ ============
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
March 31, 1995
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the Company
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
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. Operating
results for the three month period ended March 31, 1995, are not necessarily
indicative of the results that may be expected for the year ending December
31, 1995. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Form 10-K for the
year ended December 31, 1994.
NOTE B--INCOME TAXES
The Company (except for pooled entities prior to acquisition) files a
consolidated federal income tax return. Deferred taxes result from
temporary differences between the reporting for income tax and financial
statement purposes primarily related to the recording of commission and fee
income, bad debt expense, depreciation expense, basis differences in
intangible assets and the recognition of net operating loss carryforwards
from pooled entities.
NOTE C--ACQUISITIONS
During the first three months of 1995, the Company acquired all of the
outstanding shares of an insurance agency in exchange for $1,862,000
(125,000 shares of Common Stock and $440,000 in guaranteed future payments)
in a purchase accounting transaction. Proforma revenues and net income are
not material to the consolidated financial statements.
NOTE D--SALE OF ASSETS
During the three months ended March 31, 1995 and 1994, the Company sold
certain insurance accounts and other assets resulting in gains of
approximately $605,000 and $1,100,000, respectively. These amounts are
included in other revenues in the statement of consolidated income.
Revenues, expenses and assets of these operations were not material to the
consolidated financial statements.
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY (THE "COMPANY")
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Results herein reflect the restatement of prior year financial information
due to pooling-of-interest mergers in 1994.
For the three months ended March 31, 1995, commissions and fees were $38.1
million, an increase of 1.0% from commissions and fees of $37.7 million
during the comparable period of the prior year. Approximately $2.8 million
of commissions were derived from purchase acquisitions of new insurance
agencies, and revenues realized from contingency, override and profit sharing
arrangements with insurance companies increased by approximately $0.6
million. These increases were in part offset by decreases of approximately
$2.8 million from the sale of certain offices and accounts in 1994 and the
impact of the soft market conditions, which have resulted in decreasing
premium rates and increased competition.
Investment income increased 51.4% over the prior year reflecting an increase
in average investable assets combined with an increase in interest rates.
Other revenues decreased by $0.5 million and include gains from the sale of
certain insurance accounts and other assets of $0.6 million and $1.1 million
in 1995 and 1994, respectively.
Expenses decreased by $0.4 million or 1.3%. Decreases relate to expense
controls, the impact of certain offices and accounts sold in 1994, along with
$0.1 million in decreased interest associated with the retirement of debt, in
part offset by costs associated with insurance agencies purchased in the
latter part of 1994.
The Company's overall tax rate of 40.0% for the three months ended March 31,
1995, was relatively comparable to the rate of 39.4% for the same period of
the prior year.
The timing of contingent commissions, policy renewals and acquisitions may
cause revenues, expenses and net income to vary significantly from quarter to
quarter. As a result of the factors described above, operating results for
the three months ended March 31, 1995 should not be considered indicative of
the results that may be expected for the entire year ending December
31, 1995.
Liquidity and Capital Resources:
Net cash provided by operations totalled $8.1 million and $9.7 million for
the three months ended March 31, 1995 and 1994, respectively, and is primarily
dependent upon the timing of the collection of insurance premiums from
clients and payment of those premiums to the appropriate insurance
underwriters.
The Company has historically generated sufficient funds internally to
finance capital expenditures for personal property and equipment. Real
properties acquired for offices of the Company are generally financed by
long-term mortgages. Cash expenditures for the acquisition of property and
equipment were $0.5 million in both the three months ended March 31, 1995 and
1994. The timing and extent of the purchase and sale of investments is
dependent upon cash needs and yields on alternate investments and cash
equivalents. The Company did not have any material capital expenditure
commitments as of March 31, 1995.
Financing activities utilized cash of $4.9 million and $4.5 million in the
three months ended March 31, 1995 and 1994, respectively. The Company has
repaid its debt, including debt of pooled entities, and annually increased
its dividend rate. The Company anticipates continued reduction in its
long-term debt and the continuance of its dividend policy. The Company has
a $5,000,000 bank revolving credit loan which is available for short-term
financing requirements.
The Company had a current ratio (current assets to current liabilities) of
1.03 to 1.00 as of March 31, 1995. The Company expects to continue to
acquire agencies with its Common Stock through pooling-of-interests mergers.
The Company also expects to use available funds to provide funding for the
cash portion of the purchase price of agencies to be acquired under the
purchase method of accounting. Shareholders' equity of $70.2 million at
March 31, 1995, is improved from $66.4 million at December 31, 1994.
The Company believes that cash generated from operations, together with
existing cash and cash equivalent balances and borrowings, will provide
sufficient funds to meet the Company's short and long-term funding needs.
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - 11 Computation of per share earnings
b) No reports on Form 8-K have been filed during the three
months ended March 31, 1995.
SIGNATURE
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.
Hilb, Rogal and Hamilton Company
(Registrant)
Date May 8, 1995 By: /s/ Robert H. Hilb
------------------ -----------------------
Chairman
(Principal Executive Officer)
Date May 8, 1995 By: /s/ Timothy J. Korman
------------------ ---------------------------
Senior Vice President-Finance
(Principal Financial Officer)
Date May 8, 1995 By: /s/ Carolyn Jones
------------------ ----------------------------
Vice President and Controller
(Chief Accounting Officer)
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
1995 1994
(Restated)
PRIMARY:
Average shares outstanding 14,757,450 14,802,162
Net effect of dilutive stock
options -- based on the treasury
stock method using average
fair value 5,098 7,861
---------- ----------
Average number of shares
as adjusted 14,762,548 14,810,023
========== ==========
Net income $4,947,383 $4,731,029
========== ==========
Per share amount $.34 $.32
==== ====
FULLY DILUTED:
Average shares outstanding 14,757,450 14,802,162
Net effect of dilutive stock
options -- based on the treasury
stock method using the end
of period fair value, if higher
than average fair value 5,098 7,861
---------- ----------
Average number of shares
as adjusted 14,762,548 14,810,023
========== ==========
Net income $4,947,383 $4,731,029
========== ==========
Per share amount $.34 $.32
==== ====
Note: The per share amounts presented for each period above do not
necessarily support amounts in the statement of consolidated income because
common stock equivalents are less than 3% dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10Q
FOR HILB, ROGAL AND HAMILTON COMPANY FOR THE QUARTER ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 13,069,902
<SECURITIES> 27,753,702
<RECEIVABLES> 43,299,868
<ALLOWANCES> 1,993,000
<INVENTORY> 0
<CURRENT-ASSETS> 84,799,416
<PP&E> 31,780,944
<DEPRECIATION> 19,470,831
<TOTAL-ASSETS> 158,406,454
<CURRENT-LIABILITIES> 82,424,182
<BONDS> 2,961,780
<COMMON> 44,282,775
0
0
<OTHER-SE> 25,877,910
<TOTAL-LIABILITY-AND-EQUITY> 158,406,454
<SALES> 0
<TOTAL-REVENUES> 39,356,137
<CGS> 0
<TOTAL-COSTS> 31,000,262
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,237
<INCOME-PRETAX> 8,245,638
<INCOME-TAX> 3,298,255
<INCOME-CONTINUING> 4,947,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,947,383
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
