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, 1996 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 1934 during 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 1, 1996
Common stock, no par value 13,602,291
(This document contains 11 pages)
<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, 1996 and 1995 3
Consolidated Balance Sheet
March 31, 1996 and December
31, 1995 4
Statement of Consolidated Shareholders'
Equity for the three months ended
March 31, 1996 and 1995 5
Statement of Consolidated Cash Flows
for the three months ended March
31, 1996 and 1995 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-9
Exhibits to Part I
Exhibit 11 - Computation of Earnings
Per Share 10
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Exhibit 11 - See Part I
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
Revenues
Commissions and fees $41,929,002 $38,178,327
Investment income and other 1,146,567 1,276,277
----------- -----------
43,075,569 39,454,604
Operating expenses
Compensation and employee
benefits 22,620,910 20,654,489
Other operating expenses 9,691,358 8,815,518
Amortization of intangibles 1,792,341 1,648,058
Interest expense 231,895 110,237
----------- -----------
34,336,504 31,228,302
----------- -----------
INCOME BEFORE INCOME TAXES 8,739,065 8,226,302
Income taxes 3,576,750 3,298,255
----------- ----------
NET INCOME $ 5,162,315 $ 4,928,047
=========== ===========
NET INCOME PER SHARE $0.38 $0.33
===== =====
Dividends $0.15 $0.14
===== =====
Weighted Average Number of
Shares Outstanding 13,729,596 14,794,450
========== ==========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,896,195 $17,020,706
Investments 10,152,416 11,154,673
Receivables:
Premiums, less allowance for doubtful
accounts of $2,004,000 and $1,772,000,
respectively 37,576,681 41,707,706
Other 4,703,275 4,794,396
------------ ------------
42,279,956 46,502,102
Prepaid expenses and other current assets 2,453,903 3,937,964
------------ ------------
TOTAL CURRENT ASSETS 72,782,470 78,615,445
INVESTMENTS 5,770,000 4,300,000
PROPERTY AND EQUIPMENT (NET) 14,776,511 13,700,260
INTANGIBLE ASSETS
Expiration rights 65,798,219 68,345,441
Goodwill 24,901,665 24,432,875
Noncompetition agreements 9,277,473 9,888,798
------------ ------------
99,977,357 102,667,114
Less accumulated amortization 37,278,845 41,812,787
------------ ------------
62,698,512 60,854,327
OTHER ASSETS 4,722,412 5,778,932
------------ ------------
$160,749,905 $163,248,964
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 66,665,743 $ 69,481,803
Accounts payable and accrued expenses 7,537,598 8,040,022
Premium deposits and credits due customers 7,343,253 8,062,626
Current portion of long-term debt 1,284,276 1,755,238
------------ ------------
TOTAL CURRENT LIABILITIES 82,830,870 87,339,689
LONG-TERM DEBT 11,625,191 11,749,848
OTHER LONG-TERM LIABILITIES 8,036,890 7,513,537
SHAREHOLDERS' EQUITY
Common Stock, no par value;
authorized 50,000,000 shares;
outstanding 13,599,767 and 13,706,764
shares, respectively 28,396,837 29,903,900
Retained earnings 29,860,117 26,741,990
------------ ------------
58,256,954 56,645,890
------------ ------------
$160,749,905 $163,248,964
============ ============
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
Common Stock Retained Earnings
Balance at January 1, 1996 $29,903,900 $26,741,990
Issuance of 72,848 shares of
Common Stock 990,300
Purchase of 183,200 shares of
Common Stock (2,512,954)
Payment of dividends (2,044,188)
Other 15,591
Net income 5,162,315
----------- -----------
Balance at March 31, 1996 $28,396,837 $29,860,117
=========== ===========
Balance at January 1, 1995 $43,426,295 $23,003,861
Issuance of 125,400 shares of
Common Stock 1,426,975
Purchase of 50,000 shares of
Common Stock (570,495)
Payment of dividends (2,073,333)
Other 1,000 119,096
Net income 4,928,047
----------- -----------
Balance at March 31, 1995 $44,283,775 $25,977,671
=========== ===========
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, 1996 MARCH 31, 1995
OPERATING ACTIVITIES
Net income $ 5,162,315 $ 4,928,047
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 747,315 639,885
Amortization of intangible assets 1,792,341 1,648,058
Provision for losses on accounts
receivable 274,965 147,559
Gain on sale of assets (502,587) (605,452)
------------ ------------
7,474,349 6,758,097
Changes in operating assets and liabilities
net of effects from insurance agency
acquisitions:
Decrease in accounts receivable 3,947,181 4,996,855
Decrease in prepaid expenses 1,484,061 580,415
Decrease in premiums payable to
insurance companies (2,816,060) (949,951)
Decrease in premium deposits and
customer credits (719,373) (2,267,712)
Decrease in accounts payable and
accrued expenses (502,424) (729,406)
Other operating activities 1,076,618 (223,800)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,944,352 8,164,498
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
investments 3,560,000 3,140,000
Purchase of investments (4,027,743) (6,512,152)
Purchase of property and equipment (1,799,523) (537,129)
Purchase of insurance agencies, net of
cash acquired (2,242,683) 536,437
Proceeds from sale of assets 466,144 587,345
Other investing activities 127,703 (1,346)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (3,916,102) (2,786,845)
FINANCING ACTIVITIES
Proceeds from long-term debt 10,000,000
Principal payments on long-term debt (595,619) (12,216,093)
Proceeds from issuance of Common Stock 5,100
Repurchase of Common Stock (2,512,954) (570,495)
Dividends (2,044,188) (2,073,333)
Other financing activities 120,096
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (5,152,761) (4,734,725)
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 875,489 642,928
Cash and cash equivalents at beginning of
period 17,020,706 12,615,132
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 17,896,195 $ 13,258,060
============ ============
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
March 31, 1996
(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, 1996, are not necessarily indicative of the
results that may be expected for the year ending December 31,
1996. 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, 1995.
NOTE B--CHANGE IN ACCOUNTING
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." Adoption of this statement did not have a material
impact on the Company's financial position or results of
operations.
NOTE C--INCOME TAXES
The Company (except for pooled entities prior to acquisition and
its Canadian subsidiary) 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 bad debt expense, depreciation expense,
basis differences in intangible assets, deferred compensation
arrangements and the recognition of net operating loss carryforwards
from pooled entities.
NOTE D--ACQUISITIONS
During the first three months of 1996, the Company acquired all
of the outstanding shares of four insurance agencies for
$2,682,000 ($1,691,000 in cash and 72,848 shares of Common Stock)
in purchase accounting transactions. Proforma revenues and net
income are not material to the consolidated financial statements.
NOTE E--SALE OF ASSETS
During the three months ended March 31, 1996 and 1995, the
Company sold certain insurance accounts and other assets
resulting in gains of approximately $503,000 and $605,000,
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:
For the three months ended March 31, 1996, commissions and fees
were $41.9 million, an increase of 9.8% from commissions and fees
of $38.2 million during the comparable period of the prior year.
Approximately $3.7 million of commissions were derived from
purchase acquisitions of new insurance agencies. This increase
was in part offset by decreases of approximately $0.5 million
from the sale of certain offices and accounts in 1995 and early
1996.
Investment and other income decreased 10.2% over the prior year
reflecting a decrease in average investable assets due to the
Company's ongoing program to repurchase Company stock. These
amounts include gains from the sale of certain insurance accounts
and other assets of $0.5 million and $0.6 million in 1996 and
1995, respectively.
Expenses increased by $3.1 million or 10.0%. Increases include
$2.0 million in compensation and benefits primarily related to
purchase acquisitions of new insurance agencies. Other operating
expenses and amortization of intangibles increased approximately
$0.9 million and $0.1 million, respectively, primarily due to the
aforementioned purchase acquisitions.
The Company's overall tax rate of 40.9% for the three months
ended March 31, 1996, was relatively comparable to the rate of
40.1% 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, 1996 should not be considered indicative of the
results that may be expected for the entire year ending December
31, 1996.
Liquidity and Capital Resources:
Net cash provided by operations totalled $9.9 million and $8.2
million for the three months ended March 31, 1996 and 1995,
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
$1.8 million and $0.5 million for the three months ended March
31, 1996 and 1995, respectively. The timing and extent of the
purchase of investments is dependent upon cash needs and yields
on alternate investments and cash equivalents. The purchase of
insurance agencies accounted for under the purchase method of
accounting utilized cash of $2.2 million in the three months
ended March 31, 1996 and generated cash of $0.5 million in the
three months ended March 31, 1996. In addition, a portion of the
purchase price in such acquisitions may be paid through Common
Stock and deferred cash payments. The Company did not have any
material capital expenditure commitments as of March 31, 1996.
Cash proceeds form the sale of accounts and other assets amounted
to $0.5 million and $0.6 million in the three months ended March
31, 1996 and 1995, respectively.
Financing activities utilized cash of $5.2 million and $4.7
million in the three months ended March 31, 1996 and 1995,
respectively. The Company has consistently made scheduled debt
payments and annually increased its dividend rate. In addition,
during the three months ended March 31, 1996 and 1995, the
Company repurchased 183,200 and 50,000, respectively, shares of
its Common Stock under a stock repurchase program. The Company
is currently authorized to purchase an additional 1,040,000
shares and expects to continue to repurchase shares during the
remainder of 1996. The Company anticipates the continuance of
its dividend policy. The Company has a bank credit agreement for
$20.0 million under loans due through 2001. At March 31, 1996,
there were loans of $8.5 million outstanding under the agreement.
The Company had a current ratio (current assets to current
liabilities) of 0.88 to 1.00 as of March 31, 1996. Shareholders'
equity of $58.3 million at March 31, 1996, is improved from $56.6
million at December 31, 1995, and the debt to equity ratio of
0.20 to 1.00 is decreased from the ratio at December 31, 1995 of
0.21 to 1.00.
The Company believes that cash generated from operations,
together with proceeds from 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, 1996.
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 9, 1996 By: /s/ Robert H. Hilb
Chairman
(Principal Executive Officer)
Date May 9, 1996 By: /s/ Timothy J.Korman
Executive Vice President-Finance
(Principal Financial Officer)
Date May 9, 1996 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,
1996 1995
PRIMARY:
Average shares outstanding 13,729,596 14,794,450
Net effect of dilutive stock options --
based on the treasury stock method
using average fair value 30,940 5,098
---------- ----------
Average number of shares as adjusted 13,760,536 14,799,548
========== ==========
Net income $5,162,315 $4,928,047
========== ==========
Per share amount $.38 $.33
==== ====
FULLY DILUTED:
Average shares outstanding 13,729,596 14,794,450
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 41,634 7,861
---------- ----------
Average number of shares as adjusted 13,771,230 14,802,311
========== ==========
Net income $5,162,315 $4,928,047
========== ==========
Per share amount $.37 $.33
==== ====
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, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,896,195
<SECURITIES> 10,152,416
<RECEIVABLES> 44,283,956
<ALLOWANCES> 2,004,000
<INVENTORY> 0
<CURRENT-ASSETS> 72,782,470
<PP&E> 35,435,602
<DEPRECIATION> 20,659,091
<TOTAL-ASSETS> 160,749,905
<CURRENT-LIABILITIES> 82,830,870
<BONDS> 11,625,191
<COMMON> 28,396,837
0
0
<OTHER-SE> 29,860,177
<TOTAL-LIABILITY-AND-EQUITY> 160,749,905
<SALES> 0
<TOTAL-REVENUES> 43,075,569
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 34,104,609
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231,895
<INCOME-PRETAX> 8,739,065
<INCOME-TAX> 3,576,750
<INCOME-CONTINUING> 5,162,315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,162,315
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
