Net income for the second quarter of 2008 was $40,398,000, or $0.29 per share, compared with $52,012,000, or $0.37 per share for the same quarter of 2007. Excluding the non-recurring gain of $9,823,000 on the sale of Rock-Tenn shares in the second quarter of 2007, net income for the second quarter of 2007 was $45,969,000, or $0.33 per share. Total revenue for the second quarter ended June 30, 2008 was $241,720,000, compared with 2007 second quarter revenue of $246,644,000. Excluding the non-recurring gain of $9,823,000 on the sale of Rock-Tenn shares in the second quarter of 2007, total revenues for the second quarter of 2008 increased 2.1% over the adjusted total revenues in the corresponding quarter of 2007, which equaled $236,821,000.
Total revenue for the six-months ended June 30, 2008 was $498,435,000, compared with the total revenues for the first half of 2007 of $505,157,000. Excluding the non-recurring gain of $18,664,000 on the sale of Rock-Tenn shares in the first half of 2007, total revenues for the first six-month period of 2008 increased 2.5% over the adjusted total revenues in the corresponding period of 2007, which equaled $486,493,000. Net income for the six-month period ended June 30, 2008 was $92,158,000, or $0.65 per share, compared with $111,739,000, or $0.79 per share for the same period of 2007. Excluding the non-recurring gain of $18,664,000 on the sale of Rock-Tenn shares in the first half of 2007, net income for the six-month period ended June 30, 2008 was $92,158,000 compared to the adjusted net income of the comparable period in 2007 of $100,312,000.
J. Hyatt Brown, Chairman and Chief Executive Officer, noted, "Our results for the quarter were reflective of the continuing soft market. The general economic slowdown varies in degree across our 38 states footprint, but is causing reductions in renewal exposure units in most locations and in most classes of business. Even with this dual headwind, Brown & Brown has shown a dogged commitment to growth and margins. The good news is we think 2009 should be better."
Jim W. Henderson, Vice Chairman and Chief Operating Officer, added, "The second quarter of 2008 was one of our more active periods for acquisitions with 13 transactions closing, representing $47.5 million in estimated annualized revenues. For the year, we have closed 25 transactions with estimated annualized revenues of $79.0 million. We are very proud of the high-quality class of agencies that have elected to join us. The number of prospects for M&A continues to be very encouraging."
Brown & Brown, Inc. and its subsidiaries offer a broad range of insurance and reinsurance products and services, as well as risk management, third party administration, managed health care, and Medicare set-aside services and programs. Providing service to business, public entity, quasi-public entity, individual, trade and professional association clients nationwide, the Company is ranked by Business Insurance magazine as the United States' sixth largest independent insurance intermediary. The Company's Web address is www.bbinsurance.com.
This press release may contain certain statements relating to future results which are forward-looking statements, including those relating to future financial results and to acquisition opportunities. These statements are not historical facts, but instead represent only the Company's current belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results, financial condition and achievements may differ, possibly materially, from the anticipated results, financial condition and achievements contemplated by these forward-looking statements. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results and condition, as well as its other achievements, are contained in the Company's filings with the Securities and Exchange Commission. Some factors include: general economic conditions around the country; downward commercial property and casualty premium pressures; the effects of recent legislative and regulatory changes in Florida pertaining to the insurance industry, including those relating to coastal property coverages; the competitive environment; the integration of the Company's operations with those of businesses or assets the Company has acquired or may acquire in the future and the failure to realize the expected benefits of such integration; the potential occurrence of a disaster that affects certain areas of the States of California, Florida, Georgia, Michigan, New Jersey, New York, Pennsylvania, Texas and/or Washington, where significant portions of the Company's business are concentrated; and the cost and impact on the Company of previously disclosed regulatory inquiries regarding industry and Company practices with respect to compensation received from insurance carriers. All forward-looking statements made herein are made only as of the date of this release, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.
Brown & Brown, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
For the Three Months For the Six Months
Ended June 30 Ended June 30
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
REVENUES
Commissions and fees $ 238,835 $ 230,476 $ 492,363 $ 476,035
Investment income 1,909 12,990 3,908 24,569
Other income, net 976 3,178 2,164 4,553
--------- --------- --------- ---------
Total revenues 241,720 246,644 498,435 505,157
--------- --------- --------- ---------
EXPENSES
Employee compensation and benefits 120,514 112,636 241,701 223,446
Non-cash stock-based compensation 1,800 1,334 3,744 2,836
Other operating expenses 34,384 31,558 65,588 63,481
Amortization 11,392 9,965 22,508 19,467
Depreciation 3,292 3,239 6,538 6,279
Interest 3,744 3,416 7,178 7,050
--------- --------- --------- ---------
Total expenses 175,126 162,148 347,257 322,559
--------- --------- --------- ---------
Income before income taxes 66,594 84,496 151,178 182,598
Income taxes 26,196 32,484 59,020 70,859
--------- --------- --------- ---------
Net income $ 40,398 $ 52,012 $ 92,158 $ 111,739
========= ========= ========= =========
Net income per share:
Basic $ 0.29 $ 0.37 $ 0.65 $ 0.80
========= ========= ========= =========
Diluted $ 0.29 $ 0.37 $ 0.65 $ 0.79
========= ========= ========= =========
Weighted average number of shares
outstanding:
Basic 140,723 140,384 140,713 140,303
========= ========= ========= =========
Diluted 141,265 141,120 141,330 141,170
========= ========= ========= =========
Dividends declared per share $ 0.07 $ 0.06 $ 0.14 $ 0.12
========= ========= ========= =========
Brown & Brown, Inc.
INTERNAL GROWTH SCHEDULE
Core Commissions and Fees(1)
Three Months Ended June 30, 2008
(in thousands)
(unaudited)
Total Less
Quarter Quarter Total Net Acquisi- Internal Internal
Ended Ended Net Growth tion Net Net
6/30/08 6/30/07 Change % Revenues Growth $ Growth %
--------- --------- ------- ----- ------- --------- ------
Florida
Retail $ 45,806 $ 50,858 $(5,052) (9.9)% $ 2,827 $ (7,879) (15.5)%
National
Retail 73,920 63,847 10,073 15.8 % 14,393 (4,320) (6.8)%
Western
Retail 24,588 23,898 690 2.9 % 3,587 (2,897) (12.1)%
--------- --------- ------- ------- ---------
Total
Retail 144,314 138,603 5,711 4.1 % 20,807 (15,096) (10.9)%
--------- --------- ------- ------- ---------
Wholesale
Brokerage 44,362 45,369 (1,007) (2.2)% 5,294 (6,301) (13.9)%
Professional
Programs 9,353 9,080 273 3.0 % - 273 3.0 %
Special
Programs 27,412 22,599 4,813 21.3 % 147 4,666 20.6 %
--------- --------- ------- ------- ---------
Total
National
Programs 36,765 31,679 5,086 16.1 % 147 4,939 15.6 %
--------- --------- ------- ------- ---------
Services 7,982 9,184 (1,202) (13.1)% - (1,202) (13.1)%
--------- --------- ------- ------- ---------
Total Core
Commissions
and Fees
(1) $ 233,423 $ 224,835 $ 8,588 3.8 % $26,248 $ (17,660) (7.9)%
========= ========= ======= ======= =========
Reconciliation of Internal Growth Schedule
to Total Commissions and Fees
Included in the Consolidated Statements of Income
for the Three Months Ended June 30, 2008 and 2007
(in thousands)
(unaudited)
Quarter Ended Quarter Ended
6/30/08 6/30/07
------------- -------------
Total core commissions and fees(1) $ 233,423 $ 224,835
Contingent commissions 5,412 2,746
Divested business - 2,895
------------- -------------
Total commission & fees $ 238,835 $ 230,476
============= =============
(1) Total core commissions and fees are our total commissions and fees
less (i) profit-sharing contingent commissions (revenue derived from
special revenue-sharing commissions from insurance companies based
upon the volume and the growth and/or profitability of the business
placed with such companies during the prior year), and (ii) divested
business (commissions and fees generated from offices, books of
business or niches sold by the Company or terminated).
Brown & Brown, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
June 30, December 31,
2008 2007
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ - $ 38,234
Restricted cash and investments 215,630 254,404
Short-term investments 6,625 2,892
Premiums, commissions and fees receivable 264,166 240,680
Deferred income taxes - 17,208
Other current assets 42,880 33,964
------------- -------------
Total current assets 529,301 587,382
Fixed assets, net 64,223 62,327
Goodwill 978,796 846,433
Amortizable intangible assets, net 484,311 443,224
Other assets 16,202 21,293
------------- -------------
Total assets $ 2,072,833 $ 1,960,659
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Premiums payable to insurance companies $ 421,173 $ 394,034
Premium deposits and credits due customers 32,243 41,211
Accounts payable 24,121 18,760
Accrued expenses 73,697 90,599
Current portion of long-term debt 7,070 11,519
------------- -------------
Total current liabilities 558,304 556,123
Long-term debt 253,649 227,707
Deferred income taxes, net 74,459 65,736
Other liabilities 12,228 13,635
Shareholders' equity:
Common stock, par value $0.10 per share;
authorized 280,000 shares; issued and
outstanding 140,708 at 2008 and 140,673 at
2007 14,071 14,067
Additional paid-in capital 236,163 231,888
Retained earnings 923,951 851,490
Accumulated other comprehensive income 8 13
------------- -------------
Total shareholders' equity 1,174,193 1,097,458
------------- -------------
Total liabilities and shareholders' equity $ 2,072,833 $ 1,960,659
============= =============
Cory T. Walker Chief Financial Officer (386) 239-7250
SOURCE: Brown & Brown, Inc.