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Delaware | 6411 | 13-4009411 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Patrick S. Bryant Krista R. Bowen Robinson, Bradshaw & Hinson, P.A. 101 North Tryon Street, Suite 1900 Charlotte, North Carolina 28246 (704) 377-2536 (704) 378-4000 (facsimile) | Robert S. Rachofsky LeBoeuf, Lamb, Greene & MacRae LLP 125 West 55th Street New York, New York 10019 (212) 424-8088 (212) 649-9479 (facsimile) |
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The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Per Share | Total | |||
Public offering price | $ | $ | ||
Underwriting discounts | $ | $ | ||
Proceeds, before expenses, to us | $ | $ |
Merrill Lynch & Co. | Wachovia Securities |
Cochran Caronia Waller | William Blair & Company | Piper Jaffray |
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Exhibit 23.1 | ||||||||
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Exhibit 23.3 | ||||||||
Exhibit 23.4 |
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• | Property & Casualty Brokerage. With most of its operations under the AmWINS Brokerage brand name, our Property & Casualty Brokerage division distributes a broad range of property and casualty insurance products. We place a significant amount of insurance in the excess and surplus (E&S) lines market for businesses and governmental entities that are unable to obtain coverage through standard insurance products because of their risk profile or the nature or size of the risk. For the nine months ended September 30, 2006, our Property & Casualty Brokerage division represented approximately 72.2% of our total revenues. |
• | Specialty Underwriting. Our Specialty Underwriting division consists of a number of niche property and casualty insurance programs for which we act as a managing general underwriter (MGU). As an MGU, we act on behalf of insurance carriers who have given us the authority to underwrite and bind coverage for specified risks within prescribed limitations. Our Specialty Underwriting division currently administers a number of programs that offer commercial insurance for specific product lines or industry classes. For the nine months ended September 30, 2006, our Specialty Underwriting division represented approximately 8.4% of our total revenues. |
• | Group Benefits. Our Group Benefits division, which has experienced the most significant overall organic revenue growth of our three divisions since January 1, 2002, distributes group health and other benefit products and provides a full range of related administrative services. A substantial and growing part of this division’s business involves the placement and administration of retiree medical and prescription drug programs for businesses and governmental entities that are trying to reduce, control or eliminate the increasing cost of providing retiree benefits. Through our call center, we offer insurance carriers and plan sponsors the ability to outsource plan administration. We currently administer retiree health plans for over 800 employer groups and 74 member groups. Additionally, we operate a third-party claims administrator with over 100,000 lives under management. We also offer pharmacy benefit management services and distribute an approved prescription drug plan under Part D of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act). In addition, we act as the exclusive general agent for small employers, defined as employers with 50 or fewer employees, for Blue Cross Blue Shield of Rhode Island. For the nine months ended September 30, 2006, our Group Benefits division represented approximately 19.5% of our total revenues. |
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• | Greater Opportunity with Large Retail Insurance Brokers. Until recently, Aon Corporation (Aon), Marsh & McLennan Companies, Inc. (Marsh) and Willis North America Inc. (Willis), three of the largest retail insurance brokerage firms, owned their own wholesale insurance brokerage operations. During 2005, we acquired Willis’ wholesale insurance brokerage operations, and Aon and Marsh sold their wholesale insurance brokerage operations to private equity firms. Before these transactions, it generally was difficult for independent wholesale insurance brokers to conduct a significant amount of business with Aon, Marsh and Willis. Independent wholesale insurance brokers, such as AmWINS, now have greater opportunities to do business with these three firms. Additionally, we recently have observed that some large retail insurance brokerage firms have become more attentive to the number of wholesale insurance brokers they use and the compliance systems and financial position of these brokers. We believe this development may result in a reduction in the number of wholesale distributors used by these large retail insurance brokerage firms, which may benefit firms like us that have invested in and maintain compliance systems and procedures. |
• | Important Sustainable Market. The E&S lines market is a growing part of the commercial property and casualty insurance marketplace. Based on information published by A.M. Best Company, Inc. (A.M. Best), direct premiums written for E&S lines insurance policies in relation to total premiums for the commercial property and casualty lines market increased from approximately 6.4% in 1995 to approximately 12.7% in 2005, and premiums on E&S property and casualty lines insurance increased from $9.2 billion in 1995 to $33.3 billion in 2005. Apart from a slight decline in 1996, the E&S lines market has grown annually in terms of aggregate premium dollars written for the past 15 years for a variety of reasons, including the implementation of more conservative underwriting criteria and risk-selection techniques by standard insurance carriers, the elimination of non-core lines of business by standard insurance carriers and substantial losses resulting from the terrorist attacks on September 11, 2001 and natural disasters. Moreover, as reported by A.M. Best, a significant amount of capital has been invested in the E&S market during the last five years to capitalize on favorable market conditions, as evidenced by an increase in the number ofstart-up companies entering the E&S market, such as AXIS Capital Holdings Limited (AXIS), Allied World Assurance Company Holdings Limited (Allied World) and Endurance Specialty Holdings Limited (Endurance). Many insurance carriers operating in the E&S market distribute their products primarily through wholesale insurance distributors. |
• | Rising Health Care Costs. In the United States, total health care costs increased from $916.5 billion to approximately $1.9 trillion, or approximately 104.9%, from 1993 to 2004, and are projected to reach $4.0 trillion by 2015, according to the U.S. Department of Health and Human Services (HHS). On a per person basis, annual health care spending grew 49.5% during the seven-year period beginning January 1, 1999, reaching an estimated average of $6,683 per person in 2005, with spending projected to grow to approximately $12,357 per person by 2015, according to HHS and U.S. Census Bureau statistics. |
• | Aging Population. As a result of increases in life expectancy, the percentage of U.S. citizens age 65 and older is increasing in proportion to the overall U.S. population. |
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According to the U.S. Census Bureau, the proportion of the population age 65 and older was 12.4%, or 36.8 million people, in 2005, and is expected to increase to 14.2%, or 46.4 million people, by 2015, and to 16.3%, or 54.6 million people, by 2020. The age 65 and over population accounts for a disproportionate percentage of total health care costs. According to data published inAge Estimates in National Health Accounts, Health Care Financing Review, in 1999, people age 65 and older spent, on average, four times more on health care than the average person under age 65. The combination of increasing post-retirement life spans and disproportionate benefit costs, coupled with the general rise in health care spending, have led employers to seek ways to manage the costs or shift the burden of providing health benefits to retirees. |
• | Accounting Changes. We believe that recent changes in accounting principles generally accepted in the United States of America (GAAP) have increased the level of attention given to the cost of providing retiree health care benefits. The Governmental Accounting Standards Board (GASB) recently promulgated Statement No. 45,Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions(GASB No. 45). GASB No. 45, which will be phased in beginning in 2007, will require state and local governmental entities either to fund the cost of retiree benefits or recognize this obligation as a liability on their financial statements, as opposed to the prior practice of recognizing these costs on a pay-as-you-go basis. We believe GASB No. 45 is prompting many governmental entities to focus on the costs of retiree benefits and to seek ways to reduce these costs. |
• | Medicare Part D. The Medicare Modernization Act, which created the federal Voluntary Prescription Drug Benefit Program under Part D of the Social Security Act, added a new entitlement for Medicare-eligible beneficiaries for prescription drug costs. Effective as of January 1, 2006, eligible Medicare beneficiaries are able to obtain prescription drug coverage under Part D by enrolling in a prescription drug plan or in a Medicare Advantage plan, which is also known as an MA-PD. Under the Medicare Modernization Act, employers that provide retiree prescription drug benefits now have a greater number of options, including the elimination of these benefits entirely, the establishment of company-sponsored plans that are eligible for a government subsidy, the adoption of a company-sponsored prescription drug plan and the establishment of plans designed to supplement the benefits available through a prescription drug plan or Medicare Advantage plan (MA-PD). As a result of the Medicare Modernization Act, insurance products that provide prescription drug benefits for Medicare-eligible individuals now compete with the entitlement program created under Part D. We believe the Medicare Modernization Act generally has resulted in the development of new insurance products available for employers that desire to provide greater benefits than are available through a prescription drug plan or Medicare Advantage plan (MA-PD). We also believe this trend has benefited insurance brokers that have developed the expertise and product distribution capabilities to assist employers in responding to these developments. |
• | Extensive Relationships with Retail Insurance Brokers. We believe that our national operations, product expertise, extensive relationships with insurance carriers and focus on compliance make us an attractive business partner for retail insurance brokers. During 2005, we did business with over 4,500 retail insurance brokerage firms, including substantially all of the 100 largest U.S. retail insurance brokers as identified byBusiness Insurancein July 2006. We also work with small to mid-size retail insurance brokerage firms, which in many cases do not have direct access to certain of the insurance carriers with which we do business. Our extensive |
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relationships with retail insurance brokers make us an attractive distribution channel for insurance carriers. |
• | Established Insurance Carrier Relationships. We have established relationships with over 100 insurance carriers. We believe that many insurance carriers view us as a valued customer because of our expertise, experienced brokers and underwriters and national platform, which enable us to produce a significant amount of business for them. Our access to insurance carriers is key to our business. Through years of experience in the insurance industry, our management has close relationships with the management teams of many insurance carriers at the most senior levels. We understand our insurance carriers’ underwriting preferences for particular lines of business and areas of geographic focus. We believe that the scope of our relationships with insurance carriers and our product knowledge allow us to better serve the needs of our retail insurance brokerage clients. |
• | Proven and Experienced Brokers and Underwriters. As of September 30, 2006, we employed 225 brokers and underwriters, many of whom have substantial experience in the insurance industry. Our brokers and underwriters typically specialize in either certain product lines or industry classes and have, in many cases, developed close relationships with the insurance carrier underwriters for these product lines and industry classes. We believe we have been able to use our size, diverse product knowledge and extensive relationships with insurance carriers to improve the productivity of our existing brokers and recruit new brokers who can leverage these resources to increase revenues. |
• | Seasoned Management Team. Our Chief Executive Officer and division presidents have substantial experience and long-standing relationships developed over an average of 21 years of service in the insurance industry. Our management team draws on its industry experience to identify opportunities to expand our business and collaborate with insurance carriers to help develop products to respond to market trends. Through their extensive relationships in the insurance industry, our management team has contributed to the successful recruitment of key brokers and underwriters to join AmWINS. Having completed nine acquisitions since January 1, 2002, our management team has a proven track record of successfully identifying and structuring acquisitions and integrating the businesses acquired. | |
• | Business Diversification. The scope of our operations distinguishes us from traditional property and casualty wholesale insurance brokers. By operating in both the group benefits market and the property and casualty market, we believe we are better positioned to detect, analyze and capitalize on opportunities to expand our business than are companies with a more narrow market focus. In addition, our product diversity and ability to provide value-added underwriting, administrative and other services provide us with broader access to insurance carriers and enhance our ability to help retail insurance brokerage firms deliver products that meet the wide-ranging needs of their clients. | |
• | Efficient Use of Information. We believe the way we collect and analyze information using AmLINK, our proprietary enterprise operating system, will improve the efficiency and productivity of our brokers and underwriters. For example, we can access our database to identify individual insurance carrier underwriters that typically underwrite a specific type of business, making it more likely we can place a particular risk for our customers. We also intentionally capture and store data for business we are unable to place so we can analyze missed opportunities and improve our chances to place this business in the future. We believe that AmLINK allows us to more effectively manage and control our operations. |
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• | Potential for Disintermediation. We act as an intermediary between retail insurance brokers and insurance carriers that, in some cases, will not transact business directly with retail insurance brokers. If insurance carriers change the way they conduct business and begin to transact business directly with retail insurance brokers, our role in the distribution of insurance products could be eliminated or significantly reduced. |
• | Business Concentration with Willis and AIG. In April 2005, we acquired Willis’ wholesale insurance brokerage operations, formerly operated under the name Stewart Smith Group. Willis accounted for approximately 15.0% and 13.0% of our revenues for 2005 and the nine months ended September 30, 2006, respectively. Our business would suffer if we lost Willis as a client or if there was a substantial reduction in the volume of business we do with Willis. In addition, approximately 11.5% and 9.0% of our revenues for 2005 and the nine months ended September 30, 2006, respectively, were derived from insurance policies provided by AIG. We would be required to incur additional expense and could lose market share if AIG terminated or significantly reduced the amount of business we do with it. |
• | Recruitment and Retention of Brokers/Underwriters and Executive Officers. Our future operating performance and success depend on our ability to recruit and retain highly qualified brokers, underwriters and key executive officers. Competition for these persons is intense. Our inability to recruit and retain these brokers, underwriters and officers could harm our business and operating performance. |
• | Changing Conditions in the Markets in Which We Operate. We may be negatively affected by changes in the markets in which we operate. Premium pricing within the commercial property and casualty insurance market historically has been cyclical based on the underwriting capacity of the insurance carriers operating in this market and also has been impacted by general economic conditions. These factors may affect the commissions we receive and fees we are able to charge for our services. In addition, federal and state sponsored health care programs as well as proposals to alter the level of spending under these programs could affect the market for the group health insurance products we distribute. In particular, as a result of the adoption of the Medicare Modernization Act, insurance products that provide prescription drug benefits to Medicare-eligible individuals now compete with the entitlement program under Part D of the Social Security Act. |
• | Competitive Markets. The wholesale insurance brokerage industry is highly competitive. A number of firms actively compete with us for clients and access to insurance carriers. Our ability to remain competitive will, in large part, determine our future success. |
• | Increase Growth by Expanding Distribution. We strive to prudently grow our business by expanding our distribution channels. Since January 1, 2003, we have opened five new offices in our Property & Casualty Brokerage division and hired 93 new brokers, excluding brokers hired in connection with acquisitions. We intend to continue pursuing opportunities to expand into new geographic markets and increase our presence in existing geographic markets. We also seek to expand our business by marketing our diverse product capabilities through targeted advertisements, client seminars and client marketing events. |
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• | Access New Markets and Products. We are focused on expanding our access to new markets and products to better serve the needs of our retail insurance brokerage clients. For example, because certain admitted insurance carriers will not do business directly with small retail insurance brokerage firms, but will do business with us, we are developing our AmWINS Access platform to provide these brokerage firms with access to a greater variety of standard insurance products. We also are actively working to develop new MGU programs. In our Group Benefits division, we continue to explore opportunities to work with our insurance carrier partners to develop new products that help employers manage the rising cost of health care. | |
• | Capitalize on Industry Changes. We believe that recent governmental investigations into the insurance industry caused many insurance carriers and large retail insurance brokerage firms to pay greater attention to the intermediaries they use. We believe these insurance carriers and brokerage firms increasingly are seeking to solidify their business relationships with financially stable intermediaries with acceptable reporting, compliance and other administrative systems. Aon, Marsh and Willis all recently sold their wholesale insurance brokerage firms, and we believe that we can use our national platform and organizational structure to build upon our relationships with these and other firms. In addition, we intend to pursue opportunities to distribute retiree health products to employer groups to help them better respond to rising health care costs, an aging U.S. population and changes in the way they are required to account for retiree benefits. | |
• | Pursue Strategic Acquisitions. We plan to pursue strategic acquisitions that will complement our existing business or potentially expand into new wholesale distribution channels. We have substantial experience in selecting and integrating companies and are positioned to take advantage of acquisition opportunities that arise. We believe that our entrepreneurial culture and centralized administrative support system make us an attractive partner to acquisition targets. We believe this offering enhances our business profile and our ability to structure future acquisitions we decide to pursue. |
• | Our ability to grow organically depends on our ability to open new offices and recruit new brokers and underwriters. We cannot assure you that we will be able to successfully open new offices, recruit new brokers and underwriters or recover our investment in new offices, brokers or underwriters, or that any new offices, brokers and underwriters will ever achieve profitability; |
• | If we are unable to successfully acquire or integrate acquired businesses, or if they do not perform as we expect, our competitiveness, operating results and financial condition could be harmed; |
• | If any of our MGU programs are terminated or changed, our business and operating results could be harmed; |
• | We depend on our information processing systems, the interruption or loss of which could harm our business; |
• | We are subject to errors and omissions claims, which can be costly to defend and could negatively affect us; |
• | We are subject to governmental regulation and supervision, and increased costs of compliance or failure to comply with applicable laws and regulations could increase our expenses, restrict our growth and limit our ability to conduct our business; |
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• | There have been governmental investigations and private litigation involving some retail insurance brokerage firms regarding the propriety of contingent commissions and other business practices, and the results of these investigations and litigation matters could harm our business and operating results; |
• | Our offices are geographically dispersed across the United States, and we may not be able to respond quickly to operational or financial problems or promote the desired level of cooperation and interaction among our offices, which could harm our business and operating results; |
• | We may lose clients or business as a result of consolidation within the retail insurance brokerage industry; |
• | As a public company, our expenses will increase and our management will be required to devote substantial time to complying with public company requirements; and |
• | We will continue to have substantial indebtedness following this offering, the terms of which are restrictive, may prevent us from expanding our business and may restrict our flexibility and place us at a competitive disadvantage. |
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Common stock offered | shares | |
Common stock to be outstanding after the offering | shares |
Overallotment shares | shares |
Use of proceeds | We estimate that our net proceeds from this offering will be approximately $ million, based on an assumed initial public offering price of $ per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and commissions and our estimated offering costs of $ million. If the underwriters exercise their overallotment option in full, we estimate our net proceeds will be approximately $ million. We intend to use approximately $ million of the net proceeds from this offering to repay debt and the remainder for working capital and general corporate purposes, including possible acquisitions. |
Risk factors | See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. | |
Dividend policy | We do not anticipate declaring or paying cash dividends for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors. | |
Proposed New York Stock Exchange symbol | AGI |
• | shares of common stock issuable upon the exercise of warrants issued to Holdings, with a weighted average exercise price of $ per share; |
• | shares of common stock issuable upon the exercise of outstanding stock options with a weighted average exercise price of $ per share; and |
• | any additional shares of common stock that we may issue in the future to comply with our agreements to pay additional contingent purchase price in connection with certain business acquisitions. For more information about these agreements, refer to the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commitments and Contingencies — Contingent Purchase Price for Acquisitions.” |
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• | our balance sheet data as of September 30, 2006 on an actual basis and as adjusted to reflect: |
• | the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share (the mid-point of the price range set forth on the cover page of this prospectus); and | |
• | the application of the estimated net proceeds from this offering as described under “Use of Proceeds”; and |
• | our statement of operations data: |
• | for the years ended December 31, 2003, 2004 and 2005; and |
• | for the nine months ended September 30, 2005 and 2006. |
As of September 30, 2006 | ||||||||
Actual | As Adjusted | |||||||
(in thousands) | ||||||||
Balance Sheet Data: | ||||||||
Cash and cash equivalents | $ | 22,473 | ||||||
Goodwill | 251,975 | |||||||
Other identifiable intangible assets, net | 40,805 | |||||||
Total assets | 630,136 | |||||||
Total debt | 170,373 | |||||||
Stockholder’s equity | 155,635 |
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For the | ||||||||||||||||||||||||||||||
Period from | Combined | |||||||||||||||||||||||||||||
For the Period | October 28 to | Year Ended | Nine Months Ended | |||||||||||||||||||||||||||
Years Ended December 31, | Ended October 27, | December 31, | December 31, | September 30, | ||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2005 | 2005 | 2006 | ||||||||||||||||||||||||
Predecessor | Predecessor | Successor | Predecessor | Successor | ||||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||
Statement of Operations Data:(a) | ||||||||||||||||||||||||||||||
Commissions and fees | $ | 57,681 | $ | 83,452 | $ | 110,791 | $ | 29,722 | $ | 140,513 | $ | 97,815 | $ | 130,894 | ||||||||||||||||
Other income | 503 | 1,152 | 850 | 906 | 1,756 | 778 | 5,322 | |||||||||||||||||||||||
Total revenues | 58,184 | 84,604 | 111,641 | 30,628 | 142,269 | 98,593 | 136,216 | |||||||||||||||||||||||
Employee compensation and benefits (including non-cash equity compensation of $729 for the nine months ended September 30, 2006)(b) | 37,594 | 52,523 | 66,412 | 17,388 | 83,800 | 59,527 | 80,684 | |||||||||||||||||||||||
Other operating expenses | 13,421 | 16,588 | 19,431 | 5,498 | 24,929 | 17,206 | 25,297 | |||||||||||||||||||||||
Depreciation | 1,256 | 1,475 | 1,855 | 536 | 2,391 | 1,603 | 2,581 | |||||||||||||||||||||||
Amortization | 2,068 | 3,873 | 5,716 | 636 | 6,352 | 5,092 | 3,587 | |||||||||||||||||||||||
Total operating expenses | 54,339 | 74,459 | 93,414 | 24,058 | 117,472 | 83,428 | 112,149 | |||||||||||||||||||||||
Operating income | 3,845 | 10,145 | 18,227 | 6,570 | 24,797 | 15,165 | 24,067 | |||||||||||||||||||||||
Interest expense | 288 | 2,498 | 8,516 | 2,949 | 11,465 | 7,423 | 12,811 | |||||||||||||||||||||||
Loss on extinguishment of debt(c) | — | 994 | 9,799 | — | 9,799 | 1,731 | — | |||||||||||||||||||||||
Income before income taxes and minority interest and discontinued operations | 3,557 | 6,653 | (88 | ) | 3,621 | 3,533 | 6,011 | 11,256 | ||||||||||||||||||||||
Minority interest | (258 | ) | (67 | ) | — | — | — | — | ||||||||||||||||||||||
Income tax expense | 406 | 2,930 | 772 | 1,503 | 2,275 | 2,685 | 5,305 | |||||||||||||||||||||||
Income from continuing operations | 3,409 | 3,790 | (860 | ) | 2,118 | 1,258 | 3,326 | 5,951 | ||||||||||||||||||||||
Income from discontinued operations, net of minority interest and income taxes | 812 | 578 | — | — | — | — | — | |||||||||||||||||||||||
Loss on sale of discontinued operations(d) | — | (67 | ) | — | — | — | — | — | ||||||||||||||||||||||
Net income | $ | 4,221 | $ | 4,301 | $ | (860 | ) | $ | 2,118 | $ | 1,258 | $ | 3,326 | $ | 5,951 | |||||||||||||||
Income from continuing operations per share: | ||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||
Income from discontinued operations per share: | ||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | — | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | — | $ | $ | ||||||||||||||||||||||
Loss on sale of discontinued operations per share: | ||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | — | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | — | $ | $ | ||||||||||||||||||||||
Income per share: | ||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||||||
Diluted |
(a) | See “Management’s Discussion and Analysis of Financial Position and Results of Operations — Acquisitions and Dispositions” for information regarding our acquisitions and dispositions during these periods, which affect the comparability of our financial data for these periods. |
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(b) | We adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004),Share-Based Payment(SFAS No. 123(R)) as of January 1, 2006, which resulted in the recognition of expense for the period ended September 30, 2006. See Note 1 to our 2005 consolidated financial statements for the pro forma effect of recording this expense in prior periods before adoption of SFAS No. 123(R). |
(c) | Reflects the write-off of unamortized financing fees and expenses and associated prepayment fees related to the refinancing of previous credit facilities. | |
(d) | In November 2004, we sold our premium finance business. The results of operations of this business are segregated and reported as discontinued operations in each of the two years ended December 31, 2004. | |
(e) | We calculated our earnings per share for the 2005 combined period by dividing our combined net income for 2005 by our weighted average outstanding shares for 2005. Our earnings per share data for 2005 do not necessarily equal the total of our earnings per share for the period prior to the Recapitalization (January 1, 2005 to October 27, 2005) and following the Recapitalization (October 28, 2005 to December 31, 2005) due to differences caused by the number of our weighted average shares outstanding for these periods. |
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• | The commission rates paid by insurance carriers on products we distribute; | |
• | The portion of commissions we receive from insurance carriers that we pay to our retail insurance brokerage clients in connection with policy placement. The amount of these commissions is negotiated by us and retail insurance brokers on acase-by-case basis and can be affected by a number of factors, including the amount of business that a retail insurance brokerage firm places with us, competition within the wholesale insurance brokerage market, whether the retail insurance broker is being compensated by its client on a fee basis and the difficulty of obtaining insurance to cover a particular risk; | |
• | The fees we charge for certain insurance products we distribute, which are in addition to the commissions we receive and are negotiated on acase-by-case basis; and | |
• | The fees we are able to charge for providing ancillary services such as premium and claims administration and actuarial services. |
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• | retention of personnel; | |
• | diversion of management’s attention; | |
• | difficulties in the integration of acquired operations, systems and processes; | |
• | entry into new or unfamiliar markets; | |
• | unanticipated problems or liabilities; and | |
• | tax and accounting issues. |
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• | expand our business beyond those activities that we carried on as of the date that we entered into our senior secured credit facilities; |
• | incur additional indebtedness; |
• | grant additional liens on our assets; |
• | make acquisitions; |
• | pay dividends, repurchase stock or issue new capital stock; |
• | make payments on indebtedness, other than the indebtedness owed to the lenders under our senior secured credit facilities, including deferred purchase price obligations on our acquisitions, unless those payments meet certain standards; |
• | liquidate, consolidate or merge; |
• | make certain asset dispositions; and |
• | engage in certain transactions with our affiliates. |
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• | shares of common stock upon the exercise of warrants that have been issued to Holdings with a weighted average exercise price of $ per share; |
• | shares of common stock upon the exercise of outstanding stock options with a weighted average exercise price of $ per share; and |
• | additional shares of our common stock that we may issue in the future to comply with our agreements to pay additional contingent purchase price in connection with certain business acquisitions. For more information about these agreements, refer to the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commitments and Contingencies — Contingent Purchase Price for Acquisitions.” |
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• | Our board of directors is classified with three-year terms for each class of directors, which could prevent our stockholders from replacing a majority of our board of directors at an annual meeting and discourage unsolicited stockholder proposals that may be in the best interest of stockholders; | |
• | Our board of directors has the right to fill vacancies occurring on our board of directors as a result of an increase in the number of our directors or the resignation, death or removal of a director, which prevents our stockholders from being able to fill vacancies on our board of directors; | |
• | Our stockholders may not act by written consent, which means that any stockholder or group of stockholders that control a majority of our outstanding shares of common stock would not be able to take certain actions without holding a stockholders’ meeting; | |
• | Stockholders must provide advance notice to nominate persons to serve as directors and to propose other actions to be taken at a stockholders’ meeting, which may discourage or deter a |
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potential acquiror from attempting to solicit proxies to elect the acquiror’s own slate of directors or otherwise attempting to acquire control of our company; and |
• | Our board of directors may, without stockholder approval, issue authorized but unissued shares of our common stock or preferred stock, which could be used to impede an acquiror from obtaining control of our company. |
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• | We repaid in full all amounts outstanding under our prior credit facilities with the proceeds from a new first lien credit facility and second lien credit facility with aggregate principal amounts of $123.0 million and $48.0 million, respectively (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Senior Secured Credit Facilities” for more information regarding the terms of these two credit facilities); | |
• | Holdings redeemed a portion of its outstanding equity in exchange for shares of our common stock, and we then redeemed these shares for approximately $32.6 million with existing cash resources and a portion of the proceeds from our new credit facilities; |
• | Parthenon HoldCo acquired a majority equity interest in Holdings from a group consisting of Pegasus and other equity holders who elected to exercise their “tag-along” right to participate in the sale, as permitted under Holdings’ operating agreement; |
• | Parthenon HoldCo acquired an additional equity interest in Holdings directly from Holdings for approximately $11.6 million, and Holdings used that cash to acquire additional equity in AmWINS; and | |
• | All members of our senior management team and a substantial majority of our other employees who owned an interest in Holdings agreed to retain their interests in Holdings as opposed to exercising their tag-along right to participate in the sale to Parthenon HoldCo. |
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• | an actual basis; and | |
• | as adjusted to reflect: |
• | the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share (the mid-point of the price range set forth on the cover page of this prospectus); and | |
• | the application of the estimated net proceeds from this offering as described under “Use of Proceeds.” |
As of | ||||||||
September 30, 2006 | ||||||||
Actual | As Adjusted | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 22,473 | ||||||
Outstanding debt: | ||||||||
First lien credit facility | $ | 121,770 | ||||||
Second lien credit facility | 48,000 | |||||||
Other debt | 603 | |||||||
Total debt | 170,373 | |||||||
Stockholders’ equity: | ||||||||
Preferred Stock, $ par value; shares authorized; no shares issued and outstanding | — | |||||||
Common Stock, $0.01 par value; 15,000,000 shares authorized; 11,864,858 shares issued and outstanding, actual; shares issued and outstanding, as adjusted | 118 | |||||||
Additional paid-in capital | 147,140 | |||||||
Retained earnings | 8,069 | |||||||
Accumulated other comprehensive income | 308 | |||||||
Total stockholders’ equity | 155,635 | |||||||
Total capitalization | $ | 326,008 | ||||||
• | shares of common stock issuable upon the exercise of warrants issued to Holdings during the third quarter of 2006 with a weighted average exercise price of $ per share; |
• | shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2006 with a weighted average exercise price of $ per share; and |
• | any additional shares of our common stock that we may issue in the future to comply with our agreements to pay additional contingent purchase price in connection with certain business acquisitions. For more information about these agreements, refer to the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commitments and Contingencies — Contingent Purchase Price for Acquisitions.” |
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Assumed initial public offering price per share | $ | |||||||
Historical net tangible book value per share as of September 30, 2006 | $ | |||||||
Increase per share attributable to new investors | $ | |||||||
As adjusted net tangible book value per share after this offering | $ | |||||||
Dilution per share to new investors | $ | |||||||
Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
Number | Percent | Amount | Percent | per Share | ||||||||||||||||
Existing stockholders | % | $ | % | $ | ||||||||||||||||
New investors | ||||||||||||||||||||
Total | ||||||||||||||||||||
• | shares of common stock that may be issued pursuant to the underwriters overallotment option; |
• | shares of common stock issuable upon the exercise of warrants issued to Holdings during the third quarter of 2006 with a weighted average exercise price of $ per share; |
• | shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2006 with a weighted average exercise price of $ per share; and |
• | additional shares of our common stock that we may issue in the future to comply with our agreements to pay additional contingent purchase price in connection with certain business acquisitions. For more information about these agreements, refer to the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commitments and Contingencies — Contingent Purchase Price for Acquisitions.” |
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• | our statement of operations data for: |
• | the years ended December 31, 2001, 2002, 2003 and 2004; | |
• | the period from January 1, 2005 to October 27, 2005, the date of the Recapitalization, the period from October 28, 2005 to December 31, 2005, and on a “combined” basis for all of 2005; and |
• | the nine months ended September 30, 2005 and 2006; and |
• | our balance sheet data as of December 31, 2001, 2002, 2003, 2004, 2005 and September 30, 2006. |
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For the | Combined | |||||||||||||||||||||||||||||||||||||
Period from | Year | |||||||||||||||||||||||||||||||||||||
For the Period | October 28 to | Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
Years Ended December 31, | Ended October 27, | December 31, | December 31, | September 30, | ||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2005 | 2005 | 2006 | ||||||||||||||||||||||||||||||
Predecessor | Predecessor | Successor | Predecessor | Successor | ||||||||||||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||
Statement of Operations Data:(a) | ||||||||||||||||||||||||||||||||||||||
Commissions and fees | $ | 13,259 | $ | 36,160 | $ | 57,681 | $ | 83,452 | $ | 110,791 | $ | 29,722 | $ | 140,513 | $ | 97,815 | $ | 130,894 | ||||||||||||||||||||
Other income | 693 | (652 | ) | 503 | 1,152 | 850 | 906 | 1,756 | 778 | 5,322 | ||||||||||||||||||||||||||||
Total revenues | 13,952 | 35,508 | 58,184 | 84,604 | 111,641 | 30,628 | 142,269 | 98,593 | 136,216 | |||||||||||||||||||||||||||||
Employee compensation and benefits (including non-cash equity compensation of $729 for the nine months ended September 30, 2006)(b) | 10,994 | 21,163 | 37,594 | 52,523 | 66,412 | 17,388 | 83,800 | 59,527 | 80,684 | |||||||||||||||||||||||||||||
Other operating expenses | 5,629 | 7,851 | 13,421 | 16,588 | 19,431 | 5,498 | 24,929 | 17,206 | 25,297 | |||||||||||||||||||||||||||||
Depreciation | 1,410 | 1,318 | 1,256 | 1,475 | 1,855 | 536 | 2,391 | 1,603 | 2,581 | |||||||||||||||||||||||||||||
Amortization | 2,044 | 1,261 | 2,068 | 3,873 | 5,716 | 636 | 6,352 | 5,092 | 3,587 | |||||||||||||||||||||||||||||
Total operating expenses | 20,077 | 31,593 | 54,339 | 74,459 | 93,414 | 24,058 | 117,472 | 83,428 | 112,149 | |||||||||||||||||||||||||||||
Operating (loss) income | (6,125 | ) | 3,915 | 3,845 | 10,145 | 18,227 | 6,570 | 24,797 | 15,165 | 24,067 | ||||||||||||||||||||||||||||
Interest expense | 466 | 290 | 288 | 2,498 | 8,516 | 2,949 | 11,465 | 7,423 | 12,811 | |||||||||||||||||||||||||||||
Restructuring | 1,056 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on disposal of subsidiary | 2,365 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on extinguishment of debt(c) | — | — | — | 994 | 9,799 | — | 9,799 | 1,731 | — | |||||||||||||||||||||||||||||
(Loss) income before income taxes and minority interest and discontinued operations | (10,012 | ) | 3,625 | 3,557 | 6,653 | (88 | ) | 3,621 | 3,533 | 6,011 | 11,256 | |||||||||||||||||||||||||||
Minority interest | — | (153 | ) | (258 | ) | (67 | ) | — | — | — | — | — | ||||||||||||||||||||||||||
Income tax (benefit) expense | (15 | ) | (4,380 | ) | 406 | 2,930 | 772 | 1,503 | 2,275 | 2,685 | 5,305 | |||||||||||||||||||||||||||
(Loss) income from continuing operations | (9,997 | ) | 8,158 | 3,409 | 3,790 | (860 | ) | 2,118 | 1,258 | 3,326 | 5,951 | |||||||||||||||||||||||||||
Income from discontinued operations, net of minority interest and income taxes | 903 | 866 | 812 | 578 | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on sale of discontinued operations(d) | — | — | — | (67 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Net (loss) income | $ | (9,094 | ) | $ | 9,024 | $ | 4,221 | $ | 4,301 | $ | (860 | ) | $ | 2,118 | $ | 1,258 | $ | 3,326 | $ | 5,951 | ||||||||||||||||||
(Loss) income from continuing operations per share: | ||||||||||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||||||||
Income from discontinued operations per share: | ||||||||||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Loss on sale of discontinued operations per share: | ||||||||||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(Loss) income per share: | ||||||||||||||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||||||||
Diluted | $ | $ | $ | $ | $ | $ | $ | (e) | $ | $ | ||||||||||||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||||||||||||||
Diluted |
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As of December 31, | As of December 31, | As of September 30, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||||||
Predecessor | Successor | Successor | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||
Cash and cash equivalents | $ | 2,736 | $ | 8,626 | $ | 9,539 | $ | 10,055 | $ | 19,151 | $ | 22,473 | ||||||||||||||
Goodwill | 8,863 | 29,806 | 39,100 | 82,102 | 243,409 | 251,975 | ||||||||||||||||||||
Other identifiable intangible assets, net | 3,387 | 13,294 | 13,229 | 26,904 | 42,292 | 40,805 | ||||||||||||||||||||
Total assets | 63,121 | 188,838 | 212,609 | 267,185 | 622,495 | 630,136 | ||||||||||||||||||||
Total debt | 9,912 | 3,406 | 5,850 | 37,895 | 171,299 | 170,373 | ||||||||||||||||||||
Stockholder’s equity | 6,939 | 50,722 | 62,450 | 79,680 | 144,081 | 155,635 |
(a) | See “Management’s Discussion and Analysis of Financial Position and Results of Operations — Acquisitions and Dispositions,” for information regarding our acquisitions and dispositions during these periods, which affect the comparability of our financial data for these periods. |
(b) | We adopted the provisions of SFAS No. 123(R) as of January 1, 2006, which resulted in the recognition of expense for the period ended September 30, 2006. See Note 1 to our 2005 consolidated financial statements for the pro forma effect of recording this expense in prior periods before adoption of SFAS No. 123(R). |
(c) | Reflects the write-off of unamortized financing fees and expenses and associated prepayment fees related to the refinancing of previous credit facilities. | |
(d) | In November 2004, we sold our premium finance business. The results of operations of this business are segregated and reported as discontinued operations in each of the four years ended December 31, 2004. | |
(e) | We calculated our earnings per share for the 2005 combined period by dividing our combined net income for 2005 by our weighted average outstanding shares for 2005. Our earnings per share data for 2005 do not necessarily equal the total of our earnings per share for the period prior to the Recapitalization (January 1, 2005 to October 27, 2005) and following the Recapitalization (October 28, 2005 to December 31, 2005) due to differences caused by the number of our weighted average shares outstanding for these periods. |
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• | our acquisition of Stewart Smith Group, which was completed on April 13, 2005; | |
• | the Recapitalization, which was completed on October 27, 2005; | |
• | our acquisition of Communitas, which was completed on April 21, 2006; and | |
• | the borrowing of an aggregate of $171.0 million under our current first lien and second lien credit facilities in connection with the Recapitalization. |
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For the year ended December 31, 2005
Historical | ||||||||||||||||||||||||
AmWINS | Stewart | Total | Pro Forma | Pro Forma | ||||||||||||||||||||
Combined | Smith Group | Communitas | Acquisitions | Adjustments | Total | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Commissions and fees | $ | 140,513 | $ | 13,314 | $ | 11,031 | $ | 24,345 | $ | — | $ | 164,858 | ||||||||||||
Other income | 1,756 | 504 | — | 504 | — | 2,260 | ||||||||||||||||||
Total revenues | 142,269 | 13,818 | 11,031 | 24,849 | — | 167,118 | ||||||||||||||||||
Employee compensation and benefits | 83,800 | 8,606 | 6,958 | 15,564 | — | 99,364 | ||||||||||||||||||
Other operating expenses | 24,929 | 4,472 | 4,287 | 8,759 | — | 33,688 | ||||||||||||||||||
Depreciation | 2,391 | 91 | 601 | 692 | — | 3,083 | ||||||||||||||||||
Amortization | 6,352 | 9 | — | 9 | (2,498 | )(a) | 4,645 | |||||||||||||||||
662 | (b) | |||||||||||||||||||||||
120 | (c) | |||||||||||||||||||||||
Total operating expenses | 117,472 | 13,178 | 11,846 | 25,024 | (1,716 | ) | 140,780 | |||||||||||||||||
Operating income (loss) | 24,797 | 640 | (815 | ) | (175 | ) | 1,716 | 26,338 | ||||||||||||||||
Interest expense | 11,465 | 42 | 271 | 313 | 2,261 | (d) | 14,039 | |||||||||||||||||
Loss on extinguishment of debt | 9,799 | — | (8,068 | )(e) | 1,731 | |||||||||||||||||||
Income (loss) before income taxes | 3,533 | 598 | (1,086 | ) | (488 | ) | 7,523 | 10,568 | ||||||||||||||||
Income tax expense | 2,275 | 205 | — | 205 | 2,934 | (f) | 5,414 | |||||||||||||||||
Net income (loss) | $ | 1,258 | $ | 393 | $ | (1,086 | ) | $ | (693 | ) | $ | 4,589 | $ | 5,154 | ||||||||||
Income per share: | ||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||
Basic | (g) | |||||||||||||||||||||||
(h) | ||||||||||||||||||||||||
Diluted | (g) | |||||||||||||||||||||||
(h) |
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For the nine months ended September 30, 2006
Historical | ||||||||||||||||
AmWINS | Pro Forma | Pro Forma | ||||||||||||||
Combined | Communitas | Adjustments | Total | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||
Commissions and fees | $ | 130,894 | $ | 3,688 | — | $ | 134,582 | |||||||||
Other income | 5,322 | — | — | 5,322 | ||||||||||||
Total revenues | 136,216 | 3,688 | — | 139,904 | ||||||||||||
Employee compensation and benefits (including non-cash equity compensation of $729 for the nine months ended September 30, 2006) | 80,684 | 2,181 | — | 82,865 | ||||||||||||
Other operating expenses | 25,297 | 1,677 | — | 26,974 | ||||||||||||
Depreciation | 2,581 | 251 | — | 2,832 | ||||||||||||
Amortization | 3,587 | — | 40 | (i) | 3,627 | |||||||||||
Total operating expenses | 112,149 | 4,109 | 40 | 116,298 | ||||||||||||
Operating income (loss) | 24,067 | (421 | ) | (40 | ) | 23,606 | ||||||||||
Interest expense | 12,811 | 41 | — | 12,852 | ||||||||||||
Income (loss) before income taxes | 11,256 | (462 | ) | (40 | ) | 10,754 | ||||||||||
Income tax expense (benefit) | 5,305 | — | (16 | )(f) | 5,289 | |||||||||||
Net income (loss) | $ | 5,951 | $ | (462 | ) | $ | (24 | ) | $ | 5,465 | ||||||
Income per share: | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Weighted average shares: | ||||||||||||||||
Basic | (j) | |||||||||||||||
Diluted | (j) |
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Reversal of amortization expense: | ||||
Amortization expense recognized by AmWINS from January 1, 2005 to the date of the Recapitalization recognized under the straight line method over their estimated useful lives of one to ten years | $ | (5,716 | ) | |
Amortization expense recognized by the Stewart Smith Group from January 1, 2005 to the acquisition date recognized under the straight line method over their estimated useful lives of one to ten years | (9 | ) | ||
Amortization expense that would have been recognized by AmWINS had the acquisition of the Stewart Smith Group occurred on January 1, 2005 based on the expected undiscounted cash flows over the related estimated lives of seven to fourteen years | (662 | ) | ||
Pro forma reversal of amortization expense | $ | (6,387 | ) | |
Addition of amortization expense: | ||||
Amortization expense that would have been recognized by AmWINS had the Recapitalization occurred on January 1, 2005 based on the expected undiscounted cash flows over the related estimated lives of seven to fourteen years | 3,889 | |||
Net reduction in pro forma amortization expense | $ | (2,498 | ) | |
Interest and amortization of financing fees | $ | (8,829 | ) | |
New borrowings: | ||||
New first lien term loan at LIBOR plus 325 basis points | 6,702 | |||
New second lien term loan at LIBOR plus 750 basis points | 3,858 | |||
Amortization of financing fees related to the above items | 530 | |||
11,090 | ||||
Pro forma increase in interest expense | $ | 2,261 | ||
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AND RESULTS OF OPERATIONS
• | Property & Casualty Brokerage. Our Property & Casualty Brokerage division distributes property and casualty insurance products through our retail insurance brokerage clients. | |
• | Specialty Underwriting. Our Specialty Underwriting division operates our MGU programs. As an MGU, we have contractual authority from various insurance carriers to underwrite, bind, issue and administer insurance policies on their behalf. This division also distributes its products through our retail insurance brokerage clients. | |
• | Group Benefits. Our Group Benefits division distributes group benefit insurance products through retail insurance brokerage clients and provides related administrative services. |
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Nine Months Ended | ||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||
2003 | 2004 | 2005 | 2006 | |||||||||||||
(in thousands, except number of acquisitions closed) | ||||||||||||||||
Number of acquisitions closed | 2 | 2 | 1 | 2 | ||||||||||||
Consideration1: | ||||||||||||||||
Cash | $ | 2,414 | $ | 40,577 | $ | 103,113 | $ | 6,224 | ||||||||
Equity | 3,412 | 11,688 | — | 2,000 | ||||||||||||
Seller notes | 2,999 | 2,000 | — | — | ||||||||||||
Total consideration | $ | 8,825 | $ | 54,265 | $ | 103,113 | $ | 8,224 | ||||||||
(1) | These numbers include transaction expenses, any cash acquired as part of the acquisitions and the effect of any working capital and related adjustments made when we completed these acquisitions and exclude any amounts paid or payable by us as additional purchase price based on the performance of the acquired businesses. |
• | acquired The Quaker Agency of the South, Inc. (Quaker), a property and casualty wholesale insurance brokerage business based in Charlotte, North Carolina; | |
• | acquired Property Risk Services LLC (PRS), a wholesale insurance brokerage firm based in New Jersey that specializes in the placement of large complex property accounts; and | |
• | sold Capitol Payment Plan, Inc., a premium finance business. |
• | acquired the New Jersey office of a national wholesale insurance brokerage firm engaged primarily in the placement of property and casualty insurance products; |
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• | acquired an MGU firm, Seaboard Underwriters, Inc. and its affiliates (together, Seaboard), based in North Carolina; and |
• | sold a small retail benefits brokerage firm that placed group medical insurance products for companies located primarily in the state of New Jersey. |
Nine Months Ended | ||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||
2003 | 2004 | 2005* | 2005 | 2006 | ||||||||||||||||
Property & Casualty Brokerage | 49.0 | % | 57.3 | % | 72.0 | % | 72.2 | % | 72.2 | % | ||||||||||
Specialty Underwriting | 30.7 | % | 23.3 | % | 13.8 | % | 12.9 | % | 8.4 | % | ||||||||||
Group Benefits | 19.6 | % | 18.8 | % | 13.8 | % | 14.8 | % | 19.5 | % | ||||||||||
Other(a) | 0.7 | % | 0.6 | % | 0.4 | % | 0.1 | % | (0.1 | )% | ||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
* | Shown on a combined basis. |
(a) | Reflects revenues not generated by our reportable segments. |
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Nine Months Ended | ||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||
2003 | 2004 | 2005* | 2005 | 2006 | ||||||||||||||||
Total revenue | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | |||||||||||||||
Employee compensation and benefits | 64.6% | 62.1% | 58.9% | 60.4% | 59.2% | |||||||||||||||
Other operating expenses | 23.1% | 19.6% | 17.5% | 17.5% | 18.6% | |||||||||||||||
Depreciation and amortization | 5.7% | 6.3% | 6.1% | 6.8% | 4.5% | |||||||||||||||
Interest expense | 0.5% | 3.0% | 8.1% | 7.5% | 9.4% |
* | Shown on a combined basis. |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||
2003 | 2004 | 2005* | 2005 | 2006 | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||
Property & Casualty Brokerage | $ | 28,504 | $ | 48,476 | $ | 102,496 | $ | 71,180 | $ | 98,339 | ||||||||||||||
Specialty Underwriting | 17,905 | 19,716 | 19,592 | 12,688 | 11,412 | |||||||||||||||||||
Group Benefits | 11,379 | 15,890 | 19,623 | 14,596 | 26,499 | |||||||||||||||||||
Other | 396 | 522 | 558 | 129 | (34 | ) | ||||||||||||||||||
Total | $ | 58,184 | $ | 84,604 | $ | 142,269 | $ | 98,593 | $ | 136,216 | ||||||||||||||
Segment income (loss) | ||||||||||||||||||||||||
Property & Casualty Brokerage | $ | 3,730 | $ | 10,491 | $ | 26,702 | $ | 22,269 | $ | 32,471 | ||||||||||||||
Specialty Underwriting | 4,709 | 4,762 | 3,865 | 1,570 | 516 | |||||||||||||||||||
Group Benefits | 3,153 | 5,624 | 7,718 | 5,560 | 7,908 | |||||||||||||||||||
Other | (4,423 | ) | (5,384 | ) | (4,745 | ) | (7,539 | ) | (9,931 | ) | ||||||||||||||
Total | 7,169 | 15,493 | 33,540 | 21,860 | 30,964 | |||||||||||||||||||
Non-cash equity compensation | — | — | — | — | 729 | |||||||||||||||||||
Depreciation | 1,256 | 1,475 | 2,391 | 1,603 | 2,581 | |||||||||||||||||||
Amortization | 2,068 | 3,873 | 6,352 | 5,092 | 3,587 | |||||||||||||||||||
Interest expense | 288 | 2,498 | 11,465 | 7,423 | 12,811 | |||||||||||||||||||
Loss on extinguishment of debt | — | 994 | 9,799 | 1,731 | — | |||||||||||||||||||
Total | 3,612 | 8,840 | 30,007 | 15,849 | 19,708 | |||||||||||||||||||
Income before income taxes | $ | 3,557 | $ | 6,653 | $ | 3,533 | $ | 6,011 | $ | 11,256 | ||||||||||||||
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Nine Months Ended | ||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||
Net Cash Provided by (Used in) | 2003 | 2004 | 2005* | 2005 | 2006 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating activities of continuing operations | $ | 6,918 | $ | 13,837 | $ | 18,776 | $ | 13,384 | $ | 11,843 | ||||||||||
Investing activities of continuing operations | (4,972 | ) | (37,707 | ) | (105,583 | ) | (105,358 | ) | (9,439 | ) | ||||||||||
Financing activities of continuing operations | 343 | 24,386 | 95,903 | 107,043 | 918 |
* | Shown on a combined basis. |
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Contractual Obligations1 | Total | 1 year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Long-term debt | $ | 170,693 | $ | 1,230 | $ | 2,460 | $ | 2,460 | $ | 164,543 | ||||||||||
Capital lease obligations | 2,017 | 736 | 1,156 | 125 | — | |||||||||||||||
Seller notes | 606 | 606 | — | — | — | |||||||||||||||
Operating leases | 23,804 | 5,693 | 8,911 | 5,355 | 3,845 | |||||||||||||||
Interest obligations2 | 94,935 | 16,534 | 32,987 | 32,562 | 12,852 | |||||||||||||||
Total | $ | 292,055 | $ | 24,799 | $ | 45,514 | $ | 40,502 | $ | 181,240 | ||||||||||
(1) | Excludes additional earnout consideration payable under acquisition agreements. See “—Commitments and Contingencies — Contingent Purchase Price for Acquisitions.” |
(2) | Includes all interest payments through the stated maturity of the related long-term debt. Variable rate interest obligations are estimated based on interest rates in effect at September 30, 2006, and, as applicable, the variable rate interest includes the effects of our interest rate swaps through the expiration of those swap agreements. |
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Pro Forma Contractual Obligations1 | Total | 1 year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Long-term debt | $ | $ | $ | $ | $ | |||||||||||||||
Capital lease obligations | — | |||||||||||||||||||
Seller notes | — | — | — | |||||||||||||||||
Operating leases | ||||||||||||||||||||
Interest obligations2 | ||||||||||||||||||||
Total | $ | $ | $ | $ | $ | |||||||||||||||
(1) | Excludes additional earnout consideration payable under acquisition agreements. See “—Commitments and Contingencies — Contingent Purchase Price for Acquisitions.” |
(2) | Includes all interest payments through the stated maturity of the related long-term debt assumed to be outstanding following completion of the offering. See “Use of Proceeds” and “Capitalization.” Variable rate interest obligations are estimated based on interest rates in effect at September 30, 2006, and, as applicable, the variable rate interest includes the effects of our interest rate swaps through the expiration of those swap agreements. |
• | Property Risk Services. In connection with our acquisition of PRS, we agreed to pay the former owners of PRS additional purchase price for the acquired business based on the |
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performance of the business during the years ending December 31, 2004, 2005, 2006, 2007 and 2008. Specifically, we must pay the former owners of PRS the amount by which EBITDA of PRS for the year in question exceeds the greater of $6,000,000 or 35% of its net revenues for the year. Each former owner of PRS may elect to receive up to 75% of this payment in cash, and the remainder will be paid in our common stock. We have the option to pay the entire amount in cash. We paid additional consideration of $0.9 million and $0.8 million for the years ended 2004 and 2005, respectively. We anticipate that the additional consideration for 2006 will be substantially higher. |
• | Quaker. In connection with the Quaker acquisition, we agreed to pay additional purchase price based on the performance of the acquired business for the first and second years following the acquisition. We were not required to make an additional purchase price payment in 2005. We agreed to pay additional purchase price equal to 50% of the amount by which the revenues of the acquired business during 2006 exceed $7,990,545, provided that the EBITDA margin of this business (which is calculated by dividing the EBITDA of the business by the net revenues of the business) is at least 40%. If the EBITDA margin is less than 40%, our obligation to pay additional purchase price will decrease by 10% for each percentage point by which the EBITDA margin is less than 40%. We are required to pay the additional purchase price in shares of our common stock. | |
• | Communitas. In connection with the acquisition of Communitas, we agreed to pay the former owners of Communitas a maximum amount of $7.0 million in additional purchase price based on the performance of the acquired business during the period from April 21, 2007 to April 21, 2008. We have the option to make all or any portion of any additional purchase price payment in cash or in shares of our common stock. | |
• | CBCA Premium Administration Division. In connection with the acquisition of the premium administration division of CBCA, we agreed to pay a maximum amount of $3.3 million in additional purchase price to the sellers of this business based on the performance of the acquired business during the period from June 1, 2006 to September 1, 2009. We are required to pay the entire amount of the additional purchase price in cash. |
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1 | This chart illustrates typical transactions in the brokered market for insurance products. Wholesale insurance brokers may also place some standard insurance products, and retail insurance brokers generally also have the ability to directly place some E&S and specialty insurance products. |
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• | Extensive Relationships with Retail Insurance Brokers. We believe that our national operations, product expertise, extensive relationships with insurance carriers and focus on compliance make us an attractive business partner for retail insurance brokers. During 2005, we did business with over 4,500 retail insurance brokerage firms, including substantially all of the 100 largest U.S. retail insurance brokers as identified byBusiness Insurancein July 2006. We also work with small to mid-size retail insurance brokerage firms, which in many cases do not have direct access to certain of the insurance carriers with which we do business. Our extensive relationships with retail insurance brokers make us an attractive distribution channel for insurance carriers. | |
• | Established Insurance Carrier Relationships. We have established relationships with over 100 insurance carriers. We believe that many insurance carriers view us as a valued customer because of our expertise, experienced brokers and underwriters and national platform, which enable us to produce a significant amount of business for them. Our access to insurance carriers is key to our business. Through years of experience in the insurance industry, our management has close relationships with the management teams of many insurance carriers at the most senior levels. We understand our insurance carriers’ underwriting preferences for particular lines of business and areas of geographic focus. We believe that the scope of our relationships with insurance carriers and our product knowledge allow us to better serve the needs of retail insurance brokerage clients. |
• | Proven and Experienced Brokers and Underwriters. As of September 30, 2006, we employed 225 brokers and underwriters, many of whom have substantial experience in the insurance industry. Our brokers and underwriters typically specialize in either certain product lines or industry classes and have, in many cases, developed close relationships with the insurance carrier underwriters for these product lines and industry classes. We believe we have been able to use our size, diverse product knowledge and extensive relationships with insurance carriers to improve the productivity of our existing brokers and recruit new brokers who can leverage these resources to increase revenues. |
• | Seasoned Management Team. Our Chief Executive Officer and division presidents have substantial experience and long-standing relationships developed over an average of 21 years of service in the insurance industry. Our management team draws on its industry experience to identify opportunities to expand our business and collaborate with insurance carriers to help develop products to respond to market trends. Through their extensive relationships in the insurance industry, our management team has contributed to the successful recruitment of key brokers and underwriters to join AmWINS. Having completed nine acquisitions since January 1, 2002, our management team has a proven track record of successfully identifying and structuring acquisitions and integrating the businesses acquired. | |
• | Business Diversification. The scope of our operations distinguishes us from traditional property and casualty wholesale insurance brokers. By operating in both the group benefits |
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market and the property and casualty market, we believe we are better positioned to detect, analyze and capitalize on opportunities to expand our business than are companies with a more narrow market focus. In addition, our product diversity and ability to provide value-added underwriting, administrative and other services provide us with broader access to insurance carriers and enhance our ability to help retail insurance brokerage firms deliver products that meet the wide-ranging needs of their clients. |
• | Efficient Use of Information. We believe the way we collect and analyze information using AmLINK, our proprietary enterprise operating system, will improve the efficiency and productivity of our brokers and underwriters. For example, we can access our database to identify individual insurance carrier underwriters that typically underwrite a specific type of business, making it more likely we can place a particular risk for our customers. We also intentionally capture and store data for business we are unable to place so we can analyze missed opportunities and improve our chances to place this business in the future. We believe that AmLINK allows us to more effectively manage and control our operations. |
• | Increase Growth by Expanding Distribution. We strive to prudently grow our business by expanding our distribution channels. Since January 1, 2003, we have opened five new offices in our Property & Casualty Brokerage division and hired 93 new brokers, excluding brokers hired in connection with acquisitions. We intend to continue pursuing opportunities to expand into new geographic markets and increase our presence in existing geographic markets. We also seek to expand our business by marketing our diverse product capabilities through targeted advertisements, client seminars and client marketing events. |
• | Access New Markets and Products. We are focused on expanding our access to new markets and products to better serve the needs of our retail insurance brokerage clients. For example, because certain admitted insurance carriers will not do business directly with small retail insurance brokerage firms, but will do business with us, we are developing our AmWINS Access platform to provide these brokerage firms with access to a greater variety of standard insurance products. We also are actively working to develop new MGU programs. In our Group Benefits division, we continue to explore opportunities to work with our insurance carrier partners to develop new products that help employers manage the rising cost of health care. | |
• | Capitalize on Industry Changes. We believe that recent governmental investigations into the insurance industry caused many insurance carriers and large retail insurance brokerage firms to pay greater attention to the intermediaries they use. We believe these carriers and brokerage firms increasingly are seeking to solidify their business relationships with financially stable intermediaries with acceptable reporting, compliance and other administrative systems. Aon, Marsh and Willis all recently sold their wholesale insurance brokerage firms, and we believe that we can use our national platform and organizational structure to build upon our relationships with these and other firms. In addition, we intend to pursue opportunities to distribute retiree health products to employer groups to help them better respond to rising health care costs, an aging U.S. population and changes in the way they are required to account for retiree benefits. | |
• | Pursue Strategic Acquisitions. We plan to pursue strategic acquisitions that will complement our existing business or potentially expand into new wholesale distribution channels. We have substantial experience in selecting and integrating companies and are positioned to take advantage of acquisition opportunities that arise. We believe that our entrepreneurial culture and centralized administrative support system make us an attractive partner to acquisition targets. |
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We believe this offering enhances our business profile and ability to structure future acquisitions we decide to pursue. |
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• | Refuse Haulers. We underwrite commercial automobile, general liability and workers’ compensation insurance for refuse haulers. This program has been endorsed since 1987 by the Environmental Industry Association, an international trade association for companies that manage solid and medical waste or manufacture and distribute waste equipment. | |
• | Storage Tanks. We underwrite pollution liability insurance for businesses with underground and aboveground storage tanks, such as convenience stores, fuel oil dealerships, hospitals, hotels, petroleum distributors and service stations. | |
• | Apartments and Condominiums. We underwrite property, general liability and umbrella insurance for owners of apartments and condominiums in California. | |
• | Woodworking. We underwrite primarily property insurance for businesses with woodworking operations, such as sawmills, furniture manufacturers, wood chip mills and wood treatment plants. | |
• | Welding Distributors. We underwrite all lines of property and liability insurance except workers’ compensation for businesses that supply gas and propane tanks to welders. | |
• | Pizza Delivery. We underwrite various types of insurance, including property, automobile and workers’ compensation, for businesses that own pizza delivery franchises. | |
• | Long-Haul Commercial Trucking. We underwrite commercial automobile liability, physical damage and cargo insurance for long-haul trucking carriers. | |
• | Middle Market Property. We underwrite property insurance for owners of mid-size commercial property. |
• | retiree medical and prescription drug insurance plans, which have represented a significant part of our growth in this division since January 1, 2003; | |
• | group benefit products designed for member groups, such as trade associations, chambers of commerce, unions and professional organizations; and |
• | group benefit products sold by Blue Cross Blue Shield of Rhode Island, which has appointed us as its exclusive general agent for employer groups with 50 or fewer employees. |
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• | premium administration services for insurance carriers, employers and member organizations; | |
• | third-party claims administration services for insurance carriers and employer groups; |
• | pharmacy benefit management services for insurance carriers, employer groups, unions, member groups and third-party administrators; and |
• | other ancillary services, including limited-authority underwriting services for certain insurance carriers. |
Blue Cross | ||||||
Blue Shield of | ||||||
Retiree Products | Member Groups | Rhode Island | Services | |||
• Retiree Medical • Retiree Prescription Drug • Life | • Critical Illness • Dental • Life • Long-Term Disability • Long-Term Care • Retiree Medical • Retiree Prescription Drug • Student Health | • COBRA Administration • Flexible Spending Accounts • Group Dental • Group Health • Group Life • Group Long-Term Disability • Group Short-Term Disability • Health Reimbursement • Retiree Medical • Retiree Prescription Drug • Voluntary Benefits • Individual Long-Term Care | • Claims Administration • Premium Administration • Limited-Authority Underwriting • Pharmacy Benefit Management Services |
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Name | Age | Position | |||
M. Steven DeCarlo | 48 | President and Chief Executive Officer; Director | |||
Scott M. Purviance | 37 | Chief Financial Officer, Vice President and Secretary | |||
Samuel H. Fleet | 45 | President — Group Benefits Division | |||
J. Scott Reynolds | 42 | President — Specialty Underwriting Division | |||
Mark M. Smith | 53 | President — Property & Casualty Brokerage Division | |||
David W. Dabbs | 45 | General Counsel | |||
Kristin L. Downey | 34 | Director of Human Resources | |||
Joseph E. Consolino | 40 | Director | |||
Brian P. Golson | 36 | Director | |||
Marc R. Rubin | 33 | Director | |||
John C. Rutherford | 57 | Director |
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• | selecting and overseeing our independent registered public accounting firm; | |
• | reviewing the qualifications, performance and independence of our independent registered public accounting firm; | |
• | approving all audit and non-audit services rendered by our independent registered public accounting firm; | |
• | reviewing our annual and quarterly financial statements with our management and independent registered public accounting firm; | |
• | reviewing the integrity and adequacy of our financial reporting processes; | |
• | reviewing and resolving any disagreements between our management and our independent registered public accounting firm in connection with the preparation of our financial statements; | |
• | establishing procedures for the confidential, anonymous submission by our employees of concerns or complaints regarding questionable accounting or auditing matters; | |
• | reviewing and approving all related party transactions involving us and our directors and executive officers; and |
• | preparing any report of the Audit Committee that the SEC requires us to include in our annual proxy statements or other filings. |
• | reviewing and recommending compensation plans in which our executive officers and directors participate; | |
• | overseeing our executive compensation programs; | |
• | approving the compensation paid to our chief executive officer and directors; | |
• | reviewing and administering our equity-based compensation plans; and |
• | preparing any report of the Compensation Committee that the SEC requires us to include in our annual proxy statements or other filings. |
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• | identifying, evaluating and recommending candidates for appointment and reelection to our board of directors; | |
• | evaluating the composition, size and governance of our board of directors; | |
• | reviewing and recommending changes, as needed, to our corporate governance principles; | |
• | conducting or overseeing periodic evaluations of the board of directors and management; and | |
• | reviewing compliance with our code of ethics. |
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• | Since we were formed in 1998, we have been owned by private equity firms, and the compensation paid to certain of our executive officers reflects negotiations between these firms and officers. Until October 27, 2005, the date of the Recapitalization, Pegasus and related investment funds owned a majority of the outstanding equity of Holdings, our parent company. In connection with the Recapitalization, Parthenon HoldCo acquired a controlling interest in Holdings and negotiated employment agreements with our President and Chief Executive Officer and Chief Financial Officer. |
• | In connection with our acquisition of certain businesses, we have negotiated employment agreements with the key managers of these businesses, some of whom are currently named executive officers. These negotiations typically reflected our judgment regarding the volume of business generated by the acquired businesses and our subjective assessment of the relative importance of these managers to the overall success of these businesses. In one case, we have re-negotiated the employment agreement with one of these key managers to modify the performance-based mix of his compensation to provide additional incentive upon achievement of certain levels of performance. |
• | As we have grown, we have been required to recruit additional executive officers to join our company. The overall amounts and mix of compensation paid to these officers primarily reflect negotiations with them in connection with their recruitment. Although in some cases we have relied on available data regarding the level of compensation paid by other companies to persons with similar responsibilities, we have not engaged a third-party compensation consultant to assist us with any of these negotiated recruitments. |
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• | Base Salaries; |
• | Annual Cash Bonuses; and |
• | Equity Awards. |
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Change in | ||||||||||||||||||||||||||||||||
Pension Value and | ||||||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||
Stock | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||||||||
Name and | Salary | Bonus | Awards | Compensation | Earnings | Compensation | ||||||||||||||||||||||||||
Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | Total | ||||||||||||||||||||||||
M. Steven DeCarlo | 2006 | $ | 720,000 | $ | 280,000 | $ | 105,823 | (1) | — | — | $ | 32,460 | (2) | $ | 1,138,283 | |||||||||||||||||
President and | ||||||||||||||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||||||
Samuel H. Fleet | 2006 | 300,000 | — | 19,240 | (1) | $ | 1,981,602 | $ | 2,407 | 18,600 | (3) | 2,321,849 | ||||||||||||||||||||
President of | ||||||||||||||||||||||||||||||||
Group Benefits division | ||||||||||||||||||||||||||||||||
Mark M. Smith | 2006 | 750,000 | — | 298,167 | (4) | — | — | 39,366 | (5) | 1,087,533 | ||||||||||||||||||||||
President of Property & | ||||||||||||||||||||||||||||||||
Casualty Brokerage division | ||||||||||||||||||||||||||||||||
Scott M. Purviance | 2006 | 300,000 | 110,000 | 28,551 | (1) | — | 47 | 15,254 | (6) | 453,852 | ||||||||||||||||||||||
Vice President and | ||||||||||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||
J. Scott Reynolds | 2006 | 230,000 | 30,000 | 14,120 | (1) | — | — | 12,804 | (7) | 286,924 | ||||||||||||||||||||||
President of Specialty | ||||||||||||||||||||||||||||||||
Underwriting division |
(1) | These amounts include performance-based “profits-only” interests that Holdings agreed to issue in connection with the Recapitalization, which were issued in the third quarter of 2006. These interests are evidenced by Class B units, Class C units, Class D units and Class E units of Holdings that participate in distributions from Holdings on a pro rata basis if and to the extent that Parthenon HoldCo has received distributions from Holdings representing an annualized compounded internal rate of return on its investment in Holdings in excess of 10% (for Class B units), 20% (for Class C units), 30% (for Class D units) and 40% (for Class E units). Mr. DeCarlo received 137,500 of each class of these units, Mr. Purviance received 37,500 of each class of these units, Mr. Fleet received 25,000 of each class of these units and Mr. Reynolds received 18,750 of each class of these units. Of these grants, 23.33% were vested as of December 31, 2006, and the remainder will vest at the rate of 12/3% per month through October 2010. The assumptions made in valuing these units are set forth in Note 9 to our unaudited condensed consolidated financial statements at and for the nine months ended September 30, 2006 included elsewhere in this prospectus. |
(2) | This amount includes the following: a $15,000 automobile allowance; $5,400 of country club membership dues; a $6,600 matching contribution to Mr. DeCarlo’s 401(k) account; and $5,460 we paid for life and disability insurance. |
(3) | This amount includes the following: a $6,000 automobile allowance; $6,000 of country club membership dues; and a $6,600 matching contribution to Mr. Fleet’s 401(k) account. |
(4) | This amount represents a portion of “profits-only” interests issued by Holdings in April 2005 to Mr. Smith that vested during 2006. These interests are evidenced by Class Z units of Holdings and entitle Mr. Smith to receive a pro rata share of distributions made by Holdings in excess of approximately $151 million. In accordance with the terms of an exchange agreement between Holdings and Mr. Smith, 33.33% of these units were vested as of December 31, 2006, and the remainder will continue to vest at the rate of 12/3% per month through April 2010. The assumptions made in valuing these units are set forth in Note 9 to our |
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unaudited condensed consolidated financial statements at and for the nine months ended September 30, 2006 included elsewhere in this prospectus. |
(5) | This amount includes the following: a $15,860 automobile allowance; $9,131 of country club membership dues; a $4,375 matching contribution to Mr. Smith’s 401(k) account; and $10,000 in reimbursement of personal legal expenses incurred by Mr. Smith in connection with the negotiation of his employment agreement with us. |
(6) | This amount includes the following: $5,520 of country club membership dues; a $6,600 matching contribution to Mr. Purviance’s 401(k) account; and $3,134 we paid for life and disability insurance. |
(7) | This amount includes the following: $6,204 of country club membership dues; and a $6,600 matching contribution to Mr. Reynolds’ 401(k) account. |
• | “Profits-only” interests issued by Holdings in March 2002 to M. Steven DeCarlo, our President and Chief Executive Officer, and Scott M. Purviance, our Vice President, Chief Financial Officer and Secretary. These interests are evidenced by Class Y units of Holdings, 656,000 of which are held by Mr. DeCarlo and 164,000 of which are held by Mr. Purviance. The Class Y units entitle Messrs. DeCarlo and Purviance to receive their respective pro rata shares of distributions made by Holdings in excess of $25 million. These units vested over the three-year period following the date of grant. |
• | “Profits-only” interests issued by Holdings in April 2005 to Mark M. Smith, President of our Property & Casualty Brokerage division. These interests initially were evidenced by 319,922 Class Z units of Holdings. In December 2006, Holdings redeemed 32,500 of these units for nominal consideration, leaving Mr. Smith with an outstanding balance of 287,422 Class Z units. These units entitle Mr. Smith to receive a pro rata share of distributions made by Holdings in excess of approximately $151 million. In accordance with the terms of an exchange agreement between Holdings and Mr. Smith, these units vest over the five-year period following the date of grant. |
• | Restricted units issued in the second quarter of 2006 by Holdings to certain non-executive officer employees of AmWINS. These units consist of common units of Holdings, which generally participate in all distributions from Holdings on a pro rata basis. These units vest in full in one installment on January 1, 2011. |
• | Performance-based “profits-only” interests that Holdings agreed to issue in connection with the Recapitalization, which were issued in the third quarter of 2006 to certain members of our management team, including certain of the named executive officers. These interests are evidenced by Class B units, Class C units, Class D units and Class E units of Holdings. These incentive units participate in distributions from Holdings on a pro rata basis if and to the extent that Parthenon HoldCo has received distributions from Holdings representing an annualized compounded internal rate of return on its investment in Holdings in excess of 10% (for Class B units), 20% (for Class C units), 30% (for Class D units) and 40% (for Class E units). In general, 20% of these units vested on October 27, 2006, and the remainder vest ratably over a four year period thereafter. Mr. DeCarlo received 137,500 of each class of these units, Mr. Purviance |
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received 37,500 of each class of these units, Mr. Fleet received 25,000 of each class of these units and Mr. Reynolds received 18,750 of each class of these units. |
No. of Units | ||||
Class of Unit | Outstanding | |||
Common Units | 11,175,409 | |||
Class B Units | 343,750 | |||
Class C Units | 343,750 | |||
Class D Units | 343,750 | |||
Class E Units | 343,750 | |||
Class Y Units | 820,000 | |||
Class Z Units | 287,422 | |||
Total Units | 13,657,831 | |||
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Estimated Future | Estimated Future | |||||||||||||||||||
Payouts Under Non- | Payouts Under | Grant Date | ||||||||||||||||||
Equity Incentive | Equity Incentive | Fair Value of | ||||||||||||||||||
Plan Awards | Plan Awards(1) | Stock and | ||||||||||||||||||
Grant | Approval | Target | Target | Option Awards | ||||||||||||||||
Name | Date | Date(2) | ($) | (#) | ($) | |||||||||||||||
M. Steven DeCarlo | 7/28/06 | 4/17/06 | — | 137,500 Class B Units | $ | 113,382 | ||||||||||||||
7/28/06 | 4/17/06 | 137,500 Class C Units | 113,382 | |||||||||||||||||
7/28/06 | 4/17/06 | 137,500 Class D Units | 113,382 | |||||||||||||||||
7/28/06 | 4/17/06 | 137,500 Class E Units | 113,382 | |||||||||||||||||
Samuel H. Fleet | 7/28/06 | 4/17/06 | $ | 1,981,602 | (3) | 25,000 Class B Units | 20,615 | |||||||||||||
7/28/06 | 4/17/06 | 25,000 Class C Units | 20,615 | |||||||||||||||||
7/28/06 | 4/17/06 | 25,000 Class D Units | 20,615 | |||||||||||||||||
7/28/06 | 4/17/06 | 25,000 Class E Units | 20,615 | |||||||||||||||||
Mark M. Smith | — | — | — | — | — | |||||||||||||||
Scott M. Purviance | 9/29/06 | 9/29/06 | — | 6,250 Class B Units | 4,822 | |||||||||||||||
7/28/06 | 4/17/06 | 31,250 Class B Units | 25,769 | |||||||||||||||||
9/29/06 | 9/29/06 | 6,250 Class C Units | 4,822 | |||||||||||||||||
7/28/06 | 4/17/06 | 31,250 Class C Units | 25,769 | |||||||||||||||||
9/29/06 | 9/29/06 | 6,250 Class D Units | 4,822 | |||||||||||||||||
7/28/06 | 4/17/06 | 31,250 Class D Units | 25,769 | |||||||||||||||||
9/29/06 | 9/29/06 | 6,250 Class E Units | 4,822 | |||||||||||||||||
7/28/06 | 4/17/06 | 31,250 Class E Units | 25,769 | |||||||||||||||||
J. Scott Reynolds | 9/29/06 | 9/29/06 | — | 6,250 Class B Units | 4,822 | |||||||||||||||
7/28/06 | 4/17/06 | 12,500 Class B Units | 10,307 | |||||||||||||||||
9/29/06 | 9/29/06 | 6,250 Class C Units | 4,822 | |||||||||||||||||
7/28/06 | 4/17/06 | 12,500 Class C Units | 10,307 | |||||||||||||||||
9/29/06 | 9/29/06 | 6,250 Class D Units | 4,822 | |||||||||||||||||
7/28/06 | 4/17/06 | 12,500 Class D Units | 10,307 | |||||||||||||||||
9/29/06 | 9/29/06 | 6,250 Class E Units | 4,822 | |||||||||||||||||
7/28/06 | 4/17/06 | 12,500 Class E Units | 10,307 |
(1) | All equity incentive awards shown in this table are “profits-only” interests evidenced by Class B units, Class C units, Class D units and Class E units of Holdings and were issued in the third quarter of 2006. See Note 1 to the Summary Compensation Table and “— Holdings Equity Compensation Arrangements” for further information regarding the terms of these units. The assumptions made in valuing these units are set forth in Note 9 to our unaudited condensed consolidated financial statements at and for the nine months ended September 30, 2006. |
(2) | The difference between the date these awards were approved and their grant date is due to a lapse of time between the approval date and the time that award documents were finalized and executed to evidence these awards. |
(3) | Mr. Fleet’s bonus opportunity for 2007 is determined under NEBCO’s Management Bonus Plan, as described in Mr. Fleet’s employment agreement, and is based on the extent to which target levels of EBITDA margin (as defined in the agreement) and growth in net revenues (as defined in the agreement) are met. Because the formula for determining Mr. Fleet’s 2007 bonus is the same formula that was used to determine his 2006 bonus, the amount shown here represents the amount of bonus Mr. Fleet would earn for 2007 under the Management Bonus Plan assuming that NEBCO’s 2007 results with respect to these performance measures were the same as in 2006. |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||
Incentive | Plan Awards: | |||||||||||||||||||||||||||||||||||
Equity | Plan | Market or | ||||||||||||||||||||||||||||||||||
Incentive | Awards: | Payout | ||||||||||||||||||||||||||||||||||
Plan Awards: | Market | Number of | Value of | |||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number of | Value of | Unearned | Unearned | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares or | Shares or | Shares, | Shares, | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Units of | Units of | Units or | Units or | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Stock That | Stock That | Other Rights | Other Rights | |||||||||||||||||||||||||||||
Options | Options | Unearned | Exercise | Option | Have Not | Have Not | That Have | That Have | ||||||||||||||||||||||||||||
(#) | (#) | Options | Price | Expiration | Vested | Vested | Not Vested | Not Vested | ||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||
M. Steven DeCarlo | 75,000 | (1) | — | — | $ | 30.78 | 1/1/11 | 421,674 | (2) | (3 | ) | |||||||||||||||||||||||||
Samuel H. Fleet | — | — | — | — | — | 76,668 | (2) | (3 | ) | |||||||||||||||||||||||||||
Mark M. Smith | — | — | — | — | — | 191,624 | (4) | (3 | ) | (3 | ) | |||||||||||||||||||||||||
Scott M. Purviance | — | — | — | — | — | 115,002 | (2) | (3 | ) | |||||||||||||||||||||||||||
J. Scott Reynolds | 50,000 | (5) | — | 12.09 | 4/24/13 | 57,501 | (2) | (3 | ) |
(1) | This amount represents fully vested options to acquire Holdings common units. |
(2) | These amounts represent performance-based “profits-only” interests of Holdings evidenced by equal amounts of Class B units, Class C units, Class D units and Class E units of Holdings. See Note 1 to the Summary Compensation Table. This unvested portion of the grants, representing 76.67% of the entire grants, will continue to vest at the rate of 12/3% per month through October 2010. |
(3) | As “profits-only” interests, the value of which is determinable only after distributions to Holdings exceed certain thresholds, the payout value of these units is undeterminable until these distributions occur. See “— Holdings Equity Compensation Arrangements.” |
(4) | This amount represents “profits-only” interests issued by Holdings in April 2005 to Mr. Smith. This unvested portion of the grant, representing 66.67% of the entire outstanding grant, will continue to vest at the rate of 12/3% per month through April 2010. |
(5) | This amount represents fully vested options to acquire shares of our common stock. |
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares | Value | Shares | Value | |||||||||||||
Acquired on | Realized on | Acquired on | Realized on | |||||||||||||
Exercise | Exercise | Vesting | Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
M. Steven DeCarlo | — | — | 128,326 | (1) | (2 | ) | ||||||||||
Samuel H. Fleet | — | — | 23,332 | (1) | (2 | ) | ||||||||||
Mark M. Smith | 29,100 | (3) | $ | 95,448 | (4) | 57,484 | (5) | (2 | ) | |||||||
Scott M. Purviance | — | — | 34,998 | (1) | (2 | ) | ||||||||||
J. Scott Reynolds | — | — | — | (2 | ) |
(1) | These aggregate numbers represent equal amounts of “profits-only” Class B, C, D and E units in Holdings that vested in 2006. See Note 1 to the Summary Compensation Table above. |
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(2) | As “profits-only” interests, the value of which is determinable only after distributions to Holdings exceed certain thresholds, the value of these units is undeterminable until these distributions occur. See “— Holdings Equity Compensation Arrangements.” |
(3) | These represent common units in Holdings. |
(4) | This amount is based on an assumed value of $15.29 per common unit, as determined for purposes of other transactions in common units most closely preceding the time of exercise of these options. |
(5) | These represent “profits-only” Class Z units in Holdings that vested during 2006. See Note 4 to the Summary Compensation Table above. |
Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||||||||||||
Contributions | Contributions | Earnings in | Withdrawals/ | Balance at | ||||||||||||||||
in Last FY | in Last FY | Last FY | Distributions | Last FYE | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
M. Steven DeCarlo | — | — | — | — | — | |||||||||||||||
Samuel H. Fleet | — | — | $ | 2,407 | — | $ | 61,533 | |||||||||||||
Mark M. Smith | — | — | — | — | — | |||||||||||||||
Scott M. Purviance | — | — | 47 | — | 47 | |||||||||||||||
J. Scott Reynolds | — | — | — | — | — |
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Without | ||||||||||||||||
Cause or for | Change in | |||||||||||||||
Name | Good Reason | Death | Disability | Control | ||||||||||||
M. Steven DeCarlo(1) | $ | 1,058,007 | (2) | $ | 4,058,007 | (3) | $ | 2,058,007 | (4) | n/a | ||||||
Scott M. Purviance(5) | 433,428 | (6) | 433,428 | (6) | 433,428 | (6) | n/a | |||||||||
Samuel H. Fleet(7) | 2,281,602 | (8) | 1,981,602 | (9) | 1,981,602 | (9) | $ | 300,000 | (10) | |||||||
Mark M. Smith(11) | 1,322,311 | (12) | (13) | (13) | n/a | |||||||||||
J. Scott Reynolds(14) | — | — | — | — |
(1) | The circumstances that would trigger termination payments to Mr. DeCarlo, as well as the terms of those payments, are set forth in Mr. DeCarlo’s employment agreement. See “— Employment Agreements — M. Steven DeCarlo” for more information regarding these terms. |
(2) | This amount consists of the following: continuation of base salary (currently $720,000) for 12 months; a full year’s bonus (currently $280,000, but which amount would be prorated through the date of actual termination); continuation of the automobile allowance (currently $15,000 per year) and country club membership dues (currently $5,400 per year) for 12 months; and continued health coverage benefits for Mr. DeCarlo and his dependents for 24 months at an assumed cost of $37,607, which represents an assumed rate of increase of 10% per year over current costs in each year provided. |
(3) | This amount includes all items described in Note 2, plus guaranteed minimum proceeds from a life insurance policy of $3,000,000. In addition, in the event of Mr. DeCarlo’s death, his estate would receive an additional six months of vesting with respect to any unvested Class B, C, D and E units in Holdings. See Note 1 to the Summary Compensation Table. |
(4) | This amount includes all items described in Note 2, plus aggregate proceeds of $1,000,000 under a disability insurance policy. |
(5) | The circumstances that would trigger termination payments to Mr. Purviance, as well as the terms of those payments, are set forth in Mr. Purviance’s employment agreement. See “— Employment Agreements — Scott M. Purviance” for more information regarding these terms. |
(6) | This amount consists of the following: continuation of base salary (currently $300,000) for 12 months; a full year’s bonus (currently $110,000, but which amount would be prorated through the date of actual termination); continuation of the country club membership dues (currently $5,520 per year) for 12 months; and continued health coverage benefits for Mr. Purviance and his dependents for 12 months at an assumed cost of $17,908, which represents an assumed rate of increase of 10% per year over current costs for the year provided. |
(7) | The circumstances that would trigger termination payments to Mr. Fleet, as well as the terms of those payments, are set forth in Mr. Fleet’s employment agreement. See “— Employment Agreements — Samuel H. Fleet” for more information regarding these terms. |
(8) | This amount consists of the continuation of base salary (currently $300,000) and a full year’s bonus ($1,981,602 for 2006, but which amount would be prorated through the date of actual termination). |
(9) | This amount consists of a full year’s bonus ($1,981,602 for 2006, but which amount would be prorated through the date of actual termination). |
(10) | In the event of a “change of control” (as defined in Mr. Fleet’s agreement) in which the acquiror assumes Mr. Fleet’s employment agreement, but Mr. Fleet’s employment is terminated during the one year period following the change in control other than for “cause,” by reason of death or disability or by Mr. Fleet |
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for “good reason,” Mr. Fleet is entitled to 12 months of his then current base salary in a lump sum payment. In the event of a change of control in which Mr. Fleet’s agreement is not assumed by the acquiror, Mr. Fleet would be entitled to this lump sum payment in addition to amounts to which he would otherwise be entitled from us under his employment agreement. |
(11) | The circumstances that would trigger termination payments to Mr. Smith, as well as the terms of those payments, are set forth in Mr. Smith’s employment agreement. See “— Employment Agreements — Mark M. Smith” for more information regarding these terms. |
(12) | This amount includes 133% of the base salary Mr. Smith would have received had he remained employed until April 13, 2008 ($1,278,795 based on his current salary), plus health insurance coverage continuation through April 13, 2008 at an assumed cost of $43,516, which represents an assumed rate of increase of 10% per year over current costs for the term provided. Mr. Smith would also be entitled to receive a prorated portion of his annual bonus through the date of termination, payable in a lump sum. Mr. Smith received no such bonus in 2006. |
(13) | In these circumstances, we would be required to pay Mr. Smith a prorated amount of his accrued annual bonus through the date of termination. Mr. Smith received no such bonus in 2006. |
(14) | Mr. Reynolds has no employment agreement or other contractual right to receive payments upon termination of employment. |
• | any breach of their duty of loyalty to our company or our stockholders; | |
• | acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | |
• | unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and | |
• �� | any transaction from which the director derived an improper personal benefit. |
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• | each person who we know beneficially owns more than 5% of our shares; | |
• | each of our directors; | |
• | each of our named executive officers; and | |
• | all of our executive officers and directors as a group. |
Name and Address of | Shares Beneficially Owned Before Offering | Shares Beneficially Owned After Offering | ||||||||||||||
Beneficial Owner | Number | Percentage | Number | Percentage | ||||||||||||
AmWINS Holdings, LLC(1) | ||||||||||||||||
American Wholesale Insurance Holding Company, LLC(2) | ||||||||||||||||
M. Steven DeCarlo(3) | ||||||||||||||||
Samuel H. Fleet | ||||||||||||||||
Mark M. Smith | ||||||||||||||||
Scott M. Purviance | ||||||||||||||||
Stephen J. Vaccaro | ||||||||||||||||
Brian P. Golson(4) | ||||||||||||||||
Marc R. Rubin(4) | ||||||||||||||||
John C. Rutherford(4) | ||||||||||||||||
Joseph E. Consolino | ||||||||||||||||
Executive officers and directors as a group (11 persons)(4) |
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* | Indicates less than 1%. |
(1) | AmWINS Holdings, LLC (Parthenon HoldCo) is a Delaware company controlled by Parthenon Investors II, L.P. and Parthenon Investors III, L.P. The co-CEOs of Parthenon Capital, Mr. Ernest K. Jacquet and Mr. John C. Rutherford, control Parthenon Investors II, L.P. and Messrs. Jacquet and Rutherford and Mr. William C. Kessinger control Parthenon Investors III, L.P. These individuals have shared voting and investment authority over shares held by Parthenon HoldCo and disclaim beneficial ownership of these shares except to the extent of their pecuniary interest therein. The address for Parthenon HoldCo is c/o Parthenon Capital, 75 State Street, 26th floor, Boston, MA 02109. |
(2) | American Wholesale Insurance Holding Company, LLC (Holdings) is a Delaware company. The managers of Holdings, Mr. Steven DeCarlo, Mr. Brian P. Golson, Mr. Marc R. Rubin and Mr. John C. Rutherford, each have beneficial ownership of shares of common stock held by Holdings through their control of Holdings. These individuals have shared voting and investment authority over these shares and disclaim beneficial ownership of these shares except to the extent of their pecuniary interest therein. The address for Holdings is 4064 Colony Road, Suite 450, Charlotte, NC 28211. |
(3) | Mr. DeCarlo’s address is 4064 Colony Road, Suite 450, Charlotte, NC 28211. |
(4) | Excludes shares owned by Parthenon HoldCo, of which Messrs. Golson, Rubin and Rutherford are officers and Messrs. Golson and Rutherford are managers. |
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• | shares of common stock, par value $0.01 per share; and | |
• | shares of preferred stock, par value $ per share. |
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• | restricting dividends on the common stock; | |
• | diluting the voting power of the common stock; | |
• | impairing the liquidation rights of the common stock; or | |
• | delaying or preventing a change of control of us. |
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• | before the stockholder becomes an interested stockholder, the corporation’s board approves either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; | |
• | after the transaction that results in the stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the corporation’s outstanding voting stock (excluding voting stock held by directors who are also officers and voting stock held in employee stock plans if participants do not have the right to determine whether their plan stock will be tendered in a tender or exchange offer); or | |
• | the corporation’s board approves the business combination and the holders of at least two-thirds of the corporation’s outstanding voting stock, excluding voting stock held by the interested stockholder, authorize the business combination. |
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• | 1% of the number of shares of our common stock then outstanding (or approximately shares immediately after this offering, assuming no exercise of the underwriters’ overallotment option and no exercise of outstanding options or warrants); or |
• | the average weekly trading volume of the common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
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CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
• | a citizen or resident of the United States; | |
• | a corporation or partnership created or organized in or under the laws of the United States or any political subdivision of the United States, other than a partnership treated as a foreign person under U.S. Treasury regulations; | |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust, in general, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust. |
• | U.S. state and local ornon-U.S. tax consequences; | |
• | specific facts and circumstances that may be relevant to a particularnon-U.S. holder’s tax position, including, if thenon-U.S. holder is a partnership, that the U.S. tax consequences of holding and disposing of our common stock may be affected by certain determinations made at the partner level; | |
• | the tax consequences for the stockholders, partners or beneficiaries of anon-U.S. holder; | |
• | special tax rules that may apply to particularnon-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, broker-dealers and traders in securities; or | |
• | special tax rules that may apply to anon-U.S. holder that holds our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment. |
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• | thenon-U.S. holder is an individual who holds our common stock as a capital asset, is present in the United States for 183 days or more during the taxable year of the disposition and either has a “tax home” in the United States for U.S. federal income tax purposes or maintains an office or other fixed place of business in the United States to which the gain is attributable; | |
• | the gain is effectively connected with thenon-U.S. holder’s conduct of a trade or business in the United States or, in some instances if an income tax treaty applies, is attributable to a permanent establishment maintained by thenon-U.S. holder in the United States; or | |
• | we are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that thenon-U.S. holder held our common stock. |
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Number of | ||||
Underwriter | Shares | |||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Wachovia Capital Markets, LLC | ||||
Cochran Caronia Waller Securities LLC | ||||
William Blair & Company, L.L.C. | ||||
Piper Jaffray & Co. | ||||
Total | ||||
Per Share | Without Option | With Option | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discounts | $ | $ | $ | |||||||||
Proceeds, before expenses, to us | $ | $ | $ |
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• | offer, pledge, sell or contract to sell any of our common stock; | |
• | sell any option or contract to purchase any of our common stock; | |
• | purchase any option or contract to sell any of our common stock; | |
• | grant any option, right or warrant for the sale of any of our common stock; | |
• | lend or otherwise dispose of or transfer any of our common stock; | |
• | request or demand that we file a registration statement related to our common stock; or | |
• | enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any of our common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise. |
• | the valuation multiples of publicly traded companies that the representatives believe to be comparable to us; | |
• | our financial information; | |
• | the history of, and the prospects for, our company and the industry in which we compete; |
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• | an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues; | |
• | the present state of our development; and | |
• | the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. |
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Audited Financial Statements | ||||
AmWINS Group, Inc. | ||||
Reports of Independent Registered Public Accounting Firm | F-3 | |||
Consolidated Balance Sheets at December 31, 2005 and December 31, 2004 | F-5 | |||
Consolidated Statements of Operations for the period from October 28, 2005 through December 31, 2005, the period from January 1, 2005 through October 27, 2005 and the years ended December 31, 2004 and December 31, 2003 | F-6 | |||
Consolidated Statements of Stockholder’s Equity for the period from October 28, 2005 through December 31, 2005, the period from January 1, 2005 through October 27, 2005 and the years ended December 31, 2004 and December 31, 2003 | F-7 | |||
Consolidated Statements of Cash Flows for the period from October 28, 2005 through December 31, 2005, the period from January 1, 2005 through October 27, 2005 and the years ended December 31, 2004 and December 31, 2003 | F-8 | |||
Notes to Consolidated Financial Statements | F-9 | |||
Stewart Smith Group | ||||
Report of Independent Auditors | F-33 | |||
Combined Balance Sheets at April 13, 2005 and December 31, 2004 and December 31, 2003 | F-34 | |||
Combined Statements of Income for the period ended April 13, 2005 and the years ended December 31, 2004 and December 31, 2003 | F-35 | |||
Combined Statements of Shareholder’s Equity for the period ended April 13, 2005 and the years ended December 31, 2004 and December 31, 2003 | F-36 | |||
Combined Statements of Cash Flows for the period ended April 13, 2005 and the years ended December 31, 2004 and December 31, 2003 | F-37 | |||
Notes to Combined Financial Statements | F-38 | |||
Communitas, Inc. | ||||
Report of Independent Registered Public Accounting Firm | F-43 | |||
Consolidated Balance Sheets at December 31, 2005 and 2004 | F-44 | |||
Consolidated Statements of Operations for the years ended December 31, 2005 and December 31, 2004 | F-45 | |||
Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2005 and December 31, 2004 | F-46 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2005 and December 31, 2004 | F-47 | |||
Notes to Consolidated Financial Statements | F-48 | |||
The Quaker Agency of the South, Inc. | ||||
Report of Independent Auditors | F-55 | |||
Balance Sheet at November 30, 2004 | F-56 | |||
Statement of Operations for the 11 months ended November 30, 2004 | F-57 | |||
Statement of Shareholders’ Equity for the 11 months ended November 30, 2004 | F-58 | |||
Statement of Cash Flows for the 11 months ended November 30, 2004 | F-59 | |||
Notes to Financial Statements | F-60 | |||
Unaudited Condensed Consolidated Financial Statements | ||||
AmWINS Group, Inc. | ||||
Condensed Consolidated Balance Sheets at September 30, 2006 and December 31, 2005 | F-63 | |||
Condensed Consolidated Statements of Operations for the nine months ended September 30, 2006 and September 30, 2005 | F-64 | |||
Condensed Consolidated Statements of Stockholder’s Equity for the nine months ended September 30, 2006 and September 30, 2005 | F-65 |
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Condensed Consolidated Statements of Cash Flow for the nine months ended September 30, 2006 and September 30, 2005 | F-66 | |||
Notes to Condensed Consolidated Financial Statements | F-67 | |||
Communitas, Inc. | ||||
Condensed Consolidated Balance Sheets at March 31, 2006 and December 31, 2005 | F-80 | |||
Condensed Consolidated Statements of Operations for the three months ended March 31, 2006 and March 31, 2005 | F-81 | |||
Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three months ended March 31, 2006 and March 31, 2005 | F-82 | |||
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and March 31, 2005 | F-83 | |||
Notes to Condensed Consolidated Financial Statements | F-84 |
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Successor | Predecessor | ||||||||
December 31, | December 31, | ||||||||
2005 | 2004 | ||||||||
(In thousands of dollars, except share data) | |||||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 19,151 | $ | 10,055 | |||||
Premium cash | 88,047 | 41,867 | |||||||
Premiums receivable, net | 199,406 | 87,833 | |||||||
Prepaid expenses and other current assets | 10,640 | 8,642 | |||||||
Deferred tax asset | 3,812 | 3,860 | |||||||
Total current assets | 321,056 | 152,257 | |||||||
Fixed assets, net | 7,607 | 4,095 | |||||||
Goodwill | 243,409 | 82,102 | |||||||
Other identifiable intangible assets, net | 42,292 | 26,904 | |||||||
Deferred tax asset | 4,223 | — | |||||||
Other noncurrent assets | 3,908 | 1,827 | |||||||
Total assets | $ | 622,495 | $ | 267,185 | |||||
LIABILITIES AND STOCKHOLDER’S EQUITY | |||||||||
Current liabilities | |||||||||
Current portion of long-term debt | $ | 1,836 | $ | 5,772 | |||||
Premiums payable | 267,467 | 124,240 | |||||||
Accounts payable and accrued expenses | 36,965 | 21,951 | |||||||
Total current liabilities | 306,268 | 151,963 | |||||||
Long-term debt | 169,463 | 32,123 | |||||||
Deferred tax liability | — | 2,292 | |||||||
Other | 2,683 | 1,127 | |||||||
Total liabilities | 478,414 | 187,505 | |||||||
Stockholder’s equity | |||||||||
Common stock, $.01 par value; 15,000,000 authorized, 11,295,172 and 12,394,914 issued and outstanding | 113 | 124 | |||||||
Additional paid-in capital | 141,850 | 98,805 | |||||||
Retained earnings (accumulated deficit) | 2,118 | (19,249 | ) | ||||||
Total stockholder’s equity | 144,081 | 79,680 | |||||||
Total liabilities and stockholder’s equity | $ | 622,495 | $ | 267,185 | |||||
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Successor | Predecessor | ||||||||||||||||
Period From | Period From | ||||||||||||||||
October 28, 2005 | January 1, 2005 | Years Ended | |||||||||||||||
Through | Through | December 31, | |||||||||||||||
December 31, 2005 | October 27, 2005 | 2004 | 2003 | ||||||||||||||
(In thousands of dollars, except share | |||||||||||||||||
and per share data) | |||||||||||||||||
Revenues | |||||||||||||||||
Commissions and fees | $ | 29,722 | $ | 110,791 | $ | 83,452 | $ | 57,681 | |||||||||
Other income | 906 | 850 | 1,152 | 503 | |||||||||||||
Total revenues | 30,628 | 111,641 | 84,604 | 58,184 | |||||||||||||
Expenses | |||||||||||||||||
Employee compensation and benefits | 17,388 | 66,412 | 52,523 | 37,594 | |||||||||||||
Other operating expense | 5,498 | 19,431 | 16,588 | 13,421 | |||||||||||||
Depreciation | 536 | 1,855 | 1,475 | 1,256 | |||||||||||||
Amortization | 636 | 5,716 | 3,873 | 2,068 | |||||||||||||
Total operating expenses | 24,058 | 93,414 | 74,459 | 54,339 | |||||||||||||
Operating Income | 6,570 | 18,227 | 10,145 | 3,845 | |||||||||||||
Interest expense | 2,949 | 8,516 | 2,498 | 288 | |||||||||||||
Loss on extinguishment of debt | — | 9,799 | 994 | — | |||||||||||||
Income (loss) before income taxes and minority interest | 3,621 | (88 | ) | 6,653 | 3,557 | ||||||||||||
Minority interest | — | — | (67 | ) | (258 | ) | |||||||||||
Income tax expense | 1,503 | 772 | 2,930 | 406 | |||||||||||||
Income (loss) from continuing operations | 2,118 | (860 | ) | 3,790 | 3,409 | ||||||||||||
Income from discontinued operations, net of minority interest and income taxes | — | — | 578 | 812 | |||||||||||||
Loss on disposal of subsidiary | — | — | (67 | ) | — | ||||||||||||
Net income (loss) | $ | 2,118 | $ | (860 | ) | $ | 4,301 | $ | 4,221 | ||||||||
Earnings (loss) per common share | |||||||||||||||||
Basic | |||||||||||||||||
Continuing operations | $ | .19 | $ | (.07 | ) | $ | .31 | $ | .31 | ||||||||
Discontinued operations | — | — | .05 | .07 | |||||||||||||
Discontinued operations, loss on sale | — | — | (.01 | ) | — | ||||||||||||
Net income (loss) | $ | .19 | $ | (.07 | ) | $ | .35 | $ | .38 | ||||||||
Diluted | |||||||||||||||||
Continuing operations | $ | .19 | $ | (.07 | ) | $ | .31 | $ | .31 | ||||||||
Discontinued operations | — | — | .05 | .07 | |||||||||||||
Discontinued operations, loss on sale | — | — | (.01 | ) | — | ||||||||||||
Net income (loss) | $ | .19 | $ | (.07 | ) | $ | .35 | $ | .38 | ||||||||
Weighted average number of shares outstanding | |||||||||||||||||
Basic | 11,320,583 | 12,443,857 | 12,141,694 | 11,124,226 | |||||||||||||
Diluted | 11,415,726 | 12,443,857 | 12,201,646 | 11,172,513 |
F-6
Table of Contents
(Accumulated | Accumulated | |||||||||||||||||||||||
Common Stock | Additional | Deficit) | Other | Total | ||||||||||||||||||||
Par | Paid-in | Retained | Comprehensive | Stockholder’s | ||||||||||||||||||||
Shares | Value | Capital | Earnings | Income | Equity | |||||||||||||||||||
(In thousands of dollars, except share data) | ||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||
Balances, January 1, 2003 | 10,741,060 | $ | 107 | $ | 78,386 | $ | (27,771 | ) | $ | — | $ | 50,722 | ||||||||||||
Issuance of common stock for contingent consideration on prior acquisitions | 257,251 | 3 | 3,443 | — | — | 3,446 | ||||||||||||||||||
Issuance of common stock for acquisitions | 282,258 | 3 | 3,410 | — | — | 3,413 | ||||||||||||||||||
Exercise of options | 49,628 | — | 648 | — | — | 648 | ||||||||||||||||||
Net income | — | — | — | 4,221 | — | 4,221 | ||||||||||||||||||
Balances, December 31, 2003 | 11,330,197 | 113 | 85,887 | (23,550 | ) | — | 62,450 | |||||||||||||||||
Issuance of common stock for contingent consideration on prior acquisitions | 68,612 | 1 | 885 | — | — | 886 | ||||||||||||||||||
Issuance of common stock for acquisitions | 966,742 | 10 | 11,678 | — | — | 11,688 | ||||||||||||||||||
Issuance of common stock for settlement of management fee liability | 29,363 | — | 355 | — | — | 355 | ||||||||||||||||||
Net income | — | — | — | 4,301 | — | 4,301 | ||||||||||||||||||
Balances, December 31, 2004 | 12,394,914 | 124 | 98,805 | (19,249 | ) | — | 79,680 | |||||||||||||||||
Issuance of common stock for contingent consideration on prior acquisitions | 41,019 | — | 496 | — | — | 496 | ||||||||||||||||||
Issuance of common stock for recapitalization, net of issuance costs | 786,982 | 8 | 6,948 | — | — | 6,956 | ||||||||||||||||||
Redemption of common stock for recapitalization | (2,210,885 | ) | (22 | ) | (32,528 | ) | — | — | (32,550 | ) | ||||||||||||||
Net (loss) | — | — | — | (860 | ) | — | (860 | ) | ||||||||||||||||
Balances, October 27, 2005 | 11,012,030 | $ | 110 | $ | 73,721 | $ | (20,109 | ) | $ | — | $ | 53,722 | ||||||||||||
Successor | ||||||||||||||||||||||||
Balances, October 28, 2005 | 11,012,030 | $ | 110 | $ | 137,738 | $ | — | $ | — | $ | 137,848 | |||||||||||||
Issuance of common stock for acquisition of minority interest in a subsidiary | 283,142 | 3 | 4,112 | — | — | 4,115 | ||||||||||||||||||
Net income | — | — | — | 2,118 | — | 2,118 | ||||||||||||||||||
Balances, December 31, 2005 | 11,295,172 | $ | 113 | $ | 141,850 | $ | 2,118 | $ | — | $ | 144,081 | |||||||||||||
F-7
Table of Contents
Successor | Predecessor | ||||||||||||||||
Period From | Period From | ||||||||||||||||
October 28, 2005 | January 1, 2005 | Years Ended | |||||||||||||||
Through | Through | December 31, | |||||||||||||||
December 31, 2005 | October 27, 2005 | 2004 | 2003 | ||||||||||||||
(In thousands of dollars, except share and per share data) | |||||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income (loss) | $ | 2,118 | $ | (860 | ) | $ | 4,301 | $ | 4,221 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||||||||||||||
Depreciation and amortization | 1,172 | 7,571 | 5,348 | 3,324 | |||||||||||||
Loss on disposal of equipment | 14 | 7 | — | — | |||||||||||||
Loss on sale of subsidiary | — | — | 67 | — | |||||||||||||
Income tax benefit from exercise of stock options | — | — | — | 48 | |||||||||||||
Loss on extinguishment of debt | — | 9,799 | 994 | — | |||||||||||||
Deferred income taxes | 5,487 | (4,281 | ) | 1,447 | (86 | ) | |||||||||||
Minority interest | — | — | (67 | ) | (258 | ) | |||||||||||
Changes in operating assets and liabilities | |||||||||||||||||
Premium cash | 9,236 | (36,999 | ) | 1,939 | 8,317 | ||||||||||||
Premiums receivable | (38,468 | ) | (1,745 | ) | (20,252 | ) | (17,297 | ) | |||||||||
Prepaid expenses and other current assets | (1,753 | ) | 208 | (452 | ) | (148 | ) | ||||||||||
Other assets | 629 | (306 | ) | (45 | ) | 527 | |||||||||||
Premiums payable | 28,755 | 31,862 | 17,426 | 13,277 | |||||||||||||
Accounts payable and accrued expenses | 1,504 | 5,489 | 1,137 | (3,530 | ) | ||||||||||||
Other liabilities | (47 | ) | (616 | ) | (77 | ) | 179 | ||||||||||
Net cash provided by discontinued operations | — | — | 2,071 | (1,656 | ) | ||||||||||||
Net cash provided by operating activities | 8,647 | 10,129 | 13,837 | 6,918 | |||||||||||||
Cash flows from investing activities | |||||||||||||||||
Cash paid for acquisition of businesses, net of cash acquired of $493, $485 and $476 | — | (101,340 | ) | (41,462 | ) | (2,990 | ) | ||||||||||
Purchase of intangible assets | — | — | — | (42 | ) | ||||||||||||
Cash paid for acquisition costs | (40 | ) | (2,073 | ) | (749 | ) | (62 | ) | |||||||||
Cash received on sale of business | — | — | 6,075 | — | |||||||||||||
Purchases of property and equipment | (339 | ) | (1,791 | ) | (1,559 | ) | (1,769 | ) | |||||||||
Net cash used in discontinued operations | — | — | (12 | ) | 515 | ||||||||||||
Cash contributed to discontinued operations | — | — | — | (624 | ) | ||||||||||||
Net cash used in investing activities | (379 | ) | (105,204 | ) | (37,707 | ) | (4,972 | ) | |||||||||
Cash flows from financing activities | |||||||||||||||||
Exercise of options | — | — | — | 600 | |||||||||||||
Redemption of common stock | — | (32,550 | ) | — | — | ||||||||||||
Issuance of common stock | — | 11,584 | — | — | |||||||||||||
Common stock issuance costs | — | (4,628 | ) | — | — | ||||||||||||
Debt issuance costs | 73 | (563 | ) | (1,444 | ) | (994 | ) | ||||||||||
Proceeds from long-term debt | — | 310,287 | 46,373 | 5,760 | |||||||||||||
Repayments on long-term debt | (486 | ) | (187,814 | ) | (17,964 | ) | (5,891 | ) | |||||||||
Net cash used in discontinued operations | — | — | (2,579 | ) | 868 | ||||||||||||
Net cash (used in) provided by financing activities | (413 | ) | 96,316 | 24,386 | 343 | ||||||||||||
Net increase in cash and cash equivalents | 7,855 | 1,241 | 516 | 2,289 | |||||||||||||
Cash and cash equivalents | |||||||||||||||||
Beginning of period | 11,296 | 10,055 | 9,539 | 7,250 | |||||||||||||
End of period | $ | 19,151 | $ | 11,296 | $ | 10,055 | $ | 9,539 | |||||||||
Supplemental disclosures of cash flow information | |||||||||||||||||
Cash paid for | |||||||||||||||||
Income taxes | $ | 178 | $ | 838 | $ | 988 | $ | 600 | |||||||||
Interest | 1,452 | 7,044 | 1,879 | 320 | |||||||||||||
Long-term debt issued for acquisitions | — | — | 2,424 | 2,575 | |||||||||||||
Common stock issued for reduction in liabilities | — | — | 355 | — | |||||||||||||
F-8
Table of Contents
1. | Summary of Significant Accounting Policies |
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
Successor | Predecessor | |||||||||||||||
October 28, 2005 | January 1, 2005 | |||||||||||||||
Through | Through | Year Ended | Year Ended | |||||||||||||
December 31, | October 27, | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||
(In thousands of dollars, except per share data) | ||||||||||||||||
Net income (loss) as reported | $ | 2,118 | $ | (860 | ) | $ | 4,301 | $ | 4,221 | |||||||
Total stock-based employee compensation cost included in the determination of net income, net of related tax effects | — | — | — | 74 | ||||||||||||
Total stock-based employee compensation cost determined under fair value method, net of related tax effects | (55 | ) | (740 | ) | (175 | ) | (139 | ) | ||||||||
Pro forma net income (loss) | $ | 2,063 | $ | (1,600 | ) | $ | 4,126 | $ | 4,156 | |||||||
Earnings (loss) per share | ||||||||||||||||
Basic | ||||||||||||||||
As reported | $ | 0.19 | $ | (0.07 | ) | $ | 0.35 | $ | 0.38 | |||||||
Pro forma | $ | 0.18 | $ | (0.13 | ) | $ | 0.34 | $ | 0.37 | |||||||
Diluted | ||||||||||||||||
As reported | $ | 0.19 | $ | (0.07 | ) | $ | 0.35 | $ | 0.38 | |||||||
Pro forma | $ | 0.18 | $ | (0.13 | ) | $ | 0.34 | $ | 0.37 | |||||||
Successor | Predecessor | ||||||||||||||||
October 28, | January 1, | ||||||||||||||||
2005 | 2005 | Year | |||||||||||||||
Through | Through | Ended | |||||||||||||||
December 31, | October 27, | December 31, | |||||||||||||||
2005(1) | 2005 | 2004 | 2003 | ||||||||||||||
Dividend yield | — | 0% | 0% | 0% | |||||||||||||
Risk free interest rate | — | 4.77% | 4.24% | 4.27% | |||||||||||||
Expected lives | — | 6 years | 6 years | 6 years | |||||||||||||
Volatility | — | 29.3% | 33.5% | 33.5% |
(1) | There were no option grants made during the Successor period. |
F-13
Table of Contents
Number of | Weighted Average | |||||||||||||||
Grants Made During the | Options | Weighted Average | Fair Value of | Weighted Average | ||||||||||||
Year Ended December 31, 2005 | Granted | Exercise Price | Common Stock | Intrinsic Value | ||||||||||||
April 13, 2005 | 254,974 | $ | 12.09 | $ | 12.09 | $ | — |
F-14
Table of Contents
Successor | Predecessor | ||||||||||||||||||||||||||||||||
October 28, 2005 | January 1, 2005 | ||||||||||||||||||||||||||||||||
Through | Through | Year Ended | Year Ended | ||||||||||||||||||||||||||||||
December 31, 2005 | October 27, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||||||||||
Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | ||||||||||||||||||||||||||
(In thousands of dollars, except share and per share data) | |||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 2,118 | $ | 2,118 | $ | (860 | ) | $ | (860 | ) | $ | 3,790 | $ | 3,790 | $ | 3,409 | $ | 3,409 | |||||||||||||||
Income from discontinued operations | — | — | — | — | 578 | 578 | 812 | 812 | |||||||||||||||||||||||||
(Loss) on disposal of subsidiary | — | — | — | — | (67 | ) | (67 | ) | — | — | |||||||||||||||||||||||
Net income (loss) | $ | 2,118 | $ | 2,118 | $ | (860 | ) | $ | (860 | ) | $ | 4,301 | $ | 4,301 | $ | 4,221 | $ | 4,221 | |||||||||||||||
Average Equivalent Shares | |||||||||||||||||||||||||||||||||
Shares outstanding | 11,320,583 | 11,320,583 | 12,443,857 | 12,443,857 | 12,141,694 | 12,141,694 | 11,124,226 | 11,124,226 | |||||||||||||||||||||||||
Options to purchase common stock | 95,143 | — | — | — | 59,952 | — | 48,287 | — | |||||||||||||||||||||||||
Total average equivalent shares | 11,415,726 | 11,320,583 | 12,443,857 | 12,443,857 | 12,201,646 | 12,141,694 | 11,172,513 | 11,124,226 | |||||||||||||||||||||||||
Per-Share Amounts | |||||||||||||||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 0.19 | $ | 0.19 | $ | (0.07 | ) | $ | (0.07 | ) | $ | 0.31 | $ | 0.31 | $ | 0.31 | $ | 0.31 | |||||||||||||||
Earnings from discontinued operations | — | — | — | — | 0.05 | 0.05 | 0.07 | 0.07 | |||||||||||||||||||||||||
Discontinued operations, loss on sale | — | — | — | — | (0.01 | ) | (0.01 | ) | — | — | |||||||||||||||||||||||
Net earnings (loss) per share | $ | 0.19 | $ | 0.19 | $ | (0.07 | ) | $ | (0.07 | ) | $ | 0.35 | $ | 0.35 | $ | 0.38 | $ | 0.38 | |||||||||||||||
F-15
Table of Contents
2. | Acquisitions and Dispositions |
F-16
Table of Contents
(In thousands of dollars) | ||||
Net assets acquired | ||||
Cash | $ | 493 | ||
Premium cash | 18,418 | |||
Premiums receivable | 71,359 | |||
Prepaid expenses and other | 839 | |||
Property and equipment | 1,377 | |||
Goodwill | 85,795 | |||
Intangible assets | 15,979 | |||
Other assets | 102 | |||
Premiums payable | (82,610 | ) | ||
Accounts payable and accrued expenses | (8,136 | ) | ||
Other liabilities | (503 | ) | ||
103,113 | ||||
Less: Cash acquired | (493 | ) | ||
Net cash paid for acquisition | $ | 102,620 | ||
F-17
Table of Contents
Predecessor | ||||||||
Period From | ||||||||
January 1, 2005 | ||||||||
Through | Year Ended | |||||||
October 27, 2005 | December 31, 2004 | |||||||
(In thousands of dollars, | ||||||||
except per share data) | ||||||||
(Unaudited) | ||||||||
Revenues | $ | 125,459 | $ | 161,757 | ||||
Income (loss) before income taxes | (2,704 | ) | 21,344 | |||||
Net income (loss) from continuing operations | (2,395 | ) | 12,161 | |||||
Income from discontinued operations | — | 578 | ||||||
(Loss) from discontinued operations, loss on sale | — | (67 | ) | |||||
Net income (loss) | (2,395 | ) | 12,672 | |||||
Earnings (loss) per share | ||||||||
Basic | (0.19 | ) | 1.04 | |||||
Diluted | (0.19 | ) | 1.04 |
F-18
Table of Contents
(In thousands of dollars) | ||||
Net assets acquired | ||||
Cash | $ | 480 | ||
Premium cash | 2,994 | |||
Premiums receivable | 1,811 | |||
Prepaid expenses and other | 598 | |||
Property and equipment | 252 | |||
Goodwill | 28,143 | |||
Intangible assets | 12,550 | |||
Premiums payable | (5,299 | ) | ||
Deferred tax liability | (1,102 | ) | ||
Accounts payable and accrued expenses | (778 | ) | ||
39,649 | ||||
Less: Common units issued for acquisition | (9,500 | ) | ||
Cash acquired | (480 | ) | ||
Net cash paid for acquisition | $ | 29,669 | ||
F-19
Table of Contents
(In thousands of dollars) | ||||
Net assets acquired | ||||
Cash | $ | 5 | ||
Premium cash | 3,174 | |||
Premiums receivable | 3,032 | |||
Prepaid expenses and other | 6 | |||
Property and equipment | 79 | |||
Goodwill | 10,196 | |||
Intangible assets | 4,617 | |||
Premiums payable | (5,332 | ) | ||
Deferred tax liability | (249 | ) | ||
Accounts payable and accrued expenses | (912 | ) | ||
14,616 | ||||
Less: Notes payable issued for acquisition | (2,000 | ) | ||
Common units issued for acquisition | (2,188 | ) | ||
Cash acquired | (5 | ) | ||
Net cash paid for acquisition | $ | 10,423 | ||
F-20
Table of Contents
(In thousands of dollars) | ||||
Net assets acquired | ||||
Cash | $ | 476 | ||
Premium cash | 1,671 | |||
Premiums receivable | 2,101 | |||
Prepaid expenses and other | 176 | |||
Property and equipment | 68 | |||
Goodwill | 2,418 | |||
Intangible assets | 206 | |||
Other assets | 8 | |||
Premiums payable | (3,450 | ) | ||
Deferred tax liability | (68 | ) | ||
Accounts payable and accrued expenses | (429 | ) | ||
3,177 | ||||
Less: Notes payable issued for acquisition | (424 | ) | ||
Common units issued for acquisition | (1,412 | ) | ||
Cash acquired | (476 | ) | ||
Net cash paid for acquisition | $ | 865 | ||
(In thousands of dollars) | ||||
Net assets acquired | ||||
Property and equipment | $ | 175 | ||
Goodwill | 3,739 | |||
Intangible assets | 1,735 | |||
Net assets acquired | $ | 5,649 | ||
F-21
Table of Contents
3. | Fixed Assets |
Successor | Predecessor | ||||||||
December 31, | December 31, | ||||||||
2005 | 2004 | ||||||||
(In thousands of dollars) | |||||||||
Equipment and software | $ | 4,651 | $ | 5,700 | |||||
Furniture and fixtures | 1,911 | 2,578 | |||||||
Leasehold improvements | 1,581 | 921 | |||||||
8,143 | 9,199 | ||||||||
Less: Accumulated depreciation | (536 | ) | (5,104 | ) | |||||
$ | 7,607 | $ | 4,095 | ||||||
4. | Goodwill |
(In thousands | ||||
of dollars) | ||||
Predecessor, balance as of December 31, 2003 | $ | 40,377 | ||
Goodwill of acquired businesses | 41,725 | |||
Predecessor, balance as of December 31, 2004 | $ | 82,102 | ||
Goodwill of acquired businesses | $ | 85,829 | ||
Predecessor, balance as of October 27, 2005 | $ | 167,931 | ||
Successor, balance as of October 28, 2005 | $ | 238,648 | ||
Goodwill of acquired businesses | 4,761 | |||
Successor, balance as of December 31, 2005 | $ | 243,409 | ||
F-22
Table of Contents
5. | Other Identifiable Intangible Assets |
Successor | Predecessor | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2005 | 2004 | ||||||||||||||||
Gross | Gross | ||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | ||||||||||||||
Amount | Amortization | Amount | Amortization | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
Customer relationships | $ | 38,983 | $ | (549 | ) | $ | 27,530 | $ | (6,133 | ) | |||||||
Noncompete agreements | 3,946 | (88 | ) | 8,702 | (3,195 | ) | |||||||||||
$ | 42,929 | $ | (637 | ) | $ | 36,232 | $ | (9,328 | ) | ||||||||
(In thousands | ||||
of dollars) | ||||
Predecessor, balance as of December 31, 2003 | $ | 13,229 | ||
Amortization of other identifiable intangible assets | (3,873 | ) | ||
Other identifiable intangible assets of acquired businesses | 17,548 | |||
Predecessor, balance as of December 31, 2004 | $ | 26,904 | ||
Amortization of other identifiable intangible assets | (5,710 | ) | ||
Other identifiable intangible assets of acquired businesses | 13,998 | |||
Predecessor, balance as of October 27, 2005 | $ | 37,192 | ||
Successor, balance as of October 28, 2005 | $ | 42,928 | ||
Amortization of other identifiable intangible assets | (636 | ) | ||
Successor, balance as of December 31, 2005 | $ | 42,292 | ||
6. | Accrued Expenses |
Successor | Predecessor | ||||||||
December 31, | December 31, | ||||||||
2005 | 2004 | ||||||||
(In thousands of dollars) | |||||||||
Accrued bonus | $ | 16,777 | $ | 9,245 | |||||
Accrued other expenses | 20,188 | 12,706 | |||||||
$ | 36,965 | $ | 21,951 | ||||||
F-23
Table of Contents
7. | Transactions With Related Parties |
8. | Borrowings |
Successor | Predecessor | ||||||||
December 31, | December 31, | ||||||||
2005 | 2004 | ||||||||
(In thousands of dollars) | |||||||||
Term note | $ | 170,693 | $ | 17,000 | |||||
Seller notes bearing interest from 6% to 8% | 606 | 2,484 | |||||||
Notes payable due in quarterly installments of $196,875, plus interest at 5% beginning in July 2003 | — | 394 | |||||||
Revolving credit facility | — | 18,017 | |||||||
171,299 | 37,895 | ||||||||
Less: Current portion | (1,836 | ) | (5,772 | ) | |||||
$ | 169,463 | $ | 32,123 | ||||||
F-24
Table of Contents
(In thousands of dollars) | ||||
2006 | $ | 1,836 | ||
2007 | 1,230 | |||
2008 | 1,230 | |||
2009 | 1,230 | |||
2010 | 1,230 | |||
Thereafter | 164,543 | |||
$ | 171,299 | |||
F-25
Table of Contents
9. | Income Taxes |
Successor | Predecessor | |||||||||||||||
October 28, | January 1, | |||||||||||||||
2005 | 2005 | Year | Year | |||||||||||||
Through | Through | Ended | Ended | |||||||||||||
December 31, | October 27, | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Current | ||||||||||||||||
Federal | $ | (3,268 | ) | $ | 3,701 | $ | 1,164 | $ | 195 | |||||||
State | (716 | ) | 1,352 | 319 | 297 | |||||||||||
(3,984 | ) | 5,053 | 1,483 | 492 | ||||||||||||
Deferred | ||||||||||||||||
Federal | 4,852 | (3,972 | ) | 1,314 | 38 | |||||||||||
State | 635 | (295 | ) | 133 | (124 | ) | ||||||||||
Change in valuation allowance | — | (14 | ) | — | — | |||||||||||
5,487 | (4,281 | ) | 1,447 | (86 | ) | |||||||||||
Net income tax expense | $ | 1,503 | $ | 772 | $ | 2,930 | $ | 406 | ||||||||
Successor | Predecessor | |||||||||||||||||||||||||||||||
October 28, | January 1, | |||||||||||||||||||||||||||||||
2005 | 2005 | Year | Year | |||||||||||||||||||||||||||||
Through | Through | Ended | Ended | |||||||||||||||||||||||||||||
December 31, | October 27, | December 31, | December 31, | |||||||||||||||||||||||||||||
2005 | Rate | 2005 | Rate | 2004 | Rate | 2003 | Rate | |||||||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||||||||||||
Income tax expense computed at statutory rate | $ | 1,231 | 34 | % | $ | (30 | ) | 34 | % | $ | 2,285 | 34 | % | $ | 1,526 | 40 | % | |||||||||||||||
State income taxes | 177 | 5 | % | 577 | (654 | )% | 279 | 5 | % | 247 | 6 | % | ||||||||||||||||||||
Nondeductible expenses | 95 | 3 | % | 225 | (255 | )% | 366 | 5 | % | 486 | 12 | % | ||||||||||||||||||||
Change in valuation allowance | — | — | — | — | — | — | (1,853 | ) | (46 | )% | ||||||||||||||||||||||
Total income tax expense | $ | 1,503 | 42 | % | $ | 772 | (875 | )% | $ | 2,930 | 44 | % | $ | 406 | 12 | % | ||||||||||||||||
F-26
Table of Contents
Successor | Predecessor | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
(In thousands of dollars) | ||||||||
Deferred tax assets | ||||||||
Net operating loss and capital loss carryforwards | $ | 1,565 | $ | 1,906 | ||||
Intangibles | 2,676 | — | ||||||
Employee benefits | 1,277 | 1,730 | ||||||
Accrued expenses | 932 | 791 | ||||||
Allowance for commission adjustments | 950 | 897 | ||||||
Accrued commissions | 805 | 626 | ||||||
Other | 294 | 147 | ||||||
Deferred tax liabilities | ||||||||
Property and equipment | (351 | ) | (621 | ) | ||||
Intangibles | — | (3,781 | ) | |||||
Valuation allowance | (113 | ) | (127 | ) | ||||
Deferred tax asset, net | $ | 8,035 | $ | 1,568 | ||||
10. | Equity Based Compensation and Incentive Plans |
F-27
Table of Contents
Weighted Average | ||||||||
Shares | Exercise Price | |||||||
Predecessor balance, December 31, 2003 | 313,166 | $ | 9.72 | |||||
Granted | 41,500 | 12.09 | ||||||
Forfeited | (27,000 | ) | 7.93 | |||||
Predecessor balance, December 31, 2004 | 327,666 | $ | 10.17 | |||||
Granted | 254,974 | 12.09 | ||||||
Forfeited | (36,000 | ) | 10.75 | |||||
Predecessor balance, October 27, 2005 | 546,640 | $ | 11.03 | |||||
Successor balance, December 31, 2005 | 546,640 | $ | 11.03 | |||||
Outstanding Options | Options Exercisable | |||||||||||||||||||
Number | Weighted | Number | ||||||||||||||||||
Outstanding | Average | Weighted | Outstanding | Weighted | ||||||||||||||||
at | Remaining | Average | at | Average | ||||||||||||||||
December 31, | Contractual | Exercise | December 31, | Exercise | ||||||||||||||||
Range of Exercise Prices | 2005 | Life | Price | 2005 | Price | |||||||||||||||
$0.00 — $12.00 | 126,666 | 6.8 years | $ | 7.50 | 126,666 | $ | 7.50 | |||||||||||||
$12.01 — $20.00 | 419,974 | 8.6 years | 12.09 | 169,000 | 12.09 | |||||||||||||||
546,640 | 8.2 years | $ | 11.03 | 295,666 | $ | 10.12 | ||||||||||||||
11. | Employee Benefit Plan |
12. | Commitments and Contingencies |
F-28
Table of Contents
(In thousands of dollars) | ||||
2006 | $ | 5,693 | ||
2007 | 5,079 | |||
2008 | 3,832 | |||
2009 | 2,904 | |||
2010 | 2,451 | |||
Thereafter | 3,845 | |||
$ | 23,804 | |||
(In thousands of dollars) | ||||
2006 | $ | 798 | ||
2007 | 728 | |||
2008 | 486 | |||
2009 | 121 | |||
2010 | 10 | |||
Total minimum lease payments | 2,143 | |||
Less imputed interest | 125 | |||
Present value of net minimum lease payments | $ | 2,018 | ||
13. | Segment Information |
F-29
Table of Contents
Successor | ||||||||||||||||||||
Property | ||||||||||||||||||||
& | ||||||||||||||||||||
Casualty | Specialty | Group | ||||||||||||||||||
Brokerage | Underwriting | Benefits | Other | Total | ||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
As of and for the period ended December 31, 2005 | ||||||||||||||||||||
Total revenues | $ | 21,175 | $ | 5,530 | $ | 3,532 | $ | 391 | $ | 30,628 | ||||||||||
Interest income | 415 | 48 | 74 | 21 | 558 | |||||||||||||||
Amortization | — | — | — | 636 | 636 | |||||||||||||||
Depreciation | — | — | — | 536 | 536 | |||||||||||||||
Interest expense | — | — | — | 2,949 | 2,949 | |||||||||||||||
Income before income taxes | 6,388 | 2,050 | 1,547 | (6,364 | ) | 3,621 | ||||||||||||||
Total assets | 426,677 | 53,634 | 70,975 | 71,209 | 622,495 |
F-30
Table of Contents
Predecessor | ||||||||||||||||||||
Property | ||||||||||||||||||||
& | ||||||||||||||||||||
Casualty | Specialty | Group | ||||||||||||||||||
Brokerage | Underwriting | Benefits | Other | Total | ||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
For the period ended October 27, 2005 | ||||||||||||||||||||
Total revenues | $ | 81,321 | $ | 14,062 | $ | 16,091 | $ | 167 | $ | 111,641 | ||||||||||
Interest income | 756 | 171 | 217 | 108 | 1,252 | |||||||||||||||
Amortization | — | — | — | 5,716 | 5,716 | |||||||||||||||
Depreciation | — | — | — | 1,855 | 1,855 | |||||||||||||||
Interest expense | — | — | — | 8,516 | 8,516 | |||||||||||||||
Income before income taxes | 20,313 | 1,815 | 6,171 | (28,387 | ) | (88 | ) | |||||||||||||
As of and for the year December 31, 2004 | ||||||||||||||||||||
Total revenues | $ | 48,476 | $ | 19,716 | $ | 15,890 | $ | 522 | $ | 84,604 | ||||||||||
Interest income | 290 | 170 | 118 | 2 | 580 | |||||||||||||||
Amortization | — | — | — | 3,873 | 3,873 | |||||||||||||||
Depreciation | — | — | — | 1,475 | 1,475 | |||||||||||||||
Interest expense | — | — | — | 2,498 | 2,498 | |||||||||||||||
Income before income taxes | 10,491 | 4,762 | 5,624 | (14,224 | ) | 6,653 | ||||||||||||||
Total assets | 265,511 | 63,493 | 19,566 | (81,385 | ) | 267,185 | ||||||||||||||
For the year ended December 31, 2003 | ||||||||||||||||||||
Total revenues | $ | 28,504 | $ | 17,905 | $ | 11,379 | $ | 396 | $ | 58,184 | ||||||||||
Interest income | 292 | 164 | 115 | — | 571 | |||||||||||||||
Amortization | — | — | — | 2,068 | 2,068 | |||||||||||||||
Depreciation | — | — | — | 1,256 | 1,256 | |||||||||||||||
Interest expense | — | — | — | 288 | 288 | |||||||||||||||
Income before income taxes | 3,730 | 4,709 | 3,153 | (8,035 | ) | 3,557 |
14. | Subsequent Event |
F-31
Table of Contents
F-32
Table of Contents
F-33
Table of Contents
(An operating division of Willis North America Inc.,
an ultimate wholly owned subsidiary of Willis Group Holdings Ltd.)
Combined Balance Sheets
April 13, 2005, December 31, 2004 and 2003
2005 | 2004 | 2003 | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 750,406 | $ | 42,984,354 | $ | 41,138,907 | ||||||
Premium cash | 23,053,729 | 31,959,819 | 40,798,829 | |||||||||
Premiums receivable, net | 69,926,846 | 67,033,255 | 86,918,799 | |||||||||
Other current assets | 1,340,339 | 548,869 | 738,357 | |||||||||
Deferred tax asset | 965,632 | 744,967 | 688,312 | |||||||||
Total current assets | 96,036,952 | 143,271,264 | 170,283,204 | |||||||||
Property and equipment, net | 1,376,811 | 1,423,722 | 1,609,567 | |||||||||
Deferred tax asset | 387,701 | 1,118,105 | 1,444,696 | |||||||||
Other noncurrent assets | 101,813 | 1,115,127 | 993,914 | |||||||||
Total assets | $ | 97,903,277 | $ | 146,928,218 | $ | 174,331,381 | ||||||
Liabilities and Shareholder’s Equity | ||||||||||||
Current liabilities | ||||||||||||
Premiums payable | 78,547,951 | 79,056,603 | 106,845,014 | |||||||||
Accounts payable and accrued expenses | 9,379,130 | 16,815,457 | 24,925,913 | |||||||||
Cash overdraft | 4,914,505 | 6,838,521 | 6,092,232 | |||||||||
Income tax payable | 501,536 | 4,721,366 | 2,202,197 | |||||||||
Due to affiliate nontrade | — | 6,300,946 | 6,473,732 | |||||||||
Total current liabilities | 93,343,122 | 113,732,893 | 146,539,088 | |||||||||
Other liabilities | — | 2,019,541 | 2,025,570 | |||||||||
Total liabilities | 93,343,122 | 115,752,434 | 148,564,658 | |||||||||
Shareholder’s equity | ||||||||||||
Additional paid-in capital | 18,532,203 | 17,614,650 | 17,614,650 | |||||||||
Retained earnings (deficit) | (13,972,048 | ) | 13,561,134 | 8,152,073 | ||||||||
Total shareholder’s equity | 4,560,155 | 31,175,784 | 25,766,723 | |||||||||
Total liabilities and shareholder’s equity | $ | 97,903,277 | $ | 146,928,218 | $ | 174,331,381 | ||||||
F-34
Table of Contents
(An operating division of Willis North America Inc.,
an ultimate wholly owned subsidiary of Willis Group Holdings Ltd.)
Combined Statements of Income
Period Ended April 13, 2005 and Years Ended December 31, 2004 and 2003
2005 | 2004 | 2003 | ||||||||||
Revenues | ||||||||||||
Commissions and fees | $ | 13,313,686 | $ | 66,119,217 | $ | 67,878,042 | ||||||
Other income | 503,708 | 11,034,106 | 2,814,054 | |||||||||
Total revenues | 13,817,394 | 77,153,323 | 70,692,096 | |||||||||
Expenses | ||||||||||||
Employee compensation and benefits | 8,606,157 | 33,017,778 | 34,625,090 | |||||||||
Business development | 708,182 | 2,601,443 | 2,787,103 | |||||||||
General and administrative | 2,730,112 | 7,773,937 | 7,050,455 | |||||||||
Depreciation and amortization | 100,043 | 456,145 | 514,322 | |||||||||
Total expenses | 12,144,494 | 43,849,303 | 44,976,970 | |||||||||
Income from operations | 1,672,900 | 33,304,020 | 25,715,126 | |||||||||
Interest expense | 41,463 | 165,852 | 165,852 | |||||||||
Management fee to Willis | 1,034,216 | 5,123,067 | 5,312,078 | |||||||||
Income before income taxes | 597,221 | 28,015,101 | 20,237,196 | |||||||||
Income tax expense | 204,455 | 11,609,211 | 8,854,377 | |||||||||
Net income | $ | 392,766 | $ | 16,405,890 | $ | 11,382,819 | ||||||
F-35
Table of Contents
(An operating division of Willis North America Inc.,
an ultimate wholly owned subsidiary of Willis Group Holdings Ltd.)
Combined Statements of Shareholder’s Equity
Period Ended April 13, 2005 and Years Ended December 31, 2004 and 2003
Additional | Retained | Total | ||||||||||
Paid-In | Earnings | Shareholder’s | ||||||||||
Capital | (Deficit) | Equity | ||||||||||
Balances, December 31, 2002 | $ | 17,614,650 | $ | (1,017,091 | ) | $ | 16,597,559 | |||||
Net income | — | 11,382,819 | 11,382,819 | |||||||||
Distribution of capital | — | (331,183 | ) | (331,183 | ) | |||||||
Dividends | — | (1,882,472 | ) | (1,882,472 | ) | |||||||
Balances, December 31, 2003 | 17,614,650 | 8,152,073 | 25,766,723 | |||||||||
Net income | — | 16,405,890 | 16,405,890 | |||||||||
Distribution of capital | — | (289,754 | ) | (289,754 | ) | |||||||
Dividends | — | (10,707,075 | ) | (10,707,075 | ) | |||||||
Balances, December 31, 2004 | 17,614,650 | 13,561,134 | 31,175,784 | |||||||||
Net income | 392,766 | 392,766 | ||||||||||
Contribution (distribution) of capital | 917,553 | (547,157 | ) | 370,396 | ||||||||
Dividends | — | (27,378,791 | ) | (27,378,791 | ) | |||||||
Balances, April 13, 2005 | $ | 18,532,203 | $ | (13,972,048 | ) | $ | 4,560,155 | |||||
F-36
Table of Contents
2005 | 2004 | 2003 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 392,766 | $ | 16,405,890 | $ | 11,382,819 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation and amortization | 90,551 | 421,899 | 476,424 | |||||||||
Gain on sale of property and equipment | — | — | (125,213 | ) | ||||||||
Deferred tax asset | 509,737 | 269,938 | 308,533 | |||||||||
Changes in operating assets and liabilities | ||||||||||||
Premium cash | 8,906,090 | 8,839,010 | (1,747,135 | ) | ||||||||
Premiums receivable | (2,893,591 | ) | 19,885,544 | (4,914,538 | ) | |||||||
Prepaid expenses and other current assets | (791,468 | ) | 189,488 | 769,181 | ||||||||
Other assets | 1,013,314 | (121,213 | ) | (233,089 | ) | |||||||
Premiums payable | (508,652 | ) | (27,788,411 | ) | 10,319,726 | |||||||
Accounts payable and accrued expenses | (7,436,327 | ) | (8,110,456 | ) | (126,148 | ) | ||||||
Income tax payable | (4,219,830 | ) | 2,519,169 | 201,869 | ||||||||
Due to affiliate non trade | (6,300,946 | ) | (172,786 | ) | (3,371,310 | ) | ||||||
Other liabilities | (2,019,541 | ) | (6,029 | ) | 143,388 | |||||||
Net cash (used in) provided by operating activities | (13,257,897 | ) | 12,332,043 | 13,084,507 | ||||||||
Cash flows from investing activities | ||||||||||||
Proceeds from sale of property and equipment | — | — | 226,131 | |||||||||
Purchases of property and equipment | (43,640 | ) | (236,056 | ) | (589,444 | ) | ||||||
Net cash used in investing activities | (43,640 | ) | (236,056 | ) | (363,313 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Cash overdraft | (1,924,016 | ) | 746,289 | 918,744 | ||||||||
Contribution (distribution) of capital | 370,396 | (289,754 | ) | (331,183 | ) | |||||||
Payment of cash dividends | (27,378,791 | ) | (10,707,075 | ) | (1,882,472 | ) | ||||||
Net cash used in financing activities | (28,932,411 | ) | (10,250,540 | ) | (1,294,911 | ) | ||||||
Net (decrease) increase in cash and cash equivalents | (42,233,948 | ) | 1,845,447 | 11,426,283 | ||||||||
Cash and cash equivalents | ||||||||||||
Beginning of year | 42,984,354 | 41,138,907 | 29,712,624 | |||||||||
End of year | $ | 750,406 | $ | 42,984,354 | $ | 41,138,907 | ||||||
F-37
Table of Contents
(An operating division of Willis North America Inc.,
an ultimate wholly owned subsidiary of Willis Group Holdings Ltd.)
NOTES TO COMBINED FINANCIAL STATEMENTS
April 13, 2005, December 31, 2004 and 2003
1. | Summary of Significant Accounting Policies |
F-38
Table of Contents
F-39
Table of Contents
2. | Property and Equipment |
April 13, | December 31, | |||||||||||
2005 | 2004 | 2003 | ||||||||||
Equipment | $ | 1,684,040 | $ | 3,846,666 | $ | 3,804,633 | ||||||
Furniture and fixtures | 3,326,740 | 3,283,537 | 3,089,516 | |||||||||
5,010,780 | 7,130,203 | 6,894,149 | ||||||||||
Less: Accumulated depreciation | (3,633,969 | ) | (5,706,481 | ) | (5,284,582 | ) | ||||||
$ | 1,376,811 | $ | 1,423,722 | $ | 1,609,567 | |||||||
3. | Transactions With Related Parties |
F-40
Table of Contents
4. | Income Taxes |
5. | Employee Benefit Plan |
6. | Commitments and Contingencies |
F-41
Table of Contents
2005 | $ | 972,818 | ||
2006 | 1,187,849 | |||
2007 | 1,055,524 | |||
2008 | 808,257 | |||
2009 | 780,650 | |||
Thereafter | 1,711,707 | |||
$ | 6,516,805 | |||
7. | Subsequent Events |
F-42
Table of Contents
F-43
Table of Contents
December 31, | ||||||||
2005 | 2004 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 787,666 | $ | 872,063 | ||||
Accounts receivable | 386,193 | 135,453 | ||||||
Prepaid expenses | 261,721 | 190,807 | ||||||
Total current assets | 1,435,580 | 1,198,323 | ||||||
Software, equipment and fixtures | ||||||||
Office equipment | 937,018 | 833,623 | ||||||
Computer software and licenses | 748,796 | 746,732 | ||||||
Office furniture and fixtures | 638,073 | 586,487 | ||||||
Leasehold improvements | 301,638 | 263,783 | ||||||
Internally developed software | 1,327,694 | 1,082,311 | ||||||
3,953,219 | 3,512,936 | |||||||
Accumulated depreciation and amortization | (3,245,525 | ) | (2,719,543 | ) | ||||
Software, equipment and fixtures, net | 707,694 | 793,393 | ||||||
Other assets | ||||||||
Purchased contracts | 669,996 | 136,454 | ||||||
Deposits | 73,241 | 27,500 | ||||||
Goodwill | 62,889 | — | ||||||
Note receivables | 39,503 | 75,097 | ||||||
Deferred financing costs, net | 23,958 | 94,080 | ||||||
869,587 | 333,131 | |||||||
$ | 3,012,861 | $ | 2,324,847 | |||||
Liabilities, Redeemable Equity and Shareholders’ Deficit | ||||||||
Current liabilities | ||||||||
Accrued liabilities | $ | 480,897 | $ | 590,708 | ||||
Accounts payable | 1,524,847 | 326,155 | ||||||
Unearned revenue | 150,511 | 79,829 | ||||||
Current portion of notes payable | 200,846 | 9,762 | ||||||
Other current liabilities | 64,552 | 49,208 | ||||||
Total current liabilities | 2,421,653 | 1,055,662 | ||||||
Note payable, less current portion | 407,642 | — | ||||||
Subordinated debentures, net of discount | — | 4,534,033 | ||||||
Notes payable to shareholders, net of current portion | 73,204 | 73,204 | ||||||
Total liabilities | 2,902,499 | 5,662,899 | ||||||
Commitment and contingencies | ||||||||
Redeemable equity | ||||||||
Series A redeemable convertible preferred stock, par value of $0.01 per share; authorized 100,000,000 shares; 5,611 and 5,184 shares issued and outstanding | 5,588,628 | 5,091,126 | ||||||
Series B redeemable convertible preferred stock, par value of $0.01 per share; authorized 100,000,000 shares; 5,306 shares issued and outstanding | 4,840,073 | — | ||||||
Put warrants issued and outstanding | 1,608,676 | 1,608,676 | ||||||
Total redeemable equity | 12,037,377 | 6,699,802 | ||||||
Shareholders’ deficit | ||||||||
Common stock, no par value; authorized shares 20,000,000; 4,950,083 shares issued and 4,232,561 outstanding | — | — | ||||||
Additional paid in capital | 73,929 | 73,929 | ||||||
Treasury stock; 717,522 shares of common stock at cost | (90,000 | ) | (90,000 | ) | ||||
Accumulated deficit | (11,910,944 | ) | (10,021,783 | ) | ||||
Total shareholders’ deficit | (11,927,015 | ) | (10,037,854 | ) | ||||
$ | 3,012,861 | $ | 2,324,847 | |||||
F-44
Table of Contents
Years ended December 31, | ||||||||
2005 | 2004 | |||||||
Revenue | $ | 12,852,856 | $ | 10,429,374 | ||||
Cost of revenue | 11,404,856 | 8,001,224 | ||||||
Gross margin | 1,448,000 | 2,428,150 | ||||||
Operating expenses | ||||||||
General and administrative | 1,468,668 | 1,355,618 | ||||||
Depreciation and amortization | 224,716 | 121,998 | ||||||
Sales and marketing | 569,375 | 381,468 | ||||||
Total operating expenses | 2,262,759 | 1,859,084 | ||||||
Income (loss) from operations | (814,759 | ) | 569,066 | |||||
Other expenses | ||||||||
Interest expense | (244,955 | ) | (1,055,579 | ) | ||||
Other | (25,905 | ) | (27,959 | ) | ||||
Total other expenses | (270,860 | ) | (1,083,538 | ) | ||||
Net loss | $ | (1,085,619 | ) | $ | (514,472 | ) | ||
F-45
Table of Contents
Common | Additional | Total | ||||||||||||||||||||||
Stock | Treasury Stock | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||
Shares | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||||
Balanceat December 31, 2003 | 3,196,991 | 717,522 | $ | (90,000 | ) | $ | 73,929 | $ | (9,032,899 | ) | $ | (9,048,970 | ) | |||||||||||
Net loss | — | — | — | — | (514,472 | ) | (514,472 | ) | ||||||||||||||||
Issuance of restricted common stock | 1,753,092 | — | — | 70,124 | — | 70,124 | ||||||||||||||||||
Shareholders’ receivable on restricted stock issuance | — | — | — | (70,124 | ) | — | (70,124 | ) | ||||||||||||||||
Accretion of preferred stock redemption right | — | — | — | — | (70,122 | ) | (70,122 | ) | ||||||||||||||||
PIK issuance for preferred stock dividend | — | — | — | — | (404,290 | ) | (404,290 | ) | ||||||||||||||||
Balanceat December 31, 2004 | 4,950,083 | 717,522 | (90,000 | ) | 73,929 | (10,021,783 | ) | (10,037,854 | ) | |||||||||||||||
Net loss | — | — | — | — | (1,085,619 | ) | (1,085,619 | ) | ||||||||||||||||
Accretion of preferred stock redemption right | — | — | — | — | (70,122 | ) | (70,122 | ) | ||||||||||||||||
PIK issuance for preferred stock dividend | — | — | — | — | (733,420 | ) | (733,420 | ) | ||||||||||||||||
Balanceat December 31, 2005 | 4,950,083 | 717,522 | $ | (90,000 | ) | $ | 73,929 | $ | (11,910,944 | ) | $ | (11,927,015 | ) | |||||||||||
F-46
Table of Contents
Years ended December 31, | ||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,085,619 | ) | $ | (514,472 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 734,492 | 698,309 | ||||||
Non-cash interest expense | 70,122 | 414,032 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (250,741 | ) | (100,879 | ) | ||||
Other assets | (649,833 | ) | 1,034 | |||||
Prepaid expenses | (70,914 | ) | 13,210 | |||||
Accounts payable | 1,198,692 | 111,312 | ||||||
Accrued liabilities and other current liabilities | (111,785 | ) | (187,144 | ) | ||||
Net cash (used in) provided by operating activities | (165,586 | ) | 435,402 | |||||
Cash flows from investing activities: | ||||||||
Purchase of software, equipment, and fixtures | (440,284 | ) | (313,119 | ) | ||||
Net cash used in investing activities | (440,284 | ) | (313,119 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from note payable | 495,645 | — | ||||||
Reduction of other assets | 35,591 | — | ||||||
Payments on notes payable to shareholders | (9,763 | ) | (27,380 | ) | ||||
Net cash provided by (used in) financing activities | 521,473 | (27,380 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (84,397 | ) | 94,903 | |||||
Cash and cash equivalents, beginning of year | 872,063 | 777,160 | ||||||
Cash and cash equivalents, end of year | $ | 787,666 | $ | 872,063 | ||||
F-47
Table of Contents
1. | Organization and Nature of Business |
2. | Summary of Significant Accounting Policies |
F-48
Table of Contents
3. | Service Contracts |
F-49
Table of Contents
4. | Stock Options |
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding at beginning of year | 15,600 | $ | 1.05 | 19,600 | $ | 1.05 | ||||||||||
Granted | — | — | 1,753,092 | .04 | ||||||||||||
Exercised | — | — | (1,753,092 | ) | .04 | |||||||||||
Canceled | (15,600 | ) | 1.05 | (4,000 | ) | 1.05 | ||||||||||
Outstanding at end of year | — | 1.05 | 15,600 | 1.05 | ||||||||||||
Options exercisable at year end | — | $ | 1.05 | 15,600 | $ | 1.05 | ||||||||||
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5. | Related Party Transactions |
6. | Income Taxes |
December 31, | ||||||||
2005 | 2004 | |||||||
Net deferred tax assets (primarily net operating losses) | $ | 2,987,531 | $ | 2,717,000 | ||||
Valuation allowance | (2,987,531 | ) | (2,717,000 | ) | ||||
Net deferred tax balance | $ | — | $ | — | ||||
7. | Shareholders’ Equity (Deficit), Subordinated Debentures and Note Payable |
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Number of Shares | ||||
Options | — | |||
Warrants | 5,746,865 | |||
Preferred Stock | 11,029,787 | |||
16,776,652 | ||||
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Series A | Series B | |||||||||||||||
Redeemable Convertible | Redeemable Convertible | |||||||||||||||
Preferred Stock | Preferred Stock | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Balance at December 31, 2003 | 4,000 | $ | 4,616,714 | — | — | |||||||||||
Accretion of preferred stock redemption right | — | 70,122 | — | — | ||||||||||||
PIK issuance of preferred stock dividend | 1,184 | 404,290 | — | — | ||||||||||||
Balance at December 31, 2004 | 5,184 | 5,091,126 | — | — | ||||||||||||
Conversion of subordinated debt to Series B Preferred Stock | — | — | 5,000 | 4,534,033 | ||||||||||||
Accretion of preferred stock redemption right | — | 70,122 | — | — | ||||||||||||
PIK issuance of preferred stock dividend | 427 | 427,380 | 306 | 306,040 | ||||||||||||
Balance at December 31, 2005 | 5,611 | 5,588,628 | 5,306 | 4,840,073 | ||||||||||||
8. | Retirement Savings Plan |
9. | Commitments and Contingencies |
December 31, | Amount | |||
2006 | $ | 622,638 | ||
2007 | 610,887 | |||
2008 | 587,944 | |||
2009 | 15,942 | |||
$ | 1,837,411 | |||
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10. | Supplemental Cash Flow Information |
December 31, | ||||||||
2005 | 2004 | |||||||
Cash paid for interest | $ | 176,820 | $ | 989,701 | ||||
Non-cash activity: | ||||||||
Issuance of restricted common stock for note receivable | — | 70,124 | ||||||
Acquisition of service contracts for debt | 419,754 | — |
11. | Subsequent Event |
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BALANCE SHEET
November 30, 2004
November 30, | ||||
2004 | ||||
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 3,424,983 | ||
Premium cash | 2,179,691 | |||
Premiums receivable, net | 3,031,807 | |||
Total current assets | 8,636,481 | |||
Equipment and furniture, net | 79,247 | |||
Other assets | 39,811 | |||
Total assets | $ | 8,755,539 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
Current liabilities | ||||
Premiums payable | $ | 5,096,980 | ||
Accrued expenses | 2,402,437 | |||
Total liabilities | 7,499,417 | |||
Common stock, 100,000 shares authorized at $1 per share, 40,000 issued and outstanding | 1,000 | |||
Additional paid-in capital | 39,000 | |||
Retained earnings | 1,216,122 | |||
Total shareholders’ equity | 1,256,122 | |||
Total liabilities and shareholders’ equity | $ | 8,755,539 | ||
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For the Eleven | ||||
Months Ended | ||||
November 30, 2004 | ||||
Revenues | ||||
Commission and fees | $ | 5,357,581 | ||
Other Income | 542,422 | |||
5,900,003 | ||||
Operating expenses | ||||
Salaries and benefits | 2,654,429 | |||
General and administrative | 1,411,082 | |||
Depreciation and amortization | 76,856 | |||
Total operating expenses | 4,142,367 | |||
Net income | $ | 1,757,636 | ||
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Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Retained | Shareholders’ | |||||||||||||||||
Shares | Par Value | Capital | Earnings | Equity | ||||||||||||||||
Balance, January 1, 2004 | 1,000 | $ | 1,000 | $ | 39,000 | $ | 981,781 | $ | 1,021,781 | |||||||||||
Net income | 1,757,636 | 1,757,636 | ||||||||||||||||||
Dividends | (1,523,295 | ) | (1,523,295 | ) | ||||||||||||||||
Balance, November 30, 2004 | 1,000 | $ | 1,000 | $ | 39,000 | $ | 1,216,122 | $ | 1,256,122 | |||||||||||
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STATEMENT OF CASH FLOWS
For the Eleven Months Ended November 30, 2004
For the Eleven | ||||
Months Ended | ||||
November 30, | ||||
2004 | ||||
Cash flows from operating activities | ||||
Net income | $ | 1,757,636 | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Depreciation and amortization | 76,856 | |||
Changes in operating assets and liabilities: | ||||
Premiums receivable | 2,013,705 | |||
Premium cash | (86,805 | ) | ||
Premiums payable | (2,152,276 | ) | ||
Accrued expenses | 1,906,164 | |||
Net cash provided by operating activities | 3,515,280 | |||
Cash flows from investing activities | ||||
Purchases of property and equipment | (24,912 | ) | ||
Net cash used in investing activities | (24,912 | ) | ||
Cash flows from financing activities | ||||
Dividends | (1,523,295 | ) | ||
Net cash used in financing activities | (1,523,295 | ) | ||
Net change in cash and cash equivalents | 1,967,073 | |||
Cash and cash equivalents and premium cash | ||||
Beginning of year | 1,457,910 | |||
End of year | $ | 3,424,983 | ||
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NOTES TO FINANCIAL STATEMENTS
November 30, 2004
1. | Summary of Significant Accounting Policies |
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2. | Property and Equipment |
November 30, | ||||
2004 | ||||
Equipment | $ | 126,020 | ||
Furniture | 169,838 | |||
Computers | 95,380 | |||
Leasehold improvements | 92,774 | |||
Less: Accumulated depreciation | (404,764 | ) | ||
Total equipment and furniture, net | $ | 79,247 | ||
3. | Employee Benefit Plan |
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4. | Commitments and Contingencies |
Year Ending | Amount | |||
2005 | $ | 258,518 | ||
2006 | 267,566 | |||
2007 | 276,931 | |||
2008 | 286,623 | |||
2009 | 296,655 | |||
Thereafter | 624,822 | |||
Total future minimum lease payments | $ | 2,011,115 | ||
5. | Transactions With Related Parties |
6. | Subsequent Events |
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September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
(In thousands of dollars, | ||||||||
except share data) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 22,473 | $ | 19,151 | ||||
Premium cash | 113,195 | 88,047 | ||||||
Premiums receivable, net | 164,848 | 199,406 | ||||||
Prepaid expenses and other current assets | 16,416 | 10,640 | ||||||
Deferred tax asset | 4,059 | 3,812 | ||||||
Total current assets | 320,991 | 321,056 | ||||||
Fixed assets, net | 9,598 | 7,607 | ||||||
Goodwill | 251,975 | 243,409 | ||||||
Other identifiable intangible assets, net | 40,805 | 42,292 | ||||||
Deferred tax asset | 2,701 | 4,223 | ||||||
Other noncurrent assets | 4,066 | 3,908 | ||||||
Total assets | $ | 630,136 | $ | 622,495 | ||||
Liabilities and Stockholder’s Equity | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt | $ | 1,380 | $ | 1,836 | ||||
Premiums payable | 260,658 | 267,467 | ||||||
Accounts payable and accrued expenses | 40,448 | 36,965 | ||||||
Total current liabilities | 302,486 | 306,268 | ||||||
Long-term debt | 168,993 | 169,463 | ||||||
Other | 3,022 | 2,683 | ||||||
Total liabilities | 474,501 | 478,414 | ||||||
Stockholder’s equity | ||||||||
Common stock, $.01 par value; 15,000,000 authorized, 11,864,858 and 11,295,172 issued and outstanding | 118 | 113 | ||||||
Additional paid-in capital (net of receivables from issuance of stock of $3,662) | 147,140 | 141,850 | ||||||
Accumulated other comprehensive income | 308 | — | ||||||
Retained earnings | 8,069 | 2,118 | ||||||
Total stockholder’s equity | 155,635 | 144,081 | ||||||
Total liabilities and stockholder’s equity | $ | 630,136 | $ | 622,495 | ||||
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Successor | Predecessor | ||||||||
Nine Months | Nine Months | ||||||||
Ended | Ended | ||||||||
September 30, | September 30, | ||||||||
2006 | 2005 | ||||||||
(In thousands of dollars, except share and per share data) | |||||||||
Revenues | |||||||||
Commissions and fees | $ | 130,894 | $ | 97,815 | |||||
Other income | 5,322 | 778 | |||||||
Total revenues | 136,216 | 98,593 | |||||||
Expenses | |||||||||
Employee compensation and benefits (including non-cash equity compensation of $729 for nine months ended September 30, 2006) | 80,684 | 59,527 | |||||||
Other operating expense | 25,297 | 17,206 | |||||||
Depreciation | 2,581 | 1,603 | |||||||
Amortization | 3,587 | 5,092 | |||||||
Total operating expenses | 112,149 | 83,428 | |||||||
Operating income | 24,067 | 15,165 | |||||||
Interest expense | 12,811 | 7,423 | |||||||
Loss on extinguishment of debt | — | 1,731 | |||||||
Income before income taxes | 11,256 | 6,011 | |||||||
Income tax expense | 5,305 | 2,685 | |||||||
Net income | $ | 5,951 | $ | 3,326 | |||||
Earnings per common share | |||||||||
Basic | $ | .52 | $ | .27 | |||||
Diluted | $ | .52 | $ | .27 | |||||
Weighted average number of shares outstanding | |||||||||
Basic | 11,512,114 | 12,463,780 | |||||||
Diluted | 11,512,114 | 12,514,716 |
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(Accumulated | Accumulated | |||||||||||||||||||||||
Common Stock | Additional | Deficit) | Other | Total | ||||||||||||||||||||
Par | Paid-in | Retained | Comprehensive | Stockholder’s | ||||||||||||||||||||
Shares | Value | Capital | Earnings | Income | Equity | |||||||||||||||||||
(In thousands of dollars, except share data) | ||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||
Balances, December 31, 2004 | 12,394,914 | $ | 124 | $ | 98,805 | $ | (19,249 | ) | $ | — | $ | 79,680 | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | — | 3,326 | — | 3,326 | ||||||||||||||||||
Total comprehensive income | 3,326 | |||||||||||||||||||||||
Issuance of common stock for contingent consideration on prior acquisitions | 41,019 | — | 496 | — | — | 496 | ||||||||||||||||||
Balances, September 30, 2005 | 12,435,933 | $ | 124 | $ | 99,301 | $ | (15,923 | ) | $ | — | $ | 83,502 | ||||||||||||
Successor | ||||||||||||||||||||||||
Balances, December 31, 2005 | 11,295,172 | $ | 113 | $ | 141,850 | $ | 2,118 | $ | — | $ | 144,081 | |||||||||||||
Comprehensive income, net of income taxes: | ||||||||||||||||||||||||
Net income | — | — | — | 5,951 | — | 5,951 | ||||||||||||||||||
Net gain on cash-flow hedging derivative | — | — | — | — | 308 | 308 | ||||||||||||||||||
Total comprehensive income | 6,259 | |||||||||||||||||||||||
Issuance of common stock for internal purchase program, net of related receivables of $3,662 | 386,737 | 4 | 2,330 | — | — | 2,334 | ||||||||||||||||||
Issuance of common stock for contingent consideration on prior acquisitions | 14,988 | — | 232 | — | — | 232 | ||||||||||||||||||
Issuance of common stock for acquisition | 129,032 | 1 | 1,999 | — | — | 2,000 | ||||||||||||||||||
Issuance of restricted stock | 38,929 | — | — | — | — | — | ||||||||||||||||||
Amortization of restricted stock expense | — | — | 86 | — | — | 86 | ||||||||||||||||||
Equity-based compensation | — | — | 643 | — | — | 643 | ||||||||||||||||||
Balances, September 30, 2006 | 11,864,858 | $ | 118 | $ | 147,140 | $ | 8,069 | $ | 308 | $ | 155,635 | |||||||||||||
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Successor | Predecessor | ||||||||
Nine Months | Nine Months | ||||||||
Ended | Ended | ||||||||
September 30, | September 30, | ||||||||
2006 | 2005 | ||||||||
(In thousands of dollars) | |||||||||
Cash flows from operating activities | |||||||||
Net income | $ | 5,951 | $ | 3,326 | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||
Depreciation and amortization | 6,168 | 6,695 | |||||||
Loss on disposal of equipment | 56 | 7 | |||||||
Equity based compensation expense | 729 | — | |||||||
Loss on extinguishment of debt | — | 1,731 | |||||||
Deferred income taxes | 1,089 | (30 | ) | ||||||
Changes in operating assets and liabilities | |||||||||
Premium cash | (20,539 | ) | (23,223 | ) | |||||
Premiums receivable, net | 34,558 | 9,375 | |||||||
Prepaid expenses and other current assets | (5,142 | ) | (2,032 | ) | |||||
Other assets | 399 | 1,293 | |||||||
Premiums payable | (11,444 | ) | 12,518 | ||||||
Accounts payable and accrued expenses | 76 | 3,901 | |||||||
Other liabilities | (58 | ) | (177 | ) | |||||
Net cash provided by operating activities | 11,843 | 13,384 | |||||||
Cash flows from investing activities | |||||||||
Cash paid for acquisition of businesses, net of cash acquired of $540 and $493 | (6,217 | ) | (103,413 | ) | |||||
Purchases of property and equipment | (3,222 | ) | (1,945 | ) | |||||
Net cash used in investing activities | (9,439 | ) | (105,358 | ) | |||||
Cash flows from financing activities | |||||||||
Issuance of common stock | 2,426 | — | |||||||
Equity issuance costs | (93 | ) | — | ||||||
Debt issuance costs | — | (111 | ) | ||||||
Proceeds from long-term debt | 6,028 | 144,726 | |||||||
Repayments on long-term debt | (7,443 | ) | (37,572 | ) | |||||
Net cash provided by financing activities | 918 | 107,043 | |||||||
Net increase in cash and cash equivalents | 3,322 | 15,069 | |||||||
Cash and cash equivalents | |||||||||
Beginning of period | 19,151 | 10,055 | |||||||
End of period | $ | 22,473 | $ | 25,124 | |||||
Supplemental disclosures of cash flow information | |||||||||
Cash paid for income taxes | $ | 2,579 | $ | 826 | |||||
Cash paid for interest | 11,911 | 4,652 |
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F-67
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Weighted Average | ||||||||||||||||
Grants Made During the | Number of | Weighted Average | Fair Value of | Weighted Average | ||||||||||||
Nine Months Ended September 30, 2006 | Options Granted | Exercise Price | Common Stock | Intrinsic Value | ||||||||||||
April 17, 2006 | 76,600 | $ | 15.50 | $ | 15.50 | $ | — | |||||||||
September 11, 2006 | 97,500 | $ | 17.50 | $ | 17.50 | $ | — | |||||||||
September 29, 2006 | 40,000 | $ | 17.50 | $ | 17.50 | $ | — |
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Successor | Predecessor | ||||||||||||||||
Nine Months | Nine Months | ||||||||||||||||
Ended September 30, 2006 | Ended September 30, 2005 | ||||||||||||||||
Diluted | Basic | Diluted | Basic | ||||||||||||||
(In thousands of dollars, except share and per share data) | |||||||||||||||||
Net income | $ | 5,951 | $ | 5,951 | $ | 3,326 | $ | 3,326 | |||||||||
Average equivalent shares | |||||||||||||||||
Shares outstanding | 11,512,114 | 11,512,114 | 12,463,780 | 12,463,780 | |||||||||||||
Effect of dilutive securities | |||||||||||||||||
Options to purchase common stock | — | — | 50,936 | — | |||||||||||||
Total average equivalent shares | 11,512,114 | 11,512,114 | 12,514,716 | 12,463,780 | |||||||||||||
Per share amounts | |||||||||||||||||
Net earnings per share | $ | .52 | $ | .52 | $ | .27 | $ | .27 | |||||||||
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(In thousands of dollars) | ||||
Net assets acquired | ||||
Cash | $ | 540 | ||
Prepaid expenses and other | 812 | |||
Property and equipment | 791 | |||
Other assets | 64 | |||
Goodwill | 4,770 | |||
Intangible assets | 1,201 | |||
Premiums payable | (27 | ) | ||
Accounts payable and accrued expenses | (2,841 | ) | ||
Other non-current liabilities | (545 | ) | ||
4,765 | ||||
Common units issued for acquisitions | (2,000 | ) | ||
Cash acquired | (540 | ) | ||
Net cash paid for acquisition | $ | 2,225 | ||
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(In thousands of dollars) | ||||
Net assets acquired | ||||
Premium cash | 4,608 | |||
Property and equipment | 300 | |||
Goodwill | 3,576 | |||
Intangible assets | 900 | |||
Premiums payable | (4,608 | ) | ||
Accounts payable and accrued expenses | (1,317 | ) | ||
Net cash paid for acquisition | $ | 3,459 | ||
(In thousands of dollars) | ||||
Balance as of December 31, 2005 | $ | 243,409 | ||
Goodwill of acquired businesses | 8,566 | |||
Balance as of September 30, 2006 | $ | 251,975 | ||
September 30, 2006 | December 31, 2005 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Customer relationships | $ | 40,999 | $ | (3,737 | ) | $ | 38,983 | $ | (549 | ) | ||||||
Noncompete agreements | 4,030 | (487 | ) | 3,946 | (88 | ) | ||||||||||
$ | 45,029 | $ | (4,224 | ) | $ | 42,929 | $ | (637 | ) | |||||||
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September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands of dollars) | ||||||||
Term note | $ | 169,770 | $ | 170,693 | ||||
Other | 603 | 606 | ||||||
170,373 | 171,299 | |||||||
Less: Current portion | (1,380 | ) | (1,836 | ) | ||||
$ | 168,993 | $ | 169,463 | |||||
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F-74
Table of Contents
Successor | Predecessor | ||||||||
Nine Months | Nine Months | ||||||||
Ended | Ended | ||||||||
September 30, | September 30, | ||||||||
2006 | 2005 | ||||||||
Dividend yield | 0.0% | 0.0% | |||||||
Risk free interest rate | 4.84% | 4.77% | |||||||
Expected lives | 5.8 - 7.6 years | 6 years | |||||||
Volatility | 29.6% | 29.3% | |||||||
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Successor | Predecessor | ||||||||
Nine Months | Nine Months | ||||||||
Ended | Ended | ||||||||
September 30, | September 30, | ||||||||
2006 | 2005 | ||||||||
(In thousands of dollars, | |||||||||
except share and per share data) | |||||||||
Net income as reported | $ | 5,951 | $ | 3,326 | |||||
Earnings per share | |||||||||
Basic — as reported | 0.52 | 0.27 | |||||||
Diluted — as reported | 0.52 | 0.27 | |||||||
Total stock-based employee compensation cost included in the determination of net income | 729 | — | |||||||
Total stock option expense | 729 | 330 | (a) | ||||||
Pro forma effect | |||||||||
Pro forma net income | 2,996 | ||||||||
Earnings per share | |||||||||
Basic — pro forma | 0.24 | ||||||||
Diluted — pro forma | 0.24 | ||||||||
Shares | |||||||||
Basic | 11,512,114 | 12,463,780 | |||||||
Diluted | 11,512,114 | 12,514,716 |
(a) | As if the Company had applied SFAS No. 123(R) to expense options in all periods. |
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Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Shares | Price | Term (Years) | Value | |||||||||||||
Outstanding at January 1, 2006 | 546,640 | $ | 11.03 | |||||||||||||
Granted | 214,100 | 16.78 | ||||||||||||||
Forfeited | (51,000 | ) | 12.00 | |||||||||||||
Outstanding at September 30, 2006 | 709,740 | $ | 12.69 | 8.21 | $ | 3,411,419 | ||||||||||
Options exercisable at September 30, 2006 | 294,861 | $ | 10.13 | 6.81 | $ | 2,172,004 | ||||||||||
Weighted-average Black-Scholes fair value of options granted during the year | $ | 6.89 | ||||||||||||||
Weighted | ||||||||
Average | ||||||||
Grant | ||||||||
Shares | Price | |||||||
Outstanding at January 1, 2006 | — | $ | — | |||||
Granted | 38,929 | 14.72 | ||||||
Forfeited | — | — | ||||||
Exercised | — | — | ||||||
Outstanding at September 30, 2006 | 38,929 | $ | 14.72 | |||||
Weighted | ||||||||
Average | ||||||||
Grant | ||||||||
Shares | Price | |||||||
Outstanding at January 1, 2006 | — | $ | — | |||||
Granted | 1,375,000 | .01 | ||||||
Forfeited | — | — | ||||||
Exercised | — | — | ||||||
Outstanding at September 30, 2006 | 1,375,000 | $ | .01 | |||||
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10. | Commitments and Contingencies |
(In thousands of dollars) | ||||
October — December 2006 | $ | 1,877 | ||
2007 | 7,589 | |||
2008 | 6,278 | |||
2009 | 4,872 | |||
2010 | 4,340 | |||
Thereafter | 13,600 | |||
$ | 38,556 | |||
October — December 2006 | $ | 268 | ||
2007 | 1,002 | |||
2008 | 760 | |||
2009 | 394 | |||
2010 | 158 | |||
Thereafter | 28 | |||
Total minimum lease payments | 2,610 | |||
Less: Imputed Interest | (213 | ) | ||
Present value of net minimum lease payments | $ | 2,397 | ||
11. | Segment Information |
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As of and for the Nine Months Ended September 30, 2006 | ||||||||||||||||||||
Property | ||||||||||||||||||||
& Casualty | Specialty | Group | ||||||||||||||||||
Brokerage | Underwriting | Benefits | Other | Total | ||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
Total revenues | $ | 98,339 | $ | 11,412 | $ | 26,499 | $ | (34 | ) | $ | 136,216 | |||||||||
Interest income | 2,486 | 245 | 417 | 153 | 3,301 | |||||||||||||||
Amortization | — | — | — | 3,587 | 3,587 | |||||||||||||||
Depreciation | — | — | — | 2,581 | 2,581 | |||||||||||||||
Interest expense | — | — | — | 12,811 | 12,811 | |||||||||||||||
Income before income taxes | 32,471 | 516 | 7,908 | (29,639 | ) | 11,256 | ||||||||||||||
Total assets | 211,927 | 6,445 | 22,603 | 389,161 | 630,136 |
For the Nine Months Ended September 30, 2005 | ||||||||||||||||||||
Property | ||||||||||||||||||||
& Casualty | Specialty | Group | ||||||||||||||||||
Brokerage | Underwriting | Benefits | Other | Total | ||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
Total revenues | $ | 71,180 | $ | 12,688 | $ | 14,596 | $ | 129 | $ | 98,593 | ||||||||||
Interest income | 597 | 152 | 193 | 85 | 1,027 | |||||||||||||||
Amortization | — | — | — | 5,092 | 5,092 | |||||||||||||||
Depreciation | — | — | — | 1,603 | 1,603 | |||||||||||||||
Interest expense | — | — | — | 7,423 | 7,423 | |||||||||||||||
Income before income taxes | 22,269 | 1,570 | 5,559 | (23,387 | ) | 6,011 |
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March 31, | December 31, | |||||||
2006 | 2005 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 207,537 | $ | 787,666 | ||||
Accounts receivable | 385,640 | 386,193 | ||||||
Prepaid expenses | 229,649 | 261,721 | ||||||
Total current assets | 822,826 | 1,435,580 | ||||||
Software, equipment and fixtures | ||||||||
Office equipment | 945,403 | 937,018 | ||||||
Computer software and licenses | 638,073 | 748,796 | ||||||
Office furniture and fixtures | 748,796 | 638,073 | ||||||
Leasehold improvements | 301,638 | 301,638 | ||||||
Internally developed software | 1,369,826 | 1,327,694 | ||||||
4,003,736 | 3,953,219 | |||||||
Accumulated depreciation and amortization | (3,377,009 | ) | (3,245,525 | ) | ||||
Software, equipment and fixtures, net | 626,727 | 707,694 | ||||||
Other assets | ||||||||
Deferred acquisition costs | 588,446 | 669,996 | ||||||
Deposits | 63,741 | 73,241 | ||||||
Goodwill | 62,889 | 62,889 | ||||||
Note receivables | 37,084 | 39,503 | ||||||
Deferred financing costs, net | 6,428 | 23,958 | ||||||
758,588 | 869,587 | |||||||
$ | 2,208,141 | $ | 3,012,861 | |||||
Liabilities, Redeemable Equity and Shareholders’ Deficit | ||||||||
Current liabilities | ||||||||
Accrued liabilities | $ | 346,025 | $ | 480,897 | ||||
Accounts payable | 1,056,336 | 1,524,847 | ||||||
Unearned revenue | 283,945 | 150,511 | ||||||
Current portion of notes payable | 200,845 | 200,846 | ||||||
Other current liabilities | 42,765 | 64,552 | ||||||
Total current liabilities | 1,929,916 | 2,421,653 | ||||||
Note payable, less current portion | 422,914 | 407,642 | ||||||
Notes payable to shareholders, net of current portion | 73,204 | 73,204 | ||||||
Total liabilities | 2,426,034 | 2,902,499 | ||||||
Commitment and contingencies | ||||||||
Redeemable Equity | ||||||||
Series A redeemable convertible preferred stock, par value of $0.01 per share; authorized 100,000,000 shares; 5,723 and 5,611 shares issued and outstanding | 5,718,397 | 5,588,628 | ||||||
Series B redeemable convertible preferred stock, par value of $0.01 per share; authorized 100,000,000 shares; 5,412 and 5,306 shares issued and outstanding | 4,946,194 | 4,840,073 | ||||||
Put warrants issued and outstanding | 1,608,676 | 1,608,676 | ||||||
Total redeemable equity | 12,273,267 | 12,037,377 | ||||||
Shareholders’ deficit | ||||||||
Common stock, no par value; authorized shares 20,000,000; 4,950,083 shares issued and 4,232,561 outstanding | — | — | ||||||
Additional paid in capital | 73,929 | 73,929 | ||||||
Treasury stock; 717,522 shares of common stock at cost | (90,000 | ) | (90,000 | ) | ||||
Accumulated deficit | (12,475,089 | ) | (11,910,944 | ) | ||||
Total shareholders’ deficit | (12,491,160 | ) | (11,927,015 | ) | ||||
$ | 2,208,141 | $ | 3,012,861 | |||||
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(unaudited) | ||||||||
Three months ended March 31, | ||||||||
2006 | 2005 | |||||||
Revenue | $ | 3,541,774 | $ | 2,534,729 | ||||
Cost of revenue | 3,181,674 | 1,891,129 | ||||||
Gross margin | 360,100 | 643,600 | ||||||
Operating expenses | ||||||||
General and administrative | 410,299 | 384,516 | ||||||
Depreciation and amortization | 85,238 | 63,682 | ||||||
Sales and marketing | 159,085 | 136,119 | ||||||
Total operating expenses | 654,622 | 584,317 | ||||||
Income (loss) from operations | (294,522 | ) | 59,283 | |||||
Other expenses | ||||||||
Interest expense | (33,733 | ) | (159,625 | ) | ||||
Net loss | $ | (328,255 | ) | $ | (100,342 | ) | ||
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Common | Additional | Total | ||||||||||||||||||||||
Stock | Treasury Stock | Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||
Shares | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||||
Balanceat December 31, 2004 | 4,950,083 | 717,522 | $ | (90,000 | ) | $ | 73,929 | $ | (10,021,783 | ) | $ | (10,037,854 | ) | |||||||||||
Net loss | — | — | — | — | (100,342 | ) | (100,342 | ) | ||||||||||||||||
Accretion of preferred stock redemption right | — | — | — | — | (17,530 | ) | (17,530 | ) | ||||||||||||||||
PIK issuance for preferred stock dividend | — | — | — | — | (103,693 | ) | (103,693 | ) | ||||||||||||||||
Balanceat March 31, 2005 | 4,950,083 | 717,522 | $ | (90,000 | ) | $ | 73,929 | $ | (10,243,348 | ) | $ | (10,259,419 | ) | |||||||||||
Balanceat December 31, 2005 | 4,950,083 | 717,522 | $ | (90,000 | ) | $ | 73,929 | $ | (11,910,944 | ) | $ | (11,927,015 | ) | |||||||||||
Net loss | — | — | — | — | (328,255 | ) | (328,255 | ) | ||||||||||||||||
Accretion of preferred stock redemption right | — | — | — | — | (17,529 | ) | (17,529 | ) | ||||||||||||||||
PIK issuance for preferred stock dividend | — | — | — | — | (218,361 | ) | (218,361 | ) | ||||||||||||||||
Balanceat March 31, 2006 | 4,950,083 | 717,522 | $ | (90,000 | ) | $ | 73,929 | $ | (12,475,089 | ) | $ | (12,491,160 | ) | |||||||||||
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(Unaudited) | ||||||||
Three months ended March 31, | ||||||||
2006 | 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (328,255 | ) | $ | (100,342 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 213,034 | 159,157 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 555 | (22,410 | ) | |||||
Other assets | 9,500 | |||||||
Prepaid expenses | 32,072 | (17,243 | ) | |||||
Accounts payable | (468,512 | ) | 10,816 | |||||
Accrued liabilities and other current liabilities | (7,954 | ) | 142,305 | |||||
Net cash (used in) provided by operating activities | (549,560 | ) | 172,283 | |||||
Cash flows from investing activities: | ||||||||
Purchase of software, equipment and fixtures | (50,517 | ) | (93,428 | ) | ||||
Net cash used in investing activities | (50,517 | ) | (93,428 | ) | ||||
Cash flows from financing activities: | ||||||||
Reduction of other assets | 17,529 | (2,355 | ) | |||||
Payments on notes payable to shareholders | 2,419 | 8,671 | ||||||
Net cash provided by (used in) financing activities | 19,948 | 6,316 | ||||||
Net (decrease) increase in cash and cash equivalents | (580,129 | ) | 85,171 | |||||
Cash and cash equivalents, beginning of period | 787,666 | 872,063 | ||||||
Cash and cash equivalents, end of period | $ | 207,537 | $ | 957,234 | ||||
F-83
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1. | Organization and Nature of Business and Basis of Presentation |
2. | Summary of Significant Accounting Policies |
F-84
Table of Contents
3. | Service Contracts |
4. | Related Party Transactions |
5. | Income Taxes |
F-85
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2006 | 2005 | |||||||
Net deferred tax assets (primarily net operating losses) | $ | 3,105,400 | $ | 2,987,531 | ||||
Valuation allowance | (3,105,400 | ) | (2,987,531 | ) | ||||
Net deferred tax balance | $ | — | $ | — | ||||
6. | Shareholders’ Equity (Deficit), Subordinated Debentures and Note Payable |
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Number of Shares | ||||
Options | — | |||
Warrants | 5,746,865 | |||
Preferred Stock | 39,240,044 | |||
44,986,909 | ||||
7. | Retirement Savings Plan |
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8. | Commitments and Contingencies |
March 31, | Amount | |||
2006 | $ | 495,737 | ||
2007 | 655,666 | |||
2008 | 632,723 | |||
2009 | 15,942 | |||
$ | 1,800,068 | |||
10. | Supplemental Cash Flow Information |
March 31, | ||||||||
2006 | 2005 | |||||||
Cash paid for interest | $ | 9,776 | $ | 161,776 |
11. | Subsequent Event |
F-88
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Wachovia Securities |
Table of Contents
Item 13. | Other Expenses of Issuance and Distribution. |
SEC registration fee | $ | 12,305.00 | ||
NASD filing fee | $ | 12,000.00 | ||
New York Stock Exchange listing fee | * | |||
Blue sky fees and expenses | * | |||
Printing and engraving expenses | * | |||
Legal fees and expenses | * | |||
Accounting fees and expenses | * | |||
Transfer agent and registrar fees and expenses | * | |||
Miscellaneous | * | |||
Total | $ | * | ||
* | To be furnished by amendment |
Item 14. | Indemnification of Directors and Officers. |
• | any breach of the director’s duty of loyalty to the corporation or its stockholders, | |
• | acts or omissions by the director not in good faith or that involve intentional misconduct or a knowing violation of law, | |
• | liability under Section 174 of the DGCL for unlawful payment of dividends and unlawful stock purchases and redemptions by the corporation, or | |
• | any transaction from which the director derived an improper personal benefit. |
• | if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation; and | |
• | in the case of a criminal proceeding, he or she had no reasonable cause to believe that his or her conduct was unlawful. |
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Item 15. | Recent Sales of Unregistered Securities. |
II-2
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Item 16. | Exhibits and Financial Statement Schedules. |
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By: | /s/ Scott M. Purviance |
Signature | Title | Date | ||||
* M. Steven DeCarlo | Chief Executive Officer, President and Director (principal executive officer) | January 8, 2007 | ||||
/s/ Scott M. Purviance Scott M. Purviance | Chief Financial Officer, Vice President and Secretary (principal financial officer) | January 8, 2007 | ||||
/s/ Angela N. Higbea Angela N. Higbea | Controller (principal accounting officer) | January 8, 2007 | ||||
* Brian R. Golson | Director | January 8, 2007 | ||||
* Marc R. Rubin | Director | January 8, 2007 |
Table of Contents
Signature | Title | Date | ||||
* John C. Rutherford | Director | January 8, 2007 | ||||
/s/ Joseph E. Consolino Joseph E. Consolino | Director | January 8, 2007 | ||||
*By: /s/ Scott M. Purviance Scott M. Purviance Attorney-in-Fact |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
1 | * | Form of Underwriting Agreement | ||
3 | .1* | Amended and Restated Certificate of Incorporation of AmWINS Group, Inc. | ||
3 | .2* | Amended and Restated Bylaws of AmWINS Group, Inc. | ||
4 | .1* | Form of certificate for the common stock, par value $0.01 per share, of AmWINS Group, Inc. | ||
4 | .2** | Registration Agreement dated as of April 2006 by and between AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.), AmWINS Holdings, LLC and American Wholesale Insurance Holding Company, LLC | ||
4 | .3** | Credit Agreement dated as of October 27, 2005 among AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) as Borrower, the financial institutions from time to time party thereto as Lenders and Madison Capital Funding LLC, as Agent | ||
4 | .4** | Second Lien Credit Agreement dated as of October 27, 2005 among AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) as Borrower, the financial institutions from time to time party thereto as Lenders and Madison Capital Funding LLC, as Second Lien Agent | ||
5 | * | Opinion of Robinson, Bradshaw & Hinson, P.A. | ||
10 | .1* | Employment Agreement dated as of September 12, 2005 by and between American Wholesale Insurance Company, LLC, AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) and M. Steven DeCarlo, as amended and restated on January , 2007 | ||
10 | .2** | Employment Agreement dated as of September 12, 2005 by and between American Wholesale Insurance Company, LLC, AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) and Scott M. Purviance | ||
10 | .3** | Employment and Noncompete Agreement dated as of May 22, 2003 between National Employee Benefits Company, Inc. and Samuel H. Fleet (portions of this exhibit have been omitted and filed separately with the SEC) | ||
10 | .4** | Employment and Nonsolicitation Agreement dated as of April 13, 2005 by and between AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) and Mark M. Smith | ||
10 | .5** | AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) 2002 Stock Option Plan, as amended | ||
10 | .6** | Form of Stock Option Agreement | ||
10 | .7** | Executive Unit Agreement dated as of July 28, 2006 between American Wholesale Insurance Holding Company, LLC and M. Steven DeCarlo | ||
10 | .8** | Executive Unit Agreement dated as of July 28, 2006 between American Wholesale Insurance Holding Company, LLC and Samuel H. Fleet | ||
10 | .9** | Executive Unit Agreement dated as of July 28, 2006 between American Wholesale Insurance Holding Company, LLC and Scott M. Purviance | ||
10 | .10** | Executive Unit Agreement dated as of September 29, 2006 between American Wholesale Insurance Holding Company, LLC and Scott M. Purviance | ||
10 | .11** | Exchange Agreement dated as of October 27, 2005 by and between American Wholesale Insurance Holding Company, LLC and M. Steven DeCarlo | ||
10 | .12** | Exchange Agreement dated as of October 27, 2005 by and between American Wholesale Insurance Holding Company, LLC and Scott M. Purviance | ||
10 | .13** | Exchange Agreement dated as of October 27, 2005 by and between American Wholesale Insurance Holding Company, LLC and Mark M. Smith | ||
10 | .14* | Advisory Services Agreement dated as of October 27, 2005 between AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.) and PCap, L.P., as amended and restated | ||
10 | .15* | Stock Purchase Agreement dated as of February 15, 2005 by and among AmWINS Group, Inc. (f/k/a American Wholesale Insurance Group, Inc.), Willis North America Inc. and Willis of Greater New York, Inc. |
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Exhibit | ||||
Number | Description of Exhibit | |||
21 | ** | List of Subsidiaries of AmWINS Group, Inc. | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP | ||
23 | .2 | Consent of PricewaterhouseCoopers LLP | ||
23 | .3 | Consent of BDO Seidman, LLP | ||
23 | .4 | Consent of PricewaterhouseCoopers LLP | ||
23 | .5* | Consent of Robinson, Bradshaw & Hinson, P.A. (included in Exhibit 5) | ||
24 | .1 | Powers of Attorney (included on signature page) |
* | To be filed by amendment |
** | Previously filed |
E-2