EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statements of income for the year ended December 31, 2000 and the unaudited pro forma condensed combined balance sheet as of December 31, 2000 give effect to the acquisition of agency-related assets of Riedman Insurance. The purchase method of accounting has been applied to the transaction. The pro forma statements of income assume the acquisition occurred on January 1, 2000 and the pro forma balance sheet assumes the transaction occurred on December 31, 2000.
The unaudited pro forma statement of income does not include potential cost savings that may be realized as a result of the acquisition.
The unaudited pro forma condensed combined financial statements have been prepared by the Registrant based upon the assumptions disclosed in the notes to the pro forma condensed combined financial statements. The unaudited pro forma financial statements presented herein are shown for illustrative purposes only and do not purport to be indicative of the results which would have been reported if the transaction had occurred on the dates indicated or which may occur in the future. The unaudited pro forma condensed combined financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000 and the Riedman Insurance financial statements included in Exhibits 99.1 of this Form 8-K.
BROWN & BROWN, INC. |
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME |
FOR THE YEAR ENDED DECEMBER 31, 2000 (UNAUDITED) |
(In thousands, except per share figures) |
Brown & Brown, Inc. | Riedman Insurance | Pro forma Adjustments | Pro forma Combined | |
REVENUES | ||||
Commissions and fees | 204,862 | 54,070 | 0 | 258,932 |
Investment income | 3,890 | 2,416 | A-(2,416) B- | 3,890 |
Other income | 954 | 668 | A- (668) | 954 |
Total revenues | 209,706 | 57,155 | (3,084) | 263,776 |
EXPENSES | ||||
Employee compensation and benefits | 108,258 | 35,664 | 0 | 143,922 |
Other operating expenses | 33,724 | 12,465 | 0 | 46,189 |
Depreciation | 4,637 | 1,451 | A-(1,451) C- | 4,637 |
Amortization | 8,519 | 1,650 | A-(1,650) C- | 8,519 |
Interest | 590 | 1,988 | A-(1,988) D- | 590 |
Total expenses | 155,728 | 53,218 | (5,089) | 203,857 |
Income before income taxes | 53,978 | 3,937 | 2,004 | 59,919 |
Income taxes | 20,792 | 130 | 0 | 20,922 |
Net income | 33,186 | 3,807 | 2,004 | 38,997 |
Basic and diluted earnings per share | 1.16 | 0.13 | 0.07 | 1.36 |
Weighted average number of common and common equivalent shares outstanding | 28,663 | 28,663 | 28,663 | 28,663 |
See accompanying notes to pro forma condensed combined financial statements. |
A - Elimination of non-insurance related income, investment income, depreciation, |
Amortization and interest expense. |
B - Interest income earned on commissions and fees. |
C - Amortization and depreciation of acquired Riedman assets. |
BROWN & BROWN, INC. |
PRO FORMA CONDENSED COMBINED BALANCE SHEET |
AS OF ENDED DECEMBER 31, 2000 (UNAUDITED) |
(In thousands of dollars) |
Brown & Brown, Inc. | Riedman Insurance | Pro forma Adjustments | Pro forma Combined | |
ASSETS | ||||
Cash and cash equivalent | $ 57,610 | $ 0 | B-$ 90,000 C- D- | $147,610 |
Short-term investments | 373 | 43,054 | A-(43,054) | 373 |
Premiums, commissions and fees receivable | 83,199 | 11,771 | A-(11,771) | 83,199 |
Other current assets | 7,576 | 2,987 | A- (2,987) | 7,576 |
Total current assets | 148,758 | 57,812 | 32,188 | 238,758 |
Fixed assets, net | 14,210 | 3,173 | A- (3,173) C- | 14,210 |
Due from commercial real estate division | 0 | 18,451 | A-(18,451) | 0 |
Notes receivable from non-consolidated subsidiary | 0 | 4,060 | A- (4,060) | 0 |
Intangibles, net | 101,901 | 10,917 | A-(10,917) C- | 101,901 |
Investments | 5,572 | 1,357 | A- (1,357) | 5,752 |
Deferred income taxes | 649 | 0 | 649 | |
Other assets | 5,449 | 0 | 0 | 5,449 |
Total assets | $276,719 | $95,769 | $ (5,769) | $ 366,719 |
LIABILITIES | ||||
Premiums payable to insurance companies | 109,417 | 13,035 | A-(13,035) | 109,417 |
Premium deposits and credits due customers | 8,347 | 0 | 0 | 8,347 |
Accounts payable and accrued expenses | 24,101 | 3,778 | A- (3,778) | 24,101 |
Short-term notes payable to banks | 0 | 28,400 | A-(28,400) | 0 |
Current installments of records and expirations debt | 0 | 838 | A- (838) D- | 0 |
Current portion of long-term debt | 2,611 | 44 | A- 12,813 B- | 15,468 |
Total current liabilities | 144,476 | 46,094 | (33,237) | 157,333 |
Long-term records and expirations debt | 2,736 | 2,646 | A- (2,646) C- | 2,736 |
Long-term debt | 0 | 163 | A-(76,980) B- | 77,143 |
Other liabilities | 7,596 | 0 | 7,596 | |
Total liabilities | 154,808 | 48,903 | 41,097 | 244,808 |
SHAREHOLDERS' EQUITY | ||||
Common stock, par value $.10 per share; authorized 70,000 shares; issued 28,699 shares at 2000 and 28,412 shares at 1999 | 2,870 |
19 |
A- (19) |
2,870 |
Class A non-voting common stock $2 par value per share. | 0 | 93 | A- (93) |
|
Additional paid-in capital | - | 1,154 | A- (1,154) | 0 |
Retained earnings | 116,546 | 11,359 | A-(11,359) | 116,546 |
Less treasury stock of 245 shares at cost | 0 | (147) | A- 147 | |
Accumulated other comprehensive income | 2,495 | 34,388 | A-(34,388) | 2,495 |
Total shareholders' equity | 121,911 | 46,866 | (46,866) | 121,911 |
Total liabilities and shareholders' equity | 276,719 | 95,769 | (5,769) | 366,719 |
See accompanying notes to pro forma condensed combined financial statements. | ||||
A - Elimination of assets not acquired from Riedman. |
B - Borrowing of Term Loan |
C - Purchase of Riedman's Insurance agency-related assets. |
D - Assumption of certain Riedman's debt obligations. |
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS | |
A description of the adjustments reflected in the pro forma condensed combined financial statements follows: | |
(a) | Certain amounts included in the Riedman Insurance ("Riedman") statements of income and balance sheet have been reclassified to conform with the Registrant's financial statement presentation. |
(b) | To reflect the incremental estimated annual goodwill amortization charge associated with the acquisition of Riedman (the "acquisition"). Goodwill is estimated at $_______ million and is being amortized over a twenty-year period. |
(c) | To record the additional annual interest expense associated with the estimated $_______million of incremental debt that is expected to be incurred by the Registrant as a result of the acquisition. The assumed interest rate of _____ represents the weighted average interest rate of the expected incremental debt based on prevailing rates. The actual interest rate may vary from the assumed rate. The annual effect on pretax income of a one-eighth percent variance in this rate is $_____ million. |
(d) | To record the tax effect of the pro forma adjustments related to the additional annual interest expense. The assumed tax rate of 38.5% represents the federal and state tax benefit on the estimated incremental interest expense. |
(e) | Certain amounts included in the Riedman balance sheet have been reclassified to conform with the Registrant's financial statement presentation. |
(f) | The Registrant's management is in the preliminary stages of identifying the impact of purchase related matters, principally related to severance, duplicative real estate, and adjustments of asset and liability balances to fair values. The preliminary estimate of these purchase related matters of $_____ million and the related income tax benefit of $______ million, which may differ from the final resolution of such items, are not included in the pro forma financial statements. |
(g) | Represents the excess of the $______ million acquisition consideration over the $_____ million acquired net assets of Riedman. The Registrant's management is in the process of, but has not completed, identifying intangibles or fair values of assets acquired and liabilities assumed. Since there are no known adjustments at this time, the fair values of assets and liabilities are assumed to be the carrying values on the Riedman balance sheet and the excess of the acquisition consideration over the acquired net assets has been allocated to goodwill. The preliminary purchase price allocation to the underlying assets and liabilities of Riedman, including goodwill, is subject to further refinement as the Registrant's management continues to review the estimated fair values of the assets acquired and the liabilities assumed. The final purchase price allocation could be materially different from this preliminary allocation. |
(h) | To record the elimination of $_____ million of Riedman stockholders' equity. |
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