Exhibit 99.1
Press Release
Hilb, Rogal and Hamilton Company
Contact: Carolyn Jones
4951 Lake Brook Drive, Suite 500
Phone:
(804) 747-3108
Glen Allen, Virginia 23060
Fax:
(804) 747-6046
FOR IMMEDIATE RELEASE
July 21, 2003
HILB, ROGAL AND HAMILTON COMPANY REPORTS
RECORD SECOND QUARTER RESULTS
RICHMOND, Va.-- Hilb, Rogal and Hamilton Company (NYSE: HRH), the world's ninth largest insurance and risk intermediary, reported today record financial results for the second quarter and six months ended June 30, 2003.
For the second quarter, total revenues were $139.5 million, compared with $95.7 million a year ago, an increase of 45.8%. Commissions and fees rose 45.5% to $137.9 million during the quarter, compared with $94.7 million during the same period last year, reflecting acquisitions--primarily the addition of Hobbs Group, LLC (Hobbs)--, new business, and a continued positive rate environment. Net income for the quarter was $19.1 million, or $0.52 per share, compared with $12.5 million, or $0.40 per share, a year ago, an increase of 52.5%. In calculating the per share amount, the dilutive shares for the quarter increased 14.1%, reflecting shares issuable for acquisition-related contingent payments -- primarily Hobbs -- and shares issued over the past twelve months for acquisitions and a public offering.
For the first six months, total revenues rose 44.0% to $281.5 million from $195.6 million a year ago. Commissions and fees increased 43.9% to $278.4 million from $193.4 million last year, reflecting the same trends identified above for the quarter, in addition to higher contingent and override commissions, which are heavily weighted in the first quarter. Net income for the six months was $37.2 million, or $1.03 per share, compared with $31.6 million, or $1.00 per share, in 2002, an increase of 17.5%. Net income before non-operating losses, a one-time retirement benefit charge in 2003, and the cumulative effect of a 2002 revenue recognition accounting change was $40.4 million, or $1.12 per share, compared with $27.8 million, or $0.88 per share, a year ago, an increase of 45.3%. The per share amount for the six months is based on a 12.1% higher dilutive share count than the prior year due to similar factors as noted above for the quarter.
Organic growth, defined as the change in commissions and fees before the effect of acquisitions and divestitures, was 5.9% for the second quarter and 8.6% for the six months. While organic growth may vary on a quarterly basis, the company reaffirms its full year 2003 guidance of 9% to 11% for organic growth, which, beginning in the third quarter, will include revenues generated by Hobbs, whose organic growth was 16.4% for the first six months of 2003.
The operating margin for the second quarter was 26.6%, compared with 24.7% for the previous year's quarter. For the six months, the operating margin increased to 27.7% in 2003 from 26.4% in 2002. The increases reflect higher contingent and override commissions as a percentage of revenues, strong margin performance by Hobbs in the second quarter, and productivity and efficiency improvements from HRH’s Best Practices program. Continued incremental margin improvement remains one of HRH's key financial objectives.
(CONTINUED)
HILB, ROGAL AND HAMILTON COMPANY REPORTS
RECORD SECOND QUARTER RESULTS – Continued
Martin L. (Mell) Vaughan, III, chairman and chief executive officer said, "HRH's strong second quarter results were marked by continued revenue and earnings growth and margin improvement. In addition, with its outstanding performance, Hobbs has maximized the earn-out in one year--subject to formal verification--allowing us to proceed with the blending of our companies. We have completed three acquisitions during the year and are confident we will meet our 2003 goal of $30 to $50 million in annual revenues from acquisitions. Meanwhile, we also accomplished the CEO transition as planned, including informative meetings with the management of recently acquired agencies and with the investment community.
"During the quarter, we also made notable progress in each of the three areas previously identified as key priorities: sales culture and productivity, five-year plan execution, and new products and programs. A highlight of the quarter was the establishment of an excess and surplus lines wholesale business. To head the new operation, we were fortunate to attract Bryan W. Sanders, an experienced insurance professional who brings talent and enthusiasm to the venture."
Vaughan concluded, "We remain dedicated to helping our clients effectively manage risk in markets that, on balance, remain favorable, through our skilled risk management and resourceful placement capabilities. While we are actively investing in talent and products for current and future growth, we believe that our full year 2003 results will easily meet our key long-term goal of sustaining 15% to 20% growth in annual operating earnings per share."
The company cautions readers that the statements contained herein regarding the company’s future operations and business prospects are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from anticipated results. For more details on factors that could affect expectations, see the company’s Annual Report on Form 10-K for the year ended December 31, 2002, as filed with the Securities and Exchange Commission.
Hilb, Rogal and Hamilton Company is the nation’s seventh largest insurance and risk management intermediary. With offices located throughout the United States, HRH assists clients in managing their risks in areas such as property and casualty, employee benefits and many other areas of specialized exposure. The company is traded on the New York Stock Exchange, symbol HRH, and is ranked as the ninth largest insurance and risk management intermediary in the world. Additional information about HRH may be found at www.hrh.com.
(CONTINUED)
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL ANALYSIS
(In thousands, except per share data)
THREE MONTHS ENDED | SIX MONTHS ENDED | |||
6/30/03 | 6/30/02 | 6/30/03 | 6/30/02 | |
(Unaudited) | (Unaudited) | |||
Revenues | ||||
Commissions and fees | $137,868 | $ 94,739 | $278,367 | $193,387 |
Investment income | 820 | 460 | 1,479 | 974 |
Other | 846 | 518 | 1,679 | 1,210 |
139,534 | 95,717 | 281,525 | 195,571 | |
Operating expenses | ||||
Compensation and employee benefits | 75,846 | 52,795 | 151,659 | 106,054 |
Other operating expenses | 24,275 | 17,717 | 47,431 | 34,555 |
Depreciation expense | 2,292 | 1,730 | 4,580 | 3,440 |
Amortization of intangibles | 2,203 | 563 | 4,356 | 1,085 |
Interest expense | 2,746 | 1,819 | 5,539 | 3,703 |
Retirement benefit1 | -- | -- | 5,195 | -- |
107,362 | 74,624 | 218,760 | 148,837 | |
INCOME BEFORE INCOME TAXES AND | ||||
CUMULATIVE EFFECT OF ACCOUNTING | ||||
CHANGE | 32,172 | 21,093 | 62,765 | 46,734 |
Income taxes | 13,107 | 8,591 | 25,602 | 19,048 |
Income before cumulative effect of accounting change | 19,065 | 12,502 | 37,163 | 27,686 |
Cumulative effect of accounting change, net of tax2 | -- | -- | -- | 3,944 |
NET INCOME | $ 19,065 | $ 12,502 | $ 37,163 | $ 31,630 |
Net Income Per Share - Basic: | ||||
Income before cumulative effect of accounting change | $0.56 | $0.44 | $1.10 | $0.98 |
Cumulative effect of accounting change, net of tax2 | -- | -- | -- | 0.14 |
Net income | $0.56 | $0.44 | $1.10 | $1.12 |
Net Income Per Share – Assuming Dilution: | ||||
Income before cumulative effect of accounting change | $0.52 | $0.40 | $1.03 | $0.88 |
Cumulative effect of accounting change, net of tax2 | -- | -- | -- | 0.12 |
Net income | $0.52 | $0.40 | $1.03 | $1.00 |
Dividends Per Share | $0.0925 | $0.0900 | $0.1825 | $0.1775 |
Weighted Average Number | ||||
of Shares Outstanding: | ||||
Basic | 33,911 | 28,255 | 33,796 | 28,221 |
Assuming Dilution | 36,880 | 32,332 | 36,187 | 32,268 |
________________
1
The company recorded a one-time retirement benefit charge for the quarter ended March 31, 2003, representing a contractual retirement benefit for Andrew L. Rogal, the company’s former chairman and chief executive officer.
2
Effective January 1, 2002, the company changed its revenue recognition policy for commissions on premiums billed by insurance carriers on middle-market property and casualty business from when received to the later of effective date of insurance coverage or billing date.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
| JUNE 30, | DECEMBER 31, |
| 2003 | 20021 |
| (Unaudited) | |
ASSETS CURRENT ASSETS | ||
Cash and cash equivalents | $171,578 | $134,692 |
Receivables (net) | 231,715 | 201,364 |
Prepaid expenses and other | 14,167 | 21,509 |
TOTAL CURRENT ASSETS | 417,460 | 357,565 |
PROPERTY & EQUIPMENT (NET) | 21,234 | 20,386 |
INTANGIBLE ASSETS (NET) | 478,888 | 441,973 |
OTHER ASSETS | 12,096 | 13,100 |
$929,678 | $833,024 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
CURRENT LIABILITIES | ||
Premiums payable to insurance companies | $287,529 | $235,057 |
Accounts payable | 11,920 | 10,115 |
Accrued expenses | 25,446 | 39,142 |
Premium deposits and credits due customers | 34,507 | 33,998 |
Current portion of long-term debt | 20,491 | 5,733 |
TOTAL CURRENT LIABILITIES | 379,893 | 324,045 |
LONG-TERM DEBT | 161,123 | 177,151 |
OTHER LONG-TERM LIABILITIES | 31,571 | 21,180 |
SHAREHOLDERS’ EQUITY | ||
Common Stock (outstanding 34,032 and 33,484 | ||
shares, respectively) | 183,233 | 168,558 |
Retained earnings | 173,977 | 143,005 |
Accumulated other comprehensive income (loss) | (119) | (915) |
357,091 | 310,648 | |
$929,678 | $833,024 | |
________________
1
Reclassified to conform to current year presentation.
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
This press release contains references to financial measures that exclude certain charges and non-recurring items. The company believes that these adjusted financial measures provide additional measures of performance that investors can use in evaluating the company’s performance between reporting periods. The schedule below provides a reconciliation of these financial measures to those prepared in accordance with accounting principles generally accepted in the United States (GAAP).
NET INCOME | NET INCOME PER SHARE ASSUMING DILUTION | |||
THREE MONTHS ENDED | THREE MONTHS ENDED | |||
6/30/03 | 6/30/02 | 6/30/03 | 6/30/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME | $19,065 | $12,502 | $0.52 | $0.40 |
Excluding: | ||||
Non-operating losses, net of tax | 32 | 122 | -- | -- |
OPERATING NET INCOME | $19,097 | $12,624 | $0.52 | $0.40 |
OPERATING MARGIN | OPERATING REVENUE | |||
THREE MONTHS ENDED | THREE MONTHS ENDED | |||
6/30/03 | 6/30/02 | 6/30/03 | 6/30/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME / REVENUE | $19,065 | $12,502 | $139,534 | $95,717 |
Excluding: | ||||
Non-operating losses | 56 | 206 | 56 | 206 |
Amortization of intangibles | 2,203 | 563 | -- | -- |
Interest expense | 2,746 | 1,819 | -- | -- |
Income taxes | 13,107 | 8,591 | -- | -- |
OPERATING MARGIN / REVENUE | $37,177 | $23,681 | $139,590 | $95,923 |
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
NET INCOME | NET INCOME PER SHARE ASSUMING DILUTION | |||
SIX MONTHS ENDED | SIX MONTHS ENDED | |||
6/30/03 | 6/30/02 | 6/30/03 | 6/30/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME | $37,163 | $31,630 | $1.03 | $1.00 |
Excluding: | ||||
Non-operating losses, net of tax | 78 | 124 | -- | -- |
Retirement benefit, net of tax | 3,169 | -- | 0.09 | -- |
Cumulative effect of accounting change, net of tax | -- | (3,944) | -- | (0.12) |
OPERATING NET INCOME | $40,410 | $27,810 | $1.12 | $0.88 |
OPERATING MARGIN | OPERATING REVENUE | |||
SIX MONTHS ENDED | SIX MONTHS ENDED | |||
6/30/03 | 6/30/02 | 6/30/03 | 6/30/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME / REVENUE | $37,163 | $31,630 | $281,525 | $195,571 |
Excluding: | ||||
Non-operating losses | 131 | 209 | 131 | 209 |
Amortization of intangibles | 4,356 | 1,085 | -- | -- |
Interest expense | 5,539 | 3,703 | -- | -- |
Retirement benefit | 5,195 | -- | -- | -- |
Income taxes | 25,602 | 19,048 | -- | -- |
Cumulative effect of accounting change, net of tax | -- | (3,944) | -- | -- |
OPERATING MARGIN / REVENUE | $77,986 | $51,731 | $281,656 | $195,780 |
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