Exhibit 99.1
Press Release |
Hilb Rogal & Hobbs 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
February 11, 2004
HILB ROGAL & HOBBS COMPANY REPORTS RECORD RESULTS
FOR 2003 FOURTH QUARTER AND YEAR
RICHMOND, VA -- Hilb Rogal & Hobbs Company (NYSE:HRH), the world’s 10th largest insurance and risk management intermediary, reported financial results today for the fourth quarter and year ended December 31, 2003.
For the fourth quarter, total revenues were $142.7 million, compared with $128.7 million a year ago, an increase of 10.9%. Commissions and fees rose 10.9% to $140.2 million during the quarter, compared with $126.5 million during the same period of 2002, primarily reflecting acquisitions, organic growth and moderating premium rate increases. Net income for the quarter was $19.4 million, or $0.53 per share, compared with $16.2 million a year ago, or $0.48 per share, an increase of 19.5%. The quarter benefited from a reduction in the annual effective tax rate from 40.8%, which was utilized through September 30, 2003, to 40.0%, a rate that is expected to continue. Diluted weighted average shares outstanding for the quarter increased 8.4% from a year ago, reflecting acquisition-related share issuances and a late 2002 public offering, partially offset by the company’s repurchase of 1.1 million shares during 2003. Operating net income increased 25.0% to $20.1 million, or $0.55 per share, compared with $16.0 million, or $0.48 per share, a year ago.
For the year ended December 31, 2003, total revenues rose 24.5% to $563.6 million from $452.7 million a year ago. Commissions and fees increased 24.4% to $555.7 million from $446.7 million last year, reflecting acquisitions and organic growth. Net income for the year was $75.0 million, or $2.06 per share, compared with $65.1 million, or $2.01 per share, in 2002, an increase of 15.1%. Operating net income was $80.4 million, or $2.21 per share, compared with $61.0 million, or $1.89 per share, a year ago, an increase of 31.7%. The per share amount for the year is based on a 10.4% higher diluted share count than the prior year as noted above.
Organic growth, defined as the change in commissions and fees before the effect of acquisitions and divestitures, was 2.7% for the fourth quarter and 5.5% for the year. The operating margin for the quarter was 26.5%, compared with 25.4% in the prior year, and 27.4% for the year, compared with 26.3% for 2002. The integration of Hobbs and continued improvement in sales productivity and operating efficiency will be the principal contributors to margin improvement in 2004.
(CONTINUED)
HILB ROGAL & HOBBS COMPANY REPORTS RECORD RESULTS
FOR 2003 FOURTH QUARTER AND YEAR– Continued
Commenting on the results, Martin L. (Mell) Vaughan, III, chairman and chief executive officer said, "Our fourth quarter capped another year of growth that met our long-term growth goal in annual operating earnings per share, and our revised 2003 annual organic growth expectations. Although some of the issues that pressured the third quarter were not fully resolved in the fourth quarter, we believe they are now largely behind us. Bright spots in the fourth quarter were an effective transition to the new sales model led by our recently augmented executive team, and the announcement and initial implementation of the integration plan for the combined company. We are excited about the opportunities before us in 2004, and remain committed to our long-term growth rate in operating earnings per share of between 15% and 20%."
Robert B. Lockhart, president and chief operating officer, said, "During the quarter, we completed the plan for our integrated sales model and officially launched it throughout the company on January 1, 2004. New producer-led teams drive the sales process, and provide a focal point for risk management, marketing, claims and other client services. Through increased productivity, discipline and accountability, the new process is designed to win and retain major accounts, while reinforcing our sales and service commitment to all of our business lines, including our core middle-market clients. Based on the energy and momentum coming out of our January national sales meeting, we are confident the new model will generate a sustained flow of new opportunities."
Vaughan concluded, "In 2003, as planned, acquisitions accelerated our entry into excess and surplus lines and reinsurance brokerage markets, both of which give us the ability to directly place business that we have outsourced in the past, and strengthened our agency presence in selected markets. While we continue to be selective and disciplined, we expect 2004 to be another active year for acquisitions. Our pipeline continues to be robust and, despite increased competition, we are confident that we will be able to attract new business partners during 2004 that will generate annualized revenues of between $30 million and $60 million.”
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 & Hobbs 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 10th largest insurance and risk management intermediary in the world. Additional information about HRH, including instructions for the quarterly conference call, may be found at www.hrh.com.
(CONTINUED)
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL ANALYSIS
(In thousands, except per share data)
THREE MONTHS ENDED | YEAR ENDED | |||
12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |
(Unaudited) | ||||
Revenues | ||||
Commissions and fees | $140,232 | $126,451 | $555,732 | $446,673 |
Investment income | 898 | 833 | 3,151 | 2,439 |
Other | 1,618 | 1,381 | 4,764 | 3,614 |
142,748 | 128,665 | 563,647 | 452,726 | |
Operating expenses | ||||
Compensation and employee benefits | 76,982 | 69,556 | 302,497 | 245,405 |
Other operating expenses | 25,876 | 23,829 | 97,358 | 80,308 |
Depreciation expense | 2,181 | 2,333 | 9,082 | 7,771 |
Amortization of intangibles | 3,120 | 2,316 | 9,828 | 5,320 |
Interest expense | 2,596 | 3,176 | 10,692 | 10,665 |
Integration costs1 | 920 | - | 4,094 | - |
Retirement benefit2 | - | - | 5,195 | - |
111,675 | 101,210 | 438,746 | 349,469 | |
INCOME BEFORE INCOME TAXES AND | 31,073 | 27,455 | 124,901 | 103,257 |
Income taxes | 11,668 | 11,215 | 49,947 | 42,082 |
Income before cumulative effect | 19,405 | 16,240 | 74,954 |
61,175 |
Cumulative effect of accounting change, net of tax3 | - | - | - | 3,944 |
NET INCOME | $ 19,405 | $ 16,240 | $ 74,954 | $ 65,119 |
Net Income Per Share - Basic: | ||||
Income before cumulative effect | $0.54 | $0.52 | $2.17 | $2.09 |
Cumulative effect of accounting change, net of tax3 | - | - | - | 0.14 |
Net income | $0.54 | $0.52 | $2.17 | $2.23 |
| ||||
Net Income Per Share – Assuming Dilution: | ||||
Income before cumulative effect | $0.53 | $0.48 | $2.06 |
$1.89 |
Cumulative effect of accounting change, net of tax3 | - | - | - | 0.12 |
Net income | $0.53 | $0.48 | $2.06 | $2.01 |
Dividends Per Share | $0.0925 | $0.0900 | $0.3675 | $0.3575 |
Weighted Average Number | ||||
Basic | 35,757 | 31,394 | 34,595 | 29,240 |
Assuming Dilution | 36,638 | 33,799 | 36,304 | 32,876 |
____________________________________________
1 Integration costs represent one-time costs including severance and other employee-related costs, facility costs and
branding expenses.
2 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.
3 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 & HOBBS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
DECEMBER 31, | ||
2003 | 20021 | |
ASSETS CURRENT ASSETS | ||
Cash and cash equivalents | $ 126,464 | $134,692 |
Receivables (net) | 255,251 | 201,364 |
Prepaid expenses and other | 14,603 | 21,509 |
TOTAL CURRENT ASSETS | 396,318 | 357,565 |
PROPERTY & EQUIPMENT (NET) | 25,487 | 20,386 |
INTANGIBLE ASSETS (NET) | 614,246 | 441,973 |
OTHER ASSETS | 13,176 | 13,100 |
$1,049,227 | $833,024 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
CURRENT LIABILITIES | ||
Premiums payable to insurance companies | $ 308,533 | $235,057 |
Accounts payable | 9,089 | 10,115 |
Accrued expenses | 37,434 | 41,065 |
Premium deposits and credits due customers | 34,290 | 32,075 |
Current portion of long-term debt | 9,321 | 5,733 |
TOTAL CURRENT LIABILITIES | 398,667 | 324,045 |
LONG-TERM DEBT | 174,012 | 177,151 |
OTHER LONG-TERM LIABILITIES | 42,281 | 21,180 |
SHAREHOLDERS’ EQUITY | ||
Common Stock (outstanding 35,446 and 33,484 | ||
shares, respectively) | 228,357 | 168,558 |
Retained earnings | 205,184 | 143,005 |
Accumulated other comprehensive income (loss) | 726 | (915) |
434,267 | 310,648 | |
$1,049,227 | $833,024 | |
__________________________
1 Reclassified to conform to current year presentation.
HILB ROGAL & HOBBS 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 | |||
12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME | $19,405 | $16,240 | $0.53 | $0.48 |
Excluding: | ||||
Non-operating (gains) losses, net of tax | 86 | (193) | - | - |
Integration costs, net of tax | 561 | - | 0.02 | - |
OPERATING NET INCOME | $20,052 | $16,047 | $0.55 | $0.48 |
OPERATING MARGIN | OPERATING REVENUE | |||
THREE MONTHS ENDED | THREE MONTHS ENDED | |||
12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME / | $19,405 | $16,240 | $142,748 | $128,665 |
Excluding: | ||||
Non-operating (gains) losses | 145 | (328) | 145 | (328) |
Amortization of intangibles | 3,120 | 2,316 | - | - |
Interest expense | 2,596 | 3,176 | - | - |
Integration costs | 920 | - | - | - |
Income taxes | 11,668 | 11,215 | - | - |
OPERATING MARGIN / REVENUE | $37,854 | $32,619 | $142,893 | $128,337 |
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)
NET INCOME | NET INCOME PER SHARE ASSUMING DILUTION | |||
YEAR ENDED | YEAR ENDED | |||
12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME | $74,954 | $65,119 | $2.06 | $2.01 |
Excluding: | ||||
Non-operating gains, net of tax | (227) | (126) | (0.01) | - |
Integration costs, net of tax | 2,497 | - | 0.07 | - |
Retirement benefit, net of tax | 3,169 | - | 0.09 | - |
Cumulative effect of | - | (3,944) | - | (0.12) |
OPERATING NET INCOME | $80,393 | $61,049 | $2.21 | $1.89 |
OPERATING MARGIN | OPERATING REVENUE | |||
YEAR ENDED | YEAR ENDED | |||
12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME / REVENUE | $ 74,954 | $ 65,119 | $563,647 | $452,726 |
Excluding: | ||||
Non-operating gains | (385) | (213) | (385) | (213) |
Amortization of intangibles | 9,828 | 5,320 | - | - |
Interest expense | 10,692 | 10,665 | - | - |
Integration costs | 4,094 | - | - | - |
Retirement benefit | 5,195 | - | - | - |
Income taxes | 49,947 | 42,082 | - | - |
Cumulative effect of | - | (3,944) | - | - |
OPERATING MARGIN / REVENUE | $154,325 | $119,029 | $563,262 | $452,513 |
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