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
April 21, 2004
HILB ROGAL & HOBBS COMPANY REPORTS RECORD
FIRST QUARTER RESULTS
RICHMOND, Va. -- Hilb Rogal & Hobbs Company (NYSE: HRH), the world’s 10th largest insurance and risk management intermediary, reported financial results today for the first quarter ended March 31, 2004.
For the first quarter, total revenues were $158.2 million, compared with $142.0 million a year ago, an increase of 11.4%. Commissions and fees rose 11.3% to $156.4 million during the quarter, compared with $140.5 million during the same period last year, driven by acquisitions; higher contingent commissions, which are heavily concentrated in the first quarter; new business and a moderating rate environment.
Net income for the quarter was $24.2 million, or $0.67 per share, compared with $18.1 million, or $0.51 per share, a year ago. Operating net income increased 15.4% to $24.6 million, or $0.68 per share, compared with $21.3 million, or $0.60 per share, a year ago.
Organic growth, defined as the change in commissions and fees before the effect of acquisitions and divestitures, was 5.1% for the quarter. The operating margin was 29.3%, compared with 28.7% for the year-ago quarter.
Martin L. (Mell) Vaughan, III, chairman and chief executive officer said, “During the first quarter, we moved forward with three major initiatives: the rollouts of our new sales process and major accounts program, and the Hobbs integration. Organized and launched last year, these initiatives required investment this quarter, and over the past several quarters, which we believe will gradually lead to improved operating margins, higher sales productivity and increased market share. Our professionals did an excellent job managing the changes while staying focused on new business and the superior client service that is HRH’s trademark.”
Robert B. Lockhart, president and chief operating officer, said, “The new sales model, although still in its early implementation on a national scale, has already begun to generate better information and drive disciplined activity. Where the model has been in place for a while, such as the Northeast Region, organic growth is a clear beneficiary. In the major accounts program, we have nearly completed the formation of enterprise-wide teams, which unite HRH's expertise and resources to further enhance client service capabilities.”
(CONTINUED)
HILB ROGAL & HOBBS COMPANY REPORTS RECORD
FIRST QUARTER RESULTS – Continued
Concluding his remarks, Vaughan said, “With integration substantially complete, and as we move our operating model to the next level, there is a new energy throughout the company to seize opportunities and achieve our long-term financial goal of 15% to 20% annual growth in operating net income per share. Our three primary sources for driving those earnings: organic growth, margin improvement and acquisitions, are all beneficiaries of the new resolve. As for acquisitions, while timing is unpredictable, we believe our pipeline of potential deals is sufficient for us to achieve our stated 2004 objective of acquiring firms with aggregate 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, 2003, 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 | ||
3/31/04 | 3/31/03 | |
(Unaudited) | ||
Revenues | ||
Commissions and fees | $156,396 | $140,499 |
Investment income | 555 | 659 |
Other | 1,276 | 833 |
158,227 | 141,991 | |
Operating expenses | ||
Compensation and employee benefits | 83,725 | 75,813 |
Other operating expenses | 25,566 | 23,157 |
Depreciation | 2,255 | 2,288 |
Amortization of intangibles | 2,829 | 2,152 |
Interest expense | 2,529 | 2,793 |
Integration costs1 | 991 | -- |
Retirement benefit2 | -- | 5,195 |
117,895 | 111,398 | |
INCOME BEFORE INCOME TAXES | 40,332 | 30,593 |
Income taxes | 16,098 | 12,495 |
NET INCOME | $ 24,234 | $ 18,098 |
Net Income Per Share: | ||
Basic | $0.68 | $0.54 |
Assuming Dilution | $0.67 | $0.51 |
Dividends Per Share | $0.0925 | $0.0900 |
Weighted Average Number | ||
of Shares Outstanding: | ||
Basic | 35,588 | 33,681 |
Assuming Dilution | 36,336 | 35,493 |
____________________
1 Integration costs represent one-time costs including severance and other employee-related costs, facility and lease termination 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.
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
MARCH 31, | DECEMBER 31, | |
2004 | 2003 | |
(Unaudited) | ||
ASSETS CURRENT ASSETS | ||
Cash and cash equivalents | $ 158,149 | $ 126,464 |
Receivables (net) | 216,192 | 255,251 |
Prepaid expenses and other | 12,551 | 14,603 |
TOTAL CURRENT ASSETS | 386,892 | 396,318 |
PROPERTY & EQUIPMENT (NET) | 24,564 | 25,487 |
INTANGIBLE ASSETS (NET) | 615,598 | 614,246 |
OTHER ASSETS | 17,847 | 13,176 |
$1,044,901 | $1,049,227 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
CURRENT LIABILITIES | ||
Premiums payable to insurance companies | $ 273,867 | $ 308,533 |
Accounts payable | 9,584 | 9,089 |
Accrued expenses | 30,588 | 37,434 |
Premium deposits and credits due customers | 41,710 | 34,290 |
Current portion of long-term debt | 9,035 | 9,321 |
TOTAL CURRENT LIABILITIES | 364,784 | 398,667 |
LONG-TERM DEBT | 172,251 | 174,012 |
DEFERRED INCOME TAXES | 18,990 | 19,208 |
OTHER LONG-TERM LIABILITIES | 27,242 | 23,073 |
SHAREHOLDERS’ EQUITY | ||
Common Stock (outstanding 35,865 and 35,446 | ||
shares, respectively) | 234,050 | 228,357 |
Retained earnings | 226,108 | 205,184 |
Accumulated other comprehensive income (loss) | 1,476 | 726 |
461,634 | 434,267 | |
$1,044,901 | $1,049,227 |
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. 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 | |||
3/31/04 | 3/31/03 | 3/31/04 | 3/31/03 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME | $24,234 | $18,098 | $0.67 | $0.51 |
Excluding: | ||||
Non-operating (gains) losses, | ||||
net of tax | (238) | 45 | (0.01) | -- |
Integration costs, net of tax | 595 | -- | 0.02 | -- |
Retirement benefit, net of tax | -- | 3,169 | -- | 0.09 |
OPERATING NET INCOME | $24,591 | $21,312 | $0.68 | $0.60 |
OPERATING MARGIN | OPERATING REVENUE | |||
THREE MONTHS ENDED | THREE MONTHS ENDED | |||
3/31/04 | 3/31/03 | 3/31/04 | 3/31/03 | |
(Unaudited) | (Unaudited) | |||
GAAP NET INCOME / REVENUE | $24,234 | $18,098 | $158,227 | $141,991 |
Excluding: | ||||
Non-operating (gains) losses | (397) | 76 | (397) | 76 |
Amortization of intangibles | 2,829 | 2,152 | -- | -- |
Interest expense | 2,529 | 2,793 | -- | -- |
Integration costs | 991 | -- | -- | -- |
Retirement benefit | -- | 5,195 | -- | -- |
Income taxes | 16,098 | 12,495 | -- | -- |
OPERATING MARGIN / REVENUE | $46,284 | $40,809 | $157,830 | $142,067 |
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