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EXHIBIT 13
PORTIONS OF BROWN & BROWN, INC.'S 1999 ANNUAL REPORT TO SHAREHOLDERS
Financial Highlights
Year ended December 31,
(in thousands, except Percent
per share data)(1) 1999 Change 1998 1997 1996 1995
Commissions and fees(2) $172,546 10.9 $155,577 $138,112 $128,147 $115,046
Total revenues $176,413 11.0 $158,947 $143,501 $132,807 $119,789
Total expenses $132,205 9.3 $120,978 $112,517 $104,741 $ 95,817
Income before taxes $ 44,208 16.4 $ 37,969 $ 30,984 $ 28,066 $ 23,972
Net income(3) $ 27,172 16.4 $ 23,349 $ 18,988 $ 17,391 $ 15,402
Net income per share $ 1.98 16.5 $ 1.70 $ 1.39 $ 1.28 $ 1.13
Weighted average number
of shares outstanding 13,736 13,704 13,639 13,576 13,600
Dividends declared per
share $ 0.4600 $ 0.4100 $ 0.3533 $ 0.3267 $ 0.3200
Total assets $235,163 $232,129 $206,101 $189,646 $161,747
Long-term debt $ 3,909 $ 17,378 $ 6,452 $ 5,485 $ 7,615
Shareholders' equity(4) $103,026 $ 83,680 $ 76,240 $ 67,378 $ 54,604
(1) All share and per-share information has been restated to give
effect to the three-for-two stock split, which became effective
February 27, 1998. Prior years' results have been restated to
reflect the stock acquisitions of Insurance West in 1995, Daniel-
James in 1998 and Ampher-Ross and Signature Insurance Group in
1999.
(2) See Notes 2 and 3 to consolidated financial statements for information
regarding business purchase transactions which impact the comparability
of this information.
(3) During 1995, the Company reduced its general tax reserved by $451,000,
or $0.0333 per share, respectively, as a result of reaching a
settlement with the Internal Revenue Service on certain examination
issues.
(4) Shareholders' equity as of December 31, 1999, 1998, 1997, 1996 and 1995
included net increases of $4,922,000, $5,540,000, $6,511,000 and
$4,836,000, respectively, as a result of the Company's application of
SFAS 15, "Accounting for Certain Investments in Debt and Equity
Securities."
Restatement of Financial Information
On July 20, 1999, Brown & Brown (the Company) acquired Ampher
Insurance, Inc. and Ross Insurance of Florida, Inc. through an
exchange of shares. Additionally, on November 10, 1999, the
Company acquired Signature Insurance Group, Inc. also through an
exchange of shares.
These transactions were both accounted for utilizing the
pooling-of-interests method of accounting and, accordingly, the
Company was required to restate its consolidated financial
statements for all years presented in this Annual Report. The
purpose of a restatement is to present as one combined entity the
historical financial data of two (or more) previously separate and
distinct legal entities. The financial data that is contained in
the Management's Discussion and Analysis, the Consolidated
Financial Statements and Notes to Consolidated Financial
Statements reflect this restatement.
Consistent with last year's presentation, as a means of
comparison, the tables below depict the Company's revenues, pre-
tax margins and earnings per share for 1994-1999 both before and
after the restatement.
REVENUE (in thousands) PRE-TAX MARGIN EARNINGS PER SHARE
Original Restated Original Restated Original Restated
1994 $101,580 $114,525 20.3 % 18.7 % $ 1.04 $ 1.06
1995 106,365 119,789 21.9 % 20.0 % 1.13 1.13
1996 118,680 132,807 22.8 % 21.1 % 1.27 1.28
1997 129,191 143,501 24.5 % 21.6 % 1.48 1.39
1998 153,791 158,947 24.4 % 23.9 % 1.72 1.70
1999 $176,413 $176,413 25.1 % 25.1 % $ 1.98 $ 1.98
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
In April of 1993, Poe & Associates, Inc., headquartered in Tampa,
Florida, merged with Brown & Brown, Inc., headquartered in Daytona
Beach, Florida, forming Poe & Brown, Inc. In April of 1999, the
shareholders voted to change the name to Brown & Brown, Inc. (the
"Company"). Since that merger, the Company's operating results
have steadily improved. The Company achieved pre-tax income from
operations of $44,208,000 in 1999, compared to $37,969,000 in 1998
and $30,984,000 in 1997. Pre-tax income as a percentage of total
revenues was 25.1% in 1999, 23.9% in 1998 and 21.6% in 1997. This
upward trend is primarily the result of the Company's achievement
of revenue growth and operating efficiency improvements.
The Company's revenues are comprised principally of
commissions paid by insurance companies, fees paid directly by
clients and investment income. Commission revenues generally
represent a percentage of the premium paid by the insured and are
materially affected by fluctuations in both premium rate levels
charged by insurance underwriters and the volume of premiums
written by such underwriters. These premium rates are established
by insurance companies based upon many factors, none of which is
controlled by the Company. Beginning in 1986 and continuing
through 1999, revenues have been adversely influenced by a
consistent decline in premium rates resulting from intense
competition among property and casualty insurers for expanding
market share. Among other factors, this condition of prevailing
decline in premium rates, commonly referred to as a "soft market,"
has generally resulted in flat to reduced commissions on renewal
business. The possibility of rate increases in 2000 is
unpredictable.
The development of new and existing proprietary programs,
fluctuations in insurable exposure units and the volume of
business from new and existing clients, and changes in general
economic and competitive conditions further impact revenues. For
example, stagnant rates of inflation in recent years have
generally limited the increases in insurable exposure units such
as property values, sales and payroll levels. Conversely, the
increasing trend in litigation settlements and awards has caused
some clients to seek higher levels of insurance coverage. Still,
the Company's revenues continue to grow through quality
acquisitions, intense initiatives for new business and development
of new products, markets and services. The Company anticipates
that results of operations for 2000 will continue to be influenced
by these competitive and economic conditions.
On July 20, 1999, the Company acquired Ampher Insurance, Inc.
and Ross Insurance of Florida, Inc. through an exchange of shares.
Additionally, on November 10, 1999, the Company acquired Signature
Insurance Group, Inc. and C, S & D, a Florida general partnership,
also through an exchange of shares. On April 14, 1998 the Company
acquired Daniel-James Insurance Agency, Inc. and Becky-Lou Realty
Limited, through an exchange of shares. Each of these transactions
has been accounted for as a pooling-of-interests and, accordingly,
the Company's consolidated financial statements have been restated
for all periods prior to the acquisitions to include the results
of operations, financial positions and cash flows of the acquired
entities.
During 1999, the Company acquired the assets of six general
insurance agencies, several books of business (customer accounts)
and the outstanding shares of two general insurance agencies. Each
of these transactions was accounted for as a purchase. On December
30, 1999, the Company acquired all of the outstanding stock of
Roswell Insurance & Surety Agency, Inc. This transaction was
accounted for as a pooling-of-interests; however, the financial
statements for all prior periods were not restated due to the
immaterial nature of the transaction.
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During 1998, the Company acquired the assets of nineteen
general insurance agencies, several books of business and the
outstanding shares of one general insurance agency. Each of these
transactions was accounted for as a purchase.
During 1997, the Company acquired three general insurance
agencies and several books of business, all of which were
accounted for as purchases. On August 1, 1997, the Company
acquired all of the outstanding stock of Shanahan, McGrath &
Bradley, Inc. This transaction was accounted for as a pooling-of-
interests; however, the financial statements for all prior periods
were not restated due to the immaterial nature of the transaction.
Contingent commissions may be paid to the Company by
insurance carriers based upon the volume, growth and/or
profitability of the business placed with such carriers by the
Company and are primarily received in the first quarter of each
year. In the last three years, contingent commissions have
averaged approximately 4.7% of
total revenues.
Fee revenues are generated principally by the Service
Division of the Company, which offers administration and benefit
consulting services primarily in the workers' compensation and
employee benefit self-insurance markets. For the past three years,
service fee revenues have generated an average of 8.7% of total
commissions
and fees.
Investment income consists primarily of interest earnings on
premiums and advance premiums collected and not immediately
remitted to insurance carriers, with such funds being held in a
fiduciary capacity. The Company's policy is to invest its
available funds in high-quality, short-term fixed income
investment securities. Investment income also includes gains and
losses realized from the sale of investments. In 1999, investment
income included a gain of approximately $140,000 resulting from
the Company's disposition of its investment in the 37th Street
Properties partnership. For 1998, investment income included a
$165,000 realized gain from the sale of the Company's investments
in AmSouth Bancorporation and United States Filter Corporation. in
1997, investment income included a $303,000 realized gain from the
sale of the Company's investment in Fort Brooke Bank.
The following discussion and analysis regarding results of
operations and liquidity and capital resources should be
considered in conjunction with the accompanying consolidated
financial statements and related notes.
Results of Operations for the Years Ended
December 31, 1999, 1998 and 1997
Commissions and Fees
Commissions and fees increased 11% in 1999, 13% in 1998 and 8% in
1997. Excluding the effect of acquisitions, commissions and fees
increased 2% in 1999, 2% in 1998 and 6% in 1997. The 1999 results
reflect an increase in commissions for three of the four operating
divisions. The National Programs division posted a decrease in
commissions for 1999. In general, property and casualty insurance
premium prices continued to decline in 1999, which was primarily
responsible for the slower growth rate; however, certain segments
and industries had some increases in insurable exposure units
during the year.
Investment Income
Investment income decreased to $2,560,000 in 1999 compared to
$3,325,000 in 1998 and $4,241,000 in 1997. This decrease is
primarily due to lower levels of invested cash precipitated by the
Company's ongoing acquisition strategy in both 1999 and 1998.
Additionally, the 1997 results included a $303,000 gain from the
sale of the Company's investment in Fort Brooke Bank.
Other Income
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Other income consists primarily of gains and losses from the sale
and disposition of assets. During 1999, gains from the sale of
customer accounts were $1,162,000 compared to losses of $115,000
in 1998 and gains of $646,000 in 1997. The gain in 1999 was
primarily attributable to the disposition of certain accounts in
the Lawyer's Protector Plan(r) of the Company's National Programs
Division. The loss in 1998 was due primarily to the disposition of
the Company's Charlotte, North Carolina operation.
Employee Compensation & Benefits
Employee compensation and benefits increased approximately 10% in
1999, 9% in 1998 and 8% in 1997. Employee compensation and
benefits as a percentage of total revenue was 51% in 1999, down
from 52% in both 1998 and 1997. The Company had 1,370 full-time
employees at December 31, 1999, compared to 1,417 at the beginning
of the year. The decrease in personnel during 1999 is primarily
attributable to the restructuring of the National Programs
Division. The 1999 increase in compensation and employee benefits
of $8,436,000 is attributable to several factors, including higher
levels of both producer commissions and profit center bonuses
resulting from the Company's proportionate increases in revenue
and profitability.
Other Operating Expenses
Other operating expenses increased 3% in 1999, 5% in 1998 and 6%
in 1997. Other operating expenses as a percentage of total
revenues decreased to 19% in 1999 from 20% in 1998 and 22% in
1997. The continuing decline in operating expenses, expressed as a
percentage of total revenues, is primarily attributable to the
effective cost containment measures brought about by the Company's
"Project 28" initiative, designed to identify areas of excess
expense.
Interest and Amortization
Interest expense increased $115,000, or 20%, in 1999, and
decreased $405,000, or 42%, in 1998. Interest expense decreased
$2,000 in 1997. The increase in 1999 is due to higher levels of
debt during the first quarter of 1999 and the assumption of debt
in certain pooling acquisitions.
Amortization expense increased $1,804,000, or 31%, in 1999,
$213,000, or 4%, in 1998, and $434,000, or 8%, in 1997. The
increase in 1999 is due to the additional amortization of
intangibles as a result of both 1999 and 1998 acquisitions. The
increase in 1997 is due primarily to the $670,000 write-off of the
remaining intangible assets related to a terminated purchase
contract agreement.
Income Taxes
The effective tax rate on income from operations was 38.5% in both
1999 and 1998, and 38.7% in 1997.
Liquidity and Capital Resources
The Company's cash and cash equivalents of $37,459,000 at December
31, 1999 decreased by $5,366,000 from $42,825,000 at December 31,
1998. During 1999, $39,728,000 of cash was provided from operating
activities. From this amount and existing cash balances,
$18,154,000 was used to acquire businesses, $17,106,000 was used
to repay long-term debt, $6,237,000 was used for payment of
dividends, $4,936,000 was used for additions to fixed assets and
$1,152,000 was used for purchases of the Company's stock.
The Company's cash and cash equivalents of $42,825,000 at
December 31, 1998, decreased $6,623,000 from the December 31, 1997
balance of $49,448,000. During 1998, cash of $37,833,000 was
provided from operating activities and $12,000,000 was received
from long-term debt financing. From these amounts and existing
cash balances, $29,608,000 was used to acquire businesses,
$9,233,000 was used for purchases of the Company's stock,
$7,835,000 was used to repay
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long-term debt, $5,494,000 was used
for payment of dividends, $4,560,000 was used for fixed asset
additions and $1,184,000 was used for purchases of investments.
The Company's cash and cash equivalents of $49,448,000 at
December 31, 1997 increased $15,428,000 from the December 31, 1996
balance of $34,020,000. During 1997, cash of $31,507,000 was
provided from operating activities. From this amount, $5,860,000
was used for purchases of the Company's stock, $4,636,000 was used
for payment of dividends, $3,072,000 was used to acquire
businesses, $2,915,000 was used for fixed asset additions and
$2,824,000 was used for payments on long-term debt.
The Company's current ratio was .95, 1.02 and 1.11 at
December 31, 1999, 1998 and 1997, respectively. The decrease in
the current ratio in 1999 is primarily attributable to the
repayment of long-term debt during 1999.
The Company continues to maintain its credit agreement with
a major insurance company under which $4 million (the maximum
amount available for borrowing) was outstanding at December 31,
1999. The available amount will decrease by $1 million each August
beginning in 2000. The credit agreement requires the Company to
maintain certain financial ratios and comply with certain other
covenants.
The Company also has a revolving credit facility with a
national banking institution that provides for available
borrowings of up to $50 million, with a maturity date of October
2000. On borrowings of up to $8 million, the outstanding balance
is adjusted daily based upon cash flows from operations. The
interest rate on this portion of the facility is equal to the
prime rate less 1% (7.50% at December 31, 1999). On borrowings in
excess of $8 million, the interest rate on this portion of the
facility is LIBOR plus 0.45% to 1.25%, depending on certain
financial ratios that are calculated on a quarterly basis. A
commitment fee of 0.125% per annum is assessed on the unused
balance. At December 31, 1999, there were no borrowings against
the facility; at December 31, 1998, $12 million was outstanding.
The Company believes that its existing cash, cash
equivalents, short-term investment portfolio, funds generated from
operations and the availability of the bank line of credit will be
sufficient to satisfy its normal financial needs through at least
the end of 2000. Additionally, the Company believes that funds
generated from future operations will be sufficient to satisfy its
normal financial needs, including the required annual principal
payments of its long-term debt and any potential future tax
liability.
Year 2000 Data Conversion
The Company has not experienced any material disruption as a
result of Year 2000 issues and does not anticipate any material
problems in the future. The costs incurred in remediating
potential Year 2000 problems did not differ materially from the
Company's prior estimates.
Forward-Looking Statements
From time to time, the Company may publish "forward-looking
statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, or make verbal statements that
constitute forward-looking statements. These forward-looking
statements may relate to such matters as anticipated financial
performance of future revenues or earnings, business prospects,
projected acquisitions or ventures, new products or services,
anticipated market performance, compliance costs, and similar
matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to
comply with the terms of the safe harbor, the Company cautions
readers that a variety of factors could cause the Company's actual
results to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking
statements. These risks and uncertainties, many of which are
<PAGE 6>
beyond the Company's control, include, but are not limited to: (i)
competition from existing insurance agencies and new participants
and their effect on pricing of premiums; (ii) changes in
regulatory requirements that could affect the cost of doing
business; (iii) legal developments affecting the litigation
experience of the insurance industry; (iv) the volatility of the
securities markets; (v) the potential occurrence of a major
natural disaster in certain areas of the State of Florida, where
the Company's business is concentrated, and (vi) general economic
conditions. The Company does not undertake any obligation to
publicly update or revise any forward-looking statements.
Consolidated Statements of Income
Year Ended December 31,
(in thousands, except per share data) 1999 1998 1997
REVENUES
Commissions and fees $172,546 $155,577 $138,112
Investment income 2,560 3,325 4,241
Other income 1,307 45 1,148
Total revenues 176,413 158,947 143,501
EXPENSES
Employee compensation and benefits 90,440 82,004 74,931
Other operating expenses 33,424 32,552 30,972
Amortization 7,657 5,853 5,640
Interest 684 569 974
Total expenses 132,205 120,978 112,517
Income before income taxes 44,208 37,969 30,984
Income taxes 17,036 14,620 11,996
Net income $ 27,172 $ 23,349 $ 18,988
Other comprehensive income,
net of tax:
Unrealized holding (loss) gain,
net of tax benefit (expense) of
$395 in 1999, $770 in 1998 and
($149) in 1997 on securities (618) (1,204) 233
COMPREHENSIVE INCOME $ 26,554 $ 22,145 $ 19,221
Basic and diluted earnings per share $ 1.98 $ 1.70 $ 1.39
Weighted average number of shares
outstanding 13,736 13,704 13,639
See notes to consolidated financial statements.
Consolidated Balance Sheets
Year Ended December 31,
(in thousands, except per share data) 1999 1998
ASSETS
Cash and cash equivalents $ 37,459 $ 42,825
Short-term investments 481 805
Premiums, commissions and fees receivable 67,783 69,736
Other current assets 7,214 9,873
Total current assets 112,937 123,239
Fixed assets, net 14,337 13,777
Intangibles, net 91,813 79,704
Investments 9,449 10,503
Other assets 6,627 4,906
Total assets $235,163 $232,129
LIABILITIES
Premiums payable to insurance companies $ 87,737 $ 90,346
Premium deposits and credits due customers 7,771 8,379
Accounts payable and accrued expenses 20,458 17,154
Current portion of long-term debt 3,548 4,960
Total current liabilities 119,514 120,839
Long-term debt 3,909 17,378
Deferred income taxes 1,578 2,403
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Other liabilities 7,136 7,829
Total liabilities 132,137 148,449
SHAREHOLDERS' EQUITY
Common stock, par value $.10 per share;
authorized 70,000 shares; issued 13,720
shares at 1999 and 13,770 shares at 1998 1,372 1,377
Retained earnings 96,732 76,763
Accumulated other comprehensive income,
net of tax effect of $3,147 at 1999 and
$3,542 at 1998 4,922 5,540
Total shareholders' equity 103,026 83,680
Total liabilities and shareholders' equity $235,163 $232,129
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
Common Stock Accumulated
Other
Additional Compre-
Paid-in Retained hensive
(in thousands, Shares Amount Capital Earnings Income Total
except per share
data)
BALANCE, JANUARY 1,
1997 13,535 $ 1,354 $ 1,211 $ 58,302 $ 6,511 $ 67,378
Net income 18,988 18,988
Acquired and issued
for employee stock
benefit plans and
stock acquisitions 123 12 (1,211) (3,925) (5,124)
Net increase in
unrealized appre-
ciation of
available-for-
sale securities 233 233
Shareholder
distributions
from pooled
entities (600) (600)
Cash dividends paid
($.3533 per share) (4,636) (4,636)
BALANCE,
DECEMBER 31,
1997 13,658 1,366 - 68,129 6,744 76,239
Net income 23,349 23,349
Acquired and
issued for
employee
stock benefit
plans and stock
acquisitions 112 11 - (8,388) (8,377)
Net decrease in
unrealized
appreciation of
available-for-
sale securities (1,204) (1,204)
Shareholder
distributions
from pooled
entities (833) (833)
Cash dividends paid
($.4100 per share) (5,494) (5,494)
BALANCE,
DECEMBER 31,
1998 13,770 1,377 - 76,763 5,540 83,680
Net income 27,172 27,172
Acquired and
issued for
employee stock
benefit plans
and stock
acquisitions (50) (5) - 95 90
Net decrease in
unrealized
appreciation
of available-
for-sale
securities (618) (618)
Shareholder
distributions
from pooled
entities (1,061) (1,061)
Cash dividends
paid
($.4600 per share) (6,237) (6,237)
BALANCE,
DECEMBER 31,
1999 13,720 $ 1,372 $ - $ 96,732 $ 4,922 $103,026
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Year Ended December 31,
(in thousands) 1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<PAGE 8>
Net income $ 27,172 $ 23,349 $ 18,988
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4,152 3,565 3,190
Amortization 7,657 5,853 5,640
Compensation expense under
performance stock plan 1,263 732 176
Provision for doubtful accounts - - 250
Deferred income taxes (430) 271 (94)
Net (gains) losses on sales of
investments, fixed assets
and customer accounts (452) 406 (933)
Premiums, commissions and fees
receivable decrease (increase) 1,953 (2,525) (545)
Other assets increase (851) (1,432) (1,294)
Premiums payable to insurance
companies (decrease) increase (2,608) 6,837 1,236
Premium deposits and credits due
customers (decrease) increase (608) 1,344 (294)
Accounts payable and accrued
expenses increase (decrease) 3,303 (1,814) 4,848
Other liabilities (decrease) increase (823) 1,247 339
Net cash provided by operating
activities 39,728 37,833 31,507
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (4,936) (4,560) (2,915)
Payments for businesses acquired,
net of cash acquired (18,154) (29,608) (3,072)
Proceeds from sales of fixed
assets and customer accounts 647 148 597
Purchases of investments (124) (1,184) (262)
Proceeds from sales of investments 627 1,030 557
Net cash used in investing activities (21,940) (34,174) (5,095)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (17,106) (7,835) (2,824)
Proceeds from long-term debt 738 12,000 2,068
Exercise of stock options and
issuances of stock 1,664 1,113 868
Purchases of stock (1,152) (9,233) (5,860)
Shareholder distributions from pooled
entities (1,061) (833) (600)
Cash dividends paid (6,237) (5,494) (4,636)
Net cash used in financing activities (23,154) (10,282) (10,984)
Net (decrease) increase in cash and
cash equivalents (5,366) (6,623) 15,428
Cash and cash equivalents at beginning
of year 42,825 49,448 34,020
Cash and cash equivalents at end of
year $ 37,459 $ 42,825 $ 49,448
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Nature of Operations
Brown & Brown, Inc. (formerly Poe & Brown, Inc.) and subsidiaries
(the "Company") is a diversified insurance brokerage and agency
that markets and sells primarily property and casualty insurance
products and services to its clients. The Company's business is
divided into four divisions: the Retail Division, which markets
and sells a broad range of insurance products to commercial,
professional and individual clients; the National Programs
Division, which develops and administers property and casualty
insurance and employee benefits coverage for professional and
commercial groups nationwide; the Service Division, which provides
insurance-related services such as third-
<PAGE 9>
party administration and
consultation for workers' compensation and employee benefit self-
insurance markets; and the Brokerage Division, which markets and
sells excess and surplus commercial insurance primarily through
non-affiliated independent agents and brokers.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Brown & Brown, Inc. and its subsidiaries. All
significant intercompany account balances and transactions have
been eliminated in consolidation.
As more fully described in Note 2 - Mergers, the accompanying
consolidated financial statements for all periods presented have
been restated to show the effect of the acquisitions of Ampher
Insurance, Inc., Ross Insurance of Florida, Inc., Signature
Insurance Group, Inc. and C,S&D, a Florida general partnership,
during 1999, and Daniel-James Insurance Agency, Inc. during 1998.
Revenue Recognition
Commissions relating to the brokerage and agency activity whereby
the Company has primary responsibility for the collection of
premiums from insureds are generally recognized as of the latter
of the effective date of the insurance policy or the date billed
to the customer. Commissions to be received directly from
insurance companies are generally recognized when the amounts are
determined. Subsequent commission adjustments, such as policy
endorsements, are recognized upon notification from the insurance
companies. Commission revenues are reported net of sub-broker
commissions. Contingent commissions from insurance companies are
recognized when received. Fee income is recognized as services are
rendered.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents principally consist of demand deposits
with financial institutions and highly liquid investments having
maturities of three months or less when purchased. Premiums
received from insureds but not yet remitted to insurance carriers
are held in cash and cash equivalents in a fiduciary capacity.
Premiums, Commissions and Fees Receivable
In its capacity as an insurance broker or agent, the Company
typically collects premiums from insureds and, after deducting its
authorized commission, remits the premiums to the appropriate
insurance companies. In other circumstances, the insurance
companies collect the premiums directly from the insureds and
remit the applicable commissions to the Company. Accordingly, as
reported in the Consolidated Balance Sheets, "premiums" are
receivable from insureds and "commissions" are receivable from
insurance companies. "Fees" are receivable from customers
pertaining to the Company's Service Division.
Investments
The Company's marketable equity securities have been classified as
"available-for-sale" and are reported at estimated fair value,
with the accumulated other comprehensive income (unrealized gains
and losses), net of tax, reported as a separate component of
shareholders' equity. Realized gains and losses and
<PAGE 10>
declines in value judged to be other-than-temporary on available-for-sale
securities are included in investment income. The cost of
securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-
sale are included in investment income.
Nonmarketable equity securities and certificates of deposit
having maturities of more than three months when purchased are
reported at cost, adjusted for other-than-temporary market value
declines.
Accumulated other comprehensive income reported in
shareholders' equity was $4,922,000 at December 31, 1999 and
$5,540,000 at December 31, 1998, net of deferred income taxes of
$3,147,000 and $3,542,000, respectively. The Company owned 559,970
shares of Rock-Tenn Company common stock at December 31, 1999 and
1998 which have been classified as non-current, available-for-sale
securities. The Company has no current plans to sell these shares.
Fixed Assets
Fixed assets are stated at cost. Expenditures for improvements are
capitalized and expenditures for maintenance and repairs are
charged to operations as incurred. Upon sale or retirement, the
cost and related accumulated depreciation and amortization are
removed from the accounts and the resulting gain or loss, if any,
is reflected in income. Depreciation has been provided using
principally the straight-line method over the estimated useful
lives of the related assets, which range from three to ten years.
Leasehold improvements are amortized on the straight-line method
over the term of the related leases.
Intangibles
Intangible assets are stated at cost less accumulated amortization
and principally represent purchased customer accounts, non-compete
agreements, acquisition costs, purchased contract agreements and
the excess of costs over the fair value of identifiable net assets
acquired (goodwill). Purchased customer accounts, non-compete
agreements, acquisition costs, and purchased contract agreements
are being amortized on a straight-line basis over the related
estimated lives and contract periods, which range from five to 15
years. The excess of costs over the fair value of identifiable net
assets acquired is being amortized on a straight-line basis over
15 to 40 years. Purchased customer accounts are records and files
obtained from acquired businesses that contain information on
insurance policies and the related insured parties that is
essential to policy renewals.
The carrying value of intangibles, corresponding with each
agency division comprising the Company, is periodically reviewed
by management to determine if the facts and circumstances suggest
that they may be impaired. In the insurance brokerage and agency
industry, it is common for agencies or customer accounts to be
acquired at a price determined as a multiple of the corresponding
revenues. Accordingly, the Company assesses the carrying value of
its intangibles by comparison to a reasonable multiple applied to
corresponding revenues, as well as considering the operating cash
flow generated by the corresponding agency division. Any
impairment identified through this assessment may require that the
carrying value of related intangibles be adjusted; however, no
impairments have been recorded for the years ended December 31,
1999, 1998 and 1997.
Income Taxes
The Company files a consolidated federal income tax return.
Deferred income taxes are provided for in the consolidated
financial statements and relate principally to expenses charged to
income for financial reporting purposes in one period and deducted
for income tax purposes in other periods, unrealized appreciation
of available-for-sale securities and basis differences of
intangible assets.
Earnings Per Share
<PAGE 11>
Basic earnings per share (EPS) is computed by dividing income
available to common shareholders by the weighted-average number of
common shares outstanding for the period. Basic EPS excludes
dilution and Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock
were exercised or converted to common stock.
Accounting Standards
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income" (SFAS 130). SFAS 130 establishes new standards for the
reporting and display of comprehensive income and its components.
Comprehensive income, as defined, includes all changes in equity
(net assets) during a period from non-owner sources. Adoption of
this Statement had no impact on the Company's consolidated
financial position, results of operations or cash flows.
On January 1, 1998, the Company adopted SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 131 requires the Company to report
summarized financial information concerning the Company's
reportable segments, as disclosed in Note 14. Adoption of this
Statement had no impact on the Company's consolidated financial
position, results of operations or cash flows.
Note 2 Mergers
On July 20, 1999, the Company issued 167,328 shares of its common
stock in exchange for all of the outstanding stock of Ampher
Insurance, Inc. and Ross Insurance of Florida, Inc. (collectively
referred to as "Ampher-Ross"), both Florida corporations with an
office in Ft. Lauderdale, Florida.
On November 10, 1999, the Company issued 105,385 shares of
its common stock in exchange for all of the outstanding stock of
Signature Insurance Group, Inc. ("Signature"), a Florida
corporation with an office in Ocala, Florida, and for all of the
outstanding membership interests of C,S&D, a Florida general
partnership established in January 1999.
These transactions have been accounted for under the pooling-
of-interests method of accounting, and accordingly, the Company's
consolidated financial statements and related notes have been
restated for all periods prior to the acquisitions to include the
results of operations, financial positions and cash flows of
Ampher-Ross, Signature and C,S&D.
The following table reflects the 1998 and 1997 individual and
combined operating results of the Company, Ampher-Ross, Signature
and C,S&D.
Audited Unaudited
Brown & Ampher-
(in thousands of Brown Ross Signature C,S&D Combined
dollars,except
per share data)
1998
Revenues $153,791 $ 2,994 $ 2,162 $ - $158,947
Net Income 23,053 86 210 - 23,349
1997
Revenues $138,607 $ 2,761 $ 2,133 $ - $143,501
Net Income 18,666 64 258 - 18,988
1998 1997
NET INCOME PER SHARE
As previously recorded $ 1.72 $ 1.40
As combined $ 1.70 $ 1.39
On April 14, 1998, the Company issued 278,765 shares of
its common stock in exchange for all of the outstanding stock of
Daniel-James Insurance
<PAGE 12>
Agency, Inc. ("Daniel-James"), an Ohio
corporation with offices in Toledo, Ohio and Indianapolis,
Indiana, and for all of the outstanding membership interests of
Becky-Lou Realty Limited ("Becky-Lou"), an Ohio limited liability
company. This transaction has been accounted for as a pooling-of-
interests and, accordingly, the Company's consolidated financial
statements and related notes to the consolidated financial
statements have been restated for all periods prior to the
acquisition to include the results of operations, financial
positions and cash flows of Daniel-James and Becky-Lou.
The following table reflects the 1997 individual and combined
operating results of the Company, Daniel-James and Becky-Lou.
Audited Unaudited
Brown & Daniel-
(in thousands of dollars, Brown James Becky-Lou Combined
except per share data)
1997
Revenues $129,190 $ 9,215 $ 202 $138,607
Net Income 19,386 (774) 54 18,666
1997
NET INCOME PER SHARE
As previously recorded $ 1.48
As combined $ 1.40
Note 3 Acquisitions
During 1999, the Company acquired the assets of six general
insurance agencies, several books of business (customer accounts)
and the outstanding stock of two general insurance agencies at an
aggregate cost of $19,612,000, including $18,154,000 of net cash
payments and the issuance of notes payable in the amount of
$1,458,000. Each of these acquisitions was accounted for as a
purchase, and substantially the entire cost was assigned to
purchased customer accounts, non-compete agreements and goodwill.
The results of operations for the acquired companies have been
combined with those of the Company since their respective
acquisition dates. Due to the aggregate immaterial nature of these
transactions, 1999 pro forma disclosure is not presented.
During 1998, the Company acquired the assets of 19 general
insurance agencies, several books of business and the outstanding
shares of one general insurance agency at an aggregate cost of
$34,599,000, including $29,608,000 of net cash payments and the
issuance of notes payable in the aggregate amount of $4,991,000.
These acquisitions were accounted for as purchases and
substantially the entire cost was assigned to purchased customer
accounts, non-compete agreements and goodwill.
The results of operations for the acquisitions completed
during 1998 have been combined with those of the Company since
their respective acquisition dates. If the acquisitions had
occurred at the beginning of the years presented, the Company's
results of operations would be as shown in the following table.
These unaudited pro forma results are not necessarily indicative
of the actual results of operations that would have occurred had
the acquisitions actually been made at the beginning of the
respective periods.
Unaudited
(in thousands, except per share data) Year Ended December 31,
1998 1997
Total revenues $167,700 $166,577
Income before taxes 38,832 33,192
Net income 23,876 20,335
Earnings per share $ 1.74 $ 1.49
During 1997, the Company acquired four general insurance
agencies and several books of business, all of which were
accounted for as purchases. The
<PAGE 13>
total cost of these acquisitions
was $5,439,000, including $3,072,000 of cash payments and notes
payable of $2,367,000. The total purchase price was assigned to
purchased customer accounts, non-compete agreements and goodwill.
The results of operations for the acquired companies have been
combined with those of the Company since their respective
acquisition dates.
Additional or return consideration resulting from acquisition
contingency provisions is recorded as an adjustment to intangibles
when the contingency is settled. Payments of this nature totaling
$1,611,000, $1,536,000 and $154,000 were made in 1999, 1998 and
1997, respectively. As of December 31, 1999, the maximum future
contingency payments related to acquisitions totaled $4,977,000.
Note 4 Investments
Investments at December 31 consisted of the following:
1999
Carrying Value
Non-
(in thousands) Current Current
Available-for-sale marketable equity securities $ 197 $ 9,449
Nonmarketable equity securities and certificates
of deposit 284 -
Total investments $ 481 $ 9,449
1998
Carrying Value
Non-
(in thousands) Current Current
Available-for-sale marketable equity securities $ 235 $ 10,503
Nonmarketable equity securities and certificates
of deposit 570 -
Total investments $ 805 $ 10,503
The following summarizes available-for-sale securities at
December 31:
Gross Gross
Unrealized Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
Marketable Equity Securities:
1999 $ 1,576 $ 8,095 $ 25 $ 9,646
1998 $ 1,655 $ 9,093 $ 10 $10,738
In 1999, proceeds from sales of available-for-sale securities
totaled $627,000, resulting in gross realized gains of
approximately $138,000. Proceeds from sales of available-for-sale
securities totaled $1,030,000 in 1998, resulting in gross realized
gains of approximately $165,000. In 1997, proceeds from sales of
available-for-sale securities totaled $557,000, resulting in gross
realized gains and losses of approximately $349,000 and ($23,000),
respectively.
Cash and cash equivalents, investments, premiums and
commissions receivable, premiums payable to insurance companies,
premium deposits and credits due customers, accounts payable and
accrued expenses, and current and long-term debt are considered
financial instruments. The carrying amount for each of these items
at both December 31, 1999 and 1998 approximates its fair value.
Note 5 Fixed Assets
Fixed assets at December 31 consisted of the following:
(in thousands) 1999 1998
<PAGE 14>
Furniture, fixtures and equipment $ 32,661 $ 31,003
Land, buildings and improvements 2,092 1,361
Leasehold improvements 1,755 1,418
$ 36,508 $ 33,782
Less accumulated depreciation and
amortization 22,171 20,005
$ 14,337 $ 13,777
Depreciation expense amounted to $4,152,000 in 1999,
$3,565,000 in 1998 and $3,190,000 in 1997.
Note 6 Intangibles
Intangibles at December 31 consisted of the following:
(in thousands) 1999 1998
Purchased customer accounts $ 87,955 $ 74,620
Non-compete agreements 21,653 19,111
Goodwill 32,312 28,577
Acquisition costs 1,705 1,552
143,625 123,860
Less accumulated amortization 51,812 44,156
$ 91,813 $ 79,704
Amortization expense amounted to $7,657,000 in 1999,
$5,853,000 in 1998 and $5,640,000 in 1997.
Note 7 Long-Term Debt
Long-term debt at December 31 consisted of the following:
(in thousands) 1999 1998
Long-term credit agreement $ 4,000 $ 4,000
Revolving credit facility - 12,000
Notes payable from treasury stock purchases 395 647
Acquisition notes payable 2,372 5,520
Other notes payable 690 171
7,457 22,338
Less current portion 3,548 4,960
Long-term debt $ 3,909 $ 17,378
In 1991, the Company entered into a long-term credit
agreement with a major insurance company that provided for
borrowings at an interest rate equal to the prime rate plus 1%
(9.50% at December 31, 1999). At December 31, 1999, $4 million
(the maximum amount currently available for borrowings) was
outstanding. In accordance with an August 1, 1998 amendment to the
loan agreement, the outstanding balance will be repaid in annual
installments of $1 million each August beginning in 2000. This
credit agreement requires the Company to maintain certain
financial ratios and comply with certain other covenants.
The Company also has a revolving credit facility with a
national banking institution that provides for available
borrowings of up to $50 million, with a maturity date of October
2000. On borrowings of up to $8 million, the outstanding balance
is adjusted daily based upon cash flows from operations. The
interest rate on this portion of the facility is equal to the
prime rate
<PAGE 15>
less 1% (7.50% at December 31, 1999). On borrowings in
excess of $8 million, the interest rate on this portion of the
facility is LIBOR plus 0.45% to 1.25%, depending on certain
financial ratios that are calculated on a quarterly basis. A
commitment fee of 0.125% per annum is assessed on the unused
balance. At December 31, 1999, there were no borrowings against
the facility; at December 31, 1998, $12 million was outstanding.
Treasury stock notes payable are due to various individuals
for the redemption of Brown & Brown, Inc. stock. These notes bear
no interest and have maturities ranging from calendar years ending
2000 and 2001. These notes have been discounted at an effective
yield of 8.50% for presentation in the consolidated financial
statements.
Acquisition notes payable represent debt incurred to former
owners of certain agencies acquired in 1999, 1998 and 1997. These
notes, including future contingent payments, are payable in
monthly and annual installments through 2002, including interest
of 6%.
Maturities of long-term debt for succeeding years are
$3,548,000 in 2000, $1,283,000 in 2001, $1,049,000 in 2002,
$1,053,000 in 2003 and $524,000 in 2004 and beyond.
Note 8 Income Taxes
At December 31, 1999, the Company had a net operating loss
carryforward of $302,000 for income tax reporting purposes,
portions of which expire in the years 2000 through 2013. This
carryforward was derived from an agency acquired by the Company in
1998. For financial reporting purposes, a valuation allowance of
$38,000 has been recognized to offset the deferred tax asset
related to this carryforward.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the corresponding
amounts used for income tax reporting purposes. Significant
components of the Company's deferred tax liabilities and assets as
of December 31 are as follows:
(in thousands) 1999 1998
Deferred tax liabilities:
Fixed assets $ 1,087 $ 1,228
Net unrealized appreciation of
available-for-sale securities 3,147 3,542
Installment sales - 2
Prepaid insurance and pension 721 771
Intangible assets 237 208
Total deferred tax liabilities $ 5,192 $ 5,751
Deferred tax assets:
Deferred compensation $ 2,249 $ 1,926
Accruals and reserves 954 1,010
Net operating loss carryforwards 179 179
Other 270 271
Valuation allowance for deferred
tax assets (38) (38)
Total deferred tax assets $ 3,614 $ 3,348
Net deferred tax liabilities $ 1,578 $ 2,403
Significant components of the provision (benefit) for income
taxes are as follows:
(in thousands) 1999 1998 1997
Current:
Federal $ 15,015 $ 12,367 $ 10,534
State 2,451 1,955 1,730
Total current provision $ 17,466 $ 14,322 $ 12,264
Deferred:
Federal (386) 267 (228)
State (44) 31 (40)
Total deferred (benefit)
<PAGE 16>
provision (430) 298 (268)
Total tax provision $ 17,036 $ 14,620 $ 11,996
A reconciliation of the differences between the effective tax
rate and the federal statutory tax rate is as follows:
1999 1998 1997
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
State income taxes, net of
federal income tax benefit 3.6 3.4 3.7
Interest exempt from taxation
and dividend exclusion (0.3) (0.2) (0.8)
Non-deductible goodwill
amortization 0.4 0.4 0.4
Other, net (0.2) (0.1) 0.4
Effective tax rate 38.5 % 38.5 % 38.7 %
Income taxes payable were $2,464,000 and $1,463,000 at
December 31, 1999 and December 31, 1998, respectively, and are
reported as a component of accounts payable and accrued expenses.
Note 9 Employee Benefit Plan
The Company has an Employee Savings Plan (401(k)) under which
substantially all employees with more than 30 days of service are
eligible to participate. Under this plan, the Company makes
matching contributions, subject to a maximum of 2.5% of each
participant's salary. Further, the Company provides for a
discretionary profit sharing contribution for all eligible
employees. The Company's contributions to the plan totaled
$2,400,000 in 1999, $2,174,000 in 1998 and $1,876,000 in 1997.
Note 10 Stock-Based Compensation and Incentive Plans
Employee Stock Purchase Plan
The Company has adopted an employee stock purchase plan ("the
Stock Purchase Plan"), which allows for substantially all
employees to subscribe to purchase shares of the Company's
stock at 85% of the lesser of the market value of such shares
at the beginning or end of each annual subscription period. Of the
750,000 shares authorized for issuance under the Stock Purchase
Plan as of December 31, 1999, 332,606 shares remained available
and reserved for future issuance.
The Company accounts for the Stock Purchase Plan under
Accounting principles Board (APB) No. 25, "Accounting for Stocks
Issued to Employees," under which no compensation expense has been
recognized. Had compensation expense for the Stock Purchase Plan
been determined consistent with SFAS 123, "Accounting for Stock-
Based Compensation," it would have had an immaterial effect on the
Company's net income and earnings per share for the years ended
December 31, 1999, 1998 and 1997.
Stock Performance Plan
The Company has adopted a stock performance plan, under which up
to 900,000 shares of the Company's stock ("Performance Stock") may
be granted to key employees contingent on the employees' years of
service with the Company and other criteria established by the
Company's Compensation Committee. Shares must be vested before
participants take full title to Performance Stock. Of the grants
currently outstanding, specified portions will satisfy the first
condition for vesting based on increases in the market value of
the Company's common stock from the initial price specified by the
Company. Awards satisfy the second condition for vesting on the
earlier of: (i) 15 years of continuous employment with the Company
from the date shares are granted to the participant; (ii)
attainment of age 64; or (iii) death or disability of the
participant. Dividends are paid on unvested Performance Stock that
has satisfied the first vesting condition, and participants may
exercise voting privileges on such shares. At December 31, 1999,
596,482 shares had been granted under the plan at initial stock
prices ranging from $15.17 to $34.00.
<PAGE 17>
As of December 31, 1999,
331,050 shares had met the first condition for vesting; 4,800
shares had satisfied both conditions for vesting and were
subsequently distributed to the participants.
The compensation element for Performance Stock is equal to
the fair market value of the shares at the date the first vesting
condition is satisfied and is expensed over the remaining vesting
period. Compensation expense related to this Plan totaled
$1,263,000 in 1999, $732,000 in 1998 and $175,000 in 1997.
Note 11 Supplemental Disclosures of Cash Flow Information
The Company's significant non-cash investing and financing
activities and cash payments for interest and income taxes are as
follows:
Year Ended December 31,
(in thousands) 1999 1998 1997
Unrealized (depreciation)
appreciation of available-
for-sale securities net of
tax benefit (expense) of $395
for 1999,$770 for 1998 and
($149) for 1997 $ (618) $ (1,204) $ 233
Notes payable issued for purchased
customer accounts 1,458 4,991 2,367
Notes received on the sale of fixed
assets and customer accounts 1,305 1,249 187
Cash paid during the year for:
Interest 730 863 738
Income taxes 16,535 14,112 11,211
Note 12 Commitments and Contingencies
The Company leases facilities and certain items of office
equipment under noncancelable operating lease arrangements
expiring on various dates through 2009. The facility leases
generally contain renewal options and escalation clauses based on
increases in the lessors' operating expenses and other charges.
The Company anticipates that most of these leases will be renewed
or replaced upon expiration. At December 31, 1999, the aggregate
future minimum lease payments under all noncancelable lease
agreements were as follows:
Year Ending December 31, (in thousands)
2000 $ 6,128
2001 5,661
2002 5,662
2003 5,028
2004 3,556
Thereafter 4,544
Total minimum future lease payments $ 30,579
Rental expense in 1999, 1998 and 1997 for operating leases
totaled $6,314,000, $5,705,000 and $5,449,000, respectively.
The Company is not a party to any legal proceedings other
than various claims and lawsuits arising in the normal course of
business. Management of the Company does not believe that any such
claims or lawsuits will have a material effect on the Company's
financial condition or results of operations.
Note 13 Business Concentrations
Substantially all of the Company's premiums receivable from
customers and premiums payable to insurance companies arise from
policies sold on behalf of insurance companies. The Company, as
broker and agent, typically collects premiums, retains its
commission and remits the balance to the insurance companies. A
significant portion of business written by the Company is for
<PAGE 18>
customers located in Florida. Accordingly, the occurrence of
adverse economic conditions or an adverse regulatory climate in
Florida could have a material adverse effect on the Company's
business, although no such conditions have been encountered in the
past.
For the years ended December 31, 1999, 1998 and 1997,
approximately 14%, 17% and 20%, respectively, of the Company's
revenues were from insurance policies underwritten by one
insurance company. Should this carrier seek to terminate its
arrangement with the Company, the Company believes other insurance
companies are available to underwrite the business, although some
additional expense and loss of market share could possibly result.
No other insurance company accounts for as much as five percent of
the Company's revenues.
Note 14 Segment Information
The Company's business is divided into four divisions: the Retail
Division, which markets and sells a broad range of insurance
products to commercial, professional and individual clients; the
National Programs Division, which develops and administers
property and casualty insurance and employee benefits coverage
solutions for both professional and commercial groups and trade
associations nationwide; the Service Division, which provides
insurance-related services such as third-party administration and
consultation for workers' compensation and employee benefit self-
insurance markets; and the Brokerage Division, which markets and
sells excess and surplus commercial insurance primarily through
non-affiliated independent agents and brokers. The Company
conducts all of its operations in the United States of America.
The accounting policies of the reportable segments are the
same as those described in Note 1 of Notes to Consolidated
Financial Statements. The Company evaluates the performance of its
segments based upon revenues and income before income taxes.
Intersegment revenues are not significant.
Summarized financial information concerning the Company's
reportable segments is shown in the following table. The "Other"
column includes corporate-related items and, as it relates to
segment profit, income and expense not allocated to reportable
segments.
(in thousands) Retail Programs Service Brokerage Other Total
Year Ended
December 31, 1999:
Total Revenues $123,527 $ 23,822 $ 14,936 $ 15,231 $ (1,103) $176,413
Investment income 1,856 1,187 221 355 (1,059) 2,560
Interest expense 1,136 - - - (452) 684
Depreciation and
amortization 8,686 1,518 384 966 255 11,809
Income (loss) before
income taxes 26,478 7,493 2,475 5,533 2,229 44,208
Total assets 151,226 56,908 6,172 32,362 (11,505) 235,163
Capital expenditures 2,799 504 346 193 1,094 4,936
Year Ended
December 31, 1998:
Total Revenues $105,504 $ 26,737 $ 14,025 $ 13,611 $ (930) $158,947
Investment income 1,689 1,684 207 358 (613) 3,325
Interest expense 844 - - 12 (287) 569
Depreciation and
amortization 6,512 1,452 319 925 210 9,418
Income (loss) before
income taxes 21,795 9,515 2,496 4,888 (725) 37,969
Total assets 127,532 59,686 5,421 29,850 9,640 232,129
Capital expenditures 3,227 666 383 223 61 4,560
Year Ended
December 31, 1997:
Total Revenues $ 89,929 $ 26,821 $ 12,333 $ 13,440 $ 978 $143,501
Investment income 1,293 1,904 183 421 440 4,241
Interest expense 124 - - 313 537 974
Depreciation and
amortization 5,632 1,203 335 783 877 8,830
Income (loss) before
income taxes 15,523 9,657 1,964 4,783 (943) 30,984
<PAGE 19>
Total assets 113,883 58,505 4,178 29,470 65 206,101
Capital expenditures 1,789 563 259 283 21 2,915
Revenue from insurance policies underwritten by one insurance
company represents approximately $24 million of the Company's
consolidated revenues. All of the reported segments derive revenue
from this insurance company.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Brown & Brown, Inc.
We have audited the accompanying consolidated balance sheets of
Brown & Brown, Inc. and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Brown & Brown, Inc. and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999,
in conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN, LLP
Orlando, Florida
January 19, 2000