Exhibit 99.1
Hub International Net Earnings Rise Sharply for Second Quarter, First Half;
Internal Growth, Acquisitions & Expense Control Drive Improvements
CHICAGO--(BUSINESS WIRE)--July 27, 2006--Strong internal growth,
acquisition revenue and operational discipline combined to drive a 32%
increase in revenue and a 286% increase in net earnings from
continuing operations for Hub International Limited (NYSE:HBG)
(TSX:HBG) in the second quarter ended June 30, 2006. Excluding the
impact of the Talbot Charge and other items described below, net
earnings increased by 38% over the prior year.
Margins improved as cash compensation, selling, occupancy and
administration expenses declined to 71% of revenue in the second
quarter from 73% in the second quarter of 2005. The company reported
organic growth of 9%, including 8% growth of core commissions. Organic
growth includes only revenue gains from businesses owned at least a
year and excludes the impact of acquisitions made less than 12 months
ago. A stronger Canadian dollar added approximately four percentage
points to organic growth for the quarter.
"Second quarter performance was solid in essentially all areas of
our business," said Martin P. Hughes, chairman and chief executive
officer of the North American insurance broker. "As revenue increased,
we maintained strong control of expenses, which enabled us to achieve
higher margins."
For the first half of 2006, net earnings from continuing
operations grew 62% as revenue increased 22%. Excluding the Talbot
Charge and other items discussed below, net earnings increased 26%.
The company recorded 6% organic growth for the first half, including
6% growth of core commissions.
Margins Improve in Second Quarter
Second quarter revenue increased 32% to $146.0 million from $111.0
million in the same period of 2005. Core commission income, which
excludes contingent commissions, interest and other income, grew 29%
to $134.2 million from $103.8 million. Contingent commissions
increased 86% to $7.9 million from $4.2 million, while interest and
other income rose 31% to $3.9 million from $3.0 million.
Hub reported net earnings from continuing operations of $16.1
million, or $0.44 per diluted share, for the quarter, up from $4.2
million, or $0.12 in the prior year period. However, quarterly
comparisons are affected by such items as foreign exchange, the
compensation expense related to Hub's 2004 Talbot acquisition and
other factors. When adjusted for the items shown below, net earnings
from continuing operations for the second quarter increased 38% to
$17.2 million, or $0.47 per diluted share, from $12.5 million, or
$0.36 per diluted share for the same period last year.
For the three months ended 2006 2005
June 30 (per (per
2006 2005 diluted diluted
(000's) (000's) share) share)
- ----------------------------------------------------------------------
Net earnings reported under
Canadian and U.S. GAAP $16,285 $4,269 $0.44 $0.12
- ----------------------------------------------------------------------
Impact of compensation for
Talbot earnout $2,393 $8,721 $0.06 $0.25
- ----------------------------------------------------------------------
Impact of foreign exchange ($881) ($420) ($0.02) ($0.01)
- ----------------------------------------------------------------------
Impact of gain on forgiveness
of debt -- -- -- --
- ----------------------------------------------------------------------
Impact of gain on disposition
of assets ($323) -- ($0.01) --
- ----------------------------------------------------------------------
Impact of discontinued
operations ($228) ($105) -- --
- ----------------------------------------------------------------------
Net earnings adjusted for
above items $17,246 $12,465 $0.47 $0.36
- ----------------------------------------------------------------------
U.S. revenue increased 38% to $106.0 million from $76.9 million a
year earlier, including organic growth of 5%. Core commissions
increased 36% to $96.9 million from $71.1 million, while contingent
commissions grew 76% to $6.1 million from $3.5 million.
In Canada, revenue increased 17% to $40.0 million from $34.1
million in the same period of 2005, as Hub posted organic growth of
16%. Core commissions rose 14% to $37.3 million from $32.7 million,
while contingent commissions grew 127% to $1.8 million from $0.8
million. Foreign exchange impact added 11 percentage points to revenue
growth rate in Canada in the second quarter.
"We benefited from strong account retention, along with new
business generation, in the second quarter," Hughes said. "In
addition, we have begun to see some slowing in the pace of rate
reductions on a year-over-year basis. It is too early to know whether
this relative improvement is an indicator of future rate stability,
however.
"Beyond revenue gains, however, we are particularly gratified by
margin improvements in the second quarter. We continue to seek an
annual 50-150 basis point improvement in our ratio of cash
compensation, selling, occupancy and administration expense as a
percentage of revenue. These expenses declined on a relative basis to
71% of revenue in the most recent period, from 73% a year ago."
Cash compensation expense for the quarter increased 29% to $77.7
million from $60.3 million, but declined to 53% of revenue from 54% in
2005. Selling, occupancy and administration expense rose 28% to $26.2
million from $20.5 million, but declined as a percentage of revenue by
50 basis points.
Interest expense rose 52% to $3.9 million from $2.6 million a year
earlier, primarily due to increases in interest rates. Interest
expense is expected to decline in the third quarter to $2.5 million.
This reflects the repayment of debt with net proceeds from Hub's
offering of common shares in May and the conversion of $35 million of
subordinated debentures into common shares at the end of June.
"We closed out the second quarter with a very strong balance
sheet, which should enable us to continue our expansion in the coming
year," Hughes said. "As of June 30, our balance sheet included $134.1
million of cash and cash equivalents, including $64.1 million
available for acquisitions. We also have access to unused credit lines
of $85.8 million. Our debt-to-capitalization ratio was a comfortable
18% at the close of the quarter."
Hughes noted that the Talbot Charge, a compensation expense
related to Hub's 2004 acquisition of Talbot brokerages from Safeco,
continues to decline as the earnout period nears its end. The
performance-based earnout payable to approximately 70 Talbot employees
was $2.4 million compared to $8.7 million in the second quarter of
2005. Hub's final payment under the earnout agreement is scheduled for
March 2007. (See discussion of the Talbot Charge later in this
document.)
Intangible amortization expense increased 180% to $5.2 million
from $1.9 million in 2005 and was higher than the $4.2 to $4.6 million
range anticipated earlier in the year. The higher expense reflected
higher than anticipated charges related to the CFG brokerages acquired
in April. On a going-forward basis, Hub anticipates that amortization
expense, excluding acquisitions completed after the end of the
quarter, will approximate $5.2 million per quarter for the balance of
2006.
Pre-tax earnings for the second quarter increased 107% to $27.1
million from $13.1 million in 2005. Hub's effective tax rate declined
to 41% from 68% in the prior year due to the decrease in the Talbot
Charge, which is not deductible for tax purposes. Excluding the impact
of the Talbot Charge, Hub's effective tax rate would have been 37% in
the second quarter of 2006, compared with 41% a year earlier.
Hub's balance sheet at the close of the second quarter reflects
the completion of the public offering of 4.6 million common shares in
May, with net proceeds of $114.9 million to the company, and the
conversion of $35 million of 8.75% subordinated convertible debentures
that previously had been recorded in both the diluted share count and
as long-term debt.
Earnings Rise in First Half
During the first half of 2006, Hub increased revenue by 22% to
$280.1 million from $230.2 million in 2005. Core commission income
grew 23% to $234.1 million from $190.7 million, while contingent
commissions increased 17% to $39.1 million from $33.4 million.
Interest and other income rose 14% to $6.9 million from $6.1 million.
Hub reported 6% organic growth in the first half, including 6% growth
of core commissions. A stronger Canadian dollar added approximately
three percentage points to Hub's consolidated revenue growth in the
first half of 2006.
Net earnings from continuing operations increased 62% to $32.8
million, or $0.92 per diluted share, in the first half, compared with
$20.3 million, or $0.58 per diluted share, a year earlier. As noted
earlier, quarterly comparisons are affected by such items as foreign
exchange rates, the Talbot Charge and other factors. When adjusted for
the items shown below, net earnings from continuing operations for the
first six months increased 26% to $38.1 million, or $1.06 per diluted
share, from $30.3 million, or $0.85 per diluted share for the same
period last year.
For the six months ended 2006 2005
June 30 (per (per
2006 2005 diluted diluted
(000's) (000's) share) share)
- ----------------------------------------------------------------------
Net earnings reported under
Canadian and U.S. GAAP $32,751 $20,749 $0.92 $0.59
- ----------------------------------------------------------------------
Impact of compensation for
Talbot earnout $7,057 $15,915 $0.19 $0.43
- ----------------------------------------------------------------------
Impact of foreign exchange ($1,270) ($1,089) ($0.04) ($0.03)
- ----------------------------------------------------------------------
Impact of gain on forgiveness
of debt -- ($2,925) -- ($0.08)
- ----------------------------------------------------------------------
Impact of gain on disposition
of assets ($486) ($1,914) ($0.01) ($0.05)
- ----------------------------------------------------------------------
Impact of discontinued
operations $51 ($477) -- ($0.01)
- ----------------------------------------------------------------------
Net earnings adjusted for
above items $38,103 $30,259 $1.06 $0.85
- ----------------------------------------------------------------------
U.S. revenue increased 25% to $202.0 million from $161.5 million a
year earlier, including organic growth of 3%. Core commissions
increased 27% to $168.1 million from $132.2 million, while contingent
commissions grew 17% to $28.6 million from $24.4 million.
In Canada, revenue increased 14% to $78.0 million from $68.7
million in the same period of 2005, representing 12% organic growth.
Core commissions rose 13% to $66.0 million from $58.5 million, while
contingent commissions grew 16% to $10.4 million from $9.0 million.
Foreign exchange impact added nine percentage points to revenue growth
in Canada in the first six months of 2006.
Cash compensation expense increased 19% to $146.0 million from
$122.7 million, but declined to 52% of revenue from 53% in 2005.
Selling, occupancy and administration expense rose 21% to $48.6
million from $40.1 million, but held steady at about 17% of revenue.
Combined, these items fell to 70% of revenue in the first half of 2006
from 71% in the prior year.
Interest expense rose 41% to $7.0 million from $5.0 million a year
earlier, largely due to increased interest rates. The Talbot Charge
declined 56% to $7.1 million in the first half of 2006 from $15.9
million in 2005 and is anticipated to total approximately $10.7
million for all of 2006. Intangible amortization expense increased
130% to $8.5 million from $3.7 million in 2005, largely due to
higher-than-anticipated amortization expense related to the CFG
brokerages acquired in April.
Pre-tax earnings increased 33% to $55.9 million from $41.8 million
in the first half of 2005. Hub's effective tax rate declined to 41%
from 52% in the prior year due to the decrease in the Talbot Charge,
which is not deductible for tax purposes. Excluding the impact of the
Talbot Charge, Hub's effective tax rate would have been 37% in the
first six months of 2006 and 2005.
Growth Opportunities and Anticipated Revenue For Remainder of 2006
Hughes noted that Hub brings solid momentum and a strong balance
sheet into the second half of 2006, indicating significant opportunity
to build on gains already achieved in the first half of the year. The
company's acquisition pipeline remains full and integration of
recently acquired businesses has been smooth, he said. In the first
half of 2006, Hub acquired 13 businesses and sold two operations,
adding net aggregate annual revenue of approximately $59.4 million.
"As we close out the first half of this year, it is clear that
Hub's employees have delivered in all areas of our plan for growth,"
Hughes said. "We appreciate their contribution and we know we can
count on them to continue making every effort to build on our
momentum."
The Talbot Charge
Hub discloses the impact of compensation related to the Talbot
acquisition in order to give investors increased insight into Hub's
results of operations and the effective cost of the Talbot
acquisition.
Total consideration paid to acquire Talbot includes both $90
million cash paid to Safeco Corporation and the issuance of Hub
shares, or comparable amounts of cash, to approximately 70 Talbot
executives. The total consideration is within Hub's target range of
paying 5-7 times EBITDA (earnings before interest, taxes, depreciation
and amortization, a non-GAAP measure) for acquired brokerages.
As the executives participating in this earnout were not
shareholders of Talbot prior to the sale, the earnout compensation
they receive under the terms of the purchase agreement is recorded as
compensation expense. This compensation expense, which is not
deductible for tax purposes, will be charged to earnings through the
first quarter of 2007 and will affect earnings comparisons through
2007, making it difficult for investors to analyze the company's
results in comparison to prior years and industry peers.
Hub has the option to pay the executives with cash or shares. The
first Talbot earnout payment in the amount of $16.4 million was paid
in cash on September 1, 2005. The second payment of $19.0 million was
paid in March 2006 in common shares. Management expects the final
payment to be made in common shares. However, the choice of cash,
shares or a combination thereof will depend on circumstances at the
time of payment.
In the first six months of 2006, Hub recorded $7.1 million of
compensation expense for Talbot, based on a total estimated earnout
liability of approximately $56 million. The amount of this
compensation may vary from quarter to quarter, reflecting
profitability of Talbot. It is anticipated that the total charge to
earnings for the Talbot earnout, including payments made to date, will
be as follows:
2004 $14.4 million (actual)
2005 $28.7 million (actual)
2006 $10.7 million (estimate)
2007 $1.8 million (estimate)
Conference Call and Webcast
Hub International will discuss its financial results and outlook
on a conference call scheduled for 9:30 a.m. (CT), 10:30 a.m. (ET)
today, July 27, 2006. The call is being webcast by Thompson/CCBN and
can be accessed at Hub International's web site at
www.hubinternational.com. The webcast is also being distributed
through the Thomson StreetEvents Network to both institutional and
individual investors. Individual investors can listen to the call at
www.fulldisclosure.com, Thomson/CCBN's individual investor portal,
powered by StreetEvents. Institutional investors can also access the
call via Thomson's password-protected event management site,
StreetEvents (www.streetevents.com).
Headquartered in Chicago, IL, Hub International Limited is a
leading North American insurance brokerage that provides a broad array
of property and casualty, reinsurance, life and health, employee
benefits, investment and risk management products and services through
offices located in the United States and Canada.
This press release may contain forward-looking statements that
reflect our current views with respect to future events and financial
performance. These forward-looking statements relate, among other
things, to our plans and objectives for future operations and are
subject to uncertainties and other factors that could cause actual
results to differ materially from such statements. These uncertainties
and other factors include, but are not limited to, risks associated
with implementing our business strategies, identifying and
consummating acquisitions, integrating acquired brokerages, attaining
greater market share, developing and implementing effective
information technology systems, recruiting and retaining qualified
employees, fluctuations in the premiums charged by insurance companies
with corresponding fluctuations in our premium-based revenue, any loss
of services of key executives, industry consolidation, increased
competition in the industry, fluctuations in the demand for insurance
products, exchange rates, resolution of regulatory issues, including
those related to compensation arrangements with insurance companies,
the actual costs of resolution of contingent liabilities and the
passage of new legislation subjecting our business to regulation in
jurisdictions where we operate. We caution readers not to place undue
reliance on these forward-looking statements, which speak only as of
the date of this press release. Additional information regarding these
risks and other factors that could cause Hub International's actual
results to differ materially from our expectations is contained in the
company's filings with the Securities and Exchange Commission and the
Canadian securities commissions. Except as otherwise required by
federal securities laws, Hub International undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
HUB INTERNATIONAL LIMITED
Consolidated Organic Growth (unaudited)
For the three months and six months ended June 30, 2006
(in thousands of U.S. dollars, except percentages)
Net
Revenue Adjustments
------------------ Total Total For Organic
Second quarter Change Growth (Acquisitions) Growth
2006 2005 ($) (%) And Disposals (%)
----------------------------------------------------------
Total
- -----
Commission
Income $134,232 $103,797 $30,435 29% $(22,222) 8%
Contingent
Commissions
and Volume
Overrides 7,882 4,244 3,638 86% (3,295) 8%
Other Income 3,905 2,973 932 31% 186 38%
----------------------------------------------------------
Total $146,019 $111,014 $35,005 32% $(25,331) 9%
----------------------------------------------------------
USA
- ---
Commission
Income $96,890 $71,119 $25,771 36% $(21,765) 6%
Contingent
Commissions
and Volume
Overrides 6,101 3,460 2,641 76% (3,295) -19%
Other Income 3,033 2,346 687 29% 188 37%
----------------------------------------------------------
Total $106,024 $76,925 $29,099 38% $(24,872) 5%
----------------------------------------------------------
Canada
- ------
Commission
Income $37,342 $32,678 $4,664 14% $(457) 13%
Contingent
Commissions
and Volume
Overrides 1,781 784 997 127% - 127%
Other Income 872 627 245 39% (2) 39%
----------------------------------------------------------
Total $39,995 $34,089 $5,906 17% $(459) 16%
----------------------------------------------------------
Net
Revenue Adjustments
------------------ Total Total For Organic
Six months Change Growth (Acquisitions) Growth
2006 2005 ($) (%) And Disposals (%)
----------------------------------------------------------
Total
- -----
Commission
Income $234,124 $190,711 $43,413 23% $(32,630) 6%
Contingent
Commissions
and Volume
Overrides 39,051 33,404 5,647 17% (4,278) 4%
Other Income 6,912 6,080 832 14% 453 21%
----------------------------------------------------------
Total $280,087 $230,195 $49,892 22% $(36,455) 6%
----------------------------------------------------------
USA
- ---
Commission
Income $168,092 $132,217 $35,875 27% $(31,800) 3%
Contingent
Commissions
and Volume
Overrides 28,634 24,417 4,217 17% (4,278) 0%
Other Income 5,323 4,899 424 9% 456 18%
----------------------------------------------------------
Total $202,049 $161,533 $40,516 25% $(35,622) 3%
----------------------------------------------------------
Canada
- ------
Commission
Income $66,032 $58,494 $7,538 13% $(830) 11%
Contingent
Commissions
and Volume
Overrides 10,417 8,987 1,430 16% - 16%
Other Income 1,589 1,181 408 34% (3) 34%
----------------------------------------------------------
Total $78,038 $68,662 $9,376 14% $(833) 12%
----------------------------------------------------------
Notes: 1. Organic growth is a non-GAAP measure.
2. Total and Canadian organic growth rates above include
the impact of changes in foreign currency.
HUB INTERNATIONAL LIMITED
Consolidated Statements of Earnings Data (unaudited)
For the three months and six months ended June 30, 2006 and 2005
(in thousands of U.S. dollars, except per share amounts)
Second quarter Six months
-------------------- --------------------
2006 2005 2006 2005
-------------------- --------------------
Revenue
Commission income $134,232 $103,797 $234,124 $190,711
Contingent commissions
and volume overrides 7,882 4,244 39,051 33,404
Other 3,905 2,973 6,912 6,080
-------------------- --------------------
146,019 111,014 280,087 230,195
-------------------- --------------------
Expenses
Compensation (1) 81,670 70,912 156,335 142,378
Selling, occupancy and
administration 26,244 20,466 48,643 40,080
Depreciation 2,411 2,115 4,553 4,179
Interest expense 3,917 2,569 6,960 4,951
Intangible asset
amortization 5,222 1,862 8,498 3,695
Gain on disposal of
subsidiaries, property,
equipment and other
assets (536) (21) (757) (2,433)
Gain on forgiveness of
debt - - - (4,500)
-------------------- --------------------
118,928 97,903 224,232 188,350
-------------------- --------------------
Net earnings from
continuing operations
before income taxes 27,091 13,111 55,855 41,845
-------------------- --------------------
Provision for income tax
expense (benefit)
Current 11,077 8,876 22,835 22,480
Future (43) 71 218 (907)
-------------------- --------------------
11,034 8,947 23,053 21,573
-------------------- --------------------
Net earnings from
continuing operations 16,057 4,164 32,802 20,272
Net earnings (loss) from
discontinued
operations 228 105 (51) 477
-------------------- --------------------
Net earnings 16,285 4,269 32,751 20,749
-------------------- --------------------
Interest on subordinated
convertible debentures 475 - 950 950
Dividends in lieu on
restricted share units 29 28 59 56
-------------------- --------------------
Diluted net earnings 16,789 4,297 33,760 21,755
==================== ====================
Basic earnings per share
Continuing operations $0.48 $0.14 $1.00 $0.67
Discontinued operations - - - 0.01
-------------------- --------------------
Total operations $0.48 $0.14 $1.00 $0.68
-------------------- --------------------
Diluted earnings per share
Continuing operations $0.44 $0.12 $0.92 $0.58
Discontinued operations - - - 0.01
-------------------- --------------------
Total operations $0.44 $0.12 $0.92 $0.59
-------------------- --------------------
Weighted average shares
outstanding - Basic
(000's) 33,801 30,441 32,784 30,405
Weighted average shares
outstanding - Diluted
(000's) 37,892 34,713 36,856 36,994
(1) Compensation includes:
Talbot earnout
compensation $2,393 $8,721 $7,057 $15,915
Other non-cash stock
based compensation 1,610 1,931 3,245 3,735
-------------------- --------------------
$4,003 $10,652 $10,302 $19,650
==================== ====================
HUB INTERNATIONAL LIMITED
Consolidated Balance Sheet Information (unaudited)
As of June 30, 2006 and December 31, 2005
(in thousands of U.S. dollars)
2006 2005
------------ ------------
Assets
Current assets:
Cash and cash equivalents $134,089 $70,118
Trust cash 94,318 113,349
Accounts and other receivables 298,042 230,654
Income taxes receivable 4,639 6,001
Future income taxes 4,595 4,971
Prepaid expenses 10,022 6,436
------------ ------------
Total current assets 545,705 431,529
Goodwill 480,917 421,158
Other intangible assets 141,635 105,007
Property and equipment 30,787 28,160
Future income taxes 13,700 4,528
Other assets 12,030 10,971
------------ ------------
Total assets $1,224,774 $1,001,353
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $409,707 $384,174
Income taxes payable 14,432 4,344
Future income taxes 412 359
Current portion long-term debt and capital
leases 4,569 4,910
------------ ------------
Total current liabilities 429,120 393,787
Long-term debt and capital leases 141,062 135,363
Subordinated convertible debentures - 35,000
Future income taxes 18,732 17,277
------------ ------------
Total liabilities 588,914 581,427
------------ ------------
Commitments and contingencies
Shareholders' equity
Share capital 449,277 270,199
Contributed surplus 19,874 16,989
Cumulative translation account 37,890 31,893
Retained earnings 128,819 100,845
------------ ------------
Total shareholders' equity 635,860 419,926
------------ ------------
Total liabilities and shareholders' equity $1,224,774 $1,001,353
============ ============
HUB INTERNATIONAL LIMITED
Consolidated Cash Flow Information (unaudited)
For the three months and six months ended June 30, 2006 and 2005
(in thousands of U.S. dollars)
Second quarter Six months
-------------------- --------------------
2006 2005 2006 2005
-------------------- --------------------
Operating activities
Net earnings $16,285 $4,269 $32,751 $20,749
Items not affecting cash:
Amortization and
depreciation 7,633 4,022 13,051 7,962
Gain on disposal of
subsidiaries,
property, equipment
and other assets (536) 18 (369) (2,394)
Compensation for Talbot
earnout 2,393 8,721 7,057 15,915
Other non-cash stock based
compensation 1,610 1,931 3,245 3,735
Gain on forgiveness of
debt - - - (4,500)
Future income taxes (43) 75 112 (897)
Non-cash working capital items
Trust cash (24,287) (9,302) 24,368 5,764
Accounts and other
receivables (96,895) (75,553) (43,889) (42,268)
Prepaid expenses (4,255) (1,685) (3,514) (916)
Accounts payable and
accrued liabilities 115,511 85,667 8,828 19,802
Other assets 123 129 258 257
Income taxes (1,641) (3,834) 6,389 4,563
-------------------- --------------------
Net cash flows from
operating activities 15,898 14,458 48,287 27,772
-------------------- --------------------
Investing activities
Property and equipment -
purchases (2,807) (1,721) (5,711) (2,657)
Property and equipment -
proceeds on sale 11 13 11 14
Purchase of subsidiaries,
net of cash received (88,690) (7,960) (97,138) (7,977)
Sale of subsidiaries 531 (111) 1,704 3,765
Other assets (23) 126 253 4,520
-------------------- --------------------
Net cash flows used for
investing activities (90,978) (9,653) (100,881) (2,335)
-------------------- --------------------
Financing activities
Bank Debt (75,000) - - -
Long-term debt and capital
leases - advances 130,123 - 130,123 -
Long-term debt and capital
leases - repayments (124,585) (934) (125,959) (5,198)
Proceeds from share issue,
net of costs 114,903 - 114,903 -
Proceeds from exercise of
stock options - 124 704 628
Proceeds from sale of
executive purchase plan
shares - 35 - 35
Windfall tax benefit 64 - 144 -
Dividends paid (2,578) (1,844) (4,777) (3,679)
-------------------- --------------------
Net cash flows from
(used for) financing
activities 42,927 (2,619) 115,138 (8,214)
-------------------- --------------------
Effect of exchange rate
changes on cash and cash
equivalents (258) (501) 1,427 (850)
-------------------- --------------------
Change in cash and cash
equivalents (32,411) 1,685 63,971 16,373
Cash and cash equivalents -
Beginning of year 166,500 112,892 70,118 98,204
-------------------- --------------------
Cash and cash equivalents -
End of year $134,089 $114,577 $134,089 $114,577
==================== ====================
HUB INTERNATIONAL LIMITED
Compensation for Talbot Earnout and Other Non-Cash Stock Based
Compensation (unaudited)
For the three months and six months ended June 30, 2006 and 2005
(in thousands of U.S. dollars)
Non-cash stock based compensation, including both compensation for the
Talbot acquisition and other non-cash stock based compensation of
$4,003 and $10,652 for the three months ended June 30, 2006 and 2005,
respectively, and of $10,302 and $19,650 for the six months ended June
30, 2006 and 2005, respectively, was expensed with offsetting credits
to contributed surplus, and accounts payable and accrued liabilities.
The Company recognized the fair value of non-cash stock based
compensation as an expense over the period in which entitlement to the
compensation vests.
Compensation for the Talbot earnout includes both cash and non-cash
stock based compensation and is detailed below.
Other non-cash stock based compensation for the three months and six
months ended June 30, 2006 and 2005 is comprised of the following:
Second quarter Six months
------------------ ------------------
2006 2005 2006 2005
------------------ ------------------
Other non-cash stock
based compensation:
Stock options
granted June 2002 $- $389 $- $851
Stock options
granted February
2003 - 90 - 190
Restricted share units
(RSUs) granted for 2003
bonuses 280 780 1,132 1,514
Other RSUs 1,319 661 2,102 1,162
Common shares for
acquisitions 11 11 11 18
------------------ ------------------
Total other non-cash stock
based compensation $1,610 $1,931 $3,245 $3,735
================== ==================
Compensation for the Talbot earnout is comprised of the following:
Second quarter Six months
------------------ ------------------
2006 2005 2006 2005
------------------ ------------------
Cash compensation $- $3,196 $- $6,513
Non-cash stock
based compensation 2,393 5,525 7,057 9,402
------------------ ------------------
Total compensation
for the Talbot
earnout $2,393 $8,721 $7,057 $15,915
================== ==================
The Company estimates other non-cash stock based compensation expense
for 2006 through 2011 will be:
Year ended December 31,
- -----------------------
2006 2007 2008 2009 2010 2011
------------------------------------------------
RSUs granted for 2003
bonuses $2,210 $2,044 $2,044 $2,044 $1,988 $-
Other RSUs 4,308 4,138 3,987 1,733 1,035 241
Common shares for
acquisitions 19 5 - - - -
------------------------------------------------
Total other non-cash
stock based
compensation $6,537 $6,187 $6,031 $3,777 $3,023 $241
================================================
The Company estimates the compensation for the Talbot earnout for
2006 through 2011 will be:
Year ended December 31,
- -----------------------
2006 2007 2008 2009 2010 2011
------------------------------------------------
Cash compensation $- $- $- $- $- $-
Non-cash stock based
compensation 10,733 1,838 - - - -
------------------------------------------------
Total compensation
for the Talbot
earnout $10,733 $1,838 $- $- $- $-
================================================
In total, as of June 30, 2006, we had issued and outstanding
approximately 1.1 million stock options at a weighted average exercise
price of $15.40. Our closing share price on the New York Stock
Exchange was $26.21 on June 30, 2006.
CONTACT: Hub International Limited
W. Kirk James (Media), 312-279-4881
Kirk.james@hubinternational.com
or
Heather Schneider (Media), 312-279-4683
Heather.schneider@hubinternational.com
or
Rosenbaum Advisors, Inc.
Michael Rosenbaum (Investors), 847-749-1010
michael@rosenbaumadvisors.com
Fax: 847-577-6767
http://www.rosenbaumadvisors.com