ARTHUR J. GALLAGHER & CO. 
By ITASCA, Ill., April 6, 2014 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended March 31, 2014. A printer-friendly format and supplemental quarterly data is available at www.ajg.com. For a description of the non-GAAP measures used to report financial results in this earnings release, please see "Information Regarding Non-GAAP Measures" beginning on page 6.
Gallagher will host a webcast conference call on Monday, April 7, 2014 at 10:00a.m. ET/9:00 a.m. CT. To listen to this call, please go to www.ajg.com.
"We are off to an excellent start in 2014," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Our revenue momentum continues; our combined Brokerage and Risk Management segments posted 20% growth in adjusted total revenues, 4% organic growth in commissions and fee revenues, and already in 2014 we have announced ten mergers with annualized revenues of approximately $153.6 million. In the quarter we also improved our adjusted margins by 120 basis points, and we delivered 28% growth in adjusted EBITDAC and 22% growth in adjusted net earnings per share."
-- For our Brokerage segment, adjusted total revenues were up 24%, base
organic commission and fee revenues grew 3.3%, adjusted EBITDAC was up
34% and adjusted EBITDAC margin was up 150 basis points compared to the
first quarter of 2013. Supplemental and contingent revenues remain
strong as carriers recognize our growth and book loss experience. Our
integration efforts continue to move forward as planned.
-- For our Risk Management segment, adjusted total revenues were up 7%,
base organic fee revenues grew 6%, adjusted EBITDAC was up 8%, adjusted
EBITDAC margin was up 10 basis points compared to the first quarter of
2013 and bettered our 16% margin target by 30 basis points.
"The rate environment remains steady with insurance carriers continuing to focus on profitable underwriting. We believe they are quoting rational prices on a line-by-line basis which allows us to demonstrate our expertise and high-quality value-added service. In addition, we are seeing our clients slowly expand their businesses and payrolls. Our global team is energized and well positioned for 2014."
The following provides non-GAAP information that management believes is helpful when comparing 2014 revenues, EBITDAC and diluted net earnings per share with the same period in 2013:
Quarter Ended March 31 Diluted Net
Revenues EBITDAC Earnings Per Share
Segment 1st Q 14 1st Q 13 Chg 1st Q 14 1st Q 13 Chg 1st Q 14 1st Q 13 Chg
------- -------- -------- --- -------- -------- --- -------- -------- ---
(in millions) (in millions)
Brokerage,
as adjusted $567.6 $457.0 24% $110.7 $82.4 34% $0.29 $0.22 32%
Gains on
book sales 1.0 0.4 1.0 0.4 - -
Acquisition
integration - - (6.5) (3.0) (0.03) (0.02)
Workforce &
lease
termination - - (2.2) - (0.01) -
Acquisition
related
adjustments - - (1.1) - (0.01) (0.01)
Levelized
foreign
currency
translation - (3.0) - 0.5 - -
--- ---- --- ---
Brokerage,
as reported 568.6 454.4 101.9 80.3 0.24 0.19
----- ----- ----- ---- ---- ----
Risk
Management,
as adjusted 160.0 148.9 7% 26.0 24.1 8% 0.10 0.10 0%
Workforce &
lease
termination - - (0.2) - - -
South
Australia
and claim
portfolio
transfer
ramp up - 1.4 (1.2) 1.3 (0.01) 0.01
Levelized
foreign
currency
translation - 3.3 - 1.1 - -
Risk
Management,
as reported 160.0 153.6 24.6 26.5 0.09 0.11
----- ----- ---- ---- ---- ----
Total
Brokerage &
Risk
Management,
as reported 728.6 608.0 126.5 106.8 0.33 0.30
Corporate,
as reported 186.4 66.1 (6.0) (8.5) 0.03 0.02
----- ---- ---- ---- ---- ----
Total
Company, as
reported $915.0 $674.1 $120.5 $98.3 $0.36 $0.32
====== ====== ====== ===== ===== =====
Total
Brokerage &
Risk
Management,
as adjusted $727.6 $605.9 20% $136.7 $106.5 28% $0.39 $0.32 22%
====== ====== ====== ====== ===== =====
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Brokerage Segment First Quarter Highlights - The following tables provide non-GAAP information that management believes is helpful when comparing certain 2014 financial information with the same period in 2013 (in millions):
Organic Revenues (non-GAAP) 1st Q 14 1st Q 13
--------------------------
Base Commissions and Fees
Commissions as reported $411.5 $326.8
Fees as reported 97.6 86.7
Less commissions and fees from
acquisitions (82.2) -
Less disposed of operations - (2.8)
Levelized foreign currency
translation - 2.4
Organic base commissions and
fees $426.9 $413.1
====== ======
Organic change in base
commissions and fees 3.3%
===
Supplemental Commissions
Supplemental commissions as
reported $25.4 $17.3
Less supplemental commissions
from acquisitions (7.3) -
Organic supplemental commissions $18.1 $17.3
===== =====
Organic change in supplemental
commissions 4.6%
===
Contingent Commissions
Contingent commissions as
reported $32.2 $22.5
Less contingent commissions from
acquisitions (4.9) -
Organic contingent commissions $27.3 $22.5
===== =====
Organic change in contingent
commissions 21.3%
====
Adjusted Compensation Expense and
Ratio (non-GAAP) 1st Q 14 1st Q 13
---------------------------------
Reported amounts $356.1 $287.7
Acquisition integration (3.6) (1.3)
Workforce and lease termination
related charges (1.7) -
Acquisition related adjustments (1.1) -
Levelized foreign currency
translation - 2.6
Adjusted amounts $349.7 $289.0
====== ======
Adjusted ratios using adjusted
revenues on page 1 * 61.6% 63.2%
==== ====
* Adjusted first quarter
compensation ratio was 1.6
pts lower than the same
period in 2013. This
ratio was primarily
impacted by salary
decreases of 0.6 pts and a
reduction in employee
benefits of 0.9 pts, both
related to headcount
controls.
Adjusted Operating
Expense and Ratio
(non-GAAP) 1st Q 14 1st Q 13
------------------
Reported amounts $110.6 $86.4
Acquisition integration (2.9) (1.7)
Workforce and lease
termination related
charges (0.5) -
Levelized foreign
currency translation - 0.9
Adjusted amounts $107.2 $85.6
====== =====
Adjusted ratios using
adjusted revenues on
page 1 * 18.9% 18.7%
==== ====
* Adjusted first
quarter operating
expense ratio was
0.2 pts higher than
the same period in
2013. All items
were consistent
with the prior
period.
(2 of 11)
Brokerage Segment First Quarter Highlights (continued)
Adjusted EBITDAC (non-
GAAP) 1st Q 14 1st Q 13
----------------------
Total EBITDAC -see page
9 for computation $101.9 $80.3
Gains from books of
business sales (1.0) (0.4)
Acquisition integration
* 6.5 3.0
Acquisition related
adjustments 1.1 -
Workforce and lease
termination related
charges 2.2 -
Levelized foreign
currency translation - (0.5)
Adjusted EBITDAC $110.7 $82.4
====== =====
Adjusted EBITDAC change 34.3% 27.7%
==== ====
Adjusted EBITDAC margin 19.5% 18.0%
==== ====
* Acquisition integration -
During first quarter 2014,
integration costs related to
the acquisitions of Giles
and Bollinger totaled $4.2
million and $2.3 million,
respectively. These costs
were primarily related to
the on-boarding of over
1,600 employees,
communication system
conversion costs and related
performance compensation.
Integration costs in first
quarter 2013 relate to the
Heath Lambert acquisition
only.
The following is a summary of Brokerage segment acquisition activity for 2014 and 2013:
1st Q 14 1st Q
13
Shares issued for
acquisitions and
earnouts 738,000 -
Number of acquisitions
closed 9 4
Annualized revenues
acquired (in
millions) $17.8 $5.0
The table above does not include any information related to the April 1, 2014 acquisition of the Oval Group of Companies. Under the agreement, we purchased all of the outstanding equity of Oval for net cash consideration of approximately $330 million. Oval is expected to annually generate over $135 million in revenues.
Risk Management Segment First Quarter Highlights - The following tables provide non-GAAP information that management believes is helpful when comparing certain 2014 financial information with the same period in 2013 (in millions):
Organic Revenues (Non-GAAP) 1st Q 14 1st Q 13
---------------------------
Fees $155.5 $147.3
International performance
bonus fees 4.1 5.7
Fees as reported 159.6 153.0
Less fees from acquisitions (2.2) -
Less South Australia ramp
up fees - (1.4)
Less New Zealand earthquake
claims administration - (0.1)
Levelized foreign currency
translation - (3.0)
Organic fees $157.4 $148.5
====== ======
Organic change in fees 6.0% 10.8%
=== ====
Adjusted Compensation Expense and
Ratio (non-GAAP) 1st Q 14 1st Q 13
---------------------------------
Reported amounts $99.9 $91.6
South Australia and claim
portfolio transfer ramp up costs (0.8) -
Workforce and lease termination
related charges (0.2) -
Levelized foreign currency
translation - (1.9)
Adjusted amounts $98.9 $89.7
===== =====
Adjusted ratios using adjusted
revenues on page 1 * 61.8% 60.2%
==== ====
* Adjusted first quarter
compensation ratio was 1.6
pts higher than the same
period in 2013. This
ratio was primarily
impacted by salary
increases of 0.7 pts and
increased incentive
compensation of 0.9 pts.
(3 of 11)
Risk Management Segment First Quarter Highlights (continued)
Adjusted Operating
Expense and Ratio
(non-GAAP) 1st Q 14 1st Q 13
------------------
Reported amounts $35.5 $35.5
South Australia and
claim portfolio
transfer ramp up costs (0.4) (0.1)
Levelized foreign
currency translation - (0.3)
Adjusted amounts $35.1 $35.1
===== =====
Adjusted ratios using
adjusted revenues on
page 1 * 21.9% 23.6%
==== ====
* Adjusted first quarter
operating expense ratio was
1.7 pts lower than the same
period in 2013. This ratio
was primarily impacted by
savings in real estate and
professional fees of 1.4 pts
and decreased business
insurance expense of 0.5
pts, partially offset by
increased professional fees
associated with client-
centric service enhancements
of 0.4 pts.
Adjusted EBITDAC (non-
GAAP) 1st Q 14 1st Q 13
----------------------
Total EBITDAC -see page
9 for computation $24.6 $26.5
Workforce and lease
termination related
charges 0.2 -
South Australia and claim
portfolio transfer ramp
up costs 1.2 (1.3)
Levelized foreign
currency translation - (1.1)
Adjusted EBITDAC $26.0 $24.1
===== =====
Adjusted EBITDAC change 7.9% 7.6%
=== ===
Adjusted EBITDAC margin 16.3% 16.2%
==== ====
Corporate Segment First Quarter Highlights - The following table provides non-GAAP information that management believes is helpful when comparing 2014 operating results for the Corporate Segment with the same period in 2013 (in millions):
2014 2013
Pretax Income Net Pretax Income Net
Earnings Tax Earnings Earnings Tax Earnings
(Loss) Benefit (Loss) (Loss) Benefit (Loss)
1st
Quarter
--------
Interest
and
banking
costs $(16.6) $6.6 $(10.0) $(11.9) $4.8 $(7.1)
Clean
energy
related 1.4 19.5 20.9 (0.9) 14.1 13.2
Acquisition
costs (2.9) 0.4 (2.5) (1.0) 0.2 (0.8)
Corporate (5.0) 1.2 (3.8) (6.0) 2.7 (3.3)
$(23.1) $27.7 $4.6 $(19.8) $21.8 $2.0
====== ===== ==== ====== ===== ====
Debt, interest and banking - At March 31, 2014, Gallagher had $1,525.0 million of borrowings from private placements, $100.0 million of which is due in August 2014 and $367.4 million of short-term borrowings under its line of credit facility. As previously announced, Gallagher in December 2013 entered into a note purchase agreement for a private placement of $600 million of senior unsecured notes, which funded on February 27, 2014. Proceeds were primarily used to pay down its line of credit facility.
At-the-market equity program - Gallagher has an at-the-market equity program under which it may sell up to $200 million of its common stock through Morgan Stanley & Co. LLC as sales agent. During first quarter 2014, Gallagher did not sell shares of its common stock under the program.
Clean energy investments - The following provides certain information related to Gallagher's investments in limited liability companies that own 34 clean coal production plants, which produce refined coal using proprietary technologies owned by Chem-Mod. We believe that the production and sale of refined coal at these plants qualifies to receive refined coal tax credits under IRC Section 45 through 2019 for the fourteen 2009 Era Plants and through 2021 for the twenty 2011 Era Plants. The underlying operations of those investments where Gallagher has a controlling ownership interest are consolidated.
(4 of 11)
Corporate Segment First Quarter Highlights (continued)
On March 1, 2014, we acquired additional ownership interests in seven of the 2009 Era Plants and five of the 2011 Era Plants from a co-investor. All but one of our investments in these plants had been accounted for under the equity method of accounting. For all plants where our ownership is now over 50%, as of March 1, 2014 we consolidated the operations of the limited liability companies that own these plants. The transaction resulted in a non-cash after tax gain of $14.1 million, which resulted from a provisional estimate of fair value as of the transaction date
Gallagher's Portion of
Estimated
-----------------------
Additional
Gallagher's Required Ultimate
Tax-Effected Tax-Effected Annual
Book Value At Capital After-tax
($ in millions) March 31, 2014 Investment Earnings *
Investments
that own 2009
Era Plants
--------------
12 Under long-
term
production
contracts $13.9 $1.0 $22.6
2 In
negotiations
for long-term
production
contracts 0.7 Not Estimable Not Estimable
Investments
that own 2011
Era Plants
--------------
16 Under long-
term
production
contracts 40.0 0.1 72.4
4 In
negotiations
for long-term
production
contracts 1.3 Not Estimable Not Estimable
* Reflects management's
current best estimate of
the ultimate future
potential annual after-tax
earnings based on
production estimates from
the host utilities.
However, host utilities do
not consistently utilize
the refined fuel plants at
ultimate production levels
due to seasonal electricity
demand, as well as many
operational, regulatory and
environmental compliance
reasons.
Gallagher's investment in Chem-Mod generates royalty income from clean energy plants owned by those limited liability companies in which it invests as well as refined coal production plants owned by other unrelated parties. Based on current production estimates provided by licensees, Chem-Mod could generate for Gallagher approximately $4.0 million of net after-tax earnings per quarter.
All estimates set forth above regarding the potential future earnings impact of our clean energy investments are subject to significant risks. Please refer to Gallagher's filings with the SEC, including Item 1A, "Risk Factors," of its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for a more detailed discussion of these and other factors that could impact the information above.
Acquisition costs - Consists mostly of external professional fees and other due diligence costs related to acquisitions.
Corporate - Consists of overhead allocations mostly related to corporate staff compensation.
Income Taxes
Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory rates. Gallagher historically has reported, and anticipates reporting for the foreseeable future, an effective tax rate of approximately 35% to 37% in both its Brokerage and Risk Management segments. Gallagher's consolidated effective tax rate for the quarter ended March 31, 2014 and 2013 was (6.4)% and 4.3%, respectively. Gallagher's tax rate for the quarter ended March 31, 2014 was lower than the statutory rate and was lower than 2013 due to the amount of IRC Section 45 tax credits earned in 2014 compared to 2013.
Webcast Conference Call
Gallagher will host a webcast conference call on Monday, April 7, 2014 at 10:00a.m. ET/9:00 a.m. CT. To listen to this call, please go to www.ajg.com. The call will be available for replay at such website for not less than 90 days.
About Arthur J. Gallagher & Co.
Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 25 countries and offers client-service capabilities in more than 140 countries around the world through a network of correspondent brokers and consultants.
(5 of 11)
Cautionary Information
The operating results and other financial information for the quarter ended March 31, 2014 presented in this press release are preliminary. Because the financial statements for the quarter ended March 31, 2014 have not yet been finalized, the results and other financial information regarding this period is subject to change, and actual results for this period may differ materially from these preliminary estimates. Accordingly, you should not place undue reliance on these preliminary estimates. See the "Risk Factors" section of the Company's Annual Report on Form 10-K. The Company does not undertake any obligation to update publicly any forward-looking statements, whether as a result of the receipt of new information, future events or otherwise, except as otherwise required by law.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipates," "believes," "contemplates," "see," "should," "could," "estimates," "expects," "intends," "plans" and variations thereof and similar expressions, are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding (i) the amount of, and potential uses for, investment returns generated by Gallagher's clean energy investments; (ii) our corporate income tax rate; (iii) anticipated future results or performance of any segment or the Company as a whole (including recent new business wins in the Risk Management segment and the Giles acquisition); (iv) anticipated cost savings from workforce reductions; (v) the premium rate environment; (vi) the economic environment; and (vii) anticipated funding under a note purchase agreement.
Gallagher's actual results may differ materially from those contemplated by the forward-looking statements. Readers are therefore cautioned against relying on any of the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following:
-- Risks and uncertainties related to Gallagher's clean energy investments
including uncertainties related to political and regulatory risks,
including potential actions by Congress or challenges by the IRS
eliminating or reducing the availability of tax credits under IRC
Section 45 retroactively and/or going forward; the ability to maintain
and find co-investors; the potential for divergent business objectives
by co-investors and other stakeholders; plant operational risks,
including supply-chain risks; utilities' future use of, or demand for,
coal; the market price of coal; the costs of moving a clean coal plant;
intellectual property risks; and environmental risks - all could impact
(i) and (ii) above; and
-- Changes in worldwide and national economic conditions (including an
economic downturn due to a U.S. government shutdown or default and
uncertainty regarding the European debt crisis), changes in premium
rates and in insurance markets generally and changes in the insurance
brokerage industry's competitive landscape - all could impact (iii) -
(vii) above.
Please refer to Gallagher's filings with the SEC, including Item 1A, "Risk Factors," of its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for a more detailed discussion of these and other factors that could impact its forward-looking statements. Any forward-looking statement made by Gallagher in this press release speaks only as of the date on which it is made. Except as required by applicable law, Gallagher does not undertake to update the information included herein or the corresponding earnings release posted on Gallagher's website.
Information Regarding Non-GAAP Measures
In addition to reporting financial results in accordance with GAAP, this press release provides information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments, adjusted revenues, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue measures for each operating segment. These measures are not in accordance with, or an alternative to, the GAAP information provided in this press release. Gallagher's management believes that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher's results of operations and financial condition. Gallagher's industry peers may provide similar supplemental non-GAAP information related to organic revenues and EBITDAC, although they may not use the same or comparable terminology and may not make identical adjustments. The non-GAAP information provided by Gallagher should be used in addition to, but not as a substitute for, the GAAP information provided. Certain reclassifications have been made to the prior year amounts reported in this press release in order to conform them to the current year presentation.
(6 of 11)
Adjusted presentation - Gallagher believes that the adjusted presentations of the current and prior year information, presented in this earnings release, provides stockholders and other interested persons with useful information regarding certain financial metrics of Gallagher that may assist such persons in analyzing Gallagher's operating results as they develop a future earnings outlook for Gallagher. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period.
-- Adjusted revenues and expenses - Gallagher defines these measures as
revenues, compensation expense and operating expense, respectively, each
adjusted to exclude net gains realized from sales of books of business,
acquisition integration costs, New Zealand earthquake claims
administration, South Australia and claim portfolio transfer ramp up
fees/costs, workforce related charges, lease termination related
charges, acquisition related adjustments and the impact of foreign
currency translation, as applicable. Integration costs include costs
related to transactions not expected to occur on an ongoing basis in the
future once we fully assimilate the applicable acquisition. These costs
are typically associated with redundant workforce, extra lease space,
duplicate services and external costs incurred to assimilate the
acquisition with our IT related systems.
-- Adjusted ratios - Adjusted compensation expense ratio and adjusted
operating expense ratio are defined as adjusted compensation expense and
adjusted operating expense, respectively, each divided by adjusted
revenues.
Earnings Measures - Gallagher believes that each of EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin and diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments, as defined below, provides a meaningful representation of its operating performance. Gallagher considers EBITDAC and EBITDAC margin as a way to measure financial performance on an ongoing basis. Adjusted EBITDAC, adjusted EBITDAC margin and diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments are presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
-- EBITDAC - Gallagher defines this measure as net earnings before
interest, income taxes, depreciation, amortization and the change in
estimated acquisition earnout payables.
-- EBITDAC margin - Gallagher defines this measure as EBITDAC divided by
total revenues.
-- Adjusted EBITDAC - Gallagher defines this measure as EBITDAC adjusted to
exclude net gains realized from sales of books of business, acquisition
integration costs, workforce related charges, lease termination related
charges, New Zealand earthquake claims administration costs, South
Australia and claim portfolio transfer ramp up fees/costs, acquisition
related adjustments and the period-over-period impact of foreign
currency translation, as applicable.
-- Adjusted EBITDAC margin - Gallagher defines this measure as adjusted
EBITDAC divided by total adjusted revenues (defined above).
-- Diluted net earnings per share (as adjusted) for the Brokerage and Risk
Management segments - Gallagher defines this measure as net earnings
adjusted to exclude the after-tax impact of net gains realized from
sales of books of business, acquisition integration costs, New Zealand
earthquake claims administration, South Australia and claim portfolio
transfer ramp up fees/costs, the impact of foreign currency translation,
workforce related charges, lease termination related charges,
acquisition related adjustments and effective income tax rate impact
divided by diluted weighted average shares outstanding. The effective
income tax rate impact represents the difference in income tax expense
for tax amounts derived using the actual effective tax rate compared to
tax amounts derived using a normalized effective tax rate.
Organic Revenues - For the Brokerage segment, organic change in base commission and fee revenues excludes the first twelve months of net commission and fee revenues generated from acquisitions accounted for as purchases and the net commission and fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of Gallagher in both the current and prior year. In addition, change in organic growth excludes the impact of supplemental commission and contingent commission revenues and the period-over-period impact of foreign currency translation. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same periods in the prior year. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions accounted for as purchases and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the impact of South Australia ramp up fees, New Zealand earthquake claims administration and the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability or are due to the limited-time nature of these revenue sources.
These revenue items are excluded from organic revenues in order to determine a comparable measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond. Gallagher has historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of its Brokerage and Risk Management segments. Gallagher also believes that using this measure allows readers of our financial statements to measure, analyze and compare the growth from its Brokerage and Risk Management segments in a meaningful and consistent manner.
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Reconciliation of Non-GAAP Information Presented to GAAP Measures - This press release includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on page 9), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 1), for organic revenue measures (on pages 2 and 3, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 3 and 4, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can be found in the supplemental quarterly data available at www.ajg.com.
(8 of 11)
Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC -1st Qtr Ended
March 31,
(Unaudited -in millions except per share, percentage and
workforce data)
1st Q Ended 1st Q Ended
Brokerage Segment Mar 31, 2014 Mar 31, 2013
------------ ------------
Commissions $411.5 $326.8
Fees 97.6 86.7
Supplemental commissions 25.4 17.3
Contingent commissions 32.2 22.5
Investment income and gains
realized on books of business
sales 1.9 1.1
568.6 454.4
Revenues
Compensation 356.1 287.7
Operating 110.6 86.4
Depreciation 9.0 6.3
Amortization 37.4 29.0
Change in estimated
acquisition earnout payables 5.1 4.4
Expenses 518.2 413.8
----- -----
Earnings before income taxes 50.4 40.6
Provision for income taxes 17.8 16.0
Net earnings $32.6 $24.6
===== =====
EBITDAC
Net earnings $32.6 $24.6
Provision for income taxes 17.8 16.0
Depreciation 9.0 6.3
Amortization 37.4 29.0
Change in estimated
acquisition earnout payables 5.1 4.4
EBITDAC $101.9 $80.3
====== =====
1st Q Ended 1st Q Ended
Risk Management Segment Mar 31, 2014 Mar 31, 2013
------------ ------------
Fees $159.6 $153.0
Investment income 0.4 0.6
160.0 153.6
Revenues
Compensation 99.9 91.6
Operating 35.5 35.5
Depreciation 4.9 4.4
Amortization 0.7 0.6
Expenses 141.0 132.1
----- -----
Earnings before income taxes 19.0 21.5
Provision for income taxes 6.9 7.6
Net earnings $12.1 $13.9
===== =====
EBITDAC
Net earnings $12.1 $13.9
Provision for income taxes 6.9 7.6
Depreciation 4.9 4.4
Amortization 0.7 0.6
EBITDAC $24.6 $26.5
===== =====
1st Q Ended 1st Q Ended
Corporate Segment Mar 31, 2014 Mar 31, 2013
------------ ------------
Revenues from consolidated
clean coal facilities $154.3 $49.3
Royalty income from clean coal
licenses 14.6 10.0
Loss from unconsolidated clean
coal facilities (2.5) (2.3)
Other net revenues 20.0 9.1
186.4 66.1
Revenues
Cost of revenues from
consolidated clean coal
facilities 171.0 58.1
Compensation 10.3 4.6
Operating 11.1 11.9
Interest 16.2 11.2
Depreciation 0.9 0.1
Expenses 209.5 85.9
----- ----
Loss before income taxes (23.1) (19.8)
Benefit for income taxes (27.7) (21.8)
Net earnings $4.6 $2.0
==== ====
EBITDAC
Net earnings $4.6 $2.0
Benefit for income taxes (27.7) (21.8)
Interest 16.2 11.2
Depreciation 0.9 0.1
EBITDAC $(6.0) $(8.5)
===== =====
See "Information Regarding
Non-GAAP Measures" on page 7
of 11.
(9 of 11)
Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC -1st Qtr Ended
March 31,
(Unaudited - in millions except share and per share data)
1st Q Ended 1st Q Ended
Total Company Mar 31, 2014 Mar 31, 2013
------------ ------------
Commissions $411.5 $326.8
Fees 257.2 239.7
Supplemental commissions 25.4 17.3
Contingent commissions 32.2 22.5
Investment income and gains
realized on books of business
sales 2.3 1.7
Revenues from clean coal
activities 166.4 57.0
Other net revenues - Corporate 20.0 9.1
915.0 674.1
Revenues
Compensation 466.3 383.9
Operating 157.2 133.8
Cost of revenues from clean
coal activities 171.0 58.1
Interest 16.2 11.2
Depreciation 14.8 10.8
Amortization 38.1 29.6
Change in estimated
acquisition earnout payables 5.1 4.4
Expenses 868.7 631.8
----- -----
Earnings before income taxes 46.3 42.3
Provision (benefit) for income
taxes (3.0) 1.8
Net earnings $49.3 $40.5
===== =====
Diluted net earnings per share $0.36 $0.32
===== =====
Dividends declared per share $0.36 $0.35
===== =====
EBITDAC
Net earnings $49.3 $40.5
Provision (benefit) for income
taxes (3.0) 1.8
Interest 16.2 11.2
Depreciation 14.8 10.8
Amortization 38.1 29.6
Change in estimated
acquisition earnout payables 5.1 4.4
EBITDAC $120.5 $98.3
====== =====
Arthur J. Gallagher & Co.
Consolidated Balance Sheet
(Unaudited - in millions except per share data)
Mar 31, 2014 Dec 31, 2013
Cash and cash equivalents $739.2 $298.1
Restricted cash 915.9 1,027.4
Premiums and fees receivable 1,253.4 1,288.8
Other current assets 289.5 261.3
----- -----
Total current assets 3,198.0 2,875.6
Fixed assets - net 165.9 160.4
Deferred income taxes 292.9 279.8
Other noncurrent assets 383.0 320.7
Goodwill - net 2,142.0 2,145.2
Amortizable intangible assets
-net 1,093.8 1,078.8
Total assets $7,275.6 $6,860.5
======== ========
Premiums payable to insurance
and reinsurance companies $1,974.7 $2,154.7
Accrued compensation and other
accrued liabilities 471.9 370.6
Unearned fees 86.6 84.5
Other current liabilities 33.0 44.5
Corporate related borrowings -
current 467.4 630.5
Total current liabilities 3,033.6 3,284.8
Corporate related borrowings -
noncurrent 1,425.0 825.0
Other noncurrent liabilities 672.8 665.2
Total liabilities 5,131.4 4,775.0
------- -------
Stockholders' equity:
Common stock -issued and
outstanding 135.1 133.6
Capital in excess of par value 1,405.3 1,358.1
Retained earnings 596.9 596.4
Accumulated other
comprehensive income (loss) 6.9 (2.6)
Total stockholders' equity 2,144.2 2,085.5
------- -------
Total liabilities and
stockholders' equity $7,275.6 $6,860.5
======== ========
See "Information Regarding
Non-GAAP Measures" on page 7
of 11.
(10 of 11)
Arthur J. Gallagher & Co.
Other Information and Notes
(Unaudited - data is rounded where indicated)
1st Q Ended 1st Q Ended
OTHER INFORMATION Mar 31, 2014 Mar 31, 2013
------------ ------------
Basic weighted average shares
outstanding (000s) 134,230 126,165
Diluted weighted average
shares outstanding (000s) 135,840 127,543
Common shares repurchased
(000s) - -
Common shares issued for
acquisitions and earnouts
(000s) 738 -
Number of acquisitions closed 9 4
Annualized revenues acquired
(in millions) $17.8 $5.0
Workforce at end of period
(includes acquisitions):
11,143 8,966
Brokerage
4,861 4,500
Risk Management
16,340 13,760
Total Company
Contact: Marsha Akin
Director - Investor Relations
630-285-3501 or
marsha_akin@ajg.com
(11 of 11)
SOURCE Arthur J. Gallagher & Co.
