ARTHUR J. GALLAGHER & CO. ITASCA, Ill., July 28, 2016 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended June 30, 2016. Management will host a webcast conference call to discuss these results on Friday, July 29, 2016 at 9:00 a.m. ET/8:00 a.m. CT. To listen to the call, and for printer-friendly formats of this release and the "Supplemental Quarterly Data" and "CFO Commentary," which may also be referenced during the call, please visit ajg.com/IR. These documents contain both GAAP and non-GAAP measures. Investors and other users of this information should read carefully the section entitled "Information Regarding Non-GAAP Measures" beginning on page 9.
Summary of Financial Results - Second Quarter
Reconciliations of non-GAAP measures begin on page 2
(Dollars in millions, except per share data) 2nd Q 2016 2nd Q 2015 Change
---------- ---------- ------
Reported Adjusted Reported Adjusted Reported Adjusted
Brokerage Segment GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
----------------- ---- -------- ---- -------- ---- --------
Revenues $939.1 $937.7 $885.6 $866.7 6% 8%
Organic
revenues $872.4 $853.5 2.2%
Net earnings $114.9 $100.3 15%
Net earnings
margin 12.2% 11.3% +91 bpts
Adjusted
EBITDAC $284.5 $258.0 10%
Adjusted
EBITDAC
margin 30.3% 29.8% +57 bpts
Diluted net
earnings per
share $0.64 $0.75 $0.58 $0.70 10% 7%
Risk Management Segment
-----------------------
Revenues $176.5 $176.5 $189.4 $187.4 -7% -6%
Organic
revenues $174.8 $180.3 -3.1%
Net earnings $13.9 $17.1 -19%
Net earnings
margin 7.9% 9.0% -115 bpts
Adjusted
EBITDAC $30.1 $32.6 -8%
Adjusted
EBITDAC
margin 17.1% 17.4% -35 bpts
Diluted net
earnings per
share $0.08 $0.08 $0.10 $0.10 -20% -20%
Corporate Segment
-----------------
Diluted net
earnings per
share $0.12 $0.14 $0.13 $0.13 -8% 8%
Total Company
-------------
Diluted net
earnings per
share $0.84 $0.97 $0.81 $0.93 4% 4%
Diluted
weighted
average
shares
outstanding
(in millions) 178.3 171.7
"During the second quarter and first half of the year we improved our profitability margin, we posted solid growth in revenue and we grew earnings per share. We are pleased with our performance year to date and the fundamentals of our business remain strong," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Our recent internal survey suggests P&C pricing is moderating at about the same level as last year across our global footprint. Property continues to experience the largest price reductions, while casualty pricing is flat to down modestly. The survey results point to a stable market with the majority of respondents expecting no significant change in the pricing environment this year. This is a good environment for our skilled production team."
(1 of 14)
Summary of Financial Results - Six Months Ended June 30, 2016
Reconciliations of non-GAAP measures begin on page 3
(Dollars in millions, except per share data) 6 Months 2016 6 Months 2015 Change
------------- ------------- ------
Reported Adjusted Reported Adjusted Reported Adjusted
Brokerage Segment GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
----------------- ---- -------- ---- -------- ---- --------
Revenues $1,764.6 $1,761.0 $1,636.7 $1,599.2 8% 10%
Organic
revenues $1,629.7 $1,573.0 3.6%
Net earnings $180.8 $140.9 28%
Net earnings
margin 10.3% 8.6% +164 bpts
Adjusted
EBITDAC $475.7 $422.3 13%
Adjusted
EBITDAC
margin 27.0% 26.4% +60 bpts
Diluted net
earnings per
share $0.99 $1.15 $0.80 $1.06 24% 8%
Risk Management Segment
-----------------------
Revenues $355.8 $355.8 $366.6 $362.1 -3% -2%
Organic
revenues $352.2 $349.8 0.7%
Net earnings $28.9 $32.0 -10%
Net earnings
margin 8.1% 8.7% -61 bpts
Adjusted
EBITDAC $61.6 $61.5 0%
Adjusted
EBITDAC
margin 17.3% 17.0% +33 bpts
Diluted net
earnings per
share $0.16 $0.17 $0.19 $0.18 -16% -6%
Corporate Segment
-----------------
Diluted net
earnings (loss)
per share $(0.05) $(0.01) $(0.04) $(0.04) 25% -75%
Total Company
-------------
Diluted net
earnings per
share $1.10 $1.31 $0.95 $1.20 16% 9%
Diluted
weighted
average
shares
outstanding
(in millions) 178.0 169.3
Quarter Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:
Diluted Net
Revenues Net Earnings EBITDAC Earnings Per Share
Segment 2nd Q 16 2nd Q 15 2nd Q 16 2nd Q 15 2nd Q 16 2nd Q 15 2nd Q 16 2nd Q 15
------- -------- -------- -------- -------- -------- -------- -------- --------
(in millions) (in millions) (in millions)
Brokerage, as reported $939.1 $885.6 $114.9 $100.3 $267.7 $234.0 $0.64 $0.58
Gains on book
sales (1.4) (3.5) (1.0) (2.5) (1.4) (3.5) - (0.01)
Acquisition
integration - - 8.4 16.1 11.9 22.4 0.05 0.09
Workforce &
lease
termination - - 3.2 4.3 4.5 6.0 0.02 0.02
Acquisition
related
adjustments - - 8.0 4.8 1.8 2.5 0.04 0.03
Levelized foreign
currency
translation - (15.4) - (1.3) - (3.4) - (0.01)
Brokerage, as adjusted * 937.7 866.7 133.5 121.7 284.5 258.0 0.75 0.70
----- ----- ----- ----- ----- ----- ---- ----
Risk Management, as reported 176.5 189.4 13.9 17.1 29.7 33.1 0.08 0.10
Workforce &
lease
termination - - 0.3 0.2 0.4 0.3 - -
Acquisition
related
adjustments - - - (0.3) - - - -
Levelized foreign
currency
translation - (2.0) - (0.5) - (0.8) - -
Risk Management, as adjusted * 176.5 187.4 14.2 16.5 30.1 32.6 0.08 0.10
---- ----
Corporate, as reported 311.5 296.4 26.9 30.2 (30.9) (24.7) 0.12 0.13
Impact of 2015
litigation
settlement - - 4.4 - 5.5 - 0.02 -
Corporate, as adjusted * 311.5 296.4 31.3 30.2 (25.4) (24.7) 0.14 0.13
----- ----- ---- ---- ----- ----- ---- ----
Total Company, as reported $1,427.1 $1,371.4 $155.7 $147.6 $266.5 $242.4 $0.84 $0.81
======== ======== ====== ====== ====== ====== ===== =====
Total Company, as adjusted * $1,425.7 $1,350.5 $179.0 $168.4 $289.2 $265.9 $0.97 $0.93
======== ======== ====== ====== ====== ====== ===== =====
Total Brokerage & Risk
Management, as
reported $1,115.6 $1,075.0 $128.8 $117.4 $297.4 $267.1 $0.72 $0.68
======== ====== ====== =====
Total Brokerage & Risk
Management, as
adjusted * $1,114.2 $1,054.1 $147.7 $138.2 $314.6 $290.6 $0.83 $0.80
======== ====== ====== =====
* For 2016, the pretax impact of the Brokerage
Segment adjustments totals $26.3 million,
with a corresponding adjustment to the
provision for income taxes of $7.7 million
relating to these items. The pretax impact
of the Risk Management Segment adjustments
totals $0.4 million, with a corresponding
adjustment to the provision for income taxes
of $0.1 million relating to these items.
The pretax impact of the Corporate Segment
adjustments totals $5.5 million, with a
corresponding adjustment to the provision
for income taxes of $1.1 million relating to
these items. A detailed reconciliation of
the 2016 and 2015 provision for income taxes
is shown on page 13.
(2 of 14)
Six Months Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:
Diluted Net
Revenues Net Earnings EBITDAC Earnings (Loss) Per
Share
Segment 6 Mths 16 6 Mths 15 6 Mths 16 6 Mths 15 6 Mths 16 6 Mths 15 6 Mths 16 6 Mths 15
------- --------- --------- --------- --------- --------- --------- --------- ---------
(in millions) (in millions) (in millions)
Brokerage, as reported $1,764.6 $1,636.7 $180.8 $140.9 $444.5 $372.5 $0.99 $0.80
Gains on book
sales (3.6) (4.4) (2.5) (3.1) (3.6) (4.4) (0.01) (0.02)
Acquisition
integration - - 18.4 30.0 26.1 43.2 0.10 0.18
Workforce &
lease
termination - - 4.3 10.1 6.1 14.5 0.02 0.06
Acquisition
related
adjustments - - 8.3 8.8 2.6 2.5 0.05 0.05
Levelized foreign
currency
translation - (33.1) - (1.7) - (6.0) - (0.01)
Brokerage, as adjusted * 1,761.0 1,599.2 209.3 185.0 475.7 422.3 1.15 1.06
------- ------- ----- ----- ----- ----- ---- ----
Risk Management, as reported 355.8 366.6 28.9 32.0 60.7 62.7 0.16 0.19
Workforce &
lease
termination - - 0.6 0.3 0.9 0.5 0.01 -
Acquisition
related
adjustments - - - (0.3) - - - -
Levelized foreign
currency
translation - (4.5) - (1.1) - (1.7) - (0.01)
Risk Management, as adjusted * 355.8 362.1 29.5 30.9 61.6 61.5 0.17 0.18
---- ----
Corporate, as reported 607.1 599.4 3.9 7.1 (69.3) (49.5) (0.05) (0.04)
Impact of 2015
litigation
settlement - - 8.1 - 10.2 - 0.04 -
Corporate, as adjusted * 607.1 599.4 12.0 7.1 (59.1) (49.5) (0.01) (0.04)
----- ----- ---- --- ----- ----- ----- -----
Total Company, as reported $2,727.5 $2,602.7 $213.6 $180.0 $435.9 $385.7 $1.10 $0.95
======== ======== ====== ====== ====== ====== ===== =====
Total Company, as adjusted * $2,723.9 $2,560.7 $250.7 $223.0 $478.2 $434.3 $1.31 $1.20
======== ======== ====== ====== ====== ====== ===== =====
Total Brokerage & Risk
Management, as
reported $2,120.4 $2,003.3 $209.7 $172.9 $505.2 $435.2 $1.15 $0.99
======== ====== ====== =====
Total Brokerage & Risk
Management, as
adjusted * $2,116.8 $1,961.3 $238.8 $215.9 $537.3 $483.8 $1.32 $1.24
======== ====== ====== =====
* For 2016, the pretax impact of the
Brokerage Segment adjustments
totals $40.4 million, with a
corresponding adjustment to the
provision for income taxes of $11.9
million relating to these items.
The pretax impact of the Risk
Management Segment adjustments
totals $0.9 million, with a
corresponding adjustment to the
provision for income taxes of $0.3
million relating to these items.
The pretax impact of the Corporate
Segment adjustments totals $10.2
million, with a corresponding
adjustment to the provision for
income taxes of $2.1 million
relating to these items. A
detailed reconciliation of the 2016
and 2015 provision for income taxes
is shown on page 14.
(3 of 14)
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues (Non-GAAP) 2nd Q 16 2nd Q 15 Change 6 Mths 16 6 Mths 15 Change
--------------------------
Base Commissions and Fees
-------------------------
Commissions and fees, as reported $861.7 $812.3 6.1% $1,586.8 $1,478.1 7.4%
Less commissions and fees from
acquisitions (50.5) - (100.9) -
Less disposed of operations - (0.5) - (0.8)
Levelized foreign currency
translation - (14.6) - (31.0)
Organic base commissions and fees $811.2 $797.2 1.8% $1,485.9 $1,446.3 2.7%
====== ====== ======== ========
Supplemental Commissions
------------------------
Supplemental commissions, as
reported $38.6 $34.8 10.9% $71.5 $61.7 15.9%
Less supplemental commissions from
acquisitions (0.3) - (1.3) -
Levelized foreign currency
translation - (1.1) - (1.8)
Organic supplemental commissions $38.3 $33.7 13.7% $70.2 $59.9 17.2%
===== ===== ===== =====
Contingent Commissions
----------------------
Contingent commissions, as reported $25.1 $22.8 10.1% $80.3 $67.3 19.3%
Less contingent commissions from
acquisitions (2.2) - (6.7) -
Levelized foreign currency
translation - (0.2) - (0.5)
Organic contingent commissions $22.9 $22.6 1.3% $73.6 $66.8 10.2%
===== ===== ===== =====
Total reported commissions, fees,
supplemental
commissions and
contingent
commissions $925.4 $869.9 6.4% $1,738.6 $1,607.1 8.2%
Less commissions and fees from
acquisitions (53.0) - (108.9) -
Less disposed of operations - (0.5) - (0.8)
Levelized foreign currency
translation - (15.9) - (33.3)
Total organic commissions, fees,
supplemental
commissions and
contingent
commissions $872.4 $853.5 2.2% $1,629.7 $1,573.0 3.6%
Of the 2.2% growth in total organic revenues for second quarter 2016, domestic posted 3% growth and international posted 1% growth. As previously announced, the loss of one large international account negatively impacted organic growth; excluding the lost account, international would have posted 2% growth and total brokerage would have posted 2.5% growth.
Acquisition
Activity 2nd Q 16 2nd Q 15 6 Mths 16 6 Mths 15
-----------
Number
of
acquisitions
closed
* 13 11 21 22
Estimated
annualized
revenues
acquired
(in
millions) $40.4 $82.3 $70.4 $115.9
===== ===== ===== ======
* Gallagher repurchased 697,000
shares in the second quarter of
2016 to fully offset shares
issued for tax-free exchange
mergers in the quarter.
Gallagher also repurchased
804,000 shares in the second
quarter of 2016 in contemplation
of closing tax-free exchange
mergers that are anticipated to
occur in the third quarter of
2016 or thereafter.
(4 of 14)
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):
Compensation Expense and
Ratios 2nd Q 16 2nd Q 15 6 Mths 16 6 Mths 15
------------------------
Compensation expense, as
reported $518.2 $496.0 $1,011.1 $956.3
Acquisition integration
(1) (4.5) (11.1) (9.1) (22.7)
Workforce and lease
termination related
charges (2.5) (4.6) (3.8) (13.1)
Acquisition related
adjustments (1.8) (2.5) (2.6) (2.5)
Levelized foreign
currency translation - (9.2) - (20.3)
Compensation expense, as
adjusted $509.4 $468.6 $995.6 $897.7
====== ====== ====== ======
Reported compensation
expense ratios using
reported revenues on
pages 2 and 3 * 55.2% 56.0% 57.3% 58.4%
==== ==== ==== ====
Adjusted compensation
expense ratios using
adjusted revenues on
pages 2 and 3 ** 54.3% 54.1% 56.5% 56.1%
==== ==== ==== ====
* Reported second quarter
compensation ratio was 0.8 pts
lower than the same period in
2015. This ratio was primarily
impacted by lower integration
expenses.
** Adjusted second quarter
compensation ratio was 0.2 pts
higher compared to the same
period in 2015. All other items
were essentially consistent with
the prior year.
Operating Expense
and Ratios 2nd Q 16 2nd Q 15 6 Mths 16 6 Mths 15
-----------------
Operating expense,
as reported $153.2 $155.6 $309.0 $307.9
Acquisition
integration (1) (7.4) (11.3) (17.0) (20.5)
Workforce and
lease termination
related charges (2.0) (1.4) (2.3) (1.4)
Levelized foreign
currency
translation - (2.8) - (6.8)
Operating expense,
as adjusted $143.8 $140.1 $289.7 $279.2
====== ====== ====== ======
Reported operating
expense ratios
using reported
revenues on pages
2 and 3 * 16.3% 17.6% 17.5% 18.8%
==== ==== ==== ====
Adjusted operating
expense ratios
using adjusted
revenues on pages
2 and 3 ** 15.3% 16.2% 16.5% 17.5%
==== ==== ==== ====
* Reported second quarter
operating expense ratio was
1.3 pts lower than the same
period in 2015. This ratio
was primarily impacted by
decreased integration
costs, lower real estate
expense and savings in
business insurance.
** Adjusted second quarter
operating expense ratio was
0.9 pts lower than the same
period in 2015. This ratio
was primarily impacted by
lower real estate expense
and savings in business
insurance.
Net Earnings to
Adjusted EBITDAC
(Non-GAAP) 2nd Q 16 2nd Q 15 Change 6 Mths 16 6 Mths 15 Change
-----------------
Net earnings, as
reported $114.9 $100.3 14.6% $180.8 $140.9 28.3%
Provision for
income taxes 63.3 56.3 97.4 76.7
Depreciation 14.4 12.5 28.4 25.4
Amortization 61.9 58.8 120.8 112.8
Change in
estimated
acquisition
earnout payables 13.2 6.1 17.1 16.7
EBITDAC 267.7 234.0 14.4% 444.5 372.5 19.3%
Gains from books
of business sales (1.4) (3.5) (3.6) (4.4)
Acquisition
integration (1) 11.9 22.4 26.1 43.2
Acquisition
related
adjustments 1.8 2.5 2.6 2.5
Workforce and
lease termination
related charges 4.5 6.0 6.1 14.5
Levelized foreign
currency
translation - (3.4) - (6.0)
EBITDAC, as
adjusted $284.5 $258.0 10.3% $475.7 $422.3 12.7%
====== ====== ====== ======
Net earnings
margin, as
reported 12.2% 11.3% +91 bpts 10.3% 8.6% +164 bpts
==== ==== ==== ===
EBITDAC margin, as
adjusted 30.3% 29.8% +57 bpts 27.0% 26.4% +60 bpts
==== ==== ==== ====
(1) Acquisition integration costs
consist mostly of IT system
conversion costs, professional
fees, and compensation related to
certain of our large acquisitions
outside the scope of our usual
tuck-in strategy.
(5 of 14)
Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues
(Non-GAAP) 2nd Q 16 2nd Q 15 Change 6 Mths 16 6 Mths 15 Change
----------------
Fees $176.3 $182.5 -3.4% $353.6 $356.3 -0.8%
International
performance bonus
fees - 6.8 -100.0% 1.8 10.1 -82.2%
Fees as reported 176.3 189.3 -6.9% 355.4 366.4 -3.0%
Less fees from
acquisitions (1.4) - (3.1) -
Less client run-
off (0.1) (7.0) (0.1) (12.1)
Levelized foreign
currency
translation - (2.0) - (4.5)
Organic fees $174.8 $180.3 -3.1% $352.2 $349.8 0.7%
====== ====== ====== ======
Second quarter 2016 organic fees were unfavorably impacted primarily by a delay in the inception of new business, lesser arising domestic claim counts, and lower international performance bonus fees.
Compensation Expense and
Ratios 2nd Q 16 2nd Q 15 6 Mths 16 6 Mths 15
------------------------
Compensation expense, as
reported $104.0 $109.2 $209.5 $216.1
Workforce and lease
termination related
charges (0.4) (0.3) (0.9) (0.5)
Levelized foreign
currency translation - (1.0) - (2.2)
Compensation expense, as
adjusted $103.6 $107.9 $208.6 $213.4
====== ====== ====== ======
Reported compensation
expense ratios using
reported revenues on
pages 2 and 3 * 58.9% 57.7% 58.9% 59.0%
==== ==== ==== ====
Adjusted compensation
expense ratios using
adjusted revenues on
pages 2 and 3 * 58.7% 57.6% 58.6% 58.9%
==== ==== ==== ====
* Reported and adjusted second
quarter compensation ratios were
1.2 pts and 1.1 pts higher,
respectively, than the same
period in 2015. Excluding the
impact of the products discussed
below, both compensation expense
ratios were 2.5 pts higher than
the same period in 2015. This was
primarily due to the lack of
international performance bonus
fee revenues in 2016.
Operating Expense
and Ratios 2nd Q 16 2nd Q 15 6 Mths 16 6 Mths 15
-----------------
Operating expense,
as reported $42.8 $47.1 $85.6 $87.8
Levelized foreign
currency
translation - (0.2) - (0.6)
Operating expense,
as adjusted $42.8 $46.9 $85.6 $87.2
===== ===== ===== =====
Reported operating
expense ratios
using reported
revenues on pages
2 and 3 * 24.3% 24.9% 24.1% 24.0%
==== ==== ==== ====
Adjusted operating
expense ratios
using adjusted
revenues on pages
2 and 3 * 24.3% 25.0% 24.1% 24.1%
==== ==== ==== ====
* Reported and adjusted second
quarter operating expense
ratios were 0.6 pts and 0.7 pts
lower, respectively, than the
same period in 2015. Included
in both operating expense
ratios is an increase of 1.9
pts from growth of outsourced
products, the cost of which
only flows through operating
expense, that was more than
offset by savings in
professional fees, business
insurance, real estate and
other expenses.
(6 of 14)
Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):
Net Earnings to
Adjusted EBITDAC
(Non-GAAP) 2nd Q 16 2nd Q 15 Change 6 Mths 16 6 Mths 15 Change
----------------- ------ ------
Net earnings, as
reported $13.9 $17.1 -18.7% $28.9 $32.0 -9.7%
Provision for
income taxes 8.5 9.6 17.5 18.3
Depreciation 6.6 6.2 13.2 11.5
Amortization 0.7 0.7 1.1 1.4
Change in
estimated
acquisition
earnout payables - (0.5) - (0.5)
EBITDAC 29.7 33.1 -10.3% 60.7 62.7 -3.2%
Workforce and
lease termination
related charges 0.4 0.3 0.9 0.5
Levelized foreign
currency
translation - (0.8) - (1.7)
EBITDAC, as
adjusted $30.1 $32.6 -7.7% $61.6 $61.5 0.2%
===== ===== ===== =====
Net earnings
margin, as
reported 7.9% 9.0% -115 bpts 8.1% 8.7% -61 bpts
=== === === ===
EBITDAC margin, as
adjusted 17.1% 17.4% -35 bpts 17.3% 17.0% +33 bpts
==== ==== ==== ====
Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
2016 2015
Net Earnings Net Earnings
(Loss) (Loss)
Pretax Income Attributable to Pretax Income Attributable to
Earnings Tax Controlling Earnings Tax Controlling
(Loss) Benefit Interests (Loss) Benefit Interests
2nd Quarter
-----------
Interest and
banking costs $(28.0) $11.2 $(16.8) $(26.6) $10.6 $(16.0)
Clean energy
related (1) (24.4) 73.6 49.2 (25.3) 70.3 45.0
Acquisition
costs (1.1) 0.2 (0.9) (1.5) 0.2 (1.3)
Corporate (10.0) 3.9 (6.1) (8.5) 3.9 (4.6)
Litigation
settlement
(2) (5.5) 1.1 (4.4) - - -
Reported 2nd
quarter (69.0) 90.0 21.0 (61.9) 85.0 23.1
Litigation
settlement
(2) 5.5 (1.1) 4.4 - - -
Adjusted 2nd
quarter $(63.5) $88.9 $25.4 $(61.9) $85.0 $23.1
====== ===== ===== ====== ===== =====
Six Months
----------
Interest and
banking costs $(54.3) $21.7 $(32.6) $(52.9) $21.1 $(31.8)
Clean energy
related (1) (58.3) 104.8 46.5 (48.6) 88.1 39.5
Acquisition
costs (2.8) 0.5 (2.3) (3.2) 0.4 (2.8)
Corporate (18.6) 6.2 (12.4) (17.5) 6.0 (11.5)
Litigation
settlement
(2) (10.2) 2.1 (8.1) - - -
Reported six
months (144.2) 135.3 (8.9) (122.2) 115.6 (6.6)
Litigation
settlement
(2) 10.2 (2.1) 8.1 - - -
Adjusted six
months $(134.0) $133.2 $(0.8) $(122.2) $115.6 $(6.6)
======= ====== ===== ======= ====== =====
(1) Pretax earnings for the second
quarter are presented net of
amounts attributable to
noncontrolling interests of $5.9
million in 2016 and $7.1 million
in 2015. Pretax earnings for the
six month period are presented
net of amounts attributable to
noncontrolling interests of $12.8
million in 2016 and $13.7 million
in 2015.
(2) During the third quarter of 2015,
Gallagher settled litigation
against certain former U.K.
executives and their advisors for
a pretax gain of $31.0 million
($22.3 million net of costs and
taxes). Incremental expenses
that arose in connection with
this matter will result in after-
tax charges of up to $4.5 million
per quarter through June 30,
2017.
Interest and banking costs and debt - At June 30, 2016, Gallagher had $2,400.0 million of borrowings from private placements, $235.0 million of short-term borrowings under its line of credit facility and $101.2 million outstanding under a two year revolving loan facility that provides funding for premium finance receivables, which are fully collateralized by the underlying premiums held by insurance carriers and as such are excluded from our debt covenant computations. On June 2, 2016, Gallagher entered into a note purchase agreement for a private placement of $275.0 million of senior unsecured notes. Proceeds were primarily used to pay down its line of credit facility and partially fund its acquisitions.
(7 of 14)
On April 8, 2016, Gallagher entered into an $800.0 million unsecured revolving credit facility, expiring in April 2021, with a group of fifteen financial institutions led by Bank of Montreal. At Gallagher's request, the facility can increase to $1.1 billion upon satisfaction of certain conditions. This facility replaces a $600.0 million unsecured revolving credit facility that was due to expire in 2018.
Clean energy - Consists of the operating results related to our investments in 34 clean coal production plants and royalty income from clean coal licenses related to Chem-Mod LLC. Additional information regarding these results is available in the "CFO Commentary" at ajg.com/IR.
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's consolidated effective tax rate for the quarters ended June 30, 2016 and 2015 was (13.2)% and (14.9)%, respectively, which was lower than the statutory rate due to the amount of IRC Section 45 tax credits earned.
At-the-market equity program - Gallagher has an at-the-market equity program under which up to $15.6 million of its common stock remaining in the program may be sold through Morgan Stanley & Co. LLC as sales agent. During second quarter 2016, Gallagher did not sell any shares of its common stock under the program.
Balance Sheet Reclassifications
In first quarter 2016, Gallagher adopted new accounting guidance related to the presentation of both debt issuance costs and income taxes in the consolidated balance sheet as of June 30, 2016. The new debt issuance costs guidance requires such costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The new income tax guidance requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent components. The new guidance has been applied on a retrospective basis. Accordingly, Gallagher reclassified debt issuance costs of $3.3 million included in Other noncurrent assets to Corporate related borrowings - noncurrent in its consolidated balance sheet as of December 31, 2015. In addition, Gallagher reclassified the current deferred taxes to noncurrent in its consolidated balance sheet as of December 31, 2015, which increased Noncurrent deferred income taxes by $122.1 million and increased Other noncurrent liabilities by $4.6 million.
Webcast Conference Call
Gallagher will host a webcast conference call on Friday, July 29, 2016 at 9:00 a.m. ET/8:00 a.m. CT. To listen to this call, please go to ajg.com/IR. The call will be available for replay at such website for at least 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 33 countries and offers client-service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants.
Cautionary Information
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," "will," "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; (iv) the premium rate environment; (v) the economic environment; and (vi) anticipated acquisition integration costs.
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, such
as 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 litigation risks; and environmental risks - all of
which could impact (i) and (ii) above; and
-- Changes in worldwide and national economic conditions (including a
possible economic downturn or recession in the U.K. because of the
recent Brexit vote), changes in premium rates and in insurance markets
generally, changes in the insurance brokerage industry's competitive
landscape and the uncertainties and challenges inherent in the
acquisition integration process - all of which could impact (iii) - (vi)
above.
(8 of 14)
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, 2015 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 (adjusted EPS), 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. See further below for definitions and the reason each of these measures is useful to investors. Gallagher's industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, 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. As disclosed in its most recent Proxy Statement, Gallagher does not make determinations regarding executive officer incentive compensation on the basis of "adjusted" measures such as those described below in "Adjusted revenues and expenses" or "Adjusted EBITDAC". Instead, incentive compensation determinations for executive officers are made on the basis of revenue and EBITAC (defined as earnings before interest, taxes, amortization and change in estimated earnout payables) for the combined brokerage and risk management segments. 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.
Adjusted Non-GAAP presentation - Gallagher believes that the adjusted non-GAAP presentations of the current and prior year information, presented in this earnings release, provide 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. See pages 13 and 14 for a reconciliation of the adjustments made to income taxes.
-- Adjusted revenues and expenses - Revenues, compensation expense and
operating expense, respectively, each adjusted to exclude the following:
-- Net gains realized from sales of books of business, which are
primarily net proceeds received related to sales of books of
business and other divestiture transactions.
-- Acquisition integration costs, which include costs related to
certain of our large acquisitions, outside the scope of our usual
tuck-in strategy, 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.
-- Workforce related charges, which primarily include severance costs
related to employee terminations and other costs associated with
redundant workforce.
-- Lease termination related charges, which primarily include costs
related to terminations of real estate leases and abandonment of
leased space.
-- Acquisition related adjustments, which include change in estimated
acquisition earnout payables adjustments, impacts of acquisition
valuation true-ups, impairment charges and acquisition related
compensation charges.
-- The impact of foreign currency translation, as applicable. 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.
-- Adjusted ratios - Adjusted compensation expense and adjusted operating
expense, respectively, each divided by adjusted revenues.
Non-GAAP Earnings Measures - Gallagher believes that each of EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin and adjusted EPS for the Brokerage and Risk Management segments, as defined below, provides a meaningful representation of its operating performance. Adjusted EPS is a performance measure and should not be used as a measure of Gallagher's liquidity. Gallagher also considers EBITDAC and EBITDAC margin as ways to measure financial performance on an ongoing basis. In addition, adjusted EBITDAC, adjusted EBITDAC margin and adjusted EPS 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 - Net earnings before interest, income taxes, depreciation,
amortization and the change in estimated acquisition earnout payables.
-- EBITDAC margin - EBITDAC divided by total revenues.
(9 of 14)
-- Adjusted EBITDAC - EBITDAC adjusted to exclude net gains realized from
sales of books of business, acquisition integration costs, workforce
related charges, lease termination related charges, acquisition related
adjustments and the period-over-period impact of foreign currency
translation, as applicable.
-- Adjusted EBITDAC margin - Adjusted EBITDAC divided by total adjusted
revenues (defined above).
-- Adjusted EPS for the Brokerage and Risk Management segments - Gallagher
defines this non-GAAP measure as net earnings adjusted to exclude the
after-tax impact of net gains realized from sales of books of business,
acquisition integration costs, the impact of foreign currency
translation, workforce related charges, lease termination related
charges and acquisition related adjustments divided by diluted weighted
average shares outstanding.
Organic Revenues (a non-GAAP measure) - 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 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 base commission and fee organic growth excludes the period-over-period impact of foreign currency translation. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the impact of run-off of the New South Wales Workers' Compensation Scheme and other closed down operations 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, but non-GAAP, 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 non-GAAP 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.
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 pages 11 and 12), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 2 and 3), for organic revenue measures (on pages 4 and 6, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 5 and 6, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can be found in the "Supplemental Quarterly Data" available at ajg.com/IR.
(10 of 14)
Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC - 2nd Qtr Ended June 30,
(Unaudited - in millions except per share, percentage and workforce data)
2nd Q Ended 2nd Q Ended 6 Mths Ended 6 Mths Ended
Brokerage Segment June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
------------- ------------- ------------- -------------
Commissions $663.4 $634.3 $1,229.4 $1,154.0
Fees 198.3 178.0 357.4 324.1
Supplemental commissions 38.6 34.8 71.5 61.7
Contingent commissions 25.1 22.8 80.3 67.3
Investment income and gains realized on books of business
sales 13.7 15.7 26.0 29.6
Revenues
939.1 885.6 1,764.6 1,636.7
Compensation 518.2 496.0 1,011.1 956.3
Operating 153.2 155.6 309.0 307.9
Depreciation 14.4 12.5 28.4 25.4
Amortization 61.9 58.8 120.8 112.8
Change in estimated acquisition earnout payables 13.2 6.1 17.1 16.7
Expenses
760.9 729.0 1,486.4 1,419.1
----- ----- ------- -------
Earnings before income taxes 178.2 156.6 278.2 217.6
Provision for income taxes 63.3 56.3 97.4 76.7
Net earnings 114.9 100.3 180.8 140.9
Net earnings attributable to noncontrolling interests (0.2) 1.2 4.3 5.1
Net earnings attributable to controlling interests $115.1 $99.1 $176.5 $135.8
====== ===== ====== ======
EBITDAC
Net earnings $114.9 $100.3 $180.8 $140.9
Provision for income taxes 63.3 56.3 97.4 76.7
Depreciation 14.4 12.5 28.4 25.4
Amortization 61.9 58.8 120.8 112.8
Change in estimated acquisition earnout payables 13.2 6.1 17.1 16.7
EBITDAC $267.7 $234.0 $444.5 $372.5
====== ====== ====== ======
2nd Q Ended 2nd Q Ended 6 Mths Ended 6 Mths Ended
Risk Management Segment June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
------------- ------------- ------------- -------------
Fees $176.3 $189.3 $355.4 $366.4
Investment income 0.2 0.1 0.4 0.2
Revenues
176.5 189.4 355.8 366.6
----- ----- ----- -----
Compensation 104.0 109.2 209.5 216.1
Operating 42.8 47.1 85.6 87.8
Depreciation 6.6 6.2 13.2 11.5
Amortization 0.7 0.7 1.1 1.4
Change in estimated acquisition earnout payables - (0.5) - (0.5)
Expenses
154.1 162.7 309.4 316.3
----- ----- ----- -----
Earnings before income taxes 22.4 26.7 46.4 50.3
Provision for income taxes 8.5 9.6 17.5 18.3
Net earnings 13.9 17.1 28.9 32.0
Net earnings attributable to noncontrolling interests - - - -
Net earnings attributable to controlling interests $13.9 $17.1 $28.9 $32.0
===== ===== ===== =====
EBITDAC
Net earnings $13.9 $17.1 $28.9 $32.0
Provision for income taxes 8.5 9.6 17.5 18.3
Depreciation 6.6 6.2 13.2 11.5
Amortization 0.7 0.7 1.1 1.4
Change in estimated acquisition earnout payables - (0.5) - (0.5)
EBITDAC $29.7 $33.1 $60.7 $62.7
===== ===== ===== =====
2nd Q Ended 2nd Q Ended 6 Mths Ended 6 Mths Ended
Corporate Segment June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
------------- ------------- ------------- -------------
Revenues from consolidated clean coal facilities $301.5 $283.7 $583.5 $573.2
Royalty income from clean coal licenses 10.8 13.6 23.9 28.3
Loss from unconsolidated clean coal facilities (0.4) (0.3) (0.7) (0.6)
Other net revenues (0.4) (0.6) 0.4 (1.5)
Revenues
311.5 296.4 607.1 599.4
Cost of revenues from consolidated clean coal facilities 325.0 306.8 629.4 616.1
Compensation 8.8 9.9 32.5 17.9
Operating 8.6 4.4 14.5 14.9
Interest 27.2 26.0 53.0 51.6
Depreciation 5.0 4.1 9.1 7.4
Expenses
374.6 351.2 738.5 707.9
----- ----- ----- -----
Loss before income taxes (63.1) (54.8) (131.4) (108.5)
Benefit for income taxes (90.0) (85.0) (135.3) (115.6)
Net earnings 26.9 30.2 3.9 7.1
Net earnings attributable to noncontrolling interests 5.9 7.1 12.8 13.7
Net earnings (loss) attributable to controlling interests $21.0 $23.1 $(8.9) $(6.6)
===== ===== ===== =====
EBITDAC
Net earnings $26.9 $30.2 $3.9 $7.1
Benefit for income taxes (90.0) (85.0) (135.3) (115.6)
Interest 27.2 26.0 53.0 51.6
Depreciation 5.0 4.1 9.1 7.4
EBITDAC $(30.9) $(24.7) $(69.3) $(49.5)
====== ====== ====== ======
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
(11 of 14)
Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC - 2nd Qtr Ended June 30,
(Unaudited - in millions except share and per share data)
2nd Q Ended 2nd Q Ended 6 Mths Ended 6 Mths Ended
Total Company June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
------------- ------------- ------------- -------------
Commissions $663.4 $634.3 $1,229.4 $1,154.0
Fees 374.6 367.3 712.8 690.5
Supplemental commissions 38.6 34.8 71.5 61.7
Contingent commissions 25.1 22.8 80.3 67.3
Investment income and gains
realized on books of business
sales 13.9 15.8 26.4 29.8
Revenues from clean coal
activities 311.9 297.0 606.7 600.9
Other net revenues - Corporate (0.4) (0.6) 0.4 (1.5)
Revenues
1,427.1 1,371.4 2,727.5 2,602.7
Compensation 631.0 615.1 1,253.1 1,190.3
Operating 204.6 207.1 409.1 410.6
Cost of revenues from clean
coal activities 325.0 306.8 629.4 616.1
Interest 27.2 26.0 53.0 51.6
Depreciation 26.0 22.8 50.7 44.3
Amortization 62.6 59.5 121.9 114.2
Change in estimated
acquisition earnout payables 13.2 5.6 17.1 16.2
Expenses
1,289.6 1,242.9 2,534.3 2,443.3
------- ------- ------- -------
Earnings before income taxes 137.5 128.5 193.2 159.4
Benefit for income taxes (18.2) (19.1) (20.4) (20.6)
Net earnings 155.7 147.6 213.6 180.0
Net earnings attributable to
noncontrolling interests 5.7 8.3 17.1 18.8
Net earnings attributable to
controlling interests $150.0 $139.3 $196.5 $161.2
====== ====== ====== ======
Diluted net earnings per share $0.84 $0.81 $1.10 $0.95
===== ===== ===== =====
Dividends declared per share $0.38 $0.37 $0.76 $0.74
===== ===== ===== =====
EBITDAC
Net earnings $155.7 $147.6 $213.6 $180.0
Benefit for income taxes (18.2) (19.1) (20.4) (20.6)
Interest 27.2 26.0 53.0 51.6
Depreciation 26.0 22.8 50.7 44.3
Amortization 62.6 59.5 121.9 114.2
Change in estimated
acquisition earnout payables 13.2 5.6 17.1 16.2
EBITDAC $266.5 $242.4 $435.9 $385.7
====== ====== ====== ======
Arthur J. Gallagher & Co.
Consolidated Balance Sheet
(Unaudited - in millions except per share data)
June 30, 2016 Dec 31, 2015
Cash and cash equivalents $411.1 $480.4
Restricted cash 1,430.9 1,412.1
Premiums and fees receivable 2,038.4 1,734.0
Other current assets 605.2 587.2
----- -----
Total current assets 4,485.6 4,213.7
Fixed assets - net 213.9 202.7
Deferred income taxes (includes tax
credit carryforwards of $387.0 in
2016 and $341.6 in 2015) 702.3 643.5
Other noncurrent assets 606.6 488.9
Goodwill - net 3,716.1 3,662.9
Amortizable intangible assets - net 1,659.8 1,698.8
Total assets $11,384.3 $10,910.5
Premiums payable to insurance and
reinsurance companies $3,216.5 $2,877.1
Accrued compensation and other
accrued liabilities 658.5 812.7
Unearned fees 72.8 61.3
Other current liabilities 49.7 54.0
Premium financing borrowings 101.2 137.0
Corporate related borrowings -
current 285.0 245.0
Total current liabilities 4,383.7 4,187.1
Corporate related borrowings -
noncurrent 2,344.4 2,071.7
Other noncurrent liabilities 1,000.4 963.5
Total liabilities 7,728.5 7,222.3
Stockholders' equity:
Common stock -issued and
outstanding 177.0 176.9
Capital in excess of par value 3,191.2 3,209.4
Retained earnings 835.2 774.5
Accumulated other comprehensive loss (603.5) (522.5)
Total controlling interests
stockholders' equity 3,599.9 3,638.3
Noncontrolling interests 55.9 49.9
---- ----
Total stockholders' equity 3,655.8 3,688.2
Total liabilities and
stockholders' equity $11,384.3 $10,910.5
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
(12 of 14)
Arthur J. Gallagher & Co.
Other Information
(Unaudited - data is rounded where indicated)
2nd Q Ended 2nd Q Ended 6 Mths Ended 6 Mths Ended
OTHER INFORMATION June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
------------- ------------- ------------- -------------
Basic weighted average shares
outstanding (000s) 177,415 170,613 177,226 168,094
Diluted weighted average shares
outstanding (000s) 178,272 171,731 177,965 169,257
177,031 174,545
Number of common shares
outstanding at end of period
(000s)
Workforce at end of period
(includes acquisitions):
Brokerage 16,520 15,667
Risk Management 5,171 5,015
Total Company 22,228 21,098
Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited)
(Unaudited - in millions except share and per share data)
Net Earnings (Loss) Net Earnings (Loss)
Earnings (Loss) Provision (Benefit) Attributable to Attributable to Diluted Net
Before Income for Income Net Noncontrolling Controlling Earnings (Loss)
(Loss)
Taxes Taxes Earnings Interests Interests per Share
----- ----- -------- --------- --------- ---------
2nd Q Ended June 30, 2016
-------------------------
Brokerage, as reported $178.2 $63.3 $114.9 $(0.2) $115.1 $0.64
Gains on book sales (1.4) (0.4) (1.0) - (1.0) -
Acquisition integration 11.9 3.5 8.4 - 8.4 0.05
Workforce & lease termination 4.5 1.3 3.2 - 3.2 0.02
Acquisition related adjustments 11.3 3.3 8.0 - 8.0 0.04
---- --- --- --- ----
Brokerage, as adjusted $204.5 $71.0 $133.5 $(0.2) $133.8 $0.75
====== ===== ====== ===== ====== =====
Risk Management, as reported $22.4 $8.5 $13.9 $ - $13.9 $0.08
Workforce & lease termination 0.4 0.1 0.3 - 0.3 -
--- --- --- --- --- ---
Risk Management, as adjusted $22.8 $8.6 $14.2 $ - $14.2 $0.08
===== ==== ===== =================== ===== =====
Corporate, as reported $(63.1) $(90.0) $26.9 $5.9 $21.0 $0.12
Impact of 2015 litigation settlement 5.5 1.1 4.4 - 4.4 0.02
--- --- --- --- --- ----
Corporate, as adjusted $(57.6) $(88.9) $31.3 $5.9 $25.4 $0.14
====== ====== ===== ==== ===== =====
2nd Q Ended June 30, 2015
-------------------------
Brokerage, as reported $156.6 $56.3 $100.3 $1.2 $99.1 $0.58
Gains on book sales (3.5) (1.0) (2.5) - (2.5) (0.01)
Acquisition integration 22.4 6.3 16.1 - 16.1 0.09
Workforce & lease termination 6.0 1.7 4.3 - 4.3 0.02
Acquisition related adjustments 6.7 1.9 4.8 - 4.8 0.03
Levelized foreign currency translation (2.0) (0.7) (1.3) - (1.3) (0.01)
---- ---- ---- --- ---- -----
Brokerage, as adjusted $186.2 $64.5 $121.7 $1.2 $120.5 $0.70
====== ===== ====== ==== ====== =====
Risk Management, as reported $26.7 $9.6 $17.1 $ - $17.1 $0.10
Workforce & lease termination 0.3 0.1 0.2 - 0.2 -
Acquisition related adjustments (0.5) (0.2) (0.3) - (0.3) -
Levelized foreign currency translation (0.8) (0.3) (0.5) - (0.5) -
---- ---- ---- --- ---- ---
Risk Management, as adjusted $25.7 $9.2 $16.5 $ - $16.5 $0.10
===== ==== ===== =================== ===== =====
Corporate, as reported $(54.8) $(85.0) $30.2 $7.1 $23.1 $0.13
Impact of 2015 litigation settlement - - - - - -
--- --- --- --- --- ---
Corporate, as adjusted $(54.8) $(85.0) $30.2 $7.1 $23.1 $0.13
====== ====== ===== ==== ===== =====
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
(13 of 14)
Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) - Continued
(Unaudited - in millions except share and per share data)
Net Earnings (Loss) Net Earnings
(Loss)
Earnings (Loss) Provision (Benefit) Attributable to Attributable to Diluted Net
Before Income for Income Net Noncontrolling Controlling Earnings (Loss)
(Loss)
Taxes Taxes Earnings Interests Interests per Share
----- ----- -------- --------- --------- ---------
6 Mths Ended June 30, 2016
--------------------------
Brokerage, as reported $278.2 $97.4 $180.8 $4.3 $176.5 $0.99
Gains of book sales (3.6) (1.1) (2.5) - (2.5) (0.01)
Acquisition integration 26.1 7.7 18.4 - 18.4 0.10
Workforce & lease termination 6.1 1.8 4.3 - 4.3 0.02
Acquisition related adjustments 11.8 3.5 8.3 - 8.3 0.05
--- --- --- --- ----
Brokerage, as adjusted $318.6 $109.3 $209.3 $4.3 $205.0 $1.15
====== ====== ====== ==== ====== =====
Risk Management, as reported $46.4 $17.5 $28.9 $ - $28.9 $0.16
Workforce & lease termination 0.9 0.3 0.6 - 0.6 0.01
--- --- --- --- --- ----
Risk Management, as adjusted $47.3 $17.8 $29.5 $ - $29.5 $0.17
===== ===== ===== =================== ===== =====
Corporate, as reported $(131.4) $(135.3) $3.9 $12.8 $(8.9) $(0.05)
Impact of 2015 litigation settlement 10.2 2.1 8.1 - 8.1 0.04
---- --- --- --- --- ----
Corporate, as adjusted $(121.2) $(133.2) $12.0 $12.8 $(0.8) $(0.01)
======= ======= ===== ===== ===== ======
6 Mths Ended June 30, 2015
--------------------------
Brokerage, as reported $217.6 $76.7 $140.9 $5.1 $135.8 $0.80
Gains on book sales (4.4) (1.3) (3.1) - (3.1) (0.02)
Acquisition integration 43.2 13.2 30.0 - 30.0 0.18
Workforce & lease termination 14.5 4.5 10.0 - 10.0 0.06
Acquisition related adjustments 12.7 3.9 8.8 - 8.8 0.05
Levelized foreign currency translation (2.4) (0.8) (1.6) - (1.6) (0.01)
---- ---- ---- --- ---- -----
Brokerage, as adjusted $281.2 $96.2 $185.0 $5.1 $179.9 $1.06
====== ===== ====== ==== ====== =====
Risk Management, as reported $50.3 $18.3 $32.0 $ - $32.0 $0.19
Workforce & lease termination 0.5 0.2 0.3 - 0.3 -
Acquisition related adjustments (0.5) (0.2) (0.3) - (0.3) -
Levelized foreign currency translation (1.6) (0.6) (1.0) - (1.0) (0.01)
---- ---- ---- --- ---- -----
Risk Management, as adjusted $48.7 $17.7 $31.0 $ - $31.0 $0.18
===== ===== ===== =================== ===== =====
Corporate, as reported $(108.5) $(115.6) $7.1 $13.7 $(6.6) $(0.04)
Impact of 2015 litigation settlement - - - - - -
--- --- --- --- --- ---
Corporate, as adjusted $(108.5) $(115.6) $7.1 $13.7 $(6.6) $(0.04)
======= ======= ==== ===== ===== ======
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
Contacts: Ray Iardella Marsha Akin
Vice President - Investor Relations Director - Investor Relations
630-285-3661 or ray_iardella@ajg.com 630-285-3501 or marsha_akin@ajg.com
(14 of 14)
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/arthur-j-gallagher--co-announces-second-quarter-2016-financial-results-300305927.html
SOURCE Arthur J. Gallagher & Co.
