ROLLING MEADOWS, Ill., July 27, 2017 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended June 30, 2017. Management will host a webcast conference call to discuss these results on Friday, July 28, 2017 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 | |||||||||
(Dollars in millions, except per share data) | 2nd Q 2017 | 2nd Q 2016 | Change | ||||||
Reported | Adjusted | Reported | Adjusted | Reported | Adjusted | ||||
Brokerage Segment | GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | |||
Revenues | $ 998.1 | $ 997.0 | $ 939.1 | $ 916.6 | 6% | 9% | |||
Organic revenues | $ 941.6 | $ 903.8 | 4.2% | ||||||
Net earnings | $ 139.5 | $ 114.9 | 21% | ||||||
Net earnings margin | 14.0% | 12.2% | +174 bpts | ||||||
Adjusted EBITDAC | $ 309.2 | $ 279.6 | 11% | ||||||
Adjusted EBITDAC margin | 31.0% | 30.5% | +51 bpts | ||||||
Diluted net earnings per share | $ 0.76 | $ 0.81 | $ 0.64 | $ 0.74 | 19% | 9% | |||
Risk Management Segment | |||||||||
Revenues | $ 188.7 | $ 188.7 | $ 176.5 | $ 175.8 | 7% | 7% | |||
Organic revenues | $ 185.4 | $ 175.6 | 5.6% | ||||||
Net earnings | $ 14.4 | $ 13.9 | 4% | ||||||
Net earnings margin | 7.6% | 7.9% | -25 bpts | ||||||
Adjusted EBITDAC | $ 32.1 | $ 29.7 | 8% | ||||||
Adjusted EBITDAC margin | 17.0% | 16.9% | +12 bpts | ||||||
Diluted net earnings per share | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.08 | 0% | 0% | |||
Corporate Segment | |||||||||
Diluted net earnings per share | $ 0.11 | $ 0.14 | $ 0.12 | $ 0.14 | -8% | 0% | |||
Total Company | |||||||||
Diluted net earnings per share | $ 0.95 | $ 1.03 | $ 0.84 | $ 0.96 | 13% | 7% | |||
"We delivered another excellent quarter of operating performance and are optimistic about the remainder of the year. During the second quarter, we posted outstanding organic revenue growth, completed 9 tuck-in brokerage mergers, expanded margins and grew earnings per share," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Our first half renewals, as well as our mid-year internal insurance rate survey, suggest P&C pricing is mostly stable. Almost two thirds of our survey respondents expect no significant change in the 2017 pricing environment. This continues to be an environment in which our talented production team will outperform."
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Summary of Financial Results – Six Months Ended June 30, 2017 | |||||||||
(Dollars in millions, except per share data) | 6 Mths 2017 | 6 Mths 2016 | Change | ||||||
Reported | Adjusted | Reported | Adjusted | Reported | Adjusted | ||||
Brokerage Segment | GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | |||
Revenues | $ 1,876.6 | $ 1,874.1 | $ 1,764.6 | $ 1,725.7 | 6% | 9% | |||
Organic revenues | $ 1,757.3 | $ 1,697.8 | 3.5% | ||||||
Net earnings | $ 217.6 | $ 180.8 | 20% | ||||||
Net earnings margin | 11.6% | 10.3% | +135 bpts | ||||||
Adjusted EBITDAC | $ 524.9 | $ 468.8 | 12% | ||||||
Adjusted EBITDAC margin | 28.0% | 27.2% | +84 bpts | ||||||
Diluted net earnings per share | $ 1.16 | $ 1.26 | $ 0.99 | $ 1.14 | 17% | 11% | |||
Risk Management Segment | |||||||||
Revenues | $ 371.3 | $ 371.3 | $ 355.8 | $ 355.6 | 4% | 4% | |||
Organic revenues | $ 367.9 | $ 355.2 | 3.6% | ||||||
Net earnings | $ 28.7 | $ 28.9 | -1% | ||||||
Net earnings margin | 7.7% | 8.1% | -39 bpts | ||||||
Adjusted EBITDAC | $ 63.3 | $ 61.7 | 3% | ||||||
Adjusted EBITDAC margin | 17.1% | 17.4% | -30 bpts | ||||||
Diluted net earnings per share | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.17 | 0% | -6% | |||
Corporate Segment | |||||||||
Diluted net loss per share | $ (0.06) | $ 0.01 | $ (0.05) | $ (0.01) | -20% | 200% | |||
Total Company | |||||||||
Diluted net earnings per share | $ 1.26 | $ 1.43 | $ 1.10 | $ 1.30 | 15% | 10% | |||
Quarter Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation: | ||||||||||||||
Diluted Net | ||||||||||||||
Revenues | Net Earnings | EBITDAC | Earnings Per Share | |||||||||||
Segment | 2nd Q 17 | 2nd Q 16 | 2nd Q 17 | 2nd Q 16 | 2nd Q 17 | 2nd Q 16 | 2nd Q 17 | 2nd Q 16 | ||||||
(in millions) | (in millions) | (in millions) | ||||||||||||
Brokerage, as reported | $ 998.1 | $ 939.1 | $ 139.5 | $ 114.9 | $ 297.9 | $ 267.7 | $ 0.76 | $ 0.64 | ||||||
Gains on book sales | (1.1) | (1.4) | (0.8) | (1.0) | (1.1) | (1.4) | - | - | ||||||
Acquisition integration | - | - | 2.3 | 8.4 | 3.3 | 11.9 | 0.01 | 0.05 | ||||||
Workforce & lease termination | - | - | 3.7 | 3.2 | 5.4 | 4.5 | 0.02 | 0.02 | ||||||
Acquisition related adjustments | - | - | 3.7 | 8.0 | 3.7 | 1.8 | 0.02 | 0.04 | ||||||
Levelized foreign currency translation | - | (21.1) | - | (2.2) | - | (4.9) | - | (0.01) | ||||||
Brokerage, as adjusted * | 997.0 | 916.6 | 148.4 | 131.3 | 309.2 | 279.6 | 0.81 | 0.74 | ||||||
Risk Management, as reported | 188.7 | 176.5 | 14.4 | 13.9 | 31.8 | 29.7 | 0.08 | 0.08 | ||||||
Workforce & lease termination | - | - | 0.2 | 0.3 | 0.3 | 0.4 | - | - | ||||||
Levelized foreign currency translation | - | (0.7) | - | (0.3) | - | (0.4) | - | - | ||||||
Risk Management, as adjusted * | 188.7 | 175.8 | 14.6 | 13.9 | 32.1 | 29.7 | 0.08 | 0.08 | ||||||
Corporate, as reported | 376.6 | 311.5 | 26.5 | 26.9 | (50.7) | (30.9) | 0.11 | 0.12 | ||||||
Litigation settlement | - | - | 4.4 | 4.4 | 5.6 | 5.5 | 0.02 | 0.02 | ||||||
Home office lease termination/move | - | - | 1.8 | - | 3.0 | - | 0.01 | - | ||||||
Corporate, as adjusted * | 376.6 | 311.5 | 32.7 | 31.3 | (42.1) | (25.4) | 0.14 | 0.14 | ||||||
Total Company, as reported | $ 1,563.4 | $ 1,427.1 | $ 180.4 | $ 155.7 | $ 279.0 | $ 266.5 | $ 0.95 | $ 0.84 | ||||||
Total Company, as adjusted * | $ 1,562.3 | $ 1,403.9 | $ 195.7 | $ 176.5 | $ 299.2 | $ 283.9 | $ 1.03 | $ 0.96 | ||||||
Total Brokerage & Risk | ||||||||||||||
Management, as reported | $ 1,186.8 | $ 1,115.6 | $ 153.9 | $ 128.8 | $ 329.7 | $ 297.4 | $ 0.84 | $ 0.72 | ||||||
Total Brokerage & Risk | ||||||||||||||
Management, as adjusted * | $ 1,185.7 | $ 1,092.4 | $ 163.0 | $ 145.2 | $ 341.3 | $ 309.3 | $ 0.89 | $ 0.82 | ||||||
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* | For 2017, the pretax impact of the Brokerage Segment adjustments totals $12.9 million, with a corresponding adjustment to the provision for income taxes of $4.0 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.3 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 $8.6 million, with a corresponding adjustment to the provision for income taxes of $2.4 million relating to these items. A detailed reconciliation of the 2017 and 2016 provision for income taxes is shown on page 13. |
Six Months Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation: | |||||||||||||||||
Diluted Net | |||||||||||||||||
Revenues | Net Earnings | EBITDAC | Earnings Per Share | ||||||||||||||
Segment | 6 Mths 17 | 6 Mths 16 | 6 Mths 17 | 6 Mths 16 | 6 Mths 17 | 6 Mths 16 | 6 Mths 17 | 6 Mths 16 | |||||||||
(in millions) | (in millions) | (in millions) | |||||||||||||||
Brokerage, as reported | $ 1,876.6 | $ 1,764.6 | $ 217.6 | $ 180.8 | $ 505.9 | $ 444.5 | $ 1.16 | $ 0.99 | |||||||||
Gains on book sales | (2.5) | (3.6) | (1.8) | (2.5) | (2.5) | (3.6) | (0.01) | (0.01) | |||||||||
Acquisition integration | - | - | 4.3 | 18.4 | 6.2 | 26.1 | 0.02 | 0.10 | |||||||||
Workforce & lease termination | - | - | 6.4 | 4.3 | 9.3 | 6.1 | 0.04 | 0.02 | |||||||||
Acquisition related adjustments | - | - | 9.9 | 8.3 | 6.0 | 2.6 | 0.05 | 0.05 | |||||||||
Levelized foreign currency translation | - | (35.3) | - | (2.8) | - | (6.9) | - | (0.01) | |||||||||
Brokerage, as adjusted * | 1,874.1 | 1,725.7 | 236.4 | 206.5 | 524.9 | 468.8 | 1.26 | 1.14 | |||||||||
Risk Management, as reported | 371.3 | 355.8 | 28.7 | 28.9 | 62.8 | 60.7 | 0.16 | 0.16 | |||||||||
Workforce & lease termination | - | - | 0.3 | 0.6 | 0.5 | 0.9 | - | 0.01 | |||||||||
Levelized foreign currency translation | - | (0.2) | - | - | - | 0.1 | - | - | |||||||||
Risk Management, as adjusted * | 371.3 | 355.6 | 29.0 | 29.5 | 63.3 | 61.7 | 0.16 | 0.17 | |||||||||
Corporate, as reported | 728.2 | 607.1 | 1.9 | 3.9 | (101.9) | (69.3) | (0.06) | (0.05) | |||||||||
Litigation settlement | - | - | 8.8 | 8.1 | 11.1 | 10.2 | 0.05 | 0.04 | |||||||||
Home office lease termination/move | - | - | 4.2 | - | 7.0 | - | 0.02 | - | |||||||||
Corporate, as adjusted * | 728.2 | 607.1 | 14.9 | 12.0 | (83.8) | (59.1) | 0.01 | (0.01) | |||||||||
Total Company, as reported | $ 2,976.1 | $ 2,727.5 | $ 248.2 | $ 213.6 | $ 466.8 | $ 435.9 | $ 1.26 | $ 1.10 | |||||||||
Total Company, as adjusted * | $ 2,973.6 | $ 2,688.4 | $ 280.3 | $ 248.0 | $ 504.4 | $ 471.4 | $ 1.43 | $ 1.30 | |||||||||
Total Brokerage & Risk | |||||||||||||||||
Management, as reported | $ 2,247.9 | $ 2,120.4 | $ 246.3 | $ 209.7 | $ 568.7 | $ 505.2 | $ 1.32 | $ 1.15 | |||||||||
Total Brokerage & Risk | |||||||||||||||||
Management, as adjusted * | $ 2,245.4 | $ 2,081.3 | $ 265.4 | $ 236.0 | $ 588.2 | $ 530.5 | $ 1.42 | $ 1.31 | |||||||||
* | For 2017, the pretax impact of the Brokerage Segment adjustments totals $27.3 million, with a corresponding adjustment to the provision for income taxes of $8.5 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.5 million, with a corresponding adjustment to the provision for income taxes of $0.2 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $18.1 million, with a corresponding adjustment to the provision for income taxes of $5.1 million relating to these items. A detailed reconciliation of the 2017 and 2016 provision for income taxes is shown on page 14. |
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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues (Non-GAAP) | 2nd Q 17 | 2nd Q 16 | Change | 6 Mths 17 | 6 Mths 16 | Change | ||||||||
Base Commissions and Fees | ||||||||||||||
Commissions and fees, as reported | $ 912.6 | $ 861.7 | 5.9% | $ 1,691.1 | $ 1,586.8 | 6.6% | ||||||||
Less commissions and fees from acquisitions | (40.3) | - | (87.3) | - | ||||||||||
Less disposed of operations | - | - | - | (1.4) | ||||||||||
Levelized foreign currency translation | - | (19.5) | - | (32.4) | ||||||||||
Organic base commissions and fees | $ 872.3 | $ 842.2 | 3.6% | $ 1,603.8 | $ 1,553.0 | 3.3% | ||||||||
Supplemental Commissions | ||||||||||||||
Supplemental commissions, as reported | $ 41.5 | $ 38.6 | 7.5% | $ 76.0 | $ 71.5 | 6.3% | ||||||||
Less supplemental commissions from acquisitions | - | - | (1.2) | - | ||||||||||
Less disposed of operations | - | (0.3) | - | (0.4) | ||||||||||
Levelized foreign currency translation | - | (1.5) | - | (2.9) | ||||||||||
Organic supplemental commissions | $ 41.5 | $ 36.8 | 12.8% | $ 74.8 | $ 68.2 | 9.7% | ||||||||
Contingent Commissions | ||||||||||||||
Contingent commissions, as reported | $ 29.5 | $ 25.1 | 17.5% | $ 82.9 | $ 80.3 | 3.2% | ||||||||
Less contingent commissions from acquisitions | (1.7) | - | (4.2) | - | ||||||||||
Less disposed of operations | - | (0.1) | - | (2.9) | ||||||||||
Levelized foreign currency translation | - | (0.2) | - | (0.8) | ||||||||||
Organic contingent commissions | $ 27.8 | $ 24.8 | 12.1% | $ 78.7 | $ 76.6 | 2.7% | ||||||||
Total reported commissions, fees, supplemental | $ 983.6 | $ 925.4 | 6.3% | $ 1,850.0 | $ 1,738.6 | 6.4% | ||||||||
Less commissions and fees from acquisitions | (42.0) | - | (92.7) | - | ||||||||||
Less disposed of operations | - | (0.4) | - | (4.7) | ||||||||||
Levelized foreign currency translation | - | (21.2) | - | (36.1) | ||||||||||
Total organic commissions, fees, supplemental | $ 941.6 | $ 903.8 | 4.2% | $ 1,757.3 | $ 1,697.8 | 3.5% | ||||||||
Of the 4.2% growth in total organic revenues for second quarter 2017, our domestic operations posted approximately 3.5% growth and international operations posted approximately 5.5% growth.
Acquisition Activity | 2nd Q 17 | 2nd Q 16 | 6 Mths 17 | 6 Mths 16 | ||||||
Number of acquisitions closed | 9 | 13 | 21 | 21 | ||||||
Estimated annualized revenues acquired (in millions) | $ 30.3 | $ 40.4 | $ 92.8 | $ 70.4 | ||||||
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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):
Compensation Expense and Ratios | 2nd Q 17 | 2nd Q 16 | 6 Mths 17 | 6 Mths 16 | ||||||
Compensation expense, as reported | $ 547.8 | $ 518.2 | $ 1,073.3 | $ 1,011.1 | ||||||
Acquisition integration (1) | (2.6) | (4.5) | (3.7) | (9.1) | ||||||
Workforce and lease termination related charges | (4.3) | (2.5) | (7.8) | (3.8) | ||||||
Acquisition related adjustments | (3.7) | (1.8) | (6.0) | (2.6) | ||||||
Levelized foreign currency translation | - | (11.5) | - | (21.5) | ||||||
Compensation expense, as adjusted | $ 537.2 | $ 497.9 | $ 1,055.8 | $ 974.1 | ||||||
Reported compensation expense ratios using reported revenues on page 2 and 3 | * | 54.9% | 55.2% | 57.2% | 57.3% | |||||
Adjusted compensation expense ratios using adjusted revenues on page 2 and 3 | * | 53.9% | 54.3% | 56.3% | 56.5% | |||||
* | Reported second quarter compensation ratio was 0.3 pts lower than the same period in 2016. Adjusted second quarter compensation ratio was 0.4 pts lower than the same period in 2016. Both ratios were primarily impacted by savings in compensation related to headcount controls. |
Operating Expense and Ratios | 2nd Q 17 | 2nd Q 16 | 6 Mths 17 | 6 Mths 16 | ||||
Operating expense, as reported | $ 152.4 | $ 153.2 | $ 297.4 | $ 309.0 | ||||
Acquisition integration (1) | (0.7) | (7.4) | (2.5) | (17.0) | ||||
Workforce and lease termination related charges | (1.1) | (2.0) | (1.5) | (2.3) | ||||
Levelized foreign currency translation | - | (4.7) | - | (6.9) | ||||
Operating expense, as adjusted | $ 150.6 | $ 139.1 | $ 293.4 | $ 282.8 | ||||
Reported operating expense ratios using reported | ||||||||
* | 15.3% | 16.3% | 15.9% | 17.5% | ||||
Adjusted operating expense ratios using adjusted | ||||||||
** | 15.1% | 15.2% | 15.7% | 16.4% | ||||
* | Reported second quarter operating expense ratio was 1.0 pts lower than the same period in 2016. This ratio was primarily impacted by lower integration costs such as technology and lease termination charges. |
** | Adjusted second quarter operating expense ratio was 0.1 pts lower than the same period in 2016. All items were essentially consistent with the prior period. |
Net Earnings to Adjusted EBITDAC (Non-GAAP) | 2nd Q 17 | 2nd Q 16 | Change | 6 Mths 17 | 6 Mths 16 | Change | ||||||||
Net earnings, as reported | $ 139.5 | $ 114.9 | 21.4% | $ 217.6 | $ 180.8 | 20.4% | ||||||||
Provision for income taxes | 73.0 | 63.3 | 112.6 | 97.4 | ||||||||||
Depreciation | 16.1 | 14.4 | 31.0 | 28.4 | ||||||||||
Amortization | 64.4 | 61.9 | 128.0 | 120.8 | ||||||||||
Change in estimated acquisition earnout payables | 4.9 | 13.2 | 16.7 | 17.1 | ||||||||||
EBITDAC | 297.9 | 267.7 | 11.3% | 505.9 | 444.5 | 13.8% | ||||||||
Gains from books of business sales | (1.1) | (1.4) | (2.5) | (3.6) | ||||||||||
Acquisition integration (1) | 3.3 | 11.9 | 6.2 | 26.1 | ||||||||||
Acquisition related adjustments | 3.7 | 1.8 | 6.0 | 2.6 | ||||||||||
Workforce and lease termination related charges | 5.4 | 4.5 | 9.3 | 6.1 | ||||||||||
Levelized foreign currency translation | - | (4.9) | - | (6.9) | ||||||||||
EBITDAC, as adjusted | $ 309.2 | $ 279.6 | 10.6% | $ 524.9 | $ 468.8 | 12.0% | ||||||||
Net earnings margin, as reported using reported | 14.0% | 12.2% | +174 bpts | 11.6% | 10.3% | +135 bpts | ||||||||
EBITDAC margin, as adjusted using adjusted | 31.0% | 30.5% | +51 bpts | 28.0% | 27.2% | +84 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. |
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Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues (Non-GAAP) | 2nd Q 17 | 2nd Q 16 | Change | 6 Mths 17 | 6 Mths 16 | Change | ||||||||
Fees | * | $ 186.7 | $ 176.3 | 5.9% | $ 367.5 | $ 353.6 | 3.9% | |||||||
International performance bonus fees | 1.8 | - | 3.5 | 1.8 | ||||||||||
Fees as reported | 188.5 | 176.3 | 6.9% | 371.0 | 355.4 | 4.4% | ||||||||
Less fees from acquisitions | (3.1) | - | (3.1) | - | ||||||||||
Levelized foreign currency translation | - | (0.7) | - | (0.2) | ||||||||||
Organic fees | * | $ 185.4 | $ 175.6 | 5.6% | $ 367.9 | $ 355.2 | 3.6% | |||||||
* | Organic fee growth was hampered by a law change in South Australia, which capped the time an injured worker can receive benefits. A shorter claim life also effectively reduced our revenues in the second quarter by $1.8 million which had an adverse impact on our organic growth of 1.0%. We expect a similar impact for the remaining two quarters of 2017. |
Compensation Expense and Ratios | 2nd Q 17 | 2nd Q 16 | 6 Mths 17 | 6 Mths 16 | ||||||
Compensation expense, as reported | $ 110.4 | $ 104.0 | $ 218.2 | $ 209.5 | ||||||
Workforce and lease termination related charges | (0.3) | (0.4) | (0.5) | (0.9) | ||||||
Levelized foreign currency translation | - | (0.2) | - | (0.2) | ||||||
Compensation expense, as adjusted | $ 110.1 | $ 103.4 | $ 217.7 | $ 208.4 | ||||||
Reported compensation expense ratios using reported | * | 58.5% | 58.9% | 58.8% | 58.9% | |||||
Adjusted compensation expense ratios using adjusted | * | 58.4% | 58.8% | 58.6% | 58.6% | |||||
* | Reported and adjusted second quarter compensation ratios were 0.4 pts lower than the same period in 2016. Both ratios were primarily impacted by savings in compensation related to headcount controls. |
Operating Expense and Ratios | 2nd Q 17 | 2nd Q 16 | 6 Mths 17 | 6 Mths 16 | ||||||
Operating expense, as reported | $ 46.5 | $ 42.8 | $ 90.3 | $ 85.6 | ||||||
Levelized foreign currency translation | - | (0.1) | - | (0.1) | ||||||
Operating expense, as adjusted | $ 46.5 | $ 42.7 | $ 90.3 | $ 85.5 | ||||||
Reported operating expense ratios using reported | * | 24.6% | 24.3% | 24.3% | 24.1% | |||||
Adjusted operating expense ratios using adjusted | * | 24.6% | 24.3% | 24.3% | 24.0% | |||||
* | Reported and adjusted second quarter operating expense ratios were 0.3 pts higher than the same period in 2016. The increase is partially from ramp-up costs associated with new business wins in Australia. All other items were essentially consistent with the prior period. |
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Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):
Net Earnings to Adjusted EBITDAC (Non-GAAP) | 2nd Q 17 | 2nd Q 16 | Change | 6 Mths 17 | 6 Mths 16 | Change | ||||||||
Net earnings, as reported | $ 14.4 | $ 13.9 | 3.6% | $ 28.7 | $ 28.9 | -0.7% | ||||||||
Provision for income taxes | 8.5 | 8.5 | 17.1 | 17.5 | ||||||||||
Depreciation | 8.0 | 6.6 | 15.4 | 13.2 | ||||||||||
Amortization | 0.7 | 0.7 | 1.4 | 1.1 | ||||||||||
Change in estimated acquisition earnout payables | 0.2 | - | 0.2 | - | ||||||||||
EBITDAC | 31.8 | 29.7 | 7.1% | 62.8 | 60.7 | 3.5% | ||||||||
Workforce and lease termination related charges | 0.3 | 0.4 | 0.5 | 0.9 | ||||||||||
Levelized foreign currency translation | - | (0.4) | - | 0.1 | ||||||||||
EBITDAC, as adjusted | $ 32.1 | $ 29.7 | 8.1% | $ 63.3 | $ 61.7 | 2.6% | ||||||||
Net earnings margin, as reported using reported | 7.6% | 7.9% | -25 bpts | 7.7% | 8.1% | -39 bpts | ||||||||
EBITDAC margin, as adjusted using adjusted | 17.0% | 16.9% | +12 bpts | 17.1% | 17.4% | -30 bpts | ||||||||
Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
2017 | 2016 | ||||||||||||
Net Earnings | Net Earnings | ||||||||||||
(Loss) | (Loss) | ||||||||||||
Pretax | Tax | Controlling | Pretax | Tax | Controlling | ||||||||
Loss | Benefit | Interests | Loss | Benefit | Interests | ||||||||
2nd Quarter | |||||||||||||
Interest and banking costs | $ (32.4) | $ 13.0 | $ (19.4) | $ (28.0) | $ 11.2 | $ (16.8) | |||||||
Clean energy related (1) | (35.3) | 86.1 | 50.8 | (24.4) | 73.6 | 49.2 | |||||||
Acquisition costs | (2.4) | 0.6 | (1.8) | (1.1) | 0.2 | (0.9) | |||||||
Corporate | (16.1) | 12.8 | (3.3) | (10.0) | 3.9 | (6.1) | |||||||
Litigation settlement | (5.6) | 1.2 | (4.4) | (5.5) | 1.1 | (4.4) | |||||||
Home office lease termination/move | (3.0) | 1.2 | (1.8) | - | - | - | |||||||
Reported 2nd quarter | (94.8) | 114.9 | 20.1 | (69.0) | 90.0 | 21.0 | |||||||
Litigation settlement | 5.6 | (1.2) | 4.4 | 5.5 | (1.1) | 4.4 | |||||||
Home office lease termination/move | 3.0 | (1.2) | 1.8 | - | - | - | |||||||
Adjusted 2nd quarter | $ (86.2) | $ 112.5 | $ 26.3 | $ (63.5) | $ 88.9 | $ 25.4 | |||||||
Six Months | |||||||||||||
Interest and banking costs | $ (63.1) | $ 25.3 | $ (37.8) | $ (54.3) | $ 21.7 | $ (32.6) | |||||||
Clean energy related (1) | (75.7) | 125.6 | 49.9 | (58.3) | 104.8 | 46.5 | |||||||
Acquisition costs | (5.1) | 1.3 | (3.8) | (2.8) | 0.5 | (2.3) | |||||||
Corporate | (27.9) | 21.3 | (6.6) | (18.6) | 6.2 | (12.4) | |||||||
Litigation settlement | (11.1) | 2.3 | (8.8) | (10.2) | 2.1 | (8.1) | |||||||
Home office lease termination/move | (7.0) | 2.8 | (4.2) | - | - | - | |||||||
Reported six months | (189.9) | 178.6 | (11.3) | (144.2) | 135.3 | (8.9) | |||||||
Litigation settlement | 11.1 | (2.3) | 8.8 | 10.2 | (2.1) | 8.1 | |||||||
Home office lease termination/move | 7.0 | (2.8) | 4.2 | - | - | - | |||||||
Adjusted six months | $ (171.8) | $ 173.5 | $ 1.7 | $ (134.0) | $ 133.2 | $ (0.8) | |||||||
(1) | Pretax earnings for the second quarter are presented net of amounts attributable to noncontrolling interests of $6.4 million in 2017 and $5.9 million in 2016. Pretax earnings for the six-month period are presented net of amounts attributable to noncontrolling interests of $13.2 million in 2017 and $12.8 million in 2016. |
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Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):
Interest and banking costs and debt - At June 30, 2017, Gallagher had $2,700.0 million of borrowings from private placements, $318.0 million of short-term borrowings under its line of credit facility and $100.0 million outstanding under a 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. Gallagher anticipates closing $398.0 million of private placement debt in early August 2017 to fund the repayment of debt maturing around such time and reduce the credit facility balance. Any such private placement notes have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This earnings release shall not constitute an offer to sell or the solicitation of an offer to buy the notes.
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 and other corporate level activities. In the CFO commentary document as of June 13, 2017, we provided an estimate of our second quarter 2017 after-tax loss for this line ranging between $5.0 million and $6.0 million. As shown on the previous page, we actually reported a loss of $3.3 million. Most of the favorable variance occurred because of more income tax benefit from a new accounting standard for employee share-based compensation than we estimated in our June 2017 investor relations meeting.
Litigation Settlement - 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 resulted in quarterly after-tax charges being incurred through June 30, 2017.
Home Office Lease Termination/Move - During first quarter 2017, we relocated our corporate office headquarters to a nearby suburb of Chicago. Move-related after-tax charges were $1.8 million in the second quarter of 2017. Move related after-tax charges, including after-tax lease abandonment charges, are expected to total approximately $3.0 million in the third quarter of 2017.
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, 2017 and 2016 was (22.7)% and (13.2)%, respectively, which was lower than the statutory rate due to the amount of IRC Section 45 tax credits earned and the impact of the income tax benefit of stock compensation in second quarter 2017.
Webcast Conference Call
Gallagher will host a webcast conference call on Friday, July 28, 2017 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 Rolling Meadows, 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; (vi) anticipated acquisition integration costs; and (vii) anticipated actions to be taken in connection with maturing debt.
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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 Brexit); 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) - (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, 2016 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, beginning in first quarter 2017, Gallagher makes determinations regarding certain elements of executive officer compensation, performance share awards and annual cash incentive awards, partly on the basis of measures related to adjusted EBITDAC. 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.
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- 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
- EBITDAC and EBITDAC margin - EBITDAC is net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables and EBITDAC margin is EBITDAC divided by total revenues. These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher's operating performance and, for the overall business, provide a meaningful way to measure its financial performance on an ongoing basis.
- Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is 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 and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher's operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
- Adjusted EPS for the Brokerage and Risk Management segments - 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. This measure provides a meaningful representation of Gallagher's operating performance (and as such should not be used as a measure of Gallagher's liquidity), and is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
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 revenue 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 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, 6, and 7, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can also be found in the "Supplemental Quarterly Data" available at ajg.com/IR.
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, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||
Commissions | $ 690.2 | $ 663.4 | $ 1,280.7 | $ 1,229.4 | |||||
Fees | 222.4 | 198.3 | 410.4 | 357.4 | |||||
Supplemental commissions | 41.5 | 38.6 | 76.0 | 71.5 | |||||
Contingent commissions | 29.5 | 25.1 | 82.9 | 80.3 | |||||
Investment income and gains realized on books of business sales | 14.5 | 13.7 | 26.6 | 26.0 | |||||
Revenues | 998.1 | 939.1 | 1,876.6 | 1,764.6 | |||||
Compensation | 547.8 | 518.2 | 1,073.3 | 1,011.1 | |||||
Operating | 152.4 | 153.2 | 297.4 | 309.0 | |||||
Depreciation | 16.1 | 14.4 | 31.0 | 28.4 | |||||
Amortization | 64.4 | 61.9 | 128.0 | 120.8 | |||||
Change in estimated acquisition earnout payables | 4.9 | 13.2 | 16.7 | 17.1 | |||||
Expenses | 785.6 | 760.9 | 1,546.4 | 1,486.4 | |||||
Earnings before income taxes | 212.5 | 178.2 | 330.2 | 278.2 | |||||
Provision for income taxes | 73.0 | 63.3 | 112.6 | 97.4 | |||||
Net earnings | 139.5 | 114.9 | 217.6 | 180.8 | |||||
Net earnings (loss) attributable to noncontrolling interests | 2.1 | (0.2) | 7.4 | 4.3 | |||||
Net earnings attributable to controlling interests | $ 137.4 | $ 115.1 | $ 210.2 | $ 176.5 | |||||
EBITDAC | |||||||||
Net earnings | $ 139.5 | $ 114.9 | $ 217.6 | $ 180.8 | |||||
Provision for income taxes | 73.0 | 63.3 | 112.6 | 97.4 | |||||
Depreciation | 16.1 | 14.4 | 31.0 | 28.4 | |||||
Amortization | 64.4 | 61.9 | 128.0 | 120.8 | |||||
Change in estimated acquisition earnout payables | 4.9 | 13.2 | 16.7 | 17.1 | |||||
EBITDAC | $ 297.9 | $ 267.7 | $ 505.9 | $ 444.5 | |||||
2nd Q Ended | 2nd Q Ended | 6 Mths Ended | 6 Mths Ended | ||||||
Risk Management Segment | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||
Fees | $ 188.5 | $ 176.3 | $ 371.0 | $ 355.4 | |||||
Investment income | 0.2 | 0.2 | 0.3 | 0.4 | |||||
Revenues | 188.7 | 176.5 | 371.3 | 355.8 | |||||
Compensation | 110.4 | 104.0 | 218.2 | 209.5 | |||||
Operating | 46.5 | 42.8 | 90.3 | 85.6 | |||||
Depreciation | 8.0 | 6.6 | 15.4 | 13.2 | |||||
Amortization | 0.7 | 0.7 | 1.4 | 1.1 | |||||
Change in estimated acquisition earnout payables | 0.2 | - | 0.2 | - | |||||
Expenses | 165.8 | 154.1 | 325.5 | 309.4 | |||||
Earnings before income taxes | 22.9 | 22.4 | 45.8 | 46.4 | |||||
Provision for income taxes | 8.5 | 8.5 | 17.1 | 17.5 | |||||
Net earnings | 14.4 | 13.9 | 28.7 | 28.9 | |||||
Net earnings attributable to noncontrolling interests | - | - | - | - | |||||
Net earnings attributable to controlling interests | $ 14.4 | $ 13.9 | $ 28.7 | $ 28.9 | |||||
EBITDAC | |||||||||
Net earnings | $ 14.4 | $ 13.9 | $ 28.7 | $ 28.9 | |||||
Provision for income taxes | 8.5 | 8.5 | 17.1 | 17.5 | |||||
Depreciation | 8.0 | 6.6 | 15.4 | 13.2 | |||||
Amortization | 0.7 | 0.7 | 1.4 | 1.1 | |||||
Change in estimated acquisition earnout payables | 0.2 | - | 0.2 | - | |||||
EBITDAC | $ 31.8 | $ 29.7 | $ 62.8 | $ 60.7 | |||||
2nd Q Ended | 2nd Q Ended | 6 Mths Ended | 6 Mths Ended | ||||||
Corporate Segment | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||
Revenues from consolidated clean coal facilities | $ 366.3 | $ 301.5 | $ 706.6 | $ 583.5 | |||||
Royalty income from clean coal licenses | 10.3 | 10.8 | 22.2 | 23.9 | |||||
Loss from unconsolidated clean coal facilities | (0.2) | (0.4) | (0.6) | (0.7) | |||||
Other net (losses) revenues | 0.2 | (0.4) | - | 0.4 | |||||
Revenues | 376.6 | 311.5 | 728.2 | 607.1 | |||||
Cost of revenues from consolidated clean coal facilities | 397.1 | 325.0 | 764.0 | 629.4 | |||||
Compensation | 17.5 | 8.8 | 41.8 | 32.5 | |||||
Operating | 12.7 | 8.6 | 24.3 | 14.5 | |||||
Interest | 31.6 | 27.2 | 61.5 | 53.0 | |||||
Depreciation | 6.1 | 5.0 | 13.3 | 9.1 | |||||
Expenses | 465.0 | 374.6 | 904.9 | 738.5 | |||||
Loss before income taxes | (88.4) | (63.1) | (176.7) | (131.4) | |||||
Benefit for income taxes | (114.9) | (90.0) | (178.6) | (135.3) | |||||
Net earnings | 26.5 | 26.9 | 1.9 | 3.9 | |||||
Net earnings attributable to noncontrolling interests | 6.4 | 5.9 | 13.2 | 12.8 | |||||
Net earnings (loss) attributable to controlling interests | $ 20.1 | $ 21.0 | $ (11.3) | $ (8.9) | |||||
EBITDAC | |||||||||
Net earnings | $ 26.5 | $ 26.9 | $ 1.9 | $ 3.9 | |||||
Benefit for income taxes | (114.9) | (90.0) | (178.6) | (135.3) | |||||
Interest | 31.6 | 27.2 | 61.5 | 53.0 | |||||
Depreciation | 6.1 | 5.0 | 13.3 | 9.1 | |||||
EBITDAC | $ (50.7) | $ (30.9) | $ (101.9) | $ (69.3) | |||||
See "Information Regarding Non-GAAP Measures" on page 9 of 14. | |||||||||
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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, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||
Commissions | $ 690.2 | $ 663.4 | $ 1,280.7 | $ 1,229.4 | |||||
Fees | 410.9 | 374.6 | 781.4 | 712.8 | |||||
Supplemental commissions | 41.5 | 38.6 | 76.0 | 71.5 | |||||
Contingent commissions | 29.5 | 25.1 | 82.9 | 80.3 | |||||
Investment income and gains realized on books of business sales | 14.7 | 13.9 | 26.9 | 26.4 | |||||
Revenues from clean coal activities | 376.4 | 311.9 | 728.2 | 606.7 | |||||
Other net (losses) revenues - Corporate | 0.2 | (0.4) | - | 0.4 | |||||
Revenues | 1,563.4 | 1,427.1 | 2,976.1 | 2,727.5 | |||||
Compensation | 675.7 | 631.0 | 1,333.3 | 1,253.1 | |||||
Operating | 211.6 | 204.6 | 412.0 | 409.1 | |||||
Cost of revenues from clean coal activities | 397.1 | 325.0 | 764.0 | 629.4 | |||||
Interest | 31.6 | 27.2 | 61.5 | 53.0 | |||||
Depreciation | 30.2 | 26.0 | 59.7 | 50.7 | |||||
Amortization | 65.1 | 62.6 | 129.4 | 121.9 | |||||
Change in estimated acquisition earnout payables | 5.1 | 13.2 | 16.9 | 17.1 | |||||
Expenses | 1,416.4 | 1,289.6 | 2,776.8 | 2,534.3 | |||||
Earnings before income taxes | 147.0 | 137.5 | 199.3 | 193.2 | |||||
Benefit for income taxes | (33.4) | (18.2) | (48.9) | (20.4) | |||||
Net earnings | 180.4 | 155.7 | 248.2 | 213.6 | |||||
Net earnings attributable to noncontrolling interests | 8.5 | 5.7 | 20.6 | 17.1 | |||||
Net earnings attributable to controlling interests | $ 171.9 | $ 150.0 | $ 227.6 | $ 196.5 | |||||
Diluted net earnings per share | $ 0.95 | $ 0.84 | $ 1.26 | $ 1.10 | |||||
Dividends declared per share | $ 0.39 | $ 0.38 | $ 0.78 | $ 0.76 | |||||
EBITDAC | |||||||||
Net earnings | $ 180.4 | $ 155.7 | $ 248.2 | $ 213.6 | |||||
Benefit for income taxes | (33.4) | (18.2) | (48.9) | (20.4) | |||||
Interest | 31.6 | 27.2 | 61.5 | 53.0 | |||||
Depreciation | 30.2 | 26.0 | 59.7 | 50.7 | |||||
Amortization | 65.1 | 62.6 | 129.4 | 121.9 | |||||
Change in estimated acquisition earnout payables | 5.1 | 13.2 | 16.9 | 17.1 | |||||
EBITDAC | $ 279.0 | $ 266.5 | $ 466.8 | $ 435.9 | |||||
Arthur J. Gallagher & Co. | |||||||||
Consolidated Balance Sheet | |||||||||
(Unaudited - in millions except per share data) | |||||||||
June 30, 2017 | Dec 31, 2016 | ||||||||
Cash and cash equivalents | $ 587.8 | $ 545.5 | |||||||
Restricted cash | 1,481.1 | 1,392.1 | |||||||
Premiums and fees receivable | 2,374.2 | 1,844.8 | |||||||
Other current assets | 664.1 | 633.7 | |||||||
Total current assets | 5,107.2 | 4,416.1 | |||||||
Fixed assets - net | 387.6 | 377.6 | |||||||
Deferred income taxes (includes tax credit carryforwards of $552.9 in 2017 and $477.9 in 2016) | 861.9 | 796.5 | |||||||
Other noncurrent assets | 561.3 | 504.3 | |||||||
Goodwill - net | 3,989.0 | 3,767.8 | |||||||
Amortizable intangible assets - net | 1,662.6 | 1,627.3 | |||||||
Total assets | $ 12,569.6 | $ 11,489.6 | |||||||
Premiums payable to insurance and reinsurance companies | $ 3,546.4 | $ 2,996.1 | |||||||
Accrued compensation and other accrued liabilities | 711.1 | 772.1 | |||||||
Unearned fees | 74.0 | 69.0 | |||||||
Other current liabilities | 58.5 | 70.9 | |||||||
Premium financing debt | 100.0 | 125.6 | |||||||
Corporate related borrowings - current | 368.0 | 578.0 | |||||||
Total current liabilities | 4,858.0 | 4,611.7 | |||||||
Corporate related borrowings - noncurrent | 2,644.8 | 2,144.6 | |||||||
Other noncurrent liabilities | 1,156.8 | 1,077.5 | |||||||
Total liabilities | 8,659.6 | 7,833.8 | |||||||
Stockholders' equity: | |||||||||
Common stock - issued and outstanding | 180.2 | 178.3 | |||||||
Capital in excess of par value | 3,323.5 | 3,265.5 | |||||||
Retained earnings | 1,002.9 | 916.4 | |||||||
Accumulated other comprehensive loss | (661.9) | (763.6) | |||||||
Total controlling interests stockholders' equity | 3,844.7 | 3,596.6 | |||||||
Noncontrolling interests | 65.3 | 59.2 | |||||||
Total stockholders' equity | 3,910.0 | 3,655.8 | |||||||
Total liabilities and stockholders' equity | $ 12,569.6 | $ 11,489.6 | |||||||
See "Information Regarding Non-GAAP Measures" on page 9 of 14. | |||||||||
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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, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||
Basic weighted average shares outstanding (000s) | 179,860 | 177,415 | 179,375 | 177,226 | |||||
Diluted weighted average shares outstanding (000s) | 181,609 | 178,272 | 181,106 | 177,965 | |||||
Number of common shares outstanding at end of period (000s) | 180,164 | 177,031 | |||||||
Workforce at end of period (includes acquisitions): | |||||||||
Brokerage | 19,425 | 18,278 | |||||||
Risk Management | 5,781 | 5,480 | |||||||
Total Company | 25,935 | 24,447 | |||||||
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 | Net Earnings | ||||||||||||||
Earnings | Provision | (Loss) | (Loss) | Diluted Net | |||||||||||
(Loss) | (Benefit) | Attributable to | Attributable to | Earnings | |||||||||||
Before Income | for Income | Net | Noncontrolling | Controlling | (Loss) | ||||||||||
Taxes | Taxes | Earnings | Interests | Interests | per Share | ||||||||||
2nd Q Ended June 30, 2017 | |||||||||||||||
Brokerage, as reported | $ 212.5 | $ 73.0 | $ 139.5 | $ 2.1 | $ 137.4 | $ 0.76 | |||||||||
Gains on book sales | (1.1) | (0.3) | (0.8) | - | (0.8) | - | |||||||||
Acquisition integration | 3.3 | 1.0 | 2.3 | - | 2.3 | 0.01 | |||||||||
Workforce & lease termination | 5.4 | 1.7 | 3.7 | - | 3.7 | 0.02 | |||||||||
Acquisition related adjustments | 5.3 | 1.6 | 3.7 | - | 3.7 | 0.02 | |||||||||
Brokerage, as adjusted | $ 225.4 | $ 77.0 | $ 148.4 | $ 2.1 | $ 146.3 | $ 0.81 | |||||||||
Risk Management, as reported | $ 22.9 | $ 8.5 | $ 14.4 | $ - | $ 14.4 | $ 0.08 | |||||||||
Workforce & lease termination | 0.3 | 0.1 | 0.2 | - | 0.2 | - | |||||||||
Risk Management, as adjusted | $ 23.2 | $ 8.6 | $ 14.6 | $ - | $ 14.6 | $ 0.08 | |||||||||
Corporate, as reported | $ (88.4) | $ (114.9) | $ 26.5 | $ 6.4 | $ 20.1 | $ 0.11 | |||||||||
Litigation settlement | 5.6 | 1.2 | 4.4 | - | 4.4 | 0.02 | |||||||||
Home office lease termination/move | 3.0 | 1.2 | 1.8 | - | 1.8 | 0.01 | |||||||||
Corporate, as adjusted | $ (79.8) | $ (112.5) | $ 32.7 | $ 6.4 | $ 26.3 | $ 0.14 | |||||||||
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 | |||||||||
Levelized foreign currency translation | (3.1) | (0.9) | (2.2) | - | (2.2) | (0.01) | |||||||||
Brokerage, as adjusted | $ 201.4 | $ 70.1 | $ 131.3 | $ (0.2) | $ 131.5 | $ 0.74 | |||||||||
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 | - | |||||||||
Levelized foreign currency translation | (0.4) | (0.1) | (0.3) | - | (0.3) | - | |||||||||
Risk Management, as adjusted | $ 22.4 | $ 8.5 | $ 13.9 | $ - | $ 13.9 | $ 0.08 | |||||||||
Corporate, as reported | $ (63.1) | $ (90.0) | $ 26.9 | $ 5.9 | $ 21.0 | $ 0.12 | |||||||||
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 | |||||||||
See "Information Regarding Non-GAAP Measures" on page 9 of 14. | |||||||||||||||
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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 | Net Earnings | ||||||||||||||
Earnings | Provision | (Loss) | (Loss) | Diluted Net | |||||||||||
(Loss) | (Benefit) | Attributable to | Attributable to | Earnings | |||||||||||
Before Income | for Income | Net | Noncontrolling | Controlling | (Loss) | ||||||||||
Taxes | Taxes | Earnings | Interests | Interests | per Share | ||||||||||
6 Months Ended June 30, 2017 | |||||||||||||||
Brokerage, as reported | $ 330.2 | $ 112.6 | $ 217.6 | $ 7.4 | $ 210.2 | $ 1.16 | |||||||||
Gains on book sales | (2.5) | (0.7) | (1.8) | - | (1.8) | (0.01) | |||||||||
Acquisition integration | 6.2 | 1.9 | 4.3 | - | 4.3 | 0.02 | |||||||||
Workforce & lease termination | 9.3 | 2.9 | 6.4 | - | 6.4 | 0.04 | |||||||||
Acquisition related adjustments | 14.3 | 4.4 | 9.9 | - | 9.9 | 0.05 | |||||||||
Brokerage, as adjusted | $ 357.5 | $ 121.1 | $ 236.4 | $ 7.4 | $ 229.0 | $ 1.26 | |||||||||
Risk Management, as reported | $ 45.8 | $ 17.1 | $ 28.7 | $ - | $ 28.7 | $ 0.16 | |||||||||
Workforce & lease termination | 0.5 | 0.2 | 0.3 | - | 0.3 | - | |||||||||
Risk Management, as adjusted | $ 46.3 | $ 17.3 | $ 29.0 | $ - | $ 29.0 | $ 0.16 | |||||||||
Corporate, as reported | $ (176.7) | $ (178.6) | $ 1.9 | $ 13.2 | $ (11.3) | $ (0.06) | |||||||||
Litigation settlement | 11.1 | 2.3 | 8.8 | - | 8.8 | 0.05 | |||||||||
Home office lease termination/move | 7.0 | 2.8 | 4.2 | - | 4.2 | 0.02 | |||||||||
Corporate, as adjusted | $ (158.6) | $ (173.5) | $ 14.9 | $ 13.2 | $ 1.7 | $ 0.01 | |||||||||
6 Months Ended June 30, 2016 | |||||||||||||||
Brokerage, as reported | $ 278.2 | $ 97.4 | $ 180.8 | $ 4.3 | $ 176.5 | $ 0.99 | |||||||||
Gains on 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 | |||||||||
Levelized foreign currency translation | (4.0) | (1.2) | (2.8) | - | (2.8) | (0.01) | |||||||||
Brokerage, as adjusted | $ 314.6 | $ 108.1 | $ 206.5 | $ 4.3 | $ 202.2 | $ 1.14 | |||||||||
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 | |||||||||
Levelized foreign currency translation | 0.1 | 0.1 | - | - | - | - | |||||||||
Risk Management, as adjusted | $ 47.4 | $ 17.9 | $ 29.5 | $ - | $ 29.5 | $ 0.17 | |||||||||
Corporate, as reported | $ (131.4) | $ (135.3) | $ 3.9 | $ 12.8 | $ (8.9) | $ (0.05) | |||||||||
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) | |||||||||
See "Information Regarding Non-GAAP Measures" on page 9 of 14. | |||||||||||||||
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Contact:
Ray Iardella
Vice President - Investor Relations
630-285-3661 or ray_iardella@ajg.com
View original content:http://www.prnewswire.com/news-releases/arthur-j-gallagher--co-announces-second-quarter-2017-financial-results-300495702.html
SOURCE Arthur J. Gallagher & Co.
