ARTHUR J. GALLAGHER & CO. 
By ITASCA, Ill., Jan. 31, 2012 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter and year ended December 31, 2011. A printer-friendly format and supplemental quarterly data is available at www.ajg.com. For a description of the measures used to report financial results in this earnings release, please see "Information Regarding Non-GAAP Measures" beginning on page 7.
"We finished 2011 with strong momentum. During the fourth quarter, both operating segments posted strong organic growth, improved adjusted EBITDAC margins and improved adjusted diluted net earnings per share," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Our combined Brokerage and Risk Management segments posted 20% growth in adjusted total revenues, 7.2% organic growth in commission, fee and supplemental commission revenues, 26% growth in adjusted EBITDAC and 19% growth in adjusted diluted net earnings per share."
-- Our Brokerage segment had a great quarter. Adjusted total revenues were
up 22%, organic commission, fee and supplemental commission revenues
grew 5.2%, adjusted EBITDAC was up 27% and adjusted diluted earnings per
share was up 19%. Also during the quarter, we completed 11 acquisitions
with annualized revenues of $42 million. During 2011, we added $277
million of annualized revenues.
-- Our Risk Management segment had an outstanding quarter. Adjusted total
revenues were up 13%, organic fees were up 12.6%, adjusted EBITDAC was
up 23% and adjusted diluted earnings per share was up 22%.
"During the fourth quarter, we continued to see evidence of market firming and our customers' businesses seem to be stabilizing, even in these times of economic uncertainty. As we move into 2012, our global team continues to execute on our plans and are delivering outstanding service to our clients in this changing environment."
The following provides non-GAAP information that management believes is helpful when comparing 2011 revenues, EBITDAC and diluted net earnings (loss) per share with the same periods in 2010:
Quarter Ended
December 31 Diluted Net Earnings
Revenues EBITDAC (Loss) Per Share
Segment 4th Q 11 4th Q 10 Chg 4th Q 11 4th Q 10 Chg 4th Q 11 4th Q 10 Chg
------- -------- -------- --- -------- -------- --- -------- -------- ---
(in millions) (in millions)
Brokerage, as
adjusted $412.3 $337.3 22% $87.0 $68.7 27% $0.32 $0.27 19%
Gains on book sales 1.1 0.6 1.1 0.6 0.01 -
Heath Lambert
integration costs - - (7.5) - (0.04) -
Workforce & lease
termination - - (0.4) (1.5) (0.01) (0.01)
Acquisition related
adjustments - - (0.6) - (0.01) 0.01
Effective income
tax rate impact - - - - 0.01 0.01
Brokerage, as
reported 413.4 337.9 79.6 67.8 0.28 0.28
----- ----- ---- ---- ---- ----
Risk Management, as
adjusted 145.7 128.8 13% 24.1 19.6 23% 0.11 0.09 22%
GAB Robins
integration costs - - (1.7) (3.5) (0.01) (0.02)
Workforce & lease
termination - - (0.4) (0.2) - -
Effective income
tax rate impact - - - - 0.01 -
--- --- --- --- ----
Risk Management, as
reported 145.7 128.8 22.0 15.9 0.11 0.07
----- ----- ---- ---- ---- ----
Total Brokerage &
Risk
Management, as
reported 559.1 466.7 101.6 83.7 0.39 0.35
Corporate, as
reported 19.3 (7.6) (10.1) (24.8) (0.04) 0.08
---- ---- ----- ----- ----- ----
Total Continuing
Operations, as
reported $578.4 $459.1 $91.5 $58.9 0.35 0.43
====== ====== ===== =====
Discontinued
Operations - 0.08
--- ----
Total Company, as
reported $0.35 $0.51
===== =====
Total Brokerage &
Risk
Management, as
adjusted $558.0 $466.1 20% $111.1 $88.3 26% $0.43 $0.36 19%
====== ====== ====== ===== ===== =====
(1 of 14)
Year Ended December
31 Diluted Net Earnings
Revenues EBITDAC (Loss) Per Share
Segment Year 11 Year 10 Chg Year 11 Year 10 Chg Year 11 Year 10 Chg
------- ------- ------- --- ------- ------- --- ------- ------- ---
Continuing
Operations (in millions) (in millions)
Brokerage, as
adjusted $1,551.0 $1,320.0 18% $340.9 $289.7 18% $1.29 $1.18 9%
Gains on book sales 5.5 5.9 5.5 5.9 0.03 0.03
Net supplemental
commission
timing (note 1) - 14.7 - 14.7 - 0.08
Heath Lambert
integration costs - - (16.0) - (0.09) -
Workforce & lease
termination - - (2.6) (6.9) (0.01) (0.03)
Acquisition related
adjustments - - (7.0) - 0.03 0.05
Litigation
settlement - - - (3.5) - (0.02)
Brokerage, as
reported 1,556.5 1,340.6 320.8 299.9 1.25 1.29
------- ------- ----- ----- ---- ----
Risk Management, as
adjusted 548.8 462.1 19% 87.5 72.0 22% 0.38 0.34 12%
GAB Robins
integration costs - - (13.0) (3.6) (0.06) (0.02)
Litigation
settlement - - - (2.8) - (0.02)
Workforce & lease
termination - - (5.6) (0.6) (0.03) -
Risk Management, as
reported 548.8 462.1 68.9 65.0 0.29 0.30
----- ----- ---- ---- ---- ----
Total Brokerage &
Risk
Management, as
reported 2,105.3 1,802.7 389.7 364.9 1.54 1.59
Corporate, as
reported 29.4 61.5 (32.1) (36.8) (0.26) (0.03)
---- ---- ----- ----- ----- -----
Total Continuing
Operations, as
reported $2,134.7 $1,864.2 $357.6 $328.1 1.28 1.56
======== ======== ====== ======
Discontinued
Operations - 0.10
--- ----
Total Company, as
reported $1.28 $1.66
===== =====
Total Brokerage &
Risk
Management, as
adjusted $2,099.8 $1,782.1 18% $428.4 $361.7 18% $1.67 $1.52 10%
======== ======== ====== ====== ===== =====
Brokerage Segment Fourth Quarter Highlights
-- The following provides non-GAAP information that management believes is
helpful when comparing certain components of 2011 organic revenues with
the same periods in 2010 (in millions):
4th Q 11 4th Q 10 Year 11 Year 10
Commissions and Fees
Commissions as reported $297.7 $244.2 $1,127.4 $957.3
Fees as reported 96.4 76.7 324.1 274.9
Less commissions and fees from
acquisitions (59.5) - (184.4) -
Less disposed of operations - (2.1) - (4.6)
Levelized foreign currency
translation - 0.2 - 5.5
--- --- --- ---
Organic commissions and fees $334.6 $319.0 $1,267.1 $1,233.1
====== ====== ======== ========
Organic change in commissions and
fees only 4.9% 2.8%
=== ===
Supplemental Commissions
Supplemental commissions as
reported $14.0 $12.1 $56.0 $60.8
Less supplemental commissions from
acquisitions (0.4) - (4.0) -
Net supplemental commission timing
(note 1) - - - (14.7)
--- --- --- -----
Organic supplemental commissions $13.6 $12.1 $52.0 $46.1
===== ===== ===== =====
Organic change in supplemental
commissions 12.4% 12.8%
==== ====
Contingent Commissions
Contingent commissions as reported $3.5 $3.1 $38.1 $36.8
Less contingent commissions from
acquisitions (0.3) - (3.6) -
---- --- ---- ---
Organic contingent commissions $3.2 $3.1 $34.5 $36.8
==== ==== ===== =====
Organic change in contingent
commissions 3.2% -6.3%
=== ====
(2 of 14)
Brokerage Segment Fourth Quarter Highlights (continued)
-- The following is a summary of brokerage acquisition activity for 2011
and 2010:
4th Q 11 4th Q 10 Year 11 Year 10
Shares issued for acquisitions and
earnouts 1,062,000 1,937,000 3,454,000 4,148,000
Number of acquisitions closed 11 6 32 18
Annualized revenues acquired (in
millions) $42.2 $38.4 $277.0 $95.1
-- Adjusted fourth quarter compensation ratio shown on page 9 was 0.5 pts
higher than the same period in 2010. This ratio was primarily impacted
by increased incentive compensation of 2.4 pts, partially offset by
salary savings of 1.4 pts due to headcount control.
-- Adjusted fourth quarter operating expense ratio shown on page 9 was 1.3
pts lower than the same period in 2010. This ratio was primarily
impacted by reductions in travel and entertainment costs of 0.7 pts and
business insurance of 0.6 pts.
-- Acquisition related adjustments is comprised of (a) $2.3 million of
income, reported in the change in estimated earnout payables line,
relating to net downward adjustments for prior year acquisitions as a
result of revised earnout projections, (b) $0.6 million of expense
reported in the compensation expense line relating to an acquisition
where the sellers reallocated a portion of the earnout to current
employees and (c) $4.6 million of expense reported in the amortization
expense line relating to intangible asset impairments for two
acquisitions made in prior years.
-- The following provides non-GAAP information that management believes is
helpful when comparing 2011 EBITDAC and 2011 Adjusted EBITDAC to the
same periods in 2010 (in millions):
4th Q 11 4th Q 10 Year 11 Year 10
Total EBITDAC -see pages 9
and 11 for computation $79.6 $67.8 $320.8 $299.9
Gains from books of business
sales (1.1) (0.6) (5.5) (5.9)
Net supplemental commission
timing (note 6) - - - (14.7)
Heath Lambert integration
costs 7.5 - 16.0 -
Earnout related compensation
charge 0.6 - 7.0 -
Workforce related charges 0.3 1.5 2.5 6.3
Lease termination related
charges 0.1 - 0.1 0.6
Litigation settlement - - - 3.5
Adjusted EBITDAC $87.0 $68.7 $340.9 $289.7
===== ===== ====== ======
Adjusted EBITDAC change 26.6% 17.7%
==== ====
Adjusted EBITDAC margin 21.1% 20.4% 22.0% 21.9%
==== ==== ==== ====
Adjusted EBITDAC margin
excluding Heath Lambert * 21.8% 20.4% 22.4% 21.9%
==== ==== ==== ====
* As expected, until the integration process is completed in 2013, the Heath Lambert operations will reduce the overall Brokerage Segment adjusted EBITDAC margins.
Risk Management Segment Fourth Quarter Highlights
-- The following provides non-GAAP information that management believes is
helpful when comparing 2011 organic fee revenues with the same periods
in 2010 (in millions):
4th Q 11 4th Q 10 Year 11 Year 10
Domestic and international fees $132.3 $124.7 $510.8 $446.7
International performance bonus
fees 4.5 0.4 13.6 9.9
Adjusting fees related to
international natural disasters 8.2 3.1 21.7 3.5
Fees as reported 145.0 128.2 546.1 460.1
Less fees from acquisitions - - (34.1) -
Levelized foreign currency
translation - 0.6 - 7.8
Organic fees $145.0 $128.8 $512.0 $467.9
====== ====== ====== ======
Organic change in fees 12.6% 9.4%
==== ===
Organic change in domestic and
international fees 5.6% 4.9%
=== ===
(3 of 14)
Risk Management Segment Fourth Quarter Highlights (continued)
-- Adjusted fourth quarter compensation ratio shown on page 9 was 0.5 pts
lower than the same period in 2010. This ratio was primarily impacted
by reductions in salary from headcount control of 1.0 pts and employee
benefits of 0.6 pts, partially offset by increased incentive
compensation of 1.3 pts.
-- Adjusted fourth quarter operating expense ratio shown on page 9 was 0.8
pts lower than the same period in 2010. This ratio was impacted by
reductions in rent expense of 1.0 pts and travel and entertainment costs
of 0.5 pts, partially offset by increased outsourcing service and other
outside fees of 1.0 pts.
-- The following provides non-GAAP information that management believes is
helpful when comparing 2011 EBITDAC and 2011 Adjusted EBITDAC to the
same periods in 2010 (in millions):
4th Q 11 4th Q 10 Year 11 Year 10
Total EBITDAC -see pages 9 and 11
for computation $22.0 $15.9 $68.9 $65.0
Workforce related charges 0.4 0.2 5.4 0.5
Litigation settlement - - - 2.8
Lease termination related charges - - 0.2 0.1
GAB Robins integration costs 1.7 3.5 13.0 3.6
Levelized foreign currency
translation - - - 1.4
Adjusted EBITDAC $24.1 $19.6 $87.5 $73.4
===== ===== ===== =====
Adjusted EBITDAC change 23.0% 19.2%
==== ====
Adjusted EBITDAC margin 16.5% 15.2% 15.9% 15.9%
==== ==== ==== ====
Corporate Segment Fourth Quarter Highlights
The following provides non-GAAP information that management believes is helpful when comparing 2011 operating results for the Corporate Segment with the same periods in 2010 (in millions):
2011 2010
Pretax Income Net Pretax Income Net
Earnings Tax Earnings Earnings Tax Earnings
(Loss) Benefit (Loss) (Loss) Benefit (Loss)
4th Quarter
-----------
Interest and
banking costs $(11.1) $4.5 $(6.6) $(9.4) $3.8 $(5.6)
Clean energy
investments (4.7) 7.2 2.5 (2.3) 0.6 (1.7)
Acquisition costs (0.8) (0.4) (1.2) (0.2) - (0.2)
Corporate (3.6) 3.9 0.3 (5.5) 1.7 (3.8)
Legacy investments (0.4) 1.8 1.4 (16.2) 35.5 19.3
$(20.6) $17.0 $(3.6) $(33.6) $41.6 $8.0
====== ===== ===== ====== ===== ====
Year
----
Interest and
banking costs $(43.8) $17.5 $(26.3) $(36.4) $14.6 $(21.8)
Clean energy
investments (14.8) 18.7 3.9 (6.9) 14.4 7.5
Acquisition costs (4.7) 0.6 (4.1) (2.9) 1.0 (1.9)
Corporate (9.8) 5.5 (4.3) (9.2) 2.7 (6.5)
Legacy investments (0.3) 1.7 1.4 (16.4) 35.6 19.2
$(73.4) $44.0 $(29.4) $(71.8) $68.3 $(3.5)
====== ===== ====== ====== ===== =====
-- Debt, interest and banking - Gallagher has $675.0 million of long-term
borrowings outstanding under three private placement agreements, which
are due and payable in various amounts in 2014 through 2023. Gallagher
also maintains an unsecured line of credit of $500.0 million that
expires July 14, 2014. There were $10.0 million of borrowings
outstanding under Gallagher's line of credit facility at December 31,
2011.
(4 of 14)
Corporate Segment Fourth Quarter Highlights (continued)
-- Clean energy investments -Gallagher holds investment
positions in 14 commercial clean coal production plants that were
built and first began production in 2009 (the 2009 Era Plants).
These plants qualify for tax credits under Section 45 of the
Internal Revenue Code which pass through proportionally to
Gallagher's ownership level.
Gallagher holds minority investment positions in 12 of the
2009 Era Plants which are producing refined coal under long-
term agreements with utilities. At December 31, 2011,
Gallagher's net carrying value of these investments was $8.9
million and collectively they could generate approximately
$4.3 million of net after-tax earnings per quarter through
-- 2019.
Gallagher is currently seeking co-investors and long-term
utility customers for the other two 2009 Era Plants. At
December 31, 2011, Gallagher's net carrying value of these
investments was $1.5 million. Gallagher cannot predict when
these plants will resume production of refined coal or the
-- amount of refined coal that will ultimately be produced.
Gallagher holds investment positions in 15 commercial clean coal
production plants that were built and first began producing refined
coal in fourth quarter 2011 (the 2011 Era Plants). These plants
also qualify for tax credits under Section 45 of the Internal
Revenue Code which pass through proportionally based on Gallagher's
ownership level.
At December 31, 2011, Gallagher holds majority investment
positions in five of the 2011 Era Plants which are producing
refined coal under long-term agreements with utilities. At
December 31, 2011, Gallagher's net carrying value of these
investments was $23.6 million (on January 1, 2012 we sold
ownership interests in these five investments for $12.9
million) and collectively they could generate for Gallagher
approximately $8.0 million of net after-tax earnings per
-- quarter through 2021.
Gallagher has non-binding agreements in principle with a
utility and co-investors for one of the majority-owned 2011
Era Plants. This plant is expected to resume production of
refined coal late in the second quarter of 2012. At December
31, 2011, Gallagher's net carrying value of this investment
was $1.0 million. Gallagher estimates that it will invest an
additional net $2.0 million to house this plant prior to the
resumption of production. Once production resumes, it could
generate for Gallagher approximately $1.7 million of net
-- after-tax earnings per quarter through 2021.
Gallagher is currently seeking co-investors and long-term
utility customers for the other nine majority-owned 2011 Era
Plants. After co-investors' fundings, Gallagher intends on
holding minority investment positions in these investments.
At December 31, 2011, Gallagher's net carrying value of these
investments was $8.8 million. Gallagher estimates that it
will invest an additional net $2.0 million to house each of
these plants prior to the resumption of production.
Gallagher cannot predict when these plants will resume
production of refined coal or the amount of refined coal that
-- will ultimately be produced.
Gallagher holds a 42% controlling interest in Chem-Mod, LLC which
possesses rights, information and technologies used for the
reduction of unwanted emissions created during the combustion of
coal. The clean coal production plants discussed above, as well as
other unrelated parties, license and use Chem-Mod's technologies
in the production of refined fuel. Based on current production
estimates provided by licensees, Chem-Mod could generate for
Gallagher approximately $2.5 million of net after-tax earnings per
quarter.
Please note that all estimates set forth above regarding the future
quarterly earnings impact of our clean-energy investments are
subject to significant risks, including those referred to below
under "Information Regarding Forward-Looking Statements."
-- Acquisition costs -Consists of professional fees and other
due diligence costs related to acquisitions.
-- Corporate -Consists of overhead allocations mostly related to
corporate staff compensation.
(5 of 14)
Income Taxes
Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments as if those segments were computing income tax provisions on a separate company basis. Gallagher historically has reported, and anticipates reporting for the foreseeable future, an effective tax rate of approximately 38% to 41% in both its Brokerage and Risk Management segments. Gallagher's consolidated effective tax rate for the year ended December 31, 2011 and 2010 was 30.7% and 19.6%, respectively. The following provides a reconciliation of the expected federal and state statutory tax amounts to the provision (benefit) for income taxes as reported in continuing operations for 2011 and 2010:
4th Q 11 4th Q 10 Year 11 Year 10
Federal, state and foreign
tax expense using
statutory rates $17.0 $9.7 $83.1 $76.5
Recognition of previously
unrecognized tax benefits
related to
the resolution of Federal
and state income tax
examinations
and the expiration of
various statutes of
limitations (1.7) (30.6) (1.9) (30.7)
Alternative energy tax
credits (4.6) - (13.2) (11.8)
Foreign dividends and other
permanent items, net of
foreign tax credits - 0.5 0.2 3.9
Other, net (3.8) 0.2 (4.5) 1.8
---- --- ---- ---
Provision (benefit) for
income taxes as reported $6.9 $(20.2) $63.7 $39.7
==== ====== ===== =====
Webcast Conference Call
Gallagher will host a webcast conference call on Wednesday, February 1, 2012 at 9:15 a.m. ET/8:15 a.m. CT. To listen to this call, please go to www.ajg.com. The call will be available for replay at such website for not less than 90 days.
About Arthur J. Gallagher & Co.
Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 17 countries and offers client-service capabilities in more than 110 countries around the world through a network of correspondent brokers and consultants.
Information Regarding Forward-Looking Statements
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," "should," "could," "estimates," "expects," "intends," "plans" and variations thereof and similar expressions, are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding future income and tax credits generated by Gallagher's clean energy investments, our corporate income tax rate, the future revenue and earnings impact of recent acquisitions, drivers of organic growth in the Brokerage and Risk Management segments and anticipated future results or performance of any segment or the Company as a whole.
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:
-- Changes in worldwide and national economic conditions, changes in
premium rates and in insurance markets generally, changes in the
insurance brokerage industry's competitive landscape, and the
difficulties inherent in combining the cultures and systems of different
companies could impact the future revenue and earnings impact of recent
acquisitions, drivers of organic growth in the Brokerage and Risk
Management segments and anticipated future results or performance of any
segment or the Company as a whole; and
-- Uncertainties related to Gallagher's IRC Section 45 investments,
including uncertainties related to (i) maintenance of long-term permits
to operate the facilities by Gallagher's utility partners, (ii)
Gallagher's ability to find operating sites and co-investors for its
non-operating clean energy investments, (iii) potential IRS challenges
to Gallagher's ability to claim tax credits under IRC Section 45, (iv)
utilities' future use of coal to generate electricity, (v) operational
risks at the IRC Section 45 operations (including Gallagher's lack of
control over such operations), (vi) business risks relating to
Gallagher's co-investors and partners, (vii) intellectual property
risks, (viii) political and regulatory developments, including the risk
that tax incentives for coal could be eliminated retroactively, and (ix)
environmental risks, could impact Gallagher's future income and tax
credits generated from its clean energy investments and its future
corporate tax rate.
(6 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, 2010, 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, Adjusted EBITDAC margin excluding Heath Lambert, Diluted Net Earnings Per Share (As Adjusted) for the Brokerage and Risk Management segments, organic change in commission, fee and supplemental commission revenues, adjusted revenues, expenses and net earnings, adjusted compensation expense ratio and adjusted operating expense ratio. These measures are not in accordance with, or an alternative to, the GAAP information provided in this press release. Gallagher's management believes that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher's results of operations and financial condition. Gallagher's industry peers may provide similar supplemental non-GAAP information, although they may not use the same or comparable terminology and may not make identical adjustments. The non-GAAP information provided by Gallagher should be used in addition to, but not as a substitute for, the GAAP information provided. Certain reclassifications have been made to the prior year amounts reported in this press release in order to conform them to the current year presentation.
Adjusted presentation - Gallagher believes that the adjusted presentation of 2011 and 2010 statements of earnings, presented on the following pages, provides stockholders and other interested persons with useful information regarding certain financial metrics of Gallagher that may assist such persons in analyzing Gallagher's operating results as they develop a future earnings outlook for Gallagher. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period.
-- Adjusted revenues, expenses and net earnings - Gallagher defines these
measures as revenues, expenses (including compensation expense and
operating expense) and earnings from continuing operations,
respectively, each adjusted to exclude gains realized from sales of
books of business, supplemental commission timing amounts, workforce
related charges, lease termination related charges, acquisition related
integration costs, litigation settlements and adjustments to the change
in estimated acquisition earnout payables, as applicable. Acquisition
related integration costs include costs related to transactions not
expected to occur on an ongoing basis in the future once we fully
assimilate the applicable acquisition. These costs are typically
associated with redundant workforce, extra lease space, duplicate
services and external costs incurred to assimilate the acquisition on to
our IT related systems.
-- Adjusted ratios - Adjusted compensation expense ratio and adjusted
operating expense ratio are defined as adjusted compensation expense and
adjusted operating expense, respectively, each divided by adjusted
revenues.
Earnings Measures - Gallagher believes that each of EBITDAC, EBITDAC margin, Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted EBITDAC margin excluding Heath Lambert, and Diluted Net Earnings Per Share (As Adjusted) for the Brokerage and Risk Management segments, as defined below, provides a meaningful representation of its operating performance. Gallagher considers EBITDAC and EBITDAC margin as a way to measure financial performance on an ongoing basis. Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted EBITDAC margin excluding Heath Lambert, and Diluted Net Earnings Per Share (As Adjusted) for the Brokerage and Risk Management segments are presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
-- EBITDAC - Gallagher defines this measure as earnings from continuing
operations before interest, income taxes, depreciation, amortization and
the change in estimated acquisition earnout payables.
-- EBITDAC margin - Gallagher defines this measure as EBITDAC divided by
total revenues.
-- Adjusted EBITDAC - Gallagher defines this measure as EBITDAC adjusted to
exclude gains realized from sales of books of business, supplemental
commission timing amounts, earnout related compensation charges,
workforce related charges, lease termination related charges,
acquisition related integration costs, litigation settlements and the
period-over-period impact of foreign currency translation.
-- Adjusted EBITDAC margin - Gallagher defines this measure as Adjusted
EBITDAC divided by total revenues, as adjusted to exclude gains realized
from sales of books of business and supplemental commission timing
amounts.
-- Adjusted EBITDAC margin excluding Heath Lambert - Gallagher defines this
measure as Adjusted EBITDAC further adjusted to exclude the EBITDAC
associated with the acquired Heath Lambert operations divided by total
revenues, as adjusted to exclude gains realized from sales of books of
business, supplemental commission timing amounts and the revenues
associated with the acquired Heath Lambert operations.
(7 of 14)
Information Regarding Non-GAAP Measures (continued)
-- Diluted Net Earnings Per Share (As Adjusted) for the Brokerage and Risk
Management segments - Gallagher defines this measure as net earnings
adjusted to exclude the after-tax impact of gains realized from sales of
books of business, supplemental commission timing amounts, workforce
related charges, lease termination related charges, acquisition related
integration costs litigation settlements and the change in estimated
acquisition earnout payables divided by diluted weighted average shares
outstanding.
Organic Revenues - Organic change in commission, fee and supplemental commission revenues excludes the first twelve months of net commission, fee and supplemental commission revenues generated from acquisitions accounted for as purchases and the net commission and fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to determine the revenue growth associated with the operations that were a part of Gallagher in both the current and prior year. In addition, organic growth excludes the impact of contingent commission revenues and the period-over-period impact of foreign currency translation. The amounts excluded with respect to foreign currency translation are calculated by applying 2011 foreign exchange rates to the same periods in 2010.
These revenue items are excluded from organic revenues in order to determine a comparable measurement of revenue growth that is associated with the revenue sources that will be continuing in 2011 and beyond. Gallagher has historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of its Brokerage and Risk Management segments. Gallagher also believes that using this measure allows financial statement users 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 for adjusted revenues, expenses and net earnings, EBITDAC (on pages 9 through 12), for Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted EBITDAC margin excluding Heath Lambert (on pages 3 and 4, respectively, for the Brokerage and Risk Management segments), for Diluted Net Earnings Per Share (As Adjusted) for the Brokerage and Risk Management segments (on pages 1 and 2), and for organic change in commission, fee and supplemental commission revenues (on pages 2 and 3, respectively, for the Brokerage and Risk Management segments).
(8 of 14)
Arthur J. Gallagher & Co.
Reported and Adjusted Statement of Earnings and EBITDAC - 4th Qtr Ended December 31,
(Unaudited - in millions except per share, percentage and workforce data)
4th Qtr Ended December 31, 2011 4th Qtr Ended December 31, 2010
------------------------------- -------------------------------
Brokerage Segment Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Commissions $297.7 $- $297.7 $244.2 $- $244.2
Fees 96.4 - 96.4 76.7 - 76.7
Supplemental commissions (1) 14.0 - 14.0 12.1 - 12.1
Contingent commissions (1) 3.5 - 3.5 3.1 - 3.1
Investment income and gains
realized on
books of business sales 1.8 (1.1) 0.7 1.8 (0.6) 1.2
--- ---- --- --- ---- ---
Revenues 413.4 (1.1) 412.3 337.9 (0.6) 337.3
Compensation 267.3 (5.6) 261.7 213.9 (1.5) 212.4
Operating 66.5 (2.9) 63.6 56.2 - 56.2
Depreciation 5.5 - 5.5 4.9 - 4.9
Amortization 24.1 (4.6) 19.5 15.2 - 15.2
Change in estimated
acquisition earnout payables (0.2) 2.3 2.1 0.3 1.2 1.5
---- --- --- --- --- ---
Expenses 363.2 (10.8) 352.4 290.5 (0.3) 290.2
----- ----- ----- ----- ---- -----
Earnings from continuing
operations before income
taxes 50.2 9.7 59.9 47.4 (0.3) 47.1
Provision for income taxes 18.3 5.1 23.4 17.0 1.4 18.4
---- --- ---- ---- --- ----
Earnings from continuing
operations $31.9 $4.6 $36.5 $30.4 $(1.7) $28.7
===== ==== ===== ===== ===== =====
Diluted earnings from
continuing operations per
share $0.28 $0.04 $0.32 $0.28 $(0.01) $0.27
Growth in diluted earnings
from continuing operations
per share 0% 19% 33% 8%
Growth - revenues 22% 22% 5% 5%
Organic change in commissions
and fees 5% 5% 0% 0%
Compensation expense ratio 65% 63% 63% 63%
Operating expense ratio 16% 15% 17% 17%
Effective tax rate 36% 39% 36% 39%
Workforce at end of period
(includes acquisitions) 7,868 7,868 6,275 6,275
EBITDAC
Earnings from continuing
operations $31.9 $4.6 $36.5 $30.4 $(1.7) $28.7
Provision for income taxes 18.3 5.1 23.4 17.0 1.4 18.4
Depreciation 5.5 - 5.5 4.9 - 4.9
Amortization 24.1 (4.6) 19.5 15.2 - 15.2
Change in estimated
acquisition earnout payables (0.2) 2.3 2.1 0.3 1.2 1.5
---- --- --- --- --- ---
EBITDAC $79.6 $7.4 $87.0 $67.8 $0.9 $68.7
===== ==== ===== ===== ==== =====
EBITDAC margin 19% 21% 20% 20%
EBITDAC Growth 17% 27% 28% 17%
4th Qtr Ended December 31, 2011 4th Qtr Ended December 31, 2010
------------------------------- -------------------------------
Risk Management Segment Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Fees $145.0 $- $145.0 $128.2 $- $128.2
Investment income 0.7 - 0.7 0.6 - 0.6
--- --- --- --- --- ---
Revenues 145.7 - 145.7 128.8 - 128.8
----- --- ----- ----- --- -----
Compensation 88.9 (1.2) 87.7 81.1 (2.9) 78.2
Operating 34.8 (0.9) 33.9 31.8 (0.8) 31.0
Depreciation 3.7 - 3.7 3.3 - 3.3
Amortization 0.5 - 0.5 0.6 - 0.6
--- --- --- --- --- ---
Expenses 127.9 (2.1) 125.8 116.8 (3.7) 113.1
----- ---- ----- ----- ---- -----
Earnings from continuing
operations before income
taxes 17.8 2.1 19.9 12.0 3.7 15.7
Provision for income taxes 5.6 2.2 7.8 4.4 1.7 6.1
--- --- --- --- --- ---
Earnings from continuing
operations $12.2 $(0.1) $12.1 $7.6 $2.0 $9.6
===== ===== ===== ==== ==== ====
Diluted earnings from
continuing operations per
share $0.11 $- $0.11 $0.07 $0.02 $0.09
Growth in diluted earnings
from continuing operations
per share 57% 22% 40% 0%
Growth - revenues 13% 13% 13% 13%
Organic change in fees 13% 13% 0% 0%
Compensation expense ratio 61% 60% 63% 61%
Operating expense ratio 24% 23% 25% 24%
Effective tax rate 31% 39% 37% 39%
Workforce at end of period
(includes acquisitions) 4,264 4,264 4,227 4,227
EBITDAC
Earnings from continuing
operations $12.2 $(0.1) $12.1 $7.6 $2.0 $9.6
Provision for income taxes 5.6 2.2 7.8 4.4 1.7 6.1
Depreciation 3.7 - 3.7 3.3 - 3.3
Amortization 0.5 - 0.5 0.6 - 0.6
--- --- --- --- --- ---
EBITDAC $22.0 $2.1 $24.1 $15.9 $3.7 $19.6
===== ==== ===== ===== ==== =====
EBITDAC margin 15% 17% 12% 15%
EBITDAC Growth 38% 23% 64% 18%
See "Information Regarding Non-GAAP Measures" on page 7 of 14 and notes to fourth quarter 2011 earnings release on
page 13 of 14.
(9 of 14)
Arthur J. Gallagher & Co.
Reported and Adjusted Statement of Earnings and EBITDAC- 4th Qtr Ended December 31,
(Unaudited - in millions except share and per share data)
4th Qtr Ended December 31, 2011 4th Qtr Ended December 31, 2010
------------------------------- -------------------------------
Corporate Segment Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Revenues from consolidated
clean coal facilities $16.7 $- $16.7 $- $- $-
Royalty income from clean
coal licenses 2.8 - 2.8 0.7 - 0.7
Income (loss) from
unconsolidated clean coal
facilities (0.3) - (0.3) (1.2) - (1.2)
Other net revenues 0.1 - 0.1 (7.1) - (7.1)
--- --- --- ---- --- ----
Revenues 19.3 - 19.3 (7.6) - (7.6)
Cost of revenues from
consolidated clean coal
facilities 19.6 - 19.6 - - -
Compensation 4.8 - 4.8 4.0 - 4.0
Operating 5.0 - 5.0 13.2 - 13.2
Interest 10.4 - 10.4 8.7 - 8.7
Depreciation 0.1 - 0.1 0.1 - 0.1
--- --- --- --- --- ---
Expenses 39.9 - 39.9 26.0 - 26.0
---- --- ---- ---- --- ----
Loss from continuing
operations before income
taxes (20.6) - (20.6) (33.6) - (33.6)
Benefit for income taxes (17.0) - (17.0) (41.6) - (41.6)
----- --- ----- ----- --- -----
Loss from continuing
operations $(3.6) $- $(3.6) $8.0 $- $8.0
===== === ===== ==== === ====
Diluted loss from
continuing operations per
share $(0.04) $- $(0.04) $0.08 $- $0.07
EBITDAC
Loss from continuing
operations $(3.6) $- $(3.6) $8.0 $- $8.0
Benefit for income taxes (17.0) - (17.0) (41.6) - (41.6)
Interest 10.4 - 10.4 8.7 - 8.7
Depreciation 0.1 - 0.1 0.1 - 0.1
--- --- --- --- --- ---
EBITDAC $(10.1) $- $(10.1) $(24.8) $- $(24.8)
====== === ====== ====== === ======
4th Qtr Ended December 31, 2011 4th Qtr Ended December 31, 2010
------------------------------- -------------------------------
Total Company Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Commissions $297.7 $- $297.7 $244.2 $- $244.2
Fees 241.4 - 241.4 204.9 - 204.9
Supplemental commissions
(1) 14.0 - 14.0 12.1 - 12.1
Contingent commissions (1) 3.5 - 3.5 3.1 - 3.1
Investment income and gains
realized on
books of business sales 2.5 (1.1) 1.4 2.4 (0.6) 1.8
Revenues from clean coal
activities 19.2 - 19.2 (0.5) - (0.5)
Other net revenues -
Corporate 0.1 - 0.1 (7.1) - (7.1)
--- --- --- ---- --- ----
Revenues 578.4 (1.1) 577.3 459.1 (0.6) 458.5
Compensation 361.0 (6.8) 354.2 299.0 (4.4) 294.6
Operating 106.3 (3.8) 102.5 101.2 (0.8) 100.4
Cost of revenues from clean
coal activities 19.6 - 19.6 - - -
Interest 10.4 - 10.4 8.7 - 8.7
Depreciation 9.3 - 9.3 8.3 - 8.3
Amortization 24.6 (4.6) 20.0 15.8 - 15.8
Change in estimated
acquisition earnout
payables (0.2) 2.3 2.1 0.3 1.2 1.5
---- --- --- --- --- ---
Expenses 531.0 (12.9) 518.1 433.3 (4.0) 429.3
----- ----- ----- ----- ---- -----
Earnings from continuing
operations before income
taxes 47.4 11.8 59.2 25.8 3.4 29.2
Provision for income taxes 6.9 7.3 14.2 (20.2) 3.1 (17.1)
--- --- ---- ----- --- -----
Earnings from continuing
operations 40.5 4.5 45.0 46.0 0.3 46.3
---- --- ---- ---- --- ----
Earnings on discontinued
operations, net of income
taxes - - - 8.7 - 8.7
--- --- --- --- --- ---
Net earnings $40.5 $4.5 $45.0 $54.7 $0.3 $55.0
===== ==== ===== ===== ==== =====
Diluted earnings from
continuing operations per
share $0.35 $0.04 $0.39 $0.43 $- $0.43
Diluted earnings on
discontinued operations
per share - - - 0.08 - 0.08
Diluted net earnings per
share $0.35 $0.04 $0.39 $0.51 $- $0.51
===== ===== ===== ===== === =====
Dividends declared per
share $0.33 $0.33 $0.32 $0.32
===== ===== ===== =====
EBITDAC
Net earnings $40.5 $4.5 $45.0 $54.7 $0.3 $55.0
Earnings on discontinued
operations, net of income
taxes - - - (8.7) - (8.7)
--- --- --- ---- --- ----
Earnings from continuing
operations 40.5 4.5 45.0 46.0 0.3 46.3
Provision for income taxes 6.9 7.3 14.2 (20.2) 3.1 (17.1)
Interest 10.4 - 10.4 8.7 - 8.7
Depreciation 9.3 - 9.3 8.3 - 8.3
Amortization 24.6 (4.6) 20.0 15.8 - 15.8
Change in estimated
acquisition earnout
payables (0.2) 2.3 2.1 0.3 1.2 1.5
---- --- --- --- --- ---
EBITDAC $91.5 $9.5 $101.0 $58.9 $4.6 $63.5
===== ==== ====== ===== ==== =====
See "Information Regarding Non-GAAP Measures" on page 7 of 14 and notes to fourth quarter 2011 earnings release on
page 13 of 14.
(10 of 14)
Arthur J. Gallagher & Co.
Reported and Adjusted Statement of Earnings and EBITDAC- Year Ended December 31,
(Unaudited - in millions except per share, percentage and workforce data)
Year Ended December 31, 2011 Year Ended December 31, 2010
---------------------------- ----------------------------
Brokerage Segment Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Commissions $1,127.4 $- $1,127.4 $957.3 $- $957.3
Fees 324.1 - 324.1 274.9 - 274.9
Supplemental commissions (1) 56.0 - 56.0 60.8 (14.7) 46.1
Contingent commissions (1) 38.1 - 38.1 36.8 - 36.8
Investment income and gains
realized on
books of business sales 10.9 (5.5) 5.4 10.8 (5.9) 4.9
---- ---- --- ---- ---- ---
Revenues 1,556.5 (5.5) 1,551.0 1,340.6 (20.6) 1,320.0
Compensation 968.4 (18.7) 949.7 817.1 (6.3) 810.8
Operating 267.3 (6.9) 260.4 223.6 (4.1) 219.5
Depreciation 21.2 - 21.2 19.5 - 19.5
Amortization 77.0 (4.6) 72.4 59.8 (2.3) 57.5
Change in estimated
acquisition earnout payables (6.2) 14.5 8.3 (2.6) 8.8 6.2
---- ---- --- ---- --- ---
Expenses 1,327.7 (15.7) 1,312.0 1,117.4 (3.9) 1,113.5
------- ----- ------- ------- ---- -------
Earnings from continuing
operations before income
taxes 228.8 10.2 239.0 223.2 (16.7) 206.5
Provision for income taxes 88.6 5.3 93.9 87.7 (5.2) 82.5
---- --- ---- ---- ---- ----
Earnings from continuing
operations $140.2 $4.9 $145.1 $135.5 $(11.5) $124.0
====== ==== ====== ====== ====== ======
Diluted earnings from
continuing operations per
share $1.25 $0.04 $1.29 $1.29 $(0.11) $1.18
Growth in diluted earnings
from continuing operations
per share -3% 9% 5% -3%
Growth - revenues 16% 18% 5% 4%
Organic change in commissions
and fees 3% 3% -2% -2%
Compensation expense ratio 62% 61% 61% 61%
Operating expense ratio 17% 17% 17% 17%
Effective tax rate 39% 39% 39% 40%
Workforce at end of period
(includes acquisitions) 7,868 7,868 6,275 6,275
EBITDAC
Earnings from continuing
operations $140.2 $4.9 $145.1 $135.5 $(11.5) $124.0
Provision for income taxes 88.6 5.3 93.9 87.7 (5.2) 82.5
Depreciation 21.2 - 21.2 19.5 - 19.5
Amortization 77.0 (4.6) 72.4 59.8 (2.3) 57.5
Change in estimated
acquisition earnout payables (6.2) 14.5 8.3 (2.6) 8.8 6.2
---- ---- --- ---- --- ---
EBITDAC $320.8 $20.1 $340.9 $299.9 $(10.2) $289.7
====== ===== ====== ====== ====== ======
EBITDAC margin 21% 22% 22% 22%
EBITDAC Growth 7% 18% 7% 4%
Year Ended December 31, 2011 Year Ended December 31, 2010
---------------------------- ----------------------------
Risk Management Segment Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Fees $546.1 $- $546.1 $460.1 $- $460.1
Investment income 2.7 - 2.7 2.0 - 2.0
--- --- --- --- --- ---
Revenues 548.8 - 548.8 462.1 - 462.1
----- --- ----- ----- --- -----
Compensation 344.1 (13.1) 331.0 288.0 (6.7) 281.3
Operating 135.8 (5.5) 130.3 109.1 (0.3) 108.8
Depreciation 14.2 - 14.2 12.4 - 12.4
Amortization 2.3 - 2.3 1.0 - 1.0
--- --- --- --- --- ---
Expenses 496.4 (18.6) 477.8 410.5 (7.0) 403.5
----- ----- ----- ----- ---- -----
Earnings from continuing
operations before income
taxes 52.4 18.6 71.0 51.6 7.0 58.6
Provision for income taxes 19.1 8.7 27.8 20.3 3.1 23.4
---- --- ---- ---- --- ----
Earnings from continuing
operations $33.3 $9.9 $43.2 $31.3 $3.9 $35.2
===== ==== ===== ===== ==== =====
Diluted earnings from
continuing operations per
share $0.29 $0.09 $0.38 $0.30 $0.04 $0.34
Growth in diluted earnings
from continuing operations
per share -3% 12% -3% -3%
Growth - revenues 19% 19% 2% 2%
Organic change in fees 9% 9% -3% -3%
Compensation expense ratio 63% 60% 62% 61%
Operating expense ratio 25% 24% 24% 24%
Effective tax rate 36% 39% 39% 40%
Workforce at end of period
(includes acquisitions) 4,264 4,264 4,227 4,227
EBITDAC
Earnings from continuing
operations $33.3 $9.9 $43.2 $31.3 $3.9 $35.2
Provision for income taxes 19.1 8.7 27.8 20.3 3.1 23.4
Depreciation 14.2 - 14.2 12.4 - 12.4
Amortization 2.3 - 2.3 1.0 - 1.0
--- --- --- --- --- ---
EBITDAC $68.9 $18.6 $87.5 $65.0 $7.0 $72.0
===== ===== ===== ===== ==== =====
EBITDAC margin 13% 16% 14% 16%
EBITDAC Growth 6% 22% 7% 5%
See "Information Regarding Non-GAAP Measures" on page 7 of 14 and notes to fourth quarter 2011 earnings release on
page 13 of 14.
(11 of 14)
Arthur J. Gallagher & Co.
Reported and Adjusted Statement of Earnings and EBITDAC- Year Ended December 31,
(Unaudited - in millions except share and per share data)
Year Ended December 31, 2011 Year Ended December 31, 2010
---------------------------- ----------------------------
Corporate Segment Reported Adjustments Adjusted Reported Adjustments Adjusted
-------- ----------- -------- -------- ----------- --------
Revenues from consolidated
clean coal facilities $27.3 $- $27.3 $62.7 $- $62.7
Royalty income from clean
coal licenses 4.5 - 4.5 3.2 - 3.2
Income (loss) from
unconsolidated clean coal
facilities (2.6) - (2.6) (0.3) - (0.3)
Other net revenues 0.2 - 0.2 (4.1) - (4.1)
Revenues 29.4 - 29.4 61.5 - 61.5
Cost of revenues from
consolidated clean coal
facilities 32.0 - 32.0 64.0 - 64.0
Compensation 13.6 - 13.6 12.4 - 12.4
Operating 15.9 - 15.9 21.9 - 21.9
Interest 40.8 - 40.8 34.6 - 34.6
Depreciation 0.5 - 0.5 0.4 - 0.4
Expenses 102.8 - 102.8 133.3 - 133.3
----- --- ----- ----- --- -----
Loss from continuing
operations before income
taxes (73.4) - (73.4) (71.8) - (71.8)
Benefit for income taxes (44.0) - (44.0) (68.3) - (68.3)
Loss from continuing
operations $(29.4) $- $(29.4) $(3.5) $- $(3.5)
====== === ====== ===== === =====
Diluted loss from continuing
operations per share $(0.26) $- $(0.26) $(0.03) $- $(0.03)
EBITDAC
Loss from continuing
operations $(29.4) $- $(29.4) $(3.5) $- $(3.5)
Benefit for income taxes (44.0) - (44.0) (68.3) - (68.3)
Interest 40.8 - 40.8 34.6 - 34.6
Depreciation 0.5 - 0.5 0.4 - 0.4
EBITDAC $(32.1) $- $(32.1) $(36.8) $- $(36.8)
====== === ====== ====== === ======
Year Ended December 31, 2011 Year Ended December 31, 2010
---------------------------- ----------------------------
Total Company Reported Adjustments Adjusted Reported Adjustments Adjusted
Commissions $1,127.4 $- $1,127.4 $957.3 $- $957.3
Fees 870.2 - 870.2 735.0 - 735.0
Supplemental commissions (1) 56.0 - 56.0 60.8 (14.7) 46.1
Contingent commissions (1) 38.1 - 38.1 36.8 - 36.8
Investment income and gains
realized on
books of business sales 13.6 (5.5) 8.1 12.8 (5.9) 6.9
Revenues from clean coal
activities 29.2 - 29.2 65.6 - 65.6
Other net revenues -
Corporate 0.2 - 0.2 (4.1) - (4.1)
Revenues 2,134.7 (5.5) 2,129.2 1,864.2 (20.6) 1,843.6
Compensation 1,326.1 (31.8) 1,294.3 1,117.5 (13.0) 1,104.5
Operating 419.0 (12.4) 406.6 354.6 (4.4) 350.2
Cost of revenues from clean
coal activities 32.0 - 32.0 64.0 - 64.0
Interest 40.8 - 40.8 34.6 - 34.6
Depreciation 35.9 - 35.9 32.3 - 32.3
Amortization 79.3 (4.6) 74.7 60.8 (2.3) 58.5
Change in estimated
acquisition earnout payables (6.2) 14.5 8.3 (2.6) 8.8 6.2
Expenses 1,926.9 (34.3) 1,892.6 1,661.2 (10.9) 1,650.3
------- ----- ------- ------- ----- -------
Earnings from continuing
operations before income
taxes 207.8 28.8 236.6 203.0 (9.7) 193.3
Provision for income taxes 63.7 14.0 77.7 39.7 (2.1) 37.6
Earnings from continuing
operations 144.1 14.8 158.9 163.3 (7.6) 155.7
Earnings on discontinued
operations, net of income
taxes - - - 10.8 - 10.8
Net earnings $144.1 $14.8 $158.9 $174.1 $(7.6) $166.5
====== ===== ====== ====== ===== ======
Diluted earnings from
continuing operations per
share $1.28 $0.13 $1.41 $1.56 $(0.07) $1.48
Diluted earnings on
discontinued operations per
share - - - 0.10 - 0.10
Diluted net earnings per
share $1.28 $0.13 $1.41 $1.66 $(0.07) $1.58
===== ===== ===== ===== ====== =====
Dividends declared per share $1.32 $1.32 $1.28 $1.28
===== ===== ===== =====
EBITDAC
Net earnings $144.1 $14.8 $158.9 $174.1 $(7.6) $166.5
Earnings on discontinued
operations, net of income
taxes - - - (10.8) - (10.8)
Earnings from continuing
operations 144.1 14.8 158.9 163.3 (7.6) 155.7
Provision for income taxes 63.7 14.0 77.7 39.7 (2.1) 37.6
Interest 40.8 - 40.8 34.6 - 34.6
Depreciation 35.9 - 35.9 32.3 - 32.3
Amortization 79.3 (4.6) 74.7 60.8 (2.3) 58.5
Change in estimated
acquisition earnout payables (6.2) 14.5 8.3 (2.6) 8.8 6.2
EBITDAC $357.6 $38.7 $396.3 $328.1 $(3.2) $324.9
====== ===== ====== ====== ===== ======
See "Information Regarding Non-GAAP Measures" on page 7 of 14 and notes to fourth quarter 2011 earnings release on
page 13 of 14.
(12 of 14)
Arthur J. Gallagher & Co.
Consolidated Balance Sheet
(Unaudited - in millions except per share data)
Dec 31, 2011 Dec 31, 2010
Cash and cash equivalents $291.2 $249.8
Restricted cash 692.5 599.7
Premiums and fees receivable 1,027.1 750.1
Other current assets 188.6 126.4
----- -----
Total current assets 2,199.4 1,726.0
Fixed assets - net 91.3 75.8
Deferred income taxes 240.2 245.2
Other noncurrent assets 235.8 181.8
Goodwill - net 1,155.3 883.7
Amortizable intangible assets
-net 561.5 483.5
Total assets $4,483.5 $3,596.0
======== ========
Premiums payable to insurance
and reinsurance companies $1,621.9 $1,250.3
Accrued compensation and
other accrued liabilities 304.1 226.5
Unearned fees 69.7 60.5
Other current liabilities 67.9 40.0
Corporate related borrowings
-current 10.0 -
Total current liabilities 2,073.6 1,577.3
Corporate related borrowings
-noncurrent 675.0 550.0
Other noncurrent liabilities 491.3 362.0
Total liabilities 3,239.9 2,489.3
------- -------
Stockholders' equity:
Common stock -issued and
outstanding 114.7 108.4
Capital in excess of par
value 693.2 507.8
Retained earnings 482.9 488.3
Accumulated other
comprehensive earnings (47.2) 2.2
Total stockholders' equity 1,243.6 1,106.7
------- -------
Total liabilities and
stockholders' equity $4,483.5 $3,596.0
======== ========
4th Q Ended 4th Q Ended Year Ended Year Ended
OTHER INFORMATION Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010
------------ ------------ ------------ ------------
Basic weighted average shares
outstanding (000s) 113,721 106,642 111,667 104,812
Diluted weighted average
shares outstanding (000s) 114,745 107,327 112,465 105,099
Common shares repurchased
(000s) 3 7 41 32
Common shares issued for
acquisitions and earnouts
(000s) 1,062 1,937 3,454 4,148
Number of acquisitions closed 11 7 32 19
Annualized revenues acquired
(in millions) $42.2 $88.4 $277.0 $145.1
Workforce at end of period
(includes acquisitions) 12,383 10,736
Notes to Fourth Quarter 2011
Earnings Release
Reported supplemental commission revenues recognized in 2011, 2010 and 2009 by quarter are shown in the financial supplement.
As previously disclosed, many insurance carriers now provide sufficient information for Gallagher to recognize supplemental
commission revenues on a quarterly basis for a majority of its 2011 and 2010 supplemental commission arrangements. However, in
2009 and prior years, most carriers only provided this information on an annual basis after the end of the contract period.
Accordingly, the 2010 amounts reported in the table include both a full year of 2009 supplemental commission revenues and 2010
supplemental commission revenues that were recognized by Gallagher on a quarterly basis. This situation did not occur again in
2011 and should not occur in 2012 or later years as Gallagher anticipates that most of the carriers will continue to provide
information on a quarterly basis sufficient to allow recognition of revenues in a similar manner in future quarters. The
(1) reported and adjusted supplemental commissions for 2011, 2010, 2009 and 2008 are as follows (in millions):
Q1 Q2 Q3 Q4 Full Year
2011
Reported supplemental
commissions $13.5 $14.0 $14.5 $14.0 $56.0
Reported contingent
commissions 16.8 7.9 9.9 3.5 38.1
Reported supplemental and
contingent commissions $30.3 $21.9 $24.4 $17.5 $94.1
===== ===== ===== ===== =====
2010
Reported supplemental
commissions $27.9 $10.6 $10.2 $12.1 $60.8
Adjustment as if supplemental
commission
information was provided on a
quarterly basis (14.7) - - - (14.7)
Adjusted supplemental
commissions 13.2 10.6 10.2 12.1 46.1
Reported contingent
commissions 15.5 8.7 9.5 3.1 36.8
Adjusted supplemental and
reported
contingent commissions $28.7 $19.3 $19.7 $15.2 $82.9
===== ===== ===== ===== =====
(13 of 14)
Notes to Fourth Quarter 2011
Earnings Release
(continued)
(1) (Continued)
Q1 Q2 Q3 Q4 Full Year
2009
Reported supplemental
commissions $15.7 $5.8 $4.5 $11.4 $37.4
Adjustment as if supplemental
commission
information was provided on a
quarterly basis (8.2) 4.4 5.3 (0.1) 1.4
Adjusted supplemental
commissions 7.5 10.2 9.8 11.3 38.8
Reported contingent
commissions 13.8 6.0 5.8 2.0 27.6
Adjusted supplemental and
reported
contingent commissions $21.3 $16.2 $15.6 $13.3 $66.4
===== ===== ===== ===== =====
2008
Reported supplemental
commissions $6.4 $3.3 $5.1 $5.6 $20.4
Adjustment as if supplemental
commission
information was provided on a
quarterly basis (1.6) 3.0 2.4 2.3 6.1
Adjusted supplemental
commissions 4.8 6.3 7.5 7.9 26.5
Reported contingent
commissions 11.5 5.0 7.2 1.6 25.3
Adjusted supplemental and
reported
contingent commissions $16.3 $11.3 $14.7 $9.5 $51.8
===== ===== ===== ==== =====
Contact: Marsha Akin
Director - Investor Relations
630-285-3501 or
marsha_akin@ajg.com
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SOURCE Arthur J. Gallagher & Co.
