01—Abstract
Summary
Summary of the 10-K filed February 7, 2014. Cited figures are marked; the original filing is the authoritative source.
Arthur J.
Gallagher & Co. (AJG) in its 2013 10-K filing reported robust growth across its core segments. The company demonstrated a significant increase in total revenues, driven by strong performance in its Brokerage segment, which accounted for the majority of revenue. This growth was bolstered by a successful acquisition strategy, with numerous acquisitions completed throughout the year.
The Risk Management segment also showed steady improvement. A key highlight was the substantial contribution from the company's clean energy investments, particularly IRC Section 45 tax credits, which significantly boosted earnings. AJG also managed its expenses effectively and maintained a strong liquidity position, supported by its credit facilities and note purchase agreements.
Looking ahead, AJG expressed confidence in its ability to continue its growth trajectory through ongoing acquisitions and organic expansion. The company highlighted its commitment to shareholder value through dividends and potential stock repurchases. The report also detailed the company's risk factors, including economic uncertainties, competitive pressures, and regulatory changes, while also emphasizing its strategy to mitigate these risks through diversification and strong operational execution.
02—Key points
Key Highlights
- Total revenues increased to $3,179.6 million in 2013, up from $2,520.3 million in 2012, driven by strong performance in the Brokerage segment.
- The Brokerage segment, the largest revenue contributor (68% of total), saw a 17% increase in total revenues and a 5.6% organic growth in commission and fee revenues.
- Arthur J. Gallagher & Co. actively pursued its acquisition strategy, completing 30 acquisitions in 2013 with annualized revenues of $369.9 million, contributing significantly to revenue growth.
- The Corporate segment's earnings were substantially boosted by clean energy investments, contributing $63.7 million to net earnings, with projections of $65.0 million to $80.0 million for 2014.
- Diluted earnings per share increased to $2.06 in 2013, up from $1.59 in 2012.
- The company maintained a strong liquidity position, with $298.1 million in cash and cash equivalents and significant availability under its Credit Agreement.
- AJG continued to expand its international operations, with 23% of revenues in the combined brokerage and risk management segments generated internationally, up from 21% in 2012.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Arthur J. Gallagher & Co. kept $0.08.
- Revenue$3.18B100.0%
- Cost of revenue−$437.3M13.8%
- Gross profit$2.74B86.2%
- Operating costs−$3.01B94.7%
- Operating income−$268.6M8.4%
- Interest, other & tax$537.2M16.9%
- Net income$268.6M8.4%
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 7, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $3.18B$2.52B | +26.2% |
| Cost of Revenue | $437.30M$111.60M | +291.8% |
| Gross Profit | $2.74B$2.41B | +13.8% |
| Operating Expenses | $535.90M$483.20M | +10.9% |
| Operating Income | -$268.60M-$195.00M | −37.7% |
| Interest Expense | $50.10M$43.00M | +16.5% |
| Net Income | $268.60M$195.00M | +37.7% |
| EPS (Basic) | $2.08$1.61 | +29.2% |
| EPS (Diluted) | $2.06$1.59 | +29.6% |
| Shares Outstanding (Basic) | 128.90M121.00M | +6.5% |
05—Questions
Frequently Asked Questions
What was Arthur J. Gallagher & Co.'s primary source of revenue in 2013?
Arthur J. Gallagher & Co.'s primary source of revenue in 2013 was its Brokerage segment, which accounted for 68% of the company's total revenues. This segment primarily generates revenue through commissions and fees from insurance brokerage services.
How did the company's acquisition strategy contribute to its performance in 2013?
The company's acquisition strategy was a significant driver of its performance in 2013. AJG completed 30 acquisitions throughout the year, contributing significantly to revenue growth and expanding its market presence. These acquisitions are a key part of their growth strategy.
What was the impact of the company's clean energy investments on its financial results?
The company's clean energy investments, particularly those related to IRC Section 45 tax credits, had a substantial positive impact on its financial results. In 2013, these investments contributed $63.7 million to net earnings, and the company projected similar or higher contributions for 2014. These investments are expected to fund future mergers and acquisition strategies.
What are the main risks identified by Arthur J. Gallagher & Co. in its 2013 10-K filing?
The main risks identified by Arthur J. Gallagher & Co. in its 2013 10-K filing include economic downturns and European debt crisis uncertainty, volatility in insurance premiums, significant competition, risks associated with its acquisition strategy and international operations, and potential failures in attracting and retaining qualified personnel. Regulatory and legal risks, such as FCPA violations and changes to healthcare reform legislation, were also highlighted.
06—Continue