10-QPeriod: Q2 FY2015

Arthur J. Gallagher & Co. Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 31, 2015For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported solid financial results for the second quarter and first half of 2015, demonstrating continued growth driven by both organic initiatives and strategic acquisitions. Total revenues increased significantly compared to the prior year, with strong performance noted across both the Brokerage and Risk Management segments. The company highlighted positive organic growth in commissions, fees, and adjusted EBITDAC, indicating underlying business strength. Acquisition activity remained robust, with AJG completing several transactions to expand its geographic reach and service offerings. The company also reported positive progress on its clean energy investments, which contributed significantly to earnings. While facing integration costs and some market pressures, AJG's management expressed confidence in its liquidity and ability to fund future growth through operations, existing credit facilities, and strategic use of its common stock.

Financial Highlights

44 data points
Beta

Revenue

$1.37B

Net Income

$139.30M

10.2% Net Margin

EPS (Diluted)

$0.81

Total Assets

$10.72B

Cash & Equivalents

$321.70M

Free Cash Flow

-$52.50M

Financial Statements
Beta
Revenue$1.37B
Operating Expenses$1.24B
Interest Expense$26.00M
Net Income$139.30M
EPS (Basic)$0.82
EPS (Diluted)$0.81
Shares Outstanding (Basic)170.60M

Key Highlights

  • 1Total revenues increased significantly in both the three-month and six-month periods ended June 30, 2015, compared to the prior year, driven by acquisitions and organic growth.
  • 2The Brokerage segment saw strong revenue growth (23% and 35% respectively for Q2 and H1) with robust organic growth in commissions and fees (3.9% and 4.1% respectively).
  • 3The Risk Management segment also reported revenue increases (10% and 8% respectively for Q2 and H1) and strong organic fee growth (13% and 12% respectively).
  • 4AJG continued its active acquisition strategy, completing 11 acquisitions in the Brokerage segment and 2 in Risk Management during Q2 2015, with annualized revenues of approximately $82.3 million and $7.6 million respectively.
  • 5Clean energy investments generated substantial net earnings, contributing $45.0 million in Q2 2015 and contributing to a strong effective tax rate benefit.
  • 6Diluted net earnings per share attributable to controlling interests increased to $0.81 for the quarter and $0.95 for the half-year, compared to $0.70 and $1.09 in the prior year respectively.

Frequently Asked Questions

In the second quarter of 2015, Arthur J. Gallagher & Co. reported total revenues of $1,371.4 million, an increase of 16.3% from $1,179.3 million in the second quarter of 2014. The Brokerage segment's revenues increased by 23% and the Risk Management segment's revenues increased by 10%.

AJG continues to actively pursue its acquisition strategy, which is a key driver of its growth. During the second quarter of 2015, the company completed eleven acquisitions in its Brokerage segment and two in its Risk Management segment. These acquisitions contribute to revenue growth, expand market presence, and are being integrated effectively, as noted by management.

The clean energy investments, particularly those related to clean coal production plants and associated tax credits (IRC Section 45), are a material contributor to AJG's financial performance. For the second quarter of 2015, the net after-tax earnings from these investments were $45.0 million. The company anticipates these investments to generate between $98.5 million and $107.5 million in net earnings for the full year 2015.

AJG demonstrated solid financial health and liquidity. Cash flow from operations was positive, and the company had significant availability under its Credit Agreement. Management expressed confidence in its ability to meet short- and long-term liquidity needs through operating cash flows, existing credit facilities, and potential future financing activities.