10-QPeriod: Q3 FY2016

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 28, 2016For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported a solid third quarter for 2016, with consolidated revenues increasing to $1,482.3 million, up from $1,454.8 million in the prior year's period. Net earnings attributable to controlling interests were $122.8 million, or $0.69 per diluted share, compared to $133.3 million, or $0.75 per diluted share, in the same period last year. The slight decrease in net earnings was influenced by various adjustments and the impact of clean energy investments. The brokerage segment demonstrated strong revenue growth, driven by new business and acquisitions, with organic revenue growth of 2.4% in commissions and fees. The company also continued its acquisition strategy, completing several new deals during the period, which contributed to overall revenue expansion. Financially, AJG maintained a healthy liquidity position, with cash and cash equivalents increasing to $531.8 million. The company's debt levels remained significant but manageable, with $2,400.0 million in note purchase agreements and $258.0 million outstanding under its credit agreement. Management highlighted positive contributions from its clean energy investments, anticipating they would generate between $111.0 million and $119.0 million in net earnings for the full year, which are expected to fund its acquisition strategy. The company also reaffirmed its dividend policy, increasing the quarterly dividend to $0.38 per common share.

Financial Highlights

45 data points
Beta

Revenue

$1.48B

Net Income

$122.80M

8.3% Net Margin

EPS (Diluted)

$0.69

Total Assets

$11.20B

Cash & Equivalents

$531.80M

Free Cash Flow

$203.80M

Financial Statements
Beta
Revenue$1.48B
Operating Expenses$1.39B
Interest Expense$28.50M
Net Income$122.80M
EPS (Basic)$0.69
EPS (Diluted)$0.69
Shares Outstanding (Basic)177.60M

Key Highlights

  • 1Consolidated revenues increased by 2.0% year-over-year to $1,482.3 million for Q3 2016.
  • 2Brokerage segment revenues grew by 5.1% to $877.6 million, with organic commissions and fees increasing by 2.4%.
  • 3Net earnings attributable to controlling interests decreased slightly to $122.8 million in Q3 2016 from $133.3 million in Q3 2015.
  • 4Diluted earnings per share for the quarter were $0.69, down from $0.75 in the prior year's comparable period.
  • 5The company completed 28 acquisitions during the first nine months of 2016, contributing to revenue growth.
  • 6Cash and cash equivalents stood at $531.8 million as of September 30, 2016, up from $480.4 million at the end of 2015.
  • 7Clean energy investments are projected to generate between $111.0 million and $119.0 million in net earnings for the full year 2016.

Frequently Asked Questions

For the third quarter ended September 30, 2016, Arthur J. Gallagher & Co. reported consolidated revenues of $1,482.3 million, an increase from $1,454.8 million in the same period of 2015. The brokerage segment, a key driver, saw revenues rise to $877.6 million.

Net earnings attributable to controlling interests for the third quarter of 2016 were $122.8 million, or $0.69 per diluted share, which is a decrease from $133.3 million, or $0.75 per diluted share, in the third quarter of 2015. This decrease was influenced by various adjustments and the performance of certain segments.

Arthur J. Gallagher & Co. continued its active acquisition strategy, completing 28 acquisitions in the first nine months of 2016. These acquisitions contributed to revenue growth and expanded the company's market presence. The company expects to fund future acquisitions through operating cash flow and debt.

The company maintained a healthy liquidity position with cash and cash equivalents of $531.8 million at the end of the quarter. Total corporate-related borrowings were $2,400.0 million under note purchase agreements and $258.0 million under its credit agreement. Management indicated sufficient capital to meet short- and long-term needs.

The company's clean energy investments are performing well, with projected net earnings between $111.0 million and $119.0 million for the full year 2016. These investments are expected to provide positive net cash flow and support the company's acquisition strategy.