01—Abstract
Summary
Summary of the 10-K filed March 21, 1997. Cited figures are marked; the original filing is the authoritative source.
This 10-K is for Poe & Brown, Inc. (Nasdaq: POBR), a Florida general insurance agency, not Brown & Brown, Inc. (BRO) as the request states.
The company does not underwrite risk. It earns commissions and fees by placing property and casualty coverage, and it runs third-party administration and benefit consulting services. For fiscal 1996, commissions and fees rose 12% to $114.4 milliona, and total revenues reached $118.7 million, up 11.6%.
Net income grew 11.5% to $16.5 millionb, or $1.90 per share, compared with $1.70 in 1995. Pre-tax margin improved to 22.8% from 21.9%. Management attributes most of the growth to acquisitions.
Organic commission growth was a more modest 4%, and the company cited a long-running soft market in property and casualty premium rates. The balance sheet expanded materially in 1996. Total assets rose to $179.7 millionc from $151.1 million, driven by a $13.6 million increase in intangibles, mainly purchased customer accounts, after $12.3 million of cash acquisitions.
Shareholders' equity increased to $67.3 milliond, helped by $6.5 million of unrealized gains on its Rock-Tenn holdings. Total debt was about $10.7 million, and operating cash flow was $28.6 million. The current ratio was a thin 1.06 to 1.0, largely because of current debt and premiums payable to carriers.
Liquidity is supported by an undrawn $10 million revolver expiring in November 1998. Key risks include concentration in Florida, where most of the business is written, and dependence on one carrier that accounted for about 22% of revenues. The company also faces an $11.2 million damages suit tied to a 1994 fire-related coverage dispute, with trial set for December 1997.
Management says insurance should cover any loss, and it does not expect material adverse effects from other claims. The stock closed at $26.50 on March 7, 1997, with a non-affiliate market value of about $177 million.
02—Key points
Key Highlights
- Revenue growth: Commissions and fees rose 12% to $114.4 million, and total revenues rose 11.6% to $118.7 million. Organic growth excluding acquisitions was only about 4%.
- Profitability: Net income increased 11.5% to $16.5 million, or $1.90 per share. Pre-tax margin widened to 22.8%, though the effective tax rate rose to 39.0% from 36.6%.
- Acquisition-driven expansion: The company bought three agencies, a brokerage firm, and several customer books for $18.3 million in 1996. Intangible assets grew to $50.2 million, which is a significant share of the balance sheet.
- Balance sheet and liquidity: Total assets reached $179.7 million and equity $67.3 million. Operating cash flow was $28.6 million, and the $10 million revolver was undrawn at year end. The current ratio was 1.06.
- Concentration risk: Florida is the core market, and one insurance carrier generated about 22% of revenues. Rock-Tenn was the largest single retail customer, at about 1% of Retail Division revenue.
- Litigation: A $11.2 million suit against a subsidiary and the company is scheduled for trial in December 1997. Management believes insurance coverage is available and that other matters are not material.
- Shareholder returns: The dividend rose to $0.49 per share from $0.48, and the Q4 1996 quarterly dividend was $0.13. The stock traded at $26.50 in early March 1997.
03—Questions
Frequently Asked Questions
Is this filing for Brown & Brown, Inc. (BRO)?
No. The filing is for Poe & Brown, Inc., a Daytona Beach and Tampa, Florida insurance agency trading on Nasdaq under the symbol POBR. Poe & Brown merged with Brown & Brown in 1993, but this report is the separate registrant's 10-K for fiscal 1996.
How much of the revenue growth came from acquisitions versus organic growth?
Commissions and fees grew 12% in 1996, but only about 4% excluding acquisitions. Acquisitions therefore accounted for most of the increase. Employee compensation rose about 10%, and roughly half of that was attributed to acquired personnel.
What are the main risks to the company's business?
Key risks include a prolonged soft property and casualty market that pressures commission rates, heavy dependence on Florida's economy and regulatory climate, reliance on one carrier for about 22% of revenue, and the possibility that carriers change commission terms on 90 days' notice. Acquired intangibles are also subject to impairment review. The Cadillac Uniform lawsuit adds litigation exposure, although management expects insurance to cover it.
How strong is the company's financial position?
Equity of $67.3 million against total assets of $179.7 million gives a reasonable capital base, and operating cash flow of $28.6 million comfortably covered $4.6 million of capital expenditures and dividends of $4.2 million. Debt was modest at about $10.7 million. However, the current ratio of 1.06 is tight, and about half of total assets are intangibles, which reduces tangible equity.
What does the company's share and dividend profile look like?
The company had 8.7 million shares outstanding and 799 holders of record as of March 7, 1997. The stock closed at $26.50 that day, and non-affiliate shares were valued at about $177 million. The dividend increased to $0.49 per share in 1996 from $0.48, and the company has raised its quarterly payout modestly over the period.
04—Continue