10-QPeriod: Q2 FY2001

BROWN & BROWN, INC. Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 8, 2001For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported strong financial results for the six months ended June 30, 2001, demonstrating significant growth in both revenue and net income. Total revenues increased by approximately 40% to $160.7 million compared to the prior year's $114.7 million. This growth was primarily driven by a substantial rise in commissions and fees, up 40% to $157.6 million, fueled by both organic growth and strategic acquisitions, notably the significant Riedman Corporation acquisition. Net income saw a robust increase of 46% to $24.7 million, with diluted earnings per share rising to $0.82 from $0.56 in the comparable period. The company's balance sheet reflects aggressive growth, with total assets increasing significantly to $444.7 million from $297.6 million at the end of the previous year. This expansion is largely attributed to a substantial increase in intangible assets, reflecting acquired businesses. While liabilities also grew, particularly in long-term debt used to finance acquisitions, shareholders' equity also saw a healthy increase, demonstrating the company's ability to fund its growth. The company's operational cash flow remains strong, providing the necessary resources for ongoing investments and debt servicing.

Key Highlights

  • 1Total revenues for the six months ended June 30, 2001, surged by 40% to $160.7 million, up from $114.7 million in the prior year.
  • 2Net income for the same period increased by 46% to $24.7 million, with diluted EPS rising to $0.82 from $0.56.
  • 3Commissions and fees revenue grew by 40% to $157.6 million for the six-month period, driven by acquisitions (like Riedman) and organic business production.
  • 4Total assets grew significantly to $444.7 million as of June 30, 2001, from $297.6 million at year-end 2000, largely due to increases in intangible assets from acquisitions.
  • 5The company raised $90 million through a new seven-year term loan in January 2001 to fund acquisitions.
  • 6Despite increased debt, operating cash flows remain strong, providing $45.0 million for the six months ended June 30, 2001.
  • 7Core commissions and fees (excluding acquisitions/divestitures) grew by 13.5% and 12.0% for the three and six-month periods, respectively, indicating healthy organic growth.

Frequently Asked Questions

The primary driver of revenue growth is the significant increase in commissions and fees, which rose by 40% to $157.6 million for the six months ended June 30, 2001. This growth is a result of both strong organic production (new and renewal business) and strategic acquisitions, most notably the acquisition of Riedman Corporation.

Brown & Brown has financed its acquisitions through a combination of new debt and operating cash flow. A significant portion of this financing came from a $90 million seven-year term loan entered into in January 2001. Additionally, the company generated substantial cash flow from operations, which was used to fund acquisitions and other investments.

Acquisitions have led to a substantial increase in Brown & Brown's total assets, which grew to $444.7 million as of June 30, 2001. This growth is largely reflected in the significant rise in intangible assets, such as goodwill and purchased customer accounts, which are common in the insurance brokerage industry due to the nature of acquired businesses. Liabilities have also increased, particularly long-term debt, to support these acquisitions.

The company has increased its long-term debt to fund acquisitions, with approximately $86.6 million of its debt subject to variable interest rates (primarily tied to LIBOR). While this exposes the company to interest rate fluctuations, management believes its current cash flow and available credit facilities are sufficient to meet its financial obligations. A hypothetical 1% change in interest rates could impact future net income by approximately $866,000.