10-QPeriod: Q1 FY2011

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 10, 2011For Securities:BRO

Summary

Brown & Brown, Inc. reported its first-quarter 2011 results, showcasing a 3.9% increase in total revenues to $262.2 million, driven primarily by strategic acquisitions. Net income rose by 4.9% to $46.3 million, or $0.32 per diluted share, matching the prior year's earnings per share. The company experienced a 2.3% decline in "core commissions and fees" (excluding profit-sharing contingent commissions and divested business), indicating ongoing challenges from the soft insurance market and economic weakness, although this was an improvement from previous quarters. Significant acquisition activity continued, with 15 new intermediaries added in the first quarter, contributing positively to revenue growth. Key expense categories saw moderate increases, with employee compensation and benefits rising 3.6% and amortization up 7.6%, largely due to integration costs and the amortization of acquired intangibles. Despite the persistent internal revenue challenges, the company's diversified business model across retail, wholesale, national programs, and services segments, coupled with its acquisition strategy, helped to offset these pressures. Management expressed confidence in the company's ability to meet liquidity needs through its operating cash flow and existing credit facilities.

Financial Highlights

26 data points
Beta

Revenue

$252.27M

Net Income

$44.13M

17.5% Net Margin

EPS (Diluted)

$0.15

Cash & Equivalents

$228.81M

Free Cash Flow

$71.74M

Financial Statements
Beta
Revenue$252.27M
Operating Expenses$179.19M
Interest Expense$3.61M
Net Income$44.13M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)275.25M
Shares Outstanding (Diluted)275.58M

Key Highlights

  • 1Total revenues increased by 3.9% to $262.2 million in Q1 2011 compared to Q1 2010.
  • 2Net income grew by 4.9% to $46.3 million, with diluted EPS remaining stable at $0.32.
  • 3The company completed 15 acquisitions in the first quarter of 2011, contributing to revenue growth.
  • 4"Core commissions and fees" experienced a negative internal growth rate of (2.3%), reflecting ongoing market challenges but showing improvement from prior periods.
  • 5Employee compensation and benefits, as a percentage of revenue, slightly decreased to 48.3% from 48.4%.
  • 6Amortization expense increased by 7.6% due to recent acquisitions.
  • 7The company maintained compliance with all debt covenants and expressed confidence in its liquidity position.

Frequently Asked Questions

The primary driver of Brown & Brown's revenue growth in the first quarter of 2011 was its continued acquisition strategy, which added 15 new insurance intermediaries and books of business, contributing $19.4 million in core commissions and fees.

While the company is experiencing negative internal growth in 'core commissions and fees' (down 2.3% in Q1 2011), this is an improvement from previous quarters. Management is focusing on a strong sales culture and strategic acquisitions to mitigate these effects. The decline is attributed to the ongoing 'soft market' for insurance premiums and reduced insurable exposure units due to economic conditions.

Acquisitions contributed to increased expenses, particularly in employee compensation and benefits (up 3.6% overall, but decreased in existing offices) and amortization (up 7.6% due to acquired intangibles). However, the company has also seen improved cost efficiencies in other operating expenses for comparable offices.

Yes, the company believes its existing cash, cash equivalents, operating cash flow, and credit facilities are sufficient to meet its liquidity needs through the end of 2011. They also indicated that their relatively low debt-to-total-capitalization ratio would allow them to raise additional capital if needed for further acquisitions.