10-QPeriod: Q3 FY2011

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 9, 2011For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported its financial results for the third quarter and the first nine months of 2011. For the third quarter, total revenues increased by 5.2% to $260.4 million compared to the prior year, driven primarily by acquisitions. Net income remained relatively flat at $44.2 million, with diluted EPS of $0.30. The company continued to experience negative internal growth in core commissions and fees, down 2.4% for the quarter, reflecting ongoing economic challenges. For the nine-month period, total revenues grew 3.5% to $769.4 million, while net income decreased by 1.6% to $127.5 million, resulting in diluted EPS of $0.88. The company completed 29 acquisitions in the first nine months of 2011 for an aggregate purchase price of $126.5 million, demonstrating its continued strategy of growth through mergers and acquisitions. Despite the headwinds of a soft insurance market and economic weakness impacting internal growth, Brown & Brown maintained a solid liquidity position and was compliant with its debt covenants.

Financial Highlights

46 data points
Beta

Revenue

$247.62M

Net Income

$44.29M

17.9% Net Margin

EPS (Diluted)

$0.15

Total Assets

$2.39B

Cash & Equivalents

$257.15M

Free Cash Flow

$57.19M

Financial Statements
Beta
Revenue$247.62M
Operating Expenses$174.58M
Interest Expense$3.61M
Net Income$44.29M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)276.19M
Shares Outstanding (Diluted)279.01M

Key Highlights

  • 1Total revenues for Q3 2011 increased by 5.2% to $260.4 million year-over-year, largely driven by contributions from recent acquisitions.
  • 2Net income for Q3 2011 was $44.2 million, a slight decrease from $44.3 million in the prior year, with diluted EPS of $0.30.
  • 3Core commissions and fees revenue experienced a negative internal growth rate of (2.4%) for Q3 2011, indicating ongoing challenges in organic growth due to market conditions.
  • 4The company completed 29 acquisitions during the first nine months of 2011, spending $100.4 million in cash and a total of $126.5 million, underscoring its active M&A strategy.
  • 5Total revenues for the nine-month period increased by 3.5% to $769.4 million, while net income decreased by 1.6% to $127.5 million.
  • 6Liquidity remains strong, with cash and cash equivalents increasing to $334.5 million as of September 30, 2011.
  • 7Brown & Brown remains compliant with its debt covenants and has sufficient liquidity to meet its obligations.

Frequently Asked Questions

Revenue growth in the third quarter of 2011 was primarily driven by acquisitions. Total revenues increased by 5.2% to $260.4 million, with new acquisitions contributing to this growth.

The company continues to face headwinds in achieving positive internal growth for core commissions and fees, reporting a negative internal growth rate of (2.4%) for Q3 2011. This is attributed to the ongoing 'soft market' in insurance premium rates and the weakening economy impacting insurable exposure units. However, the rate of decline appears to be slowing.

Brown & Brown continues to actively pursue its acquisition strategy, having completed 29 acquisitions in the first nine months of 2011. The company is primarily financing these acquisitions through cash generated from operations, supplemented by existing debt facilities and potentially the debt markets if needed, maintaining a relatively low debt-to-total-capitalization ratio.

The company maintains a strong liquidity position, with cash and cash equivalents increasing to $334.5 million as of September 30, 2011. Brown & Brown was in compliance with all its debt covenants and believes its current cash, cash equivalents, operating cash flows, and available credit facilities are sufficient to meet its liquidity needs for at least the next twelve months.