10-QPeriod: Q3 FY2014

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 6, 2014For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported strong revenue growth for the nine months ended September 30, 2014, driven by significant acquisitions, most notably The Wright Insurance Group. Total revenues increased by 15.9% year-over-year to $1.18 billion, with commissions and fees forming the bulk of this growth. Net income also saw a healthy increase of 7.4% to $182.5 million. The company's strategic focus on acquiring other insurance intermediaries continues to be a key driver of its expansion and financial performance, reflected in the substantial increase in goodwill and amortizable intangible assets on the balance sheet. Despite robust top-line growth, investors should note the significant increase in long-term debt, rising from $380 million to over $1.16 billion, primarily to fund acquisitions. While interest expense has increased substantially (51.7% for the nine months), the company's strong operational cash flow generation and access to revolving credit facilities provide comfort regarding liquidity. The company maintains a positive outlook, expecting continued profitable growth through its decentralized sales culture and ongoing acquisition strategy.

Financial Highlights

47 data points
Beta

Revenue

$359.31M

Net Income

$57.75M

16.1% Net Margin

EPS (Diluted)

$0.20

Total Assets

$3.55B

Cash & Equivalents

$170.97M

Free Cash Flow

$83.69M

Financial Statements
Beta
Revenue$359.31M
Operating Expenses$263.86M
Interest Expense$4.13M
Net Income$57.75M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)282.28M
Shares Outstanding (Diluted)285.58M

Key Highlights

  • 1Total revenues increased by 15.9% to $1.18 billion for the nine months ended September 30, 2014, compared to the prior year period.
  • 2Net income rose by 7.4% to $182.5 million for the nine months ended September 30, 2014.
  • 3The company completed multiple acquisitions, including the significant Wright Insurance Group, contributing to substantial growth in Goodwill and Amortizable Intangible Assets.
  • 4Long-term debt significantly increased to $1.16 billion from $380 million, largely due to acquisition funding.
  • 5Interest expense increased by 51.7% for the nine-month period due to higher debt levels.
  • 6Despite increased debt, the company reported strong operating cash flow and adequate liquidity for the next twelve months.
  • 7Reported core organic commission and fee growth of 1.5% for the nine-month period (3.5% excluding Hurricane Sandy impact).

Frequently Asked Questions

Revenue growth was primarily driven by the company's aggressive acquisition strategy, including the significant acquisition of The Wright Insurance Group. Commissions and fees, particularly from newly acquired entities and net new business, were the main contributors to the top-line increase.

Brown & Brown's long-term debt increased substantially, rising from $380 million at the end of 2013 to $1.16 billion by September 30, 2014. This increase was mainly due to borrowings to finance strategic acquisitions and refinancing of existing debt.

The company expects continued profitable growth through its decentralized sales culture and its ongoing strategy of acquiring high-quality insurance intermediaries. Management believes that its existing cash flow, cash reserves, and access to credit facilities provide sufficient liquidity for its ongoing operations and investment plans.

Acquisitions have led to a significant increase in intangible assets, particularly Goodwill, which grew from $2.0 billion to $2.5 billion during the nine-month period. Amortizable intangible assets also increased substantially, reflecting the integration of acquired businesses.