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Brown & Brown, Inc. Announces Quarterly Revenues of $446.5 Million, an Increase of 6.5%; and Earnings per Share of $0.47, an Increase of 9.3%

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Brown & Brown, Inc. Announces Quarterly Revenues of $446.5 Million, an Increase of 6.5%; and Earnings per Share of $0.47, an Increase of 9.3%

July 18, 2016

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DAYTONA BEACH, FL -- (Marketwired) -- 07/18/16 -- Brown & Brown, Inc.(NYSE: BRO) (the "Company") today announced its unaudited financial results for the second quarter of 2016.

Revenues for the second quarter of 2016 under U.S. generally accepted accounting principles ("GAAP") were $446.5 million, increasing $27.1 million, or 6.5%, as compared to the second quarter of the prior year, with Organic Revenue (as defined below) increasing by 2.6%. Net income was $66.2 million, increasing by 8.5%, and diluted earnings per share were $0.47, increasing by 9.3%.

Revenues for the six months ended June 30, 2016 under GAAP were $870.7 million, increasing $47.0 million, or 5.7%, as compared to the same period of 2015, with Organic Revenue increasing by 2.0%. Net income was $128.3 million, increasing by 8.7%, and diluted earnings per share for the six months ended June 30, 2016 were $0.91 compared to $0.82 for the first half of 2015, representing a 11.0% increase.

J. Powell Brown, President and Chief Executive Officer of the Company noted, "We are pleased with the results for the quarter as we delivered good organic growth in all four divisions, invested in our businesses and maintained industry leading margins."

As announced on July 14, 2016, the Company's Board of Directors has declared a regular quarterly cash dividend of $0.1225 per share to be paid on August 17, 2016, to shareholders of record on August 9, 2016.

 
Brown & Brown, Inc.
INTERNAL GROWTH SCHEDULE
Organic Revenue Growth (1)
Three Months Ended June 30, 2016 and 2015
(in millions, unaudited)
 
    Three Months Ended   Change   Acquisition   Organic Revenue Growth (1)
    6/30/2016   6/30/2015   $   %   Revenues   $   %
                             
Retail(2)   $ 230.5   $ 216.9   $ 13.6   6.3 %   $ 9.7   $ 3.9   1.8 %
National Programs     104.2     101.5     2.7   2.7 %     0.5     2.2   2.2 %
Wholesale Brokerage     59.1     53.9     5.2   9.6 %     3.1     2.1   3.9 %
                                           
Services     41.7     36.7     5.0   13.6 %     2.6     2.4   6.3 %
Total Core Comm. and Fees   $ 435.5   $ 409.0   $ 26.5   6.5 %   $ 15.9   $ 10.6   2.6 %
                                           
                                           
Brown & Brown, Inc.
INTERNAL GROWTH SCHEDULE
Organic Revenue Growth (1)
Six Months Ended June 30, 2016 and 2015
(in millions, unaudited)
 
    Six Months Ended   Change   Acquisition   Organic Revenue Growth (1)
    6/30/2016   6/30/2015   $   %   Revenues   $   %
                             
Retail(2)   $ 438.8   $ 412.7   $ 26.1   6.3 %   $ 20.8   $ 5.3   1.3 %
National Programs     199.8     194.3     5.5   2.8 %     1.8     3.7   1.9 %
Wholesale Brokerage     107.0     100.0     7.0   7.0 %     3.4     3.6   3.7 %
                                           
Services     78.2     71.2     7.0   9.8 %     4.2     2.8   3.8 %
Total Core Comm. and Fees   $ 823.8   $ 778.2   $ 45.6   5.9 %   $ 30.2   $ 15.4   2.0 %
(1) "Organic Revenue" is defined as total commissions and fees less (i) the first twelve months of commission and fee revenues generated from acquisitions, less (ii) profit-sharing contingent commissions (revenues from insurance companies based upon the volume and the growth and/or profitability of the business placed with such companies during the prior year -- "Contingents"), less (iii) guaranteed supplemental commissions (commissions from insurance companies based solely upon the volume of the business placed with such companies during the current year -- "GSCs"), and less (iv) divested business (net commissions and fees generated from offices, books of business sold by the Company) with the associated revenue removed from the corresponding period of the prior year.
(2) The Retail Segment includes commissions and fees, which will be reported in the "Other" column of the Segment Information in the Notes to the Condensed Consolidated Financial Statements on the Company's Form 10-Q, which includes corporate and consolidation items.
   
 
Brown & Brown, Inc.
RECONCILIATION OF INTERNAL GROWTH SCHEDULE
TO TOTAL COMMISSIONS AND FEES
Included in the Consolidated Statements of Income
Three and Six Months Ended June 30, 2016 and 2015
(in millions, unaudited)
 
    Three Months Ended   Six Months Ended
    6/30/2016   6/30/2015   6/30/2016   6/30/2015
                 
Total Core Commissions and Fees   $ 435.5   $ 409.0   $ 823.8   $ 778.2
  Profit-Sharing Contingent Commissions     7.3     3.5     38.2     33.4
  Guaranteed Supplemental Commissions     2.8     2.2     6.0     5.6
  Divested Businesses     -     2.5     -     3.8
                         
Total Commissions and Fees   $ 445.6   $ 417.2   $ 868.0   $ 821.0
                         

In order to arrive at results that are more comparable to the prior year we exclude the change in estimated acquisition earn-out payables. Our diluted Earnings Per Share - Adjusted (as defined in the table below) were $0.49 for the three months ended June 30, 2016, increasing 14.0% over the second quarter of the prior year. For the six months ended June 30, 2016, Earnings Per Share - Adjusted were $0.92 compared to $0.83 in the prior year, increasing 10.8%.

 
Brown & Brown, Inc.
GAAP EARNINGS PER SHARE RECONCILIATION TO
EARNINGS PER SHARE - ADJUSTED
Three Months Ended June 30, 2016 and 2015
(unaudited)
 
    Three Months Ended   Change
    6/30/2016   6/30/2015   $   %
GAAP earnings per share - as reported   $ 0.47   $ 0.43   $ 0.04   9.3 %
  Change in estimated acquisition earn-out payables     0.02     -     0.02      
Earnings per share - adjusted   $ 0.49   $ 0.43   $ 0.06   14.0 %
                         
 
Brown & Brown, Inc.
GAAP EARNINGS PER SHARE RECONCILIATION TO
EARNINGS PER SHARE - ADJUSTED
Six Months Ended June 30, 2016 and 2015
(unaudited)
 
    Six Months Ended   Change
    6/30/2016   6/30/2015   $   %
GAAP earnings per share - as reported   $ 0.91   $ 0.82   $ 0.09   11.0 %
  Change in estimated acquisition earn-out payables     0.01     0.01     -      
Earnings per share - adjusted   $ 0.92   $ 0.83   $ 0.09   10.8 %
                         

In order to provide a better understanding of our business, we evaluate EBITDAC (as defined below) performance. EBITDAC for the second quarter of 2016 was $149.8 million, an increase of $12.0 million or 8.7%, compared to the second quarter of the prior year. The associated EBITDAC margin increased to 33.5%.

 
Brown & Brown, Inc.
GAAP RECONCILIATION -
INCOME BEFORE INCOME TAXES TO EBITDAC (3)
Three and Six Months Ended June 30, 2016 and 2015
(in millions, unaudited)
 
    Three Months Ended   Six Months Ended
    6/30/2016   6/30/2015   6/30/2016   6/30/2015
Income before income taxes   $ 109.0     $ 100.9     $ 211.6     $ 194.7  
    Amortization     21.6       21.6       43.2       43.2  
    Depreciation     5.4       5.2       10.7       10.4  
    Interest     9.8       9.7       19.7       19.5  
    Change in estimated acquisition earn-out payables     4.0       0.4       3.2       1.7  
  EBITDAC   $ 149.8     $ 137.8     $ 288.4     $ 269.5  
EBITDAC margin (4)     33.5 %     32.9 %     33.1 %     32.7 %
(3) "EBITDAC" is defined as income before interest, income taxes, depreciation, amortization and the change in estimated acquisition earn-out payables.
(4) "EBITDAC margin" is defined as EBITDAC divided by total revenues.
   
 
Brown & Brown, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
 
    For the three months ended June 30,   For the six months ended June 30,
    2016   2015   2016   2015
REVENUES                
Commissions and fees   $ 445.6     $ 417.2     $ 868.0     $ 821.0  
Investment income     0.5       0.3       0.9       0.5  
Other income, net     0.4       1.9       1.8       2.2  
  Total revenues     446.5       419.4       870.7       823.7  
                                 
EXPENSES                                
Employee compensation and benefits     231.1       217.6       455.2       429.3  
Other operating expenses     66.4       64.3       130.0       125.5  
Gain on disposal     (0.8 )     (0.3 )     (2.9 )     (0.6 )
Amortization     21.6       21.6       43.2       43.2  
Depreciation     5.4       5.2       10.7       10.4  
Interest     9.8       9.7       19.7       19.5  
Change in estimated acquisition earn-out payables     4.0       0.4       3.2       1.7  
  Total expenses     337.5       318.5       659.1       629.0  
                                 
Income before income taxes     109.0       100.9       211.6       194.7  
                                 
Income taxes     42.8       39.9       83.3       76.7  
                                 
Net income   $ 66.2     $ 61.0     $ 128.3     $ 118.0  
                                 
Net income per share:                                
  Basic   $ 0.47     $ 0.43     $ 0.92     $ 0.83  
  Diluted   $ 0.47     $ 0.43     $ 0.91     $ 0.82  
                                 
Weighted average number of shares outstanding - in thousands:                                
  Basic     135,992       137,518       135,770       138,434  
  Diluted     137,581       139,828       137,260       140,647  
                                 
Dividends declared per share   $ 0.12     $ 0.11     $ 0.25     $ 0.22  
 
 
Brown & Brown, Inc.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data, unaudited)
 
    June 30,
 2016 		  December 31,
 2015
ASSETS        
Current assets:        
  Cash and cash equivalents   $ 454.0     $ 443.4  
  Restricted cash and investments     277.6       229.8  
  Short-term investments     16.1       13.7  
  Premiums, commissions and fees receivable     472.2       433.8  
  Reinsurance recoverable     60.8       32.0  
  Prepaid reinsurance premiums     298.9       309.6  
  Deferred income taxes     15.6       24.6  
  Other current assets     52.1       50.4  
    Total current assets     1,647.3       1,537.3  
                 
Fixed assets, net     80.5       81.8  
Goodwill     2,665.3       2,586.7  
Amortizable intangible assets, net     745.4       744.7  
Investments     23.0       18.1  
Other assets     45.4       35.9  
    Total assets   $ 5,206.9     $ 5,004.5  
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
  Premiums payable to insurance companies   $ 667.2     $ 574.7  
  Losses and loss adjustment reserve     60.8       32.0  
  Unearned premiums     298.9       309.6  
  Premium deposits and credits due customers     95.1       83.1  
  Accounts payable     91.6       63.9  
  Accrued expenses and other liabilities     163.5       192.2  
  Current portion of long-term debt     80.5       73.1  
    Total current liabilities     1,457.6       1,328.6  
                 
Long-term debt     1,045.0       1,071.6  
                 
Deferred income taxes, net     371.1       360.9  
                 
Other liabilities     80.9       93.6  
                 
Shareholders' equity:                
  Common stock, par value $0.10 per share; authorized 280,000 shares; issued 147,694 shares and outstanding 139,900 shares at 2016, issued 146,415 shares and outstanding 138,985 shares at 2015 - in thousands     14.8       14.6  
  Additional paid-in capital     445.9       426.6  
  Treasury stock, at cost 7,794 and 7,430 shares at 2016 and 2015, respectively - in thousands     (250.0 )     (238.8 )
  Retained earnings     2,041.6       1,947.4  
    Total shareholders' equity     2,252.3       2,149.8  
    Total liabilities and shareholders' equity   $ 5,206.9     $ 5,004.5  
                     

Conference call, webcast and slide presentation
 A conference call to discuss the results of the second quarter of 2016 will be held on Tuesday, July 19, 2016 at 8:00 AM (EDT). The Company may refer to a slide presentation during its conference call. You can access the webcast and the slides from the "Investor Relations" section of the Company's website at www.bbinsurance.com.

About Brown & Brown
 Brown & Brown, Inc., through its subsidiaries, offers a broad range of insurance products and services. Additionally, certain Brown & Brown subsidiaries offer a variety of risk management, third-party administration, and other services. Serving business, public entity, individual, trade and professional association clients nationwide, the Company is ranked by Business Insurance magazine as the United States' sixth largest independent insurance intermediary. The Company's Web address is www.bbinsurance.com.

Forward-looking statements
 This press release may contain certain statements relating to future results which are forward-looking statements, including those relating to the Company's anticipated financial results for the second quarter of 2016 and those relating to potential repurchases of the Company's common stock. These statements are not historical facts, but instead represent only the Company's current belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results, financial condition and achievements may differ, possibly materially, from the anticipated results, financial condition and achievements contemplated by these forward-looking statements. These risks and uncertainties include, but are not limited to, the Company's determination as it finalizes its financial results for the second quarter of 2016 that its financial results differ from the current preliminary unaudited numbers set forth herein; fluctuations in the Company's stock's market price; fluctuations in operating results and cash flows; material adverse changes in economic conditions in the markets we serve and in the general economy; downward commercial property and casualty premium pressures; future regulatory actions and conditions in the states in which the Company conducts business; competition from others in the insurance agency, wholesale brokerage, insurance programs and service business; the integration of the Company's operations with those of businesses or assets the Company has acquired or may acquire in the future and the failure to realize the expected benefits of such integration; the potential occurrence of a disaster that affects certain areas including, but not limited to, the States of California, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Michigan, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia and/or Washington, where significant portions of the Company's business are conducted; and other factors that the Company may not have currently identified or quantified, and other risks, relevant factors and uncertainties identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, and the Company's other filings with the Securities and Exchange Commission. All forward-looking statements made herein are made only as of the date of this release, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.

Non-GAAP supplemental financial information
 This press release contains references to non-GAAP financial measures as defined in Regulation G of SEC rules, including Organic Revenue, Earnings Per Share - Adjusted, EBITDAC and EBITDAC margin. A reconciliation of this supplemental non-GAAP financial information to the Company's GAAP information is contained in this earnings release. We present such non-GAAP supplemental financial information, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company's operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be considered in addition to, not in lieu of, the Company's condensed consolidated financial statements.

R. Andrew Watts
Chief Financial Officer
(386) 239-5770

Source: Brown & Brown, Inc.

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