Usi (NASDAQ:USIH)
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USI Holdings Corporation (“USI”
or the “Company”),
(NASDAQ:USIH): USI today reported financial results for the fourth
quarter ended December 31, 2006. A printer friendly version of this
release is available on our website at http://www.usi.biz.
Definitive Merger Agreement
On January 16, 2007, the Company announced the signing of a definitive
merger agreement to be acquired by an entity controlled by private
equity funds sponsored by Goldman, Sachs & Co., by way of merger for
$17.00 per share in a transaction valued at approximately $1.4 billion,
including approximately $365.0 million for repayment of the Company’s
existing debt obligations. Further information regarding the proposed
merger can be found in the Company’s
definitive proxy statement which was filed with the SEC on March 1,
2007. The transaction is expected to close in the second quarter of
2007, subject to receipt of stockholder approval and the satisfaction of
other closing conditions.
A special meeting of stockholders to approve the merger has been
scheduled for March 29, 2007. Stockholders of record on February 28,
2007 are entitled to vote at the special meeting.
Other Matters
During the fourth quarter, the Company implemented several strategic
operating decisions principally related to the difficulties in its
California retail insurance operations. Actions undertaken by the
Company include the closure of one office, management changes, the
elimination of certain positions and the termination of one business
relationship. In the fourth quarter of 2006, these actions resulted in
expenses of $7.0 million, including $1.4 million of acquisition
integration costs, principally related to the Kibble & Prentice
transaction, and an impairment charge of $3.2 million on the intangible
assets of a California acquisition.
Highlights:
For the quarter ended December 31, 2006 as compared to the same
quarter in 2005:
Total revenues increased 9.5% to $149.4 million from $136.5 million
and declined organically 2.1%
Net commissions and fees increased 10.1% to $142.8 million from $129.7
million and declined organically 2.1%
Income from continuing operations, before income tax expense,
decreased to $1.9 million from $8.1 million
Net income per share on a diluted basis decreased to $0.01 from $0.06
Operating margin decreased to 16.1% from 16.8%
Excluding the impact of other identified adjustments in 2006 and 2005
and stock option expense in 2006, operating margin decreased to 17.2%
from 19.0%
Closed the acquisition of Kibble & Prentice in Seattle, WA, and four
books of business, expected to add $38.0 million of revenues on an
annual basis
Received a court order granting a new trial on damages and statute of
limitations issues in the Graham copyright infringement case
Three Months Ended
Twelve Months Ended
(Dollars in Thousands, Except Per Share Data)
December 31,
December 31,
2006
2005
% Change
2006
2005
% Change
GAAP Financial Measures:
Revenues:
Net commissions and fees (“NCF”)
$ 142,788
$ 129,745
10.1%
$ 511,777
$ 473,022
8.2%
Contingents and overrides
3,460
3,159
9.5%
26,134
25,825
1.2%
Interest income
1,384
1,254
10.4%
5,301
3,858
37.4%
Other income
1,771
2,292
(22.7)%
8,396
5,579
50.5%
Total revenues
149,403
136,450
9.5%
551,608
508,284
8.5%
Expenses:
Operating expenses
131,128
114,813
14.2%
457,727
431,953
6.0%
Amortization of intangible assets
9,652
9,311
3.7%
34,536
30,549
13.1%
Interest
6,711
4,255
57.7%
20,690
15,036
37.6%
Early extinguishment of debt
--
--
N/M
2,093
--
N/M
Total expenses
147,491
128,379
14.9%
515,046
477,538
7.9%
Operating Results:
Income from continuing operations before income tax expense
$ 1,912
$ 8,071
(76.3)%
$ 36,562
$ 30,746
18.9%
Per Share Data-Diluted:
Income from continuing operations
$ 0.01
$ 0.09
(88.9)%
$ 0.36
$ 0.32
12.5%
Net income
$ 0.01
$ 0.06
(83.3)%
$ 0.36
$ 0.14
157.1%
Non-GAAP Financial Measures (1):
Operating income
$ 24,057
$ 22,937
4.9%
$ 101,206
$ 93,045
8.8%
Operating margin
16.1%
16.8%
(4.2)%
18.3%
18.3%
--%
Operating margin, excluding identified adjustments
17.2%
19.0%
(9.5)%
19.2%
19.3%
(0.5)%
Income from continuing operations plus amortization, excluding
identified adjustments on a diluted per share basis
$ 0.25
$ 0.31
(19.4)%
$ 1.11
$ 1.10
0.9%
NCF organic (decline)/growth
(2.1)%
0.1%
Total revenue organic (decline)/growth
(2.1)%
0.7%
(1) Refer to Non-GAAP financial measures-Purpose and Use and related
reconciliations included in this release.
Comparisons of revenues and operating margin for the three and twelve
months ended December 31, 2006 to the same periods in 2005 are affected
by adjustments in both years related to the change in estimation
methodology for direct bill commissions. For the three and twelve months
ended December 31, 2005, the Company recorded adjustments to revenue,
net of related compensation expense adjustments, of $3.6 million and
$6.1 million, respectively. For the three and twelve months ended
December 31, 2006, the Company recorded similar adjustments to direct
bill revenues of $1.3 million and $1.9 million. Additionally, for both
the three and twelve months ended December 31, 2006, the Company
recorded a $2.5 million downward adjustment to revenues and receivables
in the specialized benefits services segment related to a change in the
estimate of its policy cancellation rate on two large enrollment cases.
The revenue increase for the quarter includes the net impact of $15.9
million from acquisitions and divestitures completed in the last twelve
months. On an organic basis, after identified adjustments, NCF decreased
$5.1 million, or 4.0% for the quarter compared to the same period last
year due to the continued difficult operating environment in California
and lower than expected fourth quarter enrollment performance in the
specialized benefits services segment. Total NCF for the insurance
brokerage segment, excluding California, grew 4.8% for the quarter on an
adjusted organic basis.
The revenue increase for the year includes the net impact of $39.7
million from acquisitions and divestitures completed in the last twelve
months. On an organic basis, after identified adjustments, NCF decreased
$4.4 million, or 0.9% for the year compared to the prior year, due
primarily to the year-to-date impact of the items noted above for the
fourth quarter. Total NCF for the insurance brokerage segment, excluding
California, grew 3.8% for the year on an adjusted organic basis.
In the fourth quarter of 2006, the Company recorded a $3.2 million
impairment charge on certain intangible assets associated with one of
its California acquisitions following an office closure and the
resultant impairment study. In the three and twelve months ended
December 31, 2006, the Company recorded $1.2 million and $2.7 million,
respectively, in costs related to the proposed transaction with GS
Capital Partners. Also in the fourth quarter of 2006, the Company
recorded $1.4 million of integration expenses principally related to the
Kibble & Prentice acquisition and $2.4 million in other costs related to
the previously mentioned strategic operating decisions.
For the three and twelve months ended December 31, 2005, the Company
recorded $1.2 million and $8.1 million in expenses, before income taxes,
for employee severance and related benefits, facilities closures,
contract terminations and the amendment of sales professionals’
compensation agreements. Also, for the three and twelve months ended
December 31, 2005, the Company recorded $0.1 million and $8.6 million in
expenses, respectively, before income taxes primarily associated with
the Summit Global Partners acquisition.
The operating margin (operating income as a percentage of total
revenues) for the quarter was 16.1% on $24.1 million of operating
income, compared to 16.8% on $22.9 million of operating income for the
same period in 2005. The operating margin for the quarter was positively
impacted by stronger performance in the insurance brokerage segment and
lower corporate expenses. The operating margin for the quarter was
negatively impacted by the decline in the specialized benefits services
segment due to lower than expected fourth quarter enrollment
performance, the adjustment to revenues in specialized benefits services
related to a revision of the estimated policy cancellation rate on two
large cases, the continuing challenges in the California retail
insurance operations and to stock option expense of $0.6 million
recorded beginning in 2006.
The operating margin for the year ended December 31, 2006 was 18.3% on
$101.2 million of operating income, compared to 18.3% on $93.0 million
of operating income for the same period in 2005. The operating margin
for the year was positively impacted by stronger performance in the
insurance brokerage segment and lower corporate expenses. The operating
margin for the year was negatively impacted by the aforementioned
decline in the specialized benefits services segment, the continuing
challenges in the California retail insurance operations and to stock
option expense of $3.2 million recorded beginning in 2006.
The Company will hold a conference call and audio webcast to review the
results at 8:00 AM (EST) on Friday, March 2, 2007. To access the audio
webcast, please visit USI's website at www.usi.biz
on March 2, 2007 and follow the link. To access the conference call,
dial toll-free 800-706-7749 or 617-614-3474 for international callers
and use passcode 54548532, five minutes before the teleconference. A
replay of the conference call will be available on the Investor
Relations section of the USI website (www.usi.biz)
or by dialing 888-286-8010 and using access code 25896377.
About the Proposed Merger
In connection with the proposed merger, USI filed a definitive proxy
statement on March 1, 2007, with the Securities and Exchange Commission.
INVESTORS AND SECURITY HOLDERS ARE STRONGLY ADVISED TO READ THE
DEFINITIVE PROXY STATEMENT ON FILE WITH THE SEC BECAUSE IT CONTAINS
IMPORTANT INFORMATION. Investors and security holders may obtain a free
copy of the proxy statement and other documents filed by USI Holdings
Corporation at the Securities and Exchange Commission's Web site at http://www.sec.gov.
The proxy statement and such other documents may also be obtained for
free by directing such request to USI Holdings Corporation, telephone:
914-749-8511 or on the Company's Web site at www.usi.biz.
USI and its directors, executive officers and certain other members of
its management and employees may be deemed to be participants in the
solicitation of proxies from its stockholders in connection with the
proposed merger. Information concerning all of USI’s
participants in the solicitation, including our directors and executive
officers, is included in the definitive proxy statement relating to the
proposed merger. The definitive proxy statement is available free of
charge at the Securities and Exchange Commission's Web site at www.sec.gov
and from USI Holdings Corporation, telephone: 914-749-8511 or on the
Company's Web site at www.usi.biz.
Caution Regarding Forward Looking Statements
This press release contains certain statements relating to future
results which are forward-looking statements within the meaning of that
term as found in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These statements are not
historical facts, but instead represent USI’s
belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of USI’s
control. USI can make no assurances regarding the likelihood of the
proposed merger described above, and it is possible that USI’s
actual results and financial condition may differ, possibly materially,
from the anticipated results and financial condition indicated in these
forward-looking statements. Further information concerning USI and its
business, including factors that potentially could materially affect USI’s
financial results, are contained in USI’s
filings with the Securities and Exchange Commission. Some factors
include: risks associated with uncertainty as to whether the proposed
merger will be completed; costs and potential litigation associated with
the proposed merger; the failure to obtain stockholder approval for the
proposed merger; USI’s ability to grow
revenues organically and expand its margins; successful consummation and
integration of acquisitions; the insurance brokerage business is subject
to a great deal of uncertainty due to the investigations into its
business practices by various governmental authorities and related
private litigation; resolution of regulatory matters and other claims,
lawsuits and related proceedings; the passage of new legislation and/or
disclosure arrangements with insurance companies affecting our business;
determinations of effectiveness of internal controls over financial
reporting and disclosure controls and procedures; USI’s
ability to attract and retain key sales and management professionals; USI’s
level of indebtedness and debt service requirements; downward commercial
property and casualty premium pressures; the competitive environment;
future expenses for integration and margin improvement efforts; and
general economic conditions around the country. USI’s
ability to grow has been largely attributable to acquisitions, which may
or may not be available on acceptable terms in the future and which, if
consummated, may or may not be advantageous to USI. All forward-looking
statements included in this press release are made only as of the date
of this press release, and USI 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 USI
hereafter becomes aware.
This press release includes supplemental financial information which
contains references to non-GAAP financial measures as defined in
Regulation G of SEC rules. Consistent with Regulation G, a
reconciliation of this financial information to generally accepted
accounting principles in the United States (“GAAP”)
information follows. USI presents such non-GAAP supplemental financial
information because it believes that such information is of interest to
the investment community owing to the fact that it provides additional
meaningful methods of evaluating certain aspects of USI’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 viewed in addition to, not in lieu of, USI’s
consolidated statements of operations for the three and twelve months
ended December 31, 2006 and 2005.
About USI Holdings Corporation
Founded in 1994, USI is a leading distributor of insurance and financial
products and services to businesses throughout the United States. USI is
headquartered in Briarcliff Manor, NY, and operates out of 66 offices in
18 states. Additional information about USI, including instructions for
the quarterly conference call, may be found at www.usi.biz.
USI Holdings Corporation and Subsidiaries
Consolidated Statements of Operations
Three Months Ended December 31,
Twelve Months Ended December 31,
2006
2005
2006
2005
(Amounts in Thousands, Except Per Share Data)
Revenues:
Net commissions and fees
$ 142,788
$ 129,745
$ 511,777
$ 473,022
Contingents and overrides
3,460
3,159
26,134
25,825
Interest income
1,384
1,254
5,301
3,858
Other income
1,771
2,292
8,396
5,579
Total Revenues
149,403
136,450
551,608
508,284
Expenses:
Compensation and employee benefits
81,797
77,783
303,909
304,190
Non-cash stock-based compensation:
Restricted stock awards
959
871
3,527
2,579
Stock option expense
565
-
3,181
-
Other operating expenses
45,035
33,672
136,828
115,529
Amortization of intangible assets
9,652
9,311
34,536
30,549
Depreciation
2,772
2,487
10,282
9,655
Interest
6,711
4,255
20,690
15,036
Early extinguishment of debt
-
-
2,093
-
Total Expenses
147,491
128,379
515,046
477,538
Income from continuing operations
1,912
8,071
36,562
30,746
before income tax expense
Income tax expense
1,129
2,806
15,953
12,713
Income From Continuing Operations
783
5,265
20,609
18,033
Loss from discontinued operations, net
-
(1,934)
-
(10,229)
Net Income
$ 783
$ 3,331
$ 20,609
$ 7,804
Per Share Data - Basic and Diluted:
Basic:
Income from continuing operations
$ 0.01
$ 0.09
$ 0.36
$ 0.32
Loss from discontinued operations, net
-
(0.03)
-
(0.18)
Net Income Per Common Share
$ 0.01
$ 0.06
$ 0.36
$ 0.14
Diluted:
Income from continuing operations
$ 0.01
$ 0.09
$ 0.36
$ 0.32
Loss from discontinued operations, net
-
(0.03)
-
(0.18)
Net Income Per Common Share
$ 0.01
$ 0.06
$ 0.36
$ 0.14
Weighted-Average Number of Shares Outstanding:
Basic
57,082
56,693
56,871
55,963
Diluted
58,145
57,594
57,839
56,640
USI Holdings Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 2006
December 31, 2005
(Amounts in Thousands, Except Per Share Data)
Assets
Current assets:
Cash and cash equivalents
$ 36,683
$ 27,289
Fiduciary funds--restricted
114,448
103,887
Premiums and commissions receivable, net of allowance for bad
debts and cancellations of $9,743 and $7,300, respectively
284,815
244,372
Other
21,542
25,048
Deferred tax asset
11,694
14,887
Current assets held for discontinued operations
3,000
4,843
Total current assets
472,182
420,326
Goodwill
508,330
405,490
Expiration rights
400,785
312,382
Other intangible assets
57,301
50,800
Accumulated amortization
(232,070)
(197,539)
Expiration rights and other intangible assets, net
226,016
165,643
Property and equipment, net
32,308
28,475
Other assets
3,310
3,840
Total Assets
$ 1,242,146
$ 1,023,774
Liabilities and Stockholders’ Equity
Current liabilities:
Premiums payable to insurance companies
$ 298,026
$ 259,286
Accrued expenses
75,621
77,120
Current portion of long-term debt
13,346
11,470
Other
14,039
16,829
Total current liabilities
401,032
364,705
Long-term debt
367,466
225,062
Deferred tax liability
25,782
16,237
Other liabilities
7,239
7,789
Other liabilities held for discontinued operations
225
-
Total Liabilities
801,744
613,793
Stockholders’ equity:
Common stock—voting—par
$.01, 300,000 shares authorized; 59,226 and 58,308 shares issued,
respectively
592
583
Additional paid-in capital
676,157
663,436
Accumulated deficit
(225,464)
(246,073)
Less treasury stock at cost, 827 and 620 shares, respectively
(10,883)
(7,965)
Total Stockholders’ Equity
440,402
409,981
Total Liabilities and Stockholders’
Equity
$ 1,242,146
$ 1,023,774
USI Holdings Corporation and Subsidiaries
Non-GAAP Financial Measures - Purpose and Use
USI defines Operating Income as revenues, less compensation and employee
benefits, non-cash stock-based compensation, other operating expenses
and depreciation. Compensation and employee benefits and other operating
expenses are adjusted to exclude expenses related to USI’s
margin improvement plan (announced in the fourth quarter of 2004 and
concluded in the fourth quarter of 2005 to reduce ongoing operating
expenses), acquisition integration efforts (expenses incurred during the
integration of acquired companies) and other expenses, all of which USI’s
management does not consider indicative of the Company’s
run-rate, or normal operating expenses. USI presents Operating Income
because management believes that it is a relevant and useful indicator
of operating profitability. Management believes that Operating Income is
relevant owing to USI’s leveraged approach to
its capital structure and resulting significant amount of interest
expense and to USI’s acquisition strategy
which creates significant amortization and other expenses not directly
associated with the core operations of the Company and which are
specifically aimed at eliminating redundant real estate, positions and
other costs.
Additionally, management believes that investors in its stock use
Operating Income to compare USI’s ability to
generate operating profits with its peers and for valuation purposes.
Operating Margin (Operating Income as a percentage of total revenues) is
presented because management believes that it is a relevant and useful
indicator of operating efficiency. USI uses Operating Income and
Operating Margin in budgeting and evaluating operating company
performance. These financial measures should not be considered as an
alternative to other financial measures determined in accordance with
GAAP.
USI presents Income from continuing operations plus amortization of
intangible assets on an absolute and diluted per share basis because
management believes that it is a relevant and useful indicator of its
ability to generate working capital. Management believes that income
from continuing operations plus amortization of intangible assets is
relevant owing to the significant amount of amortization of intangible
assets resulting from accounting for all acquisitions using the purchase
method of accounting. Additionally, management believes that investors
in its stock use income from continuing operations plus amortization of
intangible assets to compare USI with its peers and for valuation
purposes. These financial measures should not be considered as an
alternative to other financial measures determined in accordance with
GAAP.
USI presents Income from continuing operations plus amortization of
intangible assets and operating income and operating margin, excluding
the impact of the identified adjustments, because management believes
that it is useful in understanding operating profitability compared to
other periods presented. Additionally, management believes that
investors in its stock use income from continuing operations plus
amortization of intangible assets and operating income and operating
margin, excluding the impact of the identified adjustments on an
absolute and diluted per share basis, to compare USI with its peers, for
valuation purposes and as an indicator of operating performance. These
financial measures should not be considered as an alternative to other
financial measures determined in accordance with GAAP.
USI presents organic revenue growth (decline) because management
believes that it is useful in understanding organic revenue
growth/decline compared to prior periods presented. Organic revenue
growth (decline) is calculated by excluding the current period’s
total revenues attributable to acquisitions and the prior period’s
total revenues from divested businesses during the twelve months
following acquisition or divestiture. Additionally, management believes
that investors in its stock use organic revenue growth (decline) to
compare USI with its peers and to measure growth in revenues
attributable to the Company’s ability to
execute on its sales and client retention strategies. This financial
measure should not be considered as an alternative to other financial
measures determined in accordance with GAAP.
USI Holdings Corporation and Subsidiaries
Non-GAAP Financial Measures
Reconciliation of Operating Income, Operating Margin and Income
from Continuing Operations plus Amortization of Intangible Assets
For the Three Months Ended
For the Twelve Months Ended
December 31,
December 31,
2006
2005
2006
2005
(Dollars in Thousands)
Total Revenues
$ 149,403
$ 136,450
$ 551,608
$ 508,284
Compensation and employee benefits
81,641
76,613
303,753
287,807
Non-cash stock-based compensation:
Restricted stock awards
959
871
3,527
2,579
Stock option expense
565
-
3,181
-
Other operating expenses
39,409
33,542
129,659
115,198
Depreciation
2,772
2,487
10,282
9,655
Operating Income
24,057
22,937
101,206
93,045
Operating Margin
16.1%
16.8%
18.3%
18.3%
Amortization of intangible assets
9,652
9,311
34,536
30,549
Interest
6,711
4,255
20,690
15,036
Early extinguishment of debt
-
-
2,093
-
Margin improvement
plan expenses (a)
-
1,190
-
8,141
Acquisition
integration expenses (a)
1,401
110
1,419
8,573
Other expenses (a) (b)
4,381
-
5,906
-
Income from continuing operations before income tax expense
1,912
8,071
36,562
30,746
Income tax expense
1,129
2,806
15,953
12,713
Income from continuing operations
783
5,265
20,609
18,033
Addback: Amortization of intangible assets
9,652
9,311
34,536
30,549
Income from continuing operations plus amortization of intangible
assets
$ 10,435
$ 14,576
$ 55,145
$ 48,582
(a) Amounts are included in compensation and employee benefits and
other operating expenses in the Consolidated Statements of
Operations.
(b) The Company recorded an impairment charge on the intangible
assets of one of its California acquisitions of $3.2 million in the
three and twelve months ended December 31. 2006. The Company
recorded expenses of $1.2 million and $2.7 million in the three and
twelve months ended December 31, 2006 related to the proposed
acquisition of all of its common stock by GS Capital Partners.
USI Holdings Corporation
Non-GAAP Financial Measures
Reconciliation of Operating Income, Operating Margin and Income
from Continuing Operations plus Amortization of Intangible Assets,
Excluding Identified Adjustments
Identified Adjustments:
Effective January 1, 2006, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123(R).
Accordingly, the Company recorded expenses of $0.6 and $3.2
million related to its stock option and employee stock purchase
plans for the three and twelve months ended December 31, 2006,
respectively. The Company recorded an impairment charge on the
intangible assets of one of its California acquisitions of $3.2
million in the three and twelve months ended December 31. 2006.
The Company recorded expenses of $1.2 million and $2.7 million in
the three and twelve months ended December 31, 2006 related to the
proposed acquisition of all of its common stock by GS Capital
Partners. The Company recorded acquisition integration expenses of
$1.4 million in the three and twelve months ended December 31.
2006, primarily related to the integration of Kibble & Prentice.
Additionally, in the first quarter of 2006, the Company recorded
$2.1 million of expense for an early extinguishment of debt
related to its new credit facility. Lastly, the Company recorded
adjustments to its direct bill revenues of $1.3 million and $1.9
million for the three and twelve months ended December 31, 2006
related to a change in accounting estimate. All adjustments noted
above are referred to as "Identified Adjustments."
For the Three Months Ended
For the Twelve Months Ended
December 31,
December 31,
2006 As Reported
Identified Adjustments
2006 Excluding Identified Adjustments
2006 As Reported
Identified Adjustments
2006 Excluding Identified Adjustments
(Dollars in Thousands)
Revenues
$ 149,403
$ 1,300
$ 150,703
$ 551,608
$ 1,861
$ 553,469
Compensation and employee benefits
81,641
-
81,641
303,753
-
303,753
Non-cash stock-based compensation:
Restricted stock awards
959
-
959
3,527
-
3,527
Stock option expense
565
(565)
-
3,181
(3,181)
-
Other operating expenses
39,409
-
39,409
129,659
-
129,659
Depreciation
2,772
-
2,772
10,282
-
10,282
Operating Income
24,057
1,865
25,922
101,206
5,042
106,248
Operating Margin
16.1%
17.2%
18.3%
19.2%
Amortization of intangible assets
9,652
-
9,652
34,536
-
34,536
Interest
6,711
-
6,711
20,690
-
20,690
Early extinguishment of debt
-
-
-
2,093
(2,093)
-
Acquisition integration expenses (a)
1,401
(1,401)
-
1,419
(1,419)
-
Other expenses (a)
4,381
(4,381)
-
5,906
(5,906)
-
Total Expenses
147,491
(6,347)
141,144
515,046
(12,599)
502,447
Income from continuing operations before income tax expense
1,912
7,647
9,559
36,562
14,460
51,022
Income tax expense
1,129
3,443
4,572
15,953
5,465
21,418
Income from continuing operations
783
4,204
4,987
20,609
8,995
29,604
Addback: Amortization of intangible assets
9,652
-
9,652
34,536
-
34,536
Income from continuing operations plus amortization of intangible
assets
$ 10,435
$ 4,204
$ 14,639
$ 55,145
$ 8,995
$ 64,140
Per Share Data - Diluted:
Income From Continuing Operations
$ 0.01
$ 0.07
$ 0.08
0.36
0.15
0.51
Addback: Amortization of intangible assets
0.17
-
0.17
0.60
-
0.60
Income from continuing operations plus amortization of intangible
assets
$ 0.18
$ 0.07
$ 0.25
0.96
0.15
1.11
(a) Amounts are included in other operating expenses in the
Consolidated Statements of Operations.
USI Holdings Corporation
Non-GAAP Financial Measures
Reconciliation of Operating Income, Operating Margin and Income
from Continuing Operations plus Amortization of Intangible
Assets, Excluding Identified Adjustments
Identified Adjustments:
In December 2004, USI announced that it had approved a plan to
take steps to reduce ongoing operating expenses. As a result of
these actions, for the three and twelve months ended December 31,
2005, the Company recorded expenses of $1.2 million and $8.1
million, respectively, comprised of restructuring of sales
professionals' employment agreements, employee severance and
related benefits and lease termination costs. Additionally, in the
three and twelve months ended December 31, 2005, the Company
recorded expenses of $0.1 million and $8.6 million, primarily
related to the acquisition of Summit Global Partners. In the three
and twelve months ended December 31, 2005, the Company recorded an
adjustment to revenues and related producer compensation payable
of $3.7 million and $0.1 million and $6.7 million and $0.6
million, respectively, related to a change in accounting estimate.
There were no such similar adjustments for the three and twelve
months ended December 31, 2006. All adjustments noted above are
referred to as "Identified Adjustments."
For the Three Months Ended
For the Twelve Months Ended
December 31,
December 31,
2005 As Reported
Identified Adjustments
2005 Excluding Identified Adjustments
2005 As Reported
Identified Adjustments
2005 Excluding Identified Adjustments
(Dollars in Thousands, Except per Share Amounts)
(Dollars in Thousands, Except per Share Amounts)
Total revenues
$
136,450
$
3,742
$
140,192
$
508,284
$
6,667
$
514,951
Compensation and employee benefits
76,613
100
76,713
287,807
567
288,374
Non-cash stock-based compensation, restricted stock awards
871
-
871
2,579
-
2,579
Other operating expenses
33,542
-
33,542
115,198
-
115,198
Depreciation
2,487
-
2,487
9,655
-
9,655
Operating Income
22,937
3,642
26,579
93,045
6,100
99,145
Operating Margin
16.8%
19.0%
18.3%
19.3%
Amortization of intangible assets
9,311
-
9,311
30,549
-
30,549
Interest
4,255
-
4,255
15,036
-
15,036
Margin improvement plan expenses (a)
1,190
(1,190)
-
8,141
(8,141)
-
Acquisition Integration expenses (a)
110
(110)
-
8,573
(8,573)
-
Total Expenses
128,379
(1,200)
127,179
477,538
(16,147)
461,391
Income from continuing operations before income tax expense
8,071
4,942
13,013
30,746
22,814
53,560
Income tax expense
2,806
1,719
4,525
12,713
8,963
21,676
Income from continuing operations
5,265
3,223
8,488
18,033
13,851
31,884
Addback: Amortization of intangible assets
9,311
-
9,311
30,549
-
30,549
Income from continuing operations plus amortization of intangible
assets
$
14,576
$
3,223
$
17,799
$
48,582
$
13,851
$
62,433
Per Share Data - Diluted:
Income From Continuing Operations
$
0.09
$
0.06
$
0.15
$
0.32
$
0.24
$
0.56
Addback: Amortization of intangible assets
0.16
-
0.16
0.54
-
0.54
Income from continuing operations plus amortization of intangible
assets
$
0.25
$
0.06
$
0.31
$
0.86
$
0.24
$
1.10
(a) Amounts are included in compensation and employee benefits and
other operating expenses in the Consolidated Statements of
Operations.
USI Holdings Corporation and Subsidiaries
Summary Statements of Operations by Segment
Specialized
Insurance
Benefits
(Amounts in Thousands)
Brokerage
Services
Corporate
Total
For the three months ended December 31:
2006
Revenues
$
128,836
$
20,454
$
113
$
149,403
Compensation and employee benefits
71,045
5,735
5,017
81,797
Other operating expenses
29,280
11,367
4,388
45,035
Non-cash stock-based compensation:
Restricted stock awards
754
22
183
959
Stock option expense
272
34
259
565
Depreciation
2,177
275
320
2,772
Amortization
8,840
812
-
9,652
Interest expense
322
96
6,293
6,711
Income(loss) from continuing operations, before income taxes
16,146
2,113
(16,347)
1,912
Add back:
Amortization
8,840
812
-
9,652
Interest expense
322
96
6,293
6,711
Acquisition integration expense
1,401
-
-
1,401
Other expenses
3,234
-
1,147
4,381
Operating income (loss)
$
29,943
$
3,021
$
(8,907)
$
24,057
Operating margin
23.2%
14.8%
NM
16.1%
2005
Revenues
$
116,845
$
19,086
$
519
$
136,450
Compensation and employee benefits
67,589
5,696
4,498
77,783
Other operating expenses
21,753
7,317
4,602
33,672
Non-cash stock-based compensation, restricted stock awards
739
13
119
871
Depreciation
1,892
232
363
2,487
Amortization
8,606
705
-
9,311
Interest expense
280
86
3,889
4,255
Income(loss) from continuing operations, before income taxes
15,986
5,037
(12,952)
8,071
Add back:
Amortization
8,606
705
-
9,311
Interest expense
280
86
3,889
4,255
Acquisition integration and margin improvement plan expenses
1,300
-
-
1,300
Operating income (loss)
$
26,172
$
5,828
$
(9,063)
$
22,937
Operating margin
22.4%
30.5%
NM
16.8%
USI Holdings Corporation and Subsidiaries
Summary Statements of Operations by Segment
Specialized
Insurance
Benefits
(Amounts in Thousands)
Brokerage
Services
Corporate
Total
For the Twelve months ended December 31:
2006
Revenues
$
504,503
$
46,862
$
243
$
551,608
Compensation and employee benefits
272,189
19,211
12,509
303,909
Other operating expenses
96,444
23,481
16,903
136,828
Non-cash stock-based compensation:
Restricted stock awards
2,793
72
662
3,527
Stock option expense
1,524
152
1,505
3,181
Depreciation
7,969
989
1,324
10,282
Amortization
31,368
3,168
-
34,536
Interest expense
934
404
19,352
20,690
Early extinguishment of debt
-
-
2,093
2,093
Income(loss) from continuing operations, before income taxes
91,282
(615)
(54,105)
36,562
Add back:
Amortization
31,368
3,168
-
34,536
Interest expense
934
404
19,352
20,690
Early extinguishment of debt
-
-
2,093
2,093
Acquisition integration expense
1,419
-
-
1,419
Other expenses
3,234
-
2,672
5,906
Operating income (loss)
$
128,237
$
2,957
$
(29,988)
$
101,206
Operating margin
25.4%
6.3%
NM
18.3%
2005
Revenues
$
463,501
$
43,263
$
1,520
$
508,284
Compensation and employee benefits
273,244
15,750
15,196
304,190
Other operating expenses
81,438
16,667
17,424
115,529
Non-cash stock-based compensation, restricted stock awards
2,141
43
395
2,579
Depreciation
7,584
629
1,442
9,655
Amortization
27,799
2,750
-
30,549
Interest expense
1,090
361
13,585
15,036
Income(loss) from continuing operations, before income taxes
70,205
7,063
(46,522)
30,746
Add back:
Amortization
27,799
2,750
-
30,549
Interest expense
1,090
361
13,585
15,036
Acquisition integration and margin improvement plan expenses
15,080
82
1,552
16,714
Operating income (loss)
$
114,174
$
10,256
$
(31,385)
$
93,045
Operating margin
24.6%
23.7%
NM
18.3%
USI Holdings Corporation and Subsidiaries
Non-GAAP Financial Measures
Reconciliation of Organic Revenue Growth/(Decline)
For the Three Months Ended December 31
Revenues
Change
Adjustment for
Net Acquired Businesses
Organic
Growth/
(Decline)
Identified Adjustments
Adjusted Organic
Growth/
(Decline)
2006
2005
Amount
Percent
Consolidated
(Dollars in Thousands)
Net Commissions and Fees - Property & Casualty
$
70,166
$
62,700
$
7,466
11.9%
$
(5,229)
3.6%
$
(2,332)
-0.2%
Net Commissions and Fees - Benefits
72,622
67,045
5,577
8.3%
(10,503)
-7.3%
(110)
-7.5%
Total Net Commissions and Fees
142,788
129,745
13,043
10.1%
(15,732)
-2.1%
(2,442)
-4.0%
Contingents and Overrides
3,460
3,159
301
9.5%
(65)
7.5%
-
7.5%
Other Income
3,155
3,546
(391)
-11.0%
(58)
-12.7%
-
-12.7%
Total Revenues
$
149,403
$
136,450
$
12,953
9.5%
$
(15,855)
-2.1%
$
(2,442)
-3.9%
Insurance Brokerage
Net Commissions and Fees - Property & Casualty
$
70,166
$
62,700
$
7,466
11.9%
$
(5,229)
3.6%
$
(2,332)
-0.2%
Net Commissions and Fees - Benefits
52,168
47,968
4,200
8.8%
(5,460)
-2.6%
1,300
0.1%
Total Net Commissions and Fees (1)
122,334
110,668
11,666
10.5%
(10,689)
0.9%
(1,032)
0.0%
Contingents and Overrides
3,460
3,159
301
9.5%
(65)
7.5%
-
7.5%
Other Income
3,042
3,018
24
0.8%
(58)
-1.1%
-
-1.1%
Total Revenues
$
128,836
$
116,845
$
11,991
10.3%
$
(10,812)
1.0%
$
(1,032)
0.1%
Specialized Benefits Services
Net Commissions and Fees - Benefits
$
20,454
$
19,077
$
1,377
7.2%
$
(5,043)
-19.2%
$
(1,410)
-26.6%
Contingents and Overrides
-
-
-
-
-
-
-
-
Other Income
9
(9)
-100.0%
-
-100.0%
-
-100.0%
Total Revenues
$
20,454
$
19,086
$
1,368
7.2%
$
(5,043)
-19.3%
$
(1,410)
-26.6%
Corporate
Other Income
$
113
$
519
$
(406)
-78.2%
$
-
-78.2%
$
-
-78.2%
Total Revenues
$
113
$
519
$
(406)
-78.2%
$
-
-78.2%
$
-
-78.2%
(1) Adjusted NCF organic growth calculation for insurance brokerage,
excluding California retail brokerage operations:
Three months ended December 31, 2006
Insurance Brokerage, Net Commissions and Fees (a)
$
122,334
$
110,668
$
11,666
10.5%
$
(10,689)
0.9%
$
(1,032)
0.0%
California Net Commissions and Fees (b)
14,600
19,017
(4,417)
-23.2%
-
-23.2%
-
-23.2%
Insurance Brokerage, Net Commissions and Fees, excluding California
(a) - (b)
$
107,734
$
91,651
$
16,083
17.5%
$
(10,689)
5.9%
$
(1,032)
4.8%
USI Holdings Corporation and Subsidiaries
Non-GAAP Financial Measures
Reconciliation of Organic Revenue Growth/(Decline)
For the Twelve Months Ended December 31
Revenues
Change
Adjustment for Net Acquired
Businesses
Organic
Growth/ (Decline)
Identified
Adjustments
Adjusted Organic
Growth/
(Decline)
2006
2005
Amount
Percent
Consolidated
(Dollars in Thousands)
Net Commissions and Fees - Property & Casualty
$ 273,464
$ 260,132
$ 13,332
5.1%
$ (12,633)
0.3%
$ (4,816)
-1.6%
Net Commissions and Fees - Benefits
238,313
212,890
25,423
11.9%
(25,735)
-0.1%
10
-0.1%
Total Net Commissions and Fees
511,777
473,022
38,755
8.2%
(38,368)
0.1%
(4,806)
-0.9%
Contingents and Overrides
26,134
25,825
309
1.2%
(1,094)
-3.0%
-
-3.0%
Other Income
13,697
9,437
4,260
45.1%
(262)
42.4%
-
42.4%
Total Revenues
$ 551,608
$ 508,284
$ 43,324
8.5%
$ (39,724)
0.7%
$ (4,806)
-0.2%
Insurance Brokerage
Net Commissions and Fees - Property & Casualty
$ 273,464
$ 260,132
$ 13,332
5.1%
$ (12,633)
0.3%
$ (4,816)
-1.6%
Net Commissions and Fees - Benefits
191,453
169,669
21,784
12.8%
(17,827)
2.3%
1,420
3.2%
Total Net Commissions and Fees (1)
464,917
429,801
35,116
8.2%
(30,460)
1.1%
(3,396)
0.3%
Contingents and Overrides
26,134
25,807
327
1.3%
(1,094)
-3.0%
-
-3.0%
Other Income
13,452
7,893
5,559
70.4%
(262)
67.1%
-
67.1%
Total Revenues
$ 504,503
$ 463,501
$ 41,002
8.8%
$ (31,816)
2.0%
$ (3,396)
1.2%
Specialized Benefits Services
Net Commissions and Fees - Benefits
$ 46,860
$ 43,221
$ 3,639
8.4%
$ (7,908)
-9.9%
$ (1,410)
-13.1%
Contingents and Overrides
-
18
(18)
-
-
-
-
-
Other Income
2
24
(22)
-91.7%
-
-91.7%
-
-91.7%
Total Revenues
$ 46,862
$ 43,263
$ 3,599
8.3%
$ (7,908)
-10.0%
$ (1,410)
-13.2%
Corporate
Other Income
$ 243
$ 1,520
$ (1,277)
-84.0%
$ -
-84.0%
$ -
-84.0%
Total Revenues
$ 243
$ 1,520
$ (1,277)
-84.0%
$ -
-84.0%
$ -
-84.0%
(1) Adjusted NCF organic growth calculation for insurance brokerage,
excluding California retail brokerage operations:
Year ended December 31, 2006
Insurance Brokerage, Net Commissions and Fees (a)
$ 464,917
$ 429,801
$ 35,116
8.2%
$ (30,460)
1.1%
$ (3,396)
0.3%
California Net Commissions and Fees (b)
66,896
77,085
(10,189)
-13.2%
(1,613)
-15.3%
(480)
-15.9%
Insurance Brokerage, Net Commissions and Fees, excluding California
(a) - (b)
$ 398,021
$ 352,716
$ 45,305
12.8%
$ (28,847)
4.7%
$ (2,916)
3.8%