FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-7201.
POE & BROWN, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-0864469
_____________________ ____________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
220 S. Ridgewood Ave., Daytona Beach, FL 32114
_________________________________________ ____________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (904) 252-9601
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No __
____
The number of shares of the registrant's common stock, $.10
par value, outstanding as of July 23, 1997, was 8,800,748.
POE & BROWN, INC.
Index to Form 10-Q
For The Quarter Ended June 30, 1997
_____________________________________
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
for the three and six months ended June 30, 1997
and 1996 3
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
ITEM 1: FINANCIAL STATEMENTS
POE & BROWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
For the three months For the six months
ended June 30, ended June 30,
1997 1996 1997 1996
REVENUES
Commissions and fees $30,808 $27,305 $63,520 $57,055
Investment income 1,347 802 2,155 1,643
Other income 71 516 533 651
_______ _______ _______ _______
Total revenues 32,226 28,623 66,208 59,349
_______ _______ _______ _______
EXPENSES
Employee compensation and benefits 16,492 15,118 33,330 30,586
Other operating expenses 7,042 6,541 14,199 13,145
Interest and amortization 2,111 1,420 3,464 2,787
_______ _______ _______ _______
Total expenses 25,645 23,079 50,993 46,518
_______ _______ _______ _______
Income before income taxes 6,581 5,544 15,215 12,831
Income taxes 2,600 2,162 6,010 5,004
_______ _______ _______ _______
NET INCOME $ 3,981 $ 3,382 $ 9,205 $ 7,827
======= ======= ======= =======
Net income per share $ .46 $ .39 $ 1.06 $ .90
======= ======= ======= =======
Dividend declared per share $ .13 $ .12 $ .26 $ .24
======= ======= ======= =======
Weighted average number of shares
outstanding 8,683 8,677 8,675 8,696
See notes to condensed consolidated financial statements.
POE & BROWN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) (Audited)
June 30, December 31,
1997 1996
___________ ____________
ASSETS
Cash and cash equivalents $ 42,467 $ 31,786
Short-term investments 1,667 1,087
Premiums, commissions and fees
receivable 59,268 62,940
Other current assets 6,426 7,307
________ ________
Total current assets 109,828 103,120
Fixed assets, net 11,904 12,085
Intangible assets, net 50,250 50,167
Investments 9,695 11,288
Other assets 3,209 3,083
________ ________
Total assets $184,886 $179,743
======== ========
LIABILITIES
Premiums payable to insurance
companies $ 72,142 $ 73,570
Premium deposits and credits
due customers 6,830 7,329
Accounts payable and accrued expenses 13,033 11,130
Current portion of long-term debt 5,466 5,365
_______ _______
Total current liabilities 97,471 97,394
Long-term debt 5,219 5,300
Deferred income taxes 3,102 3,603
Other liabilities 5,843 6,160
________ ________
Total liabilities 111,635 112,457
________ ________
SHAREHOLDERS' EQUITY
Common stock, par value $.10 per
share: authorized 18,000 shares;
issued 8,715 shares at 1997 and
8,656 shares at 1996 872 866
Additional paid-in capital 1,577 1,671
Retained earnings 65,193 58,238
Net unrealized appreciation of
available-for-sale securities, net of
tax effect of $3,662 in 1997 and $4,163
in 1996 5,609 6,511
________ ________
Total shareholders' equity 73,251 67,286
________ ________
Total liabilities and shareholders'
equity $184,886 $179,743
======== ========
See notes to condensed consolidated financial statements.
POE & BROWN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
For the six months ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,205 $ 7,827
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,458 3,748
Net gains on sales of investments, fixed
assets and customer accounts (792) (625)
Premiums, commissions and fees receivable,
decrease (increase) 3,672 (3,551)
Other assets, decrease 955 599
Premiums payable to insurance companies,
(decrease) increase (1,428) 7,925
Premium deposits and credits due
customers, (decrease) (499) (124)
Accounts payable and accrued expenses,
increase 1,903 1,030
Other liabilities, (decrease) increase (317) 203
_______ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,157 17,032
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (1,296) (2,415)
Payments for businesses acquired, net
of cash acquired (1,817) (8,879)
Proceeds from sales of fixed assets and
customer accounts 275 643
Purchases of investments (616) (801)
Proceeds from sales of investments 553 402
_______ _______
NET CASH USED IN INVESTING ACTIVITIES (2,901) (11,050)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on long-term debt (1,235) (588)
Net exercise of stock options and
issuances (repurchases) of stock (89) (1,651)
Cash dividends paid (2,251) (2,075)
_______ _______
NET CASH USED IN FINANCING ACTIVITIES (3,575) (4,314)
_______ _______
Net increase in cash and cash equivalents 10,681 1,668
Cash and cash equivalents at beginning of
period 31,786 28,350
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $42,467 $30,018
======= =======
See notes to condensed consolidated financial statements.
POE & BROWN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Financial Reporting
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions for Form 10-
Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included. For further information, refer to the
consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
Results of operations for the three- and six-month
periods ended June 30, 1997 are not necessarily indicative
of the results that may be expected for the year ending
December 31, 1997.
Note 2 - Net Income Per Share
Net income per share is based upon the weighted average
number of shares outstanding, adjusted for the dilutive
effect of stock options, which is the same on both a primary
and a fully-diluted basis.
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
128 "Earnings Per Share," (SFAS 128). SFAS 128 establishes
new standards for computing and presenting earnings per
share (EPS). Specifically, SFAS 128 replaces the
presentation of primary EPS with a presentation of basic
EPS, requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with
complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997; earlier
application is not permitted. EPS for the Company for the
periods ended June 30, 1997 and June 30, 1996 computed under
SFAS 128 would not be different than that previously
computed.
Note 3 - Acquisitions
During the first quarter of 1997, the Company acquired
substantially all of the assets of Dade Underwriters
Insurance Agency of Aventura, Florida and Willits Insurance
Agency of Ft. Lauderdale, Florida. During the first quarter
of 1996, the Company acquired a majority interest in Florida
Intracoastal Underwriters, Limited Company, of Miami Lakes,
Florida. During the second quarter of 1996, the Company
acquired substantially all of the assets of B & R
International, Inc. of Atlanta, Georgia. These acquisitions
have been accounted for using the purchase method of
accounting. Pro forma results of operations for the six-
month periods ended June 30, 1996 and 1997 resulting from
these acquisitions were not materially different from the
results of operations as reported. The results of
operations for the acquired companies have been combined
with those of the Company since their respective acquisition
dates.
Note 4 - Long-Term Debt
The Company continues to maintain its credit agreement
with a major insurance company under which $5 million (the
maximum amount available for borrowings) was outstanding at
June 30, 1997, at an interest rate equal to the prime
lending rate plus one percent. The available amount will
decrease by $1 million each August, as described in Note 7
to the consolidated financial statements contained in the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
In November 1994, the Company entered into a revolving
credit facility with a national banking institution which
provides for available borrowings of up to $10 million. As
of June 30, 1997, there were no borrowings against this line
of credit.
Note 5 - Contingencies
The Company is not a party to any legal proceedings
other than various claims and lawsuits arising in the normal
course of business. Management of the Company does not
believe that any such claims or lawsuits will have a
material effect on the Company's financial condition or
results of operations.
Note 6 - New Accounting Standards
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130) and No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131).
SFAS 130 requires that an enterprise (a) classify items
of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a
statement of financial position. SFAS 130 is effective for
financial statements for periods beginning after December
15, 1997.
SFAS 131 requires that a public business enterprise
report financial and descriptive information about its
reportable operating segments. SFAS 131 is effective for
financial statements for periods beginning after December
15, 1997.
The effects of SFAS 130 and SFAS 131 on the company
have not been considered at this time.
ITEM 2:MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net Income. Net income for the second quarter of 1997
was $3,981,000, or $.46 per share, compared with net income
in the second quarter of 1996 of $3,382,000, or $.39 per
share, an 18% increase. Net income for the six months ended
June 30, 1997 was $9,205,000, or $1.06 per share, compared
with 1996 same period net income of $7,827,000, or $.90 per
share, for an 18% increase.
Commissions and Fees. Commissions and fees for the
second quarter of 1997 increased $3,503,000, or 13% from the
same period in 1996. Approximately $740,000 of this
increase represents revenues from acquired agencies with the
remainder due to new business production. Commissions and
fees for the six months ended June 30, 1997 were $63,520,000
compared to $57,055,000 for the same period in 1996, an 11%
increase. The 1997 increase is due to new business
production and approximately $2,003,000 of revenue from
acquired agencies.
Investment Income. Investment income for the second
quarter and six-month period ended June 30, 1997 increased
$545,000 and $512,000 respectively, from the same periods in
1996 primarily due to recording gains on the sale of certain
investments and increases in both cash invested and interest
rate returns.
Other Income. Other income primarily includes gains
and losses from the sale of customer accounts and other
assets. Other income for the second-quarter and six-month
periods ended June 30, 1997 decreased $445,000 and $118,000
respectively, over the same periods in 1996.
Employee Compensation and Benefits. Employee
compensation and benefits increased 9% during both the three-
month period and six-month period ended June 30, 1997 over
the same periods in 1996. This increase primarily relates
to additional compensation expense as a result of increased
commission and fee revenues and merit pay increases.
Employee compensation and benefits as a percentage of total
revenue decreased to 51% in the second quarter of 1997
compared to 53% in the same period last year and decreased
to 50% for the six-months ended June 30, 1997 compared to
52% in the same period last year.
Other Operating Expenses. Other operating expenses for
the second quarter of 1997 increased $501,000, or 8%, over
the same period in 1996, but declined as a percentage of
total revenue from 23% to 22%. Other operating expenses as
a percentage of total revenue remained constant at 22% for
the six-months ended June 30, 1997 and June 30, 1996.
Interest and Amortization. Interest and amortization
increased $691,000, or 49%, and $677,000, or 24%, for the
three-month and six-month periods ending June 30, 1997,
respectively, over the same periods in 1996. These
increases are due primarily to the write-off of the
remaining intangible assets related to a terminated
agreement.
Liquidity and Capital Resources
The Company's cash and cash equivalents of $42,467,000
at June 30, 1997 increased by $10,681,000 from $31,786,000
at December 31, 1996. During the six months ended June 30,
1997, $17,157,000 of cash was provided primarily from
operating activities. Of this amount, $1,817,000 was used
to acquire businesses, $1,296,000 for additions to fixed
assets, $1,235,000 to repay long-term debt, and the
remainder primarily to pay dividends on the Company's common
stock. The current ratio at June 30, 1997 was 1.13 compared
to 1.06 as of December 31, 1996.
The Company has a revolving credit agreement with a
major insurance company under which up to $5 million
presently may be borrowed at an interest rate equal to the
prime lending rate plus one percent. The amount of
available credit decreases by $1 million each August through
the year 2001, when it will expire. As of June 30, 1997,
the maximum amount of borrowings was outstanding. In
November 1994, the Company entered into a revolving credit
facility with a national banking institution that provides
for available borrowings of up to $10 million. As of June
30, 1997, there were no borrowings against this line of
credit. The Company believes that its existing cash, cash
equivalents, short-term investments portfolio, funds
generated from operations, and available credit facilities
are sufficient to satisfy its normal financial needs.
POE & BROWN, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is involved in various pending or
threatened proceedings by or against the Company or one or
more of its subsidiaries which involve routine litigation
relating to insurance risks placed by the Company and other
contractual matters. The Company's management does not
believe that any of such pending or threatened proceedings
will have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held
on April 30, 1997. At the Annual Meeting, six of the
existing directors of the Company were re-elected to the
Board. One director did not stand for re-election.
The number of votes cast for or withheld with respect
to the election of each of the directors is set forth below:
For Withheld
J. Hyatt Brown 7,542,765 17,238
Samuel P. Bell, III 7,542,792 17,211
Jim W. Henderson 7,542,765 17,238
Kenneth E. Hill 7,542,758 17,245
Bradley Currey, Jr. 7,542,792 17,211
Theodore J. Hoepner 7,542,792 17,211
There were no abstentions and no broker non-votes with
respect to the election of directors.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3a - Articles of Incorporation (incorporated by reference
to Exhibit 3a to Form 10-K for the year ended
December 31, 1994)
Exhibit 3b - Amended and Restated Bylaws (incorporated by
reference to Exhibit 3b to Form 10-K for the
year ended December 31, 1996)
Exhibit 11 - Statement re: Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) There were no reports filed on Form 8-K during the quarter
ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
POE & BROWN, INC.
Date: August 12, 1997 /s/ WILLIAM A. ZIMMER
_____________________________________
William A. Zimmer
Chief Financial Officer
(duly authorized officer, principal
financial officer and principal
accounting officer)
Exhibit 11 - Statement Re: Computation of Earnings Per Share
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
Average shares outstanding 8,670 8,649 8,663 8,666
Net effect of dilutive
stock options, based on
the treasury stock method 13 28 12 30
______ ______ ______ ______
Total shares used in
computation 8,683 8,677 8,675 8,696
====== ====== ====== ======
Net income $ 3,981 $ 3,382 $ 9,205 $ 7,827
======= ======= ======= =======
Net income per share $ .46 $ .39 $ 1.06 $ .90
====== ====== ======= ========
5
1000
6-MOS
DEC-31-1997
JUN-30-1997
42,467
1,667
59,268
0
0
109,828
24,631
13,727
184,886
97,471
0
0
0
872
5,609
184,886
0
32,226
0
25,645
0
0
2,111
6,581
2,600
3,981
0
0
0
3,981
.60
.60
