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8-K - 8-K - Arthur J. Gallagher & Co.d864701d8k.htm

Exhibit 99.1

 

LOGO

NEWS RELEASE

ARTHUR J. GALLAGHER & CO. ANNOUNCES

FOURTH QUARTER AND FULL YEAR 2014 FINANCIAL RESULTS

ITASCA, IL, February 3, 2015 — Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter and year ended December 31, 2014. A printer-friendly format and supplemental quarterly data are available at www.ajg.com. For a description of the non-GAAP measures used to report financial results in this earnings release and their most comparable GAAP measures, please see “Information Regarding Non-GAAP Measures” beginning on page 8.

“We had an excellent quarter to finish an outstanding year, and we are well positioned for 2015,” said J. Patrick Gallagher, Jr., Chairman, President and CEO. “In the fourth quarter, our combined Brokerage and Risk Management segments posted 31% growth in adjusted revenues, of which 5.6% was total organic growth. Our adjusted EBITDAC increased 45% and adjusted net earnings per share grew 21%. We also improved our adjusted EBITDAC margins 218 basis points compared to the fourth quarter of 2013. For the year, our combined Brokerage and Risk Management segments posted 30% growth in adjusted revenues, of which 5.5% was total organic growth, adjusted EBITDAC increased 39%, adjusted net earnings per share grew 21% and we improved our adjusted EBITDAC margins 163 basis points.”

 

    Our Brokerage segment had a terrific quarter. Adjusted revenues increased 36%, of which 3.8% was total organic growth, adjusted EBITDAC increased 47%, and we improved our adjusted EBITDAC margin 186 basis points. For the year, adjusted total revenues increased 30%, of which 4.3% was organic, adjusted EBITDAC increased 39% and we improved our adjusted EBITDAC margin 148 basis points. Additionally, our acquisition program finished strong and our integration efforts are on track. During the fourth quarter, we completed another 15 acquisitions with annualized revenues of nearly $68 million. For the full year, we completed 60 acquisitions with annualized revenues of $761 million. Excluding the three large acquisitions, we added 57 firms with an average of approximately $4 million of revenues, demonstrating that our bolt-on M&A strategy is flourishing.

 

    Our Risk Management segment had an outstanding quarter. Adjusted total organic revenues increased 12.6% and we improved our adjusted EBITDAC margin 225 basis points. For the year, adjusted total revenues increased 10% and we surpassed our 16% margin target by approximately 50 basis points.

 

    Our clean energy investments had an excellent quarter and full year — up 44% compared to the fourth quarter of 2013 and up 56% for the full year.

 

    We are comfortable with the current rate environment and we continue to see indications that our customers are anticipating growth in 2015 and beyond — this is a healthy environment for brokers.

“Finally, our culture is alive and thriving around the globe. In 2014, we added thousands of associates to the Gallagher family of professionals. They bring similar cultures and share our dedication to providing the highest quality customer service. Together, our teams are energized by our growth and excited about the vast array of resources, capabilities and risk management solutions we offer in the marketplace.”

The following tables on pages 2 and 3 provide information that management believes is helpful when comparing 2014 revenues, EBITDAC and diluted net earnings per share with the same periods in 2013. In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share, and the reconciliation for EBITDAC is provided on page 10.

 

(1 of 12)


Quarter Ended December 31                                          Diluted Net        
     Revenues            EBITDAC           Earnings Per Share        

Segment

   4th Q 14      4th Q 13      Chg     4th Q 14     4th Q 13     Chg     4th Q 14     4th Q 13     Chg  
     (in millions)            (in millions)                          

Brokerage, as adjusted

   $ 798.6       $ 586.5         36   $ 195.1      $ 132.4        47   $ 0.50      $ 0.41        22

Gains on book sales

     4.7         1.9           4.7        1.9          0.02        0.01     

Acquisition integration

     —           —             (26.5     (6.8       (0.12     (0.03  

Workforce & lease termination

     —           —             (1.8     (6.6       (0.01     (0.03  

Acquisition related adjustments

     —           —             —          —            0.01        0.01     

Levelized foreign currency translation

     —           4.3           —          0.7          —          —       

Effective income tax rate impact

     —           —             —          —            (0.01     0.01     
  

 

 

    

 

 

      

 

 

   

 

 

     

 

 

   

 

 

   

Brokerage, as reported

  803.3      592.7      171.5      121.6      0.39      0.38   
  

 

 

    

 

 

      

 

 

   

 

 

     

 

 

   

 

 

   

Risk Management, as adjusted

  167.9      149.2      13   27.2      20.8      31   0.08      0.07      14

New South Wales client run-off

  —        —        (12.9   —        (0.05   —     

Workforce & lease termination

  —        —        (0.2   (1.5   —        (0.01

Claim portfolio transfer ramp up

  —        —        (1.7   (1.2   (0.01   —     

Levelized foreign currency translation

  —        2.3      —        0.8      —        —     
  

 

 

    

 

 

      

 

 

   

 

 

     

 

 

   

 

 

   

Risk Management, as reported

  167.9      151.5      12.4      18.9      0.02      0.06   
  

 

 

    

 

 

      

 

 

   

 

 

     

 

 

   

 

 

   

Total Brokerage & Risk Management, as reported

$ 971.2    $ 744.2    $ 183.9    $ 140.5      0.41      0.44   
  

 

 

    

 

 

      

 

 

   

 

 

     

 

 

   

 

 

   

Corporate, as adjusted

  (0.02   0.01   

Retirement plan de-risking strategies

  (0.08   —     
                

 

 

   

 

 

   

Corporate, as reported

  (0.10   0.01   
                

 

 

   

 

 

   

Total Company, as reported

$ 0.31    $ 0.45   
                

 

 

   

 

 

   

Total Brokerage & Risk Management, as adjusted

$ 966.5    $ 735.7      31 $ 222.3    $ 153.2      45 $ 0.58    $ 0.48      21
  

 

 

    

 

 

      

 

 

   

 

 

     

 

 

   

 

 

   

Total Company, as adjusted

$ 0.56    $ 0.49      14
                

 

 

   

 

 

   

 

(2 of 12)


Year Ended December 31                                         Diluted Net        
     Revenues           EBITDAC           Earnings Per Share        

Segment

   Year 14      Year 13     Chg     Year 14     Year 13     Chg     Year 14     Year 13     Chg  
     (in millions)           (in millions)                          

Brokerage, as adjusted

   $ 2,907.0       $ 2,149.9        35   $ 733.4      $ 510.5        44   $ 2.06      $ 1.65        25

Gains on book sales

     7.3         5.2          7.3        5.2          0.03        0.03     

Acquisition integration

     —           —            (67.1     (24.1       (0.33     (0.11  

Workforce & lease termination

     —           —            (8.0     (7.8       (0.03     (0.04  

Acquisition related adjustments

     —           —            (1.1     —            (0.02     0.04     

Levelized foreign currency translation

     —           (10.8       —          0.2          —          —       
  

 

 

    

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Brokerage, as reported

  2,914.3      2,144.3      664.5      484.0      1.71      1.57   
  

 

 

    

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Risk Management, as adjusted

  664.3      604.1      10   109.5      94.5      16   0.35      0.35      0

New South Wales client run-off

  —        —        (12.9   —        (0.05   —     

Workforce & lease termination

  —        —        (0.8   (1.7   —        (0.01

Claim portfolio transfer and South Australia ramp up

  —        1.4      (6.4   0.1      (0.03   —     

Levelized foreign currency translation

  —        5.5      —        1.6      —        0.01   
  

 

 

    

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Risk Management, as reported

  664.3      611.0      89.4      94.5      0.27      0.35   
  

 

 

    

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total Brokerage & Risk Management, as reported

$ 3,578.6    $ 2,755.3    $ 753.9    $ 578.5      1.98      1.92   
  

 

 

    

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Corporate, as adjusted

  (0.02   0.09   

Retirement plan de-risking strategies

  (0.08   —     

Non-cash gains on changes in ownership levels

  0.09      0.05   
               

 

 

   

 

 

   

Corporate, as reported

  (0.01   0.14   
               

 

 

   

 

 

   

Total Company, as reported

$ 1.97    $ 2.06   
               

 

 

   

 

 

   

Total Brokerage & Risk Management, as adjusted

$ 3,571.3    $ 2,754.0      30 $ 842.9    $ 605.0      39 $ 2.41    $ 2.00      21
  

 

 

    

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total Company, as adjusted

$ 2.39    $ 2.09      14
               

 

 

   

 

 

   

Brokerage Segment Fourth Quarter Highlights — The following tables provide information that management believes is helpful when comparing certain 2014 financial information with the same periods in 2013 (in millions):

 

Organic Revenues (non-GAAP)

   4th Q 14     4th Q 13     Year 14     Year 13  
Base Commissions and Fees                         

Commissions as reported

   $ 559.5      $ 426.3      $ 2,083.0      $ 1,553.1   

Fees as reported

     178.3        130.0        595.0        450.5   

Less commissions and fees from acquisitions

     (164.7     —          (595.2     —     

Less disposed of operations

     —          (2.3     —          (8.5

Levelized foreign currency translation

     —          (3.8     —          9.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic base commissions and fees

$ 573.1    $ 550.2    $ 2,082.8    $ 2,004.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic change in base commissions and fees

  4.2   3.9 % * 
  

 

 

     

 

 

   

Supplemental Commissions

Supplemental commissions as reported

$ 26.5    $ 23.9    $ 104.0    $ 77.3   

Less supplemental commissions from acquisitions

  (4.6   —        (25.2   —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic supplemental commissions

$ 21.9    $ 23.9    $ 78.8    $ 77.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic change in supplemental commissions

  -8.4   1.9
  

 

 

     

 

 

   

Contingent Commissions

Contingent commissions as reported

$ 16.3    $ 8.6    $ 84.7    $ 52.1   

Less contingent commissions from acquisitions

  (6.4   —        (19.9   —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic contingent commissions

$ 9.9    $ 8.6    $ 64.8    $ 52.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic change in contingent commissions

  15.1   24.4
  

 

 

     

 

 

   

Total organic change

  3.8   4.3
  

 

 

     

 

 

   

 

(3 of 12)


Brokerage Segment Fourth Quarter Highlights (continued)

 

  * Full year 2014 base commission and fee organic growth was favorably impacted by net larger account sales activity during the third quarter which was not consistent with historical patterns and may not repeat in the future. Full year base commission and fee organic growth would have been approximately 3.7% if net larger account sales activity was more consistent with historical patterns.

 

Adjusted Compensation Expense and Ratio (non-GAAP)

          4th Q 14     4th Q 13     Year 14     Year 13  

Reported amounts

      $ 476.6      $ 370.1      $ 1,715.7      $ 1,290.4   

Acquisition integration

        (16.1     (4.5     (45.3     (10.9

Workforce and lease termination related charges

        (1.8     (6.6     (7.4     (7.7

Acquisition related adjustments

        —          —          (1.1     —     

Levelized foreign currency translation

        —          (2.8     —          8.6   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted amounts

$ 458.7    $ 356.2    $ 1,661.9    $ 1,280.4   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted ratios using adjusted revenues on pages 2 and 3

  *      57.4   60.7   57.2   59.6
     

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Adjusted fourth quarter compensation ratio was 3.3 pts lower than the same period in 2013. This ratio was primarily impacted by lower overall compensation levels of the larger recent acquisitions of 1.6 pts, headcount controls of 0.2 pts, defined contribution plan savings of 0.5 pts, employee medical plan savings of 0.4 pts and incentive compensation savings of 0.2 pts.

 

Adjusted Operating Expense and Ratio (non-GAAP)

          4th Q 14     4th Q 13     Year 14     Year 13  

Reported amounts

      $ 155.2      $ 101.0      $ 534.1      $ 369.9   

Acquisition integration

        (10.4     (2.3     (21.8     (13.2

Workforce and lease termination related charges

        —          —          (0.6     (0.1

Levelized foreign currency translation

        —          (0.8     —          2.4   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted amounts

$ 144.8    $ 97.9    $ 511.7    $ 359.0   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted ratios using adjusted revenues on pages 2 and 3

  *      18.1   16.7   17.6   16.7
     

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Adjusted fourth quarter operating expense ratio was 1.4 pts higher than the same period in 2013. This ratio was primarily impacted by higher overall operating expense levels of the larger recent acquisitions of 0.4 pts and increases in professional fees of 0.5 pts.

 

Adjusted EBITDAC (non-GAAP)

          4th Q 14     4th Q 13     Year 14     Year 13  

Total EBITDAC — see page 10 for computation

      $ 171.5      $ 121.6      $ 664.5      $ 484.0   

Gains from books of business sales

        (4.7     (1.9     (7.3     (5.2

Acquisition integration **

        26.5        6.8        67.1        24.1   

Acquisition related adjustments

        —          —          1.1        —     

Workforce and lease termination related charges

        1.8        6.6        8.0        7.8   

Levelized foreign currency translation

        —          (0.7     —          (0.2
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAC

$ 195.1    $ 132.4    $ 733.4    $ 510.5   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAC change

  47.4   28.4   43.7   23.3
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAC margin

  *      24.4   22.6   25.2   23.8
     

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Adjusted fourth quarter EBITDAC margin was 1.8 pts higher than the same period in 2013. Approximately two-thirds of this improvement results from higher overall EBITDAC margins of the combined larger recent acquisitions and one-third from the positive effect of organic growth and cost controls.

 

  ** Acquisition integration costs were primarily related to the larger recent acquisitions, communication system conversion costs and related compensation.

 

(4 of 12)


Brokerage Segment Fourth Quarter Highlights (continued)

The following is a summary of Brokerage segment acquisition activity for 2014 and 2013:

 

     4th Q 14      4th Q 13      Year 14      Year 13  

Shares issued for acquisitions & earnouts (excluding secondary offering)

     2,370,000         1,743,000         6,453,000         5,181,000   

Number of acquisitions closed

     15         13         60         30   

Annualized revenues acquired (in millions)

   $ 67.6       $ 193.5       $ 761.2       $ 369.9   

Risk Management Segment Fourth Quarter Highlights — The following tables provide information that management believes is helpful when comparing certain 2014 financial information with the same periods in 2013 (in millions):

 

Organic Revenues (non-GAAP)

   4th Q 14     4th Q 13     Year 14     Year 13  

Fees

   $ 163.3      $ 147.6      $ 644.6      $ 589.0   

International performance bonus fees

     4.4        3.3        18.7        20.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fees as reported

  167.7      150.9      663.3      609.0   

Less fees from acquisitions

  (0.4   —        (4.1   —     

Less South Australia ramp up fees

  —        —        —        (1.4

Less New Zealand earthquake claims administration

  —        —        —        (0.1

Levelized foreign currency translation

  —        (2.3   —        (5.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic fees

$ 167.3    $ 148.6    $ 659.2    $ 602.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Organic change in fees

  12.6   7.3   9.5   9.3
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Adjusted Compensation Expense and Ratio (non-GAAP)

          4th Q 14     4th Q 13     Year 14     Year 13  

Reported amounts

      $ 100.9      $ 97.0      $ 401.6      $ 370.5   

New South Wales client run-off**

        (1.7     —          (1.7     —     

Claim portfolio transfer ramp up costs

        (1.2     (1.2     (3.6     (1.2

Workforce and lease termination related charges

        —          (1.5     (0.6     (1.7

Levelized foreign currency translation

        —          (1.2     —          (3.2
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted amounts

$ 98.0    $ 93.1    $ 395.7    $ 364.4   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted ratios using adjusted revenues on pages 2 and 3

  *      58.4   62.4   59.6   60.3
     

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Adjusted fourth quarter compensation ratio was 4.0 pts lower than the same period in 2013. The 2013 ratio was 1.5 pts higher due to abnormally adverse employee medical plan severity. The remaining 2.5 pts of decrease in fourth quarter 2014 compared to 2013 is primarily due to compensation savings related to headcount controls.

 

Adjusted Operating Expense and Ratio (non-GAAP)

          4th Q 14     4th Q 13     Year 14     Year 13  

Reported amounts

      $ 54.6      $ 35.6      $ 173.3      $ 146.0   

New South Wales client run-off**

        (11.2     —          (11.2     —     

Claim portfolio transfer and South Australia ramp up costs

        (0.5     —          (2.8     (0.1

Workforce and lease termination related charges

        (0.2     —          (0.2     —     

Levelized foreign currency translation

        —          (0.3     —          (0.7
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted amounts

$ 42.7    $ 35.3    $ 159.1    $ 145.2   
     

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted ratios using adjusted revenues on pages 2 and 3

  *      25.4   23.7   24.0   24.0
     

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Adjusted fourth quarter operating expense ratio was 1.7 pts higher than the same period in 2013. This ratio was primarily impacted by higher professional fees of 1.0 pts.

 

  ** As previously announced on November 18, 2014, a contract with the New South Wales Compensation Scheme in Australia moved to run-off on January 1, 2015. Most of the amounts adjusted herein relate to non-cash impairments of capitalized software and personnel costs dedicated to servicing the run-off contract.

 

(5 of 12)


Risk Management Segment Fourth Quarter Highlights (continued)

 

Adjusted EBITDAC (non-GAAP)

   4th Q 14     4th Q 13     Year 14     Year 13  

Total EBITDAC — see page 10 for computation

   $ 12.4      $ 18.9      $ 89.4      $ 94.5   

New South Wales client run-off

     12.9        —          12.9        —     

Workforce and lease termination related charges

     0.2        1.5        0.8        1.7   

Claim portfolio transfer and South Australia ramp up

     1.7        1.2        6.4        (0.1

Levelized foreign currency translation

     —          (0.8     —          (1.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAC

$ 27.2    $ 20.8    $ 109.5    $ 94.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAC change

  30.8   -6.1   15.9   6.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAC margin

  16.2   13.9   16.5   15.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate Segment Fourth Quarter Highlights — The following table provides information that management believes is helpful when comparing 2014 operating results for the Corporate Segment with the same periods in 2013 (in millions):

 

     2014          2013      
     Pretax
Earnings
(Loss)
    Income
Tax
Benefit
     Net
Earnings
(Loss)
         Pretax
Earnings
(Loss)
    Income
Tax
Benefit
     Net
Earnings
(Loss)
     

4th Quarter

                   

Interest and banking costs

   $ (26.4   $ 10.6       $ (15.8      $ (14.5   $ 5.8       $ (8.7  

Clean energy investments

     (29.8     52.6         22.8           (15.5     31.3         15.8     

Acquisition costs

     (6.9     2.2         (4.7        (6.2     1.5         (4.7  

Corporate

     (9.0     4.2         (4.8   (1)      (5.5     3.9         (1.6  
  

 

 

   

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

Adjusted 4th quarter

$ (72.1 $ 69.6    $ (2.5 $ (41.7 $ 42.5    $ 0.8   
  

 

 

   

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

Diluted net earnings per share, as adjusted

$ (0.02 $ 0.01   

Retirement plan de-risking strategies

  (0.08 (1)   —     
       

 

 

           

 

 

   

Diluted net earnings per share, as reported

$ (0.10 $ 0.01   
       

 

 

           

 

 

   

Year

Interest and banking costs

$ (91.2 $ 36.5    $ (54.7 $ (53.0 $ 21.2    $ (31.8

Clean energy investments

  (88.7   179.2      90.5    (2)   (58.9   116.8      57.9    (2)

Acquisition costs

  (23.1   3.3      (19.8   (5.6   0.2      (5.4

Corporate

  (21.5   2.3      (19.2 (1)   (18.7   9.8      (8.9
  

 

 

   

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

Adjusted full year

$ (224.5 $ 221.3    $ (3.2 $ (136.2 $ 148.0    $ 11.8   
  

 

 

   

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

Diluted net earnings per share, as adjusted

$ (0.02 $ 0.09   

Non-cash gains on changes in ownership levels

  0.09    (2)   0.05    (2)

Retirement plan de-risking strategies

  (0.08 (1)   —     
       

 

 

           

 

 

   

Diluted net earnings per share, as reported

$ (0.01 $ 0.14   
       

 

 

           

 

 

   

 

(1) Excludes a non-cash after-tax settlement charge of $12.5 million, or approximately $0.08 per share, related to retirement plan de-risking strategies. As announced in Gallagher’s third quarter 2014 earnings release and conference call, and more fully discussed on page 54 of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, Gallagher was in the process of pursuing retirement plan de-risking strategies. The window for accepting the offers closed in early December 2014 and the payouts were completed prior to December 31, 2014.

 

(2) Excludes non-cash after tax gains of $14.1 million and $5.8 million from re-consolidation accounting gains related to clean-energy investments recorded in first quarters of 2014 and 2013, respectively.

Debt, interest and banking — At December 31, 2014, Gallagher had $2,125.0 million of borrowings from private placements and $140.0 million of short-term borrowings under its line of credit facility. On June 16, 2014 we entered into a revolving loan facility that provides funding for the three acquired Australian and New Zealand premium finance subsidiaries. This facility comprises four tranches which total approximately $180.0 million, of which $127.9 million was outstanding at December 31, 2014. These premium funding related borrowings are fully collateralized by the underlying premium finance related receivables and as such is excluded from our debt covenant computations.

 

(6 of 12)


Corporate Segment Fourth Quarter Highlights (continued)

At-the-market equity program — Gallagher has an at-the-market equity program under which up to $166.3 million of its common stock remaining in the program may be sold through Morgan Stanley & Co. LLC as sales agent. During fourth quarter 2014, Gallagher sold 609,886 shares of its common stock under this program at a weighted average price of $48.11 per share, resulting in net proceeds to Gallagher, after sales commissions, of approximately $29.0 million.

Clean energy investments — The following provides certain information related to Gallagher’s investments in limited liability companies that own 34 clean coal production plants, which produce refined coal using proprietary technologies owned by Chem-Mod. We believe that the production and sale of refined coal at these plants qualifies to receive refined coal tax credits under IRC Section 45 through 2019 for the fourteen 2009 Era Plants and through 2021 for the twenty 2011 Era Plants. The underlying operations of those investments where Gallagher has a controlling ownership interest are consolidated.

 

                 Gallagher’s Portion of Estimated  
($ in millions)    Gallagher’s
Tax-Effected
Book Value At
December 31, 2014
     Additional
Required
Tax-Effected
Capital
Investment
     Ultimate Annual
After-tax
Earnings *
 

Investments that own 2009 Era Plants

           

10 Under long-term production contracts

   $ 9.0       $ —         $ 20.0   

4 In negotiations for long-term production contracts

     1.4         Not Estimable         Not Estimable   

Investments that own 2011 Era Plants

           

16 Under long-term production contracts

     31.9         3.8         75.0   

4 In negotiations for long-term production contracts

     1.4         Not Estimable         Not Estimable   

 

  * Reflects management’s current best estimate of the ultimate future potential annual after-tax earnings based on production estimates from the host utilities. However, host utilities do not consistently utilize the refined fuel plants at ultimate production levels due to seasonal electricity demand, as well as for many other operational, regulatory and environmental compliance reasons.

Gallagher’s investment in Chem-Mod generates royalty income from clean energy plants owned by those limited liability companies in which it invests as well as refined coal production plants owned by other unrelated parties. Based on current production estimates provided by licensees, Chem-Mod could generate for Gallagher an average of approximately $4.0 million of net after-tax earnings per quarter.

All estimates set forth above regarding the potential future earnings impact of our clean energy investments are subject to significant risks. Please refer to Gallagher’s filings with the SEC, including Item 1A, “Risk Factors,” of its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and our prospectus supplement filed on April 11, 2014, for a more detailed discussion of these and other factors that could impact the information above.

Acquisition costs — Consists mostly of external professional fees and other due diligence costs related to acquisitions.

Corporate — Consists of overhead allocations mostly related to corporate staff compensation. Gallagher incurred a $12.5 million after tax non-cash settlement charge in the fourth quarter of 2014 related to a retirement plan de-risking strategy that is more fully discussed in Note 3 on page 16 of the supplemental quarterly data that is available at www.ajg.com.

Income Taxes

Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory rates. Gallagher historically has reported, and anticipates reporting for the foreseeable future, an effective tax rate of approximately 35% to 37% in both its Brokerage and Risk Management segments. Gallagher’s consolidated effective tax rate for the quarter ended December 31, 2014 and 2013 was (95.8)% and (21.7)%, respectively. Gallagher’s tax rate for the quarter ended December 31, 2014 was lower than the statutory rate and was lower than 2013 due to the amount of IRC Section 45 tax credits earned in 2014 compared to 2013.

Foreign Currency

During the fourth quarter of 2014 the US Dollar strengthened significantly verses other global currencies. The impact of the exchange rate differences between comparative periods in 2013 have been reflected in the tables throughout this earnings release. Had the US Dollar remained at levels seen in the third quarter of 2014, Gallagher would have reported an additional $0.01 of net earnings per share in the fourth quarter of 2014 and for full year 2014 in the Brokerage segment. The foreign currency impact to the Risk Management segment was insignificant.

 

(7 of 12)


Webcast Conference Call

Gallagher will host a webcast conference call on Wednesday, February 4, 2015 at 9:00 a.m. ET/8:00 a.m. CT. To listen to this call, please go to www.ajg.com. The call will be available for replay at such website for not less than 90 days.

About Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 30 countries and offers client-service capabilities in more than 140 countries around the world through a network of correspondent brokers and consultants.

Cautionary Information

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words “anticipates,” “believes,” “contemplates,” “see,” “should,” “could,” “will,” “estimates,” “expects,” “intends,” “plans” and variations thereof and similar expressions, are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding (i) the amount of, and potential uses for, investment returns generated by Gallagher’s clean energy investments; (ii) our corporate income tax rate; (iii) anticipated future results or performance of any segment or the Company as a whole; (iv) the premium rate environment; (v) the future margin impact of recent acquisitions; (vi) future debt to earnings ratios of the company; and (vii) the economic environment.

Gallagher’s actual results may differ materially from those contemplated by the forward-looking statements. Readers are therefore cautioned against relying on any of the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following:

 

    Risks and uncertainties related to Gallagher’s clean energy investments including uncertainties related to political and regulatory risks, including potential actions by Congress or challenges by the IRS eliminating or reducing the availability of tax credits under IRC Section 45 retroactively and/or going forward; the ability to maintain and find co-investors; the potential for divergent business objectives by co-investors and other stakeholders; plant operational risks, including supply-chain risks; utilities’ future use of, or demand for, coal; the market price of coal; the costs of moving a clean coal plant; intellectual property litigation risks; and environmental risks — all could impact (i) and (ii) above; and

 

    Changes in worldwide and national economic conditions, changes in premium rates and in insurance markets generally and changes in the insurance brokerage industry’s competitive landscape — all could impact (iii) — (vii) above.

Please refer to Gallagher’s filings with the SEC, including Item 1A, “Risk Factors,” of its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its prospectus supplement filed on April 11, 2014, for a more detailed discussion of these and other factors that could impact its forward-looking statements. Any forward-looking statement made by Gallagher in this press release speaks only as of the date on which it is made. Except as required by applicable law, Gallagher does not undertake to update the information included herein or the corresponding earnings release posted on Gallagher’s website.

Information Regarding Non-GAAP Measures

In addition to reporting financial results in accordance with GAAP, this press release provides information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments, adjusted revenues, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue measures for each operating segment. These measures are not in accordance with, or an alternative to, the GAAP information provided in this press release. Gallagher’s management believes that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher’s results of operations and financial condition. Gallagher’s industry peers may provide similar supplemental non-GAAP information related to organic revenues and EBITDAC, although they may not use the same or comparable terminology and may not make identical adjustments. The non-GAAP information provided by Gallagher should be used in addition to, but not as a substitute for, the GAAP information provided. Certain reclassifications have been made to the prior year amounts reported in this press release in order to conform them to the current year presentation.

Adjusted presentation — Gallagher believes that the adjusted presentations of the current and prior year information, presented in this earnings release, provides stockholders and other interested persons with useful information regarding certain financial metrics of Gallagher that may assist such persons in analyzing Gallagher’s operating results as they develop a future earnings outlook for Gallagher. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period.

 

(8 of 12)


    Adjusted revenues and expenses — Gallagher defines these measures as revenues, compensation expense and operating expense, respectively, each adjusted to exclude net gains realized from sales of books of business, acquisition integration costs, claim portfolio transfer and South Australia ramp up fees/costs, New South Wales client run-off costs, workforce related charges, lease termination related charges, acquisition related adjustments and the impact of foreign currency translation, as applicable. Integration costs include costs related to transactions not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, extra lease space, duplicate services and external costs incurred to assimilate the acquisition with our IT related systems.

 

    Adjusted ratios — Adjusted compensation expense ratio and adjusted operating expense ratio are defined as adjusted compensation expense and adjusted operating expense, respectively, each divided by adjusted revenues.

Earnings Measures — Gallagher believes that each of EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin and diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments, as defined below, provides a meaningful representation of its operating performance. Gallagher considers EBITDAC and EBITDAC margin as a way to measure financial performance on an ongoing basis. Adjusted EBITDAC, adjusted EBITDAC margin and diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments are presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

 

    EBITDAC — Gallagher defines this measure as net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables.

 

    EBITDAC margin — Gallagher defines this measure as EBITDAC divided by total revenues.

 

    Adjusted EBITDAC — Gallagher defines this measure as EBITDAC adjusted to exclude net gains realized from sales of books of business, acquisition integration costs, workforce related charges, lease termination related charges, claim portfolio transfer and South Australia ramp up fees/costs, New South Wales client run-off costs, acquisition related adjustments and the period-over-period impact of foreign currency translation, as applicable.

 

    Adjusted EBITDAC margin — Gallagher defines this measure as adjusted EBITDAC divided by total adjusted revenues (defined above).

 

    Diluted net earnings per share (as adjusted) for the Brokerage and Risk Management segments — Gallagher defines this measure as net earnings adjusted to exclude the after-tax impact of net gains realized from sales of books of business, acquisition integration costs, claim portfolio transfer and South Australia ramp up fees/costs, New South Wales client run-off costs, the impact of foreign currency translation, workforce related charges, lease termination related charges, acquisition related adjustments and effective income tax rate impact divided by diluted weighted average shares outstanding. The effective income tax rate impact represents the difference in income tax expense for tax amounts derived using the actual effective tax rate compared to tax amounts derived using a normalized effective tax rate.

Organic Revenues — For the Brokerage segment, organic change in base commission and fee revenues excludes the first twelve months of net commission and fee revenues generated from acquisitions accounted for as purchases and the net commission and fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of Gallagher in both the current and prior year. In addition, change in base commission and fee organic growth excludes the impact of supplemental commission and contingent commission revenues and the period-over-period impact of foreign currency translation. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same periods in the prior year. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions accounted for as purchases and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the impact of South Australia ramp-up fees and the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability or are due to the limited-time nature of these revenue sources.

These revenue items are excluded from organic revenues in order to determine a comparable measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond. Gallagher has historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of its Brokerage and Risk Management segments. Gallagher also believes that using this measure allows readers of our financial statements to measure, analyze and compare the growth from its Brokerage and Risk Management segments in a meaningful and consistent manner.

Reconciliation of Non-GAAP Information Presented to GAAP Measures — This press release includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on page 10), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 2 and 3), for organic revenue measures (on pages 3 and 5, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 4 and 5, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can be found in the supplemental quarterly data available at www.ajg.com.

 

(9 of 12)


Arthur J. Gallagher & Co.

Reported Statement of Earnings and EBITDAC — 4th Qtr and Year Ended December 31,

(Unaudited — in millions except per share, percentage and workforce data)

 

Brokerage Segment

   4th Q Ended
Dec 31, 2014
     4th Q Ended
Dec 31, 2013
    Year Ended
Dec 31, 2014
     Year Ended
Dec 31, 2013
 

Commissions

   $ 559.5       $ 426.3      $ 2,083.0       $ 1,553.1   

Fees

     178.3         130.0        595.0         450.5   

Supplemental commissions

     26.5         23.9        104.0         77.3   

Contingent commissions

     16.3         8.6        84.7         52.1   

Investment income and gains realized on books of business sales (1)

     22.7         3.9        47.6         11.3   
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues

  803.3      592.7      2,914.3      2,144.3   
  

 

 

    

 

 

   

 

 

    

 

 

 

Compensation

  476.6      370.1      1,715.7      1,290.4   

Operating

  155.2      101.0      534.1      369.9   

Depreciation

  12.6      9.0      44.7      31.1   

Amortization

  53.5      34.5      186.7      122.7   

Change in estimated acquisition earnout payables

  0.9      1.0      17.5      2.6   
  

 

 

    

 

 

   

 

 

    

 

 

 

Expenses

  698.8      515.6      2,498.7      1,816.7   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

  104.5      77.1      415.6      327.6   

Provision for income taxes

  41.1      26.6      151.8      122.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

$ 63.4    $ 50.5    $ 263.8    $ 204.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

EBITDAC

Net earnings

$ 63.4    $ 50.5    $ 263.8    $ 204.8   

Provision for income taxes

  41.1      26.6      151.8      122.8   

Depreciation

  12.6      9.0      44.7      31.1   

Amortization

  53.5      34.5      186.7      122.7   

Change in estimated acquisition earnout payables

  0.9      1.0      17.5      2.6   
  

 

 

    

 

 

   

 

 

    

 

 

 

EBITDAC

$ 171.5    $ 121.6    $ 664.5    $ 484.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Risk Management Segment

   4th Q Ended
Dec 31, 2014
     4th Q Ended
Dec 31, 2013
    Year Ended
Dec 31, 2014
     Year Ended
Dec 31, 2013
 

Fees

   $ 167.7       $ 150.9      $    663.3       $    609.0   

Investment income

     0.2         0.6        1.0         2.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenues

  167.9      151.5      664.3      611.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Compensation

  100.9      97.0      401.6      370.5   

Operating

  54.6      35.6      173.3      146.0   

Depreciation

  5.8      5.2      20.9      19.4   

Amortization

  0.7      0.6      2.8      2.5   

Change in estimated acquisition earnout payables

  —        (0.8   —        (0.9
  

 

 

    

 

 

   

 

 

    

 

 

 

Expenses

  162.0      137.6      598.6      537.5   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

  5.9      13.9      65.7      73.5   

Provision for income taxes

  2.8      5.2      24.5      27.3   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

$ 3.1    $ 8.7    $ 41.2    $ 46.2   
  

 

 

    

 

 

   

 

 

    

 

 

 

EBITDAC

Net earnings

$ 3.1    $ 8.7    $ 41.2    $ 46.2   

Provision for income taxes

  2.8      5.2      24.5      27.3   

Depreciation

  5.8      5.2      20.9      19.4   

Amortization

  0.7      0.6      2.8      2.5   

Change in estimated acquisition earnout payables

  —        (0.8   —        (0.9
  

 

 

    

 

 

   

 

 

    

 

 

 

EBITDAC

$ 12.4    $ 18.9    $ 89.4    $ 94.5   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

Corporate Segment

   4th Q Ended
Dec 31, 2014
    4th Q Ended
Dec 31, 2013
    Year Ended
Dec 31, 2014
    Year Ended
Dec 31, 2013
 

Revenues from consolidated clean coal facilities

   $ 266.0      $ 141.9      $ 975.3      $    387.1   

Royalty income from clean coal licenses

     13.3        8.8        57.4        32.0   

Loss from unconsolidated clean coal facilities

     (0.2     (2.3     (3.2     (6.6

Other net revenues

     (4.9     (2.4     18.4        11.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

  274.2      146.0      1,047.9      424.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues from consolidated clean coal facilities

  291.2      155.7      1,058.9      437.3   

Compensation

  29.2      6.0      50.3      24.1   

Operating

  11.2      11.1      59.8      36.5   

Interest

  25.7      13.9      89.0      50.1   

Depreciation

  1.0      1.0      3.8      2.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

  358.3      187.7      1,261.8      550.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

  (84.1   (41.7   (213.9   (126.6

Benefit for income taxes

  (69.1   (42.5   (212.3   (144.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

$ (15.0 )  $ 0.8    $ (1.6 )  $ 17.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAC

Net earnings

$ (15.0 $ 0.8    $ (1.6 $ 17.6   

Benefit for income taxes

  (69.1   (42.5   (212.3   (144.2

Interest

  25.7      13.9      89.0      50.1   

Depreciation

  1.0      1.0      3.8      2.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAC

$ (57.4 )  $ (26.8 )  $ (121.1 )  $ (73.6 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

See “Information Regarding Non-GAAP Measures” on page 8 of 12 and notes to fourth quarter 2014 earnings release on page 12 of 12.

 

(10 of 12)


Arthur J. Gallagher & Co.

Reported Statement of Earnings and EBITDAC — 4th Qtr and Year Ended December 31,

(Unaudited — in millions except share and per share data)

 

Total Company

   4th Q Ended
Dec 31, 2014
    4th Q Ended
Dec 31, 2013
    Year Ended
Dec 31, 2014
    Year Ended
Dec 31, 2013
 

Commissions

   $ 559.5      $ 426.3      $ 2,083.0      $ 1,553.1   

Fees

     346.0        280.9        1,258.3        1,059.5   

Supplemental commissions

     26.5        23.9        104.0        77.3   

Contingent commissions

     16.3        8.6        84.7        52.1   

Investment income and gains realized on books of business sales

     22.9        4.5        48.6        13.3   

Revenues from clean coal activities

     279.1        148.4        1,029.5        412.5   

Other net revenues — Corporate

     (4.9     (2.4     18.4        11.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

  1,245.4      890.2      4,626.5      3,179.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Compensation

  606.7      473.1      2,167.6      1,685.0   

Operating

  221.0      147.7      767.2      552.4   

Cost of revenues from clean coal activities

  291.2      155.7      1,058.9      437.3   

Interest

  25.7      13.9      89.0      50.1   

Depreciation

  19.4      15.2      69.4      53.4   

Amortization

  54.2      35.1      189.5      125.2   

Change in estimated acquisition earnout payables

  0.9      0.2      17.5      1.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

  1,219.1      840.9      4,359.1      2,905.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

  26.3      49.3      267.4      274.5   

Provision (benefit) for income taxes

  (25.2   (10.7   (36.0   5.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

$ 51.5    $ 60.0    $ 303.4    $ 268.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share

$ 0.31    $ 0.45    $ 1.97    $ 2.06   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per share

$ 0.36    $ 0.35    $ 1.44    $ 1.40   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAC

Net earnings

$ 51.5    $ 60.0    $ 303.4    $ 268.6   

Provision (benefit) for income taxes

  (25.2   (10.7   (36.0   5.9   

Interest

  25.7      13.9      89.0      50.1   

Depreciation

  19.4      15.2      69.4      53.4   

Amortization

  54.2      35.1      189.5      125.2   

Change in estimated acquisition earnout payables

  0.9      0.2      17.5      1.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAC

$ 126.5    $ 113.7    $ 632.8    $ 504.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Arthur J. Gallagher & Co.

Consolidated Balance Sheet

(Unaudited — in millions except per share data)

 

     Dec 31, 2014     Dec 31, 2013  

Cash and cash equivalents

   $ 314.4      $ 298.1   

Restricted cash

     1,367.6        1,027.4   

Premiums and fees receivable

     1,462.5        1,288.8   

Other current assets

     666.7        261.3   
  

 

 

   

 

 

 

Total current assets

  3,811.2      2,875.6   

Fixed assets — net

  195.4      160.4   

Deferred income taxes

  392.6      279.8   

Other noncurrent assets

  385.2      320.7   

Goodwill — net

  3,449.6      2,145.2   

Amortizable intangible assets — net

  1,776.0      1,078.8   
  

 

 

   

 

 

 

Total assets

$ 10,010.0    $ 6,860.5   
  

 

 

   

 

 

 

Premiums payable to insurance and reinsurance companies

$ 2,623.3    $ 2,154.7   

Accrued compensation and other accrued liabilities

  623.7      370.6   

Unearned fees

  66.1      84.5   

Other current liabilities

  61.7      44.5   

Premium financing borrowings

  127.9      —     

Corporate related borrowings — current

  140.0      630.5   
  

 

 

   

 

 

 

Total current liabilities

  3,642.7      3,284.8   

Corporate related borrowings — noncurrent

  2,125.0      825.0   

Other noncurrent liabilities

  1,012.9      665.2   
  

 

 

   

 

 

 

Total liabilities

  6,780.6      4,775.0   
  

 

 

   

 

 

 

Stockholders’ equity:

Common stock — issued and outstanding

  164.6      133.6   

Capital in excess of par value

  2,649.4      1,358.1   

Retained earnings

  676.0      596.4   

Accumulated other comprehensive loss

  (260.6   (2.6
  

 

 

   

 

 

 

Total stockholders’ equity

  3,229.4      2,085.5   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

$ 10,010.0    $ 6,860.5   
  

 

 

   

 

 

 

See “Information Regarding Non-GAAP Measures” on page 8 of 12 and notes to fourth quarter 2014 earnings release on page 12 of 12.

 

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Arthur J. Gallagher & Co.

Other Information and Notes

(Unaudited — data is rounded where indicated)

 

OTHER INFORMATION

   4th Q Ended
Dec 31, 2014
     4th Q Ended
Dec 31, 2013
     Year Ended
Dec 31, 2014
     Year Ended
Dec 31, 2013
 

Basic weighted average shares outstanding (000s)

     162,705         132,334         152,854         128,894   

Diluted weighted average shares outstanding (000s)

     164,007         133,990         154,259         130,467   

Common shares issued for acquisitions & earnouts (excluding secondary offering) (000s)

     2,370         1,743         6,453         5,181   

Number of acquisitions closed

     15         14         60         31   

Annualized revenues acquired (in millions)

   $ 67.6       $ 207.5       $ 761.2       $ 383.9   

Number of common shares outstanding at end of period (000s)

           164,605         133,618   

Workforce at end of period (includes acquisitions):

           

Brokerage

           14,952         11,193   

Risk Management

           4,889         4,806   

Total Company

           20,240         16,336   

Notes to Fourth Quarter 2014 Earnings Release

 

 

(1) The reported investment income and gains realized on books of business sales for 2014 include premium financing income primarily generated by the Crombie/OAMPS operations which were acquired on June 16, 2014. Operating results of the Crombie/OAMPS premium financing business recognized by Gallagher in 2014 are as follows (in millions):

 

     4th Q Ended
Dec 31, 2014
     Year Ended
Dec 31, 2014
 

Premium financing interest and fee income (included in investment income line)

   $ 11.6       $ 26.7   
  

 

 

    

 

 

 

Revenues

  11.6      26.7   
  

 

 

    

 

 

 

Compensation and commissions (included in compensation expense line)

  4.3      9.9   

Operating costs and premium financing interest (included in operating expense line)

  4.7      10.8   
  

 

 

    

 

 

 

Expenses

  9.0      20.7   
  

 

 

    

 

 

 

EBITDAC

$ 2.6    $ 6.0   
  

 

 

    

 

 

 

Contact: Marsha Akin

Director — Investor Relations

630-285-3501 or marsha_akin@ajg.com

 

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