NEW YORK, May 3, 2013 /PRNewswire/ --
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Financial Highlights(1)
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Q1
2013
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Q1
2012
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%
Change
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(Dollars
in millions, except per share amounts)
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Revenue
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$
263.5
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$
254.1
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3.7%
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Net
income (controlling interest)
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4.2
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5.6
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-26.1%
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Net
income per diluted share
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0.09
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0.13
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-30.8%
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Cash
earnings
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23.6
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24.4
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-3.4%
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Cash
earnings per diluted share
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$
0.52
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$
0.57
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-8.8%
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Adjusted EBITDA
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$
32.7
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$
32.1
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1.8%
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Adjusted EBITDA margin
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12.4%
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12.6%
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Net
cash provided by (used in) operating activities
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$
21.2
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$
(14.6)
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NM
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(1)
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This
summary includes financial measures not calculated based on
generally accepted accounting principles.
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NM
indicates metric not meaningful.
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National Financial Partners Corp. (NYSE: NFP), a leading
provider of benefits, insurance and wealth management services,
today reported financial results for the first quarter ended
March 31, 2013.
(Logo: http://photos.prnewswire.com/prnh/20100920/NY67494LOGO
)
NFP announced on April 15, 2013
that it has entered into a definitive agreement with a controlled
affiliate of Madison Dearborn Partners, LLC, under which such
controlled affiliate will acquire NFP.
First Quarter 2013 Results - Consolidated
NFP reported
first quarter 2013 net income (controlling interest) of
$4.2 million, or $0.09 per diluted share, compared with net income
(controlling interest) of $5.6
million, or $0.13 per diluted
share, in the prior year period. Net income (controlling
interest) excludes minority interests.
First quarter 2013 cash earnings was $23.6 million, or $0.52 per diluted share, compared with
$24.4 million, or $0.57 per diluted share, in the first quarter
2012. First quarter 2013's effective tax rate of 53.8% was
primarily driven by the impact of planned management contract
buyout expense on estimated pre-tax book income and the consequent
higher proportion of non-deductible expenses in the estimated
annual pre-tax book income. Compared to an expected effective
tax rate of 42% for 2013, excluding the impacts of management
contract buyouts, impairments, disposition activity and changes in
unrecognized tax benefits, first quarter 2013's higher effective
tax rate negatively impacted cash earnings per diluted share by
approximately $0.02 for the
quarter. In addition, deal-related expenses associated with
the pending acquisition of NFP negatively impacted cash earnings
per diluted share by approximately $0.01 in the first quarter 2013. In the
first quarter 2012, an interim effective tax rate of 24.0% was due
to a reduction in unrecognized tax benefits.
NFP had 45.3 million weighted average fully diluted shares
outstanding for the first quarter 2013 compared with 43.5 million
shares for the fourth quarter 2012. The increase in the first
quarter 2013 was due to an increase in the shares that may be
issued upon conversion of NFP's senior convertible notes, based on
the increase in the average share price, from 2.4 million shares in
the fourth quarter 2012 to 3.2 million shares as of the end of the
first quarter 2013. In addition, there was a dilutive impact
of 1.7 million shares in the first quarter 2013, compared with 0.8
million shares in the fourth quarter 2012, associated with warrants
that were sold in connection with the issuance of the senior
convertible notes in June 2010. NFP's share delivery
obligation may be offset by the obligation of the counterparties to
the convertible note hedge agreements to deliver a similar number
of shares.
Adjusted EBITDA in the first quarter 2013 was $32.7 million, an increase of 1.8%, compared with
$32.1 million in the first quarter
2012. Adjusted EBITDA margin of 12.4% in the first quarter
2013 compared with 12.6% in the prior year period.
Revenue was $263.5 million in the
first quarter 2013, an increase of 3.7%, compared with $254.1 million in the first quarter 2012. Organic
revenue increased 4.4% in the first quarter 2013, compared with the
prior year period. Organic revenue growth was driven by all three
business segments.
Total operating expenses were $252.4
million in the first quarter 2013, compared with
$244.1 million in the prior year
period. Increases were driven by acquisitions and the expense for
management contract buyouts. In addition, operating expenses
included deal-related expenses associated with the pending
acquisition of NFP.
Cash flow from operations for the first quarter 2013 was
$21.2 million compared with cash flow
used in operations of $14.6 million
in the first quarter 2012, a $35.8
million increase. During the first quarter 2013, the Company
made a cash payment in connection with a management contract buyout
of $0.9 million that runs through
operating cash flow compared to $3.4
million in the first quarter 2012. In addition,
estimated tax payments and fees to principals were $6.5 million and $9.6
million lower, respectively, in the first quarter 2013
compared to the prior year period.
First Quarter 2013 Results – Segments
NFP reports
results in three segments that provide unique products and services
to corporate and high net worth individual clients: the Corporate
Client Group, the Individual Client Group and the Advisor Services
Group.
Corporate Client Group (CCG)
CCG is one of the leading corporate benefits advisors in the middle
market, offering independent solutions for health and welfare,
retirement planning, executive benefits, and property and casualty
insurance.
CCG accounted for 46.6% of NFP's revenue in the first quarter
2013 and 44.1% in the first quarter 2012. This increase was
driven by both acquisitions and organic growth. CCG revenue
was $122.6 million in the first
quarter 2013 compared with $112.1
million in the prior year period, an increase of
$10.5 million or 9.4%. CCG
organic revenue growth was 2.4%.
CCG Adjusted EBITDA was $25.0
million in the first quarter 2013 compared with $24.5 million in the prior year period.
Adjusted EBITDA margin was 20.4% in the first quarter 2013 compared
with 21.9% in the prior year period.
Individual Client Group (ICG)
ICG is a leader in the delivery of independent life insurance and
wealth transfer solutions for high net worth individuals.
ICG's advisors provide wealth accumulation, preservation and
transfer solutions, including estate and business planning and
financial advisory services.
ICG accounted for 28.9% of NFP's revenue in the first quarter
2013 and 31.7% in the first quarter 2012. ICG revenue
was $76.2 million in the first
quarter 2013 compared with $80.6
million in the prior year period. This decrease of
$4.4 million, or 5.5%, was primarily
driven by dispositions. ICG organic revenue increased
6.6%.
ICG Adjusted EBITDA was $3.7
million in the first quarter 2013 compared with $4.7 million in the prior year period. Adjusted
EBITDA margin was 4.9% in the first quarter 2013 compared with 5.8%
in the prior year period.
Advisor Services Group (ASG)
ASG serves independent financial advisors whose clients are high
net worth individuals and companies by offering an open choice of
broker-dealer and asset management products and services.
ASG accounted for 24.5% of NFP's revenue in the first quarter
2013 and 24.2% for the first quarter 2012. ASG revenue was
$64.7 million in the first quarter
2013 compared with $61.4 million in
the prior year period, an increase of $3.2
million. Revenue and organic revenue increased
5.2%.
ASG Adjusted EBITDA was $4.0
million in the first quarter 2013 compared with $2.9 million in the prior year period. Adjusted
EBITDA margin was 6.1% in the first quarter 2013 and 4.7% in the
prior year period.
As of March 31, 2013, assets under
management at NFP's corporate registered investment advisor were
$11.4 billion, compared with
$10.1 billion as of March 31, 2012.
Acquisition Activity
Effective March 8, 2013, Brady Financial Group (BFG) became
a part of NFP Canada. In this transaction, NFP purchased a
70% membership interest in BFG. NFP recognizes the remaining
30% membership interest as minority interest. NFP has the
right to purchase the remaining 30% membership interest in the
future, depending on certain conditions. Founded in 1998, BFG
has annualized revenue of approximately $3
million and is a provider of corporate employee benefits,
retirement and insurance to the greater Toronto market.
Effective April 1, 2013, NFP
acquired the management company associated with Ikon
Insurance. Ikon Insurance, part of NFP since 2003 and based
in San Juan, Puerto Rico with
annualized revenue of approximately $19
million, is a comprehensive employee benefits solution
provider and financial services firm working with closely held
businesses, institutional and individual clients to provide group
health benefits, as well as voluntary and flexible benefits.
Effective April 3, 2013, NFP
acquired Thoits Insurance Services (Thoits Insurance), a leading
provider of property & casualty (P&C) insurance in
California. Thoits Insurance will be integrated into NFP
Property & Casualty Insurance Services (NFP P&C) to
establish a California regional
office, responsible for the management and growth of P&C in
this area. Thoits Insurance, with annualized revenue of
approximately $10 million, was
founded in 1891.
About NFP
National Financial Partners Corp. (NYSE:
NFP), and its benefits, insurance and wealth management businesses
provide diversified advisory and brokerage services to companies
and high net worth individuals, partnering with them to preserve
their assets and prosper over the long term. NFP advisors provide
innovative and comprehensive solutions, backed by NFP's national
scale and resources. NFP operates in three business segments. The
Corporate Client Group provides corporate and executive benefits,
retirement plans and property and casualty insurance. The
Individual Client Group includes retail and wholesale life
insurance brokerage and wealth management advisory services. The
Advisor Services Group serves independent financial advisors by
offering broker/dealer and asset management products and services.
Most recently NFP was ranked eighth on Business Insurance's 100
Largest Brokers of U.S. Business; second on Business Insurance's
Largest Agents and Brokers Headquartered in the U.S. Northeast; and
as the ninth Top Global Insurance Broker by Best's Review; it
operates the third largest executive benefits provider of
nonqualified deferred compensation plans by total clients as ranked
by PlanSponsor; operates a top 10 independent broker/dealer as
ranked by Investment Advisor; and has three advisors ranked in
Barron's Top 100 Independent Financial Advisors. NFP is also a
leading independent life insurance distributor according to many
top-tier carriers. For more information, visit
www.nfp.com.
Reconciliation of Non-GAAP Financial Measures
The
Company analyzes its performance using historical and
forward-looking non-GAAP financial measures called cash earnings,
cash earnings per diluted share, Adjusted EBITDA and percentages or
calculations using these measures. The Company believes these
non-GAAP financial measures provide additional meaningful methods
of evaluating certain aspects of the Company's operating
performance from period to period on a basis that may not be
otherwise apparent under GAAP. Cash earnings is defined as
net income excluding amortization of intangibles; depreciation; the
after-tax impact of the impairment of goodwill and intangible
assets; the after-tax impact of non-cash interest; the after-tax
impact of change in estimated acquisition earn-out payables
recorded in accordance with purchase accounting that have been
subsequently adjusted and recorded in the consolidated statements
of income; the after-tax impact of management contract buyouts; net
income (non-controlling interests) and the after-tax impact of
certain non-recurring items. Cash earnings per diluted share
is calculated by dividing cash earnings by the number of weighted
average diluted shares outstanding for the period indicated.
Cash earnings and cash earnings per diluted share should not be
viewed as substitutes for net income and net income per diluted
share, respectively. Adjusted EBITDA is defined as net income
excluding income tax expense; interest income; interest expense;
gain on early extinguishment of debt; other, net; amortization of
intangibles; depreciation; impairment of goodwill and intangible
assets; (gain) loss on sale of businesses, net; the accelerated
vesting of, or reversal of previously-recognized expenses related
to, certain RSUs; any change in estimated acquisition earn-out
payables recorded in accordance with purchase accounting that have
been subsequently adjusted and recorded in the consolidated
statements of income; the expense related to management contract
buyouts and minority interest (income) loss. Adjusted EBITDA
should not be viewed as a substitute for net income. A
reconciliation of these non-GAAP financial measures to their GAAP
counterparts is provided in the attached tables and the Company's
quarterly financial supplement for the period ended March 31, 2013, which is available on the
Investor Relations section of the Company's Web site at
www.nfp.com.
Organic Revenue Growth
The Company uses organic
revenue growth to compare revenue across periods. The Company
excludes revenue from new acquisitions, sub-acquisitions, and the
revenue derived from businesses fully disposed of for the first
twelve months after the respective transaction. Where a
significant portion of a business' assets have been disposed, the
Company reduces the prior year's comparable revenue proportionally
to the percentage of assets that have been disposed in making the
organic growth comparison.
Forward-Looking Statements
This release contains
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, any statement that may
project, indicate or imply future results, events, performance or
achievements, and may contain the words "anticipate," "expect,"
"intend," "plan," "believe," "estimate," "may," "project," "will,"
"continue" and similar expressions of a future or forward-looking
nature. Forward-looking statements may include discussions
concerning revenue, expenses, earnings, cash flow, impairments,
losses, dividends, capital structure, market and industry
conditions, premium and commission rates, interest rates,
contingencies, the direction or outcome of regulatory
investigations and litigation, income taxes and the Company's
operations or strategy. These forward-looking statements are based
on management's current views with respect to future results.
Forward-looking statements are based on beliefs and assumptions
made by management using currently-available information, such as
market and industry materials, experts' reports and opinions, and
current financial trends. These statements are only predictions and
are not guarantees of future performance. Forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those contemplated by a
forward-looking statement. These risks and uncertainties include,
without limitation: (1) factors associated with NFP's agreement to
be acquired by a controlled affiliate of Madison Dearborn Partners,
LLC, such as the consummation of the acquisition in timely manner,
if at all, the termination of the agreement in circumstances that
require the payment by NFP of certain fees or expenses, the
diversion of management's attention from the Company's ongoing
business operations, the possibility that NFP's stockholders will
not vote in favor of the merger, the failure of Madison Dearborn to obtain the necessary
financing to complete the acquisition (notwithstanding that
financing commitments have been received), the effect of the
announcement of the acquisition on the Company's business
relationships, operating results and business generally, or the
failure to obtain the requisite approvals to the acquisition; (2)
the ability of the Company to implement its business initiatives,
including increasing recurring revenue and executing management
contract buyouts; (3) NFP's ability, through its operating
structure, to respond quickly to operational, financial or
regulatory situations impacting its businesses; (4) the ability of
the Company's businesses to perform successfully following
acquisition, including through the diversification of product and
service offerings, and NFP's ability to manage its business
effectively and profitably through its employees and principals and
through the Company's reportable segments; (5) any losses or
charges that NFP may take with respect to dispositions,
restructures, the collectability of amounts owed to it, impairments
or otherwise; (6) NFP's success in acquiring and retaining
high-quality independent financial services businesses and their
managers and key producers, and the ability of the Company to
retain its broker-dealers' financial advisors and recruit new
financial advisors; (7) changes in premiums and commission rates or
the rates of other fees paid to the Company, due to requirements
related to medical loss ratios stemming from the Patient Protection
and Affordable Care Act or otherwise; (8) seasonality or an
economic environment that results in fewer sales of products or
services that the Company offers; (9) changes that adversely affect
NFP's ability to manage its indebtedness or capital structure,
including changes in interest rates or credit market conditions;
(10) adverse results or other consequences from matters including
litigation, arbitration, settlements, regulatory investigations or
compliance initiatives, such as those related to business
practices, compensation agreements with insurance companies, or
policy rescissions or chargebacks; (11) the impact of legislation
or regulations on NFP's businesses, such as the impact of the
adoption of the American Taxpayer Relief Act of 2012, the possible
adoption of exclusive federal regulation over interstate insurers,
the uncertain impact of legislation regulating the financial
services industry, the impact of the adoption of the Patient
Protection and Affordable Care Act and resulting changes in
business practices, changes in estate tax laws, or changes in
regulations affecting the value or use of benefits programs, any of
which may adversely affect the demand for or profitability of the
Company's services; (12) adverse developments in the Company's
markets, such as those related to compensation agreements with
insurance companies, which could result in fewer sales of products
or services that the Company offers; (13) the effectiveness or
financial impact of NFP's incentive plans; (14) NFP's ability to
operate effectively within the restrictive covenants of its credit
facility; (15) the impact of capital markets behavior, such as
fluctuations in the price of NFP's common stock, or the dilutive
impact of capital raising efforts; (16) the impact of the adoption
or change in interpretation of certain tax or accounting treatments
or policies and changes in underlying assumptions relating to such
treatments or policies, which may lead to adverse financial
statement results; (17) failure by the Company's broker-dealers to
comply with net capital requirements; (18) the loss of services of
key members of senior management; (19) the Company's ability to
compete against competitors with greater resources, such as those
with greater name recognition, or any damage to the Company's
reputation; (20) developments in the availability, pricing, design,
tax treatment or underwriting of insurance products, including
insurance carriers' potential change in accounting for deferred
acquisition costs, revisions in mortality tables by life expectancy
underwriters or changes in the Company's relationships with
insurance companies; (21) the reduction of the Company's revenue
and earnings due to the elimination or modification of compensation
arrangements, including contingent compensation arrangements and
the adoption of internal initiatives to enhance compensation
transparency; (22) the occurrence of adverse economic conditions or
an adverse legal or regulatory climate in New York, Florida or California; and (23) the Company's ability to
effect smooth succession planning.
Additional factors are set forth in NFP's filings with the
Securities and Exchange Commission (the "SEC"), including its
Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on
February 15, 2013.
Forward-looking statements speak only as of the date on which
they are made. NFP expressly disclaims any obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
CONSOLIDATED STATEMENTS OF INCOME
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(Unaudited-in thousands, except per share
amounts)
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Three Months Ended
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March
31,
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2013
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|
2012
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Revenue:
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Commissions and fees
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$
263,471
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$
254,131
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Operating
expenses:
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Commissions and fees
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81,014
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82,150
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Compensation expense - employees
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79,532
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70,948
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Fees to
principals
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28,000
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29,207
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Non-compensation expense
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42,124
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39,702
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Amortization of intangibles
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8,401
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8,275
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Depreciation
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2,982
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|
3,146
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Impairment
of goodwill and intangible assets
|
2,571
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|
3,228
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Loss
(gain) on sale of businesses, net
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89
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(351)
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Change in
estimated acquisition earn-out payables
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908
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4,466
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Management
contract buyout
|
6,733
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|
3,355
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Total
operating expenses
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252,354
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|
244,126
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Income
from operations
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11,117
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|
10,005
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Non-operating income and expenses
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Interest
income
|
604
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|
629
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Interest
expense
|
(4,206)
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|
(4,121)
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Other,
net
|
1,614
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|
880
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Non-operating income and expenses, net
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(1,988)
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(2,612)
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Income
before income taxes
|
9,129
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|
7,393
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Income tax
expense
|
4,915
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|
1,775
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Net
income
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$
4,214
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|
$
5,618
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Net income
(non-controlling interests)
|
(63)
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-
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Net income
(controlling interest)
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$
4,151
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$
5,618
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Earnings
per share:
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Basic
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$
0.10
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$
0.14
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Diluted
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$
0.09
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$
0.13
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Weighted
average shares outstanding:
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Basic
|
40,002
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|
40,518
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Diluted
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45,280
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|
42,599
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RECONCILIATION OF NET INCOME TO ADJUSTED
EBITDA
|
(Unaudited-in thousands)
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Three Months Ended
|
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|
March
31,
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2013
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2012
|
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GAAP net
income
|
$
4,214
|
|
$
5,618
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Income tax
expense
|
4,915
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|
1,775
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|
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Interest
income
|
(604)
|
|
(629)
|
|
|
Interest
expense
|
4,206
|
|
4,121
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|
|
Other,
net
|
(1,614)
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|
(880)
|
|
Income
from operations
|
$
11,117
|
|
$
10,005
|
|
|
Amortization of intangibles
|
8,401
|
|
8,275
|
|
|
Depreciation
|
2,982
|
|
3,146
|
|
|
Impairment
of goodwill and intangible assets
|
2,571
|
|
3,228
|
|
|
Loss
(gain) on sale of businesses, net
|
89
|
|
(351)
|
|
|
Change in
estimated acquisition earn-out payables
|
908
|
|
4,466
|
|
|
Management
contract buyout
|
6,733
|
|
3,355
|
|
|
Minority
interest (income) loss
|
(93)
|
|
-
|
|
Adjusted
EBITDA (1)
|
$
32,708
|
|
$
32,124
|
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO CASH
EARNINGS
|
|
|
|
(Unaudited-in thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
GAAP net
income
|
$
4,214
|
|
$
5,618
|
|
|
|
|
|
|
Amortization of intangibles
|
8,401
|
|
8,275
|
|
|
|
|
|
|
Depreciation
|
2,982
|
|
3,146
|
|
|
|
|
|
|
Impairment
of goodwill and intangible assets
|
2,571
|
|
3,228
|
|
|
|
|
|
|
Tax
benefit of impairment of goodwill and
|
|
|
|
|
|
|
|
|
|
intangible
assets
|
(977)
|
|
(1,227)
|
|
|
|
|
|
|
Non-cash
interest, net of tax
|
795
|
|
717
|
|
|
|
|
|
|
Change in
estimated acquisition earn-out payables, net of tax
|
631
|
|
2,544
|
|
|
|
|
|
|
Management
contract buyout, net of tax
|
4,996
|
|
2,080
|
|
|
|
|
|
|
Net income
(non-controlling interests)
|
(63)
|
|
-
|
|
|
|
|
|
Cash
earnings (2)
|
$
23,550
|
|
$
24,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income per share - diluted
|
$
0.09
|
|
$
0.13
|
|
|
|
|
|
|
Amortization of intangibles
|
0.19
|
|
0.19
|
|
|
|
|
|
|
Depreciation
|
0.07
|
|
0.07
|
|
|
|
|
|
|
Impairment
of goodwill and intangible assets
|
0.06
|
|
0.08
|
|
|
|
|
|
|
Tax
benefit of impairment of goodwill and
|
|
|
|
|
|
|
|
|
|
intangible
assets
|
(0.02)
|
|
(0.03)
|
|
|
|
|
|
|
Non-cash
interest, net of tax
|
0.02
|
|
0.02
|
|
|
|
|
|
|
Change in
estimated acquisition earn-out payables, net of tax
|
0.01
|
|
0.06
|
|
|
|
|
|
|
Management
contract buyout, net of tax
|
0.11
|
|
0.05
|
|
|
|
|
|
|
Net income
(non-controlling interests)
|
-
|
|
-
|
|
|
|
|
|
Cash
earnings per share - diluted (3)
|
$
0.52
|
|
$
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjusted
EBITDA is a non-GAAP financial measure, which the Company defines
as net income excluding income tax expense; interest
|
|
|
income;
interest expense; gain on early extinguishment of debt; other, net;
amortization of intangibles; depreciation; impairment
|
|
|
of
goodwill and intangible assets; (gain) loss on sale of businesses,
net; the accelerated vesting of, or reversal of
previously-recognized
|
|
expenses
related to, certain RSUs; any change in estimated acquisition
earn-out payables recorded in accordance with purchase
|
|
|
accounting
that have been subsequently adjusted and recorded in the
consolidated statements of income; the expense related
to
|
|
|
management
contract buyouts and minority interest (income) loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Cash
earnings is a non-GAAP financial measure, which the Company defines
as net income excluding amortization of intangibles;
|
|
|
depreciation; the after-tax impact of the impairment
of goodwill and intangible assets; the after-tax impact of non-cash
interest;
|
|
|
the
after-tax impact of change in estimated acquisition earn-out
payables recorded in accordance with purchase
accounting
|
|
|
that have
been subsequently adjusted and recorded in the consolidated
statements of income; the after-tax impact of management
|
|
|
contract
buyouts; net income (non-controlling interests) and the after-tax
impact of certain non-recurring items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
The sum of
the per-share components of cash earnings per share - diluted may
not agree to cash earnings per share -
|
|
|
|
diluted,
due to rounding.
|
|
|
|
|
|
|
|
|
CORPORATE CLIENT GROUP
|
CONDENSED STATEMENTS OF INCOME
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
|
|
|
2013
|
|
2012
|
Revenue:
|
|
|
|
|
Commissions and fees
|
$
122,628
|
|
$
112,089
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Commissions and fees
|
12,570
|
|
13,334
|
|
Compensation expense - employees
|
47,042
|
|
38,733
|
|
Fees to
principals
|
15,390
|
|
16,026
|
|
Non-compensation expense
|
22,584
|
|
19,465
|
|
Amortization of intangibles
|
6,230
|
|
5,909
|
|
Depreciation
|
1,420
|
|
1,427
|
|
Impairment
of goodwill and intangible assets
|
2,571
|
|
2,680
|
|
Loss on
sale of businesses, net
|
-
|
|
46
|
|
Change in
estimated acquisition earn-out payables
|
708
|
|
4,466
|
|
Management
contract buyout
|
6,733
|
|
3,355
|
Total
operating expenses
|
115,248
|
|
105,441
|
|
|
|
|
|
Income
from operations
|
$
7,380
|
|
$
6,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORPORATE CLIENT GROUP
|
|
|
|
RECONCILIATION OF INCOME FROM OPERATIONS TO
ADJUSTED EBITDA (1)
|
|
|
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
$
7,380
|
|
$
6,648
|
|
|
|
|
|
|
Amortization of intangibles
|
6,230
|
|
5,909
|
|
|
|
|
|
|
Depreciation
|
1,420
|
|
1,427
|
|
|
|
|
|
|
Impairment
of goodwill and intangible assets
|
2,571
|
|
2,680
|
|
|
|
|
|
|
Loss on
sale of businesses, net
|
-
|
|
46
|
|
|
|
|
|
|
Change in
estimated acquisition earn-out payables
|
708
|
|
4,466
|
|
|
|
|
|
|
Management
contract buyout
|
6,733
|
|
3,355
|
|
|
|
|
|
|
Minority
interest (income) loss
|
(54)
|
|
-
|
|
|
|
|
|
Adjusted
EBITDA
|
$
24,988
|
|
$
24,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
reconciliation of Adjusted EBITDA per reportable segment does not
include the following items, which are not allocated to any of
the
|
|
|
Company's
reportable segments: income tax expense; interest income; interest
expense; gain on early extinguishment of debt and other,
net.
|
|
These
items are included in the reconciliation of Adjusted EBITDA to net
income on a consolidated basis.
|
|
|
|
INDIVIDUAL CLIENT GROUP
|
CONDENSED STATEMENTS OF INCOME
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
|
|
|
2013
|
|
2012
|
Revenue:
|
|
|
|
|
Commissions and fees
|
$
76,174
|
|
$
80,593
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Commissions and fees
|
17,297
|
|
18,577
|
|
Compensation expense - employees
|
27,935
|
|
28,113
|
|
Fees to
principals
|
12,610
|
|
13,181
|
|
Non-compensation expense
|
14,550
|
|
16,011
|
|
Amortization of intangibles
|
1,955
|
|
2,366
|
|
Depreciation
|
964
|
|
1,012
|
|
Impairment
of goodwill and intangible assets
|
-
|
|
548
|
|
Loss
(gain) on sale of businesses, net
|
89
|
|
(397)
|
Total
operating expenses
|
75,400
|
|
79,411
|
|
|
|
|
|
Income
from operations
|
$
774
|
|
$
1,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDIVIDUAL CLIENT GROUP
|
|
|
|
RECONCILIATION OF INCOME FROM OPERATIONS TO
ADJUSTED EBITDA (1)
|
|
|
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
$
774
|
|
$
1,182
|
|
|
|
|
|
|
Amortization of intangibles
|
1,955
|
|
2,366
|
|
|
|
|
|
|
Depreciation
|
964
|
|
1,012
|
|
|
|
|
|
|
Impairment
of goodwill and intangible assets
|
-
|
|
548
|
|
|
|
|
|
|
Loss
(gain) on sale of businesses, net
|
89
|
|
(397)
|
|
|
|
|
|
|
Minority
interest (income) loss
|
(39)
|
|
-
|
|
|
|
|
|
Adjusted
EBITDA
|
$
3,743
|
|
$
4,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
reconciliation of Adjusted EBITDA per reportable segment does not
include the following items, which are not allocated to any of
the
|
|
|
Company's
reportable segments: income tax expense; interest income; interest
expense; gain on early extinguishment of debt and other,
net.
|
|
These
items are included in the reconciliation of Adjusted EBITDA to net
income on a consolidated basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADVISOR
SERVICES GROUP
|
CONDENSED STATEMENTS OF INCOME
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
|
|
|
2013
|
|
2012
|
Revenue:
|
|
|
|
|
Commissions and fees
|
$
64,669
|
|
$
61,449
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Commissions and fees
|
51,147
|
|
50,239
|
|
Compensation expense - employees
|
4,555
|
|
4,102
|
|
Non-compensation expense
|
4,990
|
|
4,226
|
|
Amortization of intangibles
|
216
|
|
-
|
|
Depreciation
|
598
|
|
707
|
|
Change in
estimated acquisition earn-out payables
|
200
|
|
-
|
Total
operating expenses
|
61,706
|
|
59,274
|
|
|
|
|
|
Income
from operations
|
$
2,963
|
|
$
2,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADVISOR
SERVICES GROUP
|
|
|
|
RECONCILIATION OF INCOME FROM OPERATIONS TO
ADJUSTED EBITDA (1)
|
|
|
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
$
2,963
|
|
$
2,175
|
|
|
|
|
|
|
Amortization of intangibles
|
216
|
|
-
|
|
|
|
|
|
|
Depreciation
|
598
|
|
707
|
|
|
|
|
|
|
Change in
estimated acquisition earn-out payables
|
200
|
|
-
|
|
|
|
|
|
Adjusted
EBITDA
|
$
3,977
|
|
$
2,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
reconciliation of Adjusted EBITDA per reportable segment does not
include the following items, which are not allocated to any of
the
|
|
|
Company's
reportable segments: income tax expense; interest income; interest
expense; gain on early extinguishment of debt and other,
net.
|
|
These
items are included in the reconciliation of Adjusted EBITDA to net
income on a consolidated basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION
|
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2013
|
|
|
2012
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
92,090
|
|
|
$
88,500
|
|
|
Fiduciary
funds - restricted related to premium trust accounts
|
84,010
|
|
|
79,980
|
|
|
Commissions, fees and premiums receivable,
net
|
116,335
|
|
|
137,310
|
|
|
Due from
principals and/or certain entities they own
|
5,560
|
|
|
4,440
|
|
|
Notes
receivable, net
|
6,087
|
|
|
5,660
|
|
|
Deferred
tax assets
|
8,554
|
|
|
8,553
|
|
|
Other
current assets
|
26,308
|
|
|
26,590
|
|
|
Total current assets
|
338,944
|
|
|
351,033
|
|
Property
and equipment, net
|
28,865
|
|
|
30,016
|
|
Deferred
tax assets
|
9,717
|
|
|
11,104
|
|
Intangibles, net
|
302,015
|
|
|
306,257
|
|
Goodwill,
net
|
157,831
|
|
|
151,319
|
|
Notes
receivable, net
|
20,518
|
|
|
21,580
|
|
Other
non-current assets
|
31,445
|
|
|
28,550
|
|
|
Total assets
|
$
889,335
|
|
|
$
899,859
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Premiums
payable to insurance carriers
|
$
84,672
|
|
|
$
77,904
|
|
|
Current
portion of long term debt
|
-
|
|
|
12,500
|
|
|
Due to
principals and/or certain entities they own
|
10,291
|
|
|
26,966
|
|
|
Accounts
payable
|
26,982
|
|
|
27,281
|
|
|
Accrued
liabilities
|
61,394
|
|
|
70,868
|
|
|
Total current
liabilities
|
183,339
|
|
|
215,519
|
|
Long term
debt
|
123,750
|
|
|
111,250
|
|
Deferred
tax liabilities
|
144
|
|
|
123
|
|
Convertible senior notes
|
97,938
|
|
|
96,657
|
|
Other
non-current liabilities
|
65,164
|
|
|
64,287
|
|
|
Total liabilities
|
470,335
|
|
|
487,836
|
|
|
|
|
|
|
|
|
Redeemable
non-controlling interest
|
2,254
|
|
|
-
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Preferred
stock at par value
|
-
|
|
|
-
|
|
Common
stock at par value
|
4,729
|
|
|
4,709
|
|
Additional
paid-in capital
|
901,158
|
|
|
900,946
|
|
Accumulated deficit
|
(360,615)
|
|
|
(364,329)
|
|
Treasury
stock
|
(127,899)
|
|
|
(128,533)
|
|
Accumulated other comprehensive loss
|
(691)
|
|
|
(770)
|
|
|
Total stockholders'
equity
|
416,682
|
|
|
412,023
|
|
Non-controlling interest
|
64
|
|
|
-
|
|
|
Total equity
|
416,746
|
|
|
412,023
|
|
|
Total liabilities and
equity
|
$
889,335
|
|
|
$
899,859
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
(Unaudited-in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
|
|
|
2013
|
|
2012
|
Cash flow
from operating activities
|
|
|
|
|
Net
income
|
$
4,214
|
|
$
5,618
|
|
|
|
|
|
Adjustments to reconcile net income to net cash
provided by (used in)
|
|
|
|
operating
activities:
|
|
|
|
|
Stock-based compensation
|
1,408
|
|
1,364
|
|
Impairment
of goodwill and intangible assets
|
2,571
|
|
3,228
|
|
Amortization of intangibles
|
8,401
|
|
8,275
|
|
Depreciation
|
2,982
|
|
3,146
|
|
Accretion
of senior convertible notes discount
|
1,281
|
|
1,157
|
|
Loss
(gain) on sale of businesses, net
|
89
|
|
(351)
|
|
Change in
estimated acquisition earn-out payables
|
908
|
|
4,466
|
|
Payments
on acquisition earn-outs in excess of original estimated
payables
|
(4,538)
|
|
-
|
|
|
|
|
|
(Increase)
decrease in operating assets:
|
|
|
|
|
Fiduciary
funds - restricted related to premium
|
|
|
|
|
trust
accounts
|
(4,032)
|
|
1,827
|
|
Commissions, fees and premiums receivable,
net
|
21,426
|
|
18,847
|
|
Due from
principals and/or certain entities they own
|
(1,093)
|
|
(2,126)
|
|
Notes
receivable, net - current
|
(427)
|
|
(707)
|
|
Other
current assets
|
860
|
|
(4,293)
|
|
Notes
receivable, net - non-current
|
1,062
|
|
(366)
|
|
Other
non-current assets
|
(623)
|
|
(1,392)
|
|
|
|
|
|
Increase
(decrease) in operating liabilities:
|
|
|
|
|
Premiums
payable to insurance carriers
|
6,771
|
|
(1,454)
|
|
Income
taxes payable
|
(8)
|
|
(3,045)
|
|
Due to
principals and/or certain entities they own
|
(16,676)
|
|
(25,206)
|
|
Accounts
payable
|
(646)
|
|
(7,851)
|
|
Accrued
liabilities
|
(3,412)
|
|
(13,170)
|
|
Other
non-current liabilities
|
656
|
|
(2,552)
|
Total
adjustments
|
16,960
|
|
(20,203)
|
Net cash
provided by (used in) operating activities
|
21,174
|
|
(14,585)
|
|
|
|
|
|
Cash flow
from investing activities:
|
|
|
|
|
Proceeds
from disposal of businesses
|
-
|
|
352
|
|
Purchases
of property and equipment, net
|
(1,829)
|
|
(1,279)
|
|
Payments
for acquired firms, net of cash
|
(8,430)
|
|
(27,079)
|
|
Payments
for contingent consideration
|
-
|
|
(6,520)
|
Net cash
used in investing activities
|
(10,259)
|
|
(34,526)
|
|
|
|
|
|
Cash flow
from financing activities:
|
|
|
|
|
Payments
on acquisition earn-outs
|
(3,128)
|
|
-
|
|
Borrowings
on revolving credit facility
|
123,750
|
|
20,000
|
|
Payments
on revolving credit facility
|
(30,000)
|
|
(5,000)
|
|
Revolving
credit facility fees
|
(2,840)
|
|
-
|
|
Repayment
of long term debt
|
(93,750)
|
|
(3,125)
|
|
(Payments
for) proceeds from stock-based awards, including tax
benefit
|
1,272
|
|
(804)
|
|
Shares
cancelled to pay withholding taxes
|
(2,500)
|
|
(3,638)
|
|
Repurchase
of Common Stock
|
-
|
|
(7,963)
|
|
Distributions to non-controlling interest
|
(104)
|
|
-
|
Net cash
used in financing activities
|
(7,300)
|
|
(530)
|
Effect of
exchange rate changes on cash and cash equivalents
|
(25)
|
|
-
|
Net
increase (decrease) in cash and cash equivalents
|
3,590
|
|
(49,641)
|
Cash and
cash equivalents, beginning of the period
|
88,500
|
|
135,239
|
Cash and
cash equivalents, end of the period
|
$
92,090
|
|
$
85,598
|
|
|
|
|
|
Supplemental disclosures of cash flow
information
|
|
|
|
|
Cash paid
for income taxes
|
$
2,312
|
|
$
8,819
|
|
Cash paid
for interest
|
$
1,332
|
|
$
1,034
|
|
|
|
|
|
SOURCE NFP