ARTHUR J. GALLAGHER & CO. ITASCA, Ill., Jan. 26, 2017 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter and year ended December 31, 2016. Management will host a webcast conference call to discuss these results on Friday, January 27, 2017 at 9:00 a.m. ET/8:00 a.m. CT. To listen to the call, and for printer-friendly formats of this release and the "Supplemental Quarterly Data" and "CFO Commentary," which may also be referenced during the call, please visit ajg.com/IR. These documents contain both GAAP and non-GAAP measures. Investors and other users of this information should read carefully the section entitled "Information Regarding Non-GAAP Measures" beginning on page 9.
Summary of Financial Results - Fourth Quarter
Reconciliations of non-GAAP measures begin on page 2
(Dollars in millions, except per
share data) 4th Q 2016 4th Q 2015 Change
---------- ---------- ------
Reported Adjusted Reported Adjusted Reported Adjusted
Brokerage Segment GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
----------------- ---- -------- ---- -------- ---- --------
Revenues $885.7 $883.8 $851.8 $821.4 4% 8%
Organic revenues $833.2 $804.4 3.6%
Net earnings $78.6 $51.7 52%
Net earnings margin 8.9% 6.1% +280 bpts
Adjusted EBITDAC $228.2 $209.5 9%
Adjusted EBITDAC margin 25.8% 25.5% +31 bpts
Diluted net earnings per
share $0.44 $0.54 $0.30 $0.50 47% 8%
Risk Management Segment
-----------------------
Revenues $185.6 $185.6 $181.3 $180.9 2% 3%
Organic revenues $185.3 $180.1 2.9%
Net earnings $15.1 $11.4 32%
Net earnings margin 8.1% 6.3% +185 bpts
Adjusted EBITDAC $33.2 $31.6 5%
Adjusted EBITDAC margin 17.9% 17.5% +42 bpts
Diluted net earnings per
share $0.08 $0.09 $0.06 $0.08 33% 13%
Corporate Segment
-----------------
Diluted net earnings (loss)
per share $0.01 $0.03 $(0.01) $0.01 200% 200%
Total Company
-------------
Diluted net earnings per
share $0.53 $0.66 $0.35 $0.59 51% 12%
"We had a terrific quarter to finish an excellent 2016. For both the quarter and the full year, we delivered strong growth in revenue, improvement in our margin and disciplined execution of our tuck-in M&A strategy," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "We are well positioned for 2017. Our unique Gallagher culture is as strong as ever, our integration efforts are largely complete and we have a robust M&A pipeline. We continue to see an environment where our talented production and claims staff can drive growth."
(1 of 14)
Summary of Financial Results - Year Ended December 31, 2016
Reconciliations of non-GAAP measures begin on page 3
(Dollars in millions, except per
share data) Year 2016 Year 2015 Change
--------- --------- ------
Reported Adjusted Reported Adjusted Reported Adjusted
Brokerage Segment GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
----------------- ---- -------- ---- -------- ---- --------
Revenues $3,527.9 $3,521.3 $3,324.0 $3,232.0 6% 9%
Organic revenues $3,286.7 $3,173.9 3.6%
Net earnings $357.1 $268.1 33%
Net earnings margin 10.1% 8.1% +205 bpts
Adjusted EBITDAC $948.7 $856.8 11%
Adjusted EBITDAC margin 26.9% 26.5% +43 bpts
Diluted net earnings per
share $1.98 $2.30 $1.54 $2.13 29% 8%
Risk Management Segment
-----------------------
Revenues $718.1 $718.1 $727.1 $723.4 -1% -1%
Organic revenues $713.9 $705.1 1.3%
Net earnings $57.2 $57.2 0%
Net earnings margin 8.0% 7.9% +10 bpts
Adjusted EBITDAC $124.4 $124.9 0%
Adjusted EBITDAC margin 17.3% 17.3% +5 bpts
Diluted net earnings per
share $0.32 $0.33 $0.33 $0.36 -3% -8%
Corporate Segment
-----------------
Diluted net earnings per
share $0.02 $0.11 $0.19 $0.09 -89% 22%
Total Company
-------------
Diluted net earnings per
share $2.32 $2.74 $2.06 $2.58 13% 6%
Quarter Ended December 31 Reported GAAP to Adjusted Non-GAAP Reconciliation:
Diluted Net
Revenues Net Earnings EBITDAC Earnings Per Share
Segment 4th Q 16 4th Q 15 4th Q 16 4th Q 15 4th Q 16 4th Q 15 4th Q 16 4th Q 15
------- -------- -------- -------- -------- -------- -------- -------- --------
(in millions) (in millions) (in millions)
Brokerage, as reported $885.7 $851.8 $78.6 $51.7 $210.8 $170.4 $0.44 $0.30
Gains on book sales (1.9) 0.3 (1.4) 0.2 (1.9) 0.3 (0.01) -
Acquisition integration - - 7.7 20.6 10.2 34.4 0.04 0.11
Workforce & lease termination - - 6.5 3.6 8.6 5.1 0.04 0.02
Acquisition related
adjustments - - 5.3 14.7 0.5 0.7 0.03 0.09
U.K. statutory income tax rate
change - - - (4.2) - - - (0.02)
Levelized foreign currency
translation - (30.7) - 1.0 - (1.4) - -
Brokerage, as adjusted
* 883.8 821.4 96.7 87.6 228.2 209.5 0.54 0.50
----- ----- ---- ---- ----- ----- ---- ----
Risk Management, as
reported 185.6 181.3 15.1 11.4 32.3 27.1 0.08 0.06
Workforce & lease termination - - 0.6 0.8 0.9 1.0 0.01 -
Client run-off - - - 2.4 - 3.0 - 0.02
Levelized foreign currency
translation - (0.4) - 0.4 - 0.5 - -
Risk Management, as
adjusted * 185.6 180.9 15.7 15.0 33.2 31.6 0.09 0.08
---- ----
Corporate, as reported 313.7 301.8 7.3 5.1 (45.8) (34.8) 0.01 (0.01)
Impact of 2015 litigation
settlement - - 4.5 4.6 5.6 5.7 0.02 0.02
Corporate, as adjusted
* 313.7 301.8 11.8 9.7 (40.2) (29.1) 0.03 0.01
----- ----- ---- --- ----- ----- ---- ----
Total Company, as
reported $1,385.0 $1,334.9 $101.0 $68.2 $197.3 $162.7 $0.53 $0.35
======== ======== ====== ===== ====== ====== ===== =====
Total Company, as
adjusted * $1,383.1 $1,304.1 $124.2 $112.3 $221.2 $212.0 $0.66 $0.59
======== ======== ====== ====== ====== ====== ===== =====
$1,071.3 $1,033.1 $93.7 $63.1 $243.1 $197.5 $0.52 $0.36
Total Brokerage & Risk
Management, as
reported
$1,069.4 $1,002.3 $112.4 $102.6 $261.4 $241.1 $0.63 $0.58
Total Brokerage & Risk
Management, as
adjusted *
(2 of 14)
* For 2016, the pretax impact of the
Brokerage Segment adjustments
totals $23.9 million, with a
corresponding adjustment to the
provision for income taxes of $5.8
million relating to these items.
The pretax impact of the Risk
Management Segment adjustments
totals $0.9 million, with a
corresponding adjustment to the
provision for income taxes of $0.3
million relating to these items.
The pretax impact of the Corporate
Segment adjustments totals $5.6
million, with a corresponding
adjustment to the provision for
income taxes of $1.1 million
relating to this item. A detailed
reconciliation of the 2016 and
2015 provision for income taxes is
shown on page 13.
Year Ended December 31 Reported GAAP to Adjusted Non-GAAP Reconciliation:
Diluted Net
Revenues Net Earnings EBITDAC Earnings Per Share
Segment Year 16 Year 15 Year 16 Year 15 Year 16 Year 15 Year 16 Year 15
------- ------- ------- ------- ------- ------- ------- ------- -------
(in millions) (in millions) (in millions)
Brokerage, as reported $3,527.9 $3,324.0 $357.1 $268.1 $885.2 $746.2 $1.98 $1.54
Gains on book sales (6.6) (6.7) (4.7) (5.0) (6.6) (6.7) (0.03) (0.03)
Acquisition integration - - 32.8 69.2 45.7 100.9 0.18 0.40
Workforce & lease termination - - 15.1 16.3 20.7 23.0 0.09 0.09
Acquisition related
adjustments - - 14.9 28.5 3.7 3.4 0.09 0.16
U.K. statutory income tax rate
change - - (1.5) (4.2) - - (0.01) (0.02)
Levelized foreign currency
translation - (85.3) - (1.1) - (10.0) - (0.01)
Brokerage, as adjusted
* 3,521.3 3,232.0 413.7 371.8 948.7 856.8 2.30 2.13
------- ------- ----- ----- ----- ----- ---- ----
Risk Management, as
reported 718.1 727.1 57.2 57.2 122.2 119.1 0.32 0.33
Workforce & lease termination - - 1.5 2.1 2.2 2.9 0.01 0.01
Client run-off / bankruptcy - 1.0 - 3.1 - 4.0 - 0.02
Acquisition related
adjustments - - - (0.3) - - - -
Levelized foreign currency
translation - (4.7) - (0.6) - (1.1) - -
Risk Management, as
adjusted * 718.1 723.4 58.7 61.5 124.4 124.9 0.33 0.36
---- ----
Corporate, as reported 1,348.8 1,341.3 30.7 63.8 (157.8) (94.0) 0.02 0.19
Impact of 2015 litigation
settlement - (31.0) 16.1 (17.7) 20.2 (16.2) 0.09 (0.10)
Corporate, as adjusted
* 1,348.8 1,310.3 46.8 46.1 (137.6) (110.2) 0.11 0.09
------- ------- ---- ---- ------ ------ ---- ----
Total Company, as
reported $5,594.8 $5,392.4 $445.0 $389.1 $849.6 $771.3 $2.32 $2.06
======== ======== ====== ====== ====== ====== ===== =====
Total Company, as
adjusted * $5,588.2 $5,265.7 $519.2 $479.4 $935.5 $871.5 $2.74 $2.58
======== ======== ====== ====== ====== ====== ===== =====
$4,246.0 $4,051.1 $414.3 $325.3 $1,007.4 $865.3 $2.30 $1.87
Total Brokerage & Risk
Management, as
reported
$4,239.4 $3,955.4 $472.4 $433.3 $1,073.1 $981.7 $2.63 $2.49
Total Brokerage & Risk
Management, as
adjusted *
* For 2016, the pretax impact of the
Brokerage Segment adjustments
totals $80.5 million, with a
corresponding adjustment to the
provision for income taxes of
$23.9 million relating to these
items. The pretax impact of the
Risk Management Segment
adjustments totals $2.2 million,
with a corresponding adjustment to
the provision for income taxes of
$0.7 million relating to these
items. The pretax impact of the
Corporate Segment adjustments
totals $20.2 million, with a
corresponding adjustment to the
provision for income taxes of $4.1
million relating to this item. A
detailed reconciliation of the
2016 and 2015 provision for income
taxes is shown on page 14.
(3 of 14)
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues (Non-
GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change
----------------------
Base Commissions and Fees
-------------------------
Commissions and fees, as
reported $816.5 $790.1 3.3% $3,214.8 $3,044.5 5.6%
Less commissions and fees
from acquisitions (33.9) - (173.2) -
Less disposed of
operations - (1.4) - (3.3)
Levelized foreign
currency translation - (27.4) - (78.7)
Organic base commissions
and fees $782.6 $761.3 2.8% $3,041.6 $2,962.5 2.7%
====== ====== ======== ========
Supplemental Commissions
------------------------
Supplemental commissions,
as reported $40.2 $34.6 16.2% $147.0 $125.5 17.1%
Less supplemental
commissions from
acquisitions (0.1) - (1.5) -
Less disposed of
operations - (0.1) - (0.3)
Levelized foreign
currency translation - (2.8) - (6.3)
Organic supplemental
commissions $40.1 $31.7 26.5% $145.5 $118.9 22.4%
===== ===== ====== ======
Contingent Commissions
----------------------
Contingent commissions,
as reported $10.5 $11.9 -11.8% $107.2 $93.7 14.4%
Less contingent
commissions from
acquisitions - - (7.6) -
Less disposed of
operations - (0.1) - (0.2)
Levelized foreign
currency translation - (0.4) - (1.0)
Organic contingent
commissions $10.5 $11.4 -7.9% $99.6 $92.5 7.7%
===== ===== ===== =====
$867.2 $836.6 3.7% $3,469.0 $3,263.7 6.3%
Total reported
commissions, fees,
supplemental
commissions
and contingent
commissions
Less commissions and fees
from acquisitions (34.0) - (182.3) -
Less disposed of
operations - (1.6) - (3.8)
Levelized foreign
currency translation - (30.6) - (86.0)
$833.2 $804.4 3.6% $3,286.7 $3,173.9 3.6%
Total organic
commissions, fees,
supplemental
commissions
and contingent
commissions
Our domestic and international operations both posted growth similar to the 3.6% growth in total organic revenues for fourth quarter 2016.
Acquisition
Activity 4th Q 16 4th Q 15 Year 16 Year 15
-----------
Number of
acquisitions
closed * 9 15 37 42
Estimated
annualized
revenues
acquired (in
millions) $40.1 $46.3 $137.9 $223.2
===== ===== ====== ======
* Gallagher issued 114,000 shares in
connection with tax-free
exchange acquisitions in the
fourth quarter of 2016. In
anticipation, a similar number of
shares were repurchased in June
2016. For the full year,
Gallagher issued 1,998,000 shares
in connection with tax-free
exchange acquisitions and
repurchased 2,265,000 shares to
fully offset the impact of the
issued shares.
Through January 26, 2017,
Gallagher closed an additional 5
acquisitions with estimated
annualized revenues of
approximately $32.2 million. No
shares were issued related to
these acquisitions.
(4 of 14)
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):
Compensation Expense and
Ratios 4th Q 16 4th Q 15 Year 16 Year 15
------------------------
Compensation expense, as
reported $526.7 $509.5 $2,041.8 $1,939.7
Acquisition integration (1) (2.9) (8.5) (16.9) (38.3)
Workforce and lease
termination related charges (8.2) (4.5) (17.5) (20.0)
Acquisition related
adjustments (0.5) (0.7) (3.7) (3.4)
Levelized foreign currency
translation - (18.5) - (52.9)
Compensation expense, as
adjusted $515.1 $477.3 $2,003.7 $1,825.1
====== ====== ======== ========
* 59.5% 59.8% 57.9% 58.4%
Reported compensation expense
ratios using reported
revenues on pages 2 and 3
* 58.3% 58.1% 56.9% 56.5%
Adjusted compensation expense
ratios using adjusted
revenues on pages 2 and 3
* Reported fourth quarter
compensation ratio was 0.3 pts
lower than the same period in
2015. Adjusted fourth quarter
compensation ratio was 0.2 pts
higher than the same period in
2015. All items were essentially
consistent with the prior period.
Operating
Expense
and
Ratios 4th Q 16 4th Q 15 Year 16 Year 15
---------
Operating
expense,
as
reported $148.2 $171.9 $600.9 $638.1
Acquisition
integration
(1) (7.3) (25.9) (28.8) (62.6)
Workforce
and
lease
termination
related
charges (0.4) (0.6) (3.2) (3.0)
Levelized
foreign
currency
translation - (10.8) - (22.4)
Operating
expense,
as
adjusted $140.5 $134.6 $568.9 $550.1
====== ====== ====== ======
Reported
operating 3
expense
ratios
using
reported
revenues
on
pages
2
and * 16.7% 20.2% 17.0% 19.2%
==== ==== ==== ====
Adjusted
operating 3
expense
ratios
using
adjusted
revenues
on
pages
2
and 15.9% 16.4% 16.2% 17.0%
** ==== ==== ==== ====
* Reported fourth quarter operating
expense ratio was 3.5 pts lower
than the same period in 2015.
This ratio was primarily
impacted by decreased technology
costs, lease abandonment charges
and outside consulting fees
related to our integration
efforts.
** Adjusted fourth quarter operating
expense ratio was 0.5 pts lower
than the same period in 2015.
This ratio was primarily
impacted by savings in
professional fees and travel and
meeting expenses.
Net Earnings to
Adjusted
EBITDAC (Non-
GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change
---------------
Net earnings, as
reported $78.6 $51.7 52.0% $357.1 $268.1 33.2%
Provision for
income taxes 45.3 21.6 194.1 145.3
Depreciation 14.6 15.2 57.2 54.4
Amortization 61.4 67.2 244.7 237.3
Change in
estimated
acquisition
earnout
payables 10.9 14.7 32.1 41.1
EBITDAC 210.8 170.4 23.7% 885.2 746.2 18.6%
Gains from books
of business
sales (1.9) 0.3 (6.6) (6.7)
Acquisition
integration
(1) 10.2 34.4 45.7 100.9
Acquisition
related
adjustments 0.5 0.7 3.7 3.4
Workforce and
lease
termination
related charges 8.6 5.1 20.7 23.0
Levelized
foreign
currency
translation - (1.4) - (10.0)
EBITDAC, as
adjusted $228.2 $209.5 8.9% $948.7 $856.8 10.7%
====== ====== ====== ======
8.9% 6.1% +280 bpts 10.1% 8.1% +205 bpts
Net earnings
margin, as
reported using
reported
revenues on
pages 2 and 3
25.8% 25.5% +31 bpts 26.9% 26.5% +43 bpts
EBITDAC margin,
as adjusted
using adjusted
revenues on
pages 2 and 3
(1) Acquisition integration costs
consist mostly of IT system
conversion costs, professional
fees, and compensation related to
certain of our large acquisitions
outside the scope of our usual
tuck-in strategy.
(5 of 14)
Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues
(Non-GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change
----------------
Fees $183.9 $178.9 2.8% $713.5 $710.9 0.4%
International
performance
bonus fees 1.4 2.2 -36.4% 3.6 15.6 -76.9%
Fees as reported 185.3 181.1 2.3% 717.1 726.5 -1.3%
Less fees from
acquisitions - - (3.1) -
Less client run-
off - (0.6) (0.1) (16.7)
Levelized foreign
currency
translation - (0.4) - (4.7)
Organic fees $185.3 $180.1 2.9% $713.9 $705.1 1.3%
====== ====== ====== ======
Compensation Expense and
Ratios 4th Q 16 4th Q 15 Year 16 Year 15
------------------------
Compensation expense, as
reported $108.2 $105.7 $424.5 $427.2
Client run-off - (0.7) - (0.7)
Workforce and lease
termination related
charges (0.7) (0.5) (1.9) (2.2)
Levelized foreign
currency translation - (0.6) - (2.6)
Compensation expense, as
adjusted $107.5 $103.9 $422.6 $421.7
====== ====== ====== ======
Reported compensation
expense ratios using
reported revenues on
pages 2 and 3 * 58.3% 58.3% 59.1% 58.8%
==== ==== ==== ====
Adjusted compensation
expense ratios using
adjusted revenues on
pages 2 and 3 ** 57.9% 57.4% 58.9% 58.3%
==== ==== ==== ====
* Reported fourth quarter
compensation ratio was flat
compared to the same period in
2015. All items were essentially
consistent with the prior period.
** Adjusted fourth quarter
compensation ratio was 0.5 pts
higher than the same period in
2015. This ratio was primarily
impacted by increased employee
benefits.
Operating
Expense
and
Ratios 4th Q 16 4th Q 15 Year 16 Year 15
---------
Operating
expense,
as
reported $45.1 $48.5 $171.4 $180.8
Client
run-
off - (2.3) - (2.3)
Workforce
and
lease
termination
related
charges (0.2) (0.5) (0.3) (0.7)
Levelized
foreign
currency
translation - (0.3) - (1.0)
Operating
expense,
as
adjusted $44.9 $45.4 $171.1 $176.8
===== ===== ====== ======
Reported
operating 3
expense
ratios
using
reported
revenues
on
pages
2
and * 24.3% 26.8% 23.9% 24.9%
==== ==== ==== ====
Adjusted
operating 3
expense
ratios
using
adjusted
revenues
on
pages
2
and 24.2% 25.1% 23.8% 24.4%
** ==== ==== ==== ====
* Reported fourth quarter
operating expense ratio was
2.5 pts lower than the same
period in 2015. This ratio
was primarily impacted by
expenses related to former
client run-off occurring
in the prior period.
** Adjusted fourth quarter
operating expense ratio was
0.9 pts lower than the same
period in 2015. This ratio
was primarily impacted by
savings in technology
expenses and travel and
meeting expenses.
(6 of 14)
Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):
Net Earnings to
Adjusted EBITDAC
(Non-GAAP) 4th Q 16 4th Q 15 Change Year 16 Year 15 Change
----------------- ------ ------
Net earnings, as
reported $15.1 $11.4 32.5% $57.2 $57.2 0.0%
Provision for income
taxes 9.5 8.2 35.3 35.1
Depreciation 7.0 6.7 27.2 24.3
Amortization 0.7 0.8 2.5 3.0
Change in estimated
acquisition earnout
payables - - - (0.5)
EBITDAC 32.3 27.1 19.2% 122.2 119.1 2.6%
Workforce and lease
termination related
charges 0.9 1.0 2.2 2.9
Client run-off/
bankruptcy - 3.0 - 4.0
Levelized foreign
currency translation - 0.5 - (1.1)
EBITDAC, as adjusted $33.2 $31.6 5.1% $124.4 $124.9 -0.4%
===== ===== ====== ======
8.1% 6.3% +185 bpts 8.0% 7.9% +10 bpts
Net earnings margin,
as reported using
reported
revenues
on pages 2 and 3
17.9% 17.5% +42 bpts 17.3% 17.3% +5 bpts
EBITDAC margin, as
adjusted using
adjusted revenues on
pages 2 and 3
Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
2016 2015
Net Earnings Net Earnings
Pretax Income Attributable to Pretax Income Attributable to
Earnings Tax Controlling Earnings Tax Controlling
(Loss) Benefit Interests (Loss) Benefit Interests
4th Quarter
-----------
Interest and
banking
costs $(29.2) $11.7 $(17.5) $(26.3) $10.5 $(15.8)
Clean energy
related (1) (35.1) 63.7 28.6 (27.3) 47.7 20.4
Acquisition
costs (0.9) 0.1 (0.8) (0.9) 0.1 (0.8)
Corporate (15.3) 10.4 (4.9) (11.8) 10.2 (1.6)
Litigation
settlement
(2) (5.6) 1.1 (4.5) (5.7) 1.1 (4.6)
Reported 4th
quarter (86.1) 87.0 0.9 (72.0) 69.6 (2.4)
Litigation
settlement
(2) 5.6 (1.1) 4.5 5.7 (1.1) 4.6
Adjusted 4th
quarter $(80.5) $85.9 $5.4 $(66.3) $68.5 $2.2
====== ===== ==== ====== ===== ====
Year
----
Interest and
banking
costs $(112.8) $45.1 $(67.7) $(105.4) $42.1 $(63.3)
Clean energy
related (1) (133.2) 247.6 114.4 (116.1) 217.0 100.9
Acquisition
costs (4.6) 0.7 (3.9) (4.3) 0.6 (3.7)
Corporate (43.0) 20.0 (23.0) (33.2) 14.8 (18.4)
Litigation
settlement
(2) (20.2) 4.1 (16.1) 16.2 1.5 17.7
Reported full
year (313.8) 317.5 3.7 (242.8) 276.0 33.2
Litigation
settlement
(2) 20.2 (4.1) 16.1 (16.2) (1.5) (17.7)
Adjusted full
year $(293.6) $313.4 $19.8 $(259.0) $274.5 $15.5
======= ====== ===== ======= ====== =====
(1) Pretax earnings for the fourth
quarter are presented net of
amounts attributable to
noncontrolling interests of $6.4
million in 2016 and $7.5 million
in 2015. Pretax earnings for the
year ended are presented net of
amounts attributable to
noncontrolling interests of $27.0
million in 2016 and $30.6 million
in 2015.
(2) During the third quarter of 2015,
Gallagher settled litigation
against certain former U.K.
executives and their advisors for
a pretax gain of $31.0 million
($22.3 million net of costs and
taxes). Incremental expenses
that arose in connection with
this matter will result in after-
tax charges of up to $4.5 million
per quarter through June 30,
2017.
(7 of 14)
Interest and banking costs and debt - At December 31, 2016, Gallagher had $2,450.0 million of borrowings from private placements, $278.0 million of short-term borrowings under its line of credit facility and $125.6 million outstanding under a revolving loan facility that provides funding for premium finance receivables, which are fully collateralized by the underlying premiums held by insurance carriers and as such are excluded from our debt covenant computations. On December 1, 2016, Gallagher entered into a note purchase agreement for a private placement of $100.0 million of senior unsecured notes. Proceeds were primarily used to fund the $50.0 million of private placement debt that matured on November 30, 2016 and partially fund acquisitions.
Clean energy - Consists of the operating results related to our investments in 34 clean coal production plants and royalty income from clean coal licenses related to Chem-Mod LLC. Additional information regarding these results is available in the "CFO Commentary" at ajg.com/IR.
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.
Income Taxes
Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory rates. Gallagher's consolidated effective tax rate for the quarters ended December 31, 2016 and 2015 was (46.8)% and (140.1)%, respectively, which was lower than the statutory rate due to the amount of IRC Section 45 tax credits earned.
At-the-market equity program - Gallagher has an at-the-market equity program under which up to $15.6 million of its common stock remaining in the program may be sold through Morgan Stanley & Co. LLC as sales agent. During fourth quarter 2016, Gallagher did not sell any shares of its common stock under the program.
Balance Sheet Reclassifications
In first quarter 2016, Gallagher adopted new accounting guidance related to the presentation of both debt issuance costs and income taxes in the consolidated balance sheet. The new debt issuance costs guidance requires such costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The new income tax guidance requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent components. The new guidance has been applied on a retrospective basis. Accordingly, Gallagher reclassified debt issuance costs of $3.3 million included in Other noncurrent assets to Corporate related borrowings - noncurrent in its consolidated balance sheet as of December 31, 2015. Gallagher also reclassified the current deferred taxes to noncurrent in its consolidated balance sheet as of December 31, 2015, which increased Noncurrent deferred income taxes by $122.1 million and increased Other noncurrent liabilities by $4.6 million. In addition, in fourth quarter 2016, Gallagher reclassified work in process type assets related to its new corporate headquarters and other projects of $46.3 million included in Other noncurrent assets to Fixed assets in its consolidated balance sheet as of December 31, 2015.
Webcast Conference Call
Gallagher will host a webcast conference call on Friday, January 27, 2017 at 9:00 a.m. ET/8:00 a.m. CT. To listen to this call, please go to ajg.com/IR. The call will be available for replay at such website for at least 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 33 countries and offers client-service capabilities in more than 150 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 economic environment; and (vi) anticipated acquisition integration costs.
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, such
as 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 of
which could impact (i) and (ii) above; and
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-- Changes in worldwide and national economic conditions (including a
possible economic downturn or recession in the U.K. because of the
recent Brexit vote); changes in premium rates and in insurance markets
generally; changes in the insurance brokerage industry's competitive
landscape and the uncertainties and challenges inherent in the
acquisition integration process - all of which could impact (iii) - (vi)
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, 2015 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 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 (adjusted EPS), 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. See further below for definitions and the reason each of these measures is useful to investors. Gallagher's industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, 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. As disclosed in its most recent Proxy Statement, Gallagher does not make determinations regarding executive officer incentive compensation on the basis of "adjusted" measures such as those described below in "Adjusted revenues and expenses" or "Adjusted EBITDAC". Instead, incentive compensation determinations for executive officers are made on the basis of revenue and EBITAC (defined as earnings before interest, taxes, amortization and change in estimated earnout payables) for the combined Brokerage and Risk Management segments. 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 Non-GAAP presentation - Gallagher believes that the adjusted non-GAAP presentations of the current and prior year information, presented in this earnings release, provide 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. See pages 13 and 14 for a reconciliation of the adjustments made to income taxes.
-- Adjusted revenues and expenses - Revenues, compensation expense and
operating expense, respectively, each adjusted to exclude the following:
-- Net gains realized from sales of books of business, which are
primarily net proceeds received related to sales of books of
business and other divestiture transactions.
-- Acquisition integration costs, which include costs related to
certain of our large acquisitions, outside the scope of our usual
tuck-in strategy, 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.
-- Workforce related charges, which primarily include severance costs
related to employee terminations and other costs associated with
redundant workforce.
-- Lease termination related charges, which primarily include costs
related to terminations of real estate leases and abandonment of
leased space.
-- Acquisition related adjustments, which include change in estimated
acquisition earnout payables adjustments, impacts of acquisition
valuation true-ups, impairment charges and acquisition related
compensation charges.
-- The impact of foreign currency translation, as applicable. 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.
-- Adjusted ratios - Adjusted compensation expense and adjusted operating
expense, respectively, each divided by adjusted revenues.
Non-GAAP Earnings Measures
-- EBITDAC and EBITDAC margin - EBITDAC is net earnings before interest,
income taxes, depreciation, amortization and the change in estimated
acquisition earnout payables and EBITDAC margin is EBITDAC divided by
total revenues. These measures for the Brokerage and Risk Management
segments provide a meaningful representation of Gallagher's operating
performance and, for the overall business, provide a meaningful way to
measure its financial performance on an ongoing basis.
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-- Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is
EBITDAC adjusted to exclude net gains realized from sales of books of
business, acquisition integration costs, workforce related charges,
lease termination related charges, acquisition related adjustments and
the period-over-period impact of foreign currency translation, as
applicable and Adjusted EBITDAC margin is Adjusted EBITDAC divided by
total adjusted revenues (defined above). These measures for the
Brokerage and Risk Management segments provide a meaningful
representation of Gallagher's operating performance, and are also
presented to improve the comparability of our results between periods by
eliminating the impact of the items that have a high degree of
variability.
-- Adjusted EPS for the Brokerage and Risk Management segments - Net
earnings adjusted to exclude the after-tax impact of net gains realized
from sales of books of business, acquisition integration costs, the
impact of foreign currency translation, workforce related charges, lease
termination related charges and acquisition related adjustments divided
by diluted weighted average shares outstanding. This measure provides a
meaningful representation of Gallagher's operating performance (and as
such should not be used as a measure of Gallagher's liquidity), and is
also presented to improve the comparability of our results between
periods by eliminating the impact of the items that have a high degree
of variability.
Organic Revenues (a non-GAAP measure) - 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 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 revenue organic growth excludes the period-over-period impact of foreign currency translation. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the impact of run-off of the New South Wales Workers' Compensation Scheme and other closed down operations 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, but non-GAAP, 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 non-GAAP 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 pages 11 and 12), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 2 and 3), for organic revenue measures (on pages 4 and 6, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 5, 6 and 7, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can also be found in the "Supplemental Quarterly Data" available at ajg.com/IR.
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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)
4th Q Ended 4th Q Ended Year Ended Year Ended
Brokerage Segment Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015
------------ ------------ ------------ ------------
Commissions $596.8 $590.1 $2,439.1 $2,338.7
Fees 219.7 200.0 775.7 705.8
Supplemental commissions 40.2 34.6 147.0 125.5
Contingent commissions 10.5 11.9 107.2 93.7
Investment income and gains realized
on books of business sales 18.5 15.2 58.9 60.3
Revenues 885.7 851.8 3,527.9 3,324.0
Compensation 526.7 509.5 2,041.8 1,939.7
Operating 148.2 171.9 600.9 638.1
Depreciation 14.6 15.2 57.2 54.4
Amortization 61.4 67.2 244.7 237.3
Change in estimated acquisition
earnout payables 10.9 14.7 32.1 41.1
Expenses 761.8 778.5 2,976.7 2,910.6
Earnings before income taxes 123.9 73.3 551.2 413.4
Provision for income taxes 45.3 21.6 194.1 145.3
Net earnings 78.6 51.7 357.1 268.1
Net earnings (loss) attributable to
noncontrolling interests (0.5) (1.6) 3.6 1.7
Net earnings attributable to
controlling interests $79.1 $53.3 $353.5 $266.4
===== ===== ====== ======
EBITDAC
Net earnings $78.6 $51.7 $357.1 $268.1
Provision for income taxes 45.3 21.6 194.1 145.3
Depreciation 14.6 15.2 57.2 54.4
Amortization 61.4 67.2 244.7 237.3
Change in estimated acquisition
earnout payables 10.9 14.7 32.1 41.1
EBITDAC $210.8 $170.4 $885.2 $746.2
====== ====== ====== ======
4th Q Ended 4th Q Ended Year Ended Year Ended
Risk Management Segment Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015
------------ ------------ ------------ ------------
Fees $185.3 $181.1 $717.1 $726.5
Investment income 0.3 0.2 1.0 0.6
Revenues 185.6 181.3 718.1 727.1
Compensation 108.2 105.7 424.5 427.2
Operating 45.1 48.5 171.4 180.8
Depreciation 7.0 6.7 27.2 24.3
Amortization 0.7 0.8 2.5 3.0
Change in estimated acquisition
earnout payables - - - (0.5)
Expenses 161.0 161.7 625.6 634.8
Earnings before income taxes 24.6 19.6 92.5 92.3
Provision for income taxes 9.5 8.2 35.3 35.1
Net earnings 15.1 11.4 57.2 57.2
Net earnings attributable to
noncontrolling interests - - - -
Net earnings attributable to
controlling interests $15.1 $11.4 $57.2 $57.2
===== ===== ===== =====
EBITDAC
Net earnings $15.1 $11.4 $57.2 $57.2
Provision for income taxes 9.5 8.2 35.3 35.1
Depreciation 7.0 6.7 27.2 24.3
Amortization 0.7 0.8 2.5 3.0
Change in estimated acquisition
earnout payables - - - (0.5)
EBITDAC $32.3 $27.1 $122.2 $119.1
===== ===== ====== ======
4th Q Ended 4th Q Ended Year Ended Year Ended
Corporate Segment Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015
------------ ------------ ------------ ------------
Revenues from consolidated clean
coal facilities $303.2 $288.8 $1,303.8 $1,254.6
Royalty income from clean coal
licenses 11.5 13.3 48.1 57.5
Loss from unconsolidated clean coal
facilities (0.6) (0.3) (1.8) (1.3)
Other net revenues (0.4) - (1.3) 30.5
Revenues 313.7 301.8 1,348.8 1,341.3
Cost of revenues from consolidated
clean coal facilities 329.5 316.5 1,408.6 1,351.5
Compensation 24.3 18.5 72.6 62.0
Operating 5.7 1.6 25.4 21.8
Interest 28.3 25.8 109.8 103.0
Depreciation 5.6 3.9 19.2 15.2
Expenses 393.4 366.3 1,635.6 1,553.5
Loss before income taxes (79.7) (64.5) (286.8) (212.2)
Benefit for income taxes (87.0) (69.6) (317.5) (276.0)
Net earnings 7.3 5.1 30.7 63.8
Net earnings attributable to
noncontrolling interests 6.4 7.5 27.0 30.6
Net earnings (loss) attributable to
controlling interests $0.9 $(2.4) $3.7 $33.2
==== ===== ==== =====
EBITDAC
Net earnings $7.3 $5.1 $30.7 $63.8
Benefit for income taxes (87.0) (69.6) (317.5) (276.0)
Interest 28.3 25.8 109.8 103.0
Depreciation 5.6 3.9 19.2 15.2
EBITDAC $(45.8) $(34.8) $(157.8) $(94.0)
====== ====== ======= ======
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
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Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC - 4th Qtr Ended December 31,
(Unaudited - in millions except share and per share data)
4th Q Ended 4th Q Ended Year Ended Year Ended
Total Company Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015
------------ ------------ ------------ ------------
Commissions $596.8 $590.1 $2,439.1 $2,338.7
Fees 405.0 381.1 1,492.8 1,432.3
Supplemental commissions 40.2 34.6 147.0 125.5
Contingent commissions 10.5 11.9 107.2 93.7
Investment income and gains realized
on books of business sales 18.8 15.4 59.9 60.9
Revenues from clean coal activities 314.1 301.8 1,350.1 1,310.8
Other net revenues - Corporate (0.4) - (1.3) 30.5
Revenues 1,385.0 1,334.9 5,594.8 5,392.4
Compensation 659.2 633.7 2,538.9 2,428.9
Operating 199.0 222.0 797.7 840.7
Cost of revenues from clean coal
activities 329.5 316.5 1,408.6 1,351.5
Interest 28.3 25.8 109.8 103.0
Depreciation 27.2 25.8 103.6 93.9
Amortization 62.1 68.0 247.2 240.3
Change in estimated acquisition
earnout payables 10.9 14.7 32.1 40.6
Expenses 1,316.2 1,306.5 5,237.9 5,098.9
Earnings before income taxes 68.8 28.4 356.9 293.5
Benefit for income taxes (32.2) (39.8) (88.1) (95.6)
Net earnings 101.0 68.2 445.0 389.1
Net earnings attributable to
noncontrolling interests 5.9 5.9 30.6 32.3
Net earnings attributable to
controlling interests $95.1 $62.3 $414.4 $356.8
===== ===== ====== ======
Diluted net earnings per share $0.53 $0.35 $2.32 $2.06
===== ===== ===== =====
Dividends declared per share $0.38 $0.37 $1.52 $1.48
===== ===== ===== =====
EBITDAC
Net earnings $101.0 $68.2 $445.0 $389.1
Benefit for income taxes (32.2) (39.8) (88.1) (95.6)
Interest 28.3 25.8 109.8 103.0
Depreciation 27.2 25.8 103.6 93.9
Amortization 62.1 68.0 247.2 240.3
Change in estimated acquisition
earnout payables 10.9 14.7 32.1 40.6
EBITDAC $197.3 $162.7 $849.6 $771.3
====== ====== ====== ======
Arthur J. Gallagher & Co.
Consolidated Balance Sheet
(Unaudited - in millions except per share data)
Dec 31, 2016 Dec 31, 2015
Cash and cash equivalents $545.5 $480.4
Restricted cash 1,392.1 1,412.1
Premiums and fees receivable 1,844.8 1,734.0
Other current assets 633.7 587.2
----- -----
Total current assets 4,416.1 4,213.7
Fixed assets - net 377.6 249.0
Deferred income taxes (includes tax
credit carryforwards of $477.9 in
2016 and $341.6 in 2015) 796.5 643.5
Other noncurrent assets 504.3 442.6
Goodwill - net 3,767.8 3,662.9
Amortizable intangible assets - net 1,627.3 1,698.8
Total assets $11,489.6 $10,910.5
Premiums payable to insurance and
reinsurance companies $2,996.1 $2,877.1
Accrued compensation and other
accrued liabilities 772.1 812.7
Unearned fees 69.0 61.3
Other current liabilities 70.9 54.0
Premium financing borrowings 125.6 137.0
Corporate related borrowings -
current 578.0 245.0
Total current liabilities 4,611.7 4,187.1
Corporate related borrowings -
noncurrent 2,144.6 2,071.7
Other noncurrent liabilities 1,077.5 963.5
Total liabilities 7,833.8 7,222.3
Stockholders' equity:
Common stock -issued and
outstanding 178.3 176.9
Capital in excess of par value 3,265.5 3,209.4
Retained earnings 916.4 774.5
Accumulated other comprehensive loss (763.6) (522.5)
Total controlling interests
stockholders' equity 3,596.6 3,638.3
Noncontrolling interests 59.2 49.9
---- ----
Total stockholders' equity 3,655.8 3,688.2
Total liabilities and
stockholders' equity $11,489.6 $10,910.5
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
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Arthur J. Gallagher & Co.
Other Information
(Unaudited - data is rounded where indicated)
4th Q Ended 4th Q Ended Year Ended Year Ended
OTHER INFORMATION Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2015
------------ ------------ ------------ ------------
Basic weighted average shares
outstanding (000s) 178,174 176,810 177,560 172,239
Diluted weighted average shares
outstanding (000s) 179,089 177,551 178,387 173,215
Number of common shares outstanding
at end of period (000s) 178,329 176,947
Workforce at end of period (includes
acquisitions):
Brokerage 18,635 17,841
Risk Management 5,449 5,439
Total Company * 24,790 23,857
* Prior to September 1,
2016, most of
Gallagher's India-based
workforce was provided
by a third-party on a
cost-pass-through
basis. During the 3rd
quarter of 2016,
Gallagher consummated a
transaction whereby it
now directly employees
those associates thereby
adding approximately
2,700 employees to our
global workforce counts
shown above.
Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited)
(Unaudited - in millions except share and per share data)
Net Earnings Net Earnings
Earnings Provision (Loss) (Loss) Diluted Net
(Loss) (Benefit) Attributable to Attributable to Earnings
Before Income for Income Net Noncontrolling Controlling (Loss)
Taxes Taxes Earnings Interests Interests per Share
----- ----- -------- --------- --------- ---------
4th Q Ended Dec 31, 2016
------------------------
Brokerage, as reported $123.9 $45.3 $78.6 $(0.5) $79.1 $0.44
Gains on book sales (1.9) (0.5) (1.4) - (1.4) (0.01)
Acquisition integration 10.2 2.5 7.7 - 7.7 0.04
Workforce & lease termination 8.6 2.1 6.5 - 6.5 0.04
Acquisition related adjustments 7.0 1.7 5.3 - 5.3 0.03
--- --- --- --- ----
Brokerage, as adjusted $147.8 $51.1 $96.7 $(0.5) $97.2 $0.54
====== ===== ===== ===== ===== =====
Risk Management, as reported $24.6 $9.5 $15.1 $ - $15.1 $0.08
Workforce & lease termination 0.9 0.3 0.6 - 0.6 0.01
--- --- --- --- --- ----
Risk Management, as adjusted $25.5 $9.8 $15.7 $ - $15.7 $0.09
===== ==== ===== =================== ===== =====
Corporate, as reported $(79.7) $(87.0) $7.3 $6.4 $0.9 $0.01
Impact of 2015 litigation settlement 5.6 1.1 4.5 - 4.5 0.02
--- --- --- --- --- ----
Corporate, as adjusted $(74.1) $(85.9) $11.8 $6.4 $5.4 $0.03
====== ====== ===== ==== ==== =====
4th Q Ended Dec 31, 2015
------------------------
Brokerage, as reported $73.3 $21.6 $51.7 $(1.6) $53.3 $0.30
Gains on book sales 0.3 0.1 0.2 - 0.2 -
Acquisition integration 34.4 13.8 20.6 - 20.6 0.11
Workforce & lease termination 5.1 1.5 3.6 - 3.6 0.02
Acquisition related adjustments 20.9 6.2 14.7 - 14.7 0.09
U.K. statutory income tax rate change - 4.2 (4.2) - (4.2) (0.02)
Levelized foreign currency translation 1.3 0.3 1.0 - 1.0 -
--- --- --- --- --- ---
Brokerage, as adjusted $135.3 $47.7 $87.6 $(1.6) $89.2 $0.50
====== ===== ===== ===== ===== =====
Risk Management, as reported $19.6 $8.2 $11.4 $ - $11.4 $0.06
Workforce & lease termination 1.0 0.2 0.8 - 0.8 -
Client run-off 3.0 0.6 2.4 - 2.4 0.02
Acquisition related adjustments - - - - - -
Levelized foreign currency translation 0.6 0.2 0.4 - 0.4 -
--- --- --- --- --- ---
Risk Management, as adjusted $24.2 $9.2 $15.0 $ - $15.0 $0.08
===== ==== ===== =================== ===== =====
Corporate, as reported $(64.5) $(69.6) $5.1 $7.5 $(2.4) $(0.01)
Impact of 2015 litigation settlement 5.7 1.1 4.6 - 4.6 0.02
--- --- --- --- --- ----
Corporate, as adjusted $(58.8) $(68.5) $9.7 $7.5 $2.2 $0.01
====== ====== ==== ==== ==== =====
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
(13 of 14)
Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) - Continued
(Unaudited - in millions except share and per share data)
Net Earnings Net Earnings
Earnings Provision (Loss) (Loss) Diluted Net
(Loss) (Benefit) Attributable to Attributable to Earnings
Before Income for Income Net Noncontrolling Controlling (Loss)
Taxes Taxes Earnings Interests Interests per Share
----- ----- -------- --------- --------- ---------
Year Ended Dec 31, 2016
-----------------------
Brokerage, as reported $551.2 $194.1 $357.1 $3.6 $353.5 $1.98
Gains on book sales (6.6) (1.9) (4.7) - (4.7) (0.03)
Acquisition integration 45.7 12.9 32.8 - 32.8 0.18
Workforce & lease termination 20.7 5.6 15.1 - 15.1 0.09
Acquisition related adjustments 20.7 5.8 14.9 - 14.9 0.09
U.K. statutory income tax rate change - 1.5 (1.5) - (1.5) (0.01)
--- ---- --- ---- -----
Brokerage, as adjusted $631.7 $218.0 $413.7 $3.6 $410.1 $2.30
====== ====== ====== ==== ====== =====
Risk Management, as reported $92.5 $35.3 $57.2 $ - $57.2 $0.32
Workforce & lease termination 2.2 0.7 1.5 - 1.5 0.01
--- --- --- --- --- ----
Risk Management, as adjusted $94.7 $36.0 $58.7 $ - $58.7 $0.33
===== ===== ===== =================== ===== =====
Corporate, as reported $(286.8) $(317.5) $30.7 $27.0 $3.7 $0.02
Impact of 2015 litigation settlement 20.2 4.1 16.1 - 16.1 0.09
---- --- ---- --- ---- ----
Corporate, as adjusted $(266.6) $(313.4) $46.8 $27.0 $19.8 $0.11
======= ======= ===== ===== ===== =====
Year Ended Dec 31, 2015
-----------------------
Brokerage, as reported $413.4 $145.3 $268.1 $1.7 $266.4 $1.54
Gains on book sales (6.7) (1.7) (5.0) - (5.0) (0.03)
Acquisition integration 100.9 31.7 69.2 - 69.2 0.40
Workforce & lease termination 23.0 6.7 16.3 - 16.3 0.09
Acquisition related adjustments 39.8 11.3 28.5 - 28.5 0.16
U.K. statutory income tax rate change - 4.2 (4.2) - (4.2) (0.02)
Levelized foreign currency translation (1.8) (0.7) (1.1) - (1.1) (0.01)
---- ---- --- ---- -----
Brokerage, as adjusted $568.6 $196.8 $371.8 $1.7 $370.1 $2.13
====== ====== ====== ==== ====== =====
Risk Management, as reported $92.3 $35.1 $57.2 $ - $57.2 $0.33
Workforce & lease termination 2.9 0.8 2.1 - 2.1 0.01
Client run-off / bankruptcy 4.0 0.9 3.1 - 3.1 0.02
Acquisition related adjustments (0.5) (0.2) (0.3) - (0.3) -
Levelized foreign currency translation (0.8) (0.2) (0.6) - (0.6) -
---- ---- ---- --- ---- ---
Risk Management, as adjusted $97.9 $36.4 $61.5 $ - $61.5 $0.36
===== ===== ===== =================== ===== =====
Corporate, as reported $(212.2) $(276.0) $63.8 $30.6 $33.2 $0.19
Impact of 2015 litigation settlement (16.2) 1.5 (17.7) - (17.7) (0.10)
----- --- ----- --- ----- -----
Corporate, as adjusted $(228.4) $(274.5) $46.1 $30.6 $15.5 $0.09
======= ======= ===== ===== ===== =====
See "Information Regarding Non-GAAP Measures" on page 9 of 14.
Contact:
Ray Iardella
Vice President - Investor Relations
630-285-3661 or ray_iardella@ajg.com
(14 of 14)
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/arthur-j-gallagher--co-announces-fourth-quarter-and-full-year-2016-financial-results-300397790.html
SOURCE Arthur J. Gallagher & Co.
