Virginia-based Hilb, Rogal and Hamilton Company reported second quarter, total revenues of $139.5 million, compared with $95.7 million a year ago, an increase of 45.8 percent.
Commissions and fees rose 45.5% to $137.9 million during the quarter, compared with $94.7 million during the same period last year, reflecting acquisitions -primarily the addition of Hobbs Group, LLC (Hobbs) – new business, and a continued positive rate environment. Net income for the quarter was $19.1 million, or $0.52 per share, compared with $12.5 million, or $0.40 per share, a year ago, an increase of 52.5 percent. In calculating the per share amount, the dilutive shares for the quarter increased 14.1 percent, reflecting shares issuable for acquisition-related contingent payments – primarily Hobbs – and shares issued over the past twelve months for acquisitions and a public offering.
For the first six months, total revenues rose 44.0 percent to $281.5 million from $195.6 million a year ago. Commissions and fees increased 43.9 percent to $278.4 million from $193.4 million last year, reflecting the same trends identified above for the quarter, in addition to higher contingent and override commissions, which are heavily weighted in the first quarter.
Net income for the six months was $37.2 million, or $1.03 per share, compared with $31.6 million, or $1.00 per share, in 2002, an increase of 17.5 percent. Net income before non-operating losses, a one-time retirement benefit charge in 2003, and the cumulative effect of a 2002 revenue recognition accounting change was $40.4 million, or $1.12 per share, compared with $27.8 million, or $0.88 per share, a year ago, an increase of 45.3 percent. The per share amount for the six months is based on a 12.1 percent higher dilutive share count than the prior year due to similar factors as noted above for the quarter.
Organic growth, defined as the change in commissions and fees before the effect of acquisitions and divestitures, was 5.9 percent for the second quarter and 8.6 percent for the six months. While organic growth may vary on a quarterly basis, the company reaffirms its full year 2003 guidance of 9 percent to 11 percent for organic growth, which, beginning in the third quarter, will include revenues generated by Hobbs, whose organic growth was 16.4 percent for the first six months of 2003.
The operating margin for the second quarter was 26.6 percent, compared with 24.7 percent for the previous year’s quarter. For the six months, the operating margin increased to 27.7 percent in 2003 from 26.4 percent in 2002.
The increases reflect higher contingent and override commissions as a percentage of revenues, strong margin performance by Hobbs in the second quarter, and productivity and efficiency improvements from HRH’s Best Practices program. Continued incremental margin improvement remains one of HRH’s key financial objectives.
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