July 28, 2016 - 4:32 PM EDT
Print Email Article Font Down Font Up Charts

Arthur J. Gallagher & Co. Announces Second Quarter 2016 Financial Results

ITASCA, Ill., July 28, 2016 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended June 30, 2016.  Management will host a webcast conference call to discuss these results on Friday, July 29, 2016 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 – Second Quarter

Reconciliations of non-GAAP measures begin on page 2


(Dollars in millions, except per share data)


2nd Q 2016


2nd Q 2015


Change






Reported

Adjusted


Reported

Adjusted


Reported

Adjusted

Brokerage Segment



GAAP

Non-GAAP


GAAP

Non-GAAP


GAAP

Non-GAAP


Revenues 



$      939.1

$      937.7


$      885.6

$      866.7


6%

8%


Organic revenues 




$      872.4



$      853.5



2.2%


Net earnings 



$      114.9



$      100.3



15%



Net earnings margin



12.2%



11.3%



 +91 bpts



Adjusted EBITDAC 




$      284.5



$      258.0



10%


Adjusted EBITDAC margin




30.3%



29.8%



 +57 bpts


Diluted net earnings per share


$        0.64

$        0.75


$        0.58

$        0.70


10%

7%














Risk Management Segment 











Revenues 



$      176.5

$      176.5


$      189.4

$      187.4


-7%

-6%


Organic revenues 




$      174.8



$      180.3



-3.1%


Net earnings 



$        13.9



$        17.1



-19%



Net earnings margin



7.9%



9.0%



   -115 bpts



Adjusted EBITDAC 




$        30.1



$        32.6



-8%


Adjusted EBITDAC margin




17.1%



17.4%



      -35 bpts


Diluted net earnings per share


$        0.08

$        0.08


$        0.10

$        0.10


-20%

-20%














Corporate Segment 












Diluted net earnings per share


$        0.12

$        0.14


$        0.13

$        0.13


-8%

8%














Total Company












Diluted net earnings per share


$        0.84

$        0.97


$        0.81

$        0.93


4%

4%


Diluted weighted average shares 












  outstanding (in millions)



178.3



171.7


















"During the second quarter and first half of the year we improved our profitability margin, we posted solid growth in revenue and we grew earnings per share.  We are pleased with our performance year to date and the fundamentals of our business remain strong," said J. Patrick Gallagher, Jr., Chairman, President and CEO.  "Our recent internal survey suggests P&C pricing is moderating at about the same level as last year across our global footprint.  Property continues to experience the largest price reductions, while casualty pricing is flat to down modestly.  The survey results point to a stable market with the majority of respondents expecting no significant change in the pricing environment this year.  This is a good environment for our skilled production team."

(1 of 14)


Summary of Financial Results – Six Months Ended June 30, 2016

Reconciliations of non-GAAP measures begin on page 3


(Dollars in millions, except per share data)


6 Months 2016


6 Months 2015


Change






Reported

Adjusted


Reported

Adjusted


Reported

Adjusted

Brokerage Segment



GAAP

Non-GAAP


GAAP

Non-GAAP


GAAP

Non-GAAP


Revenues 



$   1,764.6

$   1,761.0


$   1,636.7

$   1,599.2


8%

10%


Organic revenues 




$   1,629.7



$   1,573.0



3.6%


Net earnings 



$      180.8



$      140.9



28%



Net earnings margin



10.3%



8.6%



 +164 bpts



Adjusted EBITDAC 




$      475.7



$      422.3



13%


Adjusted EBITDAC margin




27.0%



26.4%



 +60 bpts


Diluted net earnings per share


$        0.99

$        1.15


$        0.80

$        1.06


24%

8%














Risk Management Segment 











Revenues 



$      355.8

$      355.8


$      366.6

$      362.1


-3%

-2%


Organic revenues 




$      352.2



$      349.8



0.7%


Net earnings 



$        28.9



$        32.0



-10%



Net earnings margin



8.1%



8.7%



      -61 bpts



Adjusted EBITDAC 




$        61.6



$        61.5



0%


Adjusted EBITDAC margin




17.3%



17.0%



 +33 bpts


Diluted net earnings per share


$        0.16

$        0.17


$        0.19

$        0.18


-16%

-6%














Corporate Segment 












Diluted net earnings (loss) per share


$       (0.05)

$       (0.01)


$       (0.04)

$       (0.04)


25%

-75%














Total Company












Diluted net earnings per share


$        1.10

$        1.31


$        0.95

$        1.20


16%

9%


Diluted weighted average shares 












  outstanding (in millions)



178.0



169.3


















 

Quarter Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:


















Diluted Net 





Revenues


Net Earnings


EBITDAC


Earnings Per Share

Segment


2nd Q 16

2nd Q 15


2nd Q 16

2nd Q 15


2nd Q 16

2nd Q 15


2nd Q 16

2nd Q 15




















(in millions)


(in millions)


(in millions)



















Brokerage, as reported


$    939.1

$    885.6


$    114.9

$    100.3


$    267.7

$    234.0


$     0.64

$     0.58


Gains on book sales 


(1.4)

(3.5)


(1.0)

(2.5)


(1.4)

(3.5)


-

(0.01)


Acquisition integration


-

-


8.4

16.1


11.9

22.4


0.05

0.09


Workforce & lease termination


-

-


3.2

4.3


4.5

6.0


0.02

0.02


Acquisition related adjustments


-

-


8.0

4.8


1.8

2.5


0.04

0.03


Levelized foreign currency translation

-

(15.4)


-

(1.3)


-

(3.4)


-

(0.01)
















Brokerage, as adjusted  *


937.7

866.7


133.5

121.7


284.5

258.0


0.75

0.70
















Risk Management, as reported


176.5

189.4


13.9

17.1


29.7

33.1


0.08

0.10


Workforce & lease termination


-

-


0.3

0.2


0.4

0.3


-

-


Acquisition related adjustments


-

-


-

(0.3)


-

-


-

-


Levelized foreign currency translation

-

(2.0)


-

(0.5)


-

(0.8)


-

-
















Risk Management, as adjusted  *


176.5

187.4


14.2

16.5


30.1

32.6


0.08

0.10
















Corporate, as reported


311.5

296.4


26.9

30.2


(30.9)

(24.7)


0.12

0.13


Impact of 2015 litigation settlement 


-

-


4.4

-


5.5

-


0.02

-
















Corporate, as adjusted  *


311.5

296.4


31.3

30.2


(25.4)

(24.7)


0.14

0.13
















Total Company, as reported


$1,427.1

$1,371.4


$    155.7

$    147.6


$    266.5

$    242.4


$     0.84

$     0.81
















Total Company, as adjusted  *


$1,425.7

$1,350.5


$    179.0

$    168.4


$    289.2

$    265.9


$     0.97

$     0.93

Total Brokerage & Risk 














Management, as reported


$1,115.6

$1,075.0


$    128.8

$    117.4


$    297.4

$    267.1


$     0.72

$     0.68
















Total Brokerage & Risk 














Management, as adjusted  *


$1,114.2

$1,054.1


$    147.7

$    138.2


$    314.6

$    290.6


$     0.83

$     0.80
















 

For 2016, the pretax impact of the Brokerage Segment adjustments totals $26.3 million, with a corresponding adjustment to the provision for income taxes of $7.7 million relating to these items.  The pretax impact of the Risk Management Segment adjustments totals $0.4 million, with a corresponding adjustment to the provision for income taxes of $0.1 million relating to these items.  The pretax impact of the Corporate Segment adjustments totals $5.5 million, with a corresponding adjustment to the provision for income taxes of $1.1 million relating to these items.  A detailed reconciliation of the 2016 and 2015 provision for income taxes is shown on page 13.

(2 of 14)

 

Six Months Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:


















Diluted Net 





Revenues


Net Earnings


EBITDAC


Earnings (Loss) Per Share

Segment


6 Mths 16

6 Mths 15


6 Mths 16

6 Mths 15


6 Mths 16

6 Mths 15


6 Mths 16

6 Mths 15




















(in millions)


(in millions)


(in millions)



















Brokerage, as reported


$1,764.6

$1,636.7


$    180.8

$    140.9


$    444.5

$    372.5


$     0.99

$     0.80


Gains on book sales 


(3.6)

(4.4)


(2.5)

(3.1)


(3.6)

(4.4)


(0.01)

(0.02)


Acquisition integration


-

-


18.4

30.0


26.1

43.2


0.10

0.18


Workforce & lease termination


-

-


4.3

10.1


6.1

14.5


0.02

0.06


Acquisition related adjustments


-

-


8.3

8.8


2.6

2.5


0.05

0.05


Levelized foreign currency translation

-

(33.1)


-

(1.7)


-

(6.0)


-

(0.01)
















Brokerage, as adjusted  *


1,761.0

1,599.2


209.3

185.0


475.7

422.3


1.15

1.06
















Risk Management, as reported


355.8

366.6


28.9

32.0


60.7

62.7


0.16

0.19


Workforce & lease termination


-

-


0.6

0.3


0.9

0.5


0.01

-


Acquisition related adjustments


-

-


-

(0.3)


-

-


-

-


Levelized foreign currency translation

-

(4.5)


-

(1.1)


-

(1.7)


-

(0.01)
















Risk Management, as adjusted  *


355.8

362.1


29.5

30.9


61.6

61.5


0.17

0.18
















Corporate, as reported


607.1

599.4


3.9

7.1


(69.3)

(49.5)


(0.05)

(0.04)


Impact of 2015 litigation settlement 


-

-


8.1

-


10.2

-


0.04

-
















Corporate, as adjusted  *


607.1

599.4


12.0

7.1


(59.1)

(49.5)


(0.01)

(0.04)
















Total Company, as reported


$2,727.5

$2,602.7


$    213.6

$    180.0


$    435.9

$    385.7


$     1.10

$     0.95
















Total Company, as adjusted  *


$2,723.9

$2,560.7


$    250.7

$    223.0


$    478.2

$    434.3


$     1.31

$     1.20

Total Brokerage & Risk 














Management, as reported


$2,120.4

$2,003.3


$    209.7

$    172.9


$    505.2

$    435.2


$     1.15

$     0.99
















Total Brokerage & Risk 














Management, as adjusted  *


$2,116.8

$1,961.3


$    238.8

$    215.9


$    537.3

$    483.8


$     1.32

$     1.24
















*

For 2016, the pretax impact of the Brokerage Segment adjustments totals $40.4 million, with a corresponding adjustment to the provision for income taxes of $11.9 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 $10.2 million, with a corresponding adjustment to the provision for income taxes of $2.1 million relating to these items.  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)


2nd Q 16


2nd Q 15


Change


6 Mths 16


6 Mths 15


Change


















Base Commissions and Fees














Commissions and fees, as reported


$      861.7


$      812.3


6.1%


$   1,586.8


$   1,478.1


7.4%


Less commissions and fees from acquisitions 


(50.5)


-




(100.9)


-




Less disposed of operations


-


(0.5)




-


(0.8)




Levelized foreign currency translation


-


(14.6)




-


(31.0)




















Organic base commissions and fees


$      811.2


$      797.2


1.8%


$   1,485.9


$   1,446.3


2.7%


















Supplemental Commissions














Supplemental commissions, as reported


$        38.6


$        34.8


10.9%


$        71.5


$        61.7


15.9%


Less supplemental commissions from acquisitions


(0.3)


-




(1.3)


-




Levelized foreign currency translation


-


(1.1)




-


(1.8)




















Organic supplemental commissions


$        38.3


$        33.7


13.7%


$        70.2


$        59.9


17.2%


















Contingent Commissions














Contingent commissions, as reported


$        25.1


$        22.8


10.1%


$        80.3


$        67.3


19.3%


Less contingent commissions from acquisitions


(2.2)


-




(6.7)


-




Levelized foreign currency translation


-


(0.2)




-


(0.5)




















Organic contingent commissions


$        22.9


$        22.6


1.3%


$        73.6


$        66.8


10.2%


















Total reported commissions, fees, supplemental















commissions and contingent commissions


$      925.4


$      869.9


6.4%


$   1,738.6


$   1,607.1


8.2%


Less commissions and fees from acquisitions 


(53.0)


-




(108.9)


-




Less disposed of operations


-


(0.5)




-


(0.8)




Levelized foreign currency translation


-


(15.9)




-


(33.3)




















Total organic commissions, fees, supplemental















commissions and contingent commissions


$    872.4


$    853.5


2.2%


$ 1,629.7


$ 1,573.0


3.6%


















Of the 2.2% growth in total organic revenues for second quarter 2016, domestic posted 3% growth and international posted 1% growth. As previously announced, the loss of one large international account negatively impacted organic growth; excluding the lost account, international would have posted 2% growth and total brokerage would have posted 2.5% growth.

Acquisition Activity


2nd Q 16


2nd Q 15


6 Mths 16


6 Mths 15












Number of acquisitions closed  *


13


11


21


22

Estimated annualized revenues acquired (in millions)


$         40.4


$         82.3


$         70.4


$       115.9












Gallagher repurchased 697,000 shares in the second quarter of 2016 to fully offset shares issued for tax-free exchange mergers in the quarter.  Gallagher also repurchased 804,000 shares in the second quarter of 2016 in contemplation of closing tax-free exchange mergers that are anticipated to occur in the third quarter of 2016 or thereafter. 

(4 of 14)

Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):

Compensation Expense and Ratios


2nd Q 16


2nd Q 15


6 Mths 16


6 Mths 15












Compensation expense, as reported


$    518.2


$    496.0


$1,011.1


$    956.3












Acquisition integration  (1)


(4.5)


(11.1)


(9.1)


(22.7)

Workforce and lease termination related charges


(2.5)


(4.6)


(3.8)


(13.1)

Acquisition related adjustments


(1.8)


(2.5)


(2.6)


(2.5)

Levelized foreign currency translation


-


(9.2)


-


(20.3)












Compensation expense, as adjusted


$    509.4


$    468.6


$    995.6


$    897.7












Reported compensation expense ratios using reported revenues on pages 2 and 3

*

55.2%


56.0%


57.3%


58.4%












Adjusted compensation expense ratios using adjusted revenues on pages 2 and 3

**

54.3%


54.1%


56.5%


56.1%












Reported second quarter compensation ratio was 0.8 pts lower than the same period in 2015.  This ratio was primarily impacted by lower integration expenses.  

** 

Adjusted second quarter compensation ratio was 0.2 pts higher compared to the same period in 2015.  All other items were essentially consistent with the prior year.  

 

Operating Expense and Ratios


2nd Q 16


2nd Q 15


6 Mths 16


6 Mths 15












Operating expense, as reported 


$    153.2


$    155.6


$    309.0


$    307.9












Acquisition integration  (1)


(7.4)


(11.3)


(17.0)


(20.5)

Workforce and lease termination related charges


(2.0)


(1.4)


(2.3)


(1.4)

Levelized foreign currency translation


-


(2.8)


-


(6.8)












Operating expense, as adjusted


$    143.8


$    140.1


$    289.7


$    279.2












Reported operating expense ratios using reported revenues on pages 2 and 3

*

16.3%


17.6%


17.5%


18.8%












Adjusted operating expense ratios using adjusted revenues on pages 2 and 3

**

15.3%


16.2%


16.5%


17.5%












Reported second quarter operating expense ratio was 1.3 pts lower than the same period in 2015.  This ratio was primarily impacted by decreased integration costs, lower real estate expense and savings in business insurance.

** 

Adjusted second quarter operating expense ratio was 0.9 pts lower than the same period in 2015.  This ratio was primarily impacted by lower real estate expense and savings in business insurance.

 

Net Earnings to Adjusted EBITDAC (Non-GAAP)


2nd Q 16


2nd Q 15


Change


6 Mths 16


6 Mths 15


Change




















Net earnings, as reported


$     114.9


$     100.3


14.6%


$     180.8


$     140.9


28.3%



Provision for income taxes


63.3


56.3




97.4


76.7





Depreciation


14.4


12.5




28.4


25.4





Amortization


61.9


58.8




120.8


112.8





Change in estimated acquisition earnout payables


13.2


6.1




17.1


16.7






















EBITDAC 


267.7


234.0


14.4%


444.5


372.5


19.3%




















Gains from books of business sales


(1.4)


(3.5)




(3.6)


(4.4)





Acquisition integration  (1)


11.9


22.4




26.1


43.2





Acquisition related adjustments


1.8


2.5




2.6


2.5





Workforce and lease termination related charges


4.5


6.0




6.1


14.5





Levelized foreign currency translation


-


(3.4)




-


(6.0)






















EBITDAC, as adjusted 


$     284.5


$     258.0


10.3%


$     475.7


$     422.3


12.7%




















Net earnings margin, as reported


12.2%


11.3%


 +91 bpts


10.3%


8.6%


 +164 bpts




















EBITDAC margin, as adjusted 


30.3%


29.8%


 +57 bpts


27.0%


26.4%


 +60 bpts




















(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)


2nd Q 16


2nd Q 15


Change


6 Mths 16


6 Mths 15


Change


















Fees


$      176.3


$      182.5


-3.4%


$      353.6


$      356.3


-0.8%


International performance bonus fees 


-


6.8


-100.0%


1.8


10.1


-82.2%


















Fees as reported


176.3


189.3


-6.9%


355.4


366.4


-3.0%


















Less fees from acquisitions


(1.4)


-




(3.1)


-




Less client run-off


(0.1)


(7.0)




(0.1)


(12.1)




Levelized foreign currency translation


-


(2.0)




-


(4.5)




















Organic fees


$      174.8


$      180.3


-3.1%


$      352.2


$      349.8


0.7%


















Second quarter 2016 organic fees were unfavorably impacted primarily by a delay in the inception of new business, lesser arising domestic claim counts, and lower international performance bonus fees.

Compensation Expense and Ratios


2nd Q 16


2nd Q 15


6 Mths 16


6 Mths 15














Compensation expense, as reported


$    104.0


$    109.2


$    209.5


$    216.1














Workforce and lease termination related charges


(0.4)


(0.3)


(0.9)


(0.5)


Levelized foreign currency translation


-


(1.0)


-


(2.2)














Compensation expense, as adjusted


$    103.6


$    107.9


$    208.6


$    213.4














Reported compensation expense ratios using reported revenues on pages 2 and 3

 * 

58.9%


57.7%


58.9%


59.0%














Adjusted compensation expense ratios using adjusted revenues on pages 2 and 3

*

58.7%


57.6%


58.6%


58.9%














Reported and adjusted second quarter compensation ratios were 1.2 pts and 1.1 pts higher, respectively, than the same period in 2015. Excluding the impact of the products discussed below, both compensation expense ratios were 2.5 pts higher than the same period in 2015. This was primarily due to the lack of international performance bonus fee revenues in 2016.

 

Operating Expense and Ratios


2nd Q 16


2nd Q 15


6 Mths 16


6 Mths 15














Operating expense, as reported 


$      42.8


$      47.1


$      85.6


$      87.8














Levelized foreign currency translation


-


(0.2)


-


(0.6)














Operating expense, as adjusted


$      42.8


$      46.9


$      85.6


$      87.2














Reported operating expense ratios using reported revenues on pages 2 and 3

 * 

24.3%


24.9%


24.1%


24.0%














Adjusted operating expense ratios using adjusted revenues on pages 2 and 3

*

24.3%


25.0%


24.1%


24.1%














*

Reported and adjusted second quarter operating expense ratios were 0.6 pts and 0.7 pts lower, respectively, than the same period in 2015. Included in both operating expense ratios is an increase of 1.9 pts from growth of outsourced products, the cost of which only flows through operating expense, that was more than offset by savings in professional fees, business insurance, real estate and other expenses.

(6 of 14)

Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):

Net Earnings to Adjusted EBITDAC (Non-GAAP)


2nd Q 16


2nd Q 15


Change


6 Mths 16


6 Mths 15


Change


















Net earnings, as reported


$       13.9


$       17.1


-18.7%


$       28.9


$       32.0


-9.7%


Provision for income taxes


8.5


9.6




17.5


18.3




Depreciation


6.6


6.2




13.2


11.5




Amortization


0.7


0.7




1.1


1.4




Change in estimated acquisition earnout payables


-


(0.5)




-


(0.5)




















EBITDAC


29.7


33.1


-10.3%


60.7


62.7


-3.2%


















Workforce and lease termination related charges


0.4


0.3




0.9


0.5




Levelized foreign currency translation


-


(0.8)




-


(1.7)




















EBITDAC, as adjusted 


$       30.1


$       32.6


-7.7%


$       61.6


$       61.5


0.2%


















Net earnings margin, as reported


7.9%


9.0%


  -115 bpts


8.1%


8.7%


     -61 bpts


















EBITDAC margin, as adjusted 


17.1%


17.4%


     -35 bpts


17.3%


17.0%


 +33 bpts


















Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):





















2016






2015











Net Earnings






Net Earnings









(Loss)






(Loss)





Pretax


Income


Attributable to


Pretax


Income


Attributable to





 Earnings


Tax


Controlling


 Earnings


Tax


Controlling





(Loss)


Benefit


Interests


(Loss)


Benefit


Interests

















2nd Quarter














Interest and banking costs


$         (28.0)


$           11.2


$              (16.8)


$         (26.6)


$           10.6


$              (16.0)


Clean energy related (1)


(24.4)


73.6


49.2


(25.3)


70.3


45.0


Acquisition costs


(1.1)


0.2


(0.9)


(1.5)


0.2


(1.3)


Corporate


(10.0)


3.9


(6.1)


(8.5)


3.9


(4.6)


Litigation settlement (2)


(5.5)


1.1


(4.4)


-


-


-

















Reported 2nd quarter


(69.0)


90.0


21.0


(61.9)


85.0


23.1

















Litigation settlement (2)


5.5


(1.1)


4.4


-


-


-

















Adjusted 2nd quarter


$         (63.5)


$           88.9


$               25.4


$         (61.9)


$           85.0


$               23.1

















Six Months














Interest and banking costs


$         (54.3)


$           21.7


$              (32.6)


$         (52.9)


$           21.1


$              (31.8)


Clean energy related (1)


(58.3)


104.8


46.5


(48.6)


88.1


39.5


Acquisition costs


(2.8)


0.5


(2.3)


(3.2)


0.4


(2.8)


Corporate


(18.6)


6.2


(12.4)


(17.5)


6.0


(11.5)


Litigation settlement (2)


(10.2)


2.1


(8.1)


-


-


-

















Reported six months


(144.2)


135.3


(8.9)


(122.2)


115.6


(6.6)

















Litigation settlement (2)


10.2


(2.1)


8.1


-


-


-

















Adjusted six months


$       (134.0)


$        133.2


$                (0.8)


$       (122.2)


$        115.6


$                (6.6)

















(1)

Pretax earnings for the second quarter are presented net of amounts attributable to noncontrolling interests of $5.9 million in 2016 and $7.1 million in 2015.  Pretax earnings for the six month period are presented net of amounts attributable to noncontrolling interests of $12.8 million in 2016 and $13.7 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.

Interest and banking costs and debt - At June 30, 2016, Gallagher had $2,400.0 million of borrowings from private placements, $235.0 million of short-term borrowings under its line of credit facility and $101.2 million outstanding under a two year 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 June 2, 2016, Gallagher entered into a note purchase agreement for a private placement of $275.0 million of senior unsecured notes.  Proceeds were primarily used to pay down its line of credit facility and partially fund its acquisitions.  

(7 of 14)

On April 8, 2016, Gallagher entered into an $800.0 million unsecured revolving credit facility, expiring in April 2021, with a group of fifteen financial institutions led by Bank of Montreal.  At Gallagher's request, the facility can increase to $1.1 billion upon satisfaction of certain conditions.  This facility replaces a $600.0 million unsecured revolving credit facility that was due to expire in 2018.  

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 June 30, 2016 and 2015 was (13.2)% and (14.9)%, 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 second 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 as of June 30, 2016.  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.  In addition, Gallagher 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.

Webcast Conference Call

Gallagher will host a webcast conference call on Friday, July 29, 2016 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
  • 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.

(8 of 14)

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 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 - Gallagher believes that each of EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin and adjusted EPS for the Brokerage and Risk Management segments, as defined below, provides a meaningful representation of its operating performance.  Adjusted EPS is a performance measure and should not be used as a measure of Gallagher's liquidity.  Gallagher also considers EBITDAC and EBITDAC margin as ways to measure financial performance on an ongoing basis.  In addition, adjusted EBITDAC, adjusted EBITDAC margin and adjusted EPS for the Brokerage and Risk Management segments are presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

  • EBITDAC - Net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables.
  • EBITDAC margin - EBITDAC divided by total revenues.

(9 of 14)     

  • Adjusted EBITDAC - 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. 
  • Adjusted EBITDAC margin - Adjusted EBITDAC divided by total adjusted revenues (defined above).
  • Adjusted EPS for the Brokerage and Risk Management segments - Gallagher defines this non-GAAP measure as 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. 

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 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 and 6, respectively, for the Brokerage and Risk Management segments).  Reported compensation and operating expense ratios can be found in the "Supplemental Quarterly Data" available at ajg.com/IR.

(10 of 14)


Arthur J. Gallagher & Co.

Reported Statement of Earnings and EBITDAC - 2nd Qtr Ended June 30,

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














2nd Q Ended


2nd Q Ended


6 Mths Ended


6 Mths Ended

Brokerage Segment 



June 30, 2016


June 30, 2015


June 30, 2016


June 30, 2015











Commissions


$            663.4


$            634.3


$          1,229.4


$          1,154.0

Fees


198.3


178.0


357.4


324.1

Supplemental commissions 


38.6


34.8


71.5


61.7

Contingent commissions


25.1


22.8


80.3


67.3

Investment income and gains realized on books of business sales


13.7


15.7


26.0


29.6

   Revenues





939.1


885.6


1,764.6


1,636.7











Compensation


518.2


496.0


1,011.1


956.3

Operating


153.2


155.6


309.0


307.9

Depreciation


14.4


12.5


28.4


25.4

Amortization


61.9


58.8


120.8


112.8

Change in estimated acquisition earnout payables


13.2


6.1


17.1


16.7

   Expenses





760.9


729.0


1,486.4


1,419.1











Earnings before income taxes


178.2


156.6


278.2


217.6

Provision for income taxes  


63.3


56.3


97.4


76.7











Net earnings 


114.9


100.3


180.8


140.9

Net earnings attributable to noncontrolling interests


(0.2)


1.2


4.3


5.1











Net earnings attributable to controlling interests


$            115.1


$              99.1


$            176.5


$            135.8











EBITDAC 









Net earnings


$            114.9


$            100.3


$            180.8


$            140.9

Provision for income taxes


63.3


56.3


97.4


76.7

Depreciation


14.4


12.5


28.4


25.4

Amortization


61.9


58.8


120.8


112.8

Change in estimated acquisition earnout payables


13.2


6.1


17.1


16.7











EBITDAC


$            267.7


$            234.0


$            444.5


$            372.5
























2nd Q Ended


2nd Q Ended


6 Mths Ended


6 Mths Ended

Risk Management Segment 


June 30, 2016


June 30, 2015


June 30, 2016


June 30, 2015











Fees


$            176.3


$            189.3


$            355.4


$            366.4

Investment income


0.2


0.1


0.4


0.2

    Revenues



176.5


189.4


355.8


366.6











Compensation


104.0


109.2


209.5


216.1

Operating


42.8


47.1


85.6


87.8

Depreciation


6.6


6.2


13.2


11.5

Amortization


0.7


0.7


1.1


1.4

Change in estimated acquisition earnout payables


-


(0.5)


-


(0.5)

    Expenses



154.1


162.7


309.4


316.3











Earnings before income taxes


22.4


26.7


46.4


50.3

Provision for income taxes


8.5


9.6


17.5


18.3











Net earnings 


13.9


17.1


28.9


32.0

Net earnings attributable to noncontrolling interests


-


-


-


-











Net earnings attributable to controlling interests


$              13.9


$              17.1


$              28.9


$              32.0











EBITDAC 









Net earnings 


$              13.9


$              17.1


$              28.9


$              32.0

Provision for income taxes


8.5


9.6


17.5


18.3

Depreciation


6.6


6.2


13.2


11.5

Amortization


0.7


0.7


1.1


1.4

Change in estimated acquisition earnout payables


-


(0.5)


-


(0.5)











EBITDAC


$              29.7


$              33.1


$              60.7


$              62.7
























2nd Q Ended


2nd Q Ended


6 Mths Ended


6 Mths Ended

Corporate Segment 


June 30, 2016


June 30, 2015


June 30, 2016


June 30, 2015











Revenues from consolidated clean coal facilities


$            301.5


$            283.7


$            583.5


$            573.2

Royalty income from clean coal licenses


10.8


13.6


23.9


28.3

Loss from unconsolidated clean coal facilities


(0.4)


(0.3)


(0.7)


(0.6)

Other net revenues


(0.4)


(0.6)


0.4


(1.5)

    Revenues



311.5


296.4


607.1


599.4











Cost of revenues from consolidated clean coal facilities


325.0


306.8


629.4


616.1

Compensation


8.8


9.9


32.5


17.9

Operating


8.6


4.4


14.5


14.9

Interest


27.2


26.0


53.0


51.6

Depreciation


5.0


4.1


9.1


7.4

   Expenses



374.6


351.2


738.5


707.9











Loss before income taxes


(63.1)


(54.8)


(131.4)


(108.5)

Benefit for income taxes


(90.0)


(85.0)


(135.3)


(115.6)











Net earnings 


26.9


30.2


3.9


7.1

Net earnings attributable to noncontrolling interests


5.9


7.1


12.8


13.7











Net earnings (loss) attributable to controlling interests


$              21.0


$              23.1


$               (8.9)


$               (6.6)











EBITDAC 









Net earnings 


$              26.9


$              30.2


$                3.9


$                7.1

Benefit for income taxes


(90.0)


(85.0)


(135.3)


(115.6)

Interest


27.2


26.0


53.0


51.6

Depreciation


5.0


4.1


9.1


7.4











EBITDAC


$             (30.9)


$             (24.7)


$             (69.3)


$             (49.5)











See "Information Regarding Non-GAAP Measures" on page 9 of 14.















(11 of 14)

Arthur J. Gallagher & Co.

Reported Statement of Earnings and EBITDAC - 2nd Qtr Ended June 30,

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














2nd Q Ended


2nd Q Ended


6 Mths Ended


6 Mths Ended

Total Company 


June 30, 2016


June 30, 2015


June 30, 2016


June 30, 2015











Commissions


$            663.4


$            634.3


$          1,229.4


$          1,154.0

Fees


374.6


367.3


712.8


690.5

Supplemental commissions 


38.6


34.8


71.5


61.7

Contingent commissions


25.1


22.8


80.3


67.3

Investment income and gains realized on books of business sales


13.9


15.8


26.4


29.8

Revenues from clean coal activities


311.9


297.0


606.7


600.9

Other net revenues - Corporate


(0.4)


(0.6)


0.4


(1.5)

   Revenues



1,427.1


1,371.4


2,727.5


2,602.7











Compensation


631.0


615.1


1,253.1


1,190.3

Operating


204.6


207.1


409.1


410.6

Cost of revenues from clean coal activities


325.0


306.8


629.4


616.1

Interest


27.2


26.0


53.0


51.6

Depreciation


26.0


22.8


50.7


44.3

Amortization


62.6


59.5


121.9


114.2

Change in estimated acquisition earnout payables


13.2


5.6


17.1


16.2

     Expenses



1,289.6


1,242.9


2,534.3


2,443.3











Earnings before income taxes


137.5


128.5


193.2


159.4

Benefit for income taxes


(18.2)


(19.1)


(20.4)


(20.6)











Net earnings 


155.7


147.6


213.6


180.0

Net earnings attributable to noncontrolling interests


5.7


8.3


17.1


18.8











Net earnings attributable to controlling interests


$            150.0


$            139.3


$            196.5


$            161.2











Diluted net earnings per share


$              0.84


$              0.81


$              1.10


$              0.95











Dividends declared per share


$              0.38


$              0.37


$              0.76


$              0.74











EBITDAC 









Net earnings 


$            155.7


$            147.6


$            213.6


$            180.0

Benefit for income taxes


(18.2)


(19.1)


(20.4)


(20.6)

Interest


27.2


26.0


53.0


51.6

Depreciation


26.0


22.8


50.7


44.3

Amortization


62.6


59.5


121.9


114.2

Change in estimated acquisition earnout payables


13.2


5.6


17.1


16.2











EBITDAC


$            266.5


$            242.4


$            435.9


$            385.7































 


Arthur J. Gallagher & Co.

Consolidated Balance Sheet

(Unaudited - in millions except per share data)










June 30, 2016


Dec 31, 2015







Cash and cash equivalents


$            411.1


$            480.4

Restricted cash


1,430.9


1,412.1

Premiums and fees receivable 


2,038.4


1,734.0

Other current assets


605.2


587.2








Total current assets


4,485.6


4,213.7







Fixed assets - net


213.9


202.7

Deferred income taxes (includes tax credit carryforwards of $387.0 in 2016 and $341.6 in 2015)


702.3


643.5

Other noncurrent assets


606.6


488.9

Goodwill - net


3,716.1


3,662.9

Amortizable intangible assets - net


1,659.8


1,698.8








Total assets


$        11,384.3


$        10,910.5







Premiums payable to insurance and reinsurance companies


$          3,216.5


$          2,877.1

Accrued compensation and other accrued liabilities


658.5


812.7

Unearned fees


72.8


61.3

Other current liabilities


49.7


54.0

Premium financing borrowings


101.2


137.0

Corporate related borrowings - current


285.0


245.0








Total current liabilities


4,383.7


4,187.1







Corporate related borrowings - noncurrent


2,344.4


2,071.7

Other noncurrent liabilities


1,000.4


963.5








Total liabilities


7,728.5


7,222.3







Stockholders' equity:





Common stock - issued and outstanding


177.0


176.9

Capital in excess of par value


3,191.2


3,209.4

Retained earnings


835.2


774.5

Accumulated other comprehensive loss


(603.5)


(522.5)







Total controlling interests stockholders' equity


3,599.9


3,638.3

Noncontrolling interests


55.9


49.9








Total stockholders' equity


3,655.8


3,688.2








Total liabilities and stockholders' equity


$        11,384.3


$        10,910.5







See "Information Regarding Non-GAAP Measures" on page 9 of 14.







(12 of 14)

Arthur J. Gallagher & Co.

Other Information

(Unaudited - data is rounded where indicated)














2nd Q Ended


2nd Q Ended


6 Mths Ended


6 Mths Ended

OTHER INFORMATION


June 30, 2016


June 30, 2015


June 30, 2016


June 30, 2015











Basic weighted average shares outstanding (000s)


177,415


170,613


177,226


168,094

Diluted weighted average shares outstanding (000s)


178,272


171,731


177,965


169,257











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






177,031


174,545











Workforce at end of period (includes acquisitions):










Brokerage 






16,520


15,667


Risk Management 






5,171


5,015


Total Company 






22,228


21,098











 


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 (Loss) 


Net Earnings (Loss) 






Earnings (Loss)


Provision (Benefit)




Attributable to


Attributable to


Diluted Net




Before Income


for Income


Net
(Loss)


Noncontrolling


Controlling


Earnings (Loss)




Taxes


Taxes


Earnings


Interests


Interests


per Share















2nd Q Ended June 30, 2016













Brokerage, as reported


$            178.2


$              63.3


$            114.9


$               (0.2)


$            115.1


$              0.64















Gains on book sales


(1.4)


(0.4)


(1.0)


-


(1.0)


-

Acquisition integration


11.9


3.5


8.4


-


8.4


0.05

Workforce & lease termination


4.5


1.3


3.2


-


3.2


0.02

Acquisition related adjustments


11.3


3.3


8.0


-


8.0


0.04















Brokerage, as adjusted


$            204.5


$              71.0


$            133.5


$               (0.2)


$            133.8


$              0.75















Risk Management, as reported


$              22.4


$                8.5


$              13.9


$                 -


$              13.9


$              0.08















Workforce & lease termination


0.4


0.1


0.3


-


0.3


-















Risk Management, as adjusted


$              22.8


$                8.6


$              14.2


$                 -


$              14.2


$              0.08















Corporate, as reported


$             (63.1)


$             (90.0)


$              26.9


$                5.9


$              21.0


$              0.12















Impact of 2015 litigation settlement


5.5


1.1


4.4


-


4.4


0.02















Corporate, as adjusted


$             (57.6)


$             (88.9)


$              31.3


$                5.9


$              25.4


$              0.14















2nd Q Ended June 30, 2015













Brokerage, as reported


$            156.6


$              56.3


$            100.3


$                1.2


$              99.1


$              0.58















Gains on book sales


(3.5)


(1.0)


(2.5)


-


(2.5)


(0.01)

Acquisition integration


22.4


6.3


16.1


-


16.1


0.09

Workforce & lease termination


6.0


1.7


4.3


-


4.3


0.02

Acquisition related adjustments


6.7


1.9


4.8


-


4.8


0.03

Levelized foreign currency translation


(2.0)


(0.7)


(1.3)


-


(1.3)


(0.01)















Brokerage, as adjusted


$            186.2


$              64.5


$            121.7


$                1.2


$            120.5


$              0.70















Risk Management, as reported


$              26.7


$                9.6


$              17.1


$                 -


$              17.1


$              0.10















Workforce & lease termination


0.3


0.1


0.2


-


0.2


-

Acquisition related adjustments


(0.5)


(0.2)


(0.3)


-


(0.3)


-

Levelized foreign currency translation


(0.8)


(0.3)


(0.5)


-


(0.5)


-















Risk Management, as adjusted


$              25.7


$                9.2


$              16.5


$                 -


$              16.5


$              0.10















Corporate, as reported


$             (54.8)


$             (85.0)


$              30.2


$                7.1


$              23.1


$              0.13















Impact of 2015 litigation settlement


-


-


-


-


-


-















Corporate, as adjusted


$             (54.8)


$             (85.0)


$              30.2


$                7.1


$              23.1


$              0.13















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 (Loss) 


Net Earnings
 (Loss)






Earnings (Loss)


Provision (Benefit)




Attributable to


Attributable to


Diluted Net




Before Income


for Income


Net
(Loss)


Noncontrolling


Controlling


Earnings (Loss)




Taxes


Taxes


Earnings


Interests


Interests


per Share















6 Mths Ended June 30, 2016













Brokerage, as reported


$            278.2


$              97.4


$            180.8


$                4.3


$            176.5


$              0.99















Gains of book sales


(3.6)


(1.1)


(2.5)


-


(2.5)


(0.01)

Acquisition integration


26.1


7.7


18.4


-


18.4


0.10

Workforce & lease termination


6.1


1.8


4.3


-


4.3


0.02

Acquisition related adjustments


11.8


3.5


8.3


-


8.3


0.05















Brokerage, as adjusted


$            318.6


$            109.3


$            209.3


$                4.3


$            205.0


$              1.15















Risk Management, as reported


$              46.4


$              17.5


$              28.9


$                 -


$              28.9


$              0.16















Workforce & lease termination


0.9


0.3


0.6


-


0.6


0.01















Risk Management, as adjusted


$              47.3


$              17.8


$              29.5


$                 -


$              29.5


$              0.17















Corporate, as reported


$           (131.4)


$           (135.3)


$                3.9


$              12.8


$               (8.9)


$             (0.05)















Impact of 2015 litigation settlement


10.2


2.1


8.1


-


8.1


0.04















Corporate, as adjusted


$           (121.2)


$           (133.2)


$              12.0


$              12.8


$               (0.8)


$             (0.01)















6 Mths Ended June 30, 2015













Brokerage, as reported


$            217.6


$              76.7


$            140.9


$                5.1


$            135.8


$              0.80















Gains on book sales


(4.4)


(1.3)


(3.1)


-


(3.1)


(0.02)

Acquisition integration


43.2


13.2


30.0


-


30.0


0.18

Workforce & lease termination


14.5


4.5


10.0


-


10.0


0.06

Acquisition related adjustments


12.7


3.9


8.8


-


8.8


0.05

Levelized foreign currency translation


(2.4)


(0.8)


(1.6)


-


(1.6)


(0.01)















Brokerage, as adjusted


$            281.2


$              96.2


$            185.0


$                5.1


$            179.9


$              1.06















Risk Management, as reported


$              50.3


$              18.3


$              32.0


$                 -


$              32.0


$              0.19















Workforce & lease termination


0.5


0.2


0.3


-


0.3


-

Acquisition related adjustments


(0.5)


(0.2)


(0.3)


-


(0.3)


-

Levelized foreign currency translation


(1.6)


(0.6)


(1.0)


-


(1.0)


(0.01)















Risk Management, as adjusted


$              48.7


$              17.7


$              31.0


$                 -


$              31.0


$              0.18















Corporate, as reported


$           (108.5)


$           (115.6)


$                7.1


$              13.7


$               (6.6)


$             (0.04)















Impact of 2015 litigation settlement


-


-


-


-


-


-















Corporate, as adjusted


$           (108.5)


$           (115.6)


$                7.1


$              13.7


$               (6.6)


$             (0.04)















See "Information Regarding Non-GAAP Measures" on page 9 of 14.





















 

 Contacts:

Ray Iardella

Marsha Akin 


Vice President - Investor Relations

Director - Investor Relations 


630-285-3661 or [email protected]

630-285-3501 or [email protected]

(14 of 14)

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/arthur-j-gallagher--co-announces-second-quarter-2016-financial-results-300305927.html

SOURCE Arthur J. Gallagher & Co.


Source: PR Newswire (July 28, 2016 - 4:32 PM EDT)

News by QuoteMedia
www.quotemedia.com

Legal Notice