NEW YORK, Aug. 3 /PRNewswire-FirstCall/ --
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Financial
Highlights(1)
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2Q 2010
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2Q 2009
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% Change
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2Q 2010
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1Q 2010
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% Change
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YTD 2010
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YTD 2009
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% Change
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(Dollars in millions, except per
share data)
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Revenue
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$
234.9
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$
224.2
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4.8%
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$
234.9
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$
225.3
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4.3%
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$
460.2
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$
441.2
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4.3%
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Net income (loss)
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12.1
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10.0
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21.0%
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12.1
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7.0
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72.9%
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19.1
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(505.8)
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NM
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Net income (loss) per diluted
share
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0.27
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0.23
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17.4%
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0.27
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0.16
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68.8%
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0.43
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(12.48)
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NM
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Cash earnings
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25.2
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26.4
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-4.5%
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25.2
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22.0
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14.5%
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47.2
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44.5
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6.1%
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Cash earnings per diluted
share
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$
0.57
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$
0.62
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-8.1%
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$
0.57
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0.50
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14.0%
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$
1.08
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$
1.06
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1.9%
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Adjusted EBITDA
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$
26.3
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$
28.3
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-7.1%
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$
26.3
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$
27.6
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-4.7%
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$
53.9
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$
52.5
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2.7%
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Adjusted EBITDA
margin
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11.2%
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12.6%
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11.2%
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12.3%
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11.7%
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11.9%
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Cash flow from
operations
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$
37.3
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$
34.1
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9.4%
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$
37.3
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$
4.9
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661.2%
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$
42.2
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$
32.6
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29.4%
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(1) This summary includes
financial measures not calculated based on generally accepted
accounting principles.
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NM indicates metric not
meaningful.
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National Financial Partners Corp. (NYSE: NFP), a provider of
benefits, insurance and wealth management services, today reported
financial results for the second quarter ended June 30, 2010.
Commenting on today's announcement, Jessica M. Bibliowicz, chairman, president and
chief executive officer, said, "We are proud to have recently been
ranked as the ninth top insurance broker globally by Best's Review.
As a leader in the industry, and through our client-centric
business segments, we continue to focus on providing the highest
quality of service to our clients. Our performance this
quarter included positive contributions from each of our three
business segments, driving organic revenue growth of 7.3% in a
challenging market environment."
Second Quarter Results - Consolidated
NFP reported second quarter 2010 net income of $12.1 million, or net income of $0.27 per diluted share, compared with net income
of $10.0 million, or net income of
$0.23 per diluted share in the prior
year period.
Second quarter 2010 cash earnings was $25.2 million, or $0.57 per diluted share, compared with
$26.4 million, or $0.62 per diluted share, in the second quarter
2009. Cash earnings in the second quarter 2010 included a
$7.7 million net non-cash gain on
sale of businesses. Excluding this gain, cash earnings was
$20.8 million or $0.47 per diluted share in the second quarter
2010. Cash earnings in the second quarter 2009 included
$5.5 million in key-person life
insurance proceeds. Excluding the key-person life insurance
proceeds, cash earnings was $20.9
million or $0.49 per diluted
share in the second quarter 2009. Cash earnings is a non-GAAP
measure, which the Company defines as net income excluding
amortization of intangibles, depreciation, the after-tax impact of
the impairment of goodwill and intangible assets and the after-tax
impact of non-cash interest expense. A reconciliation of net
income to cash earnings is provided in the attached tables.
Revenue was $234.9 million in the
second quarter 2010, an increase of $10.7
million, or 4.8%, compared with $224.2 million in the second quarter 2009. This
increase was driven largely by growth in the Advisor Services
Group. Revenues in the Corporate Client Group and Individual
Client Group were relatively stable year over year, as revenue
increases at existing firms largely offset the declines stemming
from dispositions. Organic revenue grew 7.3% in the second
quarter 2010, compared with the prior year period, and included
positive contributions from all three segments.
Sequentially, revenue in the second quarter 2010 increased
$9.6 million, or 4.3%, compared with
$225.3 million in the first quarter
2010. Components of the revenue increase included strength in the
Individual Client Group and the Advisor Services Group, offset by a
decrease in the Corporate Client Group which experienced the same
seasonal revenue trend in 2009.
Total operating expenses were $212.1
million, compared with $210.2
million in the prior year period. Operating expenses
in the second quarter 2010 included a $7.7
million non-cash gain on sale of businesses. Adjusted
EBITDA in the second quarter 2010 was $26.3
million with an Adjusted EBITDA margin of 11.2%, compared
with Adjusted EBITDA of $28.3 million
with an Adjusted EBITDA margin of 12.6% in the prior year period.
Results in the second quarter 2010 were impacted by an increase
in management fees driven by sequential revenue improvement in the
Individual Client Group. Specifically, in the retail life
business, management fees increased from the first quarter 2010 to
the second quarter 2010, as revenues increased and businesses that
had not earned meaningful management fees in the first quarter
moved into an earnings position in which they were eligible for
management fees and performance incentives in the second quarter.
In addition, results in the second quarter 2010 were impacted
by an increase in commissions and fees expenses commensurate with
an increase in revenue in the Advisor Services Group.
Adjusted EBITDA is a non-GAAP measure, which the Company defines
as net income excluding income tax expense, interest income,
interest expense, other, net, amortization of intangibles,
depreciation, impairment of goodwill and intangible assets, (gain)
loss on sale of businesses, and any change in estimated contingent
consideration amounts recorded in accordance with purchase
accounting that have been subsequently adjusted and recorded in the
consolidated statement of operations. Adjusted EBITDA margin
is calculated by dividing Adjusted EBITDA by revenue. A
reconciliation of net income to Adjusted EBITDA is provided in the
attached tables.
Cash flow from operations for the second quarter 2010 increased
to $37.3 million compared with a cash
flow from operations of $34.1 million
in the second quarter 2009. Cash flow from operations in the
second quarter 2009 included $5.5
million of key-person life insurance proceeds.
In the second quarter 2010, the Company sold three businesses
and certain assets of three additional businesses and recognized a
$7.7 million net non-cash gain in the
second quarter 2010. The majority of this gain was generated
by the sale of assets of a business in the Corporate Client Group
for which NFP continues to own a preferred minority interest.
The second quarter 2009 was positively impacted by a
$5.5 million gain from key person
life insurance proceeds which was recorded in other income.
Second Quarter Results - Segments
NFP reports results in three segments that provide unique
products and services to corporate and high net worth individual
clients: the Corporate Client Group, the Individual Client Group
and the Advisor Services Group.
Corporate Client Group (CCG)
The CCG is one of the leading corporate benefits advisors in the
middle market, offering clients independent solutions for health
and welfare, retirement planning, executive benefits, and property
and casualty insurance. The CCG serves corporate clients by
providing advisory and brokerage services related to planning and
administration, which take into account the clients' overall
business profile and needs.
The CCG accounted for 38.1% of NFP's revenue for the second
quarter 2010 and 40.1% in the second quarter 2009. CCG
revenue remained essentially unchanged at $89.5 million in the second quarter 2010 compared
with $89.8 million in the prior year
period. CCG organic revenue growth was 3.7%. Existing
businesses increased revenues sufficiently to offset loss of
revenues from dispositions of $3.6
million.
Sequentially, CCG revenue decreased $5.7
million or 6.0% in the second quarter 2010 compared with the
first quarter 2010, similar to the sequential trend between the
first and second quarters of 2009.
CCG Adjusted EBITDA was unchanged at $15.0 million in the second quarter 2010 compared
with $15.0 million in the prior year
period. Adjusted EBITDA margin of 16.8% was essentially
unchanged in the second quarter 2010 compared with 16.7% in the
prior year period.
Individual Client Group (ICG)
The ICG is a leader in the delivery of independent life
insurance and wealth transfer solutions for high net worth
individuals. In evaluating their clients' near and long-term
financial goals, the ICG's advisors provide wealth accumulation,
preservation and transfer solutions, including estate and business
planning and financial advisory services.
The ICG accounted for 38.9% of NFP's revenue for the second
quarter 2010 and 41.2% in the second quarter 2009. ICG
revenue was $91.4 million in the
second quarter 2010 compared with $92.4
million in the prior year period. ICG organic revenue
growth was 5.5%. Revenues for retail life declined due to
dispositions on a year over year basis, while on an organic basis,
retail life, wholesale life brokerage, and investment advisory
businesses all increased.
Sequentially, ICG revenue increased $12.7
million or 16.1% in the second quarter 2010 compared with
the first quarter 2010. There was an 8.7% increase between the
first and second quarters of 2009.
ICG Adjusted EBITDA was $9.0
million with an Adjusted EBITDA margin of 9.8% in the second
quarter 2010 compared with $11.8
million with an Adjusted EBITDA margin of 12.8% in the prior
year period.
Advisor Services Group (ASG)
The ASG serves independent financial advisors whose clients are
high net worth individuals and companies by offering broker-dealer
and asset management products and services. The ASG attracts
financial advisors seeking to provide clients with sophisticated
resources and an open choice of products.
The ASG accounted for 23.0% of NFP's revenue for the second
quarter 2010 and 18.7% for the second quarter 2009. ASG
revenue was $54.0 million in the
second quarter 2010 compared with $41.9
million in the prior year period, an increase of
$12.1 million or 28.8%. ASG
organic revenue growth was 16.0%.
Sequentially, ASG revenue increased $2.7
million or 5.2% in the second quarter 2010 compared with the
first quarter 2010, similar to the sequential trend between the
first and second quarters of 2009.
ASG Adjusted EBITDA was $2.3
million with an Adjusted EBITDA margin of 4.2% in the second
quarter 2010 compared with Adjusted EBITDA of $1.5 million with an Adjusted EBITDA margin of
3.5% in the prior year period.
As of June 30, 2010, assets under
management at NFP's registered investment advisor were $8.2 billion, compared with $6.8 billion as of June
30, 2009.
Recapitalization
During the second quarter 2010, NFP launched and closed a
portion of its recapitalization plan which was designed to (1)
maintain a similar level of debt for NFP; (2) extend debt
maturities from 2011 and 2012, to 2014 and 2017; and (3) distribute
the principal maturity payments. The remaining components of
the plan were completed in July 2010.
Specifically, NFP's recent recapitalization initiatives
included:
- Purchasing and retiring $229.9
million of the $230.0 million
aggregate principal amount of 0.75% convertible senior notes due
2012, in a tender offer completed in July
2010;
- Funding the tender offer with:
- $125.0 million aggregate
principal amount of 4.0% convertible senior notes due 2017 issued
in June 2010;
- $125.0 million four-year term
loan, part of a new credit facility due July
2014 that closed in July
2010;
- Closing the $100.0 million
four-year revolving credit facility portion of the new credit
facility, of which no amounts are currently drawn; and
- Repaying and terminating NFP's previous credit facility that
was due August 2011, of which
outstanding principal and interest were repaid on June 30, 2010.
In the third quarter 2010, NFP expects to recognize a net gain
of approximately $10.0 million
related to the tender offer.
Earnings Conference Call & Presentation
The Company will conduct its second quarter 2010 earnings
conference call and audio webcast on August
4, 2010, from 8:00 to 9:00 a.m.
(ET). The conference call will be available live via
telephone and the Internet. To access the call, dial
617-597-5392 (when prompted, callers should provide the access code
"NFP"). The conference call and webcast will be accompanied
by a presentation. The presentation will be available for
electronic download on the Company's Web site approximately one
hour before the conference call and webcast is scheduled to begin.
The presentation may also be viewed automatically upon
connecting to the webcast. To listen to the conference call
over the Internet, visit www.nfp.com/ir. The conference call
will be available for replay via telephone and Internet for a
period of 90 days. To listen to a replay of the conference
call via telephone, dial 888-286-8010. The access code for
the replay is 93602787. To access the replay of the
conference call over the Internet, visit the above-mentioned Web
site.
About National Financial Partners Corp.
NFP is a leading independent financial services distribution
company. NFP offers companies and high net worth individuals
throughout the United States and
in Canada comprehensive solutions
across corporate and executive benefits, life insurance and wealth
transfer, and investment advisory products and services. NFP
and its subsidiaries, including NFP Securities, Inc., provide
clients with access to objective advice and a choice of insurance
and financial products and services. For more information please
visit www.nfp.com.
Reconciliation of Non-GAAP Measures
The Company analyzes its performance using historical and
forward-looking non-GAAP measures called cash earnings and cash
earnings per diluted share, Adjusted EBITDA and percentages or
calculations using these measures. The Company believes these
non-GAAP measures provide additional meaningful methods of
evaluating certain aspects of the Company's operating performance
from period to period on a basis that may not be otherwise apparent
under GAAP. Cash earnings is defined as net income excluding
amortization of intangibles, depreciation, the after-tax impact of
the impairment of goodwill and intangible assets and the after-tax
impact of non-cash interest expense. Cash earnings per
diluted share is calculated by dividing cash earnings by the number
of weighted average diluted shares outstanding for the period
indicated. Cash earnings and cash earnings per diluted share
should not be viewed as substitutes for net income and net income
per diluted share, respectively. Adjusted EBITDA is defined
as net income excluding income tax expense, interest income,
interest expense, other, net, amortization of intangibles,
depreciation, impairment of goodwill and intangible assets, (gain)
loss on sale of businesses, and any change in estimated contingent
consideration amounts recorded in accordance with purchase
accounting that have been subsequently adjusted and recorded in the
consolidated statement of operations. Adjusted EBITDA should
not be viewed as a substitute for net income. A
reconciliation of these non-GAAP measures to their GAAP
counterparts is provided in the attached tables and the Company's
quarterly financial supplement for the period ended June 30, 2010, which is available on the Investor
Relations section of the Company's Web site at www.nfp.com.
Organic Revenue Growth
The Company uses organic revenue growth as a comparable revenue
measurement for future periods. The Company excludes the first
twelve months of revenue generated from new acquisitions and the
revenue derived from businesses fully disposed of in each period
presented. With respect to sub-acquisitions, the Company
establishes an internal revenue generation expectation (the
"acquired revenue") of a new sub-acquisition. During the
first twelve months immediately following the sub-acquisition, the
Company reduces the acquired revenue amount from the actual revenue
generated by the sub-acquisition and includes the revenue growth
above or below acquired revenue within the organic growth
percentage. With respect to situations where a significant
portion of a business' assets have been disposed, the Company
reduces the prior year's comparable revenue proportionally to the
percentage of assets that have been disposed to facilitate an
equitable organic growth comparison.
Forward-Looking Statements
This release contains certain statements relating to future
results, which are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, without limitation, any
statement that may project, indicate or imply future results,
events, performance or achievements, and may contain the words
"anticipate," "expect," "intend," "plan," "believe," "estimate,"
"may," "project," "will," "continue" and similar expressions of a
future or forward-looking nature. Forward-looking statements may
include discussions concerning revenue, expenses, earnings, cash
flow, impairments, losses, dividends, capital structure, credit
facilities, market and industry conditions, premium and commission
rates, interest rates, contingencies, the direction or outcome of
regulatory investigations and litigation, income taxes and NFP's
operations or strategy. These forward-looking statements are based
on management's current views with respect to future results, and
are subject to risks and uncertainties. Factors that could cause
actual results to differ materially from those contemplated by a
forward-looking statement include: (1) NFP's ability, through
its operating structure, to respond quickly to regulatory,
operational or financial situations impacting its businesses; (2)
the ability of the Company's businesses to perform successfully
following acquisition, including through cross-selling initiatives,
and the Company's ability to manage its business effectively and
profitably through its reportable segments and the principals of
its businesses; (3) any losses that NFP may take with respect to
dispositions, restructures or otherwise; (4) an economic
environment that results in fewer sales of financial products or
services; (5) the occurrence of events or circumstances that could
be indicators of impairment to goodwill and intangible assets which
require the Company to test for impairment, and the impact of any
impairments that the Company may take; (6) the impact of the
adoption, modification or change in interpretation of certain
accounting treatments or policies and changes in underlying
assumptions relating to such treatments or policies, which may lead
to adverse financial statement results; (7) NFP's success in
acquiring and retaining high-quality independent financial services
businesses; (8) the financial impact of NFP's incentive plans; (9)
changes that adversely affect NFP's ability to manage its
indebtedness or capital structure, including changes in interest
rates, credit market conditions and general economic factors; (10)
fluctuations in the price of NFP's common stock, whether due to
securities and capital markets behavior, the dilutive impact of
capital-raising effort, or otherwise; (11) the continued
availability of borrowings and letters of credit under NFP's credit
facility; (12) adverse results, market uncertainty in the financial
services industry, or other consequences from litigation,
arbitration, regulatory investigations or compliance initiatives,
including those related to business practices, compensation
agreements with insurance companies, policy rescissions or
chargebacks, regulatory investigations or activities within the
life settlements industry; (13) adverse developments in the markets
in which the Company operates, resulting in fewer sales of
financial products and services, including those related to
compensation agreements with insurance companies and activities
within the life settlements industry; (14) the impact of
legislation or regulations in jurisdictions in which NFP's
subsidiaries operate, including the possible adoption of
comprehensive and exclusive federal regulation over all interstate
insurers and the uncertain impact of legislation regulating
the financial services industry, such as the recent Dodd-Frank Wall
Street Reform and Consumer Protection Act; (15) uncertainty
regarding the impact of newly-adopted healthcare legislation or
resulting changes in business practices of NFP's subsidiaries that
operate in the benefits market; (16) changes in laws, including the
elimination or modification of the federal estate tax, changes in
the tax treatment of life insurance products, or changes in
regulations affecting the value or use of benefits programs, which
may adversely affect the demand for or profitability of the
Company's services; (17) developments in the availability, pricing,
design or underwriting of insurance products, revisions in
mortality tables by life expectancy underwriters or changes in the
Company's relationships with insurance companies; (18) changes in
premiums and commission rates or the rates of other fees paid to
the Company's businesses, including life settlements and registered
investment advisory fees; (19) the reduction of the Company's
revenue and earnings due to the elimination or modification of
compensation arrangements, including contingent compensation
arrangements and the adoption of internal initiatives to enhance
compensation transparency, including the transparency of fees paid
for life settlements transactions; (20) the occurrence of adverse
economic conditions or an adverse regulatory climate in
New York, Florida or California; (21) the loss of services of key
members of senior management; and (22) the Company's ability to
effect smooth succession planning.
Additional factors are set forth in NFP's filings with the
Securities and Exchange Commission (the "SEC"), including its
Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on
February 12, 2010 and its Quarterly
Report on Form 10-Q for the period ended March 31, 2010, filed with the SEC on
May 10, 2010.
Forward-looking statements speak only as of the date on which
they are made. NFP expressly disclaims any obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
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(Unaudited-in thousands, except
per share data)
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Three Months Ended
|
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Six Months Ended
|
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June 30,
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June 30,
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2010
|
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2009
|
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2010
|
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2009
|
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Revenue:
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Commissions and fees
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$ 234,890
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$ 224,198
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$ 460,163
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$ 441,179
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Operating expenses:
|
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Commissions and fees
|
73,421
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62,474
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|
141,727
|
|
124,875
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Compensation expense
|
63,722
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66,164
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|
128,990
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|
134,807
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Non-compensation
expense
|
38,914
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|
37,307
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|
79,363
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|
76,488
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Management fees
|
32,534
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|
29,954
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|
56,184
|
|
52,461
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Amortization of
intangibles
|
8,206
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|
9,176
|
|
16,544
|
|
18,770
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Depreciation
|
3,005
|
|
3,485
|
|
6,011
|
|
7,024
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Impairment of goodwill and
intangible assets
|
-
|
|
2,895
|
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2,901
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610,232
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Gain on sale of
businesses
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(7,690)
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(1,279)
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(9,921)
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(662)
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Total operating
expenses
|
212,112
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210,176
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|
421,799
|
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1,023,995
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Income (loss) from
operations
|
22,778
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|
14,022
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38,364
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(582,816)
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Non-operating income and
expenses
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Interest income
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888
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|
822
|
|
1,776
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|
1,546
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Interest expense
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(4,880)
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(5,386)
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(9,459)
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(10,717)
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Other, net
|
2,013
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|
6,608
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|
2,671
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|
7,724
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Non-operating income and
expenses, net
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(1,979)
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2,044
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(5,012)
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(1,447)
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Income (loss) before income
taxes
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20,799
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16,066
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33,352
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(584,263)
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Income tax expense
(benefit)
|
8,730
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6,044
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14,293
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(78,486)
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Net income (loss)
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$ 12,069
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$ 10,022
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$ 19,059
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$ (505,777)
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Earnings (loss) per
share:
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Basic
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$
0.28
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$
0.24
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$
0.45
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|
$
(12.48)
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Diluted
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$
0.27
|
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$
0.23
|
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$
0.43
|
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$
(12.48)
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Weighted average shares
outstanding:
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Basic
|
42,611
|
|
41,144
|
|
42,157
|
|
40,541
|
|
|
Diluted
|
44,353
|
|
42,833
|
|
43,819
|
|
40,541
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME
(LOSS) TO ADJUSTED EBITDA
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
GAAP net income
(loss)
|
$ 12,069
|
|
$ 10,022
|
|
$ 19,059
|
|
$ (505,777)
|
|
|
Income tax expense
(benefit)
|
8,730
|
|
6,044
|
|
14,293
|
|
(78,486)
|
|
|
Interest income
|
(888)
|
|
(822)
|
|
(1,776)
|
|
(1,546)
|
|
|
Interest expense
|
4,880
|
|
5,386
|
|
9,459
|
|
10,717
|
|
|
Other, net
|
(2,013)
|
|
(6,608)
|
|
(2,671)
|
|
(7,724)
|
|
Income (loss) from
operations
|
$ 22,778
|
|
$ 14,022
|
|
$ 38,364
|
|
$ (582,816)
|
|
|
Amortization of
intangibles
|
8,206
|
|
9,176
|
|
16,544
|
|
18,770
|
|
|
Depreciation
|
3,005
|
|
3,485
|
|
6,011
|
|
7,024
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
2,895
|
|
2,901
|
|
610,232
|
|
|
Gain on sale of
businesses
|
(7,690)
|
|
(1,279)
|
|
(9,921)
|
|
(662)
|
|
Adjusted EBITDA (1)
|
$ 26,299
|
|
$ 28,299
|
|
$ 53,899
|
|
$ 52,548
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME
(LOSS) TO CASH EARNINGS
|
|
(Unaudited-in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
GAAP net income
(loss)
|
$ 12,069
|
|
$ 10,022
|
|
$ 19,059
|
|
$ (505,777)
|
|
|
Amortization of
intangibles
|
8,206
|
|
9,176
|
|
16,544
|
|
18,770
|
|
|
Depreciation
|
3,005
|
|
3,485
|
|
6,011
|
|
7,024
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
2,895
|
|
2,901
|
|
610,232
|
|
|
Tax benefit of impairment of
goodwill and
|
|
|
|
|
|
|
|
|
|
intangible assets
|
88
|
|
(902)
|
|
(1,030)
|
|
(89,048)
|
|
|
Non-cash interest, net of
tax
|
1,838
|
|
1,732
|
|
3,705
|
|
3,289
|
|
Cash earnings (2)
|
$ 25,206
|
|
$ 26,408
|
|
$ 47,190
|
|
$ 44,490
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss) per share
- diluted
|
$ 0.27
|
|
$ 0.23
|
|
$ 0.43
|
|
$
(12.48)
|
|
|
Amortization of
intangibles
|
0.19
|
|
0.21
|
|
0.38
|
|
0.45
|
|
|
Depreciation
|
0.07
|
|
0.08
|
|
0.14
|
|
0.17
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
0.07
|
|
0.07
|
|
14.56
|
|
|
Tax benefit of impairment of
goodwill and
|
|
|
|
|
|
|
|
|
|
intangible assets
|
0.00
|
|
(0.02)
|
|
(0.02)
|
|
(2.13)
|
|
|
Non-cash interest, net of
tax
|
0.04
|
|
0.04
|
|
0.08
|
|
0.08
|
|
|
Impact of diluted shares on cash
earnings not
|
|
|
|
|
|
|
|
|
|
reflected in GAAP net loss per
share - diluted (3)
|
-
|
|
-
|
|
-
|
|
0.40
|
|
Cash earnings per share -
diluted (4)
|
$ 0.57
|
|
$ 0.62
|
|
$ 1.08
|
|
$
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjusted EBITDA is a non-GAAP
measure, which the Company defines as net income excluding income
tax expense, interest
|
|
|
income, interest expense, other,
net, amortization of intangibles, depreciation, impairment of
goodwill and intangible assets,
|
|
|
gain on sale of businesses, and
any change in estimated contingent consideration amounts recorded
in accordance
|
|
|
with purchase accounting that
have been subsequently adjusted and recorded in the consolidated
statement of operations.
|
|
|
|
|
(2)
|
Cash earnings is a non-GAAP
measure, which the Company defines as net income excluding
amortization of intangibles,
|
|
|
depreciation, the after-tax
impact of the impairment of goodwill and intangible assets and the
after-tax impact of non-cash
|
|
|
interest expense.
|
|
|
|
|
(3)
|
For periods where the Company
generated a GAAP net loss, weighted average common shares
outstanding - diluted
|
|
|
was used to calculate cash
earnings per share - diluted only. To calculate GAAP net loss per
share, weighted average
|
|
|
common shares outstanding -
diluted is the same as weighted average common shares outstanding -
basic due to the
|
|
|
antidilutive effects of other
items caused by a GAAP net loss position.
|
|
|
|
|
(4)
|
The sum of the per-share
components of cash earnings per share - diluted may not agree to
cash earnings per share -
|
|
|
diluted, due to
rounding.
|
|
|
|
|
|
|
|
|
|
|
CORPORATE CLIENT
GROUP
|
|
CONDENSED STATEMENTS OF
OPERATIONS
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
$ 89,516
|
|
$ 89,832
|
|
$ 184,763
|
|
$ 182,344
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
8,299
|
|
8,142
|
|
16,262
|
|
16,984
|
|
|
Compensation expense
|
32,296
|
|
32,288
|
|
65,392
|
|
66,242
|
|
|
Non-compensation
expense
|
18,832
|
|
18,416
|
|
38,428
|
|
36,785
|
|
|
Management fees
|
15,045
|
|
16,019
|
|
30,171
|
|
28,591
|
|
|
Amortization of
intangibles
|
5,253
|
|
5,760
|
|
10,601
|
|
11,666
|
|
|
Depreciation
|
1,516
|
|
1,688
|
|
3,075
|
|
3,494
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
110
|
|
1,931
|
|
354,408
|
|
|
(Gain) loss on sale of
businesses
|
(6,841)
|
|
(244)
|
|
(8,162)
|
|
336
|
|
Total operating
expenses
|
74,400
|
|
82,179
|
|
157,698
|
|
518,506
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$ 15,116
|
|
$ 7,653
|
|
$ 27,065
|
|
$ (336,162)
|
|
|
|
|
|
|
|
|
|
|
CORPORATE CLIENT
GROUP
|
|
RECONCILIATION OF INCOME (LOSS)
FROM OPERATIONS TO ADJUSTED EBITDA (1)
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$ 15,116
|
|
$ 7,653
|
|
$ 27,065
|
|
$ (336,162)
|
|
|
Amortization of
intangibles
|
5,253
|
|
5,760
|
|
10,601
|
|
11,666
|
|
|
Depreciation
|
1,516
|
|
1,688
|
|
3,075
|
|
3,494
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
110
|
|
1,931
|
|
354,408
|
|
|
(Gain) loss on sale of
businesses
|
(6,841)
|
|
(244)
|
|
(8,162)
|
|
336
|
|
Adjusted EBITDA
|
$ 15,044
|
|
$ 14,967
|
|
$ 34,510
|
|
$ 33,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The reconciliation of Adjusted
EBITDA per reportable segment does not include the following items,
which are not allocated to
|
|
|
any of the Company’s reportable
segments: income tax expense, interest income, interest expense,
and other, net. These items
|
|
|
are included in the
reconciliation of Adjusted EBITDA to net income on a consolidated
basis.
|
|
|
|
|
|
|
|
|
|
|
INDIVIDUAL CLIENT
GROUP
|
|
CONDENSED STATEMENTS OF
OPERATIONS
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
$ 91,377
|
|
$ 92,432
|
|
$ 170,071
|
|
$ 177,503
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
20,246
|
|
19,436
|
|
38,618
|
|
38,875
|
|
|
Compensation expense
|
27,814
|
|
29,673
|
|
56,056
|
|
60,010
|
|
|
Non-compensation
expense
|
16,857
|
|
17,540
|
|
34,312
|
|
36,585
|
|
|
Management fees
|
17,489
|
|
13,935
|
|
26,013
|
|
23,870
|
|
|
Amortization of
intangibles
|
2,953
|
|
3,416
|
|
5,943
|
|
7,104
|
|
|
Depreciation
|
1,155
|
|
1,561
|
|
2,280
|
|
3,031
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
2,785
|
|
970
|
|
255,824
|
|
|
Gain on sale of
businesses
|
(849)
|
|
(1,035)
|
|
(1,759)
|
|
(998)
|
|
Total operating
expenses
|
85,665
|
|
87,311
|
|
162,433
|
|
424,301
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$ 5,712
|
|
$ 5,121
|
|
$ 7,638
|
|
$ (246,798)
|
|
|
|
|
|
|
|
|
|
|
INDIVIDUAL CLIENT
GROUP
|
|
RECONCILIATION OF INCOME (LOSS)
FROM OPERATIONS TO ADJUSTED EBITDA (1)
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$ 5,712
|
|
$ 5,121
|
|
$ 7,638
|
|
$ (246,798)
|
|
|
Amortization of
intangibles
|
2,953
|
|
3,416
|
|
5,943
|
|
7,104
|
|
|
Depreciation
|
1,155
|
|
1,561
|
|
2,280
|
|
3,031
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
2,785
|
|
970
|
|
255,824
|
|
|
Gain on sale of
businesses
|
(849)
|
|
(1,035)
|
|
(1,759)
|
|
(998)
|
|
Adjusted EBITDA
|
$ 8,971
|
|
$ 11,848
|
|
$ 15,072
|
|
$ 18,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The reconciliation of Adjusted
EBITDA per reportable segment does not include the following items,
which are not allocated to
|
|
|
any of the Company’s reportable
segments: income tax expense, interest income, interest expense,
and other, net. These items
|
|
|
are included in the
reconciliation of Adjusted EBITDA to net income on a consolidated
basis.
|
|
|
|
|
|
|
|
|
|
|
ADVISOR SERVICES
GROUP
|
|
CONDENSED STATEMENTS OF
OPERATIONS
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
$ 53,997
|
|
$ 41,934
|
|
$ 105,329
|
|
$ 81,332
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Commissions and fees
|
44,876
|
|
34,896
|
|
86,847
|
|
69,016
|
|
|
Compensation expense
|
3,612
|
|
4,203
|
|
7,542
|
|
8,555
|
|
|
Non-compensation
expense
|
3,225
|
|
1,351
|
|
6,623
|
|
3,118
|
|
|
Depreciation
|
334
|
|
236
|
|
656
|
|
499
|
|
Total operating
expenses
|
52,047
|
|
40,686
|
|
101,668
|
|
81,188
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
$ 1,950
|
|
$ 1,248
|
|
$ 3,661
|
|
$
144
|
|
|
|
|
|
|
|
|
|
|
ADVISOR SERVICES
GROUP
|
|
RECONCILIATION OF INCOME (LOSS)
FROM OPERATIONS TO ADJUSTED EBITDA (1)
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
$ 1,950
|
|
$ 1,248
|
|
$ 3,661
|
|
$
144
|
|
|
Depreciation
|
334
|
|
236
|
|
656
|
|
499
|
|
Adjusted EBITDA
|
$ 2,284
|
|
$ 1,484
|
|
$ 4,317
|
|
$
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The reconciliation of Adjusted
EBITDA per reportable segment does not include the following items,
which are not allocated to
|
|
|
any of the Company’s reportable
segments: income tax expense, interest income, interest expense,
and other, net. These items
|
|
|
are included in the
reconciliation of Adjusted EBITDA to net income on a consolidated
basis.
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$ 157,769
|
|
$
55,994
|
|
|
Fiduciary funds - restricted
related to premium trust accounts
|
86,117
|
|
75,931
|
|
|
Commissions, fees and premiums
receivable, net
|
95,835
|
|
129,833
|
|
|
Due from principals and/or
certain entities they own
|
15,503
|
|
14,075
|
|
|
Notes receivable, net
|
7,459
|
|
9,731
|
|
|
Deferred tax assets
|
11,389
|
|
14,283
|
|
|
Other current assets
|
19,905
|
|
14,435
|
|
|
Total current
assets
|
393,977
|
|
314,282
|
|
Property and equipment,
net
|
36,362
|
|
37,291
|
|
Deferred tax assets
|
-
|
|
5,820
|
|
Intangibles, net
|
354,086
|
|
379,513
|
|
Goodwill, net
|
66,344
|
|
63,887
|
|
Notes receivable, net
|
33,158
|
|
28,714
|
|
Other non-current
assets
|
52,276
|
|
39,744
|
|
|
Total
assets
|
$ 936,203
|
|
$
869,251
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Premiums payable to insurance
carriers
|
$ 89,147
|
|
$
77,941
|
|
|
Borrowings
|
-
|
|
40,000
|
|
|
Income taxes payable
|
-
|
|
6,325
|
|
|
Due to principals and/or certain
entities they own
|
18,232
|
|
34,106
|
|
|
Accounts payable
|
16,737
|
|
24,337
|
|
|
Accrued liabilities
|
54,318
|
|
73,105
|
|
|
Total current
liabilities
|
178,434
|
|
255,814
|
|
Deferred tax
liabilities
|
5,963
|
|
4,380
|
|
Convertible senior
notes
|
295,368
|
|
204,548
|
|
Other non-current
liabilities
|
70,702
|
|
64,472
|
|
|
Total
liabilities
|
550,467
|
|
529,214
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
Preferred stock at par
value
|
-
|
|
-
|
|
Common stock at par
value
|
4,498
|
|
4,414
|
|
Additional paid-in
capital
|
901,207
|
|
876,563
|
|
Accumulated deficit
|
(442,354)
|
|
(438,109)
|
|
Treasury stock
|
(77,687)
|
|
(102,930)
|
|
Accumulated other comprehensive
income
|
72
|
|
99
|
|
|
Total stockholders'
equity
|
385,736
|
|
340,037
|
|
|
Total liabilities
and stockholders' equity
|
$ 936,203
|
|
$
869,251
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
(Unaudited-in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Cash flow from operating
activities
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$ 12,069
|
|
$ 10,022
|
|
$ 19,059
|
|
$ (505,777)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile to net
cash provided by
|
|
|
|
|
|
|
|
|
(used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
5,005
|
|
(58)
|
|
5,356
|
|
(88,106)
|
|
|
Stock-based
compensation
|
2,727
|
|
2,499
|
|
5,678
|
|
4,987
|
|
|
Impairment of goodwill and
intangible assets
|
-
|
|
2,895
|
|
2,901
|
|
610,232
|
|
|
Amortization of
intangibles
|
8,206
|
|
9,176
|
|
16,544
|
|
18,770
|
|
|
Depreciation
|
3,005
|
|
3,485
|
|
6,011
|
|
7,024
|
|
|
Accretion of senior convertible
notes discount
|
3,128
|
|
2,784
|
|
6,035
|
|
5,509
|
|
|
Gain on sale of
businesses
|
(7,690)
|
|
(1,279)
|
|
(9,921)
|
|
(662)
|
|
|
Loss on sublease
|
-
|
|
-
|
|
1,766
|
|
-
|
|
|
Bad debt expense
|
815
|
|
(76)
|
|
839
|
|
50
|
|
|
Other, net
|
(546)
|
|
-
|
|
(948)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in operating
assets:
|
|
|
|
|
|
|
|
|
|
Fiduciary funds - restricted
related to premium
|
|
|
|
|
|
|
|
|
|
trust accounts
|
(11,896)
|
|
(7,937)
|
|
(10,186)
|
|
(4,149)
|
|
|
Commissions, fees and premiums
receivable, net
|
1,268
|
|
3,436
|
|
30,900
|
|
35,073
|
|
|
Due from principals and/or
certain entities they own
|
(1,382)
|
|
(6,312)
|
|
(1,442)
|
|
(5,005)
|
|
|
Notes receivable, net -
current
|
(47)
|
|
(113)
|
|
2,272
|
|
(1,364)
|
|
|
Other current assets
|
(4,656)
|
|
(869)
|
|
(5,659)
|
|
420
|
|
|
Notes receivable, net -
non-current
|
(4,049)
|
|
3,044
|
|
(6,596)
|
|
(4,037)
|
|
|
Other non-current
assets
|
1,083
|
|
(777)
|
|
59
|
|
(1,132)
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in operating
liabilities:
|
|
|
|
|
|
|
|
|
|
Premiums payable to insurance
carriers
|
13,533
|
|
9,004
|
|
11,206
|
|
7,967
|
|
|
Income taxes payable
|
(525)
|
|
(1,231)
|
|
(6,325)
|
|
(11)
|
|
|
Due to principals and/or certain
entities they own
|
6,971
|
|
7,118
|
|
(17,410)
|
|
(22,098)
|
|
|
Accounts payable
|
1,722
|
|
(5,524)
|
|
(4,562)
|
|
(10,163)
|
|
|
Accrued liabilities
|
7,888
|
|
6,751
|
|
(6,224)
|
|
(9,556)
|
|
|
Other non-current
liabilities
|
624
|
|
(1,899)
|
|
2,803
|
|
(5,399)
|
|
Total adjustments
|
25,184
|
|
24,117
|
|
23,097
|
|
538,350
|
|
Net cash provided by operating
activities
|
37,253
|
|
34,139
|
|
42,156
|
|
32,573
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing
activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from disposal of
businesses
|
476
|
|
6,962
|
|
5,507
|
|
9,062
|
|
|
Purchases of property and
equipment, net
|
(2,334)
|
|
(1,538)
|
|
(5,267)
|
|
(3,142)
|
|
|
Payments for acquired firms, net
of cash, and
|
|
|
|
|
|
|
|
|
|
contingent
consideration
|
(2,677)
|
|
1,278
|
|
(9,481)
|
|
(979)
|
|
Net cash used in (provided by)
investing activities
|
(4,535)
|
|
6,702
|
|
(9,241)
|
|
4,941
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing
activities:
|
|
|
|
|
|
|
|
|
|
Repayments of
borrowings
|
(35,000)
|
|
(33,000)
|
|
(40,000)
|
|
(33,000)
|
|
|
Proceeds from issuance of senior
convertible notes
|
125,000
|
|
-
|
|
125,000
|
|
-
|
|
|
Senior convertible notes
issuance costs
|
(4,113)
|
|
-
|
|
(4,113)
|
|
-
|
|
|
Purchase of call
options
|
(33,913)
|
|
-
|
|
(33,913)
|
|
-
|
|
|
Sale of warrants
|
21,025
|
|
-
|
|
21,025
|
|
-
|
|
|
Proceeds from stock-based
awards, including
|
|
|
|
|
|
|
|
|
|
tax benefit
|
1,140
|
|
(327)
|
|
2,834
|
|
(3,104)
|
|
|
Shares cancelled to pay
withholding taxes
|
(48)
|
|
(12)
|
|
(1,906)
|
|
(159)
|
|
|
Payments for treasury stock
repurchase
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Dividends paid
|
(1)
|
|
1
|
|
(67)
|
|
(50)
|
|
Net cash used in (provided by)
financing activities
|
74,090
|
|
(33,338)
|
|
68,860
|
|
(36,313)
|
|
Net decrease in cash and cash
equivalents
|
106,808
|
|
7,503
|
|
101,775
|
|
1,201
|
|
Cash and cash equivalents,
beginning of period
|
50,961
|
|
42,319
|
|
55,994
|
|
48,621
|
|
Cash and cash equivalents, end
of the period
|
$ 157,769
|
|
$ 49,822
|
|
$ 157,769
|
|
$ 49,822
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash
flow information
|
|
|
|
|
|
|
|
|
|
Cash paid for income
taxes
|
$ 9,267
|
|
$ 10,306
|
|
$ 20,703
|
|
$ 13,678
|
|
|
Cash paid for
interest
|
$
317
|
|
$ 1,411
|
|
$ 1,701
|
|
$
3,796
|
|
|
|
|
|
|
|
|
|
|
SOURCE NFP
Copyright g. 3 PR Newswire