FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
For Quarter Ended: September 30, 2002 Commission file number: 1-31310
HUB INTERNATIONAL LIMITED
(Exact name of registrant as specified in its Charter)
|
Ontario, Canada (State or other jurisdiction of incorporation or organization) |
36-4412416 (I.R.S. Employer Identification No.) |
|
|
55 East Jackson Boulevard, Chicago,
Illinois (Address of principal executive offices) |
60604 (Zip Code) |
(877) 402-6601
Registrant’s telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class Common Shares |
Outstanding at November 8, 2002 28,578,534 |
HUB INTERNATIONAL LIMITED
INDEX
| Page | ||||
|
PART I. FINANCIAL
INFORMATION
|
||||
|
Item 1. Financial Statements
(Unaudited)
|
3 | |||
|
Consolidated Balance Sheets as of
September 30, 2002 and December 31, 2001
|
3 | |||
|
Consolidated Statements of Earnings for the three
months and nine months ended September 30, 2002 and 2001
|
4 | |||
| Consolidated Statements of Retained Earnings for the nine months ended September 30, 2002 and 2001 | 5 | |||
|
Consolidated Statements of Cash Flows for the
three months and the nine months ended September 30, 2002
and 2001
|
6 | |||
|
Notes to Interim Consolidated Financial Statements
|
7 | |||
|
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations
|
20 | |||
|
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
|
27 | |||
|
Item 4. Controls and
Procedures
|
27 | |||
|
PART II. OTHER INFORMATION
|
||||
|
Item 1. Legal Proceedings
|
27 | |||
|
Item 2. Changes in Securities and
Use of Proceeds
|
27 | |||
|
Item 5. Other Information
|
28 | |||
|
Item 6. Exhibits and Reports on
Form 8-K
|
29 | |||
|
SIGNATURES
|
30 | |||
|
CERTIFICATIONS
|
31 | |||
| 2 HUB INTERNATIONAL LIMITED | INTERIM REPORT SEPTEMBER 30, 2002 |
PART I. FINANCIAL INFORMATION
Hub International Limited
As of September 30, 2002 and December 31, 2001
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
|
ASSETS
|
||||||||||
|
Current assets:
|
||||||||||
|
Cash and cash equivalents
|
$ | 42,887 | $ | 26,979 | ||||||
|
Trust cash
|
45,401 | 50,426 | ||||||||
|
Accounts and other receivables
|
83,536 | 101,313 | ||||||||
|
Investment held for sale
|
— | 40,772 | ||||||||
|
Income taxes receivable
|
— | 1,460 | ||||||||
|
Future income taxes
|
4,078 | 1,999 | ||||||||
|
Prepaid expenses
|
3,179 | 2,471 | ||||||||
|
Total current assets
|
179,081 | 225,420 | ||||||||
|
Goodwill
|
222,924 | 220,848 | ||||||||
|
Other intangible assets
|
24,901 | 25,331 | ||||||||
|
Property and equipment
|
19,605 | 20,935 | ||||||||
|
Future income taxes
|
4,582 | 2,671 | ||||||||
|
Other assets
|
6,511 | 7,091 | ||||||||
|
Total assets
|
$ | 457,604 | $ | 502,296 | ||||||
|
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
||||||||||
|
Current liabilities:
|
||||||||||
|
Bank debt
|
$ | — | $ | 55,000 | ||||||
|
Accounts payable and accrued liabilities
|
124,733 | 164,094 | ||||||||
|
Income taxes payable
|
836 | — | ||||||||
|
Future income taxes
|
444 | 1,387 | ||||||||
|
Current portion long-term debt and capital leases
|
2,193 | 4,169 | ||||||||
|
Total current liabilities
|
128,206 | 224,650 | ||||||||
|
Long-term debt and capital leases
|
45,067 | 76,159 | ||||||||
|
Subordinated convertible debentures
|
35,000 | 61,624 | ||||||||
|
Future income taxes
|
5,277 | 4,592 | ||||||||
|
Total liabilities
|
213,550 | 367,025 | ||||||||
|
Commitments and contingencies
|
||||||||||
|
Shareholders’ equity:
|
||||||||||
|
Share capital
|
216,438 | 125,506 | ||||||||
|
Contributed surplus
|
575 | — | ||||||||
|
Cumulative translation account
|
2,186 | 2,770 | ||||||||
|
Retained earnings
|
24,855 | 6,995 | ||||||||
|
Total shareholders’ equity
|
244,054 | 135,271 | ||||||||
|
Total liabilities and shareholders’
equity
|
$ | 457,604 | $ | 502,296 | ||||||
(the accompanying notes form an integral part of the interim financial statements)
| INTERIM REPORT SEPTEMBER 30, 2002 | HUB INTERNATIONAL LIMITED 3 |
Hub International Limited
For the three months and nine months ended September 30, 2002 and 2001
| Third quarter | First nine months | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
| (As restated | (As restated | ||||||||||||||||
| see note 1) | see note 1) | ||||||||||||||||
|
Revenue
|
|||||||||||||||||
|
Commission income
|
$ | 46,567 | $ | 41,449 | $ | 140,117 | $ | 91,981 | |||||||||
|
Contingent commissions and volume overrides
|
767 | 220 | 10,198 | 5,324 | |||||||||||||
|
Other
|
2,218 | 1,932 | 6,017 | 3,735 | |||||||||||||
| 49,552 | 43,601 | 156,332 | 101,040 | ||||||||||||||
|
Expenses
|
|||||||||||||||||
|
Remuneration
|
26,620 | 24,701 | 84,134 | 57,875 | |||||||||||||
|
Non-cash stock option remuneration
|
575 | — | 575 | — | |||||||||||||
|
Selling
|
2,695 | 2,439 | 8,344 | 5,630 | |||||||||||||
|
Occupancy
|
2,856 | 2,798 | 8,482 | 5,953 | |||||||||||||
|
Depreciation
|
1,444 | 1,245 | 4,078 | 2,389 | |||||||||||||
|
Administration
|
5,552 | 5,211 | 16,531 | 11,071 | |||||||||||||
| 39,742 | 36,394 | 122,144 | 82,918 | ||||||||||||||
|
Net earnings before the following
|
9,810 | 7,207 | 34,188 | 18,122 | |||||||||||||
|
Interest expense
|
1,110 | 3,346 | 6,208 | 4,580 | |||||||||||||
|
Goodwill and other intangible asset amortization
|
389 | 1,424 | 1,147 | 3,101 | |||||||||||||
|
(Gain) loss on disposal of property and equipment
and investments
|
(6 | ) | 8 | (2,578 | ) | (286 | ) | ||||||||||
|
Other income — put option liability
|
(270 | ) | — | (948 | ) | — | |||||||||||
|
Net earnings before income taxes
|
8,587 | 2,429 | 30,359 | 10,727 | |||||||||||||
|
Provision for income tax expense
(benefit)
|
|||||||||||||||||
|
Current
|
4,831 | 2,323 | 10,845 | 5,366 | |||||||||||||
|
Future
|
(1,666 | ) | (1,925 | ) | (1,559 | ) | (1,694 | ) | |||||||||
| 3,165 | 398 | 9,286 | 3,672 | ||||||||||||||
|
Net earnings
|
$ | 5,422 | $ | 2,031 | $ | 21,073 | $ | 7,055 | |||||||||
|
Earnings per share
|
|||||||||||||||||
|
Basic
|
$0.21 | $0.10 | $0.96 | $0.37 | |||||||||||||
|
Diluted
|
$0.19 | $0.09 | $0.79 | $0.36 | |||||||||||||
|
Weighted average shares outstanding
|
|||||||||||||||||
|
— Basic (000’s)
|
26,416 | 19,401 | 22,060 | 18,852 | |||||||||||||
|
Weighted average shares outstanding
|
|||||||||||||||||
|
— Diluted (000’s)
|
31,696 | 21,524 | 29,139 | 19,598 | |||||||||||||
(the accompanying notes form an integral part of the interim financial statements)
| 4 HUB INTERNATIONAL LIMITED | INTERIM REPORT SEPTEMBER 30, 2002 |
Hub International Limited
For the nine months ended September 30, 2002 and 2001
| 2002 | 2001 | |||||||
| (As restated | ||||||||
| see note 1) | ||||||||
|
Retained earnings — Beginning of
period
|
$ | 6,995 | $ | 587 | ||||
|
Net earnings for the period
|
21,073 | 7,055 | ||||||
|
Dividends paid
|
(3,213 | ) | (2,639 | ) | ||||
|
Retained earnings — End of
period
|
$ | 24,855 | $ | 5,003 | ||||
(the accompanying notes form an integral part of the interim financial statements)
| INTERIM REPORT SEPTEMBER 30, 2002 | HUB INTERNATIONAL LIMITED 5 |
Hub International Limited
For the three months and nine months ended September 30, 2002 and 2001
| Third quarter | First nine months | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
| (As restated | (As restated | ||||||||||||||||
| see note 1) | see note 1) | ||||||||||||||||
|
OPERATING ACTIVITIES
|
|||||||||||||||||
|
Net earnings
|
$ | 5,422 | $ | 2,031 | $ | 21,073 | $ | 7,055 | |||||||||
|
Items not affecting cash
|
|||||||||||||||||
|
Amortization and depreciation
|
1,833 | 2,669 | 5,225 | 5,490 | |||||||||||||
|
(Gain) loss on disposal of property and equipment
and investments
|
(6 | ) | 8 | (2,578 | ) | (286 | ) | ||||||||||
|
Other income — put option liability
|
(270 | ) | — | (948 | ) | — | |||||||||||
|
Non-cash stock option remuneration
|
575 | — | 575 | — | |||||||||||||
|
Future income taxes
|
(1,666 | ) | (1,925 | ) | (1,559 | ) | (1,694 | ) | |||||||||
| 5,888 | 2,783 | 21,788 | 10,565 | ||||||||||||||
|
Non-cash working capital items
|
|||||||||||||||||
|
Accounts and other receivables
|
37,773 | 33,542 | 17,482 | 25,560 | |||||||||||||
|
Prepaid expenses
|
(650 | ) | (706 | ) | (348 | ) | (571 | ) | |||||||||
|
Accounts payable and accrued liabilities
|
(36,752 | ) | (24,535 | ) | (39,163 | ) | (18,802 | ) | |||||||||
|
Income taxes payable
|
2,986 | 2,252 | 2,231 | 2,628 | |||||||||||||
| 9,245 | 13,336 | 1,990 | 19,380 | ||||||||||||||
|
FINANCING ACTIVITIES
|
|||||||||||||||||
|
Bank debt
|
— | 15,107 | (55,000 | ) | 53,500 | ||||||||||||
|
Long-term debt — advances
|
14,101 | 2,808 | 14,101 | 82,084 | |||||||||||||
|
Long-term debt and capital leases —
repayments
|
(4,503 | ) | (1,276 | ) | (46,609 | ) | (3,506 | ) | |||||||||
|
Subordinated convertible debenture —
repayment
|
— | — | (26,800 | ) | — | ||||||||||||
|
Share capital — issued for cash net of
issue costs
|
7 | 3,635 | 88,098 | 3,635 | |||||||||||||
|
Share capital — repurchases
|
— | — | — | (299 | ) | ||||||||||||
|
Dividends paid
|
(1,263 | ) | (988 | ) | (3,213 | ) | (2,639 | ) | |||||||||
| 8,342 | 19,286 | (29,423 | ) | 132,775 | |||||||||||||