NATIONAL FINANCIAL PARTNERS CORP - FORM 8-K - EX-99.2 - QUARTERLY FINANCIAL SUPPLEMENT FOR THE PERIOD ENDED JUNE 30, 2011

Attached files

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8-K - CURRENT REPORT - NATIONAL FINANCIAL PARTNERS CORP	form8k.htm
EX-99.1 - PRESS RELEASE, DATED AUGUST 1, 2011, OF NATIONAL FINANCIAL PARTNERS CORP. - NATIONAL FINANCIAL PARTNERS CORP	ex991.htm

Exhibit 99.2

Quarterly Financial Supplement

For the Period Ended June 30, 2011

(NYSE: NFP)

Investor Relations Contact:

Abbe F. Goldstein, CFA

(212) 301-4011

ir@nfp.com

This Quarterly Financial Supplement (“QFS”) includes historical and forward-looking non-GAAP financial measures called cash earnings, cash earnings per diluted share, Adjusted EBITDA, adjusted income before management fees, management fees (excluding the accelerated vesting of certain RSUs), and percentages or calculations using these measures. The Company believes these non-GAAP financial 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, the after-tax impact of non-cash interest expense and the after-tax impact of certain non-recurring items. 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, gain on early extinguishment of debt, other, net, amortization of intangibles, depreciation, impairment of goodwill and intangible assets, (gain) loss on sale of businesses, the pre-tax impact of the accelerated vesting of certain RSUs 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. Adjusted income before management fees is defined as income before management fees excluding corporate income. Adjusted income before management fees should not be viewed as a substitute for income from operations. Management fees (excluding accelerated vesting of certain RSUs) shows management fees without the one-time impact of the accelerated vesting of certain RSUs on September 17, 2010. Management fees (excluding the accelerated vesting of certain RSUs) should not be viewed as a substitute for management fees. A reconciliation of these non-GAAP financial measures to their GAAP counterparts is provided in this QFS, which is available on the Investor Relations section of the Company’s Web site at www.nfp.com.

This QFS contains statements 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, market and industry conditions, premium and commission rates, interest rates, contingencies, the direction or outcome of regulatory investigations and litigation, income taxes and the Company’s operations or strategy. These forward-looking statements are based on management’s current views with respect to future results. Forward-looking statements are based on beliefs and assumptions made by management using currently-available information, such as market and industry materials, experts’ reports and opinions, and current financial trends. These statements are only predictions and are not guarantees of future performance. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by a forward-looking statement. These risks and uncertainties include, without limitation: (1) NFP’s ability, through its operating structure, to respond quickly to operational, financial or regulatory situations impacting its businesses; (2) the ability of the Company’s businesses to perform successfully following acquisition, inlcuding through the diversification of product and service offerings, and NFP’s ability to manage its business effectively and profitably through its principals and the Company’s reportable segments; (3) the ability of the Company to execute on its strategy of increasing recurring revenue; (4) any losses that NFP may take with respect to dispositions, restructures or otherwise; (5) an economic environment that results in fewer sales of financial products or services; (6) the impact of the adoption 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 effectiveness or 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 or credit market conditions; (10) adverse developments in the Company’s markets, such as those related to compensation agreements with insurance companies or activities within the life settlements industry, which could result in decreased sales of financial products or services; (11) NFP’s ability to operate effectively within the restrictive covenants of its credit facility; (12) adverse results or other consequences from litigation, arbitration, settlements, regulatory investigations or compliance initiatives, including those related to business practices, compensation agreements with insurance companies, policy rescissions or chargebacks or activities within the life settlements industry; (13) the impact of capital markets behavior, such as fluctuations in the price of NFP’s common stock, the dilutive impact of capital raising efforts or the impact of refinancing transactions; (14) the impact of legislation or regulations on NFP’s businesses, such as the possible adoption of exclusive federal regulation over interstate insurers, the uncertain impact of legislation regulating the financial services industry, such as the recent Dodd-Frank Wall Street Reform and Consumer Protection Act, the impact of newly-adopted healthcare legislation and resulting changes in business practices, or changes in regulations affecting the value or use of benefits programs, any of which may adversely affect the demand for or profitability of the Company’s services; (15) developments in the availability, pricing, design, tax treatment or underwriting of insurance products, revisions in mortality tables by life expectancy underwriters or changes in the Company’s relationships with insurance companies; (16) changes in premiums and commission rates or the rates of other fees paid to the Company’s businesses; (17) 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; (18) the occurrence of adverse economic conditions or an adverse regulatory climate in New York, Florida or California; (19) the loss of services of key members of senior management; (20) the Company’s ability to compete against competitors with greater resources, such as those with greater name recognition; and (21) 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, 2010, filed with the SEC on February 10, 2011.

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 STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS - CONSOLIDATED

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Revenue:
Commissions and fees	$	239,435		$	234,890		$	472,699		$	460,163

Operating expenses:
Commissions and fees		76,888			73,421			155,985			141,727
Compensation expense		63,629			63,722			130,518			128,990
Non-compensation expense		36,955			38,914			75,580			79,363
Management fees		31,889			32,534			56,508			56,184
Amortization of intangibles		7,897			8,206			15,859			16,544
Depreciation		3,037			3,005			6,114			6,011
Impairment of goodwill and intangible assets		920			—			920			2,901
Loss (gain) on sale of businesses, net		13			(7,690	)		13			(9,921	)
Total operating expenses		221,228			212,112			441,497			421,799
Income from operations		18,207			22,778			31,202			38,364

Non-operating income and expenses
Interest income		926			888			1,900			1,776
Interest expense		(3,974	)		(4,880	)		(7,745	)		(9,459	)
Gain on early extinguishment of debt		—			—			—			—
Other, net		1,328			2,013			4,516			2,671
Non-operating income and expenses, net		(1,720	)		(1,979	)		(1,329	)		(5,012	)
Income before income taxes		16,487			20,799			29,873			33,352

Income tax expense		6,997			8,730			13,505			14,293
Net Income	$	9,490		$	12,069		$	16,368		$	19,059

Cash Earnings Reconciliation
GAAP net income	$	9,490		$	12,069		$	16,368		$	19,059
Amortization of intangibles		7,897			8,206			15,859			16,544
Depreciation		3,037			3,005			6,114			6,011
Impairment of goodwill and intangible assets		920			—			920			2,901
Tax benefit of impairment of goodwill and intangible assets		(364	)		88			(364	)		(1,030	)
Non-cash interest, net of tax		637			1,838			1,268			3,704
Accelerated vesting of certain RSUs, net of tax		—			—			—			—
Gain on early extinguishment of debt, net of tax		—			—			—			—
Cash earnings	$	21,617		$	25,206		$	40,165		$	47,189

Adjusted EBITDA Reconciliation
GAAP net income	$	9,490		$	12,069		$	16,368		$	19,059
Income tax expense		6,997			8,730			13,505			14,293
Interest income		(926	)		(888	)		(1,900	)		(1,776	)
Interest expense		3,974			4,880			7,745			9,459
Gain on early extinguishment of debt		—			—			—			—
Other, net		(1,328	)		(2,013	)		(4,516	)		(2,671	)
Income from operations		18,207			22,778			31,202			38,364
Amortization of intangibles		7,897			8,206			15,859			16,544
Depreciation		3,037			3,005			6,114			6,011
Impairment of goodwill and intangible assets		920			—			920			2,901
Loss (gain) on sale of businesses, net		13			(7,690	)		13			(9,921	)
Accelerated vesting of certain RSUs		—			—			—			—
Adjusted EBITDA	$	30,074		$	26,299		$	54,108		$	53,899
Adjusted EBITDA as a % of revenue		12.6	%		11.2	%		11.4	%		11.7	%

Calculation of Management Fees %
Income from operations	$	18,207		$	22,778		$	31,202		$	38,364
Basic management fees		29,433			29,349			52,811			52,287
Principal Incentive Plan (PIP) management fees		1,163			1,933			1,599			(1,165	)
Stock-based compensation management fees		—			1,144			30			2,467
Accelerated vesting of certain RSUs		—			—			—			—
Incentive and other management fees		1,293			108			2,068			2,595
Total management fees		31,889			32,534			56,508			56,184
Amortization of intangibles		7,897			8,206			15,859			16,544
Depreciation		3,037			3,005			6,114			6,011
Impairment of goodwill and intangible assets		920			—			920			2,901
Loss (gain) on sale of businesses, net		13			(7,690	)		13			(9,921	)
Income before management fees		61,963			58,833			110,616			110,083
Corporate income		5,907			8,089			15,866			16,971
Adjusted income before management fees	$	67,870		$	66,922		$	126,482		$	127,054

Basic management fees as % of adjusted income before management fees		43.4	%		43.9	%		41.8	%		41.2	%

Total management fees as % of adjusted income before management fees		47.0	%		48.6	%		44.7	%		44.2	%

Total management fees (excluding accelerated vesting of certain RSUs)	$	31,889		$	32,534		$	56,508		$	56,184

Total management fees (excluding accelerated vesting of certain RSUs) as % of adjusted income before management fees		47.0	%		48.6	%		44.7	%		44.2	%

CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS FOR - CORPORATE CLIENT GROUP

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Revenue:
Commissions and fees	$	94,315		$	89,516		$	189,865		$	184,763

Operating expenses:
Commissions and fees		8,667			8,299			19,661			16,262
Compensation expense		33,625			32,296			67,540			65,392
Non-compensation expense		17,962			18,832			36,098			38,428
Management fees		17,347			15,045			31,860			30,171
Amortization of intangibles		5,129			5,253			10,280			10,601
Depreciation		1,615			1,516			3,238			3,075
Impairment of goodwill and intangible assets		—			—			—			1,931
Gain on sale of businesses, net		(47	)		(6,841	)		(47	)		(8,162	)
Total operating expenses		84,298			74,400			168,630			157,698
Income from operations	$	10,017		$	15,116		$	21,235		$	27,065

Adjusted EBITDA Reconciliation
Income from operations	$	10,017		$	15,116		$	21,235		$	27,065
Amortization of intangibles		5,129			5,253			10,280			10,601
Depreciation		1,615			1,516			3,238			3,075
Impairment of goodwill and intangible assets		—			—			—			1,931
Gain on sale of businesses, net		(47	)		(6,841	)		(47	)		(8,162	)
Accelerated vesting of certain RSUs		—			—			—			—
Adjusted EBITDA	$	16,714		$	15,044		$	34,706		$	34,510
Adjusted EBITDA as a % of revenue		17.7	%		16.8	%		18.3	%		18.7	%

Calculation of Management Fees %
Income from operations	$	10,017		$	15,116		$	21,235		$	27,065
Basic management fees		15,878			13,054			29,294			26,730
Principal Incentive Plan (PIP) management fees		878			790			1,260			307
Stock-based compensation management fees		(6	)		583			(6	)		1,381
Accelerated vesting of certain RSUs		—			—			—			—
Incentive and other management fees		597			618			1,312			1,753
Total management fees		17,347			15,045			31,860			30,171
Amortization of intangibles		5,129			5,253			10,280			10,601
Depreciation		1,615			1,516			3,238			3,075
Impairment of goodwill and intangible assets		—			—			—			1,931
Gain on sale of businesses, net		(47	)		(6,841	)		(47	)		(8,162	)
Income before management fees		34,061			30,089			66,566			64,681
Corporate income		6,232			6,447			13,358			12,988
Adjusted income before management fees	$	40,293		$	36,536		$	79,924		$	77,669

Basic management fees as % of adjusted income before management fees		39.4	%		35.7	%		36.7	%		34.4	%

Total management fees as % of adjusted income before management fees		43.1	%		41.2	%		39.9	%		38.8	%

Total management fees (excluding accelerated vesting of certain RSUs)	$	17,347		$	15,045		$	31,860		$	30,171

Total management fees (excluding accelerated vesting of certain RSUs) as % of adjusted income before management fees		43.1	%		41.2	%		39.9	%		38.8	%

CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS FOR - INDIVIDUAL CLIENT GROUP

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Revenue:
Commissions and fees	$	81,903		$	91,377		$	159,656		$	170,071

Operating expenses:
Commissions and fees		15,887			20,246			34,277			38,618
Compensation expense		26,144			27,814			55,104			56,056
Non-compensation expense		15,014			16,857			32,030			34,312
Management fees		14,542			17,489			24,648			26,013
Amortization of intangibles		2,768			2,953			5,579			5,943
Depreciation		1,126			1,155			2,282			2,280
Impairment of goodwill and intangible assets		920			—			920			970
Loss (gain) on sale of businesses, net		60			(849	)		60			(1,759	)
Total operating expenses		76,461			85,665			154,900			162,433
Income from operations	$	5,442		$	5,712		$	4,756		$	7,638

Adjusted EBITDA Reconciliation
Income from operations	$	5,442		$	5,712		$	4,756		$	7,638
Amortization of intangibles		2,768			2,953			5,579			5,943
Depreciation		1,126			1,155			2,282			2,280
Impairment of goodwill and intangible assets		920			—			920			970
Loss on sale of businesses, net		60			(849	)		60			(1,759	)
Accelerated vesting of certain RSUs		—			—			—			—
Adjusted EBITDA	$	10,316		$	8,971		$	13,597		$	15,072
Adjusted EBITDA as a % of revenue		12.6	%		9.8	%		8.5	%		8.9	%

Calculation of Management Fees %
Income from operations	$	5,442		$	5,712		$	4,756		$	7,638
Basic management fees		13,555			16,295			23,517			25,557
Principal Incentive Plan (PIP) management fees		285			1,143			339			(1,472	)
Stock-based compensation management fees		6			561			36			1,086
Accelerated vesting of certain RSUs		—			—			—			—
Incentive and other management fees		696			(510	)		756			842
Total management fees		14,542			17,489			24,648			26,013
Amortization of intangibles		2,768			2,953			5,579			5,943
Depreciation		1,126			1,155			2,282			2,280
Impairment of goodwill and intangible assets		920			—			920			970
Loss (gain) on sale of businesses, net		60			(849	)		60			(1,759	)
Income before management fees		24,858			26,460			38,245			41,085
Corporate income		2,719			3,926			8,313			8,300
Adjusted income before management fees	$	27,577		$	30,386		$	46,558		$	49,385

Basic management fees as % of adjusted income before management fees		49.2	%		53.6	%		50.5	%		51.8	%

Total management fees as % of adjusted income before management fees		52.7	%		57.6	%		52.9	%		52.7	%

Total management fees (excluding accelerated vesting of certain RSUs)	$	14,542		$	17,489		$	24,648		$	26,013

Total management fees (excluding accelerated vesting of certain RSUs) as % of adjusted income before management fees		52.7	%		57.6	%		52.9	%		52.7	%

CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS FOR - ADVISOR SERVICES GROUP

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Revenue:
Commissions and fees	$	63,217		$	53,997		$	123,178		$	105,329

Operating expenses:
Commissions and fees		52,334			44,876			102,047			86,847
Compensation expense		3,860			3,612			7,874			7,542
Non-compensation expense		3,979			3,225			7,452			6,623
Management fees		—			—			—			—
Amortization of intangibles		—			—			—			—
Depreciation		296			334			594			656
Impairment of goodwill and intangible assets		—			—			—			—
Gain on sale of businesses, net		—			—			—			—
Total operating expenses		60,469			52,047			117,967			101,668
Income from operations	$	2,748		$	1,950		$	5,211		$	3,661

Adjusted EBITDA Reconciliation
Income from operations	$	2,748		$	1,950		$	5,211		$	3,661
Amortization of intangibles		—			—			—			—
Depreciation		296			334			594			656
Impairment of goodwill and intangible assets		—			—			—			—
Gain on sale of businesses, net		—			—			—			—
Accelerated vesting of certain RSUs		—			—			—			—
Adjusted EBITDA	$	3,044		$	2,284		$	5,805		$	4,317
Adjusted EBITDA as a % of revenue		4.8	%		4.2	%		4.7	%		4.1	%

Calculation of Management Fees %
Income from operations	$	2,748		$	1,950		$	5,211		$	3,661
Basic management fees		—			—			—			—
Principal Incentive Plan (PIP) management fees		—			—			—			—
Stock-based compensation management fees		—			—			—			—
Accelerated vesting of certain RSUs		—			—			—			—
Incentive and other management fees		—			—			—			—
Total management fees		—			—			—			—
Amortization of intangibles		—			—			—			—
Depreciation		296			334			594			656
Impairment of goodwill and intangible assets		—			—			—			—
Gain on sale of businesses, net		—			—			—			—
Income before management fees		3,044			2,284			5,805			4,317
Corporate income (1)		(3,044	)		(2,284	)		(5,805	)		(4,317	)
Adjusted income before management fees	$	—		$	—		$	—		$	—

Basic management fees as % of adjusted income before management fees	NM			NM			NM			NM

Total management fees as % of adjusted income before management fees	NM			NM			NM			NM

Total management fees (excluding accelerated vesting of certain RSUs)	$	—		$	—		$	—		$	—

Total management fees (excluding accelerated vesting of certain RSUs) as % of adjusted income before management fees	NM			NM			NM			NM

NM indicates metric not meaningful

(1) Represents non-management fee generating income

CONDENSED STATEMENTS OF OPERATIONS, ADJUSTED EBITDA AND ORGANIC REVENUE GROWTH

(Unaudited - dollars in thousands)

FOR QUARTERLY PERIODS

	Corporate Client Group For the Three Months Ended						Individual Client Group For the Three Months Ended					Advisor Services Group For the Three Months Ended				Total For the Three Months Ended
	June 30,			June 30,			June 30,		June 30,			June 30,		June 30,		June 30,		June 30,
	2011			2010			2011		2010			2011		2010		2011		2010
Revenue:
Commissions and fees	$	94,315		$	89,516		$	81,903	$	91,377		$	63,217	$	53,997	$	239,435	$	234,890

Operating expenses:
Commissions and fees		8,667			8,299			15,887		20,246			52,334		44,876		76,888		73,421
Compensation expense		33,625			32,296			26,144		27,814			3,860		3,612		63,629		63,722
Non-compensation expense		17,962			18,832			15,014		16,857			3,979		3,225		36,955		38,914
Management fees		17,347			15,045			14,542		17,489			—		—		31,889		32,534
Amortization of intangibles		5,129			5,253			2,768		2,953			—		—		7,897		8,206
Depreciation		1,615			1,516			1,126		1,155			296		334		3,037		3,005
Impairment of goodwill and intangible assets		—			—			920		—			—		—		920		—
(Gain) loss on sale of businesses, net		(47	)		(6,841	)		60		(849	)		—		—		13		(7,690	)
Total operating expenses		84,298			74,400			76,461		85,665			60,469		52,047		221,228		212,112
Income from operations	$	10,017		$	15,116		$	5,442	$	5,712		$	2,748	$	1,950	$	18,207	$	22,778

	For the Three Months Ended
	June 30,				June 30,
	2011				2010

Revenue
Corporate Client Group	$	94,315	39.4	%	$	89,516	38.1	%
Individual Client Group		81,903	34.2	%		91,377	38.9	%
Advisor Services Group		63,217	26.4	%		53,997	23.0	%
Consolidated	$	239,435	100.0	%	$	234,890	100.0	%

Adjusted EBITDA (1)
Corporate Client Group	$	16,714	55.6	%	$	15,044	57.2	%
Individual Client Group		10,316	34.3	%		8,971	34.1	%
Advisor Services Group		3,044	10.1	%		2,284	8.7	%
Consolidated	$	30,074	100.0	%	$	26,299	100.0	%

	For the Three Months Ended
	June 30,			June 30,
	2011			2010
Organic revenue
Corporate Client Group		5.6	%		3.7	%
Individual Client Group		-10.3	%		5.5	%
Advisor Services Group		17.1	%		16.0	%
Consolidated		2.0	%		7.3	%

(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, gain on early extinguishment of debt and other, net. These items are included in the reconciliation of Adjusted EBITDA to net income on a consolidated basis.

CONDENSED STATEMENTS OF OPERATIONS, ADJUSTED EBITDA AND ORGANIC REVENUE GROWTH

(Unaudited - dollars in thousands)

YEAR TO DATE

	Corporate Client Group						Individual Client Group					Advisor Services Group				Total
	For the Six Months Ended						For the Six Months Ended					For the Six Months Ended				For the Six Months Ended
	June 30,			June 30,			June 30,		June 30,			June 30,		June 30,		June 30,		June 30,
	2011			2010			2011		2010			2011		2010		2011		2010

Revenue:
Commissions and fees	$	189,865		$	184,763		$	159,656	$	170,071		$	123,178	$	105,329	$	472,699	$	460,163

Operating expenses:
Commissions and fees		19,661			16,262			34,277		38,618			102,047		86,847		155,985		141,727
Compensation expense		67,540			65,392			55,104		56,056			7,874		7,542		130,518		128,990
Non-compensation expense		36,098			38,428			32,030		34,312			7,452		6,623		75,580		79,363
Management fees		31,860			30,171			24,648		26,013			—		—		56,508		56,184
Amortization of intangibles		10,280			10,601			5,579		5,943			—		—		15,859		16,544
Depreciation		3,238			3,075			2,282		2,280			594		656		6,114		6,011
Impairment of goodwill and intangible assets		—			1,931			920		970			—		—		920		2,901
(Gain) loss on sale of businesses, net		(47	)		(8,162	)		60		(1,759	)		—		—		13		(9,921	)
Total operating expenses		168,630			157,698			154,900		162,433			117,967		101,668		441,497		421,799
Income from operations	$	21,235		$	27,065		$	4,756	$	7,638		$	5,211	$	3,661	$	31,202	$	38,364

	For the Six Months Ended
	June 30,				June 30,
	2011				2010
Revenue
Corporate Client Group	$	189,865	40.2	%	$	184,763	40.1	%
Individual Client Group		159,656	33.8	%		170,071	37.0	%
Advisor Services Group		123,178	26.0	%		105,329	22.9	%
Consolidated	$	472,699	100.0	%	$	460,163	100.0	%

Adjusted EBITDA (1)
Corporate Client Group	$	34,706	64.2	%	$	34,510	64.0	%
Individual Client Group		13,597	25.1	%		15,072	28.0	%
Advisor Services Group		5,805	10.7	%		4,317	8.0	%
Consolidated	$	54,108	100.0	%	$	53,899	100.0	%

	For the Six Months Ended
	June 30,			June 30,
	2011			2010
Organic revenue
Corporate Client Group		4.0	%		4.7	%
Individual Client Group		-5.3	%		3.6	%
Advisor Services Group		16.9	%		12.3	%
Consolidated		3.5	%		6.1	%

CORPORATE OVERVIEW

(Unaudited - dollars in thousands, except per share data)

	At or for the Three Months Ended
	June 30,			June 30,
	2011			2010
GAAP net income	$	9,490		$	12,069
Amortization of intangibles		7,897			8,206
Depreciation		3,037			3,005
Impairment of goodwill and intangible assets		920			—
Tax benefit of impairment of goodwill and intangible assets		(364	)		88
Non-cash interest, net of tax		637			1,838
Accelerated vesting RSUs, net of tax		—			—
Gain on debt, net of tax		—			—
Cash earnings	$	21,617		$	25,206

GAAP net income per share - diluted	$	0.21		$	0.27
Amortization of intangibles		0.17			0.19
Depreciation		0.07			0.07
Impairment of goodwill and intangible assets		0.02			—
Tax benefit of impairment of goodwill and intangible assets		(0.01	)		—
Non-cash interest, net of tax		0.01			0.04
Accelerated vesting RSUs, net of tax		—			—
Gain on debt, net of tax		—			—
Impact of diluted shares on cash earnings not reflected in GAAP net loss per share - diluted (1)		—			—
Cash earnings per share - diluted (2)	$	0.48		$	0.57


Shares outstanding, beginning of period		43,976			41,926
Common shares issued for acquisitions during period		—			—
Common shares issued for contingent consideration and escrow during period		—			535
Common shares issued for stock-based awards during period		92			214
Common shares repurchased during period		(733	)		(89	)
Common shares issued under ongoing incentive program		—			—
Other		22			33
Shares outstanding, end of period		43,357			42,619

Weighted average common shares outstanding		43,925			42,499
Dilutive effect of contingent consideration and ongoing incentive payments		—			128
Dilutive effect of stock-based awards		954			1,717
Dilutive effect of escrow, stock subscriptions and other		6			9
Dilutive effect of senior convertible notes		396			—
Weighted average common shares outstanding - diluted (1)		45,281			44,353

Debt to total capitalization		32.6	%		43.4	%

Total NFP owned businesses at period end		145			145

(1) 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 anti-dilutive effects of other items caused by a GAAP net loss position. However, in periods which the Company reports positive cash earnings with a GAAP net loss, the Company uses weighted average common shares outstanding – diluted to calculate cash earnings per share – diluted only.

(2) 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.

INTANGIBLES AND GOODWILL DATA

(Unaudited - in thousands)

	At or for the Three Months Ended
	June 30,		June 30,
	2011		2010
Intangible Assets:
Book of business	$	77,486	$	94,270
Management contracts		231,946		243,913
Trade name		4,782		4,782
Institutional customer relationships		10,249		11,121
Goodwill		62,589		66,344
Total intangible assets and goodwill	$	387,052	$	420,430

Amortization Expense & Impairment Loss:
Book of business	$	4,400	$	4,711
Management contracts		4,199		3,277
Trade name		—		—
Institutional customer relationships		218		218
Goodwill		—		—
Total amortization expense & impairment loss	$	8,817	$	8,206

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (BALANCE SHEET)

(Unaudited - in thousands)

	At
	June 30,			December 31,
	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	138,621		$	128,830
Fiduciary funds - restricted relating to premium trust accounts		72,486			82,647
Commissions, fees and premiums receivable, net		90,084			120,572
Due from principals and/or certain entities they own		7,910			7,981
Notes receivable, net		5,006			6,128
Deferred tax assets		13,865			13,865
Other current assets		29,438			17,442
Total current assets		357,410			377,465
Property and equipment, net		35,866			37,359
Deferred tax assets		5,184			5,836
Intangibles, net		324,463			337,833
Goodwill, net		62,589			60,894
Notes receivable, net		29,096			30,724
Other non-current assets		43,130			42,952
Total assets	$	857,738		$	893,063

LIABILITIES
Current liabilities:
Premiums payable to insurance carriers	$	74,188		$	83,091
Borrowings		—			—
Current portion of long term debt		12,500			12,500
Income taxes payable		—			—
Due to principals and/or certain entities they own		18,005			37,406
Accounts payable		21,108			36,213
Accrued liabilities		55,609			55,673
Total current liabilities		181,410			224,883
Long term debt		100,000			106,250
Deferred tax liabilities		1,552			1,552
Convertible senior notes		89,679			87,581
Other non-current liabilities		67,361			64,585
Total liabilities		440,002			484,851

STOCKHOLDERS' EQUITY
Preferred stock at par value		—			—
Common stock at par value		4,653			4,596
Additional paid-in capital		904,400			902,153
Accumulated deficit		(410,048	)		(425,063	)
Treasury stock		(80,787	)		(73,458	)
Accumulated other comprehensive income		(482	)		(16	)
Total stockholders' equity		417,736			408,212
Total liabilities and stockholders' equity	$	857,738		$	893,063

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

	At or for the Three Months Ended						At or for the Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Cash flow from operating activities:
Net income (loss)	$	9,492		$	12,069		$	16,368		$	19,059

Adjustments to reconcile to net cash provided by (used in) operating activities:
Deferred taxes		—			5,005			—			5,356
Stock-based compensation		1,348			2,727			2,761			5,678
Impairment of goodwill and intangible assets		920			—			920			2,901
Amortization of intangibles		7,897			8,206			15,859			16,544
Depreciation		3,037			3,005			6,114			6,011
Accretion of senior convertible notes discount		1,054			3,128			2,098			6,035
Loss (gain) on sale of businesses, net		13			(7,690	)		13			(9,921	)
Loss on sublease		—			—			—			1,766
Bad debt expense		(89	)		815			478			839
Other, net		(465	)		(546	)		(943	)		(948	)

(Increase) decrease in operating assets:
Fiduciary funds - restricted relating to premium trust accounts		3,825			(11,896	)		10,161			(10,186	)
Commissions, fees and premiums receivable, net		1,827			1,268			30,435			30,900
Due from principals and/or certain entities they own		(1,773	)		(1,382	)		71			(1,442	)
Notes receivable, net - current		504			(47	)		1,122			2,272
Other current assets		(2,814	)		(4,656	)		(11,996	)		(5,659	)
Notes receivable, net - non-current		1,447			(4,049	)		903			(6,596	)
Other non-current assets		(806	)		1,083			(178	)		59

Increase (decrease) in operating liabilities:
Premiums payable to insurance carriers		(810	)		13,533			(8,903	)		11,206
Income taxes payable		—			(525	)		15			(6,325	)
Due to principals and/or certain entities they own		6,834			6,971			(19,459	)		(17,410	)
Accounts payable		2,949			1,722			(15,105	)		(4,562	)
Accrued liabilities		5,775			7,888			270			(6,224	)
Other non-current liabilities		(295	)		624			2,927			2,803
Total adjustments		30,378			25,184			17,563			23,097
Net cash provided by operating activities		39,870			37,253			33,931			42,156

Cash flow from investing activities:
Proceeds from disposal of businesses		38			476			38			5,507
Purchases of property and equipment, net		(2,539	)		(2,334	)		(4,621	)		(5,267	)
Proceeds from (payments for) acquired firms, net of cash		(65	)		1,223			(4,062	)		1,223
Proceeds from (payments for) contingent consideration		—			(3,900	)		—			(10,704	)
Net cash used in investing activities		(2,566	)		(4,535	)		(8,645	)		(9,241	)

Cash flow from financing activities:
Repayments of short term debt		—			(35,000	)		—			(40,000	)
Repayment of long term debt		(3,125	)		—			(6,250	)		—
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		583			1,140			2,516			2,834
Shares cancelled to pay withholding taxes		(49	)		(48	)		(2,958	)		(1,906	)
Repurchase of common stock		(8,803	)		—			(8,803	)		—
Dividends paid		—			(1	)		—			(67	)
Net cash (used in) provided by financing activities		(11,394	)		74,090			(15,495	)		68,860
Net increase (decrease) in cash and cash equivalents		25,910			106,808			9,791			101,775
Cash and cash equivalents, beginning of period		112,711			50,961			128,830			55,994
Cash and cash equivalents, end of the period	$	138,621		$	157,769		$	138,621		$	157,769

Supplemental disclosures of cash flow information
Cash paid for income taxes	$	3,997		$	9,267		$	11,350		$	20,703
Cash paid for interest	$	3,479		$	317		$	4,455		$	1,701

DEFINED TERMS

Accelerated Vesting of certain RSUs:	Portion of Total Management Fees attributed to accelerated vesting of approximately 1.5 million RSUs granted to certain principals. The accelerated vesting occurred on September 17, 2010.

Adjusted EBITDA:	Net income excluding income tax expense, interest income, interest expense, gain on early extinguishment of debt, other, net, amortization of intangibles, depreciation, impairment of goodwill and intangible assets, (gain) loss on sale of businesses, pre-tax impact of the accelerated vesting of certain RSUs 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 Income (Loss) before Management Fees:	Income before management fees excluding corporate income.

Base Earnings of Acquired Firms:	Represents the cumulative preferred portion of Target Earnings of Acquired Firms that NFP capitalizes at the time of acquisition of a firm.

Basic Management Fees:	Represents the expense incurred for payments made or amounts owed to NFP principals and/or certain entities they own based on the financial performance of the firms they manage. Basic management fees largely consist of: firm earnings in excess of base earnings up to target earnings, plus a portion of the earnings in excess of target earnings in accordance with the ratio of base earnings to target earnings.

Basic Management Fees Percentage:	Basic Management Fees as a percentage of gross margin before management fees.

Cash Earnings:	Net income excluding amortization of intangibles, depreciation, the after-tax impact of the impairment of goodwill and intangible assets, the after-tax impact of non-cash interest expense and the after-tax impact of certain non-recurring items.

Cash Earnings per Share - Diluted:	Represents Cash Earnings divided by weighted average diluted shares outstanding.

Common Shares Issued for Acquisitions:	Represents the portion of consideration paid in the form of shares of NFP common stock for acquisitions closed during the period presented.

Common Shares Issued for Contingent Consideration and Escrow:	Represents the portion held in escrow or contingent consideration paid in the form of shares of NFP common stock during the period presented.

Common Shares Issued for Stock-Based Awards:	Represents the number of shares of NFP common stock issued under NFP's various Stock Incentive Plans during the period presented.

Common Shares Issued under Ongoing Incentive Program:	Represents the number of shares of NFP common stock issued under NFP's ongoing incentive program.

Common Shares Repurchased:	Represents shares of NFP common stock repurchased during the period, whether in an open market transaction or privately from a firm principal or other stockholder.

Corporate Income:	The allocation of corporate revenue and expenses to businesses where management fees are earned on a standalone basis. Since the Advisor Services Group is primarily comprised of NFPSI, an entity for which no management fees are paid, and earnings are not being shared with principals, all revenue and expenses from the Advisor Services Group are considered a component of Corporate Income.

Debt to Total Capitalization:	Calculated as debt outstanding at the end of the period divided by the sum of debt outstanding and total stockholders' equity at the end of the same period.

Incentive and Other Management Fees:	Largely represents the portion of management fees expense due to accruals for certain performance-based incentive amounts payable under NFP’s ongoing incentive plan, BIP plan (business incentive plan) and other management fee amounts due to principals.

DEFINED TERMS

Income (Loss) Before Management Fees:	The Company defines income before management fees as income from operations excluding management fees, amortization, depreciation, impairment of intangible assets and the (gain) loss on sale of businesses. Income before management fees is a metric management utilizes in its evaluation of the profitability of an NFP-owned business before principals receive participation in the earnings.

Intangible Assets - Book of Business:	A portion of the purchase price of acquisitions made by NFP is allocated to book of business. The amount allocated to this component is largely determined by the amount of recurring revenue of the acquired firm. The book of business is amortized on a straight-line basis over a ten-year period.

Intangible Assets - Goodwill:	The residual amount of the purchase price not allocated to book of business, management contracts and trade name is allocated to goodwill. In accordance with GAAP, goodwill and intangible assets deemed to have indefinite lives are not amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Goodwill amortization after January 1, 2002 is entirely related to impairment losses or firms that NFP disposed.

Intangible Assets - Institutional Customer Relationships:	A portion of the purchase price of an acquisition made by NFP is allocated to institutional customer relationships. The value of the asset is derived from recurring revenue generated from these institutional customers in place at the time of the acquisition, net of an allocation of expenses and is assumed to decrease over the life of the asset due to the attrition of the institutional relationships acquired. Institutional customer relationships are amortized on a straight-line basis over an eighteen-year period.

Intangible Assets - Management Contracts:	A portion of the purchase price of acquisitions made by NFP is allocated to management contracts. The amount allocated to this component is largely determined by the amount of non-recurring revenue of the acquired firm as well as an assumption for the lost production of the principal(s) of the firm at retirement. The management contract is amortized on a straight-line basis over a twenty-five year period.

Intangible Assets - Trade Name:	NFP generally allocates approximately 1% of the purchase price of an acquisition to trade name, which is determined to have an indefinite life and, therefore, is not amortized.

Management Fees Percentage (Basic, Total, Total (excluding accelerated vesting of RSUs)):	Applicable management Fees as a percentage of adjusted income before management fees.

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.

Principal Incentive Plan (PIP) Management Fees:	Represents the expense incurred due to accruals for certain performance-based incentive amounts payable under NFP’s Principal Incentive Plan (PIP).

Stock-based Compensation Management Fees:	Represents the portion of management fee expense for stock awards issued to NFP’s principals.

Sub-Acquisitions:	A transaction in which an existing NFP-owned business acquires a new entity or book of business.

Target Earnings of Acquired Firms:	Represents the target business’s annual earnings, before interest, taxes, depreciation and amortization, and adjusted for expenses that will not continue post-acquisition, such as compensation to former owners who become principals (“Target EBITDA”). The target business’s Target EBITDA is considered “target earnings,” typically two times “base earnings.”

Total Management Fees:	Represents the payments made to NFP principals and/or certain entities they own based on the financial performance of the firms they manage. Management Fees include: Basic Management Fees, Principal Incentive Plan (PIP) Management Fees, Stock-based Compensation Management Fees, Accelerated vesting of certain RSUs and Incentive and Other Management Fees.

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