XML 21 R9.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Business Combinations | 9 Months Ended
--- | ---
Sep. 30, 2017
Business Combinations [Abstract] |
Business Combinations | Business Combinations During the nine months ended September 30, 2017, Brown & Brown acquired the assets and assumed certain liabilities of six insurance intermediaries. Additionally, miscellaneous adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last twelve months as permitted by Accounting Standards Codification Topic 805 — Business Combinations (“ASC 805”). Such adjustments are presented in the “Other” category within the following two tables. The recorded purchase price for all acquisitions included an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations will be recorded in the Condensed Consolidated Statement of Income when incurred. The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, the acquired business’s future performance is estimated using financial projections developed by management for the acquired business and reflects market participant assumptions regarding revenue growth and/or profitability. The expected future payments are estimated on the basis of the earn-out formula and performance targets specified in each purchase agreement compared to the associated financial projections. These payments are then discounted to present value using a risk-adjusted rate that takes into consideration the likelihood that the forecasted earn-out payments will be made. Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. For the nine months ended September 30, 2017, several adjustments were made within the permitted measurement period that resulted in an increase in the aggregate purchase price of the affected acquisitions of $1.5 million relating to the assumption of certain liabilities. These measurement period adjustments have been reflected as current period adjustments in the nine months ended September 30, 2017 in accordance with the guidance in ASU 2015-16 “Business Combinations”. The measurement period adjustments primarily impacted goodwill, with no effect on earnings or cash in the current period. Cash paid for acquisitions was $26.5 million and $115.3 million in the nine-month periods ended September 30, 2017 and 2016, respectively. We completed six acquisitions (excluding book of business purchases) in the nine-month period ended September 30, 2017. We completed six acquisitions (excluding book of business purchases) in the nine-month period ended September 30, 2016. The following table summarizes the purchase price allocations made as of the date of each acquisition for current year acquisitions and adjustments made during the measurement period for prior year acquisitions. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. These adjustments are made in the period in which the amounts are determined and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |
Name | Business Segment |  | Effective Date of Acquisition |  | Cash Paid |  | Other Payable |  | Recorded Earn-Out Payable |  | Net Assets Acquired |  | Maximum Potential Earn- Out Payable
Other | Various |  | Various |  | 26,478 |  |  | 11,395 |  |  | 1,332 |  |  | 39,205 |  |  | 11,605 |
Total |  |  |  |  | $ | 26,478 |  |  | $ | 11,395 |  |  | $ | 1,332 |  |  | $ | 39,205 |  |  | $ | 11,605 |
The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.
(in thousands) |  | Other |  | Total
Other current assets |  | 98 |  |  | 98 |
Fixed assets |  | 47 |  |  | 47 |
Goodwill |  | 27,580 |  |  | 27,580 |
Purchased customer accounts |  | 12,858 |  |  | 12,858 |
Non-compete agreements |  | 595 |  |  | 595 |
Total assets acquired |  | 41,178 |  |  | 41,178 |
Other current liabilities |  | (1,284 | ) |  | (1,284 | )
Deferred income tax, net |  | (689 | ) |  | (689 | )
Total liabilities assumed |  | (1,973 | ) |  | (1,973 | )
Net assets acquired |  | $ | 39,205 |  |  | $ | 39,205 |
The weighted average useful lives for the acquired amortizable intangible assets are as follows: purchased customer accounts, 15 years; and non-compete agreements, 5 years. Goodwill of $27.6 million, which is net of any opening balance sheet adjustments within the allowable measurement period, was allocated to the Retail, National Programs, Wholesale Brokerage and Service Segments in the amounts of $18.8 million, $7.3 million, $0.8 million and $0.7 million, respectively. Of the total goodwill of $27.6 million, the amount currently deductible for income tax purposes is $26.3 million and the remaining $1.3 million relates to the recorded earn-out payables and will not be deductible until it is earned and paid. For the acquisitions completed during 2017, the results of operations since the acquisition dates have been combined with those of the Company. The total revenues from the acquisitions completed through September 30, 2017, included in the Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, were $3.2 million and $3.6 million, respectively. The income before income taxes, including the intercompany cost of capital charge, from the acquisitions completed through September 30, 2017, included in the Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, were $0.9 million and $1.0 million, respectively. If the acquisitions had occurred as of the beginning of the respective periods, the Company’s results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.
(UNAUDITED) | For the three months ended September 30, |  | For the nine months ended September 30,
(in thousands, except per share data) | 2017 |  | 2016 |  | 2017 |  | 2016
Total revenues | $ | 476,124 |  |  | $ | 465,014 |  |  | $ | 1,413,278 |  |  | $ | 1,341,511 |
Income before income taxes | $ | 124,582 |  |  | $ | 117,929 |  |  | $ | 345,608 |  |  | $ | 331,574 |
Net income | $ | 76,012 |  |  | $ | 72,130 |  |  | $ | 213,496 |  |  | $ | 201,675 |
Net income per share: |  |  |  |  |  |  |
Basic | $ | 0.54 |  |  | $ | 0.51 |  |  | $ | 1.52 |  |  | $ | 1.44 |
Diluted | $ | 0.53 |  |  | $ | 0.51 |  |  | $ | 1.50 |  |  | $ | 1.43 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |
Basic | 136,346 |  |  | 136,461 |  |  | 136,592 |  |  | 136,002 |
Diluted | 138,893 |  |  | 138,182 |  |  | 139,011 |  |  | 137,584 |
As of September 30, 2017 and 2016, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820-Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the three and nine months ended September 30, 2017 and 2016, were as follows:
| For the three months ended September 30, |  | For the nine months ended September 30,
(in thousands) | 2017 |  | 2016 |  | 2017 |  | 2016
Balance as of the beginning of the period | $ | 57,943 |  |  | $ | 73,447 |  |  | $ | 63,821 |  |  | $ | 78,387 |
Additions to estimated acquisition earn-out payables | 1,050 |  |  | 1,437 |  |  | 1,332 |  |  | 3,828 |
Payments for estimated acquisition earn-out payables | (23,511 | ) |  | (16,988 | ) |  | (39,288 | ) |  | (27,555 | )
Subtotal | 35,482 |  |  | 57,896 |  |  | 25,865 |  |  | 54,660 |
Net change in earnings from estimated acquisition earn-out payables: |  |  |  |  |  |  |
Change in fair value on estimated acquisition earn-out payables | (1,784 | ) |  | 2,883 |  |  | 6,402 |  |  | 4,704 |
Interest expense accretion | 476 |  |  | 727 |  |  | 1,907 |  |  | 2,142 |
Net change in earnings from estimated acquisition earn-out payables | (1,308 | ) |  | 3,610 |  |  | 8,309 |  |  | 6,846 |
Balance as of September 30, | $ | 34,174 |  |  | $ | 61,506 |  |  | $ | 34,174 |  |  | $ | 61,506 |
Of the $34.2 million estimated acquisition earn-out payables as of September 30, 2017, $28.7 million was recorded as accounts payable and $5.5 million was recorded as other non-current liabilities. As of September 30, 2017, the maximum future acquisition contingency payments related to all acquisitions was $81.5 million, inclusive of the $34.2 million estimated acquisition earn-out payables as of September 30, 2017. Included within the additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items within the allowable measurement period, which may therefore differ from previously reported amounts.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration