We believe that the production and sale of refined coal at these plants are qualified to receive refined coal tax credits under IRC Section 45. The plants which were placed in service prior to December 31, 2009 (which we refer to as the 2009 Era Plants) received tax credits through 2019 and the 20 plants which were placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants) can receive tax credits through 2021. All twenty of the 2011 Era Plants are under long-term production contracts with several utilities.
• Acquisition related adjustments, which include changes in estimated acquisition earnout payables adjustments, impacts of acquisition valuation true-ups,
- Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, and the period-over-period impact of foreign currency translation, as applicable (and for the Corporate segment, the clean energy related adjustments described on pages 47 to 48) and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
- This report includes tabular reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted compensation expense and adjusted operating expense, EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, adjusted EBITDAC (before acquisitions), diluted net earnings per share (as adjusted) and organic revenue measures.
Reported supplemental and contingent revenues recognized in 2019, 2018 and 2017 by quarter are as follows (in millions):
The risk management segment accounted for 14% of our revenue in 2019. Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, not for profit, captive and public entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third-party claims management organization rather than the claim services provided by underwriting enterprises. Revenues for the risk management segment are comprised of fees generally negotiated (i) on a per-claim
Consists of the tax benefit related to the release of valuation allowances that resulted from moving a legal entity within our subsidiary structure.
The note purchase agreements, the Credit Agreement and the Premium Financing Debt Facility contain various financial covenants that require us to maintain specified financial ratios. We were in compliance with these covenants as of December 31, 2019.
- On November 15, 2019, we filed a shelf registration statement on Form S-3
to three-year period subsequent to the acquisition date. The aggregate amount of the maximum earnout obligations related to these acquisitions was $982.9 million, of which $565.0 million was recorded in our consolidated balance sheet as of December 31, 2019, based on the estimated fair value of the expected future payments to be made.
Investment income and other revenues are generated from our premium financing operations, our invested cash and restricted cash we hold on behalf of our clients, as well as clean energy investments. In addition, our share of the net earnings related to partially owned entities that are accounted for using the equity method is included in investment income.
We review all of our intangible assets for impairment periodically (at least annually for goodwill) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. We perform such impairment reviews at the division (i.e., reporting unit) level with respect to goodwill and at the business unit level for amortizable intangible assets. In reviewing intangible assets, if the fair value were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. Based on the results of impairment reviews in 2019, 2018 and 2017, we wrote off $0.1 million, $10.6 million and $6.2 million, respectively, of amortizable intangible assets primarily related to prior year acquisitions of our brokerage segment, which is included in amortization expense in the accompanying consolidated statement of earnings. The determinations of impairment indicators and fair value are based on estimates and assumptions related to the amount and timing of future cash flows and future interest rates. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein.
sheet credit exposures, using an expected credit loss model. This model incorporates past experience, current conditions and reasonable and supportable forecasts affecting collectability of these instruments. An entity will apply the new guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The guidance is effective January 1, 2020, with early adoption permitted. We do not expect adoption of this standard will have a material impact on our consolidated financial statements as we adopt the new standard in first quarter 2020.
on January 1, 2019. In accordance with the transition provisions of ASU 2017-12,
During 2019, we acquired substantially all of the net assets of the following firms in exchange for our common stock and/or cash. These acquisitions have been accounted for using the acquisition method for recording business combinations (in millions, except share data):
The unaudited pro forma results above have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had these acquisitions occurred at January 1, 2018, nor are they necessarily indicative of future operating results. Annualized revenues of entities acquired in 2019 totaled approximately $468.2 million. Total revenues and net earnings recorded in our consolidated statement of earnings for 2019 related to the 2019 acquisitions in the aggregate, were $274.2 million and $24.8 million, respectively.
On August 15, 2019, we entered into an amendment to our Syndicated Facility Agreement, revolving loan facility (
At December 31, 2019, AU$205.0 million and zero NZ$ of borrowings were outstanding under Facility B, AU$27.1 million of borrowings outstanding under Facility C and NZ$14.7 million of borrowings were outstanding under Facility D. Accordingly, as of December 31, 2019, zero AU$ and NZ$25.0 million remained available for potential borrowing under Facility B, and AU$12.9 million and NZ$0.3 million under Facilities C and D, respectively.
See Note 17 to these 2019 consolidated financial statements for additional discussion on our contractual obligations and commitments as of December 31, 2019.
On May 16, 2017, our stockholders approved the Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved Arthur J. Gallagher & Co. 2014 Long-Term Incentive Plan (which we refer to as the 2014 LTIP). The LTIP term began May 16, 2017 and terminates on the date of the annual meeting of stockholders in 2027, unless terminated earlier by our board of directors. All of our officers, employees and non-employee
We were not required under the IRC to make any minimum contributions to the plan for each of the 2019, 2018 and 2017 plan years. This level of required funding is based on the plan being frozen and the aggregate amount of our historical funding. During 2018 we made a $30.0 million discretionary contribution to the plan. During 2019 and 2017 we did not make discretionary contributions to the plan.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in millions):
million have an indefinite life and will be utilized or refunded in 2020, according to a specific formula, general business tax credits of $937.2
The foreign currency translation in 2019, 2018 and 2017 primarily relates to the net impact of changes in the value of the local currencies relative to the U.S. dollar for our operations in Australia, Canada, the Caribbean, India, New Zealand and the U.K.
Our audit procedures over brokerage and risk management revenue included, among other things, an evaluation of Gallagher’s identification of performance obligations against contractual terms, and the significant assumptions used by management in estimating deferred revenue and recognition patterns, including time studies and actuarial projections. Our procedures also included testing the accuracy and completeness of the underlying data used by management in determining such assumptions by comparing a sample of transactions to source documentation and recalculating the application of deferral rates for a sample of product lines and divisions. With the assistance of actuarial specialists, we compared Gallagher’s selection of actuarial methods for risk management revenue to prior periods and those used in the industry.
We have audited Arthur J. Gallagher & Co.’s (Gallagher) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Gallagher maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.