The Company is a leading independent distributor of financial services products primarily to high net worth individuals and growing entrepreneurial companies. Founded in 1998, and commencing operations on January 1, 1999, the Company has grown internally and through acquisitions and, as of December 31, 2006, operates a national distribution network with over 175 owned firms. The Company acquired 23, 26 and 19 firms in 2006, 2005, and 2004, respectively. The Company’s operating results have improved from net income of $11.6 million in 2002 to net income of $57.6 million in 2006. As a result of new acquisitions and the growth of previously acquired firms, total revenue has grown from $348.2 million in 2002 to nearly $1.1 billion of revenue in 2006, a compound annual growth rate of over 33.3%.
The Company retains a cumulative preferred position in the base earnings. To the extent earnings of a firm in any year are less than base earnings, in the following year NFP is entitled to receive base earnings together with the prior years’ shortfall before any management fees are paid.
The following table summarizes the results of operations of NFP’s firms for the periods presented and shows management fees as a percentage of gross margin before management fees:
The Company paid a quarterly cash dividend of $0.15 per share of common stock on January 6, April 7, July 7 and October 6, 2006 and of $0.12 per share of the Company’s common stock on January 7, 2005, April 7, 2005, July 7, 2005 and October 7, 2005. On November 15, 2006, the Company declared a quarterly cash dividend of $0.18 per share of the Company’s common stock that was paid on January 8, 2007 to stockholders of record on December 15, 2006. On February 14, 2007, the Company’s Board of Directors declared a quarterly cash dividend of $0.18 per share of common stock payable on April 9, 2007 to stockholders of record at the close of business on March 16, 2007. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the Company’s Board of Directors and will depend upon many factors, including the Company’s financial condition, earnings, legal requirements, and other factors as the Company’s Board of Directors deems relevant. Based on the most recent quarterly dividend declared of $0.18 per share of common stock and the number of shares held by stockholders of record on December 15, 2006, the total annual cash requirement for dividend payments would be approximately $27.9 million.
In connection with certain acquisitions, the Company also has agreed to make certain contingent payments to employees of its acquired firms, contingent upon the satisfaction of established performance milestones. These payments are expensed as employee compensation.
The Company’s firms earn additional compensation in the form of incentive and marketing support revenue payments, from manufacturers of financial services products, based on the volume, persistency and profitability of business generated by the Company’s firms from these three sources. Incentive and marketing support revenue is recognized at the earlier notification of a payment or when payment is received.