• Acquire each year, in revenues, at least 10% of our prior year’s consolidated total revenues.
We record fees for consulting and administrative services over the period in which services are rendered.
Prior to the fourth quarter of 2003, we carried a valuation allowance for our net DTA based on our history of net losses and the resulting uncertainty as to whether we would generate enough taxable income in the future to
Income From Continuing Operations Before Income Taxes in the Insurance Brokerage segment was $60.2 million, $41.9 million and $7.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. The increase in 2003 was due to the reasons noted above along with the reduction in interest expense due to lower debt balances in 2003. The increase in 2002, compared to 2001, was due to (i) the reasons noted above, and (ii) a decrease in amortization of intangible assets, principally due to our adoption of SFAS No. 142. Please read Note 1, “Nature of Operations and Summary of Significant Accounting Policies” in our consolidated financial statements under “Goodwill and Other Intangible Assets.”
After the consummation of our initial public offering, we exchanged all our outstanding SARs for stock options or stock under our 2002 Equity Incentive Plan. On November 27, 2002, all SAR holders agreed to exchange their SARs for stock options and the number of options that each individual employee was entitled to receive and the option exercise price, was known. The historical accounting treatment of SARs was finalized and all SARs tendered in the exchange were cancelled. In accordance with GAAP, the SAR program existing prior to our initial public offering was accounted for as a fixed plan, and compensation expense was measured by the difference between the quoted market price and the price, if any, to be paid by the employee. The corresponding accrual for SAR-related compensation expense was reversed and offset compensation expense that was recognized upon the conversion to a stock option. Our stock price did not increase significantly prior to the consummation of the exchange of SARs for options, therefore the financial statement impact of the transaction in which the SARs were ultimately exchanged for stock options was a $1.3 million expense which was recorded in the fourth quarter of 2002. Upon the consummation of the exchange of all SARs for options or stock, no further expense was recognized under our 2002 Equity Incentive Plan in connection with the exchange.
The Company’s revenues are derived from commissions, fees and investment income.
All acquisitions require approval of our board of directors and, if greater than $1.5 million in aggregate purchase price, also require bank approval.
The Company adopted the Employee Stock Purchase Plan (ESPP) effective on the consummation of the IPO. The ESPP is intended to promote broad-based employee stock ownership within the Company. The ESPP provides for the purchase of up to 1,600,000 shares of the Company’s common stock by its employees. The Company may deliver repurchased and/or newly issued shares under this plan. Eligible employees are entitled to purchase the Company’s common stock at a 15% discount, contributing a maximum of 20% of their gross compensation. Shares issued under the plan were 97,807 and 25,000 in 2003 and 2002, respectively. All shares purchased under this plan must be retained for a period of one year.
Fireman’s Fund Litigation. During 1998 and 1999, USIA was insured under an errors and omissions policy issued by Fireman’s Fund. USIA asserted a claim for indemnification under the policy in the amount of $10,000,000 (the policy limit) plus the cost of defense for the Nassau County, New York litigation (see Note 15-Contingencies). In November 2001, USIA settled this litigation with Fireman’s Fund with the exchange of mutual releases of liability and a payment by Fireman’s Fund to USIA in the amount of $2,067,000. As a result of the settlement, the Company reduced its receivable for the claim by $7,933,000. This write-down is reflected in the results from discontinued operations included in the accompanying statement of operations for the year ended December 31, 2001.
Pro-forma net loss per share (basic and diluted) for the years ended December 31, 2002 and 2001, assuming the conversion of all preferred stock into common stock had taken place at the beginning of each year, would have been $(0.09) and $(3.42), respectively.