Fortegra Financial Corporation (the "Company") (NYSE: FRF) an
insurance services company providing distribution and
administration services and insurance-related products, today
reported results for the second quarter and six months ended June
30, 2011:
- Net revenues increased 12.6% to $27.3
million for the second quarter of 2011
- Diluted earnings per share (EPS) on a
GAAP basis were $0.07 for the second quarter of 2011 and $0.12 on a
non-GAAP basis
- Adjusted EBITDA for the second quarter
of 2011 was $7.8 million
“We were pleased with our revenue growth in the quarter, as we
posted double-digit growth in revenue led by our eReinsure and auto
club acquisitions,” said Richard S. Kahlbaugh, Chairman and Chief
Executive Officer of Fortegra. “At the same time, our expenses this
quarter were higher than our initial expectations, and included
significant operating costs during the quarter that we plan to
reduce or eliminate in the second half of the year, as well as
other non-recurring costs. Expense management is a top priority at
the Company and we are taking steps to improve our cost structure,
which we expect to yield results in the coming quarters.”
Second Quarter Results
Gross revenues increased 9.0% to $53.9 million for the second
quarter of 2011 compared to $49.4 million for the second quarter of
2010. Net revenues (revenues net of losses, loss adjustment, and
commission expenses) increased 12.6% to $27.3 million for the
second quarter of 2011, compared to $24.2 million for the
prior-year period. Net income for the second quarter 2011 was $1.6
million, or $0.07 per diluted share, compared to $3.8 million, or
$0.22 per diluted share, for the quarter ended June 30, 2010. Net
income for the second quarter of 2011 included $0.6 million in
acquisition-related costs, as well as $0.4 million in other
one-time charges. Net income for the second quarter of 2010
included $0.3 million in one-time re-audit professional fees and
$0.1 million of costs related to acquisitions. Excluding these
items, net income for the second quarter of 2011 was $2.6 million,
or $0.12 per diluted share, compared to $4.1 million, or $0.24 per
diluted share, for the prior-year period.
Adjusted EBITDA for the second quarter of 2011 declined 18.2% to
$7.8 million compared to $9.5 million for the second quarter of
2010.
Net earned premium revenues increased 3.3% to $27.5 million from
$26.7 million in the prior-year period, primarily due to growth in
direct and assumed earned premium from new customers distributing
Fortegra's credit insurance and warranty products, partially offset
by an increase in ceded earned premiums.
Brokerage commission and fee revenues increased 43.8% to
$9.2 million compared to $6.4 million for the second quarter
of 2010, primarily due to higher fee revenue from the acquisition
of eReinsure, as well as growth in contingent commissions, net
commissions and fees.
Ceding commission revenue earned under coinsurance agreements
declined 2.3% to $6.2 million from $6.4 million for the
prior-year period, due to lower net investment income from assets
held in trust and lower service and administrative fees, and
partially offset by favorable underwriting performance.
Net investment income was $0.9 million for the second quarter of
2011, a slight decline from $1.0 million in the prior-year period
due to lower income earned on cash and fixed income securities.
Service and administrative fee revenues were $8.8 million for
the second quarter of 2011, comparable with the prior-year period,
as increased revenues from the Payment Protection segment as a
result of the first quarter 2011 acquisition of Auto Knight were
offset primarily by lower revenues from lower debt collection as
well as a reduction in revenues at the Business Process Outsourcing
(BPO) segment.
Six Month Results
For the six months ended June 30, 2011, gross revenues increased
8.3% to $108.5 million compared to $100.2 million for the
prior-year period. Net revenues (revenues net of losses, loss
adjustment, and commission expenses) increased 15.2% to $54.1
million for the six months ended June 30, 2011 compared to $46.9
million for the prior-year period. Net income was $5.2 million, or
$0.24 per diluted share, for the six months ended June 30, 2011
compared to $7.2 million, or $0.43 per diluted share, for the six
months ended June 30, 2010. Net income for the six months ended
June 30, 2011 included a $0.6 million loss on the early retirement
of debt, $0.8 million of transaction costs related to acquisitions
and $0.3 million in other one-time charges. Net income for the six
months ended June 30, 2010 included $0.3 million in one-time
re-audit professional fees and $0.4 million of costs related to
acquisitions. Excluding these items, net income for the six months
ended June 30, 2011 was $6.9 million, or $0.32 per diluted share,
compared to $7.9 million, or $0.47 per diluted share, for the six
months ended June 30, 2010.
Adjusted EBITDA for the six months ended June 30, 2011 declined
8.1% to $16.8 million, compared to $18.3 million for the prior-year
period.
Net earned premium revenues for the six months ended June 30,
2011 increased 1.5% to $56.0 million from $55.2 million for the
prior-year period, primarily due to growth in direct and assumed
earned premium from new customers distributing Fortegra's credit
insurance and warranty products and partially offset by a
corresponding increase in ceded earned premiums.
Brokerage commission and fee revenues for the six months ended
June 30, 2011 increased 30.0% to $17.1 million, compared to
$13.1 million for the prior-year period, due to higher fee revenue
related to the acquisition of eReinsure, which was completed on
March 3, 2011, as well as growth in contingent commissions, net
commissions and fees.
Ceding commission revenue earned under coinsurance agreements
for the six months ended June 30, 2011 increased 10.7% to
$14.4 million from $13.0 million for the prior-year period,
driven principally by increased service and administrative fees and
favorable underwriting performance.
Net investment income was $1.8 million for the six months ended
June 30, 2011, a slight decline from $1.9 million in the prior-year
period.
Service and administrative fee revenues for the six months ended
June 30, 2011 increased 6.5% to $17.9 million from $16.8 million
for the prior-year period, primarily due to increased revenues from
the Payment Protection segment as a result of the first quarter
2011 acquisition of Auto Knight and partially offset by lower
revenues from lower debt collection as well as a reduction in
revenues at the BPO segment.
Segment Results
Payment Protection
Revenues for the Payment Protection segment increased 12.6% to
$13.8 million in the second quarter of 2011 compared to $12.2
million for the equivalent prior-year period. The increase was
driven by the three car club acquisitions completed over the past
year, which contributed $1.3 million in additional revenues, as
well as realized gains on the sale of investments, partially offset
by a decrease in net underwriting revenue. EBITDA for the Payment
Protection segment decreased 13.8% to $5.2 million for the second
quarter of 2011 compared to $6.0 million for the prior-year period.
Excluding transaction costs and other one-time expenses, adjusted
EBITDA for the Payment Protection segment increased 1.6% to $6.2
million for the second quarter of 2011 compared to $6.1 million for
the prior-year period.
For the six months ended June 30, 2011, revenues for the Payment
Protection segment increased 27.1% to $28.1 million compared to
$22.1 million for the prior-year period. The increase was driven by
the three car club acquisitions completed over the past year, which
contributed $3.8 million in additional revenues, as well as
increased ceding commission revenue and realized gains on the sale
of investments. For the six months ended June 30, 2011, EBITDA for
the Payment Protection segment increased 1.9% to $11.0 million
compared to $10.8 million for the prior-year period. Excluding
transaction costs and other one-time expenses, adjusted EBITDA for
the Payment Protection segment increased 9.2% to $12.1 million for
the six months ended June 30, 2011 compared to $11.2 million for
the prior-year period.
BPO
Revenues for the BPO segment decreased 14.7% to $3.7 million for
the second quarter of 2011 compared to $4.3 million for the second
quarter of 2010, primarily due to regulatory changes that
temporarily slowed production at one of the Company's customers.
EBITDA for the BPO segment decreased 49.0% to $0.9 million for the
second quarter of 2011 compared to $1.7 million for the prior-year
period. EBITDA for the BPO segment in the second quarter of 2011
included $0.1 million in transaction costs and other one-time
expenses.
For the six months ended June 30, 2011, revenues for the BPO
segment decreased 18.4% to $7.3 million compared to $8.9 million
for the prior-year period, primarily due to regulatory changes that
temporarily slowed production at one of the Company's customers.
For the six months ended June 30, 2011, EBITDA for the BPO segment
decreased 48.1% to $1.8 million compared to $3.5 million for the
prior-year period, primarily related to the decrease in revenue.
EBITDA for the BPO segment for the six months ended June 30, 2011
included $0.1 million in transaction costs and other one-time
expenses.
Brokerage
Revenues for the Brokerage segment increased 28.1% to $9.8
million for the second quarter of 2011 compared to $7.7 million in
the second quarter of 2010, primarily due to $2.5 million in fees
from the acquisition of eReinsure. EBITDA for the Brokerage segment
increased 21.8% to $2.3 million for the second quarter of 2011
compared to $1.9 million for the prior-year period. EBITDA for the
Brokerage segment in the second quarter of 2011 included $0.1
million in transaction costs and other one-time expenses.
For the six months ended June 30, 2011, revenues for the
Brokerage segment increased 17.5% to $18.7 million compared to
$15.9 million for the prior-year period, primarily due to $3.3
million in fees from the acquisition of eReinsure. For the six
months ended June 30, 2011, EBITDA for the Brokerage segment
increased 8.6% to $4.4 million compared to $4.0 million for the
prior-year period. EBITDA for the Brokerage segment for the six
months ended June 30, 2011 included $0.1 million in transaction
costs and other one-time expenses.
Subsequent Event
The Company has entered into a non-binding Letter of Intent to
acquire a managing general agent that sells health, accident,
critical illness and life insurance policies in a direct response
marketing environment.
Balance Sheet
Total invested assets and cash amounted to $122.1 million as of
June 30, 2011 compared to $119.6 million as of March 31, 2011. Cash
and cash equivalents decreased slightly by $0.4 million to $18.0
million from $18.4 million as of March 31, 2011. Unearned premiums
were $203.5 million as of June 30, 2011 compared to $200.6 million
as of March 31, 2011. Total debt outstanding as of June 30, 2011
increased to $69.2 million compared to $61.5 million as of March
31, 2011. Stockholder's equity increased slightly to $127.5 million
as of June 30, 2011 compared to $126.9 million as of March 31,
2011.
Outlook
Based on the Company's performance for the first six months of
2011 and management's operating assumptions for the remainder of
the year, Fortegra is adjusting its previously provided outlook for
the fiscal year ending December 31, 2011 as follows:
- Net revenues in the range of $110 to
$115 million
- Diluted earnings per share in the range
of $0.71 to $0.80 based on a weighted fully diluted share count of
21.6 million shares
- Adjusted EBITDA in the range of $41 to
$44 million
Conference Call Information
Fortegra's executive management will host a conference call to
discuss its second quarter 2011 results later today at
5:00 p.m. Eastern Time. Analysts, media and individual
investors are invited to participate in the conference call by
calling (877) 407-9039, or for international callers, (201)
689-8470. A simultaneous Webcast of the conference call audio will
be available online at http://investors.fortegra.com. Participants
are encouraged to call or sign in at least 15 minutes prior to the
scheduled conference call time to ensure participation and, if
required, to download and install the necessary software. A replay
of the call will be available shortly after the call until August
18, 2011, by dialing (877) 870-5176, or for international callers,
(858) 384-5517. The passcode for the replay is 375727. A replay of
the call will also be available online at
http://investors.fortegra.com.
About Fortegra
Fortegra Financial Corporation is an insurance services company
that provides distribution and administration services and
insurance-related products to insurance companies, insurance
brokers and agents and other financial services companies in the
United States. It sells services and products directly to
businesses rather than directly to consumers. Fortegra's brands
include Life of the South®, Consecta, Bliss & Glennon and
eReinsure.
Use of Non-GAAP Financial Information
Fortegra presents certain additional financial measures related
to its Business Segments that are "Non-GAAP measures" within the
meaning of Regulation G under the Securities Act of 1934. Fortegra
presents these Non-GAAP measures to provide investors with
additional information to analyze Fortegra's performance from
period to period. Management also uses these measures to
assess performance for Fortegra's segments and to allocate
resources in managing Fortegra's businesses. However, investors
should not consider these Non-GAAP measures as a substitute for the
financial information that Fortegra reports in accordance with
GAAP. These Non-GAAP measures reflect subjective determinations by
management, and may differ from similarly titled Non-GAAP measures
presented by other companies.
Forward-Looking Statements
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Act of 1995. Such
statements are subject to risks and uncertainties. All statements
other than statements of historical fact included in this press
release are forward-looking statements. Forward-looking statements
give our current expectations and projections relating to our
financial condition, results of operations, plans, objectives,
future performance and business. You can identify forward-looking
statements by the fact that they do not relate strictly to
historical or current facts. These statements may include words
such as "anticipate," "estimate," "expect," "project,'' "plan,"
"intend," "believe," "may," "should," "can have," "likely" and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events.
The forward-looking statements contained in this press release
are based on assumptions that we have made in light of our industry
experience and our perceptions of historical trends, current
conditions, expected future developments and other factors we
believe are appropriate under the circumstances. As you read this
press release, you should understand that these statements are not
guarantees of performance or results. They involve risks,
uncertainties (some of which are beyond our control) and
assumptions. Although we believe that these forward-looking
statements are based on reasonable assumptions, you should be aware
that many factors could affect our actual financial results and
cause them to differ materially from those anticipated in the
forward-looking statements. We believe these factors include, but
are not limited to, those described under Item 1A. - "Risk Factors"
in Fortegra's Annual Report on Form 10-K. Should one or more of
these risks or uncertainties materialize, or should any of these
assumptions prove incorrect, our actual results may vary in
material respects from those projected in these forward-looking
statements.
Any forward-looking statement made by us in this press release
speaks only as of the date on which we make it. Factors or events
that could cause our actual results to differ may emerge from time
to time, and it is not possible for us to predict all of them. We
undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as may be required by law.
Further information concerning Fortegra and its business,
including factors that potentially could materially affect
Fortegra's financial results, is contained in Fortegra's filings
with the SEC, which are available free of charges at the SEC's
website at http://www.sec.gov and or
from Fortegra's website in the "Investor Relations" section under
"SEC Filings" at http://www.fortegra.com.
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(All Amounts in Thousands Except Share
and Per Share Amounts)
For the Three Months Ended For the Six
Months Ended June 30, 2011 June 30, 2010
June 30, 2011 June 30, 2010 Revenues:
Service and administrative fees $ 8,800 $ 8,843 $ 17,916 $ 16,817
Brokerage commissions and fees 9,208 6,404 17,075 13,134 Ceding
commission 6,243 6,389 14,401 13,013 Net investment income 894 986
1,835 1,935 Net realized gains 1,132 47 1,227 49 Net earned premium
27,536 26,669 55,973 55,162 Other income 38 45 120
126 Total Revenues 53,851 49,383
108,547 100,236 Net losses and loss adjustment
expenses 9,251 7,316 18,624 16,093 Commissions 17,323 17,850
35,840 37,199 Net Revenues 27,277
24,217 54,083 46,944
Expenses:
Personnel costs 11,428 9,332 22,420 18,413 Other operating expenses
9,216 5,891 16,160 11,027 Depreciation 814 284 1,397 558
Amortization of intangibles 1,378 779 2,430 1,559 Interest expense
1,925 1,985 3,956 3,876 Total Expenses
24,761 18,271 46,363 35,433
Income before income taxes and non-controlling interest 2,516 5,946
7,720 11,511 Income Taxes 936 2,220 2,711
4,296 Income before non-controlling interest 1,580 3,726
5,009 7,215
Less: net income (loss) attributable to
non-controlling interest
2 (46 ) (172 ) (31 )
Net income $ 1,578
$ 3,772 $ 5,181
$ 7,246
Earnings per
share:
Basic $ 0.08 $ 0.24 $ 0.25 $ 0.46 Diluted $ 0.07 $ 0.22 $ 0.24 $
0.43
Weighted average
common shares outstanding:
Basic 20,510,254 15,742,336 20,487,549 15,742,336 Diluted
21,592,418 17,040,432 21,625,817 17,040,432
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(All Amounts in Thousands Except Share
Amounts)
June 30, 2011
December 31, 2010
Assets: Investments
Fixed maturity securities
available-for-sale at fair value (amortized cost of $86,660 in2011
and $82,124 in 2010)
$ 89,668 $ 85,786
Equity securities available-for-sale at
fair value (cost of $1,806 in 2011 and $1,955in 2010)
1,790 1,935 Short-term investments 1,070 1,170 Total
investments 92,528 88,891 Cash and cash equivalents 17,980 43,389
Restricted cash 11,558 15,722 Accrued investment income 998 880
Notes receivable 1,401 1,485 Other receivables 26,885 25,473
Reinsurance receivables 170,639 169,382 Deferred acquisition costs
63,487 65,142 Property and equipment, net 15,752 11,996 Goodwill
109,488 73,639 Other intangibles, net 40,090 40,405 Other assets
7,057 5,505 Total assets $ 557,863 $ 541,909
Liabilities: Unpaid claims $ 30,878 $ 32,693
Unearned premiums 203,538 210,430 Accrued expenses, accounts
payable and other liabilities 40,514 41,844 Deferred revenue 26,351
25,611 Notes payable 69,200 36,713 Preferred trust securities
35,000 35,000 Redeemable preferred stock 350 11,040 Deferred income
taxes 24,541 24,691 Total liabilities 430,372
418,022
Stockholders' Equity: Preferred
stock, par value $0.01; 10,000,000 shares authorized; none issued —
—
Common stock, par value $0.01; 150,000,000
shares authorized; 20,510,254 and20,256,735 shares issued in 2011
and 2010, respectively
205 203 Treasury stock (44,578 shares in 2011 and 2010,
respectively) (176 ) (176 ) Additional paid-in capital 95,525
95,556
Accumulated other comprehensive income,
net of tax (expense) of $(491) and $(1,235),in 2011 and 2010,
respectively
913 2,293 Retained earnings 30,489 25,308
Stockholders' equity before non-controlling interest 126,956
123,184 Non-controlling interest 535 703 Total
stockholders' equity 127,491 123,887 Total
liabilities and stockholders' equity $ 557,863 $ 541,909
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME-
Segments (Unaudited)
(All Amounts in Thousands)
(Unaudited)
For the Three Months
Ended
For the Six Months Ended
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
Segment Net Revenue Payment Protection Service and administrative
fees $ 4,481 $ 3,240 $ 9,009 $ 5,123 Ceding commission 6,243 6,389
14,401 13,013 Net investment income 894 986 1,835 1,934 Net
realized gains (losses) 1,132 47 1,227 49 Other income 38 45 120
126 Net earned premium 27,536 26,669 55,973 55,162 Net losses and
loss adjustment expenses (9,251 ) (7,316 ) (18,624 ) (16,093 )
Commissions (17,323 ) (17,850 ) (35,840 ) (37,199 ) Total Payment
Protection 13,750 12,210 28,101 22,115 BPO 3,691 4,327 7,255 8,890
Brokerage Brokerage commissions and fees 9,208 6,404 17,075 13,132
Service and administrative fees 628 1,276 1,652
2,807 Total Brokerage 9,836 7,680 18,727 15,939
Corporate — — — — Total 27,277
24,217 54,083 46,944 Operating Expenses
Payment Protection 8,562 6,191 17,060 11,285 BPO 2,828 2,635 5,447
5,409 Brokerage 7,527 5,785 14,346 11,904 Corporate 1,727
612 1,727 842 Total 20,644 15,223
38,580 29,440 EBITDA Payment Protection
5,188 6,019 11,041 10,830 BPO 863 1,692 1,808 3,481 Brokerage 2,309
1,895 4,381 4,035 Corporate (1,727 ) (612 ) (1,727 ) (842 ) Total
6,633 8,994 15,503 17,504
Depreciation and Amortization Payment Protection 1,324 585 2,277
1,055 BPO 277 80 517 254 Brokerage 591 398 1,033
808 Total 2,192 1,063 3,827
2,117 Interest Payment Protection 1,043 1,704 2,569
3,365 BPO 99 92 162 198 Brokerage 783 189 1,225
313 Total 1,925 1,985 3,956
3,876 Income before income taxes and non-controlling
interest Payment Protection 2,821 3,730 6,195 6,410 BPO 487 1,520
1,129 3,029 Brokerage 935 1,308 2,123 2,914 Corporate (1,727 ) (612
) (1,727 ) (842 ) Total income before income taxes and
non-controlling interest 2,516 5,946 7,720 11,511 Income Taxes 936
2,220 2,711 4,296 Less: net income (loss) attributable to
non-controlling interest 2 (46 ) (172 ) (31 ) Net income $
1,578 $ 3,772 $ 5,181 $ 7,246
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME-
Segments (Unaudited)
(All Amounts in Thousands)
For the Three Months
Ended
For the Six Months Ended
(Unaudited)
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
Revenue Payment Protection $ 13,750 $ 12,210 $ 28,101 $ 22,115 BPO
3,691 4,327 7,255 8,890 Brokerage 9,836 7,680 18,727 15,939
Corporate — — — — Segment revenue
27,277 24,217 54,083 46,944 Net losses and loss adjustment expenses
9,251 7,316 18,624 16,093 Commissions 17,323 17,850
35,840 37,199 Total revenue 53,851 49,383
108,547 100,236 Operating Expenses
Payment Protection 8,562 6,191 17,060 11,285 BPO 2,828 2,635 5,447
5,409 Brokerage 7,527 5,785 14,346 11,904 Corporate 1,727
612 1,727 842 Total Operating Expenses 20,644
15,223 38,580 29,440 Net losses and loss adjustment expenses 9,251
7,316 18,624 16,093 Commissions 17,323 17,850 35,840
37,199 Total expenses before depreciation,
amortization and interest 47,218 40,389 93,044
82,732 EBITDA Payment Protection 5,188 6,019 11,041
10,830 BPO 863 1,692 1,808 3,481 Brokerage 2,309 1,895 4,381 4,035
Corporate (1,727 ) (612 ) (1,727 ) (842 ) Total 6,633 8,994
15,503 17,504 Depreciation and
Amortization Payment Protection 1,324 585 2,277 1,055 BPO 277 80
517 254 Brokerage 591 398 1,033 808
Total 2,192 1,063 3,827 2,117
Interest Payment Protection 1,043 1,704 2,569 3,365 BPO 99 92 162
198 Brokerage 783 189 1,225 313 Total
1,925 1,985 3,956 3,876 Income
before income taxes and non-controlling interest Payment Protection
2,821 3,730 6,195 6,410 BPO 487 1,520 1,129 3,029 Brokerage 935
1,308 2,123 2,914 Corporate (1,727 ) (612 ) (1,727 ) (842 ) Total
Income before income taxes and non-controlling interest 2,516
5,946 7,720 11,511 Income taxes 936
2,220 2,711 4,296 Less: net income (loss) attributable to
non-controlling interest 2 (46 ) (172 ) (31 ) Net income $
1,578 $ 3,772 $ 5,181 $ 7,246
We present EBITDA and Adjusted EBITDA in this Earning Release to
provide investors with a supplemental measure of our operating
performance and, in the case of Adjusted EBITDA, information
utilized in the calculation of the financial covenants under our
revolving credit facility and in the determination of compensation.
EBITDA, as used in this Earnings Release is defined as net income
before interest expense, income taxes, non-controlling interest and
depreciation and amortization. Adjusted EBITDA differs from the
term "EBITDA" as it is commonly used. Adjusted EBITDA, as used in
this Earnings Release, means "Consolidated Adjusted EBITDA" as that
term is defined under our revolving credit facility, which is
generally consolidated net income before consolidated interest
expense, consolidated amortization expense, consolidated
depreciation expense and consolidated tax expense, in each case as
defined more fully in the agreement governing our revolving credit
facility. The other items excluded in this calculation include, but
are not limited to, specified acquisition costs and unusual or
non-recurring charges. The calculation below does not give effect
to certain additional adjustments that are permitted under our
revolving credit facility which, if included, would increase the
amount reflected in this table.
We believe EBITDA and Adjusted EBITDA are frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in industries similar to ours. Adjusted
EBITDA is also used by management to measure operating performance
and by investors to measure a company's ability to service its debt
and other cash needs. Management believes the inclusion of the
adjustments to EBITDA and Adjusted EBITDA are appropriate to
provide additional information to investors about certain material
non-cash items and about unusual items that we do not expect to
continue at the same level in the future.
EBITDA and Adjusted EBITDA are not recognized terms under
accounting principles generally accepted in the United States, or
U.S. GAAP. Accordingly, they should not be used as an indicator of,
or alternative to, net income as a measure of operating
performance. Although we use EBITDA and Adjusted EBITDA as measures
to assess the operating performance of our business, EBITDA and
Adjusted EBITDA have significant limitations as analytical tools
because they exclude certain material costs. For example, they do
not include interest expense, which has been a necessary element of
our costs. Since we use capital assets, depreciation expense is a
necessary element of our costs and ability to generate service
revenues. In addition, the omission of the substantial amortization
expense associated with our intangible assets further limits the
usefulness of this measure. EBITDA and Adjusted EBITDA also do not
include the payment of taxes, which is also a necessary element of
our operations. Because EBITDA and Adjusted EBITDA do not account
for these expenses, its utility as a measure of our operating
performance has material limitations. Due to these limitations,
management does not view EBITDA and Adjusted EBITDA in isolation or
as a primary performance measure and also uses other measures, such
as net income. Because the definitions of EBITDA and Adjusted
EBITDA (or similar measures) may vary among companies and
industries, they may not be comparable to other similarly titled
measures used by other companies.
The following table presents a reconciliation of net income to
EBITDA and Adjusted EBITDA for each of the periods presented:
(Unaudited, all amounts in thousands)
For the Three Months
Ended
For the Six Months Ended
(in thousands)
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
Net income $ 1,578 $ 3,772 $ 5,181 $ 7,246 Depreciation 814 284
1,397 558 Amortization of intangibles 1,378 779 2,430 1,559
Interest expense 1,925 1,985 3,956 3,876 Income taxes 936 2,220
2,711 4,296 Net income (loss) attributable to non-controlling
interest 2 (46 ) (172 ) (31 ) EBITDA 6,633 8,994 15,503
17,504 Transaction costs (a) 612 87 793 374 Corporate governance
study 248 — 248 — Relocation expenses 207 — 207 — Statutory audits
98 — 98 — Re-audit expenses — 450 — 450
Adjusted EBITDA $ 7,798 $ 9,531 $ 16,849 $
18,328 (a) Represents transaction costs associated
with acquisitions.
FORTEGRA FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL
INFORMATION (Unaudited)
(All Amounts in Thousands Except Share
and Per Share Amounts)
(Unaudited)
For the Three Months
Ended
For the Six Months Ended
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
Net income $ 1,578 $ 3,772 $ 5,181 $ 7,246 Non-GAAP
Adjustments, net of tax Transaction costs associated with
acquisitions 612 87 793 374 Corporate governance study 156 — 156 —
Relocation expenses 130 — 130 — Statutory audits 62 — 62 — Re-audit
expenses — 282 — 282 Retirement of debt 14 — 560
— Total Non-GAAP adjustments, net of tax 974 369 1,701 656
Net income - Non-GAAP basis $
2,552 $ 4,141 $ 6,882 $ 7,902
Earnings per share - basic $ 0.08 $ 0.24 $ 0.25 $ 0.46 Non-GAAP
adjustments, net of tax 0.05 0.02 0.08
0.04 Non-GAAP Earnings per common share - basic $ 0.13
$ 0.26 $ 0.33 $ 0.50 Earnings per share
- diluted $ 0.07 $ 0.22 $ 0.24 $ 0.43 Non-GAAP adjustments, net of
tax 0.05 0.02 0.08 0.04 Non-GAAP
Earnings per common share - diluted $ 0.12 $ 0.24
$ 0.32 $ 0.47 Weighted average common shares
outstanding: Basic 20,510,254 15,742,336 20,487,549 15,742,336
Diluted 21,592,418 17,040,432 21,625,817 17,040,432
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