Fortegra Financial Corporation (NYSE: FRF), an insurance services
company providing distribution and administration services and
insurance-related products, today reported results for the second
quarter ended June 30, 2012.
- Total revenues climbed 8.9% compared to prior-year
- Direct and assumed written premiums increased 17.0%
year-over-year to $92.7 million
- Operating expenses declined 6.9%
- Second quarter net income was $4.0 million ($0.19 per diluted
share)
- Second quarter Adjusted EBITDA was $10.1 million ($0.49 per
diluted share) with Adjusted EBITDA margin of 34.7%
- The Company repurchased 164,817 shares for a total cost of $1.3
million
"I am pleased to report another positive quarter for Fortegra as
we increased net revenues and maintained operating expense
discipline," said Richard S. Kahlbaugh, Chairman, President and
Chief Executive Officer of Fortegra. "The cross-selling and direct
marketing initiatives for our products and services are off to a
great start and momentum is building. Since March when the program
kicked off, we have closed 39 cross-selling opportunities with
recently acquired PBG playing a key role. Our "Plus 1" campaign has
identified more than 155 leads for the Company and we are very
excited by the potential for partnering internally. We also had a
series of key new business wins in Brokerage and Payment Protection
which demonstrate the appeal of our products and the brands that
support them. Last, we increased our access to capital while
simultaneously lowering our cost of capital with our new debt
facility. I firmly believe the Company is well positioned to
execute on our strategy."
Second Quarter Results Total revenues
increased 8.9% to $58.7 million for the second quarter of 2012,
compared to $53.9 million for the second quarter of 2011. Net
revenues (total revenues less net losses and loss adjustment and
commissions expenses) increased 7.0% to $29.2 million for the
second quarter of 2012, compared to $27.3 million for the
prior-year period. Operating expenses were $19.3 million, 6.9%
below the prior-year quarter.
Net income for the second quarter 2012 was $4.0 million, or
$0.19 per diluted share, compared to $1.5 million, or $0.07 per
diluted share, for the quarter ended June 30, 2011. During the
quarter, improved operating expenses were offset in part by higher
personnel costs attributable primarily to the Pacific Benefits
Group acquisition.
Adjusted EBITDA for the second quarter of 2012 was $10.1
million, compared to $7.8 million for the second quarter of 2011.
Adjusted EBITDA margin for the second quarter of 2012 improved to
34.7%, compared to 28.8% for the prior-year period.
Segment Results Payment Protection For the
three months ended June 30, 2012, net revenues for the Payment
Protection segment were $15.0 million, compared to $13.8 million
for the prior-year period. EBITDA for the Payment Protection
segment was $6.3 million for the second quarter of 2012, compared
to $5.1 million for the prior-year period. EBITDA margin for the
Payment Protection segment reached 41.8% for the second quarter of
2012, compared to 37.1% for the prior-year period.
Business Process Outsourcing (BPO) Net revenues for the BPO
segment increased to $4.4 million for the second quarter of 2012,
compared to $3.7 million for the second quarter of 2011, primarily
attributable to the PBG acquisition. EBITDA for the BPO segment was
$1.1 million for the second quarter of 2012, compared to $0.9
million for the prior-year period. EBITDA margin for the BPO
segment improved to 24.0% for the second quarter of 2012, compared
to 23.4% for the prior-year period.
Brokerage Net revenues for the Brokerage segment remained flat
at $9.8 million for the second quarter of 2012. However, EBITDA for
the Brokerage segment improved to $2.6 million for the second
quarter of 2012, compared to $2.3 million one year ago. EBITDA
margin for the Brokerage segment improved to 26.2% for the second
quarter of 2012, compared to 23.5% for the prior-year period.
Corporate While no income or expense was recorded in the
Corporate segment for the second quarter 2012, in the second
quarter 2011 the Corporate segment experienced $1.7 million in
expenses attributable to a combination of professional fees,
transaction costs and costs associated with the corporate
relocation.
Balance Sheet Total invested assets and
cash and cash equivalents amounted to $123.0 million as of June 30,
2012 compared to $127.1 million as of December 31, 2011. Unearned
premiums were $229.0 million as of June 30, 2012 compared to $227.9
million as of December 31, 2011. Total debt outstanding at June 30,
2012 was $107.0 million compared to $108.0 million as of December
31, 2011. Stockholder's equity increased to $133.2 million as of
June 30, 2012 compared to $127.6 million as of December 31,
2011.
In November 2011, the Company's Board of Directors approved a
share repurchase program for up to $10 million. During the second
quarter of 2012, the Company repurchased 164,817 shares at a total
cost of $1.3 million. Since inception and through July 31, 2012,
the Company repurchased 954,781 shares for a total cost of $6.3
million. Approximately $3.7 million remains available in the
repurchase program.
Conference Call Information Fortegra's
executive management will host a conference call to discuss its
second quarter 2012 results tomorrow, Tuesday, August 14, 2012 at
8:30 a.m. Eastern Time. To participate in the live call, dial (877)
407-3982 within the U.S., or (201) 493-6780 for international
callers. A live audio webcast will also be available on the
Investors page of the company's website: http://www.fortegra.com. A
replay of the call will be available beginning August 14th at 11:30
a.m. Eastern Time and ending on August 21st at 11:59 p.m. Eastern
Time on the company's website, and by dialing (877) 870-5176 in the
U.S. or (858) 384-5517 for international callers. The passcode for
the replay is 397734.
Statistical Supplement In addition, the
company has provided a statistical supplement which can be accessed
through the "Investor Relations" section of Fortegra's website at:
http://www.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 (B&G), eReinsure (eRe), Motor
Clubs, Pacific Benefits Group (PBG), Universal Equipment Recovery
Group (UERG), and South Bay Acceptance Corporation (SBAC).
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.
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, as used in this
Earnings Release, means "Consolidated Adjusted EBITDA" as defined
under our revolving credit facility in effect June 30, 2012, 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 of Adjusted EBITDA in this
Earnings Release 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
Earnings Release.
In addition to the financial covenant requirements under our
revolving credit facility, management uses EBITDA and Adjusted
EBITDA as measures of operating performance for planning purposes,
including the preparation of budgets and projections, the
determination of bonus compensation for our executive officers and
the analysis of the allocation of resources and to evaluate the
effectiveness of business strategies. Further, 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 to arrive at 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.
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 most current Annual Report on Form 10-K and most
current Quarterly Report on Form 10-Q. 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 charge at the SEC's
website at http://www.sec.gov and 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 For the Six Months
Ended Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
----------- ----------- ----------- -----------
Revenues:
Service and
administrative fees $ 9,394 $ 8,800 $ 18,734 $ 17,916
Brokerage commissions and
fees 9,364 9,208 18,884 17,075
Ceding commission 7,210 6,243 14,274 14,401
Net investment income 732 894 1,475 1,835
Net realized gains on the
sale of investments 13 1,132 10 1,227
Net earned premium 31,905 27,536 63,877 55,973
Other income 48 38 120 120
----------- ----------- ----------- -----------
Total revenues 58,666 53,851 117,374 108,547
----------- ----------- ----------- -----------
Net losses and loss
adjustment expenses 9,576 9,251 20,842 18,624
Commissions 19,892 17,323 39,931 35,840
----------- ----------- ----------- -----------
Net revenues 29,198 27,277 56,601 54,083
----------- ----------- ----------- -----------
Expenses:
Personnel costs 12,246 11,298 23,518 22,079
Other operating expenses 6,868 9,295 13,548 16,452
Stock based compensation
expenses 190 133 369 401
Depreciation 975 814 1,713 1,397
Amortization of
intangibles 1,166 1,378 2,648 2,430
Interest expense 1,590 1,925 3,242 3,956
----------- ----------- ----------- -----------
Total expenses 23,035 24,843 45,038 46,715
----------- ----------- ----------- -----------
Income before income taxes
and non-controlling
interest 6,163 2,434 11,563 7,368
Income taxes 2,146 907 4,065 2,588
----------- ----------- ----------- -----------
Income before non-
controlling interest 4,017 1,527 7,498 4,780
Less: net income (loss)
attributable to non-
controlling interest 15 2 33 (172)
----------- ----------- ----------- -----------
Net income $ 4,002 $ 1,525 $ 7,465 $ 4,952
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.20 $ 0.07 $ 0.38 $ 0.24
Diluted $ 0.19 $ 0.07 $ 0.36 $ 0.23
Weighted average common
shares outstanding:
Basic 19,705,276 20,510,254 19,792,763 20,487,549
Diluted 20,632,233 21,592,418 20,686,812 21,625,817
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(All Amounts in Thousands)
June 30, March 31, December 31,
2012 2012 2011
---------- ---------- ------------
Assets:
Investments:
Fixed maturity securities available-
for-sale at fair value (amortized
cost of $85,738 at June 30, 2012
and $92,311 at December 31, 2011) $ 88,021 $ 92,843 $ 93,509
Equity securities available-for-sale
at fair value (cost of $5,498 at
June 30, 2012 and $1,203 at
December 31, 2011) 5,653 3,793 1,219
Short-term investments 970 970 1,070
---------- ---------- ------------
Total investments 94,644 97,606 95,798
Cash and cash equivalents 28,350 18,676 31,339
Restricted cash 23,659 18,959 14,180
Accrued investment income 985 927 929
Notes receivable, net 3,783 3,802 3,603
Accounts and premiums receivable, net 27,384 31,184 20,172
Other receivables 14,505 16,798 9,103
Reinsurance receivables 191,671 186,421 194,740
Deferred acquisition costs 55,983 52,517 55,467
Property and equipment, net 17,592 16,405 15,343
Goodwill 103,645 103,477 103,477
Other intangibles, net 51,930 52,928 54,410
Other assets 6,575 5,709 5,943
---------- ---------- ------------
Total assets $ 620,706 $ 605,409 $ 604,504
========== ========== ============
Liabilities:
Unpaid claims $ 31,618 $ 32,497 $ 32,583
Unearned premiums 228,991 221,059 227,929
Policyholder account balances 26,942 27,565 28,040
Accrued expenses, accounts payable,
income taxes payable and other
liabilities 49,482 42,483 35,581
Deferred revenue 18,386 17,617 20,781
Note payable 72,000 74,700 73,000
Preferred trust securities 35,000 35,000 35,000
Deferred income taxes, net 25,083 24,207 24,006
---------- ---------- ------------
Total liabilities $ 487,502 $ 475,128 $ 476,920
========== ========== ============
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;
20,650,671 and 20,561,328 shares
issued at June 30, 2012 and December
31, 2011, respectively, including
shares in treasury 207 206 206
Treasury stock, at cost; 876,709
shares and 516,132 shares at June 30,
2012 and December 31, 2011,
respectively (5,468) (4,122) (2,728)
Additional paid-in capital 96,785 96,378 96,199
Accumulated other comprehensive loss,
net of tax (1,480) (1,324) (1,754)
Retained earnings 42,615 38,613 35,150
---------- ---------- ------------
Stockholders' equity before non-
controlling interest 132,659 129,751 127,073
Non-controlling interest 545 530 511
---------- ---------- ------------
Total stockholders' equity 133,204 130,281 127,584
---------- ---------- ------------
Total liabilities and
stockholders' equity $ 620,706 $ 605,409 $ 604,504
========== ========== ============
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME- Segments (Unaudited)
(All Amounts in Thousands)
For the Three Months For the Six Months
Ended Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
----------- ----------- ----------- -----------
Segment Net Revenue
Payment Protection $ 15,007 $ 13,750 $ 28,182 $ 28,101
BPO 4,409 3,691 8,614 7,255
Brokerage 9,782 9,836 19,805 18,727
----------- ----------- ----------- -----------
Segment Net Revenues 29,198 27,277 56,601 54,083
----------- ----------- ----------- -----------
Operating Expenses
Payment Protection 8,729 8,644 16,642 17,412
BPO 3,351 2,828 6,484 5,447
Brokerage 7,224 7,527 14,309 14,346
Corporate - 1,727 - 1,727
----------- ----------- ----------- -----------
Total Operating
Expenses 19,304 20,726 37,435 38,932
----------- ----------- ----------- -----------
EBITDA
Payment Protection 6,278 5,106 11,540 10,689
BPO 1,058 863 2,130 1,808
Brokerage 2,558 2,309 5,496 4,381
Corporate - (1,727) - (1,727)
----------- ----------- ----------- -----------
Total EBITDA 9,894 6,551 19,166 15,151
----------- ----------- ----------- -----------
Depreciation and
Amortization
Payment Protection 865 1,324 1,714 2,277
BPO 498 277 1,001 517
Brokerage 778 591 1,646 1,033
Corporate - - - -
----------- ----------- ----------- -----------
Total Depreciation and
Amortization 2,141 2,192 4,361 3,827
----------- ----------- ----------- -----------
Interest Expense
Payment Protection 971 1,043 1,983 2,569
BPO 259 99 526 162
Brokerage 360 783 733 1,225
Corporate - - - -
----------- ----------- ----------- -----------
Total Interest Expense 1,590 1,925 3,242 3,956
----------- ----------- ----------- -----------
Income Before Income Taxes
and Non-controlling
Interest
Payment Protection 4,442 2,739 7,843 5,843
BPO 301 487 603 1,129
Brokerage 1,420 935 3,117 2,123
Corporate - (1,727) - (1,727)
----------- ----------- ----------- -----------
Total Income Before Income
Taxes and Non-controlling
Interest 6,163 2,434 11,563 7,368
Income Taxes 2,146 907 4,065 2,588
Less: Net Income (Loss)
Attributable to Non-
controlling Interest 15 2 33 (172)
----------- ----------- ----------- -----------
Net Income $ 4,002 $ 1,525 $ 7,465 $ 4,952
=========== =========== =========== ===========
FORTEGRA FINANCIAL CORPORATION
RECONCILIATION OF ADJUSTED EBITDA INFORMATION (Unaudited)
(All Amounts in Thousands)
For the Three Months For the Six Months
Ended Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
--------- --------- --------- ---------
Net Income $ 4,002 $ 1,525 $ 7,465 $ 4,952
Depreciation 975 814 1,713 1,397
Amortization of intangibles 1,166 1,378 2,648 2,430
Interest expense 1,590 1,925 3,242 3,956
Income taxes 2,146 907 4,065 2,588
Net income (loss) attributable
to non-controlling interest 15 2 33 (172)
--------- --------- --------- ---------
EBITDA 9,894 6,551 19,166 15,151
Transaction costs (a) 37 612 134 793
Stock based compensation
expenses 190 133 369 401
Corporate governance study - 248 - 248
Relocation expenses - 207 - 207
Statutory audits - 98 - 98
--------- --------- --------- ---------
Adjusted EBITDA $ 10,121 $ 7,849 $ 19,669 $ 16,898
EBITDA Margin 33.9% 24.0% 33.9% 28.0%
Adjusted EBITDA Margin 34.7% 28.8% 34.8% 31.2%
(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)
For the Three Months For the Six Months
Ended Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
----------- ----------- ----------- -----------
Net income $ 4,002 $ 1,525 $ 7,465 $ 4,952
Non-GAAP Adjustments, net
of tax - -
Transaction costs
associated with
acquisitions (1) 37 612 134 793
Stock based compensation
expenses 124 83 239 260
Corporate governance
study - 156 - 156
Relocation expenses - 130 - 130
Statutory audits - 62 - 62
Retirement of debt (1) - 14 - 560
----------- ----------- ----------- -----------
Total Non-GAAP
adjustments, net of tax 161 1,057 373 1,961
----------- ----------- ----------- -----------
Net income - Non-GAAP basis $ 4,163 $ 2,582 $ 7,838 $ 6,913
=========== =========== =========== ===========
GAAP Earnings per share -
basic $ 0.20 $ 0.07 $ 0.38 $ 0.24
Non-GAAP adjustments, net
of tax 0.01 0.05 0.02 0.10
----------- ----------- ----------- -----------
Non-GAAP Earnings per common
share - basic $ 0.21 $ 0.12 $ 0.40 $ 0.34
=========== =========== =========== ===========
GAAP Earnings per share -
diluted $ 0.19 $ 0.07 $ 0.36 $ 0.23
Non-GAAP adjustments, net
of tax 0.01 0.05 0.02 0.09
----------- ----------- ----------- -----------
Non-GAAP Earnings per common
share - diluted $ 0.20 $ 0.12 $ 0.38 $ 0.32
=========== =========== =========== ===========
Weighted average common
shares outstanding:
Basic 19,705,276 20,510,254 19,792,763 20,487,549
Diluted 20,632,233 21,592,418 20,686,812 21,625,817
(1) Adjustments not tax
affected
Contact: Stephanie Gannon 904-352-2759 Email Contact
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