SOURCE: Fortegra Financial Corporation

Fortegra Financial Corporation

March 10, 2014 16:15 ET

Fortegra Financial Corporation Reports Fourth Quarter and Full Year 2013 Results

JACKSONVILLE, FL--(Marketwired - Mar 10, 2014) - Fortegra Financial Corporation (NYSE: FRF), an insurance services company offering a wide array of revenue enhancing products, including payment protection products, motor club memberships, service contracts, device and warranty services, and administration services, to our business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies, reported its results for the fourth quarter and full year ended December 31, 2013.

  • Completed the sale of Bliss & Glennon, Inc. ("B&G") and eReinsure.com, Inc. ("eReinsure") to AmWINS Holdings, LLC for gross proceeds of $83.5 million on December 31, 2013 (the "Disposition"), which resulted in an $8.8 million gain on sale, net of tax.

  • Debt was reduced by $77.5 million, and goodwill and other intangible assets were reduced by a combined $70.0 million, on December 31, 2013 as a result of the Disposition.

  • Net income for the full year 2013 was $22.7 million compared to $15.2 million for the full year 2012. Diluted earnings per share were $1.11 in 2013 compared to $0.74 in 2012.

  • Net income from continuing operations before non-controlling interests was $3.9 million for the fourth quarter of 2013 compared to $3.6 million for the fourth quarter of 2012.

  • Fourth quarter 2013 diluted earnings per share from continuing operations were $0.16 compared to $0.17 in the fourth quarter of 2012.

  • Direct and assumed written premiums for the fourth quarter 2013 rose 17.6% compared to the same period in 2012, and for the full year ended December 31, 2013 increased 11.5% to $410.2 million from $367.8 million for 2012.

  • Adjusted EBITDA from continuing operations for the year ended December 31, 2013 increased 14.0% to $34.3 million, compared with $30.1 million for the year ended December 31, 2012. 

"We see 2013 as a transformational year in our company's history and one that will be viewed as a critical turning point towards our future success. We started the year having just acquired two exceptional companies, ProtectCELL and 4Warranty, and we finished the year with the sale of B&G and eReinsure. As a result of the Disposition, we de-leveraged our balance sheet by paying off the debt under our primary credit facility, and shifted our complete focus to our higher margin product and service offerings. Fortegra is more streamlined and integrated than ever before and our new operating structure will provide us increased efficiency and business flexibility. In the quarter, we took swift action to win over payment protection customers in response to the announcement of a major competitor's decision to exit a segment of the payment protection market, which created a sizeable market opportunity for us," said Richard S. Kahlbaugh, Chairman, President and Chief Executive Officer of Fortegra. "Moreover, we continued to see strong premium growth in our payment protection products, and while regulatory pressures in our Motor Clubs remain, our ProtectCell products had another strong revenue quarter. Last, we are pleased with the early performance of our recently introduced products, and we anticipate these new products will provide meaningful revenue growth in 2014."

Discontinued Operations and Revision of Business Segments
In connection with the Disposition, the financial results of the disposed businesses are reported as discontinued operations in the Consolidated Statements of Income. Fortegra also realigned its reporting structure to manage its ongoing business as a single profit center, and reports financial results from continuing operations in one reportable segment for all periods presented.

Fourth Quarter Results
Total revenues from continuing operations increased $28.9 million, or 45.4%, to $92.5 million for the fourth quarter of 2013, compared to $63.6 million for the fourth quarter of 2012. Net revenues, which are comprised of total revenues less net losses and loss adjustment expenses, member benefit claims, and commission expenses, increased $5.8 million, or 25.6%, to $28.2 million for the quarter compared to $22.5 million for the prior-year period. Operating expenses, which are comprised of personnel costs and other operating expenses, increased $4.7 million, or 32.2%, to $19.1 million for the quarter compared to $14.5 million for the prior-year period. Income from continuing operations before non-controlling interests for the quarter increased $0.3 million, or 7.3%, to $3.9 million from $3.6 million for the fourth quarter of 2012, principally a result of the expansion of our warranty service contracts through ProtectCELL and 4Warranty.

Net income attributable to Fortegra Financial Corporation, including discontinued operations, for the three months ended December 31, 2013 increased $8.8 million, or 232.0%, to $12.6 million from $3.8 million for the three months ended December 31, 2012. Earnings per diluted share attributable to Fortegra Financial Corporation, including discontinued operations, increased 244.4% to $0.62 for the three months ended December 31, 2013 from $0.18 for the same period in 2012. Our 2013 results include the $8.8 million gain, net of tax, or $0.43 per diluted share, from the Disposition. Non-GAAP earnings per share from continuing operations on a diluted basis were $0.18 and $0.20 for the three months ended December 31, 2013 and 2012, respectively.

Full Year 2013 Results
Total revenues from continuing operations increased $91.5 million, or 35.7%, to $347.9 million for the full year 2013, compared to $256.3 million for the full year 2012. Net revenues increased $22.9 million, or 27.7%, to $105.7 million for 2013 compared to $82.7 million for 2012. Operating expenses increased $21.9 million, or 41.5%, to $74.6 million for 2013 compared to $52.7 million for 2012. These increases resulted principally from the expansion of our warranty products through ProtectCELL and 4Warranty. Income from continuing operations before non-controlling interests for the year ended December 31, 2013 decreased $1.2 million, or 8.9%, to $11.8 million from $13.0 million for the year ended December 31, 2012. This decrease resulted from $0.8 million of expense due to the previously announced plan to consolidate certain functions within our operations in 2013, while our 2012 results included a $1.0 million benefit from a change in accounting estimate

Net income attributable to Fortegra Financial Corporation, including discontinued operations, for the year ended December 31, 2013 increased $7.6 million, or 49.8%, to $22.7 million from $15.2 million for the year ended December 31, 2012. Earnings per diluted share attributable to Fortegra Financial Corporation, including discontinued operations, increased 50% to $1.11 for the year ended December 31, 2013 from $0.74 for the same period in 2012. Our 2013 results include the impact of the $8.8 million gain, net of tax, or $0.43 per diluted share, from the Disposition, while 2012 included a $1.0 million benefit from a change in accounting estimate, or $0.05 per diluted share. Non-GAAP earnings per share from continuing operations on a diluted basis were $0.61 and $0.67 for the years ended December 31, 2013 and 2012, respectively.

Balance Sheet
Total investments and cash and cash equivalents increased to $160.5 million at December 31, 2013 compared to $133.3 million at December 31, 2012. Goodwill decreased $54.0 million to $73.7 million at December 31, 2013 compared to $127.7 million at December 31, 2012 as a result of the Disposition. Other intangible assets decreased $21.1 million, of which $14.1 million related to the Disposition. Unearned premiums were $256.4 million at December 31, 2013 compared to $235.9 million at December 31, 2012. Total debt outstanding at December 31, 2013 decreased to $38.3 million compared to $124.4 million at December 31, 2012. Stockholders' equity increased to $166.5 million at December 31, 2013 from $145.7 million at December 31, 2012.

Conference Call Information
Fortegra Financial's executive management will host a conference call to discuss its fourth quarter and year end 2013 results on Tuesday, March 11, 2014 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.fortegrafinancial.com. A replay of the call will be available beginning March 11, 2014 at 11:30 a.m. Eastern Time and ending on March 18, 2014 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 pass code for the replay is 13577483.

Statistical Supplement
In addition, the Company has provided a statistical supplement, which can be accessed through the "Investor Relations" section of Fortegra Financial's website at: http://www.fortegrafinancial.com.

About Fortegra Financial Corporation
Fortegra Financial Corporation (references in this report to "Fortegra Financial," "Fortegra," "we," "us," "the Company" or similar terms refer to Fortegra Financial Corporation and its subsidiaries), traded on the New York Stock Exchange under the symbol: FRF, is an insurance services company headquartered in Jacksonville, Florida. Fortegra offers a wide array of revenue enhancing products, including payment protection products, motor club memberships, service contracts, device and warranty services, and administration services, to our business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies. Fortegra's brands include Fortegra™, Life of the South®, 4Warranty, ProtectCELL™, Continental Car Club™, Auto Knight Motor Club™, United Motor Club™, Consecta™, Pacific Benefits Group™, and South Bay Acceptance Corporation.

Use of Non-GAAP Financial Information
We present certain additional financial measures related to our business that are "Non-GAAP measures" within the meaning of Regulation G under the Securities Act of 1934. We present these Non-GAAP measures to provide investors with additional information to analyze our performance from period to period. Management also uses these measures to assess performance and to allocate resources in managing our businesses. However, investors should not consider these Non-GAAP measures as a substitute for the financial information that we report 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.

In this Earnings Release, we present Net income from continuing operations - Non-GAAP Basis, Non-GAAP Earnings per share from continuing operations - basic and diluted, Net revenue, Operating expenses, EBITDA from continuing operations and Adjusted EBITDA from continuing operations. These financial measures as presented in this Earnings Release are considered Non-GAAP financial measures and are not recognized terms under U.S. GAAP and should not be used as an indicator of, and are not an alternative to, net income or earnings per share as a measure of operating performance. Net income from continuing operations - Non-GAAP Basis as used in this Earnings Release, generally means net income adjusted (on a tax-effected basis) by transaction costs associated with acquisitions, stock-based compensation, restructuring expenses, and unusual or non-recurring charges and items that affect comparability of results. Non-GAAP earnings per share from continuing operations - basic and diluted as presented in this Earnings Release adjust for the impact of the Non-GAAP adjustments to net income, net of tax, on a per share basis. Net revenues as used in this Earnings Release is total revenues less net losses and loss adjustment expenses, member benefit claims, and commission expenses. Operating expense as used in this Earnings Release is the sum of personnel costs and other operating expenses. EBITDA from continuing operations as used in this Earnings Release is net income before interest expense, income taxes, net income attributable to non-controlling interests, depreciation and amortization. Adjusted EBITDA from continuing operations as used in this Earnings Release means "Consolidated Adjusted EBITDA", which is defined under our credit facility with Wells Fargo Bank, N.A. and which generally means consolidated net income before net income attributable to non-controlling interests, consolidated interest expense, consolidated amortization expense, consolidated depreciation expense and consolidated income tax expense, relating to continuing operations. The other items excluded in this calculation may include if applicable, but are not limited to, specified acquisition costs, impairment of goodwill and other non-cash charges, stock-based compensation expense, and unusual or non-recurring charges and items that affect comparability of results. The calculation below does not give effect to certain additional adjustments permitted under our credit facility, which if included, would increase the amount of Adjusted EBITDA from continuing operations reflected in this table. We believe presenting Net Income from continuing operations - Non-GAAP Basis, Non-GAAP Earnings per share from continuing operations - basic and diluted, Net revenue, Operating expenses, EBITDA from continuing operations and Adjusted EBITDA from continuing operations provides investors with a supplemental financial measure of our operating performance.

In addition to the financial covenant requirements under our credit facility, management uses Net Income from continuing operations - Non-GAAP Basis, Non-GAAP Earnings per share from continuing operations - basic and diluted, Net revenues, Operating expenses, EBITDA from continuing operations and Adjusted EBITDA from continuing operations as financial measures of operating performance for planning purposes, which may include, but are not limited to, the preparation of budgets and projections, the determination of bonus compensation for executive officers, the analysis of the allocation of resources and the evaluation of the effectiveness of business strategies. We measure Net revenue as another means of understanding product contributions to our results. We measure Operating expenses to reconcile from Net revenues to EBITDA. Although we use EBITDA from continuing operations and Adjusted EBITDA from continuing operations as financial measures to assess the operating performance of our business, both measures have significant limitations as analytical tools because they exclude certain material expenses. For example, they do not include interest expense and the payment of income taxes, which are both necessary elements of our costs and operations. Since we use property and equipment to generate revenues, depreciation expense is a necessary element of our costs. In addition, the omission of amortization expense associated with our intangible assets further limits the usefulness of this financial measure. Management believes the inclusion of the adjustments to EBITDA from continuing operations to derive Adjusted EBITDA from continuing operations 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. Because EBITDA from continuing operations and Adjusted EBITDA from continuing operations do not account for these expenses, their utility as financial measures of our operating performance has material limitations. Due to these limitations, management does not view EBITDA from continuing operations and Adjusted EBITDA from continuing operations in isolation or as primary financial performance measures.

We believe Net Income from continuing operations - Non-GAAP Basis, Non-GAAP Earnings per share from continuing operations - basic and diluted, EBITDA from continuing operations and Adjusted EBITDA from continuing operations are frequently used by securities analysts, investors and other interested parties in the evaluation of similar companies in similar industries and to measure the company's ability to service its debt and other cash needs. Because the definitions of Net Income from continuing operations - Non-GAAP Basis, Non-GAAP Earnings per share from continuing operations - basic and diluted, EBITDA from continuing operations and Adjusted EBITDA from continuing operations (or similar financial measures) may vary among companies and industries, they may not be comparable to other similarly titled financial 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 (including statements regarding: the efficiency and flexibility of our business under our new operating structure, the size of the market opportunity resulting from our competitor's announced exist from a segment of the payment protection market, and the level of contribution of our recently introduced products to our revenue growth in 2014) 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, and any amendments to those reports. 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.fortegrafinancial.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 Years Ended
    December 31, 2013   December 31, 2012   December 31, 2013     December 31, 2012
Revenues:                          
    Service and administrative fees   $ 45,776   $ 23,355   $ 172,427     $ 90,550
    Ceding commissions     9,973     9,429     32,824       34,825
    Net investment income     635     848     3,050       3,067
    Net realized investment gains     -     9     2,043       3
    Net earned premium     35,858     29,855     136,787       127,625
    Other income     237     97     736       269
    Total revenues     92,479     63,593     347,867       256,339
                           
Expenses:                          
    Net losses and loss adjustment expenses     10,471     7,947     41,567       40,219
    Member benefit claims     11,395     1,084     46,019       4,642
    Commissions     42,382     32,094     154,606       128,741
    Personnel costs     9,638     7,231     39,487       28,475
    Other operating expenses     9,489     7,242     35,117       24,233
    Depreciation and amortization     1,249     1,166     4,858       3,275
    Amortization of intangibles     1,371     698     5,527       2,742
    Interest expense     899     779     3,621       4,334
    (Gain) on sale of subsidiary     -     -     (402 )     -
Total expenses     86,894     58,241     330,400       236,661
Income from continuing operations before income taxes     5,585     5,352     17,467       19,678
    Income taxes - continuing operations     1,733     1,761     5,660       6,716
Income from continuing operations before non-controlling interests     3,852     3,591     11,807       12,962
Discontinued operations:                          
      Income from discontinued operations - net of tax     476     202     3,546       2,275
      Gain on sale of discontinued operations - net of tax     8,844     -     8,844       -
Discontinued operations - net of tax     9,320     202     12,390       2,275
Net income before non-controlling interests     13,172     3,793     24,197       15,237
      Less: net income attributable to non-controlling interests     614     10     1,482       72
Net income attributable to Fortegra Financial Corporation   $ 12,558   $ 3,783   $ 22,715     $ 15,165
                           
Earnings per share - Basic:                          
Net income from continuing operations - net of tax   $ 0.17   $ 0.18   $ 0.53     $ 0.65
Discontinued operations - net of tax     0.48     0.01     0.64       0.12
      Net income attributable to Fortegra Financial Corporation   $ 0.65   $ 0.19   $ 1.17     $ 0.77
                           
Earnings per share - Diluted:                          
Net income from continuing operations - net of tax   $ 0.16   $ 0.17   $ 0.50     $ 0.63
Discontinued operations - net of tax     0.46     0.01     0.61       0.11
      Net income attributable to Fortegra Financial Corporation   $ 0.62   $ 0.18   $ 1.11     $ 0.74
                           
Weighted average common shares outstanding:                          
  Basic     19,410,655     19,507,733     19,477,802       19,655,492
  Diluted     20,388,890     20,507,329     20,482,652       20,600,362
 
 
 
FORTEGRA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME - Discontinued Operations (Unaudited)
(All Amounts in Thousands)
                 
    For the Three Months Ended   For the Years Ended
    December 31, 2013   December 31, 2012   December 31, 2013   December 31, 2012
Income from discontinued operations:                        
Revenues:                        
    Brokerage commissions and fees   $ 8,414   $ 8,011   $ 36,823   $ 35,306
    Net investment income     4     1     22     1
    Other income     10     -     40     -
Total revenues     8,428     8,012     36,885     35,307
                         
Expenses:                        
    Personnel costs     5,011     4,950     20,251     20,173
    Other operating expenses     1,415     1,477     5,778     6,121
    Depreciation and amortization     161     183     615     658
    Amortization of intangibles     487     480     1,929     2,211
    Interest expense     551     578     2,318     2,290
Total expenses     7,625     7,668     30,891     31,453
Income from discontinued operations before income taxes     803     344     5,994     3,854
    Income taxes - discontinued operations     327     142     2,448     1,579
Income from discontinued operations - net of tax     476     202     3,546     2,275
                         
Gain on sale of discontinued operations:                        
Gain on sale of discontinued operations before income taxes     14,739     -     14,739     -
  Income taxes - gain on sale of discontinued operations     5,895     -     5,895     -
Gain on sale of discontinued operations - net of tax     8,844     -     8,844     -
                         
Discontinued operations - net of tax   $ 9,320   $ 202   $ 12,390   $ 2,275
   
   
   
FORTEGRA FINANCIAL CORPORATION  
CONSOLIDATED BALANCE SHEETS (Unaudited)  
(All Amounts in Thousands Except Share and Per Share Amounts)  
             
    At December 31,  
    2013     2012  
Assets:                
Investments:                
  Fixed maturity securities available-for-sale, at fair value   $ 131,751     $ 110,641  
  Equity securities available-for-sale, at fair value     6,198       6,220  
  Short-term investments     871       1,222  
    Total investments     138,820       118,083  
Cash and cash equivalents     21,681       15,209  
Restricted cash     17,293       31,142  
Accrued investment income     1,175       1,235  
Notes receivable, net     11,920       11,290  
Accounts and premiums receivable, net     18,702       27,302  
Other receivables     33,409       13,393  
Reinsurance receivables     215,084       203,988  
Deferred acquisition costs     78,042       59,320  
Property and equipment, net     14,332       17,900  
Goodwill     73,701       127,679  
Other intangible assets, net     49,173       70,310  
Income taxes receivable     -       2,919  
Other assets     6,307       7,667  
Assets of discontinued operations     791       -  
      Total assets   $ 680,430     $ 707,437  
                 
Liabilities:                
Unpaid claims   $ 34,732     $ 33,007  
Unearned premiums     256,380       235,900  
Policyholder account balances     23,486       26,023  
Accrued expenses, accounts payable and other liabilities     53,035       58,660  
Income taxes payable     2,842       -  
Deferred revenue     76,927       55,043  
Notes payable     3,273       89,438  
Preferred trust securities     35,000       35,000  
Deferred income taxes, net     19,659       28,651  
Liabilities of discontinued operations     8,603       -  
    Total liabilities     513,937       561,722  
                 
Stockholders' Equity:                
Preferred stock     -       -  
Common stock     209       207  
Treasury stock     (8,014 )     (6,651 )
Additional paid-in capital     99,398       97,641  
Accumulated other comprehensive loss, net of tax     (3,665 )     (631 )
Retained earnings     72,532       49,817  
    Stockholders' equity before non-controlling interests     160,460       140,383  
Non-controlling interests     6,033       5,332  
    Total stockholders' equity     166,493       145,715  
      Total liabilities and stockholders' equity   $ 680,430     $ 707,437  
   
   
   
FORTEGRA FINANCIAL CORPORATION  
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (Unaudited)  
NET REVENUES, OPERATING EXPENSES, EBITDA FROM CONTINUING OPERATIONS AND  
ADJUSTED EBITDA, FROM CONTINUING OPERATIONS  
(All Amounts in Thousands, except for percentages)  
                         
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION - NET REVENUES  
    For the Three Months Ended     For the Years Ended  
    December 31, 2013     December 31, 2012     December 31, 2013     December 31, 2012  
Total revenues   $ 92,479     $ 63,593     $ 347,867     $ 256,339  
Less :                                
    Net losses and loss adjustment expenses     10,471       7,947       41,567       40,219  
    Member benefit claims     11,395       1,084       46,019       4,642  
    Commissions     42,382       32,094       154,606       128,741  
Net Revenues   $ 28,231     $ 22,468     $ 105,675     $ 82,737  
                                 
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION - OPERATING EXPENSES  
    For the Three Months Ended     For the Years Ended  
    December 31, 2013     December 31, 2012     December 31, 2013     December 31, 2012  
Personnel costs   $ 9,638     $ 7,231     $ 39,487     $ 28,475  
Other operating expenses     9,489       7,242       35,117       24,233  
Operating expenses   $ 19,127     $ 14,473     $ 74,604     $ 52,708  
                                 
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION EBITDA FROM CONTINUING OPERATIONS AND ADJUSTED EBITDA FROM CONTINUING OPERATIONS  
    For the Three Months Ended     For the Years Ended  
    December 31, 2013     December 31, 2012     December 31, 2013     December 31, 2012  
Income from continuing operations before non-controlling interests   $ 3,852     $ 3,591     $ 11,807     $ 12,962  
  Depreciation     1,249       1,166       4,858       3,275  
  Amortization of intangibles     1,371       698       5,527       2,742  
  Interest expense     899       779       3,621       4,334  
  Income taxes     1,733       1,761       5,660       6,716  
EBITDA from continuing operations     9,104       7,995       31,473       30,029  
    Transaction costs (1)     37       462       203       601  
    Restructuring expenses     65       -       1,299       -  
    (Gain) on sale of subsidiary     -       -       (402 )     -  
    Legal expenses     125       -       520       -  
    Stock-based compensation expense     239       297       1,228       954  
    Change in accounting estimate     -       -       -       (1,509 )
Adjusted EBITDA from continuing operations   $ 9,570     $ 8,754     $ 34,321     $ 30,075  
                                 
EBITDA from continuing operations margin     32.2 %     35.6 %     29.8 %     36.3 %
Adjusted EBITDA from continuing operations margin (2)     33.9 %     39.0 %     32.5 %     36.9 %
     
(1)   Represents transaction costs associated with acquisitions.
     
(2)   - The change in accounting estimate affecting the year ending December 31, 2012 period impacted net revenues by $1.2 million and other operating expense by ($0.3) million. The Adjusted EBITDA Margin for these periods is computed based on net revenues and income before tax adjusted for these impacts.
   
   
   
FORTEGRA FINANCIAL CORPORATION  
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (Unaudited)  
NET INCOME FROM CONTINUING OPERATIONS - NON-GAAP BASIS  
AND EARNINGS PER SHARE FROM CONTINUING OPERATIONS NON-GAAP BASIS  
(All Amounts in Thousands Except Share and Per Share Amounts)  
   
    For the Three Months Ended   For the Years Ended  
    December 31, 2013   December 31, 2012   December 31, 2013     December 31, 2012  
                             
Income from continuing operations before non-controlling interests   $ 3,852   $ 3,591   $ 11,807     $ 12,962  
    Less: net income attributable to non-controlling interests     614     10     1,482       72  
Net income from continuing operations     3,238     3,581     10,325       12,890  
                             
  Non-GAAP Adjustments, net of tax                            
    Transaction costs associated with acquisitions (1)     37     462     203       601  
    Stock-based compensation     155     190     797       615  
    Restructuring expenses     42     -     841       -  
    (Gain) on sale of subsidiary     -     -     (261 )     -  
    Legal     82     -     339       -  
    Retirement of debt (2)     -     -     -       439  
    Change in accounting estimate     -     -     -       (976 )
    Income tax provision-to-return true-ups     -     -     312       103  
  Total Non-GAAP adjustments, net of tax     316     652     2,231       782  
Net income from continuing operations - Non-GAAP basis   $ 3,554   $ 4,233   $ 12,556     $ 13,672  
                             
Earnings per share - Basic:                            
GAAP earnings per share from continuing operations - basic   $ 0.17   $ 0.18   $ 0.53     $ 0.65  
  Non-GAAP adjustments, net of tax     0.02     0.03     0.11       0.04  
Non-GAAP earnings per share from continuing operations - basic   $ 0.19   $ 0.21   $ 0.64     $ 0.69  
                             
Earnings per share - Diluted:                            
GAAP earnings per share from continuing operations - diluted   $ 0.16   $ 0.17   $ 0.50     $ 0.63  
  Non-GAAP adjustments, net of tax     0.02     0.03     0.11       0.04  
Non-GAAP earnings per share from continuing operations - diluted   $ 0.18   $ 0.20   $ 0.61     $ 0.67  
                             
Weighted average common shares outstanding:                            
    Basic     19,410,655     19,507,733     19,477,802       19,655,492  
    Diluted     20,388,890     20,507,329     20,482,652       20,600,362  
     
 (1)   Adjustments not tax effected.
 (2)   2012 amounts represent the write off of $678 in previously capitalized transactions costs on the termination of the SunTrust Bank, N.A., revolving credit line, net of tax.
    Note: Earnings per share amounts may not add or recalculate due to rounding.