UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

EXHIBIT 99.2


UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Completion of the Disposition of Assets
On December 2, 2013, Fortegra Financial Corporation, a Delaware corporation (the "Company"), entered into a Stock Purchase Agreement ("Purchase Agreement") with AmWINS Holdings, LLC,  a Delaware limited liability company ("AmWINS"), pursuant to which LOTS Intermediate Co., a Delaware corporation and direct wholly-owned subsidiary of the Corporation, agreed to sell all the issued and outstanding stock of its subsidiaries, Bliss and Xxxxxxx, Inc., a California corporation ("Bliss and Xxxxxxx"), and xXxxxxxxx.xxx, Inc., a Delaware corporation ("eReinsure"). 

On December 31, 2013, the sale of Xxxxx and Xxxxxxx and eReinsure contemplated by the Purchase Agreement (the "Disposition"), was completed.

As consideration for the Disposition, the Company received net cash proceeds of $82.5 million, representing gross proceeds of $83.5 million less $1.0 million in transaction fees paid at the time of closing. The proceeds are subject to certain purchase price adjustments as set forth in the Purchase Agreement to reflect fluctuations in working capital, including adjustments for any receivable balances as of the disposition date that are not collected within one year.

As of and after December 31, 2013, the Company does not beneficially own the disposed businesses and will no longer consolidate Bliss and Xxxxxxx or eReinsure into its financial results. Beginning in the fourth quarter of 2013, the historical financial results of the disposed businesses for periods prior to the Disposition will be reflected in the Company's Consolidated Financial Statements as discontinued operations.

Unaudited Pro Forma Consolidated Financial Information
The Unaudited Pro Forma Consolidated Financial Information of the Company and its subsidiaries has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of inclusion in the Company's Current Report on Form 8-K prepared and filed in connection with the Disposition.

Certain information and certain disclosures normally included in financial statements prepared in accordance with accounting under generally accepted accounting principles in the United States ("U.S. GAAP")  have been omitted pursuant to such rules and regulations. However, the Company believes that the disclosures provided herein are adequate to make the information presented not misleading.

The Unaudited Pro Forma Consolidated Financial Statements are based on the Company's historical Consolidated Financial Statements, adjusted to reflect effects of the Disposition. The following Unaudited Pro Forma Consolidated Financial Statements of the Company and the related Notes should be read in conjunction with the historical Consolidated Financial Statements of the Company and the related Notes included in its Quarterly Report on Form 10-Q for quarterly period ended September 30, 2013 and any amendments thereto and in its Annual Report on Form 10-K for the year ended December 31, 2012 and any amendments thereto.

The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2013 gives effect to the Disposition as if it had occurred on that date. The accompanying Unaudited Pro Forma Consolidated Statements of Income for the nine months ended September 30, 2013 and for the years ended December 31, 2012, 2011 and 2010, respectively, give effect to the Disposition as if it had occurred at the beginning of the period presented with respect to Xxxxx and Xxxxxxx, and at the later of the beginning of the period presented or March 11, 2011 with respect to eReinsure (the Company acquired eReinsure on March 11, 2011).

The Unaudited Pro Forma Consolidated Financial Information is provided for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations or financial condition of the Company that would have been reported had the Disposition been completed as of the dates presented, and should not be construed as representative of the future consolidated results of operations or financial condition of the Company. The pro forma adjustments described in Note 2 are based on Management’s judgment, including estimates and assumptions that Management believes to be reasonable.  In Management's opinion, all adjustments necessary to reflect the effects of the Disposition on a pro forma basis have been made.

Page 1

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(All Amounts in Thousands, Except Share and Per Share Amounts)
 
At September 30, 2013
 
Historical Information
 
 
 
 
 
 
As Reported
 
Disposition
Note 2, Item #
 
Pro Forma Adjustments
Note 2, Item #
 
Pro Forma
Assets:
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
 
 
Fixed maturity securities available-for-sale, at fair value
$
122,760

 
$
—

 
 
$
—

 
 
$
122,760

Equity securities available-for-sale, at fair value
6,372

 
—

 
 
—

 
 
6,372

Short-term investments
971

 
—

 
 
—

 
 
971

Total investments
130,103

 
—

 
 
—

 
 
130,103

Cash and cash equivalents
17,213

 
376

(1)
 
—

 
 
17,589

Restricted cash
28,792

 
(11,513
)
(1)
 
—

 
 
17,279

Accrued investment income
1,006

 
—

 
 
—

 
 
1,006

Notes receivable, net
5,818

 
—

 
 
—

 
 
5,818

Accounts and premiums receivable, net
32,785

 
(16,449
)
(1)
 
—

 
 
16,336

Other receivables
36,109

 
(837
)
(1)
 
—

 
 
35,272

Reinsurance receivables
211,835

 
—

 
 
—

 
 
211,835

Deferred acquisition costs
67,529

 
—

 
 
—

 
 
67,529

Property and equipment, net
16,805

 
(1,476
)
(1)
 
—

 
 
15,329

Goodwill
127,679

 
(53,978
)
(1)
 
—

 
 
73,701

Other intangible assets, net
65,139

 
(14,594
)
(1)
 
—

 
 
50,545

Other assets
9,062

 
(196
)
(1)
 
—

 
 
8,866

Total assets
$
749,875

 
$
(98,667
)
 
 
$
—

 
 
$
651,208

 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Unpaid claims
$
33,471

 
—

 
 
—

 
 
33,471

Unearned premiums
249,671

 
—

 
 
—

 
 
249,671

Policyholder account balances
24,403

 
—

 
 
—

 
 
24,403

Accrued expenses, accounts payable and other liabilities
76,298

 
(26,487
)
(1)
 
2,230

(2)
 
52,041

Income taxes payable
237

 
11

(1)
 
5,610

(3)
 
5,858

Deferred revenue
69,188

 
(556
)
(1)
 
—

 
 
68,632

Note payable
82,750

 
—

 
 
(82,491
)
(4)
 
259

Preferred trust securities
35,000

 
—

 
 
—

 
 
35,000

Deferred income taxes, net
25,844

 
(5,407
)
(1)
 
—

 
 
20,437

Total liabilities
596,862

 
(32,439
)
 
 
(74,651
)
 
 
489,772

 
 
 
 
 
 
 
 
 
 
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; 20,888,520 shares issued at September 30, 2013, including shares in treasury
209

 
—

 
 
—

 
 
209

Treasury stock, at cost; 1,224,182 shares at September 30, 2013.
(8,014
)
 
—

 
 
—

 
 
(8,014
)
Additional paid-in capital
98,893

 
—

 
 
—

 
 
98,893

Accumulated other comprehensive loss, net of tax
(3,471
)
 
—

 
 
—

 
 
(3,471
)
Retained earnings
59,974

 
(66,228
)
(1)
 
74,651

(5)
 
68,397

Stockholders' equity before non-controlling interests
147,591

 
(66,228
)
 
 
74,651

 
 
156,014

Non-controlling interests
5,422

 
—

 
 
—

 
 
5,422

Total stockholders' equity
153,013

 
(66,228
)
 
 
74,651

 
 
161,436

Total liabilities and stockholders' equity
$
749,875

 
$
(98,667
)
 
 
$
—

 
 
$
651,208


See the accompanying Notes to Unaudited Pro Forma Consolidated Financial Information.

Page 2

 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All Amounts in Thousands, Except Share and Per Share Amounts)

 
For the Nine Months Ended September 30, 2013
 
Historical Information
 
 
 
 
 
 
As Reported
 
Disposition
Note 2, Item #
 
Pro Forma Adjustments
Note 2, Item #
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
 
Service and administrative fees
$
135,022

 
$
—

 
 
$
—

 
 
$
135,022

Brokerage commissions and fees
28,409

 
(28,409
)
(6)
 
—

 
 
—

Ceding commission
22,851

 
—

 
 
—

 
 
22,851

Net investment income
2,433

 
(17
)
(6)
 
—

 
 
2,416

Net realized investment gains
2,043

 
—

 
 
—

 
 
2,043

Net earned premium
100,929

 
—

 
 
—

 
 
100,929

Other income
529

 
(31
)
(6)
 
—

 
 
498

Gain on sale of subsidiary
402

 
—

 
 
—

 
 
402

Total revenues
292,618

 
(28,457
)
 
 
—

 
 
264,161

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Net losses and loss adjustment expenses
31,096

 
—

 
 
—

 
 
31,096

Member benefit claims
34,624

 
—

 
 
—

 
 
34,624

Commissions
120,148

 
—

 
 
—

 
 
120,148

Personnel costs
45,089

 
(15,240
)
(6)
 
—

 
 
29,849

Other operating expenses
30,438

 
(3,857
)
(6)
 
—

 
 
26,581

Depreciation and amortization
4,063

 
(454
)
(6)
 
—

 
 
3,609

Amortization of intangibles
5,598

 
(1,443
)
(6)
 
—

 
 
4,155

Interest expense
4,489

 
(1,610
)
(6)
 
—


 
2,879

Total expenses
275,545

 
(22,604
)
 
 
—

 
 
252,941

Income from continuing operations before income taxes and non-controlling interests
17,073

 
(5,853
)
 
 
—

 
 
11,220

Income taxes
6,048

 
(2,341
)
(6)
 
—


 
3,707

Income before non-controlling interests
11,025

 
(3,512
)
 
 
—

 
 
7,513

Less: net income attributable to non-controlling interests
868

 
—

 
 
—

 
 
868

Net income from continuing operations
$
10,157

 
$
(3,512
)
 
 
$
—

 
 
$
6,645

 
 
 
 
 
 
 
 
 
 
Earnings per share: (a)
 
 
 
 
 
 
 
 
 
Basic
$
0.52

 
$
(0.18
)
 
 
—

 
 
$
0.34

Diluted
$
0.49

 
$
(0.17
)
 
 
—

 
 
$
0.32

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
19,500,430

 
19,500,430

 
 
19,500,430

 
 
19,500,430

Diluted
20,531,122

 
20,531,122

 
 
20,531,122

 
 
20,531,122

(a) - Earnings per share amounts may not recalculate or cross foot due to rounding.





See the accompanying Notes to Unaudited Pro Forma Consolidated Financial Information.

Page 3

 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All Amounts in Thousands, Except Share and Per Share Amounts)

 
For the Year Ended December 31, 2012
 
Historical Information
 
 
 
 
 
 
As Reported
 
Disposition
Note 2, Item #
 
Pro Forma Adjustments
Note 2, Item #
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
 
Service and administrative fees
$
90,550

 
$
—

 
 
$
—

 
 
$
90,550

Brokerage commissions and fees
35,306

 
(35,306
)
(6)
 
—

 
 
—

Ceding commission
34,825

 
—

 
 
—

 
 
34,825

Net investment income
3,068

 
(3
)
(6)
 
—

 
 
3,065

Net realized investment gains
3

 
—

 
 
—

 
 
3

Net earned premium
127,625

 
—

 
 
—

 
 
127,625

Other income
269

 
(1
)
(6)
 
—

 
 
268

Total revenues
291,646

 
(35,310
)
 
 
—

 
 
256,336

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Net losses and loss adjustment expenses
40,219

 
—

 
 
—

 
 
40,219

Member benefit claims
4,642

 
—

 
 
—

 
 
4,642

Commissions
128,741

 
—

 
 
—

 
 
128,741

Personnel costs
48,648

 
(20,172
)
(6)
 
—

 
 
28,476

Other operating expenses
30,354

 
(5,562
)
(6)
 
—

 
 
24,792

Depreciation and amortization
3,933

 
(660
)
(6)
 
—

 
 
3,273

Amortization of intangibles
4,953

 
(2,213
)
(6)
 
—

 
 
2,740

Interest expense
6,624

 
(2,200
)
(6)
 
—

 
 
4,424

Total expenses
268,114

 
(30,807
)
 
 
—

 
 
237,307

Income from continuing operations before income taxes and non-controlling interests
23,532

 
(4,503
)
 
 
—

 
 
19,029

Income taxes
8,295

 
(1,801
)
(6)
 
—

 
 
6,494

Income before non-controlling interests
15,237

 
(2,702
)
 
 
—

 
 
12,535

Less: net income attributable to non-controlling interests
72

 
—

 
 
—

 
 
72

Net income from continuing operations
$
15,165

 
$
(2,702
)
 
 
$
—

 
 
$
12,463

 
 
 
 
 
 
 
 
 
 
Earnings per share: (a)
 
 
 
 
 
 
 
 
 
Basic
$
0.77

 
$
(0.14
)
 
 
$
—

 
 
$
0.63

Diluted
$
0.74

 
$
(0.13
)
 
 
$
—

 
 
$
0.60

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
19,655,492

 
19,655,492

 
 
19,655,492

 
 
19,655,492

Diluted
20,600,362

 
20,600,362

 
 
20,600,362

 
 
20,600,362

(a) - Earnings per share amounts may not recalculate or cross foot due to rounding.





See the accompanying Notes to Unaudited Pro Forma Consolidated Financial Information.

Page 4

 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All Amounts in Thousands, Except Share and Per Share Amounts)
 
For the Year Ended December 31, 2011
 
Historical Information *
 
 
 
 
 
 
As Reported
 
Disposition
Note 2, Item #
 
Pro Forma Adjustments
Note 2, Item #
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
 
Service and administrative fees
$
94,464

 
$
—

 
 
$
—

 
 
$
94,464

Brokerage commissions and fees
34,396

 
(34,396
)
(6)
 
—

 
 
—

Ceding commission
29,495

 
—

 
 
—

 
 
29,495

Net investment income
3,368

 
(37
)
(6)
 
—

 
 
3,331

Net realized investment gains (losses)
4,193

 
—

 
 
—

 
 
4,193

Net earned premium
115,503

 
—

 
 
—

 
 
115,503

Other income
170

 
(8
)
(6)
 
—

 
 
162

Total revenues
281,589

 
(34,441
)
 
 
—

 
 
247,148

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Net losses and loss adjustment expenses
37,949

 
—

 
 
—

 
 
37,949

Member benefit claims
4,409

 
—

 
 
—

 
 
4,409

Commissions
126,918

 
—

 
 
—

 
 
126,918

Personnel costs
44,547

 
(18,526
)
(6)
 
—

 
 
26,021

Other operating expenses
31,140

 
(7,479
)
(6)
 
—

 
 
23,661

Depreciation and amortization
3,077

 
(816
)
(6)
 
—

 
 
2,261

Amortization of intangibles
4,952

 
(1,732
)
(6)
 
—

 
 
3,220

Interest expense
7,641

 
(3,038
)
(6)
 
(401
)
(7)
 
4,202

Loss on the sale of subsidiary
477

 
—

 
 
—

 
 
477

Total expenses
261,110

 
(31,591
)
 
 
(401
)
 
 
229,118

Income from continuing operations before income taxes and non-controlling interests
20,479

 
(2,850
)
 
 
401

 
 
18,030

Income taxes
7,140

 
(1,140
)
(6)
 
140

(8)
 
6,140

Income before non-controlling interests
13,339

 
(1,710
)
 
 
261

 
 
11,890

Less: net (loss) attributable to non-controlling interests
(170
)
 
—

 
 
—

 
 
(170
)
Net income from continuing operations
$
13,509

 
$
(1,710
)
 
 
$
261

 
 
$
12,060

 
 
 
 
 
 
 
 
 
 
Earnings per share: (a)
 
 
 
 
 
 
 
 
 
Basic
$
0.66

 
$
(0.08
)
 
 
$
0.01

 
 
$
0.59

Diluted
$
0.64

 
$
(0.08
)
 
 
$
0.01

 
 
$
0.57

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
20,352,027

 
20,352,027

 
 
20,352,027

 
 
20,352,027

Diluted
21,265,801

 
21,265,801

 
 
21,265,801

 
 
21,265,801

 
 
 
 
 
 
 
 
 
 
* The Historical Information for the year ended December 31, 2011 includes the eReinsure results from its acquisition date of March 11, 2011 through December 31, 2011.
(a) - Earnings per share amounts may not recalculate or cross foot due to rounding.

See the accompanying Notes to Unaudited Pro Forma Consolidated Financial Information.

Page 5

 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All Amounts in Thousands, Except Share and Per Share Amounts)

 
For the Year Ended December 31, 2010
 
Historical Information *
 
 
 
 
 
 
As Reported
 
Disposition
Note 2, Item #
 
Pro Forma Adjustments
Note 2, Item #
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
 
Service and administrative fees
$
56,254

 
$
—

 
 
$
—

 
 
$
56,254

Brokerage commissions and fees
24,620

 
(24,620
)
(6)
 
—

 
 
—

Ceding commission
28,767

 
—

 
 
—

 
 
28,767

Net investment income
4,073

 
(40
)
(6)
 
—

 
 
4,033

Net realized investment gains
650

 
—

 
 
—

 
 
650

Net earned premium
111,805

 
—

 
 
—

 
 
111,805

Other income
230

 
(74
)
(6)
 
—

 
 
156

Total revenues
226,399

 
(24,734
)
 
 
—

 
 
201,665

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Net losses and loss adjustment expenses
36,035

 
—

 
 
—

 
 
36,035

Member benefit claims
466

 
—

 
 
—

 
 
466

Commissions
92,646

 
—

 
 
—

 
 
92,646

Personnel costs
36,361

 
(14,660
)
(6)
 
—

 
 
21,701

Other operating expenses
24,426

 
(4,361
)
(6)
 
—

 
 
20,065

Depreciation and amortization
1,396

 
(223
)
(6)
 
—

 
 
1,173

Amortization of intangibles
3,232

 
(1,404
)
(6)
 
—

 
 
1,828

Interest expense
8,464

 
(1,330
)
(6)
 
(260
)
(7)
 
6,874

Total expenses
203,026

 
(21,978
)
 
 
(260
)
 
 
180,788

Income from continuing operations before income taxes and non-controlling interests
23,373

 
(2,756
)
 
 
260

 
 
20,877

Income taxes
8,159

 
(1,102
)
(6)
 
91

(8)
 
7,148

Income before non-controlling interests
15,214

 
(1,654
)
 
 
169

 
 
13,729

Less: net income attributable to non-controlling interests
20

 
—

 
 
—

 
 
20

Net income from continuing operations
$
15,194

 
$
(1,654
)
 
 
$
169

 
 
$
13,709

 
 
 
 
 
 
 
 
 
 
Earnings per share: (a)
 
 
 
 
 
 
 
 
 
Basic
$
0.95

 
$
(0.10
)
 
 
$
0.01

 
 
$
0.86

Diluted
$
0.88

 
$
(0.10
)
 
 
$
0.01

 
 
$
0.80

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
15,929,181

 
15,929,181

 
 
15,929,181

 
 
15,929,181

Diluted
17,220,029

 
17,220,029

 
 
17,220,029

 
 
17,220,029

 
 
 
 
 
 
 
 
 
 
* The Historical Information for the year ended December 31, 2010, only includes the Bliss and Xxxxxxx results.
(a) - Earnings per share amounts may not recalculate or cross foot due to rounding.








See the accompanying Notes to Unaudited Pro Forma Consolidated Financial Information.

Page 6

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)


NOTE 1. BASIS OF PRO FORMA PRESENTATION
The Unaudited Pro Forma Consolidated Financial Statements are based on the Company's historical Consolidated Financial Statements, adjusted to reflect effects of the Disposition. The following Unaudited Pro Forma Consolidated Financial Statements of the Company and the related Notes should be read in conjunction with the historical Consolidated Financial Statements of the Company and the related Notes included in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 and any amendments thereto and in its Annual Report on Form 10-K for the year ended December 31, 2012 and any amendments thereto.

The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2013 gives effect to the Disposition as if it had occurred on that date. The accompanying Unaudited Pro Forma Consolidated Statements of Income for the nine months ended September 30, 2013 and for the years ended December 31, 2012, 2011 and 2010, respectively, give effect to the Disposition as if it had occurred at the beginning of the period presented with respect to Xxxxx and Xxxxxxx, and at the later of the beginning of the period presented or March 11, 2011 with respect to eReinsure (the Company acquired eReinsure on March 11, 2011).


NOTE 2. PRO FORMA ADJUSTMENTS
The pro forma adjustments made to the Unaudited Pro Forma Consolidated Balance Sheet related to the Disposition are as follows:
Item Number
Description
(1)
Represents the deletion of the assets and liabilities of the disposed businesses at September 30, 2013.
 
 
(2)
Represents the accrual of estimated costs associated with the Disposition.
 
 
(3)
Represents estimated federal and state income taxes applicable to the estimated pre-tax gain on the Disposition as if the transaction had closed on September 30, 2013, which could materially change as we finalize our discontinued operations accounting to be reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.
 
       
(4)
Represents gross proceeds of $83.5 million, less $1.0 million of transaction fees paid at closing, resulting in the initial proceeds of $82.5 million applied fully to Notes Payable as if the transaction had closed on September 30, 2013.
 
 
(5)
Represents the estimated net after-tax proceeds from the Disposition of $74.7 million. This amount, less the net assets of the disposed businesses of $66.2 million, equals the estimated net after-tax gain on disposition of $8.4 million as if the transaction had closed on September 30, 2013.
The pro forma adjustments made to the Unaudited Pro Forma Consolidated Statements of Income related to the Disposition are as follows:
Item Number
Description
(6)
Reflects the deletion of the revenues and expenses of the disposed businesses.
 
(7)
Reflects the estimated reduction in interest expense due to the pro forma impact that the Disposition net proceeds would have had on the Company's borrowing requirements.
 
(8)
Reflects the estimated tax effect of the estimated reduction in interest expense (see Item 7) using a tax rate of 35%.



Page 7
AutoNDA by SimpleDocs

Document Metadata

Filed: January 7th, 2014
Draft better contracts in just 5 minutes Get the weekly Law Insider newsletter packed with expert videos, webinars, ebooks, and more!