Exhibit 99
Press Release | Source: First Acceptance Corporation | |
Contact: Michael Bodayle (615) 844-2885 |
First Acceptance Corporation Reports Operating Results for the Quarter and Fiscal Year Ended June 30, 2010
NASHVILLE, TN, August 31, 2010/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the quarter and fiscal year ended June 30, 2010.
Three Months Ended | ||||||||||||||||
June 30, | Year Ended | |||||||||||||||
(unaudited) | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Summary Financial Results | (in thousands, except per share data) | |||||||||||||||
Reported | ||||||||||||||||
Revenues | $ | 55,970 | $ | 61,699 | $ | 223,173 | $ | 265,465 | ||||||||
Income (loss) before income taxes | $ | 850 | $ | (56,260 | ) | $ | 7,481 | $ | (49,904 | ) | ||||||
Net income (loss) | $ | 736 | $ | (71,532 | ) | $ | 7,040 | $ | (68,300 | ) | ||||||
Net income (loss) per diluted share | $ | 0.02 | $ | (1.50 | ) | $ | 0.14 | $ | (1.43 | ) | ||||||
Number of shares used to calculate net income (loss) per diluted share | 48,494 | 47,673 | 48,638 | 47,664 | ||||||||||||
Adjusted* | ||||||||||||||||
Revenues | $ | 55,970 | $ | 61,699 | $ | 223,173 | $ | 265,465 | ||||||||
Income before income taxes | $ | 850 | $ | 11,730 | $ | 7,481 | $ | 18,086 | ||||||||
Net income | $ | 736 | $ | 6,608 | $ | 7,040 | $ | 9,840 | ||||||||
Net income per diluted share | $ | 0.02 | $ | 0.14 | $ | 0.14 | $ | 0.20 | ||||||||
Number of shares used to calculate net income per diluted share | 48,494 | 48,643 | 48,638 | 48,948 |
* | Adjusted results for the three months and year ended June 30, 2009 exclude a goodwill impairment charge of $67,990 and deferred tax charges of $10,150. These non-GAAP financial measures are detailed on page 8. |
Operating Results
Revenues for the three months ended June 30, 2010 were $56.0 million, compared with $61.7 million for the same period in fiscal year 2009. Income before income taxes for the three months ended June 30, 2010 was $0.9 million, compared with a loss before income taxes of $56.3 million in the same period in fiscal year 2009. The loss before income taxes for the three months ended June 30, 2009 included a goodwill impairment charge of $68.0 million, or $1.40 per share on a diluted basis. Net income for the three months ended June 30, 2010 was $0.7 million, or $0.02 per share on a diluted basis, compared with a net loss of $71.5 million, or $1.50 per share on a diluted basis, for the same period in fiscal year 2009. The net loss for the three months ended June 30, 2009 included the goodwill impairment charge and an additional charge of $10.2 million, or $0.21 per share on a diluted basis, related to the write-down of deferred tax assets.
Revenues for the year ended June 30, 2010 were $223.2 million, compared with $265.5 million for the same period in fiscal year 2009. Income before income taxes for the year ended June 30, 2010 was $7.5 million, compared with a loss before income taxes of $49.9 million in the same period in fiscal year 2009. The loss before income taxes for the year ended June 30,
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2009 included a goodwill impairment charge of $68.0 million, or $1.39 per share on a diluted basis. Net income for the year ended June 30, 2010 was $7.0 million, or $0.14 per share on a diluted basis, compared with a net loss of $68.3 million, or $1.43 per share on a diluted basis, for the same period in fiscal year 2009. The net loss for the year ended June 30, 2009 included the goodwill impairment charge and an additional charge of $10.2 million, or $0.20 per share on a diluted basis, related to the write-down of deferred tax assets.
Premiums earned for the three months ended June 30, 2010 were $46.7 million, compared with $52.6 million for the same period in fiscal year 2009. Premiums earned for the year ended June 30, 2010 were $187.0 million, compared with $224.1 million for the same period in fiscal year 2009. These declines were primarily due to the weak economic conditions, which have caused both a decline in the number of policies written, as well as an increase in the percentage of our customers purchasing liability-only coverage. The closure of underperforming stores also contributed to the decrease in policies written and premiums earned. At June 30, 2010, the number of policies in force was 154,655, compared with 158,222 at June 30, 2009. At June 30, 2010, we operated 394 stores, compared with 418 stores at June 30, 2009.
Income before income taxes for the three months ended June 30, 2010 of $0.9 million included favorable development of $1.0 million for losses occurring prior to June 30, 2009 and $0.2 million of other-than-temporary impairment charges on investments.
Income before income taxes for the year ended June 30, 2010 of $7.5 million included favorable development of $11.2 million for losses occurring prior to June 30, 2009 and $1.0 million of other-than-temporary impairment charges on investments.
Loss and Loss Adjustment Expense Ratio.The loss and loss adjustment expense ratio was 68.6 percent for the three months ended June 30, 2010, compared with 55.2 percent for the three months ended June 30, 2009. The loss and loss adjustment expense ratio was 67.9 percent for the year ended June 30, 2010, compared with 66.6 percent for the year ended June 30, 2009. For the three months ended June 30, 2010, we experienced favorable development related to prior periods of $1.0 million, compared with favorable development of $4.5 million for the three months ended June 30, 2009. We experienced favorable development related to prior periods of $11.2 million for the year ended June 30, 2010, compared with $11.4 million for the year ended June 30, 2009. The favorable development for each of the years ended June 30, 2010 and 2009 was primarily due to lower than anticipated severity of accidents and improvement in our claim handling practices.
Excluding the favorable development related to prior periods, the loss and loss adjustment expense ratios for the three months ended June 30, 2010 and 2009 were 70.8 percent and 63.8 percent, respectively, and the loss and loss adjustment expense ratios for the years ended June 30, 2010 and 2009 were 74.0 percent and 71.7 percent, respectively. The year-over-year increase in the loss and loss adjustment expense ratio was due to higher frequency of accidents experienced during the first half of calendar year 2010.
Expense Ratio.Our expense ratio for the three months ended June 30, 2010 was 27.8 percent, compared with 27.5 percent for the same period in fiscal year 2009. Our expense ratio increased from 24.7 percent for the year ended June 30, 2009 to 27.3 percent for the same period in the current fiscal year. The year-over-year increase in the expense ratio was due to the
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decrease in premiums earned, which resulted in a higher percentage of fixed expenses in our retail operations (such as rent and base salary).
Combined Ratio.The combined ratio was 96.4 percent for the three months ended June 30, 2010, compared with 82.7 percent for the same period in fiscal year 2009. The combined ratio was 95.2 percent for the year ended June 30, 2010, compared with 91.3 percent for the same period in fiscal year 2009.
Provision for Income Taxes.The provision for income taxes for the three months ended June 30, 2010 was $0.1 million, compared with $15.3 million for the same period in fiscal year 2009. For the year ended June 30, 2010, the provision for income taxes was $0.4 million, compared with $18.4 million for the same period in fiscal year 2009. The provision for income taxes for the three months and year ended June 30, 2010 related to current state income taxes for certain subsidiaries with taxable income. The provision for income taxes for the three months and year ended June 30, 2009 included a charge of $10.2 million related to the write-down of deferred tax assets. At June 30, 2010 and 2009, we established a full valuation allowance against all net deferred tax assets. In assessing our ability to support the realizability of our deferred tax assets, we considered both positive and negative evidence. We placed greater weight on historical results than on our outlook for future profitability. The deferred tax valuation allowance may be adjusted in future periods if we determine that it is more likely than not that some portion or all of the deferred tax assets will be realized. In the event the deferred tax valuation allowance is adjusted, we would record an income tax benefit for the adjustment.
2010 Annual Meeting of Stockholders
Our 2010 annual meeting of stockholders will be held on Tuesday, November 16, 2010, in Nashville, Tennessee. Further details will be provided in the proxy statement for the annual meeting.
About First Acceptance Corporation
Our primary focus is the selling, servicing and underwriting of non-standard personal automobile insurance products underwritten by us as well as certain commissionable ancillary products, primarily through employee-agents. In certain states, our employee-agents also sell other complementary insurance products underwritten by us. At June 30, 2010, we leased and operated 394 retail offices in 12 states. Our insurance company subsidiaries are licensed to do business in 25 states. Additional information about First Acceptance Corporation can be found online at www.firstacceptancecorp.com.
This press release contains forward-looking statements. These statements, which have been included in reliance on the “safe harbor” provisions of the federal securities laws, involve risks and uncertainties. Investors are hereby cautioned that these statements may be affected by important factors, including, among others, the factors set forth under the caption “Risk Factors” in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and in our other filings with the Securities and Exchange Commission. Actual operations and results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended | Year Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||
(Unaudited) | ||||||||||||||||||
Revenues: | ||||||||||||||||||
Premiums earned | $ | 46,729 | $ | 52,607 | $ | 187,046 | $ | 224,113 | ||||||||||
Commission and fee income | 7,461 | 7,726 | 28,852 | 31,759 | ||||||||||||||
Investment income | 2,004 | 1,763 | 7,958 | 9,504 | ||||||||||||||
Net realized gains (losses) on investments, available-for-sale | (224 | ) | (397 | ) | (683 | ) | 89 | |||||||||||
55,970 | 61,699 | 223,173 | 265,465 | |||||||||||||||
Costs and expenses: | ||||||||||||||||||
Losses and loss adjustment expenses | 32,069 | 29,063 | 126,995 | 149,277 | ||||||||||||||
Insurance operating expenses | 20,427 | 22,147 | 79,833 | 87,124 | ||||||||||||||
Other operating expenses | 930 | 325 | 2,233 | 1,307 | ||||||||||||||
Litigation settlement | (47 | ) | (3,597 | ) | (361 | ) | 1,570 | |||||||||||
Stock-based compensation | 195 | 521 | 1,048 | 2,053 | ||||||||||||||
Depreciation and amortization | 566 | 531 | 2,013 | 1,910 | ||||||||||||||
Interest expense | 980 | 979 | 3,931 | 4,138 | ||||||||||||||
Goodwill impairment | — | 67,990 | — | 67,990 | ||||||||||||||
55,120 | 117,959 | 215,692 | 315,369 | |||||||||||||||
Income (loss) before income taxes | 850 | (56,260 | ) | 7,481 | (49,904 | ) | ||||||||||||
Provision for income taxes | 114 | 15,272 | 441 | 18,396 | ||||||||||||||
Net income (loss) | $ | 736 | $ | (71,532 | ) | $ | 7,040 | $ | (68,300 | ) | ||||||||
Net income (loss) per share: | ||||||||||||||||||
Basic | $ | 0.02 | $ | (1.50 | ) | $ | 0.15 | $ | (1.43 | ) | ||||||||
Diluted | $ | 0.02 | $ | (1.50 | ) | $ | 0.14 | $ | (1.43 | ) | ||||||||
Number of shares used to calculate net income (loss) per share: | ||||||||||||||||||
Basic | 48,015 | 47,673 | 47,961 | 47,664 | ||||||||||||||
Diluted | 48,494 | 47,673 | 48,638 | 47,664 | ||||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
Consolidated Balance Sheets
(in thousands, except per share data)
June 30, | ||||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Investments, available-for-sale at fair value (amortized cost of $187,907 and $140,849, respectively) | $ | 196,550 | $ | 140,311 | ||||
Cash and cash equivalents | 26,184 | 77,201 | ||||||
Premiums and fees receivable, net of allowance of $418 and $419 | 41,276 | 45,309 | ||||||
Other assets | 8,733 | 11,866 | ||||||
Property and equipment, net | 3,524 | 3,921 | ||||||
Deferred acquisition costs | 3,623 | 3,896 | ||||||
Goodwill | 70,092 | 70,092 | ||||||
Identifiable intangible assets | 6,360 | 6,360 | ||||||
TOTAL ASSETS | $ | 356,342 | $ | 358,956 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Loss and loss adjustment expense reserves | $ | 73,198 | $ | 83,973 | ||||
Unearned premiums and fees | 52,563 | 57,350 | ||||||
Debentures payable | 41,240 | 41,240 | ||||||
Other liabilities | 12,151 | 16,537 | ||||||
Total liabilities | 179,152 | 199,100 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.01 par value, 10,000 shares authorized | — | — | ||||||
Common stock, $.01 par value, 75,000 shares authorized; 48,509 and 48,312 shares issued and outstanding, respectively | 485 | 483 | ||||||
Additional paid-in capital | 465,831 | 464,720 | ||||||
Accumulated other comprehensive income (loss) | 8,643 | (538 | ) | |||||
Accumulated deficit | (297,769 | ) | (304,809 | ) | ||||
Total stockholders’ equity | 177,190 | 159,856 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 356,342 | $ | 358,956 | ||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
Supplemental Data
(Unaudited)
GROSS PREMIUMS EARNED BY STATE
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Premiums earned: | ||||||||||||||||
Georgia | $ | 9,933 | $ | 11,717 | $ | 40,712 | $ | 49,762 | ||||||||
Texas | 6,385 | 6,377 | 24,243 | 25,971 | ||||||||||||
Illinois | 6,068 | 6,659 | 24,550 | 27,583 | ||||||||||||
Florida | 5,306 | 5,920 | 20,808 | 26,113 | ||||||||||||
Alabama | 4,693 | 5,644 | 19,338 | 23,948 | ||||||||||||
Ohio | 3,367 | 3,099 | 12,452 | 12,914 | ||||||||||||
Tennessee | 2,881 | 3,404 | 11,764 | 15,269 | ||||||||||||
South Carolina | 2,711 | 3,727 | 11,424 | 17,887 | ||||||||||||
Pennsylvania | 2,568 | 2,982 | 10,566 | 11,437 | ||||||||||||
Indiana | 1,263 | 1,316 | 4,962 | 5,537 | ||||||||||||
Missouri | 818 | 884 | 3,261 | 3,907 | ||||||||||||
Mississippi | 736 | 878 | 2,966 | 3,785 | ||||||||||||
Total premiums earned | $ | 46,729 | $ | 52,607 | $ | 187,046 | $ | 224,113 | ||||||||
COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Loss and loss adjustment expense | 68.6 | % | 55.2 | % | 67.9 | % | 66.6 | % | ||||||||
Expense | 27.8 | % | 27.5 | % | 27.3 | % | 24.7 | % | ||||||||
Combined | 96.4 | % | 82.7 | % | 95.2 | % | 91.3 | % | ||||||||
POLICIES IN FORCE
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Policies in force — beginning of period | 169,603 | 173,674 | 158,222 | 194,079 | ||||||||||||
Net decrease during period | (14,948 | ) | (15,452 | ) | (3,567 | ) | (35,857 | ) | ||||||||
Policies in force — end of period | 154,655 | 158,222 | 154,655 | 158,222 | ||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data (continued)
(Unaudited)
Supplemental Data (continued)
(Unaudited)
NUMBER OF RETAIL LOCATIONS
Retail location counts are based upon the date that a location commenced or ceased writing business.
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Retail locations — beginning of period | 405 | 419 | 418 | 431 | ||||||||||||
Opened | 1 | — | 1 | 1 | ||||||||||||
Closed | (12 | ) | (1 | ) | (25 | ) | (14 | ) | ||||||||
Retail locations — end of period | 394 | 418 | 394 | 418 | ||||||||||||
RETAIL LOCATIONS BY STATE
June 30, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Alabama | 25 | 25 | 25 | 25 | ||||||||||||
Florida | 31 | 39 | 34 | 39 | ||||||||||||
Georgia | 60 | 61 | 61 | 61 | ||||||||||||
Illinois | 74 | 78 | 75 | 80 | ||||||||||||
Indiana | 17 | 18 | 18 | 18 | ||||||||||||
Mississippi | 8 | 8 | 8 | 8 | ||||||||||||
Missouri | 12 | 12 | 12 | 12 | ||||||||||||
Ohio | 27 | 27 | 27 | 27 | ||||||||||||
Pennsylvania | 16 | 17 | 17 | 17 | ||||||||||||
South Carolina | 26 | 27 | 26 | 27 | ||||||||||||
Tennessee | 19 | 20 | 19 | 20 | ||||||||||||
Texas | 79 | 86 | 83 | 85 | ||||||||||||
Total | 394 | 418 | 405 | 419 | ||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
In the accompanying press release, the Company makes reference to income (loss) before taxes, net income (loss), net income (loss) per diluted share, and number of diluted shares used to calculate net income (loss) per share before certain reconciling items. These financial measures are not computed in accordance with United States generally accepted accounting principles, or GAAP. The Company believes that these non-GAAP financial measures, when presented in conjunction with the comparable GAAP financial measures, are useful to both management and investors in analyzing the Company’s ongoing business and operating performance for the three months and years ended June 30, 2010 and 2009. The Company believes that providing the non-GAAP financial measures to investors, in addition to the comparable GAAP financial measures, allows investors to view the Company’s financial results in the way management views the Company’s operating results. Management believes the non-GAAP financial measures are useful as a supplemental measure of the performance of the Company’s operations because they isolate the Company’s operating performance from the accounting impact of the goodwill impairment and deferred tax charges recognized during the quarter ended June 30, 2009. Management believes the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the financial measures prepared in accordance with GAAP that are presented in the accompanying press release, as the items excluded in the presentation of the non-GAAP financial measures are significant components in understanding and assessing financial performance. A reconciliation of the non-GAAP financial measures to the nearest comparable GAAP financial measures is provided below. The non-GAAP financial measures, as presented, may not be comparable to similarly titled financial measures of other companies.
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Income (loss) before income taxes | ||||||||||||||||
As reported | $ | 850 | $ | (56,260 | ) | $ | 7,481 | $ | (49,904 | ) | ||||||
Goodwill impairment | — | 67,990 | — | 67,990 | ||||||||||||
As adjusted | $ | 850 | $ | 11,730 | $ | 7,481 | $ | 18,086 | ||||||||
Net income (loss) | ||||||||||||||||
As reported | $ | 736 | $ | (71,532 | ) | $ | 7,040 | $ | (68,300 | ) | ||||||
Goodwill impairment | — | 67,990 | — | 67,990 | ||||||||||||
Deferred tax charges | — | 10,150 | — | 10,150 | ||||||||||||
As adjusted | $ | 736 | $ | 6,608 | $ | 7,040 | $ | 9,840 | ||||||||
Net income (loss) per diluted share | ||||||||||||||||
As reported | $ | 0.02 | $ | (1.50 | ) | $ | 0.14 | $ | (1.43 | ) | ||||||
Goodwill impairment | — | 1.40 | — | 1.39 | ||||||||||||
Deferred tax charges | — | 0.21 | — | 0.20 | ||||||||||||
Effect of dilutive securities | — | 0.03 | — | 0.04 | ||||||||||||
As adjusted | $ | 0.02 | $ | 0.14 | $ | 0.14 | $ | 0.20 | ||||||||
Number of diluted shares used to calculate net income (loss) per share | ||||||||||||||||
As reported | 48,494 | 47,673 | 48,638 | 47,664 | ||||||||||||
Effect of dilutive securities | — | 970 | — | 1,284 | ||||||||||||
As adjusted | 48,494 | 48,643 | 48,638 | 48,948 | ||||||||||||
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