EXHIBIT 99.1
PRESS RELEASE Source: First Acceptance Corporation
Contact: Chuck Hamilton (615) 844-2811
FIRST ACCEPTANCE CORPORATION REPORTS FOURTH QUARTER AND FISCAL YEAR 2004
FINANCIAL RESULTS
NASHVILLE, TN, September 27, 2004 /PRNewswire-FirstCall/ -- First Acceptance
Corporation (NYSE: FAC) today reported its financial results for the fourth
quarter and the fiscal year ended June 30, 2004.
KEY HIGHLIGHTS
o Successful completion on April 30, 2004 of the acquisition of
USAuto Holdings, Inc. ("USAuto") for $76 million in cash that
was raised in part by a rights offering to existing
shareholders and the issuance of 13,250,000 shares to the
shareholders of USAuto.
o From the date of acquisition to June 30, 2004 (two months),
the insurance operations produced revenues of $18.2 million
and income before tax of $3.3 million, reporting a combined
ratio of 74.8% (after adjusting expenses for ceding
commissions from reinsurer and fee income) which included a
loss ratio of 61.1% over the same period.
ACTUAL RESULTS
The net loss for the three months ended June 30, 2004 (which includes
two months of insurance operations) was $6.1 million, or a net loss of $0.16 per
share on a fully-diluted basis, compared to a net loss of $0.8 million, or a net
loss of $0.04 on a fully-diluted basis, for the same period of fiscal 2003.
Total revenues grew from $0.3 million in the fourth quarter of 2003 to $18.4
million in the fourth quarter of 2004 as a result of the inclusion of USAuto's
non-standard automobile insurance operations. Total expenses for the 2004 period
include $3.3 million of severance costs and $7.6 million in stock-based
compensation to terminated employees. Total weighted average diluted shares
increased from 20.4 million in the fourth quarter of 2003 to 38.2 million in the
fourth quarter of 2004 as a result of the rights offering and USAuto
acquisition.
The net loss for the year ended June 30, 2004 was $3.8 million, or a
net loss of $0.15 per share on a fully-diluted basis, compared to a net loss of
$1.9 million, or a net loss of $0.09 on a fully-diluted basis, for fiscal 2003.
Total weighted average diluted shares increased from 20.4 million in fiscal 2003
to 25.0 million in fiscal 2004 as a result of the rights offering and USAuto
acquisition.
PRO FORMA RESULTS
On a pro forma basis, for the year ended June 30, 2004 (assuming that
the acquisition of USAuto took place on July 1, 2002), total revenues were
$100.3 million, compared to $80.4 million for fiscal 2003. On a pro forma basis,
net income increased 27%, from $9.1 million in fiscal 2003 to $11.6 million in
fiscal 2004, and, on a fully-diluted basis, net income per share increased 26%,
from $0.19 in fiscal 2003 to $0.24 in fiscal 2004.
INSURANCE OPERATIONS
o KEY RATIOS - The Company's loss ratio was 61.1% for the period
from April 30, 2004 (the date of the USAuto acquisition) to
June 30, 2004. On a pro forma basis, for the year ended June
30, 2004, the Company's loss ratio improved to 63.4% from
67.5% for fiscal 2003 and the combined ratio improved to 79.2%
from 80.6% over the same period.
o OFFICE EXPANSION - During the three months ended June 30,
2004, the Company opened 13 new offices in four states,
bringing the total number to 139 offices in seven states. This
increase compares to two new offices opened during the same
period last year. During the year ended June 30, 2004, the
Company opened 30 new offices compared to 17 during the same
period last year, and 13 during the same period in 2002. The
30 new offices opened in fiscal 2004 were profit neutral in
fiscal 2004, but are expected to be accretive during fiscal
2005. Between June 30, 2004 and August 31, 2004, the Company
opened an additional seven offices, bringing the total number
of offices to 146.
o PREMIUM GROWTH - On a pro forma basis, for the three months
ended June 30, 2004, net premiums earned increased by 43% to
$17.5 million, as compared to $12.2 million for the same
period last year. The increase was driven by an increase in
the percentage of reinsurance assumed on business written in
Alabama (increased from 15% to 50% effective February 2004) in
addition to a 6% increase in the number of average policies in
force.
On a pro forma basis, for the year ended June 30, 2004, net
premiums earned increased by 50% to $57.7 million, as compared
to $38.4 million for fiscal 2003. The increase was due to the
previous-mentioned increase in the percentage of reinsurance
assumed on business written in Alabama and a 5% increase in
average policies in force.
o REINSURANCE - During the quarter and year ended June 30, 2004,
the Company ceded approximately 50% of its earned premiums.
Based on the increase in available statutory capital and
surplus as a result of the USAuto acquisition, the Company
elected not to renew its quota share reinsurance treaty
effective September 1, 2004. For the year ended June 30, 2004,
ceded premiums earned by the reinsurer were $44.4 million.
REAL ESTATE OPERATIONS
During the three months ended June 30, 2004, the Company sold one
property of 1.3 acres in San Antonio, Texas for net sales proceeds of $26,000,
which was equal to its carrying value. For the year ended June 30, 2004, a total
of ten properties, totaling $4.6 million in sales proceeds, were sold, producing
a gain of $4.1 million.
2
On July 7, 2004, the property and deed for 41 acres the Company owned
in Arlington, Texas was taken by the City of Arlington upon foreclosure of a tax
lien with no recourse to the Company. An accrual of $433,000 for potential
liability for taxes will be reversed in the first fiscal quarter of 2005.
The Company has six parcels of land remaining to be sold in the San
Antonio area, totaling 310 acres, with a book value of $1.1 million at June 30,
2004.
CASH AND INVESTED ASSETS
The Company completed a rights offering of its common stock on April
30, 2004, which produced net proceeds of approximately $49.4 million. Prior to
the transaction, the Company had unrestricted cash totaling $58.9 million,
resulting in total cash available for the USAuto acquisition of $108.3 million.
Of this amount, $76.0 million was paid for the purchase of USAuto, $2.9 million
was used to reduce USAuto's debt, and $3.1 million was paid for costs related to
the acquisition. After the acquisition, the Company contributed $5.0 million to
the statutory capital and surplus of its two insurance subsidiaries, USAuto
Insurance Company Inc. and Village Auto Insurance Company Inc., to support
additional premium writings. The remaining net unrestricted cash of $21.3
million is available for general corporate purposes and to provide support for
increased premium writings of the insurance operations.
Proceeds from the Company's rights offering and cash flows from
insurance operations for the two months ended June 30, 2004 have contributed to
higher invested assets. On July 1, 2004, the Company engaged Hyperion Capital
Management, Inc. to manage its insurance and corporate investment portfolios,
which total approximately $60 million in investable assets.
ABOUT FIRST ACCEPTANCE CORPORATION
First Acceptance Corporation began its operations as Liberte Investors,
Inc. in 1986. Its insurance subsidiary, USAuto, which began operations in 1995,
provides non-standard private passenger automobile insurance primarily through
employee-agents in 146 retail offices in seven states. The Company's insurance
company subsidiaries are licensed to do business in 22 states.
The Company plans to release financial results for the three months
ending September 30, 2004 on or about November 15, 2004 and will hold a
conference call to present such results.
This press release contains forward-looking statements. These
statements, which have been included in reliance on the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, involve risks and
uncertainties. Investors are hereby cautioned that these statements may be
affected by the important factors, among others, set forth in First Acceptance
Corporation's Registration Statement on Form S-1 (Registration No. 111161) and
its 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
review any forward-looking statement, whether as a result of new information,
future developments or otherwise.
3
FIRST ACCEPTANCE CORPORATION,
F/K/A LIBERTE INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
Actual (1) Pro forma (2)
-------------------------------------------- -----------------------------------------
Three Months Ended Year Ended Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
-------------------- -------------------- ------------------- -------------------
2004 2003 2004 2003 2004 2003 2004 2003
-------- -------- -------- -------- -------- -------- -------- --------
REVENUES:
Premiums earned $ 11,728 $ -- $ 11,728 $ -- $ 17,541 $ 12,167 $ 57,716 $ 38,353
Commissions and fees 4,401 -- 4,401 -- 6,639 7,405 26,275 33,462
Ceding commissions from
reinsurer 1,925 -- 1,925 -- 2,872 1,972 10,674 6,952
Gains on sales of foreclosed
real estate -- -- 4,147 233 -- -- 4,147 233
Investment income 338 261 958 1,098 341 340 1,431 1,289
Other (6) -- (6) -- 52 50 80 148
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues 18,386 261 23,153 1,331 27,445 21,934 100,323 80,437
-------- -------- -------- -------- -------- -------- -------- --------
EXPENSES:
Losses and loss adjustment
expenses 7,167 -- 7,167 -- 9,535 7,877 36,616 25,905
Insurance operating expenses 7,194 -- 7,194 -- 10,935 8,961 41,142 35,962
Other operating expenses 4,111 858 6,235 2,637 711 370 2,278 1,648
Stock-based compensation 7,560 193 7,850 546 -- -- -- --
Depreciation and amortization 615 5 648 10 377 307 1,366 1,954
Interest expense 44 -- 44 -- 69 116 318 29
-------- -------- -------- -------- -------- -------- -------- --------
Total expenses 26,691 1,056 29,138 3,193 21,627 17,631 81,720 65,498
-------- -------- -------- -------- -------- -------- -------- --------
(Loss) income before income taxes (8,305) (795) (5,985) (1,862) 5,818 4,303 18,603 14,939
Income tax (benefit) expense (2,189) -- (2,189) -- 2,036 1,660 6,983 5,844
-------- -------- -------- -------- -------- -------- -------- --------
Net (loss) income $ (6,116) $ (795) $ (3,796) $ (1,862) $ 3,782 $ 2,643 $ 11,620 $ 9,095
======== ======== ======== ======== ======== ======== ======== ========
Basic net (loss) income per share $ (0.16) $ (0.04) $ (0.15) $ (0.09) $ 0.08 $ 0.06 $ 0.25 $ 0.20
Diluted net (loss) income per
share $ (0.16) $ (0.04) $ (0.15) $ (0.09) $ 0.08 $ 0.06 $ 0.24 $ 0.19
Weighted average basic shares 38,190 20,425 24,965 20,420 46,423 46,234 46,405 46,229
Weighted average diluted shares 38,190 20,425 24,965 20,420 47,897 47,201 47,883 46,985
(1) Actual results reflect USAuto's insurance operations since the date of
acquisition (April 30, 2004).
(2) Pro forma results give effect to the USAuto acquisition and related
transactions, including the rights offering and the application of the
proceeds therefrom, as if they had been consummated on July 1, 2002.
The pro forma results also give effect to the elimination of certain
expenses that have been discontinued directly as a result of the
acquisition, such as the compensation expense of terminated employees.
4
FIRST ACCEPTANCE CORPORATION,
F/K/A LIBERTE INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - BY BUSINESS SEGMENT
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
Actual(1) Pro forma (2)
--------------------------------------------- -----------------------------------------
Three Months Ended Year Ended Three Months Ended Year Ended
INSURANCE June 30, June 30, June 30, June 30,
---------------------- --------------------- ------------------- -------------------
2004 2003 2004 2003 2004 2003 2004 2003
-------- --------- -------- --------- -------- -------- -------- --------
REVENUES:
Premiums earned $ 11,728 $ -- $ 11,728 $ -- $ 17,541 $ 12,167 $ 57,716 $ 38,353
Commissions and fees 4,401 -- 4,401 -- 6,639 7,405 26,275 33,462
Ceding commissions from reinsurer 1,925 -- 1,925 -- 2,872 1,972 10,674 6,952
Investment income 180 -- 180 -- 271 168 1,007 545
Other (6) -- (6) -- 52 50 80 148
-------- --------- -------- --------- -------- -------- -------- --------
Total revenues 18,228 -- 18,228 -- 27,375 21,762 95,752 79,460
-------- --------- -------- --------- -------- -------- -------- --------
EXPENSES:
Losses and loss adjustment
expenses 7,167 -- 7,167 -- 9,535 7,877 36,616 25,905
Operating expenses 7,194 -- 7,194 -- 10,935 8,961 41,142 35,962
Depreciation and amortization 608 -- 608 -- 377 307 1,366 1,954
-------- --------- -------- --------- -------- -------- -------- --------
Total expenses 14,969 -- 14,969 -- 20,847 17,145 79,124 63,821
-------- --------- -------- --------- -------- -------- -------- --------
Income before income taxes $ 3,259 $ -- $ 3,259 $ -- $ 6,528 $ 4,617 $ 16,628 $ 15,639
======== ========= ======== ========= ======== ======== ======== ========
Actual (1) Pro forma (2)
-------------------------------------------- -------------------------------------------
REAL ESTATE AND CORPORATE (3) Three Months Ended Year Ended Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
-------------------- -------------------- -------------------- -------------------
2004 2003 2004 2003 2004 2003 2004 2003
-------- -------- -------- -------- -------- -------- -------- --------
REVENUES:
Gains on sales of foreclosed real
estate $ -- $ -- $ 4,147 $ 233 $ -- $ -- $ 4,147 $ 233
Investment income 158 261 778 1,098 70 172 424 744
Other -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues 158 261 4,925 1,331 70 172 4,571 977
-------- -------- -------- -------- -------- -------- -------- --------
EXPENSES:
Operating expenses 4,111 858 6,235 2,637 711 370 2,278 1,648
Stock-based compensation 7,560 193 7,850 546 -- -- -- --
Depreciation 7 5 40 10 -- -- -- --
Interest expense 44 -- 44 -- 69 116 318 29
-------- -------- -------- -------- -------- -------- -------- --------
Total expenses 11,722 1,056 14,169 3,193 780 486 2,596 1,677
-------- -------- -------- -------- -------- -------- -------- --------
(Loss) income before income taxes $(11,564) $ (795) $ (9,244) $ (1,862) $ (710) $ (314) $ 1,975 $ (700)
======== ======== ======== ======== ======== ======== ======== ========
(1) Actual results reflect USAuto's insurance operations since the date of
acquisition (April 30, 2004).
(2) Pro forma results give effect to the USAuto acquisition and related
transactions, including the rights offering and the application of the
proceeds therefrom, as if they had been consummated on July 1, 2002.
The pro forma results also give effect to the elimination of certain
expenses that have been discontinued directly as a result of the
acquisition, such as the compensation expense of terminated employees.
(3) Includes activities related to acquiring an operating company and
disposing of foreclosed real estate held for sale in addition to
interest expense associated with all debt.
5
FIRST ACCEPTANCE CORPORATION,
F/K/A LIBERTE INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
June 30,
-------------------
2004 2003
-------- --------
ASSETS
Fixed maturities, available-for-sale, at market
value $ 33,243 $ --
Cash and cash equivalents 38,352 56,847
Premiums and fees receivable 32,076 --
Reinsurance receivables 24,681 --
Deferred tax asset 45,493 --
Other assets 7,800 612
Foreclosed real estate held for sale 1,108 1,594
Goodwill and identifiable intangible assets 102,914 --
-------- --------
TOTAL $285,667 $ 59,053
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total policy liabilities 63,867 --
Amounts due to reinsurers and insurance companies 13,750 --
Note payable to financial institution 4,000 --
Other liabilities 9,824 978
-------- --------
Total liabilities 91,441 978
Total stockholders' equity 194,226 58,075
-------- --------
TOTAL $285,667 $ 59,053
======== ========
Book value per share $ 4.17 $ 2.82
6
FIRST ACCEPTANCE CORPORATION,
F/K/A LIBERTE INVESTORS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
GROSS PREMIUMS EARNED BY STATE
Actual (1) Pro forma (2)
----------------------------------------- -----------------------------------------
Three Months Ended Year Ended Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
------------------- ------------------- ------------------- -------------------
State: 2004 2003 2004 2003 2004 2003 2004 2003
-------- -------- -------- -------- -------- -------- -------- --------
Insurance company
subsidiaries:
Georgia $ 10,582 $ -- $ 10,582 $ -- $ 15,682 $ 12,120 $ 53,878 $ 34,898
Tennessee 4,460 -- 4,460 -- 6,710 6,003 25,387 22,672
Mississippi 680 -- 680 -- 1,034 971 3,822 3,323
Ohio 1,250 -- 1,250 -- 1,854 813 5,789 1,694
Missouri 587 -- 587 -- 892 645 3,125 1,794
Indiana 23 -- 23 -- 25 -- 25 --
-------- -------- -------- -------- -------- -------- -------- --------
Total insurance
company subsidiaries $ 17,582 $ -- $ 17,582 $ -- $ 26,197 $ 20,552 $ 92,026 $ 64,381
======== ======== ======== ======== ======== ======== ======== ========
MGA subsidiaries:
Georgia $ 837 $ -- $ 837 $ -- $ 1,374 $ 5,423 $ 11,618 $ 28,853
Tennessee -- -- -- -- -- -- -- 25
Alabama 4,331 -- 4,331 -- 6,496 5,864 24,219 19,832
-------- -------- -------- -------- -------- -------- -------- --------
Total MGA
subsidiaries $ 5,168 $ -- $ 5,168 $ -- $ 7,870 $ 11,287 $ 35,837 $ 48,710
======== ======== ======== ======== ======== ======== ======== ========
NET PREMIUMS EARNED BY STATE
Actual (1) Pro forma (2)
----------------------------------------- -----------------------------------------
Three Months Ended Year Ended Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
------------------- ------------------- ------------------- -------------------
State: 2004 2003 2004 2003 2004 2003 2004 2003
-------- -------- -------- -------- -------- -------- -------- --------
Georgia $ 5,828 $ -- $ 5,828 $ -- $ 8,683 $ 6,801 $ 29,802 $ 20,184
Tennessee 2,300 -- 2,300 -- 3,443 3,123 13,115 11,613
Alabama 2,247 -- 2,247 -- 3,391 976 8,057 2,919
Ohio 650 -- 650 -- 963 414 3,013 862
Missouri 309 -- 309 -- 469 328 1,620 995
Mississippi 371 -- 371 -- 567 525 2,083 1,780
Indiana 23 -- 23 -- 25 -- 26 --
-------- -------- -------- -------- -------- -------- -------- --------
Total $ 11,728 $ -- $ 11,728 $ -- $ 17,541 $ 12,167 $ 57,716 $ 38,353
======== ======== ======== ======== ======== ======== ======== ========
GAAP COMBINED RATIOS (INSURANCE COMPANIES)
Actual (1) Pro forma (2)
-------------------------------------------- --------------------------------------------
Three Months Ended Year Ended Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
-------------------- -------------------- -------------------- --------------------
2004 2003 2004 2003 2004 2003 2004 2003
-------- -------- -------- -------- -------- -------- -------- --------
Loss and loss 61.1% -- 61.1% -- 54.4% 64.7% 63.4% 67.5%
adjustment expense
Expense (3) 13.7% -- 13.7% -- 14.0% 13.1% 15.8% 13.1%
-------- -------- -------- -------- -------- -------- -------- --------
74.8% -- 74.8% -- 68.4% 77.8% 79.2% 80.6%
======== ======== ======== ======== ======== ======== ======== ========
(1) Actual results reflect USAuto's insurance operations since the date of
acquisition (April 30, 2004).
(2) Pro forma results give effect to the USAuto acquisition and related
transactions, including the rights offering and the application of the
proceeds therefrom, as if they had been consummated on July 1, 2002.
The pro forma results also give effect to the elimination of certain
expenses that have been discontinued directly as a result of the
acquisition, such as the compensation expense of terminated employees.
(3) Insurance operating expenses are reduced by fee income from insureds
and ceding commissions received from reinsurer as compensation for the
costs incurred on servicing the business on their behalf.
7