Current Report Filing (8-k)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): November 12, 2015

 

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STATE NATIONAL COMPANIES, INC.

(Exact name of registrant as specified in its charter)

 

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Delaware		001-36712		26-0017421
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification Number)

 

1900 L. Don Dodson Dr.
Bedford, Texas 76021

(Address of principal executive offices) (zip code)

 

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[phone]

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02                                           Results of Operations and Financial Condition.

 

On November 12, 2015, State National Companies, Inc. (the “Company”) issued a press release reporting the Company’s financial results for the third quarter ended September 30, 2015.  A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and will be posted on the Investor Relations section of the Company’s website at http://ir.statenational.com. In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 2.02 and in the attached exhibit shall be deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Use of our Website to Distribute Material Company Information

 

Our company website address is www.statenational.com. We use our website as a channel of distribution for important company information. Important information, including press releases, investor presentations and financial information regarding our company, is routinely posted on and accessible on the Investor Relations subpage of our website, which is accessible by clicking on the tab labeled “Investor Relations” on our website home page. We also use our website to expedite public access to time-critical information regarding our company in advance of or in lieu of distributing a press release or a filing with the Securities and Exchange Commission disclosing the same information. Therefore, investors should look to the Investor Relations subpage of our website for important and time-critical information.

 

Item 9.01              Financial Statements And Exhibits.

 

(d)           Exhibits.

 

In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached exhibit shall be deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

 

99.1        Press Release dated November 12, 2015.

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	STATE NATIONAL COMPANIES, INC.
Date:   November 12, 2015	By:	/s/ David Hale
		David Hale
		Executive Vice President, Chief Operating Officer and Chief Financial Officer

 

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INDEX TO EXHIBITS

 

Exhibit No.		Description of Exhibit
99.1		Press Release dated November 12, 2015.

 

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Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

CONTACTS:

State National Companies, Inc. David Hale, COO & CFO 817-265-2000   Dennard · Lascar Associates Rick Black 713-529-6600

 

State National Companies Reports Third Quarter 2015 Results

 

BEDFORD, TX — November 12, 2015 — State National Companies, Inc. (NASDAQ: SNC), a leading specialty provider of property and casualty insurance, today reported its financial results for the third quarter ended September 30, 2015. The Company also initiated 2016 outlook and revised its 2015 outlook.

 

Recent SNC Announcements

 

·                  Nephila Capital agreement extended through 2019 announced on November 12, 2015

·                  Board authorized $50 million stock repurchase program announced on October 12, 2015

 

Financial Highlights - Third Quarter 2015 Compared to the Third Quarter 2014:

 

·                  Total revenues were $51.2 million, up 26.1 percent

·                  Premiums earned were $30.2 million, an increase of 18.0 percent

·                  Ceding fees were $18.8 million, up 54.1 percent

·                  Adjusted net income was $12.4 million, or a 63.2 percent increase

·                  Adjusted diluted EPS of $0.28, up from $0.17

·                  Reported 5th consecutive quarter of Adjusted EPS growth

·                  Combined ratio for Lender Services was 84.1%, down from 85.7%

 

Total revenues in the third quarter of 2015 were $51.2 million, up 26.1 percent from $40.6 million in the third quarter of 2014.  Adjusted net income, a non-GAAP measure, was $12.4 million, or $0.28 per diluted share, in the third quarter of 2015, compared to adjusted net income of $7.6 million, or $0.17 per diluted share, for the same period in 2014.  Reported net income was $12.4 million, or $0.28 per diluted share, in the third quarter of 2015.  See below for a reconciliation of non-GAAP financial measures.

 

Commenting on the quarter, State National’s Chairman, President and Chief Executive Officer, Terry Ledbetter, said, “We continued to achieve substantial growth in the third quarter and are pleased with the performance in our Lender and Program Services segments, which generated strong increases in cash flows and profitability.  Based on our current performance, combined with our expectations for the remainder of the year, we have revised our 2015 outlook, and we are issuing our preliminary 2016 outlook.  We are also pleased to have announced the Board’s authorization of a stock repurchase program last month, which represents our commitment to managing our capital and enhancing shareholder value.”

 

Mr. Ledbetter, continued. “In addition, we have amended our agreement with Nephila Capital to extend our partnership through 2019, which demonstrates Nephila’s long-term commitment to access the primary market for U.S. catastrophe exposed property business.  State National will benefit from the anticipated $51.5 million of contractual minimum fees over the extended term.”

 

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Lender Services Segment

 

In Lender Services, the Collateral Protection Insurance, or CPI, business is fully vertically integrated and State National manages all aspects of the CPI business for its clients, including policy issuance and administration, underwriting and claims. The Company differentiates itself from competitors by establishing long-term relationships with clients, leveraging its alliance with CUNA Mutual, and providing high-quality service and advanced technology to more than 600 customers and over 6.2 million loans.

 

In the third quarter of 2015, total revenues from the Lender Services segment were $30.9 million, an increase of $4.6 million, or 17.5 percent, from the third quarter of 2014.  Premiums earned increased by $4.6 million, or 18.0 percent, to $30.2 million in the third quarter of 2015 from $25.6 million in the third quarter of 2014.  Contributing to this increase in Lender Services premiums are sales of new accounts and growth in loan portfolios of existing accounts driven by rising automobile sales and higher automobile loan sizes.

 

Losses and loss adjustment expenses were $13.7 million in the third quarter of 2015, compared to $10.4 million in the same period last year, primarily a result of increased exposure due to higher earned premiums, increased retention for the business subject to the CUNA Mutual alliance and increases in claim frequency and severity.  Despite the increase in losses, the combined ratio decreased from 85.7% to 84.1% reflecting an improved expense ratio, consistent with our objective of 85 to 90 percent for the full year.

 

Program Services Segment

 

Our Program Services business provides fronting to general agents and insurance carriers to leverage State National’s “A” (Excellent) A.M. Best rating with its expansive licenses and trusted reputation to provide access to the U.S. property and casualty insurance market in exchange for ceding fees.  State National issues the policy, and the reinsurer assumes the risk.

 

In the third quarter of 2015, total revenues from the Program Services segment were $18.8 million, an increase of $6.7 million, or 54.1 percent, from the third quarter of 2014.  The growth in revenues was driven by increased ceding fees from both new and existing client programs.  The Nephila Capital program contributed ceding fees of $4.6 million, consisting of $3.8 million of capacity fees and $0.8 million of premium related fees.  Approximately $1.9 million of capacity fees is attributable to the re-estimation of premiums expected for 2015 from $150 to $100 million. As reported earlier today, the Company has signed a contract amendment with Nephila to extend the partnership through 2019, under which Nephila has agreed to pay contractual minimum ceding fees anticipated to total $51.5 million for 2016 through 2019.

 

General and Administrative Expenses

 

General and administrative expenses in the third quarter of 2015 decreased 2.0 percent, to $14.5 million from $14.8 million in the third quarter of 2014, primarily due to a decrease in direct personnel costs.

 

Balance Sheet

 

State National’s balance sheet reflects low financial leverage with $44.5 million of subordinated debentures.  The subordinated debentures have limited covenant requirements and are interest-only until the mid-2030s.

 

The Company had only $6.1 million of goodwill and other intangibles at September 30, 2015.

 

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State National’s investment portfolio is primarily comprised of fixed income securities, the majority of which have investment grade ratings with short duration of approximately four years and are laddered to allow for new funds to reinvest annually as rates change.  Most of the Company’s reserves are ceded to reinsurers.

 

2015 and 2016 Outlook

 

The Company has revised its 2015 outlook:

 

·                  In Lender Services, State National expects net earned premiums in fiscal 2015 to be in the range of $113 to $117 million, a reduction from our previous range of $120 to $130 million, due primarily to the current volume of gross written premiums. The Company maintains its expectations for a combined ratio of 85 to 90 percent.

·                  In Program Services, the Company now expects ceding fees in fiscal 2015 to be in the range of $61 to $64 million, up from the previous range of $55 to $60 million. Contributing to the increased range is the variation of fees recognized from the Nephila program and from the Meadowbrook program as it is exceeding prior expectations.

 

State National has also initiated its 2016 outlook:

 

·                  In Lender Services, the Company expects net earned premiums in fiscal 2016 to be in the range of $115 to $125 million, with a combined ratio of 85 to 90 percent.

·                  In Program Services, State National expects ceding fees in fiscal 2016 to be in the range of $55 to $65 million.

 

Non-GAAP Reconciliation

 

This press release includes certain financial measures that have been adjusted for items impacting comparability. The accompanying information provides reconciliations of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, earnings per share, return on equity or any other GAAP measure of liquidity or financial performance.

 

Adjusted net income is considered a non-GAAP financial measure because it reflects adjustments to net income, which is the most directly comparable measure calculated in accordance with GAAP for the pro forma provision for income taxes as if the Company had been treated as a C Corporation for each period presented and the exclusion (net of tax benefit) of the increase in the Company’s deferred tax asset as a result of the conversion to C Corporation status, the amount of founder special compensation and the non-recurring offering-related expenses and contract modification expense related to the amendment to our alliance agreement with CUNA Mutual, as applicable. Management believes this measure is helpful to investors because it provides comparability in evaluating core financial performance between periods.

 

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STATE NATIONAL COMPANIES, INC.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except per share data)

 

Adjusted Net Income

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2015			2014			2015			2014
Adjusted net income		$	12,396		$	7,634		$	30,752		$	20,796
Reconciliation of adjusted net income:
Net income (loss)		$	12,396		$	6,959		$	30,752		$	4,166
Plus (less): Provision for income taxes to reflect change to C corporation status (4)		—			—			—			4,193
Less: Recognition of deferred tax asset upon conversion to C corporation (5)		—			—			—			14,480
Plus: Founder special compensation (1) (6)		—			—			—			10,973
Plus: Offering-related expenses (2) (6)		—			675			—			5,041
Plus: Contract modification expense (3) (6)		—			—			—			10,903
Adjusted net income		$	12,396		$	7,634		$	30,752		$	20,796

 

Adjusted Earnings Per Share

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2015			2014			2015			2014
Adjusted diluted earnings per share		$	0.28		$	0.17		$	0.70		$	0.55
Reconciliation of adjusted diluted earnings per share:
Net income (loss)		$	0.28		$	0.16		$	0.70		$	0.11
Plus (less): Provision for income taxes to reflect change to C corporation status (4)		—			0.01			—			0.11
Less: Recognition of deferred tax asset upon conversion to C corporation (5)		—			—			—			0.38
Plus: Founder special compensation (1) (6)		—			—			—			0.29
Plus: Offering-related expenses (2) (6)		—			—			—			0.13
Plus: Contract modification expense (3) (6)		—			—			—			0.29
Adjusted diluted earnings per share		$	0.28		$	0.17		$	0.70		$	0.55

 

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(1)         We made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company.  We refer to these payments as “founder special compensation.”  Following the completion of the private placement, we ceased paying founder special compensation.

 

(2)         Offering related expenses are non-recurring expenses related to the Company’s private placement of common stock in 2014.

 

(3)         In connection with the 2014 amendment to the alliance agreement with CUNA Mutual, we agreed to pay CUNA Mutual $17.8 million. As a result, we recorded contract modification expense of $17.8 million as of June 30, 2014.

 

(4)         Upon the completion of the private placement, our parent company’s status as a Subchapter S corporation terminated and our consolidated income became fully subject to U.S. federal income taxes.  This adjustment represents estimated income taxes as if the Company had been treated as a C Corporation for each period presented.

 

(5)         As a result of the Company’s conversion to a C Corporation, the deferred tax asset increased by approximately $14 million as of June 30, 2014 primarily due to the effects of eliminating deferred tax balances on the insurance subsidiaries related to intercompany transactions.

 

(6)         Founder special compensation, offering-related expenses and contract modification expense are shown net of estimated statutory federal and state income taxes for each period presented.

 

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Conference Call

 

State National will host a conference tomorrow morning, November 13, 2015 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss its third quarter 2015 results.  To access the call live, dial [phone] and use the passcode 53788912# at least 10 minutes prior to the start time.  Alternatively, investors can listen live over the Internet by visiting the Company’s website at http://ir.statenational.com/.  For those who cannot listen to the live call, a telephonic replay will be available through November 20, 2015 and may be accessed by calling [phone] and using pass code 53788912#.  Also, an archive of the webcast will be available after the call for a period of 90 days on the “Investor Relations” section of the Company’s website at http://www.statenational.com/.

 

About State National Companies, Inc.

 

State National Companies, Inc. (NASDAQ: SNC) is a leading specialty provider of property and casualty insurance operating in two niche markets across the United States.  In its Program Services segment, the Company leverages its “A” (Excellent) A.M. Best rating, expansive licenses and reputation to provide access to the U.S. property and casualty insurance market in exchange for ceding fees.  In its Lender Services segment, the company specializes in providing collateral protection insurance, which insures personal automobiles and other vehicles held as collateral for loans made by credit unions, banks and specialty finance companies.  To learn more, please visit www.statenational.com. The Company routinely posts important company information on its website.

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

 

Various statements contained in this press release are forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally, but not always, accompanied by words such as “estimate,” “believe,” “expect,” “will,” “plan,” “target,” “could”  or other words that convey the uncertainty of future events or outcomes.

 

There can be no assurance that actual developments will be those anticipated by us. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, our ability to recover from our capacity providers, the cost and availability of reinsurance coverage, challenges to our use of issuing carrier or fronting arrangements by regulators or changes in state or federal insurance or other statutes or regulations, our dependence on a limited number of business partners, potential regulatory scrutiny of lender-placed automobile insurance, level of new car sales, availability of credit for vehicle purchases and other factors affecting automobile financing, our ability to compete effectively, a downgrade in the financial strength ratings of our insurance subsidiaries, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, changes in interest rates or other changes in the financial markets, the effects of emerging claim and coverage issues, changes in the demand for our products, the effect of general economic conditions, breaches in data security or other disruptions with our technology, and changes in pricing  or other competitive environments.

 

Forward-looking statements involve inherent risks and uncertainties that are difficult to predict, many of which are beyond our control. Additional information about these risks and uncertainties is contained in our filings with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date of this release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 

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STATE NATIONAL COMPANIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands, except for share and per share information)

 

		September 30,			December 31,
		2015			2014
		(Unaudited)
Assets
Investments:
Fixed-maturity securities — available-for-sale, at fair value (amortized cost — $328,271, $305,019, respectively)		$	331,478		$	309,911
Equity securities — available-for-sale, at fair value (cost — $5,594, $1,419, respectively)		6,443			2,642
Total investments		337,921			312,553
Cash and cash equivalents		47,732			38,348
Restricted cash and investments		3,716			6,597
Accounts receivable from agents, net		25,988			18,528
Reinsurance recoverable on paid losses		1,046			1,200
Deferred acquisition costs		957			1,036
Reinsurance recoverables		1,842,427			1,656,534
Property and equipment, net (includes land held for sale — $1,034, $1,034, respectively)		17,367			18,397
Interest receivable		1,985			1,795
Deferred income taxes, net		28,822			23,864
Goodwill and intangible assets, net		6,139			6,683
Other assets		4,522			6,229
Total assets		$	2,318,622		$	2,091,764
Liabilities
Unpaid losses and loss adjustment expenses		$	1,301,173		$	1,209,905
Unearned premiums		575,935			480,124
Allowance for policy cancellations		56,927			55,500
Deferred ceding fees		29,446			23,612
Accounts payable to agents		2,124			2,448
Accounts payable to insurance companies		4,437			4,399
Subordinated debentures		44,500			44,500
Income taxes payable		2,920			1,762
Other liabilities		31,556			28,642
Total liabilities		2,049,018			1,850,892
Shareholders’ equity
Common stock, $.001 par value (150,000,000 shares authorized; 44,488,190 and 44,247,102 shares issued at September 30, 2015 and December 31, 2014, respectively)		44			44
Preferred stock, $.001 par value (10,000,000 shares authorized; no shares issued and outstanding at September 30, 2015 and December 31, 2014)		—			—
Additional paid-in capital		223,429			220,577
Retained earnings		43,303			16,108
Accumulated other comprehensive income		2,828			4,143
Total shareholders’ equity		269,604			240,872
Total liabilities and shareholders’ equity		$	2,318,622		$	2,091,764

 

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STATE NATIONAL COMPANIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except for per share information)

 

		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2015			2014			2015			2014
Revenues:
Premiums earned		$	30,156		$	25,599		$	85,145		$	69,585
Commission income		340			405			1,074			1,167
Ceding fees		18,837			12,167			49,360			33,025
Net investment income		2,008			1,183			5,961			3,401
Realized net investment gains (losses)		(571		)	291			880			1,186
Other income		381			926			1,228			3,137
Total revenues		51,151			40,571			143,648			111,501
Expenses:
Losses and loss adjustment expenses		14,773			10,695			40,955			29,009
Commissions		1,207			1,209			3,964			2,438
Taxes, licenses, and fees		910			823			2,185			2,053
General and administrative		14,456			14,813			46,649			42,321
Founder special compensation		—			—			—			17,914
Offering-related expenses		—			1,101			—			8,230
Contract modification expense		—			—			—			17,800
Interest expense		510			580			1,515			1,728
Total expenses		31,856			29,221			95,268			121,493
Income (loss) before income taxes		19,295			11,350			48,380			(9,992		)
Income taxes:
Current tax expense (benefit)		8,864			752			21,878			4,505
Deferred tax expense (benefit)		(1,965		)	3,639			(4,250		)	(18,663		)
		6,899			4,391			17,628			(14,158		)
Net income (loss)		$	12,396		$	6,959		$	30,752		$	4,166
Net income (loss) per share attributable to common shareholders:
Basic earnings per share		$	0.28		$	0.16		$	0.70		$	0.11
Diluted earnings per share		0.28			0.16			0.70			0.11
Dividends, per share		$	0.06		$	—		$	0.08		$	0.48
Weighted-average common shares outstanding — basic		44,247,102			44,231,336			44,239,410			37,748,716
Weighted-average common shares outstanding — diluted		44,247,827			44,437,559			44,244,247			37,821,990

 

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Program Services Segment — Results of Operations

Unaudited

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
($ in thousands)		2015			2014			2015			2014
Revenues:
Premiums earned		$	4		$	1		$	(10	)	$	(15	)
Ceding fees		18,837			12,167			49,360			33,025
Total revenues		18,841			12,168			49,350			33,010
Expenses:
Losses and loss adjustment expenses		1,090			266			2,057			113
Commissions		—			1			2			(1		)
Taxes, licenses, and fees		(1		)	4			8			3
General and administrative		2,857			2,797			8,990			8,002
Total expenses		3,946			3,068			11,057			8,117
Income (loss) before income taxes		$	14,895		$	9,100		$	38,293		$	24,893
Program gross expense ratio		1.0		%	1.1		%	1.1		%	1.2		%
Gross premiums written		$	280,975		$	257,175		$	842,033		$	693,260
Gross premiums earned		$	258,621		$	217,000		$	745,407		$	592,248

 

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Lender Services Segment — Results of Operations

Unaudited

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
($ in thousands)		2015			2014			2015			2014
Revenues:
Premiums earned		$	30,152		$	25,598		$	85,155		$	69,600
Commission income		340			405			1,074			1,167
Other income		381			318			1,103			938
Total revenues		30,873			26,321			87,332			71,705
Expenses:
Losses and loss adjustment expenses		13,683			10,429			38,898			28,896
Commissions		1,207			1,208			3,962			2,439
Taxes, licenses, and fees		911			819			2,177			2,050
General and administrative		9,550			9,480			29,681			28,757
Contract modification expense		—			—			—			17,800
Total expenses		25,351			21,936			74,718			79,942
Income (loss) before income taxes		$	5,522		$	4,385		$	12,614		$	(8,237	)
Adjusted pre-tax income (loss)		$	5,522		$	4,385		$	12,614		$	9,563
Reconciliation of adjusted pre-tax income (loss):
Pre-tax income (loss)		$	5,522		$	4,385		$	12,614		$	(8,237	)
Plus: Contract modification expense (1)		—			—			—			17,800
Adjusted pre-tax income (loss)		$	5,522		$	4,385		$	12,614		$	9,563
Net loss ratio		45.4		%	40.7		%	45.7		%	41.5		%
Net expense ratio		38.7		%	45.0		%	42.1		%	47.8		%
Net combined ratio		84.1		%	85.7		%	87.8		%	89.3		%
Gross premiums written		$	40,522		$	34,688		$	102,635		$	89,978
Net premiums written		$	33,039		$	29,097		$	84,452		$	69,787

 

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(1)         In connection with the 2014 amendment to the alliance agreement with CUNA Mutual, we agreed to pay CUNA Mutual $17.8 million. As a result, we recorded contract modification expense of $17.8 million as of June 30, 2014.

 

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Corporate Segment — Results of Operations

Unaudited

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
($ in thousands)		2015			2014			2015			2014
Revenues:
Net investment income		$	2,008		$	1,183		$	5,961		$	3,401
Realized net investment gains (losses)		(571		)	291			880			1,186
Other income		—			608			125			2,199
Total revenues		1,437			2,082			6,966			6,786
Expenses:
General and administrative		2,049			2,536			7,978			5,562
Founder special compensation		—			—			—			17,914
Offering-related expenses		—			1,101			—			8,230
Interest expense		510			580			1,515			1,728
Total expenses		2,559			4,217			9,493			33,434
Income (loss) before income taxes		(1,122		)	(2,135		)	(2,527		)	(26,648		)
Income tax expense (benefit)		6,899			4,391			17,628			(14,158		)
Net income (loss)		$	(8,021	)	$	(6,526	)	$	(20,155	)	$	(12,490	)
Adjusted pre-tax income (loss)		$	(1,122	)	$	(1,034	)	$	(2,527	)	$	(504	)
Reconciliation of adjusted pre-tax income (loss):
Pre-tax income (loss)		$	(1,122	)	$	(2,135	)	$	(2,527	)	$	(26,648	)
Plus: Founder special compensation (1)		—			—			—			17,914
Plus: Offering-related expenses (2)		—			1,101			—			8,230
Adjusted pre-tax income (loss)		$	(1,122	)	$	(1,034	)	$	(2,527	)	$	(504	)

 

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(1)         We made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company.  We refer to these payments as “founder special compensation.”  Following the completion of the private placement, we ceased paying founder special compensation.

 

(2)         Offering related expenses are non-recurring expenses related to the Company’s private placement of common stock in 2014.

 

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