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Warrantech Corporation Reports Net Income for Third Quarter 2002; Seventh Consecutive Quarter of Profitable Performance.

Business Editors

EULESS, Texas--(BUSINESS WIRE)--Feb. 13, 2002

Warrantech Corporation (OTC:WTEC), a leader and innovator in providing service contracts and aftermarket warranties, today reported the seventh consecutive quarter of profitability.

Net income reached $491,204 or $0.03 per diluted share for the company's fiscal third quarter 2002, which ended Dec. 31, 2001, compared to net income of $909,927 or $0.06 per diluted share in the same period a year ago.

For the nine-month period, net income was $1.2 million or $0.08 per diluted share compared to net income of $1.8 million or $0.12 per diluted share for the same period a year ago. The earnings decrease for the third quarter 2002 and the nine-month period ending Dec. 31, 2001 compared to the prior year periods was due in part to the loss of net earned administrative fee from the loss of the Staples account. The decline in net earned administrative fee income continues to be offset by stringent cost containment practices and revenue generated from the company's new and existing customer base.

"Warrantech is reporting the seventh consecutive quarter of profits," Joel San Antonio, Warrantech chairman and chief executive officer, said. "Management is aggressively managing expenses, and implementing plans to steadily increase market penetration. As a result, Warrantech is aggressively entering new markets and developing new ways to serve existing customers while maintaining continued growth in spite of current economic conditions. Cash and cash equivalents for the quarter and nine-month period increased, and we are working to improve working capital. In addition, Warrantech announced two important developments during the quarter. The company renewed a five-year contract with Ultimate Electronics, and expanded its market presence in Latin America," San Antonio said.

Net Earned Administrative Fee

The net earned administrative fee for the quarter ended Dec. 31, 2001 was $8.5 million compared to $11.7 million for the same period last year. The change was due primarily to the loss of the Staples account and a lower amount of deferred revenue was recognized in the current quarter. For the nine months ended Dec. 31, 2001, the net earned administrative fee was $27.0 million, compared to $37.0 million for the prior year. Excluding the loss of Staples, the company experienced a slight increase in net earned administrative fee from the existing and new dealer client-base.

The Automotive segment's net earned administrative fee rose sharply for the third quarter to $4.1 million compared to $2.5 million during the same period last year. Increased deferred revenue that was recognized from prior periods and increased revenues from new and existing customers were primarily responsible for the increase.

The net earned administrative fee for the Consumer Products segment decreased to $4.3 million during the third quarter 2002 from $9.0 million for the same period the previous year, a decrease of $4.7 million or 52%. This change resulted primarily from the loss of the Staples account that was partially offset by increased volume from new and existing customers.

Net earned administrative fee for the International segment was $252,948 for the third quarter 2002, down from $266,511 for the same quarter last year. This decrease was the result of the loss of a significant customer offset by new business signed over the past year in South America and increased volumes from existing customers.

Service, Selling, General and Administrative (SG&A)

SG&A expenses for the third quarter 2002 declined significantly to $7.4 million, a decrease of 19% compared to $9.2 million in the corresponding quarter last year. The decrease in SG&A resulted from improved call center technologies and cost containment measures, as well as lower legal expenses. Total employee and human resource related expenses were down $894,442 or 18% to $4.3 million for the third quarter 2002 from $5.2 million for the same quarter last year.

For the nine-months ended Dec. 31, 2001, SG&A including the effect of settlement on ongoing litigation with AIG was $22.4 million, a decrease of 23% compared to $29.0 million a year ago. In addition to cost containment practices and improved call center technologies, consulting and legal fees, were reduced by $2.3 million or 55% from $4.2 in the nine months ended Dec. 31, 2000 due to the AIG settlement and an overall reduction in consulting expenses. Rent costs for the first nine months ended Dec. 31, 2001 decreased $705,382 reflecting the closure of the United Kingdom offices and the company's relocation of it's the company's corporate offices to Texas.

Income from Operations

Income from operations for the third quarter 2002 was $418,177, down from $1.1 million in the previous year. This decrease was the result of the loss of the Staples account, which was partially offset by reduction in SG&A and depreciation and amortization.

For the nine months ended Dec. 31, 2001, income from operations was $1.2 million, a 29% decrease compared to $2.1 million in the prior year period. The decrease in income from operations for the nine-month period was the result of the loss of the Staples account, substantially offset by the elimination of losses resulting from the United Kingdom closing, the overall reductions in SG&A and the benefit from the AIG settlement.

Pre-tax Profit

The Automotive division reported a pre-tax profit for the third quarter 2002 of $1.3 million compared to a loss of $374,944 in the prior year. This increase was the result of higher net earned administrative fee while SG&A was held flat. Consumer Products reported a pre-tax loss of $221,108 in the third quarter of 2002 compared to $2.0 million profit in the third quarter of 2001 due to the loss of the Staples account, partially offset by reductions in SG&A expense. International pre-tax loss decreased to $374,944 for the third quarter of 2002 from a loss of $556,781 in the prior year period, primarily due to increased business in South America and lower SG&A expense.

About Warrantech:

Warrantech Corporation administers and markets service contracts and after-market warranties on automobiles, automotive components, recreational vehicles, appliances, consumer electronics, homes, computer and computer peripherals for retailers, distributors and manufacturers. The company continues to expand its domestic and global penetration, and now provides its services in the United States, Canada, Puerto Rico and Latin America. For additional information on Warrantech, access www.warrantech.com.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are subject to risks and uncertainties, including but are not limited to, Warrantech Automotive's ability to secure an alternate source of payment of claims under the vehicle service contracts, the effectiveness of cost containment measures and the continuation of current levels of business activity, the impact of competitive products, product demand and market-acceptance risks, reliance on key strategic alliances, fluctuations in operating results and cash flow, adverse outcomes of litigation and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission. These risks could cause the company's actual results for the current fiscal year and beyond to differ materially from those expressed in any forward looking statements made by, or on behalf of, the company.

 WARRANTECH CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)



 For the Three Months Ended
 Dec. 31,
 ----------------------------------
 2001 2000
 ---------------- ---------------

Earned Administrative Fee (net of
 amortization of deferred costs) $8,549,955 $11,724,995
 ---------------- ---------------

Costs and expenses
 Service, selling, and general and
 administrative 7,394,418 9,177,970
 Legal settlement -- --
 Depreciation and amortization 737,360 1,476,477
 Loss on abandonment of assets -- --
 ---------------- ---------------
Total costs and expenses 8,131,778 10,654,447
 ---------------- ---------------
Income from operations 418,177 1,070,548

Other income (expense) 357,627 238,966
 ---------------- ---------------

Income before provision for
 income taxes 775,804 1,309,514
Provision for income taxes 284,600 399,587
 ---------------- ---------------
Net income $491,204 $909,927
 ================ ===============
Earnings per share:
 Basic $0.03 $0.06
 Diluted $0.03 $0.06

Weighted average number of
 shares outstanding:
 Basic 15,243,095 15,280,549
 Diluted 15,243,095 15,280,549



 For the Nine Months Ended
 Dec. 31,
 ------------------------------------
 2001 2000
 ---------------- ----------------
Earned Administrative Fee (net of

 amortization of deferred costs) $27,043,540 $37,022,003


 ---------------- ----------------
Costs and expenses

 Service, selling, and general and

 administrative 23,242,498 29,014,602

 Legal settlement (824,332) --
 Depreciation and amortization 3,439,123 4,858,697

 Loss on abandonment of assets -- 1,049,552

 ---------------- ----------------
Total costs and expenses 25,857,289 34,922,851

 ---------------- ----------------
Income from operations 1,186,251 2,099,152

Other income (expense) 698,623 643,751
 ---------------- ----------------
Income before provision for
 income taxes 1,884,874 2,742,903

Provision for income taxes 714,200 899,993

 ---------------- ----------------
Net income $1,170,674 $1,842,910

 ================ ================
Earnings per share:

 Basic $0.08 $0.12
 Diluted $0.08 $0.12


Weighted average number of
 shares outstanding:
 Basic 15,221,757 15,318,259

 Diluted 15,221,757 15,318,259




 WARRANTECH CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS


 (Unaudited)
 Dec. 31, March 31,
 2001 2001
 ------------ ------------
A S S E T S

Current assets:
Cash and cash equivalents $ 6,655,955 $ 3,001,924

Investments in marketable securities 960,821 196,154

Accounts receivable, (net of allowances of
 $848,881 and $1,079,946, respectively) 12,627,581 12,152,515
Other receivables, net 5,353,918 7,065,531
Income tax receivable 211,014 5,378,648
Deferred income taxes 1,711,882 571,182
Prepaid expenses and other current assets 691,395 964,929
 ------------ ------------
 Total current assets 28,212,567 29,330,883
 ------------ ------------
Property and equipment, net 10,024,243 11,898,890

Other assets:
Excess of cost over fair value of
 assets acquired (net of accumulated
 amortization of $5,825,405) 1,637,060 1,637,290
Deferred income taxes 5,201,968 2,724,096
Deferred direct costs 27,402,744 46,258,971
Investments in marketable securities 1,408,250 3,094,176
Restricted cash 800,000 800,000
Split dollar life insurance policies 799,262 708,262
Notes receivable 1,982,121 599,796
Other assets 64,809 64,809
 ------------ ------------
 Total other assets 39,926,214 55,887,400
 ------------ ------------
 Total Assets $77,533,024 $97,117,173
 ============ ============



 WARRANTECH CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS


 (Unaudited)
 Dec. 31, March 31,
 2001 2001
 ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term
 debt and capital lease
 obligations $ 866,970 $ 801,265
Insurance premiums payable 21,663,515 19,100,164
Accounts and commissions payable 6,106,949 6,346,872
Accrued expenses and other
 current liabilities 4,083,197 5,890,078
 ------------ ------------
 Total current liabilities 32,302,631 32,138,379
 ------------ ------------

Deferred revenues 39,145,878 60,057,704

Long-term debt and capital
 lease obligations 1,026,292 1,209,853

Deferred rent payable 216,550 293,293
 ------------ ------------
 Total liabilities 73,109,351 93,699,229
 ------------ ------------

Commitments and contingencies

Stockholders' equity:
 Preferred stock -
 $.0007 par value
 authorized - 15,000,000
 Shares issued -
 none at Dec. 31, 2001
 and March 31, 2001 -- --
 Common stock -
 $.0007 par value
 authorized - 30,000,000
 Shares issued -
 16,525,324 shares at
 Dec. 31, 2001 and
 16,514,228 shares
 at March 31,2001 115,609 115,580
 Additional paid-in capital 23,745,012 23,742,868
 Loans to directors and officers (10,083,038) (9,833,244)
 Accumulated other comprehensive
 income, net of taxes (25,301) (31,949)
 Retained earnings (deficit) (5,063,330) (6,234,105)
 ------------ ------------
 8,688,952 7,759,150
Treasury stock -
 at cost, 1,274,443 shares
 at Dec. 31, 2001 and 1,415,171
 shares at March 31, 2001 (4,265,279) (4,341,206)
 ------------ ------------

 Total Stockholders' Equity 4,423,673 3,417,944
 ------------ ------------

 Total Liabilities and
 Stockholders' Equity $77,533,024 $97,117,173
 ============ ============
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