Warrantech Reports First Quarter Fiscal 2005 Results.BEDFORD, Texas Bedford is a suburban city located in northeast Tarrant County, Texas in the "mid-cities" area between Dallas and Fort Worth. The population was 48,390 as of a 2005 census estimate. Bedford is part of the Hurst-Euless-Bedford Independent School District. -- Warrantech Corporation (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). :WTEC WTEC World Technology Evaluation Center ), a leading independent provider of service contracts and after-market af·ter-mar·ket n. The market for parts and accessories used in the upkeep or enhancement of a previous purchase, as of a car or computer. af warranties warranties, n.pl the details of a contract; considered less important than the conditions. Whereas the penalty for breach of conditions is the termination of the contract, the penalty for breach of warranties is payment of damages to the innocent party. , today announced that it has filed its Form 10-Q Form 10-Q See 10-Q. for the first quarter ended June June: see month. 30, 2004 of fiscal year 2005. After a cumulative deferral deferral - Waiting for quiet on the Ethernet. of $238.0 million of gross revenues on the Balance Sheet to future periods, the newly adopted accounting treatment caused the company to show a net loss of ($0.8) million or ($0.05) per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share for the first quarter of fiscal 2005 compared to a net loss of ($0.5) million or ($0.03) per diluted share in the first quarter 2004. "We have not wavered in our mission," said Joel Joel, book of the Bible Joel, prophetic book of the Bible. It is a collection of the oracles of an otherwise unknown prophet, dated variously from the 9th to the 3d cent. B.C., though a date in c.400 B.C. is likely. San Antonio San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. , Warrantech chairman and chief executive officer. "Despite the new accounting treatment during fiscal 2004, we started a number of new programs, and made improvements to Warrantech's management team. Hard work pays off in positive performance. Although weakness continued in the automotive segment, gross revenues are up in both the international and consumer product services divisions. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite a weak economy and complex accounting rule changes that obscure OBSCURE - "A Formal Description of the Specification Language OBSCURE", J. Loeckx, TR A85/15, U Saarlandes, Saarbrucken, 1985. the success of our achievements, I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in proud of what Warrantech and our management team has accomplished." Gross Revenues Gross revenues for the first quarter of fiscal 2005 ended June 30, 2004, were $33.0 million, down 16 percent compared to $39.2 million in the first quarter fiscal 2004. Gross revenues in the international division rose 11 percent during the first quarter 2005 to $2.1 million, up $0.2 million from $1.9 million in the comparable 2004 quarter. Consumer products services reported gross revenues of $9.4 million during the first quarter fiscal 2005, up 3 percent or $0.3 million in the same period the previous year. The automotive division had gross revenues of $21.8 million during the first quarter fiscal 2005, down $6.5 million or 23 percent from $28.3 million in the same quarter in fiscal 2004. Direct Costs Direct costs are primarily insurance premiums and commission expenses related to the production and acquisition of service contracts. For the first quarter fiscal 2005, direct costs were $17.4 million, down $5.7 million or 25 percent, from $23.1 million in the same quarter in fiscal 2004. Automotive direct costs decreased $5.8 million or 32 percent, consumer products direct costs decreased $0.5 million or 9 percent, while international direct costs increased $0.1 million or 11 percent during the first quarter fiscal 2005 compared to the same period in fiscal 2004. Gross Profit Gross profit for the first quarter 2005 decreased $0.8 million or 11 percent compared to the same period in fiscal 2004. The automotive segment gross profit increased $0.3 million or 18 percent during the first quarter fiscal 2005 compared to the same period in fiscal 2004. The consumer products gross profit decreased $0.5 million or 13 percent during the first quarter fiscal 2005 compared to the same period in fiscal 2004. International gross profit increased $0.1 million, or 9 percent during the first quarter fiscal 2005 compared to the same quarter in fiscal 2004. Service, Selling, General and Administrative (SG&A) SG&A expenses for the first quarter 2005 were $7.0 million, down $0.4 million or 5 percent from $7.4 million in the first quarter fiscal 2004. Legal expenses increased $0.3 million during the first quarter 2005 due to litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. expenses related to the Lloyd's Lloyd's, London insurance underwriting corporation of many separate syndicates; often called Lloyd's of London. Founded in the late 17th cent. by a group of merchants, shipowners, and insurance brokers at the coffeehouse of Edward Lloyd, the association is now Underwriter's lawsuit lawsuit: see procedure; tort. and legal advice in connection with seeking guidance from the staff of the Securities and Exchange Commission. Employee costs were lower at $4.3 million during the first quarter fiscal 2005 compared to $4.5 million in the same period the previous year due primarily to efficiencies in total head count. Rent expense decreased by $0.2 million from $0.6 million in the first quarter fiscal 2004 compared to $0.4 million in the same period in fiscal 2005 due to the company's move to the new corporate headquarters in Bedford Bedford, town, England Bedford, town (1991 pop. 75,632), county seat of Bedfordshire, central England, on the Ouse River. It is an important industrial center; diesel engines, pumps, turbines, agricultural machinery, electrical equipment, and transistors , Tx. Depreciation decreased from $0.9 million in the first quarter of 2004 to $0.7 million in the same period in 2005 due to the company's planned obsolescence Planned obsolescence (also built-in obsolescence [UK]) is the decision on the part of a manufacturer to produce a consumer product that will become obsolete and/or non-functional in a defined time frame. and reduced requirement for capital expenditures on call center equipment. Income from Operations For the first quarter fiscal 2005, Warrantech had a loss from operations of $1.4 million compared to an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $1.1 million in the same period last year. The change in income from operations was primarily due to higher levels of revenue, which must be deferred to future periods. About Warrantech: Warrantech Corporation administers and markets service contracts and after-market warranties on automobiles No invention has so transformed the landscape of the United States as the automobile, and no other country has so thoroughly adopted the automobile as its favorite means of transportation. , automotive components, recreational vehicles, appliances, jewelry jewelry, personal adornments worn for ornament or utility, to show rank or wealth, or to follow superstitious custom or fashion. The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. , musical instruments, 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . For additional information on Warrantech, access http://www.warrantech.com/. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: Except for the historical information contained herein, the matters discussed in this release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The company makes such forward-looking statements under the provisions of the "safe harbor" section of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the company's views and assumptions, based on information currently available to management. Such views and assumptions are based on, among other things, the company's operating and financial performance over recent years and its expectations about its business for the current and future fiscal years. Although the company believes that the expectations reflected in such forward-looking statements are reasonable; it can give no assurance that such expectations will prove to be correct. These statements are subject to certain risks, uncertainties and assumptions, including, but not limited to, (a) prevailing economic conditions which may significantly deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. , thereby reducing the demand for the company's products and services, (b) availability of technical support personnel or increases in the rate of turnover of such personnel, resulting from increased demand for such qualified personnel, (c) changes in the terms or availability of insurance coverage for the company's programs, (d) regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. or legal changes affecting the company's business, (e) loss of business from, or significant change in relationships with any major customer, (f) the ability to successfully identify and contract new business opportunities, both domestically and internationally, (g) the ability to secure necessary capital for general operating or expansion purposes, (h) the adverse outcomes of litigation, (i) the non-payment non-payment Noun failure to pay money owed non-payment n → Nichtzahlung f, Zahlungsverweigerung f non-payment n of notes due from an officer and two directors of the company in 2007 which would result in a charge against earnings in the period in which the event occurred, (j) the inability of any of the insurance companies which insure Insure can mean:
The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. being provided by the company's current insurance company, (l) the development of facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or which could affect existing accounting policies, and (m) the illiquidity of the company's common stock. Should one or more of these or any other risks or uncertainties materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. or develop in a manner adverse to the company, or should the company's underlying assumptions prove incorrect Incorrect means to not be correct and may also refer to:
WARRANTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
June 30,
-----------------------------------
2004 2003
------------------ ----------------
Gross revenues $32,994,936 $39,170,157
Revenues deferred to future
periods (31,042,699) (9,620,586)
Deferred revenues earned 21,909,254 844,251
Net (increase) decrease in deferred
revenues (9,133,445) (8,776,335)
------------------ ----------------
Net revenues 23,861,491 30,393,822
Direct costs 17,400,074 23,098,528
------------------ ----------------
Gross Profit $6,461,417 $7,295,294
Operating expenses
Service, selling, and general and
administrative 6,965,207 7,350,767
Provision for bad debt expense 131,279 95,000
Depreciation and amortization 728,489 928,080
------------------ ----------------
Total costs and expenses 7,824,975 8,373,847
------------------ ----------------
Income (loss) from operations (1,363,558) (1,078,553)
Other income 178,641 204,321
------------------ ----------------
Income (loss) before provision for
income taxes (1,184,917) (874,232)
Provision for income taxes (425,378) (399,240)
------------------ ----------------
Net income (loss) ($759,539) ($474,992)
================== ================
Earnings (loss) per share:
Basic ($0.05) ($0.03)
================== ================
Diluted ($0.05) ($0.03)
================== ================
Weighted average number of shares
outstanding:
Basic 15,398,677 15,344,563
================== ================
Diluted 15,398,677 15,344,563
================== ================
WARRANTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, March 31,
2004 2004
------------------ ---------------
A S S E T S
--------------------------------
Current assets:
Cash and cash equivalents $6,093,021 $5,229,773
Investments in marketable
securities 1,086,622 1,370,731
Accounts receivable, (net of
allowances of $328,065 and
$233,667, respectively) 23,123,347 23,369,612
Other receivables - net 8,111,005 7,322,289
Deferred income taxes 3,478,250 3,478,250
Employee receivables 66,834 70,908
Prepaid expenses and other
current assets 526,584 728,265
------------------ ---------------
Total current assets 42,485,663 41,569,828
------------------ ---------------
Property and equipment, net 5,344,034 5,746,851
------------------ ---------------
Other assets:
Excess of cost over fair value
of assets acquired
(net of accumulated amortization
of $5,825,405) 1,637,290 1,637,290
Deferred income taxes 19,346,464 18,879,171
Deferred direct costs 196,255,326 186,513,417
Investments in marketable
securities 1,384,764 1,083,400
Restricted cash 825,000 825,000
Split dollar life insurance
policies 900,145 900,145
Other assets 32,556 29,448
------------------ ---------------
Total other assets 220,381,544 209,867,871
------------------ ---------------
Total Assets $268,211,241 $257,184,550
================== ===============
WARRANTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, March 31,
2004 2004
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY)
-------------------------------------------
Current liabilities:
Current maturities of long-term debt and
capital lease obligations $647,731 $664,406
Insurance premiums payable 36,183,304 31,613,047
Income taxes payable 44,242 48,099
Accounts and commissions payable 6,414,843 7,083,459
Claims loss liability 3,532,287 5,608,893
Accrued expenses and other current
liabilities 4,423,426 3,776,199
------------- -------------
Total current liabilities 51,245,833 48,794,103
------------- -------------
Deferred revenues 238,032,539 228,955,971
Claims loss liability 4,208,213 3,882,685
Long-term debt and capital lease
obligations 1,003,642 980,903
Deferred rent payable 414,836 369,839
------------- -------------
Total liabilities 294,905,063 282,983,501
------------- -------------
Commitments and contingencies -- --
Stockholders' equity (Capital Deficiency):
Preferred stock - $.0007 par value
authorized - 15,000,000
Shares issued - none at June 30,
2004 and Mar. 31, 2004 -- --
Common stock - $.007 par value
authorized - 30,000,000 116,106 116,106
Shares issued - 16,586,280 shares at
June 30, 2004 and March 31,2003
Additional paid-in capital 23,800,228 23,800,228
Loans to directors and officers (10,818,242) (10,747,470)
Accumulated other comprehensive income,
net of taxes 86,422 150,801
Retained earnings (deficit) (35,690,597) (34,931,059)
------------- -------------
(22,506,265) (21,611,394)
Treasury stock - at cost, 1,187,606
shares at June 30, 2004 and
March 31, 2003 (4,187,557) (4,187,557)
------------- -------------
Total Stockholders' Equity
(Capital Deficiency) (26,693,822) (25,798,951)
------------- -------------
------------- -------------
Total Liabilities and Stockholders'
Equity (Capital Deficiency) $268,211,241 $257,184,550
============= =============
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