Warrantech Corporation Announces Second Quarter Results
27 October 1998
Warrantech Corporation Announces Second Quarter Results
STAMFORD, Conn.--Oct. 26, 1998--Warrantech Corporation today announced results for the fiscal 1999 second quarter ended September 30, 1998.Revenues for the fiscal second quarter increased 21.5 percent to $60.5 million, from revenues of $49.8 million for the fiscal second quarter of 1998. The Company reported net income for the fiscal second quarter of 1999 of $593,000, or $0.04 per fully diluted share, compared to net income of $1.6 million, or $0.10 per fully diluted share, for the same period in fiscal 1998.
For the six months ended September 30, 1998, revenues were $110.3 million, compared to $102.7 million for the same period in fiscal 1998. The Company reported a net loss of $634,000, or $0.04 per fully diluted share, for the six months ended September 30, 1998, compared to net income of $2.9 million, or $0.18 per fully diluted share, for the same period in fiscal 1998.
The Company indicated that as a result of the re-engineering of Warrantech's call center processes and other cost cutting initiatives, SG&A during the quarter was $13.2 million as compared to $14.2 for the first quarter of fiscal year 1999. As a percentage of gross revenues, SG&A improved to 21.6 percent for the second quarter, versus 28.2 percent for the first quarter.
Gross profit as a percentage of revenues decreased to 25.6 percent for the quarter, compared to 28.6 percent last year. However, excluding the startup of Warrantech Home Services, an incremental business and new market, the current quarter gross profit percentage would have been 26.7 percent. The remaining decline in gross profit was directly attributable to changes in our business segment mix.
Warrantech Chairman and Chief Executive Officer, Joel San Antonio, stated, "During the second fiscal quarter, we accomplished our strategic objectives, both in terms of generating new revenue and in reducing our costs. As a result, Warrantech has returned to profitability.
"During the quarter, Warrantech entered into new agreements that will add considerably to the Company's continued growth. Of major importance was the signing by our European subsidiary of a contract with Calortex, a domestic gas supplier in the U.K. Warrantech Europe has been providing a service contract program to Calortex customers since April 1997 covering homeowners' central heating systems and gas appliances. The Calortex contract not only has the potential to produce revenues in excess of $130 million over the seven year term of the agreement, but reinforces the tremendous revenue generating capability of our new home warranty product.
"In addition, our Warrantech Help Desk Inc. subsidiary recently announced that through its relationship with CompUSA, it has received the service contract business of Computer City, Inc., which CompUSA acquired in September. The CompUSA/Computer City should significantly impact our results for the remainder of the year."
Mr. San Antonio added, "Warrantech has also made significant progress in reducing costs. As previously announced, over the past two quarters we have made great strides in redefining our process for world class service, improving response time and decreasing call processing time of our call centers. As a result of these initiatives which equaled $1.5 million for the second quarter, SG&A decreased during the second quarter by $1 million. Based on improved financials and management's continued focus on costs, Warrantech is comfortable that it will remain profitable during the third quarter of fiscal 1999."
Warrantech Corporation, through its subsidiaries, 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, Mexico, the United Kingdom, Puerto Rico and Latin America.
"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 not limited to, 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 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
(Thousands of Dollars)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
Gross Revenues $ 61,141 $ 50,192 $ 111,406 $ 103,519
Deferred Revenues (651) (402) (1,142) (811)
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Net Revenues 60,490 49,790 110,264 102,708
Costs and Expenses:
Direct Costs 45,470 35,822 82,005 74,767
Service, Selling and
General and
Administrative 13,236 10,818 27,413 22,133
Depreciation and
Amortization 1,137 775 2,411 1,501
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Total Costs and
Expenses 59,843 47,415 111,829 98,401
Income (Loss) from
Operations 647 2,375 (1,565) 4,307
Other Income/Expense,
Net 347 199 517 396
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Income (Loss) Before
Taxes 994 2,574 (1,048) 4,703
Provision (Benefit)
for Income Taxes 401 1,004 (414) 1,806
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Net Income (Loss) $ 593 $ 1,570 $ (634) $ 2,897
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Net Income (Loss)
per Share
Basic $ 0.04 $ 0.12 $ (0.04) $ 0.22
Fully Diluted $ 0.04 $ 0.10 $ (0.04) $ 0.18
Weighted Average
Shares Outstanding
Basic 16,043,736 13,204,446 14,710,342 13,190,402
Fully Diluted 16,070,990 15,717,314 15,417,404 15,705,676
Warrantech Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
September 30,
1998 1997
Total Current Assets $60,557 $54,080
Property & equipment, net 14,563 11,881
Other Assets 11,842 10,495
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Total Assets $86,962 $76,456
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Current Liabilities $45,989 $39,247
Deferred revenues 8,016 5,784
Long term debt & rent obligations 2,354 2,938
Total Shareholders' Equity 30,603 28,487
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Total Liabilities &
Shareholders' Equity $86,962 $76,456
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