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Warrantech Announces Preliminary Unaudited Fiscal Q4 and Year End Results

4 August 1999

Warrantech Corporation Announces Preliminary Unaudited Fiscal Fourth Quarter and Year End Results

    STAMFORD, Conn.--August 3, 1999--Warrantech Corporation announced today that it is issuing preliminary unaudited results for the fiscal 1999 fourth quarter and year ended March 31, 1999 pending the review with the Financial Accounting Standards Board (FASB) of its accounting policy with respect to revenue recognition. The Company also stated that in view of the review with FASB it will file a partial annual report on Form 10-K with the Securities and Exchange Commission (SEC).
    Gross revenues for the fiscal fourth quarter 1999 increased to $60.2 million from revenues of $45.0 million for the fiscal fourth quarter of 1998. The Company reported a net loss for the fiscal fourth quarter of 1999 of $709,000, compared to net income of $1.4 million for the same period of fiscal 1998. Included in the fourth quarter loss is a one time provision for bad debts of $2.3 million, taken as a writedown of receivables, primarily attributable to the termination of Warrantech's continuing relationship with CompUSA and Proteva. Excluding the provisions, net income for the quarter would have been $1,023,000.
    For the year ended March 31, 1999, revenues were $228.3 million as compared to $201.7 million for the same period in fiscal 1998. The Company reported a net loss of $1.1 million for the year ended March 31, 1999, inclusive of the fourth quarter provision of $2.3 million, compared to net income of $5.3 million.
    The Company cautioned that depending upon the outcome of the Company's previously announced review of its revenue recognition policy, the Company's prior period revenues could be significantly reduced with a corresponding increase in revenues in future periods. Earnings for current and prior periods could be reduced or eliminated entirely and losses increased, however there would be a corresponding increase to earnings in future periods. Furthermore, depending on the magnitude of the restatement because of revenue recognition, it is possible that, as a growth company, the Company would fail to satisfy certain NASDAQ listing criteria, which could be an additional basis for termination of the Company's NASDAQ listing. The Company also said that as a consequence of the Company's inability to file a complete Form 10-K because of the unresolved issues, it has received notice from NASDAQ that the Company's common stock is subject to being delisted from the NASDAQ Stock Market. The Company has a hearing scheduled for August 27, 1999 with NASDAQ to appeal such delisting. Pending those outcomes, the Company's common stock will continue to trade on the NASDAQ system under the symbol "WTECE."
    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, results of the Financial Accounting Standards Board relating to the Company's revenue recognition policy, the possibility that as a result of such results, the Company may be required to restate its financial results, 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.

    This release and prior releases are available on the KCSA Public Relations Worldwide website at www.kcsa.com.