Message #9 From:
Stock News Bot Date: August 15, 2005 09:02:00 AM
HTVL News Hartville Group Announces Financial Results for the Second Quarter of 2005
CANTON, Ohio--(BUSINESS WIRE)--Aug. 15, 2005--Hartville, Group, Inc. (OTCBB:HTVL) on Monday announced financial results for the Company's second quarter of 2005, ended June 30, 2005. All reported results for the prior-year period reflect the previously announced restatement for the Company's first and second quarters of 2004.
For the second quarter, total premiums were $1.6 million, of which $786,875 was retained by Hartville, compared to total premiums of $1.7 million, of which Hartville retained $684,904 in the second quarter of 2004. The premiums reduction was due to the AKC business which was not renewed, and whose policies ran off through March of 2005. This higher percentage of premium retention is primarily due to the higher quota share Hartville Re assumed of the underwriting risk. Commissions earned by Petsmarketing Insurance.com for the second quarter were $242,521, compared to $92,391 for the second quarter last year, which was negatively impacted by a $393,116 reversal. As of June 30, 2005, the Company had 22,865 pets insured.
Operating expenses were $3.0 million for the quarter, compared to $2.7 million for the second quarter last year. Operating expenses increased due to a number of factors, including the hiring of additional management, amortization of a proprietary software system which the company began amortizing in July 2004, increased activity on marketing campaigns, increased professional and audit fees due to SB-2 registration, the engagement of new auditors and the restatement of financials, amortization of fees on investment banking costs on capital raised and non-recoverable costs of the terminated insurance acquisition. Non-cash operating expenses amounted to approximately $479,000.
The Company reported a loss from operations of $2.0 million for the quarter compared to an operating loss of $1.9 million for the second quarter last year. The Company incurred other expenses of $311,694 during the quarter related to the operations of the parent company, for interest penalties resulting from the failure to register shares of stock pursuant to the October 8, 2003 Stock Purchase Agreement and financing costs on all convertible debenture transactions. The net loss for the second quarter was $2.2 million, or $0.15 per share, compared to a net loss of $1.9 million, or $0.14 per share for the three-month period ending June 30 2004.
"Management took a number of specific actions in the first six months of the year, in an effort to reduce operating expenses which we expect will become evident during the second half of this year," commented Dennis C. Rushovich, who was appointed chief executive officer on April 28, 2005. "We are thoroughly evaluating our marketing strategy, including the pricing of our policies, and are making appropriate adjustments to align our products with the needs and expectations of consumers. We also completed the run-off of non-profitable policies sold through the AKC marketing program. These efforts, coupled with an emphasis on the marketing of our policies, have begun to demonstrate positive momentum with a net increase of 1,652 pets insured during the second quarter of 2005. We believe we have turned the corner on the sale of new policies, with a meaningful increase in new policies written and a net increase in total policies in force, and we also saw incremental improvements in the number of inquiries to our call center and through our Internet site from both our current and new marketing initiatives, which is currently in redesign."
For the six months ended June 30, 2005, total premiums were $3.1 million, of which Hartville retained $1.6 million, compared to total premium of $3.6 million, with $1.5 million retained for the six-months ended June 30, 2004. For the six months, commissions earned were $499,124 compared with $1.6 million earned for the first six months of last year. The increase for the six months ended June 30, 2004 was due to a reversal of a one-time recognition of a sliding scale commission in 2004 of $934,901, of which $393,116 was offset in the second quarter and $215,991 was offset in the third quarter. Commissions retained by the Agency were 20 percent for the six months ended June 30, 2005 compared to 30 percent for the six months ended June 30, 2004.
For the six months ended June 30, 2005 and 2004, operating expenses were $5.8 million compared to $4.5 million for the six month period last year. The Company reported a loss from operations for the six months of $3.7 million, compared to a loss from operations of $1.5 million for the same period last year. Increased operating loss for the six months ended June 30, 2005 is primarily attributed to insurance operations due to lower commissions and an increased operating expense ratio. The net loss for the six months ended June 30 2005 was $4.3 million, or $0.30 per share, compared with a net loss of $1.4 million, or $0.11 per share for the six months ended June 30 2004.
The Company completed the quarter with $4.6 million in cash and equivalents, compared with $6.1 million in cash as of December 31, 2004. The Company has working capital of $6.5 million, and while management believes the Company has sufficient cash to fund operations through the end of 2005 it will continue to assess future needs as the business grows.
"We believe we are getting closer to optimizing our expense levels, which will support significantly higher premium levels and enable us to reach our goal of achieving cash flow positive status as our marketing initiatives accelerate new policy additions," Mr. Rushovich continued. "We anticipate our initiatives should produce operational improvements in the second half of this year, allowing us to build momentum as we move into 2006. On the marketing side, we have made incremental improvements in the time it takes to process claims, which should improve our customer service ratings while reducing our claims processing costs. We accomplished this without adding any staff. In our Sales Center, we have improved our sales center conversion ratio, which is the calculation of the commitment to buy product as compared to the number of inquiries received, reaching a level which exceeds the industry standard. This should benefit us as we drive more traffic to our website and call center through additional marketing efforts. We believe we have more room to improve, but we are pleased with our accomplishments during the second quarter and believe we are on the right track."
Teleconference Information
Management will discuss these results in a conference call to discuss its 2005 second quarter results at 4:30 p.m. ET on Monday, August 15, 2005. Financial results will be released prior to the call. To participate in the conference call, please dial 888-802-8576 five to ten minutes prior to the scheduled conference call time. International callers should dial 973-935-8515. There is no pass code required for this call. If you are unable to listen to the live teleconference at its scheduled time, there will be a replay available through August 22, 2005, and can be accessed by dialing 877-519-4471 (U.S.), 973-341-3080 (Int'l), passcode 6373300. This call is being webcast by ViaVid Broadcasting and can be accessed at Hartville's website at http://www.hartvillegroup.com. The webcast may also be accessed at ViaVid's website at http://www.viavid.net. The webcast can be accessed through September 15, 2005 on either site. To access the webcast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player please visit: www.microsoft.com/windows/windowsmedia/en/download/default.asp.
About Hartville Corporation
Hartville Group, Inc. (Hartville Group) is a holding company whose wholly owned subsidiaries include Hartville Re Ltd. (Hartville) and Petsmarketing Insurance.com Agency, Inc. (the Agency). Hartville is a reinsurance company that is registered in the Cayman Islands, British West Indies. Hartville was formed to reinsure pet health insurance that is being marketed by the Agency. The Agency is primarily a marketing/administration company concentrating on the sale of its proprietary health insurance plans for domestic pets. Its business plan calls for introducing its product effectively and efficiently through a variety of distribution systems. The Company accepts applications, underwrites and issues policies.
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in the Company's Form 10-K, Form 8-K and Form 10-Q reports. The Company undertakes no obligation to update or revise any forward-looking statement.
Hartville Group, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2005 and December 31, 2004
Unaudited
June 30, Dec. 31,
2005 2004
------------- ------------
ASSETS
Current Assets
Cash $ 4,553,921 $ 6,104,053
Commissions receivable 132,690 159,130
Other receivables 783,880 2,368,071
Prepaid taxes 600,000 600,000
Prepaid expenses 2,101,534 2,860,850
------------- ------------
Total Current Assets 8,172,025 12,092,104
Property and equipment -- net 2,028,836 2,180,919
Deferred policy acquisition costs - net 1,122,074 578,329
Other Assets
Licensing fees. Less accumulated
depreciation of $47,267 and $30,848 7,222 12,016
Other non-current assets 118,511 76,263
------------- ------------
125,733 88,279
------------ -----------
Total Assets $ 11,448,668 $14,939,631
-============ -===========
June 30, Dec. 31,
2005 2004
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 546,939 $ 792,425
Reserve for claims 388,447 176,998
Premium deposits 614,727 -
Unearned commissions 20,522 19,284
Accrued taxes - -
Current portion of long-term debt 105,425 6,000
------------ -----------
Total Current Liabilities 1,676,060 994,707
Long-Term Debt (offset by discount of
$11,037,756 on convertible securities in
2004) 180,441 10,025,503
------------- ------------
Total Liabilities 1,856,501 11,020,210
Stockholders' Equity
Common stock, 50,000,000 shares
authorized: $.001 par value; 14,576,296 issued
and outstanding at June 30, 2005 and December
31, 2004 14,576 14,576
Additional paid in capital 22,704,482 12,656,372
Retained earnings (deficit) (13,056,391) (8,751,527)
Less: treasury stock at cost, 94,000
shares (70,500) -
------------- ------------
9,592,167 3,919,421
------------ -----------
Total Liabilities and Stockholders' Equity $ 11,448,668 $14,939,631
Hartville Group, Inc. and Subsidiaries
Consolidated Statements of Income
For the Three and Six Months Ended June 30, 2005 and June 30, 2004
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Commissions $ 242,521 $ 92,391 $ 499,124 $ 1,554,659
Premiums 786,875 684,904 1,620,539 1,478,652
------------ ------------ ------------ ------------
1,029,396 777,295 2,119,663 3,033,311
Losses and expenses 516,051 594,998 1,227,338 1,209,246
Ceded costs 196,718 171,232 405,134 369,699
General and
administrative 2,279,509 1,911,434 4,194,135 2,931,445
----------- ----------- ----------- -----------
2,992,278 2,677,664 5,826,607 4,510,390
----------- ----------- ----------- -----------
Operating (loss)
income (1,962,882) (1,900,369) (3,706,944) (1,477,079)
Other income 25,078 17,373 65,358 41,507
Other expense (311,694) - (663,278) -
----------- ----------- ----------- -----------
(Loss) income
before taxes (2,249,498) (1,882,996) (4,304,864) (1,435,572)
Provision for
taxes - - - -
----------- ----------- ----------- -----------
NET (LOSS) INCOME $(2,249,498) $(1,882,996) $(4,304,864) $(1,435,572)
=========== =========== =========== ===========
Net (loss) income
per common share $ (0.15) $ (0.14) $ (0.30) $ (0.11)
Weighted average
common shares
outstanding 14,546,340 13,761,417 14,561,235 12,858,540
