Message #7 From:
NewsBot Date: May 16, 2005 04:13:49 PM
HTVL News Hartville Group Announces Financial Results for the First Quarter of 2005
Hartville Group Announces Financial Results for the First Quarter of 2005
CANTON, Ohio
Hayden Communications
Matthew Hayden, 843-272-4653
Hartville, Group, Inc. (OTCBB: HTVL) on Monday announced financial results for the Company's first quarter of 2005, ended March 31, 2005. All reported results for the prior-year period reflect the previously announced restatement for the Company's first, second and third quarters of 2004.
For the first quarter, total premiums were $1.5 million, of which $833,664 was retained by the Company's reinsurance company, Hartville RE, compared to total premiums of $1.9 million, of which Hartville RE retained $793,748 for the three months ended March 31, 2004. Year over year, retention of premiums increased from 42 percent to 55 percent. This higher retention relative to the premium written is primarily due to the higher quota share of the underwriting risk that Hartville on average assumed. Commissions earned by Petsmarketing Insurance.com for the quarter was $256,603 compared to commissions earned of $1.5 million for the comparable quarter last year. The decrease from 2004 was due to a one-time recognition of a sliding scale commission in 2004 of $934,001, of which $609,107 was reversed in subsequent quarters. Commissions retained by the Agency were 20 percent for the first quarter of 2005 compared to 30 percent for the first quarter last year. Operating expenses were $2.8 million for the quarter compared to operating expenses of $1.8 million last year, increased expenses were the result of increased employment costs after an increase in staff hired in the forth quarter of 2004, amortization of a proprietary software system which the company began amortizing in July 2004, amortization of prepaid expenses and warrants issued in connection with capital raised. Approximately $460,000 of these expenses in the first quarter of 2005 are non-cash. Discounting these items, operating expenses would have been $2.4 million. The parent company (Hartville Group) had one-time fees related to investment banking costs on capital raised, which are being amortized over the terms of the capital raise, and interest penalties on failure to register shares pursuant to agreements. These expenses for the first quarter 2005 were approximately $318,000.
The Company reported an operating loss of $1.7 million for the quarter, compared to operating income of $423,290 for the first quarter last year. The net loss for the quarter was $2.1 million, or $(0.14) per share, compared to net income of $447,424 or $0.04 per share for the same quarter last year. The net loss is comprised of the reduction in ceded premium due to policy runoff, where 2004 premium was $1.9 million compared to $1.5 million in 2005, and a discontinued marketing campaign with PetPartners/American Kennel Club. Additionally, the agency segment (Petsmarketing) recognized a reduction in commission income due to premium runoff as noted in the reinsurance segment, as well as incurred increased operating expenses through expansion of staff. Also impacting the loss were legal and brokerage fees associated with capital funding transactions, and interest penalties on failure to register shares pursuant to the agreements.
"We successfully unwound the proposed acquisition and put it behind us, enabling the management team to refocus on the task of returning Hartville to profitability," commented Dennis C. Rushovich, who was appointed chief executive officer on April 28, 2005. "We are evaluating our administrative overhead and our policy pricing structure to ensure that our product offerings are in-line with customer expectations and being offered at the appropriate price point. Additionally, effective, January 1 we were able to negotiate improved reinsurance terms, which we anticipate will positively impact profitability by the third quarter. Meanwhile, we continue to explore alternatives to acquire or create a property and casualty company, enabling Hartville to retain the majority of the profit associated with underwriting risk assumption."
The Company completed the quarter with $4.2 million in cash and equivalents, and $2.7 million in accounts receivable, compared to $6.1 million in cash on December 31, 2004. On April 11, Hartville received $2.3 million from the insurance organization as reimbursement for expenses incurred related to the canceled acquisition.
"With a solid balance sheet and adequate working capital, we are moving expeditiously to rationalize our expenses, implement new marketing initiatives and maximize profitability opportunities throughout our organization," Mr. Rushovich continued. "We believe the second quarter will be similar to the first quarter, from a revenue and profitability standpoint as we continue to be impacted by the canceled acquisition. We believe our initiatives should produce operational improvements in the second half of this year."
The Company has instituted a variety of marketing initiatives, involving radio, television and print ads in four key markets, including South Florida, New York/New Jersey, Chicago and Dallas/Fort Worth. The Company has already seen strong response to these initiatives, including increased website traffic and inquiries about policies. The Company is currently evaluating the costs of each campaign, relative to the number of new policies generated, and will expand effective marketing campaigns as appropriate.
The Company also announced it has extended its licensing rights to use the Garfield comic strip character in marketing and advertising campaigns through 2010. The Company also negotiated more favorable terms relative to this agreement. Previously, Hartville was paying a royalty on each policy written, regardless of what marketing effort brought in the business. Going forward, the Company will pay royalties on business generated through Garfield ads.
Teleconference Information
Management will discuss these results in a conference call scheduled for 9 a.m. EST Tuesday, May 17, 2005. 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 May 24, 2005, and can be accessed by dialing 877-519-4471 (U.S.), 973-341-3080 (Int'l), passcode 6060551. 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 June 17, 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.
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.
Tables Follow
Hartville Group, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2005 and December 31, 2004
Unaudited
March 31, December 31,
2005 2004
------------- ------------
ASSETS
Current Assets
Cash $ 4,241,890 $ 6,104,053
Commissions receivable 209,127 159,130
Other receivables 2,518,975 2,368,071
Prepaid taxes 600,000 600,000
Prepaid expenses 2,383,387 2,860,850
------------- ------------
Total Current Assets 9,953,379 12,092,104
Fixed Assets
Property and equipment -- net 2,228,217 2,180,919
Deferred policy acquisition costs - net 972,084 578,329
------------ -----------
3,200,301 2,759,248
Other Assets
Licensing fees. Less accumulated
amortization of $44,870 and $30,848 9,619 12,016
Other non-current assets 65,141 76,263
------------- ------------
74,760 88,279
------------ -----------
Total Assets $ 13,228,440 $14,939,631
------------- ------------
March 31, December 31,
2005 2004
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 474,017 $ 779,117
Reserve for claims 335,101 176,998
Accrued expenses 16,601 13,308
Premium deposits 184,099 -
Unearned commissions 18,736 19,284
Current portion of long-term debt 45,062 6,000
------------ -----------
Total Current Liabilities 1,073,616 994,707
Long-Term Debt (offset by discount of
$11,038,617 on convertible securities in
2005 & $1,032,980 in 2004) 242,659 10,025,503
------------- ------------
Total Liabilities 1,316,275 11,020,210
Stockholders' Equity
Common stock, 50,000,000 shares
authorized: $.001 par value; 14,576,896
issued and outstanding at March 31, 2005
and December 31, 2004 14,576 14,576
Additional paid in capital 22,704,482 12,656,372
Retained earnings (deficit) (10,806,893) (8,751,527)
------------- ------------
11,943,921 3,919,421
------------ -----------
Total Liabilities and Stockholders' Equity $ 13,228,440 $14,939,631
============= ============
Hartville Group, Inc. and Subsidiaries
Consolidated Statements of Income
For the Quarter Ended March 31, 2005 and March 31, 2004
Unaudited
March 31, March 31,
2005 2004
------------ ------------
Commissions $ 256,603 $ 1,462,268
Premiums 833,664 793,748
------------ ------------
1,090,267 2,256,016
Losses and expenses 711,287 614,248
Ceded costs 208,416 198,467
General and administrative 1,914,626 1,020,011
----------- -----------
2,834,329 1,832,726
----------- -----------
Operating (loss) income (1,744,062) 423,290
Other income 40,280 24,134
Other expense (351,584) -
----------- -----------
(Loss) income before taxes (2,055,366) 447,424
Provision for taxes - -
----------- -----------
NET (LOSS) INCOME $(2,055,366) $ 447,424
=========== ===========
Net (loss) income per common share $ (0.14) $ 0.04
Diluted Net (loss) income per common share $ (0.14) $0.03
Weighted average common shares outstanding 14,576,296 12,180,656
