Press

Press Releases 2004

Pethealth Inc. announces second consecutive quarter with positive EBITDA, its twenty-first consecutive quarter of record revenue, and results for the second quarter and six months ended June 30, 2004.

OAKVILLE, ON, August 12, 2004. Pethealth Inc. ("Pethealth" or "the Company") (TSX Venture Exchange Tier 1: PTZ) today announced it’s financial results for the second quarter and six months ended June 30, 2004.

Highlights

FOR THE QUARTER ENDED JUNE 30, 2004

• Total revenue for the quarter ended June 30, 2004 was $2.88-million, up 75% over the quarter ended June 30, 2003.
• Net loss for the three months ended June 30, 2004 was $109,000, an 85% improvement from the net loss of $743,000 for Q2, 2003.
• Q2, 2004 EBITDA (Earnings Before Income Taxes, Depreciation and Amortization) was $17,000, compared with an EBITDA loss of $670,000 for the quarter ended June 30, 2003.
• Gross written premiums for the quarter ended June 30, 2004 were $6.3-million, up 53% from Q2, 2003.
• Q2, 2004 new policy sales were 69,930, an increase of 28% over the same period a year ago. Core policy sales for the quarter were 15,448, up 31% from a year earlier. ShelterCare policy sales were 54,482, up 27% from a year ago.
• Total paid policies in force as at June 30, 2004 were 125,241 vs. 85,964 at the end of Q2 2003, an increase of 46%.
• Core and ShelterCare paid policies, in force as of June 30, 2004, stood at 87,270 and 37,971, an increase over the previous year of 57% and 25% respectively.

FOR THE SIX MONTHS ENDED JUNE 30, 2004

1. Total revenue for the six months ended June 30, 2004 was $5.43-million, up 75% over the six months ended June 30, 2003.
2. Net loss for the six months ended June 30, 2004 was $185,000, an 85% improvement from the net loss of $1,215,000 for the same period in the prior year.
3. For the six months ended June 30, 2004 EBITDA (Earnings Before Income Taxes, Depreciation and Amortization) was $59,000, compared with an EBITDA loss of $1,058,000 for the same period last year.
4. Gross written premiums for the six months ended June 30, 2004 were $12.1-million, up 54% from the gross written premiums from the same period in the prior year.
5. New policy sales for the six months ended June 30, 2004, were 141,160, an increase of 39% over the same period a year ago. Core policy sales for the six months ended June 30, 2004 were 32,028, up 44% from a year earlier. ShelterCare policy sales were 108,964, up 37% from a year ago.

Of the Company’s total revenue in Q2, 2004, 92% was derived from commissions and management fees and administration fees earned from the placement of pet insurance policies on behalf of its carriers. The Company’s total commission and management fee revenue for Q2 2004 was $2,457,000 compared to commission and management fee revenue in Q2 2003 of $1,493,000, an increase of 65%. For the six months ended June 30, 2004 the Company’s total commission and management fee revenue was $4,704,000, an increase of 67% compared to $2,811,000 from the same period last year, related to the growth in active policies.

The Company had a net loss of $109,000 or $0.01 per share for Q2, 2004, inclusive of $117,000 (US$88,000) in legal fees, resulting from the legal action brought by AVID Identification Systems (“AVID”) and in the preparation of its counterclaim against AVID, expensed in the quarter. In the absence of these legal fees, the Company would have reported net income of $8,000. This quarter’s net loss represents an 85% reduction from the $743,000 net loss in Q2, 2003. For the six-month period ended June 30, 2004, the company had a net loss of $185,000 compared to the net loss of $1,215,000 from the same period last year. In the absence of the legal fees, the 2004 year to date net loss would have been $40,000.

For the quarter ended June 30, 2004, the Company wrote 69,930 new insurance policies consisting of 15,448 new core policies, including 546 new EmergencyCare policies, and 54,482 new ShelterCare policies. New policy sales consist of new core policy sales, new ShelterCare policy sales, ShelterCare policies converted into new core policy sales, ShelterCare policies continued past the first sixty days of coverage, and new EmergencyCare policies. The Company does not include the renewals of existing core or EmergencyCare policies in its calculation of new policy sales. New policy sales for the six months ended June 30, 2004, were 141,160, an increase of 39% over the same period a year ago. Core policy sales for the six months ended June 30, 2004 were 32,028, up 44% from a year earlier. ShelterCare policy sales were 108,964, up 37% from a year ago.

Q2, 2004 online sales increased by 48% over Q2, 2003 and represented 28% of core policy sales for the quarter up from 24% in Q2, 2003. For the six months ended June 30, 2004, on-line sales represented 27% of core policy sales up from 24% from the same period last year.

U.S. new core policy sales accounted for 78% of total new core policy sales in Q2, 2004 and for the six months ended June 30, 2004, generating increased U.S. dollars revenues, while 84% of employment and administration costs were paid in Canadian dollars.

The Company continued to expand its manufacturer-neutral pet registry and recovery service in 10 provinces and 48 states.

In Canada, the Company has become the number one distributor of new microchips to the veterinary and shelter communities. In the United States, the Company continued to distribute the Allflex ISO FDXB microchip technology in Oregon and Wisconsin and, during the quarter, began to make available non-ISO FDXA microchip technology in all additional states. As a result of the expanded technology offering, the Company sold non-ISO microchips to shelters and/or veterinary clinics in an additional 31 states and achieved an increase in microchip sales revenue of 112% over Q1, 2004. At June 30, 2004, 124,236 pets had been registered on the Company’s pet registry of which 69% reside in the United States.

At June 30, 2004, the Company had total assets of $15,342,155 including cash resources of $6,789,316. “We are delighted to again report record revenues and positive EBITDA for the first six months of the year,” said Mark Warren, President and Chief Executive Officer. “We take great pride in continuing to be Canada’s largest provider of pet insurance, and our market share in the U.S. continued to climb over the quarter to where we believe we now have 25% market share for new annual policy sales. Our Petco ‘off-the-shelf’ program has tested well and we are moving forward sometime during the fourth quarter with the national rollout of this new program. Sales of microchip technology also continue to rise. We have capitalised on the opportunity in Canada, and market share in the U.S. has jumped on the back of our expanded distribution and the growing recognition of veterinarians and animal shelters that our model, which emphasises price and service, is unmatched in the industry.”

The company will host a conference call at 10am on Friday, August 13, 2004 to discuss he second quarter results. To participate, please call 1-800-387-6216.

Financial Highlights:

*The Company, together with Avalon Risk Management Inc. in the United States, writes Gross Premiums and remits the carriers' portion to its pet insurance carriers. The Company's revenue consists of Commissions, Management Fees, Administrative and Interest Income.

** EBITDA is inclusive of amortization of non-cash deferred marketing expenses and is presented before other capital amortization. This data is considered to be a non-GAAP earnings measure and does not have any standardized meaning prescribed by GAAP. It is, therefore, unlikely to be comparable to similar measures presented by other issuers.

About Pethealth

Founded in February 1998, Pethealth is Canada’s number one provider of pet insurance and is number two in North America, currently offering its PetCare Pet Insurance Programs in 10 provinces, 45 states and Washington, D.C. In addition to the PetCare Pet Insurance Programs, Pethealth offers its pet insurance programs under a variety of names, including QuickCare, ShelterCare and Union Plus Pet Insurance. In the United States, the PetCare Pet Insurance Programs are underwritten by Lincoln General Insurance Company, York, PA, through PetCare Insurance Brokers Ltd., PetCare Insurance Agency, Ltd., both wholly owned subsidiaries of the Company, and Avalon Risk Management Inc. In Canada, the Company’s pet insurance is underwritten by ING Novex, a member of ING Group, and Kingsway General Insurance Company and offered through PetCare Insurance Brokers, Ltd. In addition, Pethealth, through its wholly owned subsidiaries Pethealth Services Inc. and Pethealth Services (USA) Inc., distributes Allflex pet microchip supplies to the companion animal market in North America and operates the related pet recovery registry under the trade name 24PetWatch. Pethealth is based in Oakville, Ontario.

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Statements contained in this news release, if not historical, are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from the results described in forward-looking statements.

Not for dissemination in the United States of America or to United States news wire services.

For further information contact:
Mark Warren, President and CEO of Pethealth at (905) 842-2615
Glen Tennison, Chief Financial Officer of Pethealth at (905) 842-2615

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