WEST PALM BEACH, Fla.---HearUSA, Inc. (AMEX: EAR - News) today reported third quarter revenues of
$22 million, an increase of 12.4% over third quarter 2005 revenues of
$19.6 million. Revenues for the first nine months of 2006 were the
highest in the Company's history, reaching $66 million, an increase of
14.3% compared to $57.7 million for the same nine-month period last
year. Income from operations for the third quarter of 2006 was
$404,000 compared with $1.3 million for the comparable period last
year. The loss applicable to common stockholders for the third quarter
was $1.5 million compared to a net loss of $164,000 for the comparable
period last year. For the nine month period, income from operations
increased to $3.7 million from $3.4 million for the comparable period
last year. Net loss applicable to common stockholders for the nine
months was $1.1 million, or $0.03 per common share, compared to a net
loss of $452,000, or $0.01 per common share, during the same period
last year.
Included in the third quarter of 2006 income from operations and
net loss applicable to common stockholders was a $247,000 non-cash
compensation charge related to expensing of previously issued and
unvested stock options under the Company's employee stock option plan
as is now required under SFAS 123®. This non-cash charge was not
required to be recorded for the comparable period in 2005. The third
quarter also had a net non-cash charge of $668,000 associated with
previous financings. In the comparable period last year, non-cash
charges of a similar nature amounted to $725,000. Included in the
first nine months of 2006 income from operations and net loss
applicable to common stockholders was a $721,000 non-cash compensation
charge related to the expensing of previously issued and unvested
stock options not required for the comparable period in 2005. The nine
month period also had a net non-cash charge of $1.7 million associated
with previous financings. In the comparable period last year, non-cash
charges of a similar nature amounted to $1.9 million.
Stephen J. Hansbrough, President and CEO stated, "Our third
quarter results were disappointing, but we believe this was an
aberration rather than an indication of future results. Two factors
clearly stand out as reasons for our losses this quarter.
"First and foremost, the decrease in income from operations can be
traced almost exclusively to Florida. While revenues were below
projections and our cost of products sold higher as a percent of those
revenues, a major contributing factor was a significant change in
Florida Medicaid. Effective July 1, the state of Florida reinstated
coverage for the adult population covered under state Medicaid for two
hearing aids every three years. In addition to the impact of the state
administered program, every contracted HMO Medicaid plan in Florida
was required to follow suit. As one of the few Medicaid providers in
the state, we bore the brunt of the pent up demand which we expect to
lessen over the next quarter. This resulted in a significant reduction
in our average selling price and an associated increase in our cost of
products sold as a percent of revenue. As a result, income from
operations in our core market was negatively impacted by approximately
$1 million.
"Second, several charges related to previous transactions also
affected the third quarter performance. The continued success of HEARx
West, our joint venture with Kaiser Permanente, resulted in a full 50%
minority interest expense for the first time, reflecting Kaiser's
share of the profits. In addition there was a non-cash charge in the
third quarter related to the warrant liability associated with the
2005 financing, as opposed to a reduction of interest expenses in the
second quarter. Those two items resulted in an additional increase in
the third quarter's net loss of approximately $475,000.
"The Company remains confident that it will reach its previously
stated goal of 15% to 20% annual revenue growth for the year and
believes that it is on track to achieve its long term strategic
objectives," Mr. Hansbrough concluded.
Gino Chouinard, Executive Vice President and CFO stated, "The
acquisitions we have completed since the inception of our strategic
acquisition program in mid 2005 have performed as expected and we
believe will continue to have a positive impact on our future
performance. Our acquisitions will help the Company to maintain a
steady improvement in revenues and income from operations year over
year."
Ken Schofield, COO, commented, "Since the inception of the
acquisition program through the end of the third quarter, we have
completed 17 transactions with total trailing 12 months revenue of
$13.8 million. Of the ten letters of intent outstanding at the end of
the third quarter, four transactions involving businesses with
trailing twelve month revenues of over $3 million have already been
closed in Q4."
Management will host a conference call on Tuesday, November 14,
2006 at 4:30 pm Eastern time. Interested parties may participate in
the call by dialing (877) 407-9210; international callers dial (201)
689-8049. The conference call will also be available for replay until
Tuesday, November 28, 2006 at midnight. For the replay, please dial
(877) 660-6853, for the international participants the access number
is (201) 612-7415 (Account #: 286, Conference ID: 220527).
There will also be a live web cast that can be addressed at:
http://www.investorcalendar.com/EventPage.asp?ID=111444
If you are unable to participate during the live web cast, the web
cast will be available for replay at
http://www.investorcalendar.com/ClientPage.asp?ID=111444 or
http://www.investorcalendar.com/
About HearUSA
HearUSA, Inc. provides hearing care to patients primarily through
its company-owned hearing care centers, which offer a complete range
of quality hearing aids, with an emphasis on the latest digital
technology. HearUSA Centers are located in California, Florida, New
York, New Jersey, Massachusetts, Ohio, Michigan, and Missouri and the
province of Ontario, Canada. The company also derives revenues from
its HearUSA Hearing Care Network, comprised of 1,400 affiliated
audiologists in 49 states, as well as its website that enables online
purchases of hearing related products, such as batteries, hearing aid
accessories and assistive listening devices. For further information,
click on "investor information" at HearUSA's website www.hearusa.com.
This press release contains forward-looking statements within the
meaning of the Securities Litigation Reform Act of 1995, including
those concerning the Company's ability to reach its previously stated
goal of 15% to 20% annual revenue growth for the year and the
Company's belief that it is on track to achieve its long term
strategic objectives; and those indicating that acquisitions will help
the Company to maintain a steady improvement in revenues and income
from operations year over year. These statements involve certain risks
and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Potential risks and
uncertainties include such factors as market demand for the Company's
goods and services; successful implementation of the Company's
acquisition program; changes in the pricing environment; general
economic conditions in those geographic regions where the Company's
centers are located; the impact of competitive products; and other
risks and uncertainties described in the Company's filings with the
Securities and Exchange Commission, including the Company's annual
report on Form 10K/A for the 2005 fiscal year.
- Tables follow -
HearUSA, Inc.
Consolidated Balance Sheets
September 30, December 31,
ASSETS (Note 3) 2006 2005
-----------------------------
(unaudited)
Current assets
Cash and cash equivalents $ 2,091,857 $ 6,706,944
Restricted cash and cash equivalents 204,614 431,000
Accounts and notes receivable, less
allowance for doubtful accounts of
$474,120 and $413,386 7,552,738 6,715,933
Inventories 2,644,717 1,604,943
Prepaid expenses and other 930,978 1,627,407
-----------------------------
Total current assets 13,424,904 17,086,227
Property and equipment, net 3,983,711 3,437,436
Goodwill (Note 3) 46,852,879 36,394,959
Intangible assets, net (Note 3) 12,787,051 11,477,290
Deposits and other 655,210 585,633
-----------------------------
Total Assets $ 77,703,755 $ 68,981,545
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,589,468 $ 8,499,812
Accrued expenses 2,982,849 2,344,419
Accrued salaries and other compensation 2,290,538 2,589,877
Current maturities of long-term debt 6,958,937 5,192,108
Current maturities of convertible
subordinated notes, net of debt discount
of $1,335,949 and $1,847,853 1,789,051 652,147
Current maturities of subordinated notes,
net of debt discount of $556,257 and
$868,345 1,203,743 891,655
Dividends payable 33,785 34,562
-----------------------------
Total current liabilities 24,848,371 20,204,580
-----------------------------
Long-term debt (Notes 3 and 4) 25,457,839 19,970,099
Convertible subordinated notes - net of
debt discount of $601,446 and $1,565,187
(Note 5) 2,523,554 3,434,813
Subordinated notes - net of debt discount
of $134,169 and $512,350 (Note 6) 1,845,831 2,787,650
Warrant liability (Note 6) 179,811 1,347,217
-----------------------------
Total long-term liabilities 30,007,035 27,539,779
-----------------------------
Commitments and contingencies - -
-----------------------------
Minority interest in net income of
consolidated subsidiary 383,535 -
-----------------------------
Stockholders' equity (Note 7)
Preferred stock (aggregate liquidation
preference $2,330,000; $1 par, 7,500,000
shares authorized)
Series H Junior Participating (none
outstanding) - -
Series J (233 shares outstanding) 233 233
-----------------------------
Total preferred stock 233 233
Common stock: $.10 par; 75,000,000 shares
authorized 32,016,350 and 31,893,200
shares issued 3,201,635 3,189,320
Stock subscription (412,500) (412,500)
Additional paid-in capital 123,707,174 121,934,658
Accumulated deficit (104,305,494) (103,252,279)
Accumulated other comprehensive income 2,758,907 2,262,895
Treasury stock, at cost: 523,662 common
shares (2,485,141) (2,485,141)
-----------------------------
Total stockholders' equity 22,464,814 21,237,186
-----------------------------
Total Liabilities and Stockholders'
Equity $ 77,703,755 $ 68,981,545
=============================
HearUSA, Inc.
Consolidated Statements of Operations
Nine months ended September 30, 2006 and October 1, 2005
Nine Months Ended
--------------------------
September 30, October 1,
2006 2005
--------------------------
(unaudited) (unaudited)
Net revenues
Hearing aids and other products $61,553,966 $53,706,549
Services 4,396,675 3,995,852
--------------------------
Total net revenues 65,950,641 57,702,401
--------------------------
Operating costs and expenses
Hearing aids and other products (Note 4) 18,676,853 15,692,130
Services 1,298,074 1,342,226
--------------------------
Total cost of products sold and services 19,974,927 17,034,356
Center operating expenses 30,663,419 26,929,214
General and administrative expenses
(including approximately $721,000 non- cash
employee stock-based compensation expense
in 2006 - Notes 1 and 7) 10,127,438 8,848,091
Depreciation and amortization 1,477,085 1,446,203
--------------------------
Total operating costs and expenses 62,242,869 54,257,864
--------------------------
Income from operations 3,707,772 3,444,537
Non-operating income (expense):
Gain from insurance proceeds 202,936 430,122
Interest income 109,929 52,180
Interest expense (including approximately
$1,978,000 and $1,789,000 of non-cash debt
discount amortization and approximately
$(250,000) and $76,000 in non-cash
interest (income) expense related to the
change in the fair value of the warrant
liability - Notes 4, 5 and 6) (4,436,120) (3,671,029)
Minority interest in net income of
consolidated subsidiary (Note 1) (383,535) -
--------------------------
Income (loss) from continuing operations
before income taxes (799,018) 255,810
Income taxes (150,900) -
--------------------------
Net income (loss) from continuing operations (949,918) 255,810
Discontinued operations (Note 2):
Gain on disposition of assets - 365,158
Net loss from discontinued operations - (406,662)
--------------------------
Total net income from discontinued
operations - (41,504)
--------------------------
Net income (loss) (949,918) 214,306
Dividends on preferred stock (103,297) (666,113)
--------------------------
Net loss applicable to common stockholders $(1,053,215) $ (451,807)
==========================
Net income (loss) from continuing
operations, after dividends on preferred
stock, applicable to common stockholders
per common share - basic and diluted $ (0.03) $ (0.01)
==========================
Net loss applicable to common stockholders
per common share - basic and diluted $ (0.03) $ (0.01)
==========================
Weighted average number of shares of common
stock outstanding - basic and diluted 32,211,925 31,452,690
==========================
HearUSA, Inc
Consolidated Statement of Operations
Three months ended September 30, 2006 and October 1, 2005
Three Months Ended
--------------------------
September 30, October 1,
2006 2005
--------------------------
(unaudited) (unaudited)
Net revenues
Hearing aids and other products $20,518,338 $18,362,752
Services 1,523,182 1,252,803
--------------------------
Total net revenues 22,041,520 19,615,555
--------------------------
Operating costs and expenses
Hearing aids and other products (Note 4) 6,490,501 5,624,739
Services 511,084 507,152
--------------------------
Total cost of products sold and services 7,001,585 6,131,891
Center operating expenses 10,598,402 8,868,510
General and administrative expenses
(including approximately $247,000 non-cash
employee stock-based compensation expense
in 2006 - Notes 1 and 7) 3,539,613 2,882,357
Depreciation and amortization 497,460 471,116
--------------------------
Total operating costs and expenses 21,637,060 18,353,874
--------------------------
Income from operations 404,460 1,261,681
Non-operating income (expense):
Gain from insurance proceeds 145,779 300,527
Interest income 18,739 22,582
Interest expense (including approximately
$601,000 and $649,000 of non-cash debt
discount amortization and approximately
$67,000 and($76,000 in non-cash addition
in interest expense for the change in the
fair value of the warrant liability -
Notes 4, 5 and 6) (1,638,389) (1,310,053)
Minority interest in net income of
consolidated subsidiary (321,897) -
--------------------------
Income (loss) from continuing operations
before income taxes (1,391,308) 274,737
Income taxes (84,750) -
--------------------------
Net income (loss) from continuing operations (1,476,058) 274,737
Discontinued operations (Note 2):
Net loss from discontinued operations - (140,155)
--------------------------
Net income (loss) (1,476,058) 134,582
Dividends on preferred stock (33,785) (299,035)
--------------------------
Net loss applicable to common stockholders $(1,509,843) $ (164,453)
==========================
Net income (loss) from continuing operations
after dividends on preferred stock,
applicable to common stockholders per
common share - basic $ (0.05) $ 0.00
==========================
Net income (loss) from continuing operations
after dividends on preferred stock,
applicable to common stockholders per
common share - diluted $ (0.05) $ 0.00
==========================
Net loss applicable to common stockholders
per common share - basic $ (0.05) $ (0.00)
==========================
Net loss applicable to common stockholders
per common share - diluted $ (0.05) $ (0.00)
==========================
Weighted average number of shares of common
stock outstanding - basic and diluted 32,259,927 32,033,447
==========================
