WEST PALM BEACH, Fla., May 9-- HearUSA, Inc.
(Amex: EAR) today announced revenues in the first quarter of fiscal 2005 which
ended April 2 were $20.1 million, an increase of 18.5 percent over revenues of
$16.9 million reported in the same period a year ago. Income from operations
in the first quarter rose to $919,496 as compared with an operating loss of
$268,735 in the first quarter last year. The company reported a net loss in
the first quarter of $445,000, or one cent per share, compared with a net loss
of $1.6 million, or five cents per share, in the first quarter last year.
The net loss for the first quarter included a non-cash charge for debt
discount amortization of approximately $568,000 from the 2003 financing as
compared with a charge of $532,000 for the same item in the first quarter of
last year. The first quarter 2005 results were favorably impacted by one
extra week of revenue, which amounted to approximately $1.4 million.
Additional fixed expenses associated with this extra week were approximately
$794,000.
"Our performance improved significantly this quarter as compared to the
2004 first quarter," said HearUSA president and chief executive officer
Stephen J. Hansbrough. "Although the additional week in the quarter this year
was a factor, we also benefited from a combination of increased unit sales and
a higher average selling price as more patients opted for high end technology
hearing aids," concluded Hansbrough.
Operating expenses, although higher in the first quarter of 2005 as
compared with the same period in 2004, generally increased at a slower rate
than revenues for the corresponding periods. This was due in part to the
company-wide program to control costs initiated in mid-2004, which is
continuing to yield benefits. Center operating expenses rose by 8.4 percent
to $9.9 million in the first quarter of this year from $9.1 million in the
year ago period. Approximately 72 percent of the increase is the result of
the additional week included in the 2005 first quarter, with the balance of
the increase due to commissions related to increased sales.
General and administrative expenses grew by 20.7 percent in the quarter as
compared with the year ago period. A significant portion of the increase was
due to the additional week. The balance was attributable to a combination of
salary increases, additional employees, and higher professional services fees.
The balance sheet as of the end of the first quarter reflected further
strengthening of the Company's financial condition. Cash, cash equivalents
and restricted cash stood at $4.1 million, up $1.0 million from $3.1 million
at the end of fiscal 2004. The working capital deficit as of the end of the
first quarter declined to $3.5 million from $4.9 million at the end of fiscal
2004. Of this amount, $2.9 million is attributable to the current portion of
long-term debt held by the Company's major supplier, which the company repays
through preferred pricing reductions. The Company believes the combination
of its current cash and cash equivalents and operating cash flow should be
sufficient to meet its cash needs for the next 12 months.
April Revenue
The Company also reported that revenue for the month of April 2005, the
first month of the second quarter, was $5.6 million. This represents an
increase of 16.7% over revenue of $4.8 million reported in the same month last
year.
Outlook
Paul A. Brown, M.D., Chairman of the Board of HearUSA, said, "Absent the
impact of the non-cash charge, which does not affect our operations or
liquidity, we would have been profitable in the quarter. For fiscal year
2005, we expect to exceed revenues of $80 million and to achieve our first
year of net income applicable to common shareholders. Clearly the strong
results we achieved in the first quarter are an important step toward those
goals. The additional contracts we signed with healthcare provider
organizations late in 2004 are beginning to have an impact on our results as
are the enhanced hearing care benefits that are available to many of our
customers. We expect them to have an increasing impact as the year
progresses.
"We also anticipate a continuation of patient preference for high-end
hearing aids as the year progresses, especially with the new Siemens Acuris
instruments. The recent changes in both Medicare rules and the terms of
coverage by many healthcare providers allows patients better access to state-
of-the-art technology," Dr. Brown added.
About HearUSA
HearUSA provides hearing care to patients whose health insurance and
managed care organizations have contracted with the company for such care and
to retail "self-pay" patients. The 154 company-owned centers are located in
California, Florida, New York, New Jersey, Massachusetts, Ohio, Michigan,
Wisconsin, Minnesota, Missouri and Washington and the province of Ontario
Canada. In addition, the company has a network of approximately 1,400
affiliated audiologists in 49 states. For further information, click on
"investor information" at HearUSA's website http://www.hearusa.com .
HearUSA will hold a webcast today at 4 pm Eastern Time to allow securities
analysts and shareholders the opportunity to hear management discuss the
company's First Quarter 2005 Financial results. The call is being webcast by
Precision IR and can be accessed at HearUSA's website at
http://www.hearusa.com or investors can access the webcast at
<http://www.vcall.com/EventPage.asp?ID=91737>. The conference can also be
listened to by telephone by dialing (toll free) 877-407-9210 (international)
201-689-8049.
This press release contains forward-looking statements within the meaning
of the Securities Litigation Reform Act of 1995, including those concerning
the Company's expectation that the combination of its cash and cash
equivalents and operating cash flow should be sufficient to meet its cash
needs for the next 12 months; that revenues for 2005 should exceed $80 million
and that 2005 should be the company's first profitable year; that the new and
expanded healthcare provider contracts signed at the end of 2004 will have an
increasing impact on results as 2005 continues; and that there will be a
continuation of patient preference for high-end hearing aids as the year
progresses. Such 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 cost reduction 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 10-K for
the 2004 fiscal year.
HearUSA
Consolidated Balance Sheets
April 2, December 25,
ASSETS 2005 2004
(unaudited)
Current assets
Cash and cash equivalents $3,632,439 $2,615,379
Restricted cash and Investment securities
(Note 2) 435,000 435,000
Accounts and notes receivable, less allowance
for doubtful accounts of $314,631 and
$373,583 5,577,348 5,876,699
Inventories 610,584 877,206
Prepaid expenses and other 1,135,557 558,921
Total current assets 11,390,928 10,363,205
Property and equipment, net 3,462,702 3,493,862
Goodwill 33,706,565 33,652,380
Intangibles assets, net 11,139,509 11,242,444
Deposits and other 538,424 549,924
$60,238,128 $59,301,815
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $6,416,889 $6,644,600
Accrued expenses 2,250,655 2,303,601
Accrued salaries and other compensation 2,099,082 1,982,559
Current maturities of long-term debt 4,026,109 4,152,908
Dividends payable 76,631 177,996
Total current liabilities 14,869,366 15,261,664
Long-term debt 16,687,968 17,296,125
Convertible subordinated notes, net of debt
discount of $4,909,447 and $5,443,879
(Note 7) 2,590,553 2,056,121
Total long-term debt and convertible
subordinated notes 19,278,521 19,352,246
Commitments and contingencies - -
Mandatorily redeemable convertible preferred
stock 4,739,486 4,709,921
Stockholders' equity
Preferred stock (Aggregate liquidation
preference $2,330,000; $1 par, 5,000,000
shares authorized)
Series H Junior Participating
(0 shares outstanding) - -
Series J (233 shares outstanding) 233 233
1998 Convertible (0 shares outstanding) - -
Total preferred stock 233 233
Common stock: $.10 par; 50,000,000 shares
authorized 31,587,210 and 30,060,690 shares
issued 3,158,721 3,006,069
Stock subscription (412,500) (412,500)
Additional paid-in capital 121,777,025 120,197,937
Accumulated deficit (102,413,520) (101,968,452)
Accumulated other comprehensive income 1,725,937 1,639,838
Treasury stock, at cost: 523,662 common
shares (2,485,141) (2,485,141)
Total stockholders' equity 21,350,755 19,977,984
$60,238,128 $59,301,815
HearUSA
Consolidated Statements of Operations
Three Months Ended April 2, 2005 and March 27, 2004
April 2, March 27,
2005 2004
(unaudited) (unaudited)
Net revenues $20,068,401 $16,934,600
Operating costs and expenses
Cost of products sold 5,732,039 4,990,482
Center operating expenses 9,906,665 9,142,814
General and administrative expenses 2,963,956 2,455,249
Depreciation and amortization 546,245 614,790
Total operating costs and expenses 19,148,905 17,203,335
Income (loss) from operations 919,496 (268,735)
Non-operating income (expense):
Interest income 12,683 3,857
Interest expense (including approximately
$568,000 and $532,000 of non-cash debt
discount amortization) (1,183,617) (1,173,272)
Net loss (251,438) (1,438,150)
Dividends on preferred stock (193,630) (177,719)
Net loss applicable to common stockholders $(445,068) $(1,615,869)
Net loss applicable to common stockholders
per common share - basic $(0.01) $(0.05)
Net loss applicable to common stockholders
per common share - diluted $(0.01) $(0.05)
Weighted average number of shares of common
stock outstanding - basic
30,516,331 30,423,636
Weighted average number of shares of common
stock outstanding - diluted
30,516,331 30,423,636
