November 10, 2008 16:05 ET

HearUSA Reports Third Quarter 2008 Results

Implements Cost Reductions

WEST PALM BEACH, FL--(Marketwire - November 10, 2008) - HearUSA, Inc. (AMEX: EAR), the recognized leader in hearing care for the nation's top managed care providers through 198 company-owned hearing care centers and a network of over 1,900 affiliated providers, reported financial results for the third quarter ended September 27, 2008.

Q3 2008 Highlights

--  Net revenues: $28.7 million, up 7% vs. Q3 2007
--  Income from operations:  $2.3 million, up 4% vs. Q2 2008 but down 8%
    vs. Q3 2007
--  Net loss of $75,000, including $428,000 in AARP start-up costs
--  Acquired five centers with aggregate annual estimated revenues of $1.4

Financial Results for Third Quarter 2008

In the third quarter 2008, net revenues totaled $28.7 million, up 7% from the third quarter of 2007. Revenues decreased 5% from the previous quarter. The 7% increase was comprised of a 9% increase attributable to centers acquired over the last 12 months and 2% decline in organic growth. Organic revenue declined in the latter part of the third quarter as a result of worsening economic conditions.

Income from operations totaled $2.3 million (8% of net revenues). Although this was a decrease of 8% from the third quarter of 2007, it represented an increase of 4% from the previous quarter.

Net loss applicable to common stockholders totaled $75,000 or $0.00 per basic and diluted share, and included costs of $428,000 ($0.01 per basic and diluted share) incurred in relation to the August 8, 2008 Hearing Care Program Services Agreement entered into with AARP. This compares to net income of $245,000 or $0.01 per basic and diluted share in the previous quarter, and $488,000 or $0.01 per basic and diluted share in the third quarter of 2007. Net income applicable to common stockholders in the third quarter of 2007 included employee severance costs of $282,000 ($0.01 per basic and diluted share).

Q3 2008 Operational Highlights

During the third quarter, HearUSA completed four transactions, acquiring five centers with aggregate estimated trailing twelve month ("TTM") revenues of $1.4 million. Subsequent to the end of the quarter, the company completed two transactions involving two centers with aggregate estimated annual TTM revenues of $700,000. This brings the total number of centers acquired year-to-date to 20, with combined TTM revenues of $7.4 million. The company has signed nine non-binding letters of intent for 15 centers representing combined TTM revenues of approximately $7.6 million.

"The financial results before the investment in the AARP program for Q3 were particularly encouraging despite the decline in revenues in September," commented HearUSA's chairman and CEO, Stephen J. Hansbrough. "While we believe that these are delayed and not lost revenues, the company is taking prudent steps to assure positive cash flow at these revenue levels and remain in a position to maximize acquisition opportunities in what we feel may well become a buyer's market."

Gino Chouinard, HearUSA's president and CFO added, "While we are working closely with our partners on a number of fronts, we can report we are currently executing an expense reduction plan to address the economic downturn. This plan is expected to reduce our annual operating costs by approximately $5 million. Severance charges related to the reduction plan will be expensed in the fourth quarter and are expected to total approximately $350,000."

Conference Call

The company will hold a conference call later today at 4:30 p.m. ET to discuss its third quarter 2008 financial results. A question and answer session will follow management's presentation.

To participate in the call, dial the appropriate number 5-10 minutes prior to the start time, request the HearUSA conference call and provide the conference ID:

Date: Monday, November 10, 2008
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
Domestic callers: 1-800-862-9098
International callers: 1-785-424-1051
Conference ID#: 7HEARUSA
Internet simulcast and replay:

If you have any difficulty connecting with the conference call or webcast, please contact the Liolios Group at 1-949-574-3860.

A replay of the call will be available later that evening and will be accessible until November 24, 2008.

Toll-free replay number: 1-800-839-5685
International replay number: 1-402-220-2567
(No passcode required)

About HearUSA

HearUSA, Inc. provides hearing care to patients primarily through 200 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, Missouri, North Carolina, and the province of Ontario, Canada. The company also derives revenues from its HearUSA Hearing Care Network, comprised of 1,900 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 the HearUSA website:

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 including those relating to the Company's expense reduction program. 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 maintenance of revenue levels from acquired centers; the company's ability to maintain cost controls and limit expenses; the ability of the company to maintain unit sales of Siemens hearing aids; market demand for the company's goods and services; changes in the pricing environment; general economic conditions in those geographic regions where the company's centers are located; consumer confidence in the general economy; 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 Form 10-K for the fiscal year ended December 29, 2007 and Form 10-Q for the quarter ended September 27, 2008.

                               HearUSA, Inc.
                   Consolidated Statements of Operations
       Three Months Ended September 27, 2008 and September 29, 2007

                                             September 27,   September 29,
                                                 2008            2007
                                            --------------  --------------
                                            (Dollars in thousands, except
                                                  per share amounts)

Net revenues
Hearing aids and other products             $       26,740  $       25,050
Services                                             1,977           1,812
                                            --------------  --------------
Total net revenues                                  28,717          26,862
                                            --------------  --------------

Operating costs and expenses
Hearing aids and other products                      7,448           6,807
Services                                               638             499
                                            --------------  --------------
Total cost of products sold and services             8,086           7,306
Center operating expenses                           14,424          12,585
General and administrative expenses                  3,275           3,890
Depreciation and amortization                          635             572
                                            --------------  --------------
Total operating costs and expenses                  26,420          24,353

                                            --------------  --------------
Income from operations                               2,297           2,509

Non-operating income (expense):

Interest income                                          7              21

Interest expense                                    (1,566)         (1,330)
                                            --------------  --------------

Income from continuing operations before
 income tax expense and minority interest
 in income of consolidated joint venture               738           1,200
Income tax expense                                    (296)           (284)
Minority interest in income of consolidated
 joint venture                                        (482)           (394)
                                            --------------  --------------
Net income (loss)                                      (40)            522
Dividends on preferred stock                           (35)            (34)
                                            --------------  --------------

Net income (loss) applicable to common
 stockholders                               $          (75) $          488
                                            ==============  ==============

Net income (loss) applicable to common
 stockholders per common share - basic      $        (0.00) $         0.01
                                            ==============  ==============

Net income (loss) applicable to common
 stockholders per common share - diluted    $        (0.00) $         0.01
                                            ==============  ==============

Weighted average number of shares of common
 stock outstanding - basic                          38,408          37,950
                                            ==============  ==============

Weighted average number of shares of common
 stock outstanding - diluted                        38,408          46,415
                                            ==============  ==============

                              HearUSA, Inc.
                      Consolidated Balance Sheets

                                            September 27,    December 29,
                                                 2008            2007
ASSETS                                      --------------  --------------
                                                (Dollars in thousands)
Current assets
Cash and cash equivalents                   $        3,546  $        3,369
Accounts and notes receivable, less
 allowance for doubtful accounts of
 $503,000 and $498,000                               8,848           8,825
Inventories                                          2,814           2,441
Prepaid expenses and other                           1,238           1,283
Deferred tax asset                                      62              62
                                            --------------  --------------
Total current assets                                16,508          15,980
Property and equipment, net                          4,896           4,356
Goodwill                                            68,405          63,134
Intangible assets, net                              35,378          16,165
Deposits and other                                     819             691
Restricted cash and cash equivalents                   216             216
                                            --------------  --------------
Total Assets                                $      126,222  $      100,542
                                            ==============  ==============

Current liabilities
Accounts payable                            $       15,051  $       12,467
Accrued expenses                                     3,060           2,523
Accrued salaries and other compensation              3,572           3,521
Current maturities of long-term debt                19,350          10,746
Current maturities of subordinated notes,
 net of debt discount of $60,000 in 2007                 -           1,480
Dividends payable                                       34              34
Minority interest in net income of
 consolidated joint venture, currently
 payable                                             1,636           1,221
                                            --------------  --------------
Total current liabilities                           42,703          31,992
                                            --------------  --------------
Long-term debt                                      50,177          36,499
Deferred income taxes                                7,299           6,462
                                            --------------  --------------
Total long-term liabilities                         57,476          42,961
                                            --------------  --------------
Commitments and contingencies
                                            --------------  --------------

Stockholders’ equity
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)                        -               -
                                            --------------  --------------
Total preferred stock                                    -               -

Common stock: $0.10 par; 75,000,000 shares
 38,424,915 and 38,325,414 shares issued             3,842           3,833
Stock subscription                                       -            (412)
Additional paid-in capital                         133,624         133,261
Accumulated deficit                               (113,589)       (113,076)
Accumulated other comprehensive income               4,651           4,468
Treasury stock, at cost: 523,662 common
 shares                                             (2,485)         (2,485)
                                            --------------  --------------
Total Stockholders' Equity                          26,043          25,589
                                            --------------  --------------
Total Liabilities and Stockholders' Equity  $      126,222  $      100,542
                                            ==============  ==============

Contact Information

  • Company Contact:
    Stephen J. Hansbrough
    Chairman and CEO
    HearUSA, Inc.
    (561) 478-8770

    Investor Relations
    Scott Liolios or Ron Both
    Liolios Group, Inc.
    Email Contact
    (949) 574-3860