HearUSA Inc (EAR, Financial) filed Quarterly Report for the period ended 2009-03-28.
HearUSA Inc. operates a network of hearing care centers which provide audiological products and services for the hearing impaired. They currently receive a per-member-per-month fee for managed care members. They have contracts for hearing care with various healthcare providers. In addition they maintain activities in the self-pay market. Each center provides hearing services. HearUSA Inc has a market cap of $32.8 million; its shares were traded at around $0.74 with and P/S ratio of 0.3. HearUSA Inc had an annual average earning growth of 8.6% over the past 5 years.
Depreciation was $384,000 in the first quarter of 2009 and $371,000 in the first quarter of 2008. Amortization expense was $264,000 in the first quarter of 2009 and $291,000 in the first quarter of 2008.
The revolving credit facility is a line of credit of $50 million that bears interest at 9.5% and is secured by substantially all of the Company assets. Approximately $45.8 million was outstanding at March 28, 2009. Approximately $5.4 million has been borrowed under Tranche B for acquisitions and $40.4 million has been borrowed under Tranche C. Borrowing for acquisitions under Tranche B is generally based upon a formula equal to 1/3 of 70% of the acquisitions trailing 12 months revenues and any amount greater than that may be borrowed from Tranche C with Siemens approval. Amounts borrowed under Tranche B are repaid quarterly at a rate of $65 per Siemens units sold by the acquired business plus interest. Amounts borrowed under Tranche C are repaid quarterly at $500,000 plus interest. The required quarterly principal and interest payments on Tranches B and C are forgiven by Siemens through rebate credits of similar amounts as long as 90% of hearing aid units sold by the Company are Siemens products.
Additional quarterly volume rebates of $156,250, $312,500 or $468,750 can be earned by meeting certain quarterly volume tests. These rebates reduce the principal and interest on Tranches B and C and are recorded as a reduction in cost of products sold. Volume rebates of $156,250 and $312,500 were recorded in the first quarter of 2009 and 2008, respectively.
The working capital deficit increased $3.1 million to $8.9 million at March 28, 2009 from $5.8 million at December 27, 2008. The increase in the deficit is attributable to an increase in accounts payable of approximately $3.2 million resulting from the conversion of $10.0 million in Siemens accounts payable to indebtedness and common stock as part of the December 23, 2008 amendments.
In the first quarter of 2009, the Company generated income from operations of approximately $1.2 million (including approximately $190,000 of non-cash other employee stock-based compensation expense and approximately $264,000 of amortization of intangible assets) compared to $1.1 million (including approximately $720,000 in accrued compensation expense and $91,000 in non-cash stock based compensation related to Dr. Browns retirement, $123,000 of non-cash other employee stock-based compensation and approximately $291,000 of amortization of intangible assets) in the first quarter of 2008. Cash and cash equivalents as of March 28, 2009 were approximately $3.1 million. The working capital deficit of $8.9 million includes approximately $2.7 million representing the current maturities of the long-term debt to Siemens which are anticipated to be repaid through rebate credits.
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HearUSA Inc. operates a network of hearing care centers which provide audiological products and services for the hearing impaired. They currently receive a per-member-per-month fee for managed care members. They have contracts for hearing care with various healthcare providers. In addition they maintain activities in the self-pay market. Each center provides hearing services. HearUSA Inc has a market cap of $32.8 million; its shares were traded at around $0.74 with and P/S ratio of 0.3. HearUSA Inc had an annual average earning growth of 8.6% over the past 5 years.
Highlight of Business Operations:
The decrease in center operating expenses in the first quarter of 2009 is attributable to decreases of approximately $503,000 related to incentive compensation due to the decline in revenues, approximately $697,000 due to a net reduction in staffing, approximately $341,000 related to decreased regional management expenses and decreases in gross marketing costs of approximately $404,000. The decrease in staffing, regional management, marketing, and a portion of the decrease in incentive compensation costs are the result of the companys cost containment measures. These were partially offset by additional expenses of approximately $907,000 related to acquired centers owned less than twelve months. Center operating expenses as a percent of total net revenues increased from 48.9% in the first quarter of 2008 to 49.9% in the first quarter of 2009 principally as a result of the decrease in organic sales. The operating expenses of the acquired centers were 52.0% of the related net revenues during the first quarter of 2009.Depreciation was $384,000 in the first quarter of 2009 and $371,000 in the first quarter of 2008. Amortization expense was $264,000 in the first quarter of 2009 and $291,000 in the first quarter of 2008.
The revolving credit facility is a line of credit of $50 million that bears interest at 9.5% and is secured by substantially all of the Company assets. Approximately $45.8 million was outstanding at March 28, 2009. Approximately $5.4 million has been borrowed under Tranche B for acquisitions and $40.4 million has been borrowed under Tranche C. Borrowing for acquisitions under Tranche B is generally based upon a formula equal to 1/3 of 70% of the acquisitions trailing 12 months revenues and any amount greater than that may be borrowed from Tranche C with Siemens approval. Amounts borrowed under Tranche B are repaid quarterly at a rate of $65 per Siemens units sold by the acquired business plus interest. Amounts borrowed under Tranche C are repaid quarterly at $500,000 plus interest. The required quarterly principal and interest payments on Tranches B and C are forgiven by Siemens through rebate credits of similar amounts as long as 90% of hearing aid units sold by the Company are Siemens products.
Additional quarterly volume rebates of $156,250, $312,500 or $468,750 can be earned by meeting certain quarterly volume tests. These rebates reduce the principal and interest on Tranches B and C and are recorded as a reduction in cost of products sold. Volume rebates of $156,250 and $312,500 were recorded in the first quarter of 2009 and 2008, respectively.
The working capital deficit increased $3.1 million to $8.9 million at March 28, 2009 from $5.8 million at December 27, 2008. The increase in the deficit is attributable to an increase in accounts payable of approximately $3.2 million resulting from the conversion of $10.0 million in Siemens accounts payable to indebtedness and common stock as part of the December 23, 2008 amendments.
In the first quarter of 2009, the Company generated income from operations of approximately $1.2 million (including approximately $190,000 of non-cash other employee stock-based compensation expense and approximately $264,000 of amortization of intangible assets) compared to $1.1 million (including approximately $720,000 in accrued compensation expense and $91,000 in non-cash stock based compensation related to Dr. Browns retirement, $123,000 of non-cash other employee stock-based compensation and approximately $291,000 of amortization of intangible assets) in the first quarter of 2008. Cash and cash equivalents as of March 28, 2009 were approximately $3.1 million. The working capital deficit of $8.9 million includes approximately $2.7 million representing the current maturities of the long-term debt to Siemens which are anticipated to be repaid through rebate credits.
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