FOR IMMEDIATE RELEASE

Company Contact:                                                       Investor Relations

Paul A. Brown, M.D, Founder & Chairman                        Scott Liolios or Ron Both

Stephen J. Hansbrough, President & CEO                                                Liolios Group, Inc.          
HearUSA, Inc.                                                                                           ron@liolios.com

(561) 478-8770                                                               (949) 574-3860  

                                                                                                 

HEARUSA REPORTS SECOND QUARTER 2007 RESULTS

Quarterly Net Revenues Reach Third Consecutive Record High

West Palm Beach, Fla. -- August 13, 2007 -- HearUSA, Inc. (AMEX: EAR), a leading provider of hearing care through a fully integrated and professionally accredited system of hearing care centers, reported financial results for the second quarter ended June 30, 2007.

Q2 2007 Financial Results

·    Net revenues totaled a record $24.9 million, an increase of 5.7% from $23.6 million in the previous quarter and an increase of 12.0% from $22.3 million a year ago. This third consecutive quarter of record net revenues is primarily attributable to the contribution of hearing centers acquired within the last 12 months.

·    Income from operations was $810,000 or 3.3% of revenues, as compared to $1.6 million or 7.0% of revenues in the previous quarter and $1.6 million or 7.3% of net revenues a year ago. The decrease was mostly attributable to the additional marketing expense of approximately $700,000 related to the Coach Shula TV campaign and $200,000 from the 2006 restatement costs. The long-term objective for income from operations remains in the range of 10% to 12%.

·    The net loss applicable to common stockholders for the second quarter was $3.4 million or $0.09 per share, as compared to a net loss of $595,000 or $0.02 per share in the previous quarter and net loss of $100,000 or $0.00 per share a year ago. The increase in net loss is principally due to a non-cash charge related to the conversion of the 2003 convertible notes and exercise of related warrants totaling $2.6 million or $0.07 per share, and the restatement costs and Coach Shula TV campaign investment costs totaling $900,000 or $0.02 per share.

 

“Our highly successful acquisition program drove our top line growth to another record this quarter,” said Stephen J. Hansbrough, president and CEO of HearUSA, “and we expect this to continue with the abundance of acquisition opportunities before us .It is also important to note that while we took on the major cost of the new Coach Shula TV campaign in the second quarter, we are looking forward to realizing the full benefit of this program in the third and fourth quarters. In fact, July revenues were up 23% to $7.3 million as compared to $5.9 million in July of last year. This strong performance keeps us on track for our 2007 net revenues to increase 15-20% over last year and range between $102 and $107 million.”

Second Quarter 2007 Highlights

In May, HearUSA launched the "Just Find Out" campaign featuring renowned NFL football coach and Pro Football Hall of Fame inductee, Don Shula. The initial campaign used television, print, and direct mail to target adults 45 and older in three major Florida markets of Miami-Ft. Lauderdale, Palm Beach and Tampa. The campaign informs consumers about the importance of hearing and directs them to a local HEARx center for a free demonstration of the latest technology from Siemens.

 

 HearUSA acquired three hearing care centers during the second quarter, with combined estimated trailing twelve-month (“TTM”) revenues of $1.7 million. This brings the total acquisitions for the first half of 2007 to six hearing centers, with combined estimated TTM revenues of $4.1 million.

Notes Ken Schofield, HearUSA’s chief operating officer, “In addition to the $4.1 million in TTM revenue we acquired in the first half of the year, we have since closed on two additional transactions representing four hearing care centers and $1.7 million in estimated TTM revenues. Additionally we have Letters of Intent representing $5.0 million in estimated TTM revenues. We continue to receive strong interest by independent private hearing care providers looking to join our organization and are confident we will meet our acquisition goal of $10 to $15 million in estimated TTM revenues for 2007. Since we initiated our strategic acquisition program over two years ago, we have been able to retain over 90% of the annual estimated revenues of the acquired hearing care centers during the first year of their acquisition and achieve a growth of over 5% above annual estimated revenues for those acquired hearing care centers we purchased more than a year ago.”

 

Gino Chouinard, HearUSA’s executive vice president and CFO, added, “Excluding the charges associated with the 2003 transaction and 2006 restatement, the only significant increase in our cost structure in the second quarter was the  $700,000 associated with the Don Shula marketing campaign. This will not repeat in the third quarter, as the investment we made in this campaign has entered a maintenance phase at a fraction of the cost spent during the branding phase. Additionally, in order to help drive profitability, the company intends to reduce corporate expenses by the end of the third quarter by more than $1 million per annum.”  

The company noted that about 17% of the hearing aids it sold during the quarter were purchased by patients under the age of 60. It believes this is an indication of environmental factors, like loud music, causing damage to the hearing of American’s younger generations. In addition to the aging population, this appears to be an emerging demographic factor that is increasing the demand for state-of-the-art hearing care like that provided by HearUSA.

Conference Call

The company will hold a conference call Wednesday August 15, 2007 to discuss its second quarter financial results. President and CEO Stephen J. Hansbrough, COO Ken Schofield, and Executive Vice President and CFO Gino Chouinard will host the presentation, which will be followed by a question and answer period.

 

Date: Wednesday, August 15, 2007

Time: 4:30 pm Eastern (1:30 pm Pacific)

Toll Free Dial-in Number: 1-877-407-9210

International/Toll Dial-in Number: 1-201-689-8049
Conference ID Number: 250109
Internet Simulcast: http://www.vcall.com/IC/CEPage.asp?ID=119220

(Windows Media Player needed for simulcast)

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact the Liolios Group at (949) 574-3860.

A replay of the call will be available later that evening and accessible until August 29, 2007.

Toll-free Replay Number: 1-877-660-6853

International/Toll Replay Number: 1-201-612-7415

Conference ID Number: 250109; and Account Number: 286

Internet Replay: http://www.vcall.com/IC/CEPage.asp?ID=119220

About HearUSA

HearUSA, Inc. provides hearing care to patients primarily through more than 173 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 and the province of Ontario, Canada. The company also derives revenues from its HearUSA Hearing Care Network, comprised of 1,600 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: http://www.hearusa.com/.

Forward Looking Statements 

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 of continued revenue growth due to acquisitions; the expectation that 2007 net revenues will increase 15-20% over 2006 and range between $102 and $107 million; our acquisition goal of $10 to $15 million in estimated TTM revenues for 2007; and our intention to reduce corporate expenses by the end of the third quarter by more than $1 million per annum.  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 successful implementation of the company’s acquisition program; integration of the newly acquired centers and maintenance of revenue levels from those centers; the  company’s ability to maintain cost controls and limit expenses; the successful implementation of the Siemens agreements; 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; 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 30, 2006. 

  


HearUSA, Inc.

Consolidated Statements of Operations

Three Months Ended June 30, 2007 and July 1, 2006

June 30,

July 1,

2007

2006

(Dollars in thousands, except per share amounts)

Net revenues

Hearing aids and other products

$              23,166

$              20,838

Services

1,754

1,419

Total net revenues

24,920

22,257

Operating costs and expenses

Hearing aids and other products

6,062

6,076

Services

556

414

Total cost of products sold and services

6,618

6,490

Center operating expenses

13,143

10,301

General and administrative expenses

3,813

3,349

Depreciation and amortization

536

488

Total operating costs and expenses

24,110

20,628

Income from operations

810

1,629

Non-operating income (expenses):

Gain from insurance proceeds

-

-

Interest income

37

52

Interest expense

(3,697)

(1,371)

Income before income tax expense and minority interest in income of consolidated joint venture 

(2,850)

310

Income tax expense

(206)

(313)

Minority interest in income of consolidated joint venture

(259)

(62)

Net loss

(3,315)

(65)

Dividends on preferred stock

(36)

(35)

Net loss applicable to common stockholders

$             (3,351)

$                (100)

Net loss applicable to common stockholders per common share – basic and diluted

$               (0.09)

$               (0.00)  

Weighted average number of shares of common stock outstanding – basic and diluted

37,358

32,216


HearUSA, Inc.

Consolidated Balance Sheets

June 30,

December 30,

ASSETS

2007

2006

(Dollars in thousands)

Current assets

Cash and cash equivalents  

$                3,210

$                2,326

Accounts and notes receivable, less allowance for

   doubtful accounts of $426,469 and $434,098

7,551

7,591

Inventories

2,460

2,371

Prepaid expenses and other

1,822

1,400

Deferred tax asset

73

67

Total current assets

15,116

13,755

Property and equipment, net

4,096

3,878

Goodwill

54,726

50,970

Intangible assets, net  

14,919

13,592

Deposits and other

710

876

Restricted cash and cash equivalents

209

205

Total Assets

$              89,776

$              83,276

LIABILITIES AND STOCKHOLDERS’  EQUITY

Current liabilities

Accounts payable

$               8,874

$              10,463

Accrued expenses

3,480

2,509

Accrued compensation

2,926

2,826

Current maturities of long-term debt

11,688

8,391

Current maturities of convertible subordinated notes, net of debt discount of $1,263,003 in 2006

-

2,487

Current maturities of subordinated notes, net of debt discount of $234,223 and $452,228

1,526

1,308

Dividends payable

34

34

Minority interest in net income of consolidated joint venture, currently payable

737

633

Total current liabilities

29,265

28,651

Long-term debt

31,157

28,599

Deferred income taxes

5,624

5,234

Convertible subordinated notes, net of debt discount of $217,923 in 2006 

-

2,282

Subordinated notes, net of debt discount of $60,123 in 2006

660

1,480

Warrant liability

-

110

Total long-term liabilities

37,441

37,705

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: $.10 par; 75,000,000 shares authorized

37,710,000 and 32,029,750 shares issued

3,771

3,203

Stock subscription

(412)

(412)

Additional paid-in capital

132,394

123,972

Accumulated deficit

(113,458)

 (109,521)

Accumulated other comprehensive income

3,260

2,163

Treasury stock, at cost:523,662 common shares

(2,485)

(2,485)

Total Stockholders’ Equity

23,070

16,920

Total Liabilities and Stockholders’ Equity

$              89,776

$              83,276