Exhibit 99.1
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| FOR IMMEDIATE RELEASE | | | | | | Contact: Michael P. Donovan |
| | | | | | | mdonovan@HealthExtras.com |
| | | | | | | HealthExtras, Inc. |
| | | | | | | 301-548-2900 |
HEALTHEXTRAS REPORTS RECORD THIRD QUARTER RESULTS
Net Income Up 54% and Revenues Up 51% Over Prior Year
Company Reports Net Income of $4.3 Million, Provides Preliminary Guidance for 2005
ROCKVILLE, MD, October 27, 2004 — HealthExtras, Inc. (NASDAQ: HLEX), a pharmacy benefit management company, today announced its financial results for the third quarter ended September 30, 2004.
Third Quarter Highlights
| | • | Net income for the third quarter 2004 was $4.3 million or $.12 per share, a 54% increase over comparable third quarter 2003 earnings of $2.8 million or $.08 per share. |
| | • | Revenues for the third quarter 2004 totaled $143.2 million, a 51% increase over third quarter 2003 revenues of $95.0 million. |
| | • | Over 3.7 million prescriptions were processed during the quarter and earnings before interest, taxes, depreciation, and amortization (EBITDA) were $8.0 million. See attached reconciliation of EBITDA to net income. |
“We are pleased with the Company’s financial performance,” said David T. Blair, Chief Executive Officer of HealthExtras. “The quarter’s financial performance reflects both new client additions and a full quarter of consolidated results from our recent acquisition of Managed Healthcare Systems. In addition to the Company’s strong financial results, new sales have exceeded our expectations and our annual client retention rate will exceed 95%.”
Operating income for the three months ended September 30, 2004, increased to $7.2 million, a 53% increase over the $4.7 million from the same period in 2003. The financial results were consistent with management’s expectations, and the Company confirmed that it is on track to meet or exceed its previously stated 2004 financial guidance of approximately $510 million in revenues and earnings of $16.4 million.
Preliminary 2005 Guidance
Based on currently booked business and margin trends, management expects 2005 net income to increase by 35% over 2004 results to at least $22.3 million, which should equate to earnings per share of at least $.61 in 2005. Revenue for 2005 is expected to be between $650 and $700 million. Reported revenue will be directly impacted by the extent to which clients continue to shift pharmacy costs to members in the form of higher co-payments and deductibles. As previously disclosed, the Company does not report member payments as revenue. Factors that could contribute to results exceeding those described above include:
| | • | new business additions with January 1, 2005, effective dates |
| | • | other new business additions in the balance of 2005 |
| | • | accelerated margin contributions from Managed Healthcare Systems |
| | • | enhanced formulary performance and |
| | • | improved generic drug utilization |
Earnings and per share calculations may also be affected by the potential issuance of new common stock. Management believes that new capital raised will facilitate accretive investment and earnings opportunities in 2005.
“The Company is well-positioned to deliver earnings growth in 2005 and beyond,” added Mr. Blair. “Throughout the year, we added clients in both existing and new markets, integrated our operations, implemented programs to control our clients’ drug costs and continued to provide our clients with an exemplary level of service. We continue to have significant sales momentum and opportunities to improve margins.”
About HealthExtras (www.healthextras.com)
HealthExtras, Inc., a pharmacy benefit management company, currently provides benefits to over three million members. Its clients include self-insured employers, including state and local governments, third-party administrators, managed care organizations and individuals. The Company’s integrated pharmacy benefit management services marketed under the name Catalyst Rx include: claims processing, benefit design consultation, drug utilization review, formulary management, drug data analysis services and mail order services. Additionally, the Company operates a national retail pharmacy network with over 53,000 participating pharmacies.
This press release may contain forward-looking information. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in HealthExtras’ filings with the Securities and Exchange Commission.
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Financial statements follow:
HealthExtras, Inc.
Balance Sheet Information
(In thousands)
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| | | September 30,
2004
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Assets | | | | |
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Current assets: | | | | |
Cash and cash equivalents | | $ | 34,847 | |
Accounts receivable, net of allowance for doubtful accounts of $1,122 | | | 61,420 | |
Inventory, net | | | 373 | |
Deferred income taxes | | | 1,225 | |
Deferred charges: | | | | |
Direct | | | 1,251 | |
Marketing and promotion | | | 755 | |
Other current assets | | | 3,876 | |
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Total current assets | | | 103,747 | |
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Fixed assets, net | | | 6,200 | |
Intangible assets, net of accumulated amortization of $2,316 | | | 22,319 | |
Goodwill | | | 69,354 | |
Restricted cash | | | 1,000 | |
Other assets | | | 214 | |
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Total assets | | $ | 202,834 | |
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Liabilities and stockholders’ equity | | | | |
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Current liabilities: | | | | |
Accounts payable | | $ | 60,896 | |
Income tax payable | | | 3,047 | |
Accrued expenses and other current liabilities | | | 2,872 | |
Note payable | | | 5,000 | |
Deferred revenue | | | 4,128 | |
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Total current liabilities | | | 75,943 | |
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Deferred income taxes | | | 2,511 | |
Notes payable | | | 38,088 | |
Other liabilities | | | 4 | |
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Total liabilities | | | 116,546 | |
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Stockholders’ equity: | | | | |
Common stock | | | 335 | |
Additional paid-in capital | | | 75,019 | |
Comprehensive loss | | | (4 | ) |
Retained earnings | | | 10,938 | |
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Total stockholders’ equity | | | 86,288 | |
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Total liabilities and stockholders’ equity | | $ | 202,834 | |
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HealthExtras, Inc.
Income Statement
(In thousands, except per share data)
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| | | For the quarter ended September 30, 2003
| | For the quarter ended September 30, 2004
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Revenue | | $ | 95,003 | | $ | 143,193 |
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Direct expenses | | | 83,909 | | | 126,847 |
Selling, general & administrative expenses | | | 6,428 | | | 9,131 |
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Total operating expenses | | | 90,337 | | | 135,978 |
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Operating income | | | 4,666 | | | 7,215 |
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Interest expense, net | | | 98 | | | 352 |
Other income | | | — | | | 41 |
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Income before taxes | | | 4,568 | | | 6,904 |
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Income tax provision | | | 1,763 | | | 2,603 |
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Net income | | $ | 2,805 | | $ | 4,301 |
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EPS - basic | | $ | 0.09 | | $ | 0.13 |
EPS - diluted | | $ | 0.08 | | $ | 0.12 |
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Weighted average common shares, basic | | | 32,466 | | | 33,415 |
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Weighted average common shares, diluted | | | 35,034 | | | 36,869 |
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Adjusting items for EBITDA: | | | | | | |
Net income | | $ | 2,805 | | $ | 4,301 |
Depreciation and amortization | | | 584 | | | 722 |
Interest expense, net | | | 98 | | | 352 |
Income tax provision | | | 1,763 | | | 2,603 |
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EBITDA | | $ | 5,250 | | $ | 7,978 |
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