HealthExtras Reports Second Quarter 2008 Results

  
    
  
  
    
      HealthExtras, Inc. (NASDAQ:HLEX), a pharmacy benefit management company, 
      today announced its financial results for the quarter ended June 30, 
      2008. The Company reported a 46% increase in quarterly revenues to 
      $614.3 million and a 47% increase of net income to $12.0 million, or 
      $0.28 per diluted share over the prior year. Additionally, the Company 
      announced the acquisition of Immediate Pharmaceutical Services, Inc. (“IPS”) 
      from Discount Drug Mart, Inc. IPS operates a state-of-the-art 
      prescription mail service fulfillment center located in Avon Lake, Ohio, 
      a western suburb of Cleveland. “The 
      acquisition of IPS is the culmination of a comprehensive evaluation of a 
      number of mail service pharmacies. While there were several potential 
      acquisition candidates, the quality and efficiencies of IPS, coupled 
      with the scalability of its operations, makes it a superb platform for 
      building our mail service capability," stated David T. Blair, Chief 
      Executive Officer of HealthExtras.
    
    
      “As illustrated by our performance during the 
      second quarter, we continue to produce strong revenue and earnings 
      growth. In addition to our sound financial results, we made key 
      strategic acquisitions of HospiScript, a leading provider of pharmacy 
      management services to the hospice industry and most recently IPS, a 
      mail service pharmacy provider. Our strong performance combined with 
      these acquisitions demonstrate progress on both our organic and 
      strategic growth initiatives,” added Blair.
    
    
      Second Quarter Results
    
    
      Revenue for the second quarter increased by $193.3 million, or 45.9%, to 
      $614.3 million from $421.0 million in the prior year’s 
      comparable quarter. The growth in revenue included $184.5 million from 
      increased prescription volume, $3.2 million from an increase in unit 
      prices and $5.6 million from the proportionate amount of prescription 
      costs paid by plan sponsors. Total claims processed in the second 
      quarter increased to 12.4 million from 9.6 million for the same period 
      in 2007. The increase in prescription volume was primarily due to the 
      addition of new clients.
    
    
      Gross profit for the second quarter increased $7.6 million, to $34.1 
      million or 5.6% of revenue compared to $26.5 million, or 6.3% of 
      revenue, in the second quarter of the prior year.
    
    
      Second quarter operating income increased 53.8% to $18.3 million from 
      $11.9 million in the second quarter of 2007. The increase in operating 
      income was primarily due to the increase in gross profit, offset by a 
      $1.3 million increase in selling, general and administrative expenses. 
      The increase in selling, general and administrative expenses included 
      $1.2 million associated with consolidating HospiScript results.
    
    
      Net income for the second quarter of 2008 was $12.0 million, or $0.28 
      per diluted share, compared to the prior year’s 
      net income of $8.2 million, or $0.19 per diluted share.
    
    
      Six Month Results
    
    
      Revenue for the six months ended June 30, 2008 increased 45.4%, to $1.2 
      billion from $827.4 million in the prior year. The growth in revenue 
      included $368.1 million from increased prescription volume, $0.2 million 
      from an increase in unit prices and $7.3 million from the proportionate 
      amount of prescription costs paid by plan sponsors. Total claims 
      processed increased to 25.3 million for the six months ended June 30, 
      2008 from 19.3 million for the same period in 2007. The increase in 
      prescription volume was primarily due to the addition of new clients.
    
    
      Gross profit for the first six months of 2008, increased by $11.2 
      million to $65.3 million, or 5.4% of revenue, compared to $54.1 million, 
      or 6.5% of revenue, in the first six months of the prior year.
    
    
      Operating income increased by $8.3 million to $35.0 million in the first 
      six months of 2008 from $26.7 million in the same period of the prior 
      year. The increase in operating income was primarily due to the increase 
      in gross profit offset by an increase in selling, general and 
      administrative expenses. The increase in selling, general and 
      administrative expenses included $2.9 million associated with 
      initiatives to support the Company’s continued 
      growth, such as additional employee facilities and vendor costs to serve 
      and implement new clients, as well as $1.2 million relating to 
      consolidating HospiScript’s results.
    
    
      Net income for the first six months of 2008 was $23.6 million, or $0.54 
      per diluted share, compared to $17.9 million, or $0.42 per diluted 
      share, in the prior year.
    
    
      Acquisition of IPS
    
    
      Today the Company announced that it has entered into a definitive 
      agreement to acquire IPS. Under the terms of the agreement, HealthExtras 
      will pay a purchase price of $40 million in cash at closing. The 
      integration costs of the IPS transaction will have an impact on results 
      beginning in the third quarter. The Company expects the IPS transaction 
      to be modestly dilutive to 2008 earnings and accretive in 2009. 
      Additional information about the timing and extent of IPS contributions 
      to revenues and earnings will be discussed during the Company’s 
      conference call scheduled for Wednesday, August 6, 2008, at 10:00 a.m. 
      Eastern time.
    
    
      HealthExtras expects to expand the operational processes, systems, and 
      personnel based in Ohio. “As we have 
      demonstrated with previous acquisitions, we will take a long-term view 
      of IPS. We will invest in their infrastructure and expand their 
      marketing initiatives. Through IPS our current and prospective clients 
      will have a mail service option which provides a greater level of 
      financial transparency and higher level of service,” 
      added Blair.
    
    
      About HealthExtras (www.healthextras.com):
    
    
      HealthExtras, Inc. is a full-service pharmacy benefit management 
      company. Its clients include self-insured employers, including state and 
      local governments, third-party administrators, managed care 
      organizations, unions 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 60,000 participating pharmacies.
    
    
      This press release may contain forward-looking statements within the 
      meaning of Section 21E of the Securities Exchange Act of 1934. These 
      forward-looking statements involve a number of risks and uncertainties. 
      Factors that we have identified that might materially affect our results 
      are discussed in our Annual Report on Form 10-K for the year ended 
      December 31, 2007 under "Item 1.A Risk Factors." Readers are urged to 
      carefully review and consider the various disclosures made in our Annual 
      Report on Form 10-K and our other filings with the Securities and 
      Exchange Commission that attempt to advise interested parties of the 
      risks and uncertainties that may affect our business.
    
    
      
        
        
        
           
        
        
        
        
           
        
        
        
      
      
        
          HEALTHEXTRAS, INC.
        
      
      
        
          and Subsidiaries
        
      
      
        
           
        
      
      
        
          CONSOLIDATED STATEMENTS OF OPERATIONS
        
      
      
        
          (In thousands, except per share data)
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          For the three months

          
            ended June 30,
          
        
        
        
        
          For the six months

          
            ended June 30,
          
        
      
      
        
        
        
        
        
           
        
        
          2008
        
        
           
        
        
           
        
        
           
        
        
          2007
        
        
           
        
        
        
        
           
        
        
          2008
        
        
           
        
        
           
        
        
           
        
        
          2007
        
        
           
        
      
      
        
          Revenue (excludes member co-payments of $173,978, $143,362, $364,590 
          and $299,431 for the three and six months ended June 30, 2008 and 
          2007, respectively)
        
        
        
        
          $
        
        
          614,302
        
        
           
        
        
        
        
          
            $
          
        
        
          421,004
        
        
           
        
        
        
        
          $
        
        
          1,202,946
        
        
           
        
        
        
        
          $
        
        
          827,376
        
        
           
        
      
      
        
          Direct expenses
        
        
        
        
        
        
          580,176
        
        
        
        
        
        
        
        
          394,487
        
        
        
        
        
        
        
        
          1,137,627
        
        
        
        
        
        
        
        
          773,301
        
        
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
           
        
        
          15,860
        
        
           
        
        
        
        
           
        
        
          14,579
        
        
           
        
        
        
        
           
        
        
          30,289
        
        
           
        
        
        
        
           
        
        
          27,391
        
        
           
        
      
      
        
          Total operating expenses
        
        
        
        
           
        
        
          596,036
        
        
           
        
        
        
        
           
        
        
          409,066
        
        
           
        
        
        
        
           
        
        
          1,167,916
        
        
           
        
        
        
        
           
        
        
          800,692
        
        
           
        
      
      
        
          Operating income
        
        
        
        
        
        
          18,266
        
        
        
        
        
        
        
        
          11,938
        
        
        
        
        
        
        
        
          35,030
        
        
        
        
        
        
        
        
          26,684
        
        
        
      
      
        
          Interest income
        
        
        
        
        
        
          1,175
        
        
        
        
        
        
        
        
          1,457
        
        
        
        
        
        
        
        
          3,072
        
        
        
        
        
        
        
        
          2,788
        
        
        
      
      
        
          Interest expense
        
        
        
        
        
        
          (36
        
        
          )
        
        
        
        
        
        
          (53
        
        
          )
        
        
        
        
        
        
          (72
        
        
          )
        
        
        
        
        
        
          (89
        
        
          )
        
      
      
        
          Other income
        
        
        
        
           
        
        
          —
        
        
           
        
        
        
        
           
        
        
          —
        
        
           
        
        
        
        
           
        
        
          1
        
        
           
        
        
        
        
           
        
        
          1
        
        
           
        
      
      
        
          Income before minority interest and income taxes
        
        
        
        
        
        
          19,405
        
        
        
        
        
        
        
        
          13,342
        
        
        
        
        
        
        
        
          38,031
        
        
        
        
        
        
        
        
          29,384
        
        
        
      
      
        
          Minority interest
        
        
        
        
           
        
        
          —
        
        
           
        
        
        
        
           
        
        
          —
        
        
           
        
        
        
        
           
        
        
          —
        
        
           
        
        
        
        
           
        
        
          31
        
        
           
        
      
      
        
          Income before income taxes
        
        
        
        
        
        
          19,405
        
        
        
        
        
        
        
        
          13,342
        
        
        
        
        
        
        
        
          38,031
        
        
        
        
        
        
        
        
          29,353
        
        
        
      
      
        
          Income tax expense
        
        
        
        
           
        
        
          7,392
        
        
           
        
        
        
        
           
        
        
          5,143
        
        
           
        
        
        
        
           
        
        
          14,414
        
        
           
        
        
        
        
           
        
        
          11,445
        
        
           
        
      
      
        
          Net income
        
        
        
        
          $
        
        
          12,013
        
        
           
        
        
        
        
          $
        
        
          8,199
        
        
           
        
        
        
        
          $
        
        
          23,617
        
        
           
        
        
        
        
          $
        
        
          17,908
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income per share, basic
        
        
        
        
          $
        
        
          0.28
        
        
        
        
        
        
          $
        
        
          0.20
        
        
        
        
        
        
          $
        
        
          0.56
        
        
        
        
        
        
          $
        
        
          0.43
        
        
        
      
      
        
          Net income per share, diluted
        
        
        
        
          $
        
        
          0.28
        
        
        
        
        
        
          $
        
        
          0.19
        
        
        
        
        
        
          $
        
        
          0.54
        
        
        
        
        
        
          $
        
        
          0.42
        
        
        
      
      
        
          Weighted average shares of common stock outstanding, basic
        
        
        
        
        
        
          42,402
        
        
        
        
        
        
        
        
          41,433
        
        
        
        
        
        
        
        
          42,310
        
        
        
        
        
        
        
        
          41,194
        
        
        
      
      
        
          Weighted average shares of common stock outstanding, diluted
        
        
        
        
        
        
          43,537
        
        
        
        
        
        
        
        
          43,027
        
        
        
        
        
        
        
        
          43,461
        
        
        
        
        
        
        
        
          42,838