NationsHealth Announces 2007 First Quarter Financial Results

  
    
  
  
    
      NationsHealth, Inc. (Nasdaq: NHRX; NHRXW; NHRXU) today announced its 
      financial results for the quarter ended March 31, 2007.
    
    
      Revenue for the quarter ended March 31, 2007 was $18.8 million, compared 
      to $25.0 million for the corresponding period in 2006. Net loss for the 
      quarter ended March 31, 2007 was $1.2 million, or $0.04 per share, 
      compared to a net loss of $13.5 million, or $0.49 per share, for the 
      corresponding period in 2006. The 2006 first quarter included 
      approximately $8.5 million of revenue related to the initial marketing 
      and enrollment efforts for CIGNA’s Medicare 
      Part D Prescription Drug Plan. Pursuant to our May 2006 amendment with 
      CIGNA, effective January 1, 2007, revenue from services to CIGNA is 
      earned under a new, more predictable service fee arrangement. Revenue 
      for the 2006 first quarter also included approximately $2.0 million from 
      the Company’s discount prescription drug card 
      business, which was sold on September 5, 2006.
    
    
      Adjusted EBITDA*, defined as earnings before interest, taxes, 
      depreciation and amortization, and stock based compensation, was $1.6 
      million for the quarter ended March 31, 2007, compared to an adjusted 
      EBITDA loss of $10.9 million for the quarter ended March 31, 2006.
    
    
      The Company’s Insurance Services segment 
      contributed profit of $3.1 million for the quarter ended March 31, 2007, 
      compared to a loss of $8.0 million for the quarter ended March 31, 2006. 
      The Medical Products segment contributed profit of $1.6 million for the 
      quarter ended March 31, 2007, compared to profit of $2.3 million for the 
      quarter ended March 31, 2006. Medical Products segment profit for the 
      prior year quarter included approximately $2.0 million of profit from 
      the divested discount prescription drug card business.
    
    
      “We are pleased with the results we are seeing 
      with regard to our new medical product offerings, expanded relationships 
      with other Medicare prescription drug and managed care providers and the 
      initial results from our acquisitions of small regional providers of 
      diabetes supplies,” said Timothy Fairbanks, 
      the Company’s Chief Financial Officer. “Furthermore, 
      our new term loan facility, which closed on April 11, 2007 and under 
      which we currently have $5.5 million available to draw upon, will enable 
      us to finance additional patient acquisitions and accelerate the growth 
      of our core diabetes business.”
    
    
      As previously announced, NationsHealth will host a conference call at 
      11:00 a.m. ET today to review its financial results for the quarter 
      ended March 31, 2007.
    
    Access Information:
Date:                         May 10, 2007
Time:                         11:00 a.m. ET
U.S./Canada dial-in number:   866-316-1371
International dial-in number: 913-312-1231
Participant passcode:         6754843
Live webcast:                 www.nationshealth.com
    
      Replay Access Information:
    
    
      A recording of the conference call will be available three hours after 
      completion until May 17, 2007 at midnight ET at 888-203-1112 (U.S.) and 
      719-457-0820 (International). The replay passcode is 6754843. The 
      webcast will be archived for on demand listening for 30 days on the 
      NationsHealth’s website, www.nationshealth.com.
    
    
      About NationsHealth, Inc.
    
    
      NationsHealth seeks to improve the delivery of healthcare to Medicare 
      and managed care beneficiaries by providing medical products and 
      prescription related services. NationsHealth provides home delivery of 
      diabetes supplies, medications and other medical products to patients 
      across the nation. In addition to its medical products business, 
      NationsHealth also provides education, marketing, enrollment and patient 
      service to insurers offering Medicare Part D prescription drug plans and 
      other Medicare insurance coverage. NationsHealth has an agreement with 
      CIGNA to service its Medicare Part D prescription drug plans nationally. 
      For more information please visit http://www.nationshealth.com.
    
    
      * Use of Non-GAAP Financial Measures
    
    
      In its earnings releases, conference calls, slide presentations or 
      webcasts, the Company may use or discuss adjusted EBITDA (or adjusted 
      EBITDA loss, as applicable), which is a non-GAAP financial measure as 
      defined by SEC Regulation G. Management regularly reviews adjusted 
      EBITDA as an analytical indicator of the Company’s 
      financial performance and believes that it is useful to investors in 
      evaluating operating performance. In addition, the Company uses adjusted 
      EBITDA as a measure of performance for its business segments and for 
      incentive compensation purposes. The Company does not intend for 
      adjusted EBITDA to be considered in isolation or as a substitute for any 
      GAAP measure. Adjusted EBITDA, as presented, may not be comparable to 
      similarly titled measures of other companies.
    
    
      Net income (loss) is the GAAP financial measure most directly comparable 
      to adjusted EBITDA (EBITDA loss). A reconciliation of net loss to 
      adjusted EBITDA (EBITDA loss) is as follows (in thousands):
    
    
      
        
        
        
        
        
          Three Months Ended March 31,
        
      
      
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Net loss
        
        
        
        
          $
        
        
          (1,188)
        
        
        
        
          $
        
        
          (13,530)
        
      
      
        
          Interest, net
        
        
        
        
        
        
          862 
        
        
        
        
        
        
          643 
        
      
      
        
          Depreciation and amortization
        
        
        
        
        
        
          572 
        
        
        
        
        
        
          458 
        
      
      
        
          Amortization of customer contract intangible
        
        
        
        
        
        
          969 
        
        
        
        
        
        
          969 
        
      
      
        
          Stock-based compensation
        
        
        
        
           
        
        
          353 
        
        
        
        
           
        
        
          543 
        
      
      
        
          Adjusted EBITDA (EBITDA loss)
        
        
        
        
          $
        
        
          1,568 
        
        
        
        
          $
        
        
          (10,917)
        
      
    
    
      This press release contains forward-looking statements about 
      NationsHealth, including statements regarding management initiatives and 
      new product and market opportunities, none of which should be construed 
      in any manner as a guarantee that such results will in fact occur. In 
      addition, other written or oral statements that constitute 
      forward-looking statements may be made by us or on our behalf. 
      Forward-looking statements are statements that are not historical facts, 
      and in some cases may be identified by the words “anticipate,” 
      “project,” “expect,” 
      “plan,” “intend,” 
      “may,” “should,” 
      “will,” and 
      similar words or phrases. Such forward-looking statements, based upon 
      the current beliefs and expectations of NationsHealth’s 
      management, are subject to risks and uncertainties, which could cause 
      actual results to differ from the forward-looking statements. The 
      following factors, among others, could cause actual results to differ 
      from those set forth in the forward-looking statements: our ability to 
      maintain our existing customer base; our ability to successfully 
      maintain our Insurance Services segment; our dependence on Medicare 
      reimbursement; our customers’ desire to take 
      advantage of our Part D and specialty pharmacy services; uncertainty in 
      our costs incurred in administering the Part D program; changes in 
      Medicare, Medicaid, Tricare, Champus and any other state or 
      national-based reimbursement program, including competitive bidding for 
      durable medical equipment and supplies; changing interpretations of 
      generally accepted accounting principles; outcomes of government reviews 
      of NationsHealth’s business practices; 
      inquiries and investigations and related litigation; our exposure to 
      product liability in excess of our insurance coverage; continued 
      compliance with government regulations; legislation or regulatory 
      requirements or changes adversely affecting the businesses in which 
      NationsHealth is engaged; fluctuations in customer demand; management of 
      growth; our ability to compete effectively; timing and market acceptance 
      of new products sold by NationsHealth; our ability to raise the capital 
      we will need to sustain our operations; general economic conditions; and 
      geopolitical events, regulatory changes and other risks and 
      uncertainties described in NationsHealth’s 
      Annual Report on Form 10-K for the year ended December 31, 2006, and in 
      NationsHealth’s other reports filed with the 
      Securities and Exchange Commission. The information set forth herein 
      should be read in light of such risks. NationsHealth cautions investors 
      not to place undue reliance on the forward-looking statements contained 
      herein. These statements speak only as of the date of this press release 
      and, except as required by applicable law, NationsHealth assumes no 
      obligation to update the information contained herein.
    
    
      
        
          
            SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
          
        
      
      
        
          
            (Unaudited)
          
        
      
      
        
          
            (In thousands, except per share data)
          
        
      
      
        
           
        
      
      
        
        
        
        
        
          Three Months EndedMarch 31,
        
      
      
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Revenue:
        
        
        
        
        
        
        
        
        
      
      
        
          Net product sales
        
        
        
        
          $
        
        
          11,074 
        
        
        
        
          $
        
        
          10,854 
        
      
      
        
          Prescription drug card revenue
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          1,973 
        
      
      
        
          Service revenue
        
        
        
        
           
        
        
          7,678 
        
        
        
        
           
        
        
          12,188 
        
      
      
        
        
        
        
        
        
        
          18,752 
        
        
        
        
        
        
          25,015 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cost of product sales
        
        
        
        
        
        
          4,398 
        
        
        
        
        
        
          5,284 
        
      
      
        
          Cost of services
        
        
        
        
           
        
        
          3,735 
        
        
        
        
           
        
        
          19,082 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Gross Profit
        
        
        
        
           
        
        
          10,619 
        
        
        
        
           
        
        
          649 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Operating Expenses:
        
        
        
        
        
        
        
        
        
      
      
        
          Patient acquisition and related costs
        
        
        
        
        
        
          736 
        
        
        
        
        
        
          1,081 
        
      
      
        
          Patient service and fulfillment
        
        
        
        
        
        
          2,227 
        
        
        
        
        
        
          2,444 
        
      
      
        
          General and administrative
        
        
        
        
        
        
          5,871 
        
        
        
        
        
        
          7,842 
        
      
      
        
          Provision for doubtful accounts
        
        
        
        
        
        
          735 
        
        
        
        
        
        
          856 
        
      
      
        
          Depreciation and amortization
        
        
        
        
        
        
          407 
        
        
        
        
        
        
          344 
        
      
      
        
          Amortization of customer contract intangible
        
        
        
        
           
        
        
          969 
        
        
        
        
           
        
        
          969 
        
      
      
        
        
        
        
        
           
        
        
          10,945 
        
        
        
        
           
        
        
          13,536 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Loss from Operations
        
        
        
        
        
        
          (326)
        
        
        
        
        
        
          (12,887)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Other Expense, net
        
        
        
        
           
        
        
          (862)
        
        
        
        
           
        
        
          (643)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net Loss
        
        
        
        
          $
        
        
          (1,188)
        
        
        
        
          $
        
        
          (13,530)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Loss per share – basic and diluted
        
        
        
        
          $
        
        
          (0.04)
        
        
        
        
          $
        
        
          (0.49)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Weighted average shares outstanding – 
            basic and diluted
          
        
        
        
        
           
        
        
          28,043 
        
        
        
        
           
        
        
          27,808 
        
      
    
    
    
    
      
        
          SUMMARY CONSOLIDATED BALANCE SHEETS
        
      
      
        
          (In thousands)
        
      
      
        
           
        
      
      
        
        
        
        
        
          March 31,
        
        
        
        
          December 31,
        
      
      
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
        
        
        
        
          (Unaudited)
        
        
        
        
        
      
      
        
          ASSETS
        
        
        
        
        
        
        
        
        
      
      
        
          Current Assets:
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and short-term investments
        
        
        
        
          $
        
        
          2,393 
        
        
        
        
          $
        
        
          4,224 
        
      
      
        
          Accounts receivable, net
        
        
        
        
        
        
          8,044 
        
        
        
        
        
        
          6,075 
        
      
      
        
          Inventory
        
        
        
        
        
        
          1,384 
        
        
        
        
        
        
          1,636 
        
      
      
        
          Costs related to billings in process, net
        
        
        
        
        
        
          533 
        
        
        
        
        
        
          565 
        
      
      
        
          Prepaid expenses and other current assets
        
        
        
        
           
        
        
          769 
        
        
        
        
           
        
        
          748 
        
      
      
        
          Total current assets
        
        
        
        
        
        
          13,123 
        
        
        
        
        
        
          13,248 
        
      
      
        
          Property and equipment, net
        
        
        
        
        
        
          4,123 
        
        
        
        
        
        
          3,557 
        
      
      
        
          Customer contract intangible, net
        
        
        
        
        
        
          10,663 
        
        
        
        
        
        
          11,632 
        
      
      
        
          Other assets, net
        
        
        
        
           
        
        
          2,021 
        
        
        
        
           
        
        
          1,951 
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          29,930 
        
        
        
        
          $
        
        
          30,388 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES AND STOCKHOLDERS' EQUITY
        
        
        
        
        
        
        
      
      
        
          Current Liabilities:
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts payable
        
        
        
        
          $
        
        
          4,325 
        
        
        
        
          $
        
        
          3,026 
        
      
      
        
          Accrued expenses
        
        
        
        
        
        
          7,467 
        
        
        
        
        
        
          9,069 
        
      
      
        
          Promissory note payable, net
        
        
        
        
        
        
          1,364 
        
        
        
        
        
        
          -- 
        
      
      
        
          Line of credit
        
        
        
        
           
        
        
          2,500 
        
        
        
        
           
        
        
          2,500 
        
      
      
        
          Total current liabilities
        
        
        
        
           
        
        
          15,656 
        
        
        
        
           
        
        
          14,595 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Long-Term Liabilities:
        
        
        
        
        
        
        
        
        
      
      
        
          Convertible notes, related party, net
        
        
        
        
        
        
          6,639 
        
        
        
        
        
        
          6,316 
        
      
      
        
          Promissory note payable, net
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          1,328 
        
      
      
        
          Other long-term liabilities
        
        
        
        
           
        
        
          1,103 
        
        
        
        
           
        
        
          782 
        
      
      
        
          Total long-term liabilities
        
        
        
        
           
        
        
          7,742 
        
        
        
        
           
        
        
          8,426 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Stockholders' Equity
        
        
        
        
           
        
        
          6,532 
        
        
        
        
           
        
        
          7,367 
        
      
      
        
          Total liabilities and stockholders' equity
        
        
        
        
          $
        
        
          29,930 
        
        
        
        
          $
        
        
          30,388