Company Completes Consolidation and Cost-Cutting Initiatives, Reports $0.09 Pro Forma Per Share Loss on Pre-Split Share Basis
Emeryville, California. - August 14, 2001 - HealthCentral (Nasdaq: HCEN), a leading provider of healthcare e-commerce and content, released its second quarter financial results for the three months ended June 30, 2001. Revenue for the second quarter 2001 was $9.6 million compared to revenue of $10.8 million for the same period in 2000. During the second quarter of 2001, the Company ceased generating substantial revenues from retail stores and Dr. Dean Edell Eyewear product sales. Excluding the retail stores and Dr. Dean Edell Eyewear sales, revenue for Q2 2001 increased 36% from Q2 2000.
Pro forma net loss in Q2 2001 after adjustments was $4.8 million versus a loss of $16.0 million in Q2 2000, a 70% improvement. Pro forma basic and diluted net loss per share (on a pre-split basis) in Q2 2001 was $0.09 compared to a net loss per share (on a pre-split basis) of $0.53 for the second quarter 2000, an 83% improvement. Pro forma net loss per share for the second quarter of 2001, excluding non-cash charges was $4.68 versus $26.26 for the second quarter 2000. Pro forma adjustments were made for amortization of intangible assets, depreciation expense, stock compensation, asset impairment charges, restructuring charges and amortization of stock warrants, before reflecting the Company`s recent stock split.
Net loss in Q2 2001 without adjustments was $10.6 million versus a loss of $23.4 million in Q2 2000, a 55% improvement. Basic and diluted net loss per share was $10.43 compared to a net loss per share of $38.55 for the second quarter 2000.
The number of shares used in computing per share results is 1,041,533 for Q2 2001 and 607,569 for Q2 2000 (and on a pre-split basis is 50,727,659 and 30,378,450).
Gross profit (revenue minus cost of e-commerce and other product sales, excluding restructuring) increased 56% to $3.3 million over second quarter of 2000. Gross margins improved significantly over the comparable period in 2000 due to the focus on higher margin product categories and the decline in discounting promotions. Gross margins were 34% for Q2 2001 compared to 19% in Q2 2000, despite the significant transition the business underwent during the first half of 2001.
The company recorded an asset impairment charge of $2.9 million and restructuring charges of $1.4 million related to the closure of unprofitable retail stores, a reduction in work force and consolidation of excess facilities and other charges during the second quarter 2001.
During second quarter 2001, the Company raised $3.5 million in debt financing secured by inventory and receivables; closed six unprofitable retail stores; consolidated the Comfort Living warehouse, customer service operations and administrative functions into the Company`s Kentucky fulfillment center, Virginia customer service center and our headquarters in California; consolidated the vitamins mail order catalog division into existing operations; completed a pharmacy outsourcing fulfillment arrangement; restructured the agreements related to the Dr. Dean Edell Eyewear license and product, and subsequently assigned and sold the license and royalty stream associated with the Dr. Dean Edell Eyewear product with no future inventory requirements. This sale added cash to the Company`s balance sheet subsequent to the end of the second quarter.
C. Fred Toney, CEO and President stated, "In the first half of the year we focused on completing the significant necessary cost-cutting and consolidation efforts, and at Q2 end we are pleased to report that we have accomplished these aggressive goals. Now that the operations and structure are in good shape, we have turned our focus toward growing order volumes and transactions, while at the same time focusing on our large existing base of valued customers. We have put into place several exciting new partnerships, and we intend to continue to pursue arrangements that are low cost to HealthCentral while increasing our customer base."
The Company`s focus has trended toward high margin product categories such as Comfort Living for allergy care, back care, maternity and baby care; vitamins, minerals, supplements and herbs; spa products; vision care products; and most recently our specialty stores. It has also entered into recent new partnership agreements with Yahoo!, Travelocity.com, PharMor, Blue Shield of California, Juno, and iMaternity designed to drive transactions through its websites, and will continue to pursue such partnerships and joint ventures in an effort to strengthen and grow the business.
HealthCentral (Nasdaq: HCEN) is a leading provider of healthcare information and e-commerce to consumers through WebRxSM, a network of sites representing the consolidation of Vitamins.com, HealthCentral.com, RxList.com and others. Its e-commerce site, WebRxSM (www.webrx.com), features more than 20,000 products. WebRxSM features one of the largest on-line selections of vitamins, a Vision Center and a Comfort Living department (www.comfortliving.com) with a broad range of products including maternity and baby care, ergonomic chairs, water purifiers and an extensive line of allergy control products. HealthCentral.com (www.healthcentral.com) provides health-related information and commentary by Dr. Dean Edell, MD and other experts. RxList.com (www.rxlist.com) provides both patient-focused and professional-focused prescription drug information monographs.
HealthCentral Forward Looking Statements Except for historical information, the statements in this news release are forward-looking statements, involving risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the possible delisting of the Company`s stock from the Nasdaq National Market System, the Company`s limited operating history and need to generate revenues, the Company`s need to raise additional cash, the substantial competition in the e-health market, the Company`s ability to successfully implement its operational plan, including proposed cost-cutting measures, possible liability related to product or content on or accessed through the Company`s web sites, the need to build a brand name quickly, the effect of substantial and changing government regulation, possible systems interruptions, a failure to integrate acquisitions or manage resources, and a failure to retain key employees. Further information regarding these and other risks is included in HealthCentral.com`s Quarterly Report on Form 10-Q for the quarters ended June 30, 2001 and March 31, 2001, Annual Report on Form 10-K for the year ended December 31, 2000 and other documents filed with the SEC.