DRAPER, Utah, March 8 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC), today reported results for its fourth quarter and fiscal year
2004 ended January 1, 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO)
Consolidated net sales for the fourth quarter ended January 1, 2005 were
$54.0 million, compared to $45.9 million for the comparable quarter of the
prior year, an 18% increase. For the fourth quarter of fiscal 2004, the
Company reported consolidated net income of $1.4 million, or $0.10 per diluted
common share, compared to a consolidated net loss of $(0.9) million, or
$(0.07) per diluted common share for the fourth quarter of fiscal 2003. The
Company's fiscal year is a 52 or 53 week period ending on the Saturday nearest
to December 31. The fourth quarter of fiscal 2004 consisted of 13 weeks
compared to 14 weeks for the same quarter of the prior year.
"In fiscal 2004, we expanded our manufacturing capacity and our product
offerings through the acquisition of VisionTec, validated the value of our
manufacturing operations and intellectual property by entering into a license
agreement with Japan's largest independent contact lens manufacturer, saw the
implementation of The Fairness to Contact Lens Consumers Act (FCLCA), and
realized significant improvement in the financial results of our U.S. retail
business," said Jonathan Coon, Chief Executive Officer.
For the fiscal year ended January 1, 2005, consolidated net sales were
$211.7 million, compared to $187.3 million for the prior year, a 13% increase.
The Company reported a consolidated net loss of $(0.6) million, or $(0.05) per
diluted common share, for fiscal 2004, compared to a consolidated net loss of
$(1.4) million, or $(0.11) per diluted common share for fiscal 2003. Net
sales and operating income for the Company's U.S. retail business for fiscal
2004 were $204.4 million and $11.6 million, respectively, compared to net
sales of $181.3 million and operating income of $3.7 million for fiscal 2003.
Net sales and operating loss for ClearLab, the Company's international
manufacturing business, for fiscal 2004 were $7.3 million and $(8.2) million,
respectively, compared to net sales of $6.0 million and an operating loss of
$(2.1) million for fiscal 2003.
Consolidated advertising expenses for the fourth quarter of fiscal 2004
were $4.6 million compared to $5.6 million for the comparable quarter of the
prior year. Consolidated legal and professional expenses for the fourth
quarter of fiscal 2004 were $1.4 million, remaining constant with the amount
for the comparable quarter of the prior year and increasing $0.4 million from
the third quarter of fiscal 2004.
For the fourth quarter of fiscal 2004, net sales and operating loss for
ClearLab were $2.7 million and $(2.7) million, respectively. This compares to
net sales of $1.3 million and an operating loss of $(0.5) million for the
fourth quarter of fiscal 2003 and net sales of $1.9 million and an operating
loss of $(2.1) million for the third quarter of fiscal 2004.
Net sales and operating income for the Company's U.S. retail business for
the fourth quarter ended January 1, 2005 were $51.3 million and $5.7 million,
respectively. This compares to net sales of $44.6 million and an operating
loss of $(0.3) million for the fourth quarter ended January 3, 2004.
During the fourth quarter of fiscal 2004, the U.S. retail business
incurred operating expenses -- excluding advertising, legal and professional,
and research and development -- of $9.8 million, or 19.0% of net sales,
compared to $8.9 million, or 20.0% of net sales for the fourth quarter of
fiscal 2003.
Brian Bethers, President and Chief Financial Officer, said, "During the
quarter, we continued to see improvement in our financial results for our U.S.
retail business. Net sales in our U.S. retail business increased $6.6 million
from the same quarter in the prior year. Our U.S. retail operating income
increased $6.0 million from a fourth quarter 2003 loss of $(0.3) million to
$5.7 million for the fourth quarter of fiscal 2004."
Mr. Coon added, "However, as encouraging as these results have been,
recent events leave us faced with a familiar challenge. We made the decision
in December to suspend sales of a doctor exclusive brand which we believe
would have represented approximately 3% of our 2005 sales. We are unable to
obtain sufficient quantities of this lens from anyone other than the
manufacturer, who refuses to sell us these lenses and continues to promote a
restrictive distribution policy.
"Although three of the four largest contact lens manufacturers entered
into a settlement agreement with 33 state attorneys general to end exclusive
dealing with prescribers, the remaining manufacturer is not bound by the terms
of these agreements and continues to offer exclusive deals for certain lenses
to prescribers and retailers affiliated with prescribers.
"Doctor exclusive brands undermine the ability of consumers to purchase
contact lenses from the retailer of their choice. We are evaluating different
ways to address this issue. In the meantime, the combination of lost sales,
overpayment for doctor exclusive and private label lenses, and increased legal
expenses will cost the Company an estimated $8 million in potential profits in
fiscal 2005. We cannot predict when this issue will be settled."
Based on the above, the Company expects to achieve U.S. retail net sales
in the range of $220 million to $230 million and U.S. retail operating income
of $17 million to $20 million in fiscal 2005. For the first quarter of fiscal
2005, the Company expects to achieve approximately $54 million in net sales
with operating income of approximately $3.5 million. The Company plans to
spend approximately $6.5 million on advertising during the first quarter and
$23 million to $25 million during fiscal 2005.
Mr. Bethers commented, "During the quarter, ClearLab increased its level
of research and development spending and continued expansion of its daily
manufacturing capacity. We have been pleased with the market demand for
ClearLab products. We are expecting fiscal 2005 revenues for ClearLab in the
range of $18 million to $23 million. This includes an estimate of $3 million
to $4 million in revenue from the license agreement that we reached during
December 2004. We expect ClearLab to be close to break-even operating income
for 2005 as we increase sales volume and leverage our cost structure. We will
continue to invest in capacity expansion during 2005 and in research and
development to develop new products. For the first quarter of fiscal 2005, we
are projecting ClearLab revenue of approximately $4.0 million, which includes
license fees of $0.8 million to $1.0 million, and an operating loss of
approximately $(2.0) million."
Mr. Coon continued, "Our vision is to partner with optical retailers and
eye doctors to build a seamless experience for consumers that includes exams
as well as in-store, phone, and online service. We have developed a new
brand, '1-800 eyedoctor,' and have partnered with a small regional optical
chain in Utah to test this seamless customer service model. Our partner is a
family owned business with 17 optical retail stores in Utah, a recognized
brand, and 10% local market share -- equal to that of the largest national
chains. Under the terms of the agreement signed in October, we have combined
our contact lens business in Utah and began jointly serving these customers in
December.
"We are pleased with the initial results. More than one third of all
contact lenses sold at our partner's retail stores are now ClearLab products.
In addition, we have worked with our partner's management team and associates
to improve the way contact lenses are merchandised and marketed in the store.
In the few months we have been working together, contact lens sales at their
17 stores have grown approximately 30%. This initial partnership demonstrates
that the combination of our phone and web expertise, vertical integration, and
retail optical stores can create substantial value for our retail partner, our
customers, and our company.
"Our referral agreement with Cole National, which was acquired by
Luxottica, expires at the end of this month. At this time, we have not
decided whether or not to renew this agreement. We have had discussions with
Luxottica as well as various other parties regarding how we might work
together to improve their contact lens business. Our goal is to expand on our
initial partnership to create a seamless experience for consumers nationwide."
1-800 CONTACTS offers consumers an attractive alternative for obtaining
replacement contact lenses in terms of convenience, price and speed of
delivery. Through its easy-to-remember, toll-free telephone number,
"1-800 CONTACTS" (1-800-266-8228), and its Internet web site,
http://www.contacts.com, the Company sells almost all of the popular brands of
contact lenses. 1-800 CONTACTS offers products at competitive prices, while
delivering a high level of customer service.
ClearLab develops and manufactures a wide range of disposable contact lens
products and distributes these lenses in international markets. More
information about ClearLab can be found at its website, http://www.clearlab.com.
This news release contains forward-looking statements about the Company's
future business prospects. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in or implied by such forward-looking statements. Factors that may
cause future results to differ materially from the Company's current
expectations include, among others: general economic conditions, the health of
the contact lens industry, inventory acquisition and management, manufacturing
operations, governmental regulations, integrations and growth of the Company's
acquisitions into its business, exchange rate fluctuations, advertising
spending and effectiveness, the length of time required for completion of the
Company's obligations under the Japanese license agreement, the ability to
complete the milestones under the Japanese license agreement, the amount of
license fees and royalties that will ultimately be received under the Japanese
license agreement, unanticipated costs and expected benefits associated with
the Japanese license agreement and the Company's supply agreements and related
arrangements, development of a nationwide retail optical store network,
research and development initiatives, prescription verification requirements
of The Fairness to Contact Lens Consumers Act, and other regulatory
considerations. Information on the Company's websites shall not be deemed to
be part of this press release.
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
(in thousands, except per share amounts)
(unaudited)
Quarter Ended Year Ended
January 3, January 1, January 3, January 1,
2004 2005 2004 2005
NET SALES $45,887 $53,965 $187,303 $211,678
COST OF GOODS SOLD 28,244 32,602 116,873 129,742
Gross profit 17,643 21,363 70,430 81,936
OPERATING EXPENSES:
Advertising 5,640 4,589 20,191 27,161
Legal and
professional 1,375 1,389 6,352 5,596
Research and
development 1,848 1,075 4,625 2,977
Purchased in-process
research and
development -- -- -- 83
Other operating 9,546 11,281 37,615 42,718
Total operating
expenses 18,409 18,334 68,783 78,535
INCOME (LOSS) FROM
OPERATIONS (766) 3,029 1,647 3,401
OTHER INCOME (EXPENSE),
net (183) 552 (1,167) (719)
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES (949) 3,581 480 2,682
BENEFIT (PROVISION)
FOR INCOME TAXES 67 (2,196) (1,918) (3,298)
NET INCOME (LOSS) $(882) $1,385 $(1,438) $(616)
PER SHARE INFORMATION:
Basic and diluted
net income (loss)
per common share $(0.07) $0.10 $(0.11) $(0.05)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING:
Basic 13,109 13,295 12,696 13,269
Diluted 13,109 13,445 12,696 13,269
OTHER DATA:
Depreciation $880 $1,177 $3,180 $4,132
Amortization 880 1,115 3,197 3,790
Total depreciation
and amortization $1,760 $2,292 $6,377 $7,922
Depreciation and
amortization
included in the
following captions:
Cost of goods sold $344 $729 $1,258 $2,562
Research and
development 9 27 17 88
Other operating 1,407 1,536 5,102 5,272
Total depreciation
and amortization $1,760 $2,292 $6,377 $7,922
SEGMENT INFORMATION:
Quarter Ended
January 3, 2004 January 1, 2005
U.S. International Total U.S. International Total
Retail Retail
Net sales $44,576 $1,311 $45,887 $51,247 $2,718 $53,965
Gross profit 17,194 449 17,643 21,197 166 21,363
Research and
development 1,681 167 1,848 -- 1,075 1,075
Other
operating
expense 8,903 642 9,545 9,756 1,525 11,281
Income (loss)
from
operations (287) (479) (766) 5,723 (2,694) 3,029
Year Ended
January 3, 2004 January 1, 2005
U.S. International Total U.S. International Total
Retail Retail
Net sales $181,331 $5,972 $187,303 $204,406 $7,272 $211,678
Gross
profit
(loss) 68,178 2,252 70,430 82,187 (251) 81,936
Research and
development 4,208 417 4,625 536 2,441 2,977
Purchased
in-process
research
and
development -- -- -- -- 83 83
Other
operating
expense 34,120 3,494 37,614 38,032 4,686 42,718
Income
(loss)
from
operations 3,701 (2,054) 1,647 11,588 (8,187) 3,401
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
January 3, January 1,
2004 2005
CURRENT ASSETS:
Cash $1,075 $3,105
Accounts receivable, net 944 3,205
Inventories, net 24,127 22,206
Prepaid income taxes 797 --
Deferred income taxes 548 1,328
Other current assets 1,752 3,917
Total current assets 29,243 33,761
PROPERTY, PLANT AND EQUIPMENT, net 13,183 20,618
DEFERRED INCOME TAXES 710 720
GOODWILL 33,853 34,320
DEFINITE-LIVED INTANGIBLE ASSETS, net 9,207 17,897
OTHER ASSETS 735 1,669
Total assets $86,931 $108,985
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $3,381 $1,632
Current portion of capital lease obligations 191 47
Accounts payable and accrued liabilities 13,405 22,125
Total current liabilities 16,977 23,804
LONG-TERM LIABILITIES:
Line of credit -- 14,404
Long-term debt, less current portion 14,683 8,170
Capital lease obligations, less current
portion 64 98
Deferred income tax liabilities -- 1,458
Other long-term liabilities -- 2,547
Total long-term liabilities 14,747 26,677
STOCKHOLDERS' EQUITY 55,207 58,504
Total liabilities and stockholders'
equity $86,931 $108,985
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.contacts.com
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AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Brian W. Bethers, President and CFO, or
Robert G. Hunter, Vice President, Finance, both of 1-800
CONTACTS, INC., +1-801-924-9800, investors@contacts.com
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