DRAPER, Utah, May 4 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC), today reported results for its first quarter ended April 3,
2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO)
Net sales for the first quarter ended April 3, 2004 were $50.8 million,
compared to $46.7 million for the comparable quarter of the prior year, a 9%
increase. For the first quarter of fiscal 2004, the Company reported a net
loss of $(2.2) million, or $(0.16) per diluted common share, compared to a net
loss of $(0.5) million, or $(0.04) per diluted common share for the first
quarter of fiscal 2003.
For the first quarter ended April 3, 2004, net sales exclusive of the
Company's international operations (ClearLab) were $49.4 million, and the
operating loss exclusive of ClearLab's operations was $(1.2) million. For the
first quarter ended March 29, 2003, net sales and operating income exclusive
of ClearLab's operations were $45.2 million and $0.6 million, respectively.
For the first quarter of fiscal 2004, net sales and operating loss for
ClearLab were $1.4 million and $(1.1) million, respectively, compared to net
sales and operating loss of $1.5 million and $(0.4) million, respectively, for
the comparable quarter of the prior year. No income tax benefit was recorded
on the net loss from ClearLab's operations due to the uncertainty of
realization of the related deferred income tax assets in Singapore and in the
United Kingdom.
The majority of the research and development expense for the first
quarters of fiscal 2004 and 2003 was for payments to VisionTec to perform
research and development activities on behalf of the Company prior to its
acquisition on February 24, 2004. The balance sheet reflects the preliminary
allocation of the purchase consideration from this transaction. In addition,
the Company incurred approximately $0.5 million in operating expenses related
to the Lens 1st operations that will not continue in subsequent quarters due
to the consolidation of a majority of Lens 1st operations to the corporate
headquarters in Salt Lake City.
The Company's consolidated gross margin improved to 38.0% for the first
quarter of fiscal 2004 from 34.5% for the comparable quarter of the prior
year, and remained relatively consistent with the Company's fourth quarter
gross profit margin of 38.4%. The Company expects gross margin to improve
during subsequent quarters as the Company realizes the full benefits from the
purchasing agreements signed with several manufacturers late last year.
For the quarter, 1-800 CONTACTS' incurred advertising expenses of
$8.8 million, or 17% of net sales. The Company expects to realize annual
advertising costs at the low end of the $25 to $30 million range announced
last quarter -- a significant reduction in advertising expense as a percent of
net sales from the first quarter. As commitments are made for 2005, the
Company will target advertising at 10 to 12% of sales. Additionally, legal
and professional expenses remained high during the quarter as the Company
provided extensive comments to the Federal Trade Commission for its rulemaking
process on the new federal legislation. The Company expects these costs to
decline substantially during the latter part of the year. Shareholders are
invited to review the Company's comments online at
http://www.ftc.gov/os/comments/contactlensrule/04-02235-1140.pdf (document may
take a minute or two to load).
Jonathan Coon added, "The FTC's rules (due to be published by August 3rd)
are critical to ensure real prescription portability -- and the future growth
of our company. Absent clear rules, eye doctors will continue to take
substantial advantage of their position as both prescriber and retailer. We
cancelled more than $10 million worth of orders during the quarter. Until the
rules governing the obligations of eye doctors under the federal law are more
clearly defined, eye doctors may continue to take advantage of loopholes in
the system and we will continue to err on the side of canceling orders.
"We believe many orders have been cancelled unnecessarily by eye doctors
who would prefer to record these sales at their own store. We also believe
this anticompetitive behavior will continue until the FTC rules are published
-- and could continue beyond that date if the published rules do not
adequately address this misconduct. Among other things, some eye doctors
continue to act in an anti-competitive manner such as -- soliciting our
customers during the verification delay period, responding that prescriptions
are expired or invalid but then selling contacts themselves without further
examination, or refusing to release prescriptions automatically to all contact
lens wearers as required by federal law. However, based on past FTC comments
regarding protecting consumers in this industry
(http://www.ftc.gov/opa/2002/03/contactlenses.htm and
http://www.ftc.gov/opa/2004/03/clrreport.htm) we are hopeful that the FTC will
vigorously enforce the final rule once it is published and help consumers
realize the full benefits that were intended when the law was passed.
"In the meantime, we continue to focus on order recovery, and have
extended our relationship with Cole through March 31, 2005," said Jonathan
Coon, Chief Executive Officer. Under the agreement, 1-800 CONTACTS' has
negotiated an exclusive arrangement with a national retail chain which allows
its customers to receive eye exams at a discount, as well as value pricing on
eyeglasses, sunglasses and other vision products, from a network of doctors.
This agreement has been executed with Cole Managed Vision and provides an
association with more than 1,500 Pearle Vision, Pearle VisionCare, Sears
Optical, and Target Optical stores in the U.S.
Jonathan Coon added, "In our 2003 annual report distributed last week, we
talk about our vision for the future of 1-800 CONTACTS and this industry. We
have copied the text below."
"Change = Opportunity
1-800 CONTACTS was founded with a simple goal -- change the way America
buys contact lenses. In our May 2002 letter to shareholders, we said:
"When the dust has settled and the changes to this industry are
complete, every contact lens wearer will have access to their
prescription and we will purchase directly from every manufacturer."
Dec 2002 Johnson & Johnson agrees to sell directly to 1-800 CONTACTS.
Dec 2003 Fairness to Contact Lens Consumers Act signed into law.
New law requires that every contact lens wearer be given a copy of
their prescription -- without asking for it.
We have made progress, but we are not finished. Consumers still
experience a disjointed and inefficient market that is full of drop-out
points -- and opportunity.
Only one in four visually corrected Americans chooses contacts. There
are almost as many dropouts as there are wearers. The 25% of the
visually corrected who do wear contacts wear their disposable lenses
twice as long as their eye doctors recommend -- cutting consumption in
half. Manufacturers invest relatively little in consumer advertising.
As a result, more than 90% of brand decisions are made by doctors instead
of consumers (leaving consumers with little loyalty for a brand they
didn't choose).
1-800 CONTACTS will 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. Consumers will be able to inquire,
try, purchase, and repurchase through one source -- 1-800 CONTACTS."
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 all of the popular brands of contact
lenses. 1-800 CONTACTS offers products at competitive prices, while
delivering a high level of customer service.
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, integrations and growth of the Company's acquisitions into its
business, exchange rate fluctuations, advertising spending and effectiveness,
unanticipated costs and unrealized benefits associated with the Company's
agreements with Johnson & Johnson Vision Care and CIBAVision, the Company's
doctor referral program with Cole National, research and development
initiatives, prescription verification requirements of The Fairness to Contact
Lens Consumers Act, and other regulatory considerations.
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
(in thousands, except per share amounts)
(unaudited)
Quarter Ended
March 29, April 3,
2003 2004
NET SALES $46,662 $50,849
COST OF GOODS SOLD 30,560 31,512
Gross profit 16,102 19,337
OPERATING EXPENSES:
Advertising 3,794 8,815
Legal and professional 1,621 1,840
Research and development 1,803 892
Purchased in-process
research and development -- 184
Other operating expenses 8,649 9,874
Total operating expenses 15,867 21,605
INCOME (LOSS) FROM OPERATIONS 235 (2,268)
OTHER EXPENSE, net (500) (356)
LOSS BEFORE PROVISION
FOR INCOME TAXES (265) (2,624)
BENEFIT (PROVISION) FOR INCOME TAXES (223) 451
NET LOSS $(488) $(2,173)
PER SHARE INFORMATION:
Basic and diluted net loss per
common share $(0.04) $(0.16)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Basic and diluted 11,985 13,188
OTHER DATA:
Depreciation $735 $855
Amortization 672 787
Total depreciation and
amortization $1,407 $1,642
Depreciation and amortization
included in the following
captions:
Cost of goods sold $300 $428
Research and development 2 18
Other operating expenses 1,105 1,196
Total depreciation and
amortization $1,407 $1,642
SEGMENT INFORMATION:
Quarter Ended
March 29, 2003
U.S. International Total
Net sales $45,131 $1,531 $46,662
Gross profit 15,748 354 16,102
Purchased in-
process
research and
development -- -- --
Income (loss) from
operations 611 (376) 235
Quarter Ended
April 3, 2004
U.S. International Total
Net sales $49,451 $1,398 $50,849
Gross profit 18,930 407 19,337
Purchased in-
process
research and
development -- 184 184
Income (loss) from
operations (1,149) (1,119) (2,268)
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
January 3, April 3,
2004 2004
CURRENT ASSETS:
Cash $1,075 $957
Accounts receivable 944 1,160
Inventories, net 24,127 26,589
Prepaid income taxes 797 797
Deferred income taxes 548 985
Other current assets 1,752 2,932
Total current assets 29,243 33,420
PROPERTY, PLANT AND EQUIPMENT, net 13,183 16,082
DEFERRED INCOME TAXES, net of
current portion 710 804
GOODWILL 33,853 33,990
DEFINITE-LIVED INTANGIBLE ASSETS,
net 9,207 14,281
OTHER ASSETS 735 672
Total assets $86,931 $99,249
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $3,381 $1,122
Current portion of capital lease
obligations 191 176
Accounts payable and accrued
liabilities 13,405 16,740
Total current liabilities 16,977 18,038
LONG-TERM LIABILITIES:
Line of credit -- 15,555
Long-term debt, net of current
portion 14,683 9,114
Capital lease obligations, net of
current portion 64 127
Total long-term liabilities 14,747 24,796
STOCKHOLDERS' EQUITY 55,207 56,415
Total liabilities and
stockholders' equity $86,931 $99,249
SOURCE 1-800 CONTACTS, INC.
 back to top
Related links:
http://www.contacts.com
Photo Notes:http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO
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
|
