DRAPER, Utah, July 26 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC), today reported results for its second quarter ended July 1,
2006 and also announced it has engaged an investment banking firm for a
strategic review of ClearLab.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO)
Second Quarter Results
Consolidated net sales for the second quarter ended July 1, 2006 were
$63.2 million, compared to $61.4 million for the comparable quarter of the
prior year. For the second quarter of fiscal 2006, the Company reported a
consolidated net loss of $(2.0) million, or $(0.15) per diluted common
share, compared to consolidated net income of $41,000, or $0.00 per diluted
common share, for the second quarter of fiscal 2005.
U.S. Retail
Net sales and operating income for the Company's U.S. retail business
for the second quarter of fiscal 2006 were $57.7 million and $5.8 million,
respectively, compared to net sales of $56.8 million and operating income
of $4.4 million for the second quarter of fiscal 2005.
Gross margin for the Company's U.S. retail business decreased to 39.4%
for the second quarter of fiscal 2006 from 40.3% for the second quarter of
fiscal 2005.
Advertising expense for the second quarter of fiscal 2006 was
approximately $3.4 million less than the second quarter of fiscal 2005.
During the second quarter of fiscal 2006, other selling, general and
administrative expenses as a percentage of net sales for the U.S. retail
business increased to 21.8% from 19.0% in the second quarter of fiscal
2005.
ClearLab
Net sales and operating loss for ClearLab, the Company's international
manufacturing business, for the second quarter of fiscal 2006 were $5.4
million and $(5.5) million, respectively, compared to net sales of $4.6
million and an operating loss of $(2.0) million for the second quarter of
fiscal 2005. ClearLab's net sales for the second quarter of fiscal 2006
included $1.5 million in license fees from the Company's Japanese license
agreement, compared to $1.0 million in the second quarter of fiscal 2005.
ClearLab's gross profit for the second quarter of fiscal 2006 was
reduced by provisions recorded on certain inventory.
For the second quarter of fiscal 2006, ClearLab's operating results
include a $0.8 million increase in research and development expense and a
$1.8 million increase in other selling, general and administrative
expenses, including costs related to today's AquaSoft Singles product
announcement as well as costs to strengthen the management team.
The change in consolidated other income (expense) for the second
quarter of fiscal 2006 was principally due to unrealized foreign exchange
transaction gains related primarily to intercompany loans to ClearLab.
Brian Bethers, President, stated, "Despite the fact that ClearLab makes
FDA approved lenses ready for sale in the United States, ClearLab has
deliberately not entered the U.S. market to avoid conflict for our U.S.
retail business with its principal suppliers. Limiting ClearLab to less
than half of the global market for contact lenses has been a considerable
constraint on ClearLab's business."
Third Quarter Outlook
For the third quarter of fiscal 2006, the Company expects U.S. retail
net sales of approximately $55.0 million to $57.0 million and operating
income of approximately $4.0 million to $5.0 million.
The Company expects ClearLab's net sales and operating loss for the
third quarter of fiscal 2006 to be similar to those reported for the second
quarter of fiscal 2006.
Strategic Review
Over the last several months, 1-800 CONTACTS' management and directors
have been evaluating a broad range of strategic alternatives in an effort
to capitalize on the value of ClearLab and its innovative AquaSoft Singles
product. The Company has engaged Sonenshine Partners LLC, an investment
banking firm, as its financial advisor for this strategic review. Among the
options being considered to maximize value for the Company's shareholders
is the possible separation of ClearLab from the Company's U.S. retail
business.
Jonathan Coon, Chief Executive Officer, remarked, "Over the past four
years, we have invested more than $90 million in ClearLab. We are extremely
pleased to have introduced today AquaSoft Singles, a milestone product that
defines the category for single-use contact lenses. We must now consider
how to best position ClearLab for the next phase of its growth, as the
initiatives underway require a strong global business focus and significant
additional capital. Through our current exploration of strategic
alternatives for ClearLab, we aim to enable ClearLab to take full advantage
of the revolutionary technology it has developed, to enable 1-800 CONTACTS
to sharpen its focus on its U.S. retail business, and to maximize value for
our shareholders."
About 1-800 CONTACTS, INC.
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.1800contacts.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 markets outside of the United
States. More information about ClearLab can be found at its website,
http://www.clearlab.com.
About Sonenshine Partners LLC
Sonenshine Partners LLC is a New York-based investment bank that
provides integrated strategic and financial advisory services for a variety
of large cap and middle market companies. The firm was founded in 2000 by
Marshall Sonenshine, who had previously been a partner at investment bank
Wolfensohn & Co. Since its inception, Sonenshine Partners has completed
major merger and acquisition, restructuring and corporate finance
assignments involving a broad range of Fortune 500 and middle market
companies worldwide. More information regarding Sonenshine Partners can be
found on http://www.sonenshinepartners.com .
Forward-looking Statements
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 and size of the contact lens industry, consumer acceptance of
ClearLab's products, product health benefits, successful completion and
implementation of the recommendations from the strategic review of
ClearLab, inventory acquisition and management, manufacturing operations,
governmental regulations, exchange rate fluctuations, advertising spending
and effectiveness, unanticipated costs and expected benefits associated
with the Japanese license agreement and the Company's supply agreements and
related arrangements, 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,
other than the information specifically referenced in this press release,
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 Two Quarters Ended
July 2, July 1, July 2, July 1,
2005 2006 2005 2006
NET SALES $61,365 $63,155 $121,648 $126,646
COST OF GOODS SOLD 37,697 40,523 75,472 79,536
Gross profit 23,668 22,632 46,176 47,110
SELLING, GENERAL & ADMINISTRATIVE
EXPENSES:
Advertising 7,120 3,703 13,658 7,686
Legal and professional 906 1,123 2,190 2,248
Research and development 811 1,637 1,866 2,965
Other selling, general &
administrative 12,304 15,922 23,821 29,601
Total selling, general &
administrative expenses 21,141 22,385 41,535 42,500
INCOME FROM OPERATIONS 2,527 247 4,641 4,610
OTHER INCOME (EXPENSE), net (1,166) 352 (1,807) 665
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,361 599 2,834 5,275
PROVISION FOR INCOME TAXES (1,320) (2,637) (2,610) (6,132)
NET INCOME (LOSS) $41 $(2,038) $224 $(857)
PER SHARE INFORMATION:
Basic and diluted net income
(loss) per common share $-- $(0.15) $0.02 $(0.06)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Basic 13,312 13,360 13,307 13,352
Diluted 13,463 13,360 13,476 13,352
OTHER DATA:
Depreciation $1,115 $1,518 $2,170 $2,906
Amortization 1,050 1,076 2,121 1,986
Total depreciation and
amortization $2,165 $2,594 $4,291 $4,892
Depreciation and amortization
included in the following
captions:
Cost of goods sold $711 $821 $1,403 $1,592
Research and development 26 63 53 111
Other selling, general &
administrative 1,428 1,710 2,835 3,189
Total depreciation and
amortization $2,165 $2,594 $4,291 $4,892
SEGMENT INFORMATION:
Quarter Ended
July 2, 2005
U.S. International Eliminations Total
Net sales $56,767 $4,601 $(3) $61,365
Gross profit (loss) 22,857 703 108 23,668
Research and development -- 811 -- 811
Other selling, general
& administrative 10,794 1,510 -- 12,304
Income (loss) from
operations 4,389 (1,970) 108 2,527
Depreciation and
amortization $1,208 $957 $-- $2,165
Quarter Ended
July 1, 2006
U.S. International Eliminations Total
Net sales $57,734 $5,421 $-- $63,155
Gross profit (loss) 22,774 (180) 38 22,632
Research and development -- 1,637 -- 1,637
Other selling, general
& administrative 12,569 3,353 -- 15,922
Income (loss) from
operations 5,755 (5,546) 38 247
Depreciation and
amortization $1,480 $1,114 $-- $2,594
Two Quarters Ended
July 2, 2005
U.S. International Eliminations Total
Net sales $113,133 $8,889 $(374) $121,648
Gross profit (loss) 45,044 1,306 (174) 46,176
Research and development -- 1,866 -- 1,866
Other selling, general
& administrative 20,872 2,949 -- 23,821
Income (loss) from
operations 8,792 (3,977) (174) 4,641
Depreciation and
amortization 2,394 1,897 -- 4,291
Two Quarters Ended
July 1, 2006
U.S. International Eliminations Total
Net sales $116,907 $9,739 $-- $126,646
Gross profit (loss) 46,398 458 254 47,110
Research and development 10 2,955 -- 2,965
Other selling, general
& administrative 24,282 5,319 -- 29,601
Income (loss) from
operations 12,761 (8,405) 254 4,610
Depreciation and
amortization 2,736 2,156 -- 4,892
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
December 31, July 1,
2005 2006
CURRENT ASSETS:
Cash $1,481 $89
Accounts receivable, net 3,451 3,471
Inventories, net 21,458 20,419
Deferred income taxes 1,624 1,817
Other current assets 5,530 4,650
Total current assets 33,544 30,446
PROPERTY, PLANT AND EQUIPMENT, net 29,705 31,223
DEFERRED INCOME TAXES 1,087 1,006
GOODWILL 35,405 35,963
DEFINITE-LIVED INTANGIBLE ASSETS, net 13,847 12,639
OTHER ASSETS 1,357 1,726
Total assets $114,945 $113,003
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $-- $19,479
Current portion of long-term debt 1,633 2,221
Current portion of capital lease obligations 58 25
Accounts payable and accrued liabilities 24,126 27,584
Total current liabilities 25,817 49,309
LONG-TERM LIABILITIES:
Line of credit 23,746 --
Long-term debt, net of current portion 6,440 5,377
Capital lease obligations, net of current portion 83 59
Other long-term liabilities 1,642 643
Total long-term liabilities 31,911 6,079
STOCKHOLDERS' EQUITY 57,217 57,615
Total liabilities and stockholders' equity $114,945 $113,003
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.1800contacts.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, or Robert G.
Hunter, CFO, both of 1-800 CONTACTS, INC., +1-801-316-5000,
investors@contacts.com
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