DRAPER, Utah, July 29 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC), today reported results for its second quarter ended
June 28, 2003.
(Logo: http://www.newscom.com/cgi-bin/prnh/19990917/1800CONTACTS )
Net sales for the second quarter ended June 28, 2003 were $46.4 million,
compared to $42.2 million for the comparable quarter of the prior year. Net
income for the second quarter of 2003 was $0.6 million, or $.04 per diluted
common share, compared to net income of $1.0 million, or $.09 per diluted
common share for the second quarter of 2002. For the second quarter ended
June 28, 2003, net sales and operating income exclusive of the Company's
Singapore operations (ClearLab) were $44.7 million and $3.0 million,
respectively. For the second quarter of 2003, net sales and operating loss
for ClearLab were $1.7 million and $(0.9) million, respectively, excluding
intercompany sales. ClearLab's results include non-cash compensation expense
of $0.7 million relating to the grant of shares of 1-800 CONTACTS' common
stock owned by ClearLab's chief technology officer to key employees of
ClearLab. 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.
The Company's consolidated gross margin improved to 38.3% for the second
quarter of 2003 from 29.4% for the comparable quarter of the prior year.
During the second quarter of 2003, the Company expensed $0.5 million for
amortization of the acquired Lens Express and Lens 1st customer database
definite-lived intangible assets.
For the two quarters ended June 28, 2003, net sales were $93.0 million,
compared to $83.8 million for the two quarters ended June 29, 2002. Net
income for the first two quarters of 2003 was $0.1 million, or $.01 per
diluted common share, compared to net income of $2.9 million, or $.25 per
diluted common share, for the first two quarters of 2002. The results for the
first two quarters of 2003 include approximately $2.0 million for research and
development, $0.8 million for amortization of the acquired Lens Express and
Lens 1st customer database definite-lived intangible assets and $0.3 million
for integration costs related to the acquisition of Lens Express and Lens 1st.
Jonathan Coon, Chief Executive Officer, said, "During the second quarter,
our gross margin improved as we continued to benefit from our supply agreement
with Johnson & Johnson. We also recently signed an agreement with Cole
National that establishes a network of doctors to help meet our customers' eye
care needs. Additionally, we improved our business by strengthening our
management team with the additions of a new Chief Financial Officer and a Vice
President of Operations."
The Company's financial statements reflect the acquisitions of Lens
Express and Lens 1st during the first quarter of 2003. The transactions were
accomplished as asset purchases and included certain assets and the assumption
of certain liabilities. The consideration paid included approximately
$7.0 million in cash (including $0.5 million in transaction costs),
approximately $4.1 million in assumed liabilities and 900,000 shares of
restricted common stock with a fair market value of approximately
$19.9 million. The Company recorded goodwill of approximately $22.3 million
and definite-lived intangible assets of approximately $5.1 million based on
the Company's preliminary allocation of the purchase price.
During the second quarter of 2003, the release conditions were met
relating to 700,000 shares of restricted common stock of 1-800 CONTACTS held
in escrow as partial purchase consideration for the July 2002 acquisition of
ClearLab. The Company's financial statements reflect as additional purchase
price the fair market value of approximately $17.0 million for these shares on
June 6, 2003, the date the escrow release conditions were met. The Company
recorded this additional purchase price as goodwill, net of the contingent
consideration liability recorded at the purchase date in accordance with SFAS
No. 141. This goodwill as of June 28, 2003 is $11.2 million. The Company
also recorded additional paid-in capital and compensation expense of
approximately $0.7 million due to the grant of a portion of these shares owned
by ClearLab's chief technology officer to key employees of ClearLab.
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 of ClearLab, Lens Express and Lens 1st, exchange rate
fluctuations, advertising spending and effectiveness, unanticipated costs and
unrealized benefits associated with the Company's supply agreement with
Johnson & Johnson, implementation of the Cole National agreement, research and
development initiatives and regulatory considerations.
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME INFORMATION
(in thousands, except per share amounts)
(unaudited)
Quarter Ended Two Quarters Ended
June 29, June 28, June 29, June 28,
2002 2003 2002 2003
NET SALES $42,233 $46,354 $83,814 $93,016
COST OF GOODS SOLD 29,803 28,580 58,697 59,140
Gross profit 12,430 17,774 25,117 33,876
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Advertising expense 3,890 3,586 6,609 7,380
Legal and professional fees 1,140 1,755 2,400 3,376
Research and development
expenses -- 197 -- 2,000
Other selling, general and
administrative expenses 5,523 10,104 10,914 18,753
Total selling, general and
administrative expenses 10,553 15,642 19,923 31,509
INCOME FROM OPERATIONS 1,877 2,132 5,194 2,367
OTHER EXPENSE, net (193) (323) (323) (823)
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,684 1,809 4,871 1,544
PROVISION FOR INCOME TAXES (681) (1,249) (1,928) (1,472)
NET INCOME $1,003 $560 $2,943 $72
PER SHARE INFORMATION:
Basic net income per common
share $0.09 $0.04 $0.26 $0.01
Diluted net income per common
share $0.09 $0.04 $0.25 $0.01
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Basic 11,382 12,552 11,451 12,269
Diluted 11,506 12,762 11,564 12,493
OTHER DATA:
Depreciation and amortization
included in the following
captions:
Cost of goods sold $-- $301 $-- $601
Research and development
expenses -- 3 -- 5
Other selling, general and
administrative expenses 426 1,297 848 2,402
Total depreciation and
amortization $426 $1,601 $848 $3,008
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
December 28, June 28,
2002 2003
CURRENT ASSETS:
Cash $259 $722
Accounts receivable 655 974
Inventories, net 37,785 30,000
Prepaid income taxes 769 121
Deferred income taxes 756 669
Other current assets 1,095 1,296
Total current assets 41,319 33,782
PROPERTY AND EQUIPMENT, net 12,862 13,426
DEFERRED INCOME TAXES 365 511
GOODWILL -- 33,508
DEFINITE-LIVED INTANGIBLE ASSETS,
net 7,089 10,664
OTHER ASSETS 369 628
Total assets $62,004 $92,519
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $5,770 $3,839
Current portion of long-term debt 2,853 2,998
Current portion of capital lease
obligations 372 305
Accounts payable and accrued
liabilities 12,327 13,217
Total current liabilities 21,322 20,359
LONG-TERM LIABILITIES:
Long-term debt, less current
portion 17,365 15,859
Capital lease obligations, less
current portion 250 103
Liability related to contingent
consideration 5,470 --
Total long-term liabilities 23,085 15,962
STOCKHOLDERS' EQUITY 17,597 56,198
Total liabilities and
stockholders' equity $62,004 $92,519
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.contacts.com
Photo Notes:http://www.newscom.com/cgi-bin/prnh/19990917/1800CONTACTS
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840
CONTACT:
Brian W. Bethers, Chief Financial Officer, or
Robert G. Hunter, Vice President, Finance, both of 1-800
CONTACTS, INC., +1-801-924-9800, investors@contacts.com
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