DRAPER, Utah, Aug. 14 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC) ("the Company") today reported results for its second
quarter ended June 30, 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO)
Second Quarter Results
For the second quarter of fiscal 2007, the Company reported
consolidated net income, including discontinued operations, of $11.6
million, or $0.85 per diluted common share, compared to a consolidated net
loss of $(2.0) million, or $(0.15) per diluted common share, for the second
quarter of fiscal 2006. The Company reported net income from continuing
operations of $3.0 million, or $0.22 per diluted common share, for the
second quarter of fiscal 2007, compared to net income of $3.0 million, or
$0.23 per diluted common share, for the second quarter of fiscal 2006.
U.S. Retail (Continuing Operations)
Net sales and operating income for the second quarter of fiscal 2007
were $63.4 million and $6.7 million, respectively, compared to net sales of
$57.7 million and operating income of $5.8 million for the second quarter
of fiscal 2006. Results for the second quarter of fiscal 2007 include
approximately $2.5 million in advisor fees and other expenses relating to
the strategic review and proposed merger of the Company. Excluding these
advisor fees and other expenses relating to the strategic review and
proposed merger, operating income for the second quarter of fiscal 2007 was
$9.2 million.
Gross margin increased to 41.7 % for the second quarter of fiscal 2007
from 39.4% for the second quarter of fiscal 2006. The gross margin was
positively impacted by a shipping credit totaling approximately $0.4
million.
Advertising expense for the second quarter of fiscal 2007 was $1.2
million more than for the second quarter of fiscal 2006.
Legal and professional fees were $2.4 million for the second quarter of
fiscal 2007 compared to $1.0 million for the same quarter of 2006. A
majority of these costs in the second quarter of fiscal 2007 relate to the
strategic review of the U.S. retail business and the proposed merger of
1-800 CONTACTS with the affiliates of Fenway Partners Capital Fund III,
L.P.
During the second quarter of fiscal 2007, other selling, general and
administrative expenses as a percentage of net sales decreased to 19.8%
from 21.8% in the second quarter of fiscal 2006.
ClearLab (Discontinued Operations)
During the second quarter, the Company completed the sale of its
ClearLab business. The Company sold ClearLab's flat pack technology and
certain other intellectual property to Menicon Co., Ltd., Japan's largest
independent contact lens manufacturer, on June 15, 2007 and sold ClearLab's
manufacturing, distribution and customer support operations to Mi Gwang
Contact Lens Co., Ltd., a Korean-based contact lens manufacturer, on June
30, 2007.
Upon closing these transactions, the Company received $32 million in
cash, which allowed the Company to pay off all of its outstanding debt and
capital lease obligations, and 1,007,220 shares of Mi Gwang's stock valued
at approximately $4.2 million as of June 30, 2007. In addition, the Company
expects to receive from Menicon deferred cash payments of up to $5 million
upon Menicon reaching certain milestones, as well as possible earn-out
payments over a minimum fifteen-year term. The Company also recorded a tax
benefit of approximately $17 million relating to these transactions.
Merger
As previously announced, the Company will hold a special meeting of
stockholders on Thursday, September 6, 2007. At this meeting, stockholders
will vote to adopt the previously announced merger agreement among 1-800
CONTACTS and affiliates of Fenway Partners Capital Fund III, L.P. If
approval of the merger is obtained at the special meeting, the Company
expects the merger to close promptly thereafter.
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 all of the popular brands of
contact lenses. 1-800 CONTACTS offers products at competitive prices, while
delivering a high level of customer service.
About Fenway Partners
Fenway Partners is a middle market private equity firm with offices in
New York and Los Angeles and $1.7 billion under management. Fenway
companies typically have leading franchises and operate in two core
industry segments, branded consumer products and transportation/logistics.
With significant knowledge and success investing in these industries,
Fenway has built a strong reputation for its hands-on approach to
supporting its portfolio companies which include sporting goods
manufacturer Easton Bell Sports, school yearbook and class ring
manufacturer American Achievement, leading global supplier of mobile
computing cases and accessories Targus International, expedited ground
transportation provider Panther Expedited Services and intermodal logistics
service provider RoadLink USA.
For further information about Fenway Partners, please visit
http://www.fenwaypartners.com.
Forward-looking Statements
This press release contains a number of statements about the Company's
future business prospects which are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include all statements which are not purely
historical and include, but are not necessarily limited to, all statements
relating in any way to the proposed transaction with Fenway Partners, the
special meeting of stockholders to vote on the merger agreement, the
anticipated timing of the closing of the merger, and all statements
relating to the Company's potential receipt of deferred cash payments or
earn-out payments from Menicon. All such forward-looking statements are
based upon information available to the Company as of the date hereof, and
the Company disclaims any intention or obligation to update any such
forward-looking statements. Actual results could differ materially from
current expectations. Factors that could cause or contribute to such
differences include, among others: general economic conditions; the health
and size of the contact lens industry; consumer acceptance of the Company's
products; product health benefits; supply risks; inventory acquisition and
management; governmental regulations; exchange rate fluctuations;
unanticipated costs and expected benefits associated with the Company's
supply agreements and related arrangements; prescription verification
requirements of The Fairness to Contact Lens Consumers Act; other
regulatory considerations; and the other risks and uncertainties identified
in the reports filed from time to time by the Company with the U.S.
Securities and Exchange Commission (the "SEC"), including the Company's
most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
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.
Additional Information About the Merger
1-800 CONTACTS, INC. filed with the SEC, and is furnishing to its
stockholders, a definitive proxy statement soliciting proxies for the
meeting of its stockholders to be held with respect to the proposed merger
between the Company and the affiliates of Fenway Partners. 1-800 CONTACTS
STOCKHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT CAREFULLY BECAUSE IT
CONTAINS IMPORTANT INFORMATION. 1-800 CONTACTS stockholders and other
interested parties can obtain, without charge, a copy of the proxy
statement and other relevant documents filed with the SEC from the SEC's
website at http://www.sec.gov. 1-800 CONTACTS stockholders and other
interested parties can also obtain, without charge, a copy of the proxy
statement and other relevant documents by directing a request by mail or
telephone to 1-800 CONTACTS, INC., 66 E. Wadsworth Park Drive, Draper, Utah
84020, Attention: Corporate Secretary, telephone: (801) 316-5000, or from
the Company's website, http://www.1800contacts.com.
1-800 CONTACTS and certain of its directors, executive officers and
other members of management and employees may, under SEC rules, be deemed
to be "participants" in the solicitation of proxies from stockholders of
1-800 CONTACTS with respect to the proposed merger. Information regarding
the persons who may be considered "participants" in the solicitation of
proxies is set forth in 1-800 CONTACTS' definitive proxy statement relating
to the proposed merger filed with the SEC. Information regarding certain of
these persons and their beneficial ownership of 1-800 CONTACTS common stock
is set forth in the definitive proxy statement described above.
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
(in thousands, except per share amounts)
(unaudited)
Quarter Ended Two Quarters Ended
July 1, June 30, July 1, June 30,
2006 2007 2006 2007
NET SALES $57,734 $63,373 $116,907 $125,202
COST OF GOODS SOLD 34,960 36,962 70,509 73,962
Gross profit 22,774 26,411 46,398 51,240
SELLING, GENERAL & ADMINISTRATIVE
EXPENSES:
Advertising 3,475 4,721 7,400 9,113
Legal and professional 975 2,386 1,945 3,937
Research and development -- -- 10 --
Other selling, general &
administrative 12,569 12,559 24,282 25,269
Total selling, general &
administrative expenses 17,019 19,666 33,637 38,319
INCOME FROM OPERATIONS 5,755 6,745 12,761 12,921
OTHER EXPENSE, net (319) (392) (638) (862)
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,436 6,353 12,123 12,059
PROVISION FOR INCOME TAXES (2,401) (3,366) (5,527) (5,789)
NET INCOME CONTINUING OPERATIONS $3,035 $2,987 $6,596 $6,270
DISCONTINUED OPERATIONS:
Loss from discontinued
operations (including
loss on disposal of $2.8
million for 2007) $(4,837) $(7,834) $(6,848) $(11,892)
Income tax benefit (expense) (236) 16,424 (605) 16,188
Net income (loss) from
discontinued operations $(5,073) $8,590 $(7,453) $4,296
NET INCOME (LOSS) $(2,038) $11,577 $(857) $10,566
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Basic 13,360 13,454 13,352 13,437
Diluted 13,473 13,637 13,457 13,635
PER SHARE INFORMATION:
Basic net income (loss) per
share:
Continuing operations $0.23 $0.22 $0.49 $0.47
Discontinued operations (0.38) 0.64 (0.55) 0.32
$(0.15) $0.86 $(0.06) $0.79
Diluted net income (loss) per
share:
Continuing operations $0.23 $0.22 $0.49 $0.46
Discontinued operations $(0.38) $0.63 $(0.55) $0.31
$(0.15) $0.85 $(0.06) $0.77
OTHER DATA:
Depreciation $725 $839 $1,384 $1,655
Amortization 755 450 1,352 951
Total depreciation and
amortization from continuing
operations included in
the other selling, general
& administrative caption $1,480 $1,289 $2,736 $2,606
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
December 30, June 30,
2006 2007
CURRENT ASSETS:
Cash $75 $5,560
Marketable securities -- 3,865
Income tax receivable -- 11,772
Inventories, net 12,689 14,446
Deferred income taxes 1,886 2,849
Current assets of discontinued
operations 19,682 4,648
Other current assets 2,834 3,138
Total current assets 37,166 46,278
PROPERTY, PLANT AND EQUIPMENT, net 7,648 7,147
DEFERRED INCOME TAXES 898 1,071
GOODWILL 22,304 22,304
DEFINITE-LIVED INTANGIBLE ASSETS, net 2,644 1,995
LONG-TERM ASSETS OF DISCONTINUED
OPERATIONS 29,169 --
OTHER ASSETS 696 830
Total assets $100,525 $79,625
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $15,696 $22,337
Current liabilities of
discontinued operations 11,898 5,232
Total current liabilities 27,594 27,569
LONG-TERM LIABILITIES:
Line of credit 29,970 --
Long-term liabilities of
discontinued operations 5,283 --
Total long-term liabilities 35,253 --
STOCKHOLDERS' EQUITY 37,678 52,056
Total liabilities and
stockholders' equity $100,525 $79,625
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.1800contacts.com
http://www.fenwaypartners.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; or Anna Cordasco or Brooke Morganstein,
both of Sard Verbinnen & Co., +1-212-687-8080, for Fenway
Partners
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