DRAPER, Utah, Oct. 28 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC), today reported results for its third quarter ended
September 27, 2003.
(Logo: http://www.newscom.com/cgi-bin/prnh/19990917/1800CONTACTS )
Net sales for the third quarter ended September 27, 2003 were
$48.4 million, compared to $44.3 million for the comparable quarter of the
prior year. For the third quarter of 2003, the Company reported a net loss of
$(0.6) million, or $(.05) per diluted common share, compared to a net loss of
$(6.4) million, or $(.56) per diluted common share for the third quarter of
2002. The results for the third quarter of 2002 include a charge of
$7.8 million for purchased in-process research and development from the
July 2002 acquisition of ClearLab. The Company did not record a tax benefit
on this charge. Absent the purchased in-process research and development
charge, net income was $1.4 million, or $.12 per diluted common share, for the
third quarter of 2002.
Net sales and operating income exclusive of the Company's Singapore
operations (ClearLab) were $46.9 million and $0.3 million, respectively, for
the third quarter ended September 27, 2003. For the third quarter ended
September 28, 2002, net sales and operating income exclusive of ClearLab's
operations were $43.4 million and $3.3 million, respectively. For the third
quarter of 2003, net sales and operating loss for ClearLab, excluding
intercompany sales, were $1.5 million and $(0.3) million, respectively,
compared to net sales and operating loss of $0.9 million and $(7.9) million,
respectively, for the third quarter of 2002 which included the charge of
$7.8 million for purchased in-process research and development. 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 39.1% for the third
quarter of 2003 from 30.8% for the comparable quarter of the prior year.
During the third quarter of 2003, the Company expensed $0.8 million for
research and development and $0.5 million for amortization of the acquired
Lens Express and Lens 1st customer database definite-lived intangible assets.
For the three quarters ended September 27, 2003, net sales were
$141.4 million, compared to $128.1 million for the three quarters ended
September 28, 2002. The net loss for the first three quarters of 2003 was
$(0.6) million, or $(.04) per diluted common share, compared to a net loss of
$(3.4) million, or $(.30) per diluted common share, for the first three
quarters of 2002. The results for the first three quarters of 2003 include
approximately $2.8 million for research and development, $1.3 million for
amortization of the acquired Lens Express and Lens 1st customer database
definite-lived intangible assets, $0.3 million for integration costs related
to the acquisition of Lens Express and Lens 1st and 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. The results for the first three quarters of 2002 include the
$7.8 million charge for purchased in-process research and development.
Jonathan Coon, Chief Executive Officer, said, "During the quarter, we
continued to invest heavily in legal and legislative efforts, our new
relationship with Cole National, and product development. We expect to see
results from these investments in future quarters. We are pleased with our
continued gross margin improvement, which reflects some of the benefits of our
direct supply arrangements with manufacturers. We continue to work to
strengthen our relationships with manufacturers and expect to see further
gross margin improvement in 2004 as new pricing arrangements are implemented."
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 September 27, 2003 is $11.4 million.
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 OPERATIONS INFORMATION
(in thousands, except per share amounts)
(unaudited)
Quarter Ended Three Quarters Ended
Sept. 28, Sept. 27, Sept. 28, Sept. 27,
2002 2003 2002 2003
NET SALES $44,316 $48,400 $128,130 $141,416
COST OF GOODS SOLD 30,659 29,489 89,356 88,629
Gross profit 13,657 18,911 38,774 52,787
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Advertising expense 3,175 7,171 9,784 14,551
Legal and professional fees 1,044 1,601 3,444 4,977
Research and development
expenses -- 777 -- 2,777
Purchased in-process
research and development 7,789 -- 7,789 --
Other selling, general and
administrative expenses 6,239 9,316 17,153 28,069
Total selling, general
and administrative
expenses 18,247 18,865 38,170 50,374
INCOME (LOSS) FROM OPERATIONS (4,590) 46 604 2,413
OTHER EXPENSE, net (575) (161) (898) (984)
INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES (5,165) (115) (294) 1,429
PROVISION FOR INCOME TAXES (1,202) (513) (3,130) (1,985)
NET LOSS $(6,367) $(628) $(3,424) $(556)
PER SHARE INFORMATION:
Basic and diluted net
loss per common share $(0.56) $(0.05) $(0.30) $(0.04)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic and diluted 11,382 13,103 11,428 12,547
OTHER DATA:
Depreciation and
amortization included in
the following captions:
Cost of goods sold $205 $313 $205 $914
Research and
development expenses -- 3 -- 8
Other selling, general
and administrative
expenses 544 1,293 1,392 3,695
Total depreciation
and amortization $749 $1,609 $1,597 $4,617
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
December 28, September 27,
2002 2003
CURRENT ASSETS:
Cash $259 $819
Accounts receivable 655 970
Inventories, net 37,785 29,723
Prepaid income taxes 769 --
Deferred income taxes 756 691
Other current assets 1,095 1,183
Total current assets 41,319 33,386
PROPERTY, PLANT AND EQUIPMENT, net 12,862 13,258
DEFERRED INCOME TAXES 365 636
GOODWILL -- 33,674
DEFINITE-LIVED INTANGIBLE ASSETS, net 7,089 9,966
OTHER ASSETS 369 888
Total assets $62,004 $91,808
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $5,770 $2,528
Current portion of long-term debt 2,853 3,199
Current portion of capital lease
obligations 372 261
Accounts payable and accrued
liabilities 12,327 14,670
Total current liabilities 21,322 20,658
LONG-TERM LIABILITIES:
Long-term debt, less current portion 17,365 15,262
Capital lease obligations, less
current portion 250 67
Liability related to contingent
consideration 5,470 --
Total long-term liabilities 23,085 15,329
STOCKHOLDERS' EQUITY 17,597 55,821
Total liabilities and
stockholders' equity $62,004 $91,808
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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