DRAPER, Utah, Oct. 29 /PRNewswire-FirstCall/ --
1-800 CONTACTS, INC. (Nasdaq: CTAC), today reported results for the third
fiscal quarter ended September 28, 2002.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990917/1800CONTACTS )
Net sales for the third quarter ended September 28, 2002 were
$44.3 million, compared to $44.4 million for the same period last year. The
Company reported a net loss for the third quarter of $6.4 million, or $.56 per
diluted common share, versus net income of $2.1 million, or $.18 per diluted
common share, in the third quarter of 2001. The results for the third quarter
of fiscal 2002 include a charge of $7.8 million for purchased in-process
research and development from the July 24, 2002 acquisition of IGEL, a
developer and contract manufacturer of contact lenses based in Singapore. 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 fiscal 2002.
For the three quarters ended September 28, 2002, net sales were
$128.1 million, compared to $131.4 million for the three quarters ended
September 29, 2001. The net loss for the first three quarters of 2002 was
$3.4 million, or $.30 per diluted common share, compared to net income of
$7.7 million, or $.66 per diluted common share, for the first three quarters
of last year. The net loss for the first three quarters of 2002 includes the
$7.8 million charge for purchased in-process research and development.
For the third quarter ended September 28, 2002, net sales and operating
income from the Company's operations (excluding the recently acquired
Singapore operations) were $43.4 million and $3.3 million, respectively.
During the third quarter of 2002, repeat sales increased 12 percent over the
same period in the prior year to $35.2 million, which represented 81 percent
of net sales. Internet sales were $18.7 million, or 43 percent, of net sales
for the third quarter of 2002, compared to $18.1 million, or 41 percent, of
net sales during the prior year period.
The Company's balance sheet reflects the acquisition of IGEL during the
third quarter of 2002. The transaction was accomplished as an asset purchase
and included certain net assets and the majority of the business operations of
IGEL. The assets acquired principally consist of the long-term leasehold
interest in the land and building where the manufacturing facility is located,
as well as equipment, inventories, and certain intellectual property rights,
including patents key to the operation of the acquired business. The
consideration paid included approximately $6.6 million in cash (including
$1.2 million in transaction costs), $8.9 million in assumed building and
business loans to be paid over the next 7 years, $0.7 million in assumed
capital lease obligations, a non-interest bearing note of $2.1 million to be
paid over the next 5 years, 700,000 shares of restricted common stock of the
Company, and 270,000 common stock options of the Company in three tranches of
90,000 each with exercise prices of $15, $25 and $35, respectively. The
700,000 shares of restricted common stock are held in escrow, subject to a
performance guarantee, and vest over a two-year schedule with no shares
released from escrow for a minimum of one year. The Company obtained a $10
million, five-year term loan from its current lender to provide partial
financing for this asset purchase.
Scott Tanner, Chief Operating Officer, commented, "Sales continued to be
affected by reduced advertising, which is part of our ongoing effort to manage
demand for Johnson & Johnson products as a result of their continued refusal
to sell to us. We spent about 60% less on advertising this quarter than we
spent in the third quarter of 2001. We believe that this reduction in
advertising primarily impacted new sales. Repeat sales remained strong,
increasing almost $4 million over the prior year quarter. Although, gross
profit continued to reflect the impact of the higher wholesale prices we have
paid for Johnson & Johnson products, our inventory management approach enabled
us to fill nearly every order that we received for Johnson & Johnson
products."
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. High volume, cost-efficient operations enable 1-800 CONTACTS to offer
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
issues, integration of IGEL, exchange rate fluctuations, advertising spending
and effectiveness, and regulatory considerations.
Company News On Call: http://www.prnewswire.com or fax 800-758-5804, ext.
109239
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
Quarter Ended Three Quarters Ended
September 29, September 28, September 29, September 28,
2001 2002 2001 2002
NET SALES $44,375 $44,316 $131,389 $128,130
COST OF GOODS SOLD 26,868 30,659 78,644 89,356
Gross profit 17,507 13,657 52,745 38,774
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES:
Advertising
expense 7,787 3,175 23,317 9,784
Legal and
professional
fees 1,038 1,044 1,946 3,444
Purchased
in-process
research and
development -- 7,789 -- 7,789
Other selling,
general and
administrative
expenses 5,289 6,239 14,665 17,153
Total selling,
general and
administrative
expenses 14,114 18,247 39,928 38,170
INCOME (LOSS) FROM
OPERATIONS 3,393 (4,590) 12,817 604
OTHER EXPENSE, net (36) (575) (208) (898)
INCOME (LOSS) BEFORE
PROVISION FOR
INCOME TAXES 3,357 (5,165) 12,609 (294)
PROVISION FOR INCOME
TAXES (1,299) (1,202) (4,898) (3,130)
NET INCOME (LOSS) $2,058 $(6,367) $7,711 $(3,424)
PER SHARE INFORMATION:
Basic net income
(loss) per common
share $0.18 $(0.56) $0.67 $(0.30)
Diluted net income
(loss) per common
share $0.18 $(0.56) $0.66 $(0.30)
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 11,572 11,382 11,574 11,428
Diluted 11,722 11,382 11,768 11,428
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
ASSETS
December 29, September 28,
2001 2002
CURRENT ASSETS:
Cash and cash equivalents $36 $347
Accounts receivable -- 630
Inventories 43,000 41,754
Prepaid income taxes -- 310
Deferred income taxes 985 761
Other current assets 1,019 1,033
Total current assets 45,040 44,835
PROPERTY AND EQUIPMENT, net 3,309 12,375
DEFERRED INCOME TAXES 439 554
INTANGIBLE ASSETS, net 1,544 6,420
OTHER ASSETS 73 354
Total assets $50,405 $64,538
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $12,526 $9,923
Current portion of capital lease obligation -- 383
Current portion of long-term debt -- 2,220
Income taxes payable 141 --
Accounts payable and accrued liabilities 13,985 10,039
Total current liabilities 26,652 22,565
CAPITAL LEASE OBLIGATION, less current portion -- 242
LONG-TERM DEBT, less current portion -- 18,144
LIABILITY RELATED TO CONTINGENT CONSIDERATION -- 5,334
STOCKHOLDERS' EQUITY 23,753 18,253
Total liabilities and stockholders' equity $50,405 $64,538
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.contacts.com
Photo Notes:
NewsCom: 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:
Jonathan C. Coon, Chief Executive Officer,
+1-801-924-9800, or Scott S. Tanner, Chief Operating Officer,
+1-801-924-9802, both of Chief Executive Officer, 1-800 CONTACTS,
INC., investors@contacts.com
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