Company Reports U.S. Retail Sales of $55.0 Million and U.S. Retail Operating
Income of $5.2 Million
DRAPER, Utah, Nov. 2 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC), today reported results for its third quarter ended October 2,
2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO)
Consolidated net sales for the third quarter ended October 2, 2004 were
$56.9 million, compared to $48.4 million for the comparable quarter of the
prior year, an 18% increase. For the third quarter of fiscal 2004, the
Company reported consolidated net income of $1.4 million, or $0.10 per diluted
common share, compared to a consolidated net loss of $(0.6) million, or
$(0.05) per diluted common share for the third quarter of fiscal 2003.
Net sales and operating income for the Company's retail business for the
third quarter ended October 2, 2004 were $55.0 million and $5.2 million,
respectively. This compares to net sales of $48.8 million and operating
income of $1.8 million for the second quarter ended July 3, 2004, and net
sales of $46.9 million and operating income of $0.3 million for the third
quarter ended September 27, 2003. The retail business gross profit of
40.5% in the third quarter of fiscal 2004 remained relatively constant with
the gross profit of 40.7% reported in the second quarter of fiscal 2004.
Consolidated advertising expenses for the third quarter of fiscal 2004
were 11.5% of net sales compared to 14.8% of net sales for the comparable
quarter of the prior year. Consolidated legal and professional expenses for
the third quarter of fiscal 2004 decreased $0.6 million from the comparable
quarter of the prior year and decreased $0.3 million from the second quarter
of fiscal 2004.
During the third quarter of fiscal 2004, the retail business incurred
operating expenses -- excluding advertising, legal and professional, and
research and development -- of $9.7 million, or 17.6% of net sales, compared
to $8.6 million, or 18.3 % of net sales for the third quarter of fiscal 2003.
Brian Bethers, President and Chief Financial Officer, said, "We saw
significant improvement in our financial results for our retail business
during this past quarter and expect these trends to continue for the
foreseeable future. Compared to the second quarter of fiscal 2004, sales in
our retail business grew from $48.8 to $55.0 million and operating income
increased from $1.8 to $5.2 million. Our projections for the third quarter
were sales of $51.0 to $53.0 million and operating income of $4.5 to
$5.0 million.
We continue to see strong results in the current quarter, and we are
raising our expectations for the fourth quarter. We had previously projected
$44.0 to $46.0 million in fourth quarter retail sales and $4.5 to $5.0 million
in operating income. We are raising our guidance for our retail business in
the fourth quarter to $48.0 to $50.0 million in sales and $5.0 to $5.5 million
in operating income. This includes an increase in advertising expenses versus
previous guidance from $4.0 to $4.5 million."
Mr. Bethers continued, "As mentioned last quarter, the reduction in
advertising and sales in the fourth quarter as compared to the third quarter
is consistent with our strategy since inception. Unlike most other retail
companies, we typically decrease advertising spending during the holiday
selling season when advertising costs increase and response rates decline."
For the third quarter of fiscal 2004, net sales and operating loss for
ClearLab, the Company's international manufacturing business, were
$1.9 million and $(2.1) million, respectively. This compares to net sales of
$1.2 million and an operating loss of $(2.3) million for the second quarter of
fiscal 2004.
Mr. Bethers added, "We are projecting ClearLab sales of $2.5 to
$3.5 million for the fourth quarter. Demand has been strong for ClearLab
products, but installation of production lines for new products took longer
than anticipated. We expect to realize an operating loss at ClearLab of
$(1.5) to $(2.0) million for the fourth quarter, as we accelerate some of our
R&D efforts and further expand daily manufacturing capacity to capitalize on
increasing demand. We are encouraged by recent developments at ClearLab and,
as stated last quarter, we believe that ClearLab will contribute to operating
income in 2005."
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 and growth of the Company's acquisitions into its
business, exchange rate fluctuations, advertising spending and effectiveness,
unanticipated costs and unrealized benefits associated with the Company's
agreements with Johnson & Johnson Vision Care and CIBAVision, the Company's
doctor referral program with Cole National, 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 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 Three Quarters Ended
Sept. 27, Oct. 2, Sept. 27, Oct. 2,
2003 2004 2003 2004
NET SALES $48,400 $56,893 $141,416 $157,713
COST OF GOODS SOLD 29,489 34,889 88,629 97,140
Gross profit 18,911 22,004 52,787 60,573
OPERATING EXPENSES:
Advertising 7,171 6,533 14,551 22,572
Legal and professional 1,601 1,026 4,977 4,207
Research and development 777 567 2,777 1,902
Purchased in-process
research and development -- -- -- 83
Other operating 9,316 10,789 28,069 31,437
Total operating expenses 18,865 18,915 50,374 60,201
INCOME FROM OPERATIONS 46 3,089 2,413 372
OTHER EXPENSE, net (161) (216) (984) (1,271)
INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES (115) 2,873 1,429 (899)
PROVISION FOR INCOME TAXES (513) (1,520) (1,985) (1,102)
NET INCOME (LOSS) $(628) $1,353 $(556) $(2,001)
PER SHARE INFORMATION:
Basic and diluted net income
(loss) per common share $(0.05) $0.10 $(0.04) $(0.15)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
Basic 13,103 13,287 12,547 13,254
Diluted 13,103 13,373 12,547 13,254
OTHER DATA:
Depreciation $785 $1,076 $2,300 $2,955
Amortization 824 945 2,317 2,675
Total depreciation and
amortization $1,609 $2,021 $4,617 $5,630
Depreciation and amortization
included in the following
captions:
Cost of goods sold $313 $711 $914 $1,833
Research and development 3 23 8 61
Other operating 1,293 1,287 3,695 3,736
Total depreciation and
amortization $1,609 $2,021 $4,617 $5,630
SEGMENT INFORMATION:
Quarter Ended
September 27, 2003 October 2, 2004
U.S. International Total U.S. International Total
Net sales $46,923 $1,477 $48,400 $54,966 $1,927 $56,893
Gross profit
(loss) 18,191 720 18,911 22,235 (231) 22,004
Research
and
development 618 159 777 -- 567 567
Other
operating
expense 8,600 716 9,316 9,701 1,088 10,789
Income
(loss)
from
operations 322 (276) 46 5,179 (2,090) 3,089
Three Quarters Ended
September 27, 2003 October 2, 2004
U.S. International Total U.S. International Total
Net sales $136,755 $4,661 $141,416 $153,159 $4,554 $157,713
Gross profit
(loss) 50,984 1,803 52,787 60,990 (417) 60,573
Research
and
development 2,527 250 2,777 536 1,366 1,902
Purchased
in-process
research
and
development -- -- -- -- 83 83
Other
operating
expense 25,217 2,852 28,069 28,276 3,161 31,437
Income
(loss)
from
operations 3,988 (1,575) 2,413 5,865 (5,493) 372
1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
(unaudited)
ASSETS
January 3, October 2,
2004 2004
CURRENT ASSETS:
Cash $1,075 $373
Accounts receivable, net 944 1,638
Inventories, net 24,127 23,832
Prepaid income taxes 797 --
Deferred income taxes 548 971
Other current assets 1,752 3,158
Total current assets 29,243 29,972
PROPERTY, PLANT AND EQUIPMENT, net 13,183 18,078
DEFERRED INCOME TAXES 710 723
GOODWILL 33,853 33,937
DEFINITE-LIVED INTANGIBLE ASSETS, net 9,207 18,400
OTHER ASSETS 735 1,070
Total assets $86,931 $102,180
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $3,381 $1,426
Current portion of capital lease obligations 191 108
Accounts payable and accrued liabilities 13,405 17,339
Total current liabilities 16,977 18,873
LONG-TERM LIABILITIES:
Line of credit -- 16,351
Long-term debt, less current portion 14,683 8,295
Capital lease obligations, less current
portion 64 54
Deferred income tax liabilities -- 2,071
Total long-term liabilities 14,747 26,771
STOCKHOLDERS' EQUITY 55,207 56,536
Total liabilities and stockholders'
equity $86,931 $102,180
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.contacts.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 and CFO, or
Robert G. Hunter, Vice President, Finance, both of 1-800
CONTACTS, INC., +1-801-924-9800, investors@contacts.com
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