DRAPER, Utah, May 8 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(NASDAQ:CTAC) ("the Company") today reported results for its first
quarter ended March 31, 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO) First
Quarter Results Consolidated net sales for the first quarter ended
March 31, 2007 were $67.4 million, compared to $63.5 million for
the comparable quarter of the prior year. For the first quarter of
fiscal 2007, the Company reported a consolidated net loss of $(1.0)
million, or $(0.08) per diluted common share, compared to
consolidated net income of $1.2 million, or $0.09 per diluted
common share, for the first quarter of fiscal 2006. U.S. Retail Net
sales and operating income for the Company's U.S. retail business
for the first quarter of fiscal 2007 were $61.8 million and $6.2
million, respectively, compared to net sales of $59.2 million and
operating income of $7.0 million for the first quarter of fiscal
2006. Results for the first quarter of fiscal 2007 include
approximately $0.4 million in legal and professional expenses
relating to the strategic review of ClearLab and the U.S. retail
business. Gross margin for the Company's U.S. retail business
increased to 40.2% for the first quarter of fiscal 2007 from 39.9%
for the first quarter of fiscal 2006. Advertising expense for the
first quarter of fiscal 2007 was $0.4 million more than for the
first quarter of fiscal 2006. During the first quarter of fiscal
2007, other selling, general and administrative expenses as a
percentage of net sales for the U.S. retail business increased to
20.6% from 19.8% in the first quarter of fiscal 2006. ClearLab Net
sales and operating loss for ClearLab, the Company's international
contact lens manufacturing business, for the first quarter of
fiscal 2007 were $5.6 million and $(4.2) million, respectively,
compared to net sales of $4.3 million and an operating loss of
$(2.9) million for the first quarter of fiscal 2006. The results
for the first quarter of fiscal 2007 include $1.0 million in
license fees from the Company's Japanese license agreement compared
to $1.5 million in the first quarter of fiscal 2006. Compared to
the first quarter of fiscal 2006, ClearLab's operating results for
the first quarter of fiscal 2007 include the same level of research
and development expense, a $0.3 million increase in other selling,
general and administrative expenses, and $0.1 million for severance
and retention costs related to the closure of the United Kingdom
manufacturing operations. Strategic Review Jonathan Coon, Chief
Executive Officer, remarked, "In March, we indicated that a
separation of ClearLab is likely to be accomplished in two separate
transactions -- one for the flat pack technology and one for
ClearLab's Singapore operation. We are pleased to announce that we
have entered into a Memorandum of Understanding (MOU) to sell
ClearLab's Singapore operation to Mi Gwang Contact Lens Co., Ltd.,
a Korean based contact lens manufacturer. This MOU includes a $1
million break-up fee that is applicable if either party does not
execute a definitive purchase agreement. We expect to execute a
purchase agreement this month and to close the transaction before
the end of June." "We are still considering whether to sell the
current Japanese license agreement and exclusive worldwide rights
to the flat pack technology or retain the current Japanese license
agreement and the flat pack technology and pursue a strategy of
non-exclusive licenses with multiple manufacturers. We expect to
announce either a transaction for the flat pack technology or a
decision to retain the technology and the Japanese license
agreement soon." "There can be no assurance that either of these
transactions will be completed. However, if completed, the
combination of transactions would provide sufficient cash at
closing to allow us to retire our outstanding indebtedness,
including our line of credit and long term debt. We believe these
transactions, if executed, will also provide a tax benefit and
ongoing future consideration." Concurrently with the strategic
review of ClearLab, we are continuing our strategic review of the
U.S. retail business. Outlook For the second quarter of fiscal
2007, the Company expects U.S. retail net sales of approximately
$62 million to $63 million and operating income of approximately $6
million. These results will continue to reflect the costs
associated with the strategic review. The Company's President,
Brian Bethers, added, "We are reconfirming our prior fiscal year
2007 guidance of retail sales of $240 to $250 million and operating
income of $23 million to $26 million. Based on our first quarter
results, we believe we will be in the upper end of this range." Mr.
Bethers further stated, "ClearLab's second quarter results will
include costs relating to the closure of the United Kingdom
manufacturing operations and the consolidation in Singapore. We
expect to incur up to $3.0 million more in costs relating to the
consolidation of operations in Singapore during fiscal 2007."
"Excluding the anticipated $1.9 to $3.4 million of additional cash
expenditures related to the UK closure, we are reconfirming our
previous estimated cash funding requirements for ClearLab
operations and R&D from 1-800 CONTACTS to be approximately $2.5
million for the second quarter of fiscal 2007." 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. ClearLab develops and manufactures a wide range of
disposable contact lens products and distributes these lenses in
markets outside of the United States. More information about
ClearLab can be found at its website, http://www.clearlab.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 to the potential separation of ClearLab from the U.S.
retail business (including all statements relating to the
structure, timing, break-up fee, or potential consideration or tax
benefits relating to any potential transaction(s)); the Company's
belief that the potential ClearLab transactions, if completed,
could provide sufficient cash at closing to allow the Company to
retire its outstanding indebtedness or could otherwise add
significant future value; all statements relating to the potential
sale or retention of the Japanese license agreement and the flat
pack technology; all statements relating to the strategic review of
the U.S. retail business and anticipated costs associated with that
review; expected U.S. retail net sales and operating income for the
second quarter of fiscal year 2007 and for fiscal year 2007;
estimated costs of the closure of the United Kingdom manufacturing
operations and the consolidation of such operations in Singapore;
the timing of the consolidation; and ongoing cash funding
requirements for ClearLab. 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 and ClearLab's
products; product health benefits; the outcome of the strategic
review of ClearLab and the U.S. retail business; supply risks;
inventory acquisition and management; manufacturing operations;
governmental regulations; exchange rate fluctuations; unanticipated
costs and expected benefits associated with the Japanese license
agreement and the Company's supply agreements and related
arrangements; research and development initiatives; 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,
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. 1-800 CONTACTS, INC. CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS INFORMATION (in thousands, except per share amounts)
(unaudited) Quarter Ended April 1, March 31, 2006 2007 NET SALES
$63,491 $67,421 COST OF GOODS SOLD 39,013 43,049 Gross profit
24,478 24,372 SELLING, GENERAL & ADMINISTRATIVE EXPENSES:
Advertising 3,983 4,421 Legal and professional 1,125 1,630 Research
and development 1,328 1,251 Restructuring charges -- 110 Other
selling, general & administrative 13,679 14,963 Total selling,
general & administrative expenses 20,115 22,375 INCOME FROM
OPERATIONS 4,363 1,997 OTHER INCOME (EXPENSE), net 313 (350) INCOME
BEFORE PROVISION FOR INCOME TAXES 4,676 1,647 PROVISION FOR INCOME
TAXES (3,495) (2,659) NET INCOME (LOSS) $1,181 $(1,012) PER SHARE
INFORMATION: Basic and diluted net income (loss) per common share
$0.09 $(0.08) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic 13,345 13,420 Diluted 13,441 13,420 OTHER DATA: Depreciation
$1,388 $1,711 Amortization 910 800 Total depreciation and
amortization $2,298 $2,511 Depreciation and amortization included
in the following captions: Cost of goods sold $770 $756 Research
and development 49 229 Other selling, general & administrative
1,479 1,526 Total depreciation and amortization $2,298 $2,511
SEGMENT INFORMATION: Quarter Ended April 1, 2006 Inter- Elimi- U.S.
national nations Total Net sales $59,173 $4,318 $-- $63,491 Gross
profit (loss) 23,624 638 216 24,478 Research and development 10
1,318 -- 1,328 Restructuring charges -- -- -- -- Other selling,
general & administrative 11,713 1,966 -- 13,679 Income (loss)
from operations 7,006 (2,859) 216 4,363 Depreciation and
amortization $1,256 $1,042 $-- $2,298 Quarter Ended March 31, 2007
Inter- Elimi- U.S. national nations Total Net sales $61,829 $5,592
$-- $67,421 Gross profit (loss) 24,829 (457) -- 24,372 Research and
development -- 1,251 -- 1,251 Restructuring charges -- 110 -- 110
Other selling, general & administrative 12,710 2,253 -- 14,963
Income (loss) from operations 6,176 (4,179) -- 1,997 Depreciation
and amortization $1,317 $1,194 $-- $2,511 1-800 CONTACTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)
(unaudited) ASSETS December 30, March 31, 2006 2007 CURRENT ASSETS:
Cash $2,737 $616 Accounts receivable, net 3,577 3,711 Inventories,
net 24,325 23,738 Deferred income taxes 1,886 1,766 Other current
assets 4,641 3,350 Total current assets 37,166 33,181 PROPERTY,
PLANT AND EQUIPMENT, net 27,555 26,425 DEFERRED INCOME TAXES 898
920 GOODWILL 22,304 22,304 DEFINITE-LIVED INTANGIBLE ASSETS, net
11,500 10,969 OTHER ASSETS 1,102 912 Total assets $100,525 $94,711
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current
portion of long-term debt 2,633 2,476 Current portion of capital
lease obligations 57 27 Accounts payable and accrued liabilities
24,904 24,422 Total current liabilities 27,594 26,925 LONG-TERM
LIABILITIES: Line of credit 29,970 26,144 Long-term debt, net of
current portion 4,404 3,934 Capital lease obligations, net of
current portion 35 29 Other long-term liabilities 844 226 Total
long-term liabilities 35,253 30,333 STOCKHOLDERS' EQUITY 37,678
37,453 Total liabilities and stockholders' equity $100,525 $94,711
http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO
http://photoarchive.ap.org/ DATASOURCE: 1-800 CONTACTS, INC.
CONTACT: Brian W. Bethers, President, or Robert G. Hunter, Chief
Financial Officer, both of 1-800 CONTACTS, +1-801-316-5000, Web
site: http://www.1800contacts.com/
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