DRAPER, Utah, Nov. 7 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(NASDAQ:CTAC), today reported results for its fiscal 2006 third
quarter ended September 30, 2006. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO) Third
Quarter Results Consolidated net sales for the third quarter ended
September 30, 2006 were $64.3 million, compared to $60.9 million
for the comparable quarter of the prior year. For the third quarter
of fiscal 2006, the Company reported a consolidated net loss of
$(1.5) million, or $(0.11) per diluted common share, compared to a
consolidated net loss of $(0.6) million, or $(0.04) per diluted
common share, for the third quarter of fiscal 2005. U.S. Retail Net
sales and operating income for the Company's U.S. retail business
for the third quarter of fiscal 2006 were $59.2 million and $5.1
million, respectively, compared to net sales of $55.8 million and
operating income of $3.4 million for the third quarter of fiscal
2005. Gross margin for the Company's U.S. retail business decreased
to 38.8% for the third quarter of fiscal 2006 from 39.3% for the
third quarter of fiscal 2005. Advertising expense for the third
quarter of fiscal 2006 was $2.6 million less than the third quarter
of fiscal 2005. During the third quarter of fiscal 2006, other
selling, general and administrative expenses as a percentage of net
sales for the U.S. retail business increased to 21.6% from 19.7% in
the third quarter of fiscal 2005. ClearLab Net sales and operating
loss for ClearLab, the Company's international contact lens
manufacturing business, for the third quarter of fiscal 2006 were
$5.1 million and $(4.6) million, respectively, compared to net
sales of $6.0 million and an operating loss of $(1.4) million for
the third quarter of fiscal 2005. ClearLab's net sales for the
third quarters of fiscal 2006 and 2005 included $1.0 million in
license fees from the Company's Japanese license agreement. In
addition, ClearLab's net sales for the third quarter of fiscal 2005
included $0.9 million of intercompany sales to the Company's U.S.
retail business. For the third quarter of fiscal 2006, ClearLab's
operating results included a $1.0 million increase in research and
development expense and a $1.4 million increase in other selling,
general and administrative expenses. The change in consolidated
other income (expense) for the third quarter of fiscal 2006 was
principally due to unrealized foreign exchange transaction gains
related primarily to intercompany loans to ClearLab. Strategic
Review of ClearLab The Company, with the assistance of its
investment banking advisor, Sonenshine Partners, has completed the
first round of its strategic review of ClearLab. Jonathan Coon,
Chief Executive Officer, remarked, "In the last 90 days, we have
met with numerous third parties who have expressed interest in
AquaSoft Singles and other technology developed by ClearLab. Based
on these discussions, we are now committed to a separation of
ClearLab from the U.S. retail business and expect to announce terms
by the end of March 2007." 2006 and 2007 Outlook For the fourth
quarter of fiscal 2006, the Company expects U.S. retail net sales
of approximately $51 million and operating income of approximately
$4 million. These expected results are comparable to the results
for the fourth quarter of the prior year and are consistent with
the Company's historical seasonality in the fourth quarter. For
fiscal year 2006, the Company expects U.S. retail net sales of
approximately $227 million and operating income of approximately
$22 million. Brian Bethers, President, added, "For the first three
quarters of 2006, the retail business has performed above
expectations despite a significant reduction in advertising
spending. This has largely been due to improved efficiency and
effectiveness of our marketing -- in particular our online
marketing. We intend to increase our advertising spending in 2007
to approximately $18 million. We believe that this level of
advertising spending will deliver a meaningful increase in revenue
and an operating income of $23 million to $26 million in 2007 for
our U.S. retail business." The Company expects ClearLab's net sales
and operating loss for the fourth quarter of fiscal 2006 to be
similar to those reported for the third quarter of fiscal 2006
excluding any potential costs or accounting charges resulting from
a possible consolidation of ClearLab's operations. Mr. Bethers
added, "Over the last several months, we have undergone an
extensive review of ClearLab's manufacturing operations. Subject to
any consultation that may be necessary under United Kingdom law, we
are evaluating a consolidation of ClearLab's manufacturing,
research and development operations which are currently carried out
in the Singapore and United Kingdom manufacturing facilities." New
Director Appointment Grange Johnson recently joined 1-800 CONTACTS'
Board of Directors. Mr. Coon, also Chairman of the Board,
commented, "Grange Johnson has been a long-term investor in 1-800
CONTACTS and is one of our largest shareholders. We are excited
about having him on our Board." Mr. Johnson added, "I am pleased to
be joining the Board of this exciting and growing company at an
inflection point in its history." Mr. Johnson founded LaGrange
Capital Partners, an asset management firm with over $300 million
in assets under management, in May 2000. Bloomberg Markets Magazine
ranked LaGrange as the highest returning event driven fund in the
world for the three year period ended September 2005. LaGrange also
received the 2003 GAIM award for the best event driven fund with a
three to four year track record. Mr. Johnson holds a BA from Brown
University and an MBA from Columbia Business School. 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 almost 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 news 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. The forward-looking
statements in this release include all statements which are not
purely historical and include, but are not necessarily limited to,
statements relating to the Company's commitment to a separation of
ClearLab from the U.S. retail business; the Company's intention to
announce terms of that separation by the end of March 2007;
anticipated net sales and operating income for the fourth quarter
of fiscal 2006 and fiscal years 2006 and 2007; the Company's
intention to increase advertising spending in fiscal 2007; and any
statements relating to the potential consolidation of ClearLab
operations. All such forward-looking statements are based upon
information available to 1-800 CONTACTS 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 ClearLab's products, product
health benefits, the outcome of the strategic review of ClearLab,
inventory acquisition and management, manufacturing operations,
governmental regulations, exchange rate fluctuations, advertising
spending and effectiveness, 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 1-800 CONTACTS with the U.S.
Securities and Exchange Commission, including the Company's most
recent Annual Report on Form 10-K. 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 Three Quarters Ended October 1, September
30, October 1, September 30, 2005 2006 2005 2006 NET SALES $60,858
$64,329 $182,506 $190,975 COST OF GOODS SOLD 37,706 40,427 113,178
119,963 Gross profit 23,152 23,902 69,328 71,012 SELLING, GENERAL
& ADMINISTRATIVE EXPENSES: Advertising 6,606 3,977 20,264
11,663 Legal and professional 1,210 1,307 3,400 3,555 Research and
development 426 1,388 2,292 4,353 Other selling, general &
administrative 13,538 16,657 37,359 46,258 Total selling, general
& administrative expenses 21,780 23,329 63,315 65,829 INCOME
FROM OPERATIONS 1,372 573 6,013 5,183 OTHER INCOME (EXPENSE), net
(755) (55) (2,562) 610 INCOME BEFORE PROVISION FOR INCOME TAXES 617
518 3,451 5,793 PROVISION FOR INCOME TAXES (1,191) (2,053) (3,801)
(8,185) NET LOSS $(574) $(1,535) $(350) $(2,392) PER SHARE
INFORMATION: Basic and diluted net loss per common share $(0.04)
$(0.11) $(0.03) $(0.18) WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING: Basic and diluted 13,329 13,366 13,315 13,357 OTHER
DATA: Depreciation $1,235 $1,776 $3,405 $4,682 Amortization 1,046
907 3,167 2,893 Total depreciation and amortization $2,281 $2,683
$6,572 $7,575 Depreciation and amortization included in the
following captions: Cost of goods sold $797 $965 $2,200 $2,557
Research and development 32 124 85 235 Other selling, general &
administrative 1,452 1,594 4,287 4,783 Total depreciation and
amortization $2,281 $2,683 $6,572 $7,575 SEGMENT INFORMATION:
Quarter Ended October 1, 2005 U.S. International Eliminations Total
Net sales $55,791 $5,984 $(917) $60,858 Gross profit (loss) 21,928
1,841 (617) 23,152 Research and development -- 426 -- 426 Other
selling, general & administrative 10,998 2,540 -- 13,538 Income
(loss) from operations 3,367 (1,378) (617) 1,372 Depreciation and
amortization $1,236 $1,045 $-- $2,281 Quarter Ended September 30,
2006 U.S. International Eliminations Total Net sales $59,189 $5,140
$-- $64,329 Gross profit (loss) 22,968 934 -- 23,902 Research and
development -- 1,388 -- 1,388 Other selling, general &
administrative 12,762 3,895 -- 16,657 Income (loss) from operations
5,125 (4,552) -- 573 Depreciation and amortization $1,358 $1,325
$-- $2,683 Three Quarters Ended October 1, 2005 U.S. International
Eliminations Total Net sales $168,924 $14,873 $(1,291) $182,506
Gross profit (loss) 66,972 3,147 (791) 69,328 Research and
development -- 2,292 -- 2,292 Other selling, general &
administrative 31,870 5,489 -- 37,359 Income (loss) from operations
12,159 (5,355) (791) 6,013 Depreciation and amortization $3,630
$2,942 $-- $6,572 Three Quarters Ended September 30, 2006 U.S.
International Eliminations Total Net sales $176,096 $14,879 $--
$190,975 Gross profit (loss) 69,366 1,393 253 71,012 Research and
development 10 4,343 -- 4,353 Other selling, general &
administrative 37,044 9,214 -- 46,258 Income (loss) from operations
17,886 (12,956) 253 5,183 Depreciation and amortization $4,094
$3,481 $-- $7,575 1-800 CONTACTS, INC. CONDENSED CONSOLIDATED
BALANCE SHEET INFORMATION (in thousands) (unaudited) ASSETS
December 31, September 30, 2005 2006 CURRENT ASSETS: Cash $1,481
$1,538 Accounts receivable, net 3,451 3,483 Inventories, net 21,458
21,988 Deferred income taxes 1,624 1,955 Other current assets 5,530
5,151 Total current assets 33,544 34,115 PROPERTY, PLANT AND
EQUIPMENT, net 29,705 31,791 DEFERRED INCOME TAXES 1,087 1,007
GOODWILL 35,405 36,742 DEFINITE-LIVED INTANGIBLE ASSETS, net 13,847
11,958 OTHER ASSETS 1,357 1,253 Total assets $114,945 $116,866
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Line of
credit $-- $27,216 Current portion of long-term debt 1,633 2,404
Current portion of capital lease obligations 58 25 Accounts payable
and accrued liabilities 24,126 24,103 Total current liabilities
25,817 53,748 LONG-TERM LIABILITIES: Line of credit 23,746 --
Long-term debt, net of current portion 6,440 4,816 Capital lease
obligations, net of current portion 83 46 Other long-term
liabilities 1,642 848 Total long-term liabilities 31,911 5,710
STOCKHOLDERS' EQUITY 57,217 57,408 Total liabilities and
stockholders' equity $114,945 $116,866
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, CFO,
both of 1-800 CONTACTS, INC., +1-801-316-5000, Web site:
http://www.1800contacts.com/
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