DRAPER, Utah, Aug. 14 /PRNewswire-FirstCall/ -- 1-800 CONTACTS,
INC. (NASDAQ:CTAC) ("the Company") today reported results for its
second quarter ended June 30, 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO) Second
Quarter Results For the second quarter of fiscal 2007, the Company
reported consolidated net income, including discontinued
operations, of $11.6 million, or $0.85 per diluted common share,
compared to a consolidated net loss of $(2.0) million, or $(0.15)
per diluted common share, for the second quarter of fiscal 2006.
The Company reported net income from continuing operations of $3.0
million, or $0.22 per diluted common share, for the second quarter
of fiscal 2007, compared to net income of $3.0 million, or $0.23
per diluted common share, for the second quarter of fiscal 2006.
U.S. Retail (Continuing Operations) Net sales and operating income
for the second quarter of fiscal 2007 were $63.4 million and $6.7
million, respectively, compared to net sales of $57.7 million and
operating income of $5.8 million for the second quarter of fiscal
2006. Results for the second quarter of fiscal 2007 include
approximately $2.5 million in advisor fees and other expenses
relating to the strategic review and proposed merger of the
Company. Excluding these advisor fees and other expenses relating
to the strategic review and proposed merger, operating income for
the second quarter of fiscal 2007 was $9.2 million. Gross margin
increased to 41.7 % for the second quarter of fiscal 2007 from
39.4% for the second quarter of fiscal 2006. The gross margin was
positively impacted by a shipping credit totaling approximately
$0.4 million. Advertising expense for the second quarter of fiscal
2007 was $1.2 million more than for the second quarter of fiscal
2006. Legal and professional fees were $2.4 million for the second
quarter of fiscal 2007 compared to $1.0 million for the same
quarter of 2006. A majority of these costs in the second quarter of
fiscal 2007 relate to the strategic review of the U.S. retail
business and the proposed merger of 1-800 CONTACTS with the
affiliates of Fenway Partners Capital Fund III, L.P. During the
second quarter of fiscal 2007, other selling, general and
administrative expenses as a percentage of net sales decreased to
19.8% from 21.8% in the second quarter of fiscal 2006. ClearLab
(Discontinued Operations) During the second quarter, the Company
completed the sale of its ClearLab business. The Company sold
ClearLab's flat pack technology and certain other intellectual
property to Menicon Co., Ltd., Japan's largest independent contact
lens manufacturer, on June 15, 2007 and sold ClearLab's
manufacturing, distribution and customer support operations to Mi
Gwang Contact Lens Co., Ltd., a Korean-based contact lens
manufacturer, on June 30, 2007. Upon closing these transactions,
the Company received $32 million in cash, which allowed the Company
to pay off all of its outstanding debt and capital lease
obligations, and 1,007,220 shares of Mi Gwang's stock valued at
approximately $4.2 million as of June 30, 2007. In addition, the
Company expects to receive from Menicon deferred cash payments of
up to $5 million upon Menicon reaching certain milestones, as well
as possible earn-out payments over a minimum fifteen-year term. The
Company also recorded a tax benefit of approximately $17 million
relating to these transactions. Merger As previously announced, the
Company will hold a special meeting of stockholders on Thursday,
September 6, 2007. At this meeting, stockholders will vote to adopt
the previously announced merger agreement among 1-800 CONTACTS and
affiliates of Fenway Partners Capital Fund III, L.P. If approval of
the merger is obtained at the special meeting, the Company expects
the merger to close promptly thereafter. 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. About Fenway Partners Fenway Partners is
a middle market private equity firm with offices in New York and
Los Angeles and $1.7 billion under management. Fenway companies
typically have leading franchises and operate in two core industry
segments, branded consumer products and transportation/logistics.
With significant knowledge and success investing in these
industries, Fenway has built a strong reputation for its hands-on
approach to supporting its portfolio companies which include
sporting goods manufacturer Easton Bell Sports, school yearbook and
class ring manufacturer American Achievement, leading global
supplier of mobile computing cases and accessories Targus
International, expedited ground transportation provider Panther
Expedited Services and intermodal logistics service provider
RoadLink USA. For further information about Fenway Partners, please
visit http://www.fenwaypartners.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 in any way to the
proposed transaction with Fenway Partners, the special meeting of
stockholders to vote on the merger agreement, the anticipated
timing of the closing of the merger, and all statements relating to
the Company's potential receipt of deferred cash payments or
earn-out payments from Menicon. 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 products;
product health benefits; supply risks; inventory acquisition and
management; governmental regulations; exchange rate fluctuations;
unanticipated costs and expected benefits associated with the
Company's supply agreements and related arrangements; 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 (the
"SEC"), 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. Additional Information About the Merger 1-800
CONTACTS, INC. filed with the SEC, and is furnishing to its
stockholders, a definitive proxy statement soliciting proxies for
the meeting of its stockholders to be held with respect to the
proposed merger between the Company and the affiliates of Fenway
Partners. 1-800 CONTACTS STOCKHOLDERS ARE ADVISED TO READ THE PROXY
STATEMENT CAREFULLY BECAUSE IT CONTAINS IMPORTANT INFORMATION.
1-800 CONTACTS stockholders and other interested parties can
obtain, without charge, a copy of the proxy statement and other
relevant documents filed with the SEC from the SEC's website at
http://www.sec.gov/. 1-800 CONTACTS stockholders and other
interested parties can also obtain, without charge, a copy of the
proxy statement and other relevant documents by directing a request
by mail or telephone to 1-800 CONTACTS, INC., 66 E. Wadsworth Park
Drive, Draper, Utah 84020, Attention: Corporate Secretary,
telephone: (801) 316-5000, or from the Company's website,
http://www.1800contacts.com/. 1-800 CONTACTS and certain of its
directors, executive officers and other members of management and
employees may, under SEC rules, be deemed to be "participants" in
the solicitation of proxies from stockholders of 1-800 CONTACTS
with respect to the proposed merger. Information regarding the
persons who may be considered "participants" in the solicitation of
proxies is set forth in 1-800 CONTACTS' definitive proxy statement
relating to the proposed merger filed with the SEC. Information
regarding certain of these persons and their beneficial ownership
of 1-800 CONTACTS common stock is set forth in the definitive proxy
statement described above. 1-800 CONTACTS, INC. CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION (in thousands,
except per share amounts) (unaudited) Quarter Ended Two Quarters
Ended July 1, June 30, July 1, June 30, 2006 2007 2006 2007 NET
SALES $57,734 $63,373 $116,907 $125,202 COST OF GOODS SOLD 34,960
36,962 70,509 73,962 Gross profit 22,774 26,411 46,398 51,240
SELLING, GENERAL & ADMINISTRATIVE EXPENSES: Advertising 3,475
4,721 7,400 9,113 Legal and professional 975 2,386 1,945 3,937
Research and development -- -- 10 -- Other selling, general &
administrative 12,569 12,559 24,282 25,269 Total selling, general
& administrative expenses 17,019 19,666 33,637 38,319 INCOME
FROM OPERATIONS 5,755 6,745 12,761 12,921 OTHER EXPENSE, net (319)
(392) (638) (862) INCOME BEFORE PROVISION FOR INCOME TAXES 5,436
6,353 12,123 12,059 PROVISION FOR INCOME TAXES (2,401) (3,366)
(5,527) (5,789) NET INCOME CONTINUING OPERATIONS $3,035 $2,987
$6,596 $6,270 DISCONTINUED OPERATIONS: Loss from discontinued
operations (including loss on disposal of $2.8 million for 2007)
$(4,837) $(7,834) $(6,848) $(11,892) Income tax benefit (expense)
(236) 16,424 (605) 16,188 Net income (loss) from discontinued
operations $(5,073) $8,590 $(7,453) $4,296 NET INCOME (LOSS)
$(2,038) $11,577 $(857) $10,566 WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING: Basic 13,360 13,454 13,352 13,437 Diluted
13,473 13,637 13,457 13,635 PER SHARE INFORMATION: Basic net income
(loss) per share: Continuing operations $0.23 $0.22 $0.49 $0.47
Discontinued operations (0.38) 0.64 (0.55) 0.32 $(0.15) $0.86
$(0.06) $0.79 Diluted net income (loss) per share: Continuing
operations $0.23 $0.22 $0.49 $0.46 Discontinued operations $(0.38)
$0.63 $(0.55) $0.31 $(0.15) $0.85 $(0.06) $0.77 OTHER DATA:
Depreciation $725 $839 $1,384 $1,655 Amortization 755 450 1,352 951
Total depreciation and amortization from continuing operations
included in the other selling, general & administrative caption
$1,480 $1,289 $2,736 $2,606 1-800 CONTACTS, INC. CONDENSED
CONSOLIDATED BALANCE SHEET INFORMATION (in thousands) (unaudited)
ASSETS December 30, June 30, 2006 2007 CURRENT ASSETS: Cash $75
$5,560 Marketable securities -- 3,865 Income tax receivable --
11,772 Inventories, net 12,689 14,446 Deferred income taxes 1,886
2,849 Current assets of discontinued operations 19,682 4,648 Other
current assets 2,834 3,138 Total current assets 37,166 46,278
PROPERTY, PLANT AND EQUIPMENT, net 7,648 7,147 DEFERRED INCOME
TAXES 898 1,071 GOODWILL 22,304 22,304 DEFINITE-LIVED INTANGIBLE
ASSETS, net 2,644 1,995 LONG-TERM ASSETS OF DISCONTINUED OPERATIONS
29,169 -- OTHER ASSETS 696 830 Total assets $100,525 $79,625
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable and accrued liabilities $15,696 $22,337 Current liabilities
of discontinued operations 11,898 5,232 Total current liabilities
27,594 27,569 LONG-TERM LIABILITIES: Line of credit 29,970 --
Long-term liabilities of discontinued operations 5,283 -- Total
long-term liabilities 35,253 -- STOCKHOLDERS' EQUITY 37,678 52,056
Total liabilities and stockholders' equity $100,525 $79,625
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, ; or Anna Cordasco
or Brooke Morganstein, both of Sard Verbinnen & Co.,
+1-212-687-8080, for Fenway Partners Web site:
http://www.1800contacts.com/ http://www.fenwaypartners.com/
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