1-800 Contacts reports a profit of $1.4 million

DRAPER — 1-800 Contacts Inc. turned a fourth-quarter profit and saw its full-year loss lessened from the 2003 figure.

The disposable contact lens company on Tuesday reported net income of $1.4 million, or 10 cents per share, for the quarter ended Jan. 1. That compares with a net loss of $900,000, or 7 cents per share, for the year-ago quarter. Sales totaled $54 million, up from $45.9 million. The 2004 quarter was 13 weeks long, one week less than the 2003 fourth quarter.

For the fiscal year ended Jan. 1, the company had a net loss of $600,000, or 5 cents per share, on sales of $211.7 million. That compares with a loss of $1.4 million, or 11 cents per share, on sales of $187.3 million in the prior year.

The company said its U.S. retail business grew from $181.3 million in sales to $204.4 million year over year, while its operating income grew from $3.7 million to $11.6 million. The ClearLab international manufacturing business saw its operating loss of $2.1 million in 2003 grow to $8.2 million in 2004.

Jonathan Coon, chief executive officer, said the company will lose about $8 million in potential profits this year — in the form of lost sales and increased legal costs, among other items — as it tries to deal with doctor-exclusive brands that he said "undermine the ability of consumers to purchase contact lenses from the retailer of their choice."

Coon said one manufacturer refuses to sell a doctor-exclusive brand to 1-800 Contacts, forcing the Utah company to suspend sales of a brand expected to represent about 3 percent of its 2005 sales. That manufacturer "continues to offer exclusive deals for certain lenses to prescribers and retailers affiliated with prescribers," Coon said.

1-800 Contacts intends to forge partnerships with optical retailers and eye doctors regarding exams plus in-store, phone and online service, he said. The model is being tested with a 17-store optical retail chain in Utah.

"We are pleased with the initial results," he said. "More than one-third of all contact lenses sold at our partner's retail stores are now ClearLab products."

Contact lens sales at those stores have grown about 30 percent, he added.

The company said it expects first-quarter 2005 sales of $54 million, with operating income of about $3.5 million. It said it will spend about $6.5 million on advertising during the quarter and $23 million to $25 million during the fiscal year.

Brian Bethers, president and chief financial officer, said ClearLab revenues should be $18 million to $23 million during the year, with ClearLab "close to break-even operating income for 2005 as we increase sales volume and leverage our cost structure." During the first quarter, ClearLab is expected to have an operating loss of $2 million on revenue of $4 million, he said.

Earnings were reported after markets closed Tuesday. The company's stock fell 37 cents to close at $22.39 per share on Nasdaq. During the past year, the price has ranged from $12.26 to $24.75.

The stock fell another 10 cents to $22.29 per share in after-hours trading.

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