Refac (AMEX:REF)
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Refac Optical Group (AMEX: REF) today announced results
for the first quarter ended April 30, 2006. The Company reported net
income for the three months ended April 30, 2006, of $1.5 million, or
$0.09 per diluted share, compared with $3.3 million, or $0.20 per
diluted share, for the prior year period. Net income from continuing
operations was $1.1 million, or $0.07 per diluted share, for the first
quarter of fiscal 2006, compared with net income from continuing
operations of $3.0 million, or $0.19 per diluted share, for the prior
year period.
To provide a better understanding of core retail optical results
and trends, the Company also reported adjusted financial results,
which are non-GAAP financial measures. Adjusted operating income from
continuing operations was $2.4 million for the first quarter of 2006.
The adjusted 2006 results exclude merger-related transaction costs of
$0.5 million. For the first quarter of 2005, adjusted operating income
from continuing operations was $1.8 million. The adjusted 2005 results
exclude $1.8 million in non-recurring intellectual property
licensing-related and related party consulting income, $0.2 million in
non-recurring health services contract settlements, net of expenses,
and $0.05 million in asset management search expenses. The $0.6
million improvement is primarily the result of increases in optical
related revenues. A reconciliation of non-GAAP financial measures to
results reported in accordance with GAAP is attached to this release.
Commenting on the first quarter results, J. David Pierson,
president and chief executive officer of Refac Optical Group, said,
"We are pleased with the year-over-year improvement in our adjusted
operating income during our first quarter as a combined company. In
early March, we completed our acquisition of U.S. Vision and OptiCare,
making us the sixth largest retail optical company in the United
States, the second largest independent operator of optical stores in
host retailers in terms of store count and the first in terms of the
number of brands. We made considerable progress in integrating U.S.
Vision and OptiCare and will continue to seek ways to increase
efficiencies, reduce costs and improve overall performance."
Total revenues for the three months ended April 30, 2006,
increased to $47.9 million from $46.8 million for the prior year
despite a $1.7 million decline in managed vision sales from Cole
Managed Vision programs in the current period. The $1.1 million
increase in revenues was principally attributable to a $2.6 million
increase in retail product sales and a $0.6 million increase in
services offset by a $2.1 million decrease in intellectual property
licensing-related revenues and other non-recurring income.
On March 6, 2006, the Company completed its acquisitions of U.S.
Vision, Inc. and OptiCare Health Systems, Inc., and on May 10, 2006,
the Company's Board of Directors approved a change in the Company's
fiscal year-end from December 31 to January 31. This is the first
fiscal quarter in which Refac Optical Group, U.S. Vision and OptiCare
are reporting as a combined company. The financial results reported
herein include consolidated financial results for all three companies
for all periods presented with the quarterly results for the fiscal
year ended January 31, 2006, reflecting the prior 2005 fiscal periods
for the Company and OptiCare.
Mr. Pierson provided the following update, "During the past year,
we have opened 10 new fashion optical stores in three regions of
Macy's department stores, including Marshall Field's which is
converting to Macy's North and have taken a leadership position in
this emerging category. Last month, the department store chain
recognized us as its "Partner of the Year" for our work in pioneering
the introduction of optical departments on its main fashion floor. In
addition to our growth prospects within Macy's, we are also encouraged
by JCPenney's recent announcement of a major expansion program. Our
relationship with JCPenney dates back to 1981, and we are currently
operating optical departments in 352 JCPenney stores. We believe that
JCPenney's investment in renovating and adding new stores will provide
us with growth opportunities.
"In April, we entered into a definitive agreement to sell
OptiCare's managed vision care business to a subsidiary of Centene
Corporation, which we expect to close during the second quarter. We
believe that OptiCare's medically driven full service eye care model
gives it an advantage over the traditional eyewear model, and with the
sale of its managed vision care division, it will concentrate on
increasing its presence in Connecticut where it is already the second
largest optical retailer."
In conclusion, Pierson stated, "Our growth opportunities, coupled
with an outstanding management team and staff, make us very excited
about the future of Refac Optical Group."
Reconciliation of Non-GAAP Financial Measures
This news release and the attached table include non-GAAP
financial measures as defined in the Securities and Exchange
Commission's Regulation G. Where noted, financial information is
presented on an adjusted basis to exclude the effect of certain items
as described herein. By presenting adjusted results, management
intends to provide investors with a better understanding of the core
results and underlying trends from which to consider past performance
and prospects for the future.
Users of this financial information should consider the types of
events and transactions for which adjustments have been made. The
adjusted information should not be considered in isolation or viewed
as a substitute for or superior to net income or other data prepared
in accordance with GAAP as measures of the Company's operating
performance or liquidity. In addition, the adjusted information is not
necessarily comparable to similarly titled measures provided by other
companies.
Pursuant to the requirements of Regulation G, a table follows that
reconciles non-GAAP financial measures, including those presented in
this release, to the most directly comparable GAAP measures.
About Refac Optical Group
Refac Optical Group, a leader in the retail optical industry and
the sixth largest retail optical chain in the United States, operates
533 retail locations in 47 states and Canada, consisting of 509
licensed departments, six freestanding stores, 18 eye health centers
and professional optometric practices, two surgery centers, one of
which is a laser correction center, and two manufacturing
laboratories. Of the 509 licensed departments, 352 are located at
JCPenney stores, 63 at Sears, 29 at Macy's and Marshall Field's
department stores, 23 in regional department stores, 29 at The Bay, a
division of Hudson's Bay Company, Canada's oldest and largest
traditional department store retailer and 13 departments at Meijer.
These licensed departments are full-service retail vision care stores
that offer an extensive selection of designer brands and private label
prescription eyewear, contact lenses, sunglasses, ready-made readers
and accessories.
Cautionary Statement Regarding Forward-Looking Statements
This News Release includes certain statements of the Company that
may constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and which are made
pursuant to the Private Securities Litigation Reform Act of 1995.
These forward-looking statements and other information relating to the
Company are based upon the beliefs of management and assumptions made
by and information currently available to the Company. Forward-looking
statements include statements concerning plans, objectives, goals,
strategies, future events, or performance, as well as underlying
assumptions and statements that are other than statements of
historical fact. When used in this document, the words "expects,"
"anticipates," "estimates," "plans," "intends," "projects,"
"predicts," "believes," "may" or "should," and similar expressions,
are intended to identify forward-looking statements. These statements
reflect the current view of the Company's management with respect to
future events. Many factors could cause the actual results,
performance or achievements of the Company to be materially different
from any future results, performance, or achievements that may be
expressed or implied by such forward-looking statements. Investors are
cautioned that all forward-looking statements involve those risks and
uncertainties detailed in the Company's filings with the Securities
and Exchange Commission, including its Annual Report on Form 10-K for
the fiscal year ended December 31, 2005. Forward-looking statements
speak only as of the date they are made and the Company undertakes no
duty or obligation to update any forward-looking statements in light
of new information or future events.
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REFAC OPTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
For the Three Months
Ended April 30,
-----------------------
2006 2005
---------- ----------
Net revenues:
Product sales $42,550 $39,949
Services 5,315 4,680
Licensing related activities 55 1,795
Other 30 390
---------- ----------
Total revenues 47,950 46,814
Operating expenses:
Cost of product sales 12,708 12,047
Cost of services 2,002 1,746
Selling, general and administrative 29,192 27,660
Merger expense 547 --
Depreciation and amortization 1,683 1,623
---------- ----------
Total operating expenses 46,132 43,076
Operating income 1,818 3,738
Other income (expense):
Dividends and interest income 310 192
Interest expense (625) (621)
---------- ----------
Income from continuing operations
before income taxes and minority interest 1,503 3,309
Minority interest 245 236
Provision for income taxes 113 35
---------- ----------
Income from continuing operations 1,145 3,038
Income from discontinued operations,
net of taxes and minority interest 364 238
---------- ----------
Net income $1,509 $3,276
========== ==========
Earnings per share:
Basic:
Continuing operations $0.07 $0.19
Discontinued operations 0.02 0.01
---------- ----------
Total $0.09 $0.20
========== ==========
Diluted:
Continuing operations $0.07 $0.19
Discontinued operations 0.02 0.01
---------- ----------
Total $0.09 $0.20
========== ==========
Weighted average shares outstanding:
Basic 17,533,613 16,491,902
Diluted 17,847,642 16,494,818
REFAC OPTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
April 30, January 31,
2006 2006
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $8,260 $10,129
Accounts receivable, net of allowances
for doubtful accounts of $247 and $220
at April 30, 2006 and January 31, 2006,
respectively 8,287 10,676
Investments being held to maturity 23,461 24,229
Inventories 20,645 20,205
Prepaid expenses and other current assets 1,039 1,057
Restricted cash and investments
being held to maturity 4,223 4,849
Assets held for sale 1,697 2,092
---------- ----------
Total current assets 67,612 73,237
---------- ----------
Property and equipment, net 33,183 34,544
Licensed optical department agreements 17,107 14,595
Goodwill 6,137 4,746
Other intangibles, net 288 300
Assets held for sale, non-current 8,833 5,384
Other assets 1,299 1,452
---------- ----------
Total assets $134,459 $134,258
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $9,184 $8,627
Accrued expenses 6,514 8,958
Accrued salaries and related expenses 2,018 1,783
Customer deposits 3,552 3,358
Deferred revenue 3,353 3,174
Current portion of capital lease obligations 695 724
Current portion of long-term debt 3,586 4,926
Liabilities of held for sale business 3,390 3,991
Other current liabilities 470 940
---------- ----------
Total current liabilities 32,762 36,481
---------- ----------
Capital lease obligations,
net of current portion 1,214 1,372
Long-term debt, net of current portion 2,826 3,378
Revolving line of credit 12,023 14,983
Subordinated vendor debt 9,000 10,000
Other long-term liabilities 330 389
Minority interest -- 3,956
Temporary equity 4,223 4,849
Stockholders' equity:
Common stock, $0.001 par value; 25,000,000
shares authorized; 18,019,997 and 16,572,558
shares issued; 17,856,293 and 16,484,335,
shares outstanding at April 30, 2006 and
January 31, 2006, respectively 18 16
Additional paid-in capital 97,374 84,892
Treasury stock, at cost; 163,704 and
88,223 shares at April 30, 2006 and
January 31, 2006, respectively (1,365) (738)
Unearned compensation -- (89)
Accumulated deficit (23,638) (24,923)
Receivable from issuance of common stock (308) (308)
---------- ----------
Total stockholders' equity 72,081 58,850
---------- ----------
Total liabilities and stockholders' equity $134,459 $134,258
========== ==========
REFAC OPTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the Three Months
Ended April 30,
-----------------------
2006 2005
---------- ----------
Cash flows from operating activities:
Net income $1,509 $3,276
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,713 1,694
Non-cash stock-based compensation 134 --
Loss on disposal of fixed assets 143 20
Minority interest 277 279
Other 156 109
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable 2,370 205
Inventories (415) (1,237)
Prepaid expenses and other current assets (158) (210)
Accounts payable and accrued expenses (1,468) 759
Deferred revenue and customer deposits 401 1,361
Assets and liabilities of business
held for sale (91) 34
Other current liabilities (485) (398)
-------- --------
Net cash provided by operating activities 4,086 5,892
-------- --------
Cash flows from investing activities:
Proceeds from (purchase of) investments
being held to maturity 3,993 (1,207)
Payments received on notes receivable 129 43
Expenditures for property and equipment (497) (985)
Investments in acquisitions,
net of cash acquired (20) (75)
Proceeds from sale of businesses -- 3,580
-------- --------
Net cash used in investing activities 3,605 1,356
-------- --------
Cash flows from financing activities:
Net payments on revolving line of credit (2,225) (9,505)
Principal payments on long-term debt
and capital leases (1,292) (2,040)
Principal payments on subordinated debt (1,000) (75)
Proceeds from issuance of preferred stock -- 4,445
Proceeds from issuance of common stock -- 528
Proceeds from exercise of stock options 16 --
Purchase of treasury stock (617) --
-------- --------
Net cash used in financing activities (5,118) (6,647)
-------- --------
Net increase in cash and cash equivalents 2,573 601
Cash and cash equivalents
at beginning of period 7,371 4,747
Cash and cash equivalents included
in assets held for sale (1,684) (1,436)
-------- --------
Cash and cash equivalents at end of period $8,260 $3,912
======== ========
Supplemental disclosure of
non cash transaction
Issuance of common stock in exchange
for minority interest $11,804 $--
======== ========
REFAC OPTICAL GROUP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Amounts in thousands)
(Unaudited)
For the Three Months
Ended April 30,
-----------------------
2006 2005
---------- ----------
Operating income - GAAP basis $1,818 $3,738
Adjustments:
Merger transaction expenses 547 --
Non-recurring intellectual property
licensing-related revenues -- (1,739)
Non-recurring health services settlement
revenues, net of expenses -- (243)
Non-recurring related party
consulting services -- (44)
Asset management search expenses -- 52
---------- ----------
Adjusted operating income $2,365 $1,764
========== ==========
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