Johnson & Johnson last week reported higher first-quarter sales at its Jacksonville-based contact lens subsidiary, despite a decline in domestic sales and a negative impact on international sales from the strong U.S. dollar.
Meanwhile, Johnson & Johnson Vision Care Inc. also announced a revision of a controversial pricing strategy that consumer advocates said was forcing customers to pay higher prices for their contact lenses.
Johnson & Johnson said it is discontinuing its Unilateral Pricing Policy (UPP), which set minimum prices for retailers to sell contact lenses.
The company, the market leader in contact lens sales, is replacing that policy with a new rewards program that it says encourages patients to visit their eye doctors more often.
However, Johnson & Johnson and other contact lens makers that followed the same pricing policy had been under fire since the UPP was introduced in 2014. Critics said that policy undercut retailers which previously offered sharp discounts to the suggested retail price.
During Johnson & Johnson’s quarterly conference call last week, an analyst asked Chief Financial Officer Dominic Caruso why the company decided to change the policy.
“We saw some unevenness (in 2014) in the pricing in the market with very, very different pricing in different channels. So, we decided to implement the Unilateral Pricing Policy in order to even out the pricing,” he said.
Caruso said consumers benefited from the policy.
“At the end of the day, what happened there was we did see a lower overall price for our products, which made the products more affordable. So today, the majority of the patients who get Acuvue contact lenses are paying less than they did for that brand two years ago,” he said.
Caruso said innovation by the company, including the introduction of four contact lens products, prompted the change in pricing announced this month.
“Now with innovation and with the market stabilizing, we’ve adopted a new program that encourages patients to see their eye care professional and provides rebates and incentives for the purchase of contact lenses in conjunction with their eye exam as prescribed by the eye care professional,” he said.
“We think that’s just the next evolution as a market leader to focus on eye health and not just price of the contact lens.”
Johnson & Johnson reported total sales in its vision care business rose 1.4 percent in the first quarter to $640 million, despite a 4.3 percent drop in domestic sales.
International sales were strong and if the impact of the currency markets on overseas sales is excluded, total sales in the business would have been up 4.1 percent.
Johnson & Johnson reported strong overall results for the quarter. The health products giant’s adjusted earnings of $1.68 a share were 12 cents higher than last year and 3 cents higher than the average forecast of analysts, according to Thomson Financial.
The company also increased its earnings forecast range for the full year by 10 cents to $6.53 to $6.68 a share.
Johnson & Johnson’s stock rose as much as $3.02 Tuesday after the earnings report to a record high of $113.95
Foley launches new venture
Fidelity National Financial Inc. Chairman Bill Foley is adding another company to his wide range of business interests.
Foley, along with former Blackstone Group dealmaker Chinh Chu, formed a “blank check” company called CF Corp. that filed plans Thursday with the Securities and Exchange Commission for a $600 million initial public offering.
The filing says CF is looking to acquire one or more businesses but “we have not selected any business combination target and we have not initiated any substantive discussions with any business combination target.”
Chu retired as senior managing director of Blackstone last fall after 25 years with the buyout firm.
CF has established its executive offices in Las Vegas, where Foley is seeking a National Hockey League expansion franchise.
Landstar System’s earnings still higher
Three weeks after Landstar System Inc. lowered its forecast for the first quarter, the Jacksonville-based trucking company still reported earnings that were higher than the first quarter of 2015.
However, Landstar said Wednesday it expects second-quarter earnings to be lower than last year.
Landstar’s first-quarter earnings of 69 cents a share were 2 cents higher than last year and within the company’s updated forecast range of 66 to 70 cents. The company had previously been projecting earnings of 70 to 75 cents before downgrading the forecast at the end of March.
“Overall, considering recent industry fundamentals of low demand and looser truck capacity, Landstar had a good first quarter. I expect the current freight environment to continue throughout the second quarter,” CEO Jim Gattoni said in the company’s conference call with analysts last week.
He gave some detail of freight demand in the call.
Gattoni said freight shipments relating to the energy sector dropped 50 percent in the first quarter and the company also saw “significant” revenue declines in machinery, metals, foodstuffs and automotive products.
The building products sector “was one of the few industry sectors that grew,” he said.
Because of the difficult environment for the trucking industry, Landstar is projecting second-quarter earnings of 80 to 85 cents a share, down from 92 cents in the second quarter of 2015.
Gattoni said 2016 “has started off with a soft operating environment. With that said, however, the model performed well in the current low-growth environment. We continue to add agents and capacities to the network and are well-positioned for when the market improves.”
Although earnings may be disappointing to some investors, Stifel, Nicolaus analyst John Larkin said in a research note Thursday that Gattoni “has exceeded expectations” since taking over as CEO at the beginning of 2015.
“With most asset-based carriers serving the dry van truckload sector reporting EPS declines in the first quarter, it strikes us as remarkable that Landstar was able to post any EPS improvement in the quarter,” Larkin said.
Unlike asset-based carriers that have their own fleet of trucks, Landstar contracts with owner-operators who drive their own trucks to haul freight around the country.
“Landstar’s variable cost model really shines in times such as these as the rate pressure evident in the market is proportionately across the business capacity owners (drivers), the agents and the salaried professionals working at the company,” Larkin said.
Dick’s Wings owner has operating profit
ARC Group Inc., the franchisor of the Dick’s Wings & Grill restaurant chain, reported an operating profit in 2015 for the first time since its 2010 initial public offering.
However, after litigation costs and a loss from its investment in another restaurant chain, Wing Nutz, ARC Group reported a final net loss for the year of $432,730, or 7 cents a share.
The company’s revenue rose 64 percent to $966,931, resulting in income from operations of $46,446.
In a news release last week, CEO Richard Akam said the operating profit is “a tremendous achievement for the company.”
ARC Group acquired a 50 percent interest in the franchisor of Wing Nutz in 2014, and that business lost money last year, according to ARC Group’s annual report.
ARC Group recorded $247,717 in losses attributed to its stake in Wing Nutz and $221,323 in litigation losses during the year, resulting in the final net loss.
Wing Nutz has 12 restaurants in the Western U.S., mainly in Utah.
Dick’s Wings has 17 restaurants in Florida and five in Georgia.
Akam said the company expects to continue expanding the Dick’s Wings chain and investing in other restaurant brands.
“The revenue and income that we expect to generate through these efforts, coupled with our focus on delivering solid earnings, will help keep us positioned for continued growth and increased shareholder value,” he said.
ARC Group lists the address of its principal executive offices in Lafayette, La., but its annual report states its corporate headquarters office is in Jacksonville.
FirstAtlantic reports lower earnings
FirstAtlantic Financial Holdings Inc. last week reported first-quarter earnings of 12 cents a share, down from 17 cents a year earlier.
The parent company of FirstAtlantic Bank said the decline was due mainly to a non-recurring gain on a loan sale that increased earnings in the first quarter of 2015. The company said core earnings rose by 12 percent in this year’s first quarter.
FirstAtlantic, with eight offices in the Jacksonville metropolitan area, was left as the last true community bank serving only Northeast Florida after the buyout of two community banks in the first quarter.
Fidelity Southern Corp. completed its acquisition of American Enterprise Bankshares Inc. and Ameris Bancorp completed its purchase of Jacksonville Bancorp Inc.
TapImmune starting new vaccine trial
TapImmune Inc. last week said it will begin a Phase 2 trial of its ovarian cancer vaccine, along with treatments produced by AstraZeneca, at Memorial Sloan Kettering Cancer Center in New York.
TapImmune last year moved its headquarters from Seattle to a small Downtown Jacksonville office as Phase 1 trials of the vaccine were conducted at the Mayo Clinic in Jacksonville.
In a news release last week, CEO Glynn Wilson said the new trial “is a significant event for TapImmune” that is part of a study “designed to greatly increase our understanding of the vaccine while providing clinical evidence of efficacy.”
TapImmune, which describes itself as an immuno-oncology company, has a number of treatments under development but no products in the market.
The company reported an operating loss of $6.2 million with no revenue for 2015.