<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): March 31, 1998
VISION TWENTY-ONE, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
FLORIDA 0-22977 59-3384581
- ---------------------------------------- -------------------------------- -------------------------------------
<S> <C> <C>
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
</TABLE>
<TABLE>
<S> <C>
7360 BRYAN DAIRY ROAD, STE. 200
LARGO, FLORIDA 33777
- ------------------------------------------------------------------------------ -------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code: 813-545-4300
<PAGE> 2
ITEM 5. OTHER MATTERS.
This Form 8-K relates to the Vision Twenty-One, Inc.'s (the "Company")
announcement on September 4, 1998 that a director of the Company, Dr. Richard
Lindstrom, purchased 100,000 shares of the Company's Common Stock, the Company's
announcement on September 21, 1998 regarding certain acquisitions, the Company's
announcement on October 14, 1998 of the appointment of Martin Stein to the
Company's Board of Directors as a result of the departure of Herbert Pegues,
M.D. and the Company's announcement on November 6, 1998 of the results for the
third quarter. In connection therewith, the Company issued press releases
announcing the purchase of shares by Dr. Lindstrom the acquisitions, the board
appointment and the results for the third quarter, copies of which are filed
herewith as Exhibits 99.1, 99.2, 99.3 and 99.4.
In addition, on April 30, 1998, the Company filed a registration
statement on Form S-1 (No.333-51437) which included Supplemental Consolidated
Financial Statements of the Company and the financial statements of EyeCare One
Corp. ("EyeCare One") and Vision Insurance Plan of America, Inc. ("VIPA"). The
supplemental financial statements and the financial statements of EyeCare One
and VIPA resulted from the Company's merger with EyeCare One and VIPA on March
31, 1998 which was accounted for as a pooling of interests and the Company's
financial statements were restated as supplemental consolidated financial
statements to include the results of EyeCare One and VIPA for the periods
presented. Following the Company's publication of the operating results of the
combined businesses, the supplemental consolidated financial statements have
become the Company's historical financial statements and were filed in an 8-K
dated August 20, 1998. The historical financial statements and notes thereto of
EyeCare One and VIPA and the report of the independent certified public
accountants are set forth below.
FINANCIAL STATEMENTS OF EYECARE ONE CORP.
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants...........................................................3
Balance Sheets as of December 31, 1996 and 1997..............................................................4
Statements of Income and Retained Earnings for the Years Ended December 31, 1995, 1996
and 1997..................................................................................................5
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997...............................6
Notes to Financial Statements................................................................................7
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
EyeCare One Corp.
We have audited the accompanying balance sheets of EyeCare One Corp. (the
Company) as of December 31, 1996 and 1997, and the related statements of income
and retained earnings and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at December 31,
1996 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Milwaukee, Wisconsin
February 4, 1998
3
<PAGE> 4
EYECARE ONE CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 140,650 $ 134,141
Receivables:
Trade, net of allowance for doubtful accounts of
$7,500................................................ 84,415 109,563
Other.................................................. 14,736 18,856
---------- ----------
99,151 128,419
Notes receivable -- officers and shareholders............. 163,489 --
Inventories............................................... 936,739 936,242
Prepaid expenses.......................................... 34,581 196,561
---------- ----------
Total current assets.............................. 1,374,610 1,395,363
Cash surrender value of life insurance, net of policy
loans of $588,179 in 1996 and $624,464 in 1997............ 166,822 205,596
Noncompete agreement, net of accumulated amortization of
$4,167.................................................... -- 20,833
Other....................................................... 3,800 5,800
Equipment and leasehold improvements, at cost:
Equipment................................................. 73,234 112,978
Computer equipment........................................ 270,701 313,733
Lab equipment............................................. 625,365 683,230
Furniture and fixtures.................................... 1,393,992 1,397,619
Leasehold improvements.................................... 1,991,575 2,322,594
Signs..................................................... 254,187 274,912
---------- ----------
4,609,054 5,105,066
Less accumulated depreciation and amortization............ 2,839,841 3,027,765
---------- ----------
Net equipment and leasehold improvements.......... 1,769,213 2,077,301
---------- ----------
$3,314,445 $3,704,893
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to affiliate.......................................... $ -- $ 25,821
Accounts payable.......................................... 209,341 292,089
Current portion of deferred leasehold incentives.......... 9,568 23,046
Accrued liabilities:
Payroll and employee benefits.......................... 463,173 519,288
Taxes other than income................................ 121,333 151,606
Other.................................................. 14,510 73,643
---------- ----------
599,016 744,537
---------- ----------
Total current liabilities......................... 817,925 1,085,493
Bank term note.............................................. 1,352,000 1,400,182
Deferred leasehold incentive................................ 81,330 186,323
Commitments
Shareholders' equity:
Common stock, no par value, 10,000 shares authorized
and 9,996 and 9,772 shares issued in 1996 and 1997,
respectively.......................................... 620,928 602,946
Retained earnings......................................... 624,319 602,933
---------- ----------
1,245,247 1,205,879
Less cost of 224 shares of common stock held in
treasury............................................... (17,982) --
Less note receivable -- officer and shareholder........... (164,075) (172,984)
---------- ----------
Total shareholders' equity........................ 1,063,190 1,032,895
---------- ----------
$3,314,445 $3,704,893
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
EYECARE ONE CORP.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net revenue............................................. $11,340,397 $11,863,187 $12,711,514
Cost of sales........................................... 2,683,633 2,807,621 3,113,851
----------- ----------- -----------
Gross profit............................................ 8,656,764 9,055,566 9,597,663
Operating expenses...................................... 6,890,223 7,203,312 7,700,684
Advertising expenses.................................... 492,573 527,800 461,005
----------- ----------- -----------
Store operating profit.................................. 1,273,968 1,324,454 1,435,974
Corporate management expenses........................... 582,749 582,014 669,717
----------- ----------- -----------
Income from operations.................................. 691,219 742,440 766,257
Interest expense........................................ 133,864 100,489 138,399
Other expense........................................... 170,174 224,611 48,464
----------- ----------- -----------
304,038 325,100 186,863
----------- ----------- -----------
Net income.............................................. 387,181 417,340 579,394
Retained earnings:
Beginning of fiscal year.............................. 482,226 733,371 624,319
Distributions to shareholders......................... (136,036) (526,392) (600,780)
----------- ----------- -----------
End of fiscal year.................................... $ 733,371 $ 624,319 $ 602,933
=========== =========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
EYECARE ONE CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 387,181 $ 417,340 $ 579,394
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 366,385 357,445 393,133
Amortization of deferred leasehold incentives............. -- (4,784) (16,307)
Loss on disposal of equipment and leasehold
improvements........................................... -- 18,458 --
Changes in:
Receivables............................................ 92,772 (18,642) (29,268)
Inventories............................................ 49,943 (112,712) 497
Prepaid expenses....................................... 9,725 701 (161,980)
Accounts payable....................................... (73,036) 1,530 82,748
Accrued liabilities.................................... (71,830) 46,668 145,521
--------- --------- ---------
373,959 288,664 414,344
--------- --------- ---------
Net cash provided by operating activities................... 761,140 706,004 993,738
INVESTING ACTIVITIES
Additions to intangible assets.............................. -- -- (20,833)
Additions to equipment and leasehold improvements........... (106,464) (757,192) (786,443)
Increase in cash surrender value of life insurance.......... (72,930) (68,979) (74,644)
Investment in First Look LLC................................ -- (3,800) (2,000)
--------- --------- ---------
Net cash used by investing activities....................... (179,394) (829,971) (883,920)
FINANCING ACTIVITIES
Net (payments) borrowings under term note................... (300,000) 25,034 48,182
(Increase) decrease in notes and interest
receivable -- officers and shareholders................... (127,444) 429,430 154,580
Net proceeds from note to affiliate......................... -- -- 25,821
Additional borrowings on cash surrender value of life
insurance................................................. 44,279 33,585 35,870
Proceeds from leasehold incentives.......................... -- 175,000 220,000
Distributions to shareholders............................... (136,036) (526,392) (600,780)
--------- --------- ---------
Net cash (used) provided by financing activities............ (519,201) 136,657 (116,327)
--------- --------- ---------
Increase (decrease) in cash................................. 62,545 12,690 (6,509)
Cash at beginning of year................................... 65,415 127,960 140,650
--------- --------- ---------
Cash at end of year......................................... $ 127,960 $ 140,650 $ 134,141
========= ========= =========
Supplemental disclosure of cash flows information --
Cash paid during the year for interest.................... $ 132,069 $ 90,776 $ 136,606
========= ========= =========
</TABLE>
See accompanying notes.
6
<PAGE> 7
EYECARE ONE CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
EyeCare One Corp. (the Company) is a state-of-the-art optical retailer,
selling frames, lenses and contact lenses, with optometric services by licensed
Doctors of Optometry in each of its 16 locations in the Milwaukee area. The
locations are predominantly in high profile, enclosed malls and successful strip
shopping centers. The stores range in size from 1,400 sq. ft. to 5,200 sq. ft. A
central warehouse and distribution center service its entire store network.
The Company began in a traditional optical format (where glasses are
manufactured in a central location and sent back to the store for sale), and
built its business using extensive, effective advertising and excellent value
and service. All of the stores have been converted to "Express" or "Super Store"
format, where glasses are made in one hour on the premises.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out basis) or
market.
RECLASSIFICATIONS
Certain items in the accompanying 1995 and 1996 financial statements have
been reclassified to conform to the 1997 presentation.
REVENUE RECOGNITION
The Company basically recognizes revenue upon sales of eyewear products and
services.
ADVERTISING
The Company expenses the production costs of advertising as incurred or the
first time the advertising takes place.
INCOME TAXES
No provision for income taxes is recorded in these financial statements
because the Company's shareholders have elected Subchapter S of the Internal
Revenue Code. Accordingly, the Company's taxable income is reported in the
personal tax returns of the shareholders.
7
<PAGE> 8
EYECARE ONE CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DEPRECIATION AND AMORTIZATION
Depreciation and amortization have been provided using the straight-line
method over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Equipment................................................... 3 - 10
Computer equipment.......................................... 3 - 10
Lab equipment............................................... 10
Furniture and fixtures...................................... 10
Leasehold improvements...................................... 10
Signs....................................................... 10
Noncompete agreement........................................ 5
</TABLE>
In substantially all instances, the remaining lives of leasehold
improvements are not in excess of the remaining terms of the leases, including
renewal options.
2. NOTES RECEIVABLE
At December 31, 1996 and 1997, the Company had a promissory note with an
officer/shareholder with balances of $164,075 and $172,984, respectively. The
note matures on December 31, 2001, with interest payable annually at a rate of
7.5%.
The Company had other notes with certain officers and shareholders that
were due on demand and carried interest rates ranging from 6% to 9%. During
1996, the remaining principal was paid by the officers and shareholders. The
balance outstanding at December 31, 1996 of $163,489 related to outstanding
interest which was collected in 1997.
3. BANK TERM NOTE
The Company has a term note payable to a bank with the principal balance
due April 1, 2000. Interest is payable monthly at prime less .25% (8.25% at both
December 31, 1996 and 1997). The note is collateralized by substantially all
assets of the Company and is guaranteed to the extent of $500,000 by each of the
Company's principal shareholders. The agreement also contains certain covenants
which require minimum levels of net worth, operating profit and net profit.
4. DESCRIPTION OF LEASING ARRANGEMENTS
The Company has leasing arrangements for its office and warehouse, optical
store facilities, office and store equipment and automobiles. All lease
agreements are accounted for as operating leases. Certain store leases provide
for additional percentage rents, based on sales. Property taxes, insurance,
utilities and maintenance costs are generally paid by the Company. Original
lease terms on the facilities are 5 - 10 years with certain leases providing for
renewal options for an additional five-year period. Rent expense in 1995, 1996
and 1997 was approximately $908,000, $905,000 and $901,000, respectively. Of the
total rent expense, approximately $291,000, $330,900 and $276,000 in 1995, 1996
and 1997, respectively, was paid to an officer/shareholder.
8
<PAGE> 9
EYECARE ONE CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future rent commitments follow:
<TABLE>
<CAPTION>
OFFICER/
SHAREHOLDER OTHERS TOTAL
----------- ---------- ----------
<S> <C> <C> <C>
Year ended in:
1998............................................. $ 364,442 $ 672,462 $1,036,904
1999............................................. 374,742 686,354 1,061,096
2000............................................. 345,157 439,672 784,829
2001............................................. 345,157 329,923 675,080
2002............................................. 345,157 312,472 657,629
Thereafter through 2003............................ 1,386,674 1,113,357 2,500,031
---------- ---------- ----------
Total minimum lease payments....................... $3,161,329 $3,554,240 $6,715,569
========== ========== ==========
</TABLE>
5. DEFERRED LEASEHOLD INCENTIVES
During 1997, the Company was requested by a lessor to move its location
within a particular mall. The lessor made a payment of $220,000 to the Company
as an incentive. The Company offset the remaining unamortized balance ($85,222)
of leasehold improvements at the abandoned location against the amount received
and will amortize the excess ($134,778) against rent expense over the remaining
term of the lease. The amortization in 1997 was $6,739.
During 1996, the Company was requested by a different lessor to move its
location within a particular mall. The lessor made a payment of $175,000 to the
Company as an incentive. The Company offset the remaining unamortized balance
($79,317) of leasehold improvements at the abandoned location against the amount
received and will amortize the excess ($95,683) against rent expense over the
remaining term of the lease. The amortization in 1996 and 1997 was $4,784 and
$9,568, respectively.
6. EMPLOYEE BENEFITS
The Company has a 401(k) profit-sharing plan covering substantially all
employees. Participants can make salary reduction contributions of up to 10% of
compensation up to the limit allowable under IRS guidelines. The Company makes
matching contributions equal to 25% of the first 4% of each employee's salary
contributed to the plan. Additional discretionary contributions may also be made
by the Company. The Company's total expense related to the 401(k) plan was
$25,311, $32,101 and $34,438 in 1995, 1996 and 1997, respectively. No additional
discretionary contributions were made. The Company declared a discretionary
bonus of $80,000 in fiscal 1995 and 1996 and $90,000 in fiscal 1997.
7. STOCK REPURCHASE AGREEMENT
In the event of the death of either of the Company's two
officer/shareholders, there is a shareholder agreement which requires the
Company to repurchase the shareholder's common stock at the fair market value of
the common stock to be determined by an appraisal.
9
<PAGE> 10
EYECARE ONE CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED COMPANY
The principal officers and shareholders of the Company are also the
principal shareholders of Vision Insurance Plan of America, Inc. (VIPA), a
Limited Health Service Organization (LHSO) in the State of Wisconsin. VIPA
contracts with corporate customers to provide vision care benefits. The Company,
under a capitation agreement with VIPA, provides optical services in its own
stores and through other providers within its network. The capitation received
by the Company during 1997 for professional eye care products and services and
administrative fees was approximately $365,279. Of the cash received by EyeCare
One from VIPA, $128,012, $135,208 and $133,693 are included in revenues in 1995,
1996 and 1997, respectively. The Company also administers payroll for VIPA. At
December 31, 1996 and 1997, the Company had a $9,000 and $8,500 receivable,
respectively, from VIPA relating to previous payroll costs paid by the Company.
During 1997, the Company entered into a term loan agreement with VIPA. The
note bears interest at 7% per annum and is due August 6, 1998.
10
<PAGE> 11
FINANCIAL STATEMENTS OF VISION INSURANCE PLAN OF AMERICA, INC.
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.............................................................. 12
Balance Sheets as of December 31, 1996 and 1997................................................................. 13
Statements of Income for the Years Ended December 31, 1995, 1996 and 1997....................................... 14
Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1995,
1996 and 1997................................................................................................ 15
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997................................... 16
Notes to Financial Statements................................................................................... 17
</TABLE>
11
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Vision Insurance Plan of America, Inc.
We have audited the accompanying balance sheets of Vision Insurance Plan of
America, Inc. (the Company) as of December 31, 1996 and 1997, and the related
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1996 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Milwaukee, Wisconsin
March 3, 1998
12
<PAGE> 13
VISION INSURANCE PLAN OF AMERICA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $43,829 $ 42,353
Accounts receivable....................................... 18,972 13,666
Notes receivable from related party....................... -- 25,821
------- --------
Total current assets.............................. 62,801 81,840
Furniture and equipment, at cost, less accumulated
depreciation ($19,647 -- 1996; $34,498 -- 1997)........... 27,492 45,944
------- --------
Total assets...................................... $90,293 $127,784
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to network............................................ $40,000 $ 36,007
Accounts payable.......................................... 15,439 20,397
Advance premiums.......................................... 10,036 11,169
Reserve for designated claims............................. -- 10,000
------- --------
Total current liabilities......................... 65,475 77,573
Shareholders' equity:
Common stock ($.01 par value, 9,000 shares authorized,
5,000 shares issued)................................... 50 50
Additional paid-in capital................................ 24,950 24,950
Retained earnings......................................... 4,818 30,211
------- --------
29,818 55,211
Less (1,000 shares -- 1996; 500 shares -- 1997) treasury
stock, at cost......................................... 5,000 2,500
Less note receivable from officer......................... -- 2,500
------- --------
24,818 50,211
------- --------
Total liabilities and shareholders' equity........ $90,293 $127,784
======= ========
</TABLE>
See accompanying notes.
13
<PAGE> 14
VISION INSURANCE PLAN OF AMERICA, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Premiums.................................................. $571,374 $571,606 $708,098
Operating expenses:
Professional services..................................... 415,611 346,736 392,583
-------- -------- --------
Operating profit............................................ 155,763 224,870 315,515
Administrative expenses:
Management fee............................................ -- -- 32,195
Payroll and related expenses.............................. 35,856 52,590 82,813
Depreciation.............................................. 5,137 8,653 14,851
Other..................................................... 87,244 107,876 160,263
-------- -------- --------
Total administrative expenses............................... 128,237 169,119 290,122
-------- -------- --------
Income from operations...................................... 27,526 55,751 25,393
Interest expense............................................ 4,088 624 --
-------- -------- --------
Net income.................................................. $ 23,438 $ 55,127 $ 25,393
======== ======== ========
</TABLE>
See accompanying notes.
14
<PAGE> 15
VISION INSURANCE PLAN OF AMERICA, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
------------------------------------------------------------------
NOTE
ADDITIONAL RETAINED TREASURY RECEIVABLE
COMMON PAID-IN EARNINGS STOCK, FROM
STOCK CAPITAL (DEFICIT) AT COST OFFICER TOTAL
------ ---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995............ $ 50 $24,950 $(73,747) $(5,000) $ -- $(53,747)
Net income for 1995................. -- -- 23,438 -- -- 23,438
-- ------- -------- ------- ------- --------
Balance at December 31, 1995.......... 50 24,950 (50,309) (5,000) -- (30,309)
Net income for 1996................. -- -- 55,127 -- -- 55,127
-- ------- -------- ------- ------- --------
Balance at December 31, 1996.......... 50 24,950 4,818 (5,000) -- 24,818
Net income for 1997................. -- -- 25,393 -- -- 25,393
Issuance of treasury common stock... -- -- -- 2,500 -- 2,500
-- ------- -------- ------- ------- --------
50 24,950 30,211 (2,500) -- 52,711
Note receivable from officer (Note
3).................................. -- -- -- -- (2,500) (2,500)
-- ------- -------- ------- ------- --------
Balance at December 31, 1997.......... $ 50 $24,950 $ 30,211 $(2,500) $(2,500) $ 50,211
== ======= ======== ======= ======= ========
</TABLE>
See accompanying notes.
15
<PAGE> 16
VISION INSURANCE PLAN OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 23,438 $ 55,127 $ 25,393
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................................. 5,137 8,653 14,851
Changes in operating accounts:
Accounts receivable.................................... (8,394) (10,578) 4,485
Due to network......................................... 11,531 1,912 (3,993)
Accounts payable....................................... 9,215 1,639 4,958
Advance premiums....................................... -- 10,036 1,133
Reserve for designated claims.......................... -- -- 10,000
-------- -------- --------
Net cash provided by operating activities................... 40,927 66,789 56,827
INVESTING ACTIVITY
Purchase of furniture and equipment......................... (10,176) (20,857) (33,303)
FINANCING ACTIVITIES
Increase in note receivable from related party.............. -- -- (25,000)
Increase in note receivable from officer.................... -- -- (2,500)
Decrease in note payable.................................... (20,000) (30,000) --
Sale of treasury stock...................................... -- -- 2,500
-------- -------- --------
Net cash used in financing activities....................... (20,000) (30,000) (25,000)
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 10,751 15,932 (1,476)
Cash and cash equivalents at beginning of year ............. 17,146 27,897 43,829
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 27,897 $ 43,829 $ 42,353
======== ======== ========
</TABLE>
See accompanying notes.
16
<PAGE> 17
VISION INSURANCE PLAN OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. DESCRIPTION OF BUSINESS
Vision Insurance Plan of America, Inc. (VIPA), a for-profit stock
corporation, was licensed in 1992 to operate as a Limited Health Service
Organization (LHSO) in the State of Wisconsin. The principal shareholders of
VIPA are also principal shareholders of EyeCare One Corp. (EyeCare One). VIPA
provides subscriber group member enrollees with covered vision care services
through EyeCare One and its provider network under a master provider agreement
which began in 1997. The EyeCare One network agrees to provide covered vision
care benefits at a contracted rate (capitation).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include operating cash and short-term investments
with maturities when acquired of three months or less. These amounts are
recorded at cost, which approximates market. Included in cash is $10,000
provided to VIPA in 1997 to begin the "Glasses for Kids" program. This amount
has been earmarked for payment of claims and administrative services related to
this program and is recorded on the balance sheet as a liability in the reserve
for designated claims.
ACCOUNTS RECEIVABLE
Accounts receivable are stated at net realizable value based upon
historical collection trends and management's judgement of the ultimate
collectibility of the accounts. These collection trends are monitored and any
adjustments required are reflected in earnings currently.
PREMIUMS
Premiums are billed monthly for coverage in the following month and are
recognized as revenue in the month for which vision care coverage is provided.
PROFESSIONAL SERVICES
In 1997, EyeCare One is the master service provider under a capitation
agreement with VIPA requiring an agreed-upon percentage of premiums to be
remitted to EyeCare One on a monthly basis. EyeCare One is then responsible for
delivery of and payment for all professional services performed. VIPA also pays
a 5% administrative service fee to EyeCare One for the processing of this
business and other management services. In prior years, VIPA paid claims on a
fee-for-service basis out of a due to network fund.
FURNITURE AND EQUIPMENT
Furniture and equipment are carried at depreciated cost. Furniture and
equipment are being depreciated using the straight-line method over the useful
lives of the assets.
NOTE PAYABLE
VIPA's note payable was satisfied in full during 1996, had a stated
interest rate of prime rate plus 1.5%, and was payable monthly.
17
<PAGE> 18
VISION INSURANCE PLAN OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
No provision for income taxes is recorded in these financial statements
because the Company's shareholders have elected Subchapter S of the Internal
Revenue Code. Accordingly, the Company's taxable income is reported in the
personal tax returns of the shareholders.
RECLASSIFICATIONS
Certain reclassifications have been made to the financial statements for
1995 and 1996 to conform with the 1997 presentation.
ADVERTISING
The Company expenses the production costs of advertising as incurred or the
first time the advertising takes place. Advertising costs were $1,311, $11,928
and $4,122, respectively, for the years ended December 31, 1995, 1996 and 1997.
3. RELATED-PARTY TRANSACTIONS
In 1997 under the master service provider agreement, VIPA paid $365,279 for
professional optical services and management and administrative services to
EyeCare One.
Included in professional services is approximately $128,012 and $135,208
paid to EyeCare One in 1995 and 1996, respectively.
During 1997, the Company entered into a term note agreement with EyeCare
One Corp. The note bears interest at 7% per annum and is due August 6, 1998.
At December 31, 1997, a $2,500 promissory note was outstanding from an
officer/shareholder related to the purchase of VIPA stock. The note matures on
April 30, 2002, with interest payable annually at a rate of 7%.
At December 31, 1996 and 1997, the Company had a $9,000 and $8,500 payable,
respectively, to EyeCare One relating to previous payroll costs paid by EyeCare
One.
4. SHAREHOLDERS' EQUITY -- STATUTORY REQUIREMENTS
Dividends paid by VIPA are restricted by regulations of the Office of the
Commissioner of Insurance (OCI). The payment of cash dividends is limited to
available shareholders' equity derived from realized net profits. Based upon the
regulatory formula, no amount is available for dividends in 1997 without
regulatory approval.
VIPA is subject to regulation by the OCI, which requires, among other
matters, the maintenance of a minimum shareholders' equity. At December 31,
1997, $128,747 of available letters of credit were outstanding to satisfy VIPA's
minimum shareholders' equity requirements.
18
<PAGE> 19
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
19
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
VISION TWENTY-ONE, INC.
By: /s/ Richard T. Welch
--------------------------
Richard T. Welch
Its: Chief Financial Officer
Dated: November 11, 1998
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------- ---------
<S> <C>
23.1 Consent of Ernst & Young, LLP.
99.1 Copy of Press Release of the Company dated September 4, 1998.
99.2 Copy of Press Release of the Company dated September 21, 1998.
99.3 Copy of Press Release of the Company dated October 14, 1998.
99.4 Copy of Press Release of the Company dated November 6, 1998.
</TABLE>
21
<PAGE> 1
[ERNST & YOUNG LLP LETTERHEAD]
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-38285) pertaining to Vision Twenty-One, Inc. 1996 Stock
Incentive Plan of our reports as follows at December 31, 1996 and 1997 and for
the three years in the period ended December 31, 1997, which are included in
the Vision Twenty-One, Inc. Form 8-K dated November 12, 1998 filed with the
Securities and Exchange Commission.
EyeCare One Corp. February 4, 1998
Vision Insurance Plan of America, Inc. March 3, 1998
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
November 12, 1998
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
<TABLE>
<S> <C> <C>
Contacts:
Theodore Gillette Richard Welch Heidi Hart
Chairman, President and CEO Chief Financial Officer Investor Relations
Vision Twenty-One, Inc. Vision Twenty-One, Inc. Vision Twenty-One, Inc.
813-545-4300 ext. 2103 (813) 545-4300 ext. 2118 (813) 545-4300 ext. 2124
</TABLE>
VISION TWENTY-ONE ANNOUNCES INSIDER STOCK PURCHASE
Largo, FL - September 4, 1998 - Vision Twenty-One, Inc. (Nasdaq: EYES), an eye
care management company, announced today that Richard L. Lindstrom, M.D., one of
the worlds leading experts in ophthalmology, and the Chief Medical Officer and a
Director of the Company, has informed the Company that he is purchasing 100,000
shares of the Company's outstanding stock, subject to availability.
Theodore Gillette, Chairman, President and CEO of Vision Twenty-One, stated,
"Dr. Lindstrom's purchase of 100,000 shares further demonstrates the substantial
commitment and confidence of our management and Board members regarding the
Company's current business operations and growth strategy. Additionally, in the
last four months, members of the Board and management of the Company have
acquired approximately 321,000 shares of its common stock." Mr. Gillette further
stated, "We believe the Company's stock is currently undervalued due to general
market conditions and investor sentiment with regard to the health care services
sector."
The Company currently manages 176 clinics, eight ambulatory surgery centers and
four refractive eye laser centers providing the full continuum of eye care
services through 218 managed eye care professionals, located primarily in seven
Local Area Delivery Systems, LADS(R). Additionally, Vision Twenty-One holds
approximately 100 managed care contracts covering an estimated 5.0 million
exclusively contracted patient lives. The Company has approximately 5,800
affiliated eye care professionals that deliver eye care services to these
patients in 40 LADS located in 27 states. In addition, the Company has
approximately 6,200 eye care professionals available for potential managed care
business in future markets.
Vision Twenty-One, Inc., provides a wide range of management and administrative
services to its LADS, which are designed to provide for integrated networks of
optometrists, ophthalmologists, refractive surgery centers, ambulatory surgery
centers and retail optical centers which offer the full continuum of eye care
services in local markets served by the Company.
###
This press release contains statements, which may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various factors
as set forth from time to time in the Company's previous filings with the SEC
including its recently filed Form 10-Q. The Company undertakes no obligation to
publicly update or revise the forward-looking statements made in this press
release to reflect events or circumstances after the date of this press release
or to reflect the occurrence of unanticipated events.
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
<TABLE>
<S> <C> <C>
Contacts:
Theodore Gillette Richard Welch Heidi Hart
Chairman, President and CEO Chief Financial Officer Investor Relations
Vision Twenty-One, Inc. Vision Twenty-One, Inc. Vision Twenty-One, Inc.
727-545-4300 ext. 2103 727-545-4300 ext. 2118 727-545-4300 ext. 2124
</TABLE>
VISION TWENTY-ONE ENTERS INTO A LETTER OF INTENT WITH AMERICAN SURGISITE
-Also announces the addition of three eye care practices-
Largo, FL - September 21, 1998 - Vision Twenty-One, Inc. (Nasdaq: EYES), an eye
care management company, today announced it has entered into a letter of intent
to acquire substantially all the operating assets of American SurgiSite Centers,
Inc. Vision Twenty-One also announced it has entered into letters of intent to
acquire the operating assets and to enter into forty-year management agreements
with two professional eye care practices. The Company has also entered into a
letter of intent with a third eye care practice for interim consulting services
with an option to acquire the operating assets of the practice and enter into a
forty-year management agreement in April 1999.
American SurgiSite, led by Glenn deBrueys, Chief Executive Officer and Louis
Sheffler, Chief Operating Officer is an ambulatory surgery center developer,
management and consulting company located in New Jersey. The company's core
competencies include creating operating efficiencies and maximizing
productivity. The Company was founded in 1987, and its management has been
involved in the development of over 100 ambulatory surgery centers throughout
the world and currently has eight ambulatory surgery centers and a refractive
surgery center under management in the states of New Jersey, New York and
Pennsylvania. For the 1997-year end, American SurgiSite reported revenues of
$4.7 million. The pending acquisition will result in American SurgiSite becoming
a division of Vision Twenty-One and retention of the American SurgiSite
management team.
Glenn deBrueys, CEO of American SurgiSite, stated, "We look forward to being a
part of the Vision Twenty-One team. American SurgiSite has developed an
excellent business model for the management of ambulatory and refractive surgery
centers and we believe that the LADS model will complement all existing and
future surgery centers within the company."
The pending professional eye care practice acquisitions include an ophthalmology
practice with three clinic locations and a refractive surgery center, one
ophthalmology clinic and three optometry clinic locations within retail optical
centers all located within existing Local Area Delivery Systems, "LADS(R)".
Aggregate consideration for these acquisitions including exercise of the
purchase option will be approximately $7.8 million, consisting of cash in the
amount of $4.1 million and approximately 673,965 shares of Vision Twenty-One
common stock. The consideration is subject to certain adjustments and potential
exists for additional contingent consideration of up to $3.5 million in the
event certain future financial targets are met. The pending acquisitions had
combined estimated clinic revenues of $10.2 million in 1997 (inclusive of $4.7
million of American SurgiSite revenues) and will be accretive to Vision
Twenty-One earnings on a pro forma basis. Upon the completion of these
acquisitions and other previously announced acquisitions, Vision Twenty-One's
estimated net revenue run rate on an annualized basis would be approximately
$256 million.
"The continued growth and development of LADS remains to be our core focus,"
commented Theodore Gillette, Chairman, President and CEO of Vision Twenty-One,
Inc. "The integration of refractive and ambulatory surgery centers into the LADS
is consistent with our business strategy of leveraging our existing market
share. Upon completion of all of our pending acquisitions we expect to have a
total of 186 eye care professional clinic locations, 16 ambulatory surgery
centers and 6 refractive surgery centers under management. We continue to
demonstrate our industry leadership by successfully integrating all levels of
eye care into local delivery systems," he added.
-more-
Vision Twenty-One, Inc., provides a wide range of management and administrative
services to its LADS, which are designed to provide for integrated networks of
optometrists, ophthalmologists, refractive surgery centers, ambulatory surgery
centers and retail optical centers which offer the full continuum of eye care
services in local markets served by the Company. Additionally, Vision Twenty-One
holds approximately 100 managed care contracts covering an estimated 5.0 million
exclusively contracted patient lives. The Company has approximately 5,800
affiliated eye care professionals that deliver eye care services to these
patients in 40 LADS located in 27 states. In addition, the Company has
approximately 6,200 eye care professionals available for potential managed care
business in future markets.
This press release contains statements, which may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various factors
as set forth from time to time in the Company's previous filings with the SEC
including its recently filed Form 10-Q. The Company undertakes no obligation to
publicly update or revise the forward-looking statements made in this press
release to reflect events or circumstances after the date of this press release
or to reflect the occurrence of unanticipated events.
<PAGE> 1
EXHIBIT 99.3
FOR IMMEDIATE RELEASE
<TABLE>
<S> <C> <C>
Contacts:
Theodore Gillette Richard Welch Heidi Hart
Chairman, President and CEO Chief Financial Officer Investor Relations
Vision Twenty-One, Inc. Vision Twenty-One, Inc. Vision Twenty-One, Inc.
727-545-4300 ext. 2103 727-545-4300 ext. 2118 727-545-4300 ext. 2124
</TABLE>
VISION TWENTY-ONE ANNOUNCES THE ADDITION OF MARTIN STEIN
TO THE BOARD OF DIRECTORS
Largo, FL - October 14, 1998 - Vision Twenty-One, Inc. (Nasdaq: EYES), an eye
care management company, has named Martin Stein to the board of directors,
filling a recent vacancy created by the decision of Herbert Pegues, M.D. to
devote substantially all of his time to his own business interests.
Martin Stein, a successful Milwaukee retailer and real estate developer, was
chairman and founder of Stein Drugs and Eye Care One Corp. Stein Drugs was sold
to Walgreen Co. in 1979 and Eye Care One Corp., the parent company of Stein
Optical, was merged with Vision Twenty-One in March 1998. Mr. Stein currently
serves as director for NORTHWESTERN MUTUAL LIFE SERIES FUND and MASON STREET
FUNDS, KOSS CORPORATION board, UNIVERSITY OF WISCONSIN FOUNDATION board and the
UNITED JEWISH APPEAL (UJA ) board, of which he is a past national Chairman of
the Board. Mr. Stein is also an active member of many civic organizations
within the Milwaukee area including BOYS AND GIRLS CLUB OF GREATER MILWAUKEE
and the HUNGER TASK FORCE OF MILWAUKEE.
Theodore Gillette, Chairman, President and CEO of Vision Twenty-One, Inc.,
stated, "The board of directors unanimously voted for the addition of Martin
Stein to the board. Martin is a uniquely qualified director who has a strong
track record of success in business, corporate governance and philanthropy. We
look forward to his contributions to Vision Twenty-One's leadership in the eye
care industry. We are regretful to see Dr. Pegues relinquish his
responsibilities from the board, but we appreciate his hard work and
contributions over the last two years."
Vision Twenty-One, Inc., provides a wide range of management and administrative
services to its LADS, which are designed to provide for integrated networks of
optometrists, ophthalmologists, refractive surgery centers, ambulatory surgery
centers and retail optical centers which offer the full continuum of eye care
services in local markets served by the Company. Additionally, Vision
Twenty-One holds approximately 100 managed care contracts covering an estimated
5.0 million exclusively contracted patient lives. The Company has approximately
5,800 affiliated eye care professionals that deliver eye care services to these
patients in 40 LADS located in 27 states. In addition, the Company has
approximately 6,200 eye care professionals available for potential managed care
business in future markets.
###
<PAGE> 1
EXHIBIT 99.4
FOR IMMEDIATE RELEASE
<TABLE>
<S> <C> <C>
Contacts:
Theodore Gillette Richard Welch Heidi Hart
Chairman, President and CEO Chief Financial Officer Investor Relations
Vision Twenty-One, Inc. Vision Twenty-One, Inc. Vision Twenty-One, Inc.
727-545-4300 ext. 2103 727-545-4300 ext. 2118 727-545-4300 ext. 2124
</TABLE>
VISION TWENTY-ONE REPORTS THIRD QUARTER RESULTS
Largo, FL - November 6, 1998 - Vision Twenty-One, Inc. (Nasdaq: EYES), a health
care company exclusively focused on all aspects of eye care, today announced
revenues and earnings for the third quarter ended September 30, 1998. Revenues
in the third quarter were $62.0 million as compared to $15.6 million in the
prior year quarter. Net income before extraordinary items for the third quarter
was $756,000 or $0.05 per diluted share as compared to $264,000 or $0.03 per
diluted share for the same quarter a year ago. The Company reported a net loss
of $(494,000) in the third quarter after an extraordinary charge of $1.3
million for early extinguishment of debt as compared to a net loss of $(59,000)
after an extraordinary charge of $323,000 in the year ago quarter. Revenues for
the nine months ended September 30, 1998 were $161.4 million as compared to
$39.3 million for the nine months last year. The Company reported income of
$3.6 million or $0.25 per diluted share, before an extraordinary charge of $1.6
million net of tax, or $0.11 per diluted share, for the nine months ended
September 30, 1998, compared to a net loss of $(394,000) or $(0.06) per diluted
share, for the nine months last year. The nine months ended September 30, 1998
included merger costs of $318,000 net of tax, or $0.02 per diluted share.
The Company's comparable clinic revenues for the third quarter increased
approximately 7% over 1997 levels for clinics operated in both periods. Managed
care revenues on a comparable basis increased approximately 41% over 1997
levels for business units operated by the Company in both periods. The
Company's medical loss ratio in conjunction with managed eye care operations
was 71.9% for the quarter compared to 79.7% for the same period in 1997.
Refractive surgical procedures for the third quarter totaled 2,051, a 21%
increase over the second quarter in 1998.
In further developments, the Company announced its plan to sell the Buying
Group Division, the expected near term addition of significant managed vision
care contracts and the implementation of cost reduction strategies. The sale of
the Buying Group is expected to close before year end, be accretive to 1999
earnings and improve the Company's operating margins. The managed care
contracts are expected to roll out in 1999 and add in excess of 1 million lives
to the Company with the potential for increasing gross profit by $1.5 - 2.0
million on an annual basis. Finally, Ernst and Young's Consulting Group has
been hired to assist management in the identification of significant cost
reduction opportunities through further streamlining and integration of
systems, processes and resources of acquired business units. The Company
expects to begin recognizing the benefits from the estimated $2.0 million in
annualized cost savings in the fourth quarter of 1998 and to take a one time,
as yet undetermined charge in that quarter.
Theodore Gillette, Chairman, President and CEO of Vision Twenty-One, addressed
the financial performance of the Company for the quarter: "Although our total
revenue met expectations, we are very disappointed with the profit reported for
the quarter. Delays in the implementation of our new accounting management
information systems resulted in current period accounting adjustments and
unforeseen margin contractions in our LADS operations. Installation of our new
accounting information systems was completed last week in all clinics and will
be implemented in every business unit by year end, replacing various accounting
systems previously utilized at each location. This system is designed to
provide management with timely access to financial and operational data
occurring in all of these business units."
<PAGE> 2
Mr. Gillette discussed strategic developments at Vision Twenty-One: "In spite
of the reduced net income and earnings per share for the third quarter, we
remain confident with our competitive market positioning and growth prospects.
Our pipeline for continued acquisitions remains strong, however we intend to
focus more efforts on maximizing our many internal growth opportunities. Such
opportunities include growth in refractive surgery, managed care, and de novo
openings of additional clinics and surgery centers. Furthermore, the Company's
cash position and credit capacity is expected to provide adequate capital in
the Company's effort to achieve its 1999 growth objectives."
The Company currently operates at 183 clinics of which 120 have optical
dispensaries, 16 ambulatory surgery centers and five refractive surgery centers
located primarily in seven Local Area Delivery Systems, LADS(R), providing the
full continuum of eye care services through 220 managed eye care professionals.
Additionally, Vision Twenty-One holds approximately 100 managed care contracts
covering an estimated 5.0 million exclusively contracted patient lives. The
Company has approximately 5,800 affiliated eye care professionals that deliver
eye care services to these patients in 40 LADS located in 27 states. In
addition, the Company has contractual relationships with approximately 6,200
eye care professionals available for potential managed care business in future
markets.
Vision Twenty-One, Inc., provides a wide range of services to its LADS, which
are designed to provide for integrated networks of optometrists,
ophthalmologists, refractive surgery centers, ambulatory surgery centers and
retail optical centers which offer the full continuum of eye care services in
local markets served by the Company.
###
This press release contains statements, which may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors as set forth from time to time in the Company's previous filing with
the SEC including its recently filed Form 10-Q. The Company undertakes no
obligation to publicly update or revise the forward-looking statements made in
this press release to reflect events or circumstances after the date of this
press release or to reflect the occurrence of unanticipated events.
- tables follow -
<PAGE> 3
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
---------------------- -------------
(RESTATED FOR POOLING) (UNAUDITED)
<S> <C> <C>
ASSETS
Cash $ 4,048 $ 10,672
Receivables and other current assets 20,274 39,964
----------- -----------
Total current assets 24,322 50,636
----------- -----------
Property and equipment, net 8,627 14,789
Intangibles and other assets 87,408 132,074
----------- -----------
Total assets $ 120,357 $ 197,499
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 10,456 $ 20,375
Other current liabilities 8,999 9,330
----------- -----------
Total current liabilities 19,455 29,705
----------- -----------
Long-term liabilities 33,171 86,864
Stockholders' equity 67,731 80,930
----------- -----------
Total liabilities and stockholders' equity $ 120,357 $ 197,499
=========== ===========
</TABLE>
<PAGE> 4
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1998 1997 1998
------------- ------------- --------- -------------
(RESTATED FOR (RESTATED FOR
POOLING) POOLING)
<S> <C> <C> <C> <C>
Revenues:
LADS operations net revenues $ 11,698 $ 31,360 $ 29,212 $ 74,592
Managed care 3,865 14,379 10,072 41,200
Buying group revenue -- 16,301 -- 45,630
--------- --------- --------- ---------
Total revenue 15,563 62,040 39,284 161,422
--------- --------- --------- ---------
Operating expenses:
LADS operating expenses 9,735 27,525 24,742 62,230
Medical claims 3,081 10,343 8,124 29,934
Buying group cost of sales -- 15,516 -- 42,956
General and administrative 1,760 4,168 4,744 12,100
Depreciation and amortization 475 1,976 1,226 4,858
Merger costs -- -- -- 508
--------- --------- --------- ---------
Total operating expenses 15,051 59,528 38,836 152,586
--------- --------- --------- ---------
Income from operations 512 2,512 448 8,836
Interest expense 248 1,756 842 3,491
--------- --------- --------- ---------
Income (loss) before income taxes 264 756 (394) 5,345
Income taxes -- -- -- 1,720
--------- --------- --------- ---------
Income (loss) before extraordinary charge 264 756 (394) 3,625
Extraordinary charge - early extinguishment
of debt (net of income taxes of
$0 and $238, respectively) 323 1,250 323 1,647
--------- --------- --------- ---------
Net income (loss) $ (59) $ (494) $ (717) $ 1,978
========= ========= ========= =========
Earnings (loss) per common share - assuming dilution:
Income (loss) before
extraordinary charge $ 0.03 $ 0.05 $ (0.06) $ 0.25
Extraordinary charge (0.04) (0.08) (0.04) (0.11)
--------- --------- --------- ---------
Net income (loss) per common
share assuming dilution $ (0.01) $ (0.03) $ (0.10) $ 0.14
========= ========= ========= =========
Weighted average number of common
shares outstanding on a diluted basis 8,708 14,762 6,921 14,575
========= ========= ========= =========
Supplemental information:
Income (loss) before extraordinary charge $ (394) $ 3,625
Merger costs (net of income taxes) -- 318
--------- ---------
Income (loss) before extraordinary charge and merger costs $ (394) $ 3,943
========= =========
Income (loss) before extraordinary charge and merger costs per
common share assuming dilution $ (0.06) $ 0.27
========= =========
Medical claims to managed care revenue 79.7% 71.9% 80.7% 72.7%
========= ========= ========= =========
</TABLE>
