<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X-QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
--
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
OCTOBER 31, 2000
Commission file number 1-10629
-------
LASER VISION CENTERS, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1530063
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer identification
or organization) number)
540 Maryville Centre Dr., Suite 200, St. Louis, Missouri 63141
---------------------------------------------------------------
(Address of principal executive offices)
(314)434-6900
-------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock outstanding as of December 1, 2000 - 25,330,991 shares
<PAGE> 2
LASER VISION CENTERS, INC.
FORM 10-Q FOR QUARTERLY PERIOD ENDED OCTOBER 31, 2000
INDEX
<TABLE>
<CAPTION>
PART OR ITEM PAGE
<S> <C> <C>
Part I. FINANCIAL STATEMENTS (unaudited)
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheet - October 31, 2000 and April 30, 2000.............................3-4
Consolidated Statement of Operations - Three months and six months
ended October 31, 2000 and 1999.................................................................5
Consolidated Statement of Cash Flow - Six months
ended October 31, 2000 and 1999...............................................................6-7
Consolidated Statement of Changes in Stockholders' Equity - Six months
ended October 31, 2000..........................................................................8
Notes to Interim Consolidated Financial Statements...........................................9-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources.............................................................12-13
Results of Operations.......................................................................13-18
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................19
Item 2. Changes in Securities..........................................................................19
Item 3. Defaults upon Senior Securities................................................................19
Item 4. Submission of Matters to a
Vote of Security Holders.......................................................................19
Item 5. Other Information..............................................................................19
Item 6. Reports on Form 8-K............................................................................19
Signatures..............................................................................................19
</TABLE>
<PAGE> 3
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
OCTOBER 31, April 30,
2000 2000
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 13,911,000 $ 17,702,000
Short-term investments 17,927,000 31,440,000
Accounts receivable, net 8,690,000 11,055,000
Inventory 3,319,000 2,978,000
Deferred tax asset 2,570,000 3,680,000
Prepaid expenses and
other current assets 1,883,000 1,407,000
------------- -------------
Total Current Assets 48,300,000 68,262,000
EQUIPMENT
Laser equipment 36,525,000 30,654,000
Medical equipment 8,263,000 5,901,000
Mobile equipment 11,898,000 10,677,000
Furniture and fixtures 3,487,000 2,979,000
-Accumulated depreciation (27,012,000) (22,183,000)
------------- -------------
Total Equipment, Net 33,161,000 28,028,000
OTHER ASSETS
Deferred tax asset 6,549,000 6,309,000
Goodwill and other, net 28,289,000 17,437,000
Tradename and service mark costs, net 64,000 74,000
Deferred contract rights 482,000 608,000
Investment in common equity securities 2,325,000
Rent deposits and other, net 181,000 224,000
------------- -------------
Total Other Assets 35,565,000 26,977,000
------------- -------------
Total Assets $ 117,026,000 $ 123,267,000
============= =============
</TABLE>
See notes to interim consolidated financial statements
3
<PAGE> 4
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
OCTOBER 31, April 30,
2000 2000
<S> <C> <C>
CURRENT LIABILITIES
Current portion of notes payable $ 7,115,000 $ 8,323,000
Current portion of capitalized
lease obligations 1,512,000 1,006,000
Accounts payable 4,791,000 4,268,000
Accrued compensation 1,181,000 1,549,000
Other accrued liabilities 3,471,000 8,975,000
------------- -------------
Total Current Liabilities 18,070,000 24,121,000
NON-CURRENT LIABILITIES
Notes payable 3,372,000 4,025,000
Capitalized lease obligations 1,938,000 1,853,000
------------- -------------
Total Non-Current Liabilities 5,310,000 5,878,000
MINORITY INTERESTS 1,201,000 1,354,000
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SERIES B CONVERTIBLE PREFERRED STOCK WITH
MANDATORY REDEMPTION PROVISIONS 2,404,000 2,295,000
STOCKHOLDERS' EQUITY
Common stock, par value of $.01 per
share, 50,000,000 shares authorized;
25,330,991 and 25,330,991 shares issued
and outstanding, respectively 253,000 253,000
Warrants and options 1,045,000 915,000
Paid-in capital 107,930,000 107,875,000
Treasury stock at cost (8,763,000) (7,514,000)
Accumulated deficit (10,424,000) (11,910,000)
------------- -------------
Total Stockholders' Equity 90,041,000 89,619,000
------------- -------------
Total Liabilities and Stockholders' Equity $ 117,026,000 $ 123,267,000
============= =============
</TABLE>
See notes to interim consolidated financial statements
4
<PAGE> 5
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended October 31, Ended October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES $21,657,000 $20,835,000 $43,894,000 $41,834,000
COST OF REVENUES
Royalty fees and professional
medical services 5,183,000 6,697,000 10,721,000 13,580,000
Depreciation and amortization 3,737,000 2,175,000 6,988,000 4,123,000
Cost of revenues, other 6,680,000 5,221,000 13,090,000 10,186,000
------------ ------------ ------------ ------------
GROSS PROFIT 6,057,000 6,742,000 13,095,000 13,945,000
Selling, general and
administrative expenses 5,592,000 3,884,000 11,464,000 8,011,000
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 465,000 2,858,000 1,631,000 5,934,000
Other income (expenses)
Minority interests in net income (88,000) (93,000) (480,000) (181,000)
Interest and other income 625,000 841,000 1,394,000 1,538,000
Gain on sale of equity investment 595,000
Interest and other expense (283,000) (261,000) (558,000) (560,000)
------------ ------------ ------------ ------------
INCOME BEFORE TAXES 719,000 3,345,000 2,582,000 6,731,000
Income tax (expense) benefit (270,000) 590,000 (978,000) 1,337,000
------------ ------------ ------------ ------------
NET INCOME 449,000 3,935,000 1,604,000 8,068,000
Deemed preferred dividends (55,000) (52,000) (109,000) (102,000)
------------ ------------ ------------ ------------
NET INCOME APPLICABLE TO
COMMON STOCKHOLDERS $ 394,000 $ 3,883,000 $ 1,495,000 $ 7,966,000
============ ============ ============ ============
Net Income per Share - Basic $ 0.02 $ 0.15 $ 0.06 $ 0.32
============ ============ ============ ============
NET INCOME PER SHARE - DILUTED $ 0.02 $ 0.14 $ 0.06 $ 0.28
============ ============ ============ ============
Weighted average number of
common shares outstanding - basic 23,866,000 25,118,000 23,893,000 24,647,000
============ ============ ============ ============
Weighted average number of
common shares outstanding - diluted 24,133,000 28,859,000 24,321,000 28,590,000
============ ============ ============ ============
</TABLE>
See notes to interim consolidated financial statements
5
<PAGE> 6
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Six Month Period
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED) Ended October 31,
-----------------------------------------------
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net income $ 1,604,000 $ 8,068,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,777,000 4,665,000
Deferred income taxes 870,000 (1,620,000)
Compensation paid in common stock,
options or warrants 156,000 110,000
Minority interest in net income of subsidiary 480,000 58,000
(Increase) decrease in accounts receivable 2,365,000 (1,501,000)
Increase in inventory (341,000) (1,283,000)
Increase in prepaid expenses
and other current assets (376,000) (918,000)
Increase in accounts payable 523,000 1,670,000
Decrease in accrued liabilities (5,872,000) (399,000)
------------ ------------
Net cash provided by operating activities 7,186,000 8,850,000
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Purchase of short-term investments (49,072,000) (90,314,000)
Sale of short-term investments 62,585,000 53,111,000
Sale of investment in common equity securities 2,494,000
Acquisition of equipment (9,396,000) (4,010,000)
Proceeds from sale of minority interests 40,000 276,000
Business acquisitions and partnership investments,
net of cash acquired, and other (12,158,000) (90,000)
------------ ------------
Net cash used in investing activities (5,507,000) (41,027,000)
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Proceeds from secondary stock offering 44,150,000
Stock offering costs (104,000)
Purchase of treasury stock (1,534,000)
Proceeds from exercise of stock options and warrants 162,000 8,267,000
Return of restricted cash 1,132,000
Principal payments under capitalized
lease obligations and notes payable (3,425,000) (5,375,000)
Proceeds paid to minority shareholders (673,000) -
------------ ------------
Net cash (used in) provided by financing activities (5,470,000) 48,070,000
------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (3,791,000) 15,893,000
Cash and cash equivalents at beginning of period 17,702,000 8,173,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,911,000 $ 24,066,000
============ ============
</TABLE>
See notes to interim consolidated financial statements
6
<PAGE> 7
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Six Month Period
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED) Ended October 31,
------------------------------------------------
2000 1999
<S> <C> <C>
Non-cash investing and financing:
Capital lease obligations and notes payable related
to laser and equipment purchases $2,155,000 $5,635,000
Accrued and deferred stock offering costs 412,000
Deemed preferred dividends 109,000 102,000
</TABLE>
See notes to interim consolidated financial statements
7
<PAGE> 8
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (UNAUDITED)
-----------------------------------
<TABLE>
<CAPTION>
Common Stock Accumulated
$.01 Par Value Other Warrants
Paid-in Comprehensive Treasury and Accumulated
Shares Amount Capital Income Stock Options Deficit
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-
April 30, 2000 25,330,991 $253,000 $108,044,000 (169,000) (7,514,000) $915,000 ($11,910,000)
Warrants and options issued 130,000
Exercise of
warrants and options (5,000) 285,000 (118,000)
Treasury stock purchased (1,534,000)
Dividends accrued
on convertible
preferred stock (109,000)
Comprehensive income
Net income for the
six month period
ended October 31, 2000 1,604,000
Reverse unrealized holding
loss on investment 169,000
Total comprehensive income
---------- -------- ------------ -------- ----------- ---------- ------------
Balance -
October 31, 2000 25,330,991 $253,000 $107,930,000 $ - $(8,763,000) $1,045,000 $(10,424,000)
========== ======== ============ ======== =========== ========== ============
<CAPTION>
Total
Shareholders'
Equity
<S> <C>
Balance-
April 30, 2000 $89,619,000
Warrants and options issued 130,000
Exercise of
warrants and options 162,000
Treasury stock purchased (1,534,000)
Dividends accrued
on convertible
preferred stock (109,000)
Comprehensive income
Net income for the
six month period
ended October 31, 2000
Reverse unrealized holding
loss on investment
Total comprehensive income 1,773,000
-------------
Balance -
October 31, 2000 $90,041,000
=============
</TABLE>
See notes to interim consolidated financial statements
8
<PAGE> 9
LASER VISION CENTERS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(Unaudited)
Item 1.
1. The information contained in the interim consolidated financial
statements and footnotes is condensed from that which would appear in the
annual consolidated financial statements. Accordingly, the interim
consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements and related notes
thereto contained in the April 30, 2000 Annual Report on Form 10-K filed
by Laser Vision Centers, Inc. ("Laser Vision") with the Securities and
Exchange Commission. The unaudited interim consolidated financial
statements as of October 31, 2000, and for the three and six month
periods ended October 31, 2000 and October 31, 1999, include all normal
recurring adjustments which management considers necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results which may be expected for the
entire fiscal year. The interim consolidated financial statements include
the accounts and transactions of the Company and its subsidiaries. All
significant intercompany transactions and accounts have been eliminated.
2. The net income per share was computed as described below using the
"Weighted average number of common shares outstanding - basic" during
each period.
"Weighted average number of common shares outstanding - diluted" for the
three and six month periods ended October 31, 2000 include the dilutive
effects of warrants and options using the treasury stock method.
"Weighted average number of common shares outstanding - diluted" for the
three and six month periods ended October 31, 1999 include the dilutive
effects of warrants and options using the treasury stock method and the
Series B Convertible Preferred Stock. For the three and six month periods
ended October 31, 2000, dilutive warrants and options were calculated
using an average market price of $4.82 and $5.16, respectively, per
common share. Diluted per share calculations follow:
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended October 31, Ended October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income 449,000 3,935,000 1,604,000 8,068,000
Deemed preferred dividends (55,000) (52,000) (109,000) (102,000)
----------- ----------- ---------- ----------
Net income applicable to
common stockholders 394,000 3,883,000 1,495,000 7,966,000
Weighted average number of
common shares outstanding-basic 23,866,000 25,118,000 23,893,000 24,647,000
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
Dilutive securities
Warrants and options 267,000 2,843,000 428,000 3,050,000
Preferred stock - 898,000 - 893,000
---------- ---------- ---------- -----------
Weighted average number of
common shares outstanding-diluted 24,133,000 28,859,000 24,321,000 28,590,000
Net Income per share - diluted $0.02 $0.14 $0.06 $0.28
</TABLE>
3. Effective June 2000 LaserVision acquired Southeast Medical, Inc.
(Southeast Medical) of Mandeville, Louisiana for $1.5 million of cash and
future contingent consideration which is dependent upon Southeast Medical
achieving certain levels of revenue. This transaction has been accounted
for under the purchase method of accounting and was financed with
existing cash. Southeast Medical is a provider of mobile cataract
services in Louisiana and Mississippi and the results of their operations
for the five months ended October 31, 2000 are included in the
consolidated financial statements of LaserVision. For segment reporting
purposes, its results of operations are included in the cataract segment.
4. Short-term investments have an original maturity of more than three
months and a remaining maturity of less than one year. These investments
are stated at cost as it is the intent of Laser Vision to hold these
securities until maturity. The fair market value of short-term
investments approximates book value at October 31, 2000.
5. In October 2000 LaserVision finalized a three year, $20 million line of
credit with LaSalle Bank as administrative agent. Interest rates vary
with our choice of either the prime rate or LIBOR (London Interbank
Borrowing Rate). The line of credit is collateralized by accounts
receivable, short-term investments, certain lasers and the related
inventory and requires LaserVision to maintain certain financial
covenants concerning EBITDA (earnings before interest, taxes,
depreciation and amortization), a fixed charge coverage ratio, a maximum
funded debt to EBITDA ratio and minimum net worth. No borrowings have
been made against the line as of October 31, 2000.
6. We have been contacted by three state sales tax authorities who are
reviewing whether the services provided by LaserVision to our surgeon
customers are subject to state sales and use tax. One state has
determined that we are not liable and two states have not yet begun their
review. A fourth state has advised one of our customers that we will be
reviewed. It is our belief that we are providing a service to our
customers which is not taxable and accordingly we have not collected
sales and use tax. Although our contracts generally require our customers
to pay any sales taxes, the outcome of each such sales and use tax review
is not known.
7. In September 2000 LaserVision entered into a five year agreement with
Minnesota Eye Consultants (MEC) to provide laser access. LaserVision paid
$6.2 million to acquire five lasers and the exclusive right to provide
laser access to MEC. LaserVision also assumed leases on three of the five
lasers acquired. The transaction resulted in a $5.0 million intangible
asset recorded as goodwill and other which will be amortized over the
life of the agreement. The
10
<PAGE> 11
president of MEC, Dr. Richard Lindstrom, serves on LaserVision's Board of
Directors and Medical Advisory Board.
8. The table below presents information about net income and segment assets
used by the chief operating decision maker of LaserVision as of and for
the periods ended October 31, 2000 and 1999:
<TABLE>
<CAPTION>
North American Other
Refractive Refractive Cataract Reconciling TOTAL
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED OCTOBER 31, 2000
-----------------------------------
REVENUE $17,249,000 $788,000 $3,620,000 $ - $21,657,000
Interest and other income 625,000 625,000
Interest and other expense (283,000) (283,000)
Income before taxes 286,000 102,000 409,000 (78,000) 719,000
Income tax expense (270,000) (270,000)
NET INCOME 286,000 102,000 409,000 (348,000) 449,000
Three months ended October 31, 1999
-----------------------------------
Revenue 16,982,000 863,000 2,990,000 - 20,835,000
Interest and other income 841,000 841,000
Interest and other expense (261,000) (261,000)
Income before taxes 3,033,000 118,000 600,000 (406,000) 3,345,000
Income tax benefit 590,000 590,000
Net income 3,033,000 118,000 600,000 184,000 3,935,000
SIX MONTHS ENDED OCTOBER 31, 2000
---------------------------------
REVENUE 35,387,000 1,669,000 6,838,000 - 43,894,000
Interest and other income 1,394,000 1,394,000
Interest and other expense (558,000) (558,000)
Income before taxes 1,767,000 211,000 772,000 (168,000) 2,582,000
Income tax expense (978,000) (978,000)
NET INCOME 1,767,000 211,000 772,000 (1,146,000) 1,604,000
Six months ended October 31, 1999
---------------------------------
Revenue 34,528,000 1,446,000 5,860,000 - 41,834,000
Interest and other income 1,538,000 1,538,000
Interest and other expense (560,000) (560,000)
Income before taxes 6,736,000 89,000 976,000 (1,070,000) 6,731,000
Income tax benefit 1,337,000 1,337,000
Net income $6,736,000 $89,000 $ 976,000 $267,000 $8,068,000
</TABLE>
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
(A) LIQUIDITY AND CAPITAL RESOURCES
Except for historical information, statements relating to Laser Vision's
plan, objectives and future performance are forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are based on management's current expectations. Because of various
risks and uncertainties, actual strategies and results in future periods may
differ materially from those currently expected.
The discussion set forth below analyzes certain factors and trends
related to the financial results for the three and six month periods ended
October 31, 2000 and 1999. This discussion should be read in conjunction with
the related consolidated financial statements and notes to the consolidated
financial statements.
ITEM 2.
(A) LIQUIDITY AND CAPITAL RESOURCES
During the six months ended October 31, 2000, cash and cash equivalents
decreased 21% or $3.8 million to $13.9 million at October 31, 2000 from $17.7
million at April 30, 2000. Short-term investments maturing in less than one year
decreased $13.5 million to $17.9 million at October 31, 2000 from $31.4 million
at April 30, 2000. The ratio of current assets to current liabilities at October
31, 2000 was 2.67 to one, compared to 2.83 to one at April 30, 2000.
Cash Flows from Operating Activities
Net cash provided by operating activities decreased by $1.7 million to $7.2
million for the six months ended October 31, 2000 from $8.9 million for the six
months ended October 31, 1999. The cash flows provided by operating activities
during the six months ended October 31, 2000 primarily represent the net income
in this period plus depreciation and amortization, the decrease in deferred
income taxes, the minority interest in the income of subsidiaries, the decrease
in accounts receivable and the increase in accounts payable less the decrease in
accrued liabilities. The cash flows provided by operating activities during the
six months ended October 31, 1999 primarily represent the net income in this
period plus depreciation and amortization and the net increase in current
liabilities, less increases in accounts receivable, inventory, prepaid expenses
and other current assets and deferred taxes. Accounts receivable decreased
during the six months ended October 31, 2000 due to improved collections and due
to lower revenue during September and October, 2000 compared to March and April,
2000 due to the decrease in the royalty fee collected from our surgeon
customers. The significant decrease in current liabilities during the six months
ended October 31, 2000 was due to paying the contingent consideration to the
former owners of Midwest Surgical Services, Inc.
12
<PAGE> 13
Cash Flows from Investing Activities
Net cash used for investing activities decreased by $35.5 million to $5.5
million for the six months ended October 31, 2000 from $41.0 million for the six
months ended October 31, 1999. Cash used for investing during the six months
ended October 31, 2000 was used to acquire Southeast Medical, enter a long-term
agreement with Minnesota Eye Consultants, and enter into partnership agreements
and to acquire equipment partially offset by the net proceeds from the sale of
short-term and common equity investments. Cash used for investing during the six
months ended October 31, 1999 was used to acquire short-term investments and
acquire equipment partially offset by the sale of minority interests.
Cash Flows from Financing Activities
During the six months ended October 31, 2000, $5.5 million cash was used in
financing activities. During the six months ended October 31, 1999, $48.1
million cash was provided by financing activities. Cash used in financing
activities during the six months ended October 31, 2000 was primarily used to
purchase 289,800 shares of treasury stock, make principal payments under
capitalized lease obligations and notes payable and to pay proceeds to minority
shareholders. Cash provided by financing during the six months ended October 31,
1999 was primarily provided by the underwritten public stock offering, the
exercise of stock options and warrants and the return of restricted cash and was
partially offset by principal payments under capitalized lease obligations and
notes payable.
In October 2000 LaserVision finalized a three year, $20 million line of credit
with LaSalle Bank as administrative agent. Interest rates vary with our choice
of either the prime rate or LIBOR (London Interbank Borrowing Rate). The line of
credit is collateralized by accounts receivable, short-term investments, certain
lasers and the related inventory and requires LaserVision to maintain certain
financial covenants concerning EBITDA (earnings before interest, taxes,
depreciation and amortization), a fixed charge coverage ratio, a maximum funded
debt to EBITDA ratio and minimum net worth. No borrowings have been made against
the line as of October 31, 2000.
Income Taxes
During the fourth quarter of fiscal 1999 LaserVision began recognizing deferred
tax assets related to net operating loss (NOL) carryforwards. Based on expected
future operating plans, at October 31, 2000, management has determined that the
net deferred tax assets generated by operations will more likely than not be
utilized to offset future taxes. For tax purposes, the tax benefit related to
certain equity transactions that did not impact operating results, such as those
arising from the exercise of non-qualified stock options and warrants, will be
credited to shareholders' equity and serve to reduce the future taxes paid by
LaserVision. In the future, LaserVision anticipates income tax expense to be
approximately 38% of income before taxes. With the impact of the equity related
tax loss carryforwards, LaserVision expects its cash income tax expense to be
about 6%.
Overview
LaserVision expects to continue to fund future operations from revenues received
from providing laser access and market services, existing cash and cash
equivalents and short-term investments, the possible
13
<PAGE> 14
exercise of stock options and warrants, the line of credit and future financing
as required. LaserVision has established a $20 million bank line of credit for
acquisitions and general corporate purposes and is in the process of
establishing a $5 million leasing line with another bank for laser equipment
purchases. LaserVision can also obtain financing from vendors. There can be no
assurance that the leasing line will be finalized or that capital will be
available when needed or, if available, that the terms for obtaining such funds
will be favorable to LaserVision.
(B) RESULTS OF OPERATIONS
The following table breaks out revenue by source and includes certain
profitability amounts as a percentage of revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUE
North American refractive $17,249,000 $16,982,000 $35,387,000 $34,528,000
Other refractive 788,000 863,000 1,669,000 1,446,000
Cataract 3,620,000 2,990,000 6,838,000 5,860,000
------------ ------------ ------------ ------------
TOTAL REVENUE 21,657,000 20,835,000 43,894,000 41,834,000
Gross profit 6,057,000 6,742,000 13,095,000 13,945,000
% of total revenue 28% 32% 30% 33%
Income from operations 465,000 2,858,000 1,631,000 5,934,000
% of total revenue 2% 14% 4% 14%
Net income before taxes 719,000 3,345,000 2,582,000 6,731,000
% of total revenue 3% 16% 6% 16%
</TABLE>
The fiscal 1999 revenues and cost of revenues include an additional $150 per
case for royalties paid to laser manufacturers. We continue to negotiate with
multiple suppliers for discounts, incentives and favorable financing terms.
QUARTER ENDED OCTOBER 31, 2000 COMPARED TO QUARTER ENDED OCTOBER 31, 1999
LaserVision has continued to provide excimer laser access to additional sites
throughout the U.S. We are focused on establishing long-term relationships with
our customers and providing value-added services through our partnership and
market development models. These models require a larger investment on our part
in marketing and personnel in exchange for a larger portion of the global fee.
These models are less profitable initially, but we believe they have the
potential to provide greater profitability and stability during the course of
the agreements.
Revenues
Total revenue increased by 4%, or $0.8 million, to $21.7 million for the three
months ended October 31, 2000 from $20.8 million for the three months ended
October 31, 1999. Total refractive procedures
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increased by 30% to 30,516 for the three months ended October 31, 2000 from
23,520 for the three months ended October 31, 1999. The increase in revenue is
not as great as the increase in procedures primarily due to the 60% decrease in
the royalty fees paid to laser manufacturers that has decreased the fee we
charge to our surgeon customers. In addition, global pricing to the patient has
declined due to competition and, accordingly, our fees to our surgeon customers,
particularly for higher volume accounts, have also declined.
The increase in revenue is attributable to a $0.3 million increase in North
American refractive revenue, a $0.6 million increase in cataract revenue and a
$0.1 decrease in other refractive revenue. The increase in North American
revenue was attributable to an increase both in the number of U.S. lasers in
operation and the number of procedures performed by our eye surgeon customers in
the U.S. partially offset by the decline in price due to the 60% decrease in the
royalty fee paid to laser manufacturers and lower prices for high volume
accounts. The increase in cataract revenue is due to the acquisition of
Southeast Medical in June 2000 and an increase in procedure volume.
Cost of Revenues/Gross Profit
Cost of revenues increased by 11%, or $1.5 million, to $15.6 million for the
three months ended October 31, 2000 from $14.1 million for the three months
ended October 31, 1999. This was primarily due to an increase of $0.6 million in
mobile laser engineer salaries and travel costs, an increase of $0.8 million in
maintenance, gases and medical supplies, an increase of $0.7 million in
professional medical services, an increase of $1.5 million in depreciation and
amortization and an increase of $0.5 million of costs related to the cataract
business offset by a $2.3 million decrease in royalty fees paid to laser
manufacturers and a $0.2 million decrease in expenses related to training
courses. The increases in salaries and travel, professional medical services,
maintenance, gases and medical supplies and depreciation and amortization are
primarily due to increased lasers and refractive procedure volume.
Total gross profit decreased by 10%, or $0.6 million, to $6.1 million for the
three months ended October 31, 2000 from $6.7 million for the three months ended
October 31, 1999. The variable gross profit, excluding depreciation, increased
by 10%, or $0.9 million, to $9.8 million for the three months ended October 31,
2000 from $8.9 million for the three months ended October 31, 1999. As a
percentage of total revenue, total gross profit decreased to 28% from 32% for
the three months ended October 31, 2000 and 1999, respectively. This decline is
primarily due to a decline in the average sales price per procedure greater than
the decline in the average cost per procedure.
Operating Expenses
Selling, general and administrative expenses increased by 44%, or $1.7 million,
to $5.6 million for the three months ended October 31, 2000 from $3.9 million
for the three months ended October 31, 1999. This was attributed to increases in
selling and marketing expenses of $1.3 million, increases in salaries and
related expenses of $0.8 million and increases in depreciation of $0.1 million
partially offset by decreases in general and administrative expense of $0.6
million. The $1.3 million increase in selling and marketing expenses and a
portion of the $0.8 million increase in salaries and related expenses is a
result of our change in focus to partnerships and market development sites where
we provide substantially all marketing services and employ refractive
coordinators in the practice in exchange for a
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larger percentage of the global patient fee. The decline in general and
administrative expense primarily reflects a gain on the sale of a non-current
asset. Excluding this one-time gain, general and administrative expenses were
relatively unchanged.
Income from Operations
The income from operations decreased by $2.4 million to $0.5 million for the
three months ended October 31, 2000 from $2.9 million for the three months ended
October 31, 1999. This was primarily related to decreased North American
refractive profitability.
Other Income (Expenses)
Lower interest income and higher interest expense partially offset by lower
minority interests in net income of subsidiaries caused a $233,000 decrease in
other income (expense) to a net $254,000 of income during the three months ended
October 31, 2000 from a net $487,000 of income during the three months ended
October 31, 1999.
Taxes
Income tax (expense) benefit changed from a tax benefit of $590,000 for the
three months ended October 31, 1999 to tax expense of $270,000 for the three
months ended October 31, 2000. Given the utilization of NOL carryforwards
generated by operations available to offset future taxes for financial reporting
purposes, LaserVision anticipates income tax expense remaining at approximately
38% of income before taxes.
SIX MONTHS ENDED OCTOBER 31, 2000 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1999
Revenues
Total revenue increased by 5%, or $2.1 million, to $43.9 million for the six
months ended October 31, 2000 from $41.8 million for the six months ended
October 31, 1999. Total refractive procedures increased by 34% to 62,760 for the
six months ended October 31, 2000 from 46,820 for the six months ended October
31, 1999.
The increase in revenue is attributable to a $0.9 million increase in North
American refractive revenue, a $0.2 million increase in other refractive revenue
and a $1.0 million increase in cataract revenue. The increase in revenue is not
as great as the increase in procedures primarily due to the 60% decrease in the
royalty fees paid to laser manufacturers that has decreased the fee we charge to
our surgeon customers. In addition, global pricing to the patient has declined
due to competition and, accordingly, our fees to our surgeon customers,
particularly for higher volume accounts, have also declined. The increase in
cataract revenue is due to the acquisition of Southeast Medical in June 2000 and
an increase in procedure volume.
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Cost of Revenues/Gross Profit
Cost of revenues increased by 10%, or $2.9 million, to $30.8 million for the six
months ended October 31, 2000 from $27.9 million for the six months ended
October 31, 1999. This was primarily due to an increase of $1.3 million in
mobile laser engineer salaries and travel costs, an increase of $1.3 million in
maintenance, gases and medical supplies, an increase of $1.4 million in
professional medical services, an increase of $2.7 million in depreciation and
amortization and an increase of $0.9 million of costs related to the cataract
business offset by a $4.4 million decrease in royalty fees paid to laser
manufacturers and a decrease of $0.3 million in expenses related to training
courses. The increases in salaries and travel, professional medical services,
maintenance, gases and medical supplies and depreciation and amortization are
primarily due to increased lasers and refractive procedure volume.
Total gross profit decreased by 6%,or $0.8 million to $13.1 million for the six
months ended October 31, 2000 from $13.9 million for the six months ended
October 31, 1999. The variable gross profit, excluding depreciation, increased
by 11%, or $1.9 million, to $20.0 million for the six months ended October 31,
2000 from $18.1 million for the six months ended October 31, 1999. As a
percentage of total revenue, total gross profit decreased to 30% from 33% for
the three months ended October 31, 2000 and 1999, respectively. This decline is
primarily due to a decline in the average sales price per procedure greater than
the decline in the average cost per procedure.
Operating Expenses
Selling, general and administrative expenses increased by 43%, or $3.5 million,
to $11.5 million for the six months ended October 31, 2000 from $8.0 million for
the six months ended October 31, 1999. The increase was attributed to increased
salaries and related expenses of $1.0 million, increased selling and marketing
expenses of $2.4 million, and increased depreciation of $0.2 million offset by
decreased general and administrative expense of $0.2 million. The $2.4 million
increase in selling and marketing expenses and a portion of the $1.0 million
increase in salaries and related expenses is a result of our change in focus to
partnerships and market development sites where we provide substantially all
marketing services and employ refractive coordinators in the practice in
exchange for a larger percentage of the global patient fee. The decline in
general and administrative expense primarily reflects a gain on the sale of a
non-current asset. Excluding this one-time gain, general and administrative
expenses would have increased by $0.4 million.
Income from Operations
The income from operations decreased by $4.3 million to $1.6 million for the six
months ended October 31, 2000 from $5.9 million for the six months ended October
31, 1999. This was primarily related to decreased North American Refractive
profitability.
Other Income (Expenses)
A one-time gain of $595,000 relative to the sale of an investment in common
equity securities increased other income during the six months ended October 31,
2000. Excluding this one-time event, higher minority interests in net income of
subsidiaries and lower interest income caused a $441,000 decrease in
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other income (expense) to a net $356,000 of income during the six months ended
October 31, 2000 from a net $797,000 of income during the six months ended
October 31, 1999.
Taxes
Income tax (expense) benefit changed from a tax benefit of $1,337,000 for the
six months ended October 31, 1999 to tax expense of $978,000 for the six months
ended October 31, 2000. Given the utilization of NOL carryforwards generated by
operations available to offset future taxes for financial reporting purposes,
LaserVision anticipates income tax expense remaining at approximately 38% of
income before taxes.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings
There has been no material change in the status of any litigation from
that reported in the Form 10-K for the year ended April 30, 2000, nor has any
other material litigation been initiated.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders on November 10, 2000,
shareholders elected five members of the Board of Directors, approved
PricewaterhouseCoopers LLP as the Company's independent public accountants, and
approved the Laser Vision Centers, Inc. 2000 Incentive Stock Option Plan.
Item 5. Other Information
None
Item 6. Reports on Form 8-K during the period covered by this report:
None
Exhibits - None
Signatures
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Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASER VISION CENTERS, INC.
\s\John J. Klobnak December 12, 2000
------------------------------------- ---------------------
John J. Klobnak Date
Chairman of the Board and Chief Executive Officer
\s\B. Charles Bono, III December 12, 2000
------------------------------------- ---------------------
B. Charles Bono Date
Chief Financial Officer and
Principal Accounting Officer
19
