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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period Commission File
ended March 29, 1997 Number 0-20001
NATIONAL VISION ASSOCIATES, LTD.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1910859
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
296 Grayson Highway 30245
Lawrenceville, Georgia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (770) 822-3600
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
----- -----
The number of shares of Common Stock of the registrant outstanding as
of April 23, 1997 was 20,709,359.
The Exhibit Index is located at page 11.
Page 1 of 12
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NATIONAL VISION ASSOCIATES, LTD.
FORM 10-Q INDEX
Page of
Form 10-Q
---------
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
December 28, 1996 and March 29, 1997 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 30, 1996 and March 29, 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 30, 1996 and March 29, 1997 5
Notes to Condensed Consolidated Financial Statements - 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
Page 2 of 12<PAGE>
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PART I
FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, 1996 and March 29, 1997
(000's except share information)
<TABLE>
<CAPTION>
December 28, March 29,
1996 1997
------------ ---------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,110 $ 2,878
Accounts receivable (net of allowance: 1996-$353; 1997-$402) 4,164 4,998
Inventories 23,970 22,557
Store preopening costs (net of accumulated amortization: 1996-$605; 1997-$588) 240 291
Other current assets 944 794
------- -------
Total current assets 30,428 31,518
------- -------
PROPERTY AND EQUIPMENT:
Equipment 38,573 39,458
Furniture and fixtures 17,136 17,959
Leasehold improvements 13,178 13,459
Construction in progress 1,669 1,462
------- -------
70,556 72,338
Less accumulated depreciation (27,206) (29,439)
------- -------
Net property and equipment 43,350 42,899
------- -------
ORGANIZATION COSTS (net of accumulated amortization: 1996-$503; 1997-$532) 108 53
------- -------
OTHER ASSETS AND DEFERRED COSTS (net of accumulated amortization:
1996-$226; 1997-$223) 378 767
ASSIGNMENT AGREEMENT AND INTANGIBLE ASSETS (net of accumulated
amortization: 1997-$176) 4,429
------- -------
$74,264 $79,666
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,283 $ 8,547
Accrued expenses and other current liabilities 8,343 10,632
------- -------
Total current liabilities 16,626 19,179
------- -------
LONG-TERM DEBT, less current portion 26,500 23,000
LONG-TERM DEBT RELATED TO ASSIGNMENT AGREEMENT AND INTANGIBLE ASSETS 4,100
DEFERRED INCOME TAX LIABILITIES 1,232 1,826
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value; 5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value; 100,000,000 shares authorized,
20,644,752 and 20,709,359 shares issued and outstanding as
of December 28, 1996 and March 29, 1997, respectively 206 207
Additional paid-in capital 42,166 42,167
Retained deficit (8,393) (6,740)
Cumulative foreign currency exchange rate translation (4,073) (4,073)
------- -------
Total shareholders' equity 29,906 31,561
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$74,264 $79,666
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Page 3 of 12<PAGE>
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<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000's except per share information)
(Unaudited)
Three Months Ended
------------------------
March 30, March 29,
1996 1997
---- ----
<S> <C> <C>
NET SALES $40,133 $44,362
COST OF GOODS SOLD 18,724 20,143
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GROSS PROFIT 21,409 24,219
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 19,386 20,971
------- -------
OPERATING INCOME 2,023 3,248
OTHER EXPENSE, NET 659 488
------- -------
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,364 2,760
PROVISION FOR INCOME TAXES 373 1,107
------- -------
NET INCOME $ 991 $ 1,653
======= =======
NET INCOME PER COMMON SHARE $ .05 $ .08
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Page 4 of 12<PAGE>
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<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's)
Three Months Ended
-----------------------
March 30, March 29,
1996 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 991 $ 1,653
------- -------
Adjustments to reconcile net income to
net cash provided by (used for) operating activities:
Depreciation and amortization 2,531 2,566
Provision for deferred income tax expense 280 594
Changes in assets and liabilities:
Receivables (574) (834)
Inventories (355) 1,413
Store preopening costs (111) (175)
Other current assets (719) 149
Accounts payable, accrued expenses and other current liabilities 1,025 2,554
------- -------
Total adjustments 2,077 6,267
------- -------
Net cash provided by operating activities 3,068 7,920
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (834) (1,782)
Organization costs (19) 19
Change in other assets (80) (386)
Assignment Agreement and intangible assets (4,605)
Proceeds from sale of French operations 3,400
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Net cash provided by (used for) investing activities 2,467 (6,754)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayment) on long-term debt (3,000) (3,500)
Long-term debt related to Assignment Agreement and
intangible assets 4,100
Net proceeds from issuance of common stock 9 2
Net payment on capital leases (162)
------- -------
Net cash provided by (used for) financing activities (3,153) 602
------- -------
Effect of foreign currency exchange rate changes 20 0
------- -------
NET INCREASE IN CASH 2,402 1,768
CASH AND CASH EQUIVALENTS, beginning of period 1,307 1,110
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 3,709 $ 2,878
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Page 5 of 12<PAGE>
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NATIONAL VISION ASSOCIATES, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 1997
(Unaudited)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared by National Vision Associates, Ltd. (the "Company")
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although management believes that the disclosures are
adequate to make the information presented not misleading, it is suggested
that these interim condensed consolidated financial statements be read in
conjunction with the Company's most recent audited consolidated financial
statements and notes thereto. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations, and cash
flows for the interim periods presented have been made. Operating results
for the interim periods presented are not necessarily indicative of the
results that may be expected for the year ending January 3, 1998. Certain
amounts in the March 30, 1996 condensed consolidated financial statements
have been reclassified to conform to the March 29, 1997 presentation.
(2) RELATED-PARTY TRANSACTIONS
During the three months ended March 30, 1996, the Company made lease
payments of approximately $114,000 to a lease finance company which is owned
by a shareholder/director of the Company. The Company made cash payments
of approximately $6,500 and $26,700 during the three months ended
March 30, 1996 and March 29, 1997, respectively, for insurance purchased
through an agency in which a director of the Company has a substantial
ownership interest. During the three months ended March 30, 1996, the
Company made payments of approximately $73,000 to a fixture company which
had made certain installment payments to the spouse of the Company's
then Vice Chairman, pursuant to an agreement entered into in 1992.
(3) ASSIGNMENT AGREEMENT AND INTANGIBLE ASSETS
In January 1997, the Company completed various transactions related to
its relationship with each of Eyecare Leasing, Inc., which had recruited
optometrists for the Company pursuant to a consulting agreement, and Stewart-
Phillips, Inc., which had recruited optometrists practicing adjacent to the
Company's vision centers in California. The transactions involved the
termination of such consulting agreement and the transfer of certain
responsibilities to the Company. Aggregate payments received by the
Company under the arrangement in 1996 were $1.4 million. The aggregate
cost of the transactions was $4.6 million, which has been capitalized
as an intangible asset and will be amortized over the remaining life of
the vision center leases. The Company made a lump sum payment of $500,000
at closing and entered into promissory obligations for the balance,
payable over a 12-year period at 6.4% interest.
Page 6 of 12<PAGE>
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(4) PROVISION FOR INCOME TAXES
The effective income tax rate on consolidated pre-tax income in the
first quarter of 1997 is 40%, which represents a tax provision of 39% on
domestic earnings. Due to the Company's current tax net operating loss
carryforward position, current year earnings will not be subject to regular
Federal Income Tax. However, the Company will be subject to Federal
Alternative Minimum Tax and state income tax, which will result in the
Company making cash payments approximating 27% of consolidated pre-tax
earnings.
(5) NET INCOME PER COMMON SHARE
Net income per common share is computed based on the weighted average
number of common stock and common stock equivalent shares outstanding during
the period. Options granted to purchase common stock have been included in
the calculation of the shares used in computing net income per share
information as if they were outstanding as of the date of grant, using the
treasury stock method. The weighted average number of common shares
outstanding used in the calculation is as follows (000's):
Three Months Ended
--------------------------
March 30, March 29,
1996 1997
---- ----
Weighted average number of
shares outstanding 20,642 20,778
====== ======
SFAS Statement No. 128 "Earnings per Share" is effective for financial
statements for both interim and annual periods ending after December 15,
1997. Management anticipates that the statement, which revises the
calculation for earnings per share, will not have a material affect on the
computation of per share earnings.
(6) RESTRICTED STOCK AWARDS
On February 12, 1997, in accordance with the Company's Restated Stock
Option and Incentive Award Plan, the Compensation Committee of the Board
of Directors approved the issuance of 60,000 restricted shares of the
Company's common stock to selected employees, including the executive
officers of the Company. The 60,000 restricted shares represent an
increase in shareholders' equity and, as such, are reflected on
the balance sheet at $600 in common stock ($.01 par value) and $288,000
in additional paid-in capital based on the $4.81 market value on the date
of grant. Pursuant to the terms of the awards, the stock will be issued
to the employees at the end of a four-year performance period, if the
Company meets certain performance goals. As the awards are not vested,
the full value of $288,600 represents deferred compensation and is
reflected as a reduction to additional paid-in capital. This deferred
compensation will be amortized to expense over the four-year performance
period.
Page 7 of 12<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's results of operations in any period are significantly
affected by the number and mix of vision centers opened and operating during
such period. At March 29, 1997, the Company operated 352 vision centers,
versus 322 vision centers at March 30, 1996.
THREE MONTHS ENDED MARCH 29, 1997 (THE "CURRENT PERIOD") COMPARED TO
THREE MONTHS ENDED MARCH 30, 1996 (THE "PRIOR PERIOD")
CONSOLIDATED RESULTS
NET SALES. Net sales during the Current Period increased to $44.4
million from $40.1 million for the Prior Period due in part to the increase
in the number of operating vision centers. Average weekly net sales per
domestic vision center increased from $9,700 in the Prior Period to $10,360
in the Current Period, due to a 7.5% increase in comparable store sales.
Continued success of "life style" selling programs, improved merchandising
and product presentation, as well as continued focus on customer service,
contributed to the sales improvement. In addition, sales under managed
care programs substantially increased from the Prior Period. Average
weekly net sales for vision centers open less than one year was lower
than the average for vision centers opened in the Prior Period. Net
sales from international operations decreased to $935,000 in the
three-month period ended February 28, 1997 from $1.3 million in the
comparable period a year ago. Such decrease was due primarily to the
sale of the Company's French vision centers and closure of certain
vision centers in Mexico in 1996.
GROSS PROFIT. In the Current Period, gross profit increased to
$24.2 million from $21.4 million in the Prior Period. This increase was
primarily due to the increased net sales described above. Gross profit as
a percent of sales increased to 54.6% from 53.3% in the Prior Period. Such
increase was principally due to an increase in revenue from independent
optometrists who lease space from the Company. This increase was, in turn,
due to a transaction, which closed in January 1997, among the Company,
Eyecare Leasing, Inc. ("ELI") and other parties. (See Note 3 to consolidated
financial statements.)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES ("SG&A expense").
SG&A expense (which includes both store operating expenses and home office
overhead) increased to $21.0 million in the Current Period from $19.4 million
for the Prior Period, reflecting operating expenses of the additional vision
centers. As a percentage of net sales, SG&A expense was 47.3% in the Current
Period, compared to 48.3% for the Prior Period. The percentage decrease was
due primarily to improved efficiencies at store level.
Page 8 of 12<PAGE>
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OPERATING INCOME. Operating income for the Current Period increased
to $3.2 million from $2.0 million in the Prior Period. The Company's
international operations (24 vision centers at the end of the Current
Period) generated an operating profit of $25,000 in the three months
ended February 28, 1997, as opposed to an operating loss of $340,000
in the comparable period a year ago. The international operating
results do not include allocated corporate overhead, interest, and
taxes. The improvement in international operations was due to the
sale of the Company's French operations, which generated an operating
loss of $240,000 in 1996, the closure of ten unprofitable locations in
Mexico, as well as operating improvements in the vision centers still
open in Mexico.
The Securities and Exchange Commission has qualified Mexico as a highly
inflationary economy under the provisions of SFAS No. 52 - Foreign Currency
Translation. Consequently, in 1997, the financial statements of the Mexico
operation will be remeasured with the U.S. dollar as the functional currency.
Any gain or loss resulting from changes in foreign currency rates between
the peso and the U.S. dollar, as calculated in the remeasurement process,
have been recorded in the Company's statement of operations. Management does
not expect this charge to have a material impact on the financial statements
or condition of the Company.
OTHER EXPENSE. The decrease in other expense to $488,000, compared
to $659,000 in the Prior Period, is due to lower interest costs. The
decrease in interest costs results from a decrease in average borrowings
by the Company under its credit facility. The effective interest rate on
the credit facility was flat versus the Prior Period. The Company did,
however, incur increased interest expense as a result of the transaction
with ELI which closed in January 1997.
PROVISION FOR INCOME TAXES. The effective income tax rate on
consolidated pre-tax income in the Current Period is 40%, which represents
a tax provision of 39% on domestic earnings. Due to the Company's current
tax net operating loss carryforward position, current year earnings will
not be subject to regular Federal Income Tax. However, the Company will
be subject to Federal Alternative Minimum Tax and state income tax, which
will result in the Company making cash payments approximating 27% of
consolidated pre-tax earnings.
NET INCOME. Net income was $1.7 million, or $0.08 per share, as
compared to net income of $991,000, or $0.05 per share, in the Prior Period.
Page 9 of 12<PAGE>
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LIQUIDITY AND CAPITAL RESOURCES
As of March 29, 1997, the Company anticipates opening 35 domestic
vision centers during the last three quarters of 1997. Average costs for
domestic vision centers have approximated $145,000 for fixed assets, $35,000
for inventory, and $20,000 for preopening expenses. The Company currently
plans to open nine vision centers in Mexico in 1997.
As of March 29, 1997, the Company had borrowed $23.0 million under
its credit facility versus outstanding borrowings of $26.5 million as of
December 28, 1996. During the Current Period, internal cash flow was
sufficient to fund store openings and other capital requirements, with
the excess utilized to repay borrowings under the credit facility.
In connection with the ELI transaction which closed in January 1997,
the Company incurred long-term debt of approximately $4.1 million. (See
Note 3 to consolidated financial statements.) The debt is payable over
a twelve-year period.
In the opinion of management, internally generated funds will be
sufficient to fund ongoing operating costs associated with its current
vision centers and costs for additional vision centers scheduled to be
opened in 1997. At March 29, 1997, the Company had borrowed $23 million
under its $45 million credit facility. Management believes that, during
1997, the Company should be able to further reduce long-term debt, subject
to operating results and the opening schedule of vision centers.
RISKS
This Report on Form 10-Q contains forward-looking statements, including
statements concerning expected capital expenditures to be made in the future,
the addition of new locations, and the adequacy of the Company's sources of
cash to finance its current and future operations. These forward-looking
statements involve a number of risks and uncertainties. Among factors
that could cause actual results to differ materially are delays in the
construction of host stores and the ability of the Company: to manage
growth in Wal-Mart stores in 1997 and, potentially, in other hosts and/or
free-standing locations; to be competitive in the areas of quality,
technology, methods of distribution, and customer service; to manage
expenses, including SG&A expenses; to acquire, on favorable terms,
inventory and/or capital assets; and to sell and/or participate in managed
care and safety eyewear contracts on a profitable basis. Other such factors
are the risk factors listed from time to time in the Company's Securities
and Exchange Commission reports, including but not limited to, its Current
Report on Form 8-K filed with the Commission on January 17, 1997.
Page 10 of 12<PAGE>
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
Exhibit
Number
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<S> <C>
Amended and Restated Articles of Incorporation of the Company 3.1*
Amended and Restated By-Laws of the Company 3.2*
Form of Common Stock Certificate 4.1**
Amended and Restated Articles of Incorporation of the Company 4.1***
Letter Agreement between the Company and Edward G. Weiner, 10.41.1****
dated as of February 10, 1997
First Amendment to Restated Stock Option and Incentive Award Plan 10.48.1****
Restricted Stock Award, between the Company and the individuals 10.51****
listed on the attached Schedule
Statement Regarding Computation of Per Share Earnings 11****
Financial Data Schedule 27****
*Incorporated by reference to the Company's Registration Statement on Form S-1,
registration number 33-46645, filed with the Commission on March 25, 1992, and
amendments thereto.
**Incorporated by reference to the Company's Registration Statement on Form 8-A
filed with the Commission on January 17, 1997.
***Incorporated by reference to the Company's Form 8-K filed with the Commission
on January 17, 1997.
****Filed with this Form 10-Q.
(b) Reports on Form 8-K.
The registrant filed one report on Form 8-K during the three months ended
March 29, 1997.
</TABLE>
Page 11 of 12<PAGE>
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SIGNATURES
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, thereunto duly authorized.
NATIONAL VISION ASSOCIATES, LTD.
By: /s/ Sandra M. Buffa
Sandra M. Buffa
Senior Vice President
Finance
April 29, 1997
Page 12 of 12
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February 10, 1997
Edward G. Weiner
600 Golden Harbor Drive
Boca Raton, FL 33431
Re: Employment Agreement dated February 27, 1992, as
amended by Letter Agreement dated May 16, 1995
(collectively, the "Employment Agreement") between
National Vision Associates, Ltd. ("NVAL") and
Edward G. Weiner ("Weiner")
Dear Ed:
As you know, you and the Company have, after discussion, mutually
agreed to replace the Employment Agreement with a Noncompetition
Agreement described below. Our agreement is as follows:
1. Termination of Employment Agreement. Effective February 10,
1997, the Employment Agreement is terminated and of no force
and effect.
2. Noncompetition. From February 10, 1997, through and until
March 1, 2000, Weiner shall not, without the approval of the
Board of Directors of NVAL, directly or indirectly seek,
obtain employment or provide consulting or other services
with respect to the retail optical business within the
United States or Mexico, and shall not hire or induce or
solicit to leave employment with NVAL, for himself or on
behalf of any other person or entity, anyone who is or was,
during the 12 months prior to Weiner's termination of
employment with NVAL, an employee of NVAL.
3. Consideration. As consideration for the Noncompetition
Agreement granted by Weiner pursuant to Section 2 above,
NVAL shall pay Weiner no later than February 12, 1997, the
amount of $483,809.
4. COBRA Payments. From the date medical benefits are
terminated under the Employment Agreement until the earlier
of (a) 18 months following such date and (b) the date Weiner
notifies NVAL that Weiner has obtained alternative medical
insurance for himself, NVAL shall make COBRA payments on
behalf of Weiner, who hereby elects such coverage.
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The Company wishes to express its gratitude to you for your many
contributions.
Please sign the enclosed copy of this letter and return it to me
to indicate your agreement.
We wish you every continued success.
Very truly yours,
/s/ James W. Krause
James W. Krause
Accepted and Agreed:
/s/ Edward G. Weiner
__________________________
Edward G. Weiner
<PAGE>
FIRST AMENDMENT TO NATIONAL VISION ASSOCIATES, LTD.
RESTATED STOCK OPTION AND INCENTIVE AWARD PLAN
This First Amendment to National Vision Associates, Ltd. Restated
Stock Option and Incentive Award Plan, dated as of February 12, 1997.
Recitals
A. On February 27, 1996, the Board of Directors of National Vision
Associates, Ltd., a Georgia corporation (the "Company"), adopted the
National Vision Associates, Ltd. Restated Stock Option and Incentive Award
Plan (the "Plan"). The Plan was approved by the shareholders of the
Company at the 1996 Annual Meeting of Shareholders.
B. On February 12, 1997, the Board of Directors of the Company amended
the Plan and authorized the execution of this First Amendment to the Plan.
Amendment
1. Amendment. The first paragraph of Section 13.1 of the Plan is
amended in its entirety as follows:
Upon the occurrence of a Change in Control, or upon the
termination of a Participant by the Company or a Subsidiary
other than for Cause as a result of a Threatened Change in
Control, and except as provided in the Award Agreement, Option
Agreement or Section 13.3, or as prohibited by the terms of
Article 17 hereof:
2. Ratification. In all other respects, the terms and conditions of
the Plan are ratified and affirmed.
AS APPROVED BY THE BOARD OF DIRECTORS OF NATIONAL VISION
ASSOCIATES, LTD. ON FEBRUARY 12, 1997.
NATIONAL VISION ASSOCIATES, LTD.
By: /s/ James W. Krause
ATTEST:
By: /s/ Mitchell Goodman
Secretary
<PAGE>
NATIONAL VISION ASSOCIATES, LTD.
RESTATED STOCK OPTION AND INCENTIVE AWARD PLAN
RESTRICTED STOCK AWARD
**********
Number of Shares: _____________
Date of Award: _____________
Restricted Period: Four Years
THIS IS TO CERTIFY THAT, in accordance with and subject to all terms,
provisions and conditions of the National Vision Associates, Ltd. Restated
Stock Option and Incentive Award Plan (the "Plan"), as adopted by the
Board of Directors (the "Board") of National Vision Associates, Ltd., a
Georgia corporation (the "Company"), at a meeting thereof held on
February 27, 1996 and approved by the shareholders of the Company at a
meeting thereof held on May 7, 1996, the Company has awarded, and does
hereby award unto:
____________________
(the "Grantee") an aggregate of __________ shares of Common Stock of the
Company ("Common Stock") subject, however, to the terms and conditions
hereinafter set forth:
1. The Grantee shall execute and return to the Company an executed copy
of this Restricted Stock Award. At such time, the Company shall cause
a stock certificate for the number of shares of Common Stock noted
above ("Restricted Shares") to be issued in the name of the Grantee.
Such stock certificate shall reference the restrictions as set forth
herein and shall be retained in the custody of the Company. The
Grantee shall have no rights with respect to such Common Stock except
as otherwise set forth herein.
2. After the Grantee shall have completed four (4) years of continuous
employment, commencing from the date of this Award, with the Company,
or a subsidiary thereof, in his/her present position or in such other
position as the Compensation Committee of the Board (the "Committee"),
in its sole discretion, may determine entitles the Grantee to retain
his rights under this Award (such positions being hereinafter referred
to as a "Participating Position", and such period of continuous
employment being hereinafter referred to as the "Restricted Period"),
the Grantee shall be entitled to have a stock certificate issued in
the name of such Grantee delivered to him/her representing a percentage
1<PAGE>
<PAGE>
(as determined below) of the shares granted hereunder without any
restrictions, other than such restrictions as may apply to Common
Stock generally or as may otherwise be required by applicable federal
or state law. The issuance of such stock certificate in the name of
the Grantee for the number of unrestricted shares to which he/she
may be entitled as provided herein shall be made after such time as
the Committee has obtained the information, made the decisions, and
completed the calculations necessary to determine such number of
unrestricted shares. At such time the original stock certificate
issued as provided in Paragraph 1 hereof shall be canceled and such
new stock certificate shall be issued to the Grantee representing
the number of unrestricted shares to which such Grantee is entitled
as provided herein, if any.
(a) The percentage of the number of Restricted Shares which the
Grantee shall be entitled to receive without restriction after
termination of the Restricted Period shall be based upon a
comparison of the Average Return on Average Equity of (i) the
Company during the Restricted Period, as determined by the
Committee, and (ii) such other group of companies as the
Committee determines, in its sole discretion, represents a
fair comparison to the Company during such Restricted Period;
and shall be determined in accordance with the following table:
Average Return on
Average Equity Percentage
----------------- ----------
80th to 100th Percentile 100%
75th to 80th Percentile 90%
70th to 75th Percentile 80%
65th to 70th Percentile 70%
60th to 65th Percentile 60%
55th to 60th Percentile 50%
50th to 55th Percentile 40%
Less than 50th Percentile 0%
(b) Exhibit A, attached hereto, represents the group of companies
which the Committee intends, as of the date of this Award, to
use for a fair comparison of the Average Return on Average Equity
during the Restricted Period; however, the Committee may reduce,
increase or otherwise change the list of companies to be used
for comparison purposes as it shall, in its sole discretion,
deem appropriate to more accurately render a fair comparison as
a result of changes in business, competition, the industry or
such other factors as the Committee may deem relevant to effect
the purposes of the Plan. The final determination of the
Committee as to the companies which shall be used for comparison
purposes shall be conclusive and binding upon the Grantee.
2<PAGE>
<PAGE>
(c) Exhibit B, attached hereto, represents the manner which the
Committee intends, as of the date of this Award, to use to
determine the Average Return on Average Equity during the
Restricted Period for purpose of this Paragraph 2; however,
the Committee may adjust the manner in which it determines the
Average Return on Average Equity as it, in its sole discretion,
shall deem appropriate to reflect or exclude the impact of
extraordinary or unusual events (including, without limitation,
changes in accounting rules or principles or in tax or securities
laws or regulations) or items which may result in a distortion of
the comparative results or as it shall otherwise deem appropriate
to effect the purposes of the Plan. The final determination of
the Committee as to the manner in which the Average Return on
Average Equity is determined shall be conclusive and binding upon
the Grantee.
(d) Except as otherwise provided below, upon termination of the Grantee
from a Participating Position during the Restricted Period, the
Grantee shall lose all rights to the Restricted Shares:
(i) If the Grantee dies during the Restricted Period, the Company
shall deliver to the beneficiary of the Grantee, or, if no
beneficiary is named, the estate of the Grantee, a stock
certificate issued in the name of such beneficiary or the
estate for the full number of Restricted Shares, without
any restrictions other than such restrictions as may apply to
Common Stock generally or as may otherwise be required by
applicable federal and state law.
(ii) If the employment of the Grantee is terminated by the Company
as a result of Disability (as defined in the Plan) during the
Restricted Period, the Company shall deliver to the Grantee
a stock certificate for the full number of Restricted Shares
without restriction, other than such restrictions as may apply
to Common Stock generally or as may otherwise be required by
applicable federal and state law.
(iii) If the Grantee terminates his or her employment as a result of
normal Retirement (as defined in the Plan) on or after age 65
under one of the Company's pension plans, all rights of the
Grantee under this Award shall continue as if the Grantee had
continued employment in a Participating Position. The
provisions of Subparagraph 2(d)(i) shall apply if, following
such Retirement, Grantee dies during the Restricted Period
determined as if Grantee had remained employed in a
Participating Position. The determination of the percentage
of Restricted Shares which the Grantee would be entitled to
receive in accordance with Subparagraph 2(a) will be made at
the termination of the Restricted Period determined as if
the Grantee had remained employed in a Participating Position.
3<PAGE>
<PAGE>
(iv) If the employment of the Grantee terminates as a result of
early Retirement (on or after age 55 and completion of at
least 10 years of service with the Company) under one of the
Company's pension plans, the Committee in its sole discretion
may provide that the number of Restricted Shares granted
hereunder may be canceled, continued in full, or pro-rated
for the portion of the Restricted Period completed at the date
of termination or as the Committee may otherwise deem
appropriate. Determination of the percentage of such shares
which the Grantee is entitled to receive in accordance with
Subparagraph 2(a) will be made at termination of the Restricted
Period determined as if the Grantee had remained employed in
a Participating Position.
(e) In the event the Grantee is transferred from a Participating
Position, the Committee in its sole discretion may provide that
the number of Restricted Shares granted hereunder may be canceled,
continued in full, or pro-rated for the portion of the Restricted
Period completed as of the date of such transfer or as the
Committee may otherwise deem appropriate. Determination of the
percentage of such shares which the Grantee is entitled to receive
in accordance with Subparagraph 2(a) will be made at termination
of the Restricted Period determined as if the Grantee had remained
employed in a Participating Position.
(f) In the event of a "Change in Control" of the Company, as defined
in the Plan, the Grantee shall immediately be entitled to have a
stock certificate issued in the name of such Grantee and delivered
to him/her representing the full number of the Restricted Shares,
without any restrictions other than such restrictions as may apply
to Common Stock generally or as may otherwise be required by
applicable federal or state law.
(g) Notwithstanding anything in this Award to the contrary, in the event
that prior to a Change in Control the Grantee commits an act during
the Restricted Period, which act is determined by the Committee,
in its sole discretion, to be materially harmful to the best
interest of the Company, all rights of the Grantee in the
Restricted Shares as provided herein shall terminate.
3. During the Restricted Period, the Grantee shall not be permitted to sell,
transfer, pledge or assign the Restricted Shares but shall be entitled
to the right to vote such shares and to receive dividends. The
Restricted Shares shall be deemed to be subject to a substantial risk
of forfeiture within the meaning of Section 83 of the Internal Revenue
Code.
4<PAGE>
<PAGE>
4. Nothing contained in this Award shall limit whatever right the Company
or a subsidiary might otherwise have to terminate the employment of the
Grantee and the terms of this Award shall not be affected in any manner
by any employment or other agreement between the Grantee and the Company
or any subsidiary.
5. This Award is not transferable by the Grantee otherwise than by will or
the laws of descent and distribution.
6. This Award shall not be valid if such would involve a violation of any
applicable state law, and the Company hereby agrees to make reasonable
efforts to comply with any applicable state law.
7. This Award shall not be valid if it would require registration under the
Securities Act of 1933, as amended, or under any similar federal
securities law then in effect, of the shares of Common Stock or other
securities to be delivered hereunder, and such registration shall not
then be effective. The Company shall register the shares of Common
Stock or other securities covered by this Award under any such law if
(i) such registration shall be necessary to effect this Award and the
Board shall not determine that such registration would result in undue
expense or undue hardship to the Company, or (ii) the Board, in its
sole discretion, shall determine that such registration is desirable to
effect the purposes of this Award and would not result in undue expense
or undue hardship to the Company.
8. The Committee shall make or provide for such adjustments in the number
and kind of shares or other securities subject to this Award as the
Committee may determine in accordance with the terms of the Plan.
9. The Committee shall administer this Award in accordance with the terms
of the Plan. The interpretation of any terms and conditions contained
in this Award or in the Plan shall be made by the Committee whose
decision shall be final and binding upon the Grantee.
10. The Company shall have the right to deduct from any transfer of shares
or other payment under this Award an amount equal to the federal, state
and local income and employment taxes required to be withheld by it with
respect to such transfer or payment and, if the cash portion of any
such payment is less than the amount of taxes required to be withheld,
to require the Grantee or other persons receiving such transfer or
payment, to pay to the Company the balance of such taxes so required
to be withheld. The Grantee may elect to satisfy the obligation in
whole or in part, (i) with respect to a Grantee who has not made an
election to recognize income currently in accordance with Section 83
of the Internal Revenue Code, by electing to have withheld, from the
shares required to be delivered to the Grantee in accordance with the
5<PAGE>
<PAGE>
terms and conditions hereof, shares of Common Stock having a value equal
to the amount required to be withheld, or (ii) by delivering to the
Company other shares of Common Stock held by such Grantee. The shares
used for tax withholding settlement will be valued at an amount equal to
the fair market value of such Common Stock on the day the tax is
determinable (the "Tax Date"). Election by the Grantee to have shares
withheld or to deliver other shares of Common Stock for this purpose
will be subject to the following restrictions: (1) it must be made
prior to the Tax Date, and (2) it will be irrevocable.
EXECUTED at Lawrenceville, Georgia, this ______ day of ______________, ____.
NATIONAL VISION ASSOCIATES, LTD.
By:______________________________
Authorized Officer
The undersigned hereby acknowledges receipt of the foregoing Restricted
Stock Award and agrees to the provisions set forth therein.
_________________________________
Signature of Grantee
6<PAGE>
<PAGE>
Exhibit A
---------
RETURN ON PERCENTILE
COMPANY AVERAGE EQUITY* RANKING
Oakley 78.7%
Sunglass Hut 18.5%
Cole 134.6%
Sterling Vision 4.6%
Sola International 19.7%
New West Eyeworks -65.3%
Bausch & Lomb 12.1%
Haverty's 9.0%
Rhodes 8.7%
Zale Corporation 10.4%
* Represents the Return on Average Equity as determined only for the year
1995 in accordance with Steps #1 and #2 on Exhibit B and is not indicative
of a ranking based upon the Average Return on Average Equity over the
Restricted Period or a similar number of years in accordance with Step
#3 on Exhibit B.
<PAGE>
<PAGE>
Exhibit B
---------
1. Add the beginning and ending shareholder's equity with respect to each
fiscal year of a given company beginning with or immediately prior to
each year of the Restricted Period and divide by two to arrive at the
Average Equity for each such year.
2. Divide the Net Income as determined for each such year by the Average
Equity of the company for each such year to arrive at the Return on
Average Equity. Net Income equals Reported Net Income less those
items required to be reported as unusual items.
3. Add the Return on Average Equity for each year of the Restricted Period
as determined above and divide by the number of years in the Restricted
Period to arrive at the Average Return on Average Equity during the
Restricted Period.
Example
-------
Assuming a four-year Restricted Period.
<TABLE>
<CAPTION>
1993 1992 1991 1990
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning Equity 550 492 465 404
Ending Equity 650 550 492 465
---- ---- --- ---
1200 1042 957 869
*2 *2 *2 *2
---- ---- --- ---
Average Equity 600 521 478.5 434.4
Net Income 100 97 86 75
Return on 100 = 16.7% 97 = 18.6% 86 = 18.0% 75 = 17.3%
Average Equity --- --- --- ---
600 521 478.5 434.4
*divided by
Year Return on Average Equity
- ---- ------------------------
1990 17.3%
1991 18.0%
1992 18.6%
1993 16.7%
-----
70.6 divided by 4 = 17.65% Average Return
on Average Equity
</TABLE>
<PAGE>
<PAGE>
SCHEDULE
The following individuals have executed this form agreement on
February 12, 1997:
James Barden
Michael J. Boden
Sandra M. Buffa
Mitchell Goodman
Lonald R. Johnson
James W. Krause
D. Michael Lampman
Susan Meador
Angus C. Morrison
Robert W. Stein
Michael Thomas
Patric L. Welch
<TABLE>
<CAPTION>
EXHIBIT 11
NATIONAL VISION ASSOCIATES, LTD.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(000's except net income per common share information)
Three Months Ended
-----------------------------
March 30, March 29,
1996 1997
---- ----
<S> <C> <C>
NET INCOME $ 991 $ 1,653
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 20,602 20,648
Common stock equivalents using
the treasury stock method 40 130
AVERAGE COMMON SHARES ------- -------
OUTSTANDING AS ADJUSTED 20,642 20,778
======= =======
NET INCOME PER COMMON SHARE $ 0.05 $ 0.08
======= =======
</TABLE>
SFAS Statement No. 128 "Earnings per Share" is effective for financial
statements for both interim and annual periods ending after December 15,
1997. Management anticipates that the statement, which revises the
calculation for earnings per share, will not have a material affect on the
computation of per share earnings.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 29, 1997 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 29, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000868263
<NAME> NATIONAL VISION ASSOCIATES, LTD.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 2,878
<SECURITIES> 0
<RECEIVABLES> 5,400
<ALLOWANCES> 402
<INVENTORY> 22,557
<CURRENT-ASSETS> 31,518
<PP&E> 72,338
<DEPRECIATION> 29,439
<TOTAL-ASSETS> 79,666
<CURRENT-LIABILITIES> 19,179
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 31,355
<TOTAL-LIABILITY-AND-EQUITY> 79,666
<SALES> 44,362
<TOTAL-REVENUES> 44,362
<CGS> 20,143
<TOTAL-COSTS> 20,143
<OTHER-EXPENSES> 20,971
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 488
<INCOME-PRETAX> 2,760
<INCOME-TAX> 1,107
<INCOME-CONTINUING> 1,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,653
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
