SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 23, 1998
VISTA EYECARE, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Georgia
----------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-20001 58-1910859
------------------------ ---------------------------------------
(Commission File Number) (I.R.S. Employer Identification Number)
296 Grayson Highway, Lawrenceville, Georgia 30045
-------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(770) 822-3600
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
On December 31, 1998, the registrant filed Articles of
Amendment to its Amended and Restated Articles of Incorporation,
changing its name from National Vision Associates, Ltd. to Vista
Eyecare, Inc. All information historically reported as National
Vision Associates, Ltd. is presented as Vista Eyecare, Inc. ("Vista").
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 23, 1998, the registrant completed its tender offer
for all the issued and outstanding capital stock of New West Eyeworks,
Inc. ("New West"), which operates approximately 120 free-standing
retail vision centers as well as approximately 60 retail vision
centers located in Fred Meyer stores. New West also operates an
optical laboratory and has its administrative offices in Tempe,
Arizona. The registrant paid approximately $70.0 million consisting
of cash and the assumption of approximately $3.2 million of debt. The
transaction was financed through the issuance of the registrant's $125
million Senior Notes due 2005. The registrant intends to continue to
operate substantially all of the vision centers and to achieve
administrative and manufacturing synergies.
ITEM 5. OTHER EVENTS.
On October 23, 1998, Barry J. Feld, the President and Chief
Executive Officer of New West, was appointed President and Chief
Operating Officer of the registrant and a member of its Board of
Directors. On October 20, 1998, James E. Kanaley was appointed to the
Board of Directors of the registrant. The number of members of the
Board of Directors has accordingly been increased to seven. On October 20,
1998, Timothy W. Ranney was appointed Vice President, Corporate
Controller.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Business Acquired
New West Eyeworks, Inc. Consolidated Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheets for the years ended
December 28, 1996 and December 28, 1997 and
September 26, 1998 (Unaudited) F-2
Consolidated Statements of Operations for the years
ended December 30, 1995, December 28, 1996, and
December 27, 1997 and for the Nine Months ended
September 27, 1997 and September 26, 1998 (Unaudited) F-3
Consolidated Statements of Shareholders' Equity for the
years ended December 30, 1995, December 28, 1996,
December 27, 1997 and for the Nine Months Ended
September 26, 1998 (Unaudited) F-4
Consolidated Statements of Cash Flows for the years
ended December 30, 1995, December 28, 1996, December 27,
1997; and for the Nine Months Ended September 27, 1997
and September 26, 1998 (Unaudited) F-5
Notes to Consolidated Financial Statements F-6
<PAGE>
(b) Pro forma Financial Information
Unaudited Pro Forma Condensed Consolidated Financial
Data PF-1
Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of October 3, 1998 PF-2
Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet PF-3
Unaudited Pro Forma Condensed Consolidated
Statements of Operations For the Year Ended
January 3, 1998 PF-5
Unaudited Pro Forma Condensed Consolidated
Statement of Operations For the Nine Months
Ended October 3, 1998 PF-6
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations PF-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of New West Eyeworks, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders' equity
and of cash flows present fairly, in all material respects, the
financial position of New West Eyeworks, Inc. and its subsidiaries at
December 27, 1997 and December 28, 1996, and the results of their
operations and their cash flows for each of the three years in the
period ended December 27, 1997, in conformity with generally accepted
accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Phoenix, Arizona
March 6, 1998
F-1<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED BALANCE SHEET
December 28, December 27, September 26,
1996 1997 1998
------------ ------------ -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 256,000 $ 577,000 $ 397,000
Accounts receivable, net........................... 1,304,000 1,741,000 2,483,000
Inventory.......................................... 3,190,000 3,519,000 4,466,000
Deferred tax assets................................ 579,000 508,000
Other current assets............................... 309,000 400,000 269,000
------------- ------------ ------------
Total current assets....................... 5,059,000 6,816,000 8,123,000
Property and equipment, net.......................... 7,518,000 9,108,000 11,550,000
Goodwill, net........................................ 506,000 416,000 348,000
Other assets......................................... 44,000 12,000 14,000
------------- ------------ ------------
Total assets............................... $ 13,127,000 $ 16,352,000 $ 20,035,000
============= ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................... $ 5,392,000 $ 4,022,000 $ 5,256,000
Accrued expenses................................... 1,868,000 1,948,000 1,894,000
Line of credit..................................... 1,968,000 30,000 542,000
Deferred warranty revenues......................... 279,000 271,000 301,000
Notes payable and capital lease obligations,
current portion................................. 320,000 338,000 673,000
Notes payable to related party..................... 358,000
------------- ------------ ------------
Total current liabilities.................. 10,185,000 6,609,000 8,666,000
Notes payable and capital lease obligations.......... 516,000 291,000 1,936,000
------------- ------------ ------------
Total liabilities.......................... 10,701,000 6,900,000 10,602,000
------------- ------------ ------------
Stockholders' Equity:
Series A 6% Cumulative Convertible Preferred
Stock, $1,000 par value, 3,960 shares
authorized, issued and outstanding.............. 3,960,000 3,960,000 3,960,000
Series B 6% Cumulative Convertible Preferred
Stock, $1,000 par value, 1,500 shares
authorized, issued and outstanding.............. 1,500,000 1,500,000 1,500,000
Common stock, $0.01 par value, 25,000,000
shares authorized, 4,868,436 and 3,763,036
shares issued and outstanding at December 27,
1997 and December 28, 1996, respectively........ 38,000 49,000 49,000
Paid-in capital.................................... 10,100,000 15,630,000 15,746,000
Accumulated deficit................................ (13,172,000) (11,687,000) (11,822,000)
------------- ------------ ------------
Total stockholders' equity................. 2,426,000 9,452,000 9,433,000
------------- ------------ ------------
Total liabilities and stockholders'
equity .................................. $ 13,127,000 $ 16,352,000 $ 20,035,000
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended Nine Months Ended
----------------------------------------- ---------------------------
December 30, December 28, December 27, September 27, September 26,
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ....................... $40,033,000 $43,940,000 $49,212,000 $37,855,000 $41,449,000
Cost of sales.................... 20,352,000 21,719,000 24,253,000 18,533,000 20,556,000
----------- ----------- ----------- ----------- -----------
Gross profit................... 19,681,000 22,221,000 24,959,000 19,322,000 20,893,000
Selling, general and
administrative expenses........ 21,667,000 21,173,000 23,641,000 17,902,000 20,290,000
----------- ----------- ----------- ----------- -----------
Operating income (loss).......... (1,986,000) 1,048,000 1,318,000 1,420,000 603,000
Acquisition related expenses..... -- -- -- -- 270,000
Interest income.................. 12,000 -- 66,000 64,000 --
Interest expense ................ 51,000 216,000 122,000 102,000 154,000
----------- ----------- ----------- ----------- -----------
Income (loss) before
income tax expense............. (2,025,000) 832,000 1,262,000 1,382,000 179,000
Income tax benefit
(expense) ..................... -- (30,000) 547,000 (27,000) (71,000)
----------- ----------- ----------- ----------- -----------
Net income (loss)................ (2,025,000) 802,000 1,809,000 1,355,000 108,000
Preferred stock dividends ....... (329,000) (328,000) (324,000) (243,000) (243,000)
----------- ----------- ----------- ----------- -----------
Net income
(loss) applicable to
common shares ................. $(2,354,000) $ 474,000 $ 1,485,000 $ 1,112,000 $ (135,000)
=========== =========== =========== =========== ===========
Basic and diluted income
(loss) per share .............. $ (0.63) $ 0.13 $ 0.31 $ 0.24 $ (0.03)
=========== =========== =========== =========== ===========
Weighted average shares
outstanding - Basic ............ 3,763,000 3,763,000 4,717,000 4,666,000 4,877,000
Weighted average shares
outstanding - Diluted ......... 3,763,000 3,786,000 4,785,000 4,720,000 5,027,000
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Shares Amounts
------------------- -----------------------------------------------------------
Paid-in Accumulated
Preferred Common Preferred Common Capital Deficit Total
--------- ------ --------- ------ ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1994 ...................... 5,460 3,763,036 $5,460,000 $38,000 $10,070,000 $(11,292,000) $ 4,276,000
Preferred stock dividends.... (329,000) (329,000)
Net loss..................... (2,025,000) (2,025,000)
----- --------- ---------- ------- ----------- ------------ ------------
Balances at December 30,
1995 ...................... 5,460 3,763,036 5,460,000 38,000 10,070,000 (13,646,000) 1,922,000
Issuance of warrants......... 30,000 30,000
Preferred stock dividends.... (328,000) (328,000)
Net income................... 802,000 802,000
----- --------- ---------- ------- ----------- ------------ ------------
Balances at December 28,
1996 ...................... 5,460 3,763,036 5,460,000 38,000 10,100,000 (13,172,000) 2,426,000
Common stock issued.......... 1,105,400 11,000 5,530,000 5,541,000
Preferred stock dividends.... (324,000) (324,000)
Net income .................. 1,809,000 1,809,000
----- --------- ---------- ------- ----------- ------------ ------------
Balances at December 27,
1997 ...................... 5,460 4,868,436 5,460,000 49,000 15,630,000 (11,687,000) 9,452,000
Exercise of stock options
(unaudited)................. 19,000 116,000 116,000
Preferred stock dividends
(unaudited) ................ (243,000) (243,000)
Net income (unaudited)...... 108,000 108,000
----- --------- ---------- ------- ----------- ------------ ------------
Balances at September 26, 1998
(unaudited)................. 5,460 4,887,436 $5,460,000 $49,000 $15,746,000 $(11,822,000) $ 9,433,000
====== ========= ========== ======= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Fiscal Year Ended Nine Months Ended
----------------------------------------------- --------------------------
December 30, December 28, December 27, September 27, September 26,
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES:
Net income (loss) ............................... $ (2,025,000) $ 802,000 $ 1,809,000 $1,355,000 $ 108,000
Adjustments to reconcile net income (loss) to
net cash from (used in) operating activities:
Depreciation and amortization.................. 1,048,000 1,229,000 1,505,000 1,129,000 1,288,000
Loss on disposal of fixed assets .............. 65,000 2,000 3,000 15,000
Deferred income taxes .......................... (579,000) 71,000
Changes in assets and liabilities:
Accounts receivable ........................... (124,000) (305,000) (437,000) (518,000) (742,000)
Inventory ..................................... (281,000) (58,000) (329,000) (686,000) (947,000)
Other current assets .......................... 52,000 (231,000) (91,000) 213,000 131,000
Accounts payable .............................. 1,696,000 (363,000) (1,370,000) (1,458,000) 1,234,000
Accrued expenses .............................. 603,000 (1,228,000) 80,000 489,000 (54,000)
Deferred warranty revenues .................... (240,000) (69,000) (8,000) (6,000) 30,000
Other assets and liabilities .................. (72,000) (57,000) 32,000 29,000 (2,000)
------------ ------------ ----------- ----------- -----------
Net cash from (used in) operating .........
activities ............................... 722,000 (280,000) 614,000 550,000 1,132,000
------------ ------------ ----------- ----------- -----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment .............. (1,532,000) (1,459,000) (2,864,000) (1,970,000) (3,407,000)
------------ ------------ ----------- ----------- -----------
Net cash (used in) investing activities.... (1,532,000) (1,459,000) (2,864,000) (1,970,000) (3,407,000)
------------ ------------ ----------- ----------- -----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from the revolving line of credit ...... 24,050,000 8,136,000 5,126,000 45,522,000
Payment on the revolving line of credit ......... (22,082,000) (10,074,000) (7,094,000) (43,010,000)
Proceeds from the bridge loans .................. 1,050,000
Payment of bridge loans ......................... (700,000) (358,000) (358,000)
Proceeds from capital leases .................... 505,000
Payment of capital leases ....................... (208,000) (236,000) (350,000) (252,000) (290,000)
Payment of preferred stock dividends............. (246,000) (328,000) (324,000) (243,000) (243,000)
Net proceeds from common stock offering ......... 5,541,000 5,541,000
Exercise of stock options........................ 116,000
------------ ------------ ----------- ----------- -----------
Net cash from financing activities......... 51,000 1,754,000 2,571,000 2,720,000 2,095,000
------------ ------------ ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents .................................... (759,000) 15,000 321,000 1,300,000 (180,000)
Cash and Cash equivalents, beginning of year ..... 1,000,000 241,000 256,000 256,000 577,000
------------ ------------ ----------- ----------- -----------
Cash and Cash equivalents, end of year ........... $ 241,000 $ 256,000 $ 577,000 $ 1,556,000 $ 397,000
============ ============ =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ................................... $ 51,000 $ 208,000 $ 122,000 102,000 153,000
Income taxes paid ............................... 30,000 25,000 11,000 19,000
Assets acquired under capital lease ............. 524,000 141,000 136,000 270,000
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
New West Eyeworks, Inc. (the Company) is a leading specialty
retailer of eyewear, operating under the trade names "Vista Optical"
and "Lee Optical." The Company operates value-priced optical stores in
thirteen states. These stores are located in malls, strip shopping
centers and Fred Meyer host stores. The Company operates optical
laboratory and distribution facilities in Tempe, Arizona and near
Portland, Oregon.
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 reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION: The accompanying financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated.
FISCAL YEAR: The Company's fiscal year ends on the last Saturday of
the calendar year. References to the year 1995, 1996, and 1997 relate
to the fiscal years ended December 30, 1995, December 28, 1996, and
December 27, 1997, each of which consisted of 52 weeks.
REVENUE RECOGNITION: Revenues are recognized at the time of
customer order. Revenues from separately priced warranty contracts are
deferred and recognized on a pro rata basis over the contract period.
The Company receives certain vendor rebates and allowances which are
reflected in operations based on the terms of the underlying
agreements. Such amounts are classified as reductions of either
selling, general and administrative costs or cost of sales as
appropriate.
STORE OPENING COSTS: The Company expenses store opening costs as
incurred.
ADVERTISING COSTS: The Company expenses advertising production
costs in the period in which the related advertisement first takes
place. Advertising communication costs such as television air time and
newspaper advertising space are expensed as the related services are
received. All other costs are expensed as incurred. Advertising
expenses totaled $4,136,000, $3,576,000, and $4,228,000, for the years
1995, 1996, and 1997, respectively.
CASH AND CASH EQUIVALENTS: The Company considers liquid investments
with an original maturity of three months or less to be cash
equivalents.
ACCOUNTS RECEIVABLE: Accounts receivable are primarily comprised of
amounts due from insurance and managed care plans on sales where the
Company has contractual arrangements or has accepted an assignment of
insurance benefits from the customer. The reported balance is net of
an allowance for doubtful accounts of $139,000 and $159,000 at
December 28, 1996, and December 27, 1997, respectively.
F-6<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORY AND COST OF SALES: Inventory primarily consists of the
direct material cost of eyeglass frames, contact lenses, ophthalmic
lenses and optical laboratory supplies and is stated at the lower of
cost or market. Cost is determined using the first-in, first-out
method.
Cost of sales includes the cost of merchandise sold during the year,
optical laboratory costs directly related to manufacturing eyeglasses,
store occupancy expenses, and depreciation expense relating to store
and optical laboratory fixtures and equipment.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the related
assets which range from five to ten years. Major improvements are
capitalized while repairs which do not extend the useful life of the
asset are expensed.
GOODWILL: Goodwill represents the cost in excess of the net assets
of a business acquired and is being amortized for financial statement
purposes on a straight-line basis over a period of fifteen years. The
reported balance is net of accumulated amortization of $759,000 and
$849,000 at December 28, 1996, and December 27, 1997 respectively. The
Company evaluates the possibility of goodwill impairment when events
or changes in economic circumstances indicate that the related
carrying amount may not be recoverable.
ACCOUNTS PAYABLE: Accounts payable includes $644,000 at December 28,
1996 and $641,000 at December 27, 1997 relating to the
reclassification of book overdrafts.
STOCK COMPENSATION: The Company measures compensation expense
related to employee stock options using the intrinsic value-based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations.
INCOME TAXES: The Company accounts for income taxes using the
liability method, recognizing temporary differences between the
financial reporting basis of the Company's assets and liabilities and
the related income tax basis for such assets and liabilities. This
method generates a net deferred income tax liability or a net deferred
income tax asset for the Company as of the end of the year, as
measured by the statutory tax rates in effect as enacted. The Company
derives its deferred income tax charge or benefit by recording the
change in the net deferred income tax liability or net deferred income
tax asset balance for the year.
The Company's deferred income tax assets include certain future tax
benefits. The Company records a valuation allowance against the
portion of these deferred income tax assets which it believes it will
more likely than not fail to realize.
F-7<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE: In 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS No.
128). Basic earnings per share is computed by dividing income
applicable to common shares by the weighted average number of common
shares outstanding for the year. Diluted earnings per share is similar
to basic earnings per share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potential dilutive common shares had been issued.
Adoption of SFAS No. 128 did not effect the Company's previously
reported income (loss) per share computations for years subsequent to
its initial public offering. The following table presents a
reconciliation of the basic and diluted earnings per share
calculations:
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per share:
Numerator:
Net income (loss) applicable to common
shares ..................................... $(2,354,000) $ 474,000 $1,485,000
----------- ---------- ----------
Denominator:
Weighted average common shares
outstanding ............................... 3,763,000 3,763,000 4,717,000
----------- ---------- ----------
Basic earnings (loss) per share ................ $ (0.63) $ 0.13 $ 0.31
=========== ========== ==========
Diluted earnings per share:
Numerator:
Net income (loss) applicable to common
shares .................................... $(2,354,000) $ 474,000 $1,485,000
------------ ---------- ----------
Denominator:
Weighted average common shares
outstanding ............................... 3,763,000 3,763,000 4,717,000
Weighted average employee stock options....... --- 23,000 68,000
------------ ---------- ----------
3,763,000 3,786,000 4,785,000
------------ ---------- ----------
Diluted earnings (loss) per share ............... $ (0.63) $ 0.13 $ 0.31
============ ========== ==========
</TABLE>
Unaudited Interim Financial Statements: The interim consolidated
financial statements as of September 26, 1998 and for the nine-month
periods ended September 26, 1998 and September 27, 1997 are unaudited.
In the opinion of management, such interim consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Company's consolidated financial
position as of September 26, 1998 and the consolidated results of
operations and cash flows for the periods ended September 26, 1998
and September 27, 1997. The interim results are not necessarily indicative
of results which may occur for the full year.
F-8<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY, EQUIPMENT AND LEASES
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 28, December 27,
1996 1997
------------ ------------
<S> <C> <C>
Store fixtures and equipment............... $ 11,549,000 $ 13,796,000
Laboratory fixtures and equipment.......... 2,100,000 2,286,000
Other fixtures and equipment............... 2,558,000 2,717,000
Building and improvements ................. 641,000 686,000
Construction in progress .................. 188,000
------------ ------------
16,848,000 19,673,000
Less: accumulated depreciation ............ (9,330,000) (10,565,000)
------------ ------------
$ 7,518,000 $ 9,108,000
============ ============
</TABLE>
The Company leases substantially all of its store facilities under
operating leases which expire at various dates through 2002. Certain
leases require payment of property taxes, utilities, common area
maintenance and insurance as well as additional rent if sales exceed
specified amounts. Total rent expense incurred during 1995, 1996, and
1997 approximated $5,000,000, $5,493,000, and $6,069,000,
respectively, including additional rent expense of $889,000,
$1,045,000, and $1,192,000, respectively. At December 27, 1997, future
minimum annual rental commitments under noncancelable operating leases
were as follows:
1998 .................................. $ 3,820,000
1999 .................................. 3,184,000
2000 .................................. 2,455,000
2001 .................................. 2,016,000
2002 .................................. 1,554,000
Thereafter ............................ 3,109,000
-----------
$16,138,000
===========
3. LINE OF CREDIT
The Company entered into a new $3.0 million revolving line of credit
agreement and a $2.0 million term loan agreement with a major national
bank in August 1997. The revolving line of credit matures on August 1,
1999, and is secured by the Company's inventory, accounts receivable,
F-9
<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and general intangibles. The revolving line of credit bears interest
at a rate of prime plus one-eighth percent (8.625% at December 27,
1997) or, at the Company's option, a rate equal to the then current
London Interbank Offered Rate ("LIBOR") for the term selected by the
Company plus 2.35% on any principal outstanding; interest is payable
on a monthly basis. The Company may request advances on the term loan
until August 1, 1998, at which time the balance will be amortized over
a 48 month period. The term loan is secured by the Company's property
and equipment, and bears interest at a rate of prime plus one-half
percent or, at the Company's option, a rate equal to LIBOR for the
term selected by the Company plus 2.75% on any principal outstanding.
At December 27, 1997, $30,000 was outstanding on the revolving line of
credit while no amounts were outstanding under the term loan.
The Company entered into a $2.0 million revolving line of credit
with a bank in June 1996. The revolving line of credit matured on May 31,
1997, and was secured by substantially all of the Company's
assets, including the Company's executive office building and optical
laboratory in Tempe, Arizona, but excluding furniture, fixtures, and
equipment. The Company repaid the line of credit borrowings with a
portion of the proceeds from its February 1997 common stock offering
described in Note 5.
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable, and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
December 28, December 27,
1996 1997
------------ ------------
<S> <C> <C>
Capital lease obligations ............................................... $ 836,000 $ 629,000
Notes payable - related party .......................................... 358,000
---------- ----------
Total debt ...................................................... 1,194,000 629,000
Less: current portion ................................................... 678,000 338,000
---------- ----------
Total long-term debt ............................................ $ 516,000 $ 291,000
========== ==========
</TABLE>
In early 1996, the Company entered into two bridge loans with
Mesirow Capital Partners VI, a common and preferred stockholder, and
Ronald E. Weinberg, Chairman of the Board, totaling $700,000 to fund
the Company's expansion and advertising needs. The loans bore interest
at an annual rate of 15% and were secured by a deed of trust on the
Company's executive office building and optical laboratory facility in
Tempe, Arizona. The bridge loans were retired with the proceeds of the
former revolving line of credit described in Note 3.
In December 1996, the Company entered into a bridge loan for
$350,000 with The Second National Bank of Warren (Ohio). The loan was
scheduled to mature on June 2, 1997 and bore interest at a rate equal
to the lending bank's prime rate plus 1.5% per annum, payable upon
maturity. The loan was guaranteed by Mr. Weinberg and Mr. Feld agreed
to share in the guaranty. The Company paid Mr. Weinberg and Mr. Feld a
F-10<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
total of $7,500 in exchange for their guaranty of the loan. Norman C.
Harbert, a director of the Company, is also a director of Second
Bancorp Inc., the parent holding company of the Second National Bank
of Warren (Ohio). The Bridge Loan was retired with a portion of the
proceeds from the February 1997 common stock offering described in
Note 5.
5. STOCKHOLDERS' EQUITY
In February 1997, the Company completed a public offering (the
"Offering") of 1,505,400 shares of its common stock, including shares
sold upon the exercise of the underwriters' over allotment option.
Gross proceeds, direct costs, and net proceeds of this Offering
totaled approximately $6,626,000, $1,085,000, and $5,541,000,
respectively. Of the shares sold, 400,000 shares were sold by selling
stockholders. The Company did not receive any proceeds from the sale
of shares by the selling stockholders.
In December 1993, the Company issued 3,960 shares of Series A and
1,500 shares of Series B $1,000 par value 6% Cumulative Convertible
Preferred Stock (the "Preferred Stock"). The Preferred Stock is
redeemable by the Company at par value plus accrued but unpaid
dividends; however, Series B shares cannot be redeemed while any
Series A shares are outstanding. The number of common shares issuable
upon conversion is determined by dividing the par value of outstanding
Preferred Stock by $8.40, subject to customary adjustments. Dividends
on the Preferred Stock are payable quarterly, at an annual rate of $60
per share.
6. COMMON STOCK OPTIONS AND WARRANTS
In October 1993, the Company established the New West Eyeworks Stock
Option Plan under which certain eligible employees and directors of
the Company may receive awards in the form of stock options. Certain
stock options become exercisable on the date the Company achieves
annual earnings per share targets while others become exercisable
immediately or over a multi-year period with the options vesting
ratably during that period. The exercise price is generally equal to
the fair market price of the Company's common stock on the date of the
grant. The stock option exercise period may not exceed ten years from
the date of grant.
F-11<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Company's Stock Option Plan as of
December 30, 1995 December 28, 1996, and December 27, 1997, and
changes during the years ended is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of
year ..................................... 108,500 $7.00 131,500 $5.89 143,500 $5.56
Granted .................................. 99,500 $4.10 53,000 $4.25 159,000 $6.75
Exercised ................................
Forfeited ................................ (76,500) $4.99 (41,000) $5.00 (7,000) $4.75
------- ------- -------
Options outstanding at end of year .......... 131,500 $5.89 143,500 $5.56 295,500 $6.29
======= ======= =======
Options exercisable at end of year .......... 86,500 $7.00 77,000 $6.90 163,600 $6.31
Weighted-average fair value of options
granted during the year .................. $2.12 $2.12 $3.61
</TABLE>
The following table summarizes information about the stock options
granted during 1995, 1996, and 1997 which are outstanding at December 27, 1997:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Range of Average Average Average
Exercise Options Remaining Exercise Options Exercise
Prices Outstanding Contract Life Price Exercisable Price
----------- ----------- ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$3.44-$4.63 64,500 7.2-8.2 years $4.14 6,600 $4.63
$5.50-$7.00 189,000 6.0-9.1 years $6.31 157,000 $6.38
$9.50 42,000 9.8 years $9.50 --- ---
------- -------
295,500 163,600
======= =======
</TABLE>
For purposes of determining the weighted average fair market value
of the options granted during the year, the Company used the Black-Scholes
option-pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield ............................... 0% 0% 0%
Expected stock price volatility........................ 50% 50% 50%
Risk free interest rate ............................... 7.1% 5.3% 4.6%
Expected option life .................................. 5 years 5 years 5 years
</TABLE>
F-12<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company applies APB 25 and related
interpretations in accounting for its stock option plan and,
accordingly, does not recognize compensation expense. If the Company
had elected to recognize compensation expense based on the fair value
of the options granted at grant date as prescribed by SFAS No. 123,
net income and earnings per share (basic and diluted) for 1997 would
have been reduced by approximately $170,000 and $0.04, respectively.
Similar pro forma disclosures for 1996 and 1995 have not been
presented as the effect of such pro forma adjustments is not material.
In connection with the initial public offering in December 1993, the
Company sold warrants to its primary underwriter and two individuals
at a nominal price (1993 Warrants). The 1993 Warrants, which are
exercisable for a four-year period commencing December 23, 1994,
entitle the holders to purchase a total of 106,563 shares of the
Company's common stock at an exercise price of 125% of the initial
public offering price of $7.00 per share ($8.75 per share). In
conjunction with the Offering in early 1997, the Company reduced the
exercise price of the 1993 Warrants from $8.75 to $8.00 per share.
In connection with the Offering, the Company granted to its primary
underwriter and certain individuals warrants (1997 Warrants) to
purchase a number of shares of common stock equal to the number of
shares of common stock that remain issuable and unexercised under the
1993 Warrants upon their termination. The 1997 Warrants are
exercisable beginning on December 23, 1998, the termination date of
the 1993 Warrants, for a period of three years terminating on December 23,
2001. The initial exercise price for the 1997 Warrants will equal
the exercise price under the 1993 Warrants upon their termination,
which price is currently $8.00.
In exchange for the guarantee of the Company's obligations under its
former line of credit by certain officers and shareholders, the
Company issued warrants to them to purchase, in the aggregate, 50,000
shares of the Company's common stock at a price per share of $6.11,
subject to customary anti-dilution adjustments. The value of the
warrants, which was determined by independent valuation to be $0.57
per share, is reflected on the December 28, 1996 balance sheet in
other assets and paid-in capital and was amortized to expense in 1997,
concurrent with the termination of the revolving line of credit.
F-13<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
Income tax (expense) benefit is comprised of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Current (expense) benefit:
Federal .............................. -- $(30,000) $(32,000)
State ................................ -- -- --
-------- -------- --------
Total ........................ -- (30,000) (32,000)
-------- -------- --------
Deferred (expense) benefit:
Federal .............................. -- -- 521,000
State ................................ -- -- 58,000
-------- -------- --------
Total ........................ -- -- 579,000
-------- -------- --------
Total (expense) benefit ...... -- $(30,000) $547,000
======== ======== ========
</TABLE>
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
December 28, 1996 December 27, 1997
----------------- -----------------
<S> <C> <C>
Net operating loss carryforwards ................. $2,873,000 $ 2,297,000
Employee benefits ................................ 244,000 289,000
Deferred warranty revenues ....................... 112,000 108,000
Other ............................................ 306,000 317,000
----------- -----------
Deferred tax assets .............................. 3,535,000 3,011,000
Less: valuation allowance ........................ (3,535,000) (2,432,000)
----------- -----------
Net deferred tax assets ..................... $ --- $ 579,000
=========== ===========
</TABLE>
F-14<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax (expense) benefit differs from the amount determined by
applying the U.S. statutory federal tax rate of 34% to income (loss)
before income tax (expense) benefit as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Expected income tax (expense) benefit $ 689,000 $(283,000) $ (429,000)
Nondeductible expenses (38,000) (56,000) (49,000)
(Increase) decrease in valuation allowance (651,000) 309,000 1,025,000
---------- --------- ----------
Income tax (expense) benefit $ --- $ (30,000) $ 547,000
========== ========= ==========
</TABLE>
The Company increased its valuation allowance in 1995 due to the net
operating loss (NOL) incurred during the year coupled with the lack of
sustained historical profitability. In 1996, the Company returned to
profitability and reduced its valuation allowance as it was able to
substantially offset taxable income generated during the year with
existing NOL carryforwards. The Company further reduced its valuation
allowance in 1997 because of its ability to once again substantially
offset taxable income generated during the year as well as the
Company's belief that it will be able to realize a portion of its
remaining deferred tax assets. The Company will consider further
reduction to or elimination of the remaining valuation allowance as
profitable operations continue.
As of December 27, 1997, the Company had NOL carryforwards of $5.7
million and $4.9 million for regular tax and alternative minimum tax
purposes, respectively, which begin to expire in 2006. The Company
also has nonexpiring alternative minimum tax credit carryforwards of
$79,000 available to offset future regular taxes.
8. EMPLOYEE BENEFIT PLAN
The Company established the New West Eyeworks, Inc. Profit Sharing
and 401(k) Savings Plan (the Plan) for the benefit of employees
(participants) who meet certain age and eligibility requirements. The
Plan provides for discretionary profit sharing contributions as well
as employer matching contributions on participants' pre-tax savings
deferrals. A profit sharing contribution was not made in 1995, 1996 or
1997; however, employer matching contributions approximated $97,000,
$90,000, and $106,000 in 1995, 1996 and 1997, respectively.
9. RELATED PARTY TRANSACTIONS
The Company is a party to an expense sharing arrangement whereby it
pays an entity owned by an officer of the Company for certain services
provided by such entity for the Company and as reimbursement for
certain expenses incurred directly on behalf of the Company. The
aggregate amount of the payments by the Company to such entity,
including expenses incurred directly on behalf of the Company, were
approximately $136,000, $109,000, and $137,000 in 1995, 1996 and 1997,
respectively.
F-15<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A director of the Company is a partner in a law firm which provides
legal services to the Company. The aggregate amount of expense
included in 1996 and 1997 for services provided to the Company by this
entity amount to $158,000 and $173,000, respectively.
10. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is involved in legal matters which
are incidental to its operations. In the opinion of management, the
ultimate resolution of these matters is not anticipated to have a
material adverse effect on the Company's financial condition or
results of operations.
11. (UNAUDITED) SUBSEQUENT EVENT
On October 23, 1998, Vista Eyecare, Inc. completed its tender offer
for all the issued and outstanding capital stock of the Company. In
connection with this transaction, the Company incurred approximately
$270,000 of related costs through September 26, 1998. These costs
have been reflected as acquisition related expenses in the accompanying
consolidated statement of operations.
F-16
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial
data ("Pro Forma Financial Statements") as of October 3, 1998, for the
year ended January 3, 1998, and for the nine-month period ended
October 3, 1998, have been derived by the application of pro forma
adjustments to the historical financial statements of Vista, Frame-n-Lens
Optical, Inc. ("Frame-n-Lens"), and New West Eyeworks, Inc. ("New West").
Historical financial statements for Frame-n-Lens were included with the
Company's Current Report on Form 8-K/A filed with the Securities and
Exchange Commission on October 13, 1998. New West historical financial
statements are included herein.
The unaudited pro forma condensed consolidated balance sheet has been
prepared to give effect to the New West Acquisition, the closing of the
new $25 million revolving credit facility, and the sale of $125 million of
Senior Notes due 2005 as if each occurred on October 3, 1998. The unaudited
pro forma condensed consolidated statements of operations for the year ended
January 3, 1998 and the nine-month period ended October 3, 1998, have been
presented to give effect to the Frame-n-Lens acquisition, the New West
acquisition (using the financial data for the corresponding fiscal periods
of the respective companies), the closing of the new Credit Facility, and
the sale of the Senior Notes as if each occurred at the beginning of
the respective periods.
The Pro forma Financial Statements include pro forma data
relative to the Frame-n-Lens acquisition completed July 28, 1998.
Such data is incorporated in the pro forma financial statements
to provide a more complete representation of the pro forma condensed
consolidated statement of operations of Vista.
The pro forma adjustments are described in the accompanying notes
and are based upon available information and certain assumptions that
the Company believes are reasonable, including assumptions relating to
the allocation of the consideration paid in connection with the acquisitions
of Frame-n-Lens and New West to the respective assets and liabilities based
on estimates of their respective fair values.
The Pro Forma Financial Statements do not purport to represent what
the Company's results would have been if the Frame-n-Lens acquisition,
the New West Acquisition, the closing of the new Credit Facility, and
the sale of the Senior Notes had occurred on the date or for the periods
indicated, or to project what the Company's results of operations or
financial position for any future period or date will be. The Pro
Forma Financial Statements should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
PF-1<PAGE>
<TABLE>
<CAPTION>
Vista Eyecare, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
October 3, 1998
(dollars in thousands)
Pro forma
Vista New West Acquisition Financing October 3,
Historical Eyeworks Adjustments Adjustments 1998
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 2,408 397 (72,145) (a) 126,323 (c) 35,883
(600) (d)
(20,500) (e)
Accounts receivable (net) 8,583 2,483 (255) (a) 10,811
Inventories (net) 28,248 4,466 (445) (a) 32,269
Other current assets 2,347 777 (180) (a) 2,944
------------------------------- --------- -------
Total current assets 41,586 8,123 (73,025) 105,223 81,907
------------------------------- --------- -------
Net Property and equipment 48,191 11,550 (358) (a) 59,383
Other assets and deferred costs (net) 6,032 14 5,033 (c) 15,679
4,600 (d)
Intangible assets (net) 41,756 348 63,476 (a) 105,580
------------------------------- --------- -------
Total assets 137,565 20,035 (9,907) 114,856 262,549
================================ ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 11,624 5,256 16,880
Accrued expenses and other current liabilities 17,354 2,195 2,068 (a) 21,617
Current portion of long-term debt 892 1,215 (542) (a) 1,565
-------------------------------- --------- -------
Total current liabilities 29,870 8,666 1,526 40,062
Revolving credit facility ---long-term 52,000 7,776 (c) 43,276
4,000 (d)
(20,500)(e)
Long-term notes payable, net of debt discount, less
current portion 6,687 1,936 (2,000) (a) 123,580 (c) 130,203
Deferred income tax liabilities 2,595 2,595
Shareholders' equity:
Preferred Stock 5,460 (5,460) (b)
Common Stock 212 49 (49) (b) 212
Additional paid-in-capital 46,634 15,746 (15,746) (b) 46,634
Retained Earnings (deficit) 3,640 (11,822) 11,822 (b) 3,640
Cumulative foreign currency exchange rate
translation (4,073) (4,073)
-------------------------------- --------- -------
Total shareholders' equity 46,413 9,433 (9,433) 46,413
-------------------------------- --------- -------
Total liabilities and shareholders' equity 137,565 20,035 (9,907) 114,856 262,549
================================ ========= =======
</TABLE>
PF-2
<PAGE>
VISTA EYECARE, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
(a) The Pro Forma Financial Statements include information concerning
the following acquisitions:
NEW WEST ACQUISITION. On October 23, 1998, the Company acquired all
the outstanding common stock and common stock equivalents of New West.
The New West Acquisition will be accounted for as a purchase, with the
excess purchase price over the fair value of the net assets acquired
allocated to goodwill. Goodwill is $63,476 and will be amortized
over 30 years. A summary of the purchase price and the related purchase
allocation follows:
Aggregate Purchase Price
Cash paid at closing .............................. $ 65,778
Financial, accounting, legal and other direct
acquisition costs .................................. 3,825
Cash paid to extinguish line of credit ............. 2,542
--------
Aggregate purchase price.................. $ 72,145
========
Preliminary Allocation of Purchase Price
Aggregate purchase price: .......................... $ 72,145
Less net book value of assets acquired............ (11,975)
--------
Excess of cost over the net book value of assets
acquired ........................................ 60,170
Adjustments to record assets and liabilities at
fair market value:
Accounts receivable .............................. 255
Inventory ........................................ 445
Other current assets.............................. 180
Property, Plant and Equipment..................... 358
Current liabilities, including severance costs.... 2,068
--------
Total adjustments ........................ 3,306
--------
Goodwill ........................................ $ 63,476
========
FRAME-N-LENS ACQUISITION. On July 28, 1998, the Company
acquired all the outstanding capital stock of Frame-n-Lens.
The Frame-n-Lens Acquisition is being accounted for as a purchase,
with the excess of the purchase price over the fair value of the
net assets acquired to be allocated to goodwill. Goodwill is $25,961
and will be amortized over 30 years.
The results of operations for Frame-n-Lens after the date of
acquisition are included in the consolidated results of operations
for Vista. Financial information for Frame-n-Lens included in the
unaudited pro forma condensed consolidated statements of operations
as of October 3, 1998 reflects only the periods prior to the Frame-n-Lens
acquisition.
(b) Represents elimination of historical equity balances of
New West.
PF-3<PAGE>
VISTA EYECARE, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(dollars in thousands)
(c) Reflects the issuance of the Notes and the New Credit Facility:
Issuance of the Notes, net of discount............... $ 123,580
New Credit Facility ................................. 7,776
Fees and expenses ................................... (5,033)
---------
$ 126,323
=========
(d) In anticipation of the Offering, Vista entered into three
anticipatory hedging transactions with a notional amount
of $100 million. The interest rates on these instruments
were tied to U.S. Treasury securities and ranged from 5.43%
to 5.62%. The Company settled these transactions for approximately
$4,600 in September 1998 with $600 cash and additional borrowings
of $4,000 on the Existing Credit Facility. The settlement costs
will be treated as deferred financing costs amortized over the
life of the Notes.
(e) Reflects the repayment of outstanding balances under, and
termination of, the Existing Credit Facility, including additional
borrowings in (d) above.
PF-4<PAGE>
<TABLE>
<CAPTION>
Vista Eyecare, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended January 3, 1998
(dollars in thousands)
Vista Frame-n- New West Acquisition Financing
Historical Lens Eyeworks Adjustments Adjustments Pro forma
-----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Net Sales 186,354 78,371 49,212 313,937
Cost of Goods Sold 86,363 28,632 24,253 5,707 (a)
(2,648) (b) 142,307
----------------------------------------- ----------- --------
Gross Profit 99,991 49,739 24,959 (3,059) 171,630
Selling, general, and administrative expenses 89,156 49,783 23,641 (5,707) (a) 153,205
(6,649) (c)
2,981 (d)
---------------------------------------- ----------- --------
Operating Income (loss) 10,835 (44) 1,318 6,316 18,425
Interest expense, net 1,568 804 56 (533) (e) 16,475 (g) 18,593
223 (f)
Other expense (Income), net (14) (14)
---------------------------------------- ------- --------
Income (loss) before provision for income taxes 9,281 (848) 1,262 6,626 (16,475) (154)
Income tax provision (benefit) 3,708 (547) 3,843 (h) (6,590) (h) 414
---------------------------------------- ------- -------
Net Income (loss) 5,573 (848) 1,809 2,783 (9,885) (568)
======================================== ======= ========
</TABLE>
PF-5<PAGE>
<TABLE>
<CAPTION>
Vista Eyecare, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended October 3, 1998
(dollars in thousands)
NVAL Frame-n- New West Acquisition Financing
Historical Lens Eyeworks Adjustments Adjustments Pro forma
-----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Net revenues 173,099 38,890 41,449 253,438
Cost of Goods Sold 79,112 13,837 20,556 2,416 (a) 113,450
(2,471) (b)
--------------------------------------- ----------- --------
Gross Profit 93,987 25,053 20,893 55 139,988
Selling, general, and administrative expenses 81,838 26,336 20,290 (2,416) (a) 122,997
(5,070) (c)
2,019 (d)
--------------------------------------- ----------- --------
Operating Income (loss) 12,149 (1,283) 603 5,522 16,991
Interest expense, net 465 154 (453) (e) 12,154 (g) 12,487
167 (f)
Other expense, net 1,248 270 1,518
--------------------------------------- ------- --------
Income (loss) before provision for income taxes 10,901 (1,748) 179 5,808 (12,154) 2,986
Income tax provision (benefit) 4,454 (31) 71 3,131 (h) (4,862) (h) 2,763
--------------------------------------- ------- --------
Net Income (loss) 6,447 (1,717) 108 2,677 (7,292) 223
======================================= ======= ========
</TABLE>
PF-6
<PAGE>
VISTA EYECARE, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(a) Primarily represents the reclassification of other miscellaneous
store expense and store rent for New West and Frame-n-Lens,
respectively, to conform with Vista's historical presentation.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- ---------------
<S> <C> <C>
NEW WEST
COGS .................... $(1,430) $(1,423)
SG&A .................... 1,430 1,423
FRAME-N-LENS
COGS .................... $ 7,137 $ 3,839
SG&A .................... (7,137) (3,839)
COMBINED
COGS .................... $ 5,707 $ 2,416
SG&A .................... (5,707) (2,416)
</TABLE>
(b) In connection with the Frame-n-Lens Acquisition and the New West
Acquisition, the Company initiated a plan to consolidate three
manufacturing facilities (located in Los Angeles, California;
Tempe, Arizona; and Portland, Oregon) into the Frame-n-Lens
operations located in Fullerton, California. Amounts shown
below represent estimated savings for payroll related costs and
reduced occupancy expense for the applicable periods:
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- -----------------
$ 2,648 $ 2,471
PF-7<PAGE>
VISTA EYECARE, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)
(dollars in thousands)
(c) In connection with the Frame-n-Lens Acquisition and the New West
Acquisition, the Company initiated a plan to (i) close the existing
corporate support office for Frame-n-Lens and New West, and (ii)
consolidate operations with the Company's corporate support office in
Lawrenceville, Georgia. Amounts shown below represent the savings
resulting from the elimination of duplicative expenses for the
applicable periods:
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- ---------------
$ 6,649 $ 5,070
(d) Reflects additional amortization of goodwill over 30 years.
(e) Reflects elimination of interest expense on debt repaid upon the
Frame-n-Lens and New West acquisitions.
(f) Reflects amortization of the discount on deferred purchase price
obligation related to the Frame-n-Lens acquisition.
(g) Reflects the following:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- ------------------
<S> <C> <C>
Interest expense on the Notes.......... $ 15,938 $ 11,953
Interest expense on the New Credit
Facility ............................ 688 516
-------- --------
Total cash interest
expense ................... 16,626 12,469
Amortization of deferred financing
costs and debt discount ............. 1,609 1,207
-------- --------
Total interest expense ...... 18,235 13,676
Less: Interest expense on the
Existing Credit Facility............. (1,524) (1,420)
Amortization of deferred financing
fees on the Existing Credit
Facility .......................... (236) (102)
-------- --------
$ 16,475 $ 12,154
======== ========
</TABLE>
(h) Represents the net additional income tax expense (benefit)
as a result of the acquisitions and financing adjustments
at an effective rate of 40%.
PF-8<PAGE>
(c) Exhibits
The following exhibits are incorporated herein by reference:
Exhibit
Number
-------
10.57* Agreement and Plan of Merger dated as of July 13,
1998 by and among the Company, New West Eyeworks,
Inc. and NW Acquisition Corp.
23.1** Consent of PricewaterhouseCoopers LLP
_____________________________________
* Incorporated by reference to the Registrant's Schedule 14D-1 filed
with the Commission on July 20, 1998.
** Filed herewith
<PAGE>
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.
VISTA EYECARE, INC.
By: /s/ Angus C. Morrison
Angus C. Morrison
Senior Vice President,
Chief Financial Officer and Treasurer
Dated: January 8, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
23.1 Consent of PricewaterhouseCoopers LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 of Vista Eyecare, Inc. (formerly National
Vision Associates, Ltd.) of our report dated March 6, 1998, relating
to the consolidated financial statements of New West Eyeworks, Inc.,
appearing on page F-1 of Vista Eyecare, Inc.'s Current Report on Form
8-K/A filed January 8, 1999.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Phoenix, Arizona
January 8, 1999
