<PAGE>
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 July 1, 2000 Number 0-20001
VISTA EYECARE, INC.
(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 30045
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
July 21, 2000 was 21,179,103.
The Exhibit Index is located at page 25.
Page 1
<PAGE>
VISTA EYECARE, INC.
FORM 10-Q INDEX
Page of
Form 10-Q
---------
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
July 1, 2000 and January 1, 2000 3
Condensed Consolidated Statements of Operations -
Three Months Ended July 1, 2000 and July 3, 1999 5
and Six Months Ended July 1, 2000 and July 3, 1999
Condensed Consolidated Statements of Cash Flows -
Six Months Ended July 1, 2000 and July 3, 1999 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 24
PART II - OTHER INFORMATION
---------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 25
Page 2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, 2000 and January 1, 2000
(In thousands except share information)
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
------------ ---------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $7,777 $ 2,886
Accounts receivable (net of allowance: 2000-$4,039; 1999-$4,403) 13,372 10,416
Inventories 32,429 34,373
Other current assets 2,865 2,761
------- -------
Total current assets 56,443 50,436
------- -------
PROPERTY AND EQUIPMENT:
Equipment 55,536 57,750
Furniture and fixtures 27,073 26,600
Leasehold improvements 26,258 28,458
Construction in progress 994 3,427
------- -------
109,861 116,235
Less accumulated depreciation (63,536) (62,329)
------- -------
Net property and equipment 46,325 53,906
------- -------
OTHER ASSETS AND DEFERRED COSTS (net of accumulated amortization:
2000-$1,975; 1999-$1,500) 8,544 9,315
DEFERRED INCOME TAX ASSETS 385 385
GOODWILL AND OTHER INTANGIBLE ASSETS (net of accumulated
amortization: 2000-$9,292; 1999-$6,994) 103,880 106,177
------- -------
$215,577 $220,219
======= =======
</TABLE>
Page 3
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES NOT SUBJECT TO COMPROMISE:
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 590 $ 17,192
Accrued expenses and other current liabilities 20,933 24,568
Current portion long-term debt and capital lease obligations -- 1,098
Revolving credit facility and term loan 12,896 19,292
------- -------
Total current liabilities 34,419 62,150
------- -------
SENIOR NOTES (net of discount: 1999-$1,253) -- 123,747
OTHER LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS -- 6,865
------ -------
Total liabilities not subject to compromise 34,419 192,762
LIABILITIES SUBJECT TO COMPROMISE 168,336 --
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK -- 900
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value; 5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value; 100,000,000 shares authorized,
21,179,103 and 21,179,103 shares issued and outstanding as
of July 1, 2000 and January 1, 2000, respectively 211 211
Additional paid-in capital 47,387 47,387
Retained deficit (30,703) (16,968)
Cumulative foreign currency translation (4,073) (4,073)
------- -------
Total shareholders' equity 12,822 26,557
------- -------
$215,577 $ 220,219
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
<PAGE>
VISTA EYECARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ---------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $77,407 $82,531 $163,665 $169,166
COST OF GOODS SOLD 35,804 36,745 73,480 73,833
------- ------- ------- -------
GROSS PROFIT 41,603 45,786 90,185 95,333
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSE 42,424 42,937 88,183 85,383
IMPAIRMENT LOSS ON LONG-LIVED ASSETS -- -- 2,684 --
RESTRUCTURING EXPENSE -- -- 1,601 --
------- ------- ------- -------
OPERATING INCOME/(LOSS) (821) 2,849 (2,283) 9,950
INTEREST EXPENSE, NET 917 4,743 6,247 9,409
------- ------- ------- -------
INCOME/(LOSS) BEFORE REORGANIZATION ITEMS AND TAXES (1,738) (1,894) (8,530) 541
REORGANIZATION ITEMS 4,379 -- 4,379 --
------- ------- ------- -------
INCOME/(LOSS) BEFORE TAXES AND EXTRAORDINARY ITEM (6,117) (1,894) (12,909) 541
INCOME TAX EXPENSE/(BENEFIT) -- (584) -- 386
------- ------- ------- -------
NET INCOME/(LOSS) BEFORE EXTRAORDINARY ITEM $(6,117) $(1,310) $(12,909) $ 155
EXTRAORDINARY LOSS, NET OF TAX 827 -- 827 --
------- ------- ------- -------
NET INCOME/(LOSS) $(6,944) $(1,310) $(13,736) $ 155
======= ======= ======= =======
BASIC EARNINGS/(LOSS) PER COMMON SHARE:
EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM $ (0.29) $ (0.06) $ (0.61) $ 0.01
EXTRAORDINARY LOSS (0.04) -- (0.04) --
------- ------- ------- -------
NET EARNINGS/(L0SS) PER BASIC SHARE $ (0.33) $ (0.06) $ (0.65) $ 0.01
======= ======= ======= =======
DILUTED EARNINGS/(LOSS) PER COMMON SHARE:
EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM $ (0.29) $ (0.06) $ (0.61) $ 0.01
EXTRAORDINARY LOSS (0.04) -- (0.04) --
------- ------- ------- -------
NET EARNINGS/(LOSS) PER DILUTED SHARE $ (0.33) $ (0.06) $ (0.65) $ 0.01
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
<PAGE>
VISTA EYECARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
Six Months Ended
-----------------------
July 1, July 3,
2000 1999
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $(13,736) $ 155
------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,498 9,375
Provision for deferred income tax expense -- 174
Impairment of long-lived assets 2,684 --
(See Note 4 to Condensed Consolidated Financial Statements)
Restructuring expense 1,601 --
(See Note 4 to Condensed Consolidated Financial Statements)
Reorganization items 4,379 --
(See Note 4 to Condensed Consolidated Financial Statements)
Extraordinary item 827 --
(See Note 7 to Condensed Consolidated Financial Statements)
Changes in operating assets and liabilities:
Receivables (4,015) (3,536)
Inventories 1,909 (2,965)
Other current assets 896 (2,244)
Other assets 489 (160)
Accounts payable 8,752 4,593
Accrued expenses and other current liabilities 2,793 (7,193)
------- -------
Total adjustments 29,813 (1,956)
------- -------
Net cash provided by (used in) operating activities 16,077 (1,801)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,241) (7,287)
------- -------
Net cash used in investing activities (3,241) (7,287)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on revolving credit facility (165,884) (7,500)
Advances on revolving credit facility 159,487 14,000
Repayments on notes payable and capital leases (830) (830)
Deferred financing costs (718) --
Proceeds from issuance of common stock -- 56
------- -------
Net cash (used in) provided by financing activities (7,945) 5,726
------- -------
NET INCREASE (DECREASE) IN CASH 4,891 (3,362)
CASH, beginning of period 2,886 7,072
------- -------
CASH, end of period $ 7,777 $ 3,710
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 6
<PAGE>
VISTA EYECARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 2000
(Unaudited)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by Vista Eyecare, Inc., formerly known as 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 December 30, 2000. Certain amounts in the July 3, 1999 condensed
consolidated financial statements have been reclassified to conform to the July
1, 2000 presentation.
(2) BANKRUPTCY PROCEEDING AND GOING CONCERN MATTERS
Proceedings Under Chapter 11 of the Bankruptcy Code
On April 5, 2000, the Company and ten of its subsidiaries (collectively,
the "Debtors") filed voluntary petitions with the United States Bankruptcy Court
for the Northern District of Georgia for reorganization under Chapter 11 (the
"Chapter 11 Cases"). The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code.
The Debtors expect to file a reorganization plan or plans that provide for
emergence from bankruptcy in 2000 or 2001. There can be no assurance that a
reorganization plan or plans will be proposed by the Debtors or confirmed by the
Bankruptcy Court, or that any such plan(s) will be consummated. A plan of
reorganization could result in holders of the Common Stock receiving no value
for their interests. Because of such possibilities, the value of the Common
Stock is highly speculative.
Page 7
<PAGE>
Going Concern Matters
The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting and do not reflect any adjustments that might
result if the Company is unable to continue as a going concern. The Company's
recent losses and negative cash flows from operations, and the Chapter 11 Cases,
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
relating to recoverability and classification of recorded asset amounts,
including goodwill and other intangible assets, or the amount and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern. The ability of the Company to continue as a going concern
and appropriateness of using the going concern basis is dependent upon, among
other things:
(i) the Company's ability to comply with its debtor-in-possession
financing agreement (the "DIP Facility") (See Note 6 to Condensed
Consolidated Financial Statements);
(ii) the Company's ability to generate sufficient cash from operations to
meet its obligations;
(iii)the confirmation of a plan of reorganization under the Bankruptcy
Code; and
(iv) the Company's ability to achieve profitable operations after such
confirmation.
Management believes that the DIP Facility, which has been approved by the
Bankruptcy Court, along with cash provided by operations, will provide
sufficient liquidity to allow the Company to continue as a going concern.
However, there can be no assurance that the sources of liquidity will be
available or sufficient to meet the Company's needs.
A plan of reorganization could materially change the amounts currently
recorded in the consolidated financial statements. The consolidated financial
statements do not give effect to any adjustment to the carrying value of assets
or amounts and classifications of liabilities that might be necessary as a
result of a reorganization plan.
(3) ACCOUNTING DURING REORGANIZATION PROCEEDINGS
Entering the reorganization proceeding will not affect or change the
application of generally accepted accounting principles followed by the Company
in the preparation of its consolidated financial statements. During the pendency
of the Chapter 11 Cases, our consolidated financial statements will distinguish
transactions and events that are directly associated with the reorganization
from the ongoing operations of the business in accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7 -
Page 8
<PAGE>
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code"
("SOP 90-7"). The Company's consolidated balance sheets will segregate
liabilities subject to compromise from liabilities not subject to compromise. In
addition, we will stop accruing for interest on unsecured debt until the Company
emerges from protection under Chapter 11 of the Bankruptcy Code, or it becomes
probable that we will pay these amounts as part of a plan of reorganization.
Contractual interest was $5.2 million for the quarter and six months ending July
1, 2000.
Liabilities Subject to Compromise
"Liabilities subject to compromise" refers to liabilities incurred prior to
the commencement of the Chapter 11 Cases, including those considered by the
Bankruptcy Court to be prepetition claims, such as claims arising out of a
rejection of a lease for real property. These liabilities consist primarily of
amounts outstanding under long-term debt and also include accounts payable,
accrued interest, accrued restructuring costs, and other accrued expenses. These
amounts represent the Company's estimate of known or potential claims to be
resolved in the Chapter 11 Cases. Such claims remain subject to future
adjustments. Adjustments may result from (1) negotiations; (2) actions of the
Bankruptcy Court; (3) further development with respect to disputed claims; (4)
future rejection of additional executory contracts or unexpired leases; (5) the
determination as to the value of any collateral securing claims; (6) proofs of
claim; or (7) other events. Payment terms for these amounts, which are
considered long-term liabilities at this time, will be established in connection
with the Chapter 11 Cases.
The principal categories of claims classified as liabilities subject to
compromise in the Chapter 11 Cases are identified below. (Amounts in thousands.)
July 1, 2000
------------
Accounts payable $ 25,880
Provision for rejected contracts 3,195
Senior notes, net of discount
including $7,480 accrued interest 131,266
Other long-term debt and capital
lease obligations 7,094
Redeemable common stock 900
------------
$ 168,336
============
The Company has received approval from the Bankruptcy Court to pay
pre-petition and post-petition employee wages, salaries, benefits and other
employee obligations, to pay vendors and other providers in the ordinary course
for goods and services received from April 5, 2000 and to honor customer service
programs, including warranties and returns. These items are recorded as accrued
expenses not subject to compromise.
Page 9
<PAGE>
(4) REORGANIZATION ITEMS, RESTRUCTURING EXPENSES AND IMPAIRMENT ON LONG-LIVED
ASSETS
General
In the last quarter of 1999 and the first two quarters of 2000, we have
recorded charges relating to store closings and to expenses incurred in the
Chapter 11 Cases. Generally accepted accounting principles require different
presentations depending on whether we incurred the cost before or after the
filing of the Chapter 11 Cases.
Impairment of Fixed Assets and Restructuring Expenses
We have recorded charges for impairment of fixed assets and restructuring
expenses in connection with stores we closed before the filing of the Chapter 11
Cases. Emerging Issues Task Force Issue 94-03, "Liability Recognition for
Certain Employee Termination Benefits to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)", requires that we present these charges as
components of operating income in the last quarter 1999 and the first quarter
2000.
In connection with stores we closed after the filing of the Chapter 11
Cases, we have also recorded charges for impairment of fixed assets and for
restructuring expenses. SOP 90-7 requires that we present these charges as
reorganization items below operating income.
Summary of Charges in Last Quarter 1999 and First Quarter 2000
The table below summarizes charges for impairment of fixed assets and
restructuring expenses incurred in the fourth quarter 1999 and the first quarter
2000. These charges were incurred before the Company began the Chapter 11 Cases
(amounts in thousands):
Fourth Quarter 1999 First Quarter 2000
------------------- ------------------
Impairment of Fixed Assets $1,952 $2,684
Restructuring Expense
Provision for Rejected Leases $ -- $1,362
Other Store Closing Costs -- 239
------ ------
$ -- $1,601
====== ======
Second Quarter Charge for Reorganization Items
Results for the second quarter include charges which were incurred after
the Company filed the Chapter 11 Cases. These charges are accordingly presented
as reorganization items.
Page 10
<PAGE>
The table below summarizes these charges (amounts in thousands):
Impairment of Fixed Assets $ 333 (See Note 5 to Condensed
Provision for Rejected Leases 1,834 Consolidated Financial
Other Store Closing Costs 419 Statements)
Professional Fees 1,156
Retention Bonus 549
Interest Income on Accumulated Cash (48)
Other Reorganization Costs 136
------
$4,379
======
Potential Impairment of Long-Lived Assets
The Company periodically evaluates the carrying value of goodwill based on
the expected future undiscounted operating cash flows of the related business
unit. The analysis for the Acquired Entities is based on assumptions of future
operating results and capital expenditures over a period in excess of twenty
years. Based on the analysis, an impairment of goodwill did not exist at July 1,
2000.
As a result of the Chapter 11 filing, the Debtors may decide to sell or
otherwise dispose of assets for amounts other than those reflected in the
Condensed Consolidated Financial Statements, which would result in an impairment
of the related assets, including goodwill. Also, our failure to improve sales
levels at the locations acquired from Frame-n-Lens Optical, Inc. and New West
Eyeworks, Inc. will have a substantial negative impact on cashflow. If we do not
improve these sales levels, it may become appropriate to record an impairment on
a portion of the goodwill associated with these acquired stores.
(5) SAM'S CLUB LEASE TERMINATION
The Company has reached an agreement in principle with Wal-Mart Stores,
Inc. to terminate 72 leases governing all of the Company's units located in
Sam's Clubs locations. Pursuant to this agreement, the Company will turn over
all such locations to Wal-Mart Stores no later than September 1, 2000. The
agreement contemplates that the Company will receive no proceeds from Wal-Mart
for the early termination. Wal-Mart will waive all claims for rent under the
leases for the balance of the original lease term. The Company has recorded a
noncash pre-tax charge of approximately $330,000 related to the impairment of
leasehold improvements and furniture and fixtures in the Sam's Club locations.
(See Note 4 to Condensed Consolidated Financial Statements.)
(6) DEBTOR-IN-POSSESSION FINANCING
On May 9, 2000, the Bankruptcy Court approved an order permitting the
Company to enter into a $25 million debtor-in-possession credit facility with
Foothill Capital Corporation (the "DIP Facility"). The DIP Facility (which
replaced the Company's prior secured credit facility with Foothill Capital
Corporation) consists of a $12.5 million term loan and $12.5 million revolving
credit facility. The Company paid professional fees, organization fees, and
waiver fees of $500,000 to convert the previous Foothill credit facility to the
DIP Facility. As of July 1, 2000, the Company had borrowed a total of $12.9
million (inclusive of the $12.5 million term loan portion) under the DIP
Facility.
Page 11
<PAGE>
The DIP Facility contains customary terms and conditions. It expires on May
31, 2001. The DIP Facility further provides that:
- The Company must maintain a rolling twelve month EBITDA of no less than $15
million, calculated prior to restructuring charges, reorganization items,
extraordinary losses and store impairment reserves.
- The $12.5 million term loan portion of the DIP Facility bears interest at
15% per annum.
- Interest rates on the revolver portion of the DIP Facility are based on
either the Wells Fargo Bank, N.A. Base Rate plus 2% or the Adjusted
Eurodollar Rate plus 3.25%.
(7) EXTRAORDINARY ITEM
The Company recorded an extraordinary loss of $827,000 as a result of
refinancing the Company's previous revolving credit facility in the second
quarter of 2000 (See Note 6 to Condensed Consolidated Financial Statements).
This refinancing necessitated the write-off of capitalized costs associated with
the previous credit facility. Because of the Company's decision to fully reserve
for the Company's 2000 tax benefit, the net tax effect on the extraordinary item
is zero.
(8) INCOME TAXES
The Company recorded a pretax loss of $6.9 million in the second quarter.
The resulting income tax benefit was approximately $2.5 million. The Company has
established a valuation allowance equal to the amount of the tax benefit.
(9) EARNINGS PER COMMON SHARE
Basic earnings (loss) per common share were computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
year. Diluted earnings (loss) per common share were computed as basic earnings
per common share, adjusted for outstanding stock options that are dilutive. The
following table sets forth basic and diluted earnings per share for the periods
indicated (amounts in thousands except per share information):
Page 12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
------------------------------ ----------------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
-------------- ------------- ------------ -------------
Income/(loss) before extraordinary item $ (6,117) $ (1,310) $ (12,909) $ 155
Extraordinary loss, net of tax (827) -- (827) --
-------------- ------------- ------------ -------------
Net Income/(loss) $ (6,944) $ (1,310) $ (13,736) $ 155
============== ============= ============ =============
Weighted shares outstanding 21,070 21,070 21,070 21,066
Basic earnings/(loss) per share:
Earnings before extraordinary item ($0.29) ($0.06) ($0.61) $0.01
Extraordinary loss, net of tax (0.04) -- (0.04) --
-------------- ------------- ------------ -------------
Basic earnings/(loss) per share ($0.33) ($0.06) ($0.65) $0.01
============== ============= ============ =============
Weighted shares outstanding 21,070 21,070 21,070 21,066
Impact of dilutive options held by employees -- -- -- 215
-------------- ------------- ------------ -------------
Aggregate shares outstanding 21,070 21,070 21,070 21,281
============== ============= ============ =============
Diluted earnings per share:
Earnings before extraordinary item ($0.29) ($0.06) ($0.61) $0.01
Extraordinary loss, net of tax (0.04) - (0.04) -
-------------- ------------- ------------ -------------
Diluted earnings/(loss) per share ($0.33) ($0.06) ($0.65) $0.01
============== ============= ============ =============
</TABLE>
There are no outstanding options with an exercise price below the average
price of the Company's common stock.
Page 13
<PAGE>
(10) SUPPLEMENTAL DISCLOSURE INFORMATION
The following table sets forth inventory balances by classification:
<TABLE>
<S> <C> <C>
July 1, January 1,
(In thousands) 2000 2000
------ ------
Raw Material $22,661 $24,408
Finished Goods 8,594 8,804
Supplies 1,174 1,161
------ ------
$32,429 $34,373
====== ======
</TABLE>
The following table sets forth the components of interest expense, net:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
--------------------------- -------------------------
July 1, July 3, July 1, July 3,
(In thousands) 2000 1999 2000 1999
---- ---- ---- ----
Interest expense on debt
and capital leases $ 739 $4,491 $5,749 $8,917
Purchase discounts on invoice
payments (12) (24) (13) (36)
Finance fees and amortization of
hedge and swap agreements 187 298 512 569
Interest income(1) (2) (17) (3) (70)
Other 5 (5) 2 29
------ ------ ------ ------
$ 917 $4,743 $6,247 $9,409
====== ====== ====== ======
<FN>
(1) This excludes second quarter interest income of $48,000 which was included
as a reorganization item. (See Note 4 to Condensed Consolidated Financial
Statements.)
</FN>
</TABLE>
Supplemental cash flow information:
<TABLE>
<S> <C> <C>
Six Months Ended
--------------------------
July 1, July 3,
(In thousands) 2000 1999
------- -------
Cash paid for
Income taxes $ 74 $ 495
Interest 1,487 8,879
Restructuring expenses and
Reorganization Items 2,698 --
</TABLE>
Page 14
<PAGE>
(11) REVENUE RECOGNITION
The Company currently recognizes revenues and the related costs from retail
sales when it has received at least 50% of the payment. Under Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", revenue and the
related costs from retail sales may be recognized only when the entire payment
has been received. The SEC has delayed the implementation date of this
accounting bulletin until the end of fiscal 2000. The Company expects to apply
this accounting bulletin and the related accounting principles to its financial
statements in the fourth quarter of 2000. We will report the impact as a
cumulative effect adjustment to our consolidated financial statements resulting
from a change in accounting principles as if the change had occurred on January
1, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Proceedings Under Chapter 11 of the Bankruptcy Code
On April 5, 2000, the Company and ten of its subsidiaries (collectively,
the "Debtors") filed voluntary petitions with the Bankruptcy Court for the
Northern District of Georgia for reorganization under Chapter 11 (the "Chapter
11 Cases"). The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code.
The Debtors expect to file a reorganization plan or plans that provide for
emergence from bankruptcy in 2000 or 2001. There can, however, be no assurance
that a reorganization plan or plans will be proposed by the Debtors or confirmed
by the Bankruptcy Court, or that any such plan(s) will be consummated. A plan of
reorganization could result in holders of the common stock receiving no value
for their interests. Because of such possibilities, the value of the common
stock is highly speculative. On June 7, 2000, the Company announced that it had
retained McDonald Investments, an investment banking firm, to advise the Company
as to strategic alternatives.
We cannot predict the outcome of the Chapter 11 Cases or their effect on
the Company's business. If the liabilities subject to compromise in the Chapter
11 Cases exceed the fair value of the assets, unsecured claims may be satisfied
at less than 100% of their face value and the common stock of the Company may
have no value.
Condensed Consolidated Financial Statements
The Company's Condensed Consolidated Financial Statements have been
prepared on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities and commitments in the
normal course of business. The filing of the bankruptcy petition, the related
circumstances and the losses from operations raise substantial doubt with
respect to the Company's ability to continue as a going concern. The
appropriateness of using the going concern basis is dependent upon, among other
things, confirmation of a plan or plans of reorganization, future profitable
operations and the ability to generate cash from operations and financing
sources sufficient to meet obligations.
Page 15
<PAGE>
As a result of the filing of the Chapter 11 Cases and related
circumstances, realization of assets and liquidation of liabilities is subject
to significant uncertainty. While under the protection of Chapter 11, the
Debtors may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the Condensed
Consolidated Financial Statements. Further, a plan or plans of reorganization
could materially change the amounts reported in the accompanying Condensed
Consolidated Financial Statements. The Condensed Consolidated Financial
Statements do not include any adjustments relating to recoverability of the
value of recorded asset amounts or the amounts and classification of liabilities
that might be necessary as a consequence of a plan of reorganization.
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. As of July 1, 2000, the Company operated 804 vision centers, versus
930 vision centers as of July 3, 1999. In the second quarter, the Company closed
and rejected the leases for 91 free-standing vision centers. In addition, the
Company has reached an agreement in principle with Wal-Mart Stores, Inc. to
terminate 72 leases governing all of the Company's units located in Sam's Clubs
locations no later than September 1, 2000 (See Note 5 to Condensed Consolidated
Financial Statements).
THREE MONTHS ENDED JULY 1, 2000 COMPARED TO THREE MONTHS ENDED JULY 3, 1999
CONSOLIDATED RESULTS
NET SALES. Net sales during the current period decreased to $77.4 million
from $82.5 million in the period a year ago. The sales decline was
attributable to the following reasons:
- In the second quarter of fiscal 2000, the Company closed 91 vision centers
which, in the second quarter of 1999, had generated $3.4 million in sales.
These vision centers generated $0.3 million in net sales in the second
quarter 2000.
- The Company's free-standing vision centers recorded comparable store sales
of negative 15.5% in the second quarter.
Net comparable sales for the domestic core business increased 2% over
levels recorded in the comparable period a year ago.
Management continues to concentrate on improving the sales in the
free-standing operations and other businesses acquired from Frame-n-Lens and New
West Eyeworks ("Acquired Entities"). We cannot provide any assurances that the
sales levels at these vision centers will improve. Our failure to improve these
sales levels will continue to have a substantial negative impact on earnings and
liquidity. In addition, if we do not improve these sales levels, we may write
off an appropriate part of the goodwill now reflected on our balance sheets.
(See - "Reorganization Items, Restructuring Expenses and Impairment on
Long-Lived Assets")
Page 16
<PAGE>
GROSS PROFIT. Gross profit decreased to $41.6 million from $45.8 million in
the comparable period a year ago. This decrease was due to the following:
- A reduction in sales caused by the closure of 91 vision centers and the
negative comparable store sales registered by the vision centers acquired
by the Company.
- A sales shift from eyeglasses to contact lenses caused by contact lens
promotions in the free-standing vision centers. Eyeglasses have a higher
margin than do contact lenses.
- A reduction in vendor promotional monies from the amounts received a year
ago.
Gross profit as a percentage of sales decreased from 55.5% a year ago to
53.7% in the current period. In addition to the reasons described above, the
decrease can also be attributed to the following:
- A loss of efficiency in the Fullerton Lab caused by the decrease in volume
as a result of declining sales levels in the Company's free-standing vision
centers.
- Declining sales recorded by the free-standing operations caused rent as a
percentage of net sales to increase and thereby reduced margin as a percent
of net sales.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE ("SG&A expense"). SG&A
expense, which includes both store operating expenses and home office overhead,
decreased from $42.9 million to $42.4 million in the current period. The
principal reason for the decrease was the closure of 91 underperforming vision
centers. These savings were partially offset, however, by an increase in SG&A
expense at other host store operations due to new store openings and sales
growth, as well as an increase in payroll for optometrists employed at certain
vision centers.
As a percentage of net sales, SG&A expense increased from 52.0% in the
comparable period a year ago to 54.8% in the current period. This increase was
due primarily to the sales shortfall from the acquired vision centers.
OPERATING INCOME/(LOSS). Operating results for the current period, prior to
restructuring reserves and the impairment loss on long-term assets, decreased to
an operating loss of $821,000 from operating income of $2.8 million in the
comparable period a year ago.
INTEREST EXPENSE. Interest expense decreased from $4.7 million to $917,000
in the current period. Because of the filing of the Chapter 11 Cases, we will
stop accruing for interest on unsecured debt until the Company emerges from
Chapter 11 of the Bankruptcy Code or it becomes probable that the Company will
pay these amounts as part of a plan of reorganization. See " - Accounting During
Reorganization Proceedings." Contractual interest for the second quarter of 2000
was $5.2 million. This amount excludes $48,000 of interest income which was
included as a reorganization item.
Page 17
<PAGE>
REORGANIZATION ITEMS, RESTRUCTURING EXPENSES AND IMPAIRMENT ON LONG-LIVED
ASSETS.
General
In the last quarter 1999 and the first two quarters of 2000 we have
recorded charges relating to store closings and to expenses incurred in the
Chapter 11 Cases. Generally accepted accounting principles require different
presentations depending on whether we incurred the cost before or after the
filing of the Chapter 11 Cases.
Impairment of Fixed Assets and Restructuring Expenses
We have recorded charges for impairment of fixed assets and restructuring
expenses in connection with stores we closed before the filing of the Chapter 11
Cases. Emerging Issues Task Force Issue 94-03, "Liability Recognition for
Certain Employee Termination Benefits to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)", requires that we present these charges as
components of operating income in the last quarter 1999 and the first quarter
2000.
In connection with stores we closed after the filing of the Chapter 11
Cases, we have also recorded charges for impairment of fixed assets and for
restructuring expenses. SOP 90-7 requires that we present these charges as
reorganization items below operating income.
Summary of Charges in Last Quarter 1999 and First Quarter 2000
The table below summarizes charges for impairment of fixed assets and
restructuring expenses incurred in the fourth quarter 1999 and the first quarter
2000. These charges were incurred before the Company began the Chapter 11 Cases
(amounts in thousands):
Fourth Quarter 1999 First Quarter 2000
------------------- ------------------
Impairment of Fixed Assets $1,952 $2,684
Restructuring Expense
Provision for Rejected Leases $ -- $1,362
Other Store Closing Costs -- 239
------ ------
$ -- $1,601
====== ======
Second Quarter Charge for Reorganization Items
Results for the second quarter include charges which were incurred after
the Company filed the Chapter 11 Cases. These charges are accordingly presented
as reorganization items.
Page 18
<PAGE>
The table below summarizes these charges (amounts in thousands):
Second Quarter 2000
-------------------
Impairment of Fixed Assets $ 333 (See Note 5 to Condensed
Provision for Rejected Leases 1,834 Consolidated Financial
Other Store Closing Costs 419 Statements)
Professional Fees 1,156
Retention Bonus 549
Interest Income on Accumulated Cash (48)
Other Reorganization Costs 136
------
Reorganization Items $4,379
======
The Company periodically evaluates the carrying value of goodwill based on
the expected future undiscounted operating cash flows of the related business
unit. The analysis for the Acquired Entities is based on assumptions of future
operating results and capital expenditures over a period in excess of twenty
years. Based on the analysis, an impairment of goodwill did not exist at July 1,
2000.
As a result of the Chapter 11 filing, the Debtors may decide to sell or
otherwise dispose of assets for amounts other than those reflected in the
Condensed Consolidated Financial Statements, which would result in an impairment
of the related assets, including goodwill. Also, our failure to improve sales
levels at the locations acquired from Frame-n-Lens Optical, Inc. and New West
Eyeworks, Inc. will have a substantial negative impact on cashflow. If we do not
improve these sales levels, it may become appropriate to record an impairment on
a portion of the goodwill associated with these acquired stores.
BENEFIT FOR INCOME TAXES. We recorded a pre-tax operating loss of $6.8
million versus a loss of $1.3 million in the prior period. The resulting income
tax benefit was approximately $2.5 million. We have established a valuation
allowance equal to the amount of the tax benefit.
EXTRAORDINARY ITEM. The Company recorded an extraordinary loss of $827,000
as a result of refinancing the Company's revolving credit facility in the second
quarter of 2000 (See Note 7 to Condensed Consolidated Financial Statements).
This refinancing necessitated the write-off of capitalized costs associated with
the previous credit facility. Due to the Company's decision to fully reserve for
the Company's 2000 tax benefit, the net tax effect on the extraordinary item is
zero.
NET INCOME/(LOSS). The Company posted a net loss of $6.9 million or $(0.33)
per share, versus a net loss of $1.3 million or $(0.06) per share in the
comparable period a year ago.
SIX MONTHS ENDED JULY 1, 2000 COMPARED TO SIX MONTHS ENDED JULY 3, 1999
NET SALES. Net sales during the current six month period decreased from
$169.2 million to $163.7 million. The decrease in net sales was primarily due to
the following:
- In the second quarter of fiscal 2000, the Company closed 91 vision centers
which, in the first six months of 1999, had generated $7.0 million in
sales. These vision centers generated $3.1 million in net sales in the
first six months of 2000.
Page 19
<PAGE>
- The Company's free-standing vision centers recorded comparable store sales
of negative 17% in the first six months of 2000. This decrease was
partially offset by a 2% increase in sales for the domestic host store
business over the comparable prior period.
GROSS PROFIT. For the current six month period, gross profit decreased to
$90.2 million from $95.3 million in the prior six months. This decrease was due
to the following:
- A reduction in sales caused by the closure of 91 vision centers and the
negative comparable store sales registered by the vision centers acquired
by the Company.
- A shift in sales mix from eyeglasses to contact lenses caused by a contact
lens promotion in the free-standing vision centers. Eyeglasses have a
higher margin than do contact lenses.
- A reduction in vendor promotional monies from the amounts received a year
ago.
Gross profit as a percentage of sales decreased from 56.4% in the prior six
months to 55.1% in the current six months. In addition to the afore-mentioned
reasons, this decrease can also be attributed to the following:
- A loss of efficiency in the Fullerton Lab caused by the decrease in volume
as a result of declining sales levels in the Company's free-standing vision
centers.
- Declining sales recorded by the free-standing operations caused rent as a
percentage of net sales to increase and thereby reduced margin as a percent
of net sales.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE ("SG&A expense"). SG&A expense
(which includes both store operating expenses and home office overhead)
increased to $88.2 million in the current six months from $85.4 million for the
prior six months. This increase was attributable to the following:
- An increase in store SG&A expense. This is due to an increase in SG&A
expense at the host store locations (excluding Sam's Clubs) which resulted
from the sales increase at these locations which includes new store
openings. This increase was partially offset by a decrease in SG&A expense
at the free-standing and Sam's Club stores despite a proportionately larger
decrease in sales. This is illustrated as follows:
Six Months
Increase/(Decrease)
(in millions)
Net Sales Store SG&A
--------- ----------
Free-standing stores ($10.5) ($0.8)
Sam's Club stores (3.6) (0.8)
Other host stores 8.2 3.1
Page 20
<PAGE>
- An increase in payroll for optometrists employed at vision centers.
- An increase in corporate support costs, primarily due to an increase in
health benefit costs and, to a lesser degree, an increase in administrative
costs to support the managed care billings and collections process.
As a percentage of net sales, SG&A expense increased to 53.9% in the
current six months, from 50.5% for the prior six months. In addition to the
reasons described above, the percentage increase was also due to low sales
levels recorded at the vision centers acquired from Frame-n-Lens and New West.
OPERATING INCOME/(LOSS). Operating results for the current six months
decreased to a loss of $2.3 million from operating income of $10.0 million in
the comparable period a year ago.
INTEREST EXPENSE. Our interest expense decreased from $9.4 million to $6.2
million because we stopped accruing interest for unsecured debt at the time we
filed the Chapter 11 Cases. See "-Accounting During Reorganization Proceedings."
INCOME TAXES. We recorded a pre-tax operating loss of $12.9 million versus
pre-tax income of $541,000 in the comparable prior period. The resulting income
tax benefit in 2000 was approximately $5 million. We have established a
valuation allowance equal to the amount of the tax benefit.
NET INCOME/(LOSS). We generated a net loss of $13.7 million, or $(0.65) per
share, as compared to net income of $155,000 or $0.01 per share, in the
comparable period a year ago.
ACCOUNTING DURING REORGANIZATION PROCEEDINGS
Entering the reorganization proceeding will not affect or change the
application of generally accepted accounting principles followed by the Company
in the preparation of its consolidated financial statements. During the pendency
of the Chapter 11 Cases, our consolidated financial statements will distinguish
transactions and events that are directly associated with the reorganization
from the ongoing operations of the business in accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7 -
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code"
("SOP 90-7"). The Company's consolidated balance sheets will segregate
liabilities subject to compromise from liabilities not subject to compromise. In
addition, we will stop accruing for interest on unsecured debt until the Company
emerges from protection under Chapter 11 of the Bankruptcy Code, or it becomes
probable that we will pay these amounts as part of a plan of reorganization.
Contractual interest was $5.2 million for the quarter and six months ending July
1, 2000.
Page 21
<PAGE>
Liabilities Subject to Compromise
"Liabilities subject to compromise" refers to liabilities incurred prior to
the commencement of the Chapter 11 Cases, including those considered by the
Bankruptcy Court to be prepetition claims such as claims arising out of a
rejection of a lease for real property. These liabilities consist primarily of
amounts outstanding under long-term debt and also include accounts payable,
accrued interest, accrued restructuring costs, and other accrued expenses. These
amounts represent the Company's estimate of known or potential claims to be
resolved in the Chapter 11 Cases. Such claims remain subject to future
adjustments. Adjustments may result from (1) negotiations; (2) actions of the
Bankruptcy Court; (3) further development with respect to disputed claims; (4)
future rejection of additional executory contracts or unexpired leases; (5) the
determination as to the value of any collateral securing claims; (6) proofs of
claim; or (7) other events. Payment terms for these amounts, which are
considered long-term liabilities at this time, will be established in connection
with the Chapter 11 Cases.
The principal categories of claims classified as liabilities subject to
compromise in the Chapter 11 Cases are identified below.
(In thousands) July 1, 2000
-------------- ------------
Accounts payable $ 25,880
Provision for rejected contracts 3,195
Senior notes, net of discount
including $7,480 accrued interest 131,266
Other long-term debt and capital
lease obligations 7,094
Redeemable common stock 900
------------
$ 168,336
============
The Company has received approval from the Bankruptcy Court to pay
pre-petition and post-petition employee wages, salaries, benefits and other
employee obligations, to pay vendors and other providers in the ordinary course
for goods and services received from April 5, 2000 and to honor customer service
programs, including warranties and returns. These items are recorded as accrued
expenses not subject to compromise.
LIQUIDITY AND CAPITAL RESOURCES
Our capital needs have been for operating expenses, capital expenditures,
acquisitions and interest expense. Our sources of capital have been cash flow
from operations and borrowings under our credit facilities.
In October 1998, we issued our $125 million notes due 2005 to help fund the
acquisition of Frame-n-Lens Optical, Inc. and New West Eyeworks, Inc. These
notes bear interest of 12.75% and were issued pursuant to an indenture which
contains a variety of customary provisions and restrictions. Interest payments
are due on April 15 and October 15 of each year. The Company did not make the
interest payment due on April 15, 2000. Amounts due under the indenture are
unsecured claims in the Chapter 11 Cases, and are classified as liabilities
subject to compromise. (See Note 3 to Condensed Consolidated Financial
Statements.)
Page 22
<PAGE>
On April 5, 2000, the Debtors filed the Chapter 11 Cases. On May 9, 2000,
the Bankruptcy Court approved an order permitting the Company to enter into a
$25 million debtor-in-possession credit facility with Foothill Capital
Corporation (the "DIP Facility"). The DIP Facility (which replaced the Company's
prior secured credit facility) consists of a $12.5 term loan and $12.5 revolving
credit facility. As of July 1, 2000, the Company had borrowed a total of $12.9
million (inclusive of the $12.5 million term loan portion) under the DIP
Facility.
The DIP Facility contains customary terms and conditions. It expires on May
31, 2001. The DIP Facility further provides that:
- The Company must maintain a rolling twelve month EBITDA of no less than $15
million, calculated prior to restructuring charges, reorganization items,
extraordinary losses and store impairment reserves.
- The $12.5 million term loan portion of the DIP Facility bears interest at
15% per annum.
- Interest rates on the revolver portion of the DIP Facility are based on
either the Wells Fargo Bank, N.A. Base Rate plus 2% or the Adjusted
Eurodollar Rate plus 3.25%.
The Company believes the DIP Facility should provide it with adequate
liquidity to conduct its operations while it prepares a reorganization plan.
However, the Company's liquidity, capital resources, results of operations and
ability to continue as a going concern are subject to risks and uncertainties.
Although the Company is currently in compliance with the terms of the DIP
Facility, a continuation of the negative sales trends of the free-standing
vision centers could cause the Company to breach the EBITDA covenant.
We expect to complete a plan of reorganization in 2000 or 2001. The plan
will likely provide for the conversion of debt into equity. We do not know
whether the plan will be approved or, if it is approved, whether it will
succeed. If the Company is successful in restructuring its debt obligations and
its equity, the Company may utilize and/or trigger limitations on certain tax
net operating loss carryforwards.
We plan, as of July 1, 2000, to open approximately four Wal-Mart vision
centers during the remainder of 2000. We may open up to three additional vision
centers dependent upon liquidity, construction schedules and other constraints.
For each of our new vision centers, we typically spend between $100,000 and
$160,000 for fixed assets and approximately $25,000 for inventory. In general,
free-standing locations are more costly than leased locations. We also spend
approximately $20,000 for pre-opening costs.
Page 23
<PAGE>
RISK FACTORS
Any expectations, beliefs, and other non-historical statements contained in
this Form 10-Q are forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements represent
the Company's expectations or belief concerning future events, including the
following: any statements regarding future sales levels, any statements
regarding the continuation of historical trends, and any statements regarding
the Company's liquidity. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," and similar expressions are intended to
identify forward-looking statements. With respect to such forward-looking
statements and others which may be made by, or on behalf of, the Company, the
factors described as "Risk Factors" in the Company's Report on Form 10-K for
1999 could materially affect the Company's actual results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market Risk
Market risk is the potential change in an instrument's value caused by, for
example, fluctuations in interest and currency exchange rates. The Company's
primary market risk exposures are interest rate risk and the risk of unfavorable
movements in exchange rates between the U.S. dollar and the Mexican peso.
Monitoring and managing these risks is a continual process carried out by senior
management, which reviews and approves the Company's risk management policies.
We manage market risk on the basis of an ongoing assessment of trends in
interest rates, foreign exchange rates, and economic developments, giving
consideration to possible effects on both total return and reported earnings.
The Company's financial advisors, both internal and external, provide ongoing
advice regarding trends that affect management's assessment.
Interest Rate Risk
The Company borrows long-term debt under our credit facility at variable
interest rates. We therefore incur the risk of increased interest costs if
interest rates rise.
In anticipation of the issuance of our senior notes, in 1998 we 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%. We settled these transactions for
approximately $4.6 million in September 1998 with $0.6 million cash and
additional borrowings of $4.0 million. The settlement costs are treated as
deferred financing costs amortized over the life of the notes.
Foreign Exchange Rate Risk
Historically, Mexico qualified 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 were reassured with the
U.S. dollar as the functional currency. Since 1997, we have recorded immaterial
losses because of changes in foreign currency rates between the peso and the
U.S. dollar.
Page 24
<PAGE>
PART II
OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company filed the Chapter 11 Cases on April 5, 2000 and failed to make
the $8.1 million payment due on April 15, 2000 on its $125 million senior notes
due 2005. The total arrearage as of July 31, 2000 under the senior notes is $133
million, including accrued interest.
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
-------
<S> <C>
Amended and Restated Articles of Incorporation 3.1*
Amended and Restated Bylaws 3.2**
Form of Common Stock Certificate 4.1***
Senior Secured, Super-Priority Debtor-in-Possession Loan and Security
Agreement dated as of April 6, 2000 by and between the Company and
Foothill Capital Corporation 10.17****
Key Employee Retention Program 10.18****++
Financial Data Schedule 27****
*Incorporated by reference to the Company's Form 8-K filed with the
Commission on January 6, 1999.
**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.
****Filed with this Form 10-Q.
++Management contract or compensatory plan or arrangement in which a
director or named executive officer participates.
</TABLE>
Page 25
<PAGE>
(b) Reports on Form 8-K.
The following reports on Form 8-K have been filed during the last
quarter of the period covered by this report:
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
April 12, 2000 3 None
May 18, 2000 5 None
June 7, 2000 5 None
Page 26
<PAGE>
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.
VISTA EYECARE, INC.
By: /S/ Angus C. Morrison
-----------------------
Senior Vice President
Chief Financial Officer
By: /S/ Timothy W. Ranney
------------------------
Chief Accounting Officer
August 14, 2000
Page 27
