<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1998 Commission File Number 0-21068
-------------- -------
SIGHT RESOURCE CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 04-3181524
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Jeffrey Avenue
Holliston, MA 01746
----------------------------------------
(Address of principal executive offices)
508-429-6916
---------------------------
(Issuer's telephone number)
N/A
------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since the last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
On March 31, 1998, 8,797,790 shares of common stock, par value $0.01 per share,
were outstanding.
TOTAL PAGES 16
EXHIBIT INDEX AT PAGE 15
1
<PAGE>
SIGHT RESOURCE CORPORATION
INDEX
PART 1. FINANCIAL INFORMATION PAGE
----
<TABLE>
<CAPTION>
Item 1 Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
</TABLE>
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SIGHT RESOURCE CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,359 $ 6,076
Accounts receivable, net of allowance
of $483 and $478, respectively 2,225 1,781
Inventories 4,365 4,434
Prepaid expenses and other current assets 589 377
--------------- -----------------
Total current assets 11,538 12,668
--------------- -----------------
Property and equipment 10,163 10,070
Less accumulated depreciation (4,783) (4,406)
--------------- -----------------
Net property and equipment 5,380 5,664
--------------- -----------------
Other assets:
Intangible assets, net 14,708 14,898
Other assets 1,239 1,277
--------------- -----------------
Total other assets 15,947 16,175
--------------- -----------------
$ 32,865 $ 34,507
=============== =================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt --- 1,000
Accounts payable 2,091 1,797
Accrued expenses 4,565 5,628
--------------- -----------------
Total current liabilities 6,656 8,425
--------------- -----------------
Non-current liabilities:
Other liabilities 94 101
--------------- -----------------
Total Non-current liabilities 94 101
--------------- -----------------
Redeemable, convertible preferred stock
1,452,119 shares issued 6,535 6,535
Stockholders' equity:
Preferred Stock, $.01 par value. Authorized
5,000,000 shares; no shares issued and outstanding. --- ---
Common Stock, $.01 par value. Authorized 20,000,000
shares; issued 8,797,790 at March 31, 1998
and 8,756,500 at December 31, 1997. 88 88
Additional paid-in capital 36,451 36,329
Common stock issuable, 71,181 shares at March 31,
1998 and December 31, 1997 432 432
Treasury stock at cost
(30,600 shares in 1997 and 1998) (137) (137)
Accumulated deficit (17,253) (17,266)
--------------- -----------------
Total stockholders' equity 19,580 19,446
--------------- -----------------
$ 32,865 $ 34,507
=============== =================
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
SIGHT RESOURCE CORPORATION
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1998 1997
------------------- ------------------
<S> <C> <C>
Net revenue $13,580 $10,440
Cost of revenue 4,752 3,849
------------------- ------------------
Gross profit 8,828 6,591
Selling, general and administrative expenses 8,895 7,000
------------------- ------------------
Loss from operations (67) (409)
------------------- ------------------
Other income (expense)
Interest income 71 102
Interest expense (51) (80)
Gain on sale of opohthalmic equipment 69 ---
------------------- ------------------
Total other income (expense) 89 22
------------------- ------------------
Income (loss) before income tax expense 22 (387)
Income tax expense 9 ---
------------------- ------------------
Net income (loss) $ 13 ($387)
=================== ==================
Basic and Diluted Earnings (Loss)
per common share and potential common share 0.00 ($0.04)
=================== ==================
Weighted average number of common
shares outstanding 8,785 8,638
=================== ==================
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
SIGHT RESOURCE CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998 March 31, 1997
------------------- -----------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 13 ($387)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 613 483
Gain on sale of ophthalmic equipment (69) --
Changes in operating assets and liabilities:
Accounts receivable (444) (470)
Inventories 69 94
Prepaid expenses and other current assets (213) (681)
Accounts payable and accrued expenses (756) 266
------------------- -----------------
Net cash used in operating activities (787) (695)
------------------- -----------------
Investing activities:
Purchases of property and equipment (148) (440)
Payments for acquisitions (12) ---
Proceeds from sale of assets 99 98
Other assets 17 (502)
------------------- -----------------
Net cash used in investing activities (44) (844)
------------------- -----------------
Financing activities:
Principal payments on long term debt (1,000) ---
Other liabilities (7) 4
Proceeds from issuance of stock 121 ---
Purchase of common stock for treasury --- (137)
------------------- -----------------
Net cash used in financing activities (886) (133)
------------------- -----------------
Net decrease in cash and cash equivalents (1,717) (1,672)
Cash and cash equivalents, beginning of period 6,076 9,924
------------------- -----------------
Cash and cash equivalents, end of period $ 4,359 $ 8,252
=================== =================
Supplemental disclosure:
Interest paid $ 77 $ 102
=================== =================
Equity issued associated with
credit agreement --- $ 180
=================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(1) The Company
(a) Nature of Business
Sight Resource Corporation (the "Company") manufactures, distributes
and sells eyewear and related products and services.
(b) Acquisitions
During 1995, the Company acquired two primary eye care chains,
effective January 1, 1995 and July 1, 1995, respectively. The
aggregate purchase price paid in connection with the acquisitions
consisted of (i) $2,660 in cash, (ii) 555,525 shares of common stock,
(iii) the assumption of approximately $1,600 of net liabilities, and
(iv) $660 payable over a 3 year period and $250 payable over 18
months, contingent upon the occurrence of certain future events. The
transactions were accounted for using the purchase method of
accounting.
Effective July 1, 1996, the Company purchased certain assets and
assumed certain liabilities of The E.B. Brown Optical Company and
Brown Optical Laboratories, Inc. as well as entered into a merger with
E.B. Brown Opticians, Inc. (together "EB Brown") for approximately
$7,733, consisting of: $4,000 in cash, 521,997 shares of common stock
issued, 71,181 shares of common stock to be issued and $1,400 in notes
payable over an eighteen month period. When the common stock to be
issued is issued, the $432 of common stock issuable will be reclassed
into common stock and additional paid in capital. As of July 1, 1996,
EB Brown operated forty-two eye care centers located throughout Ohio
and Western Pennsylvania which provide optometric and audiology goods
and services to persons with vision and hearing disorders. The
transaction was accounted for using the purchase method of accounting.
Effective July 1, 1997, the Company acquired one hundred percent of
the outstanding shares of stock of Vision Holdings, Ltd. (formerly
known as Dr. Greenberg, an Optometry Corporation d/b/a Vision Plaza)
("Vision Plaza")). The purchase price paid in connection with this
acquisition was $2,000 in cash and the assumption and repayment of
notes payable outstanding as of July 1, 1997 of approximately $800. As
of July 1, 1997, Vision Plaza operated 14 primary eye care centers and
three specialty eyewear centers in southeast Louisiana and
Mississippi. The acquisition was accounted for using the purchase
method of accounting.
The results of operations of the four acquisitions have been included
in the consolidated financial statements from their respective dates
of acquisition. The excess of the purchase price and expenses
associated with each acquisition over the estimated fair value of the
net assets acquired has been recorded as goodwill. As a result of the
acquisition, the Company has also recorded adjustments to increase
liabilities and establish reserves for the closing of stores and
related restructuring costs, including lease commitments and severance
costs. Total acquisition related reserves established during 1997 were
$2,066.
6
<PAGE>
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying consolidated financial statements have been prepared
by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Company,
these consolidated financial statements contain all adjustments
(consisting of only normal, recurring adjustments) necessary to
present fairly the financial position of Sight Resource Corporation as
of March 31, 1998 and the results of its operations and cash flows for
the three months ended March 31, 1998 and 1997.
The accompanying consolidated financial statements and related notes
should be read in conjunction with the audited consolidated financial
statements which are contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries and three
professional corporations ("PC's") in which the Company's subsidiaries
assume the financial risks and rewards of such entities through a
management contract and a stock agreement. The Company has no direct
equity ownership in the PC's. All significant intercompany balances
and transactions have been eliminated.
In preparation of these consolidated financial statements in
conformity with generally accepted accounting principles, management
of the Company has made estimates and assumptions that affect the
reported amounts of assets and liabilities, such as accounts
receivable, inventory impairment of property and equipment and
intangibles. Actual results could differ from those estimates.
(c) Revenue Recognition
Revenue and the related costs from the sale of eyewear are recognized
at the time an order is complete. Revenue from eye care services is
recognized when the service is performed. The Company has fee for
service arrangements with all of its third party payors. Revenue is
reported net of contractual allowances.
Under revenue sharing arrangements for refractive surgery where the
Company is not responsible for patient billing, the Company receives a
specified payment from the hospital or center for each refractive
surgical procedure performed. Accordingly, the Company recognizes
revenue on a per procedure basis at the time procedures are performed.
Under existing revenue-sharing arrangements for refractive surgery
where the Company is responsible for the collection from the patient
and payment to the ophthalmologist and other operating costs, the
total patient charge is recorded as revenue with the corresponding
expenses recorded in cost of revenue.
7
<PAGE>
Sight Resource Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(d) Inventories
Inventories primarily consist of the costs of eyeglass frames, contact
lenses, ophthalmic lenses, sunglasses and other optical products and
are valued at the lower of cost (using the first-in, first-out method)
or market.
(e) Property and Equipment
Property and equipment is stated at cost. The Company provides for
depreciation at the time the property and equipment is placed in
service. The straight-line method is used over the estimated useful
life of the assets. The Company assesses the recoverability of the
undepreciated property and equipment on an ongoing basis by comparing
anticipated profits and future, undiscounted cash flows to net book
value. In performing this analysis, management considers such factors
as current results, trends, and future prospects, in addition to other
economic factors.
(f) Intangible Assets
Intangible assets resulting from the business acquisitions consist of
customer lists, trademarks, non-compete agreements and the excess cost
of the acquisition over the fair value of the net assets acquired
(goodwill). Certain values assigned are based upon independent
appraisals and are amortized on a straight line basis over a period of
five to twenty-five years. The Company assesses the recoverability of
unamortized intangible assets on an ongoing basis by comparing
anticipated operating profits and future, undiscounted cash flows to
net book value. In performing this analysis, management considers such
factors as current results, trends, and future prospects, in addition
to other economic factors.
(g) Deferred Revenue
The Company offers a contact lens purchasing program in which, for a
set fee, customers may purchase contacts at discounted rates for a 12
month period. The Company recognizes revenue from the sales of its
contact lens purchasing program on a monthly basis over the life of
the program.
(h) Net Earnings (Loss) Per Share
Earnings per share are computed based on Statement of Financial
Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"). SFAS
128 requires presentation of basic earnings per share ("Basic EPS")
and diluted earnings per share ("Diluted EPS") by all entities that
have publicly traded common stock or potential common stock (options,
warrants, convertible securities or contingent stock arrangements).
Basic EPS is computed by dividing income available to common
stockholders by the weighted average number of common shares
outstanding during the period. The computation of Diluted EPS does not
assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings.
8
<PAGE>
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
The following table provides a reconciliation of the numerators and denominators
of the basic and diluted earnings (loss) per share computations for the quarters
ended March 31:
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31 1998 1997
--------------- --------------
(in thousands)
<S> <C> <C>
BASIC INCOME (LOSS) PER SHARE
Net Income (Loss) 13 (387)
--------------- --------------
Net Income (Loss) available to common shareholders 13 (387)
=============== ==============
Weighted average common shares outstanding 8,785 8,638
Net Income (Loss) per share $ 0.00 ($0.04)
=============== ==============
DILUTED INCOME PER SHARE
Net Income 13
---------------
Net Income available to common shareholders 13
===============
Weighted average common shares outstanding 8,785
Convertible preferred stock 1,452
Options 29
---------------
Weighted average common shares outstanding and potential
shares 10,266
===============
Net Income per potential share $ 0.00
===============
</TABLE>
Outstanding warrants and certain options are not included in the
calculation of diluted loss per share because the effect would be anti-
dilutive.
<TABLE>
<CAPTION>
(3) DEBT
Debt consists of the following:
MARCH 31, DECEMBER 31,
1998 1997
------------- -----------
<S> <C> <C>
Bank term loan secured by all assets of one of the
Company's subsidiaries $ - $ -
Unsecured notes payable, 7% interest rate, $1,000 paid
on March 18, 1998; due on demand if the Company's
cash balance is less than $2,800 - 1,000
------------- -----------
- 1,000
Less current maturities - 1,000
Long term debt, less current maturities $ - $ -
============= ===========
</TABLE>
9
<PAGE>
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
On February 20, 1997, the Company entered into a Credit Agreement (the
"Agreement") with a bank pursuant to which the Company can borrow $5,000 on
a term loan basis and $5,000 on a revolving credit basis, subject to
certain performance criteria. The performance criteria include, among
others, financial condition covenants such as rolling EBITDA levels,
indebtedness to EBITDA ratios, current ratio of 1:1 and minimum net worth
requirements. The term loan facility bears interest at the bank's prime
rate plus 1.5% or LIBOR plus 3% at the Company's election and the revolving
credit facility bears interest at the bank's prime rate plus 1.25% or LIBOR
plus 2.75% at the Company's election. These loans are secured by all assets
of the Company and its wholly owned subsidiaries. As of March 31, 1998, the
entire term loan and revolving note was unused. Amounts borrowed under the
agreement will be used to finance future acquisitions, provide ongoing
working capital and for other general corporate purposes. As part of the
Agreement, the Company issued to the bank warrants to purchase 150,000
shares of the common stock at a purchase price of $4.625 per share. The
warrants expire December 31, 2003. The warrants were accounted for as
additional paid in capital based upon the fair value of the securities.
Fair market value was determined by using the relationship of the interest
rate charged with the warrants versus the rate to be charged without the
warrants. This value approximated that obtained using the Black Scholes
Method.
(4) Subsequent Events
Effective April 1, 1998, the Company acquired one hundred percent of the
outstanding shares of stock of Eye Glass Emporium, Inc. ("Eyeglass
Emporium"). The purchase price paid in connection with this acquisition was
$2,309 in cash, $350 in notes payable in twelve equal installments
commencing June 30, 1998, and 87,940 shares of common stock. Eyeglass
Emporium operates nine eye care centers in Indiana. The acquisition was
accounted for using the purchase method of accounting.
10
<PAGE>
PART I:
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
These risks are described in the Company's Form 10K for the fiscal year ended
December 31, 1997 filed with the Securities and Exchange Commission.
OVERVIEW
Sight Resource Corporation (the "Company") manufactures, distributes and sells
eyewear and related products and services. The Company's operations currently
consist of 84 eye care centers, with three regional optical laboratories and
distribution centers, making it one of the seventeen largest providers in the
United States' primary eye care industry. The Company's eye care centers operate
primarily under the brand names Cambridge Eye Doctors, E.B. Brown Opticians,
Vision Plaza and Vision World. The Company also provides, or where necessary to
comply with applicable law administers the business functions of optometrists,
ophthalmologists and professional corporations that provide, vision related
professional services. In addition, as of March 31, 1998 the Company operated
three laser vision correction ("LVC") centers.
The Company operates three regional optical laboratories and distribution
centers. The regional optical laboratories provide complete laboratory services
to the Company's eye care centers, including polishing, cutting and edging,
tempering, tinting and coating of ophthalmic lenses. The distribution centers
provide and maintain an inventory of all accessories and supplies necessary to
operate the primary eye care centers in their regions, as well as "ready made"
eye care products, including contact lenses and related supplies. The inventory
of eyeglass lenses, frames, contact lenses, accessories and supplies is acquired
through a number of sources, domestic and foreign. Management believes that the
regional optical laboratories and distribution centers have the capacity to
accommodate additional multi-site eye care centers.
Based on review to date, the Company does not believe that the impact of any
Year 2000 issue will be material because its principal information systems
appear to correctly define the year 2000 and only the Company's point of sale
system needs to be made year 2000 compliant. The Company expects to complete
such compliance as part of the installation of a new point of sale system which
is scheduled to be completed during 1998.
11
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
NET REVENUE. The Company generated net revenue of approximately $13.6 million
during the three months ended March 31, 1998, from the operation of its 84 eye
care centers and three laser vision correction centers as compared to net
revenue of approximately $10.4 million from its 72 eye care centers and ten
laser vision correction centers for the same period in 1997. The $3.1 million,
or 30.1%, increase in net revenue, primarily relates to the additional seventeen
eye care centers acquired effective July 1, 1997.
COST OF REVENUE. Cost of revenue increased from approximately $3.8 million for
the three months ended March 31, 1997 to approximately $4.8 million for the
three months ended March 31, 1998. Cost of revenue as a percent of net revenue
decreased from 36.9% for the three months ended March 31, 1997 to 35.0% for the
three months ended March 31, 1998. The decrease as a percentage of net revenue
is primarily due to the margin impact of the additional seventeen eye care
centers acquired July 1, 1997 and the reduced percentage of revenue derived from
the LVC centers. Cost of revenue for the three months ended March 31, 1998 and
1997 principally consisted of (i) the cost of manufacturing, purchasing and
distributing optical products to its customers and (ii) the cost of delivering
laser vision correction services, including depreciation and maintenance on
excimer lasers.
SELLING, GENERAL AND ADMINISTRATION EXPENSES. Selling, general and
administration expenses were approximately $8.9 million for the three months
ended March 31, 1998 as compared to approximately $7.0 million for the three
months ended March 31, 1997. The increase primarily relates to payroll and
facility costs incurred in operating additional eye care centers in the first
quarter of fiscal 1998 as compared to the first quarter of fiscal 1997.
Selling, general and administrative expenses, as a percentage of net revenue,
declined from 67.0% in 1997 to 65.5% in 1998. This decrease is primarily a
result of operating efficiencies which the Company realized from the acquisition
of multi-site eye care centers.
OTHER INCOME AND EXPENSES. Interest income totaled $71,000 for the three months
ended March 31, 1998 as compared to $102,000 for the three months ended March
31, 1997. This decrease resulted from the investment of a lower average cash
balance during the first quarter of 1998 as compared to the same period in 1997.
Interest expense totaled $51,000 for the three months ended March 31, 1998 as
compared to $80,000 for the three months ended March 31, 1997. The decrease is
associated with a higher average balance of debt outstanding in the first
quarter of 1997 as compared to the same period in 1998. The sale of certain
ophthalmic equipment during the three months ended March 31, 1998 generated a
gain of approximately $69,000.
NET INCOME (LOSS). The Company realized net income of $13,000, or $0.00 per
share on a basic and fully diluted basis,for the three months ended March 31,
1998 as compared to a net loss of $387,000, or ($0.04) per share for the three
months ended March 31, 1997.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had approximately $4.4 million in cash and cash
equivalents and working capital of approximately $4.9 million, in comparison to
approximately $6.0 million in cash and cash equivalents and working capital of
approximately $4.2 million as of December 31, 1997. The increase in working
capital is mainly due to the increase in Accounts Receivable during the three
months ended March 31, 1998.
As of March 31, 1998, the Company had securities outstanding which provide it
with potential sources of financing as outlined below:
<TABLE>
<CAPTION>
Securities Potential proceeds
- ----------------------------------------------- --------------------
<S> <C> <C>
Warrants 2,472,100 $14,800,000
Class A Warrants 85,000 500,000
Class II Warrants 290,424 2,032,968
Unit Purchase Options 215,000 3,700,000
Creditanstalt Warrants 150,000 694,000
Representative Warrants 170,000 1,400,000
--------------------
$23,126,968
====================
</TABLE>
The Company also has 842,294 Class I Warrants. The Class I Warrants entitle the
holder to purchase an amount of shares of the Company's common stock equal to an
aggregate of up to 19.9% of the shares of common stock purchasable under the
Company's outstanding warrants and options on the same terms and conditions of
existing warrant and option holders. The purchaser is obligated to exercise
these warrants at the same time the options and warrants of existing holders are
exercised, subject to certain limitations. The amount of proceeds from the
exercise of these warrants cannot be estimated at this time.
There can be no assurance that the Company will obtain any such proceeds from
the exercise of the above securities.
On February 20, 1997, the Company entered into a Credit Agreement (the
"Agreement") with a bank pursuant to which the Company can borrow up to $5.0
million on a term loan basis and up to $5.0 million on a revolving credit basis,
subject to certain performance criteria. Such performance criteria include,
among others, financial condition covenants such as rolling EBITDA levels,
indebtedness to EBITDA ratios, current ratio of 1:1 and minimum net worth
ratios. The term loan facility bears interest at the bank's prime rate plus
1.5% or LIBOR plus 3% at the Company's election, and the revolving credit
facility bears interest at the bank's prime rate plus 1.25% or LIBOR plus 2.75%
at the Company's election. These loans are secured by all assets of the Company
and its wholly owned subsidiaries. Amounts borrowed under the Agreement have
been and will continue to be used to refinance existing debt, finance future
acquisitions, provide ongoing working capital and for other general corporate
purposes. As part of the Agreement, the Company issued to the bank warrants to
purchase 150,000 shares of the common stock at a purchase price of $4.625 per
share. The warrants expire December 31, 2003.
13
<PAGE>
Effective April 1, 1998, the Company acquired one hundred percent of the
outstanding shares of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium").
The purchase price paid in connection with this acquisition was $2,309,157 of
cash on hand, $350,000 in notes payable in twelve equal installments commencing
June 30, 1998, and 87,940 shares of common stock. Eyeglass Emporium operates
nine eye care centers in Indiana. The acquisition was accounted for using the
purchase method of accounting.
The Company anticipates that its working capital and sources of capital, such as
the existing credit facility, will be adequate to fund the Company's currently
proposed activities for at least the next twelve months. The Company
anticipates using financing vehicles such as bank debt and other sources of
funding, such as additional equity offerings, to achieve its business plan,
including the acquisition of eye care centers.
The Company has an acquisition strategy to acquire and integrate the assets of
multi-site eye care centers and the practices of eye care professionals and to
employ or enter into management services contracts with these professionals.
This strategy includes both expanding existing regional markets and entering new
regional markets. The Company will also target acquisitions in strategic markets
that will serve as platforms from which the Company can consolidate a given
service area by making and integrating additional "in-market" acquisitions. The
Company is currently evaluating potential acquisition candidates. Without
additional funding, the Company's rate of acquisition and size of acquisition
could be limited.
14
<PAGE>
PART II. OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sight Resource Corporation
Date: May 1, 1998 /s/ WILLIAM T. SULLIVAN
----------- ------------------------
William T. Sullivan
President and Chief Executive Officer
(principal executive officer)
Date: May 1, 1998 /s/ AMY FELDMAN
----------- ----------------------------
Amy Feldman
Corporate Controller
(principal financial and
accounting officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIGHT
RESOURCE CORPORATION'S BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AS REPORTED ON FORM 10Q FOR THE QUARTER
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,359
<SECURITIES> 0
<RECEIVABLES> 2,708
<ALLOWANCES> 483
<INVENTORY> 4,365
<CURRENT-ASSETS> 11,538
<PP&E> 10,163
<DEPRECIATION> 4,783
<TOTAL-ASSETS> 32,865
<CURRENT-LIABILITIES> 6,656
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,580
<TOTAL-LIABILITY-AND-EQUITY> 32,865
<SALES> 13,580
<TOTAL-REVENUES> 13,580
<CGS> 4,752
<TOTAL-COSTS> 4,752
<OTHER-EXPENSES> 8,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 22
<INCOME-TAX> 9
<INCOME-CONTINUING> 13
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
