10-Q 1 c66618e10-q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X-QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES -- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2001 Commission file number 1-10629 LASER VISION CENTERS, INC. (Exact name of registrant as specified in its charter) Delaware 43-1530063 -------- ---------- State or other jurisdiction of incorporation (I.R.S. Employer identification or organization) number) 540 Maryville Centre Dr., Suite 200, St. Louis, Missouri 63141 --------------------------------------------------------------- (Address of principal executive offices) (314)434-6900 ------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock outstanding as of December 1, 2001 -- 27,865,911 shares LASER VISION CENTERS, INC. FORM 10-Q FOR QUARTERLY PERIOD ENDED OCTOBER 31, 2001 INDEX

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LASER VISION CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

See notes to interim consolidated financial statements. 3 LASER VISION CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

See notes to interim consolidated financial statements. 4 LASER VISION CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

See notes to interim consolidated financial statements. 5 LASER VISION CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)

See notes to interim consolidated financial statements. 6 LASER VISION CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)(CONTINUED)

On August 31, 2001, LaserVision acquired certain assets and liabilities of ClearVision Laser Centers, Inc. for an aggregate of $4,882,000 in cash and issued 2,129,085 shares of restricted stock of which 750,000 shares are being held by an escrow agent pending resolution of contractual purchase price adjustments with respect to the acquired net liabilities and the retention of ClearVision doctors through November 30, 2001. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $18,872,000 Cash and stock paid (11,525,000) ---------- Liabilities assumed $7,347,000 ==========

7 LASER VISION CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

See notes to interim consolidated financial statements. 8 LASER VISION CENTERS, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2001 (Unaudited) 1. The information contained in the interim consolidated financial statements and footnotes is condensed from that which would appear in the annual consolidated financial statements. Accordingly, the interim consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and related notes thereto contained in the Annual Report on Form 10-K for the fiscal year ended April 30, 2001 filed by Laser Vision Centers, Inc. ("LaserVision") with the Securities and Exchange Commission. The unaudited interim consolidated financial statements as of October 31, 2001, and for the three and six month periods ended October 31, 2001 and 2000, are unaudited, but include all normal recurring adjustments which management considers necessary for a fair presentation. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for the entire fiscal year ending April 30, 2002. The interim consolidated financial statements include the accounts and transactions of LaserVision and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. 2. On August 27, 2001, LaserVision announced that it had entered into an Agreement and Plan of Merger with TLC Laser Eye Centers, Inc. ("TLC") which, subject to stockholder and regulatory approval, will result in each share of LaserVision's common stock being converted into the right to receive 0.95 shares of TLC common stock. In addition, the number of shares receivable upon exercise of each outstanding stock option and warrant to purchase shares of LaserVision common stock will be proportionately adjusted on the basis of the 0.95-to-1 ratio and become exercisable for shares of TLC common stock on the same material terms and conditions of the LaserVision option or warrant, subject to the adjusting of the respective exercise price described below. Additionally, immediately prior to the effective time of the merger, LaserVision will change the exercise price of approximately 2,109,825 outstanding stock options and warrants of LaserVision which would have an exercise price greater than $8.688 per share of TLC common stock after the merger to a price equivalent to $8.688 per share of TLC common stock. As the acquiring company, TLC expects to use the purchase method of accounting and to complete the transaction by March 31, 2002. TLC is a Toronto-based operator of refractive laser centers in the U.S. and Canada and owns other smaller medical businesses. On the accompanying Statement of Operations, the $413,000 of legal, accounting and investment banking costs related to the TLC transaction and incurred through October 31, 2001 are reported as "Pending merger costs." 3. The net income (loss) per share was computed as described below using the "Weighted average number of common shares outstanding - basic" during each period. The 750,000 outstanding shares of common stock which were issued during the quarter ended October 31, 2001 and are being held by an escrow agent in connection with the ClearVision acquisition have been excluded. "Weighted average number of common shares outstanding - diluted" for the three- and six- month periods ended October 31, 2001 excludes the effects of outstanding warrants and options 9 because they are anti-dilutive. As of October 31, 2001, warrants and options to purchase 7.8 million shares were outstanding with an average exercise price of approximately $7.60 each, including warrants and options to purchase 1.3 million shares with an average exercise price of approximately $1.90 each. Diluted per share calculations follow:

4. The table below presents information about net income of segments used by the chief operating decision maker of LaserVision as of and for the periods ended October 31, 2001 and 2000. Amounts for net income listed as "reconciling" represent corporate expenses including executive management, legal, accounting, information systems and other costs of the corporate headquarters including occupancy costs, certain insurance and property taxes. 10

5. During the quarter ended July 31, 2001, LaserVision adopted the provisions of Statement on Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141) and Statement on Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 provides standards on accounting for business combinations, eliminates the pooling of interests method of accounting for business combinations and provides separate recognition criteria for intangible assets. Based upon its review of the provisions of the standard, LaserVision believes that it will not have a significant impact on its financial position, results of 11 operations or on its financial reporting. Under the provisions of SFAS 142, if an intangible asset is determined to have an indefinite useful life, it will not be amortized until its useful life is determined to be no longer indefinite. An intangible asset that is not subject to amortization shall be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is not amortized but is tested for impairment on an annual basis and between annual tests in certain circumstances at a level of reporting referred to as a reporting unit. For purposes of this impairment testing LaserVision will consider the reporting units to be North American refractive, other refractive and cataract. We have completed the first step of the transitional goodwill impairment test and have preliminarily determined that the fair value of the net assets of each reporting unit exceed the carrying value of the net assets of each reporting unit. LaserVision did not amortize goodwill during the six months ended October 31, 2001. A reconciliation of reported net income to adjusted net income and earnings per share reflecting retroactive adoption of SFAS 142 in the three and six month periods ended October 31, 2000 is provided below.

6. On August 31, 2001, LaserVision acquired certain assets and liabilities of ClearVision Laser Centers, Inc., a privately held company in the refractive laser access business based in Lakewood, Colorado ("ClearVision"). LaserVision paid an aggregate of $4,882,000 in cash and issued 2,129,085 shares of restricted common stock (of which 750,000 shares are being held by an escrow agent pending resolution of contractual adjusting provisions with respect to the acquired net liabilities and the retention of ClearVision doctors through November 30, 2001) for 12 the net liabilities of ClearVision. The acquisition resulted in $13.1 million of goodwill, which includes $2.3 million of goodwill related to shares of LaserVision common stock held in escrow pending the resolution of contractual purchase price adjustments. ClearVision's results of operations are included with the LaserVision's results of operations for periods subsequent to August 31, 2001. During the quarter ended October 31, 2001, LaserVision paid approximately $3.2 million to ClearVision vendors to pay the accounts payable liabilities assumed in the transaction. The purchase price has been allocated as follows: Current assets $641,000 Equipment 4,898,000 Goodwill 13,126,000 Other 104,000 Accounts payable (3,247,000) Accrued liabilities (2,640,000) Notes and lease liabilities (1,357,000) ----------- Total $11,525,000 ===========

The unaudited pro forma LaserVision results from operations assuming the ClearVision acquisition were consummated as of May 1, 2001 are as follows:

Pro forma revenue and net loss for the three and six month periods ended October 31, 2001 include the activity of ClearVision for the one and four month periods ended August 31, 2001, respectively. Pro forma adjustments to depreciation, interest and tax expense resulting in net benefits of $155,000 and $615,000 for the three and six month periods ended October 31, 2001, respectively, were made. 7. In accordance with the LaserVision's stated policy on impairments of long-lived assets, during the quarter ended October 31, 2001, we recorded a $1,168,000 non-cash charge to cost of revenues related to an impairment in the net carrying value of certain unused and underutilized lasers. The lasers are essentially being held for sale, trade-in or other disposal at October 31, 2001, and are recorded at an estimated fair market value of $153,000. 8. In July 2001, two excimer laser manufacturers reported settling class action anti-trust cases for a total of $62.8 million. We expect that a portion of this settlement will be paid to LaserVision. As part of the ClearVision acquisition, we acquired ClearVision's rights to payments made under this settlement. LaserVision's and ClearVision's settlement claims have now been filed with the court. The amount to be received has not yet been determined, but is estimated to be less than $5 million for LaserVision and less than $2.5 million for ClearVision. Amounts received from the settlement by LaserVision will be recorded in the Statement of Operations when the amount and date of receipt are both determinable. Amounts received from the settlement with respect to ClearVision will be recorded by LaserVision as a reduction in goodwill when the amount and 13 date of receipt are both determinable. We expect to record these payments during the first half of calendar 2002. 14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information, statements relating to LaserVision's plan, objectives and future performance are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. Because of various risks and uncertainties, actual strategies and results in future periods may differ materially from those currently expected. The discussion set forth below analyzes certain factors and trends related to the financial results for the three and six month periods ended October 31, 2001 and 2000. This discussion should be read in conjunction with the related consolidated financial statements and notes to the consolidated financial statements. ITEM 2. (A) LIQUIDITY AND CAPITAL RESOURCES During the six months ended October 31, 2001, cash and cash equivalents decreased 14% or $2.2 million to $13.6 million at October 31, 2001 from $15.7 million at April 30, 2001. Short-term investments maturing in less than one year decreased $6.9 million to $2.1 million at October 31, 2001 from $9.0 million at April 30, 2001. The ratio of current assets to current liabilities at October 31, 2001 was 1.43 to one, compared to 2.44 to one at April 30, 2001. Cash Flows from Operating Activities Net cash provided by operating activities decreased by $2.8 million to $4.4 million for the six months ended October 31, 2001 from $7.2 million for the six months ended October 31, 2000. The cash flows provided by operating activities during the six months ended October 31, 2001 primarily represented the net loss in this period offset by depreciation and amortization, the non-cash fixed asset impairment charge and the decrease in accounts receivable, less increases in inventory, prepaid expenses and other current assets and deferred taxes and decreases in accounts payable and accrued liabilities. The cash flows provided by operating activities during the six months ended October 31, 2000 primarily represent the net income in that period plus depreciation and amortization, the decrease in deferred income taxes, the minority interest in the income of subsidiaries, the decrease in accounts receivable and the increase in accounts payable less the decrease in accrued liabilities. Accounts receivable decreased during the six months ended October 31, 2001 due to lower revenue during September and October, 2001 compared to March and April, 2001 due to the decrease in the procedures performed during those months due primarily to the slow economy. The decrease in accounts payable is due to payment of $3.2 million of accounts payable assumed in the ClearVision acquisition. The significant decrease in current liabilities during the six months ended October 31, 2000 was due to payment of the contingent consideration to the former owners of Midwest Surgical Services, Inc. 15 Cash Flows from Investing Activities Net cash used for investing activities decreased by $3.1 million to $2.4 million for the six months ended October 31, 2001 from $5.5 million for the six months ended October 31, 2000. Cash used for investing during the six months ended October 31, 2001 was used to acquire ClearVision, acquire equipment, and acquire deferred contract rights, partially offset by the net sale of short-term investments. Cash used for investing during the six months ended October 31, 2000 was used to acquire Southeast Medical, enter a long-term agreement with Minnesota Eye Consultants, enter into partnership agreements and to acquire equipment, partially offset by the net proceeds from the sale of short-term and common equity investments. Cash Flows from Financing Activities Net cash used for financing activities decreased by $1.3 million to $4.2 million for the six months ended October 31, 2001 from $5.5 million for the six months ended October 31, 2000. Cash used in financing activities during the six months ended October 31, 2001 was primarily used to make principal payments under capitalized lease obligations and notes payable and to pay down the line of credit. Cash used in financing activities during the six months ended October 31, 2000 was primarily used to purchase 289,800 shares of treasury stock, make principal payments under capitalized lease obligations and notes payable and to pay proceeds to minority shareholders. Income Taxes During the fourth quarter of fiscal 1999 LaserVision began recognizing deferred tax assets related to net operating loss (NOL) carryforwards. Based on expected future operating plans, at October 31, 2001, management has determined that the net deferred tax assets generated by operations will more likely than not be utilized to offset future taxes. For tax purposes, the tax benefit related to certain equity transactions that did not impact operating results, such as those arising from the exercise of non-qualified stock options and warrants, will be credited to shareholders' equity and serve to reduce the future taxes paid by LaserVision. In the future, LaserVision anticipates income tax expense to be approximately 38% of income before taxes. With the impact of the equity-related tax loss carryforwards, LaserVision expects its cash income tax rate to be about 6%. Acquisitions On August 27, 2001, LaserVision announced that it had entered into an Agreement and Plan of Merger with TLC Laser Eye Centers, Inc. ("TLC") which, subject to stockholder and regulatory approval, will result in each share of LaserVision's common stock being converted into the right to receive 0.95 shares of TLC common stock. In addition, the number of shares receivable upon exercise of each outstanding stock option and warrant to purchase shares of LaserVision common stock will be proportionately adjusted on the basis of the 0.95-to-1 ratio and become exercisable for shares of TLC common stock on the same material terms and conditions of the LaserVision option or warrant subject to exercise price adjustments described below. Additionally, immediately prior to the effective time of the merger, LaserVision will change the exercise price of outstanding stock options and warrants to purchase 2,109,825 shares of LaserVision common stock which would have an exercise price greater than $8.688 16 per share of TLC common stock after the merger to a price equivalent to $8.688 per share of TLC common stock. As the acquiring company, TLC expects to use the purchase method of accounting and to complete the transaction within the first calendar quarter of 2002. TLC is a Toronto-based operator of refractive laser centers in the U.S. and Canada and owns other smaller medical businesses. On August 31, 2001, LaserVision acquired certain assets and liabilities of ClearVision Laser Centers, Inc., a privately held company in the refractive laser access business based in Lakewood, Colorado ("ClearVision"). LaserVision paid an aggregate of $4,882,000 in cash and issued 2,129,085 shares of restricted common stock (of which 750,000 shares are being held by an escrow agent pending resolution of the contractual purchase price adjustment provisions relating to acquired net liabilities and the retention of ClearVision doctors through November 30, 2001) for the net liabilities of ClearVision. The acquisition resulted in $13.1 million of goodwill, which includes $2.3 million of goodwill related to shares held in escrow pending the resolution of contingencies. ClearVision's results of operations are included with the LaserVision's results of operations for periods subsequent to August 31, 2001. During the quarter ended October 31, 2001, LaserVision paid approximately $3.2 million to ClearVision vendors to pay the accounts payable liabilities assumed in the transaction. Overview LaserVision expects to continue to fund future operations from cash generated by operations, vendor financing, the line of credit with LaSalle Bank, the proceeds from the exercise of options and warrants, and the remaining proceeds from the public stock offering completed in May 1999. We believe this will be sufficient to fund our expected cash needs as described below for the next twelve months, exclusive of any acquisitions. LaserVision is in compliance with all debt covenants related to its line of credit with LaSalle Bank. (B) RESULTS OF OPERATIONS The following table breaks out revenue by source and includes certain profitability amounts as a percentage of revenue.

17 Refractive and cataract revenue represents the income received for access to LaserVision's refractive lasers and cataract equipment and company-owned facilities. In most refractive locations where LaserVision provides laser access, the patient pays LaserVision's customer, usually an ophthalmologist or ophthalmic practice, directly and LaserVision's customer provides the facility and pays LaserVision a laser access fee. In five to seven refractive centers which are company-owned fixed site centers, LaserVision typically collects the entire fee, including the surgical fees, directly from the patient, provides the laser and the facility, and pays the surgeon who performs the surgery. For these locations, LaserVision's revenue and cost of revenues include the amounts LaserVision pays to surgeons for their professional medical services. In all locations where LaserVision provides cataract services, LaserVision's customer, usually a local hospital, pays LaserVision and collects from the patient or a third party insurer. Thus, for cataract services, there are no amounts for professional medical services in revenues or cost of revenues. QUARTER ENDED OCTOBER 31, 2001 COMPARED TO QUARTER ENDED OCTOBER 31, 2000 LaserVision provided excimer laser access to approximately 366 sites throughout the U.S. during the quarter ended October 31, 2001. We are focused on establishing long-term relationships with our customers and providing value-added services through our affiliated practices model. Revenues Total revenue increased by 3%, or $0.7 million, to $22.4 million for the three months ended October 31, 2001 from $21.7 million for the three months ended October 31, 2000. Revenues for ClearVision for the two months ended October 31, 2001 totaled $1.9 million. In the future, as the operations of ClearVision and LaserVision are more fully integrated, it will not be practicable to provide segregated financial information. Total refractive procedures decreased by 8% to 28,115 for the three months ended October 31, 2001 from 30,516 for the three months ended October 31, 2000. The increase in revenue was attributable to a $1.9 million increase in cataract revenue and a $0.2 million increase in other refractive revenue offset by a $1.4 million decrease in North American refractive revenue. The decrease in North American revenue was attributable to a decrease in the number of procedures performed by our eye surgeon customers in the U.S. The increase in cataract revenue was due to acquisitions and an increase in procedure volume. Cost of Revenues/Gross Profit Cost of revenues increased by 13%, or $2.1 million, to $17.7 million for the three months ended October 31, 2001 from $15.6 million for the three months ended October 31, 2000. This was primarily due to non-cash fixed asset impairment charges of $1.2 million, increased cataract expenses of $1.2 million, and increased salaries of $0.7 million, offset by decreased royalty fees of $0.7 million and decreased travel expense of $0.4 million. The fixed asset impairment charges related to an impairment in the net carrying value of certain unused and underutilized lasers. The increase in cataract expenses was a result of increased procedures. The decrease in royalties and travel services was primarily due to decreased 18 refractive procedure volume. Total gross profit decreased by 22%, or $1.4 million, to $4.7 million for the three months ended October 31, 2001 from $6.1 million for the three months ended October 31, 2000. The variable gross profit, excluding depreciation and fixed asset impairment charges, decreased by 2%, or $0.2 million, to $9.6 million for the three months ended October 31, 2001 from $9.8 million for the three months ended October 31, 2000. As a percentage of total revenue, total gross profit decreased to 21% from 28% for the three months ended October 31, 2001 and 2000, respectively. Excluding the fixed asset impairment charges, as a percentage of total revenue, total gross profit decreased to 26% from 28% for the three months ended October 31, 2001 and 2000, respectively. This decline was primarily due to a decline in the refractive procedure volume. Operating Expenses Selling, general and administrative expenses increased by 39%, or $2.2 million, to $7.8 million for the three months ended October 31, 2001 from $5.6 million for the three months ended October 31, 2000. This change was attributable to increases in general and administrative expenses of $1.7 million and increases in salaries and related expenses of $0.8 million, partially offset by decreases in depreciation and amortization of $0.2 million and decreases in selling and marketing expense of $0.1 million. The $1.7 million increase in general and administrative expenses was due to an increase in office expenses primarily related to the ClearVision acquisition and an increase in professional fees. Also, included in the general and administrative expenses for the quarter ended October 31, 2000 was a gain of $0.6 million on the sale of a non-current asset. The decrease in depreciation and amortization expenses was due to the early adoption of SFAS 142 effective May 1, 2001 which eliminated the requirement to amortize goodwill but instead requires goodwill to be expensed when impaired. Income (loss) from Operations The income (loss) from operations was a loss of $3.1 million for the three months ended October 31, 2001 compared to income of $0.5 million for the three months ended October 31, 2000. This was primarily related to decreased North American refractive profitability as a result of the decline in procedure volume. Other Income (Expenses) Lower interest income and costs of the pending merger with TLC primarily caused a decrease in other income (expense) to a net $552,000 of expense during the three months ended October 31, 2001 from a net $254,000 of income during the three months ended October 31, 2000. Taxes Income tax (expense) benefit changed from a tax expense of $270,000 for the three months ended October 31, 2000 to tax benefit of $1,150,000 for the three months ended October 31, 2001 reflecting the reduced profitability during the period. 19 SIX MONTHS ENDED OCTOBER 31, 2001 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 2000 Revenues Total revenue increased by 9%, or $3.8 million, to $47.7 million for the six months ended October 31, 2001 from $43.9 million for the six months ended October 31, 2000. Revenues for ClearVision for the two months ended October 31, 2001 totaled $1.9 million. In the future, as the operations of ClearVision and LaserVision are more fully integrated, it will not be practicable to provide segregated financial information. Total refractive procedures decreased by 1% to 62,200 for the six months ended October 31, 2001 from 62,760 for the six months ended October 31, 2000. The increase in revenue was attributable to a $3.8 million increase in cataract revenue and a $0.3 million increase in other refractive revenue, offset by a $0.2 million decrease in North American refractive revenue. The increase in cataract revenue was due to acquisitions and an increase in procedure volume. Cost of Revenues/Gross Profit Cost of revenues increased by 13%, or $3.9 million, to $34.7 million for the six months ended October 31, 2001 from $30.8 million for the six months ended October 31, 2000. This was primarily due to non-cash fixed asset impairment charges of $1.2 million, an increase of $2.3 million in cataract expenses, and an increase of $1.2 million in salaries, partially offset by a $1.2 million decrease in royalty fees paid to laser manufacturers and a decrease of $0.9 million in travel expenses. The fixed asset impairment charges related to an impairment in the net carrying value of certain unused and underutilized lasers. The increase in cataract expenses was a result of increased procedures. The decrease in royalties and travel services was primarily due to decreased refractive procedure volume. Total gross profit decreased by 1%, or $0.1 million, to $13.0 million for the six months ended October 31, 2001 from $13.1 million for the six months ended October 31, 2000. The variable gross profit, excluding depreciation and fixed asset impairment charges, increased by 1%, or $0.2 million, to $20.3 million for the three months ended October 31, 2001 from $20.1 million for the three months ended October 31, 2000. As a percentage of total revenue, total gross profit decreased to 27% from 30% for the three months ended October 31, 2001 and 2000, respectively. This decline was primarily due to a decline in the refractive procedure volume and a decline in the procedures per laser. Operating Expenses Selling, general and administrative expenses increased by 36%, or $4.1 million, to $15.6 million for the six months ended October 31, 2001 from $11.5 million for the six months ended October 31, 2000. The increase was attributable to increased general and administrative expenses of $2.5 million, salaries and related expenses of $1.5 million, increased selling and marketing expenses of $0.6 million and decreased depreciation and amortization of $0.4 million. The $2.5 million increase in general and administrative expenses was due to a $0.4 million increase in professional fees and a $0.7 million increase in office expenses. Also, included in general and administrative expenses for the six months ended October 31, 2000 was a gain of $0.6 million on the sale of a non-current asset. The decrease in depreciation and amortization expenses was due to the early adoption of SFAS 142 effective May 1, 2001 which 20 eliminated the requirement to amortize goodwill but instead requires goodwill to be expensed when impaired. Income from Operations The income (loss) from operations decreased by $4.2 million to a loss of $2.6 million for the six months ended October 31, 2001 from income of $1.6 million for the six months ended October 31, 2000. This was primarily related to decreased North American refractive profitability. Other Income (Expenses) A one-time gain of $595,000 relative to the sale of an investment in common equity securities increased other income during the six months ended October 31, 2000. Excluding this one-time event, lower interest income and the costs of the pending merger primarily caused a $974,000 decrease in other income (expense) to a net $618,000 of expense during the six months ended October 31, 2001 from a net $356,000 of income during the six months ended October 31, 2000. Taxes Income tax (expense) benefit changed from a tax expense of $978,000 for the six months ended October 31, 2000 to tax benefit of $994,000 for the six months ended October 31, 2001 reflecting the reduced profitability during the period. 21 PART II-OTHER INFORMATION Item 1. Legal Proceedings There has been no material change in the status of any litigation from that reported in the Form 10-Q for the period ended July 31, 2001, nor has any other material litigation been initiated. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K during the period covered by this report: On August 16, 2001 LaserVision filed a Form 8-K announcing the planned acquisition of certain assets and liabilities of ClearVision Laser Centers, Inc. On August 31, 2001 LaserVision filed a Form 8-K announcing the planned merger with TLC Laser Eye Centers, Inc. On September 7, 2001 LaserVision filed a Form 8-K announcing that the acquisition of certain assets and liabilities of ClearVision Laser Centers, Inc. was completed. On October 11, 2001 LaserVision filed an amendment on Form 8-K/A including additional financial information with respect to the acquisition of ClearVision Laser Centers, Inc. 22 Signatures Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LASER VISION CENTERS, INC. \s\John J. Klobnak December 17, 2001 ------------------------------------- ----------------------- John J. Klobnak Date Chairman of the Board and Chief Executive Officer \s\B. Charles Bono, III December 17, 2001 ------------------------------------- ----------------------- B. Charles Bono Date Chief Financial Officer and Principal Accounting Officer 23

LASER VISION CENTERS INC 10-Q