Anna Austin, EVP, Corporate Communications (314) 523-8354 Email: investor.relations@tlcvision.com
TLCVisionReports Fourth Quarter and Full Year 2005 Financial Results; Reaffirms Outlook for 2006
ST. LOUIS, MO, March 16, 2006: TLC Vision Corporation (NASDAQ:TLCV; TSX:TLC), North America’s premier eye care services company, today announced its financial results for the fourth quarter and full year ended December 31, 2005. All dollar amounts are expressed in U.S. currency and results are reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP) unless otherwise noted.
Editor’s Note: “Operating Business” (or “Operating”) is defined as TLCVision’s operating activities excluding the impact of the AMD segment, principally represented by our investment in OccuLogix Inc. To provide maximum transparency for investors, Operating Business financial results are listed separately from consolidated results in this press release.
“TLCVisiondelivered solid, broad-based revenue growth over prior year in the operating business, which is especially noteworthy given the uneven demand in the core LASIK market in the fourth quarter,” said Jim Wachtman, President and Chief Executive Officer. “We met analysts mean earnings expectations for the quarter, even while funding the initial start up investment in our new LASIK Select(SM) centers. The implementation of our refractive expansion strategy is well on track, including the integration of TruVision and the opening of 5 new LASIK Select(SM) locations in the first quarter of 2006, bringing our total number of refractive centers to 83.”
REVENUES
Q4 2005:TLCVision’sfourth quarter consolidated net revenues were $60.5 million, an increase of 6% from the comparable period in 2004. Excluding the AMD business segment, revenues from the Operating Business were $60.3 million versus $56.5 million last year, an increase of $3.8 million or 7%.
•
Total refractive revenues were up 1% to $40.8 million, with total refractive procedures of 39,800 compared to 42,200 the prior year, down 6%. Center revenues were 5% higher during the quarter, as softer economic conditions resulted in a 3% decline in same store procedures that were more than offset by revenues from new centers. Access revenues were down by 15% due to lower demand and the loss of fixed site business.
•
Other healthcare services revenues (excluding AMD) increased 21% to $19.5 million, with strong growth in our mobile cataract (+22%) and ambulatory surgery centers businesses (+37%). Vision Source grew by 21% over the same period in 2004.
Full Year 2005:TLCVision’sfull year consolidated net revenues were up 5% to $260 million, and net revenues from the Operating Business were $258 million (up 5%).
•
Annual refractive revenues of $186.6 million were up 2% from 2004, with a total of 190,900 procedures. Centers revenues of $150.2 million were up 6% from 2004, as same store revenue growth of 3% combined with the revenues from the refractive acquisitions closed earlier in the year. Access revenues for the year of $36.5 million were 10% lower than 2004 due to lower demand and the loss of fixed site customers.
•
Other healthcare services revenues (excluding AMD) of $71.6 million grew by 12% on a full year basis and 17% in the second half of 2005.
EARNINGS
Q4 2005:The consolidated business generated a net pre-tax loss for the fourth quarter of $2.6 million, as OccuLogix loss from operations combined with several non-cash charges related to its revaluation of certain assets as a result of their preliminary analysis of the MIRA-1 clinical trial. After removing the loss from the AMD business, net pre-tax income from the Operating Business was $0.9 million or $0.01 per share. It is important to note that current year earnings include the start-up costs of the LASIK Select (SM) branded centers (approximately $0.4 million) and the costs to close or renegotiate three underperforming locations (approximately $1.7 million). Comparable pre-tax earnings for 2004 were $1.3 million.
Also included in the fourth quarter financial results was $1.7 million of principally non-cash income tax expense, of which $1.2 million related to the correction on understated income tax expense in 2004.
The resulting consolidated net loss for the quarter of $4.3 million compared with net income of $26.1 million for the prior period, including a one-time gain of $25.8 million from the company’s sale of OccuLogix shares in its initial public offering. The net loss for the Operating Business was $0.8 million or $0.01 per fully diluted share.
Full Year 2005:Consolidated pre-tax income was $14.8 million or $0.21 per share. Pre-tax income from the Operating Business totaled $22.6 million for 2005, up $1.5 million or 7% from 2004. Pre-tax earnings per share were $0.32, meeting analysts mean estimates for the year after deducting cash income tax expense of $0.01.
Income tax expense of $7.9 million for the full year includes a non-cash charge of $7.1 million. This charge corrects the reversal of deferred tax valuation allowances that are more properly recorded as reductions in intangible asset values and an increase to equity. Accordingly, the Company’s financials have been restated for the first three quarters of 2005 to reflect an increase in income tax expense totaling $5.7 million in addition to the $1.2 million adjustment for 2004 noted above.
On an annual basis, consolidated net income was $6.9 million or $0.10 per share. The Operating Business generated full year net income of $14.7 million or $0.21 per share.
STRONG CASH GENERATION
Consolidated:The business model continues to generate strong cash flow to fund the Company’s growth strategy. Consolidated operating cash flow was $3.4 million ($0.05 per share) for the fourth quarter and $22.5 million ($0.32 per share) for the full year. Year-end consolidated cash and short-term investments totaled $69.9 million.
Operating Business:Operating cash flow from the Operating Business in the fourth quarter was $7.9 million ($0.11 per share), up $2.3 million or 42% from last year. For the full year, operating cash flow of $41.6 million, or $0.58 per share, was $6.5 million or 19% ahead of last year. The Company continues to maintain a strong financial position, with cash and short-term investments for the Operating Business totaling $28.7 million.
2006 FINANCIAL GUIDANCE
“We remain very confident that our strategy will continue to deliver consistent, strong growth in revenues, earnings and cash flow. With that in mind, we are reaffirming our 2006 financial guidance for the Operating Business,” said Jim Wachtman.
•
2006 net revenues of between $308 million and $318 million, or a growth of between 19% and 23% from full year 2005 results;
•
Fully diluted pre-tax earnings per share of $0.33 and $0.36, including approximately $1.1 million of compensation expense related to stock options which will be recorded for the first time in 2006, and costs related to our rollout of LASIK Select (SM) which are anticipated to cost $0.03 in 2006.
•
Fully-taxed earnings per share of between $0.20 to $0.22, reflecting a book income tax expense at a 40% effective rate;
•
Operating cash flow per share of between $0.58 and $0.62.
Conference Call
TLCVisionis pleased to invite all interested parties to participate in a conference call during which these results will be discussed. The call will be held today, March 16, at 10:30 am Eastern Time at 1-877-888-7019. The call will also be broadcast live and archived on the Company’s web site atwww.tlcv.com under the “Webcasts” link in the Investor Relations section. In addition, the live web cast will be available at various other popular portals and financial web sites.
AboutTLCVision
TLCVisionis North America’s premier eye care services company, providing eye doctors with the tools and technologies needed to deliver high-quality patient care. Through its centers management and technology access service models, and its managed care contracting strength, TLCVision maintains leading positions in Refractive and Cataract markets. More information about TLCVision can be found on the website atwww.tlcv.com.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934, which statements can be identified by the use of forward looking terminology, such as “may”, “will”, “expect”, ”intend”, “anticipate”, “estimate”, “predict”, “plans” or “continue” or the negative thereof or other variations thereon or comparable terminology referring to future events or results. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors, including the timing of expenditures, effects of competition, changes to pricing, acquisitions and expansion opportunities, any of which could cause actual results to vary materially from current results or TLCVision’s anticipated future results. See the Company’s reports filed with the Canadian Securities Regulators and the U.S. Securities and Exchange Commission from time to time for cautionary statements identifying important factors with respect to such forward looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from results referred to in forward looking statements. TLCVision assumes no obligation to update the information contained in this press release.
TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except per share amounts)
Three Months Ended
Three Months Ended
December 31, 2005
December 31, 2004
Results Before AMD
Results Before AMD
Segment
AMD Segment
Total TLCVision
Segment
AMD Segment
Total TLCVision
Revenues:
Refractive:
Centers
$
33,425
$
—
$
33,425
$
31,724
$
—
$
31,724
Access
7,368
—
7,368
8,676
—
8,676
Other healthcare services
19,518
206
19,724
16,130
346
16,476
Total revenues
60,311
206
60,517
56,530
346
56,876
Cost of revenues:
Refractive:
Centers
25,879
—
25,879
24,599
—
24,599
Access
6,045
—
6,045
6,646
—
6,646
Other healthcare services
11,920
2,345
14,265
10,259
492
10,751
Total cost of revenues
43,844
2,345
46,189
41,504
492
41,996
Gross profit (loss)
16,467
(2,139
)
14,328
15,026
(146
)
14,880
General and administrative
6,538
2,981
9,519
6,833
466
7,299
Marketing and sales
5,308
168
5,476
5,063
77
5,140
Research and development, clinical and regulatory
—
1,456
1,456
—
576
576
Amortization of intangibles
950
—
950
1,013
—
1,013
Other expenses, net
1,769
1
1,770
80
—
80
Total operating costs
14,565
4,606
19,171
12,989
1,119
14,108
Operating income (loss)
1,902
(6,745
)
(4,843
)
2,037
(1,265
)
772
Gain on sale of OccuLogix, Inc. stock
—
—
—
—
25,792
25,792
Interest income
513
406
919
564
52
616
Interest expense
(421
)
—
(421
)
(418
)
—
(418
)
Minority interests
(1,834
)
2,891
1,057
(1,362
)
411
(951
)
Earnings from equity investments
718
—
718
490
—
490
Income (loss) before income taxes
878
(3,448
)
(2,570
)
1,311
24,990
26,301
Income tax expense
(1,689
)
3
(1,686
)
(206
)
—
(206
)
Net income (loss)
$
(811
)
$
(3,445
)
$
(4,256
)
$
1,105
$
24,990
$
26,095
Earnings (loss) per share — diluted
$
(0.01
)
$
(0.05
)
$
(0.06
)
$
0.02
$
0.34
$
0.36
Weighted average number of common shares outstanding — diluted
68,645
68,645
68,645
71,846
71,846
71,846
Note: The AMD segment primarily includes the Company’s majority interest in OccuLogix, Inc. (formerly Vascular Sciences Corp.).
TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except per share amounts)
Year Ended December
Year Ended December
31, 2005
31, 2004
Results Before AMD
Results Before AMD
Segment
AMD Segment
Total TLCVision
Segment
AMD Segment
Total TLCVision
Revenues:
Refractive:
Centers
$
150,168
$
—
$
150,168
$
141,782
$
—
$
141,782
Access
36,453
—
36,453
40,659
—
40,659
Other healthcare services
71,563
1,841
73,404
63,969
837
64,806
Total revenues
258,184
1,841
260,025
246,410
837
247,247
Cost of revenues:
Refractive:
Centers
106,476
—
106,476
101,440
—
101,440
Access
26,974
—
26,974
28,863
—
28,863
Other healthcare services
43,537
3,738
47,275
39,389
1,046
40,435
Total cost of revenues
176,987
3,738
180,725
169,692
1,046
170,738
Gross profit (loss)
81,197
(1,897
)
79,300
76,718
(209
)
76,509
General and administrative
27,647
8,850
36,497
26,009
857
26,866
Marketing and sales
21,055
659
21,714
18,541
164
18,705
Research and development, clinical and regulatory
—
5,250
5,250
—
1,825
1,825
Amortization of intangibles
4,039
—
4,039
4,098
—
4,098
Other expenses, net
935
(166
)
769
940
—
940
Total operating costs
53,676
14,593
68,269
49,588
2,846
52,434
Operating income (loss)
27,521
(16,490
)
11,031
27,130
(3,055
)
24,075
Gain on sale of OccuLogix, Inc. stock
—
—
—
—
25,792
25,792
Interest income
2,687
1,593
4,280
1,902
52
1,954
Interest expense
(1,737
)
—
(1,737
)
(2,617
)
—
(2,617
)
Minority interests
(8,401
)
7,058
(1,343
)
(7,364
)
411
(6,953
)
Earnings from equity investments
2,545
—
2,545
2,057
—
2,057
Income (loss) before income taxes
22,615
(7,839
)
14,776
21,108
23,200
44,308
Income tax expense
(7,891
)
—
(7,891
)
(600
)
—
(600
)
Net income (loss)
$
14,724
$
(7,839
)
$
6,885
$
20,508
$
23,200
$
43,708
Earnings (loss) per share — diluted
$
0.21
$
(0.11
)
$
0.10
$
0.29
$
0.32
$
0.61
Weighted average number of common shares outstanding — diluted
71,380
71,380
71,380
71,088
71,088
71,088
Note: The AMD segment primarily includes the Company’s majority interest in OccuLogix, Inc. (formerly Vascular Sciences Corp.).
TLC VISION CORPORATION
CONSOLIDATING BALANCE SHEETS
(In thousands)
December 31, 2005
(Unaudited)
December 31, 2004
Results Before
Results Before AMD
AMD Segment
AMD Segment
Segment
AMD Segment
Total TLCVision
(Unaudited)
(Unaudited)
Total TLCVision
ASSETS
Current assets
Cash and cash equivalents
$
22,122
$
9,607
$
31,729
$
15,847
$
17,588
$
33,435
Short-term investments
6,550
31,663
38,213
68,515
42,500
111,015
Accounts receivable
20,056
527
20,583
16,489
954
17,443
Prepaid expenses, inventory and other
11,604
5,519
17,123
12,212
1,609
13,821
Total current assets
60,332
47,316
107,648
113,063
62,651
175,714
Intercompany
1,693
(1,693
)
—
1,877
(1,877
)
—
Restricted cash
975
—
975
932
—
932
Investments and other assets
19,838
—
19,838
10,482
—
10,482
Goodwill
99,402
—
99,402
53,774
—
53,774
Other intangible assets
23,886
135
24,021
18,037
103
18,140
Fixed assets
48,646
513
49,159
45,636
563
46,199
Total assets
$
254,772
$
46,271
$
301,043
$
243,801
$
61,440
$
305,241
LIABILITIES
Current liabilities
Accounts payable
$
10,517
$
514
$
11,031
$
8,491
$
225
$
8,716
Accrued liabilities
22,158
2,295
24,453
23,425
3,714
27,139
Current maturities of long-term debt
5,268
—
5,268
8,664
—
8,664
Total current liabilities
37,943
2,809
40,752
40,580
3,939
44,519
Long-term debt, less current maturities
12,665
—
12,665
9,991
—
9,991
Other long-term liabilities
3,427
—
3,427
2,242
480
2,722
Minority interests
14,284
21,510
35,794
9,307
27,915
37,222
Total liabilities
68,319
24,319
92,638
62,120
32,334
94,454
STOCKHOLDERS’ EQUITY
Common stock
419,936
30,767
450,703
428,877
30,082
458,959
Option and warrant equity
1,861
—
1,861
2,872
—
2,872
Accumulated deficit
(235,344
)
(8,815
)
(244,159
)
(250,068
)
(976
)
(251,044
)
Total stockholders’ equity
186,453
21,952
208,405
181,681
29,106
210,787
Total liabilities and stockholders’ equity
$
254,772
$
46,271
$
301,043
$
243,801
$
61,440
$
305,241
Note: The AMD segment primarily includes the Company’s majority interest in OccuLogix, Inc. (formerly Vascular Sciences Corp.).
TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands except per share amounts)
Year Ended December
Year Ended December
31, 2005
31, 2004
Results Before AMD
Results Before AMD
Segment
AMD Segment
Total TLCVision
Segment
AMD Segment
Total TLCVision
OPERATING ACTIVITIES
Net income (loss)
$
14,724
$
(7,839
)
$
6,885
$
20,508
$
23,200
$
43,708
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization
16,233
120
16,353
17,594
87
17,681
Write-offs (reimbursements) of investments in research and development
arrangements
(300
)
—
(300
)
(400
)
1,249
849
Minority interests
8,401
(7,058
)
1,343
7,364
(411
)
6,953
Earnings from equity investments
(2,545
)
—
(2,545
)
(2,057
)
—
(2,057
)
Deferred taxes
6,301
—
6,301
—
—
—
Loss (gain) on disposals of fixed assets
75
(167
)
(92
)
839
—
839
Gain on sale of OccuLogix, Inc. stock
—
—
—
—
(25,792
)
(25,792
)
Gain on sales of subsidiaries
(319
)
—
(319
)
(1,143
)
—
(1,143
)
Non-cash compensation expense
648
790
1,438
484
—
484
Adjustments to the fair values of intangibles, long-term receivables and
long-term liabilities
888
—
888
(1,206
)
—
(1,206
)
Other
—
182
182
—
—
—
Changes in operating assets and liabilities, net of acquisitions and dispositions:
(2,513
)
(5,095
)
(7,608
)
(6,923
)
1,967
(4,956
)
Cash from operating activities
41,593
(19,067
)
22,526
35,060
300
35,360
INVESTING ACTIVITIES
Purchases of fixed assets
(8,139
)
(182
)
(8,321
)
(5,103
)
(88
)
(5,191
)
Proceeds from sales of fixed assets
1,494
285
1,779
1,565
—
1,565
Proceeds from divestitures of investments and subsidiaries, net
3,430
—
3,430
729
—
729
Proceeds from sale of OccuLogix, Inc. stock, net
—
—
—
25,792
—
25,792
Distributions and loan payments received from equity investments
3,039
—
3,039
2,518
—
2,518
Reimbursements from (investments in) research and development
arrangements
300
—
300
(849
)
—
(849
)
Acquisitions and equity investments
(67,573
)
—
(67,573
)
(10,067
)
—
(10,067
)
Proceeds from short-term investments
91,025
38,725
129,750
8,353
—
8,353
Purchases of short-term investments
(29,060
)
(28,035
)
(57,095
)
(68,555
)
(42,500
)
(111,055
)
Other
49
(36
)
13
60
—
60
Cash from investing activities
(5,435
)
10,757
5,322
(45,557
)
(42,588
)
(88,145
)
FINANCING ACTIVITIES
Restricted cash movement
(43
)
—
(43
)
444
—
444
Principal payments of debt financing and capital leases
(9,504
)
—
(9,504
)
(13,669
)
—
(13,669
)
Proceeds from debt financing
1,992
—
1,992
—
—
—
Distributions to minority interests
(8,440
)
—
(8,440
)
(7,216
)
—
(7,216
)
Purchases of treasury stock
(15,868
)
—
(15,868
)
—
—
—
Proceeds from issuances of common stock
1,980
—
1,980
25,231
—
25,231
Proceeds from issuances of OccuLogix, Inc. stock, net and cash
acquired upon consolidation
—
329
329
—
59,850
59,850
Cash from financing activities
(29,883
)
329
(29,554
)
4,790
59,850
64,640
Net increase (decrease) in cash and cash equivalents during the period
6,275
(7,981
)
(1,706
)
(5,707
)
17,562
11,855
Cash and cash equivalents, beginning of period
15,847
17,588
33,435
21,554
26
21,580
Cash and cash equivalents, end of period
$
22,122
$
9,607
$
31,729
$
15,847
$
17,588
$
33,435
Operating cash flow per diluted share
$
0.58
$
(0.26
)
$
0.32
$
0.49
$
0.01
$
0.50
Note: The AMD segment primarily includes the Company’s majority interest in OccuLogix, Inc. (formerly Vascular Sciences Corp.).
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