Anna Austin, EVP, Corporate Communications (636) 534-2271 Email: investor.relations@tlcvision.com
TLCVisionReports First Quarter 2006 Financial Results;
On Target With Refractive Expansion Strategy
and Reaffirms Full Year Outlook
ST. LOUIS, MO, May 8, 2006: TLC Vision Corporation (NASDAQ:TLCV; TSX:TLC), North America’s premier eye care services company, today announced its financial results for the first quarter ended March 31, 2006. 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 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.
“TLCVision saw overall revenue growth and generated solid earnings in the first quarter,” said Jim Wachtman, President and Chief Executive Officer. “This was achieved despite a slowdown in the overall refractive industry and costs associated with our refractive expansion strategy, as previously guided. The quarter’s financial performance, including significant revenue growth in our Other Healthcare Services, and the progress achieved thus far in our refractive expansion, give us confidence that TLCVisionis delivering on our growth strategy. We are reaffirming our 2006 financial guidance.”
FIRST QUARTER HIGHLIGHTS:
•
Over 9% consolidated revenue growth, with additional benefit from LASIK Select and TruVision projected for the second quarter.
•
Over 20% revenue growth in Other Healthcare Services, excluding the AMD segment.
•
Solid earnings contribution, even during this period of expansion investment.
•
Operating cash flow well above prior year, demonstrating continued strong cash generation and allowing us to fund our expansion strategy.
•
Five LASIK Select centers opened in the quarter, as guided, with a sixth center announced in early May.
•
TruVision integration progressing according to plan.
•
With the sale of OccuLogix stock in early April, we accomplished our long stated goal of reducing our ownership below 50%.
REVENUES
TLCVision’sfirst quarter consolidated net revenues were $77.6 million, an increase of over 9% from 2005, with revenues from the Operating Business up $7 million or 10%.
•
Total refractive revenues were up 7% to $58.9 million reflecting higher average selling prices in the centers business and the benefit of 2005 acquisitions. Total refractive procedures of 56,100 were down 4% overall and down 1% in our centers business, as demand softened across the entire industry compared to a strong first quarter in 2005. Center revenues were 10% higher during the quarter, while access revenues were down by 4% due to lower demand in both the mobile and fixed site businesses.
•
Other Healthcare Services revenues (excluding AMD) increased 21% to $18.7 million, with strong growth in our cataract business of 24%. Vision Source grew by 18% over the same period in 2005.
EARNINGS
Consolidated: Net income for the first quarter was $2.7 million, including the OccuLogix loss from operations of $2.8 million.
Operating Business: Net income from the Operating Business before AMD was $5.5 million or $0.08 per share. These results compare with a 2005 pro forma net income of $7.0 million or $0.10 per share (after adjusting reported 2005 results for the book tax rate of 38% and stock compensation expense). Net income decreased from the prior year in large part due to the previously guided investments in its new value priced strategy and selected marketing at premium centers of $1.2 million during the quarter.
STRONG CASH GENERATION
Consolidated: Consolidated operating cash flow was $9.0 million ($0.13 per share) for the first quarter, and ending cash and short-term investments totaled $75.6 million.
Operating Business: Operating cash flow from the Operating Business before AMD in the first quarter was $13.8 million ($0.20 per share), up $2.1 million or 17% for the same period in 2005. The Company continues to maintain a strong financial position, with cash and short-term investments for the Operating Business totaling $39.1 million.
“We are very pleased with the continued strong cash flow generated from our businesses, which combined with our strong balance sheet, positions the Company to fund its growth strategy,” said Jim Wachtman.
2006 OPERATING BUSINESS FINANCIAL GUIDANCE
•
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 between $0.33 and $0.36, including an estimated $1.1 million impact from FAS 123R, and anticipated costs of $0.03 related to our rollout of LASIK Select.
•
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, May 8, at 4:30 pm Eastern Time at 1-877-888-3490. 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.
About TLCVision
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, Cataract and Optometric Services markets. More information about TLCVisioncan be found on the website at .
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.
1
TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF
OPERATIONS (UNAUDITED)
(In thousands except per
share amounts)
Three Months
EndedMarch 31, 2006
Three Months Ended March 31, 2005 (As Restated)
Results Before AMD
Segment
AMD Segment
Total TLCVision
Results Before AMD Segment
AMD Segment
Total TLCVision
Revenues:
Refractive:
Centers
$
47,939
$
—
$
47,939
$
43,765
$
—
$
43,765
Access
10,988
—
10,988
11,411
—
11,411
Other healthcare services
18,654
—
18,654
15,442
431
15,873
Total revenues
77,581
—
77,581
70,618
431
71,049
Cost of revenues:
Refractive:
Centers
31,888
—
31,888
28,529
—
28,529
Access
7,515
—
7,515
7,410
—
7,410
Other healthcare services
11,327
1,659
12,986
9,632
519
10,151
Total cost of revenues
50,730
1,659
52,389
45,571
519
46,090
Gross profit (loss)
26,851
(1,659
)
25,192
25,047
(88
)
24,959
General and administrative
9,068
1,759
10,827
7,046
1,879
8,925
Marketing and sales
6,802
169
6,971
4,812
185
4,997
Research and development, clinical and regulatory
—
1,475
1,475
—
1,344
1,344
Amortization of intangibles
864
—
864
1,011
—
1,011
Other
(357
)
849
492
(535
)
—
(535
)
Total operating costs
16,377
4,252
20,629
12,334
3,408
15,742
Operating income (loss)
10,474
(5,911
)
4,563
12,713
(3,496
)
9,217
Interest income
647
366
1,013
716
356
1,072
Interest expense
(538
)
—
(538
)
(457
)
(1
)
(458
)
Minority interests
(2,529
)
2,715
186
(2,185
)
1,499
(686
)
Earnings from equity investments
923
—
923
659
—
659
Income (loss) before income taxes
8,977
(2,830
)
6,147
11,446
(1,642
)
9,804
Income tax expense
(3,435
)
—
(3,435
)
(3,077
)
—
(3,077
)
Net income (loss)
$
5,542
$
(2,830
)
$
2,712
$
8,369
$
(1,642
)
$
6,727
Earnings (loss) per share - diluted
$
0.08
$
(0.04
)
$
0.04
$
0.12
$
(0.03
)
$
0.09
Weighted average number of common shares outstanding - diluted
69,550
69,550
69,550
72,045
72,045
72,045
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)
March 31, 2006
(Unaudited)
December 31, 2005
Results Before AMD
Results Before AMD Segment
AMD Segment
Segment
AMD Segment
Total TLCVision
(Unaudited)
(Unaudited)
Total TLCVision
ASSETS
Current assets
Cash and cash equivalents
$
30,911
$
14,824
$
45,735
$
22,122
$
9,607
$
31,729
Short-term investments
8,200
21,712
29,912
6,550
31,663
38,213
Accounts receivable, net
20,981
560
21,541
20,056
527
20,583
Prepaid expenses, inventory and other
11,956
4,860
16,816
11,604
5,519
17,123
Total current assets
72,048
41,956
114,004
60,332
47,316
107,648
Intercompany
1,717
(1,717
)
—
1,693
(1,693
)
—
Restricted cash
1,010
—
1,010
975
—
975
Investments and other assets
20,110
—
20,110
19,838
—
19,838
Goodwill
100,021
—
100,021
99,402
—
99,402
Other intangible assets, net
23,102
205
23,307
23,886
135
24,021
Fixed assets, net
49,337
438
49,775
48,646
513
49,159
Total assets
$
267,345
$
40,882
$
308,227
$
254,772
$
46,271
$
301,043
LIABILITIES
Current liabilities
Accounts payable
$
10,331
$
92
$
10,423
$
10,517
$
514
$
11,031
Accrued liabilities
26,741
2,430
29,171
22,158
2,295
24,453
Current maturities of long-term debt
6,099
—
6,099
5,268
—
5,268
Total current liabilities
43,171
2,522
45,693
37,943
2,809
40,752
Long-term debt, less current maturities
12,115
—
12,115
12,665
—
12,665
Other long-term liabilities
3,198
—
3,198
3,427
—
3,427
Minority interests
14,512
19,107
33,619
14,284
21,510
35,794
Total liabilities
72,996
21,629
94,625
68,319
24,319
92,638
STOCKHOLDERS’ EQUITY
Common stock
422,315
30,898
453,213
419,936
30,767
450,703
Option and warrant equity
1,836
—
1,836
1,861
—
1,861
Accumulated deficit
(229,802
)
(11,645
)
(241,447
)
(235,344
)
(8,815
)
(244,159
)
Total stockholders’ equity
194,349
19,253
213,602
186,453
21,952
208,405
Total liabilities and stockholders’ equity
$
267,345
$
40,882
$
308,227
$
254,772
$
46,271
$
301,043
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)
Three Months Ended March 31, 2006
Three Months Ended March 31, 2005 (As Restated)
Results Before AMD
Segment
AMD Segment
Total TLCVision
Results Before AMD Segment
AMD Segment
Total TLCVision
OPERATING ACTIVITIES
Net income (loss)
$
5,542
$
(2,830
)
$
2,712
$
8,369
$
(1,642
)
$
6,727
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization
3,758
34
3,792
3,971
46
4,017
Reimbursements from investments in research and development
arrangements
(300
)
—
(300
)
—
—
—
Minority interests
2,529
(2,715
)
(186
)
2,185
(1,499
)
686
Earnings from equity investments
(923
)
—
(923
)
(659
)
—
(659
)
Deferred taxes
2,131
—
2,131
2,506
—
2,506
Excess tax benefits from stock-based compensation expense
(1,710
)
—
(1,710
)
—
—
—
Loss (gain) on sales and disposals of fixed assets
32
29
61
(96
)
—
(96
)
Write-down of OccuLogix, Inc. inventory
—
1,625
1,625
—
—
—
Gain on sale of subsidiary
—
—
—
(319
)
—
(319
)
Non-cash compensation expense
426
186
612
69
—
69
Other
—
26
26
—
—
—
Changes in operating assets and liabilities, net of acquisitions and dispositions:
2,344
(1,225
)
1,119
(4,254
)
(2,872
)
(7,126
)
Cash from operating activities
13,829
(4,870
)
8,959
11,772
(5,967
)
5,805
INVESTING ACTIVITIES
Purchases of fixed assets
(2,349
)
—
(2,349
)
(2,681
)
(46
)
(2,727
)
Proceeds from sales of fixed assets
26
—
26
454
—
454
Proceeds from divestitures of investments and subsidiaries, net
—
—
—
3,430
—
3,430
Distributions and loan payments received from equity investments
1,333
—
1,333
556
—
556
Reimbursements from investments in research and development
arrangements
300
—
300
—
—
—
Acquisitions and equity investments
(1,474
)
—
(1,474
)
(443
)
—
(443
)
Proceeds from sales of short-term investments
—
9,925
9,925
34,350
4,400
38,750
Purchases of short-term investments
(1,650
)
—
(1,650
)
(4,685
)
(9,561
)
(14,246
)
Other
14
(71
)
(57
)
(125
)
—
(125
)
Cash from investing activities
(3,800
)
9,854
6,054
30,856
(5,207
)
25,649
FINANCING ACTIVITIES
Restricted cash movement
(35
)
—
(35
)
23
—
23
Principal payments of debt financing and capital leases
(1,071
)
—
(1,071
)
(4,219
)
—
(4,219
)
Proceeds from debt financing
83
—
83
1,117
—
1,117
Excess tax benefits from stock-based compensation expense
1,710
—
1,710
—
—
—
Distributions to minority interests
(2,184
)
—
(2,184
)
(1,977
)
—
(1,977
)
Proceeds from issuances of common stock
257
—
257
1,077
—
1,077
Proceeds from issuances of OccuLogix, Inc. stock
—
233
233
—
217
217
Cash from financing activities
(1,240
)
233
(1,007
)
(3,979
)
217
(3,762
)
Net increase (decrease) in cash and cash equivalents during the period
8,789
5,217
14,006
38,649
(10,957
)
27,692
Cash and cash equivalents, beginning of period
22,122
9,607
31,729
15,847
17,588
33,435
Cash and cash equivalents, end of period
$
30,911
$
14,824
$
45,735
$
54,496
$
6,631
$
61,127
Operating cash flow per diluted share
$
0.20
$
(0.07
)
$
0.13
$
0.16
$
(0.08
)
$
0.08
Note: The AMD segment primarily includes the Company’s majority interest in OccuLogix, Inc. (formerly Vascular Sciences Corp.).
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