SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1998
COMMISSION FILE NUMBER: 0-29302
TLC THE LASER CENTER INC.
-------------------------
(Exact name of registrant as specified in its charter)
Ontario, Canada 980151150
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5600 Explorer Drive, Suite 301 L4W 4Y2
Mississauga, Ontario (Zip Code)
(Address of principal executive offices)
Registrant's telephone, including area code (905) 602-2020
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 and 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. |X| Yes |_| No
As of January 13, 1999, there were 33,948,179 of the registrant's Common
Shares outstanding.
This Quarterly Report on Form 10-Q (herein, together with all amendments,
exhibits and schedules hereto, referred to as the "Form 10-Q") contains certain
forward-looking statements within the meaning of Section 27A of the U.S.
Securities and Exchange Act of 1934, which statements can be identified by the
use of forward looking terminology, such as "may", "will", "expect",
"anticipate", "estimate", "plans", "intends" or "continue" or the negative
thereof or other variations thereon or comparable terminology. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to those set forth elsewhere in this Form 10-Q in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the Company's Annual Report on Form 10-K for the year ended
May 31, 1998. Unless the context indicates or requires otherwise, references in
this Form 10-Q to the "Company" or "TLC" shall mean TLC The Laser Center Inc.
and its subsidiaries. The Company's fiscal year ends on May 31. Therefore,
references in this Form 10-Q to a particular fiscal year shall mean the 12
months ended on May 31 in that year. References to "$" or "dollars" shall mean
U.S. dollars unless otherwise indicated. References to "C$" shall mean Canadian
dollars. References to the "Commission" shall mean the U.S. Securities and
Exchange Commission.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of November 30, 1998 and
May 31, 1998
Consolidated Statement of Income for the Three Months Ended
November 30, 1998 and November 30, 1997 and the Six Months
Ended November 30, 1998 and November 30, 1997
Consolidated Statement of Changes in Financial Position for
the Six Months Ended November 30, 1998 and November 30, 1997
Notes to Interim Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matter to Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
2
TLC THE LASER CENTER INC.
CONSOLIDATED BALANCE SHEET
November 30 May 31
(U.S. dollars, in thousands) 1998 1998
===============================================================================
ASSETS
Current assets
Cash and short-term deposits $ 4,755 $ 1,895
Marketable securities 32,545 54,234
Accounts receivable 10,958 10,282
Prepaids and sundry assets 5,554 4,632
- -------------------------------------------------------------------------------
Total current assets 53,812 71,043
Restricted cash 2,022 2,086
Investments and other assets 11,010 1,663
Intangibles 51,331 47,189
Capital assets 36,050 31,049
Assets under capital lease 11,095 11,182
- -------------------------------------------------------------------------------
Total assets $ 165,320 $ 164,212
===============================================================================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 10,233 $ 9,096
Current portion of long term debt 3,031 2,861
Current portion of obligations under capital lease 4,281 3,951
Income taxes payable 247 613
Deferred compensation 320 320
Deferred income taxes 117 118
- -------------------------------------------------------------------------------
Total current liabilities 18,229 16,959
Long term debt 7,912 8,378
Obligations under capital lease 8,467 9,533
Deferred rent and compensation 1,122 1,110
- -------------------------------------------------------------------------------
Total liabilities 35,730 35,980
- -------------------------------------------------------------------------------
Non-controlling interest 7,208 6,357
- -------------------------------------------------------------------------------
Commitments
SHAREHOLDERS' EQUITY
Capital stock 143,841 143,554
Deficit (21,459) (21,679)
- -------------------------------------------------------------------------------
Total shareholders' equity 122,382 121,875
- -------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 165,320 $ 164,212
===============================================================================
See notes to interim consolidated financial statements
3
TLC THE LASER CENTER INC.
CONSOLIDATED STATEMENT OF INCOME
3 months ended November 30th 6 months ended November 30th
(U.S. dollars, in thousands ------------------------------ -------------------------------
except per share amounts) 1998 1997 1998 1997
==============================================================================================================
Net revenues
Refractive $ 26,836 $ 12,171 $ 53,220 $ 21,366
Secondary care 2,676 2,033 4,997 3,539
Other 558 428 816 760
- --------------------------------------------------------------------------------------------------------------
Net revenues 30,070 14,632 59,033 25,665
- --------------------------------------------------------------------------------------------------------------
Expenses
Doctor Compensation
Refractive 2,645 2,089 5,240 3,707
Operating 22,078 10,920 41,785 19,573
Interest and other 129 563 840 893
Depreciation and amortization 3,545 1,948 7,160 3,813
- --------------------------------------------------------------------------------------------------------------
28,397 15,520 55,025 27,986
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS BEFORE
START-UP AND DEVELOPMENT EXPENSES 1,673 (888) 4,008 (2,321)
Start-up and development expenses 1,137 1,058 2,132 2,157
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND
NON-CONTROLLING INTEREST 536 (1,946) 1,876 (4,478)
- --------------------------------------------------------------------------------------------------------------
Income taxes
Current -- 43 619 61
- --------------------------------------------------------------------------------------------------------------
-- 43 619 61
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE NON-CONTROLLING
INTEREST 536 (1,989) 1,257 (4,539)
Non-controlling interest 123 83 (195) 83
- --------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD $ 659 $ (1,906) $ 1,062 $ (4,456)
==============================================================================================================
INCOME (LOSS) PER SHARE $ 0.02 $ (0.07) $ 0.03 $ (0.16)
Weighted average number of
Common Shares Outstanding 33,840,597 27,459,333 33,769,226 27,192,930
See notes to interim consolidated financial statements
4
TLC THE LASER CENTER INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
SIX MONTHS ENDED NOVEMBER 30
(U.S. dollars, in thousands) 1998 1997
================================================================================
Operating activities
Net income (loss) for the period: $ 1,062 $ (4,456)
Items not affecting cash
Depreciation and amortization 7,160 3,813
Non-controlling interest 195 (82)
Deferred income taxes (net) -- (1)
Other 416 (36)
Changes in non-cash operating items
Accounts receivable (291) (2,200)
Prepaids and sundry assets (866) (1,695)
Accounts payable and accrued liabilities (209) (3,449)
Income taxes payable (net) (335) (148)
Deferred rent and compensation 12 286
- --------------------------------------------------------------------------------
Cash provided by (used for) operating activities 7,144 (7,968)
- --------------------------------------------------------------------------------
Financing activities
Restricted cash 64 --
Long term debt (1,233) (346)
Term bank loan -- (43)
Obligations under capital lease (1,026) 1,724
Non-controlling interest (41) 161
Capital stock issued (purchased for cancellation) (555) 1,334
- --------------------------------------------------------------------------------
Cash provided by (used for) financing activities (2,791) 2,830
- --------------------------------------------------------------------------------
Investing activities
Capital assets (8,227) (1,861)
Assets under capital lease (760) (1,747)
Acquisitions and investments (14,160) (1,312)
Marketable securities 21,689 --
Other (35) 119
- --------------------------------------------------------------------------------
Cash provided by (used for) investing activities (1,493) (4,801)
- --------------------------------------------------------------------------------
Increase (decrease) in cash 2,860 (9,939)
Cash and short-term deposits, beginning of year 1,895 14,397
- --------------------------------------------------------------------------------
Cash and short-term deposits, end of year $ 4,755 $ 4,458
================================================================================
See notes to interim consolidated financial statements
5
TLC THE LASER CENTER INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1998
(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 May 31, 1998 Annual Report on Form 10-K filed by TLC The Laser Center
Inc. (the "Company") with the Securities and Exchange Commission. The
unaudited interim consolidated financial statements as of November 30,
1998 and November 30, 1997, and for the six month period then ended,
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 that may be
expected for the entire fiscal year. The interim consolidated financial
statements include the accounts and transactions of the Company and its
majority owned subsidiaries, partnerships and other entities in which the
Company has more than a 50% ownership interest and exercises control. The
ownership interests of other parties in less than wholly owned
consolidated subsidiaries, partnerships and other entities are presented
as non-controlling interests. The November 30, 1997 six month
consolidation includes certain reclassifications to conform with
classifications for the six month period ended November 30, 1998.
The net income (loss) per share was computed using the weighted average
number of common shares outstanding during each period.
Historically, the Company's consolidated financial statements have been
expressed in Canadian dollars. As a result of increased business activity
in the United States ("U.S.") resulting principally from recent U.S.
acquisitions, the opening of new centers in the U.S. and the Company's
growing U.S. shareholder base, the U.S. dollar has become the unit of
measure of the large majority of the Company's operations. Accordingly,
the U.S. dollar has been adopted as the Company's reporting currency
effective May 31, 1998.
2. On June 8, 1998 the Company made a portfolio investment of $8.0 million in
cash through the purchase of 2,000,000 preference shares in LaserSight
Incorporated. These preference shares are convertible to LaserSight
Incorporated common shares at $4.00. This investment was made to fund the
start up and development of mobile open access excimer lasers to
individual doctors and networks throughout North America. The companies
will focus on providing the best technology in a cost-effective manner to
both urban and rural based ophthalmic surgeons.
On June 16, 1998 the Company made a 51% equity investment of $204,000 in
cash in AllSight, Inc., a refractive laser center in the Pittsburgh, PA
area.
On June 16, 1998, the Company acquired the operating assets and
liabilities of Western Oklahoma Eye Center in exchange for cash and common
shares. Consideration for this acquisition was $182,000 and $835,000
respectively. Simultaneous with the acquisition, the Company entered into
a long-term Practice management agreement with Dr. John Belardo, P.C.
On July 1, 1998 TLC NorthWest Eye, Inc. a wholly owned subsidiary of the
company acquired the operating assets and liabilities of the Figgs Eye
Clinic in Yakema, Washington and Robert C. Bockoven with three locations
in Washington in exchange for $737,500 in cash and $737,500 in debt.
On September 23, 1998, the Company acquired the 10% interest of Vision
Institute of Canada in one of the Company's laser centers in Toronto in
exchange for $332,000 in cash and $332,000 in common shares.
On September 24, 1998, the Company exercised a contractual option to
purchase 116,771 common shares from the Goldstein Family Trust for a
$1,264,411 in cash. The common shares were then cancelled and capital
stock was reduced using the average value of common shares as at November
30, 1998 of C$6.20 per share. The remaining allocation of the cash paid
for the shares was reflected as a reduction in retained earnings.
6
On October 13, 1998, the Company acquired 90% of the operating assets and
liabilities of WaterTower Acquisition, Inc. in exchange for cash of
$625,000 and amounts contingent upon future events. No value will be
assigned to these contingent amounts until completion of the earn out
period and the outcome of the contingency is known.
On October 31, 1998, the Company acquired 85% of the operating assets and
liabilities of Aspen HealthCare, Inc. in exchange for cash of $1,750,000
and amounts contingent upon future events. No value will be assigned to
these contingent amounts until completion of the earn out period and the
outcome of the contingency is known. $2,050,000 of cash was paid into
Aspen HealthCare, Inc. and ownership of TLC Wisconsin Eye Surgery
Center,Inc.; an ambulatory surgical center wholly owned by the company;
was transferred to Aspen HealthCare, Inc. as part of this transaction.
3. These consolidated financial statements are prepared in accordance with
accounting principles generally accepted ("GAAP") in Canada. The most
significant differences between Canadian and United States GAAP, insofar
as they affect the Company's consolidated financial statements, are
described below.
The following table reconciles results as reported under Canadian GAAP
with those that would have been reported under U.S. GAAP:
Three months ended Six months ended
November 30,1998 November 30,1998
Net gain (loss) for the period-Canadian GAAP $ 659 $ 1,062
Deferred foreign exchange losses 10 259
Net gain (loss) for the period-U.S. GAAP $ 669 $ 1,321
Gain (Loss) per share-U.S. GAAP $ 0.02 $ 0.04
The gain or loss on translation of foreign currency denominated long-term
monetary items is deferred and amortized over the remaining life of the
item under Canadian GAAP. Under U.S. GAAP, the gain or loss on translation
is included in income when it arises.
Shareholders' equity under U.S. GAAP would have been $121,899,000 at
November 30, 1998.
7
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three and Six Month Periods Ended November 30, 1998 Compared to Three and Six
Month Periods Ended November 30, 1997
TLC THE LASER CENTER INC.
SEGMENTED INFORMATION
Three months ended November 30 Secondary 1998 1997
(U.S. dollars, in thousands) Refractive Care Other Total Total
========================================================================================================== ========
Revenues and physician costs:
Gross revenues of all owned and managed clinics $ 32,731 $ 10,207 $ 577 $ 43,515 $ 18,351
Amounts retained by physician group (4,568) (3,524) (16) (8,108) (1,822)
Contractual allowances and adjustments (1,327) (4,007) (3) (5,337) (1,897)
- ---------------------------------------------------------------------------------------------------------- --------
Net revenues 26,836 2,676 558 30,070 14,632
Doctor compensation 2,645 -- -- 2,645 2,089
- ---------------------------------------------------------------------------------------------------------- --------
Net revenue after doctor compensation 24,191 2,676 558 27,425 12,543
- ---------------------------------------------------------------------------------------------------------- --------
Expenses
Operating 19,515 1,959 604 22,078 10,920
Interest and other 144 (20) 5 129 563
Depreciation and amortization 2,881 578 86 3,545 1,948
----------------------------------------------------- --------
22,540 2,517 695 25,752 13,431
----------------------------------------------------- --------
Income (loss) from operations $ 1,651 $ 159 $ (137) $ 1,673 $ (888)
===================================================== ========
Six months ended November 30, 1998 Secondary 1998 1997
(U.S. dollars, in thousands) Refractive Care Other Total Total
========================================================================================================== ========
Revenues and physician costs:
Gross revenues of all owned and managed clinics $ 64,878 $ 20,287 $ 852 $ 86,017 $ 32,860
Amounts retained by physician group (9,034) (4,600) (31) (13,665) (3,239)
Contractual allowances and adjustments (2,624) (10,690) (5) (13,319) (3,956)
- ---------------------------------------------------------------------------------------------------------- --------
Net revenues 53,220 4,997 816 59,033 25,665
Doctor compensation 5,240 -- -- 5,240 3,707
- ---------------------------------------------------------------------------------------------------------- --------
Net revenue after doctor compensation 47,980 4,997 816 53,793 21,958
- ---------------------------------------------------------------------------------------------------------- --------
Expenses
Operating 36,780 3,934 1,071 41,785 19,573
Interest and other 912 (82) 10 840 893
Depreciation and amortization 5,922 1,071 167 7,160 3,813
----------------------------------------------------- --------
43,614 4,923 1,248 49,785 24,279
----------------------------------------------------- --------
Income (loss) from operations $ 4,366 $ 74 $ (432) $ 4,008 $ (2,321)
===================================================== ========
8
Total net revenues in the second quarter of the 1999 fiscal year increased to
$30.1 million from $14.6 million the previous year, an increase of 106%. Total
net revenue for the six-month period increased to $59.0 million from $25.7
million, an increase of 130%. More than 18,000 procedures were performed in the
quarter as compared to 6,400 during the second quarter of fiscal 1998. On a
fiscal year to date basis procedures increased to 35,800 from 12,500 in the same
period of the prior year. The increase in revenues is a result of improved
procedure volumes at all sites that have been open in the two periods, the
development of new centers and the acquisition of BeaconEye.
Total operating expenses and doctor compensation increased to $24.7 million from
$13.0 million in the previous year, or 90%. For the six month period ending
November 30, 1998 total operating expenses and doctor compensation increased to
$47.0 million from $23.3 million in the previous year or 102%. These increases
are a result of (i) increased fixed and variable costs attributed to the
addition of new refractive centers including the acquisition of eleven BeaconEye
centers, (ii) higher marketing costs, (iii) increases in the variable cost
component resulting from the higher number of procedures performed at centers
that have been open for more than a year. Operating expenses and doctor
compensation as a percentage of net revenues were 82% as compared to 89% in the
previous second quarter (YTD Nov 98 - 80%, Nov 97 - 91%). This reduction
reflects the impact of having reached revenue levels, which cover fixed costs,
at most centers.
In the second quarter interest expense and other of $.1 million compares to $0.6
million. This decrease reflects the reversal of $0.2 million in accrued interest
charges recorded in the first quarter. On a year to date basis net interest is
relatively unchanged as higher interest costs on higher debt balances are offset
with interest income on higher cash balances.
Depreciation and amortization increased to $3.5 million from $1.9 million in the
second quarter of the previous year. For the six months ended November 30 1998
the expense was $7.2 million verses $3.8 million in 1997. This increase is
largely a result of new centers and the additional depreciation and amortization
charges associated with the BeaconEye acquisition.
Start up and development costs were unchanged and were largely incurred by
Partner Provider Health for the development of a managed care business
specializing in eye care.
Income tax expense for the 2nd quarter has been eliminated because the Canadian
refractive centers have been amalgamated with the former Beacon refractive
centers, thereby allowing the Beacon tax losses to be applied against the
profits from the other Canadian refractive centers. The company files
consolidated tax returns in the US and therefore tax losses are available to
offset taxable income.
Net income of $0.7 million or two cents per share compared to a loss of $1.9
million or seven cents per share loss in the second quarter of fiscal 1998. This
net income was generated by operating profits of $1.7 million from the
refractive surgery business, which was partially offset by losses in other
business including PPH. For the six months ended November 30, 1998 net income
was $1.1 million verses a loss of $4.5 million in the same period last year.
Liquidity and Capital Resources
Cash provided from operating activities was $7.1 million for the first six
months as compared to the first six months of fiscal 1998 use of cash of $8.0
million. This is primarily a result of the company generating its first net
income.
Working capital decreased to $35.6 million from $54.1 million at May 31 1998.
Cash and marketable securities were $37.3 million as compared to $56.1 million
at May 31 1998. The company continued to develop or acquire new refractive
centers and therefore increased its investment in capital assets. In addition,
the company made a strategic investment in Lasersight Incorporated, at a cost of
$8 million.
The Company estimates that funds expected to be generated from operations and
available credit facilities, together with the net proceeds of the recent public
offering, will be sufficient to fund the Company's anticipated level of
operations and its current acquisition and expansion plans for at least the next
twelve months.
Year 2000 Compliance
The Company is currently completing a comprehensive study of the possible
affects of the Year 2000 issue on its systems and results of operations.
Assessment of mission critical systems and equipment was completed during the
9
last quarter and completion of the assessment of less essential equipment will
now be completed during the next fiscal quarter. The results of the assessment
thus far have highlighted no significant concerns as far as the Company's
internal operations. However, there can be no assurance that Year 2000-related
issues will not have a material effect on the financial condition or results of
operations of the Company.
The Company believes that it has prepared, or will prepare by mid-calendar year
1999, its computer systems and related applications to accommodate
date-sensitive information relating to the Year 2000. The Company's systems
constitute primarily desktop computers most of which are linked by a local area
network server at individual site locations. The Company has determined that its
software applications for all essential functions, such as accounting,
scheduling, center management and communications, are already Year 2000
compliant and that any hardware and software upgrades, mostly replacing some
older desktop computers and relevant operating software, will not be material to
the financial condition or results of operations of the Company. Such costs will
be expensed as incurred. In addition, the Company is discussing with its vendors
the possibility of any interface difficulties or other difficulties which may
affect the Company. To date, no significant concerns have been identified.
Through these assessments the Company still has not identified any significant
Year 2000 concerns in its internal operations or vendor relationships, however
there can be no assurance that no Year 2000-related operating problems or
expenses will arise with the Company's computer systems and software or in their
interface with the computer systems and software of the Company's vendors.
The Company's core business is operating refractive laser surgery centers that
are equipped with a computer-controlled excimer laser as the primary essential
piece of equipment. Approximately 85% of the excimer lasers owned by the Company
are manufactured by VISX Incorporated ("VISX"). Representatives from VISX have
informed the Company that it has tested its lasers for Year 2000 compliance and
that the lasers will function without any affect on safety or efficacy upon a
change of date to the Year 2000. However, without any upgrade, some VISX lasers
might print out patient reports with an incorrect date on them. VISX has
developed a software upgrade to correct this problem and has stated that it will
install the upgrade in the Company's VISX lasers by mid-1999 at no cost to the
Company. The Company's refractive centers are equipped with other
computer-controlled ophthalmic equipment, but none are essential to the laser
vision correction procedure. While the Company does not expect that the cost of
any replacements or upgrades required for ophthalmic equipment in its laser
centers in the Year 2000 will be material to the financial condition or results
of operations of the Company, there can be no assurance that no material
ophthalmic equipment upgrades will be required.
Refractive surgery is an elective procedure which is not covered by Medicare,
Medicaid or other governmental reimbursement programs (however, see discussion
of the Company's secondary care operations below). There are some private
insurance companies that provide partial or full coverage for the procedure,
which the Company estimates accounts for approximately 5% of its current
quarterly revenues. In the event private insurance companies that cover the
laser vision procedure have difficulty processing and paying claims because of
Year 2000 issues, this could cause accounts receivable for refractive procedures
performed at the Company's refractive centers to increase, or the patient volume
in the refractive centers operated by the Company to decrease, which could have
a material adverse effect on the financial condition or results of operations of
the Company until such Year 2000 problems are corrected.
For the period from September 1, 1998 to November 30, 1998 approximately 9% of
the Company's revenues were derived from the operation of its secondary care
centers. Completion of the review of Year 2000 issues pertaining to ophthalmic
equipment located in its secondary care centers is now expected to be completed
during the next quarter. Most secondary care procedures are covered by
governmental reimbursement programs, such as Medicare or Medicaid, and by
private insurance companies. In the event such third party payors have
difficulty processing and paying claims because of Year 2000 issues, this could
cause delays in such payments and an increase in accounts receivable for
procedures performed in secondary care centers operated by the Company, which
could have a material adverse effect on the financial condition or results of
operations of the Company until such Year 2000 problems are corrected.
The Company's managed care subsidiary, Partner Provider Health Inc. ("PPH"), has
completed a review of its internal operating systems for Year 2000 compliance
and to date, no significant concerns have been identified as far as PPH's
internal operations. However, PPH will rely, directly and indirectly, almost
entirely on third party payors, including managed care companies, private
company health plans, and Medicare and Medicaid and other governmental health
reimbursement programs for its revenues in the future. PPH is in the process of
evaluating the Year 2000 compliance of its existing customers. Since PPH is
expanding its customer base and negotiating for new
10
contracts with new customers on a continual basis, it is not possible for PPH to
fully assess the Year 2000 compliance of its future customers. In the event
PPH's customers and other third party payors have difficulty processing and
paying claims because of Year 2000 issues, this could cause delays in such
payments and an increase in accounts receivable for PPH, which could have a
material adverse effect on the financial condition or results of operations of
PPH and the Company until such Year 2000 problems are corrected.
Further, the Company cannot predict the impact that the Year 2000 issue will
have on its potential patients or the economy generally. If the Year 2000 issue
were to have a significant adverse impact on the economy or potential patients
perception of the economy, this could have a material adverse impact on the
number of procedures performed, particularly with respect to elective procedures
such as refractive surgery, and on the Company's financial results until the
economy and consumer confidence recovers.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Certain legal proceedings against the Company are described in Item 3 (Legal
Proceedings) of the Company's Form 10-K for the year ended May 31, 1998. In
addition, in July, 1998, Lasik Vision of Canada, Inc. filed a lawsuit against
the Company in the Supreme Court of British Columbia and certain of its officers
alleging libel and slander. In September, 1998, Lasik Vision of Canada, Inc.
also filed a lawsuit in the State of Washington alleging defamation, commercial
disparagement, unfair and deceptive trade practices, and tortious interference
with economic relations. Both of these lawsuits are in the early stages, and in
neither of these lawsuits has the plaintiff quantified an amount of damages. The
Company intends to vigorously defend these lawsuits. In addition, the Company
has filed a lawsuit in Federal Court of Canada against Lasik Vision of Canada,
Inc. and Dr. Hugo F. Sutton alleging trademark infringement and misleading
advertising. Although there can be no assurance, the Company does not expect
either of these suits to have a material adverse effect on its business,
financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on October 30, 1998 at the
Toronto Stock Exchange Conference Center, 2 First Canadian Place, Toronto,
Ontario.
The shareholders voted on the following matters as set forth in the proxy
statement:
1. Election of Directors. The Company has implemented a staggered board of
directors. The shareholders voted to elect John F. Riegert to serve until the
annual meeting of shareholders for fiscal year 1999, Messrs. James R. Connacher
and Howard J. Gourwitz and Dr. William D. Sullins, Jr. to serve until the annual
meeting of shareholders for fiscal year 2000; and Messrs. Elias Vamvakas and
Warren S. Rustand and Dr. Jeffrey J. Machat to serve until the annual meeting of
shareholders for fiscal year 2001 or, in each case, until such director's
successor is elected or appointed.
The voting tabulation for each nominee was as follows:
Mr. Riegert - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
Mr. Connacher - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
Mr. Gourwitz - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
11
Dr. Sullins - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
Mr. Vamvakas - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
Mr. Rustand - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
Dr. Machat - 16,986,000 votes in favor of election and 1,133,164 votes
withheld.
2. Appointment of Auditors. The shareholders authorized the selection of
Ernst & Young as the Company's auditors until the next annual meeting of
shareholders and authorized the board of directors to fix the remuneration of
the auditors. The voting tabulation was as follows: 18,092,435 votes in favor
and 21,629 votes withheld.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
a. Exhibit 27
Financial Data Schedules
b. Reports on 8-K
None.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TLC THE LASER CENTER INC.
By: /s/ Elias Vamvakas
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Elias Vamvakas
Chief Executive Officer
January 14, 1999
By: /s/ Peter Kastelic
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Peter Kastelic
Chief Financial Officer
January 14, 1999
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