TLC Vision Corp. Reports Full-Year 2008 Results

ST. LOUIS, MO--(Marketwire - March 31, 2009) - TLC Vision Corporation (NASDAQ: TLCV) (TSX: TLC), North America’s premier eye care services company, today announced results for the fourth quarter and full year ended December 31, 2008.

Jim Wachtman, President and Chief Executive Officer of TLCVision, commented, “Although we find ourselves in the midst of the worst consumer discretionary spending environment in the last 40 years, our company was able to achieve adjusted EBITDA of $18.6 million for 2008 and operating cash flow of $15.8 million on the strength of our two diversified businesses, Doctor Services and Eye Care.”

“TLCVision recorded market-leading LASIK procedure growth during the first quarter of 2008. The company then experienced market weakness in April and May that continued to deteriorate throughout the remainder of the year. Laser vision correction demand is a function of consumer discretionary spending. We entered 2008 with a consumer confidence index at 90, ended the year with the index at 38, and today the index stands at 25, an all-time low.”

“During 2008 we removed significant cost from the business. Marketing spend was reduced 22% from plan, and we achieved salary and benefit savings from an 18% reduction in full-time equivalents and the elimination of annual incentive programs. Fixed field and overhead costs were reduced as well as professional fees and other discretionary spending. Overall, total cost reductions for 2008 were over $20 million.”

Full-Year 2008 Results

-- Revenue for the year ended December 31, 2008 was $275.7 million, compared to $298.4 million for the prior year period, a decrease of 8%, with refractive revenues showing a decline of 14% while our current non-refractive businesses grew by a combined 10%. -- Refractive Centers revenue of $151.4 million decreased by 14% as majority-owned center procedures declined by 16% in a market that is estimated to have declined by 26%. -- Doctor Services revenue of $95.6 million decreased by 1%, as growth in the non-refractive businesses was more than offset by weakness in the mobile refractive offering. -- Eye Care revenue of $28.6 million increased by 8%. -- The Company implemented aggressive cost reduction initiatives that reduced the cost run rate by over $20 million. -- The full year results include a non-cash goodwill and other assets impairment charge of $85.0 million (of which $83.5 million was recorded in the fourth quarter) due to the deterioration of the equity markets and the resulting reduction in the Company’s market capitalization. -- The resulting consolidated net loss was $98.3 million compared to a net loss of $43.5 million for the prior year period. -- Year-to-date operating cash flow was $15.8 million, or $0.31 per share, compared to $31.3 million, or $0.53 per share, in the prior year period. 

Fourth Quarter 2008 Results

-- Revenue for the fourth quarter was $53.7 million, a 19% decrease over prior year revenue of $66.3 million, with refractive revenues showing a decline of 32% while our current non-refractive businesses grew by a combined 8%. -- Refractive Centers revenue of $24.9 million decreased by 32%, as majority-owned center procedures declined by 32% in a market that is estimated to have declined by 39%. -- Doctor Services revenue of $22.4 million decreased by 3.5%, reflecting weakness in the mobile refractive offering, as the non-refractive businesses showed growth of 8%. -- Eye Care revenue of $6.4 million decreased 4%. -- The fourth quarter results include a $83.5 million noncash goodwill and other assets impairment charge noted earlier -- The resulting consolidated net loss for the fourth quarter was $95.4 million, compared to a net loss of $25.3 million from the prior year period. 

Capital Structure

Continued Wachtman, “As a result of the economic crisis and the sharp decline in consumer discretionary spending during 2008, the Company’s financial performance deteriorated during the fourth quarter. This has resulted in the Company falling out of compliance with its primary financial covenants under its credit facility as of December 31, 2008. We are in final negotiations with our lenders for an amendment to existing loan documents that should be completed within the next several days. Our shared goal is to secure a more flexible capital structure to bridge the company through the current weak economy.”

It is unlikely the company will remain in compliance with the existing covenants for the balance of 2009 unless amended. Since those amendments are not yet completed, the company has been advised by its independent auditor, Ernst & Young LLP, that its opinion on TLC’s consolidated financial statements for the fiscal year ended December 31, 2008, will include an explanatory paragraph relating to going concern.

“We remain focused on delivering quality customer service and surgical outcomes and we are confident that our day-to-day operations will remain unaffected. We are working constructively with our lenders and advisors to secure more financial flexibility and we will continue to implement cost reduction initiatives to keep them in balance with demand. We have ample liquidity in the near term, and remain confident that we can reach a prompt resolution with our lenders.”

Conference Call

TLCVision invites all interested parties to participate in a conference call during which time the financial and operating results will be discussed. The call will be held today, at 9:00 a.m. Eastern Daylight Time. To participate, please dial 877-874-1586 or 719-325-4748 (international callers) and enter the pass code: 4046513. The call will be broadcast live on the Company’s web site at www.tlcv.com under the “Webcasts” link in the Investor Relations section.

A replay of the conference call will be available until April 14, 2009. To access the replay, dial 888-203-1112 or 719-457-0820 (international callers) and enter the pass code: 4046513. The call will also be archived on the Company’s web site at www.tlcv.com under the “Webcasts” link in the Investor Relations section.

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, Section 21E of the U.S. Securities Exchange Act of 1934 and Canadian Provincial Securities Laws, 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. We caution that all forward-looking information is inherently uncertain and that actual results may differ materially from the assumptions, estimates or expectations reflected in the forward-looking information.

A number of factors could cause actual results to differ materially from those in forward-looking statements, including but not limited to economic conditions, the level of competitive intensity for laser vision correction, the market acceptance of laser vision correction, concerns about potential side effects and long term effects of laser vision correction, the ability to maintain agreements with doctors on satisfactory terms, quarterly fluctuation of operating results that make financial forecasting difficult, the volatility of the market price of our common shares, profitability of investments, successful execution of our direct-to-consumer marketing programs, the ability to open new centers, the reliance on key personnel, medical malpractice claims and the ability to maintain adequate insurance therefore, claims for federal, state and local taxes, compliance with industry regulation, compliance with U.S. and Canadian healthcare regulations, disputes regarding intellectual property, many of which are beyond our control.

Therefore, should one or more of theses risks materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary significantly from what we currently foresee. Accordingly, we warn investors to exercise caution when considering any such forward-looking information herein and to not place undue reliance on such statements and assumptions. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any forward-looking statements or assumptions whether as a result of new information, future events or otherwise, except as required by law.

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.

About TLCVision

TLCVision is 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, extensive optometric relationships, aggressive consumer advertising and managed care contracting strength, TLCVision maintains leading positions in Refractive, Cataract and Eye Care markets. More information about TLCVision can be found on the website at www.tlcv.com. Information about vision correction surgery can be found on the TLC Laser Eye Centers website at www.tlcvision.com.

TLC VISION CORPORATION CONSOLIDATING STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended Three Months Ended December December 31, 2008 December 31, 2007 ---------------------------- ------------------------------ Results Results Before Before AMD AMD Total AMD AMD Total Segment Segment TLCVision Segment Segment TLCVision --------- ------- --------- --------- -------- --------- Revenues: Refractive centers $ 24,902 $ - $ 24,902 $ 36,424 $ - $ 36,424 Doctor services 22,390 - 22,390 23,208 - 23,208 Eye care 6,390 - 6,390 6,662 - 6,662 --------- ------- --------- --------- -------- --------- Total revenues 53,682 - 53,682 66,294 - 66,294 Cost of revenues (excluding amortization): Refractive centers 21,813 - 21,813 29,458 - 29,458 Doctor services 17,665 - 17,665 16,991 - 16,991 Eye care 2,901 - 2,901 2,940 - 2,940 --------- ------- --------- --------- -------- --------- Total cost of revenues (excluding amortization) 42,379 - 42,379 49,389 - 49,389 --------- ------- --------- --------- -------- --------- Gross profit 11,303 - 11,303 16,905 - 16,905 --------- ------- --------- --------- -------- --------- General and administrative 5,815 - 5,815 8,606 - 8,606 Marketing and sales 11,417 - 11,417 12,389 - 12,389 Amortization of intangibles 801 - 801 844 - 844 Impairment 83,547 - 83,547 4,550 - 4,550 Other expense, net 364 - 364 1,771 - 1,771 --------- ------- --------- --------- -------- --------- Total operating expenses 101,944 - 101,944 28,160 - 28,160 --------- ------- --------- --------- -------- --------- Operating loss (90,641) - (90,641) (11,255) - (11,255) Loss on sale of OccuLogix, Inc. stock - - - - (34) (34) Interest income 186 - 186 227 - 227 Interest expense (2,605) - (2,605) (2,370) - (2,370) Minority interest expense (1,506) - (1,506) (1,979) - (1,979) Loss from equity investments (925) - (925) (81) (6,573) (6,654) --------- ------- --------- --------- -------- --------- Loss from continuing operations before income taxes (95,491) - (95,491) (15,458) (6,607) (22,065) Income tax benefit (expense) 76 - 76 (3,445) - (3,445) --------- ------- --------- --------- -------- --------- Loss from continuing operations (95,415) - (95,415) (18,903) (6,607) (25,510) Income from discontinued operations, net of tax - - - 226 - 226 --------- ------- --------- --------- -------- --------- Net loss $ (95,415) $ - $ (95,415) $ (18,677) $ (6,607) $ (25,284) ========= ======= ========= ========= ======== ========= Loss per share - diluted $ (1.89) $ - $ (1.89) $ (0.37) $ (0.13) $ (0.51) ========= ======= ========= ========= ======== ========= Weighted average number of common shares outstanding - diluted 50,398 50,398 50,398 49,928 49,928 49,928 Calculation of Adjusted EBITDA Net loss, as reported $ (95,415) $ (18,677) Add: Income tax (benefit) expense (76) 3,445 Depreciation and amortization 4,825 5,031 Interest expense, net 2,419 2,143 Non-cash compensation 290 155 Impairment and restructuring charges 84,097 6,513 --------- --------- Adjusted EBITDA $ (3,860) $ (1,390) ========= ========= Adjusted EBITDA per share $ (0.08) $ (0.03) ========= ========= Note: The AMD segment includes the Company’s interest in OccuLogix, Inc. TLC VISION CORPORATION CONSOLIDATING STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2008 Year Ended December 31, 2007 ---------------------------- ------------------------------- Results Results Before Before AMD AMD Total AMD AMD Total Segment Segment TLCVision Segment Segment TLCVision --------- ------- --------- --------- --------- --------- Revenues: Refractive centers $ 151,442 $ - $ 151,442 $ 175,206 $ - $ 175,206 Doctor services 95,615 - 95,615 96,697 - 96,697 Eye care 28,611 - 28,611 26,511 - 26,511 --------- ------- --------- --------- --------- --------- Total revenues 275,668 - 275,668 298,414 - 298,414 Cost of revenues (excluding amortization): Refractive centers 110,824 - 110,824 127,024 - 127,024 Doctor services 71,104 - 71,104 70,061 - 70,061 Eye care 13,010 - 13,010 11,999 - 11,999 --------- ------- --------- --------- --------- --------- Total cost of revenues (excluding amortization) 194,938 - 194,938 209,084 - 209,084 --------- ------- --------- --------- --------- --------- Gross profit 80,730 - 80,730 89,330 - 89,330 --------- ------- --------- --------- --------- --------- General and admin- istrative 28,016 - 28,016 34,819 - 34,819 Marketing and sales 42,725 - 42,725 42,979 - 42,979 Amortization of intangibles 3,233 - 3,233 3,398 - 3,398 Impairment 85,047 - 85,047 7,659 - 7,659 Other (income) expense, net (339) - (339) 2,753 - 2,753 --------- ------- --------- --------- --------- --------- Total operating expense 158,682 - 158,682 91,608 - 91,608 --------- ------- --------- --------- --------- --------- Operating loss (77,952) - (77,952) (2,278) - (2,278) Gain on sale of OccuLogix, Inc. stock - - - - 899 899 Interest income 734 - 734 1,621 - 1,621 Interest expense (10,072) - (10,072) (5,778) - (5,778) Minority interest expense (9,530) - (9,530) (8,921) - (8,921) (Loss) earnings from equity investments (560) - (560) 1,029 (13,396) (12,367) --------- ------- --------- --------- --------- --------- Loss from continuing operations before income taxes (97,380) - (97,380) (14,327) (12,497) (26,824) Income tax expense (874) - (874) (8,476) - (8,476) --------- ------- --------- --------- --------- --------- Loss from continuing operations (98,254) - (98,254) (22,803) (12,497) (35,300) Loss from discontinued operations, net of tax - - - (8,214) - (8,214) --------- ------- --------- --------- --------- --------- Net loss $ (98,254) $ - $ (98,254) $ (31,017) $ (12,497) $ (43,514) ========= ======= ========= ========= ========= ========= Loss per share - diluted $ (1.95) $ - $ (1.95) $ (0.53) $ (0.21) $ (0.74) ========= ======= ========= ========= ========= ========= Weighted average number of common shares outstanding - diluted 50,319 50,319 50,319 59,139 59,139 59,139 Calculation of Adjusted EBITDA Net loss, as reported $ (98,254) $ (31,017) Add: Income tax expense 874 8,476 Depreciation and amort- ization 19,670 18,859 Interest expense, net 9,338 4,157 Non-cash compen- sation 1,391 1,115 Impairment and restruct- uring charges 85,597 20,987 --------- --------- Adjusted EBITDA $ 18,616 $ 22,577 ========= ========= Adjusted EBITDA per share $ 0.37 $ 0.38 ========= ========= Note: The AMD segment includes the Company’s interest in OccuLogix, Inc. TLC VISION CORPORATION CONSOLIDATING BALANCE SHEETS (In thousands) December 31, 2008 December 31, 2007 ----------------------------- ----------------------------- Results Results Before Before AMD AMD AMD Total AMD Segment Segment Total Segment Segment TLCVision (Unaudited)(Unaudited) TLCVision --------- ------- --------- --------- --------- --------- ASSETS Current assets Cash and cash equivalents $ 4,492 $ - $ 4,492 $ 12,925 $ - $ 12,925 Accounts receivable, net 16,870 - 16,870 18,076 - 18,076 Prepaid expenses, inventory and other 14,214 - 14,214 14,882 - 14,882 --------- ------- --------- --------- ------- --------- Total current assets 35,576 - 35,576 45,883 - 45,883 Restricted cash - - - 1,101 - 1,101 Investments and other assets 11,694 - 11,694 17,524 - 17,524 Goodwill 28,570 - 28,570 94,346 - 94,346 Other intangible assets, net 10,628 - 10,628 17,020 - 17,020 Fixed assets, net 50,514 - 50,514 61,936 - 61,936 --------- ------- --------- --------- ------- --------- Total assets $ 136,982 $ - $ 136,982 $ 237,810 $ - $ 237,810 ========= ======= ========= ========= ======= ========= LIABILITIES Current liabilities Accounts payable $ 17,897 $ - $ 17,897 $ 17,177 $ - $ 17,177 Accrued liabilities 28,076 - 28,076 28,115 - 28,115 Current maturities of long-term debt 89,081 - 89,081 11,732 - 11,732 --------- ------- --------- --------- ------- --------- Total current liabilities 135,054 - 135,054 57,024 - 57,024 Long-term debt, less current maturities 16,500 - 16,500 98,417 - 98,417 Other long-term liabilities 5,444 - 5,444 5,023 - 5,023 Minority interests 15,330 - 15,330 15,224 - 15,224 --------- ------- --------- --------- ------- --------- Total liabilities 172,328 - 172,328 175,688 - 175,688 --------- ------- --------- --------- ------- --------- STOCKHOLDERS’ (DEFICIT) EQUITY Common stock 310,611 28,501 339,112 308,972 28,501 337,473 Option and warrant equity 745 - 745 837 - 837 Other comprehensive income (1,545) - (1,545) (784) - (784) Accumulated deficit (345,157) (28,501) (373,658) (246,903) (28,501) (275,404) --------- ------- --------- --------- ------- --------- Total stockholders’ (deficit) equity (35,346) - (35,346) 62,122 - 62,122 --------- ------- --------- --------- ------- --------- Total liabilities and stockholders’ (deficit) equity $ 136,982 $ - $ 136,982 $ 237,810 $ - $ 237,810 ========= ======= ========= ========= ======= ========= Note: The AMD segment includes the Company’s interest in OccuLogix, Inc. TLC VISION CORPORATION CONSOLIDATING STATEMENTS OF CASH FLOWS (In thousands, except per share amounts) Year Ended December 31, 2008 Year Ended December 31, 2007 --------------------------- ------------------------------- Results Results Before Before AMD AMD Total AMD AMD Total Segment Segment TLCVision Segment Segment TLCVision --------- ------ --------- --------- --------- --------- OPERATING ACTIVITIES Net loss $ (98,254) $ - $ (98,254) $ (31,017) $ (12,497) $ (43,514) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 19,670 - 19,670 18,859 - 18,859 Impairment loss 85,047 - 85,047 16,950 - 16,950 Deferred taxes - - - 7,172 - 7,172 Minority interests 9,530 - 9,530 9,423 - 9,423 Loss (income) from equity investments 560 - 560 (1,029) 13,396 12,367 Gain on sales and disposals of fixed assets (269) - (269) (11) - (11) Gain on sale of Occulogix, Inc. stock - - - - (899) (899) (Gain) loss on sale of businesses (139) - (139) 233 - 233 Non-cash compensation expense 1,391 - 1,391 1,115 - 1,115 Other 561 - 561 275 - 275 Changes in operating assets and liabilities, net of acquisitions and dispositions: (2,274) - (2,274) 9,360 - 9,360 --------- ------ --------- --------- --------- --------- Cash provided by operating activities 15,823 - 15,823 31,330 - 31,330 --------- ------ --------- --------- --------- --------- INVESTING ACTIVITIES Purchases of fixed assets (3,534) - (3,534) (13,279) - (13,279) Proceeds from sales of fixed assets 1,259 - 1,259 1,114 - 1,114 Proceeds from sale of Occulogix, Inc. stock, net - - - 2,000 - 2,000 Distributions and loan payments received from equity investments 2,107 - 2,107 2,846 - 2,846 Acquisitions and equity investments (8,862) - (8,862) (4,815) - (4,815) Divestitures of business 1,281 - 1,281 1,619 - 1,619 Proceeds from sales of short-term investments - - - 17,375 - 17,375 Purchases of short-term investments - - - (5,800) - (5,800) Other 144 - 144 123 - 123 --------- ------ --------- --------- --------- --------- Cash (used in) provided by investing activities (7,605) - (7,605) 1,183 - 1,183 --------- ------ --------- --------- --------- --------- FINANCING ACTIVITIES Restricted cash movement 1,101 - 1,101 (66) - (66) Principal payments of debt financing and capital leases (33,070) - (33,070) (11,998) - (11,998) Proceeds from debt financing 25,392 - 25,392 89,717 - 89,717 Capitalized debt costs (534) - (534) (1,960) - (1,960) Distributions to minority interests (9,895) - (9,895) (9,454) - (9,454) Purchases of treasury stock - - - (117,569) - (117,569) Proceeds from issuances of common stock 355 - 355 2,825 - 2,825 --------- ------ --------- --------- --------- --------- Cash used in financing activities (16,651) - (16,651) (48,505) - (48,505) --------- ------ --------- --------- --------- --------- Net decrease in cash and cash equivalents during the period (8,433) - (8,433) (15,992) - (15,992) Cash and cash equivalents, beginning of period 12,925 - 12,925 28,917 - 28,917 --------- ------ --------- --------- --------- --------- Cash and cash equivalents, end of period $ 4,492 $ - $ 4,492 $ 12,925 $ - $ 12,925 ========= ====== ========= ========= ========= ========= Operating cash flow per diluted share $ 0.31 $ - $ 0.31 $ 0.53 $ - $ 0.53 Note: The AMD segment includes the Company’s interest in OccuLogix, Inc.