10-Q 1 w53254e10-q.txt 10-Q FOR US VISION FOR 7/31/2001 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2001. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ___________________ to ________________. Commission File Number: 0-23397 U.S. VISION, INC. (Exact name of registrant as specified in its charter) ~~DELAWARE 22-3032948 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)~~

1 HARMON DRIVE, GLEN OAKS INDUSTRIAL PARK, GLENDORA, NEW JERSEY 08012 (Address of principal executive offices) (Zip Code) (856) 228-1000 (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 [ ] As of September 1, 2001 there were 7,802,942 shares of the registrant's common stock outstanding. 2 U.S. VISION, INC. TABLE OF CONTENTS

3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS U.S. VISION, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited)

See accompanying notes to condensed consolidated financial statements. 1 4 U.S. VISION, INC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited)

See accompanying notes to condensed consolidated financial statements. 2 5 U.S. VISION, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)

See accompanying notes to condensed consolidated financial statements. 3 6 U.S. VISION, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Financial Statement Presentation The accompanying unaudited condensed consolidated financial statements of U.S. Vision, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the company's audited consolidated financial statements and notes which are included in the company's annual report on Form 10-K, as amended, for the fiscal year ended January 31, 2001. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. Operating results for the interim period are not necessarily indicative of results that may be expected for the fiscal year ending January 31, 2002. 2. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. INCOME TAXES As of January 31, 2001, the Company had net operating loss carry forwards of approximately $14,100,000 which will begin to expire in the year 2006. Approximately $5,900,000 of these carry forwards are available to offset future taxable income without limitation and approximately $8,200,000 of these carry forwards (the "Restricted NOLs") are significantly limited due to ownership changes. Approximately $780,000 of the Restricted NOLs will become available for use each year through the year 2008. Approximately $3,400,000 of the Restricted NOLs are expected to expire unutilized. 4 7 U.S. VISION, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. NET INCOME PER SHARE The following table (in thousands except per share data) presents the calculation of earnings per share for the periods indicated.

5 8 U.S. VISION, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth selected statement of operations data expressed as a percentage of net sales for the periods indicated:

THREE MONTHS ENDED JULY 31, 2001 COMPARED TO THREE MONTHS ENDED JULY 31, 2000 Net sales decreased $3.3 million, or 9.0%, from $36.8 million for the three months ended July 31, 2000 to $33.5 million for the three months ended July 31, 2001. The decrease in sales was due to the closing of 95 unproductive stores and a 2.9% decrease in comparable-store sales. Cost of sales, as a percentage of net sales, decreased by 0.6%, from 30.4% for the three months ended July 31, 2000, to 29.8% for the three months ended July 31, 2001. The decrease was due to a decrease in labor costs. Selling, general and administrative expenses ("SG&A"), as a percentage of net sales, increased by 2.5% from 63.4% for the three months ended July 31, 2000 to 65.9% for the three months ended July 31, 2001 due to the lower sales volume. SG&A expenses decreased $1.2 million from $23.3 million for the three months ended July 31, 2000 to $22.1 million for the three months ended July 31, 2001. The reduction in SG&A expenses was principally due to lower rent expenses based on the lower sales volume and an overall decrease in operating expenses from the closing of unproductive stores. Interest expense increased $190,000 from $98,000 for the three months ended July 31, 2000 to $288,000 for the three months ended July 31, 2001. As of February 1, 2001, the company completed the development stage of its point of sale system and is expensing, instead of capitalizing, all costs incurred in connection with the completion of the point of sale system. Additionally, interest expense was lower during the quarter due to a lower outstanding balance on the company's revolving line of credit. 6 9 U.S. VISION, INC. SIX MONTHS ENDED JULY 31, 2001 COMPARED TO SIX MONTHS ENDED JULY 31, 2000 Net sales decreased $8.4 million, or 10.7%, from $78.7 million for the six months ended July 31, 2000 to $70.3 million for the six months ended July 31, 2001. The closure of 106 unproductive stores accounted for 7.4% or $6.0 million of the decrease in net sales. The remaining decrease in net sales was attributable to a 3.3% decrease in comparable-store sales. Cost of sales, as a percentage of net sales, decreased 0.4%, from 30.5% for the six months ended July 31, 2000 to 30.1% for the six months ended July 31, 2001. This change is a result of a decrease in labor costs. SG&A as a percentage of net sales, increased by 1.9% from 61.5% for the six months ended July 31, 2000 to 63.4% for the six months ended July 31, 2001. SG&A expenses decreased $3.8 million from $48.4 million for the six months ended July 31, 2000 to $44.6 million for the six months ended July 31, 2001. The reduction in SG&A expense was principally due to reduced salary expense as a result of the closing of unproductive stores and lower rent expenses based on the lower sales volume. Interest expense increased $329,000 from $247,000 for the six months ended July 31, 2000 to $576,000 for the six months ended July 31, 2001. As of February 1, 2001, the company completed the development stage of its point of sale system and is expensing, instead of capitalizing, all costs incurred in connection with the completion of the point of sale system. Additionally, interest expense was lower due to a lower outstanding balance on the revolving line of credit. LIQUIDITY AND CAPITAL RESOURCES The company's primary source of cash for the first six months of fiscal 2001 was from operations. Cash and working capital at July 31, 2001 were $404,000 and $20.1 million, respectively, compared to $240,000 and $20.5 million, respectively, at January 31, 2001. For the six months ended July 31, 2001, cash provided by operating activities was $4.3 million compared to $6.7 million for the six months ended July 31, 2000. The $2.4 million decrease resulted principally from a decrease in net income. Cash used in investing activities in the first six months of fiscal 2001 was $837,000 compared to $3.4 million in the first six months of fiscal 2000. Capital expenditures during the first six months of fiscal 2001 of $1.7 million were primarily for new store openings and the beginning of the rollout of a new point of sale system in our stores. The company's principal external source of liquidity is its $20.0 million revolving line of credit with Commerce Bank, N.A. The revolving line of credit facility bears interest at the lower of the prime rate as published in the Wall Street Journal or the thirty (30) day rate for United States Treasury Bills plus 250 basis points, which was 7.20% as of July 31, 2001, and matures in December 2002. As of July 31, 2001, the company had $9.5 million outstanding under its revolving line of credit and $10.5 million of availability. The loan agreement prohibits the payment of dividends to stockholders and the company must maintain certain financial ratios including a specified net worth level, current ratio, and a fixed charge ratio. As of July 31, 2001, the company was in compliance with all the financial covenants. We 7 10 U.S. VISION, INC. do not believe that the financial covenants set forth in our revolving line of credit will have an adverse impact on our operations or future plans. We have commitments from Commerce BankLease, a unit of Commerce Bank, N.A., for a $2,000,000 five-year equipment lease financing facility. During fiscal 2000 and 1999, we executed the agreement and leased approximately $382,000 and $922,000, respectively of laboratory equipment and furniture and fixtures, which will be paid for over a period of 60 months. The leased laboratory equipment and furniture and fixtures have been recorded as a capital lease on the consolidated balance sheet. The company filed preliminary proxy materials on August 10, 2001 regarding the previously announced merger agreement with the NOROB Group, Inc. The Company expects to mail proxy materials to its shareholders sometime in October of this year and hold a special shareholder meeting to vote on the transaction sometime in November. Assuming the transaction is approved by our stockholders, the transaction will close promptly thereafter. The transaction is subject to the satisfaction of a number of conditions, some of which are beyond the company's control, and there can be no assurance that the transaction will be consummated as expected. CAUTION REGARDING FORWARD-LOOKING STATEMENTS The company occasionally makes forward-looking statements concerning its plans, goals, product and service offerings, store openings and closings and anticipated financial performance. These forward-looking statements may generally be identified by introductions such as "outlook" for an upcoming period of time, or words and phrases such as "should", "expect", "hope", "plans", "projected", "believes", "forward-looking" (or variants of those words and phrases) or similar language indicating the expression of an opinion or view concerning the future. These forward-looking statements are subject to risks and uncertainties based on a number of factors and actual results or events may differ materially from those anticipated by such forward-looking statements. These factors include, but are not limited to: the company's ability to maintain its relationship with its host stores such as J.C. Penney and Sears, as well as with Cole National Corporation, a competitor of the company and the owner of the Vision One managed vision care plan in which the company participates; the growth rate of the company's revenue and market share; the company's ability to effectively manage its business functions while growing the company's business in a rapidly changing environment; and the quality of the company's plans and strategies, and the ability of the company to execute such plans and strategies. In addition, forward-looking statements concerning the company's expected revenue or earnings levels are subject to many additional uncertainties applicable to competitors generally and to general economic conditions over which the company has no control, such as the performance of its host stores. The company does not plan to generally publicly update prior forward-looking statements for unanticipated events or otherwise and, accordingly, prior forward-looking statements should not be considered to be "fresh" simply because the company has not made additional comments on those forward-looking statements. 8 11 U.S. VISION, INC. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. EXHIBITS The following exhibits are filed as a part of this report:

* Previously filed as an exhibit to the Form S-1 (Reg. No. 333-35819) filed with the Commission on September 17, 1997. ** Previously filed as an exhibit to Amendment No. 1 to the Form S-1 (Reg. No. 333-35819) filed with the Commission on October 29, 1997. *** Previously filed as an exhibit to the company's report on Form 10-K for the fiscal year ended January 31, 1998, which was filed with the Securities and Exchange Commission on April 30, 1999. *V Previously filed as an exhibit to the company's report on Form 10-Q for the quarter ended July 31, 2000, which was filed with the Securities and Exchange Commission on September 13, 2000. V Previously filed as an exhibit to the company's report on Form 10-K for the fiscal year ended January 31, 2001, which was filed with the Securities and Exchange Commission on April 30, 2001. V* Previously filed as an exhibit to the company's Form 8-K, which was filed with the Securities and Exchange Commission on July 2, 2001.

9 12 U.S. VISION, INC. B. REPORTS ON FORM 8-K On July 2, 2001, the company filed a report on Form 8-K in connection with its entering into an Agreement and Plan of Merger with the Norcross Roberts Group. 10 13 U.S. VISION, INC. SIGNATURES Pursuant to the requirements 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. U.S. VISION, INC. ------------------------------------------------ (Registrant) September 13, 2001 /s/George E. McHenry, Jr. ------------------------------------------------ George E. McHenry, Jr. Chief Financial Officer (Principal Financial and Accounting Officer) 11

U S VISION INC 10-Q