-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HZMXirLGWyaymVyiacGF3RnwYJNo4BRLDj+wm0pAH/pyyj9sd2/eY8nb0UKAX8Am Onv3w5KaHqp5VXOOkdS5kA== 0001005477-99-004759.txt : 19991018 0001005477-99-004759.hdr.sgml : 19991018 ACCESSION NUMBER: 0001005477-99-004759 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TLC LASER CENTER INC CENTRAL INDEX KEY: 0001010610 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 980151150 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29302 FILM NUMBER: 99729317 BUSINESS ADDRESS: STREET 1: 5600 EXPLORER DRIVE STREET 2: SUITE 301 CITY: MISSISSAUGA STATE: A6 ZIP: 00000 BUSINESS PHONE: 3015712020 MAIL ADDRESS: STREET 1: 6701 DEMOCRACY BLVD STREET 2: SUITE 200, LEGAL DEPT. CITY: BETHESDA STATE: MA ZIP: 20817 10-Q 1 FORM 10-Q 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 AUGUST 31, 1999 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 Mississauga, Ontario L4W 4Y2 (Address of principal executive offices) (Zip Code) 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. Yes |X| No |_| As of October 13, 1999 there were 37,782,456 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 Section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended May 31, 1999. 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 August 31, 1999 and May 31, 1999 Consolidated Statement of Income for the Three Months Ended August 31, 1999 and August 31, 1998 Consolidated Statement of Changes in Financial Position for the Three Months Ended August 31, 1999 and August 31, 1998 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 5. Other Information Item 6. Exhibits 2 PART I. FINANCIAL INFORMATION Item 1. TLC The Laser Center Inc. Consolidated Balance Sheet August 31 May 31 (U.S. dollars, in thousands) 1999 1999 ================================================================================ ASSETS Current assets Cash and cash equivalents $ 136,833 $ 151,810 Marketable securities 11,657 -- Accounts receivable 17,496 15,359 Prepaids and sundry assets 7,823 6,602 - -------------------------------------------------------------------------------- Total current assets 173,809 173,771 Restricted cash 1,606 1,730 Investments and other assets 15,545 14,359 Intangibles 57,094 47,441 Capital assets 40,112 38,993 Assets under capital lease 12,048 10,556 - -------------------------------------------------------------------------------- Total assets $ 300,214 $ 286,850 ================================================================================ LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 21,341 $ 19,512 Current portion of long term debt 1,937 2,181 Current portion of obligations under capital lease 5,413 4,717 Income taxes payable 2,958 477 Deferred compensation -- -- - -------------------------------------------------------------------------------- Total current liabilities 31,649 26,887 Long term debt 4,680 4,620 Obligations under capital lease 6,402 6,410 Deferred rent and compensation 939 959 - -------------------------------------------------------------------------------- Total liabilities 43,670 38,876 - -------------------------------------------------------------------------------- Non-controlling interest 10,134 8,151 - -------------------------------------------------------------------------------- Commitments SHAREHOLDERS' EQUITY Capital stock 269,775 269,454 Deficit (23,365) (29,631) - -------------------------------------------------------------------------------- Total shareholders' equity 246,410 239,823 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 300,214 $ 286,850 ================================================================================ See notes to interim consolidated financial statements. 3 TLC THE LASER CENTER INC. CONSOLIDATED STATEMENT OF INCOME THREE MONTHS ENDED AUGUST 31 (Unaudited) (U.S. dollars, in thousands except per share amounts) 1999 1998 ================================================================================ Net revenues Refractive $ 50,044 $ 26,384 Other 1,999 2,579 - -------------------------------------------------------------------------------- Net revenues 52,043 28,963 - -------------------------------------------------------------------------------- Expenses Doctor Compensation Refractive 4,627 2,595 Operating 34,223 19,707 Interest and other (1,102) 711 Depreciation and amortization 4,076 3,615 Start-up and Development expenses -- 995 - -------------------------------------------------------------------------------- 41,824 27,623 - -------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST 10,219 1,340 - -------------------------------------------------------------------------------- Income taxes Current 2,924 619 - -------------------------------------------------------------------------------- 2,924 619 - -------------------------------------------------------------------------------- INCOME BEFORE NON-CONTROLLING INTEREST 7,295 721 Non-controlling interest (1,029) (318) - -------------------------------------------------------------------------------- NET INCOME FOR THE PERIOD $ 6,266 $ 403 ============================== BASIC INCOME PER SHARE $ 0.17 $ 0.01 ============================== Weighted average number of Common Shares Outstanding 37,403,397 33,698,630 ============================== Fully Diluted Income Per Share (1) $ 0.16 $ 0.01 ============================== (1) Fully Diluted earnings per share reflect earnings that would have been reported had all compensation based options been exercised. See notes to interim consolidated financial statements. 4 TLC THE LASER CENTER INC. CONSOLIDATED STATEMENT OF INCOME THREE MONTHS ENDED AUGUST 31 (Unaudited) (U.S. dollars, in thousands) 1999 1998 ================================================================================ Operating activities Net income $ 6,266 $ 403 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 4,076 3,615 Non-controlling interest 530 318 Other (205) 241 Changes in non-cash operating items Accounts receivable (2,132) 3,426 Prepaids and sundry assets (1,221) (789) Accounts payable and accrued liabilities 1,474 (234) Income taxes payable (net) 2,481 (79) Deferred rent and compensation (20) (185) - -------------------------------------------------------------------------------- Cash provided by operating activities 11,249 6,716 - -------------------------------------------------------------------------------- Financing activities Restricted cash 124 725 Long term debt (195) (1,165) Obligations under capital lease (1,246) (886) Non-controlling interest 570 (44) Capital stock issued 321 285 - -------------------------------------------------------------------------------- Cash provided by (used in) financing activities (426) (1,085) - -------------------------------------------------------------------------------- Investing activities Capital assets (2,369) (3,953) Assets under capital lease (507) (149) Acquisitions and investments (11,320) (10,511) Marketable securities (11,657) -- Other 53 55 - -------------------------------------------------------------------------------- Cash provided by (used in) investing activities (25,800) (14,558) - -------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (14,977) (8,927) Cash and cash equivalents, beginning of year 151,810 56,129 - -------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 136,833 $ 47,202 ================================================================================ * Note: The consolidated statement of cashflow for the 3 months ended August 31, 1998 has been restated to reflect the retroactive adoption of the CICA revised guidelines for cash flow statements. See notes to interim consolidated financial statements. 5 TLC THE LASER CENTER INC. AND SUBSIDIARIES NOTES TO INTERIM CONSIOLIDATED FINANCIAL STATEMENTS August 31, 1999 (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, 1999 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 August 31, 1999 and August 31, 1998, 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 August 28, 1998 three month consolidation includes certain reclassifications to conform with classifications for the three month period ended August 31, 1999. The net income (loss) per share was computed using the weighted average number of common shares outstanding during each period. 2. On April 7, 1999, the Company entered into an agreement with a subsidiary of Kaiser Permanente, providing for a strategic alliance, with the intention to initially own and operate three refractive centers in California and to eventually develop additional centers in markets in the United States where Kaiser Permanente has a significant presence. The agreement also grants the Kaiser Permanente subsidiary the opportunity to negotiate an ownership interest in existing and future TLC refractive centers. On June 30, 1999 the Company made a capital contribution of $1,002,000 representing a 50.1% interest in TLC USA, LLC, the operating company, for activities of this strategic alliance. On July 8,1999 the Company acquired 50.1% of the operating assets and liabilities on Laser Eye Care of California, LLC for cash consideration, certain operating assets and liabilities of the Company's two California refractive centers and additional amounts contingent upon achieving certain levels of profits. No value will be assigned to these contingent amounts until completion of the earn out period and the outcome of the contingency is known. 3. Difference Between Canadian and United States Generally Accepted Accounting Principles 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 for the three months ended August 31, 1999: August 31,1999 -------------- Net Income for the period -- Canadian GAAP $ 6,266 Deferred foreign exchange gains (losses) (1) 16 Income tax expense adjustment under the liability method (2) (483) ------- Net Income for the year -- U.S. GAAP $ 5,799 ------- Income per share -- U.S. GAAP (3) $ 0.15 ------- Net income based on US GAAP 5,799 Unrealized gains on securities available for sale (2,131) ------- Comprehensive income 3,668 ======= (1) 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. (2) Under U.S GAAP, deferred taxes are recorded based on the difference between the values assigned for accounting purposes and the tax values of individual assets acquired in business combinations, except for nondeductible goodwill. The only such significant differences with respect to the Company are the practice management agreement assets acquired in prior periods. Under U.S. GAAP, this deferred tax liability is matched by an equal increase in the value assigned to the practice management agreement assets. In the statement of income, the resulting increased annual asset amortization is offset by an equal deferred tax recovery with no effect on the net income (loss). In addition, the recognition of operating loss carry-forwards which existed at the acquisition date is recorded as a reduction of goodwill related to the acquisition and an increase in the tax provision under U.S. GAAP. (3) SFAS No. 128, "Earnings Per Share", is effective for fiscal periods ending after December 15, 1997 As a result of the above differences, as at August 31, 1999 under U.S. GAAP, long-term assets would increase by $6,112,000 , deferred income tax liabilities would increase by $4,589,000 and total shareholders' equity would increase by $1,523,000. In addition, other comprehensive income would increase to $3,626,000. Additional disclosures required related to the reconciliation of the consolidated financial statements from Canadian to U.S. GAAP are as follows: 7 Income Taxes Deferred income taxes under U.S. GAAP consist of the following temporary differences: Aug. 31,1999 ------------ Tax benefit of loss carry forwards Pre-acquisition $ 11,396 Post-acquisition 5,478 Start-up costs 1,348 Other 1,489 Valuation allowance (19,711) -------- $ -- -------- Liabilities: Practice management agreements 1,739 Capital assets 2,180 Other -- -------- $ 3,919 ======== 8 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Quarter Ended August 31, 1999 Compared to Quarter Ended August 31, 1998 TLC THE LASER CENTER INC. SUPPLEMENTARY SEGMENTED FINANCIAL INFORMATION Three months ended August 31, 1999 (U.S. dollars, in thousands) Refractive Other Total ================================================================================ Net revenues $ 50,044 $ 1,999 $ 52,043 Doctor compensation 4,627 -- 4,627 - -------------------------------------------------------------------------------- Net revenue after doctor compensation 45,417 1,999 47,416 - -------------------------------------------------------------------------------- Operating Expenses 32,348 1,875 34,223 Interest and other (1,070) (32) (1,102) Depreciation and amortization 3,632 444 4,076 Start-up and development expenses -- -- -- --------------------------------- $ 34,910 $ 2,287 $ 37,197 --------------------------------- Income (loss) from operations $ 10,507 $ (288) $ 10,219 --------------------------------- Three months ended August 31, 1998 (U.S. dollars, in thousands) Refractive Other Total ================================================================================ Net revenues $ 26,384 $ 2,579 $ 28,963 Doctor compensation 2,595 -- 2,595 - -------------------------------------------------------------------------------- Net revenue after doctor compensation 23,789 2,579 26,368 - -------------------------------------------------------------------------------- Operating Expenses 17,265 2,442 19,707 Interest and other 768 (57) 711 Depreciation and amortization 3,041 574 3,615 Start-up and development expenses 995 995 --------------------------------- $ 21,074 $ 3,954 $ 25,028 --------------------------------- Income (loss) from operations $ 2,715 $ (1,375) $ 1,340 ================================= 9 Total net revenues in the first quarter of the 2000 fiscal year increased from $29.0 million the previous year to $52.0 million, an increase of 79%. Revenues from refractive revenue made up 96% of the total net revenue compared to 91% during the first quarter of fiscal 1999. This trend emphasizes the significance of the Company's core business and the impact of the divestiture of a significant portion of its secondary care operation in the final quarter of fiscal 1999. Net revenues from refractive centers for the first quarter of fiscal 2000 were $50.0 million, which is 89% higher than $26.4 million in the previous year's first quarter. More than 33,200 procedures were performed in the quarter as compared to 17,700 during the first quarter of fiscal 1999. The increasing revenues reflects strong growth in the number of procedures at existing sites, the development of new centers and the acquisition of centers from competitors. Net revenues from other activities decreased to $2.0 million from $2.6 million in the first quarter of fiscal 1999. Net revenues from this business segment will continue to decline as a percentage of total revenues reflecting the divestiture of certain secondary care practices which occurred in the fourth quarter of fiscal year 1999. Operating expenses and doctor compensation increased to $38.9 million in the first quarter of fiscal 2000 from $22.3 million in same quarter of the previous fiscal year. This increase is a result of: (i) increased variable expenses associated with the increase in the number of laser vision correction procedures performed at existing refractive centers, and (ii) increased fixed and variable costs from the addition of new refractive centers, and (iii) higher corporate costs which are necessary to support the higher level of business activity. Operating expenses and doctor compensation as a percentage of net revenues were 74.6% of net revenues as compared to 77% of net revenues in fiscal year 1999. This decrease is attributed to the higher average number of procedures being performed at the Company's centers. Interest expense and other expenses of ($1.1) million reflects interest revenue from a strong cash position resulting from ongoing positive cashflow from operations and the result of a successful public offering in the fourth quarter of fiscal 1999. Interest expense on long term debt and capital leases on equipment are lower from that of prior quarters and reflect better financing terms. Depreciation and amortization expense increased from $3.6 million in the first quarter of fiscal 1999 to $4.1 million in same the quarter of this fiscal year. This increase is largely a result of new centers and the additional depreciation and amortization associated with the Company's acquisitions during fiscal 1999 as well as the amortization from the goodwill resulting from the Company's California investment in the first quarter of fiscal 2000. Goodwill is amortized on a straight-line basis over fifteen years. Start up and development costs in the first quarter of fiscal 1999 were incurred by Partner Provider Health for the development of a managed care business specializing in eye care. TLC sold PPH in May of 1999. The Company does not expect to incur these costs in the future. Income tax expense increased to $2.9 million for the first quarter of fiscal 2000 from $0.6 million in the same period in 1999. This increase is a result of the company having utilized most of its tax losses from prior periods, the Company expects to incur tax liabilities for its earnings in fiscal 2000. The net income for the first quarter of fiscal 2000 was $6.3 million or $0.17 per share, compared to net income of $0.4 million or $0.01 cents a share for the same quarter last year. This net income is a result of the much higher procedure volume in the refractive business as well as the reduction of losses in secondary care operations and the disposal of managed health care business. Liquidity and Capital Resources Cash from operating activities was $11.2 million for the first three months as compared to the first three months of fiscal 1999 of $6.7 million. This is primarily a result of the Company' substantial increase in net income for the quarter. Working capital decreased to $142.2 million from $146.9 million at May 31 1999. Cash, cash equivalents and marketable securities were $148.5 million as compared to $151.8 million at May 31 1999. The company 10 continued to develop or acquire new refractive centers and therefore increased its investment in capital assets. In addition, the company made strategic investments of $11 million in the California market. The Company estimates that the net proceeds of its recent public offering, together with existing cash balances, funds expected to be generated from operations and available credit facilities, will be sufficient to fund the Company's anticipated level of operations and its current acquisition and expansion plans for at least the next 18 months. The Company continues to invest in assets to develop and expand its refractive procedure capacity in anticipation of continued growth, through the development of new centers and acquisition of refractive practices. At the current time, TLC has more than 15 centers under development. In addition, the Company is actively pursuing other acquisition opportunities. Year 2000 Compliance The Company is aware of the issues associated with the programming code in existing computer systems as the Year 2000 approaches. The " Year 2000 problem" is pervasive and complex. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company completed a comprehensive study of the possible affects of the Year 2000 issue on its systems and results of operations and a detailed plan of action including projected costs and contingency plans. The Company's systems constitute primarily desktop computers most of which are linked by a local area network server at individual site locations. In August of 1999, the Company completed a total company-wide upgrade of its financial, operational systems and relevant hardware as relating to its core business. This upgrade provided significant additional systems functionality and integration as well as enhanced internal communication tools to the whole organization. As a result of these upgrades the Company believes that it has prepared its computer systems and related applications to accommodate date-sensitive information relating to the Year 2000. Any upgrades still to be done, 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. The Company has tested and determined that its software applications for all essential functions, such as all financial applications, scheduling, center management and communications, are Year 2000 compliant. The Company is currently successfully scheduling future appointments in the 2000 calendar year. The Company's contingency plans in place for failure of "mission critical" systems will be used. Other than providing additional support resources over year end, no specific changes to the contingency plans have been made for the failure of systems as a result of year 2000. Such costs will be expensed as incurred. The Company is continuing to monitor the Y2K compliance of its suppliers. To date, no significant concerns have been identified. However, there can be no assurance that Year 2000-related issues with the providers of good and services will not have a material adverse affect on the financial condition or the results of operations of the Company. 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. VISX Incorporated ("VISX") manufactures approximately 85% of the excimer lasers owned by the Company. 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 developed a software upgrade to correct this problem and has completed the installation of the upgrade in all of the Company's VISX lasers 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. The Company does not expect that the cost of any replacements or upgrades required for other ophthalmic equipment in its laser centers for the Year 2000 will be material to the financial condition or results of operations of the Company. Laser vision correction is an elective procedure, which is not covered by Medicare, Medicaid or other governmental reimbursement programs. Some private insurance companies, however, provide partial or full coverage for the procedure, which the Company estimates accounts for approximately 8 % of its revenues for the period from June 1, 1999 to August 31st. If 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. Most secondary care procedures are covered by governmental reimbursement 11 programs, such as Medicare or Medicaid, and by private insurance companies. If 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 in which the Company has an investment. 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 5. OTHER INFORMATION See Note 2 in the Financial Statements above for discussion of the Company's California investments. ITEM 6. EXHIBITS Exhibit 10.1(e) Amendment to Employment Agreement with Elias Vamvakas Exhibit 27 Financial Data Schedule 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 ----------------------------- Elias Vamvakas Chief Executive Officer October 15, 1999 By: /s/ Peter Kastelic ----------------------------- Peter Kastelic Chief Financial Officer October 15, 1999 13 EX-10.1(E) 2 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT Exhibit 10.1(e) FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, made and entered into as of the 14th day of August, 1998, by and between TLC THE LASER CENTER INC., a corporation incorporated under the laws of the Province of Ontario (the "Corporation"), and ELIAS VAMVAKAS of the City of Richmond Hill, in the Province of Ontario (the "Executive"). W I T N E S S E T H: WHEREAS, the Corporation and the Executive executed an Employment Agreement as of January 1, 1996 ("Employment Agreement"); and WHEREAS the parties desire to extend and amend the Employment Agreement. NOW, THEREFORE, said Employment Agreement shall be amended as follows: 1. Section 3 of the Employment Agreement shall be deleted in its entirety and the following language substituted in place thereof: "The Executive's employment will, subject to Section 9, be for a term of five years from and after January 1, 1996 and extending to December 31, 2000 (the "Term"). Commencing on January 1, 2001, the Term shall be automatically extended for successive periods of one year unless terminated by the agreement of the parties or pursuant to Section 9(c) or 9(d) hereof." 2. Section 5(a) of the Employment Agreement shall be deleted in its entirety and the following language substituted in place thereof: "(a) Basic Remuneration. The Corporation will pay the Executive a gross annual salary (the `Salary') in an amount equal to $225,000(US) in the first year of the Term, $250,000(US) in the second year of the Term, $275,000(US) in the third year of the Term, $316,250(US) in the fourth year of the Term, and $363,750(US) in the fifth year of the Term, and thereafter during successive annual renewals of the Term the Corporation will pay the Executive a gross annual Salary in an amount determined by the board of directors of the Corporation from time to time in respect of each such successive year, provided that the Executive's Salary in each such successive year shall be no less than that paid in the previous year plus fifteen percent. The foregoing Salary payable in each year is before deduction for income taxes and other required deductions, such as Canada Pension Plan and Employment Insurance contributions, but excluding the Benefits paid by the Corporation as provided in Section 5(b). The Salary will be payable in equal instalments semi-monthly in arrears in each month during each Year of Employment, the first payment to be made on January 15, 1996." 3. Section 5(c) of the Employment Agreement shall be deleted in its entirety and the following language substituted in place thereof: "(c) Bonus Remuneration. The Executive will be entitled to receive such bonus remuneration, if any, in respect of each Year of Employment during the Employment Period (including, without limitation, any Year of Employment during which this Agreement terminates), as the board of directors of the Corporation, in its sole discretion, may authorize (the "Bonus"), provided, however, the Executive will not be entitled to any Bonus during the fourth and fifth years of the Term." 14 4. The following paragraph shall be added to Section 8 of the Employment Agreement: "The Corporation hereby grants to the Executive options to acquire 250,000 common shares in the capital of the Corporation at an option price of $20.75(Cdn) per common share. The option to acquire 125,000 of such shares is exercisable immediately. Provided that either: i) the Corporation has met or exceeded the average of the analysts' expectations as expressed by the investment banking firms RBC Dominion Securities Inc. and Paine Webber Incorporated, or their successors, regarding the Corporation's earnings per share for each quarter beginning December 1, 1998 through November 30, 1999, or December 1, 1999 through November 30, 2000, as the case may be, or ii) the price per share of the Corporation's stock on the Toronto Stock Exchange shall have increased by a percentage that equals or exceeds the percentage increase of the Toronto Stock Exchange 300 Index for the period beginning January 1, 1999 through December 15, 1999 or the period beginning January 1, 2000 through December 15, 2000, as the case may be, then an option to acquire 62,500 of such shares will be exercisable on each of December 31, 1999 or December 31, 2000, as the case may be. In the event that neither of the contingencies are satisfied for 1999, then the option to purchase 62,500 of such shares shall be forfeited as of December 31, 1999. In the event that neither of the contingencies are satisfied for 2000, then the option to purchase 62,500 of such shares shall be forfeited as of December 31, 2000. Anything to the contrary herein notwithstanding, all of the options granted in this paragraph which have not yet been exercised or forfeited shall become immediately exercisable upon the earlier of: i) the termination of Executive's employment by the Corporation for any reason other than Just Cause, as defined in this Employment Agreement, or ii) the Executive's death or Disability, as defined in this Employment Agreement. Each of the foregoing options shall expire on the earlier of (i) 5 years following the date on which they become exercisable and (ii) ninety days following termination of the Executive's employment hereunder. The parties agree to enter into such additional documents as may be required to give effect to the options herein granted." IN WITNESS WHEREOF, Corporation and Executive have executed this First Amendment to Employment Agreement as of the date specified on the first page hereof, and the terms of the Employment Agreement, as modified herein, are hereby ratified and affirmed. TLC THE LASER CENTER INC. BY: /s/ Peter J. Kastelic ------------------------- Peter J. Kastelic, Its: Chief Financial Officer WITNESS: CORPORATION ) ) ) /s/ Elias Vamvakas ) --------------------- ) ELIAS VAMVAKAS - --------------------------- ) EXECUTIVE Witness Name (Please Print) ) 15 EX-27 3 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the interim consolidated financial statements of TLC The Laser Center Inc. for the three month period ending August 31, 1999 and is qualified in its entirety by reference to such financial statements. 3-MOS MAY-31-2000 JUN-01-1999 AUG-31-1999 136,833,000 11,657,000 17,496,000 2,547,000 0 173,809,000 83,023,000 (30,863,000) 300,214,000 31,649,000 0 0 0 269,775,000 (23,365,000) 300,214,000 0 52,043,000 0 (38,850,000) (4,076,000) 0 1,102,000 10,219,000 (2,924,000) 0 0 (1,029,000) 0 6,266,000 0.17 0.16
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