-----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, BsOdW/tSuVey/x5LANdtrw5mp0HdX/Z60O2rn7wtdv/OLplljvPCXAVe9bY8MBhH FlMmvHPMT+dqMaS/HYEFrw== /in/edgar/work/20000807/0000927016-00-002757/0000927016-00-002757.txt : 20000921 0000927016-00-002757.hdr.sgml : 20000921 ACCESSION NUMBER: 0000927016-00-002757 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000624 FILED AS OF DATE: 20000807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGHT RESOURCE CORP CENTRAL INDEX KEY: 0000895651 STANDARD INDUSTRIAL CLASSIFICATION: [8000 ] IRS NUMBER: 043181524 STATE OF INCORPORATION: DE FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21068 FILM NUMBER: 687590 BUSINESS ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 BUSINESS PHONE: 5084296916 MAIL ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 FORMER COMPANY: FORMER CONFORMED NAME: NEWVISION TECHNOLOGY INC DATE OF NAME CHANGE: 19940224 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 24, 2000 Commission File Number 0-21068 ------------- ------- Sight Resource Corporation - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 04-3181524 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Jeffrey Avenue Holliston, MA 01746 - -------------------------------------------------------------------------------- (Address of principal executive offices) 508-429-6916 - -------------------------------------------------------------------------------- (Issuer's telephone number) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since the last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ ------ APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: On July 31, 2000, 9,225,952 shares (does not include 30,600 shares held as treasury stock) of common stock, par value $0.01 per share, were outstanding. 1 Sight Resource Corporation Index PART I. FINANCIAL INFORMATION Page ---- Item 1 Financial Statements Consolidated Balance Sheets as of June 24, 2000 and December 25, 1999 3 Consolidated Statements of Operations for the Three and Six Months Ended June 24, 2000 and June 26, 1999 4 Consolidated Statements of Cash Flows for the Three and Six Months Ended June 24, 2000 and June 26, 1999 5 Notes to Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3 Quantitative and Qualitative Disclosures About Market Risk 15 PART II. OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 16 Item 5 Other Information 16 Item 6 Exhibits and Reports on Form 8-K 17 Signatures 18 Exhibit Index 19 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SIGHT RESOURCE CORPORATION Consolidated Balance Sheets (In thousands, except share and per share data)
June 24, December 25, 2000 1999 ------------------ ----------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 65 $ 166 Accounts receivable, net of allowance of $1,962 and $1,881, respectively 3,477 3,583 Inventories 7,161 6,875 Prepaid expenses and other current assets 362 344 ----------------- ---------------- Total current assets 11,065 10,968 ----------------- ---------------- Property and equipment 11,075 12,396 Less accumulated depreciation (6,196) (6,662) ----------------- ---------------- Net property and equipment 4,879 5,734 ----------------- ---------------- Other assets: Intangible assets, net 22,305 23,131 Other assets 939 921 ----------------- ---------------- Total other assets 23,244 24,052 ----------------- ---------------- $39,188 $40,754 ================= ================ Liabilities and Stockholders' Equity Current liabilities: Revolver notes payable $1,775 $ 975 Current portion of long term debt 6,922 1,682 Current portion of capital leases 7 28 Accounts payable 5,109 4,606 Accrued expenses 1,817 2,673 ----------------- ---------------- Total current liabilities 15,630 9,964 ----------------- ---------------- Non-current liabilities: Long term debt, less current maturities 632 6,882 Capital leases --- 2 Other liabilities 22 22 ----------------- ---------------- Total non-current liabilities 654 6,906 ----------------- ---------------- Series B redeemable convertible preferred stock 1,452,119 shares issued 6,535 6,535 Stockholders' equity: Preferred Stock, $.01 par value. Authorized 5,000,000 shares; no shares of Series A issued and outstanding. --- --- Common Stock, $.01 par value. Authorized 20,000,000 shares; issued 9,225,952 at June 24, 2000 and at December 25, 1999. 93 93 Additional paid-in capital 38,500 38,500 Treasury stock at cost, 30,600 shares at June 24, 2000 and December 25, 1999. (137) (137) Unearned compensation --- (2) Accumulated deficit (22,087) (21,105) ----------------- ---------------- Total stockholders' equity 16,369 17,349 ----------------- ---------------- $39,188 $40,754 ================= ================
See accompanying notes to consolidated financial statements. 3 SIGHT RESOURCE CORPORATION Consolidated Statement of Operations (In thousands, except share and per share data)
Three Months Ended Six Months Ended ------------------------------- --------------------------------- June 24, June 26, June 24, June 26, 2000 1999 2000 1999 ------------------------------- --------------------------------- (Unaudited) (Unaudited) Net revenue $16,483 $17,582 $34,002 $33,346 Cost of revenue 5,120 5,827 10,522 10,840 ------------ -------------- ------------- ------------ Gross profit 11,363 11,755 23,480 22,506 Selling, general and administrative expenses 11,697 11,300 23,865 21,494 ------------ -------------- ------------- ------------ Income (loss) from operations (334) 455 (385) 1,012 ------------ -------------- ------------- ------------ Other income (expense) Interest income 17 19 29 61 Interest expense (296) (162) (519) (244) Write off of deferred financing costs (60) --- (60) (323) ------------ -------------- ------------- ------------ Total other income (expense) (339) (143) (550) (506) ------------ -------------- ------------- ------------ Income (loss) before income tax expense (673) 312 (935) 506 Income tax expense 22 24 47 45 ------------ -------------- ------------- ------------ Net income (loss) ($695) $ 288 ($982) $ 461 ============ ============== ============= ============ Net earnings (loss) per common share: Basic ($0.08) $ 0.03 ($0.11) $ 0.05 ============ ============== ============= ============ Diluted ($0.08) $ 0.03 ($0.11) $ 0.04 ============ ============== ============= ============ Weighted average number of common shares outstanding used to compute net earnings (loss) per common share: Basic 9,226,000 9,214,000 9,226,000 9,137,000 ============= =============== ================ =============== Diluted 9,226,000 10,771,000 9,226,000 10,663,000 ============= =============== ================ ===============
See accompanying notes to consolidated financial statements. 4 SIGHT RESOURCE CORPORATION Consolidated Statement of Cash Flows (In thousands)
Six Months Ended ----------------------------------- June 24, June 26, 2000 1999 ----------------------------------- (unaudited) Operating activities: Net income (loss) ($982) $ 461 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,980 1,755 Amortization and write off of deferred financing costs 135 343 Amortization of unearned compensation 2 10 Loss on sale of assets 20 --- Changes in operating assets and liabilities: Accounts receivable 106 69 Inventories (287) (522) Prepaid expenses and other current assets (18) (124) Accounts payable and accrued expenses (404) (3,005) --------- ---------- Net cash provided by (used in) operating activities 552 (1,014) --------- ---------- Investing activities: Purchases of property and equipment (420) (400) Net payments for acquisitions --- (6,419) Proceeds from sale of assets 160 --- Other assets (152) 546 --------- ---------- Net cash used in investing activities (412) (6,273) --------- ---------- Financing activities: Principal payments (1,041) (2,689) Proceeds from notes 800 9,234 Other liabilities --- (130) --------- ---------- Net cash provided by (used in) financing activities (241) 6,415 --------- ---------- Net decrease in cash and cash equivalents (101) (872) Cash and cash equivalents, beginning of period 166 1,860 --------- ---------- Cash and cash equivalents, end of period $ 65 $ 988 ========= ========== Supplemental cash flow information: Interest paid $ 414 $ 115 Income taxes paid 58 89
See accompanying notes to consolidated financial statements. 5 Sight Resource Corporation Notes to Consolidated Financial Statements (In thousands, except share and per share data) (1) The Company (a) Nature of Business Sight Resource Corporation (the "Company") manufactures, distributes and sells eyewear and related products and services. (b) Acquisitions Effective January 1, 1999, the Company acquired all of the outstanding shares of stock of Shawnee Optical, Inc. ("Shawnee"). The purchase price paid in connection with this acquisition was $1,750 in cash, $300 in notes payable over three years and 70,000 shares of common stock. Shawnee operated nine eye care centers in Pennsylvania and Ohio. The acquisition was accounted for using the purchase method of accounting. In connection with the acquisition, the Company recorded purchase accounting adjustments to increase liabilities and establish reserves for the closing of facilities and related restructuring costs, including lease commitments and severance costs. The Company preliminarily recorded $450 in acquisition reserves, of which the Company provided a reserve of $400 for the potential closing of two stores and one laboratory, and a reserve of $50 for costs to sever administrative, store and laboratory personnel. During 1999, the Company further revised its plan and determined that no stores or laboratories would be closed. The Company reduced these reserves by $450 against goodwill as an adjustment to the cost of the acquired enterprise. No amounts have been charged against the acquisition reserves. At June 24, 2000, there were no purchase accounting reserves for this acquisition. Effective April 1, 1999, the Company acquired all of the outstanding shares of stock of Kent Optical Company and its associated companies (collectively, "Kent"). The purchase price paid in connection with this acquisition was $5,209 in cash, $1,000 in notes payable over three years and 160,000 shares of common stock. Kent operated 28 eye care centers in Michigan. The acquisition was accounted for using the purchase method of accounting. In connection with the acquisition, the Company recorded $91.5 as a reserve for potential costs to sever administrative and store personnel. At June 24, 2000, no amounts have been charged against this reserve. The following unaudited pro forma financial information for the Company gives effect to the acquisition of Kent as if it became effective on January 1, 1999. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the Kent acquisition occurred on the date indicated, or which may result in the future. 6 Sight Resource Corporation Notes to Consolidated Financial Statements (In thousands, except share and per share data)
Three Months Ended Six Months Ended ------------------ ---------------- June 24, 2000 June 26, 1999 June 24, 2000 June 26, 1999 ------------- ------------- ------------- ------------- Revenue........................................................... $ 16,483 $ 17,582 $ 34,002 $ 35,901 Net income/(loss)................................................. (695) 288 (982) (183) Basic and diluted earnings/(loss) per share....................... (0.08) 0.03 (0.11) (0.02) Weighted average number of common shares outstanding.............. 9,226,000 9,214,000 9,226,000 9,297,000
The above unaudited pro forma financial information reflects certain adjustments, including amortization of goodwill, and an increase in the weighted average shares outstanding. This pro forma information does not necessarily reflect the results of operations that would have occurred had the Kent acquisition taken place at the beginning of 1999 and is not necessarily indicative of the results that may be obtained in the future. (2) Summary of Significant Accounting Policy Basis of Presentation The accompanying consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these consolidated financial statements contain all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the financial position of Sight Resource Corporation as of June 24, 2000 and the results of its operations and cash flows for the periods presented. The Company's fiscal year ends on the last Saturday in December. Each quarter represents a thirteen-week period, except during a fifty-three week year in which case the fourth quarter represents a fourteen-week period. The quarters ended June 24, 2000 and June 26, 1999 were thirteen-weeks; the six months ended June 24, 2000 and June 26, 1999 represent 26-week periods. Fiscal year 2000 is a fifty-three week fiscal year and 1999 was a fifty-two week fiscal year. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements which are contained in the Company's Annual Report on Form 10-K for the year ended December 25, 1999. (3) Earnings Per Share The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations, if applicable, for the three and six months ended June 24, 2000 and June 26, 1999: 7 SIGHT RESOURCE CORPORATION Notes to Consolidated Financial Statements
Three Months Ended Six Months Ended ------------------------- --------------------------------- June 24, June 26, June 24, June 26, 2000 1999 2000 1999 ---- ---- ---- ---- Basic Income Per Share Net income/(loss) ($695) $ 288 ($982) $ 461 ---------- ----------- ---------- ----------- Net income/(loss) available to common shareholders (695) 288 (982) 461 ========== =========== ========== =========== Weighted average common shares outstanding 9,226,000 9,214,000 9,226,000 9,137,000 Net income/(loss) per share ($0.08) $ 0.03 ($0.11) $ 0.05 ========== =========== ========== =========== Diluted Income Per Share Net income/(loss) ($695) $ 288 ($982) $ 461 ---------- ----------- ---------- ----------- Net income/(loss) available to common shareholders (695) 288 (982) 461 ========== =========== ========== =========== Weighted average common shares outstanding 9,226,000 9,214,000 9,226,000 9,137,000 Convertible preferred stock --- 1,452,000 --- 1,452,000 Options and warrants --- 105,000 --- 74,000 ---------- ----------- ---------- ----------- Weighted average common shares outstanding and potential diluted shares 9,226,000 10,771,000 9,226,000 10,663,000 ========== =========== ========== =========== Net income/(loss) per share ($0.08) $ 0.03 ($0.11) $ 0.04 ========== =========== ========== ===========
The options, warrants and convertible preferred stock were not included in the computation of diluted earnings per share for the three and six months ended June 24, 2000 since they would have been antidilutive. 8 Sight Resource Corporation Notes to Consolidated Financial Statements (In thousands, except share and per share data) (4) Operating Segment and Related Information The following tables present certain operating segment information. For the three months ended June 24, 2000 and June 26, 1999:
Eye Care Laser Vision Consolidated Centers Correction All Others Totals ------- ---------- ---------- ------ 2000 1999 2000 1999 2000 1999 2000 1999 ---- ----- ---- ---- ----- ---- ---- ---- Revenues: External customers $16,279 $16,927 $204 $655 $ 0 $ 0 $16,483 $17,582 Interest: Interest income 0 0 0 0 17 19 17 19 Interest expense (9) (8) 0 (1) (347) (153) (356) (162) -------- -------- ----- ----- ------ ------ -------- -------- Net interest income/ (expense) (9) (8) 0 (1) 330 (134) 339 (143) Depreciation and amortization 974 875 1 34 50 37 1,025 946 Income/(loss) from operations 752 1,194 50 273 (1,136) (1,012) (334) 455 Identifiable assets 29,333 31,522 15 651 9,840 10,329 39,188 42,503 Capital expenditures 143 145 0 0 30 62 173 207
For the six months ended June 24, 2000 and June 26, 1999:
Eye Care Laser Vision Consolidated Centers Correction All Others Totals ------- ---------- ---------- ------ 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- ---- ---- Revenues: External customers $33,628 $32,027 $374 $1,319 $ 0 $ 0 $34,002 $33,346 Interest: Interest income 0 0 0 0 29 61 29 61 Interest expense (14) (33) 0 (3) (565) (531) (579) (567) ------- ------- ---- ------ ----- ----- ------- ------- Net interest income/ (expense) (14) (33) 0 (3) 536 (470) (550) (506) Depreciation and amortization 1,882 1,616 4 67 94 72 1,980 1,755 Income/(loss) from operations 1,845 2,627 50 516 (2,280) (2,131) (385) 1,012 Identifiable assets 29,333 31,522 15 651 9,840 10,329 39,188 42,503 Capital expenditures 373 338 2 0 44 62 419 400
9 Sight Resource Corporation Notes to Consolidated Financial Statements (In thousands, except share and per share data) Each operating segment is individually managed and has separate financial results that are reviewed by the Company's chief operating decision-makers. Each segment contains closely related products that are unique to the particular segment. The principal products of the Company's eye care centers are eyeglasses, frames, ophthalmic lenses and contact lenses. Profit from operations is net sales less cost of sales and selling, general and administrative expenses, but is not affected by non-operating charges/income or by income taxes. Non-operating charges/income consists principally of net interest expense. In calculating profit from operations for individual operating segments, certain administrative expenses incurred at the operating level that are common to more than one segment are not allocated on a net sales basis. All intercompany transactions have been eliminated, and intersegment revenues are not significant. (5) Other Information The Company has been notified that the Nasdaq National Market ("Nasdaq") has determined that the Company no longer meets the criteria to continue its listing on Nasdaq for the following reasons: (1) the Company does not meet the minimum net tangible assets requirement of $4,000 and (2) the Company has not maintained a minimum bid price per share of Common Stock of $1.00 during the 30 trading days preceding the date of Nasdaq's notice. The Company has filed an appeal of Nasdaq's determination and a hearing on the matter has been scheduled for August 31, 2000. 10 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 Statements contained in this document which are not historical fact are forward-looking statements based upon management's current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Company's Form 10-K for the fiscal year ended December 25, 1999 filed with the Securities and Exchange Commission. Overview Sight Resource Corporation (the "Company") manufactures, distributes and sells eyewear and related products and services. As of June 24, 2000, the Company's operations consisted of 128 eye care centers, with two regional optical laboratories and three distribution centers, making the Company one of the fifteen largest providers in the United States' primary eye care industry based upon sales. The Company's eye care centers operate primarily under the brand names Cambridge Eye Doctors, E.B. Brown Opticians, Eyeglass Emporium, Kent Optical, Shawnee Optical, Vision Plaza, and Vision World. The Company also provides, or where necessary to comply with applicable law administers the business functions of optometrists, ophthalmologists and professional corporations that provide, vision related professional services. The Company operates two regional optical laboratories and three distribution centers. The regional optical laboratories provide complete laboratory services to the Company's eye care centers, including polishing, cutting and edging, tempering, tinting and coating of ophthalmic lenses. The distribution centers provide and maintain an inventory of all accessories and supplies necessary to operate the primary eye care centers in their regions, as well as "ready made" eye care products, including contact lenses and related supplies. The inventory of eyeglass lenses, frames, contact lenses, accessories and supplies is acquired through a number of sources, domestic and foreign. Management believes that the regional optical laboratories and distribution centers have the capacity to accommodate additional multi-site eye care centers. Results of Operations Three Months and Six Months Ended June 24, 2000 and June 26, 1999 Net Revenue. During the three months ended June 24, 2000, the Company generated net revenue of approximately $16.3 and $0.2 million from the operation of its 128 eye care centers and laser vision correction affiliation, respectively, as compared to net revenue of approximately $16.9 and $0.7 million from its 130 eye care and two LVC centers, respectively, for the three months ended June 26, 1999. Net revenue for the first six months of fiscal 2000 were approximately $33.6 million and $0.4 million from the operations of its eye care centers and laser vision correction affiliation, respectively, as compared to net revenue of approximately $32.0 million and $1.3 million from its eye 11 care centers and LVC centers for the comparable period of fiscal 1999. The $1.1 million, or 6.3% decrease in total net revenue for the three months ended June 24, 2000 relates to lower average net sales per store. The $0.7 million or 2.0% increase in total net revenue for the first six months of fiscal 2000 relates primarily to the additional 37 eye care centers acquired since January 1, 1999, offset somewhat by reduced laser vision correction revenues. Cost of Revenue. Cost of revenue decreased from approximately $5.5 million and $0.3 million from the operation of the 130 eye care centers and two LVC centers, respectively, for the three months ended June 26, 1999 to approximately $4.9 million and $0.2 million from the operation of the 128 eye care centers and the Company's laser vision correction affiliation, respectively, for the three months ended June 24, 2000. Total cost of revenue as a percentage of net revenue decreased from 33.1% for the three months ended June 26, 1999 to 31.1% for the three months ended June 24, 2000. Cost of revenue increased from approximately $10.1 million from the operation of the eye care centers for the first six months of 1999 to approximately $10.2 million for the first six months of 2000. Cost of revenue decreased from approximately $0.7 million from the operation of the Company's LVC centers for the first six months of 1999 to approximately $0.3 million from its laser vision correction affiliation for the first six months of 2000. Cost of revenue as a percentage of net revenue decreased from 32.5% for the six months ended June 26, 1999 to 30.9% for the six months ended June 24, 2000. The improvement as a percentage of net revenue primarily reflects the realization of purchasing economies, less sales price discounting, and, to a lesser extent, some small retail price increases. Cost of revenue principally consisted of (i) the cost of manufacturing, purchasing and distributing optical products to customers of the Company and (ii) the cost of delivering LVC services, including depreciation and maintenance on excimer lasers. Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $11.7 million and $23.9 million for the three months and six months ended June 24, 2000 as compared to approximately $11.3 million and $21.5 million for the three and six months ended June 26, 1999. The increase primarily relates to inflationary pressures that increased payroll and occupancy costs. Selling, general and administrative expense, as a percentage of net revenue, increased from 64.3% to 71.0% for the three months ended June 24, 2000, and increased from 64.5% to 70.2% for the six months ended June 24, 2000 as compared to the corresponding periods in 1999. The increase relates to inflationary pressures that increased payroll and occupancy cost as well as payroll and facility costs incurred in operating additional eye care centers in the first quarter of 2000 as compared to the corresponding period in fiscal 1999. Other Income and Expense. Interest income totaled $17,000 and $29,000 for the three months and six months ended June 24, 2000, respectively, as compared to $19,000 and $61,000 for the three and six months ended June 26, 1999, respectively. This decrease resulted from the investment of a lower average cash and cash equivalents balance during the first and second quarters of 2000 as compared to the same period in 1999. Interest expense totaled $296,000 and $519,000 for the three and six months ended June 24, 2000, respectively, as compared to $162,000 and $244,000 for the three and six months ended June 26, 1999, respectively. The increase resulted from higher interest rates and a higher average balance of debt outstanding during the first and second quarters of 2000 as compared to the same periods in 1999. The non-cash write-off of deferred financing costs for the three months ended June 24, 2000 resulted from the costs associated with the Company's credit facility that are required by GAAP to be written off in connection with the execution of the loan modification dated March 31, 2000. 12 Income Taxes. The effective tax rate includes the utilization of net operating loss carry forwards and the amounts for state income taxes. Net Income (Loss). The Company realized a net loss of $695,000, or ($0.08) per share on a basic and diluted weighted average basis, for the three months ended June 24, 2000 as compared to net income of $288,000, or $0.03 per share on a basic and diluted basis, for the same period last year. The Company realized a net loss of $982,000 or ($0.11) per share basic and diluted for the six months ended June 24, 2000, as compared to net income of $461,000 or $0.05 per share basic and $0.04 on a diluted basis for the same period last year. Liquidity and Capital Resources At June 24, 2000, the Company had approximately $0.065 million in cash and cash equivalents and a working capital deficit of approximately ($4.6) million, in comparison to approximately $0.2 million in cash and cash equivalents and working capital of approximately $1.0 million as of December 25, 1999. As compared to December 25, 1999, current assets have increased by $0.1 million and current liabilities have increased by $5.7 million. The decrease in working capital and increase in current liabilities is primarily due to the bank debt of $6.3 million which is now classified as current with a maturity date of March 31, 2001. To date the Company has financed its capital expenditures, operating requirements, growth and acquisitions primarily through cash from operations, bank borrowings, the public and private sale of its equity securities and lease financing. On March 31, 2001, the Company's bank debt, which has an outstanding balance of approximately $6.3 million as of July 31, 2000, will mature. The Company is presently in discussions with potential lenders to pursue a refinancing of the existing bank debt. If the Company is unable to refinance the bank debt before it matures, the Company's financial condition could be materially adversely affected. In addition to pursuing the refinancing, the Company has retained Paine Webber Incorporated as its financial advisor to work with management in exploring strategic alternatives for the Company, including mergers, joint ventures, strategic partnerships and equity or debt financing. Effective April 1, 1999, the Company acquired all of the outstanding shares of stock of Kent Optical Company and its affiliates (collectively, "Kent"). The purchase price of this acquisition was $5.2 million in cash, $1.0 million in notes payable in annual substantially equal installments commencing April, 2000 and continuing until April, 2002, and 160,000 shares of common stock. Kent operated 28 eye care centers in central and southwest Michigan. The acquisition was accounted for using the purchase method of accounting. As of June 24, 2000, the Company had securities outstanding which provide it with potential sources of financing as outlined below: Securities Securities Potential Outstanding Proceeds - ------------------------------------------------------------------------------- Class II Warrants 290,424 $2,032,968 Representative Warrants 170,000 1,400,000 Bank Austria AG, f/k/a Creditanstalt, Warrants 150,000 693,750 ---------- $4,126,718 ========== As of June 24, 2000, the Company also has outstanding 374,582 Class I Warrants. The Class I Warrants entitle the holder to purchase an amount of shares of the Company's common stock equal to an aggregate of up to 19.9% of the shares of common stock purchasable under the Company's outstanding warrants and options on the same terms and conditions of existing warrant and option holders. The purchaser is obligated to exercise these warrants at the same time the options and warrants of existing holders are exercised, subject to certain limitations. The amount of proceeds from the exercise of these warrants cannot be estimated at this time. 13 There can be no assurance that the Company will obtain any such proceeds from the exercise of the above securities. On February 20, 1997, the Company entered into a Credit Agreement (the "1997 Agreement") with a bank pursuant to which the Company could borrow up to $5.0 million on a term loan basis and up to $5.0 million on a revolving credit basis, subject to certain performance criteria. As part of the 1997 Agreement, the Company issued to the bank warrants to purchase 150,000 shares of the common stock at a purchase price of $4.625 per share. The warrants expire December 31, 2003. As noted in the next paragraph below, the Company has entered into a new credit facility and retired the 1997 Agreement. On April 15, 1999, the Company entered into a Credit Agreement (the "1999 Agreement") with a bank pursuant to which the Company could borrow $10.0 million on an acquisition line of credit, $7.0 million on a term loan basis and $3.0 million on a revolving line of credit basis, subject to certain performance criteria and a asset-related borrowing base for the revolver. The performance criteria include, among others, financial condition covenants such as net worth requirements, indebtedness to net worth ratios, debt service coverage ratios, funded debt coverage ratios, and pretax profit, net profit and EBITDA requirements. The acquisition line facility bore interest at either the bank's prime rate, or LIBOR plus 2.25%, or at a comparable interest swap rate at the Company's election. The term loan facility bore interest at LIBOR plus 2.25% or at a comparable interest swap rate at the Company's election. The revolving credit facility bore interest at the bank's prime rate or LIBOR plus 2.0% at the Company's election. As of June 24, 2000, $6.3 million was borrowed on the term loan and $1.775 million was borrowed on the revolving credit facility. At December 25, 1999, the Company was not in compliance with the following financial covenants of the 1999 Agreement: minimum net worth, minimum debt service coverage, maximum funded debt service coverage and minimum net profit. However, on March 31, 2000, the Company and the bank entered into a modification agreement that amended the 1999 Agreement in order to, among other things, waive the Company's default, adjust certain covenants to which the Company is subject and terminate the acquisition line of credit. In addition, the modification agreement limits the revolving line note to $2.5 million and the term loan to $6.75 million and establishes the maturity date for each of these credit lines as March 31, 2001. Also, the modification agreement establishes the following interest rates for both the revolving line note and term loan: (i) from the closing date of the agreement through August 31, 2000 - prime rate + 1.0%; (ii) from September 1, 2000 through October 31, 2000 - prime rate + 2.0%; and (iii) from November 1, 2000 through March 31, 2001 - prime rate + 3.0%. The scheduled monthly principal payments for the term loan have been adjusted to $83,333.33 from April, 2000 through July, 2000, $100,000.00 from August, 2000 through December, 2000 and $125,000.00 from January, 2001 through March, 2001. The Company intends to consider and pursue alternative lenders to refinance this credit arrangement on a long-term basis. In addition, the Company has retained PaineWebber Incorporated as its financial advisor to work with management in exploring strategic alternatives, including mergers, joint ventures, strategic partnerships and equity or debt financing, to support the future growth of the business and maximize shareholder value. The Company has an acquisition strategy to acquire and integrate the assets of multi-site eye care centers and the practices of eye care professionals and to employ or enter into management services contracts with these professionals. This strategy includes both 14 expanding existing regional markets and entering new regional markets. The Company will also target acquisitions in strategic markets that will serve as platforms from which the Company can consolidate a given service area by making and integrating additional "in-market" acquisitions. The Company from time to time will evaluate potential acquisition candidates. Without additional funding, the Company's rate of acquisition and size of acquisition could be limited. Recent Accounting Pronouncements In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as "derivatives") and for hedging activities, and required adoption in periods beginning after June 15, 2000. SFAS 133 was subsequently amended by Statement of Financial Accounting Standards No. 137 ("Accounting for Derivative Instruments and Hedging Activities"). SFAS No. 137 will be effective for fiscal years beginning after June 15, 2000. SFAS 137, which becomes effective for the Company in its year ending December 31, 2001, is not expected to have a material impact on the consolidated financial statements of the Company. Year 2000 Issue The Company did not experience any difficulties related to the Year 2000 problem on December 31, 1999, and we are not aware of any such difficulties since that date. The Company's operations have not, to date, been adversely affected by any difficulties experienced by suppliers or customers in connection with the Year 2000 problem. The Company's Year 2000 Compliance Plan also addressed issues related to the date February 29, 2000, and management will continue to monitor systems for potential difficulties through the remainder of calendar year 2000. Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has not entered into any transactions using derivative financial instruments or derivative commodity instruments and believes that its exposure to market risk associated with other financial instruments (such as investments) is not material. 15 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on May 25, 2000. Of the 10,678,071 shares issued and outstanding and eligible to vote as of the record date of March 31, 2000, a quorum of 8,209,663 shares or 76.9% of the eligible shares were present in person or represented by proxy. The following actions were taken at such meeting: (a) The reelection of Mr. Blinn and the election of Mr. Schwarz as Class A Directors: Stephen M. Blinn For = 7,560,698 Withheld Authority = 648,965 Ryan M. Schwarz For = 7,561,198 Withheld Authority = 648,465 Continuing Class B Directors (terms to expire 2001): Russell E. Taskey William T. Sullivan Continuing Class C Directors (terms to expire 2002): Christian E. Callsen William G. McLendon (b) The approval of the proposal to amend the Company's 1992 Employee, Director and Consultant Stock Option Plan to increase the maximum number of shares for which stock options may be granted to any participant during any consecutive three year period from 350,000 shares to 400,000 shares (6,828,944 shares for approval, 1,358,894 shares against approval and 21,825 shares abstaining). (c) The ratification of the appointment of KPMG, LLP as the Company's independent public accountants for the fiscal year ending December 30, 2000 (7,533,540 shares for approval, 644,914 shares against approval and 11,209 shares abstaining). Item 5. Other Information The Company has been notified that The Nasdaq National Market ("Nasdaq") has determined that the Company no longer meets the criteria to continue its listing on Nasdaq for the following reasons: (1) the Company does not meet the minimum net tangible assets requirement of $4 million, and (2) the Company has not maintained a minimum bid price per share of Common Stock of $1.00 during the 30 trading days preceding the date of Nasdaq's notice. The Company has filed an appeal of Nasdaq's determination and a hearing on the matter has been scheduled for August 31, 2000. 16 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit No. Title --- ----- 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter covered by this report. 17 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Sight Resource Corporation Date: August 4, 2000 By: /S/ WILLIAM T. SULLIVAN --------------------------- William T. Sullivan President and Chief Executive Officer (principal executive officer) Date: August 4, 2000 By: /S/ JAMES NORTON -------------------- James Norton Chief Financial Officer (principal financial officer) 18 Exhibit Index Exhibit No. Title - ----------- -------------------------------------------------------- 27 Financial Data Schedule 19 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM UNAUDITED FINANCIAL STATEMENTS OF SIGHT RESOURCE CORPORATION FOR THE PERIOD ENDED JUNE 24, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 6-MOS DEC-30-2000 DEC-30-2000 MAR-26-2000 DEC-26-1999 JUN-24-2000 JUN-24-2000 65 65 0 0 5,439 5,439 1,962 1,962 7,161 7,161 11,065 11,065 11,075 11,075 6,196 6,196 39,188 39,188 15,630 15,630 0 0 0 0 6,535 6,535 93 93 16,369 16,369 39,188 39,188 16,483 34,002 16,483 34,002 5,120 5,120 5,120 5,120 0 0 0 0 296 519 (673) (935) 22 47 0 0 0 0 0 0 0 0 (695) (982) (0.08) (0.11) (0.08) (0.11)
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