TLC Vision Corporation
TSX : TLC
NASDAQ : TLCV

TLC Vision Corporation

March 15, 2007 16:12 ET

TLCVision Announces Fourth Quarter and Full-Year 2006 Financial Results and Refractive Strategy Update

ST. LOUIS, MISSOURI--(CCNMatthews - March 15, 2007) - TLC Vision Corporation (TSX:TLC)(NASDAQ:TLCV), North America's premier eye care services company, today announced financial results for the year ended December 31, 2006. All dollar amounts are expressed in U.S. currency and results are reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP) unless otherwise noted.

"In the third quarter of 2006, we announced a new refractive centers strategy that we expect will deliver much higher growth rates in our core business," said Jim Wachtman, President and Chief Executive Officer. "Our strategy to drive additional procedure volume includes a more consumer-friendly price coupled with significant marketing investment. Our financial results for the fourth quarter and full year 2006 were impacted by this investment. However, I am pleased to report that, even at this early stage of execution, this strategic approach is delivering the metrics that we anticipated. To date, we have converted 29 centers to this new strategy, including our latest new center in Seattle, Washington opened in January, and we are experiencing increased call volume and resulting consultation appointments across our network of centers. The Company is very confident in this direction, which combines the most successful elements of the current medical referral model with a direct-to-consumer approach, creating a unique and competitive position for TLCVision."

Editor's Note: "Operating Business" (or "Operating") is defined as TLCVision's activities excluding the impact of the AMD segment, representing our investment in OccuLogix, Inc. To provide maximum transparency for investors, Operating Business financial results are listed separately from consolidated results in this press release.

FOURTH QUARTER RESULTS:

REVENUES

TLCVision's fourth quarter revenues were $63.5 million, an increase of 5% from 2005.

- Total refractive revenues were up 4% to $42.5 million. Centers revenues of $34.6 million were 3% higher than last year, with same store center revenues also up 3%. Refractive center procedure volume (including LECC) was 26,100, up 1% from prior year. Excluding LECC, center procedures were up 2% vs. a reported industry decline in procedure volumes for the quarter. Access revenues of $8.0 million were up 8%, as lower procedures (13,600 vs. 14,000 in the prior year) were offset by higher pricing from increased custom penetration.

- Other Healthcare Services revenues (excluding AMD) increased 8% to $21.0 million, fueled by strong growth at Vision Source (+16%) and the mobile cataract business (+6%). Surgical procedures of 18,200 were 3% below prior year, but revenues were up 2% due to a better mix overall and higher average selling prices in our mobile cataract business.

EARNINGS

Consolidated: Including the AMD net loss of ($2.5) million, the net loss for the quarter was ($2.4) million or ($0.03) per share.

Operating Business: Net income for the quarter was $0.1 million, comparable to $0.4 million for the prior year on an as-reported basis. 2006 operating results were impacted by non-recurring charges of $5.3 million and an income tax benefit of $6.0 million related to the reversal of certain deferred tax valuation allowances.

STRONG CASH GENERATION

Operating cash flow for the fourth quarter was $3.0 million or $0.04 per fully diluted share. The Company continues to maintain a strong financial position, with cash and short-term investments totaling $40.5 million.

YEAR-TO-DATE RESULTS

As previously guided, revenues for the full year ended December 31, 2006 were $281.8 million, growing 8% from 2005 on a consolidated basis and 9% excluding the AMD business. Total refractive revenues increased 6% to $198.7 million, and total refractive procedure volume (including LECC) was 187,300. Other Healthcare Services revenues of $83.1 million (excluding AMD) increased 16%, with a total of 73,200 surgical procedures performed.

For the full year ended December 31, 2006, consolidated net income was $11.5 million (or $0.17 per share) including a ($7.2) million net loss from the AMD segment. Net income for the Operating Business was $18.7 million or $0.27 per share, an increase over 2005 of $2.8 million or $0.05 per share on an as-reported basis. Earnings per share were below previous the expected range due to a higher effective tax rate and the unanticipated non-recurring charges. After adjusting both periods on a pro forma basis to remove stock compensation, non-recurring costs and one-off income tax benefits, pro forma 2006 net income of $17.1 million (or $0.25 per share) trailed pro forma 2005 net income of $20.3 million by 16%, as the losses on new de novo centers more than offset an increase in earnings from existing facilities.

Consolidated operating cash flow for full year 2006 was $33.5 million. Operating cash flow for the Operating Business was $38.4 million or $0.55 per share, consistent with previous guidance.

2007 OUTLOOK

Historically, the core refractive centers business has been the largest contributor to revenue and earnings for the Company. TLCVision is embarking upon a significant change in this business. Given the magnitude of this change and the expected variability in operating results during this transition period, the Company is choosing not to issue annual guidance at this time. While the Company anticipates positive earnings and cash flow for the year from its Operating Business, they will be at levels below 2006 given the significant marketing spend associated with the change in strategy and the time required to get a return on that investment.

"While early results from this strategy are very encouraging, the Company needs to demonstrate a level of growth and predictability before issuing guidance," said Jim Wachtman. "We appreciate the financial community's need for forward-looking information to effectively evaluate investment decisions in TLCVision, and intend to provide additional color as our strategy progresses during the year."

TLCVision continues to review strategic and financial alternatives to maximize near-term and longer-term shareholder value. There can be no assurance that the review will result in any strategic or financial transaction, and no timetable has been set for its completion.

CONFERENCE CALL

TLCVision is pleased to invite all interested parties to participate in a conference call during which time these financial results will be discussed. The call will be held today, March 15, at 4:30 pm Eastern Time at 1-877-888-4605.

The call will also be broadcast live and archived on the Company's web site at www.tlcv.com under the "Webcasts" link in the Investor Relations section. In addition, the live web cast will be available at various other popular portals and financial web sites. A replay will be available until March 29 by dialing 1-888-509-0081 and entering pass code 640813.

About TLCVision

TLCVision is North America's premier eye care services company, providing eye doctors with the tools and technologies needed to deliver high-quality patient care. Through its centers management and technology access service models, and its managed care contracting strength, TLCVision maintains leading positions in Refractive and Cataract markets. More information about TLCVision can be found on the corporate website www.tlcv.com. Go to www.tlcvision.com for information on refractive surgery.

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934, which statements can be identified by the use of forward looking terminology, such as "may", "will", "expect", "intend", "anticipate", "estimate", "predict", "plans" or "continue" or the negative thereof or other variations thereon or comparable terminology referring to future events or results. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors, including the timing of expenditures, effects of competition, changes to pricing, acquisitions and expansion opportunities, any of which could cause actual results to vary materially from current results or TLCVision's anticipated future results. See the Company's reports filed with the Canadian Securities Regulators and the U.S. Securities and Exchange Commission from time to time for cautionary statements identifying important factors with respect to such forward looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from results referred to in forward looking statements. TLCVision assumes no obligation to update the information contained in this press release.



TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except per share amounts)

Three Months Ended Three Months Ended
December 31, 2006 December 31, 2005
----------------------------- ----------------------------
Results Results
Before Before
AMD AMD Total AMD AMD Total
Segment Segment TLCVision Segment Segment TLCVision
----------------------------- ----------------------------
Revenues:
Refractive:
Centers $ 34,556 $ - $ 34,556 $ 33,425 $ - $ 33,425
Access 7,977 - 7,977 7,368 - 7,368
Other healthcare
services 21,008 - 21,008 19,518 206 19,724
----------------------------- ----------------------------
Total revenues 63,541 - 63,541 60,311 206 60,517

Cost of revenues
(excluding
amortization):
Refractive:
Centers 26,519 - 26,519 25,879 - 25,879
Access 6,619 - 6,619 6,045 - 6,045
Other healthcare
services 12,976 - 12,976 11,920 2,345 14,265
----------------------------- ----------------------------
Total cost of
revenues
(excluding
amortization) 46,114 - 46,114 43,844 2,345 46,189
----------------------------- ----------------------------

Gross profit (loss) 17,427 - 17,427 16,467 (2,139) 14,328
----------------------------- ----------------------------

General and
administrative 8,642 - 8,642 6,538 2,981 9,519
Marketing and sales 7,468 - 7,468 5,308 168 5,476
Research and
development,
clinical and
regulatory - - - - 1,456 1,456
Amortization of
intangibles 873 - 873 950 - 950
Impairment of
goodwill 4,087 - 4,087 - - -
Other expenses, net 781 - 781 1,769 1 1,770
----------------------------- ----------------------------
Total operating
costs 21,851 - 21,851 14,565 4,606 19,171
----------------------------- ----------------------------
Operating income
(loss) (4,424) - (4,424) 1,902 (6,745) (4,843)

Interest income 525 - 525 513 406 919
Interest expense (388) - (388) (421) - (421)
Minority interests (2,060) - (2,060) (1,834) 2,891 1,057
Earnings (losses)
from equity
investments 450 (2,506) (2,056) 718 - 718
----------------------------- ----------------------------

Income (loss) before
income taxes (5,897) (2,506) (8,403) 878 (3,448) (2,570)

Income tax benefit
(expense) 6,042 - 6,042 (455) 3 (452)
----------------------------- ----------------------------

Net income (loss) $ 145 $(2,506) $(2,361) $ 423 $(3,445) $ (3,022)
----------------------------- ----------------------------
----------------------------- ----------------------------

Earnings (loss) per
share - diluted $ 0.00 $ (0.03) $ (0.03) $ 0.01 $ (0.05) $ (0.04)
----------------------------- ----------------------------
----------------------------- ----------------------------

Weighted average
number of common
shares outstanding -
diluted 69,759 69,759 69,759 68,645 68,645 68,645

Note: The AMD segment includes the Company's interest in OccuLogix, Inc.



TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF OPERATIONS(UNAUDITED)
(In thousands except per share amounts)


Year Ended December 31, Year Ended December 31,
2006 2005
-----------------------------------------------------------
Results Results
Before Before
AMD AMD Total AMD AMD Total
Segment Segment TLCVision Segment Segment TLCVision
-----------------------------------------------------------
Revenues:
Refractive:
Centers $ 161,514 $ - $ 161,514 $150,168 $ - $ 150,168
Access 37,186 - 37,186 36,453 - 36,453
Other healthcare
services 83,126 - 83,126 71,563 1,841 73,404
-----------------------------------------------------------
Total revenues 281,826 - 281,826 258,184 1,841 260,025

Cost of revenues
(excluding
amortization):
Refractive:
Centers 114,575 - 114,575 106,476 - 106,476
Access 27,949 - 27,949 26,974 - 26,974
Other healthcare
services 50,866 1,659 52,525 43,537 3,738 47,275
-----------------------------------------------------------
Total cost of
Revenues (excluding
amortization) 193,390 1,659 195,049 176,987 3,738 180,725
-----------------------------------------------------------

Gross profit
(loss) 88,436 (1,659) 86,777 81,197 (1,897) 79,300
-----------------------------------------------------------

General and
administrative 32,862 1,759 34,621 27,647 8,850 36,497
Marketing and
sales 27,623 169 27,792 21,055 659 21,714
Research and
development,
clinical and
regulatory - 1,475 1,475 - 5,250 5,250
Amortization of
intangibles 3,484 - 3,484 4,039 - 4,039
Impairment of
goodwill 4,087 - 4,087 - - -
Other expenses
(income), net 25 849 874 935 (166) 769
-----------------------------------------------------------
Total operating
costs 68,081 4,252 72,333 53,676 14,593 68,269
-----------------------------------------------------------
Operating income
(loss) 20,355 (5,911) 14,444 27,521 (16,490) 11,031

Gain on sale of
OccuLogix,
Inc. stock - 1,450 1,450 - - -
Interest income 1,964 366 2,330 2,687 1,593 4,280
Interest expense (1,455) - (1,455) (1,737) - (1,737)
Minority
interests (9,737) 2,715 (7,022) (8,401) 7,058 (1,343)
Earnings (losses)
from equity
investments 3,173 (5,809) (2,636) 2,545 - 2,545
-----------------------------------------------------------
Income (loss)
before
income
taxes 14,300 (7,189) 7,111 22,615 (7,839) 14,776

Income tax
benefit
(expense) 4,408 - 4,408 (6,657) - (6,657)
-----------------------------------------------------------

Net income (loss) $ 18,708 $(7,189) $11,519 $15,958 $(7,839) $ 8,119
-----------------------------------------------------------
-----------------------------------------------------------

Earnings (loss)
per
share -
diluted $ 0.27 $ (0.10) $ 0.17 $ 0.22 $ (0.11) $ 0.11
-----------------------------------------------------------
-----------------------------------------------------------

Weighted average
number of
common shares
outstanding -
diluted 69,580 69,580 69,580 71,380 71,380 71,380

Note: The AMD segment includes the Company's interest in OccuLogix, Inc.



TLC VISION CORPORATION
CONSOLIDATING BALANCE SHEETS
(In thousands)

December 31, 2006
(Unaudited) December 31, 2005
------------------------------------------------------------
Results
Results Before
Before AMD AMD
AMD AMD Total Segment Segment Total
Segment Segment TLCVision (Unaudited)(Unaudited)TLCVision
------------------------------------------------------------

ASSETS
Current assets
Cash and cash
equivalents $ 28,917 $ - $ 28,917 $ 22,122 $ 9,607 $ 31,729
Short-term
investments 11,575 - 11,575 6,550 31,663 38,213
Accounts
receivable, net 19,315 - 19,315 20,056 527 20,583
Deferred tax
asset 7,153 - 7,153 - - -
Prepaid
expenses,
inventory and
other 13,911 - 13,911 11,604 5,519 17,123
------------------------------------------------------------
Total current
assets 80,871 - 80,871 60,332 47,316 107,648

Intercompany - - - 1,693 (1,693) -
Restricted cash 1,035 - 1,035 975 - 975
Investments and
other assets 24,495 14,362 38,857 19,838 - 19,838
Goodwill 96,148 - 96,148 99,402 - 99,402
Other
intangible
assets, net 20,503 - 20,503 23,886 135 24,021
Fixed assets,
net 56,888 - 56,888 48,646 513 49,159
------------------------------------------------------------
Total assets $279,940 $14,362 $294,302 $254,772 $46,271 $301,043
------------------------------------------------------------
------------------------------------------------------------

LIABILITIES
Current
liabilities
Accounts
payable $12,314 $ - $12,314 $10,517 $ 514 $ 11,031
Accrued
liabilities 20,231 - 20,231 22,158 2,295 24,453
Current
maturities of
long-term debt 8,311 - 8,311 5,268 - 5,268
------------------------------------------------------------
Total current
liabilities 40,856 - 40,856 37,943 2,809 40,752

Long-term debt,
Less current
maturities 15,122 - 15,122 12,665 - 12,665
Other long-term
liabilities 4,442 - 4,442 3,427 - 3,427
Minority
interests 14,583 - 14,583 14,284 21,510 35,794
------------------------------------------------------------
Total
liabilities 75,003 - 75,003 68,319 24,319 92,638

STOCKHOLDERS'
EQUITY
Common stock 419,767 30,366 450,133 419,936 30,767 450,703
Option and
warrant equity 1,806 - 1,806 1,861 - 1,861
Accumulated
deficit (216,636)(16,004) (232,640) (235,344) (8,815) (244,159)
------------------------------------------------------------
Total
stockholders'
equity 204,937 14,362 219,299 186,453 21,952 208,405
------------------------------------------------------------

Total
liabilities and
stockholders'
equity $279,940 $14,362 $ 294,302 $ 254,772 $ 46,271 $ 301,043
------------------------------------------------------------
------------------------------------------------------------

Note: The AMD segment includes the Company's interest in OccuLogix, Inc.



TLC VISION CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS(UNAUDITED)
(In thousands, except per share amounts)

Year Ended Year Ended
December 31, 2006 December 31, 2005
-----------------------------------------------------------
Results Results
Before Before
AMD AMD Total AMD AMD Total
Segment Segment TLCVision Segment Segment TLCVision
-----------------------------------------------------------
OPERATING
ACTIVITIES
Net income
(loss) $ 18,708 $ (7,189) $ 11,519 $ 15,958 $ (7,839) $ 8,119

Adjustments to
reconcile net
income (loss)
to net cash
from operating
activities:
Depreciation
and
amortization 16,358 34 16,392 16,233 120 16,353
Reimbursements
from
investments in
research and
development
arrangements (300) - (300) (300) - (300)
Minority
interests 9,737 (2,715) 7,022 8,401 (7,058) 1,343
(Earnings)
losses from
equity
investments (3,173) 5,809 2,636 (2,545) - (2,545)
Deferred taxes (5,241) - (5,241) 5,067 - 5,067
Loss (gain) on
sales and
disposals of
fixed assets 111 29 140 75 (167) (92)
Gain on sales
and issuances
of subsidiary
stock (349) (1,450) (1,799) - - -
Write-down of
OccuLogix, Inc.
inventory - 1,625 1,625 - 1,982 1,982
Impairment of
goodwill 4,087 - 4,087 - - -
Gain on sale of
subsidiary - - - (319) - (319)
Non-cash
compensation
expense 1,258 186 1,444 648 790 1,438
Adjustments to
the fair values
of long-lived
assets and
liabilities 294 - 294 888 - 888
Other 58 26 84 - 182 182
Changes in
operating
assets and
liabilities,
net of
acquisitions
and
dispositions: (3,190) (1,225) (4,415) (2,513) (7,077) (9,590)
-----------------------------------------------------------
Cash from
operating
activities 38,358 (4,870) 33,488 41,593 (19,067) 22,526
-----------------------------------------------------------

INVESTING
ACTIVITIES
Purchases of
fixed assets (11,493) - (11,493) (8,139) (182) (8,321)
Proceeds from
sales of fixed
assets 681 - 681 1,494 285 1,779
Proceeds from
divestitures of
investments and
subsidiaries,
net - - - 3,430 - 3,430
Proceeds from
sale of
subsidiary
stock, net 230 2,226 2,456 - - -
OccuLogix, Inc.
cash balance at
time of
deconsolidation - (14,814) (14,814) - - -
Distributions
and loan
payments
received from
equity
investments 3,613 - 3,613 3,039 - 3,039
Reimbursements
from
investments in
research and
development
arrangements 300 - 300 300 - 300
Acquisitions
and equity
investments (7,839) - (7,839) (67,573) - (67,573)
Proceeds from
sales of
short-term
investments 400 9,925 10,325 91,025 38,725 129,750
Purchases of
short-term
investments (5,425) - (5,425) (29,060)(28,035) (57,095)
Other 59 (71) (12) 49 (36) 13
-----------------------------------------------------------
Cash from
investing
activities (19,474) (2,734) (22,208) (5,435) 10,757 5,322
-----------------------------------------------------------

FINANCING
ACTIVITIES
Restricted cash
movement (60) - (60) (43) - (43)
Transfer
proceeds from
sale of
OccuLogix, Inc.
stock, net 2,226 (2,226) - - - -
Transfer
intercompany
cash 10 (10) - - - -
Principal
payments of
debt financing
and capital
leases (6,479) - (6,479) (9,504) - (9,504)
Proceeds from
debt financing 441 - 441 1,992 - 1,992
Distributions
to minority
interests (9,197) - (9,197) (8,440) - (8,440)
Purchases of
treasury stock - - - (15,868) - (15,868)
Proceeds from
issuances of
common stock 970 - 970 1,980 - 1,980
Proceeds from
issuances of
OccuLogix, Inc.
stock - 233 233 - 329 329
-----------------------------------------------------------
Cash from
financing
activities (12,089) (2,003) (14,092) (29,883) 329 (29,554)
-----------------------------------------------------------

Net increase
(decrease) in
cash and cash
equivalents
during the
period 6,795 (9,607) (2,812) 6,275 (7,981) (1,706)
Cash and cash
equivalents,
beginning of
period 22,122 9,607 31,729 15,847 17,588 33,435
-----------------------------------------------------------
Cash and cash
equivalents,
end of period $ 28,917 $ - $ 28,917 $ 22,122 $ 9,607 $ 31,729
-----------------------------------------------------------
-----------------------------------------------------------

Operating cash
flow per
diluted share $ 0.55 $ (0.07) $ 0.48 $ 0.58 $ (0.26) $ 0.32

Note: The AMD segment includes the Company's interest in OccuLogix, Inc.

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