NVI National Vision

National Vision Reports Operating Results for 2005 Fiscal First Quarter LAWRENCEVILLE, Ga., May 16 /PRNewswire-FirstCall/ -- National Vision, Inc. (AMEX:NVI) today announced operating results for its fiscal first quarter ended April 2, 2005. Total net revenue from continuing operations for the first quarter of 2005 was $60.6 million, a 5% increase over total net revenue from continuing operations of $57.9 million in the prior year's first quarter. The Company's retail optical locations achieved a year-over-year comparable store sales increase of +2%. Net earnings for 2005's first quarter were $2.8 million, or $0.50 per share on a diluted basis, compared with net earnings of $3.1 million, or $0.56 per diluted share, in the first quarter of 2004. This reduction in net income was driven by an increase of $1.7 million in the provision for income taxes. The Company recorded a total income tax provision of approximately 40% of pre- tax income in the first quarter of fiscal 2005 whereas income taxes were recorded at a rate of approximately 6% in the fiscal 2004 first quarter. Substantially all of the 2005 income tax provision pertains to deferred income taxes, as the Company expects its cash taxes paid to be less than 4% of its full-year pre-tax income for 2005. Adjusted EBITDA increased to $10.1 million in the fiscal 2005 first quarter from $9.7 million in the prior year comparable period. Earnings before income taxes and discontinued operations increased to $4.5 million in 2005's first quarter from $2.1 million in the first quarter of 2004. "NVI delivered another very strong quarter," stated Reade Fahs, CEO and President. "Positive sales comps were on top of a +10% sales comp in the first quarter of 2004. Our quarterly adjusted EBITDA was the best we've had in over five years and our earnings before income taxes and discontinued operations more than doubled those of last year's first quarter." "At the end of the first quarter of 2005, we were operating 45 fewer retail optical locations than we were operating a year earlier," Mr. Fahs continued. "In light of that reduction in store count and the significant increase in our effective tax rate, our net income comparisons are quite remarkable. Our store teams and operations management continue to perform exceptionally well." Fahs added, "We recently announced that we would use some of the first quarter's positive cash flow to redeem $5.2 million of our Notes on June 1. We've also repurchased another $772,000 of our Notes so far this year, so our Note balance following the June 1 redemption will be approximately $67.0 million assuming no other repurchases by then. We hope to continue repurchasing our Notes as opportunities arise." The Company will hold an Investor Relations Conference Call on Tuesday, May 17, 2005, at 11:00 a.m. EDT to discuss its first quarter results. The call may be accessed via the Company's web site at http://www.nationalvision.com/ . Following the conclusion of the prepared remarks by management, the Company will accept and address questions from investors. The Company's financial disclosures refer to adjusted EBITDA because it is used in the calculation of excess cash flow principal repayments required under the Company's Senior Subordinated Notes, it is the basis of certain covenants in the Company's senior credit facility with the Fleet Retail Group and it is a widely accepted financial indicator of a company's ability to service or incur indebtedness. Adjusted EBITDA is calculated as net earnings before interest, taxes, depreciation, amortization, and certain other unusual non-cash items. A reconciliation of net earnings to EBITDA is presented in the attached financial tables. National Vision, Inc. is a retail optical company that operates vision centers primarily within host environments in the United States and Mexico. Our vision centers sell a wide range of optical products including eyeglasses, contact lenses and sunglasses. As of the end of the most recent fiscal quarter on April 2, 2005, the Company operated 406 vision centers. As of the date of the news release, the Company operates 411 vision centers, including 293 located inside domestic Wal-Mart stores. National Vision depends on its domestic Wal-Mart locations for substantially all of its revenues and cash flow. Investments in the debt and equity securities of National Vision, Inc. are subject to substantial risks as described in the Company's public filings with the Securities and Exchange Commission. This release includes statements concerning the Company's plans, beliefs and expectations for future periods. These "forward-looking statements" may be identified by the use of words such as "intends," "contemplates," "believes," "anticipates," "expects," "should," "could," "would" and words of similar import. These forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from the expectations expressed or implied in such statements. With respect to such forward-looking statements and others that may be made by, or on behalf of, the Company, the factors described as "Risk Factors" in the Company's Reports filed with the SEC, could materially affect the Company's actual results. These risks and uncertainties include, among others, the Company's potential inability to repay its debt, an adverse change in the Company's relationship with Wal-Mart, changes in economic conditions (including an increase in interest rates), financial markets or customer demand, the level of competition in the retail eyecare industry, federal and state regulation of the healthcare and insurance industries (particularly in California), the tax treatment accorded to the Company's net operating loss carryforwards by federal and state tax authorities, the Company's financial condition and other risks and uncertainties set forth in the Company's filings with the Securities and Exchange Commission. All forward-looking statements included in this release are based upon management's present expectations and the information available at this time. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or other factors. NATIONAL VISION, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share information) (Unaudited) Three Months Ended April 2, 2005 April 3, 2004 Sales of optical products and services $57,952 $56,003 Fees from managed vision care services 2,500 1,927 Sales of home medical products and services 120 Total net revenue 60,572 57,930 Cost of goods sold, including occupancy costs 26,072 23,976 Gross profit 34,500 33,954 Selling, general & administrative expense 27,789 29,033 Operating income from continuing operations 6,711 4,921 Other income (expense): Interest expense (2,368) (2,911) Gain on repurchase of Senior Subordinated Notes 6 Other income, net 196 40 Earnings before taxes and discontinued operations 4,545 2,050 Income tax expense 1,783 135 Net earnings before discontinued operations 2,762 1,915 Discontinued operations: Operating income from discontinued operations 138 1,257 Loss on disposal (1) (31) Income tax expense 70 50 Earnings from discontinued operations 67 1,176 Net earnings $2,829 $3,091 Earnings per common share: Basic $0.54 $0.61 Diluted $0.50 $0.56 NATIONAL VISION, INC. CONDENSED CONSOLIDATED BALANCE SHEETS April 2, 2005 and January 1, 2005 (In thousands) April 2, 2005 (Unaudited) January 1, 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents $11,365 $7,858 Accounts receivable (net of allowance: 2005 - $550; 2004 - $423) 4,051 2,561 Inventories 13,781 14,065 Deferred income tax asset 8,024 9,394 Other current assets 1,351 2,405 Total current assets 38,572 36,283 PROPERTY AND EQUIPMENT, net 12,291 12,271 INTANGIBLE VALUE OF CONTRACTUAL RIGHTS (net of accumulated amortization: 2005 - $28,851; 2004 - $26,974) 83,894 85,771 OTHER ASSETS AND DEFERRED COSTS (net of accumulated amortization: 2005 - $1,236; 2004 - $1,193) 780 785 $135,537 $135,110 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $5,495 $3,446 Accrued expenses and other current liabilities 23,853 23,772 Senior Subordinated Notes - current portion 5,200 4,858 Total current liabilities 34,548 32,076 DEFERRED INCOME TAX LIABILITY 8,514 8,191 OTHER LONG TERM LIABILITIES 490 491 SENIOR SUBORDINATED NOTES 67,693 72,930 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, $1 par value; 5,000,000 shares authorized, none issued Common stock, $0.01 par value; 10,000,000 shares authorized, 5,390,679 shares issued and outstanding at April 2, 2005 and January 1, 2004 54 54 Additional paid-in capital 25,592 25,592 Deferred stock compensation (371) (407) Retained deficit (728) (3,557) Accumulated other comprehensive loss (255) (260) Total shareholders' equity 24,292 21,422 $135,537 $135,110 NATIONAL VISION, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands except per share information) (Unaudited) Three Months Ended April 2, 2005 April 3, 2004 Cash flow from operating activities: Net income $2,829 $3,091 Adjustments to reconcile cash to net income: Depreciation and amortization 3,052 3,487 Gain on repurchase of Senior Subordinated Notes (6) Loss (gain) on disposal of equipment (56) 115 Deferred income taxes 1,693 Other 47 100 Changes in operating assets and liabilities: Accounts receivable (1,490) (885) Inventories 284 613 Other current assets 1,054 (53) Other assets (10) 6 Accounts payable 2,049 1,081 Accrued expenses and other current liabilities 81 (692) Other non-current liabilities (1) Net cash provided by operating activities 9,526 6,863 Cash flow from investing activities: Purchase of property and equipment (1,181) (861) Proceeds from sale of property and equipment 59 98 Net cash used by investing activities (1,122) (763) Cash flow from financing activities: Principal payments on subordinated debt (4,858) (545) Repurchases of subordinated debt (31) Deferred financing costs (8) (9) Net cash used by financing activities (4,897) (554) Net increase in cash 3,507 5,546 Cash, beginning of year 7,858 3,545 Cash, end of period $11,365 $9,091 Supplemental cash flow information Cash paid for: Interest $4,671 $5,772 Income taxes $49 $193 NATIONAL VISION, INC. COMPUTATION OF CONSOLIDATED EBITDA Three Month Periods Ended April 2, 2005 and April 3, 2004 (In thousands) Three Months Ended April 2, 2005 April 3, 2004 Net earnings $2,829 $3,091 Adjustment to net earnings: Interest expense 2,368 2,911 Income tax expense 1,853 185 Depreciation and amortization 3,052 3,487 Gain on repurchase of Notes (6) Other (29) (17) Adjusted EBITDA $10,067 $9,657 DATASOURCE: National Vision, Inc. CONTACT: Paul A. Criscillis, Jr., Senior Vice President and CFO of National Vision, Inc., +1-770-822-4262 Web site: http://www.nationalvision.com/

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