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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





Form 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 29, 2008.

OR



| ̈ | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 33 - 70572





EYE CARE CENTERS OF AMERICA, INC.

(Exact name of registrant as specified in
its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|TEXAS                                                          |  | 74-2337775                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification number)

11103 WEST AVENUE

SAN ANTONIO, TEXAS 78213

(Address of principal executive offices, including
zip code)

(210) 340-3531

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant
has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:    Yes   x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the
definitions of accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                             
|-------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈        
|Non-accelerated filer  x   |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes   ̈                                   
     No  x

Indicate the number of shares outstanding of each of the issuers
classes of common stock as of the latest practicable date:



|                             |  |                           
|---------------------------- |  | --------------------------
|Class                        |  | Outstanding at May 9, 2008
|Common Stock, $.01 par value |  | 10,000 shares             









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EYE CARE CENTERS OF AMERICA, INC.

TABLE OF CONTENTS

FORM 10-Q REPORT

MARCH 29, 2008

INDEX



|                               |  |                                                                                                                                                                 |  |      
|------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                               |  | PageNumber                                                                                                                                                     
|Part I - Financial Information |  |                                                                                                                                                                
|                               |  |                                                                                                                                                                
|Item 1.                        |  | Financial Statements                                                                                                                                            |  |      
|                               |  |                                                                                                                                                                
|                               |  | Condensed Consolidated Balance Sheets at December 29, 2007 (Unaudited) and March 29, 2008 (Unaudited)                                                           |  | 2    
|                               |  |                                                                                                                                                                
|                               |  | Condensed Consolidated Statements of Operations for the Thirteen Weeks Ended March 31, 2007 (Unaudited) and the Thirteen Weeks Ended March 29, 2008 (Unaudited) |  | 3    
|                               |  |                                                                                                                                                                
|                               |  | Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 31, 2007 (Unaudited) and the Thirteen Weeks Ended March 29, 2008 (Unaudited) |  | 4    
|                               |  |                                                                                                                                                                
|                               |  | Notes to Condensed Consolidated Financial Statements                                                                                                            |  | 5-13 
|                               |  |                                                                                                                                                                
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                           |  | 14-24
|                               |  |                                                                                                                                                                
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                      |  | 25   
|                               |  |                                                                                                                                                                
|Item 4.                        |  | Controls and Procedures                                                                                                                                         |  | 25   
|                               | 
|Part II - Other Information    |  |                                                                                                                                                                
|                               |  |                                                                                                                                                                
|Item 1.                        |  | Legal Proceedings                                                                                                                                               |  | 26   
|                               |  |                                                                                                                                                                
|Item 1A.                       |  | Risk Factors                                                                                                                                                    |  | 26   
|                               |  |                                                                                                                                                                
|Item 6.                        |  | Exhibits                                                                                                                                                        |  | 27   



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

EYE CARE CENTERS OF AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)



|                                        |  |                  |         |               |   |        
|--------------------------------------- |  | ---------------- | ------- | ------------- | - | -------
|                                        |  | December 29,2007 |         | March 29,2008
|                                        |  | (Unaudited)      |         | (Unaudited)  
|ASSETS                                  |  |                  |         |               |   |        
|CURRENT ASSETS:                         |  |                  |         |               |   |        
|Cash and cash equivalents               |  | $                | 5,637   |               | $ | 22,115 
|Accounts and notes receivable, net      |  |                  | 10,323  |               |   | 12,423 
|Inventory, net                          |  |                  | 32,933  |               |   | 32,473 
|Deferred income taxes, net              |  |                  | 1,606   |               |   | 1,606  
|Prepaid expenses and other              |  |                  | 9,089   |               |   | 8,369  
|                                        |  |                  |         |               |   |        
|Total current assets                    |  |                  | 59,588  |               |   | 76,986 
|                                        |  |                 
|PROPERTY & EQUIPMENT, net               |  |                  | 62,466  |               |   | 65,509 
|GOODWILL                                |  |                  | 523,377 |               |   | 523,377
|OTHER ASSETS                            |  |                  | 7,876   |               |   | 7,774  
|DEFERRED INCOME TAXES, net              |  |                  | 16,255  |               |   | 16,255 
|                                        |  |                  |         |               |   |        
|Total assets                            |  | $                | 669,562 |               | $ | 689,901
|                                        |  |                  |         |               |   |        
|LIABILITIES AND SHAREHOLDER'S EQUITY    |  |                  |         |               |   |        
|CURRENT LIABILITIES:                    |  |                  |         |               |   |        
|Accounts payable                        |  | $                | 21,142  |               | $ | 25,113 
|Current maturities of long-term debt    |  |                  | 2,255   |               |   | 2,310  
|Deferred revenue                        |  |                  | 3,655   |               |   | 3,890  
|Accrued taxes                           |  |                  | 10,496  |               |   | 19,329 
|Accrued payroll expense                 |  |                  | 10,847  |               |   | 7,828  
|Accrued interest                        |  |                  | 6,700   |               |   | 1,871  
|Other accrued expenses                  |  |                  | 6,126   |               |   | 6,564  
|                                        |  |                  |         |               |   |        
|Total current liabilities               |  |                  | 61,221  |               |   | 66,905 
|LONG TERM DEBT, less current maturities |  |                  | 255,950 |               |   | 255,407
|OTHER LONG-TERM LIABILITIES             |  |                  | 5,835   |               |   | 6,458  
|                                        |  |                  |         |               |   |        
|Total liabilities                       |  |                  | 323,006 |               |   | 328,770
|                                        |  |                  |         |               |   |        
|SHAREHOLDER'S EQUITY:                   |  |                  |         |               |   |        
|Common stock                            |  |                  |        |               |   |       
|Additional paid-in capital              |  |                  | 317,152 |               |   | 317,152
|Retained earnings                       |  |                  | 29,404  |               |   | 43,979 
|                                        |  |                  |         |               |   |        
|Total shareholder's equity              |  |                  | 346,556 |               |   | 361,131
|                                        |  |                  |         |               |   |        
|                                        |  | $                | 669,562 |               | $ | 689,901
|                                        |  |                  |         |               |   |        

See Notes to Consolidated Financial Statements



2



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EYE CARE CENTERS OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)



|                                             |  |                      |         |               |   |        
|-------------------------------------------- |  | -------------------- | ------- | ------------- | - | -------
|                                             |  | Thirteen Weeks Ended
|                                             |  | March 31,2007        |         | March 29,2008
|                                             |  | (Unaudited)          |         | (Unaudited)  
|NET REVENUES:                                |  |                      |         |               |   |        
|Optical sales                                |  | $                    | 131,621 |               | $ | 146,023
|Management fee                               |  |                      | 864     |               |   | 928    
|                                             |  |                      |         |               |   |        
|Total net revenues                           |  |                      | 132,485 |               |   | 146,951
|                                             |  |                     
|OPERATING COSTS AND EXPENSES:                |  |                      |         |               |   |        
|Cost of goods sold                           |  |                      | 41,259  |               |   | 47,601 
|Selling, general and administrative expenses |  |                      | 62,211  |               |   | 69,016 
|                                             |  |                      |         |               |   |        
|Total operating costs and expenses           |  |                      | 103,470 |               |   | 116,617
|                                             |  |                      |         |               |   |        
|INCOME FROM OPERATIONS                       |  |                      | 29,015  |               |   | 30,334 
|                                             |  |                     
|INTEREST EXPENSE, NET                        |  |                      | 6,726   |               |   | 5,418  
|                                             |  |                      |         |               |   |        
|INCOME BEFORE INCOME TAXES                   |  |                      | 22,289  |               |   | 24,916 
|                                             |  |                     
|INCOME TAX EXPENSE                           |  |                      | 8,926   |               |   | 10,341 
|                                             |  |                      |         |               |   |        
|NET INCOME                                   |  | $                    | 13,363  |               | $ | 14,575 
|                                             |  |                      |         |               |   |        

See Notes to Consolidated Financial Statements



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EYE CARE CENTERS OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)



|                                                                                  |  |                      |         |   |               |   |        |  
|--------------------------------------------------------------------------------- |  | -------------------- | ------- | - | ------------- | - | ------ | -
|                                                                                  |  | Thirteen Weeks Ended |        
|                                                                                  |  | March 31,2007        |         |   | March 29,2008 |  
|                                                                                  |  | (Unaudited)          |         |   | (Unaudited)   |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                      |         |   |               |   |        |  
|Net income                                                                        |  | $                    | 13,363  |   |               | $ | 14,575 |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                      |         |   |               |   |        |  
|Depreciation and amortization                                                     |  |                      | 4,413   |   |               |   | 4,573  |  
|Amortization of debt issue costs                                                  |  |                      | 58      |   |               |   | 81     |  
|Deferred liabilities and other                                                    |  |                      | 2,006   |   |               |   | 858    |  
|Increase in operating assets and liabilities                                      |  |                      | 498     |   |               |   | 4,578  |  
|                                                                                  |  |                      |         |   |               |   |        |  
|Net cash provided by operating activities                                         |  |                      | 20,338  |   |               |   | 25,101 |  
|                                                                                  |  |                      |         |   |               |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                      |         |   |               |   |        |  
|Acquisition of property and equipment, net                                        |  |                      | (5,437  | ) |               |   | (7,641 | )
|                                                                                  |  |                      |         |   |               |   |        |  
|Net cash used in investing activities                                             |  |                      | (5,437  | ) |               |   | (7,641 | )
|                                                                                  |  |                      |         |   |               |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                      |         |   |               |   |        |  
|Payments on debt and capital leases                                               |  |                      | (19,095 | ) |               |   | (546   | )
|                                                                                  |  |                      |         |   |               |   |        |  
|Net cash used in financing activities                                             |  |                      | (19,095 | ) |               |   | (546   | )
|                                                                                  |  |                      |         |   |               |   |        |  
|NET INCREASE (DECREASE) IN CASH                                                   |  |                      | (4,194  | ) |               |   | 16,478 |  
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                      | 13,860  |   |               |   | 5,637  |  
|                                                                                  |  |                      |         |   |               |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                    | 9,666   |   |               | $ | 22,115 |  
|                                                                                  |  |                      |         |   |               |   |        |  

See Notes to Consolidated Financial Statements



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EYE CARE CENTERS OF AMERICA, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS

1. Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements of Eye Care Centers of America, Inc. which is referred to as the
Company, we, our and us herein, include all of our accounts, our wholly owned subsidiaries accounts and certain private optometrists accounts for whom we perform management services (the
ODs). All significant intercompany accounts and transactions have been eliminated in consolidation. The fiscal year end balance sheet data was derived from audited financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of America.

The accompanying condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The information reflects all normal and recurring adjustments which in the opinion of the Companys
management are necessary for a fair presentation of the financial position of the Company and its results of operations for the interim periods set forth herein.

Operating results for the thirteen weeks ended March 29, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ended January 3, 2009 (fiscal 2008). For
further information, refer to the consolidated financial statements and footnotes thereto included in the Eye Care Centers of America, Inc.s annual report on Form 10-K for the year ended December 29, 2007 (fiscal 2007).

2. Critical Accounting Policies

Critical accounting policies are those that require us to make assumptions that are difficult or complex about matters that are uncertain and may change in subsequent periods, resulting in changes to reported results.

The majority of our accounting policies do not require us to make difficult, subjective or complex judgments or estimates or the variability of the
estimates is not material. However, the following policies could be deemed critical. We have discussed these critical accounting policies with the audit committee of the Board of Directors.



| |  |  | Accounts receivable are primarily from third party payors related to the sale of eyewear and include receivables from insurance reimbursements, optometrist
management fees, credit card companies, merchandise, rent and license fee receivables. Our allowance for doubtful accounts requires significant estimation and primarily consists of amounts owed to us by third party insurance payors. This estimate is
based on the historical ratio of collections to billings. Our allowance for doubtful accounts was $2.2 million at December 29, 2007 and March 29, 2008, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inventory consists principally of eyeglass frames, ophthalmic lenses and contact lenses and is stated at the lower of cost or market. Cost is determined using the
weighted average method which approximates the first-in, first-out (FIFO) method. Our inventory reserves require
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | significant estimation and are based on product with low turnover or deemed by us to be unsaleable. Our inventory reserve was $2.1 million at
December 29, 2007 and March 29, 2008, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Goodwill represents approximately 76% of our assets and consists of the amount by which the purchase price exceeds the market value of acquired net assets. Goodwill
must be tested for impairment at least annually using a two-step approach that involves the identification of reporting units and the estimation of fair values. This fair value estimation requires significant judgment by us.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Valuation allowances for deferred tax assets reduce deferred tax assets when it is deemed more likely than not that some portion or all of the deferred tax assets
will expire before realization of the benefit or that future deductibility is not probable due to taxable losses. Although realization is not assured due to historical taxable income and the probability of future taxable income, we believe it is
more likely than not that all of the deferred tax asset will be realized.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We maintain our own self-insurance group health plan. The plan provides medical benefits for participating employees. We have an employers stop loss insurance
policy to cover individual claims in excess of $200,000 per employee. The amount charged to health insurance expense is based on estimates obtained from an actuarial firm. We believe the accrued liability of approximately $1.0 million, which is
included in other accrued expenses as of December 29, 2007 and March 29, 2008, respectively, is adequate to cover future benefit payments for claims that occurred prior to the period end.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Related Party Transactions

Highmark.On August 1, 2006, ECCA Holdings Corporation was merged with a wholly-owned subsidiary of HVHC Inc. (HVHC), a subsidiary of Highmark Inc. (Highmark), with ECCA Holdings being the surviving corporation and becoming a
wholly-owned subsidiary of HVHC (the Highmark Acquisition). Eye Care Centers of America, Inc. is owned by ECCA Holdings and as a result of the merger became an indirect wholly-owned subsidiary of Highmark. In June 2007, we began
contracting our employees health insurance through Highmark. We paid Highmark and its affiliates $1.0 million for management fees, $2.5 million for insurance claims and $0.2 million for administrative and other expenses during the thirteen
weeks ended March 29, 2008.

We are wholly-owned by HVHC. HVHC also owns Davis Vision, Inc. (Davis), a national vision
managed care and optical retail company, and Viva Optique, Inc. (Viva), an international designer and distributor of eyewear and sunwear. During the thirteen weeks ended March 31, 2007, we recorded revenue of $4.2 million related to
managed care reimbursements due from Davis and had a $0.4 million receivable related to these revenues at March 31, 2007. During the thirteen weeks ended March 29, 2008, we recorded revenue of $4.9 million related to managed care
reimbursements due from Davis and have a $1.8 million receivable related to these revenues at March 29, 2008. We purchased $2.3 million and $2.7 million in frame product from Viva during the thirteen weeks ended March 31, 2007 and
March 29, 2008, respectively. We recorded cost of goods sold related to products purchased from Viva that were sold to our customers of $0.9 million and $2.8 million during the thirteen weeks ended March 31, 2007 and
March 29, 2008, respectively.



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4. Income Taxes

We record income taxes under SFAS No. 109 using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense increased to $10.3 million for the thirteen weeks ended March 29, 2008 from $8.9
million for the thirteen weeks ended March 31, 2007. This increase is mainly due to the increase in income before taxes in fiscal 2008.

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on our expected annual income, statutory tax rates and tax planning opportunities available to us in the various
jurisdictions in which we operate. This includes recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns to the extent pervasive
evidence exists that they will be realized in future periods. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which are expected to be in effect in the years in which the
temporary differences are expected to reverse. In accordance with our income tax policy, significant or unusual items are separately recognized in the quarter in which they occur.

The Company adopted the provisions of FIN 48 on December 31, 2006. At March 29, 2008, the Company had approximately $3.2 million of gross
liabilities related to unrecognized tax benefits (composed of $2.3 million of gross unrecognized tax benefits and accrued interest and penalties of $0.9 million) which would affect our effective tax rate if recognized. The Company does not expect
that there will be any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months. A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (in thousands):



|                                                              |  |   |       |  
|------------------------------------------------------------- |  | - | ----- | -
|Balance at December 29, 2007                                  |  | $ | 2,793 |  
|Additions based on tax provisions related to the prior year   |  |   | 375   |  
|Additions based on tax provisions related to the current year |  |   | 187   |  
|Additions based on tax provisions related to the prior year   |  |   | (174  | )
|Balance at March 29, 2008                                     |  | $ | 3,181 |  
|                                                              |  |   |       |  

An IRS audit of the fifty-nine day period ended March 1, 2005 was completed in fiscal 2006
with no material impact on income taxes. With the exception of this audit, the tax years 2003 through 2006 remain open to examination by the Internal Revenue Service. Additionally, the Company operates in multiple taxing jurisdictions and is subject
to various state income tax examinations for the 2003 through 2007 calendar tax years. The Company is not currently under any state or federal income tax examinations.

5.Supplemental Disclosure of Cash Flow Information (dollars in thousands)



|                       |  |                      |        |               |   |       
|---------------------- |  | -------------------- | ------ | ------------- | - | ------
|                       |  | Thirteen Weeks Ended
|                       |  | March 31,2007        |        | March 29,2008
|                       |  | (Unaudited)          |        | (Unaudited)  
|Cash paid for interest |  | $                    | 11,600 |               | $ | 10,024
|Cash paid for taxes    |  | $                    | 203    |               | $ | 847   



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6. Accounting Standards and Disclosures

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. For financial assets and liabilities, this statement is effective for fiscal
periods beginning after November 15, 2007 and does not require any new fair value measurements. In February 2008, the FASB Staff Position No. 157-1 and No. 157-2 were issued which delayed the effective date of FASB Statement
No. 157 to fiscal years ending after November 15, 2008 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Our
adoption of SFAS No. 157 as of December 30, 2007 did not have a material effect on the consolidated financial statements.

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  including an amendment of FASB Statement No. 115. This statement permits entities to choose to
measure many financial instruments and certain other items at fair value. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, including interim periods within that fiscal year. The
Company did not elect the fair value option for any of its existing financial instruments as of March 31, 2008 and the Company has not determined whether or not it will elect this option for financial instruments it may acquire in the future.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan
amendment of ARB No. 51 (SFAS 160). SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be
identified in the consolidated financial statements. It also requires consistency in the manner of reporting changes in the parents ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a
deconsolidation. The Company will apply the provisions of this statement prospectively, as required, beginning on January 1, 2009 and does not expect the adoption of SFAS 160 to have a material effect on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
No. 141(R)). SFAS No. 141(R) retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. In general, the statement 1) broadens the guidance of SFAS No. 141, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the
use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increases required
disclosures. The Company will apply the provisions of this statement prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No. 133 (SFAS No. 161). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 with the intent to provide users of financial statements with an enhanced understanding of: 1) How
and why an entity uses derivative instruments; 2) How derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and 3) How derivative instruments and related hedged items affect an
entitys financial position, financial performance and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The
Company is currently assessing the impact SFAS No. 161 would have on the Companys consolidated financial statements, if the Company were to adopt it.



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7. Condensed Consolidating Information

On February 4, 2005, we issued $152.0 million aggregate principal amount of our 10 3/4% Senior Subordinated Notes (the Initial Notes) due 2015. The Company filed a registration statement with the
Securities and Exchange Commission with respect to an offer to exchange the Initial Notes for notes which have terms substantially identical in all material respects to the Initial Notes, except such notes are freely transferable by the holders
thereof and are issued without any covenant regarding registration (the Notes). The registration statement was declared effective on September 26, 2005. The exchange period ended October 31, 2005. The Notes are the only notes
of the Company which are currently outstanding.

The Notes were issued by us and are guaranteed by all of our subsidiaries (the
Guarantor Subsidiaries) but are not guaranteed by the ODs. The subsidiaries are wholly owned by us and the guarantees are full, unconditional and joint and several.

Presented on the following pages are condensed consolidating financial statements for the Company (the issuer of the Notes), the subsidiary guarantors
and the non-guarantor subsidiaries as of and for the thirteen weeks ended March 29, 2008. The equity method has been used with respect to the Companys investments in its subsidiaries.

As of March 29, 2008, the guarantor subsidiaries include Enclave Advancement Group, Inc., ECCA Managed Vision Care, Inc., Visionworks, Inc.
Visionary Retail Management, Inc., Visionary Properties, Inc., Vision World, Inc., Stein Optical, Inc., Eye DRx Retail Management, Inc., Visionary Lab Services, Ltd., EyeMasters of Texas, Ltd., EyeMasters, Inc., ECCA Management Services, Ltd., ECCA
Distribution Services, Ltd., ECCA Enterprises, Inc., ECCA Management Investments, Inc., ECCA Management, Inc., EyeMasters of Texas Investments, Inc., EyeMasters of Texas Management, Inc., ECCA Distribution Investments, Inc., ECCA Distribution
Management, Inc., Visionary Lab Investments, Inc., Visionary Lab Management, Inc., Dr. Mark Lynn & Associates, PLLC, Visionworks Holdings, Inc., Metropolitan Vision Services, Inc., Hour Eyes, Inc., Eye Care Holdings, Inc.

The following condensed consolidating financial information presents (i) our financial position, results of operations and cash flows, as parent,
as if we accounted for our subsidiaries using the equity method, (ii) the Guarantor Subsidiaries, and (iii) ODs. There were no transactions between the subsidiaries during any of the periods presented. Separate financial statements of the
subsidiaries are not presented herein as we do not believe that such statements would be material to investors.



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Condensed Consolidating Balance Sheet

December 29, 2007

(in thousands)



|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|--------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | -------- | - |  | - | -------
|                                              |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany
|ASSETS                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Current assets:                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Cash and cash equivalents                     |  | $      | (53     | ) |                       | $ | 5,211   |     |  | $ | 479          |   |  | $                   |         |   |  | $ | 5,637  
|Accounts and notes receivable                 |  |        | 130,634 |   |                       |   | 8,299   |     |  |   | 2,437        |   |  |                     | (131,047 | ) |  |   | 10,323 
|Inventory                                     |  |        |        |   |                       |   | 31,053  |     |  |   | 1,880        |   |  |                     |         |   |  |   | 32,933 
|Deferred income taxes, net                    |  |        | 1,606   |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 1,606  
|Prepaid expenses and other                    |  |        | (190    | ) |                       |   | 9,231   |     |  |   | 48           |   |  |                     |         |   |  |   | 9,089  
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current assets                          |  |        | 131,997 |   |                       |   | 53,794  |     |  |   | 4,844        |   |  |                     | (131,047 | ) |  |   | 59,588 
|                                              |  |        |         |   |                      
|Property and equipment                        |  |        |        |   |                       |   | 62,466  |     |  |   |             |   |  |                     |         |   |  |   | 62,466 
|Goodwill                                      |  |        | 416,095 |   |                       |   | 107,195 |     |  |   | 87           |   |  |                     |         |   |  |   | 523,377
|Other assets                                  |  |        | 7,544   |   |                       |   | 329     |     |  |   | 3            |   |  |                     |         |   |  |   | 7,876  
|Deferred income taxes, net                    |  |        | 16,255  |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 16,255 
|Investment in subsidiaries                    |  |        | 96,085  |   |                       |   |        |     |  |   |             |   |  |                     | (96,085  | ) |  |   |       
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total Assets                                  |  | $      | 667,976 |   |                       | $ | 223,784 |     |  | $ | 4,934        |   |  | $                   | (227,132 | ) |  | $ | 669,562
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Current liabilities:                          |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Accounts payable                              |  | $      | 43,412  |   |                       | $ | 106,817 |     |  | $ | 1,960        |   |  | $                   | (131,047 | ) |  | $ | 21,142 
|Current portion of long-term debt             |  |        | 1,650   |   |                       |   | 605     |     |  |   |             |   |  |                     |         |   |  |   | 2,255  
|Deferred revenue                              |  |        |        |   |                       |   | 2,567   |     |  |   | 1,088        |   |  |                     |         |   |  |   | 3,655  
|Accrued payroll expense                       |  |        |        |   |                       |   | 9,898   |     |  |   | 949          |   |  |                     |         |   |  |   | 10,847 
|Accrued taxes                                 |  |        | 11,248  |   |                       |   | (1,791  | )   |  |   | 1,039        |   |  |                     |         |   |  |   | 10,496 
|Accrued interest                              |  |        | 6,700   |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 6,700  
|Other accrued expenses                        |  |        | 361     |   |                       |   | 5,453   |     |  |   | 312          |   |  |                     |         |   |  |   | 6,126  
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current liabilities                     |  |        | 63,371  |   |                       |   | 123,549 |     |  |   | 5,348        |   |  |                     | (131,047 | ) |  |   | 61,221 
|Long-term debt, less current maturities       |  |        | 255,588 |   |                       |   | 362     |     |  |   |             |   |  |                     |         |   |  |   | 255,950
|Other long-term liabilities                   |  |        | 2,461   |   |                       |   | 3,340   |     |  |   | 34           |   |  |                     |         |   |  |   | 5,835  
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total liabilities                             |  |        | 321,420 |   |                       |   | 127,251 |     |  |   | 5,382        |   |  |                     | (131,047 | ) |  |   | 323,006
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Shareholders equity (deficit):                |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Common stock                                  |  |        |        |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   |       
|Additional paid-in capital                    |  |        | 317,152 |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 317,152
|Accumulated equity (deficit)                  |  |        | 29,404  |   |                       |   | 96,533  |     |  |   | (448         | ) |  |                     | (96,085  | ) |  |   | 29,404 
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total shareholders equity (deficit)           |  |        | 346,556 |   |                       |   | 96,533  |     |  |   | (448         | ) |  |                     | (96,085  | ) |  |   | 346,556
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|                                              |  | $      | 667,976 |   |                       | $ | 223,784 |     |  | $ | 4,934        |   |  | $                   | (227,132 | ) |  | $ | 669,562
|                                              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        



10



---

##### Table of Contents

Condensed Consolidating Statement of Operations

For the Thirteen Weeks Ended March 31, 2007

(in thousands)



|                                             |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|-------------------------------------------- |  | ------ | ------ | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | ------- | - |  | - | -------
|                                             |  | Parent |        | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany
|Revenues:                                    |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|Optical sales                                |  | $      |       |                       | $ | 103,088 |     |  | $ | 28,533       |   |  | $                   |        |   |  | $ | 131,621
|Management fees                              |  |        |       |                       |   | 15,957  |     |  |   |             |   |  |                     | (15,093 | ) |  |   | 864    
|Equity earnings in subsidiaries              |  |        | 29,704 |                       |   |        |     |  |   |             |   |  |                     | (29,704 | ) |  |   |       
|                                             |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|Total net revenues                           |  |        | 29,704 |                       |   | 119,045 |     |  |   | 28,533       |   |  |                     | (44,797 | ) |  |   | 132,485
|Operating costs and expenses:                |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|Cost of goods sold                           |  |        |       |                       |   | 30,936  |     |  |   | 10,323       |   |  |                     |        |   |  |   | 41,259 
|Selling, general and administrative expenses |  |        | 514    |                       |   | 53,953  |     |  |   | 22,837       |   |  |                     | (15,093 | ) |  |   | 62,211 
|                                             |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|Total operating costs and expenses           |  |        | 514    |                       |   | 84,889  |     |  |   | 33,160       |   |  |                     | (15,093 | ) |  |   | 103,470
|                                             |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|Income from operations                       |  |        | 29,190 |                       |   | 34,156  |     |  |   | (4,627       | ) |  |                     | (29,704 | ) |  |   | 29,015 
|Interest expense, net                        |  |        | 6,901  |                       |   | (175    | )   |  |   |             |   |  |                     |        |   |  |   | 6,726  
|Income tax expense                           |  |        | 8,926  |                       |   | (934    | )   |  |   | 934          |   |  |                     |        |   |  |   | 8,926  
|                                             |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        
|Net income                                   |  | $      | 13,363 |                       | $ | 35,265  |     |  | $ | (5,561       | ) |  | $                   | (29,704 | ) |  | $ | 13,363 
|                                             |  |        |        |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        

Condensed Consolidating Statements of Cash Flows

For the Thirteen Weeks Ended March 31, 2007

(in thousands)



|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | ------- | - |  | - | ------- | -
|                                                        |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany |        
|Cash flows from operating activities:                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net income                                              |  | $      | 13,363  |   |                       | $ | 35,265  |     |  | $ | (5,561       | ) |  | $                   | (29,704 | ) |  | $ | 13,363  |  
|Adjustments to reconcile net income to net              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash provided by (used in) operating activities:        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Depreciation and amortization                           |  |        | 204     |   |                       |   | 4,209   |     |  |   |             |   |  |                     |        |   |  |   | 4,413   |  
|Amortization of debt issue costs                        |  |        | 58      |   |                       |   |        |     |  |   |             |   |  |                     |        |   |  |   | 58      |  
|Deferred liabilities and other                          |  |        |        |   |                       |   | 1,570   |     |  |   | 436          |   |  |                     |        |   |  |   | 2,006   |  
|Equity earnings in subsidiaries                         |  |        | (29,704 | ) |                       |   |        |     |  |   |             |   |  |                     | 29,704  |   |  |   |        |  
|Increase/(decrease) in operating assets and liabilities |  |        | 34,908  |   |                       |   | (39,219 | )   |  |   | 4,809        |   |  |                     |        |   |  |   | 498     |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net cash provided by (used in) operating activities     |  |        | 18,829  |   |                       |   | 1,825   |     |  |   | (316         | ) |  |                     |        |   |  |   | 20,338  |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash flows from investing activities:                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Acquisition of property and equipment                   |  |        |        |   |                       |   | (5,437  | )   |  |   |             |   |  |                     |        |   |  |   | (5,437  | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net cash used in investing activities                   |  |        |        |   |                       |   | (5,437  | )   |  |   |             |   |  |                     |        |   |  |   | (5,437  | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash flows from financing activities:                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Payments on debt and capital leases                     |  |        | (19,001 | ) |                       |   | (94     | )   |  |   |             |   |  |                     |        |   |  |   | (19,095 | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net cash used in financing activities                   |  |        | (19,001 | ) |                       |   | (94     | )   |  |   |             |   |  |                     |        |   |  |   | (19,095 | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net decrease in cash and cash equivalents               |  |        | (172    | ) |                       |   | (3,706  | )   |  |   | (316         | ) |  |                     |        |   |  |   | (4,194  | )
|Cash and cash equivalents at beginning of period        |  |        | 279     |   |                       |   | 12,994  |     |  |   | 587          |   |  |                     |        |   |  |   | 13,860  |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash and cash equivalents at end of period              |  | $      | 107     |   |                       | $ | 9,288   |     |  | $ | 271          |   |  | $                   |        |   |  | $ | 9,666   |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  



11



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##### Table of Contents

Condensed Consolidating Balance Sheet

March 29, 2008

(in thousands)



|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|--------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | -------- | - |  | - | -------
|                                        |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany
|ASSETS                                  |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Current assets:                         |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Cash and cash equivalents               |  | $      | (71     | ) |                       | $ | 21,886  |     |  | $ | 300          |   |  | $                   |         |   |  | $ | 22,115 
|Accounts and notes receivable           |  |        | 118,921 |   |                       |   | 12,892  |     |  |   | 2,876        |   |  |                     | (122,266 | ) |  |   | 12,423 
|Inventory                               |  |        |        |   |                       |   | 30,645  |     |  |   | 1,828        |   |  |                     |          |   |  |   | 32,473 
|Deferred income taxes                   |  |        | 1,606   |   |                       |   |        |     |  |   |             |   |  |                     |          |   |  |   | 1,606  
|Prepaid expenses and other              |  |        | (313    | ) |                       |   | 8,635   |     |  |   | 47           |   |  |                     |          |   |  |   | 8,369  
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current assets                    |  |        | 120,143 |   |                       |   | 74,058  |     |  |   | 5,051        |   |  |                     | (122,266 | ) |  |   | 76,986 
|                                        |  |        |         |   |                      
|Property and equipment                  |  |        |        |   |                       |   | 65,509  |     |  |   |             |   |  |                     |          |   |  |   | 65,509 
|Goodwill                                |  |        | 416,095 |   |                       |   | 107,195 |     |  |   | 87           |   |  |                     |          |   |  |   | 523,377
|Other assets                            |  |        | 7,445   |   |                       |   | 331     |     |  |   | (2           | ) |  |                     |          |   |  |   | 7,774  
|Deferred income taxes                   |  |        | 16,255  |   |                       |   |        |     |  |   |             |   |  |                     |          |   |  |   | 16,255 
|Investment in subsidiaries              |  |        | 127,884 |   |                       |   |        |     |  |   |             |   |  |                     | (127,884 | ) |  |   |       
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total assets                            |  | $      | 687,822 |   |                       | $ | 247,093 |     |  | $ | 5,136        |   |  | $                   | (250,150 | ) |  | $ | 689,901
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY     |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Current liabilities:                    |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Accounts payable                        |  | $      | 43,652  |   |                       | $ | 101,526 |     |  | $ | 2,201        |   |  | $                   | (122,266 | ) |  | $ | 25,113 
|Current portion of long-term debt       |  |        | 1,650   |   |                       |   | 660     |     |  |   |             |   |  |                     |         |   |  |   | 2,310  
|Deferred revenue                        |  |        |        |   |                       |   | 2,735   |     |  |   | 1,155        |   |  |                     |         |   |  |   | 3,890  
|Accrued taxes                           |  |        | 21,585  |   |                       |   | (2,851  | )   |  |   | 595          |   |  |                     |         |   |  |   | 19,329 
|Accrued payroll expense                 |  |        |        |   |                       |   | 6,876   |     |  |   | 952          |   |  |                     |         |   |  |   | 7,828  
|Accrued interest                        |  |        | 1,865   |   |                       |   | 6       |     |  |   |             |   |  |                     |         |   |  |   | 1,871  
|Other accrued expenses                  |  |        | 245     |   |                       |   | 5,997   |     |  |   | 322          |   |  |                     |         |   |  |   | 6,564  
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current liabilities               |  |        | 68,997  |   |                       |   | 114,949 |     |  |   | 5,225        |   |  |                     | (122,266 | ) |  |   | 66,905 
|Long-term debt, less current maturities |  |        | 255,233 |   |                       |   | 174     |     |  |   |             |   |  |                     |         |   |  |   | 255,407
|Other long-term liabilities             |  |        | 2,461   |   |                       |   | 3,959   |     |  |   | 38           |   |  |                     |         |   |  |   | 6,458  
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total liabilities                       |  |        | 326,691 |   |                       |   | 119,082 |     |  |   | 5,263        |   |  |                     | (122,266 | ) |  |   | 328,770
|Shareholders equity                     |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Common stock                            |  |        |        |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   |       
|Additional paid-in capital              |  |        | 317,152 |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 317,152
|Retained earnings                       |  |        | 43,979  |   |                       |   | 128,011 |     |  |   | (127         | ) |  |                     | (127,884 | ) |  |   | 43,979 
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total shareholders equity               |  |        | 361,131 |   |                       |   | 128,011 |     |  |   | (127         | ) |  |                     | (127,884 | ) |  |   | 361,131
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|                                        |  | $      | 687,822 |   |                       | $ | 247,093 |     |  | $ | 5,136        |   |  | $                   | (250,150 | ) |  | $ | 689,901
|                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        



12



---

##### Table of Contents

Condensed Consolidating Statement of Operations

For the Thirteen Weeks Ended March 29, 2008

(in thousands)



|                                             |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|-------------------------------------------- |  | ------ | ------ | --------------------- | - | ------- | --- |  | ------------ | ------ |  | ------------------- | ------- | - |  | - | -------
|                                             |  | Parent |        | GuarantorSubsidiaries |   |         | ODs |  | Eliminations |        |  | ConsolidatedCompany
|Revenues:                                    |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|Optical sales                                |  | $      |       |                       | $ | 115,985 |     |  | $            | 30,038 |  |                     |         |   |  | $ | 146,023
|Management fees                              |  |        |       |                       |   | 11,433  |     |  |              |        |  |                     | (10,505 | ) |  |   | 928    
|Equity earnings in subsidiaries              |  |        | 31,799 |                       |   |         |     |  |              |        |  |                     | (31,799 | ) |  |   |       
|                                             |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|Total net revenues                           |  |        | 31,799 |                       |   | 127,418 |     |  |              | 30,038 |  |                     | (42,304 | ) |  |   | 146,951
|Operating costs and expenses:                |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|Cost of goods sold                           |  |        |       |                       |   | 36,840  |     |  |              | 10,761 |  |                     |         |   |  |   | 47,601 
|Selling, general and administrative expenses |  |        | 1,434  |                       |   | 59,131  |     |  |              | 18,956 |  |                     | (10,505 | ) |  |   | 69,016 
|                                             |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|Total operating costs and expenses           |  |        | 1,434  |                       |   | 95,971  |     |  |              | 29,717 |  |                     | (10,505 | ) |  |   | 116,617
|                                             |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|Income from operations                       |  |        | 30,365 |                       |   | 31,447  |     |  |              | 321    |  |                     | (31,799 | ) |  |   | 30,334 
|Interest expense, net                        |  |        | 5,449  |                       |   | (31     | )   |  |              |       |  |                     |        |   |  |   | 5,418  
|Income tax expense                           |  |        | 10,341 |                       |   |        |     |  |              |       |  |                     |        |   |  |   | 10,341 
|                                             |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        
|Net income                                   |  | $      | 14,575 |                       | $ | 31,478  |     |  | $            | 321    |  | $                   | (31,799 | ) |  | $ | 14,575 
|                                             |  |        |        |                       |   |         |     |  |              |        |  |                     |         |   |  |   |        

Condensed Consolidating Statements of Cash Flows

For the Thirteen Weeks Ended March 29, 2008

(in thousands)



|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | ------- | - |  | - | ------ | -
|                                                        |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany |        
|Cash flows from operating activities:                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|                                                        |  |        |         |   |                      
|Net income                                              |  | $      | 14,575  |   |                       | $ | 31,478  |     |  | $ | 321          |   |  | $                   | (31,799 | ) |  | $ | 14,575 |  
|Adjustments to reconcile net income to net              |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Cash provided by (used in) operating activities:        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Depreciation and amortization                           |  |        | 77      |   |                       |   | 4,496   |     |  |   |             |   |  |                     |        |   |  |   | 4,573  |  
|Amortization of debt issue costs                        |  |        | 81      |   |                       |   |        |     |  |   |             |   |  |                     |        |   |  |   | 81     |  
|Deferred liabilities and other                          |  |        |        |   |                       |   | 787     |     |  |   | 71           |   |  |                     |        |   |  |   | 858    |  
|Equity earnings in subsidiaries                         |  |        | (31,799 | ) |                       |   |        |     |  |   |             |   |  |                     | 31,799  |   |  |   |       |  
|Increase/(decrease) in operating assets and liabilities |  |        | 17,461  |   |                       |   | (12,312 | )   |  |   | (571         | ) |  |                     |         |   |  |   | 4,578  |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Net cash provided by (used in) operating activities     |  |        | 395     |   |                       |   | 24,449  |     |  |   | (179         | ) |  |                     |        |   |  |   | 24,665 |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Cash flows from investing activities:                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Acquisition of property and equipment                   |  |        |        |   |                       |   | (7,641  | )   |  |   |             |   |  |                     |        |   |  |   | (7,641 | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Net cash used in investing activities                   |  |        |        |   |                       |   | 7,641   |     |  |   |             |   |  |                     |        |   |  |   | 7,641  |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Cash flows from financing activities:                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Payments on debt and capital leases                     |  |        | (413    | ) |                       |   | (133    | )   |  |   |             |   |  |                     |        |   |  |   | (546   | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Net cash used in financing activities                   |  |        | (413    | ) |                       |   | (133    | )   |  |   |             |   |  |                     |        |   |  |   | (546   | )
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Net decrease in cash and cash equivalents               |  |        | (18     | ) |                       |   | 16,675  |     |  |   | (179         | ) |  |                     |        |   |  |   | 16,478 |  
|Cash and cash equivalents at beginning of period        |  |        | (53     | ) |                       |   | 5,211   |     |  |   | 479          |   |  |                     |        |   |  |   | 5,637  |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  
|Cash and cash equivalents at end of period              |  | $      | (71     | ) |                       | $ | 21,886  |     |  | $ | 300          |   |  | $                   |        |   |  | $ | 22,115 |  
|                                                        |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |        |  



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements

Certain statements contained herein constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this
report regarding our financial position, business strategy, budgets and plans and objectives of management for future operations are forward-looking statements. These forward-looking statements may relate to, among other things, our future
performance generally, business development activities, strategy, projected synergies, future capital expenditures, financing sources and availability and the effects of regulation and competition. When used in this report, the words
expect, anticipate, intend, plan, believe, seek, estimate, may, will or should or, in each case, their negative and similar
expressions are generally intended to identify forward-looking statements although not all forward-looking statements contain such identifying words.

You should not place undue reliance on these forward-looking statements, which reflect our managements view and various assumptions only as of the date of this report. Because these forward-looking statements
involve risks and uncertainties, many of which are beyond our control, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our assumptions,
plans, objectives, expectations and intentions with respect to the following:



| |  |  | our competitive environment;
| | - |  | ----------------------------



| |  |  | the cost and effect of legal, tax or regulatory proceedings;
| | - |  | ------------------------------------------------------------



| |  |  | changes in general economic conditions;
| | - |  | ---------------------------------------



| |  |  | changes to our regulatory environment;
| | - |  | --------------------------------------



| |  |  | our ability to maintain our relationships with optometrists;
| | - |  | ------------------------------------------------------------



| |  |  | franchise claims by optometrists;
| | - |  | ---------------------------------



| |  |  | our ability to build and maintain managed vision care plans;
| | - |  | ------------------------------------------------------------



| |  |  | reduction of third-party reimbursement;
| | - |  | ---------------------------------------



| |  |  | technological advances in vision care;
| | - |  | --------------------------------------



| |  |  | conflicts of interest between our controlling shareholder and noteholders;
| | - |  | --------------------------------------------------------------------------



| |  |  | failure to realize anticipated cost savings;
| | - |  | --------------------------------------------



| |  |  | exposure to liability claims if we are unable to obtain adequate insurance;
| | - |  | ---------------------------------------------------------------------------



| |  |  | changes in general industry and market conditions and growth rates;
| | - |  | -------------------------------------------------------------------



| |  |  | loss of key management personnel;
| | - |  | ---------------------------------



| |  |  | changes in accounting policies applicable to our business;
| | - |  | ----------------------------------------------------------



| |  |  | the impact of unusual items resulting from the implementation of new business strategies, acquisitions and divestitures or future restructuring activities;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our substantial indebtedness;
| | - |  | -----------------------------



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##### Table of Contents

| |  |  | restrictions imposed on our business by the terms of our indebtedness;
| | - |  | ----------------------------------------------------------------------



| |  |  | our ability to fund our capital requirements;
| | - |  | ---------------------------------------------



| |  |  | long-term impact of laser surgery on the optical industry;
| | - |  | ----------------------------------------------------------



| |  |  | our ability to open new stores and the financial impact derived from those openings; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | our ability to implement and maintain our merchandising and marketing business strategy.
| | - |  | ----------------------------------------------------------------------------------------

In light of these risks, uncertainties and assumptions, the forward-looking statements and events discussed in this report might not occur. You should
assume the information appearing in this report is accurate only as of the date on the front cover of this report, as our business, financial condition, results of operations and prospects may have changed since that date. Unless required by law, we
undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Some of these risks, uncertainties, assumptions and other factors can be found in our filings with the Securities and Exchange Commission, including the factors discussed under Item 1A. Risk Factors in our Annual Report on Form
10-K for the year ended December 29, 2007 (2007 Form 10-K) and any updated thereto in our Forms 10-Q.

Introduction

The following MD&A section is intended to help the reader better understand our results of operations and financial condition.
This section is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to thereto contained elsewhere in this report and our MD&A section, financial
statements and accompanying notes to financial statements in our 2007 Form 10-K.

We are the third largest operator of optical retail
stores in the United States as measured by revenue. We currently operate 413 stores in 36 states, including 346 directly-owned stores and 67 stores owned by an optometrists professional entity (an OD PC), which we manage under
long-term management agreements. Our consolidated financial information includes the results of our 346 directly-owned stores, as well as the results of 54 of the 67 stores operated by an OD PC. The remaining 13 stores operated by an OD PC are not
consolidated and we recognize as management fee revenue only the cash flows we earn pursuant to the terms of management agreements for those 13 OD PC-operated stores.

Our net revenues are comprised of optical sales, net of discounts and promotions, from our 400 consolidated stores as well as management fees from the 13 stores owned by OD PCs that are not consolidated in our
results. Optical sales include sales of frames, lenses (including lens treatments), contact lenses and eyeglass warranties at all of our 400 consolidated stores, as well as the professional fees of the optometrists at 213 of the stores. These 213
stores include 116 stores where the optometrist is our employee or an independent contractor, the 54 stores operated by an OD PC that are consolidated in our results and the 43 stores with independent optometrists for whom we provide management
services. The management fees from the 13 unconsolidated OD PC-operated stores are based on the performance of the stores.

Our operating
costs and expenses are comprised of costs of goods sold and selling, general and administrative expenses. Cost of goods sold primarily includes the cost of eyeglass frames, ophthalmic lenses, contact lenses, lab manufacturing costs and buying,
warehousing, distribution, shipping and delivery costs and doctor payroll. Selling, general and administrative expenses primarily include retail



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payroll, occupancy, overhead, advertising and depreciation. Occupancy, overhead and depreciation are less variable relative to sales levels than other
components of selling, general and administrative expenses.

In this managements discussion and analysis we use the terms gross
profit, gross margin, comparable store sales, comparable transaction volume and average ticket price to compare our period-over-period performance. Gross profit is defined as optical sales less
cost of goods sold in a period. Gross margin is defined as gross profit as a percentage of optical sales in a period. Comparable store sales is calculated by comparing net revenues for a period to net revenues of the equivalent prior period for all
stores open at least twelve months during such prior period. Comparable transaction volume is based on the number of comparable store sales in a period. Average ticket price is calculated by dividing comparable net revenues by comparable transaction
volume in a period.

We believe that the key driver of our performance is our ability to grow revenue without increasing costs at the same
rate by (i) increasing comparable transaction volume by offering value and convenience, (ii) actively managing our store base in targeted markets and (iii) pursuing fee-for-service funded managed vision care relationships. Our
performance is also affected by general economic conditions and consumer confidence.

We primarily grow optical sales by offering value and
convenience to our customers. Since fiscal 2001, we have focused on our value strategy, which includes a promotion of two complete pairs of single vision eyewear for $99. We believe our value strategy results in increased comparable transaction
volume and also believe it encourages customers to purchase higher margin lenses, lens treatments and accessories, which increases average ticket price.

We also grow optical sales and leverage costs through selective store base expansion by opening new stores in targeted markets. Until a new store matures, its operating costs as a percentage of optical sales are
generally higher than that of an established store. Accordingly, the expense related to opening new stores adversely affects our results in that period. Over the longer term, opening a new store in an existing market allows us to leverage existing
advertising, field management and overhead to mitigate margin pressure. When entering a new market, we seek to achieve sufficient market penetration to generate brand awareness and economies of scale in advertising, field management and overhead.
Consistent with our strategic objectives, we believe the opportunity exists to open approximately 25 new stores in fiscal 2008 in existing and new markets. We also manage costs by closing stores that do not meet our performance expectations. Store
openings and store closures affect period over period comparisons.

We have made a strategic decision to pursue fee-for-service funded
managed vision care plans. Fee-for-service funded managed vision care plans consist of insurance relationships where we receive set fees for services provided to participants of a plan as opposed to capitated funded managed vision care plans where
we receive a set fee per plan participant to provide any and all services requested by participants of such plan. Under a fee-for-service funded managed vision care plan we benefit from participants utilization of the plan, whereas under a
capitated funded managed vision care plan we bear risk related to the level at which participants utilize such plan. Substantially all of our current funded managed vision care plans are fee-for-service funded managed vision care plans. Our managed
vision care plans also include discount managed vision care plans where participants receive a set discount on eye care products. We believe that participation in managed vision care plans will continue to benefit us and other large optical retail
chains with strong local market shares, broad geographic coverage and sophisticated management information and billing systems. We expect that optical revenues derived from managed vision care plans will continue to account for approximately 30% of
our net revenues, but that the percentage attributable to fee-for-service funded managed vision care plans will increase as revenues from discount managed vision care plans decline. While the average ticket price on products purchased



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under managed vision care plans is typically slightly lower than a non-managed vision care sale, managed vision care plan transactions generally earn
comparable operating profit margins as they require less promotional spending and advertising support. We believe that the increased volume resulting from managed vision care plans also compensates for the lower average ticket price.



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##### Table of Contents

Results of Operations

The following table sets forth the percentage relationship to net revenues of certain income statement data. The period-to-period comparison of financial results is not necessarily indicative of future results.



|                                             |  |                      |   |  |               |  
|-------------------------------------------- |  | -------------------- | - |  | ------------- | -
|                                             |  | Thirteen Weeks Ended |  
|                                             |  | March 31,2007        |   |  | March 29,2008 |  
|Statement of Income Data:                    |  |                      |   |  |               |  
|NET REVENUES:                                |  |                      |   |  |               |  
|Optical sales                                |  | 99.3                 | % |  | 99.4          | %
|Management fee                               |  | 0.7                  |   |  | 0.6           |  
|                                             |  |                      |   |  |               |  
|Total net revenues                           |  | 100.0                |   |  | 100.0         |  
|                                             |  |                     
|OPERATING COSTS AND EXPENSES:                |  |                      |   |  |               |  
|Cost of goods sold                           |  | 31.3                 | * |  | 32.6          | *
|Selling, general and administrative expenses |  | 47.3                 | * |  | 47.3          | *
|Total operating costs and expenses           |  | 78.1                 |   |  | 79.4          |  
|                                             |  |                      |   |  |               |  
|INCOME FROM OPERATIONS                       |  | 21.9                 |   |  | 20.6          |  
|                                             |  |                     
|INTEREST EXPENSE, NET                        |  | 5.1                  |   |  | 3.7           |  
|                                             |  |                     
|INCOME TAX EXPENSE                           |  | 6.7                  |   |  | 7.0           |  
|                                             |  |                      |   |  |               |  
|NET INCOME                                   |  | 10.1                 | % |  | 9.9           | %
|                                             |  |                      |   |  |               |  



|* | Percentages based on optical sales only
|- | ---------------------------------------

The Thirteen Weeks
Ended March 29, 2008 Compared to the Thirteen Weeks Ended March 31, 2007.

Net Revenues.Net revenues increased to $147.0 million for
the thirteen weeks ended March 29, 2008 from $132.5 million for the thirteen weeks ended March 31, 2007. The increase in revenues compared to the first quarter of fiscal 2007 was primarily driven by a 5.8% increase in comparable store
sales and new store openings. Net revenues attributable to new stores in the first quarter of fiscal 2008 were $0.2 million. Comparable transactions increased by 4.2% and average ticket price increased by 1.6% compared to the first quarter of fiscal
2007. The increase in transactions was driven by the continued increase in the sale of premium lenses, strong acceptance of our value offering and the addition of a second value offering related to multifocal lenses. Total managed vision care sales
increased by 13.1%, or $5.3 million, compared to the first quarter of fiscal 2007. We opened eight new stores in the first quarter of fiscal 2008.

Gross Profit.Gross profit increased to $98.4 million for the thirteen weeks ended March 29, 2008 from $90.4 million for the thirteen weeks ended March 31, 2007. Gross profit as a percentage of optical sales decreased to
67.4% for the thirteen weeks ended March 29, 2008 from 68.7% for the thirteen weeks



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##### Table of Contents

ended March 31, 2007. The decrease in gross profit as a percentage of optical sales was largely the result of the increase in the sale of lower margin
specialty lenses and the increase in lab expenditures related to the increased transaction volumes of specialty lenses. These increased expenses were partially offset by the continued increase in the sales mix of high margin private label and value
frames.

Selling General & Administrative Expenses (SG&A).SG&A increased to $69.0 million for the thirteen weeks ended
March 29, 2008 from $62.2 million for the thirteen weeks ended March 31, 2007. SG&A, as a percentage of optical sales, remained constant at 47.3% for the thirteen weeks ended March 29, 2008 and March 31, 2007. Amounts spent
on certain components such as advertising, occupancy and depreciation remained relatively stable while optical sales increased. The leveraging of advertising, occupancy and depreciation expenses was partially offset by increases in retail payroll.

Net Interest Expense.Net interest expense decreased to $5.4 million for the thirteen weeks ended March 29, 2008 from $6.7 million for the
thirteen weeks ended March 31, 2007. This decrease was primarily due to lower outstanding debt balances as compared to the first quarter of fiscal 2007.

Income Tax Expense.Income tax expense increased from $8.9 million for the thirteen weeks ended March 31, 2007 to $10.3 million for the thirteen weeks ended March 29, 2008 primarily due to the $2.6 million increase in
income before taxes. Our effective tax rate was 41.5% for the thirteen weeks ended March 29, 2008 from 40.0% for the thirteen weeks ended March 31, 2007.

Net Income.Net income increased to $14.6 million for the thirteen weeks ended March 29, 2008 compared to $13.4 million for the thirteen weeks ended March 31, 2007.

Liquidity and Capital Resources

Our capital
requirements are driven principally by our obligations to service debt and to fund the following costs:



| |  |  | Construction of new stores;
| | - |  | ---------------------------



| |  |  | Repositioning of existing stores;
| | - |  | ---------------------------------



| |  |  | Purchasing inventory and equipment; and
| | - |  | ---------------------------------------



| |  |  | Leasehold improvements.
| | - |  | -----------------------

The amount
of capital available to us will affect our ability to service our debt obligations and to continue to grow our business through expanding the number of stores and increasing comparable store sales.

Sources of Capital

Our short-term and
long-term liquidity needs arise primarily from: (i) interest payments primarily related to our Credit Facility (as defined below) and the Notes; (ii) capital expenditures, including those for opening new stores; and (iii) working
capital requirements as may be needed to support our business. We intend to fund our operations, interest expense, capital expenditures and working capital requirements principally from cash from operations. We are a holding company with no direct
operations. Our principal assets are the equity interests we hold in our subsidiaries. As a result, we are dependent upon dividends and other payments from our subsidiaries to generate the cash necessary to fund our operations, interest expense,
capital expenditures and working capital requirements. There are currently no restrictions on the ability of our subsidiaries to transfer funds to us.



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Cash flows from operating activities provided net cash of $25.1 million for the thirteen weeks ended
March 29, 2008 and $20.3 million for the thirteen weeks ended March 31, 2007. Our other sources of working capital are cash on hand and funding from the revolving portion of our Credit Facility. As of March 29, 2008, we had $22.1
million of cash available to meet our obligations. We had $25.0 million of borrowings available under the $25.0 million revolving portion of our Credit Facility, excluding $2.6 million letters of credit outstanding.

Payments on debt and issuance of debt and equity transactions related to the Highmark Acquisition and merger have been our principal financing
activities. Cash flows used in financing activities were $0.5 million for the thirteen weeks ended March 29, 2008 and were solely related to the payment of debt. Cash flows used in financing activities were $0.5 million for the thirteen weeks
ended March 29, 2008 and $19.1 million for the thirteen weeks ended March 31, 2007, respectively, and related solely to the payment of debt.

Our working capital primarily consists of cash and cash equivalents, accounts receivable, inventory, accounts payable and accrued expenses and was $10.1 million as of March 29, 2008. Our working capital was a
deficit of $1.7 million as of December 29, 2007.

Capital expenditures were $7.6 million for the thirteen weeks ended March 29,
2008 compared to $5.4 million for the thirteen weeks ended March 31, 2007. Capital expenditures for all of 2008 are projected to be approximately $21.8 million. Of the planned 2008 capital expenditures, approximately $12.6 million is related to
commitments for new stores and approximately $9.2 million is expected to be for improvement of existing facilities and systems.

Based upon
current operations, we believe that our cash flows from operations, together with borrowings that are available under the $25.0 million revolving portion of our Credit Facility, will be adequate to meet our anticipated requirements for working
capital, capital expenditures and scheduled principal and interest payments through the next twelve months. Our ability to satisfy our financial covenants under our Credit Facility, meet our debt service obligations and reduce our debt will be
dependent on our future performance, which in turn, will be subject to general economic conditions and to financial, business, and other factors, including factors beyond our control. We believe that our ability to repay amounts outstanding under
our Credit Facility and the Notes at maturity will likely require additional financing, which may not be available to us in the future on acceptable terms, if at all. A portion of our debt bears interest at floating rates; therefore, our financial
condition is and will continue to be affected by changes in prevailing interest rates.

Long-Term Debt

Credit Facility

In March 2005, the Company
entered into a credit agreement which provided for $165.0 million in term loans (the Term Loan Facility) and $25.0 million in revolving credit facilities (the Revolver and together with the Term Loan Facility, the
Credit Facility). The borrowings under the Credit Facility together with the net proceeds from the offering of the Initial Notes (defined herein) and the equity investment of Moulin Global Eyecare Holdings Limited and Golden Gate Capital
were used to pay a cash portion of the purchase price for the equity interests held by Thomas L. Lee Partners in us and sold to ECCA Holdings Corporation in March 2005, to repay debt outstanding under a previous credit facility, to retire old notes,
pay the related tender premium and accrued interest and to pay the related transaction fees and expenses. The remainder of the Credit Facility is available to finance working capital requirements and general corporate purposes.



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##### Table of Contents

On December 21, 2006, we obtained an amendment and consent to our Credit Agreement (the 2006
Amendment). The 2006 Amendment primarily reduced the interest rate on the credit agreement as well as changed several covenants. A prepayment of $25.0 million in principal was made in conjunction with the lenders approval and a
prepayment of $9.0 million in principal was made in conjunction with the filing of the 2006 10-K in March, 2007, as required under the 2006 Amendment. Additional voluntary prepayments of $20.0 million were made throughout fiscal 2007.

Amortization payments. Prior to the maturity date, funds borrowed under the Revolver may be borrowed, repaid and re-borrowed, without premium or
penalty. The Term Loan Facility began amortizing in the third quarter of fiscal 2005 and continues through the date of maturity in fiscal 2012 according to the following schedule:



|     |  |                     |       
|---- |  | ------------------- | ------
|Year |  | Amount(in millions)
|2008 |  |                     | 1.24  
|2009 |  |                     | 1.65  
|2010 |  |                     | 1.65  
|2011 |  |                     | 1.65  
|2012 |  |                     | 100.27
|     |  |                     |       
|     |  | $                   | 106.46
|     |  |                     |       

Interest.Our borrowings under the Credit Facility bear interest at a
floating rate, which can either be, at our option, a base rate or a Eurodollar rate, in each case plus an applicable margin. The base rate is defined as the higher of (i) the JPMorgan Chase Bank prime rate or (ii) the federal funds
effective rate, plus one half percent (0.5%) per annum. The Eurodollar rate is defined as the rate for Eurodollar deposits for a period of one, two, three, six, nine or twelve months (as selected by us). The applicable margins are:



|                   |  |                  |   |  |                   |  
|------------------ |  | ---------------- | - |  | ----------------- | -
|Facility           |  | Base Rate Margin |   |  | Eurodollar Margin |  
|Term Loan Facility |  | 1.50             | % |  | 2.50              | %
|Revolver           |  | 1.75             | % |  | 2.75              | %

The applicable margin for borrowings under our Revolver will be determined pursuant to a pricing
grid based on the attainment of certain leverage ratios. The applicable margins for borrowings under the Term Loan Facility are not subject to adjustment.

In addition to paying interest on outstanding principal under the Credit Facility, we are required to pay a commitment fee to the lenders under the Revolver in respect of the unutilized commitments thereunder. We will
also pay customary letter of credit fees.

Security and guarantees. The Credit Facility is secured by a valid first-priority
perfected lien or pledge on (i) 100% of the capital stock of each of our present and future direct and indirect domestic subsidiaries, (ii) 65% of the capital stock of each of our future first-tier foreign subsidiaries, (iii) 100% of
the capital stock of Eye Care Centers of America, Inc. and (iv) substantially all our present and future property and assets and those of each guarantor, subject to certain exceptions. Our obligations under the Credit Facility are guaranteed by
each of our existing and future direct and indirect domestic subsidiaries and ECCA Holdings.



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Covenants. The Credit Facility documentation contains customary affirmative and negative covenants
and financial covenants. During the term of the Credit Facility, the negative covenants restrict our ability to do certain things, including but not limited to:



| |  |  | incur additional indebtedness, including guarantees;
| | - |  | ----------------------------------------------------



| |  |  | create, incur, assume or permit to exist liens on property and assets;
| | - |  | ----------------------------------------------------------------------



| |  |  | make loans and investments and enter into acquisitions and joint ventures;
| | - |  | --------------------------------------------------------------------------



| |  |  | engage in sales, transfers and other dispositions of our property or assets;
| | - |  | ----------------------------------------------------------------------------



| |  |  | prepay, redeem or repurchase our debt (including the Notes), or amend or modify the terms of certain material debt (including the Notes) or certain other
agreements;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | declare or pay dividends to, make distributions to, or make redemptions and repurchases from, equity holders; and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | agree to restrictions on the ability of our subsidiaries to pay dividends and make distributions.
| | - |  | -------------------------------------------------------------------------------------------------

The following financial covenants are included:



| |  |  | maximum consolidated leverage ratio;
| | - |  | ------------------------------------



| |  |  | maximum capital expenditures; and
| | - |  | ---------------------------------



| |  |  | minimum rent-adjusted interest coverage ratio.
| | - |  | ----------------------------------------------

As of March 29, 2008 we were in compliance with all of our financial covenants.

Mandatory
prepayment. Our mandatory prepayment for fiscal 2006 was waived by the 2006 Amendment which required a $25 million prepayment at the time of the 2006 Amendment, as well as a $9.0 million prepayment in March 2007. We made a voluntary prepayment
of $10.0 million in March 2007. Beginning with fiscal 2007, we are required to make a mandatory annual prepayment of the Term Loan Facility in an amount equal to 75% of excess cash flows as defined in the Credit Facility, which percentage we expect
to be reduced upon our achieving certain consolidated leverage ratios. Due to our voluntary prepayments during fiscal 2007, no excess cash flow prepayment was necessary. In addition, we are required to make a mandatory prepayment of the Term Loan
Facility with:



| |  |  | 100% of the net cash proceeds of any property or asset sale or casualty, subject to certain exceptions and reinvestment rights;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | 100% of the net cash proceeds of certain debt issuances, subject to certain exceptions; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | 50% of the net cash proceeds from the issuance of additional equity interests, subject to certain exceptions.
| | - |  | -------------------------------------------------------------------------------------------------------------

Mandatory prepayments will be applied to the Term Loan Facility, first to the scheduled installments of the Term Loan Facility occurring within the next
12 months in direct order of maturity, and second, ratably to the remaining installments of the Term Loan Facility. We may voluntarily repay outstanding loans under the Credit Facility at any time without premium or penalty, other than customary
breakage costs (as defined in the Term Loan Facility Agreement) with respect to Eurodollar loans.

Notes

On February 4, 2005, we issued $152.0 million aggregate principal amount of our 10 3/4% Senior Subordinated Notes (the Initial Notes) due
2015. The Company filed a registration statement with the Securities and Exchange Commission with respect to an offer to exchange the Initial Notes for



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notes which have terms substantially identical in all material respects to the Initial Notes, except such notes are freely transferable by the holders
thereof and are issued without any covenant regarding registration (the Notes). The registration statement was declared effective on September 26, 2005. The exchange period ended October 31, 2005. The Notes are the only notes
of the Company which are currently outstanding.

The Notes:



| |  |  | are general unsecured, senior subordinated obligations of the Company;
| | - |  | ----------------------------------------------------------------------



| |  |  | are limited to an aggregate principal amount of $152.0 million, subject to our ability to issue additional notes;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | mature on February 15, 2015;
| | - |  | ----------------------------



| |  |  | are represented by one or more registered notes in global form, but in certain circumstances may be represented by notes in definitive form ;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | are subordinated in right of payment to all existing and future Senior Indebtedness of the Company, including the Credit Facility;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | rank equally in right of payment to any future Senior Subordinated Indebtedness of the Company;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | are unconditionally guaranteed on a senior subordinated basis by each existing Subsidiary of the Company and any future Restricted Subsidiary of the Company that is
not a Foreign Subsidiary;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | are effectively subordinated to any future Indebtedness and other liabilities of Subsidiaries of the Company that are not guaranteeing the notes;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | may default in the event there is a failure to make an interest or principal payment under the Credit Facility.
| | - |  | ---------------------------------------------------------------------------------------------------------------

Interest.Interest on the Notes compounds semi-annually and:



| |  |  | accrues at the rate of 10.75% per annum;
| | - |  | ----------------------------------------



| |  |  | accrues from the date of original issuance or, if interest has already been paid, from the most recent interest payment date;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | is payable in cash semi-annually in arrears on February 15 and August 15, commencing on August 15, 2005;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | is payable to the holders of record on the February 1 and August 1 immediately preceding the related interest payment dates; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | is computed on the basis of a 360-day year comprised of twelve 30-day months.
| | - |  | -----------------------------------------------------------------------------

Optional redemption.At any time prior to February 15, 2010, the Company may redeem all or part of the Notes upon not less than
30 nor more than 60 days prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) the Applicable Premium as of the date of redemption, plus (iii) accrued and unpaid interest on
the notes, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

On and after February 15, 2010, the Company may redeem all or, from time to time, a part of the Notes upon not less than 30 nor more than 60
days notice, at the following redemption prices (expressed as a percentage of principal amount) plus accrued and unpaid interest on the Notes, if any, to the applicable redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on February 15 of the years indicated below:



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|                    |  |                  |  
|------------------- |  | ---------------- | -
|YEAR                |  | REDEMPTION PRICE |  
|2010                |  | 105.375          | %
|2011                |  | 103.583          | %
|2012                |  | 101.792          | %
|2013 and thereafter |  | 100.000          | %

Covenants. The Notes contain customary affirmative and negative covenants including but not
limited to:



| |  |  | payment of securities
| | - |  | ---------------------



| |  |  | limitation on indebtedness;
| | - |  | ---------------------------



| |  |  | limitation on restricted payments;
| | - |  | ----------------------------------



| |  |  | limitation on liens;
| | - |  | --------------------



| |  |  | initial and future subsidiary guarantors; and
| | - |  | ---------------------------------------------



| |  |  | change of control.
| | - |  | ------------------

In connection
with the borrowings made under the Initial Notes, we incurred approximately $10.3 million in debt issuance costs. In conjunction with the Highmark Acquisition, the unamortized amount of debt issuance costs was included in goodwill and thus is no
longer being amortized.

Off-balance sheet arrangements.As of March 29, 2008 our only off-balance sheet
arrangements were letters of credit, in the amount of $2.6 million, issued under our credit facility primarily to insurance companies.

Future Capital Resources.Based upon current operations, anticipated cost savings and future growth, we believe that our cash flow from operations, together with borrowings currently available under the Revolver, are
adequate to meet our anticipated requirements for working capital, capital expenditures and scheduled principal and interest payments through the next twelve (12) months. Our ability to satisfy our financial covenants under the Credit Facility
to meet our debt service obligations and to reduce our debt will depend on our future performance, which in turn, will be subject to general economic conditions and to financial, business, and other factors, including factors beyond our control. In
the event we do not satisfy our financial covenants set forth in the Credit Facility, we may attempt to renegotiate the terms of the Credit Facility with our lenders for further amendments to, or waivers of, the financial covenants of the Credit
Facility. We believe that our ability to repay the Credit Facility at maturity will likely require additional financing. We cannot assume that additional financing will be available to us. A portion of our debt bears interest at floating rates;
therefore, our financial condition is and will continue to be affected by changes in prevailing interest rates.

Seasonality and Quarterly Results

Our sales fluctuate seasonally. Historically, our highest sales and earnings occur in the first and third fiscal quarters; however, the
opening of new stores may affect seasonal fluctuations. Hence, quarterly results are not necessarily indicative of results for the entire year.



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|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We are exposed to various market risks. Market risk is the potential risk of loss arising from adverse changes in market prices and rates. We do not enter into derivative or other financial instruments for trading or speculative purposes.
There have been no material changes in our market risk during the first quarter of fiscal 2008. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year
ended December 29, 2007 (2007 Form 10-K).

Our primary market risk exposure is interest rate risk. As of March 29,
2008, approximately $106.5 million of our long-term debt bore interest at variable rates. Accordingly, our net income is affected by changes in interest rates. For every one hundred basis point change in the average interest rate under our $106.5
million in long-term borrowings, our annual interest expense would change by approximately $1.1 million.

In the event of an adverse change
in interest rates, we could take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such actions.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Our Chief Executive
Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this report. Based upon such evaluation, such officers have concluded that our disclosure controls and procedures are effective as of the end of such period.

There has been no change in our internal controls over financial reporting that occurred during the thirteen weeks ended March 29, 2008 that has materially affected, or is reasonably likely to materially affect,
our internal controls over financial reporting.



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PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

We are a party to routine
litigation in the ordinary course of our business. There have been no such pending matters, individually or in the aggregate that we believe to be material to our business or our financial condition that have arisen during the first quarter of
fiscal 2008. For further discussion, refer to our 2007 Form 10-K.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

In addition to the other information
set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors in our 2007 Form 10-K, filed with the Securities and Exchange Commission on March 28, 2008. The risks described in
our 2007 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
In our judgment, there were not material changes in the risk factors as previously disclosed in Part I, Item 1A. Risk Factors of our 2007 Form 10-K.



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|Item 6. | Exhibits
|------- | --------



|(a) | The following documents are filed as part of this report.
|--- | ---------------------------------------------------------



|     |  |                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Amendment No. 1 to the Professional Business Management Agreement dated July 2, 2006 by and between EyeMasters, Inc., a Delaware corporation and Mark Lynn O.D. & Associates, P.C., a
Georgia Professional corporation.
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                    
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                    
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.                                                                     
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.                                                                     



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|                                  |  |                                                     
|--------------------------------- |  | ----------------------------------------------------
|EYE CARE CENTERS OF AMERICA, INC.
|                                 
|Date: May 9, 2008                
|                                  | 
|by:                               |  | /s/ Jennifer L. Kelley                              
|                                  |  | Jennifer L. Kelley                                  
|                                  |  | Executive Vice President and Chief Financial Officer