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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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Form 10-Q



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(Mark One)

|x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended April 1, 2006.

OR



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 33 - 70572



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EYE CARE CENTERS OF AMERICA, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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)



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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. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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 12, 2006
|Common Stock, $.01 par value |  | 10,000 shares              



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##### Table of Contents

EYE CARE CENTERS OF AMERICA, INC.

INDEX



|                                                                                              |  |                                                                                                                                                                                                                                |  |            
|--------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------
|                                                                                              |  |                                                                                                                                                                                                                                |  | Page Number
|Part I - Financial Information                                                                |  |                                                                                                                                                                                                                               
|                                                                                              | 
|Item 1.
Financial Statements                                                                  |  |                                                                                                                                                                                                                               
|                                                                                              |  |                                                                                                                                                                                                                               
|                                                                                              |  | Condensed Consolidated Balance Sheets at December 31, 2005 and April 1, 2006 (Unaudited)                                                                                                                                       |  | 2          
|                                                                                              |  |                                                                                                                                                                                                                               
|                                                                                              |  | Condensed Consolidated Statements of Income for the Fifty-Nine Day Period Ended March 1, 2005 (Unaudited) the Thirty-Two Day Period Ended April 2, 2005 (Unaudited) and the Thirteen weeks ended April 1, 2006
(Unaudited)     |  | 3          
|                                                                                              |  |                                                                                                                                                                                                                               
|                                                                                              |  | Condensed Consolidated Statements of Cash Flows for the Fifty-Nine Day Period Ended March 1, 2005 (Unaudited) the Thirty-Two Day Period Ended April 2, 2005 (Unaudited) and the Thirteen weeks ended April 1, 2006
(Unaudited) |  | 4          
|                                                                                              |  |                                                                                                                                                                                                                               
|                                                                                              |  | Notes to Condensed Consolidated Financial Statements                                                                                                                                                                           |  | 5-14       
|                                                                                              | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15-26                                                                                                                                                                                                                         
|                                                                                              | 
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                            |  | 26                                                                                                                                                                                                                            
|                                                                                              | 
|Item 4.
Controls and Procedures                                                               |  | 26                                                                                                                                                                                                                            
|                                                                                              | 
|Part II - Other Information                                                                   |  |                                                                                                                                                                                                                               
|                                                                                              | 
|Item 1.
Legal Proceedings                                                                     |  | 27                                                                                                                                                                                                                            
|                                                                                              | 
|Item 5.
Other Information                                                                     |  | 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 31,2005 |         | April 1, 2006
|                                        |  |                  |         | (Unaudited)  
|ASSETS                                  |  |                  |         |               |   |        
|CURRENT ASSETS:                         |  |                  |         |               |   |        
|Cash and cash equivalents               |  | $                | 17,782  |               | $ | 33,433 
|Accounts and notes receivable, net      |  |                  | 10,444  |               |   | 10,392 
|Inventory, net                          |  |                  | 30,642  |               |   | 30,430 
|Deferred income taxes, net              |  |                  | 116     |               |   | 116    
|Prepaid expenses and other              |  |                  | 10,158  |               |   | 8,847  
|                                        |  |                  |         |               |   |        
|Total current assets                    |  |                  | 69,142  |               |   | 83,218 
|                                        |  |                 
|PROPERTY & EQUIPMENT, net               |  |                  | 50,525  |               |   | 50,604 
|GOODWILL                                |  |                  | 368,500 |               |   | 368,131
|OTHER ASSETS                            |  |                  | 25,424  |               |   | 24,503 
|DEFERRED INCOME TAXES, net              |  |                  | 16,271  |               |   | 13,218 
|                                        |  |                  |         |               |   |        
|Total assets                            |  | $                | 529,862 |               | $ | 539,674
|                                        |  |                  |         |               |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY    |  |                  |         |               |   |        
|CURRENT LIABILITIES:                    |  |                  |         |               |   |        
|Accounts payable                        |  | $                | 19,635  |               | $ | 23,601 
|Current maturities of long-term debt    |  |                  | 1,654   |               |   | 1,681  
|Deferred revenue                        |  |                  | 3,900   |               |   | 3,846  
|Accrued payroll expense                 |  |                  | 8,605   |               |   | 6,894  
|Accrued interest                        |  |                  | 7,934   |               |   | 3,209  
|Other accrued expenses                  |  |                  | 9,786   |               |   | 12,461 
|                                        |  |                  |         |               |   |        
|Total current liabilities               |  |                  | 51,514  |               |   | 51,692 
|LONG TERM DEBT, less current maturities |  |                  | 314,243 |               |   | 313,351
|DEFERRED RENT                           |  |                  | 1,698   |               |   | 2,390  
|                                        |  |                  |         |               |   |        
|Total liabilities                       |  |                  | 367,455 |               |   | 367,433
|                                        |  |                  |         |               |   |        
|SHAREHOLDERS EQUITY:                   |  |                  |         |               |   |        
|Common stock                            |  |                  |        |               |   |       
|Additional paid-in capital              |  |                  | 158,447 |               |   | 158,447
|Retained earnings                       |  |                  | 3,960   |               |   | 13,794 
|                                        |  |                  |         |               |   |        
|Total shareholders equity              |  |                  | 162,407 |               |   | 172,241
|                                        |  |                  |         |               |   |        
|                                        |  | $                | 529,862 |               | $ | 539,674
|                                        |  |                  |         |               |   |        

See Notes to Consolidated Financial Statements



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EYE CARE CENTERS OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands)

The purchase method of accounting
was used to record assets and liabilities assumed by the Company. Such accounting generally results in increased depreciation recorded in future periods. Accordingly, the accompanying financial statements of the Predecessor and the Company are not
comparable in all material respects since those financial statements report financial position, results of operations and cash flows of these two separate entities. See Note 2.



|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|-------------------------------------------------- |  | -------------------------------------- | ------ | - | -------------------------------------- | - | -------------------------------- |  | - | -------
|                                                   |  | Predecessor                            |        |   | Company                               
|                                                   |  | Fifty-NineDay
PeriodEndedMarch 1, 2005 |        |   | Thirty-TwoDay
PeriodEndedApril 2, 2005 |   | ThirteenWeeks EndedApril 1, 2006
|                                                   |  | (Unaudited)                            |        |   | (Unaudited)                            |   | (Unaudited)                     
|NET REVENUES:                                      |  |                                        |        |   |                                        |   |                                  |  |   |        
|Optical sales                                      |  | $                                      | 74,839 |   |                                        | $ | 38,511                           |  | $ | 120,622
|Management fee                                     |  |                                        | 560    |   |                                        |   | 333                              |  |   | 975    
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|Total net revenues                                 |  |                                        | 75,399 |   |                                        |   | 38,844                           |  |   | 121,597
|OPERATING COSTS AND EXPENSES:                      |  |                                        |        |   |                                        |   |                                  |  |   |        
|Cost of goods sold                                 |  |                                        | 22,648 |   |                                        |   | 11,095                           |  |   | 32,195 
|Selling, general and administrative expenses       |  |                                        | 42,226 |   |                                        |   | 19,842                           |  |   | 65,229 
|Transaction expenses                               |  |                                        | 15,642 |   |                                        |   |                                 |  |   |       
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|Total operating costs and expenses                 |  |                                        | 80,516 |   |                                        |   | 30,937                           |  |   | 97,424 
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|INCOME (LOSS) FROM OPERATIONS                      |  |                                        | (5,117 | ) |                                        |   | 7,907                            |  |   | 24,173 
|                                                   |  |                                        |       
|INTEREST EXPENSE, NET                              |  |                                        | 3,433  |   |                                        |   | 2,777                            |  |   | 8,051  
|                                                   |  |                                        |       
|INCOME TAX EXPENSE (BENEFIT)                       |  |                                        | (1,676 | ) |                                        |   | 2,052                            |  |   | 6,268  
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|NET INCOME (LOSS)                                  |  |                                        | (6,874 | ) |                                        |   | 3,078                            |  |   | 9,854  
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|LESS PREFERRED STOCK DIVIDENDS                     |  |                                        | 1,493  |   |                                        |   |                                 |  |   |       
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        
|NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS |  | $                                      | (8,367 | ) |                                        | $ | 3,078                            |  | $ | 9,854  
|                                                   |  |                                        |        |   |                                        |   |                                  |  |   |        

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)

The purchase method of accounting
was used to record assets and liabilities assumed by the Company. Such accounting generally results in increased depreciation recorded in future periods. Accordingly, the accompanying financial statements of the Predecessor and the Company are not
comparable in all material respects since those financial statements report financial position, results of operations and cash flows of these two separate entities. See Note 2.



|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|---------------------------------------------------------------------------------------- |  | -------------------------------------- | -------- | - | -------------------------------------- | - | ------ | -------------------------------- |  | - | ------ | -
|                                                                                         |  | Predecessor                            |          |   | Company                                |  
|                                                                                         |  | Fifty-NineDay
PeriodEndedMarch 1, 2005 |          |   | Thirty-TwoDay
PeriodEndedApril 2, 2005 |   |        | ThirteenWeeks EndedApril 1, 2006 | 
|                                                                                         |  | (Unaudited)                            |          |   | (Unaudited)                            |   |        | (Unaudited)                      | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Net income (loss)                                                                        |  | $                                      | (6,874   | ) |                                        | $ | 3,078  |                                  |  | $ | 9,854  |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Depreciation and amortization                                                            |  |                                        | 2,683    |   |                                        |   | 1,099  |                                  |  |   | 4,130  |  
|Amortization of debt issue costs                                                         |  |                                        | 309      |   |                                        |   | 206    |                                  |  |   | 631    |  
|Deferred liabilities and other                                                           |  |                                        | (1,713   | ) |                                        |   | 1,703  |                                  |  |   | 4,072  |  
|Deferred financing costs write-off                                                       |  |                                        | 3,534    |   |                                        |   |       |                                  |  |   |       |  
|Increase in operating assets and liabilities                                             |  |                                        | 3,771    |   |                                        |   | 6,675  |                                  |  |   | 2,128  |  
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Net cash provided by operating activities                                                |  |                                        | 1,710    |   |                                        |   | 12,761 |                                  |  |   | 20,815 |  
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Acquisition of property and equipment, net                                               |  |                                        | (1,850   | ) |                                        |   | (234   | )                                |  |   | (4,221 | )
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Net cash used in investing activities                                                    |  |                                        | (1,850   | ) |                                        |   | (234   | )                                |  |   | (4,221 | )
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Payments on debt and capital leases                                                      |  |                                        | (213,872 | ) |                                        |   | (26    | )                                |  |   | (923   | )
|Dividend to parent                                                                       |  |                                        |         |   |                                        |   |       |                                  |  |   | (20    | )
|Payments for refinancing fees                                                            |  |                                        | (16,925  | ) |                                        |   | (465   | )                                |  |   |       |  
|Proceeds from issuance of debt                                                           |  |                                        | 314,713  |   |                                        |   |       |                                  |  |   |       |  
|Retirement of treasury stock                                                             |  |                                        | 1,668    |   |                                        |   |       |                                  |  |   |       |  
|Retirement of preferred stock                                                            |  |                                        | (72,318  | ) |                                        |   |       |                                  |  |   |       |  
|Common stock buyback                                                                     |  |                                        | (168,116 | ) |                                        |   |       |                                  |  |   |       |  
|Common stock sale, net                                                                   |  |                                        | 158,521  |   |                                        |   |       |                                  |  |   |       |  
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|Net cash provided by (used in) in financing activities                                   |  |                                        | 3,671    |   |                                        |   | (491   | )                                |  |   | (943   | )
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|NET INCREASE IN CASH                                                                     |  |                                        | 3,531    |   |                                        |   | 12,036 |                                  |  |   | 15,651 |  
|CASH AND CASH EQUIVALENTS, beginning of period                                           |  |                                        | 3,098    |   |                                        |   | 6,629  |                                  |  |   | 17,782 |  
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                                 |  | $                                      | 6,629    |   |                                        | $ | 18,665 |                                  |  | $ | 33,433 |  
|                                                                                         |  |                                        |          |   |                                        |   |        |                                  |  |   |        |  

See Notes to Consolidated Financial Statements



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EYE CARE CENTERS OF AMERICA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The Condensed
Consolidated Financial Statements of Eye Care Centers of America, Inc. which is referred to as the Company, we, our and us 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 accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Condensed Consolidated Balance Sheet for the year ended December 31, 2005 was derived from the audited financial statements as of that
date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. We believe that all adjustments considered necessary for a fair presentation have been included
and are of a normal, recurring nature. Operating results for the thirteen week period ended April 1, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ended December 30, 2006 (fiscal
2006). 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 31, 2005 (fiscal
2005).

2. Merger Agreement

On December 2, 2004, we entered into a definitive merger agreement pursuant to which Thomas H. Lee Partners agreed to sell all of its equity interests in us to ECCA Holdings Corporation (ECCA Holdings), a company controlled
by Moulin Global Eyecare Holdings Limited, which we refer to as Moulin, and Golden Gate Capital, which we refer to as Golden Gate (the Acquisition) for a purchase price of $450 million plus adjustments. Upon consummation of the agreement
on March 1, 2005, we became a wholly owned subsidiary of ECCA Holdings, which was in turn is owned 56.5% by Offer High Investments, Ltd. a subsidiary of Moulin, 42.5% by Golden Gate and 1% by our management. In connection with the Acquisition,
we issued $152 million aggregate principal amount of 103/4% Senior Subordinated Notes due February 15,
2015, which we refer to as the Initial Notes, and entered into a $190 million senior credit facility, which we refer to as (the New Credit Facility). The net proceeds from the Initial Notes together with borrowings under the New Credit
Facility and a $172.7 million equity contribution from Moulin and Golden Gate were used to finance the Acquisition, including the permanent repayment of our old credit facility and the retirement of our 91/8% Senior Subordinated Notes due 2008 and our Floating Interest Rate Subordinated Term Securities due 2008, which together we refer to as (the Retired
Notes). All of these transactions together are collectively referred to as (the transactions); prior to the transactions the company is referred to as the Predecessor and subsequent to the transactions the company is
referred to as the Company. The purchase method of accounting was used to record assets and liabilities assumed by the Company. Such accounting generally results in increased depreciation recorded in future periods. Accordingly, the
accompanying financial statements of the Predecessor and the Company are not comparable in all material respects since those financial statements report financial position, results of operations and cash flows of these two separate entities.

As a result of the Acquisition, we incurred approximately $15.6 million of non-recurring expenses. These expenses consisted
of professional fees incurred by the selling shareholders, premium paid to retire the Retired Notes and the write off of previously capitalized loan fees related to the Retired Notes and old credit facility.



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The Acquisition was accounted for using the push-down method of accounting. Accordingly, a portion of the
purchase price was allocated to the identifiable net assets acquired based on their estimated fair values with the balance of the purchase price, $368.1 million, included in goodwill. We expect $54.2 million of this goodwill will be deductible for
tax purposes.

3. 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 $2.7 million at December 31, 2005 and April 1, 2006.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 significant estimation and are based on product with low turnover or deemed by us to be unsaleable. Our inventory reserve was $1.3 million and $1.8
million at December 31, 2005 and April 1, 2006, respectively.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Goodwill represents approximately 68% 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 $0.8 million, which is included in other
accrued expenses, as of April 1, 2006 is adequate to cover future benefit payments for claims that occurred prior to April 1, 2006.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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4. Related Party Transactions

In connection with the recapitalization of the Company in 1998, we entered into a management agreement with THL Equity Advisors IV, LLC, or THL Advisors, dated as of April 24, 1998. We incurred approximately
$81,000 for the fifty-nine day period ended March 1, 2005 for management and other consulting services. The management agreement was terminated in conjunction with the Acquisition.

During fiscal 1998, Bernard W. Andrews, one of our former directors and who was our Chief Executive Officer at the time, purchased $1.0 million of our
common stock, which was paid for by the delivery by Mr. Andrews of a promissory note payable to us with an original principal amount of $1.0 million. Mr. Andrews promissory note accrued interest at a fixed annual rate of 9.0% and was
secured by 96,061 shares of our common stock held by Bernard W. Andrews Revocable Trust U/A. The promissory note plus all accrued interest was paid in full in conjunction with the Acquisition.

In connection with the Acquisition, we became a party to an advisory agreement with ECCA Holdings and an entity affiliated with Golden Gate, and a
separate advisory agreement with ECCA Holdings and Moulin. Pursuant to each advisory agreement, Golden Gate, on the one hand, and Moulin, on the other hand, will be compensated for the financial, investment banking, management advisory and other
services performed for future financial, investment banking, management advisory and other services they perform on our behalf. Each advisory agreement has a term of 10 years following the date on which the transactions are consummated, but will
terminate on the date on which Golden Gate or Moulin, as the case may be, ceases to be a direct or indirect holder of equity interests of ECCA Holdings.

We prepaid $3.0 million to Golden Gate and $1.5 million to Moulin on the date of the Acquisition as compensation for advisory services to be rendered through the three-year period and 18-month period, respectively,
immediately following the date of the Acquisition. Beginning 18 months after the consummation of the Acquisition, we will pay management fees of up to $500,000 per fiscal quarter to Moulin until the aggregate management fees paid to Moulin under its
Advisory Agreement, including those paid upon consummation of the Acquisition, total $3.0 million, and thereafter we will pay management fees of up to $250,000 per fiscal quarter to each of Golden Gate and Moulin, subject to restrictions in
(i) our New Credit Facility and (ii) the indenture governing the Notes. We have also agreed to reimburse each of Golden Gate and Moulin up to $125,000 annually for their out-of-pocket fees and expenses, including legal and accounting fees,
incurred in connection with the provision of services to us, their ownership of equity securities of ECCA Holdings or the exercise of rights under the various agreements entered in connection with the Acquisition. In addition, we have agreed to pay
certain additional transaction fees to each of them in the event we, ECCA Holdings or any of our subsidiaries completes any acquisition (whether by merger, consolidation, purchase of stock or assets or otherwise), debt or equity financing, sale of
all or substantially all of our assets, change of control transaction or other similar transaction in an amount equal to 0.5% of the value of each such transaction.

During the thirteen weeks ended April 1, 2006, we expensed approximately $0.5 million related to the above arrangements.



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5. 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.

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



|                                     |  |                                       |       |                                       |   |                                |  |   |       
|------------------------------------ |  | ------------------------------------- | ----- | ------------------------------------- | - | ------------------------------ |  | - | ------
|                                     |  | Predecessor                           |       | Company                              
|                                     |  | Fifty-NineDay PeriodEndedMarch 1,2005 |       | Thirty-TwoDay PeriodEndedApril 2,2005 |   | ThirteenWeeksEndedApril 1,2006
|                                     |  | (Unaudited)                           |       | (Unaudited)                           |   | (Unaudited)                   
|Cash paid for interest               |  | $                                     | 5,213 |                                       | $ | 957                            |  | $ | 12,481
|Dividends accrued on preferred stock |  | $                                     | 1,493 |                                       | $ |                               |  | $ |      
|Cash paid for taxes                  |  | $                                     | 8     |                                       | $ | 286                            |  | $ | 254   

7. Stock Based Compensation

We accounted for stock based compensation in accordance with APB 25. As all options were granted at fair market value, no compensation expense was
recorded for options granted. The pro forma calculations include only the effects of 2002, 2003 and 2004 grants as all grants previous to 2002 were exercised or cancelled. As such the impacts are not necessarily indicative of the effects on reported
net income of future years. No options were outstanding during the thirteen week period ended April 1, 2006 as all options were cancelled in connection with the Acquisition. Our pro forma net income for the fifty-nine day period ended
March 1, 2005 is as follows:



|                                             |  |                                       |        |  
|-------------------------------------------- |  | ------------------------------------- | ------ | -
|                                             |  | Predecessor                           |       
|                                             |  | Fifty-NineDay PeriodEndedMarch 1,2005 |       
|                                             |  | (Unaudited)                           |       
|Net loss                                     |  | $                                     | (6,874 | )
|Fair value based method compensation expense |  |                                       | 21     |  
|                                             |  |                                       |        |  
|Pro forma net loss                           |  | $                                     | (6,895 | )
|                                             |  |                                       |        |  

8. Merger Agreement Subsequent Event

On May 1, 2006, Highmark Inc. (Highmark) and ECCA Holdings Corporation announced that HVHC, Inc. (HVHC), a subsidiary of
Highmark, and ECCA Holdings have entered into a merger agreement pursuant to which ECCA Holdings will be merged with a wholly-owned subsidiary of HVHC,



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with ECCA Holdings being the surviving corporation and becoming a wholly-owned subsidiary of HVHC. Eye Care Centers of
America, Inc. is owned by ECCA Holdings and as a result of the merger will become an indirect wholly-owned subsidiary of Highmark. The board of directors of both companies approved the merger, subject to the approval of ECCA Holdings
stockholders and customary regulatory approvals. The transaction is expected to close in the third quarter of 2006. Citigroup Corporate Investment Banking and PNC Capital Markets have provided a financing commitment.

On May 8, 2006, Eye Care Centers of America, Inc. announced that it had commenced a cash tender offer for its outstanding 103/4% Senior Subordinated Notes due 2015. A related solicitation of consents to certain amendments to the indenture
governing the Notes was also announced. The tender offer is being made in connection with the May 1stmerger
announcement.

9. Condensed Consolidating Information (Unaudited) (Dollars in Thousands)

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



9



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Consolidating Balance Sheets

For the Year Ended December 31, 2005



|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|---------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | -------- | - |  | - | -------
|                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany
|ASSETS                                         |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Current assets:                                |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Cash and cash equivalents                      |  | $      | 73      |   |                       | $ | 17,012  |     |  | $ | 697          |   |  | $                   |         |   |  | $ | 17,782 
|Accounts and notes receivable                  |  |        | 162,042 |   |                       |   | 49,251  |     |  |   | 3,200        |   |  |                     | (204,049 | ) |  |   | 10,444 
|Inventory                                      |  |        |        |   |                       |   | 28,760  |     |  |   | 1,882        |   |  |                     |         |   |  |   | 30,642 
|Deferred income taxes, net                     |  |        | 116     |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 116    
|Prepaid expenses and other                     |  |        | 1,653   |   |                       |   | 8,461   |     |  |   | 44           |   |  |                     |         |   |  |   | 10,158 
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current assets                           |  |        | 163,884 |   |                       |   | 103,484 |     |  |   | 5,823        |   |  |                     | (204,049 | ) |  |   | 69,142 
|Property and equipment                         |  |        |        |   |                       |   | 50,459  |     |  |   | 66           |   |  |                     |         |   |  |   | 50,525 
|Intangibles                                    |  |        | 261,242 |   |                       |   | 107,195 |     |  |   | 88           |   |  |                     | (25      | ) |  |   | 368,500
|Other assets                                   |  |        | 24,855  |   |                       |   | 569     |     |  |   |             |   |  |                     |         |   |  |   | 25,424 
|Deferred income taxes, net                     |  |        | 16,271  |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 16,271 
|Investment in subsidiaries                     |  |        | 8,251   |   |                       |   |        |     |  |   |             |   |  |                     | (8,251   | ) |  |   |       
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total Assets                                   |  | $      | 474,503 |   |                       | $ | 261,707 |     |  | $ | 5,977        |   |  | $                   | (212,325 | ) |  | $ | 529,862
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Current liabilities:                           |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Accounts payable                               |  | $      | 9       |   |                       | $ | 219,285 |     |  | $ | 4,390        |   |  | $                   | (204,049 | ) |  | $ | 19,635 
|Current portion of long-term debt              |  |        | 1,237   |   |                       |   | 417     |     |  |   |             |   |  |                     |         |   |  |   | 1,654  
|Deferred revenue                               |  |        |        |   |                       |   | 3,448   |     |  |   | 452          |   |  |                     |         |   |  |   | 3,900  
|Accrued payroll expense                        |  |        |        |   |                       |   | 8,218   |     |  |   | 387          |   |  |                     |         |   |  |   | 8,605  
|Accrued interest                               |  |        | 7,934   |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 7,934  
|Other accrued expenses                         |  |        | 1,803   |   |                       |   | 6,329   |     |  |   | 1,654        |   |  |                     |         |   |  |   | 9,786  
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current liabilities                      |  |        | 10,983  |   |                       |   | 237,697 |     |  |   | 6,883        |   |  |                     | (204,049 | ) |  |   | 51,514 
|Long-term debt, less current maturities        |  |        | 312,843 |   |                       |   | 1,400   |     |  |   |             |   |  |                     |         |   |  |   | 314,243
|Deferred rent                                  |  |        |        |   |                       |   | 1,582   |     |  |   | 116          |   |  |                     |         |   |  |   | 1,698  
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total liabilities                              |  |        | 323,826 |   |                       |   | 240,679 |     |  |   | 6,999        |   |  |                     | (204,049 | ) |  |   | 367,455
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Shareholders equity (deficit):                |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Common stock                                   |  |        |        |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   |       
|Additional paid-in capital                     |  |        | 162,690 |   |                       |   | (994    | )   |  |   | (3,224       | ) |  |                     | (25      | ) |  |   | 158,447
|Accumulated equity (deficit)                   |  |        | (12,013 | ) |                       |   | 22,022  |     |  |   | 2,202        |   |  |                     | (8,251   | ) |  |   | 3,960  
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total shareholders equity (deficit)           |  |        | 150,677 |   |                       |   | 21,028  |     |  |   | (1,022       | ) |  |                     | (8,276   | ) |  |   | 162,407
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|                                               |  | $      | 474,503 |   |                       | $ | 261,707 |     |  | $ | 5,977        |   |  | $                   | (212,325 | ) |  | $ | 529,862
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        



10



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Condensed Consolidating Statements of Income

For the Fifty-Nine Day Period Ended March 1, 2005



|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------ | --- |  | - | ------------ | - |  | ----------------------- | ------ | - |  | - | -------- | -
|                                                                                                   |  | Parent |          |   | GuarantorSubsidiaries |   |        | ODs |  |   | Eliminations |   |  | ConsolidatedPredecessor |       
|Revenues:                                                                                          |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Optical sales                                                                                      |  | $      |         |   |                       | $ | 57,670 |     |  | $ | 17,169       |   |  | $                       |       |   |  | $ | 74,839   |  
|Management fees                                                                                    |  |        |         |   |                       |   | 5,328  |     |  |   |             |   |  |                         | (4,768 | ) |  |   | 560      |  
|Equity earnings in subsidiaries                                                                    |  |        | 4,220    |   |                       |   |       |     |  |   |             |   |  |                         | (4,220 | ) |  |   |         |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Total net revenues                                                                                 |  |        | 4,220    |   |                       |   | 62,998 |     |  |   | 17,169       |   |  |                         | (8,988 | ) |  |   | 75,399   |  
|Operating costs and expenses:                                                                      |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Cost of goods sold                                                                                 |  |        |         |   |                       |   | 19,504 |     |  |   | 3,144        |   |  |                         |       |   |  |   | 22,648   |  
|Selling, general and administrative expenses                                                       |  |        | 102      |   |                       |   | 33,961 |     |  |   | 12,931       |   |  |                         | (4,768 | ) |  |   | 42,226   |  
|Transaction expenses                                                                               |  |        | 15,642   |   |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | 15,642   |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Total operating costs and expenses                                                                 |  |        | 15,744   |   |                       |   | 53,465 |     |  |   | 16,075       |   |  |                         | (4,768 | ) |  |   | 80,516   |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Income from operations                                                                             |  |        | (11,524  | ) |                       |   | 9,533  |     |  |   | 1,094        |   |  |                         | (4,220 | ) |  |   | (5,117   | )
|Interest expense, net                                                                              |  |        | 182      |   |                       |   | 3,251  |     |  |   |             |   |  |                         |       |   |  |   | 3,433    |  
|Income tax expense                                                                                 |  |        | (4,832   | ) |                       |   | 3,156  |     |  |   |             |   |  |                         |       |   |  |   | (1,676   | )
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Net income (loss)                                                                                  |  | $      | (6,874   | ) |                       | $ | 3,126  |     |  | $ | 1,094        |   |  | $                       | (4,220 | ) |  | $ | (6,874   | )
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|                                                                                                  
|Condensed Consolidating Statements of Cash Flows For the Fifty-Nine Day Period Ended March 1, 2005 | 
|                                                                                                   |  | Parent |          |   | GuarantorSubsidiaries |   |        | ODs |  |   | Eliminations |   |  | ConsolidatedPredecessor |       
|Cash flows from operating activities:                                                              |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Net income                                                                                         |  | $      | (6,874   | ) |                       | $ | 3,126  |     |  | $ | 1,094        |   |  | $                       | (4,220 | ) |  | $ | (6,874   | )
|Adjustments to reconcile net income to net                                                         |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Cash provided by (used in) operating activities:                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Depreciation and amortization                                                                      |  |        |         |   |                       |   | 2,683  |     |  |   |             |   |  |                         |       |   |  |   | 2,683    |  
|Amortization of debt issue costs                                                                   |  |        | 8        |   |                       |   | 301    |     |  |   |             |   |  |                         |       |   |  |   | 309      |  
|Deferred liabilities and other                                                                     |  |        | (1,904   | ) |                       |   | 167    |     |  |   | 24           |   |  |                         |       |   |  |   | (1,713   | )
|Deferred financing costs write-off                                                                 |  |        | 3,534    |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   | 3,534    |  
|Equity earnings in subsidiaries                                                                    |  |        | (4,220   | ) |                       |   |       |     |  |   |             |   |  |                         | 4,220  |   |  |   |         |  
|Increase/(decrease) in operating assets and liabilities                                            |  |        | 2,731    |   |                       |   | 1,602  |     |  |   | (562         | ) |  |                         |       |   |  |   | 3,771    |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Net cash provided by operating activities                                                          |  |        | (6,725   | ) |                       |   | 7,879  |     |  |   | 556          |   |  |                         |       |   |  |   | 1,710    |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Cash flows from investing activities:                                                              |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Acquisition of property and equipment                                                              |  |        |         |   |                       |   | (1,850 | )   |  |   |             |   |  |                         |       |   |  |   | (1,850   | )
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Net cash used in investing activities                                                              |  |        |         |   |                       |   | (1,850 | )   |  |   |             |   |  |                         |       |   |  |   | (1,850   | )
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Cash flows from financing activities:                                                              |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Payments on debt and capital leases                                                                |  |        | (213,819 | ) |                       |   | (53    | )   |  |   |             |   |  |                         |       |   |  |   | (213,872 | )
|Payments for refinancing fees                                                                      |  |        | (16,925  | ) |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | (16,925  | )
|Proceeds from issuance of debt                                                                     |  |        | 314,713  |   |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | 314,713  |  
|Retirement of treasury stock                                                                       |  |        | 1,668    |   |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | 1,668    |  
|Retirement of preferred stock                                                                      |  |        | (72,318  | ) |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | (72,318  | )
|Common stock buyback                                                                               |  |        | (168,116 | ) |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | (168,116 | )
|Common stock sale, net                                                                             |  |        | 158,521  |   |                       |   |       |     |  |   |             |   |  |                         |       |   |  |   | 158,521  |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Net cash used in financing activities                                                              |  |        | 3,724    |   |                       |   | (53    | )   |  |   |             |   |  |                         |       |   |  |   | 3,671    |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Net increase in cash and cash equivalents                                                          |  |        | (3,001   | ) |                       |   | 5,976  |     |  |   | 556          |   |  |                         |       |   |  |   | 3,531    |  
|Cash and cash equivalents at beginning of period                                                   |  |        | 2,582    |   |                       |   | 337    |     |  |   | 179          |   |  |                         |       |   |  |   | 3,098    |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  
|Cash and cash equivalents at end of period                                                         |  | $      | (419     | ) |                       | $ | 6,313  |     |  | $ | 735          |   |  | $                       |       |   |  | $ | 6,629    |  
|                                                                                                   |  |        |          |   |                       |   |        |     |  |   |              |   |  |                         |        |   |  |   |          |  



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Condensed Consolidating Statements of Income

For the Thirty-Two Day Period Ended April 2, 2005



|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------ | --- |  | - | ------------ | - |  | ------------------- | ------ | - |  | - | ------ | -
|                                                                                                   |  | Parent |        |   | GuarantorSubsidiaries |   |        | ODs |  |   | Eliminations |   |  | ConsolidatedCompany |       
|Revenues:                                                                                          |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Optical sales                                                                                      |  | $      |       |   |                       | $ | 32,721 |     |  | $ | 5,790        |   |  | $                   |       |   |  | $ | 38,511 |  
|Management fees                                                                                    |  |        |       |   |                       |   | 2,758  |     |  |   |             |   |  |                     | (2,425 | ) |  |   | 333    |  
|Equity earnings in subsidiaries                                                                    |  |        | (4,028 | ) |                       |   |       |     |  |   |             |   |  |                     | 4,028  |   |  |   |       |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Total net revenues                                                                                 |  |        | (4,028 | ) |                       |   | 35,479 |     |  |   | 5,790        |   |  |                     | 1,603  |   |  |   | 38,844 |  
|Operating costs and expenses:                                                                      |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Cost of goods sold                                                                                 |  |        |       |   |                       |   | 9,836  |     |  |   | 1,259        |   |  |                     |       |   |  |   | 11,095 |  
|Selling, general and administrative expenses                                                       |  |        | (9,039 | ) |                       |   | 25,869 |     |  |   | 5,437        |   |  |                     | (2,425 | ) |  |   | 19,842 |  
|Transaction expenses                                                                               |  |        |       |   |                       |   |       |     |  |   |             |   |  |                     |       |   |  |   |       |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Total operating costs and expenses                                                                 |  |        | (9,039 | ) |                       |   | 35,705 |     |  |   | 6,696        |   |  |                     | (2,425 | ) |  |   | 30,937 |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Income from operations                                                                             |  |        | 5,011  |   |                       |   | (226   | )   |  |   | (906         | ) |  |                     | 4,028  |   |  |   | 7,907  |  
|Interest expense, net                                                                              |  |        | (298   | ) |                       |   | 3,075  |     |  |   |             |   |  |                     |       |   |  |   | 2,777  |  
|Income tax expense                                                                                 |  |        | 2,231  |   |                       |   | (179   | )   |  |   |             |   |  |                     |       |   |  |   | 2,052  |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Net income                                                                                         |  | $      | 3,078  |   |                       | $ | (3,122 | )   |  | $ | (906         | ) |  | $                   | 4,028  |   |  | $ | 3,078  |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|                                                                                                  
|Condensed Consolidating Statements of Cash Flows For the Thirty-Two Day Period Ended April 2, 2005 | 
|                                                                                                   |  | Parent |        |   | GuarantorSubsidiaries |   |        | ODs |  |   | Eliminations |   |  | ConsolidatedCompany |       
|Cash flows from operating activities:                                                              |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Net income                                                                                         |  | $      | 3,078  |   |                       | $ | (3,122 | )   |  | $ | (906         | ) |  | $                   | 4,028  |   |  | $ | 3,078  |  
|Adjustments to reconcile net income to net                                                         |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Cash provided by (used in) operating activities:                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Depreciation and amortization                                                                      |  |        |       |   |                       |   | 1,099  |     |  |   |             |   |  |                     |       |   |  |   | 1,099  |  
|Amortization of debt issue costs                                                                   |  |        | 21     |   |                       |   | 185    |     |  |   |             |   |  |                     |       |   |  |   | 206    |  
|Deferred liabilities and other                                                                     |  |        | (693   | ) |                       |   | 2,420  |     |  |   | (24          | ) |  |                     |       |   |  |   | 1,703  |  
|Deferred financing costs write-off                                                                 |  |        | (3,534 | ) |                       |   | 3,534  |     |  |   |             |   |  |                     |       |   |  |   |       |  
|Equity earnings in subsidiaries                                                                    |  |        | 4,028  |   |                       |   |       |     |  |   |             |   |  |                     | (4,028 | ) |  |   |       |  
|Increase/(decrease) in operating assets and liabilities                                            |  |        | 2,454  |   |                       |   | 3,404  |     |  |   | 817          |   |  |                     |       |   |  |   | 6,675  |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Net cash provided by operating activities                                                          |  |        | 5,354  |   |                       |   | 7,520  |     |  |   | (113         | ) |  |                     |       |   |  |   | 12,761 |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Cash flows from investing activities:                                                              |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Acquisition of property and equipment                                                              |  |        |       |   |                       |   | (234   | )   |  |   |             |   |  |                     |       |   |  |   | (234   | )
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Net cash used in investing activities                                                              |  |        |       |   |                       |   | (234   | )   |  |   |             |   |  |                     |       |   |  |   | (234   | )
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Cash flows from financing activities:                                                              |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Payments on debt and capital leases                                                                |  |        | (22    | ) |                       |   | (4     | )   |  |   |             |   |  |                     |       |   |  |   | (26    | )
|Payments for refinancing fees                                                                      |  |        | 3,354  |   |                       |   | (3,819 | )   |  |   |             |   |  |                     |       |   |  |   | (465   | )
|Proceeds from issuance of debt                                                                     |  |        |       |   |                       |   |       |     |  |   |             |   |  |                     |       |   |  |   |       |  
|Retirement of treasury stock                                                                       |  |        |       |   |                       |   |       |     |  |   |             |   |  |                     |       |   |  |   |       |  
|Retirement of preferred stock                                                                      |  |        |       |   |                       |   |       |     |  |   |             |   |  |                     |       |   |  |   |       |  
|Common stock buyback                                                                               |  |        |       |   |                       |   |       |     |  |   |             |   |  |                     |       |   |  |   |       |  
|Common stock sale, net                                                                             |  |        |       |   |                       |   |       |     |  |   |             |   |  |                     |       |   |  |   |       |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Net cash used in financing activities                                                              |  |        | 3,332  |   |                       |   | (3,823 | )   |  |   |             |   |  |                     |       |   |  |   | (491   | )
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Net increase in cash and cash equivalents                                                          |  |        | 8,686  |   |                       |   | 3,463  |     |  |   | (113         | ) |  |                     |       |   |  |   | 12,036 |  
|Cash and cash equivalents at beginning of period                                                   |  |        | (419   | ) |                       |   | 6,313  |     |  |   | 735          |   |  |                     |       |   |  |   | 6,629  |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  
|Cash and cash equivalents at end of period                                                         |  | $      | 8,267  |   |                       | $ | 9,776  |     |  | $ | 622          |   |  | $                   |       |   |  | $ | 18,665 |  
|                                                                                                   |  |        |        |   |                       |   |        |     |  |   |              |   |  |                     |        |   |  |   |        |  



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##### Table of Contents

Consolidating Balance Sheets

For the Thirteen Weeks Ended April 1, 2006



|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|---------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | -------- | - |  | - | -------
|                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany
|ASSETS                                         |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|                                               |  |        |         |   |                      
|Current assets:                                |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Cash and cash equivalents                      |  | $      | 37      |   |                       | $ | 33,066  |     |  | $ | 330          |   |  | $                   |         |   |  | $ | 33,433 
|Accounts and notes receivable                  |  |        | 148,704 |   |                       |   | 51,767  |     |  |   | 8,844        |   |  |                     | (198,923 | ) |  |   | 10,392 
|Inventory                                      |  |        |        |   |                       |   | 29,115  |     |  |   | 1,315        |   |  |                     |         |   |  |   | 30,430 
|Deferred income taxes, net                     |  |        | 116     |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 116    
|Prepaid expenses and other                     |  |        | 1,241   |   |                       |   | 7,559   |     |  |   | 47           |   |  |                     |         |   |  |   | 8,847  
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current assets                           |  |        | 150,098 |   |                       |   | 121,507 |     |  |   | 10,536       |   |  |                     | (198,923 | ) |  |   | 83,218 
|                                               |  |        |         |   |                      
|Property and equipment                         |  |        |        |   |                       |   | 50,538  |     |  |   | 66           |   |  |                     |         |   |  |   | 50,604 
|Intangibles                                    |  |        | 260,874 |   |                       |   | 107,195 |     |  |   | 87           |   |  |                     | (25      | ) |  |   | 368,131
|Other assets                                   |  |        | 24,032  |   |                       |   | 471     |     |  |   |             |   |  |                     |         |   |  |   | 24,503 
|Deferred income taxes, net                     |  |        | 13,218  |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 13,218 
|Investment in subsidiaries                     |  |        | 25,117  |   |                       |   |        |     |  |   |             |   |  |                     | (25,117  | ) |  |   |       
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total Assets                                   |  | $      | 473,339 |   |                       | $ | 279,711 |     |  | $ | 10,689       |   |  | $                   | (224,065 | ) |  | $ | 539,674
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|                                               |  |        |         |   |                      
|Current liabilities:                           |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Accounts payable                               |  | $      | 10      |   |                       | $ | 221,584 |     |  | $ | 930          |   |  | $                   | (198,923 | ) |  | $ | 23,601 
|Current portion of long-term debt              |  |        | 1,238   |   |                       |   | 443     |     |  |   |             |   |  |                     |         |   |  |   | 1,681  
|Deferred revenue                               |  |        |        |   |                       |   | 3,403   |     |  |   | 443          |   |  |                     |         |   |  |   | 3,846  
|Accrued payroll expense                        |  |        |        |   |                       |   | 6,418   |     |  |   | 476          |   |  |                     |         |   |  |   | 6,894  
|Accrued interest                               |  |        | 3,209   |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   | 3,209  
|Other accrued expenses                         |  |        | 4,548   |   |                       |   | 7,230   |     |  |   | 683          |   |  |                     |         |   |  |   | 12,461 
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total current liabilities                      |  |        | 9,005   |   |                       |   | 239,078 |     |  |   | 2,532        |   |  |                     | (198,923 | ) |  |   | 51,692 
|Long-term debt, less current maturities        |  |        | 312,076 |   |                       |   | 1,275   |     |  |   |             |   |  |                     |         |   |  |   | 313,351
|Deferred rent                                  |  |        |        |   |                       |   | 2,197   |     |  |   | 193          |   |  |                     |         |   |  |   | 2,390  
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total liabilities                              |  |        | 321,081 |   |                       |   | 242,550 |     |  |   | 2,725        |   |  |                     | (198,923 | ) |  |   | 367,433
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Shareholders equity (deficit):                |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Common stock                                   |  |        |        |   |                       |   |        |     |  |   |             |   |  |                     |         |   |  |   |       
|Additional paid-in capital                     |  |        | 162,690 |   |                       |   | (3,193  | )   |  |   | (1,025       | ) |  |                     | (25      | ) |  |   | 158,447
|Accumulated equity (deficit)                   |  |        | (10,432 | ) |                       |   | 40,354  |     |  |   | 8,989        |   |  |                     | (25,117  | ) |  |   | 13,794 
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|Total shareholders equity (deficit)           |  |        | 152,258 |   |                       |   | 37,161  |     |  |   | 7,964        |   |  |                     | (25,142  | ) |  |   | 172,241
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        
|                                               |  | $      | 473,339 |   |                       | $ | 279,711 |     |  | $ | 10,689       |   |  | $                   | (224,065 | ) |  | $ | 539,674
|                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |          |   |  |   |        



13



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##### Table of Contents

Condensed Consolidating Statements of Income

For the Thirteen Weeks Ended April 1, 2006



|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | --- |  | - | ------------ | - |  | ------------------- | ------- | - |  | - | ------- | -
|                                                                                            |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany |        
|Revenues:                                                                                   |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Optical sales                                                                               |  | $      |        |   |                       | $ | 94,840  |     |  | $ | 25,782       |   |  | $                   |        |   |  | $ | 120,622 |  
|Management fees                                                                             |  |        |        |   |                       |   | 8,138   |     |  |   |             |   |  |                     | (7,163  | ) |  |   | 975     |  
|Equity earnings in subsidiaries                                                             |  |        | 25,117  |   |                       |   |        |     |  |   |             |   |  |                     | (25,117 | ) |  |   |        |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Total net revenues                                                                          |  |        | 25,117  |   |                       |   | 102,978 |     |  |   | 25,782       |   |  |                     | (32,280 | ) |  |   | 121,597 |  
|Operating costs and expenses:                                                               |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cost of goods sold                                                                          |  |        |        |   |                       |   | 27,299  |     |  |   | 4,896        |   |  |                     |        |   |  |   | 32,195  |  
|Selling, general and administrative expenses                                                |  |        | 749     |   |                       |   | 52,590  |     |  |   | 19,053       |   |  |                     | (7,163  | ) |  |   | 65,229  |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Total operating costs and expenses                                                          |  |        | 749     |   |                       |   | 79,889  |     |  |   | 23,949       |   |  |                     | (7,163  | ) |  |   | 97,424  |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Income from operations                                                                      |  |        | 24,368  |   |                       |   | 23,089  |     |  |   | 1,833        |   |  |                     | (25,117 | ) |  |   | 24,173  |  
|Interest expense, net                                                                       |  |        | 8,246   |   |                       |   | (195    | )   |  |   |             |   |  |                     |        |   |  |   | 8,051   |  
|Income tax expense                                                                          |  |        | 6,268   |   |                       |   | (839    | )   |  |   | 839          |   |  |                     |        |   |  |   | 6,268   |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net income                                                                                  |  | $      | 9,854   |   |                       | $ | 24,123  |     |  | $ | 994          |   |  | $                   | (25,117 | ) |  | $ | 9,854   |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|                                                                                           
|Condensed Consolidating Statements of Cash Flows For the Thirteen Weeks Ended April 1, 2006 | 
|                                                                                            |  | Parent |         |   | GuarantorSubsidiaries |   |         | ODs |  |   | Eliminations |   |  | ConsolidatedCompany |        
|Cash flows from operating activities:                                                       |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net income                                                                                  |  | $      | 9,854   |   |                       | $ | 24,123  |     |  | $ | 994          |   |  | $                   | (25,117 | ) |  | $ | 9,854   |  
|Adjustments to reconcile net income to net                                                  |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash provided by (used in) operating activities:                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Depreciation and amortization                                                               |  |        |        |   |                       |   | 4,130   |     |  |   |             |   |  |                     |        |   |  |   | 4,130   |  
|Amortization of debt issue costs                                                            |  |        | 632     |   |                       |   | (1      | )   |  |   |             |   |  |                     |        |   |  |   | 631     |  
|Deferred liabilities and other                                                              |  |        | 3,422   |   |                       |   | 582     |     |  |   | 68           |   |  |                     |        |   |  |   | 4,072   |  
|Equity earnings in subsidiaries                                                             |  |        | (25,117 | ) |                       |   |        |     |  |   |             |   |  |                     | 25,117  |   |  |   |        |  
|Increase/(decrease) in operating assets and liabilities                                     |  |        | 12,018  |   |                       |   | (8,461  | )   |  |   | (1,429       | ) |  |                     |        |   |  |   | 2,128   |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net cash provided by (used in) operating activities                                         |  |        | 809     |   |                       |   | 20,373  |     |  |   | (367         | ) |  |                     |        |   |  |   | 20,815  |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash flows from investing activities:                                                       |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Acquisition of property and equipment                                                       |  |        |        |   |                       |   | (4,221  | )   |  |   |             |   |  |                     |        |   |  |   | (4,221  | )
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net cash used in investing activities                                                       |  |        |        |   |                       |   | (4,221  | )   |  |   |             |   |  |                     |        |   |  |   | (4,221  | )
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash flows from financing activities:                                                       |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Payments on debt and capital leases                                                         |  |        | (825    | ) |                       |   | (98     | )   |  |   |             |   |  |                     |        |   |  |   | (923    | )
|Dividend to parent                                                                          |  |        | (20     | ) |                       |   |        |     |  |   |             |   |  |                     |        |   |  |   | (20     | )
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net cash used in financing activities                                                       |  |        | (845    | ) |                       |   | (98     | )   |  |   |             |   |  |                     |        |   |  |   | (943    | )
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Net increase in cash and cash equivalents                                                   |  |        | (36     | ) |                       |   | 16,054  |     |  |   | (367         | ) |  |                     |        |   |  |   | 15,651  |  
|Cash and cash equivalents at beginning of period                                            |  |        | 73      |   |                       |   | 17,012  |     |  |   | 697          |   |  |                     |        |   |  |   | 17,782  |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $      | 37      |   |                       | $ | 33,066  |     |  | $ | 330          |   |  | $                   |        |   |  | $ | 33,433  |  
|                                                                                            |  |        |         |   |                       |   |         |     |  |   |              |   |  |                     |         |   |  |   |         |  



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##### Table of Contents

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Introduction

We are the
third largest operator of optical retail stores in the United States as measured by revenue. We currently operate 385 stores in 36 states, including 319 directly-owned stores and 66 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 319 directly-owned stores, as well as the results of 53 of the 66 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 372 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 372 consolidated stores, as well as the professional
fees of the optometrists at 181 of the stores. These 181 stores include 85 stores where the optometrist is our employee or an independent contractor, the 53 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. Selling, general and administrative expenses primarily include retail payroll,
doctor 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.



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##### Table of Contents

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 15 new stores in fiscal 2006 and 25 new
stores in fiscal 2007 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 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.



16



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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. In order to provide the most beneficial performance comparison, the period January 2, 2005 to
March 1, 2005 of the Predecessor and the period March 2, 2005 to April 2, 2005 of the Company have been combined to represent a total thirteen week period. The period-to-period comparison of financial results is not necessarily
indicative of future results.



|                                             |  |                      |    |  |              |  
|-------------------------------------------- |  | -------------------- | -- |  | ------------ | -
|                                             |  | Thirteen Weeks Ended |   
|                                             |  | April 2,2005         |    |  | April 1,2006 |  
|Statement of Income Data:                    |  |                      |    |  |              |  
|NET REVENUES:                                |  |                      |    |  |              |  
|Optical sales                                |  | 99.2                 | %  |  | 99.2         | %
|Management fee                               |  | 0.8                  |    |  | 0.8          |  
|                                             |  |                      |    |  |              |  
|Total net revenues                           |  | 100.0                |    |  | 100.0        |  
|                                             |  |                     
|OPERATING COSTS AND EXPENSES:                |  |                      |    |  |              |  
|Cost of goods sold                           |  | 29.8                 | *  |  | 26.7         | *
|Selling, general and administrative expenses |  | 54.8                 | *  |  | 54.1         | *
|Transaction expenses                         |  | 13.7                 |    |  |             |  
|                                             |  |                      |    |  |              |  
|Total operating costs and expenses           |  | 97.6                 |    |  | 80.1         |  
|                                             |  |                      |    |  |              |  
|INCOME FROM OPERATIONS                       |  | 2.4                  |    |  | 19.9         |  
|                                             |  |                     
|INTEREST EXPENSE, NET                        |  | 5.4                  |    |  | 6.6          |  
|                                             |  |                     
|INCOME TAX EXPENSE                           |  | 0.3                  |    |  | 5.2          |  
|                                             |  |                      |    |  |              |  
|NET INCOME (LOSS)                            |  | (3.3                 | )% |  | 8.1          | %
|                                             |  |                      |    |  |              |  



---

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

The
following is a discussion of certain factors affecting our results of operations and our liquidity and capital resources. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere
in this document.

The Thirteen Weeks Ended April 1, 2006 Compared to the Thirteen Weeks Ended April 2, 2005.

Net Revenues.Net revenues increased to $121.6 million for the thirteen weeks ended April 2, 2006 from $114.2 million for the thirteen weeks ended
April 1, 2005. The increase in revenues compared to the first quarter of fiscal 2005 was primarily driven by a 5.4% increase in comparable store sales and new store openings. Net revenues attributable to new stores opened after the first
quarter of fiscal 2005 were $1.6 million. Comparable transactions increased by 2.9% and average ticket increased by 2.5% compared to the first quarter of fiscal 2005. The increase in average ticket was the result of a continued increase in the sale
of premium lenses. Total managed vision care sales increased by 1.5% compared to the first quarter



17



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##### Table of Contents

of fiscal 2005. The growth in managed vision care was primarily due to an increase in plans offered by our two largest
managed vision care partners. The growth is from both new and existing accounts which they administer. In addition, we opened five new stores and closed one store in the first quarter of fiscal 2006.

Gross Profit.Gross profit increased to $88.4 million for the thirteen weeks ended April 1, 2006 from $79.6 million for the thirteen weeks ended
April 2, 2005. Gross profit as a percentage of optical sales increased to 73.3% for the thirteen weeks ended April 1, 2006 from 70.2% for the thirteen weeks ended April 2, 2005. This increase was largely the result of an increase in
the sales mix of higher margin premium lenses and the sale of lower cost frames purchased from China.

Selling General & Administrative
Expenses (SG&A).SG&A increased to $65.2 million for the thirteen weeks ended April 1, 2006 from $62.1 million for the thirteen weeks ended April 2, 2005. SG&A, as a percentage of optical sales, decreased to 54.1% for the
thirteen weeks ended April 1, 2006 from 54.8% for the thirteen weeks ended April 2, 2005. This percentage decrease was primarily due to increased sales from more efficient advertising promotions and the leveraging of retail payroll
expenses which were offset by increased overhead and depreciation expenditures.

Net Interest Expense.Net interest expense increased to $8.1
million for the thirteen weeks ended April 1, 2006 from $6.2 million for the thirteen weeks ended April 2, 2005. This increase was primarily due to larger outstanding debt balances as a result of the acquisition and an increase in interest
rates as compared to the first quarter of fiscal 2005.

Income Tax Expense.Income tax expense increased to $6.3 million for the thirteen weeks
ended April 1, 2006 from $0.4 million for the thirteen weeks ended April 2, 2005. The effective tax rate for the thirteen weeks ended April 1, 2006 was affected by our positive net income while the thirteen weeks ended April 2,
2005 was affected by our transaction expenses and their tax deductibility.

Net Income.Net income increased to $9.9 million for the thirteen weeks
ended April 1, 2006 from a net loss of $3.8 million for the thirteen weeks ended April 2, 2005. This was primarily as a result of the transaction expenses incurred during the first quarter of fiscal 2005.

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
| | - |  | ----------------------------------



| |  |  | 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 New Credit Facility and the Notes; (ii) capital expenditures, including those for opening



18



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##### Table of Contents

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.

Cash flows from operating activities provided net cash of $20.8 million for
the thirteen weeks ended April 1, 2006 and $14.5 million for the thirteen weeks ended April 2, 2005. Our other sources of working capital are cash on hand and funding from our revolving credit facility. As of April 1, 2006, we had
$33.4 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 New Credit Facility, excluding $2.7 million letters of credit outstanding.

Payments on debt and issuance of debt and equity transactions related to the Acquisition have been our principal financing activities. Cash flows used in
financing activities were $0.9 million for the thirteen weeks ended April 1, 2006. Cash flows provided by financing activities were $3.2 million for the thirteen weeks ended April 2, 2005.

Our working capital primarily consists of cash and cash equivalents, accounts receivable, inventory, accounts payable and accrued expenses and was $31.5
million as of April 1, 2006. Our working capital was $17.6 million as of December 31, 2005.

Capital expenditures were $4.2
million for the thirteen weeks ended April 1, 2006 compared to $2.1 million for the thirteen weeks ended April 2, 2006. Capital expenditures for all of 2006 are projected to be approximately $15.4 million. Of the planned 2006 capital
expenditures, approximately $6.1 million is related to commitments to new stores and approximately $9.3 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 credit facility portion of our new senior 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 new senior 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 new senior credit facility and the notes at maturity will likely require additional financing, which may
not be available to us 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 December 2002, the Company entered into a credit agreement which provided for $117.0 million in term loans and $25.0 million in revolving credit
facilities (the Old Credit Facility). In connection with the Acquisition, we entered into a new senior secured credit facility which consists of (i) the $165.0 million term loan facility (the Term Loan Facility); and (ii) the $25.0 million
secured revolving credit facility (the Revolver and together with the Term Loan Facility, the New Credit



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##### Table of Contents

Facility). The borrowings of the New Credit Facility together with the net proceeds from the offering of the Initial
Notes and the equity investment of Moulin and Golden Gate were used to pay a cash portion of the purchase price of the Acquisition, to repay debt outstanding under the Old Credit Facility, to retire the Retired Notes, pay the related tender premium
and accrued interest and to pay the related transaction fees and expenses. Thereafter, the New Credit Facility is available to finance working capital requirements and general corporate purposes.

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 will continue through the date of maturity in fiscal 2012 according to the following schedule:



|     |  |                      |       
|---- |  | -------------------- | ------
|Year |  | Amount (in millions)
|2006 |  | $                    | 1.24  
|2007 |  |                      | 1.65  
|2008 |  |                      | 1.65  
|2009 |  |                      | 1.65  
|2010 |  |                      | 1.65  
|2011 |  |                      | 1.65  
|2012 |  |                      | 153.86
|     |  |                      |       
|     |  | $                    | 163.35
|     |  |                      |       

Interest.Our borrowings under the New 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 |  | 2.00             | % |  | 3.00              | %
|                   |  |                 
|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 New Credit Facility, we are required to pay a commitment fee to the lenders under the Revolver in respect of the unutilized commitments thereunder at a
rate equal to 0.50%. We will also pay customary letter of credit fees.

Security and guarantees. The New 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
New Credit Facility are guaranteed by each of our existing and future direct and indirect domestic subsidiaries and ECCA Holdings.



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##### Table of Contents

Covenants. The New Credit Facility documentation contains customary affirmative and negative covenants
and financial covenants. During the term of the New 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
April 1, 2006 we were in compliance with all of our financial covenants.

Mandatory prepayment. 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 New Credit Facility, which percentage we expect to be reduced upon our achieving certain consolidated leverage ratios. 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 occurring within the next 12 months
in direct order of maturity, and second, ratably to the remaining installments of the term loan. We may voluntarily repay outstanding loans under the New Credit Facility at any time without premium or penalty, other than customary
breakage costs with respect to Eurodollar loans.

In connection with the borrowings made under the New Credit Facility, we
incurred approximately $8.2 million in debt issuance costs. These amounts are classified within other assets in the accompanying balance sheets and are being amortized over the life of the New Credit Facility. The unamortized amount of debt issuance
costs as of April 1, 2006 related to the New Credit Facility was $6.7 million.



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##### Table of Contents

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 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 New 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 New 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).



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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:



|                    |  |                  |  
|------------------- |  | ---------------- | -
|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;
| | - |  | -----------------------------------------



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

In connection with the borrowings
made under the Initial Notes, we incurred approximately $10.3 million in debt issuance costs. These amounts are classified within other assets in the accompanying balance sheets and are being amortized over the life of the notes. The unamortized
amount of debt issuance costs as of April 1, 2006 related to the notes was $9.1 million.

In 1998, we issued 300,000 shares of a new
series of preferred stock (the Preferred Stock), par value $.01 per share. Dividends on shares of the Preferred Stock were cumulative from the date of issue (whether or not declared). Such dividends accrued on a daily basis from the
original date of issue at an annual rate per share equal to 13% of the original purchase price per share, with such amount compounded annually. In conjunction with the Acquisition, we redeemed all 300,000 shares of the Preferred Stock at $100 per
share plus all accumulated and unpaid dividends.

Contractual Obligations. We are committed to make cash payments in the future on
the following types of agreements:



| |  |  | Long term debt; and
| | - |  | -------------------



| |  |  | Operating leases for stores and office facilities.
| | - |  | --------------------------------------------------



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##### Table of Contents

The following table reflects a summary of our contractual obligations as of April 1, 2006:



|                                                           |  |                        |         |                |   |            |  |            |         |                 |   |        |  |   |        
|---------------------------------------------------------- |  | ---------------------- | ------- | -------------- | - | ---------- |  | ---------- | ------- | --------------- | - | ------ |  | - | -------
|                                                           |  | Payments due by period
|                                                           |  | Total                  |         | Less than 1 yr |   | 1 to 3 yrs |  | 3 to 5 yrs |         | More than 5 yrs
|Long Term Debt (1)                                         |  | $                      | 313,314 |                | $ | 1,238      |  | $          | 3,300   |                 | $ | 3,300  |  | $ | 305,476
|Capital Lease Obligations                                  |  |                        | 1,718   |                |   | 443        |  |            | 621     |                 |   | 641    |  |   | 13     
|Operating Leases (2)                                       |  |                        | 160,473 |                |   | 33,734     |  |            | 58,542  |                 |   | 37,024 |  |   | 31,173 
|Interest on Long-Term Debt Obligations (3)                 |  |                        | 213,628 |                |   | 27,894     |  |            | 55,436  |                 |   | 54,968 |  |   | 75,330 
|                                                           |  |                        |         |                |   |            |  |            |         |                 |   |        |  |   |        
|Total Future Principal Payments on Contractual Obligations |  | $                      | 689,133 |                | $ | 63,309     |  | $          | 117,899 |                 | $ | 95,933 |  | $ | 411,992
|                                                           |  |                        |         |                |   |            |  |            |         |                 |   |        |  |   |        



---

|(1) | Does not include interest payable on outstanding long-term debt obligations, including 10.75% annual interest on $152.0 million aggregate principal amount of notes and interest on
approximately $165.0 million of floating rate debt under our new senior credit facility. See Description of new senior credit facility-Interest. Does not include mandatory annual prepayments of the term loan facility based on defined
excess cash flows. See Description of new senior credit facility-Mandatory prepayment.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Our operating leases generally have a 10-year duration. We renew approximately 40 to 50 operating leases annually. Rental payments on leases to be renewed could be subject to
change.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents interest payable on outstanding long-term debt obligations, including 10.75% annual interest on $152.0 million aggregate principal amount of notes and 7.1% annual
interest on $165.0 million of floating rate debt under our new senior credit facility. The assumed 7.1% interest on the new senior credit facility represents rates at April 1, 2006. The new senior credit facility has quarterly principal
payments of $412,000 and a final payment of $153,862,500 due March 1, 2012.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Off-balance sheet
arrangements.As of April 1, 2006 our only off-balance sheet arrangements were letters of credit, in the amount of $2.7 million, issued under our old credit facility primarily to insurance companies and remain outstanding
under our New Credit Facility.

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 New 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 New Credit Facility, we may attempt to
renegotiate the terms of the New Credit Facility with our lenders for further amendments to, or waivers of, the financial covenants of the New Credit Facility. We believe that our ability to repay the New 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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##### Table of Contents

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 shareholders 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;
| | - |  | -----------------------------



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



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



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



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

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.

Additional information regarding these factors and others
that could cause our actual results to differ materially from our expectations is included in our annual report on Form 10-K for the year ended December 31, 2005. The information appearing under Risk Factors on Form 10-K is
incorporated by reference into and made a part of this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks.
Market risk is the potential 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 2006. 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 31, 2005.

Our primary market risk exposure is interest rate risk. As of April 1, 2006, approximately $163.4 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 $163.4 million in long-term borrowings, our annual interest expense would change by
approximately $1.6 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 quarter ended April 1, 2006 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 2006. For further discussion, refer to our annual
report on Form 10-K for the year ended December 31, 2005.

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 starting on page 22 of our Annual Report on Form 10-K for the year ended December 31, 2005, filed with Securities Exchange Commission on March 27, 2006.

We may not complete the Merger or the Change of Control Offer

On May 1, 2006, Highmark
Inc. (Highmark) and our parent, ECCA Holdings Corporation (Holdings) announced that HVHC, Inc. (HVHC), a subsidiary of Highmark, and Holdings entered into a merger agreement pursuant to which Holdings will be
merged with a wholly-owned subsidiary of HVHC, with Holdings being the surviving corporation and becoming a wholly-owned subsidiary of HVHC (the Merger). As a result of the Merger, we will become an indirect wholly-owned subsidiary of
Highmark. The transaction is expected to close in the third quarter of 2006.

The Merger is subject to the approval of Holdingss
stockholders and customary regulatory approvals. If we do not complete the Merger, we will not be required to make a Change of Control Offer or repurchase any Notes.

ITEM 5. OTHER INFORMATION

Recent Developments

On May 1, 2006, Highmark and Holdings announced that HVHC and Holdings entered into a merger agreement pursuant to which Holdings will be merged with
a wholly-owned subsidiary of HVHC, with Holdings being the surviving corporation and becoming a wholly-owned subsidiary of HVHC. As a result of the Merger, we will become an indirect wholly-owned subsidiary of Highmark. The transaction is expected
to close in the third quarter of 2006.

The Merger, if completed, will constitute a Change of Control under the terms of the
indenture governing the Notes. Not later than 30 days following the Change of Control, we will be required to make a Change of Control Offer to the holders of our Notes, whereby each holder will have the right to require that we
repurchase all or any part of such holders Notes at a purchase price in cash equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any.

The Merger will also constitute an event of default under the terms of the New Credit Facility. Pursuant to the terms of the New Credit Facility, upon an
event of default, the lenders under the New Credit Facility have the right to terminate their commitments under the Revolver and declare all loans immediately due and payable.



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Vision Service Plan. Vision Service Plan (VSP) is a managed vision care network that
accounts for approximately $5.0 in annual revenues. We were removed from that network in September, 2005. In October 2005, a Kentucky court ordered injunction was issued preventing VSP from removing us from the network until further ordered by the
court. We expect this matter to be resolved in early 2006.



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Item 6. Exhibits and Reports on Form 8-K

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



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|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.
|     | 
|32.1 |  | 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.

(b) The Company filed a report on Form 8-K dated April 25, 2006 under Item 8.01.. Other
Events that reported the Company entered into a merger Agreement with HVHC, Inc., a subsidiary of Highmark Inc., pursuant to which the Company will be merged with a wholly-owned subsidiary of HVHC, Inc. The Company filed a report on Form 8-K dated
May 8, 2006 under Item 8.01. Other Events that reported the Company had announced the commencement of a cash tender offer for its outstanding 103/4% Senior Subordinated Notes due 2015.



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                                  |  |                                                     
|--------------------------------- |  | ----------------------------------------------------
|EYE CARE CENTERS OF AMERICA, INC.
|                                  | 
|Date:                             |  | May 16, 2006                                        
|                                  | 
|by:                               |  | /s/ Douglas C. Shepard                              
|                                  |  | Douglas C. Shepard                                  
|                                  |  | Executive Vice President and Chief Financial Officer