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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 FOR THE YEAR ENDED DECEMBER 31, 2008
 COMMISSION FILE NUMBER: 0-29302
 TLC VISION CORPORATION
  NEW BRUNSWICK, CANADA
    
    980151150(State or jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)5280 SOLAR DRIVE, SUITE 300
    
    L4W 5M8MISSISSAUGA, ONTARIO
    
    (Zip Code)(Address of principal executive offices)Registrants telephone, including area code:
    
    (905) 602-2020
      
 o þ
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  Large accelerated filer o
    
    Accelerated filer
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    Non-accelerated filer
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    Smaller reporting company o(Do not check if a smaller reporting company)
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TABLE OF CONTENTS
 PART IITEM 1. BUSINESS
    
    3ITEM 1A. RISK FACTORS
    
    19ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    28ITEM 2. PROPERTIES
    
    28ITEM 3. LEGAL PROCEEDINGS
    
    28ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    29PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    
    30ITEM 6. SELECTED FINANCIAL DATA
    
    32ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    34ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    47ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    47ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    79ITEM 9B. OTHER INFORMATION
    
    82PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF AND CORPORATE GOVERNANCE
    
    82ITEM 11. EXECUTIVE COMPENSATION
    
    82ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    82ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    83ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    83PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    83SIGNATURES
    
    84EX-21EX-23EX-31.1EX-31.2EX-32.1EX-32.2
  
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Vision
 
  
   ®
  Vision
  ,
 3




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
    
    Myopia (nearsightedness) means the eye is longer than normal resulting in difficulty
seeing distant objects as clearly as near objects.
    
    Hyperopia (farsightedness) means the eye is shorter than normal resulting in difficulty
seeing near objects as clearly as distant objects.
    
    Astigmatism means the cornea is oval-shaped resulting in blurred vision.
    
    Presbyopia is the loss of lens and eye muscle flexibility due to the natural aging
process, causing difficulty in focusing on near objects and usually corrected by reading
glasses. Because vision correction surgery cannot reverse the aging process, presbyopia
cannot be corrected surgically. However, there are surgical and non-surgical techniques
available that can effectively manage presbyopia.
  Eyeglasses.
 Contact Lenses.
 Surgical Procedures. Vision
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##### Table of Contents




    
    LASIK (Laser In Situ Keratomileusis). LASIK corrects nearsightedness, farsightedness and
astigmatism by using an excimer laser to reshape the cornea. Because LASIK creates a
corneal flap to reshape the cornea and does not disrupt the front surface of the cornea, it
generally is less painful, has a quicker recovery period and shorter post-operative need
for steroid eye drops than other surgical procedures. LASIK is currently the most common
laser refractive procedure and may be the treatment of choice for patients desiring a more
rapid visual recovery.
    
    CustomLASIK. Widely introduced in 2003, CustomLASIK is a technologically supported
advancement to LASIK. CustomLASIK involves increased pre-operative diagnostic capabilities
that measure the eye from front to back using wavefront technology to create a three
dimensional corneal map. The information from that map guides the laser in customizing the
laser ablation to an individuals visual irregularities, beyond myopia and hyperopia.
CustomLASIK using wavefront technology has the potential to improve not only how much a
person can see, in terms of visual acuity measured by the standard 20/20 eye chart, but
also how well an individual can see in terms of contrast sensitivity and fine detail. This
translates to a reduced occurrence of night vision disturbances post-LASIK.
    
    PRK (Photorefractive Keratectomy). PRK corrects nearsightedness, farsightedness and
astigmatism by using an excimer laser to reshape the cornea without making a flap. During
PRK, the protective surface layer of the cornea (the epithelium) is removed prior to the
laser refractive treatment to reshape the cornea. This protective layer regenerates during
the first week after surgery. The risk of pain, infection and corneal scarring is higher
with PRK than with LASIK; however, the intra-operative risks are lessened with PRK because
no corneal flap is created.
    
    LASEK (Laser Assisted Sub-Epithelial Keratectomy). LASEK corrects nearsightedness,
farsightedness and astigmatism by using an excimer laser to reshape the cornea. Unlike
LASIK that creates a corneal flap, LASEK loosens and folds the protective outer layer of
the cornea (the epithelium) to the side prior to the laser refractive treatment. At the
completion of the laser refractive treatment the epithelium is put back in its original
position. This combines the advantages of LASIK with the safety of PRK. The risk of pain,
infection and corneal scarring is higher with LASEK than with LASIK; however, the
intra-operative risks are lessened with LASEK because the flap which is created is only in
the epithelium. The United States Food and Drug Administration (FDA) has not yet approved
use of the excimer laser for LASEK.
    
    AK (Astigmatic Keratotomy). AK corrects astigmatism by making microscopic incisions in
the cornea to relax and change the shape of the cornea.
    
    INTACS. INTACS corrects very low levels of nearsightedness (1.00 diopters to 3.00
diopters) by implanting rings in the cornea to reshape it rather than surgically altering
the cornea. INTACS may also be used to correct irregularities in the shape of the cornea
caused by some corneal dystrophies.
    
    CK (Conductive Keratoplasty). For patients age 40 and older, CK is designed for the
temporary reduction of farsightedness (+.75 to +3.25 diopters) or treat an aging change to
the focusing power of the eye called presbyopia. CK uses radio frequency instead of a
laser to reshape the cornea.
    
    PTK (Phototherapeutic Keratectomy). PTK treats abrasions, scars or other abnormalities
of the cornea caused by injury, disease or previous surgery. PTK uses an excimer laser to
remove superficial opacities and irregularities of the cornea to improve vision or reduce
symptoms of pain or discomfort due to an underlying eye condition.
    
    Refractive IOL Procedures. Intraocular lenses (IOLs) are permanent or semi-permanent,
artificial lenses that are implanted to replace or supplement the eyes natural crystalline
lens. While not a common procedure for correcting refractive errors, the placement of a
refractive IOL can help patients who are not candidates for laser refractive surgery. IOLs
have been used in the United States since the late 1960s to restore visual function to
cataract patients, and more recently are being used in refractive surgery procedures.
There are several types of refractive IOLs: phakic IOLs, multi-focal IOLs and accommodating
IOLs. Patient suitability and quality of visual outcome for each of these lens options
varies.
    5




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Vision
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Vision Business
Corporations Act
  Vision
 Refractive Centers
  
    
    a retail-oriented pricing strategy that includes an attractive entry-level price point
and logical increases tied to technology upgrades;
    
    direct-to-consumer communication that creates both brand awareness and potential LASIK
patients, utilizing broad-reach media, Internet, telephone, direct mail, email, alumni
and referral programs;
    
    a continued commitment to the co-management model, which allows primary care doctors
to provide the best clinical outcomes for their patients while retaining them in their
practices;
    
    providing continuing clinical education for our affiliate optometrists, as well as
practice development education and tools focused on educating their staffs;
    
    additional marketing to health plans and health plan members for increased penetration
in the managed care market;
    
    a best in class customer contact management center; and
    
    a continued commitment to a gold standard patient experience and high quality
patient outcomes.
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Doctors Services
  
    
    gain cost efficiencies across all offerings and balance those costs against near-term
market demand
    
    expand the Companys existing service and product offerings; and
    
    grow the number of mobile customers and seek complementary acquisitions to accelerate
this growth.
 Eye Care
 ® ®
 Other Strategic Initiatives Focus
    ®
 Vision Vision Vision
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Vision Vision Vision Vision Vision www.tlcvision.com www.lasik.com Vision
 ® Vision Vision
 Pricing
 Vision
  Co-management Model
 Vision Vision
 Vision
 Vision ®
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Sales and Marketing
 Vision
  Vision Vision-
 Contracts with Eye Doctors
  Vision
   10




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Vision
  Vision
   TM TM
 TM
  Vision Vision
 Vision
 Vision
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##### Table of Contents



Vision
   Vision Vision
 
    
    Under standard refractive mobile access agreements with surgeons, TLCVisionprovides
some or all of the following: laser platform and microkeratome equipment, certain related
supplies for the equipment (such as laser gases, per procedure cards and microkeratome
blades), laser operator, microkeratome technicians, maintenance and certain technology
upgrades. In addition, the Company may provide marketing assistance, coordination of
surgeon training and other support services. This access is provided on agreed upon dates
at either the surgeons offices or a third partys facility. In return, the surgeons pay a
per procedure fee for access services and generally agree to exclusively use TLCVisions
equipment for refractive surgery. The Company does not provide medical services to the
patients or any administrative services to the access surgeon customer.
    
    Under standard refractive fixed access agreements with surgeons, TLCVisiongenerally
provides the following: a fixed-base laser platform and microkeratome equipment, certain
related supplies for the equipment (such as laser gases, per procedure cards and
microkeratome blades), periodic maintenance and certain technology upgrades. In return, the
surgeons pay either a per procedure fee and guarantee a minimum number of procedures per
month, or a flat monthly fee plus the cost of per procedure cards and blades. In addition,
the surgeons generally agree to use exclusively TLCVisions equipment for refractive
surgery. The Company does not provide a laser operator, microkeratome technician, medical
services or any administrative services to the access surgeon customer.
    
    Under joint venture arrangements, TLCVisiondirectly or indirectly provides either
mobile or fixed-base laser access and the following: microkeratome equipment, certain
related supplies for the equipment (such as laser gases, per procedure cards and
microkeratome blades), laser operator, microkeratome technician, maintenance and certain
technology upgrades, the laser facility, management services which include administrative
services such as billing and collections, staffing for the refractive practice, marketing
assistance and funds and other support services. TLCVisionreceives an access fee and
management services fees in addition to being reimbursed for the direct costs paid by the
Company for the laser facility operations. In return, the surgeons generally agree to
exclusively use the Companys equipment for refractive surgery and/or not to compete with
the Company within a certain area. Neither TLCVisionnor the joint ventures provide medical
services to the patients.
  Vision
  12




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® ® ®
  Visions Vision
  Vision www.tlcvision.com www.lasik.com Vision www.tlcv.com
 Vision Vision www.sec.gov
 www.tlcv.com
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Vision
   United States
  14




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Vision
     Canada
   United States
  Vision
 15




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Federal Law.
      16




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
    
    Privacy Regulations designed to protect and enhance the rights of patients by providing
patient access to their PHI and controlling the use of their PHI;
    
    Security Regulations designed to protect electronic health information by mandating
certain physical, technical and administrative safeguards;
    
    Electronic Transactions and Code Sets Regulations designed to standardize electronic data
interchange in the health care industry;
    
    Standard Unique Employer Identifier Regulations designed to standardize employer
identification numbers used in certain electronic transactions; and
    
    Standard Unique Health Identifier for Health Care Providers Regulations designed to
standardize the identification of health care providers used in electronic transactions.
  State Law.
     17




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Canada
 Vision
 Vision
 Vision Vision
      Vision
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Visions
  Vision
  19




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,
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Vision
 
    
    macroeconomic conditions in the United States and Canada, including the availability
of discretionary income;
    
    general demand for eye-care services;
    
    the Companys public image in the marketplace;
    
    market acceptance of TLCVisionsvalue-oriented pricing strategy;
    
    the Companys ability to control costs;
    
    the Companys ability to execute its business strategy;
    
    the Companys ability to obtain adequate insurance against malpractice claims and
reduce the number of claims;
    
    concerns about the safety and effectiveness of laser vision correction;
    
    competitive factors;
    
    regulatory developments;
    
    the Companys ability to retain and attract qualified personnel; and
    
    doctors ability to obtain adequate insurance against malpractice claims at reasonable
rates.
  Vision. Vision
 Visions Visions
 Vision
  21




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Vision
  Vision
 
    
    its cost, particularly since laser vision correction typically is not covered by
government or private insurers;
    
    general resistance to surgery;
    
    the fact that effective and less expensive alternative methods of correcting
refractive vision disorders are widely available;
    
    the lack of long-term follow-up data;
    
    the possibility of unknown side effects; and
    
    reported adverse events or other unfavorable publicity involving patient outcomes from
laser vision correction.
    
    
    foreign body sensation;
    
    pain or discomfort;
    
    sensitivity to bright lights;
    
    blurred vision;
    
    dryness or tearing;
    
    fluctuation in vision;
    
    night glare;
    
    poor or reduced visual quality;
    
    overcorrection or under-correction;
    
    regression; and
    
    corneal flap or corneal healing complications.
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Vision Vision Vision
  Vision
 VISIONS
 Visions
 
    
    the Companys ability to effectively penetrate the laser vision correction market;
    
    success of its patient acquisition strategies;
    
    the Companys ability to execute its business strategy;
    
    new technological innovations and products;
    
    changes in government regulations;
    
    adverse regulatory action;
    
    public concerns about the safety and effectiveness of laser vision correction;
    
    loss of key management;
    
    announcements of non-routine events such as acquisitions or litigation;
    
    variations in TLCVisionsfinancial results;
    
    fluctuations in competitors stock prices;
    
    the issuance of new or changed stock market analyst reports and recommendations
concerning our common shares or competitors stock;
    
    changes in earnings estimates by securities analysts;
    
    the Companys ability to meet analysts projections;
    
    changes in the market for medical services; or
    
    general economic, political and market conditions.
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Vision
  Visions
 
    
    cost-effectively generate procedures through advertising programs;
    
    develop consumer advertising as a core competency in the Company; and
    
    maintain a reliable contact management center, including call center operations and
lead follow-up programs.
    
    
    the integration of operations and technologies into existing platforms;
    
    hiring and training personnel to staff the center;
    
    developing and implementing effective marketing programs to attract potential patients
to the center; and
    
    managing the losses incurred during the development and ramp-up period.
  
    
    identifying unanticipated liabilities and contingencies;
    
    diversion of management attention; and
    
    possible adverse effects on operating results resulting from:
 
    
    possible future goodwill impairment;
    
    increased interest costs;
    
    the issuance of additional securities; and
    
    increased costs resulting from difficulties related to the integration of the
acquired businesses.
  
    
    the availability of attractive acquisition opportunities;
    
    the availability of capital to complete acquisitions;
    
    the availability of working capital to fund the operations of acquired businesses;
and
    
    the effect of existing and emerging competition on operations.
 Vision
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Visions
 
    
    implement upgraded operations, information technologies and financial systems,
procedures and controls;
    
    hire and train new staff and managerial personnel;
    
    adapt or amend the business structure to comply with present or future legal
requirements affecting arrangements with doctors, including state prohibitions on
fee-splitting, corporate practice of optometry and medicine and referrals to facilities
in which doctors have a financial interest;
    
    obtain regulatory approvals, where necessary, and comply with licensing requirements
applicable to doctors and facilities operated, and services offered, by doctors; and
    
    successfully integrate acquisitions into our existing business model.
     Visions
 Vision
  Vision Vision
 Vision
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Visions Vision
   Vision Vision
  Visions Vision
  Vision
 Vision
 Vision Vision
 26




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Vision Vision
  Vision
    Visions
  Visions Visions
 27




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VISIONS
 Vision
 Vision Vision Visions
  Vision Vision Visions
   
   
  Vision Vision Vision
 
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Visions
    Visions
 Vision
 Vision Vision,
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®
 Vision
 
  
    THETORONTO
    
    NASDAQSTOCK
    
    GLOBALEXCHANGE
    
    MARKETHIGH
    
    LOW
    
    HIGH
    
    LOW2007First Quarter March 31, 2007
    
    Cdn$7.13
    
    
    Cdn$6.02
    
    
    $
    6.00
    
    
    $
    5.10Second Quarter June 30, 2007
    
    
    6.80
    
    
    
    5.45
    
    
    
    6.06
    
    
    
    5.10Third Quarter September 30, 2007
    
    
    5.45
    
    
    
    3.17
    
    
    
    5.21
    
    
    
    3.06Fourth Quarter December 31, 2007
    
    
    3.71
    
    
    
    2.02
    
    
    
    3.79
    
    
    
    2.082008First Quarter March 31, 2008
    
    Cdn$3.13
    
    
    Cdn$0.98
    
    
    $
    3.17
    
    
    $
    0.96Second Quarter June 30, 2008
    
    
    1.62
    
    
    
    1.03
    
    
    
    1.58
    
    
    
    0.99Third Quarter September 30, 2008
    
    
    1.39
    
    
    
    0.80
    
    
    
    1.37
    
    
    
    0.74Fourth Quarter December 31, 2008
    
    
    0.79
    
    
    
    0.16
    
    
    
    0.74
    
    
    
    0.14
   30




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The information contained in this Performance Graph section shall not be deemed to be
soliciting material or filed or incorporated by reference in future filings with the SEC, or
subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into a document filed under the Securities Act of 1933,
as amended, or the Exchange Act.
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $100 invested on 12/31/03 in stock & index-including reinvestment of dividends.
Fiscal year ending December 31.Copyright@ 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. 12/31/03
    
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08TLC Vision Corporation
    
    
    
    100.00
    
    
    
    
    157.16
    
    
    
    
    97.29
    
    
    
    
    78.88
    
    
    
    
    50.23
    
    
    
    
    2.56S&P/TSX Composite
    
    
    
    100.00
    
    
    
    
    114.48
    
    
    
    
    142.10
    
    
    
    
    166.63
    
    
    
    
    183.01
    
    
    
    
    122.61NASDAQ Health Services
    
    
    
    100.00
    
    
    
    
    127.29
    
    
    
    
    135.26
    
    
    
    
    141.82
    
    
    
    
    142.06
    
    
    
    
    100.14
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Vision
 YEAR ENDEDDECEMBER 31,(U.S. dollars, in thousands except per share amounts and operating data)
    
    2004(2)
    
    2005(3)
    
    2006(4)
    
    2007(5)
    
    2008(6)STATEMENT OF OPERATIONS DATANet revenues
    
    $
    242,481
    
    
    $
    255,547
    
    
    $
    277,853
    
    
    $
    298,414
    
    
    $
    275,668Cost of revenues (excluding amortization)
    
    
    168,796
    
    
    
    178,572
    
    
    
    192,937
    
    
    
    209,084
    
    
    
    194,938Gross profit
    
    
    73,685
    
    
    
    76,975
    
    
    
    84,916
    
    
    
    89,330
    
    
    
    80,730General and administrative
    
    
    26,747
    
    
    
    36,458
    
    
    
    34,476
    
    
    
    34,819
    
    
    
    28,016Marketing and sales
    
    
    18,702
    
    
    
    21,714
    
    
    
    27,791
    
    
    
    42,979
    
    
    
    42,725Impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,659
    
    
    
    85,047Income (loss) from continuing operations, net of tax
    
    
    41,402
    
    
    
    7,169
    
    
    
    13,680
    
    
    
    (35,300
    )
    
    
    (98,254
    )Income (loss) from discontinued operations, net of tax
    
    
    1,072
    
    
    
    950
    
    
    
    (2,161
    )
    
    
    (8,214
    )
    
    
    Net income (loss)
    
    
    42,474
    
    
    
    8,119
    
    
    
    11,519
    
    
    
    (43,514
    )
    
    
    (98,254
    )Income (loss) per share from continuing operations, diluted
    
    $
    0.58
    
    
    $
    0.10
    
    
    $
    0.20
    
    
    $
    (0.60
    )
    
    $
    (1.95
    )Income (loss) per share, diluted
    
    $
    0.60
    
    
    $
    0.11
    
    
    $
    0.17
    
    
    $
    (0.74
    )
    
    $
    (1.95
    )Weighted average number of Common
Shares outstanding, diluted
    
    
    71,088
    
    
    
    71,380
    
    
    
    69,580
    
    
    
    59,139
    
    
    
    50,319DECEMBER 31,2004(2)
    
    2005(3)
    
    2006(4)
    
    2007(5)
    
    2008(6)BALANCE SHEET DATACash and cash equivalents
    
    $
    33,435
    
    
    $
    31,729
    
    
    $
    28,917
    
    
    $
    12,925
    
    
    $
    4,492Working capital
    
    
    131,195
    
    
    
    66,896
    
    
    
    40,015
    
    
    
    (11,141
    )
    
    
    (99,478
    )Total assets
    
    
    304,007
    
    
    
    301,043
    
    
    
    294,302
    
    
    
    237,810
    
    
    
    136,982Long-term debt, excluding current portion
    
    
    9,991
    
    
    
    12,665
    
    
    
    15,122
    
    
    
    98,417
    
    
    
    16,500STOCKHOLDERS EQUITYCommon stock
    
    
    458,959
    
    
    
    450,703
    
    
    
    450,133
    
    
    
    337,473
    
    
    
    339,112Option and warrant equity
    
    
    2,872
    
    
    
    1,861
    
    
    
    1,806
    
    
    
    837
    
    
    
    745Accumulated other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (784
    )
    
    
    (1,545
    )Accumulated deficit
    
    
    (252,278
    )
    
    
    (244,159
    )
    
    
    (232,640
    )
    
    
    (275,404
    )
    
    
    (373,658
    )Total stockholders equity (deficit)
    
    
    209,553
    
    
    
    208,405
    
    
    
    219,299
    
    
    
    62,122
    
    
    
    (35,346
    )
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##### Table of Contents



YEAR ENDEDDECEMBER 31,2004(2)
    
    
    2005(3)
    
    
    2006(4)
    
    
    2007(5)
    
    
    2008(6)OPERATING DATA (unaudited)Number of majority owned eye care
centers
at end of period (7)
    
    
    59
    
    
    
    64
    
    
    
    67
    
    
    
    66
    
    
    
    66Number of minority owned eye care
centers
at end of period (1)
    
    
    9
    
    
    
    9
    
    
    
    9
    
    
    
    14
    
    
    
    9Number of TLCVision branded eye care
centers at end of period
    
    
    68
    
    
    
    73
    
    
    
    76
    
    
    
    80
    
    
    
    75Number of access service sitesRefractive
    
    
    326
    
    
    
    318
    
    
    
    327
    
    
    
    327
    
    
    
    320Mobile Cataract
    
    
    371
    
    
    
    563
    
    
    
    689
    
    
    
    444
    
    
    
    367Number of laser vision correction
procedures:Majority owned centers
    
    
    99,100
    
    
    
    101,000
    
    
    
    101,000
    
    
    
    105,700
    
    
    
    88,300Minority owned centers
    
    
    18,700
    
    
    
    20,000
    
    
    
    20,300
    
    
    
    21,400
    
    
    
    16,800Total TLCVision branded center
Procedures
    
    
    117,800
    
    
    
    121,000
    
    
    
    121,300
    
    
    
    127,100
    
    
    
    105,100Access
    
    
    78,600
    
    
    
    69,900
    
    
    
    65,900
    
    
    
    59,500
    
    
    
    44,100Total TLCVision branded refractive
Procedures
    
    
    196,400
    
    
    
    190,900
    
    
    
    187,200
    
    
    
    186,600
    
    
    
    149,200Mobile Cataract
    
    
    43,700
    
    
    
    49,000
    
    
    
    55,700
    
    
    
    56,900
    
    
    
    59,500
 
 (1)
    
    Minority owned centers primarily represent the Companys 30% interest in LECC centers.
 (2)
    
    In fiscal 2004, the selected financial data of the Company included:
 (a)
    
    an adjustment to the fair value of long-term receivables of $1.2 million;(b)
    
    other income of $25.8 million from the gain on sale of OccuLogix stock; and(c)
    
    an executive severance charge of $2.6 million.
 (3)
    
    In fiscal 2005, the selected financial data of the Company included:
   (4)
    
    In fiscal 2006, the selected financial data of the Company included:
 (a)
    
    an impairment of goodwill of $4.1 million, which related to discontinued operations;(b)
    
    gain on sales and issuances of subsidiary stock of $1.8 million;(c)
    
    severance charges totaling $1.0 million ($0.6 million net of minority interests);(d)
    
    net write-downs of assets and liabilities of $1.9 million ($1.1 million net of minority
interests);(e)
    
    income tax benefit of $5.3 million related to a partial reversal of the deferred tax
asset valuation allowance;(f)
    
    income tax benefit of $0.9 million related to IRC Section 382 and $1.5 million related to
deductible interest expense adjustments; and(g)
    
    consolidated results of OccuLogix for the three months ended March 31, 2006 before
deconsolidation effective April 1, 2006.
 (5)
    
    In fiscal 2007, the selected financial data of the Company included:
     33




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##### Table of Contents



(6)
    
    In fiscal 2008, the selected financial data of the Company included:
   (7)
    
    The Company reviews its definition of centers when there is a change in its level of
operating control and/or ownership at the center, or if the mode of service delivery at the
location is significantly altered. As a result, prior year figures may vary from previously
reported financials in order to better reflect changes in the Companys current portfolio of
centers.
 
    ®
  ® ® ® .
 ®
 ® ® ®
 34




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Vision
      Vision
  ,
  35




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FISCAL 2008 IMPAIRMENT CHARGES
 Investments and
    
    
    
    
    
    
    
    
    
    
    Definite-LivedOther Long-Term Assets
    
    
    Fixed Assets
    
    
    Goodwill
    
    
    Intangible Assets
    
    
    TotalRefractive Centers
    
    $
    
    
    
    $
    
    
    
    $
    66,843
    
    
    $
    4,658
    
    
    $
    71,501Refractive Access
    
    
    
    
    
    
    
    
    
    
    4,993
    
    
    
    1,500
    
    
    
    6,493Other Doctor Services
    
    
    2,478
    
    
    
    639
    
    
    
    1,555
    
    
    
    17
    
    
    
    4,689Corporate
    
    
    2,364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,364Total
    
    $
    4,842
    
    
    $
    639
    
    
    $
    73,391
    
    
    $
    6,175
    
    
    $
    85,047
 36




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37




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® ® ® .
  ®
 38




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® ® ®
 ®
            39




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40




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41




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42




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43




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Liquidity
   Vision
  ,
    44




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Credit Facility
        Contractual Obligations
  45




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PAYMENTS DUE BY PERIODLESS
    
    
    
    
    
    
    MORETHAN 1
    
    
    1 TO 3
    
    
    THAN 3CONTRACTUAL OBLIGATIONS
    
    TOTAL
    
    
    YEAR
    
    
    YEARS
    
    
    YEARSDebt
    
    $
    105,581
    
    
    $
    13,051
    
    
    $
    10,724
    
    
    $
    81,806Interest on debt
    
    25,411
    
    
    6,413
    
    
    11,137
    
    
    7,861Operating leases
    
    
    28,704
    
    
    
    7,810
    
    
    
    11,790
    
    
    
    9,104Inventory purchases
    
    
    12,600
    
    
    
    12,600
    
    
    
    
    
    
    
    Marketing contracts
    
    
    8,750
    
    
    
    2,750
    
    
    
    6,000
    
    
    
    Total
    
    $
    181,046
    
    
    $
    42,624
    
    
    $
    39,651
    
    
    $
    98,771
   Equity Transactions
         46




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Investments
  Interest Rate Risk
    Foreign Currency Risk
  
    47




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48




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/s/ Ernst & Young LLP 
 49




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YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006Revenues:Refractive centers
    
    $
    151,442
    
    
    $
    175,206
    
    
    $
    162,015Doctor services
    
    
    95,615
    
    
    
    96,697
    
    
    
    92,978Eye care
    
    
    28,611
    
    
    
    26,511
    
    
    
    22,860Total revenues
    
    
    275,668
    
    
    
    298,414
    
    
    
    277,853Cost of revenues (excluding amortization expense shown below):Refractive centers
    
    
    110,824
    
    
    
    127,024
    
    
    
    114,981Doctor services
    
    
    71,104
    
    
    
    70,061
    
    
    
    66,564Eye care
    
    
    13,010
    
    
    
    11,999
    
    
    
    11,392Total cost of revenues (excluding amortization expense shown
below)
    
    
    194,938
    
    
    
    209,084
    
    
    
    192,937Gross profit
    
    
    80,730
    
    
    
    89,330
    
    
    
    84,916General and administrative
    
    
    28,016
    
    
    
    34,819
    
    
    
    34,476Marketing and sales
    
    
    42,725
    
    
    
    42,979
    
    
    
    27,791Research and development, clinical and regulatory
    
    
    
    
    
    
    
    
    
    
    1,475Amortization of intangibles
    
    
    3,233
    
    
    
    3,398
    
    
    
    3,451Impairment of goodwill and other assets
    
    
    85,047
    
    
    
    7,659
    
    
    
    Other (income) expenses, net
    
    
    (339
    )
    
    
    2,753
    
    
    
    874158,682
    
    
    
    91,608
    
    
    
    68,067Operating (loss) income from continuing operations
    
    
    (77,952
    )
    
    
    (2,278
    )
    
    
    16,849Gain on sale of OccuLogix, Inc. stock
    
    
    
    
    
    
    899
    
    
    
    1,450Interest income
    
    
    734
    
    
    
    1,621
    
    
    
    2,330Interest expense
    
    
    (10,072
    )
    
    
    (5,778
    )
    
    
    (1,455
    )Minority interests
    
    
    (9,530
    )
    
    
    (8,921
    )
    
    
    (6,513
    )Loss from equity investments
    
    
    (560
    )
    
    
    (12,367
    )
    
    
    (2,636
    )(Loss) income from continuing operations before income taxes
    
    
    (97,380
    )
    
    
    (26,824
    )
    
    
    10,025Income tax (expense) benefit
    
    
    (874
    )
    
    
    (8,476
    )
    
    
    3,655(Loss) income from continuing operations
    
    
    (98,254
    )
    
    
    (35,300
    )
    
    
    13,680Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (8,214
    )
    
    
    (2,161
    )Net (loss) income
    
    $
    (98,254
    )
    
    $
    (43,514
    )
    
    $
    11,519(Loss) earnings per share  basic
    
    $
    (1.95
    )
    
    $
    (0.74
    )
    
    $
    0.17(Loss) earnings per share  diluted
    
    $
    (1.95
    )
    
    $
    (0.74
    )
    
    $
    0.17Weighted-average number of common shares outstanding  basic
    
    
    50,319
    
    
    
    59,139
    
    
    
    68,907Weighted-average number of common shares outstanding  diluted
    
    
    50,319
    
    
    
    59,139
    
    
    
    69,580
  50




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DECEMBER 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,492
    
    
    $
    12,925Accounts receivable, net
    
    
    16,870
    
    
    
    18,076Prepaid expenses, inventory and other
    
    
    14,214
    
    
    
    14,882Total current assets
    
    
    35,576
    
    
    
    45,883Restricted cash
    
    
    
    
    
    
    1,101Investments and other assets, net
    
    
    11,694
    
    
    
    17,524Goodwill
    
    
    28,570
    
    
    
    94,346Other intangible assets, net
    
    
    10,628
    
    
    
    17,020Fixed assets, net
    
    
    50,514
    
    
    
    61,936Total assets
    
    $
    136,982
    
    
    $
    237,810LIABILITIESCurrent liabilities:Accounts payable
    
    $
    17,897
    
    
    $
    17,177Accrued liabilities
    
    
    28,076
    
    
    
    28,115Current
maturities of long-term debt, including $82.7 million in default at December 31, 2008
    
    
    89,081
    
    
    
    11,732Total current liabilities
    
    
    135,054
    
    
    
    57,024Other long-term liabilities
    
    
    5,444
    
    
    
    5,023Long-term debt, less current maturities
    
    
    16,500
    
    
    
    98,417Minority interests
    
    
    15,330
    
    
    
    15,224Total liabilities
    
    
    172,328
    
    
    
    175,688STOCKHOLDERS EQUITYCommon stock, no par value; unlimited number authorized
    
    
    339,112
    
    
    
    337,473Option and warrant equity
    
    
    745
    
    
    
    837Accumulated other comprehensive loss
    
    
    (1,545
    )
    
    
    (784
    )Accumulated deficit
    
    
    (373,658
    )
    
    
    (275,404
    )Total stockholders (deficit) equity
    
    
    (35,346
    )
    
    
    62,122Total liabilities and stockholders (deficit) equity
    
    $
    136,982
    
    
    $
    237,810
   /s/ JAMES C. WACHTMAN
    
    
    
    /s/ WARREN S. RUSTANDJames C. Wachtman, Director
    
    
    
    Warren S. Rustand, Director
 51




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##### Table of Contents



YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006OPERATING ACTIVITIESNet (loss) income
    
    $
    (98,254
    )
    
    $
    (43,514
    )
    
    $
    11,519Adjustments to reconcile net income to net cash from operating
activities:Depreciation and amortization
    
    
    19,670
    
    
    
    18,859
    
    
    
    16,392Reimbursements of investments in research and development arrangements
    
    
    
    
    
    
    
    
    
    
    (300
    )Deferred taxes
    
    
    
    
    
    
    7,172
    
    
    
    (5,241
    )Minority interests
    
    
    9,530
    
    
    
    9,423
    
    
    
    7,022Gain on sales and issuances of subsidiary stock
    
    
    
    
    
    
    (899
    )
    
    
    (1,799
    )(Gain) loss on sales of subsidiaries
    
    
    (139
    )
    
    
    233
    
    
    
    Loss from equity investments
    
    
    560
    
    
    
    12,367
    
    
    
    2,636(Gain) loss on sales and disposals of fixed assets
    
    
    (269
    )
    
    
    (11
    )
    
    
    140Non-cash compensation expense
    
    
    1,391
    
    
    
    1,115
    
    
    
    1,444Write-down of OccuLogix inventory
    
    
    
    
    
    
    
    
    
    
    1,625Adjustments to the fair values of long-lived assets and liabilities
    
    
    
    
    
    
    
    
    
    
    294Impairment
    
    
    85,047
    
    
    
    16,950
    
    
    
    4,087Other
    
    
    561
    
    
    
    275
    
    
    
    84Changes in operating assets and liabilities, net of acquisitions and dispositions:Accounts receivable
    
    
    (626
    )
    
    
    392
    
    
    
    632Prepaid expenses, inventory and other current assets
    
    
    704
    
    
    
    (280
    )
    
    
    (3,165
    )Accounts payable and accrued liabilities
    
    
    (2,352
    )
    
    
    9,248
    
    
    
    (1,882
    )Cash provided by operating activities
    
    
    15,823
    
    
    
    31,330
    
    
    
    33,488INVESTING ACTIVITIESPurchases of fixed assets
    
    
    (3,534
    )
    
    
    (13,279
    )
    
    
    (11,493
    )Proceeds from sales of fixed assets
    
    
    1,259
    
    
    
    1,114
    
    
    
    681Proceeds from divestitures of investments and subsidiaries, net
    
    
    1,281
    
    
    
    1,619
    
    
    
    Proceeds from sale of OccuLogix, Inc. stock, net
    
    
    
    
    
    
    2,000
    
    
    
    2,456Distributions and loan payments received from equity investments
    
    
    2,107
    
    
    
    2,846
    
    
    
    3,613Reimbursements from research and development arrangements
    
    
    
    
    
    
    
    
    
    
    300Acquisitions and equity investments
    
    
    (8,862
    )
    
    
    (4,815
    )
    
    
    (7,839
    )OccuLogix, Inc. cash balance at time of deconsolidation
    
    
    
    
    
    
    
    
    
    
    (14,814
    )Proceeds from sales of short-term investments
    
    
    
    
    
    
    17,375
    
    
    
    10,325Purchases of short-term investments
    
    
    
    
    
    
    (5,800
    )
    
    
    (5,425
    )Other
    
    
    144
    
    
    
    123
    
    
    
    (12
    )Cash (used in) provided by investing activities
    
    
    (7,605
    )
    
    
    1,183
    
    
    
    (22,208
    )FINANCING ACTIVITIESDecrease (increase) in restricted cash
    
    
    1,101
    
    
    
    (66
    )
    
    
    (60
    )Proceeds from debt financing
    
    
    25,392
    
    
    
    89,717
    
    
    
    441Principal payments of debt financing and capital leases
    
    
    (33,070
    )
    
    
    (11,998
    )
    
    
    (6,479
    )Capitalized debt costs
    
    
    (534
    )
    
    
    (1,960
    )
    
    
    Distributions to minority interests
    
    
    (9,895
    )
    
    
    (9,454
    )
    
    
    (9,197
    )Purchases of treasury stock
    
    
    
    
    
    
    (117,569
    )
    
    
    Proceeds from issuances of OccuLogix, Inc. stock, net and cash acquired upon
consolidation
    
    
    
    
    
    
    
    
    
    
    233Proceeds from issuances of common stock
    
    
    355
    
    
    
    2,825
    
    
    
    970Cash used in financing activities
    
    
    (16,651
    )
    
    
    (48,505
    )
    
    
    (14,092
    )Net decrease in cash and cash equivalents during the period
    
    
    (8,433
    )
    
    
    (15,992
    )
    
    
    (2,812
    )Cash and cash equivalents, beginning of period
    
    
    12,925
    
    
    
    28,917
    
    
    
    31,729Cash and cash equivalents, end of period
    
    $
    4,492
    
    
    $
    12,925
    
    
    $
    28,917
  52




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COMMON STOCK
    
    
    
    
    
    
    TREASURY STOCKOPTION
    
    
    
    
    
    
    
    
    
    
    ACCUMULATEDAND`
    
    
    
    
    
    
    
    
    
    
    OTHERWARRANT
    
    
    
    
    
    
    
    
    
    
    COMPREHENSIVE
    
    
    ACCUMULATEDSHARES
    
    
    AMOUNT
    
    
    EQUITY
    
    
    SHARES
    
    
    AMOUNT
    
    
    LOSS
    
    
    DEFICIT
    
    
    TOTALBalance December 31, 2005
    
    
    68,691
    
    
    $
    450,703
    
    
    $
    1,861
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (244,159
    )
    
    $
    208,405Shares issued as part of
the employee share purchase
plan and 401(k) plan
    
    
    142
    
    
    
    740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    740Exercise of stock options
    
    
    258
    
    
    
    647
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    597Options expired or forfeited
    
    
    
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustment of utilized net
operating loss carry
forwards
    
    
    
    
    
    
    (3,116
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,116
    )Stock based compensation
    
    
    
    
    
    
    983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    983Changes in subsidiaries
stockholders equity
    
    
    
    
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,519
    
    
    
    11,519Balance December 31, 2006
    
    
    69,091
    
    
    $
    450,133
    
    
    $
    1,806
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (232,640
    )
    
    $
    219,299Shares issued as part of
the employee share purchase
plan and 401(k) plan
    
    
    70
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264Exercise of stock options
    
    
    979
    
    
    
    3,222
    
    
    
    (661
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,561Options expired or forfeited
    
    
    
    
    
    
    308
    
    
    
    (308
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,115Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    (117,569
    )
    
    
    
    
    
    
    
    
    
    
    (117,569
    )Retirement of treasury stock
    
    
    (20,000
    )
    
    
    (117,569
    )
    
    
    
    
    
    
    (20,000
    )
    
    
    117,569
    
    
    
    
    
    
    
    
    
    
    
    Adjustment related to
adoption of FIN 48
(see note
19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    750Comprehensive lossDeferred hedge loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (784
    )
    
    
    
    
    
    
    (784
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,514
    )
    
    
    (43,514
    )Balance December 31, 2007
    
    
    50,140
    
    
    $
    337,473
    
    
    $
    837
    
    
    
    
    
    
    $
    
    
    
    $
    (784
    )
    
    $
    (275,404
    )
    
    $
    62,122Shares issued as part of
the employee share purchase
plan and 401(k) plan
    
    
    180
    
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Exercise of stock options
    
    
    86
    
    
    
    259
    
    
    
    (89
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170Options expired or forfeited
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    1,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,391Changes in subsidiaries
stockholders equity
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )Comprehensive lossDeferred hedge loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (761
    )
    
    
    
    
    
    
    (761
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,254
    )
    
    
    (98,254
    )Balance December 31, 2008
    
    
    50,406
    
    
    $
    339,112
    
    
    $
    745
    
    
    
    
    
    
    $
    
    
    
    $
    (1,545
    )
    
    $
    (373,658
    )
    
    $
    (35,346
    )
  53




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##### Table of Contents



®
       YEAR ENDED DECEMBER 31,2007
    
    
    2006Total revenues
    
    $
    3,535
    
    
    $
    3,973Gross profit
    
    
    1,739
    
    
    
    1,861Impairment of goodwill
    
    
    9,291
    
    
    
    4,087Operating (loss) income
    
    
    (7,796
    )
    
    
    (2,405
    )(Loss) income from discontinued operations before income taxes
    
    
    (8,214
    )
    
    
    (2,914
    )Income tax benefit (expense)
    
    
    
    
    
    
    753(Loss) income from discontinued operations, net of tax
    
    $
    (8,214
    )
    
    $
    (2,161
    )
       54




---



##### Table of Contents



Buildings
    
    - 40 yearsComputer equipment and software
    
    - three to four yearsFurniture, fixtures and equipment
    
    - seven yearsLaser and medical equipment
    
    - five to seven yearsLeasehold improvements
    
    - shorter of useful life or initial term of the leaseVehicles and other
    
    - five years
         55




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##### Table of Contents



® ® ® .
 ®
 ® ® ®
 ®
 Vision
   56




---



##### Table of Contents



57




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##### Table of Contents



Vision
  ,
  58




---



##### Table of Contents



2008 Impairment
     FISCAL 2008 IMPAIRMENT CHARGESInvestments and
    
    
    
    
    
    
    
    
    
    
    Definite-LivedOther Long-Term Assets
    
    
    Fixed Assets
    
    
    Goodwill
    
    
    Intangible Assets
    
    
    TotalRefractive Centers
    
    $
    
    
    
    $
    
    
    
    $
    66,843
    
    
    $
    4,658
    
    
    $
    71,501Refractive Access
    
    
    
    
    
    
    
    
    
    
    4,993
    
    
    
    1,500
    
    
    
    6,493Other Doctor Services
    
    
    2,478
    
    
    
    639
    
    
    
    1,555
    
    
    
    17
    
    
    
    4,689Corporate
    
    
    2,364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,364Total
    
    $
    4,842
    
    
    $
    639
    
    
    $
    73,391
    
    
    $
    6,175
    
    
    $
    85,047
 59




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##### Table of Contents



2007 Impairment
    Acquisitions
     Divestitures
  60




---



##### Table of Contents



DECEMBER 31,2008
    
    
    2007Refractive centers
    
    $
    673
    
    
    $
    848Doctor servicesRefractive access
    
    
    2,802
    
    
    
    3,631Mobile cataract
    
    
    4,427
    
    
    
    4,083Other
    
    
    2,882
    
    
    
    3,315Eye careOptometric franchising
    
    
    5,243
    
    
    
    4,31216,027
    
    
    
    16,189Other corporate receivables
    
    
    843
    
    
    
    1,887$
    16,870
    
    
    $
    18,076
  
    
    Refractive centers accounts receivable are due principally from open-access surgeons
who utilize the Companys facilities and staff on a per-use basis (pursuant to their
contractual agreement). While the Company offers consumer financing options for LASIK
surgery, the credit risk is borne by the Companys third-party providers who perform an
independent credit evaluation on each potential patient before extending credit.
    
    Doctor services accounts receivable are generally due from surgeon and medical
facility partners who contract with the Company to use its mobile technology platform.
    
    Eye care accounts receivable represent fees due from franchisees pursuant to their
franchise agreements.
    DECEMBER 31,2008
    
    
    2007Prepaid expenses
    
    $
    3,341
    
    
    $
    3,758Inventory
    
    
    9,371
    
    
    
    8,986Other current assets
    
    
    1,502
    
    
    
    2,138$
    14,214
    
    
    $
    14,882
 61




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##### Table of Contents



DECEMBER 31,2008
    
    
    2007Equity method investments
    
    $
    4,059
    
    
    $
    7,022Cost method investments
    
    
    2,010
    
    
    
    3,625Long-term receivables
    
    
    2,771
    
    
    
    4,071Capitalized debt costs
    
    
    1,755
    
    
    
    1,785Other
    
    
    1,099
    
    
    
    1,021$
    11,694
    
    
    $
    17,524
   INVESTMENT % ATDECEMBER 31,2008
    
    2007OccuLogix (dba TearLab Corporation, Inc.)*.
    
    
    8
    %
    
    
    33
    %Laser Eye Centers of California
    
    
    30
    
    
    
    30Liberty Eye Surgery Center LLC
    
    
    49
    
    
    
    49Rockland Surgery Center, LP **
    
    
    
    
    
    
    38Eastern Oregon Regional Surgery Center, LLC
    
    
    49
    
    
    
    49Summit Ambulatory Surgical Center LLP
    
    
    24
    
    
    
    24TLC Oklahoma Doctors LLC
    
    
    25
    
    
    
    25TLC Northwest Ohio LLC
    
    
    25
    %
    
    
    25
    %
 
 *
    
    Ownership in OccuLogix was diluted to 8% resulting in
the Company no longer accounting for the results of OccuLogix under
the equity method of accounting as of December 31, 2008.**
    
    Rockland Surgery Center was divested during the year
ended December 31, 2008.    62




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##### Table of Contents



YEAR ENDEDDECEMBER 31, 2007Net sales
    
    $
    92Gross profit
    
    
    (2,307
    )Net loss from continuing operations
    
    
    (34,401
    )Net loss from discontinued operations
    
    
    (35,429
    )Net loss
    
    $
    (69,830
    )
   DOCTOR SERVICES
    
    
    EYE CAREREFRACTIVE
    
    
    REFRACTIVE
    
    
    MOBILE
    
    
    
    
    
    
    OPTOMETRICCENTERS
    
    
    ACCESS
    
    
    CATARACT
    
    
    OTHER
    
    
    FRANCHISING
    
    
    TOTALDecember 31, 2006
    
    
    53,747
    
    
    
    11,195
    
    
    
    10,806
    
    
    
    14,295
    
    
    
    6,105
    
    
    
    96,148Impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,636
    )
    
    
    
    
    
    
    (9,636
    )Acquired during the period
    
    
    8,521
    
    
    
    
    
    
    
    338
    
    
    
    
    
    
    
    
    
    
    
    8,859Disposals and other during the period
    
    
    (193
    )
    
    
    
    
    
    
    (93
    )
    
    
    (739
    )
    
    
    
    
    
    
    (1,025
    )December 31, 2007
    
    $
    62,075
    
    
    $
    11,195
    
    
    $
    11,051
    
    
    $
    3,920
    
    
    $
    6,105
    
    
    $
    94,346Impairment
    
    
    (66,843
    )
    
    
    (4,993
    )
    
    
    
    
    
    
    (1,555
    )
    
    
    
    
    
    
    (73,391
    )Acquired during the period
    
    
    7,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,729Disposals and other during the period
    
    
    (114
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114
    )December 31, 2008
    
    $
    2,847
    
    
    $
    6,202
    
    
    $
    11,051
    
    
    $
    2,365
    
    
    $
    6,105
    
    
    $
    28,570
  2008 and 2007 Acquired Goodwill
      63




---



##### Table of Contents



2008
    
    
    2007GROSS CARRYING
    
    
    ACCUMULATED
    
    
    GROSS CARRYING
    
    
    ACCUMULATEDAMOUNT
    
    
    AMORTIZATION
    
    
    AMOUNT
    
    
    AMORTIZATIONPractice management agreements
    
    $
    25,215
    
    
    $
    19,924
    
    
    $
    23,015
    
    
    $
    18,366Deferred contract rights
    
    
    3,870
    
    
    
    2,422
    
    
    
    11,081
    
    
    
    7,740Trade names
    
    
    630
    
    
    
    110
    
    
    
    5,870
    
    
    
    797Other
    
    
    4,936
    
    
    
    1,567
    
    
    
    5,500
    
    
    
    1,543Total
    
    $
    34,651
    
    
    $
    24,023
    
    
    $
    45,466
    
    
    $
    28,446
  2009
    
    $
    2,3492010
    
    
    2,3112011
    
    
    1,6752012
    
    
    1,3852013
    
    
    787
   DECEMBER 31,2008
    
    
    2007Land and buildings
    
    $
    12,286
    
    
    $
    12,285Computer equipment and software
    
    
    14,363
    
    
    
    14,483Furniture, fixtures and equipment
    
    
    7,943
    
    
    
    7,587Laser and medical equipment
    
    
    93,905
    
    
    
    95,360Leasehold improvements
    
    
    24,947
    
    
    
    24,640Vehicles and other
    
    
    5,938
    
    
    
    4,701159,382
    
    
    
    159,056Less accumulated depreciation
    
    
    108,868
    
    
    
    97,120Net book value
    
    $
    50,514
    
    
    $
    61,936
       64




---



##### Table of Contents



DECEMBER 31,2008
    
    
    2007Senior term loan; weighted average interest rate of 8.76% and 8.16% at
December 31, 2008 and 2007, respectively
    
    $
    76,667
    
    
    $
    82,748Revolving credit facility, weighted average interest rate of 6.60%
    
    
    6,000
    
    
    
    Capital lease obligations, payable through 2013, interest at various rates
    
    
    14,176
    
    
    
    17,389Sale-leaseback debt  interest imputed at 6.25%, due through October
2016, collateralized by building (Cdn $6.7 million and $7.4 million at
December 31, 2008 and 2007 respectively)
    
    
    5,453
    
    
    
    6,297Other
    
    
    3,285
    
    
    
    3,715105,581
    
    
    
    110,149Less current portion
    
    
    89,081
    
    
    
    11,732$
    16,500
    
    
    $
    98,417
  2009
    
    $
    13,0512010
    
    
    5,9102011
    
    
    4,8142012
    
    
    3,8062013
    
    
    2,451Thereafter
    
    
    75,549Total
    
    $
    105,581
  June 2007 Credit Facility
       65




---



##### Table of Contents



2009
    
    $
    6,6372010
    
    
    8502011
    
    
    8502012
    
    
    8502013
    
    
    850Thereafter
    
    
    72,630Total
    
    $
    82,667
  Capital Lease Obligations
  2009
    
    $
    5,5422010
    
    
    4,3362011
    
    
    3,2432012
    
    
    2,0402013
    
    
    770Thereafter
    
    
    12Total
    
    
    15,943Less interest portion
    
    
    1,767$
    14,176
 Sale-leaseback Transaction
   66




---



##### Table of Contents



2009
    
    Cdn$
    1,0502010
    
    
    1,0502011
    
    
    1,0552012
    
    
    1,1102013
    
    
    1,110Thereafter
    
    
    3,118Cdn$
    8,493
  Visions
       67




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##### Table of Contents



OUTSTANDING
    
    
    EXERCISABLEWEIGHTEDAVERAGE
    
    
    WEIGHTED
    
    
    
    
    
    
    WEIGHTEDREMAINING
    
    
    AVERAGE
    
    
    
    
    
    
    AVERAGEPRICE RANGE
    
    NUMBER OF
    
    
    CONTRACTUAL
    
    
    EXERCISE
    
    
    NUMBER OF
    
    
    EXERCISE(U.S.$)
    
    OPTIONS *
    
    
    LIFE
    
    
    PRICE
    
    
    OPTIONS *
    
    
    PRICE$0.20   $1.88
    
    
    1,225
    
    
    6.3 years
    
    $
    0.55
    
    
    
    115
    
    
    $
    1.31$2.44   $4.83
    
    
    2,059
    
    
    5.0 years
    
    
    3.57
    
    
    
    935
    
    
    
    3.64$5.95   $6.81
    
    
    773
    
    
    1.7 years
    
    
    6.37
    
    
    
    502
    
    
    
    6.35$8.19   $11.64
    
    
    610
    
    
    0.9 years
    
    
    10.42
    
    
    
    608
    
    
    
    10.424,667
    
    
    4.2 years
    
    $
    4.14
    
    
    
    2,160
    
    
    $
    6.06
 
 *
    
    Values in thousands.  OUTSTANDING
    
    
    EXERCISABLEWEIGHTEDAVERAGE
    
    
    WEIGHTED
    
    
    
    
    
    
    WEIGHTEDREMAINING
    
    
    AVERAGE
    
    
    
    
    
    
    AVERAGEPRICE RANGE
    
    NUMBER OF
    
    
    CONTRACTUAL
    
    
    EXERCISE
    
    
    NUMBER OF
    
    
    EXERCISE(CDN $)
    
    OPTIONS *
    
    
    LIFE
    
    
    PRICE
    
    
    OPTIONS *
    
    
    PRICE$0.25     $1.82
    
    
    105
    
    
    5.5 years
    
    Cdn$
    0.88
    
    
    
    21
    
    
    Cdn$
    1.82$2.98     $5.31
    
    
    138
    
    
    5.6 years
    
    
    3.82
    
    
    
    47
    
    
    
    4.22$7.51     $7.95
    
    
    57
    
    
    1.6 years
    
    
    7.59
    
    
    
    34
    
    
    
    7.64$11.02   $15.49
    
    
    48
    
    
    0.9 years
    
    
    12.75
    
    
    
    48
    
    
    
    12.75348
    
    
    4.3 years
    
    Cdn$
    4.79
    
    
    
    150
    
    
    Cdn$
    7.41
 
 *
    
    Values in thousands. 68




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##### Table of Contents



WEIGHTED
    
    
    WEIGHTED
    
    
    AGGREGATE
    
    
    AGGREGATEAVERAGE
    
    
    AVERAGE
    
    
    INTRINSIC
    
    
    INTRINSICEXERCISE PRICE
    
    
    EXERCISE PRICE
    
    
    VALUE
    
    
    VALUEOPTIONS *
    
    
    PER SHARE
    
    
    PER SHARE
    
    
    US OPTIONS
    
    
    CDN OPTIONSDecember 31, 2005
    
    
    3,536
    
    
    US$
    5.53
    
    
    Cdn$
    5.26Granted
    
    
    1,902
    
    
    
    5.51
    
    
    
    6.39Exercised
    
    
    (258
    )
    
    
    1.91
    
    
    
    3.97Forfeited
    
    
    (51
    )
    
    
    4.92
    
    
    
    4.80Expired
    
    
    (39
    )
    
    
    8.63
    
    
    
    11.28December 31, 2006
    
    
    5,090
    
    
    US$
    5.66
    
    
    Cdn$
    5.53Granted
    
    
    1,366
    
    
    
    3.21
    
    
    
    2.98Exercised
    
    
    (979
    )
    
    
    2.41
    
    
    
    3.57Forfeited
    
    
    (454
    )
    
    
    5.52
    
    
    
    8.51Expired
    
    
    (398
    )
    
    
    6.57
    
    
    
    4.75December 31, 2007
    
    
    4,625
    
    
    US$
    5.43
    
    
    Cdn$
    6.03Granted
    
    
    1,227
    
    
    
    0.50
    
    
    
    0.64Exercised
    
    
    (86
    )
    
    
    1.86
    
    
    
    1.82Forfeited
    
    
    (189
    )
    
    
    4.50
    
    
    
    7.97Expired
    
    
    (562
    )
    
    
    6.85
    
    
    
    9.02December 31, 2008
    
    
    5,015
    
    
    US$
    4.14
    
    
    Cdn$
    4.79
    
    
    US$
    0
    
    
    Cdn$
    0Exercisable at
December 31, 2008
    
    
    2,310
    
    
    US$
    6.06
    
    
    Cdn$
    7.41
    
    
    US$
    0
    
    
    Cdn$
    0
 
 *
    
    Values in thousands.    Vision
 2008
    
    2007
    
    2006Weighted-average risk free rate of interest
    
    
    2.19
    %
    
    
    3.57
    %
    
    
    4.48
    %Expected volatility
    
    
    64
    %
    
    
    56
    %
    
    
    60
    %Weighted-average expected award life
    
    4.9 years
    
    4.9 years
    
    4.1 yearsDividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
  Vision
 69




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##### Table of Contents



DECEMBER 31,2008
    
    
    2007Deferred tax asset:Net operating loss carry forwards
    
    $
    91,156
    
    
    $
    93,742Fixed assets
    
    
    243
    
    
    
    (134
    )Intangibles
    
    
    14,263
    
    
    
    9,451Investments
    
    
    15,989
    
    
    
    18,259Accruals and other reserves
    
    
    5,163
    
    
    
    4,697Tax credits
    
    
    166
    
    
    
    357Other
    
    
    13,780
    
    
    
    513Total deferred tax asset
    
    
    140,760
    
    
    
    126,885Valuation allowance
    
    
    (140,760
    )
    
    
    (126,885
    )Total deferred tax asset, net of valuation
allowance
    
    $
    
    
    
    $
    
       YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006Income tax (benefit) expense at the Canadian statutory rate of 36.12%
    
    $
    (35,174
    )
    
    $
    (8,142
    )
    
    $
    6,289Change in valuation allowance
    
    
    23,052
    
    
    
    15,098
    
    
    
    (6,246
    )Expenses not deductible for income tax purposes
    
    
    12,136
    
    
    
    216
    
    
    
    224State taxes
    
    
    605
    
    
    
    691
    
    
    
    633Canadian income tax
    
    
    269
    
    
    
    632
    
    
    
    180IRC Section 382 adjustments
    
    
    
    
    
    
    
    
    
    
    (3,415
    )Deductible interest expense adjustments
    
    
    
    
    
    
    
    
    
    
    (1,464
    )Rate differential on United States operations
    
    
    (14
    )
    
    
    (19
    )
    
    
    144Income tax expense (benefit) from continuing operations
    
    
    874
    
    
    
    8,476
    
    
    
    (3,655
    )Discontinued operations income tax (benefit) expense
    
    
    
    
    
    
    
    
    
    
    (753
    )Income tax expense (benefit)
    
    $
    874
    
    
    $
    8,476
    
    
    $
    (4,408
    )
 70




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##### Table of Contents



YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006Current:Canada
    
    $
    269
    
    
    $
    632
    
    
    $
    180United States  federal
    
    
    
    
    
    
    
    
    
    
    129United States  state
    
    
    605
    
    
    
    691
    
    
    
    524Other
    
    
    
    
    
    
    (19
    )
    
    
    $
    874
    
    
    $
    1,304
    
    
    $
    833Deferred:United States  federal
    
    $
    
    
    
    $
    6,899
    
    
    $
    (4,165
    )United States  state
    
    
    
    
    
    
    273
    
    
    
    (323
    )$
    
    
    
    $
    7,172
    
    
    $
    (4,488
    )Income tax expense (benefit) from continuing operations
    
    $
    874
    
    
    $
    8,476
    
    
    $
    (3,655
    )
     71




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##### Table of Contents



YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006Other
(income) expense:(Gain) loss on sales and disposals of fixed assets
    
    $
    (269
    )
    
    $
    (11
    )
    
    $
    140Adjustments to the fair values of long-lived
assets and liabilities
    
    
    
    
    
    
    
    
    
    
    294Center closing costs
    
    
    
    
    
    
    1,352
    
    
    
    234(Gain) loss on sales of subsidiaries
    
    
    (139
    )
    
    
    233
    
    
    
    Gain on sales and issuances of subsidiary stock
    
    
    
    
    
    
    
    
    
    
    (349
    )Reimbursements from previous research and
development arrangements
    
    
    
    
    
    
    
    
    
    
    (300
    )Severance accruals for employees under terms of
employment contracts
    
    
    
    
    
    
    1,268
    
    
    
    229OccuLogix severance accruals
    
    
    
    
    
    
    
    
    
    
    820Miscellaneous
expense (income)
    
    
    69
    
    
    
    (89
    )
    
    
    (194
    )$
    (339
    )
    
    $
    2,753
    
    
    $
    874
    YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006Net (loss) income from continuing operations
    
    $
    (98,254
    )
    
    $
    (35,300
    )
    
    $
    13,680Net (loss) income from continuing operations
    
    
    
    
    
    
    (8,214
    )
    
    
    (2,161
    )Net (loss) income
    
    $
    (98,254
    )
    
    $
    (43,514
    )
    
    $
    11,519Weighted-average shares outstanding  basic
    
    
    50,319
    
    
    
    59,139
    
    
    
    68,907Stock options *
    
    
    
    
    
    
    
    
    
    
    673Weighted-average shares outstanding  diluted
    
    
    50,319
    
    
    
    59,139
    
    
    
    69,580(Loss) earnings per share from continuing operations
    
    $
    (1.95
    )
    
    $
    (0.60
    )
    
    $
    0.20(Loss) earnings per share from continuing operations, diluted
    
    $
    (1.95
    )
    
    $
    (0.60
    )
    
    $
    0.20(Loss) earnings per share
    
    $
    (1.95
    )
    
    $
    (0.74
    )
    
    $
    0.17(Loss) earnings per share, diluted *
    
    $
    (1.95
    )
    
    $
    (0.74
    )
    
    $
    0.17
 
 *
    
    The effects of including the incremental shares associated with options
and warrants are anti-dilutive for years ended December 31, 2008 and 2007 and
are not included in weighted-average shares outstanding-diluted. The total
weighted-average number of options with exercise prices less than the average
closing price of the Companys common stock was 0.2 million for the year ended
December 31, 2008. 72




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##### Table of Contents



2009
    
    $
    7,8102010
    
    
    6,7312011
    
    
    5,0592012
    
    
    3,7122013
    
    
    2,069Thereafter
    
    
    3,323$
    28,704
  2009
    
    
    2,7502010
    
    
    3,0002011
    
    
    3,000$
    8,750
 TM TM
     Vision Vision Vision Vision
   73




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##### Table of Contents




    
    Refractive Centers: The refractive centers business provides a significant
portion of the Companys revenue and is in the business of providing corrective laser
surgery (principally LASIK) in fixed sites typically branded under the TLC name.
    
    Doctor Services: The doctor services business provides a variety of services and
products directly to doctors and the facilities in which they perform surgery. It consists
of the following segments:
 
    
    Mobile Cataract: The mobile cataract segment provides technology and diagnostic
equipment and services to doctors and hospitals to support cataract surgery as well as
treatment of other eye diseases.
    
    Refractive Access: The refractive access segment assists surgeons in providing
corrective laser surgery in their own practice location by providing refractive
technology, technicians, service and practice development support at the surgeons
office.
    
    Other: The Company has ownership interests in businesses that manage surgical and
secondary care centers. None of these businesses meets the quantitative criteria to be
disclosed separately as a reportable segment and they are included in Other for
segment disclosure purposes.
 
    
    Eye Care: The eye care business consists of two business segments:
 
    
    Optometric Franchising: The optometric franchising segment provides marketing,
practice development and purchasing power to independently-owned and operated
optometric practices in the United States and Canada.
    
    Age-Related Macular Degeneration (AMD): The AMD segment includes the Companys
ownership interest in OccuLogix, which is a health care company currently focused on
ophthalmic devices for the diagnosis and treatment of age-related eye diseases. During
the three months ended December 31, 2008, the Companys ownership level in OccuLogix
was diluted to a level below 20%, resulting in the Company no longer accounting for
the results of OccuLogix under the equity method of accounting on a prospective basis.
     74




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##### Table of Contents



DOCTOR SERVICES
    
    
    EYE CAREYEAR ENDED DECEMBER 31, 2008
    
    REFRACTIVE
    
    
    REFRACTIVE
    
    
    MOBILE
    
    
    
    
    
    
    OPTOMETRIC(IN THOUSANDS)
    
    CENTERS
    
    
    ACCESS
    
    
    CATARACT
    
    
    OTHER
    
    
    FRANCHISING
    
    
    AMD
    
    
    TOTALRevenues
    
    $
    151,442
    
    
    $
    29,176
    
    
    $
    40,916
    
    
    $
    25,523
    
    
    $
    28,611
    
    
    $
    
    
    
    $
    275,668Cost of revenues (excluding amortization)
    
    
    110,824
    
    
    
    23,623
    
    
    
    30,294
    
    
    
    17,187
    
    
    
    13,010
    
    
    
    
    
    
    
    194,938Gross profit
    
    
    40,618
    
    
    
    5,553
    
    
    
    10,622
    
    
    
    8,336
    
    
    
    15,601
    
    
    
    
    
    
    
    80,730Segment expenses:Marketing and sales
    
    
    31,235
    
    
    
    140
    
    
    
    6,533
    
    
    
    484
    
    
    
    4,333
    
    
    
    
    
    
    
    42,725G&A, amortization and other
    
    
    7,765
    
    
    
    (299
    )
    
    
    3,931
    
    
    
    1,591
    
    
    
    51
    
    
    
    
    
    
    
    13,039Impairment *
    
    
    73,865
    
    
    
    6,493
    
    
    
    
    
    
    
    4,689
    
    
    
    
    
    
    
    
    
    
    
    85,047Minority interests
    
    
    912
    
    
    
    56
    
    
    
    
    
    
    
    3,383
    
    
    
    5,179
    
    
    
    
    
    
    
    9,530Earnings from equity investments
    
    
    1,820
    
    
    
    
    
    
    
    
    
    
    
    (1,260
    )
    
    
    
    
    
    
    
    
    
    
    560Segment (loss) profit
    
    $
    (74,979
    )
    
    $
    (837
    )
    
    $
    158
    
    
    $
    (551
    )
    
    $
    6,038
    
    
    $
    
    
    
    $
    (70,171
    )Corporate operating expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,871
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,338
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (874
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,254
    )Depreciation and amortization
    
    $
    12,423
    
    
    $
    2,939
    
    
    $
    2,742
    
    
    $
    1,516
    
    
    $
    50
    
    
    $
    
    
    
    $
    19,670Total assets
    
    $
    74,892
    
    
    $
    16,910
    
    
    $
    25,531
    
    
    $
    4,555
    
    
    $
    15,094
    
    
    $
    
    
    
    $
    136,982
 
 *
    
    Note: Refractive Centers impairment charge of
$73.9 million includes approximately $2.3 million
of allocated corporate related impairment charges. DOCTOR SERVICES
    
    
    EYE CAREYEAR ENDED DECEMBER 31, 2007
    
    REFRACTIVE
    
    
    REFRACTIVE
    
    
    MOBILE
    
    
    
    
    
    
    OPTOMETRIC(IN THOUSANDS)
    
    CENTERS
    
    
    ACCESS
    
    
    CATARACT
    
    
    OTHER
    
    
    FRANCHISING
    
    
    AMD
    
    
    TOTALRevenues
    
    $
    175,206
    
    
    $
    35,535
    
    
    $
    37,556
    
    
    $
    23,606
    
    
    $
    26,511
    
    
    $
    
    
    
    $
    298,414Cost of revenues (excluding amortization)
    
    
    127,024
    
    
    
    28,020
    
    
    
    26,889
    
    
    
    15,152
    
    
    
    11,999
    
    
    
    
    
    
    
    209,084Gross profit
    
    
    48,182
    
    
    
    7,515
    
    
    
    10,667
    
    
    
    8,454
    
    
    
    14,512
    
    
    
    
    
    
    
    89,330Segment expenses:Gain on sale of OccuLogix stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (899
    )
    
    
    (899
    )Marketing and sales
    
    
    32,543
    
    
    
    1,372
    
    
    
    4,252
    
    
    
    470
    
    
    
    4,342
    
    
    
    
    
    
    
    42,979G&A, amortization and other
    
    
    11,587
    
    
    
    64
    
    
    
    4,182
    
    
    
    2,198
    
    
    
    167
    
    
    
    
    
    
    
    18,198Impairment goodwill and other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,659
    
    
    
    
    
    
    
    
    
    
    
    7,659Minority interests
    
    
    1,270
    
    
    
    133
    
    
    
    
    
    
    
    2,981
    
    
    
    4,537
    
    
    
    
    
    
    
    8,921(Earnings) losses from equity investments
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    (1,115
    )
    
    
    
    
    
    
    13,396
    
    
    
    12,367Segment profit (loss)
    
    $
    2,696
    
    
    $
    5,946
    
    
    $
    2,233
    
    
    $
    (3,739
    )
    
    $
    5,466
    
    
    $
    (12,497
    )
    
    $
    105Corporate operating expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,772
    )Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,157
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,476
    )Net loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,300
    )Net loss from discontinued operations**
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,214
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,514
    )Depreciation and amortization from
continuing operations
    
    $
    11,930
    
    
    $
    2,486
    
    
    $
    2,863
    
    
    $
    1,425
    
    
    $
    58
    
    
    $
    
    
    
    $
    18,762Depreciation and amortization from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,859Total assets
    
    $
    159,912
    
    
    $
    27,979
    
    
    $
    26,154
    
    
    $
    8,750
    
    
    $
    15,015
    
    
    $
    
    
    
    $
    237,810
 
 **
    
    Note: Net loss from discontinued operations for the year ended December 31, 2007 includes a
goodwill impairment charge of $9.3 million and relates to the Other segment. 75




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DOCTOR SERVICES
    
    
    EYE CAREYEAR ENDED DECEMBER 31, 2006
    
    REFRACTIVE
    
    
    REFRACTIVE
    
    
    MOBILE
    
    
    
    
    
    
    OPTOMETRIC(IN THOUSANDS)
    
    CENTERS
    
    
    ACCESS
    
    
    CATARACT
    
    
    OTHER
    
    
    FRANCHISING
    
    
    AMD
    
    
    TOTALRevenues
    
    $
    162,015
    
    
    $
    36,685
    
    
    $
    35,058
    
    
    $
    21,235
    
    
    $
    22,860
    
    
    $
    
    
    
    $
    277,853Cost of revenues (excluding amortization)
    
    
    114,981
    
    
    
    27,543
    
    
    
    24,631
    
    
    
    14,390
    
    
    
    9,733
    
    
    
    1,659
    
    
    
    192,937Gross profit
    
    
    47,034
    
    
    
    9,142
    
    
    
    10,427
    
    
    
    6,845
    
    
    
    13,127
    
    
    
    (1,659
    )
    
    
    84,916Segment expenses:Gain on sale of OccuLogix stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,450
    )
    
    
    (1,450
    )Marketing and sales
    
    
    19,639
    
    
    
    413
    
    
    
    3,012
    
    
    
    437
    
    
    
    4,121
    
    
    
    169
    
    
    
    27,791G&A, amortization and other
    
    
    11,621
    
    
    
    265
    
    
    
    4,034
    
    
    
    1,773
    
    
    
    150
    
    
    
    4,083
    
    
    
    21,926Minority interests
    
    
    2,144
    
    
    
    284
    
    
    
    
    
    
    
    2,720
    
    
    
    4,080
    
    
    
    (2,715
    )
    
    
    6,513(Earnings) losses from equity investments
    
    
    (1,356
    )
    
    
    
    
    
    
    
    
    
    
    (1,817
    )
    
    
    
    
    
    
    5,809
    
    
    
    2,636Segment profit (loss)
    
    $
    14,986
    
    
    $
    8,180
    
    
    $
    3,381
    
    
    $
    3,732
    
    
    $
    4,776
    
    
    $
    (7,555
    )
    
    $
    27,500Corporate operating expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,350
    )Interest income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,655Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,680Net loss from discontinued operations ***
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,161
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,519Depreciation and amortization from continuing operations
    
    $
    10,017
    
    
    $
    2,146
    
    
    $
    2,683
    
    
    $
    1,337
    
    
    $
    58
    
    
    $
    34
    
    
    $
    16,275Depreciation and amortization from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    16,392Total assets
    
    $
    189,125
    
    
    $
    29,510
    
    
    $
    23,806
    
    
    $
    24,078
    
    
    $
    13,421
    
    
    $
    14,362
    
    
    $
    294,302
 
 ***
    
    Note: Net loss from discontinued operations for the year ended December 31, 2006 includes a
goodwill impairment charge of $4.1 million and relates to the other segment.  YEAR ENDED DECEMBER 31, 2008
    
    CANADA
    
    
    UNITED STATES
    
    
    TOTALRevenues from continuing operations
    
    $
    15,199
    
    
    $
    260,469
    
    
    $
    275,668Total fixed assets and intangibles
    
    $
    6,510
    
    
    $
    83,202
    
    
    $
    89,712
 YEAR ENDED DECEMBER 31, 2007
    
    CANADA
    
    
    UNITED STATES
    
    
    TOTALRevenues from continuing operations
    
    $
    16,608
    
    
    $
    281,806
    
    
    $
    298,414Total fixed assets and intangibles
    
    $
    8,445
    
    
    $
    164,857
    
    
    $
    173,302
 YEAR ENDED DECEMBER 31, 2006
    
    CANADA
    
    
    UNITED STATES
    
    
    TOTALRevenues from continuing operations
    
    $
    14,395
    
    
    $
    263,458
    
    
    $
    277,853Total fixed assets and intangibles
    
    $
    7,938
    
    
    $
    165,601
    
    
    $
    173,539
    76




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##### Table of Contents




    
    Level 1:Unadjusted quoted prices in active markets for identical assets and
liabilities.
    
    Level 2:Observable inputs other than those included in Level 1. For example, quoted
prices for similar assets or liabilities in active markets or quoted prices for identical
assets or liabilities in inactive markets.
    
    Level 3:Unobservable inputs reflecting managements own assumptions about the inputs
used in pricing the asset or liability.
         YEAR ENDED DECEMBER 31,2008
    
    2007
    
    2006Capital lease obligations relating to equipment purchases
    
    $
    3,110
    
    
    $
    8,513
    
    
    $
    11,129Option and warrant reduction
    
    
    92
    
    
    
    969
    
    
    
    55Retirement of treasury stock
    
    
    
    
    
    
    117,569
    
    
    
    Other comprehensive loss on interest rate swap
    
    
    761
    
    
    
    784
    
    
    
    
  YEAR ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006Interest
    
    $
    9,406
    
    
    $
    4,771
    
    
    $
    1,453Income taxes
    
    $
    1,246
    
    
    $
    1,143
    
    
    $
    1,814
 77




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##### Table of Contents



Vision Vision
 Vision
  Defined Contribution Plan (401k)
  Employee Stock Purchase Plan
 Vision
    THREE MONTHS
    
    THREE MONTHS
    
    THREE MONTHS
    
    THREE MONTHSENDED MARCH 31,
    
    ENDED JUNE 30,
    
    ENDED SEPTEMBER 30,
    
    ENDED DECEMBER 31,2008 (1)
    
    2008 (2)
    
    2008(3)
    
    2008(4)Revenues
    
    $
    90,355
    
    
    $
    74,097
    
    
    $
    57,534
    
    
    $
    53,682Gross profit
    
    
    32,035
    
    
    
    21,317
    
    
    
    16,075
    
    
    
    11,303Net income (loss) from continuing operations
    
    
    6,072
    
    
    
    (2,200
    )
    
    
    (6,711
    )
    
    
    (95,415
    )Net income (loss)
    
    
    6,072
    
    
    
    (2,200
    )
    
    
    (6,711
    )
    
    
    (95,415
    )Income (loss) per share from
 continuing
operations
    
    
    0.12
    
    
    
    (0.04
    )
    
    
    (0.13
    )
    
    
    (1.89
    )Income (loss) per share from
 continuing
operations, diluted
    
    
    0.12
    
    
    
    (0.04
    )
    
    
    (0.13
    )
    
    
    (1.89
    )Income (loss) per share
    
    
    0.12
    
    
    
    (0.04
    )
    
    
    (0.13
    )
    
    
    (1.89
    )Income (loss) per share, diluted
    
    
    0.12
    
    
    
    (0.04
    )
    
    
    (0.13
    )
    
    
    (1.89
    )
 78




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##### Table of Contents



THREE MONTHS
    
    THREE MONTHS
    
    THREE MONTHS
    
    THREE MONTHSENDED MARCH 31,
    
    ENDED JUNE 30,
    
    ENDED SEPTEMBER 30,
    
    ENDED DECEMBER 31,2007 (5)
    
    2007 (6)
    
    2007(7)
    
    2007(8)Revenues
    
    $
    82,346
    
    
    $
    80,081
    
    
    $
    69,693
    
    
    $
    66,294Gross profit
    
    
    27,834
    
    
    
    25,758
    
    
    
    18,833
    
    
    
    16,905Net income (loss) from continuing operations
    
    
    3,283
    
    
    
    530
    
    
    
    (13,603
    )
    
    
    (25,510
    )Net income (loss)
    
    
    3,478
    
    
    
    876
    
    
    
    (22,584
    )
    
    
    (25,284
    )Income (loss) per share from continuing
operations
    
    
    0.05
    
    
    
    0.01
    
    
    
    (0.27
    )
    
    
    (0.51
    )Income (loss) per share from continuing
operations, diluted
    
    
    0.05
    
    
    
    0.01
    
    
    
    (0.27
    )
    
    
    (0.51
    )Income (loss) per share
    
    
    0.05
    
    
    
    0.01
    
    
    
    (0.45
    )
    
    
    (0.51
    )Income (loss) per share, diluted
    
    
    0.05
    
    
    
    0.01
    
    
    
    (0.45
    )
    
    
    (0.51
    )
 
 (1)
    
    In the three months ended March 31, 2008, net income includes a $0.1 million gain on the sale
of subsidiaries.
 (2)
    
    In the three months ended June 30, 2008, net loss includes a $0.2 million gain on the sale
and disposal of fixed assets.
 (3)
    
    In the three months ended September 30, 2008, net loss includes:
 (a)
    
    a $1.5 million impairment charge to goodwill and other long-term assets; and(b)
    
    a $0.1 million gain on the sale and disposal of fixed assets.
 (4)
    
    In the three months ended December 31, 2008, net loss includes an $83.5 million impairment to
goodwill, definite-lived intangible assets, fixed assets and other long-term assets.(5)
    
    In the three months ended March 31, 2007, net income includes severance charges totaling $0.4
million.(6)
    
    In the three months ended June 30, 2007, net income includes a $0.9 million gain on sale of
OccuLogix common stock.
 (7)
    
    In the three months ended September 30, 2007, net loss includes:
 (a)
    
    a $12.4 million impairment charge to goodwill and other;(b)
    
    $0.2 million related to center closing costs; and(c)
    
    $0.2 million in loss on the sale of subsidiaries.
 (8)
    
    In the three months ended December 31, 2007, net loss includes:
 (a)
    
    a $4.5 million impairment to the Companys investments in the stand-alone ASCs;(b)
    
    severance charges totaling $0.7 million; and(c)
    
    $1.0 million related to center closing costs.
 
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
     79




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Internal
Control Integrated Framework.
  80




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.
  /s/ Ernst & Young LLP 
 81




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www.tlcv.com
 
   
   Vision
 Number of securitiesremaining available forNumber of securities
    
    
    Weighted-average
    
    
    future issuances underto be issued upon
    
    
    exercise price of
    
    
    equity compensationexercise of
    
    
    outstanding
    
    
    plans (excludingoutstanding options,
    
    
    options, warrants
    
    
    securities reflected inPlan category
    
    warrants and rights
    
    
    and rights
    
    
    column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    5,015
    
    
    $
    4.14
    (1)
    
    
    61Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    5,015
    
    
    $
    4.14
    (1)
    
    
    61
 
 (1)
    
    Represents the weighted-average exercise price of outstanding options, warrants and rights
denominated in U.S. dollars. The weighted-average exercise price of outstanding options, warrants
and rights denominated in Canadian dollars was Cdn$4.79.  82




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(a)
    
    The following documents are filed as part of the report:
 (1)
    
    Financial statements:
 Report of Independent Registered Public Accounting Firm.Consolidated Statements of Operations  Years Ended December 31, 2008, 2007 and 2006.Consolidated Balance Sheets as of December 31, 2008 and 2007.Consolidated Statements of Cash Flows  Years Ended December 31, 2008, 2007 and 2006.Consolidated Statements of Stockholders Equity  Years Ended December 31, 2008, 2007 and 2006.Notes to Consolidated Financial Statements
 (2)
    
    Financial statement schedules required to be filed by Item 8 and Item 15(d) of Form 10-K.
 Schedule II  Valuation and Qualifying Accounts and ReservesExcept as provided below, all schedules for which provision is made in the applicable accounting
regulations of the Commission either have been included in the consolidated financial statements
or are not required under the related instructions, or are inapplicable and therefore have been
omitted.
 (3)
    
    Exhibits required by Item 601 of Regulation S-K and by Item 14(c).
 See Exhibit Index.
 (b)
    
    Exhibits required by Item 601 of Regulation S-K.
 See Exhibit Index.
 83




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TLC VISION CORPORATIONBy  /s/ JAMES C. WACHTMANJames C. Wachtman, Chief Executive Officer   SIGNATURE
    
    TITLE
    
    DATED/s/ JAMES C WACHTMAN
    
    Chief Executive Officer and Director
    
    March 31, 2009James C. Wachtman/s/ STEVEN P. RASCHE

Steven P. Rasche
    
    Chief Financial Officer
    
    March 31, 2009/s/ WARREN S. RUSTAND

Warren S. Rustand
    
    Chairman of the Board of Directors and Director
    
    March 31, 2009/s/ RICHARD L. LINDSTROM, M.D.

Richard L. Lindstrom, M.D.
    
    Director
    
    March 31, 2009/s/ TOBY S. WILT

Toby S. Wilt
    
    Director
    
    March 31, 2009/s/ MICHAEL D. DEPAOLIS, O.D.

Michael D. DePaolis, O.D.
    
    Director
    
    March 31, 2009/s/ JAY T. HOLMES

Jay T. Holmes
    
    Director
    
    March 31, 2009/s/ OLDEN C. LEE

Olden C. Lee
    
    Director
    
    March 31, 2009
 84




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BALANCE AT
    
    
    
    
    
    
    
    
    
    DEDUCTIONS-
    
    BALANCE ATBEGINNING
    
    
    
    
    
    
    
    
    
    UNCOLLECTABLE
    
    ENDOF PERIOD
    
    PROVISION
    
    OTHER
    
    AMOUNTS
    
    OF PERIOD2006Provision for contractual allowances
and doubtful accounts receivable
    
    $
    4,229
    
    
    $
    (339
    )
    
    $
    (1,048
    )
    
    $
    (471
    )
    
    $
    2,371Provision against investments and other
assets
    
    
    2,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,314Deferred tax asset valuation allowance
    
    
    75,607
    
    
    
    (5,875
    )
    
    
    40,267
    
    
    
    
    
    
    
    109,9992007Provision for contractual allowances
and doubtful accounts receivable
    
    $
    2,371
    
    
    $
    (9
    )
    
    $
    (18
    )
    
    $
    (379
    )
    
    $
    1,965Provision against investments and other
assets
    
    
    2,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,314Deferred tax asset valuation allowance
    
    
    109,999
    
    
    
    7,926
    
    
    
    8,960
    
    
    
    
    
    
    
    126,8852008Provision for contractual allowances
and doubtful accounts receivable
    
    $
    1,965
    
    
    $
    1,709
    
    
    $
    (29
    )
    
    $
    (128
    )
    
    $
    3,517Provision against investments and other
assets
    
    
    2,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,314Deferred tax asset valuation allowance
    
    
    126,885
    
    
    
    23,037
    
    
    
    (9,174
    )
    
    
    
    
    
    
    140,748
    85




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EXHIBITNO.
    
    DESCRIPTION3.1
    
    Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Companys
10-K filed with the Commission on August 28, 1998)3.2
    
    Articles of Amendment (incorporated by reference to Exhibit 3.2 to the Companys 10-K
filed with the Commission on August 29, 2000)3.3
    
    Articles of Continuance (incorporated by reference to Exhibit 3.6 to the Companys
Registration Statement on Form S-4/A filed with the Commission on March 1, 2002 (file
no. 333-71532))3.4
    
    Articles of Amendment (incorporated by reference to Exhibit 4.2 to the Companys Post
Effective Amendment No. 1 on Form S-8 to the Companys Registration Statement on Form
S-4 filed with the Commission on May 14, 2002 (file no. 333-71532))3.5
    
    By-Laws of the Company (incorporated by reference to Exhibit 3.6 to the Companys
Registration Statement on Form S-4/A filed with the Commission on March 1, 2002 (file
no. 333-71532))4.1
    
    Shareholder Rights Plan Agreement dated March 4, 2005, as amended as of June 16,
2005, between the Company and CIBC Mellon Trust Company (incorporated by reference to
Exhibit 99.2 to the Companys 8-K filed with the Commission on June 20, 2005 (file
no. 000-29302))10.1*
    
    TLC Vision Corporation Amended and Restated Share Option Plan (incorporated by
reference to Exhibit 4.2 to the Companys Registration Statement on Form S-8 filed
with the Commission on June 23, 2004 (file no. 333-116769))10.2*
    
    TLC Corporation 2004 Employee Share Purchase Plan (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-8 filed with the
Commission on June 23, 2004 (file no. 333-116769))10.3*
    
    Employment Agreement with James C. Wachtman dated May 15, 2002 (incorporated by
reference to Exhibit 10.13 to the Companys 10-K for the year ended May 31, 2002)10.4*
    
    Employment Agreement with Steve Rasche dated July 1, 2004 (incorporated by reference
to Exhibit 10.17 to the Companys 10-K for the year ended December 31, 2004)10.5*
    
    Employment Agreement with Brian Andrew dated December 31, 2004 (incorporated by
reference to Exhibit 10.18 to the Companys 10-K for the year ended December 31,
2004)10.6
    
    Agreement and Plan of Merger By and Among TruVision, Inc. and TLC Wildcard Corp. and
TLC Vision Corporation and TLC Vision (USA) Corporation and Lindsay T. Atwood dated
as of October 27, 2005 (incorporated by reference to Exhibit 2.3 to the Companys
10-Q for the three and nine months ended September 30, 2005)10.7
    
    Amended and Restated Credit Agreement By and Among TLC Vision Corporation, TLC Vision
(USA) Corporation, CIT Capital Securities, LLC, CIT Healthcare, LLC and Lenders dated
as of June 21, 2007 (incorporated by reference to Exhibit 12.(B) to the Companys
Schedule TO-I/A filed June 22, 2007)10.8
    
    Amendment No. 1 to the Amended and Restated Credit Agreement dated as of June 21,
2007 (incorporated by reference to Exhibit 10.23 to the Companys 10-K for the year
ended December 31, 2007)10.9
    
    Amended and Restated Master Capital Lease Agreement with Advanced Medical Optics
(IntraLase Corp), portions of which omitted pursuant to a request for confidential
treatment filed separately with the Commission, dated December 18, 2007 (incorporated
by reference to Exhibit 10.1 to the Companys 10-Q for the three and nine months
ended September 30, 2008)10.10*
    
    Consulting Agreement with Richard L. Lindstrom, M.D. dated July 1, 2008 (incorporated
by reference to Exhibit 10.2 to the Companys 10-Q for the three and nine months
ended September 30, 2008)21
    
    List of the Companys Subsidiaries23
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    CEOs Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.31.2
    
    CFOs Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.
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EXHIBITNO.
    
    DESCRIPTION32.1
    
    CEOs Certification of periodic financial report pursuant to Section 906 of the32.2
    
    Sarbanes-Oxley Act of 2002, U.S.C. Section 1350
CFOs Certification of periodic financial report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section 1350
 
 *
    
    Management contract or compensatory plan arrangement. 87