SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended	Commission File	
 June 28, 2003	Number 0-20001	

NATIONAL VISION, INC.	
(Exact name of registrant as specified in its charter)	

GEORGIA		58-1910859	
(State or other jurisdiction		(I.R.S. Employer	
of incorporation or organization)		Identification No.)	

296 Grayson Highway			
Lawrenceville, Georgia		30045	
(Address of principal executive offices)		(Zip Code)	
			
Registrant’s telephone number, including area code:  (770) 822-3600
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
                                                         YES   þ           NO   ☐
Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2).
                                            YES   ☐           NO   þ  
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    
                                             YES   þ           NO   ☐
The number of shares of Common Stock of the registrant outstanding as of August 4, 2003 was 5,266,672, including shares that are part of the disputed claims reserve in the registrant's Chapter 11 Case.
- 1 -

 
 FORM 10-Q INDEX
		Page	
Item 1.	Financial Statements		
    			
     	Condensed Consolidated Balance Sheets -	 3	
     	June 28, 2003 (unaudited) and December 28, 2002		
     			
     	Condensed Consolidated Statements of Operations (unaudited) -	 5	
      	Three Months Ended June 28, 2003		
     	Three Months Ended June 29, 2002		
      			
     	Six Months Ended June 28, 2003	 6	
      	Six Months Ended June 29, 2002		
      			
	Condensed Consolidated Statements of Cash Flows (unaudited) -	 7	
	Six Months Ended June 28, 2003		
	Six Months Ended June 29, 2002		
      			
	Notes to Condensed Consolidated Financial Statements (unaudited)	 8	
      			
Item 2.	Management’s Discussion And Analysis Of	14	
	Financial Condition And Results Of Operations		
      			
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	29	
      			
Item 4.	Controls and Procedures	29	
    			
PART II	OTHER INFORMATION		
    			
Item 6.	Exhibits And Reports On Form 8-K	30	
     			
Signatures	31	
   		
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 	32	
- 2 -

PART I
FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	
NATIONAL VISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 28, 2003 and December 28, 2002
(In thousands except share information)
 	June 28, 2003	 	 	
 	(unaudited)	 	December 28, 2002	
ASSETS	 	 	 	 	 	
CURRENT ASSETS:	 	 	 	 	 	
     Cash and cash equivalents	$	10,613 	 	$	9,020 	
     Accounts receivable	 	 	 	 	 	
          (net of allowance: 2003 - $1,164; 2002 - $1,031)	 	2,638 	 	 	2,164 	
     Inventories	 	20,056 	 	 	17,928 	
     Other current assets	 	889 	 	 	979 	
     Deferred income tax asset	 	-- 	 	 	975 	
 	 	 	 	 	 	
          Total current assets	 	34,196 	 	 	31,066 	
  	 	 	 	 	 	
PROPERTY AND EQUIPMENT:	 	  	 	 	 	
     Equipment	 	20,798 	 	 	19,876 	
     Furniture and fixtures	 	8,353 	 	 	7,833 	
     Leasehold improvements	 	7,000 	 	 	6,709 	
     Construction in progress	 	494 	 	 	1,360 	
 	 	36,645 	 	 	35,778 	
     Less accumulated depreciation	 	(21,460)	 	 	(17,786)	
 	 	 	 	 	 	
     Net property and equipment	 	15,185 	 	 	17,992 	
   	 	 	 	 	 	
INTANGIBLE VALUE OF CONTRACTUAL RIGHTS	 	 	 	 	 	
     (net of accumulated amortization:  2003 - $15,637; 	 	 	 	 	 	
         2002 - - $11,934) 	 	97,268 	 	 	100,960 	
   	 	 	 	 	 	
OTHER ASSETS AND DEFERRED COSTS	 	 	 	 	 	
     (net of accumulated amortization: 2003 -- $821;	 	 	 	 	 	
         2002 - - $658) 	 	840 	 	 	1,004 	
 	$	147,489 	 	$	151,022 	
 3 -

	June 28, 2003	 	 	
	(unaudited)	 	December 28, 2002	
LIABILITIES AND SHAREHOLDERS' EQUITY	 	 	 	 	 	
CURRENT LIABILITIES:	 	 	 	 	 	
     Accounts payable	$	6,179 	 	$	3,445 	
     Accrued expenses and other current liabilities	 	26,436 	 	 	24,067 	
     Current portion, Senior Subordinated Notes	 	5,289 	 	 	3,824 	
          Total current liabilities	 	37,904 	 	 	31,336 	
 	 	 	 	 	 	
SENIOR SUBORDINATED NOTES	 	101,546 	 	 	105,882 	
 	 	 	 	 	 	
DEFERRED INCOME TAX LIABILITY	 	-- 	 	 	975 	
 	 	 	 	 	 	
COMMITMENTS AND CONTINGENCIES	 	 	 	 	 	
 	 	 	 	 	 	
SHAREHOLDERS' EQUITY:	 	 	 	 	 	
     Preferred stock, $1 par value; 5,084,400 shares	 	 	 	 	 	
         authorized, none issued	 	-- 	 	 	-- 	
     Common stock $0.01 par value; 10,000,000 shares authorized,	 	 	 	 	 	
         5,098,672 and 5,084,400 shares issued and outstanding at June 28, 2003	 	 	 	 	 	
         and December 28, 2002, respectively	 	50 	 	 	50 	
     Additional paid-in capital	 	25,078 	 	 	25,097 	
     Deferred stock compensation	 	(96)	 	 	(124)	
     Retained deficit	 	(16,832)	 	 	(12,064)	
     Accumulated other comprehensive income	 	(161)	 	 	(130)	
 	 	8,039 	 	 	12,829 	
 	 	 	 	 	 	
           Total shareholders' equity	$	147,489 		$	151,022 	
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
- 4 -

NATIONAL VISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share information)
(Unaudited)
 	Three months	 	Three months	
 	ended	 	ended	
 	June 28, 2003	 	June 29, 2002	
Retail sales, net	$	59,209 	 	$	58,178 	
Premium revenue	 	1,647 	 	 	664 	
 	 	 	 	 	 	
Total net sales	 	60,856 	 	 	58,842 	
Cost of goods sold	 	27,945 	 	 	26,254 	
 	 	 	 	 	 	
Total gross profit	 	32,911 	 	 	32,588 	
Selling, general & administrative expense	 	32,341 	 	 	31,063 	
 	 	 	 	 	 	
Operating income	 	570 	 	 	1,524 	
Interest expense, net	 	3,241 	 	 	3,564 	
 	 	 	 	 	 	
Loss from continuing operations before income taxes	 	(2,671)	 	 	(2,040)	
Income tax expense	 	-- 	 	 	-- 	
 	 	 	 	 	 	
Loss from continuing operations	 	(2,671)	 	 	(2,040)	
 	 	 	 	 	 	
Discontinued operations:	 	 	 	 	 	
     Operating income / (loss) from discontinued operations	 	(20)	 	 	484 	
     Loss on disposal	 	(30)	 	 	-- 	
Income / (loss) from discontinued operations, net of taxes	 	(50)	 	 	484 	
 	 	 	 	 	 	
Net loss	$	(2,721)	 	$	(1,556)	
 	 	 	 	 	 	
Basic net loss per share	 $	(0.54)	 	$	(0.31)	
 	 	 	 	 	 	
Diluted net loss per share	$	(0.54)	 	$	(0.31)	
- 5 -

 	Six months	 	Six months	
 	ended	 	ended	
 	June 28, 2003	 	June 29, 2002	
Retail sales, net	$	119,605 	 	$	116,954 	
Premium revenue	 	3,007 	 	 	661 	
 	 	 	 	 	 	
Total net sales	 	122,612 	 	 	117,615 	
Cost of goods sold	 	55,718 	 	 	51,791 	
 	 	 	 	 	 	
Total gross profit	 	66,894 	 	 	65,824 	
Selling, general & administrative expense	 	64,405 	 	 	62,596 	
 	 	 	 	 	 	
Operating income	 	2,489 	 	 	3,228 	
Interest expense, net	 	6,545 	 	 	7,144 	
 	 	 	 	 	 	
Loss from continuing operations before income taxes	 	(4,056)	 	 	(3,916)	
Income tax expense	 	--	 	 	-- 	
 	 	 	 	 	 	
Loss from continuing operations	 	(4,056)	 	 	(3,916)	
 	 	 	 	 	 	
Discontinued operations:	 	 	 	 	 	
     Operating income / (loss) from discontinued operations	 	(72)	 	 	940 	
     Loss on disposal	 	(77)	 	 	-- 	
Income / (loss) from discontinued operations, net of taxes	 	(149)	 	 	940 	
 	 	 	 	 	 	
Loss before cumulative effect of a change in accounting principle	 	(4,205)	 	 	(2,976)	
Cumulative effect of a change in accounting principle	 	(564)	 	 	-- 	
 	 	 	 	 	 	
Net loss	$	(4,769)	 	$	(2,976)	
 	 	 	 	 	 	
Basic net loss per share	$ 	(0.94)	 	$	(0.59)	
 	 	 	 	 	 	
Diluted net loss per share	$	(0.94)	 	$	(0.59)	
- 6 -

NATIONAL VISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 	Six months	 	Six months	
 	ended	 	ended	
 	June 28, 2003	 	June 29, 2002	
CASH FLOW FROM OPERATING ACTIVITIES:	 	 	 	 	 	
Net loss	$	(4,769)	 	 $	(2,976)	
Adjustments to reconcile net loss to	 	 	 	 	 	
     cash provided by operating activities:	 	 	 	 	 	
        Depreciation & amortization	 	8,105 	 	 	9,821 	
        Cumulative effect of a change in accounting principle	 	564 	 	 	-- 	
        Other	 	22 	 	 	144 	
     Changes in operating assets & liabilities:	 	  	 	 	 	
         Accounts receivable	 	(474)	 	 	1,446 	
         Inventories	 	(2,692)	 	 	(1,143)	
         Other current assets	 	90 	 	 	(371)	
         Accounts payable	 	2,734 	 	 	874 	
         Accrued expenses and other current liabilities	 	2,369 	 	 	(940)	
 	 	 	 	 	  	
Total adjustments	 	10,718 	 	 	9,831 	
 	 	 	 	 	 	
Net cash provided by operating activities	 	5,949 	 	 	6,855 	
 	 	 	 	 	 	
CASH FLOW FROM INVESTING ACTIVITIES:	 	 	 	 	 	
         Proceeds from sale of equipment	 	106 	 	 	-- 	
         Purchase of property & equipment	 	(1,591)	 	 	(2,153)	
 	 	 	 	 	 	
Net cash used in investing activities	 	(1,485)	 	 	(2,153)	
 	 	 	 	 	 	
CASH FLOW FROM FINANCING ACTIVITIES:	 	 	 	 	 	
         Advances on revolving credit facility	 	1,625 	 	 	7,232 	
         Payments on revolving credit facility	 	(1,625)	 	 	(7,232)	
         Repayments of principal on Senior	 	 	 	 	 	
             Subordinated Notes	 	(2,871)	 	 	(1,597)	
         Principal payments on other long-term debt	 	-- 	 	 	(12)	
 	 	 	 	 	 	
Net cash used in financing activities	 	(2,871)	 	 	(1,609)	
 	 	 	 	 	 	
Net increase in cash	 	1,593 	 	 	3,093 	
Cash, beginning of period	 	9,020 	 	 	9,846 	
 	 	 	 	 	 	
Cash, end of period	 $	10,613	 	$	12,939 	
- 7 -

NATIONAL VISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 2003
(Unaudited)
(1)  BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by National Vision, Inc.  (f.k.a. Vista Eyecare, Inc., “National Vision” or  the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  Although management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and  notes thereto.  In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented have  been  made. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending January 3, 2004.
(2)  DISCONTINUED OPERATIONS
During the second quarter of 2003, the Company closed ten vision centers.  Five closings were the result of Wal*Mart lease expirations.  The remaining five closures were under-performing Fred Meyer vision centers closed prior to their scheduled lease expiration. Through June 28, 2003, the Company has closed a total of 18 Wal*Mart vision centers, 5 vision centers in Fred Meyer and 2 vision centers on military bases.  Condensed information for these closed stores is presented below.  The net loss on disposal of these operations includes severance, closing costs and gains recorded from the sale of certain assets.   Historical operating results for these closed vision centers have been reclassified as discontinued operations and presented separately for all periods presented in the Condensed Consolidated Statements of Operations.
 	Three Months Ended	 	Six Months Ended	
 	June 28, 2003	 	June 29, 2002	 	June 28, 2003	 	June 29, 2002	
 	 	 	 	 	 	 	 	
Total net sales	$	297 	 	$	3,093 	 	$	1,702 	 	$	6,193 	
Operating income / (loss)	$	(20)	 	$	484  	 	$	(72)	 	$	940 	
Loss on disposal	$	(30)	 	$	-- 	 	$	(77)	 	$	-- 	
(3)  CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
The Company adopted Emerging Issues Task Force Issue No. 02-16, "Accounting by a Customer for Certain Consideration Received from a Vendor" ("EITF  02-16") at the beginning of the first quarter of 2003.  This issue addresses the method by which retailers account for vendor allowances.  Prior to fiscal 2003, the Company received vendor allowances through co-op advertising agreements, which were classified in the income statement as a reduction in advertising expense.  As a result of the adoption of EITF 02-16, certain vendor allowances, which formerly were treated as a reduction in advertising costs, are presented as a reduction of inventory cost and subsequently as a component of cost of goods sold.   On the first day of fiscal 2003, the Company recorded additional expense of $564,000 as the cumulative effect for this change in accounting principle.  This amount reflects the portion of vendor allowances that would have reduced inventory costs had this new accounting pronouncement been in effect in 2002.
(4)  EXTENDED WARRANTY PRODUCT
During the second quarter of 2003, the Company began selling an extended warranty plan that provides for free replacement of frames and lenses if broken, bent or damaged within 12 months of the date of purchase.  Revenue from the sale of these contracts is deferred and amortized over the life of the contract on a straight-line basis.  The cost to service the warranty claims is expensed as incurred.  As of June 28, 2003, the Company has recognized approximately $70,000 of revenue and deferred approximately $800,000 of revenue related to this product.
 8

(5)  SENIOR SUBORDINATED NOTES AND REVOLVING LINE OF CREDIT
The indenture governing the Company’s Senior Subordinated Notes provides for semi-annual payments of interest (on March 30 and September 30 of each year, to holders of record on March 15 and September 15, respectively).  The indenture also provides for semi-annual redemptions of notes (on February 28 and August 31 of each year, to holders of record on February 13 and August 15, respectively) in the amount of the "Excess Cash Flow" (if any) generated by the Company in the fiscal six-month period ending on the last day of December and June (for the February and the August redemptions, respectively).  Excess Cash Flow is defined as EBITDA (as defined in the indenture) plus or minus working capital changes less the sum of capital expenditures, cash interest payments and cash tax payments, and is limited to the extent that the Company must maintain a minimum cash balance of $3 million as of the measurement date.
Based on results for the six-month period ended June 28, 2003, the Company expects to make an excess cash repayment of approximately  $5.3 million, which includes $953,000 of additional principal based on prior periods' calculation.  This amount is presented as a current liability at June 28, 2003. 
On March 28, 2003 the Company made a semi-annual interest payment in the amount of $6.4 million.  On February 28, 2003, the Company made a principal redemption in the amount of $2.9 million, plus accrued interest of approximately $150,000.
The Company had no outstanding borrowings on its Revolving Credit Facility at June 28, 2003.  The Company's availability under the Revolving Credit Facility at June 28, 2003, after being reduced for letter of credit requirements, was approximately $2.8 million.
(6)  EARNINGS PER COMMON SHARE
The computation for basic and diluted earnings per share is summarized as follows (amounts in thousands except per share information):  
 	 	Three Months Ended	
 	 	June 28, 2003  	 	June 29, 2002 	
Net loss from continuing operations	 	$ 	(2,671)	 	 	$	(2,040)	 	
Net income / (loss) from discontinued operations	 	 	(50)	 	 	 	484 	 	
Net loss	 	 $	(2,721)	 	 	$	(1,556)	 	
 	 	 	 	 	 	 	 	 	
Weighted shares outstanding	 	 	5,099 	 	 	 	5,084 	 	
Less:  Unvested restricted stock	 	 	(56)	 	 	 	(84)	 	
 	 	 	5,043 	 	 	 	5,000 	 	
 	 	 	 	 	 	 	 	 	
Basic and diluted loss per share:	 	 		 	 	 		 	
     Loss from continuing operations	 	$	(0.53)	 	 	$	(0.41)	 	
     Income / (loss) from discontinued operations	 	 	(0.01)	 	 	 	0.10 	 	
Net loss per basic and diluted share	 	$	(0.54)	 	 	$	(0.31)	 	
 
- 9 -

 	 	Six Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
Net loss from continuing operations	 	$	(4,056)	 	 	$	(3,916)	 	
Net income / (loss) from discontinued operations	 	 	(149)	 	 	 	940 	 	
Cumulative effect of a change in accounting principle	 		(564)	 	 	 	-- 	 	
Net loss	 	  $	(4,769)	 	 	$	(2,976)	 	
 	 	 		 	 	 		 	
Weighted shares outstanding	 	 	5,092 	 	 	 	5,084 	 	
Less:  Unvested restricted stock	 	 	(28)	 	 	 	(84)	 	
 	 	 	5,064 	 	 	 	5,000 	 	
 	 			 	 			 	
Basic and diluted loss per share:	 	 		 	 	 		 	
     Loss from continuing operations	 	$	(0.80)	 	 	$	(0.77)	 	
     Income / (loss) from discontinued operations	 	 	(0.03)	 	 	 	0.18 	 	
     Cumulative effect of a change in accounting principle	 	 	(0.11)	 	 	 	-- 	 	
Net loss per basic and diluted share	 	$	(0.94)	 	 	$	(0.59)	 	
At June 28, 2003 and June 29, 2002, the Company had approximately 577,000 and 534,000 stock options and unvested restricted shares outstanding, respectively, which have been excluded from the computation of diluted earnings per share since they are anti-dilutive.
- 10 -

NATIONAL VISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 28, 2003
(Unaudited)
(7)  STOCK COMPENSATION/EQUITY TRANSACTIONS
The Company applies the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation".  Stock option awards continue to be accounted for in accordance with APB Opinion No. 25.  In October 2001, the Company granted stock options to eligible employees under the Company's employee stock option plan.  Because the number of shares to be issued and the per share strike price are certain, this stock option plan qualifies for fixed accounting treatment.  As the strike price equaled market value, the Company did not record compensation expense at the date of grant for these stock options.
Had compensation cost for this plan been determined based on the fair value at the grant date for awards in the first half of 2003 and 2002 consistent with the provisions of SFAS No. 123, the Company’s net earnings and earnings per share would have been reduced to the pro forma amounts indicated below (amounts in thousands except per share information):
 	 	Three Months Ended	 	Three Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
As reported:	 	 	 	 	
     Net loss	 	$	(2,721)	 	$	(1,556)	
 	 	 	 	 	 	 	
Pro forma:	 	 	 	 	 	 	
     Compensation expense	 	(18)	  	(14)	
     Net loss	 	$	(2,739)	 	$	(1,570)	

As reported:	 	 	 	 	 	 	
     Loss per share	 	$	(0.54)	 	$	(0.31)	
 	 	 	 	 	 	 	
Pro forma:	 	 	 	 	 	 	
     Compensation expense per share	 	 -- 	 	 -- 	
     Net loss per share	 	$	(0.54)	 	$	(0.31)	
 
 	 	Six Months Ended	 	Six Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
As reported:	 	 	 	 	
     Net loss	 	$	(4,769)	 	$	(2,976)	
 	 	 	 	 	 	 	
Pro forma:	 	 	 	 	 	 	
     Compensation expense	 	(35)	 	(20)	
     Net loss	 	$	(4,804)	 	$	(2,996)	

As reported:	 	 	 	 	 	 	
     Loss per share	 	$	(0.94)	 	$	(0.59)	
 	 	 	 	 	 	 	
Pro forma:	 	 	 	 	 	 	
     Compensation expense per share	 	 	(0.01)	 	 	-- 	
     Net loss per share	 	$	(0.95)	 	$	(0.59)	
- 11 -

In April of 2003, the Company issued 14,272 shares of its common stock to certain members of management in accordance with the Company's Long-Term incentive performance plan.  These shares are reflected in the Company's total shares outstanding at June 28, 2003.
(8)  SUPPLEMENTAL DISCLOSURE INFORMATION
Inventory balances, by classification, may be summarized as follows (amounts in thousands):
 	June 28, 2003	 	December 28, 2002	
 	 	 	 	
Raw Material	$	12,569	 	 	$	10,024	 	
Finished Goods	 	6,965	 	 	 	7,344	 	
Supplies	 	522	 	 	 	560	 	
 	 	 	 	 	 	 	 	
 	$	20,056 	 	 	$	17,928	 	
Significant components of accrued expenses and other current liabilities may be summarized as follows (amounts in thousands): 
 	Balance at	 	Balance at	
 	June 28, 2003	 	December 28, 2002	
 	 	 	 	
Accrued employee compensation and benefits	$	4,537    	 	$	5,736     	
Accrued rent expense	$	4,693    	 	$	5,914     	
Accrued capital expenditures	$	15    	 	$	442     	
Customer deposit liability	$	5,814    	 	$	2,158     	
Accrued interest expense	$	3,205    	 	$	3,287     	
Deferred warranty revenue	$	821    	 	$	--     	
 
The components of interest expense, net, are summarized as follows (amounts in thousands):
 	Three months ended	 	Three months ended	
 	June 28, 2003	 	June 29, 2002	
 	 	 	 	 	 	 	 	
Interest expense on debt	$	3,205 	 	 	$	3,576 	 	
Purchase discounts on invoice payments	 	(91)	 	 	 	(115)	 	
Finance fees	 	75 	 	 	 	69 	 	
Interest income	 	(10)	 	 	 	(18)	 	
Other	 	62 	 	 	 	 52 	 	
 	 	 	 	 	 	
 	$	3,241	 	 	$	3,564	 	
   
 	Six months ended	 	Six months ended	
 	June 28, 2003	 	June 29, 2002	
 	 	 	 	
Interest expense on debt	$	6,472 	 	 	$	7,186 	 	
Purchase discounts on invoice payments	 	(165)	 	 	 	(232)	 	
Finance fees	 	151 	 	 	 	147 	 	
Interest income	 	(32)	 	 	 	(52)	 .	
Other	 	119 	 	 	 	95 	 	
 	 	 	 	
 	$	6,545 	 	 	$	7,144 	 	
- 12 -

(9)  COMPREHENSIVE INCOME / (LOSS)
Comprehensive income / (loss), which consists of net income and foreign currency translation adjustments, was a loss of approximately $2.7 million and approximately $1.7 million for the three months ended June 28, 2003 and June 29, 2002, respectively.  Comprehensive loss for the six months ended June 28, 2003 was $ 4.8 million and for the six months ended June 29, 2002 was $3.1 million.
(10)  RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of Variable Interest Entities, an Interpretation of APB No. 50," ("FIN 46").  FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003.  For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003.  The adoption of FIN 46 did not have an impact on the Company's consolidated financial position, results of operations or cash flows.
In November 2002, the FASB issued Interpretation ("FIN") No. 45, "Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others."  FIN 45 requires footnote disclosures of the guarantees or indemnification agreements a company issues.  With certain exceptions, these agreements will also require a company to prospectively recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee.  The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.  The adoption of FIN No. 45 on December 29, 2002 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."  This statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred.  Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan, which is generally before an actual liability has been incurred.  As vision centers are identified for closure, any costs associated with the closure or disposal will be recorded at fair value when the liability is incurred.  The Company adopted this statement on December 29, 2002.  As a result, the Company has reflected closing costs associated with store closings at their fair values when incurred.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements 4, 44 and 64, Amendment to FASB Statement 13, and Technical Corrections."  One of the major changes of this statement is to change the accounting for the classification of gains and losses arising from the extinguishment of debt.  The Company adopted SFAS No. 145 on December 29, 2002, which will result in future gains or losses on extinguishment of debt being presented as a component of income from continuing operations instead of as an extraordinary item.
(11)  SUBSEQUENT EVENTS
Since June 28, 2003, the Company has closed seven Wal*Mart vision centers and seven vision centers within Fred Meyer.
In July 2003, the Company amended its agreement with Fred Meyer.  Our new agreement provides an extension of the original lease term from December 31, 2003 to December 31, 2006 and eliminates the five-year option to extend the agreement.  The amendment also revises the rent structure, beginning in 2004, to better align rent obligations with individual store performance.  The amendment also permits the closure of 12 under-performing locations.  Five of these vision centers closed in the second quarter of 2003, and the remainder have been closed in the third quarter.  
- 13 -

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS	
RESULTS OF OPERATIONS
The Company’s results of operations in any period are significantly affected by the number and mix of vision centers operating during such period.  At June 28, 2003, the Company operated 495 vision centers, versus 518 vision centers at December 28, 2002 and June 29, 2002.
 	As of	 	 As of	 	As of	
 	June 28, 2003	 	 December 28, 2002	 	June 29, 2002	
 	 	 	 	 	 	
Wal*Mart, domestic	381	 	 	399 	 	 	399	 	
Fred Meyer	54	 	 	58 	 	 	58	 	
Military	23	 	 	24 	 	 	24	 	
Wal*Mart de Mexico	37	 	 	37 	 	 	37	 	
 	 	 	 	 	 	 	 	 	
     TOTAL	495	 	 	518 	 	 	518	 	
 
THREE MONTHS ENDED JUNE 28, 2003 (THE “CURRENT THREE MONTHS”) COMPARED TO THREE MONTHS ENDED JUNE 29, 2002 (THE “PRIOR THREE MONTHS”)
CONSOLIDATED RESULTS
 	 	Three Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
 	 	$	 	% of Sales	 	$	 	% of Sales	
 	 	 	 	 	 	 	 	 	
Domestic store comp %	 	 	 	1.0%    	 	 	 	1.5%    	
 	 	 	 	 	 	 	 	 	
Net sales	 	$	60,856 	 		 	$	58,842 	 		
 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	32,911 	 	54.1%    	 	 	32,588 	 	55.4%    	
Selling, general and administrative expense	 	 	32,341 	 	53.1%    	 	 	31,063 	 	52.8%    	
Operating income from continuing operations	 	 $	570 	 	1.0%    	 	$	1,524	 	2.6%    	
Income / (loss) from discontinued operations,	 	 	 	 	 	 	 	 	 	 	
     net of income taxes 	 	$	(50)	 	 	 	$	484 	 	 	
Net loss	 	$	(2,721)	 	 	 	$	(1,556)	 	 	
 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 $	768 	 	 	 	$	1,357 	 	 	
Depreciation and amortization:	 	  	 	 	 	 	 	 	 	 	
     Continuing operations	 	$	4,005 	 	 	 	$	4,749 	 	 	
     Discontinued operations	 	$	14 	 	 	 	$	64 	 	 	
Overview of Results.  Historically, the Company has held a contact lens event in mid-June, generating between $2.0 and $4.0 million in sales.  In prior years, sales from the event were part of second quarter results.  In 2003, this event was held during the final week of the month versus earlier in the month in 2002.  As a result, we received many orders in late June for contact lenses that were delivered to customers in early July.  The amount of such orders was approximately $3.9 million.  The Company recognizes sales revenue upon delivery of the product.  As a result, the $3.9 million in sales and $1.0 million in gross margin has been deferred and will be recognized in the third quarter of 2003.  
- 14 -

Significant items that negatively affected the financial results for the second quarter of 2003 are summarized as follows:  (in millions)
 	(A)	 Decline in operating income due to store closures; represents the change in results from discontinued operations	 	 	0.5	
 	 	 	 	 	 	
 	(B)	Reduction in gross profit resulting from deferring revenues related to the contact lens event from the second quarter to the third quarter in 2003	 	 	1.0	
 	 	 	 	 	 	
 	(C)	Increase in professional fees related to the re-audit of the 2001 financial statements and completion of the 2002 financial statements	 	 	0.3	
 	 	 	 	 	 	
 	(D)	Increase in store payroll, which includes rate increases and incentive expense	 	 	1.1	
 	 	 	 	 	 	
 	(E)	Increase in workers compensation expense related to adverse development of prior year claims	 	 	0.3	
Net Sales.  Even with the significant timing difference of the contact lens event, the Company recorded net sales of $60.9 million in the Current Three Months, a 3.4% increase from sales of $58.8 million in the Prior Three Months.  The sales increase was partially due to premium revenue from a managed care insurance product that the Company began selling in the Wal*Mart California vision centers during the second quarter of 2002.  Revenue from this product contributed approximately $1.0 million of the sales increase for the Current Three Months.  The remaining increase came from a domestic comparable store sales increase of 1.0%.
Historically, the Company's in-store presentation of frame and lens options was based on a package price, which included a pair of frames, a base lens and certain lens options.  In July of 2002, the Company "unbundled" the package price so that prices for frames and lenses are separately presented in the store.  The new presentation is more clear, concise and customer-friendly and is similar to product and price presentation at a majority of our competitors' stores.  After an initial orientation phase, the Company has experienced an increase in the average spectacle transaction value.
During the second quarter of 2003, the Company began selling an extended warranty plan that provides for free replacement of frames and lenses if broken, bent or damaged with 12 months.  The Company recognizes this revenue over 12 months.  Although this was not a significant factor in the sales improvement in the Current Three Months, the amount of warranty revenues recognized in future periods is expected to increase as sales of the product accumulate.  As of June 28, 2003, the Company has deferred revenue related to this product of approximately $800,000, and had recognized revenue of approximately $70,000.
Also in 2003, the Company began selling and manufacturing eyeglasses for certain outside vision centers.  Total revenue from this line of business was approximately $300,000 for the Current Three Months.
 
- 15 -

Gross Profit.  In the Current Three Months, gross profit dollars increased slightly over gross profit dollars in the Prior Three Months.  The retail and insurance components of sales and gross profit for the Current and Prior Three Months are detailed below:  (in thousands)
 	Three Months Ended	 	Three Months Ended	
 	June 28, 2003	 	June 29, 2002	
 	 	 	 	
Retail sales, net	$	59,209    	 	100.0%    	 	$	58,178    	 	100.0%    	
Retail cost of goods sold	 	26,389    	 	44.6%    	 	 	25,635    	 	44.1%    	
 	 	 	 	 	 	 	 	
Retail gross profit	$	32,820    	 	55.4%    	 	$	32,543    	 	55.9%    	
 	 	 	 	 	 	 	 	
Premium revenue	$	1,647    	 	100.0%    	 	$	664    	 	100.0%    	
Claims expense	 	1,556    	 	94.5%    	 	 	619    	 	93.2%    	
 	 	 	 	 	 	 	 	
Insurance gross profit	$	91    	 	5.5%    	 	$	45    	 	6.8%    	
 	 	 	 	 	 	 	 	
Total net sales	$	60,856    	 	100.0%    	 	$	58,842    	 	100.0%    	
Total cost of goods sold	 	27,945    	 	45.9%    	 	 	26,254    	 	44.6%    	
 	 	 	 	 	 	 	 	
Total gross profit	$	32,911    	 	54.1%    	 	$	32,588    	 	55.4%    	
Retail gross profit decreased by 0.5% as a percent of sales in the Current Three Months.  The Company experienced a shift in sales mix toward contact lens and sunglasses, coupled with a slight decrease in eyeglass margins in the Current Three Months.  This margin decline was furthered by an increase in rent expense (which is a component of Gross Profit) for the Wal*Mart division.  This was primarily due to approximately 47 vision centers entering the “3-year option period” of the Wal*Mart lease.  The option period effectively increases each location’s minimum rent requirement.  We expect this trend of increased rent to continue as additional Wal*Mart locations enter the “option period” of their lease.
Insurance gross profit represents premium revenue less claims expense for a managed care insurance product that the Company began selling in the Wal*Mart California vision centers in the second quarter of 2002.  We do not expect a significant change in insurance gross profit as a percent of premium revenue in future periods.  The addition of the lower-margin insurance product increased total revenues over the Prior Three Months by $1.0 million and increased gross profit dollars by $45,000, but decreased total gross profit as a percent of total net sales by 0.8%.
- 16 -

Selling, General, And Administrative Expense (“SG&A expense”).  SG&A expense (which includes both store operating expenses and home office overhead) increased to $ 32.3 million in the Current Three Months from $ 31.1 million for the Prior Three Months.   The increase in SG&A dollars was primarily attributable to:
 1.	retail-level payroll costs, which increased approximately $ 1.3 million or 2.1% of sales over the Prior Three Months.  This percentage increase was due to: 
(a)	an increase in rates in certain markets, where growing competition resulted in upward pressure on rates for optical personnel;	
 	 	
(b)	an increase in incentive costs.  The Company amended its incentive plan in 2003 to drive improvements in retail performance.  Also, store-level incentives are impacted by "orders placed," including $3.9 million of orders related to the contact lens event where the sales were deferred into July when the product was delivered to the customer and $800,000 of extended warranty sales that will be recognized as revenue over the 12-month protection period; and	
 	 	
(c)	an increase in health and medical benefit costs.	
 2.	workers compensation expense, which increased approximately $300,000 or 0.5% of sales over the Prior Three Months.  This increase was due to adverse claims development from previous years, and 
 3.	increased professional fees of approximately $300,000 associated with the re-audit of the 2001 financial statements and completion of the 2002 financial statements. 
Operating Income.  Operating income for the Current Three Months declined by approximately $1.0 million from the Prior Three Months.   Operating income as a percentage of sales was 1.0% in the Current Three Months, down from 2.6% in the Prior Three Months.
Interest Expense.  Interest expense was $ 3.2 million compared to $ 3.6 million in the Prior Three Months.  The decrease was primarily the result of a weighted-average outstanding debt balance of $ 106.9 million in the Current Three Months versus $118.4 million in the Prior Three Months.  Our Senior Subordinated debt has a fixed interest rate of 12%, which has not changed since issuance in May 2001.
Benefit For Income Taxes.  The Company recorded a pre-tax  operating loss in the Current Three Months.  No income tax benefit has been recorded due to the uncertainty of realizability.
Loss from Discontinued Operations.  During the second quarter of 2003, the Company closed 10 vision centers.  Five closings were the result of  Wal*Mart lease expirations.  The remaining 5 closures were under-performing  vision centers in Fred Meyer that were closed prior to their scheduled lease expiration.  In fiscal 2003, the Company has closed a total of 18 Wal*Mart vision centers, 5 vision centers in Fred Meyer and 2 vision centers on military bases through June 28, 2003.  Condensed information for these closed stores is presented below.  The net loss on disposal of these operations includes severance, closing costs and gains recorded from the sale of certain assets.   Historical operating results for these closed vision centers have been reclassified as discontinued operations and presented separately for all periods presesnted in the Condensed Consolidated Statements of Operations.
 	Three Months Ended	
 	June 28, 2003	 	June 29, 2002	
 	 	 	 	
Total net sales	$	297 	 	$	3,093 	
Operating income / (loss)	$	(20)	 	$	484  	
Loss on disposal	$	(30)	 	$	-- 	
Net Income.  The Company incurred a net loss of $ 2.7 million in the Current Three Months versus a net loss of $ 1.6 million in the Prior Three Months.  
- 17 -

Use of non-GAAP Financial Measures:  We frequently refer to EBITDA in this document.  EBITDA (as defined in the terms of our Senior Subordinated Debt agreement) is calculated as net earnings before interest, taxes, depreciation and amortization, extraordinary items, the cumulative effect of a change in accounting principle and reorganization items.  We refer to EBITDA because:
•	it is the basis for the calculation of the excess cash flow principal repayment under our senior notes; and
•	it is a widely accepted financial indicator of a company’s ability to service or incur indebtedness.
EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles, is not necessarily indicative of cash available to fund all cash flow needs, should not be considered an alternative to net income or to cash flow from operations (as determined in accordance with GAAP) and should not be considered an indication of our operating performance or as a measure of liquidity.  EBITDA is not necessarily comparable to similarly titled measures for other companies.
The following is a reconciliation of net earnings to EBITDA:
 	 	Three Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
Net loss	 	$ 	(2,721)	 	$	(1,556)	
Addback:	 	 	 	 	 	 	
     Interest expense, net	 	 	3,241 	 	 	3,564 	
     Income tax expense	 	 	-- 	 	 	-- 	
     Cumulative effect of a change in accounting principle	 	 	-- 	 	 	-- 	
     Depreciation and amortization	 	 	4,019 	 	 	4,868 	
 	 	  	 	 	 	 	
EBITDA	 	$	4,539 	 	$	6,876 	
EBITDA.  EBITDA is calculated as net earnings before interest, taxes, depreciation and amortization, extraordinary items, cumulative effect of a change in accounting principle and reorganization items.  (See "Use of non-GAAP financial measures.")  EBITDA declined from $6.8 million in the Prior Three Months to $4.5 million in the Current Three Months, primarily as the result of three factors:
 1.	decline of $0.6 million EBITDA from discontinued operations, 
 2.	lower gross profit of $1.0 million due to deferring revenues related to the contact lens event from the second quarter to the third quarter of 2003 (see "Overview of Results"); 
 3.	increases in store operating expenses, primarily from payroll and workers' compensation expense, and 
 4.	increases in professional fees of approximately $300,000 due to the re-audit of the 2001 financial statements and completion of the 2002 financial statements. 
 
- 18 -

SIX MONTHS ENDED JUNE 28, 2003 (THE “CURRENT SIX MONTHS”) COMPARED TO SIX MONTHS ENDED JUNE 29, 2002 (THE “PRIOR SIX MONTHS”)
CONSOLIDATED RESULTS
 	 	Six Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
 	 	$	 	% of Sales	 	$	 	% of Sales	
 	 	 	 	 	 	 	 	 	
Domestic store comp %	 	 	 	2.0%      	 	 	 	1.0%       	
 	 	 	 	 	 	 	 	 	
Net sales	 	$	122,612 	 	 	 	$	117,615 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	66,894 	 	54.6%      	 	 	65,824 	 	56.0%      	
Selling, general and administrative expense	 	 	64,405 	 	52.5%      	 	 	62,596 	 	53.2%      	
Operating income from continuing operations	 	 $	2,489 	 	2.1%      	 	$	3,228	 	2.8%      	
Income / (loss) from discontinued operations,	 	 	 	 	 	 	 	 	 	 	
     net of income taxes 	 	$	(149)	 	 	 	$	940 	 	 	
Cumulative effect of a change in accounting principle	 	 $	(564)	 	 	 	 $	-- 	 	 	
Net loss	 	$	(4,769)	 	 	 	$	(2,976)	 	 	
 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 $	1,591 	 	 	 	$	2,153 	 	 	
Depreciation and amortization:	 	  	 	 	 	 	 	 	 	 	
     Continuing operations	 	$	8,016 	 	 	 	$	9,695 	 	 	
     Discontinued operations	 	$	89  	 	 	 	$	126 	 	 	
Net Sales.  The Company recorded net sales of $122.6 million in the Current Six Months, an increase of $5.0 million, or 4.3% from the Prior Six Months.  A portion of the remaining increase came from a domestic comparable store sales increase of 2.0%.  The sales increase was also partially due to premium revenue from a managed care insurance product that the Company began selling in the Wal*Mart California vision centers during the second quarter of 2002.  Revenue from this product contributed approximately $2.3 million of the sales increase for the Current Six Months.  Sales increases in the Current Six Months were somewhat reduced due to the timing of a contact lens event, typically held in mid-June.  In 2003, this event took place during the final weekend of June, resulting in customer orders of $3.9 million being deferred until delivery of the product in July.  (See "Overview of Results.")  
During the second quarter of 2003, the Company began selling an extended warranty plan that provides for free replacement of frames and lenses if broken, bent or damaged with 12 months.  The Company recognizes this revenue over 12 months.  Although this was not a significant factor in the sales improvement in the Current Six Months, the amount of warranty revenues recognized in future periods is expected to increase as sales of the product accumulate.  As of June 28, 2003, the Company has deferred revenue related to this product of approximately $800,000, and had recognized approximately $70,000.
Also in 2003, the Company began selling and manufacturing eyeglasses for certain outside vision centers.  Total revenue from this line of business was approximately $300,000 for the Current Six Months.
- 19 -

Gross Profit.  In the Current Six Months, gross profit increased to $66.9 million from $65.8 million in the Prior Six Months.  The retail and insurance components of sales and gross profit for the Current and Prior Six Months are detailed below:  (in thousands)
 	Six Months Ended	 	Six Months Ended	
 	June 28, 2003	 	June 29, 2002	
 	 	 	 	
Retail sales, net	$	119,605 	 	100.0%    	 	$	116,954 	 	100.0%    	
Retail cost of goods sold	 	52,836 	 	44.2%    	 	 	51,176 	 	43.8%    	
 	 	 	 	 	 	 	 	
Retail gross profit	$	66,769 	 	55.8%    	 	$	65,778 	 	56.2%    	
 	 	 	 	 	 	 	 	
Premium revenue	$	3,007 	 	100.0%    	 	$	661 	 	100.0%    	
Claims expense		2,882 	 	95.8%    	 	 	615 	 	93.0%    	
 	 	 	 	 	 	 	 	
Insurance gross profit	$	125 	 	4.2%    	 	$	46 	 	7.0%    	
 	 	 	 	 	 	 	 	
Total net sales	$	122,612 	 	100.0%    	 	$	117,615 	 	100.0%    	
Total cost of goods sold		55,718 	 	45.4%    	 		51,791 	 	44.0%    	
 	 	 	 	 	 	 	 	
Total gross profit	$	66,894	 	54.6%     	 	$	65,824 	 	56.0%    	
Retail gross profit decreased by 0.4% as a percent of sales in the Current Six Months, but increased by approximately $1.0 million dollars.  The gross profit percentage decrease is primarily attributable to approximately 47 vision centers entering the "3-year option period" of the Wal*Mart lease.  The option period effectively increases each location's minimum rent requirement.  We expect this trend of increased rent to continue as additional Wal*Mart locations enter the "option period" of their lease.
These margin decreases were partially offset by an improvement in eyeglass margins in the Current Six Months.
Insurance gross profit represents premium revenue less claims expense for a managed care product that the Company began selling in the Wal*Mart California vision centers in the second quarter of 2002.  The addition of this lower-margin insurance product increased total revenues by $2.3 million and gross profit dollars by $79,000, but decreased total gross profit as a percent of total net sales by 1.0%.
- 20 -

Selling, General, And Administrative Expense (“SG&A expense”).   SG&A expense (which includes both store operating expenses and home office overhead) increased to $64.4 million  in the Current Six Months from $62.6 million for the Prior Six Months.  The increase in SG&A expense was primarily attributable to the following factors:
 1.	retail-level payroll costs, which increased approximately $2.3 million  or 1.9% of sales over the Prior Six Months.  This increase was due to multiple factors, including: 
(a)	an increase in health and medical benefit costs of approximately $300,000;	
 	 	
(b)	an increase in rates in certain markets, where state regulations for dispensing opticians and growing competition resulted in upward pressure on rates for optical personnel;	
 	 	
(c)	an increase in coverage.  The Company restructured payroll scheduling in 2003, to provide consistent coverage based on operating needs by volume levels; and 	
 	 	
(d)	an increase in incentive costs.  The Company amended its incentive programs in 2003 to drive increases in retail performance.   Also, store-level incentives are impacted by "orders placed," including $3.9 million of orders related to the contact lens event where the sales were deferred into July when the product was delivered to the customer and $800,000 of extended warranty sales that will be recognized as revenue over the 12-month protection period; and	
 2.	workers compensation expense, which increased approximately $500,000 or 0.4% of sales over the Prior Six Months.  This increase was due to adverse development of claims from previous years; 
 3.	increased professional fees associated with the re-audit of the 2001financial statements and the completion of the 2002 financial statements; and 
 4.	costs for the Company's national sales meeting, which approximated $300,000. 
Some of this increase in SG&A expense was offset by decreases in advertising expenditures and lower receivable write-offs related to managed care sales for the Current Six Months.
Operating Income.  Operating income for the Current Six Months decreased to $2.5 million from $3.2 million in the Prior  Six Months.  Operating income as a percentage of sales was 2.1% in the Current Six Months, compared to 2.8% in the Prior Six Months.
Interest Expense.  Interest expense decreased to $6.5 million in the Current Six Months, compared to $7.1 million in the Prior Six Months.  The decrease was primarily the result of a weighted-average outstanding debt balance of $107.8 million in the Current Six Months versus $118.9 million in the Prior Six Months.  Our Senior Subordinated Debt has a fixed interest rate of 12%, which has not changed since issuance in May 2001.
- 21 -

Benefit For Income Taxes.  The Company recorded a pre-tax operating loss in the Current Six Months.  No income tax benefit has been recorded due to the uncertainty of realizability.
Loss from Discontinued Operations.  During the first half of 2003, 20 of the Company’s vision center leases expired, resulting in the closure of 18 Wal*Mart vision centers and two vision centers on military bases.  In addition, the Company has closed 5 under-performing vision centers in Fred Meyer locations prior to their scheduled lease expiration.  Condensed information for these closed stores is presented below.  The net loss on disposal of these operations included severance and closing costs and gains recorded from the sale of certain assets.   Operating results for these closed vision centers have been presented separately as discontinued operations for all periods presented in the Condensed Consolidated Statements of Operations.  
 	Six Months Ended	
 	June 28, 2003	 	June 29, 2002	
 	 	 	 	
Total net sales	$	1,702 	 	$	6,193 	
Operating income / (loss)	$	(72)	 	$	940 	
Loss on disposal	$	(77)	 	$	-- 	
Cumulative Effect of a Change in Accounting Principle.  The Company adopted Emerging Issues Task Force Issue No. 02-16, "Accounting by a Customer for Certain Consideration Received from a Vendor" ("EITF  02-16") at the beginning of the first quarter of 2003.  This issue addresses the method by which retailers account for vendor allowances.  Historically, the Company received vendor allowances through co-op advertising agreements, which were classified in the income statement as a reduction in advertising expense.  As a result of the adoption of EITF 02-16, certain vendor allowances, which formerly were treated as a reduction in advertising costs, are presented as a reduction of inventory cost and subsequently as a component of cost of goods sold.   On the first day of fiscal 2003, the Company recorded additional expense of $564,000 as the cumulative effect for this change in accounting principle.  This amount reflects the portion of vendor allowances that would have reduced inventory costs had this new accounting pronouncement been in effect in 2002.
Net Income.  The Company posted a net loss of $4.8 million versus a net loss of $3.0 million in the Prior Six Months.  
EBITDA.  EBITDA is calculated as net earnings before interest, taxes, depreciation and amortization, extraordinary items, the cumulative effect of a change in accounting principle and reorganization items.  (See "Use of non-GAAP financial measures.")  EBITDA declined from $13.9 million in the Prior Six Months to $10.4 million in the Current Six Months primarily as a result of the following factors:
 1.	decline of $1.1 million from discontinued operations, 
 2.	increases in store operating expenses, primarily from payroll and and workers' compensation expense, 
 3.	increases in professional fees due to the re-audit of the 2001 financial statements, and 
 4.	costs for the Company's national sales meeting. 
The following is a reconciliation of net earnings to EBITDA:
 	 	Six Months Ended	
 	 	June 28, 2003	 	June 29, 2002	
Net loss	 	$ 	(4,769)	 	$	(2,976)	
Addback:	 	 	 	 	 	 	
     Interest expense, net	 	 	6,545 	 	 	7,144 	
     Income tax expense	 	 	-- 	 	 	-- 	
     Cumulative effect of a change in accounting principle	 	 	564 	 	 	-- 	
     Depreciation and amortization	 	 	8,105 	 	 	9,821 	
 	 	  	 	 	 	 	
EBITDA	 	$	10,445 	 	$	13,989 	
 
- 22 -

SUMMARY OF MASTER LEASE AGREEMENTS
We have agreements governing our operations in host environments, such as Wal*Mart.  Typically, each agreement is for a base term, followed by an option to renew for a specified length of time.  The agreements provide for payments of minimum and percentage rent, and also contain customary provisions for leased department operations. 
Wal*Mart Vision Centers
Our agreement with Wal*Mart gives us the right to open 400 vision centers, the last of which opened in 2001.  Our agreement with Wal*Mart also provides that, if Wal*Mart converts its own store to a supercenter (a store which contains a grocery department in addition to the traditional Wal*Mart store offering) and relocates our vision center as part of the conversion, the term of our lease begins again.  During 2002, 14 locations were relocated, effectively renewing these leases.  We expect approximately 19 leases to relocate to supercenters in 2003.  Eleven stores have relocated  in the first six months of 2003, effectively renewing their leases.  As of June 28, 2003, we have 152 vision centers located in Wal*Mart supercenters.  We believe that Wal*Mart may in the future convert many of its stores and thereby cause many of our leases to start again.  We have received no assurances from Wal*Mart as to how many of their locations will ultimately be converted.
On a continuous basis, the Company monitors total lease months remaining under the Wal*Mart Master License Agreement.  Our measurement of lease months assumes that we exercise all available renewal options, and that supercenter conversions currently scheduled will trigger new vision center leases.  The remaining lease months may be affected by the conversion of the host store to a supercenter.  additionally, the remaining lease months may be affected by the Company's decision on exercising lease renewal options and, in general, by the passage of time.  Total remaining lease months at June 2003 were approximately 25,300 compared to approximately 25,100 in July 2002.
The following table sets forth the number of leases for domestic Wal*Mart and Fred Meyer vision centers that expire each year, assuming the Company exercises all available options to extend the terms of the leases, with the exception of any known options that have been declined as of June 28, 2003.  This table includes 26 future Wal*Mart superstore conversions which are scheduled at this time.
Leases Expiring in Calendar Year
HOST
COMPANY	2002	2003	2004	2005	2006	2007	2008 	2009 AND
THEREAFTER 	 	TOTAL 	
 	 	 	 	 	 	 	 	 	 	 	
Wal*Mart 	6	35	37	38	41	55	26	162	 	400 	
Fred Meyer	–	12	–	–	47	–	--	– 	 	59	
Totals	6	47	37	38	88	55	26	162	 	459	
Of the six Wal*Mart leases that expired in 2002, 1 location was closed in the first quarter of 2002 at the end of the original nine-year lease term.  The remaining 5 leases expired on December 31, 2002, which fell in the Company’s fiscal year 2003.  In fiscal 2003, 40 leases are scheduled to expire over the course of the year, including the 5 vision centers discussed above that closed on December 31, 2002; 13 in the first quarter, 5 in the second quarter, 8 in the third quarter, and 14 in the fourth quarter.  These stores represent annualized sales of approximately $20.6 million and annualized store-level operating income of approximately $2.5 million.  Store-level operating income excludes corporate overhead and other costs not specifically attributable to individual stores.  Of the 35 Wal*Mart leases scheduled to expire in calendar year 2003, the Company has elected to close 4 locations at the end of the original nine-year lease term due to store level operating losses.  The Company presents the financial results of closed stores separately as discontinued operations for all periods presented.
As of August 4, 2003, we have closed 25 Wal*Mart vision center, 12 Fred Meyer vision centers and 2 vision centers on military bases in fiscal 2003.  We are experiencing declining sales of approximately -25% in the final month of operations for stores that are closing.  We also have incurred store closing costs, including severance related to the 39 stores closed through August 4, 2003.  Store closing costs average between $5,000 and $10,000 per vision center.
As of June 28, 2003, we had 123 vision centers that were operating in the three-year extension period of the Wal*Mart lease.  We exercised our option to renew the leases for the three-year extension period for 28 Wal*Mart vision centers in the first half of 2003.  The base term for 32 vision centers expires in the last six months of 2003.  At this time, we have elected to close 4 of these locations at the end of the original nine-year lease.  We expect to renew the leases for the vast majority of the remaining vision centers.  These decisions will be based on various factors, including sales levels, anticipated future profitability, increased rental fees in the option period, and market share.
- 23 -

Other Vision Centers
In July 2003, the Company amended its agreement with Fred Meyer.  Our new agreement provides an extension of the original lease term from December 31, 2003 to December 31, 2006 and eliminates the five-year option to extend the agreement.  The amendment also revises the rent structure, beginning in 2004, to better align rent obligations with individual store performance.  The amendment also permits the closure of 12 under-performing locations.  Five of these vision centers closed in the second quarter of 2003, and the remainder have been closed in the third quarter.  
Our agreement with Wal*Mart de Mexico provides that each party will not deal with other parties to operate leased department vision centers in Mexico.  (We have agreed to waive this restriction for the next five stores opened by Wal*Mart de Mexico.)  This agreement also permits each party to terminate the lease for each vision center which fails to meet minimum sales requirements specified in the agreement.  Under our agreement with Wal*Mart de Mexico, we have two options for two-year renewals, and one option for an additional one-year renewal, for each vision center.
We meet with representatives of our host companies on a regular basis and periodically discuss proposed amendments to our master license agreements, as well as expansion opportunities.  We can provide no assurances that we will enter into favorable amendments to these agreements or that we will have any opportunities to expand our operations within any of our current host environments.
Liquidity And Capital Resources
Our capital needs have been for operating expenses, capital expenditures, the repayment of principal on the Senior Subordinated Notes and the payment of interest expense.  Our sources of capital have been cash flow from operations and borrowings under the Company’s credit facility.
It is the Company’s intent to use excess cash for its ongoing operations, repayment of principal and payment of interest on the Company’s outstanding debt and for the repurchase of Notes.  During the first quarter of 2003, the Company made a principal redemption payment on the Senior Subordinated Notes of approximately $2.9 million on February 28, 2003.  In addition, the Company made an interest payment of approximately $6.4 million on March 28, 2003.  Pursuant to the terms of the indenture, each principal redemption payment is based on the results for the six-month period ending in June or December, respectively.  The Company borrowed $1.0 million under its credit facility in the week preceding the interest payment date in order to provide liquidity for the Company’s daily cash flow requirements.  The Company repaid the borrowings during April 2003.
On August 29, 2003, the Company expects to make a principal redemption payment of $5.3 million from existing cash balances to bondholders of record on August 15, 2003.  This amount includes $953,000 of additional principal from previous periods' excess cash calculation.  In addition, the Company expects to make a semi-annual interest payment of $6.1 million from existing cash balances on September 30, 2003. 
As of August 4, 2003, the Company’s remaining unused availability under its credit facility with Fleet, after being reduced for letter of credit requirements, has increased slightly to approximately $1.8 million from $1.7 million at December 28, 2002.  At August 4, 2003 and June 28, 2003, the Company had no borrowings under its credit facility, and had letters of credit of $4.1 million outstanding.  Cash and cash equivalents totaled $10.6 million on June 28, 2003.  The Company believes that cash generated from operations and funds available under the credit facility will be sufficient to satisfy its cash requirements through 2003. 
During the second quarter of 2003, the Company began selling an extended warranty plan that provides for free replacement of frames and lenses if broken, bent or damaged within 12 months of the date of purchase.  The Company recognizes this revenue on a straight-line basis over 12 months.  As of June 28, 2003, the Company has deferred revenue related to this product of approximately $0.8 million.  
- 24 -

During the first half of 2003, we rolled out a new eyeglass frames collection, which changed approximately 50% of the frames we display at retail, and we rolled out a new offering of contact lenses and sunglasses.  As a result of these changes we increased our inventory of eyeglass frames, contact lenses and sunglasses versus December 28, 2002.  We obtained extended payment terms for the initial product purchases, which resulted in comparable increases in accounts payable as of the end of the first quarter.  During the second quarter, our frame inventory level declined to a level consistent with the comparable period in 2002.  We anticipate our frame inventory levels to decline slightly in the course of the second half.  Our inventory levels of contact lenses and sunglasses declined in the second quarter.  The level of contact lenses will remain higher than the comparable period in 2002, and we expect our inventory to remain at higher levels during the second half of 2003.  
During the second quarter of 2003, we changed the number and mix of disposable contact lenses that we offer at our retail locations.  The biggest change represents the addition of color disposable contact lenses to store stock.  During the rollout of this change, we temporarily increased our aggregate investment in this inventory by approximately $500,000.  We further expect that, at the end of the third quarter, our inventory of disposable contact lenses will decline to a level closer to historical levels.
During the third quarter of 2002, the Company’s Board of Directors authorized the Company to spend up to $3 million in cash to repurchase (in private, unsolicited transactions) the Company’s Senior Subordinated Notes, within a rolling twelve-month period.  The initial twelve-month rolling period started in August 2002.  These repurchases have been made on individually negotiated discounts to par.  In November 2002, the Board of Directors revised its prior resolution and authorized the Company to continue to repurchase Notes in private transactions (without any annual limit), subject only to any limitations on repurchases contained in the Company’s credit facility.  As of December 28, 2002, the Company had repurchased Notes with a face value of $4.5 million for $3.0 million in cash (which included $106,000 of accrued interest), resulting in a non-cash, extraordinary gain of $1.6 million during the second half of fiscal 2002.  
Certain holders of the Company’s senior notes previously objected to these repurchases at a discount.  The Company engaged in discussions with these holders and believes that it has the legal right to continue to repurchase the notes.  The Board of Directors is evaluating various means of continuing these repurchases.  The Company may seek to repurchase notes in private transactions or other means, including a broader offer to the holders, but can give no assurances as to whether such repurchases will take place or as to the timing, duration or amount of any such repurchases.  The Company is discussing amendments to its credit facility with its lender to permit the Company to continue to repurchase the Notes.
Prior to 2002, we opened 400 domestic Wal*Mart vision centers, as provided for in our Master Lease Agreement.  The Company opened one vision center on a military base and one vision center located in a Fred Meyer during the first half of 2003.  We expect to open between 5 and 7 vision centers in 2003 in host environments other than domestic Wal*Mart vision centers.  These store openings are subject to change depending upon liquidity, construction schedules and other constraints.  For each of our new vision centers, we typically spend between $100,000 and $140,000 for fixed assets and approximately $25,000 for inventory.
Through June 28, 2003, we have converted 10 Wal*Mart vision centers to supercenters this year.  In all of 2003, we expect to convert approximately 19 of our existing Wal*Mart vision centers to supercenters.  Each supercenter conversion requires expenditures of approximately $60,000 to $80,000 and effectively “re-starts” that location’s lease term. 
Recently Issued Accounting Pronouncements 
In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of Variable Interest Entities, an Interpretation of APB No. 50," ("FIN 46").  FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003.  For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003.  The adoption of FIN 46 did not have an impact on the Company's consolidated financial position, results of operations or cash flows.
- 25 -

In November 2002, the FASB issued Interpretation ("FIN") No. 45, "Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others."  FIN 45 requires footnote disclosures of the guarantees or indemnification agreements a company issues.  With certain exceptions, these agreements will also require a company to prospectively recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee.  The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.  The adoption of FIN No. 45 on December 29, 2002 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."  This statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred.  Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan, which is generally before an actual liability has been incurred.  As vision centers are identified for closure, any costs associated with the closure or disposal will be recorded at fair value when the liability is incurred.  The Company adopted this statement on December 29, 2002.  As a result, the Company has reflected closing costs associated with store closings at their fair values when incurred.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements 4, 44 and 64, Amendment to FASB Statement 13, and Technical Corrections."  One of the major changes of this statement is to change the accounting for the classification of gains and losses arising from the extinguishment of debt.  The Company adopted SFAS No. 145 on December 29, 2002, which will result in future gains or losses on extinguishment of debt being presented as a component of income from continuing operations instead of as an extraordinary item.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations presents the consolidated financial statements of National Vision, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant areas that require management’s judgment and the use of estimates include:  reserves for loss, obsolescence and discontinuance of inventory, reserves for uncollectible managed care receivables, accruals for self-insured group medical insurance claims and workers’ compensation claims, accruals for remake and warranty costs and  estimates for the deferral of revenue for product not delivered at the end of the reporting period.
Revenue Recognition
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”  ("SAB 101").  SAB 101 summarizes the SEC’s view in applying generally accepted accounting principles to selected revenue recognition issues.  The Company defers revenue recognition until delivery of the product by estimating the value of transactions in which final delivery to the customer has not occurred at the end of the period presented.  The amount of cash received at the time the customer’s order is placed is recorded as a deposit liability and is presented within accrued liabilities.  These estimates are based on historical trends and take into consideration current changes in the Company’s manufacturing and distribution process.
The Company sells separately priced extended warranty contracts with terms of twelve months.  Revenues from the sale of these contracts are deferred and amortized over the life of the contract on a straight-line basis.  The costs to service the warranty claims are expensed as incurred.
Premium revenue is earned from HMO memberships and services.  Revenue from premiums is recognized over the life of the policy as the related services are rendered. 
Management must make estimates of potential returns and replacements of all or part of the eyewear sold to a customer.  We analyze historical remake and warranty activity, consider current economic trends and changes in customer demand and acceptance of our products when evaluating the adequacy of our estimate of these costs.  Differences may result in the amount and timing of revenue and related costs for any period if management made different judgments or utilized different estimates.
- 26 -

Allowance for Uncollectible Receivables under Reimbursement Plans
Managed care accounts receivable are recorded net of contractual allowances and reduced by an allowance for amounts that may become uncollectible in the future.  Substantially all of the Company’s receivables are due from health care plans or third-party administrators located throughout the United States.  Approximately 11% of the Company net sales from ongoing businesses relate to products sold to customers that ultimately will be funded in full or in part through private insurance plans, third party insurance administration programs or government reimbursement programs such as Medicare and Medicaid.  Failure by the Company to accurately file for reimbursement on a timely basis with these programs can have an adverse effect on the Company’s collection results which, in turn, will have an adverse effect on liquidity and profitability.
Estimates of our allowance for uncollectible receivables are based on our historical billing and collection experience.  Changes in our billing and collection processes, changes in funding policies by insurance plans and changes in our sales mix within insurance plans may have a material effect on the amount and timing of our estimated expense requirements.
Accounting for inventory
The Company’s inventories are stated at the lower of weighted average cost or market.
In most cases, the expected sales value (i.e., market value) of the Company’s inventory is higher than its cost.  However, as the Company progresses through a selling season, certain slow-moving merchandise may be removed from stores and returned to the Company’s distribution center to be sold below cost in secondary markets.  As a result, there is a high degree of judgment and complexity in determining the market value of such inventories.  For inventory on hand, the Company estimates the future selling price of its merchandise, given its current selling price and its planned promotional activities, and provides a reserve for the difference between cost and the expected selling price for all items expected to be sold below cost.
The Company conducts physical inventory counts for a selection of store locations on a periodic basis through the course of the fiscal year and adjusts the Company’s records to reflect the actual inventory counts.  Inventory in the Company’s distribution center is counted near the end of the fiscal year.  As all locations are not counted as of the Company’s reporting dates, the Company provides a reserve for inventory shrinkage based principally on historical inventory shrinkage experience.
Valuation of long-lived and intangible assets
Our most significant intangible asset is the Intangible Value of Contractual Rights, which was established as part of the Company’s adoption of fresh start accounting in May 2001.  This intangible asset, which has a net book value of $97.3 million at June 28, 2003, represents the value of the Company’s lease agreement with Wal*Mart and the business relationship therein created.  In accordance with SFAS No. 142, this intangible is an amortizable asset because it has a finite useful life.  However, the precise length of its life is not known due primarily to the Wal*Mart superstore conversions that automatically trigger extensions on the contractual life of the asset.  Based on our projections, our best estimate of the useful life of this asset is 15 years.  Due to the uncertainty involved in predicting the pattern of economic benefits realized from the Wal*Mart relationship, we amortize this asset using the straight-line method.
We assess the impairment of all identifiable intangibles and long-lived assets on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  Factors we consider important, which could trigger an impairment review, include (1) a significant underperformance of vision center operations relative to expected historical or projected future operating results; (2) significant changes in the manner of our use of Company assets or the strategy for our overall retail optical business; (3) significant negative industry or economic trends; (4) a significant decline or adverse change in the rate or geographic concentration of Wal*Mart host store relocations or superstore conversions; and (5) a permanent adverse change in cash flows generated by an operation.
If we determine that the carrying value of intangibles or long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected cash flow model.  If the projected cash flows are not in excess of the book value of the related asset, we measure the impairment based on a projected discounted cash flow method.  Significant management judgment is required regarding the existence of impairment indicators as discussed above.  Future events could cause us to conclude that impairment indicators exist and that long-lived assets or intangible assets are impaired.  Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.  Based on our review of our intangible and other long-lived assets as of June 28, 2003, no impairment was determined to exist.
- 27 -

Accounting for income taxes
As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate.  This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as equipment depreciation, for tax and accounting purposes.  These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet.  We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance.  To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations. 
The Company emerged from Chapter 11 Bankruptcy on May 31, 2001.  As part of our plan of reorganization, the Company’s capital structure was highly leveraged with $120 million of senior subordinated notes providing for interest at 12% per annum.  Before, during and after the bankruptcy process, the Company incurred significant net operating losses (“NOL”) that result in tax loss carry-forwards.  A portion of these carry-forwards are subject to limitations under Section 382 of the Internal Revenue Code.
Generally accepted accounting principles require that we record a valuation allowance against the deferred tax asset associated with this NOL if it is “more likely than not” that we will not be able to utilize it to offset future taxes.  We have provided a full valuation allowance against this deferred tax asset because our high leverage will make it difficult for us to become profitable, and our historical high leverage substantially contributed to our failure to achieve profitability.  We currently provide for income taxes only to the extent that we expect to pay cash taxes for current income.
It is possible, however, that we could be profitable in the future at levels which cause management to conclude that it is more likely than not that we will realize all or a portion of the NOL carry forward.  Upon reaching such a conclusion, we would immediately record the estimated net realizable value at a rate equal to our combined federal and state effective rates.  Subsequent revisions to the estimated net realizable value of the deferred tax asset could cause our provision for income taxes to vary significantly from period to period, although our cash tax payments would remain unaffected.
Self-Insurance Accruals
We self-insure estimated costs associated with workers’ compensation claims and group medical liabilities, up to certain limits.  Insurance reserves are established based on actuarial estimates of the loss that we will ultimately incur on reported claims, as well as estimates of claims that have been incurred but not yet reported.  The recorded levels of these reserves incorporate historical loss experience and judgments about the present and expected levels of cost per claim.  Trends in actual experience are a significant factor in the determination of such reserves.  We believe our estimated reserves for such claims are adequate, however actual experience in claim frequency and/or severity could materially differ from our estimates and affect our results of operations.
 
- 28 -

                RISK FACTORS.  Any expectations, beliefs and other non-historical statements contained in this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements represent the Company’s expectations or belief concerning future events, including the following:  any statements regarding future sales levels, any statements regarding the continuation of historical trends, any statements regarding the Company’s liquidity and any statements regarding tax losses.  Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements.  With respect to such forward-looking statements and others that may be made by, or on behalf of, the Company, the factors described as “Risk Factors” in the Company’s Report on Form 10-K, filed on June 4, 2003, could materially affect the Company’s actual results.

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	
MARKET RISK
Market risk is the potential change in an instrument’s value caused by, for example, fluctuations in interest and currency exchange rates.  The Company’s primary market risk exposures are interest rate risk and the risk of unfavorable movements in exchange rates between the U.S. dollar and the Mexican peso.  Monitoring and managing these risks is a continual process carried out by senior management, which reviews and approves the Company’s risk management policies.  We manage market risk on the basis of an ongoing assessment of trends in interest rates, foreign exchange rates, and economic developments, giving consideration to possible effects on both total return and reported earnings.  The Company’s financial advisors, both internal and external, provide ongoing advice regarding trends that affect management’s assessment.  The Company's operations are not considered to give rise to significant market risk.

INTEREST RATE RISK
The Company borrows under its credit facility at variable interest rates.  We therefore incur the risk of increased interest costs if interest rates rise.  At June 28, 2003, the Company had no outstanding borrowings under its credit facility.  The Company's interest cost under its Senior Notes is fixed at 12% through the expiration date in 2009.
FOREIGN CURRENCY RISK
The Company's division in Mexico operates in a functional currency other than the U.S. dollar.  The net assets of this division are exposed to foreign currency translation gains and losses, which are included as a component of accumulated other comprehensive loss in shareholders' equity.  Such translation resulted in an unrealized gain of approximately $42,000 and an unrealized loss of approximately $31,000  for the three and six months ended June 28, 2003, respectively.   Historically, the Company has not attempted to hedge this equity risk.

ITEM 4.	CONTROLS AND PROCEDURES	
Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.  Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective as of the date of such evaluation.  The Company also believes that management has remedied the previously reported deficiencies in the Company's controls and procedures over accounting for vendor allowances and discounts.  Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
Since the evaluation date, there have not been any significant changes in the internal controls of the Company, or in other factors that could significantly affect these controls subsequent to the evaluation date.
- 29 -

PART II
OTHER INFORMATION
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K		
   			
(a)	Exhibits		
    			
	The following exhibits are filed herewith or incorporated by reference:		
 
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	99.1	
 
(b)	Reports on Form 8-K.	
                          The following reports on Form 8-K have been filed during the quarter for which this report is filed:
Date of Report	 	Item Reported	 	Financial Statement Filed	
 	 	 	 	 	
June 23, 2003	 	5	 	None	
June 28, 2003	 	9	 	None	
June 10, 2003	 	5	 	None	
June 5, 2003	 	9	 	None	
June 4, 2003	 	9	 	None	
May 8, 2003	 	5	 	None	
April 10, 2003	 	9	 	None	
April 7, 2003	 	5	 	None	
- 30 -

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

 		
	By: /s/    Angus C. Morrison                               	
	        Angus C. Morrison	
	        Senior Vice President	
	        Chief Financial Officer	

  		
	By:  /s/   S. Lynn Butler                                    	
	        S. Lynn Butler 	
	        Principal Accounting Officer	
		
August 12, 2003

 
 
- 31 -

I, Reade Fahs, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of National Vision, Inc.  	
  	  	
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;	
   	   	
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;	
  	  	
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:	
  	  	
  	a)	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;	
  	  	  	
  	b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and	
  	  	  	
  	 c)	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;	
  	  	  	
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):	
  	  	
  	a)	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and	
  	  	  	
  	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and	
  	  	  	
 6.	The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.	
Date:  August 12, 2003
/s/     Reade Fahs	
__________________________________________________	
Reade Fahs	
Title:  Chief Executive Officer	
- 32 -

I, Angus C. Morrison, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of National Vision, Inc.  	
  	  	
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;	
   	   	
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;	
  	  	
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:	
  	  	
  	a)	Designed such disclosure controls and procedures to ensure that material information relating to the registrant , including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;	
  	  	  	
  	b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and	
  	  	  	
  	 c)	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;	
  	  	  	
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):	
  	  	
  	a)	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and	
  	  	  	
  	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and	
  	  	  	
 6.	The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.	
Date:  August 12, 2003
/s/     Angus C. Morrison	
__________________________________________________	
Angus C. Morrison	
Title:  Chief Financial Officer	
- 33 -

Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of National Vision, Inc. (the “Company”) on Form 10-Q for the period ending June 28, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Reade Fahs, Chief Executive Officer of the Company and I, Angus C. Morrison, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
    (1)        The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
    (2)        The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to National Vision, Inc. and will be retained by National Vision, Inc. and forwarded to the Securities and Exchange Commission or its staff upon requiest.
 
/s/  Reade Fahs                        
Reade Fahs
Chief Executive Officer
August 12, 2003
 
/s/ Angus C. Morrison                
Angus C. Morrison
Chief Financial Officer
August 12, 2003