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LCA-Vision Announces First Quarter 2009 Financial Results

Second consecutive quarter of market share gains; Reports positive cash flow

CINCINNATI, April 28 /PRNewswire-FirstCall/ -- LCA-Vision Inc. (Nasdaq: LCAV), a leading provider of laser vision correction services under the LasikPlus(R) brand, today announced financial and operating results for the three months ended March 31, 2009.

First Quarter 2009 Results (all comparisons are versus the first quarter of 2008)

  • Revenue was $47.9 million compared with $79.6 million; adjusted revenue was $44.9 million compared with $74.0 million.
  • Procedure volume was 27,859 compared with 44,159. Rate of procedure volume decline was 37%, an improvement from year-over-year declines of 51% in the 2008 fourth quarter and of 52% in the 2008 third quarter.
  • Same-store revenue (71 vision centers) decreased 40.7%; adjusted same-store revenue decreased 40.4%.
  • Operating loss was $4.2 million compared with operating income of $10.5 million; adjusted operating loss was $6.9 million compared with adjusted operating income of $5.4 million. Operating loss and adjusted operating loss included $0.9 million in restructuring expense and $0.8 million in consent revocation expenses; operating income and adjusted operating income in the first quarter of 2008 included restructuring expense of $0.5 million.
  • Net loss was $2.8 million, or $0.15 per share, compared with net income of $6.9 million, or $0.37 per diluted share.

First Quarter 2009 Operational and Financial Highlights

  • Increased estimated market share to 13.0% of total industry procedure volume, based on independent market researcher Market Scope(R), LLC's projected industry procedure volume of 213,500 for the period. LCA-Vision reported market share of 11.9% in the 2008 fourth quarter and 10.5% in the 2008 third quarter.
  • Total procedure volume grew 43% from the 2008 fourth quarter, which compares favorably with the 11% increase in the 2008 first quarter from the 2007 fourth quarter.
  • Net cash provided by operating activities was $7.3 million. Capital expenditures were minimized to $0.2 million.
  • Cash and investments totaled $64.5 million as of March 31, 2009, an increase of $5.0 million from December 31, 2008.

LCA-Vision is providing both adjusted revenue and operating income as a means of measuring performance that adjusts for the non-cash impact of accounting for separately priced extended warranties. A reconciliation of revenue and operating income (loss) as reported in accordance with U.S. Generally Accepted Accounting Principles (GAAP) is provided at the end of this news release. Management believes the adjusted information is more reflective of operating performance and, therefore, more meaningful to investors.

"Although our business and our industry continue to be affected adversely by the recession, we are pleased to report a second consecutive quarter of market-share gains," said Steven C. Straus, Chief Executive Officer of LCA-Vision. "We attribute our ability to gain share to our business and marketing initiatives, and the support and dedication of our Medical Advisory Board, Optometric Advisory Board, surgeons and optometrists, and the full staff at LCA-Vision and LasikPlus(R) vision centers.

"We are making measurable progress on our new, methodical approach to marketing that is designed to produce results, while conforming with our cash-conscious and cash-conservative strategy," Straus added. "We are now delivering integrated marketing messages within all markets served by LasikPlus(R) vision centers, following testing of this program in selected LasikPlus(R) markets in the fourth quarter. We also have completed comprehensive market research that included a marketing segmentation analysis to identify a target audience who represent our highest opportunity to purchase surgical services during the next year and focus group interviews with members of this audience to gain insights into their decision-making process. Based on this research, we have developed and are in the process of refining marketing messages to maximize their impact in the marketplace."

LCA-Vision's Chief Financial Officer Michael Celebrezze commented, "We benefited from cost reduction and cash conservation measures that we began implementing early last year to better align our expenses with procedure volume. Both our direct costs per vision center and general and administrative costs were reduced compared to the same quarter last year. Our financial results for this year's first quarter were impacted negatively by $0.9 million in costs associated with the previously announced closure of two underperforming vision centers and $0.8 million related to our successful consent revocation.

"Following our announced decision in March, we have reduced the number of excimer laser platforms from three to two in 22 LasikPlus(R) vision centers so far and expect to complete this program in all of our 75 vision centers in the third quarter," he said. "When fully implemented, this program will reduce our annual operating expenses in excess of $3 million, while allowing us to achieve industry-leading clinical outcomes and to retain our competitive advantage of offering prospective patients a choice of state-of-the-art Abbott Medical Optics VISX Star S4 IR and Alcon Laboratories ALLEGRETTO WAVE(R) Eye-Q 400Hz laser platforms. In conjunction with this program, we entered into new agreements with these manufacturers that will permit us to retire $2.1 million of capital lease obligations and add cash to our balance sheet over the next few quarters.

"We also expect to improve collections and to continue moving toward an increasing part-time workforce to complement our core group of full-time employees so as to continue to reduce compensation expenses throughout 2009."

"Lifetime Vision" Model

"Among our priorities this year is to institute a 'Lifetime Vision' model, which is intended to allow us to more fully utilize the highly trained and skilled ophthalmic surgeons and optometrists within the company," stated Straus. "The 'Lifetime Vision' model is based on the concept that an individual should be a patient of LCA-Vision for life and thereby become a repeat source of revenue. We are pursuing an Advanced Ocular Exam procedure, which constitutes a comprehensive eye exam using new diagnostic tools to screen for various eye diseases and irregularities, as well as determining a patient's candidacy for laser vision correction and other refractive surgical procedures. This program fits our business strategy as it provides a source of incremental revenue from our existing centers and staff, it supports our laser vision correction business by becoming a potential source of referrals and it requires a minimal capital expenditure. We expect to begin testing the Advanced Ocular Exam procedure later this year. We also are evaluating additional opportunities including premium intraocular lens surgery."

Near-Term Financial Outlook

LCA-Vision affirmed its intent to continue to manage cash and investments conservatively in 2009.

  • The company does not plan to open any new vision centers in 2009. LCA-Vision plans to restart its successful de novo new center opening program following improvements in the economy;
  • The company will continue to manage general and administrative expenses aggressively, which it expects to remain relatively unchanged in 2009 compared with 2008;
  • The company expects marketing efficiency and effectiveness improvements;
  • The company expects center direct costs per center to decline in 2009; and
  • The company expects capital expenditures to be approximately $2.0 million in 2009, down significantly from $14.9 million in 2008.

Comparing 2009 (the first full year of benefit from cost reductions) with 2007 (prior to cost reductions), the company expects vision center breakeven eyes per month to decline to 105 in 2009 from 125 in 2007, and expects the number of procedures per year required for its cash flow to be breakeven to decline to approximately 110,000 from 170,000.

Management has repositioned the company to be cash-flow positive at 2008 procedure volume levels. Management believes that its current cash and investment resources provide it with significant staying power should the current recession be prolonged. For example, the company believes that current cash and investment resources are sufficient to fund operations for more than three years even if annual procedure volumes decline 22% from 2008 levels to 90,000 procedures annually.

Conference Call and Webcast

As previously announced, a conference call and webcast will be held today, Tuesday, April 28, 2009, beginning at 10:00 a.m. Eastern time. To access the conference call, dial 866-322-1352 (United States and Canada) or 706-634-1308 (international callers). The webcast will be available at the investor relations section of LCA-Vision's website. A replay of the call and webcast will begin approximately two hours after the live call has ended. To access the replay, dial 800-642-1687 (United States and Canada) or 706-645-9291 (international callers) and enter the conference ID number: 926 47 070.

Forward-Looking Statements

This news release contains forward-looking statements based on current expectations, forecasts and assumptions of LCA-Vision that are subject to risks and uncertainties. The forward-looking statements in this release are based on information available to us as of the date hereof. Actual results could differ materially from those stated or implied in our forward-looking statements due to risks and uncertainties associated with our business, including, without limitation, those concerning economic, political and sociological conditions; the successful execution of marketing strategies to cost-effectively drive patients to our vision centers; an inability to attract new patients; our ability to profitably operate vision centers and retain qualified personnel during periods of lower procedure volumes; the relatively high fixed cost structure of our business; the acceptance rate of new technology, and our ability to successfully implement new technology on a national basis; market acceptance of our services; competition in the laser vision correction industry; the possibility of long-term side effects and adverse publicity regarding laser vision correction; operational and management instability; legal or regulatory action against us or others in the laser vision correction industry; the continued availability of non-recourse third-party financing for our patients on terms similar to what we have paid historically; and the future value of revenues financed by us and our ability to collect on such financings, which will depend on a number of factors including the worsening consumer credit environment and our ability to manage credit risk related to consumer debt, bankruptcies and other credit trends. In addition, an ongoing FDA study about post-Lasik quality-of-life matters could impact negatively the acceptance of LASIK. For a further discussion of the factors that may cause actual results to differ materially from current expectations, please review our filings with the Securities and Exchange Commission, including but not limited to our reports on Forms 10-K, 10-Q and 8-K. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the Securities and Exchange Commission, we assume no obligation to update the information included in this news release, whether as a result of new information, future events or circumstances, or otherwise.

About LCA-Vision Inc./LasikPlus(R)

LCA-Vision Inc., a leading provider of laser vision correction services under the LasikPlus(R) brand, operates 75 LasikPlus(R) fixed-site laser vision correction centers in 32 states and 57 markets in the United States and a joint venture in Canada. Additional company information is available at and

Earning Trust Every Moment.

Transforming Lives Every Day.

    For Additional Information

    Company Contact:                  Investor Relations Contact:
    Barb Kise                         Jody Cain
    LCA-Vision Inc.                   Lippert/Heilshorn & Associates
    513-792-9292                      310-691-7100

                              LCA-Vision Inc.
        Condensed Consolidated Statements of Operations (Unaudited)
               (Amounts in thousands except per share data)

                                                     Three months ended
                                                           March 31,
                                                         2009     2008
                                                         ----     ----

    Revenues - Laser refractive surgery               $47,921  $79,568

    Operating costs and expenses
       Medical professional and license fees           10,776   14,761
       Direct costs of services                        17,816   24,451
       General and administrative expenses              4,418    5,191
       Marketing and advertising                       13,026   19,984
       Depreciation                                     4,358    4,254
       Consent revocation expenses                        804        -
       Restructuring expense                              902      456
                                                          ---      ---

    Operating (loss) income                            (4,179)  10,471

    Equity in earnings from unconsolidated businesses      27       56
    Net investment (loss) income                         (177)     736
    Other income, net                                       2       18
                                                            -       --

    (Loss) income before taxes on income               (4,327)  11,281

    Income tax (benefit) expense                       (1,483)   4,405
                                                       ------    -----

    Net (loss) income                                 $(2,844)  $6,876
                                                      =======   ======

    (Loss) income per common share
       Basic                                           $(0.15)   $0.37
       Diluted                                         $(0.15)   $0.37

    Dividends declared per share                           $-    $0.18

    Weighted average shares outstanding
       Basic                                           18,561   18,495
       Diluted                                         18,561   18,587

                                 LCA-Vision Inc.
                Condensed Consolidated Balance Sheets (Unaudited)
                             (Dollars in thousands)

    Assets                                 March 31, 2009  December 31, 2008
                                           --------------  -----------------
    Current assets
       Cash and cash equivalents                  $29,214           $23,648
       Short-term investments                      32,087            32,687
       Patient receivables, net of allowance
        for doubtful accounts of $1,186 and
        $1,465                                      8,625             9,678
       Other accounts receivable                    3,842             2,515
       Prepaid professional fees                      776               911
       Prepaid income taxes                         7,558             8,957
       Deferred tax assets                          4,385             4,708
       Prepaid expenses and other                   5,371             5,299
                                                    -----             -----

    Total current assets                           91,858            88,403

    Property and equipment                        120,282           121,734
    Accumulated depreciation and
     amortization                                 (73,039)          (70,235)
                                                  -------           -------
    Property and equipment, net                    47,243            51,499

    Long-term investments                           3,155             3,126
    Accounts receivable, net of allowance
     for doubtful accounts of $1,394 and
     $1,662                                         2,237             2,645
    Deferred compensation plan assets               2,071             2,196
    Investment in unconsolidated
     businesses                                       396               377
    Deferred tax assets                             7,407             7,027
    Other assets                                    1,942             2,209
                                                    -----             -----

    Total assets                                 $156,309          $157,482
                                                 ========          ========

    Liabilities and Stockholders' Investment
    Current liabilities
       Accounts payable                            $9,278            $8,169
       Accrued liabilities and other               11,839             8,608
       Deferred revenue                             7,761             9,107
       Debt obligations maturing in one
        year                                        6,171             6,985
                                                    -----             -----
    Total current liabilities                      35,049            32,869

    Long-term rent obligations                      2,557             1,820
    Long-term debt obligations (less
     current portion)                              13,081            14,120
    Deferred compensation liability                 2,071             2,196
    Insurance reserve                               9,656             9,489
    Deferred revenue                               12,290            14,003
    Other liabilities                               2,000                 -

    Stockholders' investment
       Common stock ($0.001 par value; 25,207,465
        and 25,199,734 shares and 18,581,953
        and 18,552,985 shares issued and
        outstanding, respectively)                     25                25
       Contributed capital                        173,668           174,206
       Common stock in treasury, at cost
        (6,625,512 shares and 6,646,749
        shares)                                  (114,668)         (114,632)
       Retained earnings                           20,671            23,515
       Accumulated other comprehensive
        loss                                          (91)             (129)
                                                      ---              ----

    Total stockholders' investment                 79,605            82,985
                                                   ------            ------

    Total liabilities and stockholders'
     investment                                  $156,309          $157,482
                                                 ========          ========

                                 LCA-Vision Inc.
           Condensed Consolidated Statements of Cash Flows (Unaudited)
                             (Dollars in thousands)

                                                             Three months
                                                            ended March 31,
                                                              2009     2008
                                                              ----     ----

    Cash flow from operating activities:
    Net (loss) income                                      $(2,844)  $6,876
    Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation                                          4,358    4,254
       Provision for loss on doubtful accounts               1,175    2,080
       Loss on investments                                     365        -
       Restructuring expense                                   872        -
       Deferred income taxes                                  (136)     980
       Stock based compensation                                 (8)    (101)
       Insurance reserve                                       167    1,305
       Equity in earnings of unconsolidated affiliates         (27)     (56)
       Changes in operating assets and liabilities:
         Patient accounts receivable                           286   (3,796)
         Other accounts receivable                          (1,327)  (1,039)
         Prepaid income taxes                                1,399    6,218
         Prepaid expenses and other                            (72)  (2,944)
         Accounts payable                                    1,109   (2,003)
         Deferred revenue, net of professional fees         (2,753)  (5,038)
         Income taxes payable                                   11    2,827
         Accrued liabilities and other                       4,756     (674)
                                                             -----     ----

    Net cash provided by operations                          7,331    8,889

    Cash flow from investing activities:
       Purchases of property and equipment                    (157)  (9,330)
       Purchases of investment securities                  (81,478) (54,942)
       Proceeds from sale of investment securities          81,841   67,287
       Other, net                                              (82)     480
                                                               ---      ---

    Net cash provided by investing activities                  124    3,495

    Cash flow from financing activities:
       Principal payments of capital lease obligations and
        loan                                                (1,853)    (570)
       Shares repurchased for treasury stock                   (36)    (205)
       Exercise of stock options                                 -      148
       Dividends paid to stockholders                            -   (3,335)
                                                               ---   ------

    Net cash used in financing activities                   (1,889)  (3,962)
                                                            ------   ------

    Increase in cash and cash equivalents                    5,566    8,422

    Cash and cash equivalents at beginning of period        23,648   17,614
                                                            ------   ------

    Cash and cash equivalents at end of period             $29,214  $26,036
                                                           =======  =======

                                 LCA-VISION INC.
                              ON FINANCIAL RESULTS
                              (dollars in thousands)

    To supplement its condensed consolidated financial statements presented
    in accordance with accounting principles generally accepted in the
    United States, LCA-Vision discusses adjusted revenues and operating
    income.  Management utilizes this information as a means of measuring
    performance that adjusts for the non-cash impact of the accounting for
    separately priced extended warranties and believes that including this
    additional disclosure is meaningful to investors for the same reason.

    Accordingly, this news release contains non-GAAP financial measures
    within the meaning of Regulation G promulgated by the Securities and
    Exchange Commission.  A reconciliation of the difference between the
    non-GAAP measures with the most directly comparable financial measures
    calculated in accordance with GAAP follows:

                                                      Three Months
                                                     Ended March 31,
                                                      2009     2008

         Reported                                   $47,921  $79,568
            Amortization of prior deferred revenue   (3,059)  (5,599)
                                                     ------   ------
         Adjusted revenue                           $44,862  $73,969
                                                    =======  =======

    Operating (Loss) Income

         Reported                                   $(4,179) $10,471
            Impact of warranty revenue deferral      (3,059)  (5,599)
            Amortization of prior professional fees     306      560
                                                        ---      ---
         Adjusted operating (loss) income           $(6,932)  $5,432
                                                    =======   ======

SOURCE LCA-Vision Inc.
Copyright©2009 PR Newswire.
All rights reserved

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