CINCINNATI, Oct. 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 operational results for the three months and nine months ended
September 30, 2008. Third Quarter 2008 Financial & Operational
Results (all comparisons are versus the third quarter of 2007) --
Revenue was $37.4 million compared with $74.6 million; adjusted
revenue was $33.0 million compared with $66.9 million. -- Procedure
volume was 21,484 compared with 44,547. -- Same-store revenue
decreased 52.4%; adjusted same-store revenue decreased 53.5%. There
were 68 vision centers included in same-store revenue. -- Operating
loss was $6.2 million compared with operating income of $14.1
million; the adjusted operating loss was $10.1 million compared
with adjusted operating income of $7.2 million. -- Net loss was
$4.7 million or $0.25 per diluted share, compared with net income
of $10.0 million or $0.51 per diluted share. -- Opened new
LasikPlus(R) vision centers in Nashville, Tennessee and Arlington,
Texas and relocated LasikPlus(R) vision centers in Raleigh, North
Carolina, and Orlando, Florida. Year-to-Date 2008 Financial &
Operational Results (all comparisons are versus the first nine
months of 2007) -- Revenue was $171.1 million compared with $222.9
million; adjusted revenue was $156.2 million compared with $221.8
million. -- Procedure volume was 95,729 compared with 152,316. --
Operating income was $1.4 million compared with $39.7 million; the
adjusted operating loss was $12.1 million compared with adjusted
operating income of $38.7 million. -- Net income was $1.6 million,
or $0.09 per diluted share, compared with net income of $28.4
million, or $1.41 per diluted share. LCA-Vision is providing
adjusted revenue and operating income as a means of measuring
performance that adjusts for the non-cash impact of the accounting
for separately priced extended warranties. A reconciliation of
revenue and operating income (loss) as reported in accordance with
Generally Accepted Accounting Principles (GAAP) is provided on the
last page of this news release. Management believes the adjusted
information is more reflective of operating performance and,
therefore, more meaningful to investors. "As previously announced,
declining appointment volume led to a 52% decrease in total
procedure volume for the third quarter of 2008, compared with the
third quarter of 2007," said Steven C. Straus, Chief Executive
Officer of LCA-Vision. "That said, we saw modest improvements in
appointment show rates, conversion rates and treatment show rates
in this year's third quarter compared to the second quarter, which
we attribute to the implementation of business initiatives aimed at
driving procedure volume. "We also reported a $100 decline in our
average price-per-procedure, excluding the impact of deferred
revenue, compared with the second quarter of this year. The decline
reflects the rollout of market-level pricing in July. An evaluation
of this pricing program indicates that it has produced mixed
results, with favorable changes in conversion in some markets and
less effect on conversion in other markets. We have modified the
pricing in those markets that were found to be inelastic, which is
expected to result in an overall increase in average
price-per-procedure in coming periods. We will monitor the
relationship between price and conversion in each market on a
monthly basis and make adjustments as appropriate to maximize
revenue. "In the third quarter, we reduced our media expenditures
to $8.3 million, or by 46% as compared with the 2008 second
quarter, as we aligned spending with the current tightening we are
seeing in discretionary consumer spending. The resulting benefit
was a marketing-spend-per-procedure saving of 25% to $386, compared
with $514 in the 2008 second quarter," he said. "Our media programs
are being consolidated under a proven, single lead agency with
relevant industry experience to better integrate various marketing
programs and leverage the best of our marketing agency partners. As
part of this strategy, market research is currently being
conducted. Our re-engineered program is designed to assist in
maximizing our marketing and procedure volume results, with a goal
of continuing to improve our marketing-spend-per- procedure over
time. We expect marketing expenses for the fourth quarter of 2008
in the $8 million to $9 million range. "During the third quarter,
we opened new LasikPlus(R) vision centers in Nashville, Tennessee
and Arlington, Texas, and relocated existing centers in Raleigh,
North Carolina, and Orlando, Florida," said Mr. Straus. "In
October, we closed our vision center in Boise, Idaho after a year
of operation, and we recently converted our vision center in
Alpharetta, Georgia to a pre-operation / post-operation facility,
with actual procedures to be performed at the three other nearby
LasikPlus(R) vision centers in Atlanta. These decisions were based
on a number of factors that included an evaluation of the
anticipated timing of improvement in procedure volume and the
extent of that improvement, as well as the costs associated with
center closing. We expect to report a charge of $600,000 related to
the Boise center closing in the fourth quarter of this year. We
will continue to monitor the financial performance of all vision
centers on a monthly basis." LCA-Vision's Interim Chief Financial
Officer Michael Celebrezze commented, "Our cost control and cash
conservation measures are having the desired results as we continue
to take actions that we believe are prudent given the current
economic environment. Among these, we reduced headcount in the
vision centers, national call center and corporate office during
the quarter, reduced marketing expense significantly, and are
reducing costs in all other discretionary areas. Capital
expenditures are being minimized by halting new center openings and
center relocations for the rest of 2008 and dividend payments for
the time being. Working capital is also being closely managed.
During the third quarter we adjusted payment terms with most
vendors to 30 days and generated $4.5 million of cash through
accounts payable management. As we have reduced expenses and
spending to a low level, cash flow in the fourth quarter and beyond
will largely be dependent on the level of procedure volume and
changes in working capital." Cash & Investments Net cash
provided by operating activities in the first nine months of 2008
was $9.9 million. Cash and investments totaled $67.1 million as of
September 30, 2008, compared with cash and investments of $62.4
million as of December 31, 2007, and $67.9 million as of June 30,
2008. In late April, the Company borrowed $19.2 million to finance
the majority of its IntraLase(R) lasers. The loan requires monthly
payments over a five-year period at a fixed interest rate of 4.96%.
As of September 30, 2008, the remaining outstanding balance of this
loan was $17.8 million. The par value of auction rate securities as
of September 30, 2008 was $6.2 million, compared with $18.3 million
as of December 31, 2007. LCA-Vision redeemed $12.1 million of
auction rate securities at par value during the nine months ended
September 30, 2008 and has redeemed another $500,000 at par value
since the beginning of the fourth quarter of 2008. Based on a
valuation of the remaining auction rate securities, certain
instruments with a par value of $2.3 million were deemed to have
other-than-temporary impairment, and LCA- Vision has recorded a
$1.1 million loss on these investments within the consolidated
statement of operations as of September 30, 2008. The remaining
portfolio of auction rate securities, with a par value of $3.4
million, was deemed to have temporary impairment; for these,
LCA-Vision has recorded an unrealized loss of $220,000, or $132,000
on an after-tax basis, within other comprehensive income, a
component of stockholders' investment, as of September 30, 2008.
Due to the continuation of the unstable credit environment, the
Company believes the recovery period for auction rate instruments
will exceed 12 months. Accordingly, it has classified the fair
value of the auction rate instruments that have not been redeemed
subsequent to September 30, 2008, as long-term. The fair value and
par value of the Company's long-term auction rate instruments were
$4.4 million and $5.7 million at September 30, 2008, respectively.
Share Repurchase LCA-Vision did not repurchase any shares of its
common stock during the first nine months of 2008 under the $50
million share repurchase plan that the Board of Directors
authorized in August 2007. Approximately $40 million remains
available for repurchase under this plan. Conference Call and
Webcast As previously announced, a conference call and webcast will
be held today, Tuesday, October 28, 2008, beginning at 10:00 a.m.
(ET). To access the conference call, dial 866-322-1352 (United
States and Canada) or 706-758-1564 (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: 679 31 057. 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. These 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
acceptance rate of new technology, and our ability to successfully
implement new technology on a national basis; market acceptance of
our services; the successful execution of marketing strategies to
cost-effectively drive patients to our vision centers; competition
in the laser vision correction industry; an inability to attract
new patients; 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; 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 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 potentially 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 77 LasikPlus(R) fixed-site laser
vision correction centers in 33 states and 59 markets in the United
States and a joint venture in Canada. Additional Company
information is available at http://www.lca-vision.com/ and
http://www.lasikplus.com/ . Earning Trust Every Moment.
Transforming Lives Every Day. LCA-Vision Inc. Condensed
Consolidated Statements of Operations (Unaudited) (Dollars in
thousands except per share data) Three Months Ended Nine Months
Ended September 30, September 30, 2008 2007 2008 2007 Revenue --
Laser refractive surgery $37,397 $74,584 $171,147 $222,933
Operating costs and expenses Medical professional and license fees
8,201 12,344 34,222 37,738 Direct costs of services 17,686 23,304
62,532 72,399 General and administrative expenses 4,869 4,637
15,914 15,225 Marketing and advertising 8,294 17,208 43,744 50,100
Depreciation 4,508 2,961 13,375 7,758 Operating (loss) income
(6,161) 14,130 1,360 39,713 Equity in earnings from unconsolidated
businesses 132 244 453 598 Net investment (loss) income (724) 1,474
842 4,900 Other income (expense), net - - 18 (31) (Loss) income
before taxes (6,753) 15,848 2,673 45,180 Income tax (benefit)
expense (2,036) 5,830 1,088 16,822 Net (loss) income $(4,717)
$10,018 $1,585 $28,358 (Loss) income per common share Basic $
(0.25) $0.51 $0.09 $1.43 Diluted $ (0.25) $0.51 $0.09 $1.41
Dividends declared per share $ - $0.18 $0.24 $0.54 Weighted average
shares outstanding Basic 18,537 19,521 18,519 19,834 Diluted 18,537
19,754 18,572 20,147 LCA-Vision Inc. Condensed Consolidated Balance
Sheets (Unaudited) (Dollars in thousands) Assets September 30, 2008
September 30, 2007 Current assets Cash and cash equivalents $24,669
$17,614 Short-term investments 37,993 42,534 Patient receivables,
net of allowance for doubtful accounts of $1,945 and $2,987 10,957
12,712 Other accounts receivable 2,260 5,941 Prepaid professional
fees 1,105 1,872 Prepaid income taxes 2,880 6,391 Deferred tax
assets 3,385 3,450 Prepaid expenses and other 5,238 5,076 Total
current assets 88,487 95,590 Property and equipment 122,080 106,788
Accumulated depreciation and amortization (66,139) (52,872)
Property and equipment, net 55,941 53,916 Long-term investments
4,406 2,250 Patient receivables, net of allowance for doubtful
accounts of $1,931 and $2,130 3,499 4,556 Deferred compensation
plan assets 3,106 5,540 Investment in unconsolidated businesses 398
590 Deferred tax assets 14,044 13,561 Other assets 2,398 3,644
Total assets $172,279 $179,647 Liabilities and Stockholders'
Investment Current liabilities Accounts payable $8,077 $10,396
Accrued liabilities and other 9,961 13,219 Deferred revenue 11,050
18,719 Income taxes payable 1,308 642 Debt obligations maturing in
one year 7,281 3,941 Total current liabilities 37,677 46,917
Long-term debt obligations (less current portion) 15,331 2,012
Deferred compensation liability 3,067 5,516 Insurance reserve 9,689
8,493 Deferred revenue 15,830 23,110 Stockholders' Investment
Common stock ($0.001 par value; 25,193,866 and 25,114,244 shares
issued and 18,547,417 and 18,482,658 shares outstanding as of
September 30, 2008 and December 31, 2007, respectively) 25 25
Contributed capital 173,540 172,965 Common stock in treasury, at
cost (6,646,449 and 6,631,586 shares at September 30, 2008 and
December 31, 2007) (114,632) (114,427) Retained earnings 31,735
34,597 Accumulated other comprehensive income 17 439 Total
stockholders' investment 90,685 93,599 Total liabilities and
stockholders' investment $172,279 $179,647 LCA-Vision Inc.
Condensed Consolidated Statements of Cash Flow (Unaudited) (Dollars
in thousands) Nine Months Ended September 30, 2008 2007 Cash flow
from operating activities: Net income $1,585 $28,358 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation 13,375 7,758 Provision for loss on doubtful accounts
4,303 4,383 Loss on investment 1,074 - Deferred income taxes (50)
9,927 Stock based compensation 966 3,623 Insurance reserve 1,196
1,684 Equity in earnings of unconsolidated affiliates (453) (598)
Changes in operating assets and liabilities Patient receivables
(1,491) (9,617) Other accounts receivable 3,681 (2,934) Prepaid
income taxes 3,511 (5,365) Prepaid expenses and other (162) 1,400
Accounts payable (2,319) (1,313) Deferred revenue, net of
professional fees (13,454) (1,059) Income taxes payable 666 -
Accrued liabilities and other (2,499) 2,505 Net cash provided by
operations $9,929 $38,752 Cash flow from investing activities:
Purchase of property and equipment (13,597) (13,012) Purchases of
investment securities (297,128) (258,415) Proceeds from sale of
investment securities 297,433 260,328 Other, net 645 (77) Net cash
used in investing activities $(12,647) $(11,176) Cash flow from
financing activities: Principal payments of capital lease
obligations and debt (4,328) (3,873) Proceeds from loan 19,184 -
Shares repurchased for treasury stock (205) (34,943) Tax benefits
related to stock-based compensation (624) 1,107 Exercise of stock
options 193 3,402 Dividends paid to stockholders (4,447) (10,658)
Net cash provided by (used in) financing activities 9,773 (44,965)
Increase (decrease) in cash and cash equivalents 7,055 (17,389)
Cash and cash equivalents at beginning of period 17,614 24,431 Cash
and cash equivalents at end of period $24,669 $7,042 LCA-Vision
Inc. Effect of the Change in Our Accounting for Deferred Revenues
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
differences between the non-GAAP measures with the most directly
comparable financial measures calculated in accordance with GAAP
follows: Three Months Ended Nine Months Ended September 30,
September 30, 2008 2007 2008 2007 Revenue Reported $37,397 $74,584
$171,147 $222,933 Adjustments Warranty revenue deferred into future
- - - 20,054 Amortization of prior deferred revenue (4,404) (7,706)
(14,950) (21,231) Adjusted revenue $32,993 $66,878 $156,197
$221,756 Operating Income Reported $(6,161) $14,130 $1,360 $39,713
Adjustments Impact of warranty revenue deferral (4,404) (7,706)
(14,950) (1,177) Professional fees deferred into future - - -
(2,005) Amortization of prior professional fees 440 771 1,495 2,123
Adjusted operating (loss) income $(10,125) $7,195 $(12,095) $38,654
For Additional Information Company Contact: Investor Relations
Contact: Barb Kise Jody Cain LCA-Vision Inc. Lippert/Heilshorn
& Associates 513-792-9292 310-691-7100 DATASOURCE: LCA-Vision
Inc. CONTACT: Barb Kise of LCA-Vision Inc., +1-513-792-9292;
Investor Relations: Jody Cain of Lippert-Heilshorn &
Associates, +1-310-691-7100, for LCA-Vision Inc. Web site:
http://www.lca-vision.com/ http://www.lasikplus.com/
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