LCA-Vision announces third quarter 2009 operational and financial results

LCA-Vision Inc.Oct 27 2009

LCA-Vision Inc. (Nasdaq: LCAV), a leading provider of laser vision correction services under the LasikPlus® brand, today announced financial and operating results for the three and nine months ended September 30, 2009.

Third Quarter 2009 Operational and Financial Results (all comparisons are with the third quarter of 2008)

• Revenue was $27.6 million compared with $37.4 million; adjusted revenue was $25.7 million compared with $33.0 million.
• Procedure volume was 15,335 compared with 21,484.
• Same-store revenue (70 vision centers) decreased 24.9%; adjusted same-store revenue decreased 20.6%.
• Operating loss was $10.4 million compared with $6.2 million; adjusted operating loss was $12.1 million compared with $10.1 million. Operating loss and adjusted operating loss in the third quarter of 2009 included $4.4 million in impairment charges; the third quarter of 2008 included $0.8 million in restructuring charges.
• Income tax expense was $10.3 million, which reflected the previously announced establishment of a full valuation allowance on net deferred tax assets, compared with an income tax benefit of $2.0 million.
• Net loss was $19.9 million, or $1.07 per share, compared with net loss of $4.7 million, or $0.25 per share.
• Cash and investments totaled $62.1 million as of September 30, 2009, up $2.6 million from December 31, 2008.

Year-to-date 2009 Operational and Financial Results (all comparisons are with the first nine months of 2008)

• Revenue was $107.2 million compared with $171.1 million; adjusted revenue was $100.0 million compared with $156.2 million.
• Procedure volume was 61,058 compared with 95,729.
• Operating loss was $26.4 million compared with operating income of $1.4 million; adjusted operating loss was $32.9 million compared with adjusted operating loss of $12.1 million. Operating loss and adjusted operating loss included $6.9 million in restructuring and impairment charges and $0.8 million in consent revocation solicitation charges in 2009; operating income and adjusted operating loss in the first nine months of 2008 included restructuring charges of $1.3 million.
• Net cash provided by operations was $7.8 million compared with $9.3 million.
• Net loss was $29.6 million, or $1.59 per share, compared with net income of $1.6 million, or $0.09 per diluted share.

Since the first quarter of 2007, LCA-Vision has provided both adjusted revenue and operating income (loss) 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 better reflects operating performance and, therefore, is more meaningful to investors.

"As an organization, we are focused on maximizing our business results in the current challenging environment while building a foundation for growth and profitability when the economy improves. Our priorities include cash conservation, patient acquisition and retention, and organizational effectiveness," said LCA-Vision's Chief Financial Officer Michael J. Celebrezze. "We are taking multiple actions that involve every aspect of our operations. To expedite needed change, we expanded our leadership advisory committee that now includes three LasikPlus(®) surgeons to provide more immediate medical input on our strategic decisions.

"During the third quarter, we implemented programs that improved financial performance in 28 targeted LasikPlus(®) vision centers, resulting in approximately $900,000 in monthly profit improvements," stated Celebrezze. "However, in order to further conserve cash, we will be closing 10 underperforming vision centers and reducing our workforce by 15%, both by year end. These 70 positions include reductions from the closing of 10 vision centers, as well as reductions in our call center and corporate and regional offices. We expect these actions to reduce annual expenses by more than $4 million annually. During the fourth quarter of 2009, we anticipate recording restructuring charges of approximately $4.1 million related to these closures and staff reductions. We will consider the closure of additional underperforming vision centers in the future as we continue to take aggressive actions to conserve cash."

Chief Operating Officer David L. Thomas commented, "We improved marketing efficiency to $359 per procedure during the third quarter, while evaluating a host of initiatives to support procedure volume. Among these, we conducted consumer research to identify factors driving customer choice and we have developed and are testing new television advertisements. We also have underway a new 'See Now; Pay Later' promotion that tested well with focus groups. We are reaching new prospects through innovative programs such as our Delta Airlines SkyMiles and Life Time Fitness partnerships that provide their members with options such as frequent flyer miles or reduced out-of-pocket procedure costs. Additionally, we plan in the coming weeks to unveil an upgraded LasikPlus(®) website with enhanced features including easier online appointment scheduling.

"Our Advanced Eye Health Analysis, a thorough vision analysis that incorporates digital, three-dimensional images of the eye linked with a software model, is currently being tested in nine LasikPlus(®) vision centers. Advanced Eye Health Analysis is the first program under our expanded Lifetime Vision business model, which is designed to improve patient acquisition and retention. We plan to implement the model in an additional five existing vision centers in the fourth quarter and anticipate evaluating results of this program in early 2010," Thomas added.

Near-Term Financial Outlook

• LCA-Vision intends to manage cash flow conservatively in 2009 and 2010.
• The company does not plan to open any new vision centers in the near term. LCA-Vision will consider restarting its de novo new center opening program when market conditions improve.
• The company will continue to manage general and administrative expenses aggressively, which it now expects will decline approximately 17% in 2009 compared with 2008. The company expects further decreases in general and administrative expenses in 2010 resulting from the impact of center closures and the reductions in force occurring in 2009.
• The company expects center direct costs per center to decline in excess of 10% in 2009 compared with 2008.
• The company expects marketing spend for the 2009 fourth quarter of $6.0 million to $6.5 million.
• The company expects capital expenditures of less than $1.0 million in 2009, down significantly from $14.9 million in 2008.

Including the impact of recently announced cost reductions, the company expects the number of procedures per vision center required to reach breakeven to decline to 95 per month, compared with 125 per month in 2007, and expects the number of procedures companywide required for breakeven cash flow after capital expenditures and debt service to decline to approximately 95,000 per year from 170,000 in 2007. Due to recently announced cost reduction and cost control measures, the company now expects it has sufficient cash and investments to last beyond 2012 at 65,000 procedures annually.

Conference Call and Webcast

As previously announced, a conference call and webcast will be held today beginning at 10:00 a.m. Eastern time. To access the conference call, dial 866-322-1352 (United States and Canada) or 706-643-6246 (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: 328 092 80.