LCA-Vision revenues increase 2.1% to $20.6 million in Q4 2013

LCA-Vision Inc.Feb 18 2014

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 12 months ended December 31, 2013.

Fourth Quarter 2013 Financial and Operating Highlights (all comparisons are with the fourth quarter of 2012)

• Revenues increased 2.1% to $20.6 million from $20.2 million; adjusted revenues increased 4.0% to $20.5 million from $19.7 million.
• Procedure volume increased 3.6% to 12,033 from 11,613.
• Medical professional and license fees remained unchanged at $4.6 million. Medical professional and license fees for the 2013 fourth quarter included higher fees due to an increase in procedure volume, offset by lower license fees related to renegotiated costs.
• Vision center direct costs decreased by $1.2 million to $9.7 million from $10.9 million. The decrease was a result of favorable insurance experience, lower employee-related costs, lower financing fees from finance plan mix and renegotiated rates for third-party financing plans. These reductions were partially offset by higher variable operating expenses associated with higher procedure volumes, including laser maintenance costs, as well as higher professional services and other operating expense.
• General and administrative expense decreased by $0.5 million to $2.8 million from $3.3 million, due primarily to reductions in employee-related costs as a result of restructuring initiatives implemented early in 2013.
• Marketing expense remained unchanged at $4.7 million. Marketing cost per eye was $392, compared with $411.
• Depreciation expense decreased by $0.5 million to $0.5 million from $1.0 million.
• Operating loss was $1.7 million, a $4.3 million improvement from an operating loss of $6.0 million; adjusted operating loss was $1.8 million, a $4.6 million improvement from an adjusted operating loss of $6.4 million. Operating loss in the fourth quarter of 2012 included restructuring charges of $1.1 million and impairment charges of $0.6 million.
• Net loss narrowed to $1.5 million, or $0.08 per share, a $4.1 million improvement from a net loss of $5.6 million, or $0.30 per share.

2013 Financial and Operating Highlights (all comparisons are with 2012)

• Revenues were $92.2 million compared with $101.5 million; adjusted revenues were $91.3 million compared with $99.0 million.
• Procedure volume was 53,231 compared with 58,525.
• Medical professional and license fees decreased by $3.6 million to $20.1 million from $23.7 million. The decrease resulted from lower procedure volume coupled with the impact of renegotiated license fees and lower enhancement costs.
• Vision center direct costs decreased by $5.2 million to $39.1 million from $44.3 million. The decrease was a result of lower variable costs associated with procedure volume combined with other cost savings. These savings primarily included lower financing fees from renegotiated rates and a shift in portfolio mix, reductions in employee-related costs and lower insurance costs from favorable claims experience.
• General and administrative expense decreased by $1.7 million to $11.7 million from $13.4 million, due primarily to reductions in employee-related costs and rent from the relocation of the company's call center as a result of restructuring initiatives implemented in early 2013, and reductions in travel and telecommunications expenses.
• Marketing expense decreased by $1.5 million to $21.6 million from $23.1 million. Marketing cost per eye was $406 compared with $394.
• Depreciation expense decreased by $2.6 million to $2.1 million from $4.7 million, due primarily to lower capital expenditures in recent years.
• Restructuring charges of $0.2 million resulted primarily from the relocation of the company's call center during the first quarter of 2013.
• Operating loss was $2.4 million, a $6.9 million improvement from an operating loss of $9.3 million; adjusted operating loss was $3.2 million, an $8.4 million improvement from an adjusted operating loss of $11.6 million.
• Net loss was $1.4 million, or $0.07 per share, a $7.1 million improvement from a net loss of $8.5 million, or $0.45 per share.
• Cash and investments were $28.7 million as of December 31, 2013, compared with $34.5 million as of December 31, 2012. Cash used in operations included approximately $1.2 million of investment in expansion efforts related to the company's refractive lens and cataract business, $1.8 million of restructuring payments related to previously announced actions, and additional working capital changes of $4.1 million primarily related to reductions in accounts payable and accrued liabilities related to timing of payments, and increased accounts receivable for self-financed patients, offset by positive earnings from the core LASIK business.

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

"We are delighted that our core LASIK business returned to profitability in 2013, earning nearly $400,000, our first operating profit since 2007.  This achievement followed a focused effort to right-size our cost structure and benefitted from improved procedure volumes in the second half of the year.  Entering 2014, we were able to lower cash flow breakeven for our core LASIK business to 54,000 procedures annually, down from 56,000 procedures previously.

"As we reported earlier, the number of procedures we performed during the fourth quarter rose for the second consecutive quarter.  Our financial results are particularly gratifying as fourth quarter procedures got off to a slow start due to uncertainty created in October by the shutdown of the federal government," said LCA-Vision Chief Executive Officer Michael J. Celebrezze.  "We have been diligent in controlling expenses, including our patient-acquisition costs, and note that marketing costs per eye during the quarter was $392, down from $417 in the third quarter of 2013 and $411 a year ago.  Our average adjusted revenue per procedure increased slightly to $1,704 from $1,698 in the fourth quarter of last year, but down from $1,718 in the third quarter of 2013 due to a promotion in the fourth quarter. In addition, based on input from industry sources, we believe that during the fourth quarter we again took market share from our competitors."

Mr. Celebrezze added, "We continue to increase the number of cataract and other intraocular procedures, and remain positive about the long-term prospects that this service brings to the company."

Near-Term Financial Outlook
LCA-Vision intends to continue to manage expenses conservatively throughout 2014; its plans and current outlook for the year include:

• The company plans to open one satellite vision center in the first quarter and one additional full-service vision center late in the third quarter of 2014.
• The company expects 2014 capital expenditures to be between $1.1 million and $1.3 million.
• For the first quarter of 2014, the company expects marketing and advertising expenses to be between $6.4 million and $6.8 million.

"The first quarter of 2014 appointment bookings have been running behind last year due to a combination of factors. Due to the expiring promotion at the end of 2013 and to allow demand to rebuild, we delayed marketing spending and did not run a promotion in January 2014, compared to running a promotion that began in mid-January 2013.  In addition, severe winter weather impacted January bookings and procedures, with 11 vision centers closing 16 days and 16 vision centers having 22 shortened days, including some in our largest markets.  To compensate for these challenges, we began a promotion on February 3rd offering a $500-off-discount.  We will also begin testing television advertising in six markets this week," Mr. Celebrezze concluded.

LCA-Vision is lowering its estimate for the annual number of procedures companywide necessary to reach cash-flow breakeven from its LASIK business to approximately 54,000, down from 56,000 previously.  This cash-flow estimate does not include restructuring payments, debt service or start-up losses and capital expenditures for its refractive lens and cataract business.  The company expects to continue to incur start-up costs for its business expansion initiatives.