LCA-Vision Reports Third Quarter Financial Results

CINCINNATI, Oct. 30, 2012 /PRNewswire/ -- 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, 2012.

Third Quarter 2012 Financial and Operating Highlights (all comparisons are with the third quarter of 2011)

• Revenues were $20.0 million compared with $21.8 million; adjusted revenues were $19.5 million compared with $20.8 million.
• Procedure volume was 11,510 procedures versus 12,444 procedures.
• Operating loss narrowed to $3.7 million from $4.1 million; adjusted operating loss narrowed to $4.2 million from $5.0 million. The improvement reflects a decrease in variable costs, lower general and administrative costs and a decrease in spending on marketing and advertising, offset partially by costs incurred in connection with the company's business expansion initiatives.
• Marketing cost per eye was $417 compared with $426.
• Net loss was $3.5 million, or $0.19 per share, compared with a net loss of $3.8 million, or $0.20 per share.

Year-to-Date 2012 Financial and Operating Highlights (all comparisons are with the first nine months of 2011)

• Revenues increased 3.6% to $81.3 million from $78.5 million; adjusted revenues increased 5.6% to $79.3 million from $75.1 million.
• Procedure volume increased 3.4% to 46,912 procedures from 45,382 procedures.
• Operating loss was $3.3 million, a $1.6 million improvement from an operating loss of $4.9 million; adjusted operating loss was $5.2 million, a $2.8 million improvement from an adjusted operating loss of $8.0 million. The improvement reflects higher procedure revenue, lower variable costs, a decrease in general and administrative expenses and a decline in depreciation expense, offset partially by higher spending on marketing and advertising and costs incurred in connection with the company's business expansion initiatives.
• Marketing cost per eye was $390 compared with $391.
• Net loss was $2.9 million, or $0.15 per share, a $1.6 million improvement from a net loss of $4.5 million, or $0.24 per share.
• Cash and investments totaled $34.9 million as of September 30, 2012, compared with $44.8 million as of December 31, 2011. The cash and investment balance for the first nine months of 2012 was impacted primarily by $4.0 million of payments to retire all outstanding debt, $2.3 million of investment in developing the cataract services business, and $5.7 million of changes in working capital, offset partially by $2.1 million of cash sources from other activity.

The company provides adjusted revenues and operating income and 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 income and 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.

"Following four consecutive quarters of procedure volume increases, the third quarter revenue decline resulting from lower procedure volume is disappointing," said LCA-Vision Chief Financial Officer Michael J. Celebrezze. "We were up against a difficult comparison from the third quarter of 2011 in which same-store procedure volume increased 18% from the prior year. We also were challenged by continued cautious consumer spending, as well as by factors specific to our direct-to-consumer marketing model that made it difficult to get our advertising messages heard. 

"Both revenues and procedure volume increased for the first nine months of 2012 compared with the prior year.  At the same time we reduced our expenses through cost-management measures," added Celebrezze. "However, the current environment is challenging and we face a tough comparison with the fourth quarter of 2011 in which year-over-year procedure volume increased by 30%."

LCA-Vision Chief Operating Officer David L. Thomas said, "Our average price per procedure for the third quarter increased by $22 from the prior year to $1,690, even with the $500-discount promotion we offered for the majority of the quarter. We employed a comprehensive market-by-market review of competitive pricing and price sensitivity, which allowed us to adjust our pricing in many LasikPlus^® markets without impacting demand. Our operational metrics for the quarter were strong due to our ability to convert prospects to treated patients.

"We limited our marketing spend for the third quarter as we believed the obstacles to attracting prospective patients made the costs to do so prohibitively high," explained Thomas. "Among the actions we are taking to support patient acquisition are optimizing our messaging for current market conditions following insightful market research that we conducted earlier this month and continuing the $500-discount promotion through mid-November.  We will open a satellite LasikPlus^® vision center in Chicago during the fourth quarter to leverage our marketing spending in that market.  The satellite center will perform pre-operative and post-operative exams, providing added convenience for patients who live considerable distances from our full-service LasikPlus^® vision centers in that market.  Additionally, we are establishing a network of optometrists and other eye-health professionals to co-manage their laser vision correction and cataract patients for patient convenience. We currently have more than 100 partner doctors in our network." 

The company offered cataract surgery and implantable collamer lens procedures in seven markets under the Visium Eye Institute™ brand during the third quarter. The company is on track to expand its Visium centers to 10 by the end of 2012.

Near-term Financial Outlook
LCA-Vision intends to continue to manage expenses conservatively in 2012; its plans and outlook for the remainder of 2012 include:

• The company does not plan to open any new full service vision centers in the near term. The company intends to test the value of satellite vision centers in certain established LasikPlus^® markets. 
• The company anticipates an improvement in price per procedure from the 2011 average of $1,655.
• The company expects capital expenditures for cataract-related equipment and other capital needs to be between $1.2 million and $1.5 million.
• For the fourth quarter of 2012, the company expects marketing and advertising expenses to be between $5.0 million and $5.5 million.

The company estimates that the number of procedures companywide required for its laser vision correction business to achieve breakeven free cash flow is approximately 68,000 per year. The company expects to incur start-up losses and capital investment during the expansion phase for its cataract business.

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 (U.S. and Canada) or 706-643-6246 (international callers). The webcast will also be available in 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 855-859-2056 (U.S. and Canada) or 404-537-3406 (international callers) and enter the conference ID number: 35324861.

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 the company as of the date hereof. Actual results could differ materially from those stated or implied in the forward-looking statements due to risks and uncertainties associated with its business.  In addition to the risk factors discussed in the company's Form 10-K and other filings with the Securities and Exchange Commission, there are a number of other risks and uncertainties associated with its business including, without limitation, the successful execution of cost effective marketing strategies to drive patients to its vision centers; the impact of low consumer confidence and discretionary spending; competition in the laser vision correction industry; the company's ability to attract patients; the possibility of adverse outcomes or long-term side effects of laser vision correction and negative publicity regarding laser vision correction; the company's ability to operate profitable vision centers and retain qualified personnel during periods of lower procedure volumes; the company's success in expanding its services into the cataract and intraocular lens (IOL) market; additional regulatory requirements, such as for Medicare, related to cataract and IOL procedures; the continued availability of non-recourse third-party financing for its patients on terms similar to what it has paid historically; and the future value of revenues financed by the company and its ability to collect on such financings, which will in turn depend on a number of factors, including the consumer credit environment and the company's ability to manage credit risk related to consumer debt, bankruptcies and other credit trends.

Further, the Food and Drug Administration's (FDA) advisory board on ophthalmic devices currently is reviewing concerns about post-LASIK quality of life matters, and the FDA is recruiting participants for two studies on LASIK outcomes and quality of life. The FDA or another regulatory body could take legal or regulatory action against the company or others in the laser vision correction industry. The outcome of this review or legal or regulatory action potentially could impact negatively the acceptance of LASIK. In addition, the acceptance rate of new technologies and our ability to implement successfully new technologies on a national basis create additional risk.

Except to the extent required under the federal securities laws and the rules and regulations promulgated by the Securities and Exchange Commission, the company assumes 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^®
LCA-Vision Inc., a leading provider of laser vision correction services under the LasikPlus^® brand, operates 53 LasikPlus^® fixed-site laser vision centers in 26 states and 41 markets in the United States. Additional company information is available at www.lca-vision.com and www.lasikplus.com.

Earning Trust Every Moment; Transforming Lives Every Day.

LCA-Vision Inc.
Effect of the Change in Accounting for Deferred Revenues on Financial Results
(Dollars in thousands)
(Unaudited)

To supplement its Consolidated Financial Statements presented in accordance with accounting principles generally accepted in the United States, LCA-Vision discusses adjusted revenues and operating income and loss. 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:

SOURCE LCA-Vision Inc.