LCA-Vision Announces Fourth Quarter and Full Year 2008 Financial Results
Sequential quarter decline in procedure volume rate shows signs of stabilization;
Provides near-term financial outlook
Fourth Quarter 2008 Results (all comparisons are versus the fourth quarter of 2007)
- Revenue was
$34.0 million compared with$69.7 million ; adjusted revenue was$30.3 million compared with$62.9 million . - Procedure volume was 19,424 compared with 39,888.
- Same-store revenue (69 vision centers) decreased 54.2%; adjusted same-store revenue decreased 55.3%.
- Operating loss was
$9.6 million compared with operating income of$5.9 million ; adjusted operating loss was$13.0 million compared with adjusted operating loss of$0.3 million . - Operating loss and adjusted operating loss included
$2.1 million in restructuring and impairment charges. - Net loss was
$8.2 million or$0.44 per share, compared with net income of$4.1 million or$0.22 per diluted share.
Full Year 2008 Results (all comparisons are versus the full year 2007)
- Revenue was
$205.2 million compared with$292.6 million ; adjusted revenue was$186.5 million compared with$284.6 million . - Procedure volume was 115,153 compared with 192,204.
- Operating loss was
$8.2 million compared with operating income of$45.6 million ; adjusted operating loss was$25.1 million compared with adjusted operating income of$38.4 million . - Operating loss and adjusted operating loss included
$3.5 million in restructuring and impairment charges. - Net loss was
$6.6 million or$0.36 per share, compared with net income of$32.5 million or$1.64 per diluted share.
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 better reflects operating performance and, therefore, is more meaningful to investors.
“During the fourth quarter, we began to benefit from our numerous business initiatives implemented throughout 2008, even though the decline in the overall U.S. economy and weakening consumer confidence continued to impact discretionary spending and led to what we believe was additional deterioration in overall industry procedure volume,” said
Straus added, “We are building on a strengthened infrastructure based on the many processes and procedures put in place since
The accomplishments implemented by current management of LCA-Vision to respond to the current operating environment and position the company for future success with the goal of profitable growth include the following, among others:
- In the area of patient care, the company has upgraded the laser technology in all of its vision centers and empowered decision-making at the vision center level to be more responsive to patient needs in individual markets;
- In the area of staff development, management has introduced various training, recruitment and succession planning programs for surgeons, optometrists and staff, which have resulted in improvements in exam show-rate, patient conversion and treatment show-rate;
- In the area of operations, management has reorganized and strengthened the company’s organizational structure, including the hiring of senior executives with responsibility for operations and call center management, the opening of state-of-the-art national call and data centers, and the evaluation in collaboration with its Medical and Optometric Advisory Boards of the company’s excimer laser platforms to simplify surgical processes;
- In the area of financial/accounting management, management created the first-ever detailed annual operating budget process, improved the timeliness of financial reporting, and negotiated a five-year,
$19.2 million term loan with a fixed interest rate below 5% and other favorable terms; and - In the area of leadership, management has created the Optometric Advisory Board, comprised of a group of LasikPlus(R) optometrists, created strong partnerships between field staff and corporate support departments, and increased and improved communication across the entire company, which helps all members stay connected and improve morale.
“We have executed agreements with major managed health care and vision plans, a major source of patients in our LasikPlus(R) vision centers, and we have exclusive or preferred agreements with seven of the top eight vision plans in the United States,” added Straus. “We recently initiated our affiliation with the well-respected National Vision Administrators, L.L.C. to provide its members with access to substantial discounts on laser vision correction through our National Lasik Network.”
“Additionally, our fresh marketing approach is producing highly encouraging initial results,” he said. “Following research and a segmentation study, we developed cost-effective, market-specific plans, which deliver a message that clearly differentiates LasikPlus(R) to targeted audiences, while building brand awareness through integrated marketing materials. Our test of this new concept in 13 markets over a three-week period late in 2008 resulted in a 34% increase in eye procedures performed compared to the prior four weeks. We expect to roll out the new campaigns nationally in March 2009.”
LCA-Vision’s Chief Financial Officer
“Ongoing initiatives are expected to reduce further our costs in the coming year,” he added. “These include negotiations to rationalize the number of excimer lasers in each vision center to reduce royalty fees and maintenance costs, steps to further improve collection results from internally financed patients including the use of credit scores to qualify patients for appropriate financing options, and continued migration toward an increasingly part-time workforce to complement a core group of full-time employees. Additionally, after carefully analyzing the performance of our vision centers in
Celebrezze added, “The quarter was impacted negatively by restructuring and impairment charges that totaled
“Lifetime Vision” Model
“During 2008, our executive management team completed the first strategic plan in LCA-Vision’s history. A key feature of our business strategy for 2009 is to build upon the improvements implemented by instituting a ‘Lifetime Vision’ model, which is intended to allow us to leverage our currently installed fixed asset base and to utilize fully 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 rejects the old ‘Catch & Release’ model implemented by previous management that did not allow for repeat sources of revenue. The advancement and development of the ‘Lifetime Vision’ model, including intraocular lens surgery, will be a management focus in 2009.”
Cash & Investments
Net cash provided by operating activities in 2008 was
The par value of auction rate securities held by the company as of
LCA-Vision did not repurchase any shares of its common stock during 2008. Approximately
Near-Term Financial Outlook
LCA-Vision will continue to manage cash and investments conservatively in 2009.
- No new vision centers are currently planned for the year. LCA-Vision plans to restart its successful de novo center opening program following improvements in the economy;
- The company will continue to manage general and administrative expenses aggressively, which are expected to remain relatively unchanged in 2009 compared with 2008;
- Center direct costs per center are expected to decline in 2009;
- We will monitor the efficiency of marketing spending and modify our spending based on effectiveness, taking it up if demand improves and reducing it if demand declines, and
- Capital expenditures are expected to be approximately
$2.0 million in 2009, down significantly from$14.9 million in 2008.
Comparing 2009 (the first full year to benefit from cost reductions) with 2007 (prior to cost reductions), vision center breakeven eyes per month are expected to decline to 105 from 125, and the number of procedures per year required for company cash flow to be breakeven is expected to decline to approximately 110,000 from 170,000.
The company has been repositioned to be cash-flow positive at 2008 procedure volume levels. Current cash and investment resources provide the company significant staying power should the current recession be prolonged. Current cash and investment resources are sufficient to fund operations for more than three years even if procedure volumes decline as much as 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,
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 operate vision centers profitably 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 implement successfully 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
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 INCOME
(Dollars in thousands except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenue -- Laser refractive
surgery $34,029 $69,702 $205,176 $292,635
Operating costs and expenses
Medical professional and
license fees 7,575 11,574 41,797 49,312
Direct costs of services 15,504 25,024 77,474 97,423
General and administrative
expenses 5,125 7,432 20,262 22,657
Marketing and advertising 8,685 16,369 52,429 66,469
Depreciation 4,597 3,451 17,972 11,209
Restructuring expense 1,584 - 2,923 -
Impairment of fixed assets 553 - 553 -
Operating (loss) income (9,594) 5,852 (8,234) 45,565
Equity in earnings from
unconsolidated businesses 24 217 477 814
Net investment (loss) income (2,366) 1,075 (1,524) 5,953
Other income (loss), net 5 (598) 23 (607)
(Loss) income before taxes (11,931) 6,546 (9,258) 51,725
Income tax (benefit) expense (3,711) 2,400 (2,623) 19,221
Net (loss) income $(8,220) $4,146 $(6,635) $32,504
Net (loss) income per common
share
Basic $(0.44) $0.22 $(0.36) $1.66
Diluted $(0.44) $0.22 $(0.36) $1.64
Dividends declared per share $- $0.18 $0.24 $0.72
Weighted average shares
outstanding
Basic 18,548 18,790 18,526 19,572
Diluted 18,548 18,862 18,526 19,858
LCA-VISION INC.
CONSOLIDATED BALANCE SHEETS
At December 31,
2008 2007
(Dollars in thousands, except per share amounts)
Assets
Current assets
Cash and cash equivalents $23,648 $17,614
Short-term investments 32,687 42,534
Patient receivables, net of allowance for doubtful
accounts of $1,465 and $2,987 9,678 12,712
Other accounts receivable 2,515 5,941
Prepaid professional fees 911 1,872
Prepaid income taxes 8,957 6,391
Deferred tax assets 4,708 3,450
Prepaid expenses and other 5,299 5,076
Total current assets 88,403 95,590
Property and equipment 121,734 106,788
Accumulated depreciation and amortization (70,235) (52,872)
Property and equipment, net 51,499 53,916
Long-term investments 3,126 2,250
Accounts receivables, net of allowance for 2,645 4,556
doubtful accounts of $1,662 and $2,130
Deferred compensation plan assets 2,196 5,540
Investment in unconsolidated businesses 377 590
Deferred tax assets 7,027 13,561
Other assets 2,209 3,644
Total assets $157,482 $179,647
Liabilities and Stockholders' Investment
Current liabilities
Accounts payable $8,169 $10,396
Accrued liabilities and other 8,608 13,861
Deferred revenue 9,107 18,719
Debt obligations maturing in one year 6,985 3,941
Total current liabilities 32,869 46,917
Long-term rent obligations 1,820 -
Long-term debt obligations (less current portion) 14,120 2,012
Deferred compensation liability 2,196 5,516
Insurance reserve 9,489 8,493
Deferred revenue 14,003 23,110
Stockholders' Investment
Common stock ($.001 par value; 25,199,734 and
25,114,244 shares and 18,552,985 and 18,482,658
shares issued and outstanding, respectively) 25 25
Contributed capital 174,206 172,965
Common stock in treasury, at cost (6,646,449 (114,632) (114,427)
shares and 6,631,586 shares)
Retained earnings 23,515 34,597
Accumulated other comprehensive (loss) income (129) 439
Total stockholders' investment 82,985 93,599
Total liabilities and stockholders' investment $157,482 $179,647
LCA-VISION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2008 2007
(dollars in thousands)
Cash flow from operating activities:
Net (loss) income $(6,635) $32,504
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 17,972 11,209
Provision for loss on doubtful accounts 5,355 7,675
Loss on investment 3,125 -
Restructuring expense 1,426 -
Impairment of fixed assets 553 -
Deferred income taxes 4,965 5,369
Stock-based compensation 1,878 5,024
Insurance reserve 996 2,330
Equity in earnings from unconsolidated affiliates (477) (814)
Distributions from unconsolidated affiliates 690 1,128
Changes in operating assets and liabilities
Patient receivable (410) (11,500)
Other accounts receivable 3,426 1,080
Prepaid income taxes (2,566) (4,035)
Prepaid expenses and other (223) 1,338
Accounts payable (2,227) 5,132
Deferred revenue, net of professional fees (16,847) (7,212)
Accrued liabilities and other (3,432) 5,751
Net cash provided by operations 7,569 54,979
Cash flows from investing activities:
Purchases of property and equipment (14,860) (28,586)
Purchases of investment securities (391,026) (330,826)
Proceeds from sale of investment securities 396,674 356,874
Net cash used in investing activities (9,212) (2,538)
Cash flows from financing activities:
Principal payments of capital lease obligations
and debt (6,410) (5,782)
Proceeds from loan 19,184 -
Shares repurchased for treasury stock (205) (44,940)
Tax benefits related to stock-based compensation (638) 1,949
Exercise of stock options 193 3,499
Dividends paid to stockholders (4,447) (13,984)
Net cash provided by (used in) financing activities 7,677 (59,258)
Increase (decrease) in cash and cash equivalents 6,034 (6,817)
Cash and cash equivalents at beginning of year 17,614 24,431
Cash and cash equivalents at end of year $23,648 $17,614
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
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 Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenue
Reported $34,029 $69,702 $205,176 $292,635
Adjustments
Warranty revenue deferred
into future - - - 20,054
Amortization of prior
deferred revenue (3,769) (6,836) (18,719) (28,067)
Adjusted revenue $30,260 $62,866 $186,457 $284,622
Operating (Loss) Income
Reported $(9,594) $5,852 $(8,234) $45,565
Adjustments
Impact of warranty revenue
deferral (3,769) (6,836) (18,719) (8,013)
Professional fees deferred
into future - - - (2,005)
Amortization of prior
professional fees 377 684 1,872 2,807
Adjusted operating (loss)
income $(12,986) $(300) $(25,081) $38,354
SOURCE LCA-Vision Inc.