Provides Business Update and Near-term Financial Outlook CINCINNATI, Feb. 9 /PRNewswire-FirstCall/ -- 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 month periods ended December 31, 2009. Fourth Quarter 2009 Operational and Financial Results (all comparisons are with the fourth quarter of 2008) -- Revenues were $22.0 million compared with $34.0 million; adjusted revenues were $20.1 million compared with $30.3 million. -- Procedure volume was 11,718 compared with 19,424. -- Same-store revenues (71 vision centers) decreased 33.3%; adjusted same-store revenues decreased 31.1%. -- Operating loss was $10.1 million compared with operating loss of $9.6 million; adjusted operating loss was $11.8 million compared with adjusted operating loss of $13.0 million. Operating loss and adjusted operating loss for the fourth quarters of 2009 and 2008 included restructuring and impairment charges of $1.2 million and $2.1 million, respectively. -- Net loss was $3.6 million, or $0.19 per share, compared with net loss of $8.2 million, or $0.44 per share. The decrease in net loss resulted primarily from charges taken in the fourth quarter of 2008 of $2.1 million for other-than-temporary impairment of investments and a decrease of $930,000 in restructuring and fixed asset impairment charges. Full Year 2009 Operational and Financial Results (all comparisons are with the full year 2008) -- Revenues were $129.2 million compared with $205.2 million; adjusted revenues were $120.1 million compared with $186.5 million. -- Procedure volume was 72,776 compared with 115,153. -- Operating loss was $36.5 million compared with operating loss of $8.2 million; adjusted operating loss was $44.7 million compared with adjusted operating loss of $25.1 million. Operating loss and adjusted operating loss for 2009 included $8.1 million in restructuring and impairment charges and $0.8 million in consent revocation solicitation charges; operating loss and adjusted operating loss for 2008 included $3.5 million in restructuring and impairment charges. -- Net cash provided by operations was $1.4 million compared with $6.9 million. -- Net loss was $33.2 million, or $1.79 per share, compared with net loss of $6.6 million, or $0.36 per share. The 2009 net loss included a $12.2 million, or $0.66 per share, valuation allowance for deferred tax assets. -- Cash and investments totaled $54.6 million as of December 31, 2009, compared with $59.5 million as of December 31, 2008. Since the first quarter of 2007, LCA-Vision has provided both adjusted revenues and operating losses 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 losses 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. "We are balancing cash conservation in the current challenging economic environment against our longer-term objective of managing to profitability and growth when the economy improves," said LCA-Vision Chief Financial Officer Michael J. Celebrezze. "Our combined cash conservation and expense reduction measures last year included closing 12 underperforming vision centers, reducing marketing expense by $18.6 million, reducing our headcount by 19%, and renegotiating our equipment contracts. The payroll and equipment cost reductions resulted in an annual savings of approximately $11 million. We ended 2009 with more than $54 million in cash and investments and currently operate a network of 62 LasikPlus® vision centers." Chief Operating Officer David L. Thomas commented, "Our decision to reduce fourth quarter marketing and advertising spending to less than $6 million in an effort to align marketing expenses with perceived consumer demand resulted in less than desired procedure volume. We are increasing marketing and advertising spending in the first quarter of 2010 to $9 million. Consumer marketing is critical to driving procedure volume and, in the past several months, we have conducted an extensive analytical evaluation of all marketing drivers with the objective of taking a more comprehensive data-driven approach to marketing. With the support of a top-line, full-service advertising agency, we are refining our branding to better differentiate LCA-Vision / LasikPlus® from others in our category and developing more compelling messages. We also are changing our focus toward competing with individual surgeon practices, which control nearly two-thirds of our market. Early this year we hired a Vice President of Marketing with considerable senior-level experience in customer-centric organizations who is now leading our marketing initiatives. "During the fourth quarter, we expanded our Advanced Eye Health Analysis, or AEHA, program to 14 LasikPlus® vision centers. We also decided to offer the exam free of charge to prospective LASIK patients after determining that fees for the stand-alone procedure were negatively impacting appointment show rates. We expect to complete an evaluation of this program in the second quarter of 2010." Near-term Financial Outlook LCA-Vision intends to continue to manage cash flow conservatively in 2010. The Company's plans and outlook for 2010 include: -- 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 expects will decline slightly in 2010 from 2009 levels, following a 19% decline in 2009 from 2008. -- The company expects direct costs per center to decline slightly in 2010 from 2009, following an 18% decline in 2009 from 2008. -- The company expects marketing and advertising spend for the 2010 first quarter to be approximately $9.0 million. -- The company expects capital expenditures of $1.2 million in 2010 for vision center renovations and equipment replacement. As a result of aggressive efforts to reduce costs, the number of procedures per vision center required to reach breakeven has declined to 95 per month. LCA-Vision estimates the number of procedures companywide required for breakeven cash flow, after capital expenditures and debt service, to be approximately 95,000 per year. The company believes that it has sufficient cash and investments to fund its business beyond 2012 if it performs at least 65,000 procedures annually. Procedure volume for 2009 was 72,776. 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: 493 358 95. 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. In addition to the risk factors discussed in our Form 10-K and other filings with the Securities and Exchange Commission, there are a number of other risks and uncertainties associated with our business, including, without limitation, the successful execution of marketing strategies cost effectively to drive patients to our vision centers; the impact of low consumer confidence and discretionary spending; competition in the laser vision correction industry; our ability to attract new patients; the possibility of adverse outcomes or long-term side effects of laser vision correction; negative publicity regarding laser vision correction; our ability to operate profitable vision centers and retain qualified personnel during periods of lower procedure volumes; 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 in turn 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. Further, the FDA's advisory board on ophthalmic devices is currently reviewing concerns about post-Lasik quality of life matters, and the FDA has planned a major new study on Lasik outcomes and quality of life that is expected to end in 2012. The FDA or another agency could take legal or regulatory action against us or others in the laser vision correction industry. The outcome of this review or legal or regulatory action could potentially impact negatively the acceptance of Lasik. 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® LCA-Vision Inc., a leading provider of laser vision correction services under the LasikPlus® brand, operates 62 LasikPlus® fixed-site laser vision correction centers in 29 states and 45 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; Building Relationships for a Lifetime. For Additional Information Company Contact: Investor Relations Contact: Barb Kise Jody Cain Lippert/Heilshorn & LCA-Vision Inc. Associates 513-792-9292 310-691-7100 LCA-Vision Inc. Consolidated Statements of Operations (Dollars in thousands except per share data) (Unaudited) Three Months Twelve Months Ended Ended December 31, December 31, ------------- -------------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenues - Laser refractive surgery $21,965 $34,030 $129,213 $205,176 Operating costs and expenses Medical professional and license fees 5,097 7,575 28,746 41,797 Direct costs of services 13,288 15,505 63,579 77,474 General and administrative 3,926 5,126 16,501 20,262 Marketing and advertising 5,775 8,685 33,784 52,429 Depreciation 2,778 4,597 14,198 17,972 Consent revocation solicitation charges (24) - 780 - Impairment charges (190) 1,672 5,414 1,672 Restructuring charges 1,422 465 2,696 1,804 ----- --- ----- ----- Operating loss (10,107) (9,595) (36,485) (8,234) Equity in (loss) earnings from unconsolidated businesses (6) 24 122 477 Net investment income (loss) 673 (2,376) 1,785 (1,524) Other income, net 359 15 385 23 --- -- --- -- Loss before income taxes (9,081) (11,932) (34,193) (9,258) Income tax benefit (5,471) (3,712) (949) (2,623) ------ ------ ---- ------ Net loss $(3,610) $(8,220) $(33,244) $(6,635) ======= ======= ======== ======= Loss per common share Basic $(0.19) $(0.44) $(1.79) $(0.36) Diluted $(0.19) $(0.44) $(1.79) $(0.36) Weighted average shares outstanding Basic 18,614 18,548 18,594 18,526 Diluted 18,614 18,548 18,594 18,526 LCA-VISION INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) At December 31, ---------------- 2009 2008 ---- ---- Assets Current assets Cash and cash equivalents $24,049 $23,648 Short-term investments 28,455 32,687 Patient receivables, net of allowance for doubtful accounts of $1,645 and $1,465 4,562 9,678 Other accounts receivable 2,002 2,515 Assets held for sale 1,031 - Prepaid professional fees 615 911 Prepaid income taxes 12,270 8,957 Deferred tax assets - 4,708 Deferred compensation plan assets 400 - Prepaid expenses and other 5,582 5,299 ----- ----- Total current assets 78,966 88,403 Property and equipment 81,477 121,734 Accumulated depreciation and amortization (55,479) (70,235) ------- ------- Property and equipment, net 25,998 51,499 Long-term investments 2,090 3,126 Accounts receivables, net of allowance for doubtful accounts of $674 and $1,662 854 2,645 Deferred compensation plan assets - 2,196 Investment in unconsolidated businesses 137 377 Deferred tax assets - 7,027 Other assets 4,590 2,209 ----- ----- Total assets $112,635 $157,482 ======== ======== Liabilities and Stockholders' Investment Current liabilities Accounts payable $6,504 $8,169 Accrued liabilities and other 11,581 8,608 Deferred revenue 6,151 9,107 Deferred compensation liability 400 - Debt obligations maturing in one year 3,998 6,985 ----- ----- Total current liabilities 28,634 32,869 Long-term rent obligations and other 2,395 1,820 Long-term debt obligations (less current portion) 9,145 14,120 Deferred compensation liability - 2,196 Insurance reserve 9,154 9,489 Deferred license fee 4,428 - Deferred revenue 7,852 14,003 Total stockholders' investment 51,027 82,985 ------ ------ Total liabilities and stockholders' investment $112,635 $157,482 ======== ======== LCA-VISION INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (Unaudited) Year Ended December 31, ---------------- 2009 2008 ---- ---- Cash flow from operating activities: Net loss $(33,244) $(6,635) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 14,198 17,972 Provision for loss on doubtful accounts 3,320 5,355 (Gain) loss on investments (48) 3,115 Impairment 5,414 1,672 (Gain) loss on sale of property and equipment (385) 2 Deferred income taxes 10,943 4,965 Stock-based compensation 741 1,878 Insurance reserve (335) 996 Equity in earnings from unconsolidated affiliates (122) (477) Distributions from unconsolidated affiliates 362 690 Changes in operating assets and liabilities Patient receivable 3,587 (410) Other accounts receivable 513 3,426 Prepaid income taxes (3,313) (2,566) Prepaid expenses and other 773 (223) Accounts payable (1,665) (2,227) Deferred revenue, net of professional fees (8,196) (16,847) Accrued liabilities and other 8,858 (3,755) ----- ------ Net cash provided by operations 1,401 6,931 Cash flows from investing activities: Purchases of property and equipment (240) (14,869) Proceeds from sale of property and equipment 466 18 Purchases of investment securities (327,367) (391,026) Proceeds from sale of investment securities 333,438 396,674 Other, net 683 (9) --- -- Net cash provided by (used in) investing activities 6,980 (9,212) Cash flows from financing activities: Principal payments of capital lease obligations and loan (7,962) (6,410) Proceeds from loan - 19,184 Shares repurchased for treasury stock (36) (205) Tax benefits related to stock-based compensation - - Exercise of stock options 18 193 Dividends paid to stockholders - (4,447) - ------ Net cash (used in) provided by financing activities (7,980) 8,315 ------ ----- Increase in cash and cash equivalents 401 6,034 Cash and cash equivalents at beginning of year 23,648 17,614 ------ ------ Cash and cash equivalents at end of year $24,049 $23,648 ======= ======= LCA-VISION INC. Effect of the Change in Accounting for Deferred Revenues on Financial Results (Dollars in thousands) (Unaudited) 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 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, ------------------ ------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenues Reported U.S. GAAP $21,965 $34,030 $129,213 $205,176 Adjustments Amortization of prior deferred revenue (1,827) (3,770) (9,107) (18,719) ------ ------ ------ ------- Adjusted revenues $20,138 $30,260 $120,106 $186,457 ======= ======= ======== ======== Operating Loss Reported U.S. GAAP $(10,107) $(9,595) $(36,485) $(8,234) Adjustments Impact of warranty revenue deferral (1,827) (3,770) (9,107) (18,719) Amortization of prior professional fees 183 377 911 1,872 --- --- --- ----- Adjusted operating loss $(11,751) $(12,988) $(44,681) $(25,081) ======== ======== ======== ======== DATASOURCE: LCA-Vision Inc. CONTACT: Barb Kise, LCA-Vision Inc., +1-513-792-9292; or Investor Relations: Jody Cain, Lippert/Heilshorn & Associates, +1-310-691-7100 Web Site: http://www.lca-vision.com/

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