LCA-Vision Third Quarter Results Feature Revenue Growth and Narrowed Operating Loss

CINCINNATI, Oct. 29, 2013 /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, 2013.

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

• Revenues increased 3.2% to $20.7 million from $20.0 million; adjusted revenues increased 5.4% to $20.5 million from $19.5 million.
• Procedure volume increased 3.7% to 11,932 from 11,510.
• Medical professional and license fees remained essentially unchanged at $4.6 million. Medical professional and license fees for the 2013 third quarter included higher fees due to an increase in procedure volume, offset by lower license fees as a result of the company's purchase in April 2013 of its previously leased excimer lasers.
• Vision center direct costs decreased by $0.2 million to $9.9 million from $10.1 million. The decrease was a result of savings in employee-related costs, lower financing fees from finance plan mix and renegotiated rates for third-party financing plans. These costs were offset partially by higher laser maintenance costs and increases in insurance expense.
• General and administrative expenses decreased by $0.2 million to $2.8 million from $3.0 million, due primarily to reductions in employee-related costs as a result of restructuring initiatives implemented earlier in the year.
• Marketing expense increased by $0.2 million to $5.0 million from $4.8 million. Marketing cost per eye was $417 for the third quarters of each of 2013 and 2012.
• Depreciation expense decreased by $0.7 million to $0.5 million from $1.2 million, due to lower capital expenditures in recent years.
• Operating loss was $2.0 million, a $1.7 million improvement from an operating loss of $3.7 million; adjusted operating loss was $2.1 million, a $2.1 million improvement from an adjusted operating loss of $4.2 million.
• Net loss was $1.6 million, or $0.08 per share, a $1.9 million improvement from a net loss of $3.5 million, or $0.19 per share.

Year-to-Date 2013 Financial and Operating Highlights (all comparisons are with the first nine months of 2012)

• Revenues were $71.6 million compared with $81.3 million; adjusted revenues were $70.8 million compared with $79.3 million.
• Procedure volume was 41,198 compared with 46,912.
• Medical professional and license fees decreased by $3.6 million to $15.5 million from $19.1 million. The decrease resulted from lower procedure volume coupled with the impact of lower license fees and enhancement expenses related to the company's purchase of its previously leased excimer lasers.
• Vision center direct costs decreased by $4.1 million to $29.4 million from $33.5 million. The decrease was a result of lower variable costs associated with the 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 expenses decreased by $1.4 million to $8.8 million from $10.2 million, due primarily to reductions in employee-related costs and rent from the consolidation 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 $1.4 million to $16.9 million from $18.3 million. Marketing cost per eye was $411 compared with $390.
• Depreciation expense decreased by $2.1 million to $1.6 million from $3.7 million, primarily due to lower capital expenditures in recent years.
• Restructuring charges of $0.2 million resulted primarily from the relocation of the company's call center.
• Operating loss was $0.7 million, a $2.6 million improvement from an operating loss of $3.3 million; adjusted operating loss was $1.4 million, a $3.8 million improvement from an adjusted operating loss of $5.2 million.
• Net income was $0.1 million, or $0.01 per diluted share, a $3.0 million improvement from a net loss of $2.9 million, or $0.15 per share.
• Cash and investments were $29.1 million as of September 30, 2013, compared with $34.5 million as of December 31, 2012. Cash used in operations included working capital changes driven primarily by $1.5 million of restructuring payments related to previously closed vision centers, reductions in accounts payable related to timing of payments, increased accounts receivable for self-financed patients and reductions in accruals. Cash used in operations also included approximately $1.1 million of start-up losses related to the company's refractive lens and cataract 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 reporting a significant improvement in operating performance for the nine-month period.  Revenues and procedure volume grew for the first time in five quarters," said LCA-Vision Chief Executive Officer Michael J. Celebrezze.  "We are working diligently to support patient acquisition while managing expenses and we are making progress toward our goals of returning our core LASIK business to sustained profitability, growing our core business and diversifying our service offerings. Our average revenue per procedure was $1,718, up $28 year-over-year and, as expected, down $4 sequentially due to the $500-off discount promotion we offered throughout the third quarter.

"Among other highlights for the quarter, we added one licensed full-service vision center and two satellite pre- and post-operative centers, bringing the total number of new centers since the beginning of 2013 to six. Additionally, our co-management partner network contributed 2.1% of our third quarter LASIK procedure volume, up from 1.7% in the second quarter and just under 1.0% in the first quarter."

Near-Term Financial Outlook

LCA-Vision intends to manage expenses conservatively into 2014; its plans and outlook for the remainder of the 2013 year include:

• The company plans to open one additional full-service licensed vision center late in the fourth quarter of 2013, bringing the total number of full-service licensed vision centers opened in 2013 to three. The company also intends to continue leveraging marketing spend and may add a few satellite vision centers where it has confidence that incremental patient volume can be achieved. Four satellite vision centers have been opened since the beginning of 2013.
• The company revised its expectation for annual capital expenditures to be between $0.7 million and $0.9 million from its prior outlook of $0.8 million to $1.2 million.
• For the fourth quarter of 2013, the company expects marketing and advertising expenses to be between $4.6 million and $5.0 million.

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

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).  A webcast will 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: 68999720.

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 attract patients to its vision centers; the impact of low consumer confidence and discretionary spending; the impact of changes in government regulations related to medical expenses; competition in the laser vision correction industry; 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 refractive lens and cataract market; additional regulatory requirements, such as for Medicare, related to cataract and other refractive procedures; the continued availability of non-recourse third-party financing for its patients on terms similar to what it has paid historically; the company's ability to achieve profitability in its developing business expansion initiatives; 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 action against the company or others in the laser vision correction industry. The outcome of this review or legal action potentially could impact negatively the acceptance of LASIK.  In addition, the acceptance rate of new technologies and the Company's 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 59 LasikPlus® vision centers in the United States: 51 full-service LasikPlus® fixed-site laser vision correction centers and eight pre- and post-operative LasikPlus® satellite centers. LCA-Vision has performed more than 1.3 million procedures since FDA approval of photorefractive keratectomy (PRK) in late 1995.

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SOURCE LCA-Vision Inc.