CINCINNATI--(BUSINESS WIRE)--May 8, 2007--LCA-Vision Inc. (Nasdaq:
LCAV), a leading provider of laser vision correction services under
the LasikPlus brand, today announced that it has filed with the
Securities and Exchange Commission (SEC) an amended Annual Report on
Form 10-K/A for the year ended December 31, 2006, including prior
period restatements for the years 2002 to 2006. On April 18, 2007, the
Company announced that it would file a Form 10-K/A for 2006 that
represents the Company's view on changes in revenue recognition for
its separately priced extended warranties. The Form 10-K/A is subject
to ongoing review by, and possible additional comments from, the staff
of the SEC.
The effect of the restatement for 2006 was a reduction in revenues
of $18.0 million and a reduction in net income of $9.9 million. The
cumulative effect of the restatements for the years through 2006 was a
reduction in revenues of $48.9 million and a reduction in retained
earnings of $27.4 million.
The table below summarizes the key income statement results of the
restatement for the three years ended December 31, 2006, 2005, 2004.
There is no change to cash provided by operating activities or to cash
and cash equivalents on the balance sheet for any period affected.
For the Years Ended December 31,
---------------------------------------------
2006 2005
--------------------- ---------------------
Previously Previously
Reported Restated Reported Restated
---------- ---------- ---------- ----------
Revenues -- Laser
refractive surgery $ 256,927 $ 238,925 $ 192,397 $ 176,874
Net income $(256,927) $(238,925) $(192,397) $(176,874)
========== ========== ========== ==========
Income per common share
Basic $ 1.85 $ 1.37 $ 1.54 $ 1.12
Diluted $ 1.80 $ 1.34 $ 1.47 $ 1.07
For the Years Ended
December 31,
----------------------
2004
----------------------
Previously
Reported Restated
----------- ----------
Revenues -- Laser refractive surgery $ 127,122 $ 120,364
Net income $(127,122) $(120,364)
=========== ==========
Income per common share
Basic $ 1.59 $ 1.59
Diluted $ 1.54 $ 1.53
Reasons for the Restatement
On March 9, 2007, LCA-Vision received a comment letter from the
SEC related to a staff review of its 2006 Annual Report on Form 10-K.
The single issue raised in this letter addressed the Company's revenue
recognition policy regarding services provided subsequent to the
initial surgical procedure. In most cases, LCA-Vision's base price
laser vision correction surgery includes a one-year acuity program,
which will cover the cost of post-surgical enhancements should the
patient not achieve the desired visual correction during the initial
procedure. In addition, LCA-Vision offers its patients the option to
purchase a lifetime acuity plan. The majority of LCA-Vision patients
purchase the lifetime acuity program.
The Company's historical accounting policy had been to defer
revenues for separately priced extended warranties for those patients
expected to receive treatment under the warranty. Historical data
indicates that approximately 7% of patients received treatment under
the warranty. The accounting for separately priced extended warranties
is subject to Financial Accounting Standards Board (FASB) Technical
Bulletin 90-1 (FTB 90-1), Accounting for Separately Priced Extended
Warranty and Product Maintenance Contracts.
Following receipt of the SEC staff comment letter and upon further
examination of the manner in which the Company has historically
accounted for the revenues associated with the lifetime acuity
program, LCA-Vision determined that its accounting for deferred
revenues was not appropriate under FTB 90-1 and resulted in an
overstatement of revenues. Under FTB 90-1, 100% of revenues from
separately priced extended warranties are to be deferred and
recognized over the life of the contract on a straight-line basis
unless the Company has sufficient experience to indicate that the
costs to provide the service will be incurred other than on a
straight-line basis.
The Company has sufficient experience to support that future
enhancements will be incurred on other than a straight-line basis.
Accordingly, LCA-Vision has restated its results to reflect the
deferral of revenues associated with its lifetime acuity program as a
separately priced extended warranty under FTB 90-1. LCA-Vision
recognized these deferred revenues in its restated results over the
periods in which the future costs of performing the enhancement
procedures are expected to be incurred. Because the Company's base
price generally included the right to enhancements in the first year,
LCA-Vision recognizes these deferred revenues based on historical
enhancement rate patterns with amortization beginning after the first
anniversary of a patient's surgical date. Under the historical
pattern, approximately 51% of the deferred revenue will be recognized
in the second year after the patient's initial surgery. The following
table highlights the amortization rates in each successive period:
Year after Amortization
Initial Surgery Rate
3 15%
4 13%
5 11%
6 7%
7 3%
In addition to the deferral of revenues under FTB 90-1, LCA-Vision
is also deferring a portion of its costs of service related to
professional fees paid to the attending surgeon. Professional fees are
earned when a procedure is performed. The physician receives no
incremental fee for an enhancement procedure. Accordingly, a portion
of the professional fee paid to the physician relates to the future
enhancement procedures to be performed and qualifies for deferral
under FTB 90-1 as a direct and incremental cost of the warranty
contract. LCA-Vision will use the same historical experience to
amortize the deferred revenue and the deferred professional fees.
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. 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 such forward-looking statements due to risks and
uncertainties associated with our business, including, without
limitation, those concerning economic, political and sociological
conditions; market acceptance of our services; the successful
execution of marketing strategies to cost effectively drive patients
to our vision centers, which recent results would indicate are no
longer as effective as they have been in prior periods; competition in
the laser vision correction industry; an inability to attract new
patients; the possibility of long-term side effects and adverse
publicity regarding laser vision correction; regulatory action against
us or others in the laser vision correction industry; and the
relatively high fixed cost structure of our business. 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 Forms 10-K and 10-Q. 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. is a leading provider of laser vision correction
services under the LasikPlus brand. We own and operate 63 LasikPlus
fixed-site laser vision correction centers in the United States and a
joint venture in Canada. LasikPlus vision centers are located in 48
markets in 29 states. Additional information is available at our
corporate websites: www.lca-vision.com and www.lasikplus.com.
It's Not Just LASIK. It's LasikPlus!
CONTACT: Lippert/Heilshorn & Associates
Jody Cain, 310-691-7100
Senior Vice President
SOURCE: LCA-Vision Inc.
