Contacts: LCA-Vision Inc. Lippert/Heilshorn & Associates Alan H. Buckey, CFO
Bruce Voss / Jody Cain Michael J. Celebrezze, VP Finance (310) 691-7100 Barbara
E. Ruskaup, Administrative Director Keith Lippert
LCA-Vision to Restate Financial Statements to Increase Deferred Revenues for Separately Priced Extended Warranties
Management comfortable with current 2007 financial guidance
Conference call begins today at 8:30 a.m. Eastern time
(April 18, 2007) — LCA-Vision Inc. (Nasdaq: LCAV), a leading provider of laser vision
correction services under the LasikPlus brand, today announced it will restate financial results
for 2004, 2005 and 2006 to reflect a change in revenue recognition for the Company’s separately
priced extended warranties.
This change is expected to reduce 2006 revenues and net income by approximately $18 million and $10
million, respectively. This reflects a reduction in revenues of approximately 7 percent for the
year. The proposed accounting also is expected to reduce shareholders’ equity as of December 31,
2006 by approximately $30 million, of which approximately $9 million relates to periods prior to
2004. The proposed adjustment in revenue recognition is expected to increase revenues and earnings
in future periods as deferred revenues are amortized back into income. There will be no change to
cash provided by operating activities or to cash and cash equivalents on the balance sheet for any
period affected. Management is analyzing the restatement adjustments and the estimated changes
outlined above are preliminary and are subject to further review and audit.
This action resulted from analysis performed following the Company’s receipt of a comment letter
from the Securities and Exchange Commission (SEC) pursuant to their
review of the 2006 10-K. The single issue raised in this letter
addressed the Company’s revenue recognition policy. The Company’s historical policy has been to
defer revenues for separately priced extended warranties for those patients expected to receive
treatment under the warranty. Historical data indicates that only 7% of patients elected to
receive treatment under the warranty.
Because LCA-Vision has offered separately priced extended warranties, it is subject to FASB
Technical Bulletin 90-1. Under this Bulletin 100 percent of revenues from extended warranties are
to be deferred and these deferred revenues are to be amortized back into income 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 believes it has
sufficient experience to show that future enhancements are not expected to be performed on a
straight-line basis and should be amortized over seven years.
“We have provided the SEC with a response to its comment letter and we look forward to resolving
this issue as soon as is practical,” said Steven C. Straus, LCA-Vision’s Chief Executive Officer.
“Since we started offering separately priced extended vision acuity plans, we have consistently
applied our interpretation of the relevant accounting rules and deferred a portion of the revenue
from acuity plans consistent with the percentage of patients who return to LasikPlus vision centers
for enhancement procedures.
“We plan to limit or eliminate the use of separately priced extended warranties in the near
future,” added Mr. Straus. “Therefore, we expect the impact of the restated financial statements
will be to increase revenues and pretax income in future periods as the deferred revenue is
amortized back into income. At present, we are comfortable with our 2007 revenue guidance growth
of 20 to 25 percent compared with 2006, and our 2007 earnings per share guidance of $2.05 to
The Company’s decision to restate prior-period financial statements was made by LCA-Vision
management with the concurrence of the Audit Committee of its Board of Directors and its
independent auditors, Ernst & Young LLP.
In light of the restatement, investors should rely on LCA-Vision’s forthcoming restated financial
statements and other financial information rather than the previously filed financial statements
and other financial information.
Conference Call & Webcast
A conference call and webcast will be held today, Wednesday, April 18, 2007 at 8:30 a.m. Eastern
time to answer analyst and investor questions. To access the conference call, dial 888-803-7404
(within the United States and Canada), or 706-634-1308 (international callers). To access the
replay, dial 800-642-1687 (within the United States and Canada), or 706-645-9291 (international
callers) and enter the conference ID number: 6321144. A replay of the conference call will be
available at the investor relations section of LCA-Vision’s website.
First Quarter 2007 Financial Results
The Company will file its Form 10-Q for the first quarter of 2007 with finalized first quarter 2007
financial results as well as its restated financial statements in amendments to prior reports with
the Securities and Exchange Commission as soon as it is practical. The final changes to deferred
revenues, net income, and earnings per share will be available in these filings.
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;
operational and management instability, which we have recently experienced including at the
executive management level; 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 participate in 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.