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Definitive Proxy Statement
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Soliciting Materials Pursuant to Section 240.14a.12
LCA-Vision Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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LCA-Vision Inc. is using the following presentation materials in connection with its consent revocation solicitation.
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February 2009
Earning Trust Every Moment.
Transforming Lives Every Day.
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Forward-Looking Statements
This presentation contains forward-looking statements that are subject to risks and uncertainties including, but not limited to, the impact of competition and pricing, procedure demand and marketplace acceptance, and unforeseen fluctuations in operating results and other risks detailed from time to time in the company’s filings with the Securities and Exchange Commission, including but not limited to, the company’s Forms 10-K and 10-Q.
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Summary of Discussion Points
Business Overview
Plan for Sustainable Growth
Joffe Group Actions Raise Questions
Corporate Governance
Surgeon and Analyst Support
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Business Overview
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The Industry
More than 170 million wear eyeglasses or contact lenses
60 million are candidates for laser vision correction
New entrants to patient pool approximate annual procedures
7.7 million patients treated in the U.S. since FDA approval in October 1995
Approximately 88% of potential candidates have not been treated
1 Industry data obtained from Market Scope (October 2008)
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Highly Fragmented Market = Opportunity
2003
Q4-2008
Procedures Performed by Market Segment
Industry data obtained from Market Scope (November 2003 and January 2009)
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Our Company
Performed more than 1,000,000 procedures since FDA approval in October 1995
75 LasikPlus® vision centers located in 57 markets in 32 states
92.6% of LasikPlus patients would recommend LasikPlus to a friend1
Company has a strong balance sheet with nearly $60 million of cash and investments at December 31, 2008
Continues to lead the industry in managed care relationships and agreements; exclusive or preferred agreements with 7 of top 8 vision plans
Segmentation Study: High opportunity consumer segments identified & pursued
Clear Brand Positioning: Differentiate Lasik Plus from competition
Execution: New marketing campaigns, including integration of segmentation findings and positioning will be rolled out in March
Media Channels: Efficiency
Build Brand Awareness: Integrate all marketing materials with same look, feel and message
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Increase Market Share in a Fragmented Industry
Control Time Period= 4 Weeks (10/13/08, 10/20/08, 10/27/08, 11/3/08) Test Time Period= 3 Weeks (11/10/08, 11/17/08, 12/1/08)
Control Markets, n=46 Test Markets, n=13
Source: LCA Vision Internal Database, 1/21/2009
0%
34%
X%
= Difference between Control Time Period and Test Time Period
Preliminary Results: Eye procedures performed in test markets grew 34% more than control markets
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As the Economy Improves, Expand into Top US Markets
Restart successful de novo expansion when economy improves
Expand into top U.S. markets
Capitalize on pent-up demand
Leverage infrastructure and purchasing power
Note: Vision for the future is for illustrative purposes only and is subject to change
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Lifetime Vision
Test & Expand the New Business Model
Current Model inherited from Stephen Joffe: “Catch & Release”
Limits revenue per patient
High acquisition costs per procedure
Expanded Model: Lifetime Vision and Visual Acuity
Providing medical and surgical care for the health and visual acuity of the eye from age 20 and beyond
Continuum of eye care including intraocular lens replacement (IOL) at $7,000 - $8,000 per patient
Employer of choice: increase MD/OD income, retention and job satisfaction
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Leadership in Place to Deliver Results
Steven C. Straus
CEO
President, COO and CDO, MSO Medical; CDO, Titan Health Corp; VP, General Manager, OR Partners, Division, TLC Vision; President, Health Care Products, Jordan Industry; SVP, Columbia/HCA and Medical Care, Inc.; Various management positions, Baxter Healthcare and American Hospital Supply Corp
Michael J. Celebrezze
Senior VP, Finance; CFO and Treasurer
CFO, First Transit, Inc; Exec.VP, CFO, APCOA/Standard Parking
Stephen M. Jones
Sr. VP Human Resources
VP, Talent Management, The Kroger Company; Principle and Practice Leader, Mercer Consulting
David L. Thomas
Sr. VP Operations
Sr. Manager, McDonalds Corp, COO, Boston Market
Byron R. Hill
Sr. VP Marketing
Embedded Marketing Consultant (Sr. VP) Marketing Cardinal Health, Sr. VP TBresner Associates, Sr. Director Curative Health Service
Owner / Optometrist, Advanced Eye Care Center; Optometrist, Shopko Optical
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Experienced & Seasoned Board of Directors
William F. Bahl
Co-founder and President, Bahl & Gaynor Investment Counsel; Previously SVP, Chief Investment Officer, Northern Trust Company
John H. Gutfreund
President, Gutfreund & Co, Inc.; Previously Senior Advisor, Collins Stewart LLC and Chairman and Chief Executive Officer Salomon Brothers
John C. Hassan
Consultant BSC Ventures; Previously President & CEO, Champion Printing and VP Marketing, Drackett Company
Edgar F. Heizer, III
Chairman and former CEO of Manus Health System; Principal and founder of Coral SR LLC / Heizer Capital; Previously Partner of Gardner, Carton & Douglas
E. Anthony Woods
Non-executive Chairman, Board of Directors, LCA-Vision Inc.; Chairman of Deaconess Associations, Inc.; Previously President and CEO Deaconess Hospital
Steven C. Straus
CEO LCA-Vision; Previously President, COO and CDO, MSO Medical; CDO, Titan Health Corp; VP, General Manager, OR Partners, Division, TLC Vision; President, Health Care Products, Jordan Industry; SVP, Columbia/HCA and Medical Care, Inc.; Various management positions, Baxter Healthcare and American Hospital Supply Corp
Increased market share to 11.9% in 4Q08 vs. 10.5% in 3Q08
Stabilized procedure volume decline; year-over-year decline in 4Q08 of 51% vs. 3Q08 of 52%
Volume increase of 48% from Dec. 2008 to Jan. 2009; compared with 14% increase in Dec. 2007 to Jan. 2008
Implemented initiatives that are reducing costs and conserving cash
Preparing to roll out tested marketing approach with addition of new messaging
Developing broadened business model with adoption of Lifetime Vision
The Joffe Group has no clearly defined plan
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Joffe Group Actions Raise Questions
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Stephen Joffe’s Past Actions Raise Questions as to his Judgment & Motives
While serving as Chairman & CEO, Joffe divested virtually all of his LCA holdings in 2004 & 2005 without prior notice to LCA
Both Joffe’s son and wife were active officers while he was Chairman and CEO. Son is expected to be named President and COO if Joffe takes over BOD
In 2006 Joffe rejected a substantial compensation increase and abruptly resigned as CEO with no succession plan in place
LCA BOD negotiated with Joffe to remain as Chairman and paid him $1 million to assist in transition for remainder of 2006
While still serving as Chairman, Joffe violated LCA’s code of business ethics by purchasing $30M (7.7%) of competitor TLCV stock
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Stephen Joffe’s Past Actions Raise Questions as to his Judgment & Motives
Joffe refused to divest his TLCV shares; LCA’s BOD declined to re-nominate him as a Director and removed him as Chairman
Joffe told LCA BOD that there would be “unintended consequences” as a result of his removal
Joffe request to be named Executive Chairman/CEO of TLCV was rebuffed by TLCV BOD
Joffe filed preliminary TLCV proxy materials to elect 3 Directors; then withdrew from the process
After Joffe is rebuffed by TLCV, he attacks LCA
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Other Joffe Group Members Abruptly Resign Executive Management Positions
Craig Joffe named interim CEO following father’s departure and no succession plan in place
BOD engages industry-leading national recruitment firm; hires Steven Straus in Nov. 2006
Craig Joffe remains as COO & General Counsel and on BOD
Leaves legacy of poor relationships with key vendors and favoritism toward certain employees at expense of deteriorating morale among others
Alan Buckey resigns as CFO in June 2008 with short notice and promptly joins Joffe Group
Craig Joffe and Alan Buckey’s actions are not
aligned with best interests of LCA
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Corporate Governance
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Stockholders’ Rights Plan
BOD adopts stockholders’ rights plan in Nov. 2008
Plan was under consideration since 2Q08
Plan expires if not approved by stockholders within 12 months of adoption
Adverse Person provision has not been applied to Joffe Group
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Executive Compensation
Action by BOD in 2008
Study by independent firm analyzed exec. pay against 25 comparators; concluded management was significantly underpaid
Pay increases were based on study; with 8% increase to Straus, all other executives paid below comparator average with exception of Alan Buckey
Increased Straus’ severance from 1 to 2 years
1-year severance offered to 5 members of senior management; 3 of whom joined the company in past 2 years
All execs. eligible for bonus tied to company performance; 1 received partial bonus in 2007; none receive bonus in 2008
Exec. team is committed to pay-for-performance strategy
Straus salary is well below the $600K figure
rejected by Stephen Joffe
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Non-employee Board Member Compensation
BOD adjusted non-employee BOD compensation in 2006 based on review of competitive practices
Changes instituted to improve the competitiveness of BOD compensation; enable recruitment and retention of BOD members
BOD adopted more specific language regarding director indemnification in 2008
Based on independent consultant review
Changes are normal and customary
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Board Vacancies
BOD committed to filling vacancies
Actively recruiting seasoned executives
Focus on expertise in operations, clinical, healthcare, public company, multi-site service, finance and marketing
Added Edgar F. Heizer, III, on Feb. 17, 2009
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Surgeon and Analyst Support
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Surgeon Confidence
Straus knows that LCA’s staff is its greatest asset
Surgeon pay directly related to procedure volume
Management and BOD take action to integrate surgeons into decision-making process
Hold in-person quarterly meetings
Consulted on operations-model for head-count reduction
Two or more surgeons serve on each management team, including operations and human resources, finance and marketing
More input in the planning stage
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Surgeon Commentary
“Excellent call last night (12/8/08). Just wanted to send a short note to let you know I am very impressed by the team you have assembled and the leadership you have demonstrated. It has been a trying year, as we all know. You have my complete respect, confidence, and support. I look forward to the future and believe LCA/LP will be the dominant and finest provider of LVC for years to come. Let me know if there is anything more I can do to help you and the Company.” ……..LCA surgeon 1
“The marketing meeting (12/16/08) was outstanding. Trudi and her team (Tbresner Associates) have put together a truly extraordinary analysis of the market circa 2009, where LasikPlus stands, the wealth of information gleaned from focus group and competitor research, and possibilities for our group going forward. It was one of the most comprehensive LASIK marketing analyses I’ve ever seen – and portends well for management making a well thought out and rational marketing plan going forward.” ……..LCA surgeon 2
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Surgeon Commentary, continued
“….I want you to know that in my opinion you and your team are doing the best possible job in this economic downswing and I appreciate your staying the course, believing in and focusing on your goals for resolution and success. It is not easy to make tough but appropriate decisions. It takes character, and I applaud you and your team for that.
Once again, I appreciate your willingness and courage to make the necessary decisions in which you believe as the eye care industry reorganizes, the ‘refractive herd thins’ and laser vision correction flourishes, once again, out of this economic slump to an even greater market share than before.” (1/28/09)
……..LCA surgeon 3
“The economy is the reason volumes/profits are down. End of story. You have made the tough decisions and have done a commendable job in weathering the storm and have kept our heads above water during these difficult times. Thank you for that! …..You have the company poised for great success once the economy recovers.” (1/28/09)
Many industry analysts have commented on the impact of consumer confidence, including Maxim Group analyst Anthony Vendetti in a report dated October 28, 2008:
“…We believe that it is too soon to call a bottom in the refractive market due to continued erosion in many key economic indicators, particularly rising unemployment and declining consumer spending…On the expense side of the equation, we applaud management’s effort to rein in expenditures across all operations during the present softening market conditions.”
Source: Maxim Group Report; October 28, 2008
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Current Board and Management Bring Leadership and Professionalism
The old Joffe “Catch & Release” model produces sub-optimal performance in the current economic environment
Joffe’s past actions raise questions about his judgment
Current plan is producing tangible results
Implemented infrastructure, process and organizational improvements that better position LCA
Implemented cost reduction and cash management programs that provide the resources to withstand the tough times
Expanding business model to position LCA for future growth
Recent successes: Increased market share and stabilized procedure volume decline
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