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1
1
February 2009
Earning Trust Every Moment.
Transforming Lives Every Day.
- 2 -
2
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.
3
Summary of Discussion Points
Business Overview
Plan for Sustainable Growth
Joffe Group Actions Raise Questions
Corporate Governance
Surgeon and Analyst Support
4
Business Overview
5
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)
6
Highly Fragmented Market = Opportunity
2003
Q4-2008
Procedures Performed by Market Segment
Industry data obtained from Market Scope (November 2003 and January 2009)
7
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
friend 1
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
1 Source: LCA Internal Database, Patient Satisfaction Surveys, 2008
8
Source: Consumer Confidence Index from University of Michigan/Reuters survey
Consumer Confidence Directly Correlated to LCA Eye Volume
LCA Eye Volume Directly Correlated
to Consumer Confidence
Consumer confidence level is at its lowest point ever
since February 1967 when the measurement began
9
Everyone in the Industry Feels the Pain
2-Year Stock Price Comparison
LCAV, TLCV & EYE % Change
12/06
12/07
12/08
10
Old Model, Old Times
Inherited from Stephen Joffe
Historic model depended on high consumer confidence
Ineffective in a deteriorating macroeconomic environment
Operating performance more volatile than industry average
Based on swings in consumer confidence and discretionary
spending
Patient financing made Company susceptible to economic decline
“Catch & Release”
No repeat purchases
Model dependent upon new patients for each additional procedure
Very little investment was made in consumer research/insights
11
LCA Poor Performance in Last Economic
Downswing
2001 – 2002 Under Stephen Joffe Leadership
4 consecutive quarters of year-over-year revenue declines
Reported loss (excluding 1X items) in 5 of 6 consecutive
quarters
Postponed new center openings / restructured operations
Closed 15% of the centers that were open as of January 1, 2001
Market share declined from 6.2% in 1Q01 to 3.8% in 4Q01
“Catch & Release” Model was NOT effective
in last Economic Downswing
12
Joffe’s Response: No Response
Under Stephen Joffe Leadership
No major initiatives to change marketing strategy or consumer
messages
No major initiatives to strengthen field operations
Maintained sole dependence on elective, self-pay laser vision
correction services rather than diversifying the business model
Growth was opportunistic vs. strategic
Stephen Joffe failed to take action to remove
risk of similar fate in future economic downturns
13
Plan for Sustainable Growth
14
Straus Leadership: Result–oriented Actions
Under Steven Straus leadership (since Nov. 2006)
LCA-Vision has a professional, comprehensive business
plan that addresses all aspects of the Company
Expense management / cash conservation
Improved leadership structure
Initiatives to drive growth
Fresh marketing approach
Expanded business model
Experienced management and BOD
15
Cash + Cost Reduction = Staying Power
Current Situation
Contrast to the Past
Nearly $60M in cash and
investments as of 12/31/08
Company repositioned to be cash
flow positive in 2009 if it can
maintain 2008 procedure volume
Current cash resources are
sufficient to support business for in
excess of 3 YEARS even if
procedures decline as much as
22% in 2009 (to 90,000)
Vision Center Break-Even Eyes - per month
Company Cash Flow – Break-Even Procedures - Annual
Excludes Stock Buy-backs in 2007
16
Aggressive Cost Reduction
Capital Expenditures Reduced
$ in $000s
Average #
Centers
($ in $000s)
G&A Costs
($ in $000s)
Center
Direct (1)
(Per
Center)
Center
Direct
2007
65.5
$ 22,657
$97,423
$1,487
2009B
75.0
$ 20,489
$76,951
$1,013
% Change
16%
-10%
-21%
-32%
(1) Center Direct costs are partially variable based upon procedure
volume so amounts are subject to change
G&A and Operating Costs Reduced
17
Aggressive Cash Management
Capital Expenditures Reduced
($ in $000s)
18
Management / leadership
development program initiated for
entire Field Management team
Replaced ineffective Area Vice
Presidents, Regional Directors, Center
Directors, Optometrists and Surgeons
Professional Leadership Drives Change
Actions Taken
Results
Reduced region and area
management staff by 38%
Consolidated Vision Center
management positions
Annual savings of $1,500,000
Certifying ophthalmic technician staff
increases professionalism and
quality in centers nationwide
Improved employee / surgeon
relations, better hires, better morale
Streamlined field leadership through
creation of multi-center directors
Clinical certification program for all
ophthalmic technicians
19
Built new state-of-the-art data and
call centers
Full in-house system redundancy. New
system kept call center fully functional
during Hurricane Ike in 2008 with no
revenue loss
80% of procedures; generates
approximately $10 million in
annualized incremental revenue
Enhanced capability for data
management, reporting, analysis and
decision making. Provided access to
untapped intelligence on prospective
patients.
Expected to improve candidacy by
9% or 10,000 eyes annually
Actions Taken
Results
Infrastructure for Growth
Installed IntraLase femtosecond
laser in every center
Enhanced customer relationship
management system (CRM)
Patient chart sharing system
20
Implemented annual budget process
Identified spending trends to better
predict and manage expenses
Actions Taken
Results
Decentralized Authority & Accountability
Developed levels of authority for
spending at all levels of management
Monthly operational business review
meetings with field leadership
Monthly review of all cost line-items
at every Vision Center with
benchmarking against standards
Improved working capital
management
Information sharing and
benchmarking drove changes in
poor performing Vision Centers
Increased accounts payable
days from approximately 15 to
30 generating $3 million in cash
flow
Increased field accountability
Field Management better trained
on financial matters
21
Industry Innovator & Thought Leader
Medical Advisory Board tests all new technology
Medical and Optometric Advisory Boards create forum for idea
exchange among LCA’s 120 doctors
Management brings close relationships to manufacturers
Managed care programs link LCA’s clinical operations with
health benefit providers
Patient financing provides flexibility
Marketing partners bring expert outside perspective
22
Increase Market Share in a Fragmented Industry
Local Marketing &
Advertising
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
23
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
24
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
25
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
26
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
Marcello J. Celentano
AVP-Operations -
East
Managing Director,Int’l Sales and Operations, FedEx Kinkos;
Regional VP, Enterprise Rent-A-Car
Dr. Jason J. Schmit
AVP-Operations -
West
Owner / Optometrist, Advanced Eye Care Center; Optometrist,
Shopko Optical
27
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
Risk Metrics rated LCA corporate governance better than1 :
99.3% of the S&P 600
98.7% of health care equipment and services sector
1 Source: www.NASDAQ.net/aspx/CorporateGovernanceRating.aspx , January, 2009
28
Straus Leadership = Tangible Results
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
29
Joffe Group Actions Raise
Questions
30
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
31
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
32
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
33
Corporate Governance
34
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
35
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
36
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
37
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
38
Surgeon and Analyst Support
39
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
40
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
41
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)
……..LCA surgeon 4
42
Analyst Comments: Uncontrollable Market,
Controllable Costs
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
43
5
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