UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
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(Name
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STEPHEN
N. JOFFE
CRAIG
P.R. JOFFE
ALAN
H. BUCKEY
JASON
T. MOGEL
ROBERT
PROBST
EDWARD
J. VONDERBRINK
ROBERT
H. WEISMAN
THE
LCA-VISION FULL VALUE COMMITTEE
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On
February 6, 2009, The LCA-Vision Full Value Committee (the “Committee”) made a
definitive filing with the Securities and Exchange Commission (“SEC”) of a
consent solicitation statement relating to the solicitation of written consents
from stockholders of LCA-Vision Inc., a Delaware corporation (the “Company”), in
connection with seeking to remove and replace the current members of the Board
of Directors of the Company.
In a conference call with RiskMetrics
Group (RMG) on March 18, 2009, the LCA-Vision Full Value Committee provided RMG
same-store procedural volume data for LCA-Vision, Inc. (NASDAQ: LCAV) relative
to TLC Vision Inc. (TLCV) and the laser vision correction industry generally.
The relevant data is below:
|
LCAV
Same
store
Growth
(decline) (1)
|
Industry
Procedure
Growth
(decline) (2)
|
TLC
Procedure
Growth
(decline) (3)
|
2007
|
|
|
|
Q1
|
(1%)
|
3%
|
1%
|
Q2
|
(8%)
|
3%
|
0%
|
Q3
|
(7%)
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0%
|
1%
|
Q4
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(15%)
|
(3%)
|
(5%)
|
|
|
|
|
2008
|
|
|
|
Q1
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(33%)
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(12%)
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0%
|
Q2
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(43%)
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(24%)
|
(22%)
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Q3
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(55%)
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(35%)
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(33%)
|
Q4
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(55%)
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(40%)
|
|
(1)
|
Steve
Willoughby, Cleveland Research
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(2)
|
MarketScope
estimate of total U.S. market (including U.S. patients going to
Canada for treatment)
|
(3)
|
TLC
Vision filings with the Securities and Exchange
Commission
|
In
addition, the LCA-Vision Full Value Committee pointed out to RMG certain issues
related to LCAV’s recently filed Form 10-K for the year ended December 31, 2008
documenting the largest adjusted operating loss in LCAV’s history. In
its 2008 Form 10-K filing, LCAV made the following statements:
“In February, 2009 the (Compensation)
Committee determined that, in view of current market conditions and
uncertainties affecting our ability to forecast our operating results for 2009,
it was unable to select objective measures for 2009 cash bonuses to our
executive officers. Accordingly, the Committee determined that 2009 cash
bonuses for our executive officers would be entirely discretionary and the
Committee would determine them after financial results for 2009 are
available.”
“In 2009,
we expect to continue to experience lower procedure volumes if current economic
conditions, including weakness in consumer confidence and discretionary spending
persist. We expect this will result in continuing losses and negative cash
flow.”
Now,
they
are telling us they
expect to experience operating losses and negative cash flow in 2009 and that
they’ll hand out
whatever
bonuses they think appropriate after the fact? We believe that
is an extremely convenient decision for a CEO embarking on an unproven strategy
amidst turbulent market conditions: tell the Board your team cannot predict
where the business is going, so that establishing “objective measures” such as
performance targets is impossible. While the company is proud to talk
about their sophisticated budgeting process, it is unable to forecast operating
results for 2009. We believe the reality is both that management does
not have a plan to return LCAV to profitability
and
management wants
to be paid large cash bonuses to lose money.
As
investors, we were operating under the apparently mistaken impression that
bonuses are meant to be incentives – granted to executives for meeting goals and
making money for stockholders. Whatever incentive value they may indeed carry is
turned into a mockery if it is
granted in
hindsight
. If it’s a gift, not a bonus,
we neither elected nor are we paying
this Board to
give
our money away. If
elected by stockholders, the LCA-Vision Full Value Committee board of directors
commits not to grant management bonuses at a time when the company is not cash
flow positive.
With no performance metrics to hit,
and an apparently weak and pliant Board, we question who will hold this
management team accountable. The company would like you to believe
its poor performance is all because of a bad economy. What they
hope you will overlook is that every single full quarter Mr. Straus has been CEO
since 2006, LCAV’s same store procedure volume has underperformed the laser
vision correction industry. The company has been in harvest mode for
two years, and 2009 will not be any better. The company has lost its
#1 market share position to its largest publicly traded competitor, and
continues to aggressively burn through its dwindling cash
reserves. Left unchecked, the cost to stockholders could be their
entire investment.
Consumer confidence, discretionary
spending, the current Board and Mr. Straus have already chewed away 95% of
LCAV’s market capitalization. The remaining portion could come all
too easily and all too soon.