Current, former LCA-Vision execs battle publicly

CINCINNATI, OH—The same day LCA-Vision announced that it would solidify Michael J. Celebrezze’s post, removing the word “interim” from his Interim CFO title, the company’s founders and former executives filed with the U.S. Securities and Exchange Commission (SEC) saying they are considering actions to protect their investment and help turn around the company’s flagging performance.

LCA-Vision is a provider of laser vision correction services under the LasikPlus brand; the company operates 77 LasikPlus fixed-site centers in 33 states and 59 markets in the U.S. as well as a joint venture in Canada.

Celebrezze joined the company as VP of Finance and Treasurer in July 2006 and was appointed to the LCA-Vision Executive Management team as Senior VP of Finance and Treasurer in July 2007. He has served in the interim role since June 2008, when former CFO and EVP of Finance Alan H. Buckey left the company. Buckey, who is one of the executives involved in the SEC filing, had served in that capacity since March 2000.

The three-member team Buckey is part of includes Stephen N. Joffe, MD, FACS, LCA-Vision’s founder and former Chairman and CEO, who also founded the company’s predecessor, Laser Centers of America, in 1985 and served as its board chair and CEO until its merger into LCA-Vision in 1995. His son Craig P.R. Joffe, who was Interim CEO from March through November 2006, also joined in the complaint. A graduate of Harvard Law and Columbia, he served as LCA-Vision’s Secretary from March 2003 and was appointed COO in September 2005, a position he held until he resigned in March 2008.

Stephen Joffe, Craig Joffe, and Buckey say they worked together to grow the market capitalization of the company in excess of 1000% from 2003–2006. The three had previously filed a 13D with the SEC disclosing ownership of 11.4% of LCA-Vision. The filing states that their actions were prompted by “the systematic and dramatic destruction of the shareholder, physician and employee value” they had created. They note that LCA-Vision’s share price has fallen over 90% in the two years since Steve Straus was appointed CEO by its Board of Directors.

In a letter to LCA-Vision’s Chairman of the Board of Directors dated November 21, 2008, and filed with the amendment to their Schedule 13D, they stated, “As the founders and former executive management team of LCAV that led the Company to its past successes, we feel financially, ethically, and reputationally compelled to help rescue LCAV before it implodes,” and argued, “we have the unique experience and know-how to help get the Company back on track.” Dr. Joffe emphasized the need to have a Board of Directors and executive management team with the insights, experience, and passion to lead the company and better serve its shareholders, physicians, employees, and patients.

Then on November 24, LCA-Vision announced that its Board of Directors had adopted a stockholder rights plan, and in connection with it declared a dividend distribution of one preferred stock purchase right on each outstanding share of common stock. “The rights will become exercisable only if a person or group acquires or obtains the right to acquire ownership of 20% or more of LCA-Vision common stock, commences a tender or exchange offer for 20% or more of the common stock, or is declared an “Adverse Person” by the Board of Directors of the Company,” said LCA-Vision in a news release.

The plan, “commonly known as a poison pill,” say Joffe, Joffe, and Buckey, was put into place immediately following the delivery of their letter to the LCA-Vision board of directors. They followed up with a second letter (posted in its entirety at www.bioopticsworld.com/articles/34646) and filed it along with another amendment to their Schedule 13D with the SEC. “Often ‘shareholder right plans,’ poison pills and similar type of corporate (mis)governance shenanigans are associated with incompetent Boards of Directors and management teams entrenching themselves and protecting their positions and their compensation at the expense of their shareholders and shareholder value,” the letter states.

In the release announcing Celebrezze’s new title, LCA-Vision said it has begun initiatives aimed at supporting procedure volume and controlling costs, including both a head-to-head clinical study and a request for cost proposals to evaluate potentially reducing the number of excimer laser technology platforms used in its vision centers.

On October 28, the company announced its results for quarter ended September 30, 2008. Compared with Q3 2007, when the company reported revenue of $74.6 million, Q3 2008 revenue was just about half ($37.4 million), and procedure volume was 21,484 in Q3 2008 compared with 44,547 in 07. Operating loss was $6.2 million for 2008’s third quarter, compared with operating income of $14.1 million in Q3 2007.