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Document And Entity Information
6 Months Ended
Jun. 30, 2011
Jul. 21, 2011
Document And Entity Information
Document Type 10-Q
Amendment Flag false
Document Period End Date Jun 30, 2011
Document Fiscal Year Focus 2011
Document Fiscal Period Focus Q2
Entity Registrant Name LCA VISION INC
Entity Central Index Key 0001003130
Current Fiscal Year End Date --12-31
Entity Filer Category Accelerated Filer
Entity Common Stock, Shares Outstanding 18,837,847
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Condensed Consolidated Balance Sheets (USD  $)
In Thousands
Jun. 30, 2011
Dec. 31, 2010
Assets
Cash and cash equivalents  $ 19,867  $ 19,350
Short-term investments 30,436 31,947
Patient receivables, net of allowances of  $1,223 and  $1,392, respectively 2,382 2,256
Other accounts receivable, net 1,606 1,867
Prepaid expenses and other 4,748 5,641
Total current assets 59,039 61,061
Property and equipment 73,009 72,286
Accumulated depreciation and amortization (60,177) (57,322)
Property and equipment, net 12,832 14,964
Long-term investments 954 951
Patient receivables, net of allowances of  $542 and  $330, respectively 566 413
Other assets 2,187 3,092
Total assets 75,578 80,481
Liabilities and Stockholders' Investment
Accounts payable 7,357 8,110
Accrued liabilities and other 13,956 12,266
Deferred revenue 3,457 4,376
Debt obligations maturing within one year 3,004 3,039
Total current liabilities 27,774 27,791
Long-term rent obligations and other 2,871 3,368
Long-term debt obligations, less current portion 2,583 4,245
Insurance reserves 7,135 7,406
Deferred license fee 2,213 3,065
Deferred revenue 1,989 3,476
Stockholders' investment
Common stock ( $.001 par value; 25,291,637 shares issued and 18,837,847 and 18,711,365 shares outstanding, respectively) 25 25
Contributed capital 176,437 175,610
Common stock in treasury, at cost (6,453,790 shares and 6,580,272 shares, respectively) (113,062) (114,033)
Retained deficit (33,115) (31,134)
Accumulated other comprehensive income 728 662
Total stockholders' investment 31,013 31,130
Total liabilities and stockholders' investment  $ 75,578  $ 80,481
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Condensed Consolidated Balance Sheets (Parenthetical) (USD  $)
In Thousands, except Share data
Jun. 30, 2011
Dec. 31, 2010
Condensed Consolidated Balance Sheets
Allowances for patient receivables, current  $ 1,223  $ 1,392
Allowances for patient receivables, non-current  $ 542  $ 330
Common stock, par value  $ 0.001  $ 0.001
Common stock, shares issued 25,291,637 25,291,637
Common stock, shares outstanding 18,837,847 18,711,365
Treasury stock, shares 6,453,790 6,580,272
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Condensed Consolidated Statements Of Operations (USD  $)
In Thousands, except Per Share data
3 Months Ended 6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Condensed Consolidated Statements Of Operations
Revenues  $ 24,416  $ 26,290  $ 56,698  $ 60,303
Operating costs and expenses
Medical professional and license fees 6,072 6,102 14,055 14,440
Direct costs of services 10,451 12,777 21,470 25,891
General and administrative expenses 3,534 3,643 6,991 7,432
Marketing and advertising 5,929 6,330 12,425 14,197
Depreciation 1,434 2,454 2,888 4,996
Impairment charges 87 87
Restructuring charges 311 56 648
Total operating cost 27,420 31,704 57,885 67,691
Gain on sale of assets 237 18 400 1,311
Operating loss (2,767) (5,396) (787) (6,077)
Net investment income and other 77 1,145 158 1,321
Loss before taxes on income (2,690) (4,251) (629) (4,756)
Income tax expense 75 36 116 96
Net loss  $ (2,765)  $ (4,287)  $ (745)  $ (4,852)
Loss per common share
Basic  $ (0.15)  $ (0.23)  $ (0.04)  $ (0.26)
Diluted  $ (0.15)  $ (0.23)  $ (0.04)  $ (0.26)
Weighted average shares outstanding
Basic 18,813 18,678 18,778 18,656
Diluted 18,813 18,678 18,778 18,656
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Condensed Consolidated Statements Of Cash Flows (USD  $)
In Thousands
6 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Cash flow from operating activities:
Net loss  $ (745)  $ (4,852)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 2,888 4,996
Provision for loss on doubtful accounts 316 1,136
Gain on sale of investments (5) (994)
Impairment charges 87
Gain on sale of property and equipment (400) (1,311)
Deferred income taxes 368
Stock-based compensation 827 602
Insurance reserve (271) (1,052)
Changes in operating assets and liabilities:
Patient accounts receivable (620) 831
Other accounts receivable 30 320
Prepaid expenses and other 485 12,280
Accounts payable (753) (1,762)
Deferred revenue, net of professional fees (2,165) (2,966)
Accrued liabilities and other 1,053 (424)
Net cash provided by operations 640 7,259
Cash flow from investing activities:
Purchases of property and equipment (763) (144)
Proceeds from sale of assets 1,027 1,234
Purchases of investment securities (94,173) (203,256)
Proceeds from sale of investment securities 95,637 200,313
Net cash provided by (used in) investing activities 1,728 (1,853)
Cash flow from financing activities:
Principal payments of capital lease obligations and loan (1,697) (3,094)
Shares repurchased for treasury stock (288) (192)
Proceeds from exercise of stock options 23 13
Net cash used in financing activities (1,962) (3,273)
Net effect of exchange rate changes on cash and cash equivalents 111 (56)
Increase in cash and cash equivalents 517 2,077
Cash and cash equivalents at beginning of period 19,350 24,529
Cash and cash equivalents at end of period  $ 19,867  $ 26,606
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Description Of Business And Accounting Policies
6 Months Ended
Jun. 30, 2011
Description Of Business And Accounting Policies
Description Of Business And Accounting Policies

1. Description of Business and Accounting Policies

Description of Business

We are a provider of fixed-site laser vision correction services at our LasikPlus® vision centers. Our vision centers provide the staff, facilities, equipment and support services for performing laser vision correction that employ advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. We currently use two suppliers for fixed-site excimer lasers: Abbott Medical Optics ("AMO") and Alcon, Inc. ("Alcon"). Our vision centers are supported by independent, board-certified ophthalmologists and credentialed optometrists, as well as other healthcare professionals. The ophthalmologists perform the laser vision correction procedures in our vision centers, and ophthalmologists or optometrists conduct pre-procedure evaluations and post-operative follow-up care in-center. Most of our patients currently receive a procedure called LASIK, which we began performing in the United States in 1996.

As of June 30, 2011, we operated 53 LasikPlus® fixed-site laser vision correction centers in the United States. Included in the 53 vision centers are two vision centers licensed to ophthalmologists who use our trademarks. Due to the nature of our operations and organization, we operate in only one business segment.

Basis of Presentation

We have prepared our Condensed Consolidated Financial Statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") which, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position, results of operations, and cash flows for each period presented. The adjustments referred to above are of a normal and recurring nature unless otherwise disclosed herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations.

We derived the Condensed Consolidated Balance Sheet as of December 31, 2010 from audited financial statements, but did not include all disclosures required by U.S. generally accepted accounting principles ("U.S. GAAP"). These Condensed Consolidated Financial Statements should be read in conjunction with our 2010 Annual Report on Form 10-K. Operating results for the three and six month periods ended June 30, 2011 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2011.

Use of Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include investments, patient financing receivables and reserves, insurance reserves, income taxes and enhancement accruals. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.

Reclassifications

We have reclassified certain prior-period amounts in the Condensed Consolidated Balance Sheets, Statements of Operations and Statements of Cash Flows to conform to current period presentation. The reclassifications were not material to the Condensed Consolidated Financial Statements.

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Investments
6 Months Ended
Jun. 30, 2011
Investments
Investments

2. Investments

Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. Currently, we classify all securities as available-for-sale. We carry available-for-sale securities at fair value, with temporary unrealized gains and losses, net of tax, reported in accumulated other comprehensive income, a component of stockholders' investment. The amortized cost of debt securities in this category reflects amortization of premiums and accretion of discounts to maturity computed under the effective interest method. We include this amortization in the caption "Net investment income and other" within the Condensed Consolidated Statement of Operations. We also include in net investment income realized gains and losses and declines in value determined to be other-than-temporary. We base the cost of securities sold upon the specific identification method. We include interest and dividends on securities classified as available-for-sale in net investment income.

The following table summarizes unrealized gains and losses related to our investments designated as available-for-sale (in thousands):

 

     June 30, 2011  
     Adjusted
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

Corporate obligations

    $ 20,895        $ 1        $ (13    $ 20,883   

U.S. Government notes

     9,614         2         (63     9,553   

Auction rate municipal securities

     924         30         —          954   
                                  

Total investments

    $ 31,433        $ 33        $ (76    $ 31,390   
                                  

 

     December 31, 2010  
     Adjusted
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

Corporate obligations

    $ 18,492        $ 1        $ (1    $ 18,492   

U.S. Government notes

     11,585         —           (29     11,556   

Municipal securities

     1,006         2         —          1,008   

Auction rate municipal securities

     924         27         —          951   

Auction rate preferred securities

     891         —           —          891   
                                  

Total investments

    $ 32,898        $ 30        $ (30    $ 32,898   
                                  

 

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2011 and December 31, 2010, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

 

     June 30, 2011     December 31, 2010  
     Less than 12 Months     Less than 12 Months  
     Fair Value      Unrealized
Loss
    Fair Value      Unrealized
Loss
 

Corporate obligations

    $ 11,378        $ (13    $ 6,624        $ (1

U.S. Government notes

     8,628         (63     10,179         (29
  

 

 

    

 

 

   

 

 

    

 

 

 
    $ 20,006        $ (76    $ 16,803        $ (30
  

 

 

    

 

 

   

 

 

    

 

 

 

We realized gains of  $5,000 and losses of  $10,000, primarily on the sale of our debt securities for the three months ended June 30, 2011 and realized gains of  $27,000 and losses of  $22,000 for the six months ended June 30, 2011. We had realized gains of  $1.0 million and losses of  $43,000, primarily on the sale of equity securities, for the three months ended June 30, 2010 and realized gains of  $1.0 million and losses of  $50,000 for the six months ended June 30, 2010.

We recognized unrealized gains of  $33,000 and unrealized losses of  $76,000 in accumulated other comprehensive income as of June 30, 2011. We recognized unrealized gains of  $133,000 and unrealized losses of  $1,000 as of June 30, 2010. There were no other-than-temporary impairments to our auction rate securities for the three and six months ended June 30, 2011 and 2010. When evaluating investments for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer of the investment securities and any changes thereto, and our intent to sell, or whether it is more-likely-than-not we would be required to sell the investment before recovery of the investment's amortized cost basis.

The following table shows the net carrying value (amortized cost) and estimated fair value of debt and equity securities at June 30, 2011 by contractual maturity (in thousands). Expected maturities may differ from contractual maturities because the issuers of the securities may have the right or obligation to prepay obligations without prepayment penalties.

 

     Amortized
Cost
     Estimated
Fair Value
 

Due in one year or less

    $ 30,509        $ 30,436   

Due after one year through three years

     —           —     

Due after three years

     924         954   
  

 

 

    

 

 

 

Total investments

    $ 31,433        $ 31,390   
  

 

 

    

 

 

 

Auction Rate Securities

At June 30, 2011 and December 31, 2010, we held  $1.1 million and  $2.2 million par value, respectively, of various auction rate securities. The assets underlying the auction rate instruments are primarily municipal bonds and preferred closed end funds. Maturity dates for our auction rate securities range from 2030 to 2036. In the six months ended June 30, 2011, we redeemed auction rate preferred securities with a par value of  $1.1 million for  $891,000. The redemption value was equal to the securities' carrying value at the time of liquidation.

As a result of failed auctions, our auction rate instruments are not currently liquid. Due to the continuation of the unstable credit environment, we believe that the recovery period for most of our auction rate instruments will exceed 12 months. Accordingly, we have classified the fair value of the auction rate instruments that have not been redeemed prior to June 30, 2011 as long-term.

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Fair Values Of Financial Instruments
6 Months Ended
Jun. 30, 2011
Fair Values Of Financial Instruments
Fair Values Of Financial Instruments

3. Fair Values of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset and liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

Level Input:

  

Input Definition:

Level 1

   Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2

   Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3

   Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following tables summarize fair value measurements by level at June 30, 2011 and December 31, 2010 for assets and liabilities measured at fair value on a recurring basis (dollars in thousands):

 

     Fair Value Measurements as of June 30, 2011 Using  

Description

   Quoted Prices in
Active Markets for
Identical Assets

(Level 1)
     Significant Other
Observable Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
     Total  

Assets:

           

Cash and cash equivalents

    $ 19,867        $ —          $ —          $ 19,867   

Investments

     —           30,436         954         31,390   
                                   

Total

    $ 19,867        $ 30,436        $ 954        $ 51,257   
                                   
     Fair Value Measurements as of December 31, 2010 Using  

Description

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
     Significant Other
Observable Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
     Total  

Assets:

           

Cash and cash equivalents

    $ 19,350        $ —          $ —          $ 19,350   

Investments

     891         31,056         951         32,898   
                                   

Total

    $ 20,241        $ 31,056        $ 951        $ 52,248   
                                   

 

Cash and cash equivalents are comprised of either bank deposits or amounts invested in money market funds, the fair value of which is based on quoted market prices. The fair values of some investment securities included within our investment portfolio are based on quoted market prices from various stock and bond exchanges. Certain of our debt securities are classified at fair value utilizing Level 2 inputs. For these securities, fair value is measured using observable market data that includes dealer quotes, live trading levels, trade execution data, credit information and the bond's terms and conditions. The fair values of our auction rate instruments are classified in Level 3 because they are valued using a trinomial discount model as there is insufficient observable auction rate market information available to determine the fair value of these investments. The determination of the fair value of the auction rate instruments employs assumptions including financial standing of the issuer of the instruments, final stated maturities, estimates of the probability of the issue being called prior to final maturity, estimates of the probability of defaults and recoveries, expected changes in interest rates paid on the securities, interest rates paid on similar instruments, and an estimated illiquidity discount due to extended redemption periods.

The following table presents the changes in Level 3 instruments for the three and six months ended June 30, 2011 and 2010 (in thousands):

 

     For the Three
Months Ended
June 30,
    For the Six
Months Ended
June 30,
 
     2011     2010     2011      2010  

Balance at beginning of period

    $ 962       $ 2,078       $ 951        $ 2,090   

Assets sold

     —          —          —           (22

Transfers out of Level 3

     —          (100     —           (100

(Losses) gains included in other comprehensive loss

     (8     3        3         13   
                                 

Balance as of June 30

    $ 954       $ 1,981       $ 954        $ 1,981   
                                 
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Assets Held For Sale
6 Months Ended
Jun. 30, 2011
Assets Held For Sale
Assets Held For Sale

4. Assets Held For Sale

We had assets held for sale of  $146,000 and  $462,000 at June 30, 2011 and December 31, 2010, respectively, comprised of lasers and other equipment from closed vision centers. We include assets held for sale in the caption "Prepaid expenses and other" on the Condensed Consolidated Balance Sheets. During the six months ended June 30, 2011, we were able to sell some of our assets held for sale with a combined net book value of  $316,000 for total cash proceeds of approximately  $582,000, resulting in a gain of approximately  $266,000, before tax. During the six months ended June 30, 2010, we sold some of our assets held for sale with a combined net book value of  $626,000 for total cash proceeds of approximately  $1.1 million and notes receivable of  $836,000, resulting in a gain of approximately  $1.3 million, before tax.

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Income Taxes
6 Months Ended
Jun. 30, 2011
Income Taxes
Income Taxes

5. Income Taxes

The following table presents the components of our income tax expense for the following periods (dollars in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
       2011         2010         2011         2010    

Current:

        

Federal

    $ 6       $ (353    $ 11       $ (328

State and local

     69        21        105        56   
                                

Total Current

     75        (332     116        (272
                                

Deferred:

        

Federal

    $ —         $ 322       $ —         $ 322   

State and local

     —          46        —          46   
                                

Total Deferred

     —          368        —          368   
                                

Income tax expense

    $ 75       $ 36       $ 116       $ 96   
                                

Effective income tax rate

     2.8     0.9     18.5     2.0

Our effective tax rate for the three and six month periods ended June 30, 2011 was impacted by a full valuation allowance against all of our deferred tax assets, net of deferred tax liabilities. The effective tax rate of 18.5% for the six months ended June 30, 2011 is higher than previous periods due to the decrease in our loss before taxes.

As of June 30, 2011 and December 31, 2010, deferred tax assets net of deferred tax liabilities totaled  $21.7 million and  $21.1 million, respectively, offset by full valuation allowances. We increased both the gross deferred tax asset and the associated valuation allowance by  $600,000 as a result of the increase of net operating loss carryforward based on our loss in the first half of 2011. Since it is not more-likely-than-not that we will realize our deferred tax assets, we will be unable to record tax benefits in the United States and state jurisdictions during 2011. Income tax expense for the six month periods ended June 30, 2011 and 2010 includes interest on unrecognized tax benefits and state taxes in certain jurisdictions.

During the three and six month periods ended June 30, 2011, there were no significant changes to the liability for unrecognized tax benefits or potential interest and penalties recorded as a component of income tax. The total amount of unrecognized tax benefits at each of June 30, 2011 and December 31, 2010 was approximately  $539,000. It is reasonably possible that the amount of the total unrecognized tax benefits may change in the next 12 months. However, we do not believe that any anticipated change will be material to the Condensed Consolidated Financial Statements. In January 2011, the Internal Revenue Service initiated a review of the 2009 tax year. Based on the early status of the review, we cannot estimate the impact, if any, to previously recorded unrecognized tax benefits.

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Per Common Share Data
6 Months Ended
Jun. 30, 2011
Per Common Share Data
Per Common Share Data

6. Per Common Share Data

We calculate basic earnings per common share data using the weighted average number of common shares outstanding during the period. Diluted per share data reflects the potential dilution that would occur if common stock equivalents were exercised or converted to common stock but only to the extent that they are considered dilutive to our earnings. The following table is a reconciliation of basic and diluted per share data for the following periods (dollars in thousands, except per share amounts):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Basic Loss

        

Net loss

    $ (2,765    $ (4,287    $ (745    $ (4,852

Weighted average shares outstanding

     18,813        18,678        18,778        18,656   

Basic loss

    $ (0.15    $ (0.23    $ (0.04    $ (0.26

Diluted Loss

        

Net loss

    $ (2,765    $ (4,287    $ (745    $ (4,852

Weighted average shares outstanding

     18,813        18,678        18,778        18,656   

Effect of dilutive securities

        

Stock options

     —          —          —          —     

Restricted stock

     —          —          —          —     
                                

Weighted average common shares and potential dilutive shares

     18,813        18,678        18,778        18,656   

Diluted loss per common share

    $ (0.15    $ (0.23    $ (0.04    $ (0.26

For the three and six month periods ended June 30, 2011 and 2010, we excluded all outstanding stock options and restricted stock awards from the computation of our diluted earnings per share because the effect of these share-based awards was antidilutive due to our net loss. For the three and six months ended June 30, 2011, the total number of outstanding options and restricted stock awards that were antidilutive was 668,531 and 400,877, respectively. For the three and six months ended June 30, 2010, the total number of outstanding options and restricted stock awards that were antidilutive was 614,228 and 505,771, respectively.

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Stock-Based Compensation
6 Months Ended
Jun. 30, 2011
Stock-Based Compensation
Stock-Based Compensation

7. Stock-Based Compensation

We have stock incentive plans through which employees and directors have been or are granted stock-based compensation. We recognize compensation expense for the grant date fair value of stock-based awards over the applicable vesting period. The components of our pre-tax stock-based compensation expense, net of forfeitures, and associated income tax effect were as follows for the following periods (in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
       2011          2010          2011          2010    

Stock options

    $ 18        $ 24        $ 35        $ 11   

Restricted stock

     434         402         792         591   
                                   
     452         426         827         602   

Income tax effect

     175         165         320         233   
                                   
    $ 277        $ 261        $ 507        $ 369   
                                   

We estimate the fair value of stock options granted using the Black-Scholes option-pricing model. This model requires several assumptions, which we have developed and update based on historical trends and current market observations. The accuracy of these assumptions is critical to the estimate of fair value for these equity instruments.

 

Our restricted stock unit awards include both time-based awards that vest ratably over three years and restricted stock units that are tied to the achievement of certain financial targets and stock performance criteria and cliff-vest in three years. The financial targets include revenue and operating income measurements. Total stockholder return is considered a market condition and the fair value of those awards was calculated using a Monte Carlo simulation valuation model.

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Restructuring And Impairment Charges
6 Months Ended
Jun. 30, 2011
Restructuring And Impairment Charges
Restructuring And Impairment Charges

8. Restructuring and Impairment Charges

For the six months ended June 30, 2011, we incurred net restructuring charges of  $56,000. The restructuring charges consisted primarily of a change in estimate related to previously accrued lease termination costs and employee separation benefits. For the six months ended June 30, 2010, we incurred a net restructuring charge of  $648,000. The charges were  $271,000 for exit and disposal costs associated with the closing of vision centers and  $377,000 for contract termination costs. Contract termination costs resulted primarily from the closure of one of our licensed operations and the termination of the related license agreement. Other exit and disposal costs incurred in 2010 were primarily expenses related to the closures of facilities and the relocation of various medical equipment.

At June 30, 2011 and December 31 2010, we included short-term restructuring reserves of  $1.3 million and  $1.6 million, respectively, in "Accrued liabilities and other" in the Condensed Consolidated Balance Sheets. Long-term restructuring reserves were  $1.6 million and  $2.1 million at June 30, 2011 and December 31, 2010, respectively, and were included in "Long-term rent obligations and other." The decline in restructuring reserves related to payments during the six month period. The fair value measurements in all periods utilized market prices of similar assets in determining fair value, which is a Level 3 input under U.S. GAAP.

The following table summarizes the restructuring reserve for the three and six months ended June 30, 2011 (in thousands):

 

     Employee
Separation
Costs
    Contract
Termination
Costs
    Total  

Balance at December 31, 2010

    $ 107       $ 3,641       $ 3,748   

Liabilities recognized

     20        36        56   

Utilized

     (127     (427     (554
  

 

 

   

 

 

   

 

 

 

Balance at March 31, 2011

     —          3,250        3,250   

Liabilities recognized

     —          —          —     

Utilized

     —          (329     (329
  

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2011

    $ —         $ 2,921       $ 2,921   
  

 

 

   

 

 

   

 

 

 

In the second quarter of 2011 and for the six months then ended, we incurred no impairment charges. In the second quarter of 2010 and for the six months then ended, we recorded an impairment charge to reduce the carrying amount of long-lived assets by  $87,000 for one vision center. This impairment charge reflects our decision to close the vision center. We assess the impairment of property and equipment whenever events or circumstances indicate that the carrying value might not be recoverable. We write down to fair value, which is generally determined from estimated discounted cash flows for assets held for use, recorded values of property and equipment that we do not expect to recover through undiscounted future net cash flows. The use of discounted cash flows represents a Level 3 fair value input under U. S. GAAP.

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Debt
6 Months Ended
Jun. 30, 2011
Debt
Debt

9. Debt

Long-term debt obligations consist of (in thousands):

 

     June 30,
2011
    December 31,
2010
 

Bank loan

    $ 5,587       $ 7,284   

Debt obligations maturing within one year

     (3,004     (3,039
                

Long-term obligations (less current portion)

    $ 2,583       $ 4,245   
                

In April 2008, we entered into a five-year bank loan agreement for  $19.2 million to finance medical equipment. The loan agreement provides for repayment in equal monthly installments over a five-year period at a fixed interest rate of 4.96%. Loan repayments totaling  $1.7 million for the six months ended June 30, 2011 reflect a decrease of approximately  $674,000, compared to the same period in 2010, due primarily to early payoffs of excimer lasers that were sold relating to vision centers that we closed in the prior year.

The estimated fair value of our long-term obligations is  $5.5 million based on the present value of the underlying cash flows discounted at our incremental borrowing rate. Within the hierarchy of fair value measurements, this is a Level 3 fair value measurement.

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Comprehensive Income (Loss)
6 Months Ended
Jun. 30, 2011
Comprehensive Income (Loss)
Comprehensive Income (Loss)

10. Comprehensive Income (Loss)

The components of accumulated other comprehensive income consisted of the following (in thousands):

 

     June 30,
2011
    December 31,
2010
 

Unrealized investment loss

    $ (43    $ —     

Foreign currency translation adjustment

     771        662   
                

Accumulated other comprehensive income

    $ 728       $ 662   
                

The components of comprehensive income (loss) consisted of the following for the following periods (in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Net loss

    $ (2,765    $ (4,287    $ (745    $ (4,852

Unrealized investment loss

     (43     (616     (43     (544

Foreign currency translation

     (29     (187     109        (59
                                

Comprehensive loss

    $ (2,837    $ (5,090    $ (679    $ (5,455
                                
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Commitments And Contingencies
6 Months Ended
Jun. 30, 2011
Commitments And Contingencies
Commitments And Contingencies

11. Commitments and Contingencies

Our business results in medical malpractice lawsuits. Effective in December 2002, we established a captive insurance company to provide coverage for claims brought against us after December 17, 2002. We use the captive insurance company for both primary insurance and excess liability coverage. A number of claims are now pending with our captive insurance company. At June 30, 2011 and December 31, 2010, our insurance reserve balance was  $7.1 million and  $7.4 million, respectively.

In addition to these malpractice suits, we are periodically subject to various other claims and lawsuits. We believe that none of these other claims or lawsuits to which we are currently subject, individually or in the aggregate, will have a material adverse effect on our business, financial position, results of operations, or cash flows.

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