LCA founder Stephen Joffe makes apparent overture
Business Courier of Cincinnati - by Dan Monk Senior Staff Reporter
Media
Less than three years after he was ousted by the company he founded, Dr. Stephen Joffe appears to be plotting his return to LCA-Vision Inc.
The Indian Hill physician leads an investment group that acquired an 11 percent stake in the laser-vision surgery provider. LCA’s stock price has plunged in the last 16 months as the economy weakened and profits evaporated.
A Nov. 5 filing with the U.S. Securities and Exchange Commission indicated that Joffe, his son, Craig, and LCA-Vision’s former CFO Alan Buckey jointly acquired 2.1 million shares of LCA-Vision stock between Oct. 6 and Nov. 4. Their total investment: about $6 million.
The group indicated that it bought shares strictly for investment purposes and was not planning to present any proposals for reform at LCA-Vision. But Stephen Joffe offered a slightly different take when reached by phone this week.
“The company is broken, and change is needed,” Joffe said, declining further comment.
But interim CFO Michael Celebrezze said the company has improved its financial performance in recent quarters by reducing costs and improving its “conversion rate” of prospects turning into patients. LCA-Vision declined to comment on Joffe’s recent purchases.
“The company has taken a lot of actions to increase its volume in this tough economic time,” Celebrezze said. “We are seeing financial improvement in terms of cost savings and cash preservation.”
The weak economy has hampered the entire industry, said Dave Harmon, a principal with Marketscope LLC, a Manchester, Mo.-based research company that has followed the refractive-surgery industry since the mid-1990s. In 2007, the industry neared its all-time high, performing nearly 1.4 million procedures, Harmon said. This year, total volume will be more than 1 million. Because LCA-Vision targets consumers who are more price-sensitive, the economic downturn is hitting it harder than competitors, Harmon said.
“The overall market was down 35 percent in the third quarter, and they were down 52 percent,” Harmon said. “On the other side, when things recover, you would expect them to recover faster.”
Just a few years ago, LCA-Vision was a Wall Street darling. Its steady growth in profits produced a 25-fold increase in its stock price, peaking at more than $58 per share in May 2006. That was just a few months after Stephen Joffe left. The Wall Street Journal said he was forced out for investing in a rival firm, TLC Vision Corp. Neither Joffe nor the company has ever confirmed that report. Craig Joffe replaced his father as interim CEO until November 2006, when Steven Straus was given the job on a permanent basis.
A change in the winds
By summer 2007, the glory days were a distant memory. LCA-Vision’s stock price plunged with a downward revision in earnings guidance last July. It continued this July, as the company posted a second-quarter loss and suspended its dividend. After a third-quarter loss of $4.7 million, the stock hit a five-year low, trading at $2.16. The Joffe purchases in October sparked a rally, but the investment group still bought its shares at less than $3 a share. Stephen and Craig Joffe both sold shares prior to leaving LCA-Vision at prices above $30 a share. Stephen Joffe was the biggest buyer of shares in the last month, with 1.2 million. Craig Joffe now owns 864,000 shares, while Buckey holds about 78,000.
“He’s kind of pulling a Warren Buffett here,” Harmon said of Stephen Joffe’s latest investment. “He’s getting in when prices are low, riding out the weak economic times and being well positioned for the recovery.”
Now that he’s acquired a sizable stake in LCA-Vision, Joffe could employ the same strategy he used at TLC Vision. There, he proposed his own slate of directors and called for a management shakeup before ending his assault in May.
“If what is past is prologue, we would expect members of the joint filing group to approach management regarding business changes and possibly even managerial changes,” wrote Senior Analyst Chris Cooley, in a Nov. 6 report for FTN Midwest Securities Corp. in Cleveland. He is not sure management changes are the answer.
“One has to acknowledge the effects of the economy,” he wrote.
dmonk@bizjournals.com | (513) 337-9438
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