Description of Business and Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Description of Business

Description of Business

We are a provider of 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 and Alcon, Inc. Our vision centers are supported by independent 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 1995.

As of March 31, 2013, we operated 53 LasikPlus^® vision centers in the United States: 49 full-service LasikPlus^® fixed-site laser vision correction centers and four pre- and post-operative LasikPlus^® satellite centers. Included in the 53 vision centers are two vision centers owned and operated by ophthalmologists who license our trademarks. Beginning in late 2011, we began offering standard cataract and premium intraocular lens (“IOL”) and implantable collamer lens (“ICL”) services in certain of our existing markets under our new Visium Eye Institute^® brand.

Basis of Presentation

Basis of Presentation

Our Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, 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. These adjustments 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 (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules and regulations.

We derived the Condensed Consolidated Balance Sheet as of December 31, 2012 from audited financial statements, but did not include all disclosures required by U.S. GAAP. These Condensed Consolidated Financial Statements should be read in conjunction with our 2012 Annual Report on Form 10-K. Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2013.

Use of Estimates

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 allowance for doubtful accounts against patient receivables, insurance reserves, income taxes and enhancement accruals. Although our 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

Reclassifications

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

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance to improve the reporting of reclassifications out of Accumulated Other Comprehensive Income (“AOCI”) and requires the disclosure (either on the face of the financial statements or within the Notes) for significant items reclassified out of AOCI and into net income, for each component of Other Comprehensive Income (“OCI”). The new guidance is effective beginning with the filing of our Form 10-Q for the three months ending March 31, 2013, with prospective application required and does not have a material impact on our condensed consolidated financial statements.

Patient Receivables and Allowance for Doubtful Accounts

Patient Receivables and Allowance for Doubtful Accounts

We provide financing to some of our patients, including those who could not otherwise obtain third-party financing. The terms of the financing usually require the patient to pay an up-front fee which is intended to cover some or all of our variable costs, and then, usually, we deduct the remainder automatically from the patient’s bank account over a period of 12 to 36 months. We have recorded an allowance for doubtful accounts as a best estimate of the amount of probable credit losses from our patient financing program. Each month, we review the allowance and adjust it based upon our experience with patient financing. We charge-off receivables against the allowance when it is probable that a receivable will not be recovered. Our policy is to reserve for all patient receivables that remain open past their financial maturity date and to provide reserves for patient receivables prior to the maturity date so as to bring patient receivables, net of reserves, down to the estimated net realizable value based on historical collectability rates, recent default activity and the current credit environment. Receivable balances that remain open past their financial maturity amounted to $50,000 and $42,000 at March 31, 2013 and December 31, 2012, respectively.

We maintained an allowance for doubtful accounts on our patient receivables of $1.5 million and $1.7 million at March 31, 2013 and December 31, 2012. During the three months ended March 31, 2013, we wrote-off $227,000 of receivables against the allowance for doubtful accounts and recovered $29,000 in receivables previously written off. During the three months ended March 31, 2012, we wrote-off $217,000 of receivables against the allowance for doubtful accounts and recovered $31,000 in receivables previously written off.