MONROVIA, Calif., July 31, 2014 /PRNewswire/ -- STAAR Surgical Company (NASDAQ: STAA) a leading developer, manufacturer and marketer of implantable lenses and delivery systems for the eye today reported revenue for the second quarter ended July 4, 2014 of $20.0 million, a 10% increase over $18.2 million reported for the second quarter of 2013. On a constant currency basis, revenues grew 11% during the second quarter of 2014 compared to the second quarter of 2013. The effect of foreign currency exchange reduced sales by $0.1 million during the quarter. The results included quarterly sales of $12.2 million of the Company's Visian ICL product portfolio, and $6.4 million of its IOL products. Lower margin Other Product sales were $1.4 million, a 39% increase compared to the second quarter of 2013. The GAAP net loss for the second quarter of 2014 was $1.8 million or $0.05 on a per diluted share basis, compared with a net income of $278,000, or $0.01 on a per diluted share basis, in the second quarter of 2013."Our revenue growth for the first half of 2014 was 11% as reported and 13% in constant currency which was higher than our initial expectations," said Barry G. Caldwell, President and CEO. "We currently expect our second half growth rate to be even higher given new product releases and increased IOL supply. Visian ICL growth continues to be fueled by the expansion and penetration of the ICL with CentraFLOW® technology, which makes the procedure more convenient and cost effective for both the patient and the surgeon. The CentraFLOW technology drove a revenue increase during the first half of 24% in our EMEA region with deeper penetration in Europe and expansion to our Latin America markets. We also believe the CE Mark approval of the Preloaded ICL should help to drive additional revenue growth starting with full commercialization during the fourth quarter. The Preloaded ICL eliminates multiple steps in the loading and delivery process which many surgeons believe is the most challenging aspect of the procedure. In addition the Preloaded System should reduce the learning curve to the procedure and the overall ICL procedure time. We believe this ICL enhancement will be very important for both our experienced ICL implanters as well as those surgeons wanting to add the ICL to their current refractive offerings. Global ICL revenue growth was 8% in the quarter and procedure growth was 5%. We continue to gain market share globally as LASIK procedures remain under downward pressure."
"IOL revenue increased by 10% during the quarter driven by a 17% increase in unit sales. This growth was driven by the expansion of our KS-IOL products in the European and Japanese markets. IOL revenue increased by 117% in Europe while units basically doubled. Increased supply of the KS-IOL products allowed us to rebuild consignment accounts in Japan to where they were a year ago. This allowed our KS-IOL products to generate 28% growth in Japan during the quarter and 83% growth the final eight weeks of the quarter. We now feel more confident about our supply levels for the rest of the year, which should help to drive additional growth during the second half of the year focused in our higher margin markets," continued Mr. Caldwell.
Gross profit margin for the quarter was 68.2% compared to 69.5% in the second quarter of 2013. Three key factors drove a 450 basis point negative impact on the gross margin during the quarter; two of which should improve and one remain negative during the second half.
The increased geographical sales mix of KS-IOL products had a negative impact of approximately 230 basis points. This should improve with the increasing growth rate of KS-IOL sales within our higher margin markets. Secondly, the increase of lower margin IOL injectors to a third party drove a negative impact of 80 basis points. This factor should continue to be a headwind during the second half. Finally, the transition of ICL production to the U.S. had a negative impact of 140 basis points. This should improve during the second half, as it did during the first half, with increased manufacturing experience in the U.S. and the transfer of management from Switzerland. An increase of 3% in the average prices on ICLs had a positive impact on gross margin during the second quarter. The Company expects higher average prices for both ICLs and IOLs which should have a positive impact during the second half of the year.
Operating expenses for the quarter were $15.1 million, up 26% from $11.9 million in the prior year. This includes a $0.8 million increase in R&D expenses driven by the cost of an increased number of regulatory approvals in process, consultants working with the Company on the actions to address the issues in the FDA Warning Letter and cost associated with the development of the Preloaded ICL and the V6a ICL. Investments in Sales and Marketing increased by $1.4 million which includes cost related to the expansion of the U.S. sales team in anticipation of the potential launch of the TICL and increased promotional spending. General and Administrative expenses increased by $1.4 million primarily due to the increased cost of stock compensation due to a higher stock price in the second quarter of 2014 than in the second quarter of 2013, higher bonus accrual as targets for bonus achievement are on track, and tax consulting expenses.
The income tax provision was $0.4 million during the second quarter of 2014 compared to a provision of $0.6 million during the second quarter of 2013. The effective tax rate for the second quarter was 26%, while the rate for the first half was 23%. The effective income tax rates are negative in periods where we have both consolidated pre-tax losses and tax provisions in foreign jurisdictions with pre-tax profits.
Adjusted net income (excluding manufacturing consolidation expenses, distribution transition expenses in Spain, gain (loss) on foreign currency transactions, fair value adjustment of warrants, stock-based compensation expense and Toric ICL FDA panel expenses) for the quarter ended July 4, 2014 was $0.3 million, or $0.01 per share versus adjusted net income for the year ago quarter of $1.8 million, or $0.05 per diluted share.
The GAAP net loss for the first half of 2014 was $3.1 million or $0.08 on a per diluted share basis, compared with a net income of $0.7 million, or $0.02 on a per diluted share basis, in the first half of 2013. Adjusted net income (excluding manufacturing consolidation expenses, distribution transition expenses in Spain, gain (loss) on foreign currency transactions, fair value adjustment of warrants, stock-based compensation expense and Toric ICL FDA panel expenses) for the first half of 2014 was $1.9 million, or $0.05 per share versus adjusted net income for the year ago first half of 2013 at $5.0 million, or $0.13 per diluted share.
Cash and cash equivalents at July 4, 2014 totaled $19.2 million. During the quarter, the Company used $1.5 million in cash for operating activities including: $1.0 million to build inventory to support the potential U.S. launch of the TICL and the Preloaded ICL for EU launch.
Recent Visian Implantable Collamer® Lens (ICL) Highlights.
Regional ICL UpdatesEurope, Middle East, Africa (EMEA)
Asia Pacific (APAC)
North America (NA)
Quarterly Intraocular Lens (IOL) Highlights
Other Operational Highlights during the Quarter
2014 Annual ObjectivesThe Company's annual 2014 annual objectives were established at beginning of the year and the Company will continue to report progress each quarter on those objectives. Those annual objectives are:
Conference CallThe Company will host a conference call and webcast today 5:00 p.m. Eastern / 2:00 p.m. Pacific to discuss these results and recent corporate developments. The dial-in number for the conference call is 866-515-2907 for domestic participants and 617-399-5121 for international participants, both using the passcode 24164533. The Company will also be using slides to illustrate its second quarter results and operational progress. The webcast with accompanying slides can be accessed from the investor relations section of the STAAR website at www.staar.com.
A taped replay of the conference call will also be available beginning approximately one hour after the call's conclusion and will be available for seven days. This replay can be accessed by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers, both using passcode 54025734. An archived audio webcast will also be available at www.staar.com.
Use of Non-GAAP Financial MeasuresThis press release includes supplemental non-GAAP financial information, which STAAR believes investors will find helpful in understanding its operating performance.
The Company conducts a significant part of its activities outside the U.S. It receives sales revenue and pays expenses principally in U.S. dollars, Swiss francs, Japanese yen and Euros. The exchange rates between dollars and non-U.S. currencies can fluctuate greatly and can have a significant effect on our results when reported in U.S. dollars. When preparing its financial statements in conformity with GAAP, the Company translates foreign currency sales and expenses denominated in Japanese yen to dollars at the weighted average of exchange rates in effect during the period. As a result, the Company's reported performance may be significantly affected by currency fluctuations. In order to compare the Company's performance from period to period without the effect of currency, the Company will apply the same average exchange rate applicable in the prior period, or the "constant currency" rate to sales or expenses in the current period as well. Because changes in currency are outside of the control of the Company and its managers, management finds this non-GAAP measure useful in determining the long term progress of its initiatives and determining whether its managers are achieving their performance goals. The Company believes that the non-GAAP constant-currency sales results measures provided in this press release are similarly useful to investors to give insight on long term trends in the Company's performance without the external effect of changes in relative currency values. The table below shows sales results calculated in accordance with GAAP, the effect of currency, and the resulting non-GAAP measure expressed in constant currency.
"Adjusted Net Income" excludes the following items that are included in "Net Income" as calculated in accordance with U.S. generally accepted accounting principles ("GAAP"):
manufacturing consolidation expenses, Spain distribution transition expenses, gain or loss on foreign currency transactions, the fair value adjustment of outstanding warrants issued in 2007, stock-based compensation expenses, and FDA TICL Panel expense.
Management believes that "Adjusted Net Income" is useful to investors in gauging the outcome of the key drivers of the business performance: the ability to increase sales revenue and our ability to increase profit margin by improving the mix of high value products while reducing the costs over which management has control.
We have excluded manufacturing consolidation, Spain distribution transition expenses, and FDA Toric ICL panel expenses because these are non-recurring expenses and their inclusion may mask underlying trends in our business performance. Expenses associated with the Company's plans to consolidate its manufacturing operations to the U.S. are largely expected to have been completed by the middle of 2014 and the Spain distribution transition expenses were completed at the end of the first quarter of 2013.
We have excluded gains and losses on foreign currency transactions and the fair value adjustment of warrants because of the significant fluctuations that can result from period to period as a result of market driven factors.
Stock-based compensation expenses consist of expenses for stock options and restricted stock under the Financial Accounting Standards Board's Accounting Standards Codification (ASC) 718. In calculating Adjusted Net Income STAAR excludes these expenses and the fair value adjustment of outstanding warrants because they are non-cash expenses and because of the complexity and considerable judgment involved in calculating their values. In addition, these expenses tend to be driven by fluctuations in the price of our stock and not by the same factors that generally affect our other business expenses.
We have provided below a detailed reconciliation table, which is useful to investors in providing the context to understand our Adjusted Net Income and how it differs from Net Income calculated in accordance with GAAP.
About STAAR SurgicalSTAAR, which has been dedicated solely to ophthalmic surgery for over 25 years, designs, develops, manufactures and markets implantable lenses for the eye and delivery systems therefor. All of these lenses are foldable, which permits the surgeon to insert them through a small incision. STAAR's lens used in refractive surgery as an alternative to LASIK is called an Implantable Collamer® Lens or "ICL." A lens used to replace the natural lens after cataract surgery is called an intraocular lens or "IOL." More than 450,000 Visian ICLs have been implanted to date; to learn more about the ICL go to: www.visianinfo.com. STAAR has approximately 335 full time employees and markets lenses in over 60 countries. Headquartered in Monrovia, CA, it manufactures in the following locations: Nidau, Switzerland; Aliso Viejo, CA; and Monrovia, CA. For more information, please visit the Company's website at www.staar.com.
Safe HarborAll statements in this press release that are not statements of historical fact are forward-looking statements, including statements about any of the following: any projections of earnings, revenue, sales, profit margins, cash, effective tax rate or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; metrics for 2014; statements regarding new or improved products, including but not limited to, expectations for success of new or improved products in the U.S. or international markets or government approval of new or improved products (including the Toric ICL in the U.S.); the nature, timing and likelihood of resolving issues sited in the FDA's Warning Letter; future economic conditions or size of market opportunities; expected IOL backorder position; expected costs of Monrovia facility expansion; expected costs and savings from business consolidation plans and the timetable for those plans; statements of belief, including as to achieving 2014 growth plans or metrics; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing. Important additional factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the company's Annual Report on Form 10-K for the year ended January 3, 2014, under the caption "Risk Factors," which is on file with the Securities and Exchange Commission and available in the "Investor Information" section of the company's website under the heading "SEC Filings."
These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the following: our limited capital resources and limited access to financing; the negative effect of unstable global economic conditions on sales of products, especially products such as the ICL used in non-reimbursed elective procedures; the challenge of managing our foreign subsidiaries; backlog or supply delays as we fully integrate our manufacturing facility consolidation; the risk of unfavorable changes in currency exchange rate; the discretion of regulatory agencies to approve or reject new or improved products, or to require additional actions before approval (including but not limited to FDA requirements regarding the TICL and/or actions related to the FDA Warning Letter); unexpected costs or delays that could reduce or eliminate the expected benefits of our consolidation plans; the risk that research and development efforts will not be successful or may be delayed in delivering for launch; the purchasing patterns of our distributors carrying inventory in the market; the willingness of surgeons and patients to adopt a new or improved product and procedure; patterns of Visian ICL use that have typically limited our penetration of the refractive procedure market, and a general decline in the demand for refractive surgery particularly in the U.S. and the Asia Pacific region, which STAAR believes has resulted from both concerns about the safety and effectiveness of laser procedures and current economic conditions. The Visian Toric ICL and the Visian ICL with CentraFLOW are not yet approved for sale in the United States.CONTACT: Investors MediaEVC Group
EVC GroupDoug Sherk, 415-652-9100
Nicole Kruse, 212-850-6025
STAAR Surgical CompanyCondensed Consolidated Balance Sheets(in 000's)UnauditedJuly 4,January 3,20142014ASSETSCurrent assets:Cash and cash equivalents$ 19,186$ 22,954Accounts receivable trade, net12,70010,731Inventories, net14,93212,514Prepaids, deposits, and other current assets3,5393,503Deferred income taxes384373Total current assets50,74150,075Property, plant, and equipment, net9,3207,405Intangible assets, net1,2061,380Goodwill1,7861,786Deferred income taxes647626Other assets672659Total assets$ 64,372$ 61,931LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Line of credit$ 4,900$
4,750Accounts payable5,2696,263Deferred income taxes738739Obligations under capital leases 445288Other current liabilities5,8336,372Total current liabilities17,18518,412Obligations under capital leases 629141Deferred income taxes1,7351,654Asset retirement obligations134157Pension liability2,8582,715Total liabilities22,54123,079Stockholders' equity:Common stock384379Additional paid-in capital176,204170,246Accumulated other comprehensive income446282Accumulated deficit(135,203)(132,055)Total stockholders' equity41,83138,852Total liabilities and stockholders' equity$ 64,372$ 61,931
STAAR Surgical CompanyCondensed Consolidated Statements of Operations(In 000's except for per share data)UnauditedThree Months EndedSix Months Ended% ofJuly 4,% ofJune 28,Fav (Unfav)% ofJuly 4,% ofJune 28,Fav (Unfav)Sales2014Sales2013Amount%Sales2014Sales2013Amount%Net sales100.0%
$36,165$ 4,06111.2%Cost of sales31.8%
25,2742,2779.0%Selling, general and administrative expenses: General and administrative26.5%
7,881(2,836)-36.0% Marketing and selling35.0%
10,945(2,219)-20.3% Research and development12.5%
3,052(2,929)-96.0% Medical device excise tax0.3%
10417-100.0%Selling, general, and administrative expenses74.3%
21,982(7,967)-36.2% Other general and administrative expenses0.8%
1,5141,18077.9%Total selling, general and administrative expenses75.1%
23,496(6,787)-28.9%Operating income (loss) -6.9%
1,778(4,510)-253.7%Other income (expense): Interest income0.0%
15320.0% Interest expense-0.2%
(96)2930.2% Gain (loss) on foreign currency transactions-0.7%
(264)19674.2% Other income, net0.6%
2305724.8%Total other income (expense), net-0.2%
(115)285-247.8%Income (loss) before provision for income taxes-7.1%
1,663(4,225)254.1%Provision for income taxes1.8%
91432835.9%Net income (loss) -8.9%
749$(3,897)520.3%Net income (loss) per share - basic$ (0.05)$
.02Net income (loss) per share - diluted$ (0.05)$
.02Weighted average shares outstanding - basic38,16836,49637,97036,461Weighted average shares outstanding - diluted38,16838,34237,97037,887
STAAR Surgical CompanyCondensed Consolidated Statements of Cash Flows(in 000's)UnauditedSix Months EndedJuly 4,June 28,20142013Cash flows from operating activities:Net income (loss) $ (3,148)$
749Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation of property and equipment981840Amortization of intangibles213225Deferred income taxes57129Fair value adjustment of warrant-(27)Loss on disposal of property and equipment-59Stock-based compensation expense3,1832,019Change in net pension liability8357Accretion of asset retirement obligation27Provision for sales returns and bad debts1111Changes in working capital:Accounts receivable trade, net(1,895)(2,229)Inventories(2,093)71Prepaids, deposits and other current assets(20)(507)Accounts payable(874)(1,123)Other current liabilities(554)(25)Net cash provided by (used in) operating activities(4,064)356Cash flows from investing activities:Acquisition of property and equipment(2,269)(2,017)Cash proceeds from sale of property and equipment68-Net cash used in investing activities(2,201)(2,017)Cash flows from financing activities:Repayment of capital lease lines of credit(251)(478)Proceeds from exercise of stock options2,632952Net cash provided by financing activities2,381474Effect of exchange rate changes on cash and cash equivalents116(763)Decrease in cash and cash equivalents(3,768)(1,950)Cash and cash equivalents, at beginning of the period22,95421,675Cash and cash equivalents, at end of the period$19,186$19,725
STAAR Surgical CompanyGlobal Sales(in 000's)UnauditedThree Months EndedSix Months EndedJuly 4,June 28,% ChangeJuly 4,June 28,% ChangeGeographic Sales20142013Fav (Unfav)20142013Fav (Unfav)United States
7,50711.8% Total International Sales
$ 36,16511.2%Product Sales Core productsICLs
12,2116.8% Total core products
34,1039.8% Non-core productsOther
STAAR Surgical CompanyReconciliation of Non-GAAP Financial Measure(in 000's)UnauditedThree Months EndedSix Months EndedJuly 4,June 28,July 4,June 28,2014
2013Net income (loss) - (as reported)$(1,789)
749Less: Manufacturing consolidation expenses165
$ 1,514 Spain distribution transition cost-
442 Foreign currency impact134
264 Fair value adjustment of warrants-
(27) Stock-based compensation expense1,683
$ 2,019 FDA panel expense - Toric ICL98
-Net income - (adjusted)$
$ 1,799$ 1,929
$ 4,961Net income (loss) per share, basic - (as reported)$ (0.05)
$ 0.01$ (0.08)
.02 Manufacturing consolidation expenses0.00
0.04 Spain distribution transition cost-
0.01 Foreign currency impact0.00
0.01 Fair value adjustment of warrants-
(0.00) Stock-based compensation expense0.04
0.06 FDA panel expense - Toric ICL0.00
-Net income per share, basic - (adjusted)$ 0.01
$ 0.05$ 0.05
.14Net income (loss) per share, diluted - (as reported)$ (0.04)
$ 0.01$ (0.08)
.02 Manufacturing consolidation expenses0.00
0.04 Spain distribution transition cost-
0.01 Foreign currency impact0.00
0.01 Fair value adjustment of warrants-
(0.00) Stock-based compensation expense0.04
0.05 FDA panel expense - Toric ICL0.00
-Net income per share, diluted - (adjusted)$ 0.01
$ 0.05$ 0.05
$ 0.13Weighted average shares outstanding - Basic38,168
36,461Weighted average shares outstanding - Diluted40,557
37,887Note: Net income per share (adjusted), basic and diluted, may not add up due to rounding
STAAR Surgical CompanyReconciliation of Non-GAAP Financial MeasureConstant Currency Sales(in 000's)Unaudited Three Months Ended GAAP Sales July 4, Effect of Constant June 28, As Reported Constant Currency 2014 Currency Currency 2013 $ Change % Change $ Change % Change ICL $
8% IOL $
10% Other 1,448
42% Total Sales $
11% Six Months Ended GAAP Sales July 4, Effect of Constant June 28, As Reported Constant Currency 2014 Currency Currency 2013 $ Change % Change $ Change % Change ICL $
12% IOL 13,041
11% Other 2,772
40% Total Sales $
|SOURCE STAAR Surgical Company|
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