MONROVIA, Calif., July 31, 2013 /PRNewswire/ -- STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of minimally invasive ophthalmic products, today reported revenue for the second quarter ended June 28, 2013 of $18.2 million, which represented 14% growth compared to $15.9 million reported for the second quarter of 2012. The results included sales of $11.3 million of the Company's Visian ICL product portfolio and $5.9 million of its IOL products. In addition, low margin Other Product sales increased to $1.0 million. The effect of foreign currency exchange during the quarter versus prior year second quarter reduced total sales by $1.0 million. On a constant currency basis revenues grew 20% during the second quarter of 2013 compared to the second quarter of 2012.
"We delivered a second consecutive quarter of solid revenue growth with some very positive trends that we believe can be built on over the next several quarters," said Barry Caldwell, President and CEO. "In our focused major markets, our Visian ICL continues to gain share over LASIK. We have now successfully implanted over 20,000 ICLs with CentraFLOW and this technology continues to be a key growth driver. During June we received approval of the ICL with CentraFLOW in Argentina and Korea. The ICL with CentraFLOW launch events took place this month in Korea and also in India where we now expect to receive the final product approval during the third quarter. Based upon our experience in Europe, the wider approval range of the Visian ICL with CentraFLOW opens up the refractive market for increased market share gains.""We saw good growth in ICL revenues from all three of our regions despite the continued downward pressure on LASIK," added Mr. Caldwell. "Our European region grew 47% during the quarter driven by the new CentraFLOW technology, productivity from our expanded sales team in the region and the shift to a direct selling model in Spain. Our Asia Pacific region grew Visian ICL sales by 29% which was driven by 77% growth in China. With the growth renewal in China during the quarter that market was our number one market in Visian ICL revenues. During the second half of this year the region will have the new CentraFLOW approvals in Korea and India to drive incremental growth. North America grew ICL revenues by 9%. The U.S. continues to show market share gains as revenue grew 10% while units increased 15% during the quarter. Our competitors promoting LASIK continue to profile the U.S. as a very challenging market for refractive procedures."
"We sold our first nanoFLEX™ Toric IOLs in Europe during the quarter with encouraging results. IOL growth overall continued to be negatively impacted by KS IOL product supply and the worsening value of the yen. The negative impact from the value of the yen on IOL sales was $827,000 during the quarter. We had to suspend delivery of our new KS IOL products to China until we have additional supply which is dependent on our third party supplier. This interruption in supply for China resulted in reduced sales of $810,000 as compared to second quarter of 2012 and $347,000 sequentially. Our backorders in Europe increased to $1.2 million at the end of the second quarter."
"Our manufacturing consolidation project remained basically on schedule as all IOLs and 21% of myopic ICLs through final inspection were manufactured in Monrovia during June. Throughout this three year process, supply and product quality have remained our priority. As a result of higher than expected demand for the Visian ICL during the first half of the year our ICL inventory levels in Switzerland have declined below our level of comfort.
We need to build more ICL units during the second half for both the increased demand and inventory replenishment. In order to accomplish this we have decided to extend completion of our manufacturing consolidation initiative until the first half of 2014. By the end of December we expect to have two thirds of all myopic ICLs and one third of all TICLs manufactured in the U.S. as well as 100% of all IOL products. Production in Switzerland will continue into the first half of next year to build more robust inventory levels for our ICL products and we plan to begin a second shift in Monrovia at the end of August. We do not anticipate this slight shift will interfere with the planned use of all of the NOLs after consolidation," Mr. Caldwell continued.
"We remain focused on expanding our market share and gaining additional approvals for our technology in key markets. I am encouraged that we have executed so well against the plan we laid out at the start of this year. While we expect to have continued headwinds due to the yen valuation, as a result of our performance during the first half of the year, and the positive momentum going into the second half of the year, we are increasing our annual revenue growth metric from the original 8 to 10% to the 12 to 14% range," concluded Mr. Caldwell.
Gross profit margin for the quarter was 69.5% compared to 69.3% in the second quarter of 2012. The highest gross margin product, the Visian ICL, represented 62% of all revenue during the quarter. Gross margin expansion was limited primarily by a 23% sequential increase in very low margin IOL injector systems sales to a third party supplier for the buildup of their acrylic preloaded product supply, which appears in the Other Product sales category. These sales generated a gross margin considerably below the Company's Visian ICL and IOL product lines gross margins. Those differences accounted for a 150 basis point difference in the gross margin results during the quarter which would have otherwise been 71%.
Operating expenses for the second quarter of 2013 were $11.9 million, up 6.4% from the $11.2 million prior year period reflecting $613,000 in related charges associated with the Company's manufacturing consolidation project and a $293,000 increase in sales and marketing expenses driven by the additions to the Company's headcount throughout 2012. The effect of foreign currency exchange on overall operating expenses was a positive $505,000.
Income taxes increased to $599,000 during the second quarter of 2013 compared to $327,000 during the second quarter of 2012. The overall tax rate was 68.3% during the quarter and the estimated tax rate for 2013 has been increased to 45% due to the Company's decision to extend the completion date of its manufacturing consolidation project to focus on meeting near term demand. Additionally, the effective tax rate for the quarter was negatively impacted because under GAAP jurisdictions with losses are excluded from the calculation for interim reporting purposes.
GAAP net income for the second quarter of 2013 was $278,000, or $0.01 on a per diluted share basis, compared with net loss of $491,000, or $0.01 on a per diluted share basis, in the second quarter of 2012, a $769,000 improvement. Adjusted net income (excluding manufacturing consolidation expenses, gain (loss) on foreign currency transactions, fair value adjustment of warrants, and stock-based compensation expense) for the quarter ended June 28, 2013 was $1.8 million or $0.05 per diluted share versus adjusted net income for the year ago quarter of $1.2 million or $0.03 per diluted share. The reconciliation between GAAP and non-GAAP financial matters is provided with financial tables included with this release.
Cash and cash equivalents on June 28, 2013 totaled $19.7 million, compared to $19.2 million at the end of the first quarter of 2013. Cash generation from operations during the quarter was $788,000, which includes the use of $613,000 for the manufacturing consolidation project. The Company also used $799,000 for the purchase of property and equipment and generated $929,000 in proceeds from stock option exercises.
For the six month period ended June 28, 2013, sales increased to $36.2 million versus $31.5 million during the first half of 2012, a 15% increase in U.S. dollars and 21% increase in constant currency. Gross profit increased by 15%.
Operating expenses increased $1.7 million or 7.6%, which included key investments of $1.5 million for the consolidation project ($262,000 above prior year) and incremental spending of $916,000 in sales and marketing. Operating income increased by $1.7 million during the six month period. Income taxes were $355,000 higher and the new medical device tax was $104,000. Net Income on a GAAP basis was $749,000 or $0.02 per diluted share and the non-GAAP adjusted net income increased to $5.0 million or $0.13 per diluted share basis as compared to $2.6 million or $0.07 per diluted share during the first half of 2012.
Recent Visian Implantable Collamer® Lens (ICL) Highlights
Regional ICL UpdatesEurope, Middle East, Africa (EMEA)
Asia Pacific (APAC)
North America (NA)
Recent Intraocular Lens (IOL) Highlights
Project Comet Update
2013 Metrics- Revenue Growth Metric Increased; Manufacturing Consolidation ExtendedThe Company updated its metrics as follows and will continue to report and update on each of the 2013 metrics quarterly:
Conference CallThe Company will host a conference call and video webcast today, July 31, 2013 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss the Company's second quarter 2013 financial results and recent corporate developments. The dial-in number for the conference call is 877-703-6105 for domestic participants and 857-244-7304 for international participants, both using a passcode 23510067.
The Company will also be using slides to illustrate its second quarter results and operational progress. The slides and live webcast of the call 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 40120994. An archived 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 conformance 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, and stock-based compensation expenses.
We believe that "Adjusted Net Income" is useful to investors in gauging the outcome of the key drivers of our business performance: our 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 we have control.
We have excluded manufacturing consolidation and Spain distribution transition 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 be completed at the end of 2013 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 Statement of Financial Accounting Standards ("SFAS") No. 123R. 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." Over 350,000 Visian ICLs have been implanted to date; to learn more about the ICL go to: www.visianinfo.com. STAAR has approximately 300 full time employees and markets lenses in over 60 countries. Headquartered in Monrovia, CA, it manufactures in the following locations: Nidau, Switzerland; Ichikawa City, Japan; Aliso Viejo, CA; and Monrovia, CA. For more information, please visit the Company's website at www.staar.com or call 626-303-7902.
Collamer® is the registered trademark for STAAR's proprietary biocompatible collagen copolymer lens material.
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 2013; statements regarding new products, including but not limited to, expectations for success of new products in the U.S. or international markets or government approval of new products; 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 2013 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 December 28, 2012, 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 as we prepare for our manufacturing facility consolidation; the risk of unfavorable changes in currency exchange rate; the discretion of regulatory agencies to approve or reject new products, or to require additional actions before approval; 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 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.
EVC GroupDouglas Sherk, 415-652-9100
Chris Gale, 646-201-5431Leigh Salvo, 415-568-9348
STAAR Surgical CompanyCondensed Consolidated Balance Sheets(in 000's)UnauditedJune 28,December 28,ASSETS20132012Current assets:Cash and cash equivalents$ 19,725$
21,675Accounts receivable trade, net10,3428,543Inventories, net11,12311,673Prepaids, deposits, and other current assets2,6242,183Total current assets43,81444,074Property, plant, and equipment, net6,1475,439Intangible assets, net1,6892,142Goodwill1,7861,786Deferred income taxes189187Other assets1,0411,131Total assets$ 54,666$
54,759LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Line of credit$ 5,100$
5,850Accounts payable3,8095,129Deferred income taxes440439Obligations under capital leases 525829Other current liabilities5,5465,702Total current liabilities15,42017,949Obligations under capital leases 276488Deferred income taxes1,014885Asset retirement obligations386707Pension liability2,9092,988Total liabilities20,00523,017Stockholders' equity:Common stock366364Additional paid-in capital165,327162,251Accumulated other comprehensive income6711,580Accumulated deficit(131,703)(132,453)Total stockholders' equity34,66131,742Total liabilities and stockholders' equity$ 54,666$
STAAR Surgical CompanyCondensed Consolidated Statements of Operations(In 000's except for per share data)UnauditedThree Months EndedSix Months Ended% ofJune 28,% ofJune 29,Fav (Unfav)% ofJune 28,% ofJune 29,Fav (Unfav)Sales2013Sales2012Amount%Sales2013Sales2012Amount%Net sales100.0%
$31,451$ 4,71415.0%Cost of sales30.5%
21,9473,32715.2%Selling, general and administrative expenses: General and administrative21.6%
7,493(388)-5.2% Marketing and selling31.2%
10,029(916)-9.1% Research and development9.3%
3,05970.2% Medical device tax0.2%
0(104)-100.0%Selling, general, and administrative expenses62.3%
20,581(1,401)-6.8% Other general and administrative expenses3.4%
1,252(262)-20.9%Total selling, general and administrative expenses65.7%
21,833(1,663)-7.6%Operating income (loss) 3.8%
1141,6641459.6%Other income (expense): Interest income0.0%
78114.3% Interest expense-0.2%
(162)6640.7% Gain (loss) on foreign currency transactions0.4%
(182)(82)-45.1% Other income, net0.8%
523(293)-56.0%Total other income (expense), net1.0%
186(301)-161.8%Income (loss) before provision for income taxes4.8%
3001,363-454.3%Provision for income taxes3.3%
559(355)-63.5%Net income (loss) 1.5%
(259)$ 1,008389.2%Net income (loss) per share - basic$
.02$ (0.01)Net income (loss) per share - diluted$
.02$ (0.01)Weighted average shares outstanding - basic36,49636,25736,46136,164Weighted average shares outstanding - diluted38,34236,25737,88736,164
STAAR Surgical CompanyCondensed Consolidated Statements of Cash Flows(in 000's)UnauditedSix Months EndedJune 28,June 29,20132012Cash flows from operating activities:Net income (loss) $
(259)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation of property and equipment840627Amortization of intangibles225350Deferred income taxes12982Fair value adjustment of warrant(27)(207)Loss on disposal of property and equipment5931Stock-based compensation expense2,0191,481Change in net pension liability57136Accretion of asset retirement obligation7-Other11171Changes in working capital:Accounts receivable trade, net(2,229)334Inventories71(344)Prepaids, deposits and other current assets(507)(138)Accounts payable(1,123)(1,089)Other current liabilities(25)153Net cash provided by operating activities3561,228Cash flows from investing activities:Acquisition of property and equipment(2,017)(833)Decrease in restricted cash, including reinvested interest-129Net cash used in investing activities(2,017)(704)Cash flows from financing activities:Repayment of capital lease lines of credit(478)(438)Proceeds from exercise of stock options952950Net cash provided by financing activities474512Effect of exchange rate changes on cash and cash equivalents(763)(74)Increase (decrease) in cash and cash equivalents(1,950)962Cash and cash equivalents, at beginning of the period21,67516,582Cash and cash equivalents, at end of the period$19,725$17,544 STAAR Surgical CompanyGlobal Sales(in 000's)UnauditedThree Months EndedYear EndedJune 28,June 29,% ChangeJune 28,June 29,% ChangeGeographic Sales20132012Fav (Unfav)20132012Fav (Unfav)United States
8,19819.1% Total International Sales
$ 31,45115.0%Product Sales Core productsICLs
13,132-7.0% Total core products
30,34312.4% Non-core productsOther
STAAR Surgical CompanyReconciliation of Non-GAAP Financial Measure(in 000's)UnauditedThree Months EndedSix Months EndedJune 28,June 29,June 28,June 29,2013201220132012Net income (loss) - (as reported)$
$ (259)Less: Manufacturing consolidation expenses613
$ 1,252 Spain distribution transition cost-
73 Foreign currency impact(77)
82 Fair value adjustment of warrants-
$ (207) Stock-based compensation expense985
$ 1,481Net income - (adjusted)$ 1,799
$ 1,200$ 4,961
$ 2,622Net income (loss) per share, basic - (as reported)$ 0.01
$ (0.01)$ 0.02
$ (0.01) Manufacturing consolidation expenses$ 0.02
$ 0.02$ 0.04
$ 0.03 Spain distribution transition cost$
$ 0.00$ 0.01
$ 0.00 Foreign currency impact$ (0.00)
$ 0.01$ 0.01
$ 0.01 Fair value adjustment of warrants$
$ (0.01)$ (0.00)
$ (0.01) Stock-based compensation expense$ 0.03
$ 0.02$ 0.06
$ 0.04Net income per share, basic - (adjusted)$ 0.05
$ 0.03$ 0.14
$ 0.07Net income (loss) per share, diluted - (as reported)$ 0.01
$ (0.01)$ 0.02
$ (0.01) Manufacturing consolidation expenses$ 0.02
$ 0.03 Spain distribution transition cost$
$ 0.02$ 0.01
$ 0.00 Foreign currency impact$ (0.00)
$ 0.00$ 0.01
$ 0.00 Fair value adjustment of warrants$
$ 0.01$ (0.00)
$ (0.01) Stock-based compensation expense$ 0.03
$ (0.01)$ 0.05
$ 0.04Net income per share, diluted - (adjusted)$ 0.05
$ 0.03$ 0.13
$ 0.07Weighted average shares outstanding - Basic36,496
36,164Weighted average shares outstanding - Diluted38,342
38,406Note: 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 June 28, Effect of Constant June 29, As Reported Constant Currency 2013 Currency Currency 2012 $ Change % Change $ Change % Change ICL $
$ 11,302$ 8,606$
31% IOL 5,863
-1% Other 1,040
110% Total Sales $
20% Six Months Ended GAAP Sales June 28, Effect of Constant June 29, As Reported Constant Currency 2013 Currency Currency 2012 $ Change % Change $ Change % Change ICL $
28% IOL 12,211
4% Other 2,062
105% Total Sales $
|SOURCE STAAR Surgical Company|
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