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STAAR Surgical Reports Second Quarter 2015 Results

  • 2015-07-29
  • Press release

MONROVIA, Calif., July 29, 2015 /PRNewswire/ -- STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of implantable lenses and delivery systems for the eye today reported financial results for the second quarter ended July 3, 2015.

Second Quarter Overview

  • Net Sales of $18.7 Million Down 7% from the Prior Year Quarter
  • Unfavorable Currency Impact of $2.1 Million from the Weakening Euro and Yen
  • ICL Units Increased 24% in EMEA and 13% in China
  • APAC Sales Down 1% Including Korea - Up 16% Excluding Korea
  • Gross Margin of 66.3% for 2Q 2015 vs. Prior Year of 68.2% Due to Currency
  • FDA Remediation Expense of $1.1 Million for the Quarter and on Plan for 1st Half
  • Second Quarter Net Loss of $0.04 per Share; Adjusted Net Income per Share Breakeven

"Our second quarter results were mixed with strong double digit ICL unit growth in EMEA and China offset by the weakening euro and yen and continuing softness in Korea" said Caren Mason, President and CEO.  "The impact of the MERS scare in Korea kept patients out of the clinic with cancelled surgeries and impacted the second traditionally high procedure season this year.  In order to capture more of the dollars associated with our significant unit volume growth, we announced our intent to raise prices on our ICL lenses at our most recent International Sales and Distributors meeting in Lisbon.  The price increase will impact all of our global customers and will be adjusted by market.  It has been several years since we announced a global price increase and many markets have had a strong period of unit growth with significant investment by STAAR at no additional cost.  Most price increases will take effect October 1st in keeping with notification requirements for contracted customers.  During the quarter, we continued our positive momentum in strengthening manufacturing efficiency and output.  Our yields continue to improve and our TICL quarterly shipments were the highest ever recorded during the second quarter.  Importantly, we continue our steadfast commitment and focus on meeting all FDA remediation requirements and the building of an enhanced Quality System."

Financial Overview

Net sales were $18.7 million for the second quarter of 2015, down 7% compared to $20.0 million reported in the prior year. On a constant currency basis, second quarter net sales declined 3% compared to the prior period.

The sales decline was driven by foreign currency changes due to the strengthening U.S. dollar against the euro and the yen, lower IOL unit sales in EMEA, and lower ICL unit sales primarily in Korea.  These impacts were partially offset by ICL unit growth in EMEA of 24% and ICL unit growth in China of 13%.  In the second quarter, 97% of all ICL shipments to China were the CentraFLOW® technology.

For the second quarter of 2015, the gross profit margin declined 190 basis points to 66.3% compared to the prior year period of 68.2%.  Average unit costs improved 170 basis points but were offset by a 200 basis point decrease due to the impact of the weaker euro on average selling prices, unfavorable geographic and product mix of 70 basis points, and 90 basis points in higher other cost of sales.

Operating expenses for the quarter declined 6% to $14.1 million from $15.1 million in the prior year period, primarily due to lower general and administrative expense, and lower marketing and selling expense than the prior year period. General and administrative expense was $4.7 million and approximately $632,000 lower than the prior year due to decreased stock-based compensation and travel costs.  Marketing and selling expense was $5.8 million and approximately $1.2 million lower than the prior year due to decreased stock-based compensation, travel, and promotional costs and optimization of North American selling costs.  Research and development expense, which includes remediation and other FDA expenses, was $3.5 million and approximately $1.0 million higher than the prior year due to approximately $1.1 million in FDA remediation expenses in the second quarter of 2015 compared to less than $100,000 in the second quarter of 2014.  Remediation costs for the first half of 2015 are on budget.

The net loss for the second quarter of 2015 was $1.6 million or $0.04 per share, compared with a net loss of $1.8 million or $0.05 per share for the prior year period.

Adjusted net income for the second quarter of 2015 was $167,000 or breakeven on a per diluted share basis, compared with adjusted net income of $291,000 or $0.01 per diluted share for the prior year period.  The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.

Cash and cash equivalents at July 3, 2015 totaled $15.3 million, compared to $10.8 million at the end of the first quarter of 2015 and $13.0 million at year-end 2014. The Company added $4.5 million in cash during the second quarter of 2015, which includes $800,000 provided by operating activities, $2.8 million from an exercise of warrants, and $1.5 million from the exercise of stock options, partially offset by $600,000 in other uses of cash, primarily purchases of property and equipment.

Conference Call

The Company will host a conference call and webcast on Wednesday, July 29 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results. To access the conference call (Conference ID 83982418), please dial 855-765-5684 for domestic participants and 262-912-6252 for international participants.  The live webcast 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 for seven days.  This replay can be accessed by dialing 855-859-2056 for domestic callers and 404-537-3406 for international callers. An archived webcast will also be available at www.staar.com.

Use of Non-GAAP Financial Measures

This 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 the Company's 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, gain or loss on foreign currency transactions, stock-based compensation expenses, and FDA panel and remediation expenses. 

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. 

Management has excluded manufacturing consolidation expenses and FDA panel and remediation expenses because these are non-recurring expenses and their inclusion may mask underlying trends in our business performance.  Expenses associated with the consolidation of the Company's manufacturing operations to the U.S. were largely completed by the end of the second quarter of 2014.

Management has also excluded gains and losses on foreign currency transactions 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 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.

The Company has provided below a detailed reconciliation table, which is useful to investors in providing the context to understand STAAR Surgical's Adjusted Net Income and how it differs from Net Income calculated in accordance with GAAP. 

About STAAR Surgical

STAAR, 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 500,000 Visian ICLs have been implanted to date. To learn more about the ICL go to: www.visianinfo.com. STAAR has approximately 300 employees and markets lenses in over 60 countries. Headquartered in Monrovia, CA, the company operates manufacturing facilities in Aliso Viejo, CA and Monrovia, CA. For more information, please visit the Company's website at www.staar.com.

Safe Harbor

All statements in this press release that are not statements of historical fact are forward-looking statements, including statements about any of the following: any financial projections; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans, 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 2, 2015, 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; the risk of unfavorable changes in currency exchange rate; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before approval (including but not limited to FDA requirements regarding the Visian Toric ICL and/or actions related to the FDA Warning Letter and Form FDA-483s), or to take enforcement action; 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, negative media coverage in different regions regarding refractive procedures, 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

Media


EVC Group

EVC Group


Brian Moore, 310-579-6199

Rob Swadosh, 212-850-6021


Doug Sherk, 415-652-9100


 

STAAR Surgical Company




Condensed Consolidated Balance Sheets



(in 000's)




Unaudited












July 3,


January 2,



2015


2015

ASSETS





Current assets:





Cash and cash equivalents


$ 15,335


$   13,013

Accounts receivable trade, net


12,478


11,054

Inventories, net


14,153


15,717

Prepaids, deposits, and other current assets


4,017


4,517

Deferred income taxes


582


596

   Total current assets


46,565


44,897

Property, plant, and equipment, net


9,931


10,066

Long-lived intangible assets, net


750


870

Goodwill


1,786


1,786

Deferred income taxes


685


695

Other assets


580


597

   Total assets


$ 60,297


$   58,911






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Line of credit


$   4,055


$     4,150

Accounts payable


4,761


6,620

Deferred income taxes


301


301

Obligations under capital leases 


349


399

Other current liabilities


5,580


4,901

   Total current liabilities


15,046


16,371

Obligations under capital leases 


305


468

Deferred income taxes


1,813


1,704

Asset retirement obligations


112


115

Pension liability


3,140


3,079

Other long-term liabilities


89


75

   Total liabilities


20,505


21,812
















Stockholders' equity:





Common stock


398


384

Additional paid-in capital


184,990


178,232

Accumulated other comprehensive income


(1,211)


(1,070)

Accumulated deficit


(144,385)


(140,447)

   Total stockholders' equity


39,792


37,099

   Total liabilities and stockholders' equity


$ 60,297


$   58,911

 

 

STAAR Surgical Company















Condensed Consolidated Statements of Operations












(In 000's except for per share data)















Unaudited







































































































Three Months Ended


Six Months Ended



% of

July 3,


% of

July 4,


Fav (Unfav)


% of

July 3,


% of

July 4,


Fav (Unfav)



Sales

2015


Sales

2014


Amount


%


Sales

2015


Sales

2014


Amount


%






















Net sales


100.0%

$18,657


100.0%

$20,048


$(1,391)


-7%


100.0%

$37,514


100.0%

$40,226


$(2,712)


-7%






















Cost of sales


33.7%

6,296


31.8%

6,381


85


1%


32.7%

12,254


31.5%

12,675


421


3%






















Gross profit


66.3%

12,361


68.2%

13,667


(1,306)


-10%


67.3%

25,260


68.5%

27,551


(2,291)


-8%






















Selling, general and administrative expenses:





















  General and administrative


25.4%

4,736


26.8%

5,368


632


12%


26.4%

9,896


26.9%

10,804


908


8%

  Marketing and selling


31.3%

5,832


35.0%

7,026


1,194


17%


30.7%

11,500


32.7%

13,164


1,664


13%

  Research and development


19.0%

3,536


12.5%

2,498


(1,038)


-42%


19.0%

7,116


14.9%

5,981


(1,135)


-19%

     Selling, general, and administrative expenses


75.6%

14,104


74.3%

14,892


788


5%


76.0%

28,512


74.5%

29,949


1,437


5%

  Other general and administrative expenses


0.0%

-


0.8%

165


165


100%


0.0%

-


0.8%

334


334


100%






















     Total selling, general and administrative expenses


75.6%

14,104


75.1%

15,057


953


6%


76.0%

28,512


75.3%

30,283


1,771


6%






















Operating loss 


-9.3%

(1,743)


-6.9%

(1,390)


(353)


-25%


-8.7%

(3,252)


-6.8%

(2,732)


(520)


19%






















Other income (expense):





















  Interest income


0.3%

49


0.0%

10


39


390%


0.1%

49


0.0%

18


31


172%

  Interest expense


-0.2%

(33)


-0.2%

(34)


1


3%


-0.2%

(68)


-0.2%

(67)


(1)


-1%

  Gain (loss) on foreign currency transactions


1.0%

180


-0.7%

(134)


314



-1.9%

(711)


-0.2%

(68)


(643)


-946%

  Other income, net


0.5%

101


0.6%

126


(25)


-20%


0.5%

170


0.7%

287


(117)


-41%

    Total other income (expense), net


1.6%

297


-0.2%

(32)


329



-1.5%

(560)


0.4%

170


(730)























Loss before provision for income taxes


-7.8%

(1,446)


-7.1%

(1,422)


(24)


-2%


-10.2%

(3,812)


-6.4%

(2,562)


(1,250)


-49%






















Provision for income taxes


0.8%

153


1.8%

367


214


58%


0.3%

126


1.5%

586


460


78%






















Net loss 


-8.6%

$ (1,599)


-8.9%

$ (1,789)


$    190


11%


-10.5%

$ (3,938)


-7.8%

$ (3,148)


$   (790)


-25%






















Net loss per share - basic and diluted



$   (0.04)



$   (0.05)







$   (0.10)



$   (0.08)





Weighted average shares outstanding - basic and diluted



39,066



38,168







38,769



37,970





 

 

STAAR Surgical Company





Condensed Consolidated Statements of Cash Flows





(in 000's)





Unaudited








Six Months Ended




July 3,


July 4,




2015


2014

Cash flows from operating activities:





   Net loss 


$ (3,938)


$ (3,148)

   Adjustments to reconcile net loss to net cash used in operating activities:






Depreciation of property and equipment


996


981


Amortization of long-lived intangible assets


103


213


Deferred income taxes


(35)


57


Stock-based compensation expense


1,823


3,183


Change in net pension liability


95


83


Accretion of asset retirement obligation



2


Provision for sales returns and bad debts


243


1

   Changes in working capital:






Accounts receivable trade, net


(1,732)


(1,895)


Inventories


1,669


(2,093)


Prepaids, deposits and other current assets


538


(20)


Accounts payable


(1,994)


(874)


Other current liabilities


827


(554)


      Net cash used in operating activities


(1,405)


(4,064)







Cash flows from investing activities:






Acquisition of property and equipment


(701)


(2,269)


Cash proceeds from sale of property and equipment


2


68


      Net cash used in investing activities


(699)


(2,201)







Cash flows from financing activities:






Repayment of capital lease lines of credit


(210)


(251)


Proceeds from exercise of stock options


1,896


2,632


Proceeds from exercise of warrants


2,800



      Net cash provided by financing activities


4,486


2,381







Effect of exchange rate changes on cash and cash equivalents


(60)


116







Increase (decrease) in cash and cash equivalents


2,322


(3,768)

Cash and cash equivalents, at beginning of the period


13,013


22,954

Cash and cash equivalents, at end of the period


$15,335


$19,186

 

 

STAAR Surgical Company











Global Sales












(in 000's)












Unaudited









































Three Months Ended


Six Months Ended



July 3,


July 4,


% Change



July 3,


July 4,


% Change

Geographic Sales


2015


2014


Fav (Unfav)



2015


2014


Fav (Unfav)

United States

14.6%

$   2,723

14.6%

$   2,926


-7%


14.9%

$   5,589

14.4%

$   5,801


-4%















Japan

21.3%

3,980

22.7%

4,549


-13%


22.0%

8,267

23.8%

9,557


-13%

Korea

6.8%

1,269

9.7%

1,952


-35%


9.6%

3,612

11.4%

4,573


-21%

China

17.8%

3,327

12.6%

2,535


31%


15.2%

5,698

11.8%

4,759


20%

Spain

8.0%

1,486

7.4%

1,474


1%


7.9%

2,964

7.7%

3,092


-4%

France

4.8%

888

5.9%

1,190


-25%


5.4%

2,039

5.3%

2,136


-5%

Germany

3.7%

694

5.1%

1,015


-32%


3.2%

1,190

4.8%

1,912


-38%

Other

23.0%

4,290

22.0%

4,407


-3%


21.7%

8,155

20.9%

8,396


-3%

  Total International Sales

85.4%

15,934

85.4%

17,122


-7%


85.1%

31,925

85.6%

34,425


-7%















    Total Sales

100.0%

$  18,657

100.0%

$  20,048


-7%


100.0%

$  37,514

100.0%

$  40,226


-7%





























Product Sales














  Core products














    ICLs

65.6%

$  12,236

60.7%

$  12,172


1%


65.3%

$  24,490

60.7%

$  24,413


0%

    IOLs

27.9%

5,204

32.1%

6,428


-19%


28.2%

10,562

32.4%

13,041


-19%

  Total core products

93.5%

17,440

92.8%

18,600


-6%


93.4%

35,052

93.1%

37,454


-6%

  Non-core products














    Other

6.5%

1,217

7.2%

1,448


-16%


6.6%

2,462

6.9%

2,772


-11%

    Total Sales

100.0%

$  18,657

100.0%

$  20,048


-7%


100.0%

$  37,514

100.0%

$  40,226


-7%

 

 

STAAR Surgical Company






Reconciliation of Non-GAAP Financial Measure





(in 000's)







Unaudited


Three Months Ended


Six Months Ended



July 3,

July 4,


July 3,

July 4,



2015

2014


2015

2014

Net loss - (as reported)


$(1,599)

$(1,789)


$(3,938)

$(3,148)

Less:







  Manufacturing consolidation expenses


-

165


-

$    334

  Foreign currency impact


(180)

134


711

$      68

  Fair value adjustment of warrants


-

-


-

$      -

  Stock-based compensation expense


829

1,683


1,823

$ 3,183

  FDA panel/remediation expenses


1,117

98


2,558

$ 1,492

Net income - (adjusted)


$    167

$    291


$ 1,154

$ 1,929








Net loss per share, basic - (as reported)


$  (0.04)

$  (0.05)


$  (0.10)

$  (0.08)

  Manufacturing consolidation expenses


-

0.00


-

0.01

  Foreign currency impact


(0.00)

0.00


0.02

0.00

  Fair value adjustment of warrants


-

-


-

-

  Stock-based compensation expense


0.02

0.04


0.05

0.08

  FDA panel/remediation expenses


0.03

0.00


0.07

0.04

Net income per share, basic - (adjusted)


$   0.00

$   0.01


$   0.03

$   0.05








Net loss per share, diluted - (as reported)


$  (0.04)

$  (0.04)


$  (0.10)

$  (0.08)

  Manufacturing consolidation expenses


-

0.00


-

0.01

  Foreign currency impact


(0.00)

0.00


0.02

0.00

  Fair value adjustment of warrants


-

-


-

-

  Stock-based compensation expense


0.02

0.04


0.05

0.08

  FDA panel/remediation expenses


0.03

0.00


0.06

0.04

Net income per share, diluted - (adjusted)


$   0.00

$   0.01


$   0.03

$   0.05








Weighted average shares outstanding - Basic


39,066

38,168


38,769

37,970

Weighted average shares outstanding - Diluted


40,386

40,557


40,048

40,514


Note:  Net income per share (adjusted), basic and diluted, may not add up due to rounding

 

STAAR Surgical Company









Reconciliation of Non-GAAP Financial Measure







Constant Currency Sales









(in 000's)











Unaudited












 Three Months Ended 


 GAAP Sales 












July 3,

 Effect of 

 Constant 


July 4, 


 As Reported 


 Constant Currency 


2015

 Currency 

 Currency 


2014


 $ Change 

 % Change 


 $ Change 

 % Change 

 ICL 

$        12,236

$         76

$   12,312


$12,172


$            64

1%


$         140

1%

 IOL 

$          5,204

614

5,818


6,428


(1,224)

-19%


(610)

-9%

 Other 

1,217

191

1,408


1,448


(231)

-16%


(40)

-3%

 Total Sales 

$        18,657

$       881

$   19,538


$20,048


$    (1,391)

-7%


$       (510)

-3%






































 Six Months Ended 


 GAAP Sales 












July 3,

 Effect of 

 Constant 


July 4, 


 As Reported 


 Constant Currency 


2015

 Currency 

 Currency 


2014


 $ Change 

 % Change 


 $ Change 

 % Change 

 ICL 

$        24,490

$       142

$   24,632


$24,413


$            77

0%


$          219

1%

 IOL 

10,562

1,103

11,665


13,041


(2,479)

-19%


(1,376)

-11%

 Other 

2,462

335

2,797


2,772


(310)

-11%


25

1%

 Total Sales 

$        37,514

$     1,580

$   39,094


$40,226


$    (2,712)

-7%


$    (1,132)

-3%

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/staar-surgical-reports-second-quarter-2015-results-300120739.html

SOURCE STAAR Surgical Company