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STAAR Surgical Reports Fourth Quarter and Full Year 2015 Results

  • 2016-03-02
  • Press release

MONROVIA, Calif., March 2, 2016 /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 fourth quarter and full year ended January 1, 2016.

Fourth Quarter 2015 Overview

  • Record Quarterly Net Sales of $20.9 Million Up 26% from the Prior Year Quarter and Up 27% on a Constant Currency Basis
  • Worldwide Implantable Collamer® Lens ("ICL") Revenue Up 57% and Units Up 60% vs. Prior Year Quarter:
    • Europe Middle East Africa (EMEA) ICL Revenue Up 19% and Units Up 16%
    • Asia Pacific (APAC) ICL Revenue Up 118% and Units Up 118%
    • North America (NA) ICL Revenue Up 5% and Units Down 4%
  • Worldwide Intraocular Lens ("IOL") Revenue Down 11% and Units Down 14% vs. Prior Year Quarter
  • Gross Margin Improved from 56.7% to 70.3% of Sales Primarily Attributable to Favorable Mix, Price Increase and Manufacturing Performance Improvement
  • On-Going FDA Remediation Effort for the Quarter On-Track and On-Budget
  • Fourth Quarter Net Loss of $0.02 per Share vs. Prior Year Quarter Net Loss of $0.07 per Share.

Full Year 2015 Overview

  • Record Full Year Net Sales of $77.1 Million Up 3% from Prior Year and Up 6% on a Constant Currency Basis
  • Worldwide ICL Revenue Up 17% and Units Up 18% vs. Prior Year:
    • Europe Middle East Africa (EMEA) ICL Revenue up 11% and Units Up 21%
    • Asia Pacific (APAC) ICL Revenue Up 25% and Units Up 18%
    • North America (NA) ICL Revenue Up 8% and Units Up 6%
  • Worldwide IOL Revenue Down 18% and Units Down 11% vs. Prior Year
  • Gross Margin Improved from 65.1% to 68.4% of Sales Primarily Attributable to Favorable Mix and Manufacturing Performance Efficiencies
  • On-Going FDA Remediation Effort for the Year On-Track and On-Budget
  • Full Year Net Loss of $0.17 per Share vs. Prior Year Net Loss of $0.22 per Share.

"Our record fourth quarter and full year net sales were due to the continuing growth of our ICL business.  The majority of APAC and EMEA ICL markets performed very well closing out the year with good momentum.  The success of the CentraFLOW® ICL in approved markets spurred the growth with both the Spheric and Toric versions of the lens growing double digits.  We now have approximately 200,000 implants of this lens and the clinical data is testament to its potential as a primary and premium lens choice for refractive surgeons. Our ICL lenses are intended to provide visual freedom for patients, lessening or eliminating the reliance on glasses or contact lenses. In 2016, we will be focusing aggressively on a number of key strategic priorities to advance the ICL as an Evolution in Visual Freedom™ for patients globally," said Caren Mason, President and CEO.  "We are beginning the second year of our commitment to build a foundation for consistent growth.  Our leading imperative remains our work in FDA remediation and quality system overhaul while we build a strong Culture of Quality for STAAR.  Our other imperatives include ICL market building, global key accounts focus, clinical validation and regulatory rebirth, innovation in products, materials and delivery systems and continuing infrastructure and systems renovation.  The investment in these imperatives will remain significant and will outpace revenue and gross margin expansion in the near term. One-time charges, such as the recently announced stock plan acceleration expense, need also to be considered.  An aggressive and transformative three year cycle is essential for STAAR to capture its market position as a clinically proven product provider with global quality and regulatory compliance that is at the forefront of refractive procedure offerings," added Ms. Mason.

Financial Overview

Net sales were $20.9 million for the fourth quarter of 2016, up 26% compared to $16.6 million reported in the prior year. On a constant currency basis, fourth quarter net sales increased 27% compared to the prior period.

The sales increase was driven by strong ICL unit sales in APAC and EMEA with units growing 118% and 16%, respectively and a price increase on ICL's in most markets that averaged 6%.  These increases were partially offset by lower IOL unit sales and foreign currency changes due to the strengthening U.S. dollar against the euro and the yen.

For the fourth quarter of 2015, the gross profit margin increased 13.6 points to 70.3% compared to the prior year period of 56.7%.  An increased mix of higher margin ICL units, higher average selling prices exclusive of currency impacts, and lower unit and other costs improved gross margin by approximately 14.5 points which was partially offset by a decrease of approximately one point due to the impact of the weaker euro on average selling prices.

Operating expenses for the quarter increased 12% to $14.7 million from $13.1 million in the prior year period due to costs related to quality system improvements of $600,000, increased selling costs in Germany of $500,000 as a result of the conversion to a direct sales force in that market, and higher headcount costs of $500,000.  General and administrative expense was $4.9 million and $600,000 higher than the prior year due to bonuses and stock-based compensation, partially offset by lower recruiting and consulting costs.  Marketing and selling expense was $5.9 million and $200,000 higher than the prior year due to the costs of direct selling in Germany, partially offset by optimization of North American selling and promotional costs.  Research and development expense, which includes remediation and other FDA expenses, was $4.0 million and approximately $700,000 higher than the prior year due to increased validation and project-related spending, partially offset by lower remediation expenses.  Remediation expense for the year was on budget.

The net loss for the fourth quarter of 2015 was $0.8 million or $0.02 per share, compared with a net loss of $2.5 million or $0.07 per share for the prior year period.

Adjusted net income for the fourth quarter of 2015 was $537,000 or $0.01 on a per diluted share basis, compared with an adjusted net loss of $1.2 million or $0.03 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.

The GAAP net loss for the fiscal year ending January 1, 2016 was $6.5 million or $0.17 per share, compared to a net loss of $8.4 million or $0.22 per share for the prior year.  Adjusted net income for the full year was $1.7 million or $0.04 per diluted share versus adjusted net income of $779,000 or $0.02 per diluted share for the prior year.

Cash and cash equivalents at January 1, 2016 totaled $13.4 million, compared to $16.1 million at the end of the third quarter of 2015 and $13.0 million at year-end 2014. The Company used $2.7 million in cash during the fourth quarter of 2015, which includes $1.8 million used in operating activities and $0.8 million for purchases of property and equipment.

Conference Call

The Company will host a conference call and webcast on Wednesday, March 2 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results. To access the conference call (Conference ID 34287402), 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 U.S. generally accepted accounting principals ("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 (or Loss)" excludes the following items that are included in "Net Income (or Loss)" as calculated in accordance with 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 (or Loss)" 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.

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 (or Loss)" 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 non-GAAP information and how it differs from GAAP. 

About STAAR Surgical

STAAR, which has been dedicated solely to ophthalmic surgery for over 30 years, designs, develops, manufactures and markets implantable lenses for the eye with companion delivery systems. These lenses are intended to provide visual freedom for patients, lessening or eliminating the reliance on glasses or contact lenses.  All of these lenses are foldable, which permits the surgeon to insert them through a small incision.  STAAR's lens used in refractive surgery is called an Implantable Collamer® Lens or "ICL".  More than 550,000 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, expectations for sales, building a foundation for consistent growth, investment imperatives remaining significantly outpacing revenue and gross margin expansion and operating cash flow improving expectations for new products or support for product growth, 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; changes in currency exchange rates; 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; research and development efforts may not be successful or may be delayed in delivering products for launch or may exceed anticipated costs; 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; and patterns of Visian ICL use that have typically limited our penetration of the refractive procedure market.  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

Dave Schemelia, 646-445-4800


Doug Sherk, 415-652-9100


 

STAAR Surgical Company

Consolidated Balance Sheets

(in 000's)

Unaudited








January 1,


January 2,

ASSETS


2016


2015






Current assets:





Cash and cash equivalents


$   13,402


$   13,013

Accounts receivable trade, net


15,675


11,054

Inventories, net


15,921


15,717

Prepayments, deposits, and other current assets


3,636


4,517

Deferred income taxes


439


596

   Total current assets


49,073


44,897

Property, plant, and equipment, net


10,095


10,066

Intangible assets, net


666


870

Goodwill


1,786


1,786

Deferred income taxes


717


695

Other assets


617


597

   Total assets


$   62,954


$   58,911






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Line of credit


$     4,159


$     4,150

Accounts payable


6,691


6,620

Deferred income taxes


370


301

Obligations under capital leases 


362


399

Other current liabilities


6,305


4,901

   Total current liabilities


17,887


16,371

Obligations under capital leases 


204


468

Deferred income taxes


1,888


1,704

Asset retirement obligations


156


115

Pension liability


3,886


3,079

Deferred rent


87


75

   Total liabilities


24,108


21,812
















Stockholders' equity:





Common stock


399


384

Additional paid-in capital


187,007


178,232

Accumulated other comprehensive loss


(1,580)


(1,070)

Accumulated deficit


(146,980)


(140,447)

   Total stockholders' equity


38,846


37,099

   Total liabilities and stockholders' equity


$   62,954


$   58,911

 

STAAR Surgical Company

Consolidated Statements of Operations

(In 000's except for per share data)

Unaudited













































Three Months Ended


Year Ended



% of

January 1,


% of

January 2,


Fav (Unfav)


% of

January 1,


% of

January 2,


Fav (Unfav)



Sales

2016


Sales

2015


Amount


%


Sales

2016


Sales

2015


Amount


%






















Net sales


100.0%

$   20,858


100.0%

$   16,573


$  4,285


25.9%


100.0%

$   77,123


100.0%

$   74,987


$  2,136


2.8%






















Cost of sales


29.7%

6,194


43.3%

7,170


976


13.6%


31.6%

24,400


34.9%

26,164


1,764


6.7%






















Gross profit


70.3%

14,664


56.7%

9,403


5,261


56.0%


68.4%

52,723


65.1%

48,823


3,900


8.0%






















Selling, general and administrative expenses:





















  General and administrative


23.3%

4,856


25.4%

4,211


(645)


-15.3%


25.4%

19,604


24.3%

18,287


(1,317)


-7.2%

  Marketing and selling


28.3%

5,911


34.3%

5,689


(222)


-3.9%


30.7%

23,695


34.5%

25,879


2,184


8.4%

  Research and development


19.0%

3,961


19.6%

3,245


(716)


-22.1%


19.1%

14,761


16.5%

12,363


(2,398)


-19.4%

  Other general and administrative expenses


0.0%

-


0.0%

-


-




0.0%

-


0.4%

321


321


100.0%

    Total selling, general, and administrative expenses


70.6%

14,728


79.3%

13,145


(1,583)


-12.0%


75.3%

58,060


75.7%

56,850


(1,210)


-2.1%






















Operating loss 


-0.3%

(64)


-22.6%

(3,742)


3,678


-98.3%


-6.9%

(5,337)


-10.7%

(8,027)


2,690


-33.5%






















Other income (expense):





















  Interest income


0.0%

0


0.1%

25


(25)


-100.0%


0.1%

50


0.1%

51


(1)


-2.0%

  Interest expense


-0.1%

(31)


-0.3%

(52)


21


40.4%


-0.2%

(128)


-0.1%

(154)


26


16.9%

  Loss on foreign currency transactions


-1.2%

(257)


-1.2%

(200)


(57)


28.5%


-1.2%

(949)


-1.2%

(896)


(53)


-5.9%

  Royalty income


1.7%

365


0.3%

55


310


563.6%


1.0%

740


0.5%

355


385


-108.5%

  Other income, net


-0.2%

(43)


-0.1%

(11)


(32)


290.9%


0.0%

19


0.0%

26


(7)


-26.9%

    Total other income (expense), net


0.2%

34


-1.2%

(183)


217


-118.6%


-0.3%

(268)


-0.8%

(618)


350


-56.6%






















Loss before provision (benefit) for income taxes


-0.1%

(30)


-23.7%

(3,925)


3,895


-99.2%


-7.3%

(5,605)


-11.5%

(8,645)


3,040


-35.2%






















Provision (benefit) for income taxes


3.9%

814


-8.4%

(1,387)


(2,201)


158.7%


1.2%

928


-0.3%

(253)


(1,181)


466.8%






















Net loss


-4.0%

$       (844)


-15.4%

$    (2,538)


$  1,694


-66.7%


-8.5%

$    (6,533)


-11.2%

$    (8,392)


$  1,859


-22.2%











































Net loss per share - basic and diluted



$      (0.02)



$      (0.07)







$      (0.17)



$      (0.22)





Weighted average shares outstanding - basic and diluted



39,763



38,413







39,260



38,091





 

STAAR Surgical Company

Consolidated Statements of Cash Flows

(in 000's)

Unaudited




Year Ended




January 1,


January 2,




2016


2015

Cash flows from operating activities:





   Net loss 


$    (6,533)


$    (8,392)






   Adjustments to reconcile net loss to net cash provided by operating activities:






Depreciation of property and equipment


2,196


2,078


Amortization of intangibles


205


382


Deferred income taxes


473


(841)


Stock-based compensation expense


3,304


4,663


Change in net pension liability


190


194


Accretion of asset retirement obligation


-


3


Other


288


182

   Changes in working capital:






Accounts receivable 


(4,895)


(934)


Inventories


327


(3,943)


Prepayments, deposits and other current assets


856


(1,062)


Accounts payable


14


972


Other current liabilities


1,413


(1,253)


      Net cash used in operating activities


(2,162)


(7,951)







Cash flows from investing activities:






Acquisition of property and equipment


(2,043)


(4,054)


      Net cash used in investing activities


(2,043)


(4,054)







Cash flows from financing activities:






Repayment of capital lease lines of credit


(391)


(490)


Proceeds from exercise of stock options


2,170


3,022


Proceeds from exercise of warrants


2,800


-


      Net cash provided by financing activities


4,579


2,532







Effect of exchange rate changes on cash and cash equivalents


15


(468)







Increase (decrease)  in cash and cash equivalents


389


(9,941)

Cash and cash equivalents, at beginning of the period


13,013


22,954

Cash and cash equivalents, at end of the period


$   13,402


$   13,013

 

STAAR Surgical Company

Global Sales

(in 000's)

Unaudited






























Three Months Ended


Year Ended



January 1,


January 2,


% Change



January 1,


January 2,


% Change

Geographic Sales


2016


2015


Fav (Unfav)



2016


2015


Fav (Unfav)

United States

11.7%

$     2,441

14.7%

$     2,441


0.0%


14.1%

$   10,904

14.8%

$   11,117


-1.9%















Japan

21.4%

4,466

28.7%

4,757


-6.1%


22.0%

16,982

25.5%

19,107


-11.1%

China

18.1%

3,778

10.2%

1,696


122.7%


16.3%

12,571

12.5%

9,370


34.2%

Korea

13.2%

2,758

5.4%

891


209.5%


10.5%

8,061

8.8%

6,563


22.8%

Spain

7.3%

1,515

7.8%

1,292


17.3%


7.3%

5,617

7.4%

5,562


1.0%

Other

28.3%

5,900

33.2%

5,496


7.3%


29.8%

22,988

31.0%

23,268


-1.2%

  Total International Sales

88.3%

18,417

85.3%

14,132


30.3%


85.9%

66,219

85.2%

63,870


3.7%















    Total Sales

100.0%

$   20,858

100.0%

$   16,573


25.9%


100.0%

$   77,123

100.0%

$   74,987


2.8%





























Product Sales














  Core products














    ICLs

67.8%

$   14,148

54.3%

$     8,994


57.3%


66.8%

$   51,543

58.7%

$   44,047


17.0%

    IOLs

23.5%

4,905

33.4%

5,532


-11.3%


25.7%

19,857

32.5%

24,336


-18.3%

  Total core products

91.3%

19,053

87.7%

14,526


31.2%


92.6%

71,400

91.2%

68,383


4.4%

  Non-core products














    Other

8.7%

1,805

12.4%

2,047


-12.0%


7.4%

5,723

8.8%

6,604


-13.4%

    Total Sales

100.0%

$   20,858

100.0%

$   16,573


25.9%


100.0%

$   77,123

100.0%

$   74,987


2.8%

 

STAAR Surgical Company

Reconciliation of Non-GAAP Financial Measure

(in 000's)

Unaudited


Three Months Ended


Year Ended



January 1,

January 2,


January 1,

January 2,



2016

2015


2016

2015

Net loss - (as reported)


$       (844)

$    (2,538)


$    (6,533)

$    (8,392)

Less:







  Foreign currency impact


257

200


949

896

  Stock-based compensation expense


557

(73)


3,304

4,663

  Manufacturing consolidation expenses


-

-


-

321

  FDA panel/remediation expense


567

1,187


3,933

3,291

Net income (loss) - (adjusted)


$        537

$    (1,224)


$     1,653

$        779








Net income (loss) per share, basic - (as reported)


$      (0.02)

$      (0.07)


$      (0.17)

$      (0.22)

  Foreign currency impact


0.01

0.01


0.02

0.02

  Stock-based compensation expense


0.01

(0.00)


0.08

0.12

  Manufacturing consolidation expenses


-

-


-

0.01

  FDA panel/remediation expense


0.01

0.03


0.10

0.09

Net income (loss) per share, basic - (adjusted)


$       0.01

$      (0.03)


$       0.04

$       0.02








Net income (loss) per share, diluted - (as reported)


$      (0.02)

$      (0.07)


$      (0.16)

$      (0.21)

  Foreign currency impact


0.01

0.01


0.02

0.02

  Stock-based compensation expense


0.01

(0.00)


0.08

0.12

  Manufacturing consolidation expenses


-

-


-

0.01

  FDA panel/remediation expense


0.01

0.03


0.10

0.08

Net income (loss) per share, diluted - (adjusted)


$       0.01

$      (0.03)


$       0.04

$       0.02








Weighted average shares outstanding - Basic


39,763

38,413


39,260

38,091

Weighted average shares outstanding - Diluted


40,559

38,413


40,451

40,220








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


 

STAAR Surgical Company

Reconciliation of Non-GAAP Financial Measure

Constant Currency Sales

(in 000's)

Unaudited


 Three Months Ended 


 GAAP Sales 












January 1,

 Effect of 

 Constant 


January 2,


 As Reported 


 Constant Currency 


2016

 Currency 

 Currency 


2015


 $ Change 

 % Change 


 $ Change 

 % Change 

 ICL 

$        14,148

$         16

$   14,164


$     8,994


$     5,154

57.3%


$     5,170

57.5%

 IOL 

4,905

74

4,979


5,532


(627)

-11.3%


(553)

-10.0%

 Other 

1,805

64

1,869


2,047


(242)

-11.9%


(178)

-8.7%

 Total Sales 

$        20,858

$       154

$   21,012


$   16,573


$     4,285

25.9%


$     4,439

26.8%






































 Year  Ended 


 GAAP Sales 












January 1,

 Effect of 

 Constant 


January 2,


 As Reported 


 Constant Currency 


2016

 Currency 

 Currency 


2015


 $ Change 

 % Change 


 $ Change 

 % Change 

 ICL 

$        51,543

$       235

$   51,778


$   44,047


$     7,497

17.1%


$     7,732

17.6%

 IOL 

19,857

1,590

21,447


24,336


(4,479)

-18.4%


(2,889)

-11.9%

 Other 

5,723

604

6,327


6,604


(882)

-13.4%


(278)

-4.2%

 Total Sales 

$        77,123

$     2,429

$   79,552


$   74,987


$     2,136

2.8%


$     4,565

6.1%

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/staar-surgical-reports-fourth-quarter-and-full-year-2015-results-300229808.html

SOURCE STAAR Surgical Company