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STAAR Surgical Revenues Increase in Fourth Quarter by 18% Over Quarter Three and by 4% Over Quarter Four 2001

  • 2003-02-27
  • Press release
MONROVIA, Calif., Feb 27, 2003 /PRNewswire-FirstCall via COMTEX/ --

Company is Cash Flow Positive for 2002

STAAR Surgical Company (Nasdaq: STAA) today announced financial results for the fourth quarter of 2002 and for the full year ended January 3, 2003. Revenues and operating results met expectations and the Company ended the year cash-flow positive.

Revenues for the fourth quarter of 2002 were $13.2 million, compared to $12.7 million in the fourth quarter of 2001. There was a net loss for the quarter of $10.1 million, or $0.59 per share, versus a net loss of $8.4 million, or $0.49 per share for the fourth quarter of 2001. Excluding the effect of restructuring and other one-time charges and the associated tax impact, the net loss for the fourth quarter of 2002 was $933,000, or $0.05 per share, compared to a net loss of $438,000 or $0.03 per share in the fourth quarter of 2001.

In the fourth quarter of 2002, STAAR recorded a non-cash adjustment of $9.2 million, or $0.54 per share, to increase its valuation allowance against its U.S. deferred tax assets. The valuation allowance now fully offsets the value of deferred tax assets on the Company's balance sheet. Although these deferred tax assets are available to be utilized in the future, the Company determined that an adjustment to its valuation allowance was appropriate in accordance with the requirements of Statement of Financial Accounting Standard No. 109.

Revenues in 2002 were $48 million, compared to $51 million for 2001. The Company reported a net loss of $17.2 million, or $1.00 per share in 2002, compared to a net loss of $14.8 million, or $0.87 per share in the prior year.

Excluding the effects of non-recurring charges, income-tax benefits recorded on net operating losses, and valuation allowances, the net loss for 2002 was $6.5 million, or $0.38 per share. On the same basis, the 2001 loss was $4.5 million, or $0.26 per share. Including a 2001 tax benefit for which there was no comparable 2002 benefit, the net loss for 2001 was $1.7 million or $0.10 per share.

Non-recurring charges of $1.5 million in 2002 were primarily related to the non-cash recognition of deferred losses resulting from the translation of foreign currency statements into U.S. dollars from subsidiaries that were closed, and employee severance costs. The $14.2 million in charges taken in 2001 included restructuring and various other charges.

David Bailey, President of STAAR, said, "The 18% increase in fourth quarter revenues over third quarter revenues is very rewarding particularly when coupled with the 4% increase in revenues over quarter four of 2001. Our increasing revenues along with improved gross margins and tight expense controls, yielded an improving monthly trend towards operating profitability during the fourth quarter."

Revenues were down 5 percent for the year, driven by the planned exit from affiliate operations in Europe and the loss of market share in IOLs in the U.S. This decline was partially offset by two factors: a strong positive growth trend in ICL sales internationally and a significant increase in sales of distributed products in international markets.

Operating expenses (excluding non-recurring charges) fell $2.8 million, or 8.5% for the year as a result of the Company's strategy to become more efficient. The Company realized significant expense reductions by implementing cost containment measures in the U.S. and by closing unproductive international subsidiaries.

The Company increased spending on research and development from 7.5% of revenues in 2001 to 8.3% in 2002. During the year, the Company restructured the research department and began to increase expenditures on critical projects, including new cartridge technology for the IOL, as well as development of the ICL and Toric ICL.

Gross margins improved for the third consecutive quarter. In the fourth quarter gross margins were 51.4% of revenues, up from 50.2% in the third quarter, despite large sales of lower margin equipment in the quarter. The Company expects gross margins to continue to improve as high cost IOL inventory is depleted and the Company's strategy to improve efficiency yields additional cost savings.

Bailey commented, "We are following through on our efforts to restructure the business, delivering both margin and expense improvements. In addition we continued to manage working capital much more effectively giving us the ability to pay down $2.6 million in debt during the year and ending the year with cash and cash equivalents of $1.0 million."

Sales in the Company's 80% owned German affiliate were particularly strong in 2002, growing 8% over the prior year. Given the importance of this affiliate to the Company, STAAR acquired the remaining 20% of the business at the close of fiscal 2002. Bailey commented, "The acquisition of the minority interest was achieved through a cashless transaction, involving the transfer of ownership from the current general manager in exchange for forgiveness of an outstanding debt owed to the Company. I believe this represents a real win- win for all concerned and is in line with our commitment to shareholders to secure repayment of all outstanding debts by current and past corporate officers and directors. In this case, we have accomplished this goal with the transfer of ownership of our most successful affiliate. I look forward to working with Gunther Roepstorff, our highly successful General Manager, for many years to come."

As a result of the Company's decision to record a valuation allowance against the full amount of its deferred tax assets, it was not in compliance with the covenants for tangible net worth and total liabilities to tangible net worth in its domestic credit facility. A waiver of these violations has been obtained from the lender. The Company is currently in negotiations to renew the credit facility agreement, which expires on March 31, 2003. Any future decision by the lender not to renew the line of credit could have a material adverse effect on the Company, and the costs associated with obtaining alternate financing could be significant. The outstanding balance under the domestic line of credit as of February 25, 2003 was $2.2 million.


In looking forward Bailey commented, "Assuming new market approvals and an ability to reverse the loss of market share domestically, we would expect sales to grow in 2003 and for gross profits to continue to improve. Given the leveraged nature of our current P&L statement, sales growth and continued cost controls could enable us to become profitable again sometime in the second half of 2003. In line with our strategic goal, we will continue to push ahead with new approvals for the high-margin ICL and Toric ICL in order to increase the proportion of revenues from these high margin products. Critically improved injector systems introduced in the first half of 2003 should assist us to regain market share with our core IOLs, particularly in the US market."

There will be a conference call today at 1:30 Pacific Time and 4:30 Eastern Time to discuss the quarter and year-end results. To access the call participants should dial (800) 773-2261 in US/Canada or 1-706-634-1467 for International, ten minutes before the scheduled start of the conference call and ask the operator for conference ID# 7867272. A tape replay of the call will be available two hours after the conclusion of the conference through Thursday, March 6, 2003 by dialing (800) 642-1687 in US/Canada or 1-706-645-9291 International, and giving the conference ID#7867272. Additionally, the call will be broadcast on the internet. To connect, go to STAAR Surgical Company at CCBN's individual investor center at or follow the links at or .

For additional information about STAAR Surgical, visit the Company's web site at or . You may wish to contact David Bailey, President, STAAR Surgical, or John Bily, Chief Financial Officer, STAAR Surgical, at (626) 303-7902. To contact Bill Roberts, President, CTC, Inc., or Wayne Buckhout, CTC Inc., please call (937) 434-2700.

All statements in this press release that are not statements of historical fact are forward-looking statements, including any projections of earnings, revenue, or other financial items, any statements of the plans, strategies, and objectives of management for future operations, any statements concerning proposed new products, services or developments, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing. 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 need to obtain regulatory approval for new products, acceptance of new products by medical practitioners and consumers, the rapid pace of technological change in the ophthalmic industry, general domestic and international economic conditions, and other factors beyond the control of STAAR Surgical Company, including those detailed from time to time in STAAR Surgical Company's reports filed with the Securities and Exchange Commission. STAAR Surgical Company assumes no obligation and does not intend to update these forward-looking statements.

    STAAR Surgical Company
    Condensed Consolidated Statements of Operations
    (In 000's except for per share data)

                                    Three Months Ended     Year Ended
                                     Jan. 3,  Dec. 28,  Jan. 3,  Dec. 28,
                                      2003      2001     2003      2001

     Sales                          $13,156  $12,523   $47,880   $50,237
     Royalties                           73      217       368       549
        Total revenues               13,229   12,740    48,248    50,786

        Total cost of goods sold      6,435    6,532    24,099    28,203

    Gross profit                      6,794    6,208    24,149    22,583

      General and administrative      2,173    1,914     8,959     8,746
      Marketing and selling           4,331    4,920    16,833    20,043
      Research and development          960    1,264     4,016     3,800
      Restructuring                     -      5,671     1,455     7,780

         Total selling, general
          and administrative
          expenses:                   7,464   13,769    31,263    40,369

    Operating income (loss)            (670)  (7,561)   (7,114)  (17,786)

    Total other expense                (162)    (107)   (1,011)     (455)

    Income (loss) before income
     taxes                             (832)  (7,668)   (8,125)  (18,241)

    Income tax provision (benefit)    9,364      762     8,959    (3,547)

    Minority interest                   (89)       6        75       139

    Net income (loss)              $(10,107) $(8,436) $(17,159) $(14,833)

    Net loss per share               $(0.59)  $(0.49)   $(1.00)   $(0.87)

    Weighted average shares
     outstanding                     17,198   17,133    17,142    17,003

                            STAAR Surgical Company
                     Condensed Consolidated Balance Sheet
                                  (in 000's)

                                                 January 3,       December 28,
                                                     2003              2001

    Cash and cash equivalents                       $1,009              $853
    Restricted cash                                    -               2,000
    Accounts receivable, net                         5,992             7,542
    Inventories, net                                11,761            15,231
    Prepaids, deposits, and other current
     assets                                          2,510             3,659
    Deferred income tax                                -               5,304
       Total current assets                         21,272            34,589
    Investment in joint venture                        462               466
    Property, plant, and equipment, net              7,438             8,742
    Patents and licenses, net                        9,038             9,896
    Goodwill, net                                    6,426             5,985
    Deferred income tax                                -               3,982
    Other assets                                       583             1,143
       Total assets                                $45,219           $64,803

    Notes payable                                   $5,845            $8,216
    Accounts payable                                 4,556             5,593
    Other current liabilities                        4,079             4,000
       Total current liabilities                    14,480            17,809
    Other-long term liabilities                         89               316
       Total liabilities                            14,569            18,125
    Minority interest                                  100               382
       Stockholders' equity - net                   30,550            46,296
       Total liabilities and equity                $45,219           $64,803
SOURCE STAAR Surgical Company

CONTACT:          David Bailey, President, or John Bily, Chief Financial Officer
                  of STAAR Surgical, +1-626-303-7902; or Bill Roberts, President, or Wayne
                  Buckhout of CTC Inc., +1-937-434-2700

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