Full Press Release Details
STAAR Surgical Reports 10% Second Quarter
~Total Sales Increased to $20.0M from
~ Quarterly Visian ICL Sales
Increased to $12.2 Million ~
~ IOL Sales Growth of 10% Led by Increased
Supply of the KS-IOLs~
~ GAAP Net Income Loss of $0.05 per Share~
MONROVIA, CA, July 30, 2014---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.
Visian Implantable Collamer Lens (ICL) Highlights.
Regional ICL Updates
Europe, Middle East, Africa (EMEA)
Quarterly Intraocular Lens (IOL) Highlights
Other Operational Highlights during the Quarter
2014 Annual Objectives
The 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
The 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 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 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