Full Press Release Details
STAAR Surgical Reports Fourth Quarter
and Full Year 2014 Results
~ Total Sales of $16.6 Million for Q4
and $75.0 Million for Full-Year 2014 ~
~Full Year Sales Growth at 4%, 6% in
~Over 500,000 Visian ICLs
Successfully Implanted~
~ Q4 GAAP Net Loss of $0.07 per Share,
Non-GAAP Net Loss of $0.03 ~
MONROVIA, CA, February 25, 2015---STAAR Surgical Company (NASDAQ:
STAA) a leading developer, manufacturer and marketer of implantable lenses and delivery systems for the eye, today reported sales
for the fourth quarter and fiscal year ended January 2, 2015. For the fiscal year, total sales of $75.0 million increased 4% compared
to fiscal year 2013 and increased 6% on a constant currency basis. ICL sales were flat compared to prior year while IOL sales grew
1% as reported or 5% in constant currency. Sales of lower margin Other products, including IOL injectors, increased 68%.
As previously announced, sales for the fourth quarter were $16.6
million compared with $18.9 million for the fourth quarter of 2013. The effect of changes in foreign currency reduced sales by
$556,000. The fourth quarter of 2014 had five fewer shipping days than the fourth quarter of 2013. Backorders due to a voluntary
hold on product and the timing of an order from the Company's Korean distributor reduced ICL sales by approximately $2.0
million in the quarter. The Company is filling backorders as it manufactures product not subject to the voluntary hold. STAAR continues
to work toward a resolution of the voluntary shipping hold.
The Company showed progress in two important international markets
during the fourth quarter. In China, STAAR received final approval for the ICL and TICL with CentraFLOW in November and began
shipping product during the quarter. The approval also expanded the ranges for treatment on both myopic and astigmatic corrections.
The Company has now trained 200 ophthalmic surgeons in China on the new technology and during January 51% of all ICLs shipped from
the distributor to customers were the CentraFLOW technology. China is the largest refractive market in the world according to Market
Scope with an estimated 875,000 refractive procedures in 2013. These approvals enable a significant future potential opportunity
for the Company to expand its estimated 1.6% market share.
In Korea, ICL sales declined in both the quarter and for the
full year, largely due to the previously discussed and disclosed negative media coverage of LASIK complications. Data from major
centers in Korea report the impact from that coverage continues to drive declines in all refractive surgery. The Company's
partner in the Korean market continues its direct-to-consumer campaign that highlights the advantages of the Visian ICL refractive
For the fourth quarter, gross profit margin was 56.7% compared
to 68.5% in the fourth quarter of 2013. Approximately 660 basis points of the decline was due to recording inventory reserves,
the majority of which was for Toric ICL inventory that had been built in Switzerland in anticipation of the U.S. launch. Other
negative impacts included higher ICL unit costs (210 basis points), a higher mix of low margin IOL injector sales (130 basis points),
and lower average selling prices (110 basis points).
Operating expenses for the quarter declined 8% to $13.1 million
from $14.2 million in the prior year primarily due to lower stock-based compensation expense and the timing of ESCRS conference
expenses, partially offset by remediation expenses and costs related to the FDA inspections. General and administrative expense
was $0.4 million lower, and selling and marketing expense was $1.7 million lower, compared with the prior year's quarter.
These decreases in expenses were partially offset by a $1.3 million increase in research and development expense, which includes
approximately $1.2 million in remediation expenses and costs related to the FDA inspections in the fourth quarter. Remediation
expenses and costs related to the FDA panel and inspections were approximately $3.3 million for the fiscal year.
During the fourth quarter of 2014, the Company recorded a $1.4
million income tax benefit, as compared to a benefit of $172,000 in the prior year period. The tax benefit in the quarter was driven
by finalization of Swiss tax authority rulings in connection with the Company's manufacturing consolidation project completed
The GAAP net loss for the fourth quarter of 2014 was $2.5 million
or $0.07 on a per diluted share basis, compared with a net loss of $876,000 or $0.02 on a per diluted share basis, in the fourth
quarter of 2013. Adjusted net loss (excluding manufacturing consolidation expenses for the prior year's quarter, gain (loss)
on foreign currency transactions, stock-based compensation expense and FDA panel and remediation expenses) for the fourth quarter
ended January 2, 2015 was $1.2 million or $0.03 per diluted share versus adjusted net income for the prior year's quarter
of $850,000 or $0.02 per diluted share. 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 2, 2015
was $8.4 million or $0.22 on a per diluted share basis, compared to net income of $398,000 or $0.01 on a per diluted share basis
for the prior year. Adjusted net income for the full year was $779,000 or $0.02 per diluted share versus adjusted net income of
$7.5 million or $0.19 per diluted share for the prior year.
Cash and cash equivalents at January 2, 2015 and October 3,
2014 totaled $13.0 million and $18.4 million respectively. During the quarter ended January 2, 2015, the Company used $3.5 million
in cash for operating activities and $1.5 million for the purchase of property and equipment. Cash used for operating activities
during the quarter resulted primarily from payments made for FDA remediation activities and an $800,000 increase in inventory.
Recent Visian Implantable Collamer Lens (ICL)
Recent Intraocular Lens (IOL) Highlights
The Company continues to work to resolve observations
issued in the FDA Warning Letter of May 21, 2014 and the related Form 483. The Company developed and implemented corrective action
plans related to observations in the May 2014 letter, which required remedial action in four general areas. As disclosed earlier
this month, beginning on November 14, 2014 and continuing through February 4, 2015, the FDA conducted a follow-up inspection of
the Company's Monrovia facility and also a post-approval inspection regarding the approved PMA supplement that added the
Monrovia facility as an alternate manufacturing facility for the ICL. On February 4, 2015, at the conclusion of the inspections,
the FDA issued a Form 483 with 10 inspectional observations. The observations focus primarily on the need for adherence to and
improved procedures, processes and documentation relating to design change, design transfer into specifications and production,
verification and validation associated with device design and production, improvement in Good Documentation Practices, and broader
environmental monitoring. Two of the general areas noted in the May 21, 2014 Warning Letter, the calculator previously used by
the Company to use measurements of the eye for ICL sizing, and complaint trending procedures, were not part of the 10 observations
made by the Agency on February 4, 2015. The Company will submit its response to the FDA's most recent observations by February
26, 2015 and will also continue to implement corrective action plans related to the February 4, 2015 Form 483. The Company will
continue to address the observations identified in the 2014 Form 483 and 2014 Warning Letter. The Company has enhanced and continues
to enhance its overall quality program as it focuses on remediating all elements identified. There can be no assurance that the
FDA will be satisfied with the Company's response. Unless and until STAAR is able to correct outstanding issues to the FDA's
satisfaction, the FDA may withhold approval of new products such as the Toric ICL (TICL) or take additional regulatory or legal
action against the Company. Any such further action could have a material and negative impact on the Company's ongoing business
The Company will host a conference call and video webcast today,
February 25, 2015 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss these results and recent corporate developments. The dial-in
number for the conference call is 877-299-4454 for domestic participants and 617-597-5447 for international participants, both
using the passcode 65517011. The Company will also be using slides to illustrate its fourth quarter results and operational progress.
The live video 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 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 15256547. An archived video 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