Full Press Release Details
STAAR Surgical Reports Third Quarter
~Total Sales Increase to $18.2M from
$17.1M in Q3 2013; Up 9% on Constant Currency Basis~
~ Visian ICL Sales of $10.6
Million versus $10.7 Million in Q3 2013 ~
~ IOL Sales Growth of 8.3%; Up 13% on
Constant Currency Basis~
~ GAAP Net Loss of $0.07 per Share, Non-GAAP
~Visian ICL with CentraFLOW Gains
Marketing Approval in China~
MONROVIA, CA, October 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 third quarter ended October 3, 2014 of $18.2 million, a 6.3% increase over $17.1 million reported for the third quarter
of 2013. The results included quarterly sales of $10.6 million of the Company's Visian ICL product portfolio, $5.8 million
of its IOL products and $1.8 million of its lower margin Other Product sales. The effect of foreign currency exchange reduced sales
by $0.4 million during the quarter. On a constant currency basis, revenues grew 9% during the third quarter of 2014 compared to
the third quarter of 2013.
"The third quarter revenue results offer both disappointing
and promising news with Visian ICL revenue basically flat while IOL and Other Product sales reflect strong top line growth,"
said Barry G. Caldwell, President & CEO. "Data from major centers in Korea report a decline in all refractive surgery
of more than 50% during the quarter largely driven by quite negative media coverage on LASIK complications. The out the door demand
to our distributor in Korea was down 40% and as a result ICL orders to us declined approximately $900,000, or 45% as compared to
the third quarter of last year. We are taking action with our distributor to combat this negative coverage with an aggressive direct
to consumer campaign planned to begin in December. We also have yet to see a rebound in the refractive market in Japan which was
under downward pressure all of last year as well."
"Excluding Korea and Japan, ICL sales globally increased
12% over the third quarter of last year," Mr. Caldwell continued. "Led by a 27% increase in China, we grew ICL revenue
in 8 of our 12 focus markets. We received news of the final marketing approval for the ICL with CentraFLOW in China yesterday which
should help increase our momentum in this market. The final step necessary to ship product is the Approval Certification which
is normally issued within 10 working days. In addition, the development of our Visian ICL pipeline continued to advance during
"We continued to gain momentum during the quarter in the
IOL market. IOL revenue increased by 8% during the quarter as reported, and 13% in constant currency, which was driven by a 13%
increase in unit sales. This growth was driven by our KS-IOL products in the European and Japanese markets as we continue to benefit
from positive market acceptance and an increased supply of this product. Japan IOL revenue increased by 7%, 16% in constant currency,
while European IOL revenue increased 45%. The lack of backorders allows us to more actively promote IOLs in current markets. We
remain confident about supply into 2015, which should help to drive additional growth in both existing and new markets."
Gross profit margin for the quarter was 65.3% compared to 70.5%
in the third quarter of 2013. Several factors drove the gross margin comparison, at least one of which is expected to continue
through calendar 2015. First, higher distribution costs and increased inventory reserves impacted margins by approximately 200
basis points; higher ICL unit costs negatively impacted gross margin by 160 basis points; and preloaded acrylic mix was an approximate
90 basis point negative impact on gross margin. Finally, a greater proportion of lower-margin IOL injector sales to a third party
impacted gross margin by approximately 160 basis points. These IOL injector sales are included on the Other Product sales line
which was approximately 9.8% of sales in the third quarter of 2014 compared with 6.2% in the year ago period. The Company anticipates
this trend continuing to be a gross margin headwind into 2015 as IOL injector sales are expected to increase. A positive impact
on gross margin during the third quarter was the combination of higher average selling prices on ICLs and IOL unit cost reductions,
which positively impacted gross margin by approximately 85 basis points.
Operating expenses for the quarter were $13.4 million, up 13%
from $11.9 million in the prior year. This includes a $1.5 million increase in R&D expenses and a $1.5 million increase in
selling and marketing expenses, which was partially offset by a $0.9 million decrease in G&A due to lower bonus accruals. Increased
R&D expenses were driven by project costs on the V5 and V6a ICL models, and the ongoing cost of an increased number of regulatory
approvals and responses in the U.S. and China, including approximately $600,000 of costs related to actions to address the FDA
Warning Letter observations. Increased selling and marketing expenses were driven by the timing of ESCRS expenses that occurred
in this year's third quarter, but last year's fourth quarter. Those expenses, reflecting the Company's largest
presence ever at this important meeting, were $1.2 million in the third quarter of 2014.
The Company recorded an income tax provision of $548,000 during
the third quarter of 2014, compared to a benefit of $25,000 during the third quarter of 2013. The tax provision in the quarter
was driven by the amount of profit generated outside the U.S. The income tax benefit recorded in the third quarter of 2013 is due
to the release of $0.4 million valuation allowance.
The GAAP net loss for the third quarter of 2014 was $2.7 million
or $0.07 on a per diluted share basis, compared with a net income of $525,000 or $0.01 on a per diluted share basis, in the third
quarter of 2013. Adjusted net income (excluding manufacturing consolidation expenses for the year ago quarter, gain (loss) on foreign
currency transactions, fair value adjustment of warrants, stock-based compensation expense and FDA panel and remediation expenses)
for the quarter ended October 3, 2014 was $0.09 million, or $0.00 per share versus adjusted net income for the year ago quarter
of $1.7 million, or $0.04 per diluted share. The reconciliation between GAAP and non-GAAP financial matters is provided with financial
tables included with this release.
Cash and cash equivalents at October 3, 2014 totaled $18.4 million.
During the quarter, the Company used $0.4 million in cash for operating activities.
Visian Implantable Collamer Lens (ICL) Highlights.
Regional ICL Updates
Europe, Middle East, Africa (EMEA)
Quarterly Intraocular Lens (IOL) Highlights
Other Operational Highlights and Upcoming Milestones
The Company will host a conference call and video webcast today
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 877-415-3177 for domestic participants and 857-244-7320 for international participants, both using the passcode
59045211. The Company will also be using slides to illustrate its third quarter results and operational progress. The slides and
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 77729383. 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
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.
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, Spain distribution transition