Full Press Release Details
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C O R P O R A T E P A R T I C I P A N T S
Doug Sherk STAAR Surgical Company - EVC Group
Barry Caldwell STAAR Surgical Company - President
Steve Brown STAAR Surgical Company - CFO
Sam Gesten STAAR Surgical Company - General Counsel
C O N F E R E N C E C A L L P A R T I C I
Chris Cooley Stephens Inc. - Analyst
Jim Sidoti Sidoti & Company - Analyst
Matt Larew William Blair & Company - Analyst
Larry Haimovitch HMTC - Analyst
P R E S E N T A T I O N
Good day ladies and gentlemen, and welcome
to the STAAR Surgical Fourth-Quarter and Full-Year 2014 Financial Results conference call and webcast. My name is Derek, and I'll
be your operator for today.
(Operator Instructions)
As a reminder, this conference is being
recorded for replay purposes. I would now like to turn the conference over to Mr. Doug Sherk. You may proceed.
Doug Sherk - STAAR Surgical Company - EVC Group
Thank you, Derek, and good afternoon, everyone.
Thank you for joining us for the STAAR Surgical conference call to review the Company's financial results for the fourth quarter
which ended on January 2, 2015, as well as recent corporate developments.
The news release detailing the fourth quarter
and fiscal year results was issued just after 4:00 PM Eastern time this afternoon, and is now available on STAAR's website at www.staar.com.
In addition, a slide presentation is accompanying Management's remarks during today's call. To access both the webcast and the
presentation slides, go to the Investor Relations section of STAAR's website at www.staar.com.
If you're listening via telephone to today's
call and would like to review the slides that accompany Management's remarks, please navigate to the live webcast as I've just
reviewed, and choose the No Audio, Slides Only option. In addition, an archived replay of the event will be available on the STAAR
Before we get started, during the course
of this conference call, the Company will make forward looking statements. We caution you that any statement that is not a statement
of historical fact is a forward-looking statement. This includes remarks about the Corporation's projections, expectations, plans,
beliefs and prospects.
These statements are based on judgment
and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause
actual results to differ materially from those described in the forward-looking statements.
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These risks and uncertainties associated
with the forward-looking statements made in this conference call and webcast are described in the Safe Harbor statement in today's
press release, as well as STAAR's periodic filings with the SEC, including the discussion in the Risk Factors section of our 2013
annual report on Form 10-K, and our quarterly report on Form 10-Q for the period ended July 4, 2014, as well as for the third quarter.
Investors or potential investors should
read these risks. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes,
and does not intend to do so.
In addition, to supplement the GAAP numbers,
we have provided non-GAAP adjusted net income and diluted net income per share information that exclude manufacturing consolidation
expenses, Spain distribution transition expenses, gains or losses on foreign currency, fair market value adjustment for warrants,
stock-based compensation expense, and FDA panel and remediation expenses. We believe that these non-GAAP numbers provide meaningful
supplemental information, and are helpful in assessing our historical and future performance.
Also, in order to compare our performance
from period to period without the effect of currency fluctuations, we apply the same average exchange rate application to the prior
period or a constant currency rate to sales. A table reconciling the GAAP information to the non-GAAP information is included in
our financial release, which is available on our website and in our slide presentation.
Now I'd like to turn the call over to Barry Caldwell, President
and Chief Executive Officer of STAAR Surgical.
Barry Caldwell - STAAR Surgical Company - President
Thank you, Doug, and good afternoon, everyone.
Thank you for joining us on the call and the webcast this afternoon for a review of our fiscal year and fourth quarter 2014 results,
as well as a general business and regulatory update. With me today on the call is Steve Brown, our Chief Financial Officer, and
Sam Gesten, our General Counsel.
I'll begin our discussion with an overview
of the headwinds affecting sales, and then Steve will review fourth quarter and FY14 financial results. I'll then come back and
provide a regulatory update, before we open the call for your questions.
For 2014, our total sales increased 4%
as reported or 6% on a constant currency basis to approximately $75 million. For the year overall, ICL sales were flat while IOL
sales increased 1% as reported or 5% on a constant currency basis. The other product sales category which generates lower gross
margins increased 68% as reported.
For the fourth quarter, our sales were
$16.6 million, which we had previously reported and was down from the fourth quarter of 2013 which was $18.9 million. ICL sales
were $9 million versus $11.5 million in the fourth quarter of 2013, whereas IOL sales were $5.5 million as reported or $5.8 million
in constant currency versus $6.6 million in the fourth quarter of 2013. The other product category was at $2 million versus $800,000
in the prior-year fourth quarter.
Now, the challenges impacting sales during
the fourth quarter included, first of all, a voluntary hold on several thousand ICLs from shipment. This hold resulted in back
orders totaling over 2,000 ICLs at the end of the quarter.
Second, the timing of a 2,500 ICL lens
order from our Korean distributor, which moved from the fourth quarter to the first quarter of this year. Third, foreign currency
exchange reduced fourth-quarter sales by over $500,000, and we did have five fewer shipping days during the fourth quarter of 2014
versus the fourth quarter of 2013.
Now, let's go back and talk about the voluntary
hold on ICLs. In terms of the ICLs placed on voluntary hold, we have determined now and have corrected the root cause of the issue.
Since determining the root cause, we presented to the FDA voluntary protocols for testing the product held to verify that it meets
our standards for quality.
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We are waiting to learn if the FDA will
provide any feedback on our protocols. The FDA may choose to offer no comment, or may ask us to revise our protocols or otherwise.
The Company, meanwhile, is working to fill these backorders as it manufactures product not subject to the voluntary hold. We continue
to work toward a resolution of the voluntary shipping hold.
Next, I'd like to provide you with an update
on the Korean market, and our distributor's efforts to address the decline in the end consumer demand caused by the negative press
on LASIK complications, which began during the third quarter.
As we reported on our last call, during
October, we started to see the rate of decline in the number of patients coming in the door decrease. While the rate of decline
of ICLs out the door to the end customer was down 49% in September, the rate declined to 27% in October, 24% in November, and then
18% during December.
You may recall that we have worked with
our distributor on the messaging regarding the advantages of the ICL for a direct-to-consumer campaign in Korea to combat the negative
Lasik press. That campaign began the first of December and consists of cable television commercials, movie theater commercials,
bus wrap advertisements, journal and magazine advertisements, and standing banners for key ICL centers.
The theme is consistent throughout these