SOURCE: Synergetics

Synergetics

December 09, 2013 16:02 ET

Synergetics Reports First Fiscal Quarter 2014 Results

O'FALLON, MO--(Marketwired - Dec 9, 2013) - Synergetics USA, Inc. (NASDAQ: SURG), a medical device company that designs, manufactures, and markets innovative surgical devices for ophthalmic and neurosurgical applications, today reported growth in sales and reported gross profit, operating margin, income from continuing operations and net income for the first quarter ended October 31, 2013. 

First Quarter Summary:

  • Total sales were $15.5 million, a year-over-year increase of 6.2%.
  • OEM sales increased 19.1% and Ophthalmic sales declined 1.9% year-over-year.
  • Domestic product sales increased 9.6% and International sales declined 3.4% year-over-year.
  • Disposable products sales increased 13% and capital equipment sales declined 31.6% year-over year.
  • GAAP EPS was $0.04 compared to $0.05 for the first quarter of last year.
  • Cash flow from operations was $1.5 million compared to a loss of $103,000 last year.

"We had a solid start to the fiscal year highlighted by strong OEM revenue growth, contributions from our recent acquisition of M.I.S.S. Ophthalmics Limited and notable cash flow from operations compared to last year," stated Dave Hable, President and CEO of Synergetics USA, Inc. "We continue to see progress in our commercialization of VersaVIT™, our innovative, portable vitrectomy machine, and related disposable products which offset ongoing weakness in our ophthalmic business again this quarter. We look forward to building on this solid start to fiscal year 2014 driven by increasing contributions to top-line results from new products, like our VersaVIT™ franchise, steady demand from our OEM partners and improving profitability and financial performance as we progress through the remainder of the fiscal year."

First Quarter Results

First quarter sales increased 6.2% to $15.5 million compared to $14.6 million in the first quarter of fiscal 2013. The increase in first quarter sales from last year was due primarily to growth in OEM sales. 

  • Total Ophthalmic sales declined 1.9% to $8.5 million compared to $8.7 million in the first quarter of fiscal 2013. Domestic ophthalmic sales decreased 0.8% in the first quarter of fiscal 2014, primarily due to the decreased sales of base business capital equipment and disposables, partially offset by increased sales of procedural kits. International ophthalmic sales decreased 3.4% in the first quarter of fiscal 2014, primarily due to decreased sales of capital equipment and base business disposables, partially offset by sales from our acquisition of M.I.S.S. Ophthalmics.

  • Total OEM sales increased 19.1% to $6.8 million compared to $5.7 million in the first quarter of fiscal 2013. The increase in OEM sales benefited from strong volumes of disposable products sold to Codman & Shurtleff, Inc. OEM sales also included deferred revenue of $322,000 recognized in the first quarter of fiscal 2014 compared with $322,000 in the first quarter of fiscal 2013.

  • Disposable product sales grew 13.0%, or $1.6 million, to $13.8 million in the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013. Disposable sales accounted for approximately 88.6% of total sales in the first quarter of fiscal 2014.

  • Capital equipment sales totaled $1.4 million in the first quarter of fiscal 2014 compared to $2.1 million in the first quarter of fiscal 2013. 

Gross profit for the first quarter of fiscal 2014 rose to $8.9 million, or 57.5% of sales, compared to $8.5 million, or 58.0% of sales, in the first quarter of fiscal 2013. The decline in gross profit margin in the first quarter of fiscal 2014 was driven by a shift in the mix to OEM sales versus the prior year period. 

Research and development expenses rose to $1.2 million, or 7.7% of net sales. The Company's R&D investment is driven by the opportunities to develop new products to meet the needs of its surgeon customers. Sales and marketing expenses increased to $3.6 million, or 23.0% of sales, this year, compared with $3.3 million, or 22.3% of net sales, for the same period last year. General and administrative expenses increased to $2.6 million, or 17.0% of net sales, for the first quarter of fiscal 2014, compared with $2.4 million, or 16.5% of net sales, for the same period last year. The increase in sales and marketing and G&A expenses was primarily due to the additional expenses related to our recent acquisition of M.I.S.S. Ophthalmics. Total operating expenses included $125,000 in the first quarter of fiscal 2014 related to the medical device excise tax which the Company began paying in January 2013.

Operating income for the first quarter of fiscal 2014 declined to $1.4 million compared to $1.9 million in the first quarter of fiscal 2013. Net income for the first quarter of fiscal 2014 declined 30.8% to $0.9 million, or $0.04 per diluted share, compared to $1.4 million, or $0.05 per diluted share, compared to the first quarter of fiscal 2013.

As of October 31, 2013, the Company had approximately $13.5 million in cash and no interest-bearing debt on its balance sheet.

Conference Call Information

Synergetics USA, Inc. will host a conference call on Monday, December 9, 2013 at 4:00 p.m. Central Time (5:00 p.m. Eastern). The toll free dial-in number to participate live on this call is (800) 588-4973, confirmation code 36213533. For callers outside the U.S., the number is (847) 230-5643. Participants are encouraged to email questions to investorinfo@synergeticsusa.com. The conference call will also be simulcast live at http://www.synergeticsusa.com. An online replay will be available on the Company's website for approximately 30 days.

About Synergetics USA, Inc.

Through continuous improvement and development of our people, our mission is to design, manufacture and market innovative surgical devices, capital equipment, accessories and disposables of the highest quality in order to assist and enable surgeons who perform surgery around the world to provide a better quality of life for their patients. 

Synergetics USA, Inc. (the "Company") is a leading supplier of precision surgical devices. The Company's primary focus is on the disciplines of ophthalmology and neurosurgery. The Company's distribution channels include a combination of direct and independent sales distributor organizations, both domestically and internationally, and important strategic alliances with market leaders. The Company's product lines focus upon precision engineered, disposable and reusable devices, surgical equipment, procedural kits and the delivery of various energy modalities for the performance of surgery including: (i) laser energy, (ii) ultrasonic energy, (iii) radio frequency energy for electrosurgery and lesion generation and (iv) visible light energy for illumination, and where applicable, simultaneous infusion (irrigation) of fluids into the operative field. The Company's website address is http://www.synergeticsusa.com.

Forward-Looking Statements

Some statements in this release may be "forward-looking statements" for the purposes of the Private Securities Litigation Reform Act of 1995. In some cases forward-looking statements can be identified by words such as "believe," "expect," "anticipate," "plan," "potential," "continue" or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company's Annual Report on Form 10-K for the year ended July 31, 2013, as amended, as updated from time to time in our filings with the Securities and Exchange Commission. The Company is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.

   
Synergetics USA, Inc. and Subsidiaries  
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)  
Three Months Ended October 31, 2013 and 2012  
(Dollars in thousands, except share and per share data)  
   
    Three Months Ended
October 31, 2013
  Three Months Ended
October 31, 2012
 
Net sales   $ 15,530   $ 14,620  
Cost of sales     6,606     6,147  
    Gross profit     8,924     8,473  
Operating expenses              
  Research and development     1,197     861  
  Sales and marketing     3,576     3,263  
  Medical device excise tax     125     --  
  General and administrative     2,635     2,408  
      7,533     6,532  
    Operating income     1,391     1,941  
Other income (expenses)              
  Investment income     4     7  
  Miscellaneous     --     (3 )
      4     4  
    Income from operations before provision for income taxes    
1,395
   
1,945
 
Provision for income taxes     460     593  
    Net income   $ 935   $ 1,352  
Earnings per share:              
  Basic earnings per share   $ .04   $ 0.05  
  Diluted earnings per share   $ .04   $ 0.05  
               
  Basic weighted average common shares outstanding     25,294,020     25,160,757  
  Diluted weighted average common shares outstanding     25,380,940     25,286,184  
               
Net income   $ 935   $ 1,352  
Foreign currency translation adjustment     175     70  
Comprehensive income   $ 1,110   $ 1,422  
               
   
Synergetics USA, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
As of October 31, 2013 (Unaudited) and July 31, 2013  
(Dollars in thousands, except share data)  
   
    October 31, 2013     July 31, 2013  
Assets                
Current Assets                
  Cash and cash equivalents   $ 13,537     $ 12,470  
  Accounts receivable, net of allowance for doubtful accounts of $555 and $495, respectively     12,730       14,425  
  Inventories     16,029       14,825  
  Income taxes refundable     --       254  
  Prepaid expenses     1,381       996  
  Deferred income taxes     1,887       1,827  
    Total current assets     45,564       44,797  
Property and equipment, net     8,998       8,962  
Intangible and other assets                
  Goodwill     12,228       12,155  
  Other intangible assets, net     11,603       11,715  
  Deferred income taxes     3,405       3,557  
  Patents, net     1,440       1,411  
  Cash value of life insurance     96       96  
    Total assets   $ 83,334     $ 82,693  
Liabilities and stockholders' equity                
Current Liabilities                
  Accounts payable     3,109       3,237  
  Accrued expenses     3,203       3,486  
  Income taxes payable     81       --  
  Deferred revenue     1,288       1,288  
    Total current liabilities     7,681       8,011  
Long-Term Liabilities                
  Deferred revenue     14,208       14,530  
    Total long-term liabilities     14,208       14,530  
    Total liabilities     21,889       22,541  
Commitments and contingencies                
Stockholders' Equity                
  Common stock at October 31, 2013 and July 31, 2013, $0.001 par value, 50,000,000 shares authorized; 25,296,106 and 25,292,960 shares issued and outstanding, respectively     25       25  
  Additional paid-in capital     27,673       27,489  
  Retained earnings     34,031       33,097  
  Accumulated other comprehensive loss:                
  Foreign currency translation adjustment     (284 )     (459 )
    Total stockholders' equity     61,445       60,152  
    Total liabilities and stockholders' equity   $ 83,334     $ 82,693  
                 
   
Synergetics USA Inc. and Subsidiaries  
Condensed Consolidated Statements of Cash Flows (Unaudited)  
Three Months Ended October 31, 2013 and 2012  
(Dollars in thousands, except share data)  
   
    Three Months Ended October 31, 2013     Three Months Ended October 31, 2012  
Cash Flows from Operating Activities                
  Net income   $ 935     $ 1,352  
  Adjustments to reconcile net income to net cash used in operating activities                
    Depreciation     266       305  
    Amortization     180       161  
    Provision for doubtful accounts receivable     56       (3 )
    Stock-based compensation     184       243  
    Deferred income taxes     92       97  
Changes in assets and liabilities                
  (Increase) decrease in:                
    Accounts receivable     1,629       (169 )
    Inventories     (1,152 )     (1,577 )
    Prepaid expenses     (236 )     (229 )
  (Decrease) increase in:                
    Accounts payable     (135 )     31  
    Accrued expenses     (267 )     (42 )
    Deferred revenue     (322 )     (322 )
    Income taxes payable     300       50  
      Net cash provided by (used in) continuing operating activities     1,530       (103 )
                 
Cash Flows from Investing Activities                
    Purchase of property and equipment     (302 )     (106 )
    Acquisition of patents and other intangibles     (82 )     (78 )
      Net cash used in continuing investing activities     (384 )     (184 )
                 
Foreign exchange rate effect on cash and cash equivalents     (79 )     (69 )
Net increase (decrease) in cash and cash equivalents     1,067       (356 )
Cash and cash equivalents                
    Beginning     12,470       12,680  
    Ending   $ 13,537     $ 12,324  
                 

Contact Information

  • SYNERGETICS USA, INC.
    3845 Corporate Centre Drive
    O'Fallon, Missouri 63368
    (636) 939-5100
    http://www.synergeticsusa.com
    Pamela G. Boone
    Chief Financial Officer