SOURCE: Synergetics USA, Inc.

Synergetics USA, Inc.

October 14, 2014 16:33 ET

Synergetics Reports Fourth Quarter and Fiscal Year 2014 Results

O'FALLON, MO--(Marketwired - Oct 14, 2014) -  Synergetics USA, Inc. (NASDAQ: SURG), a medical device company that designs, manufactures, and markets innovative surgical devices for ophthalmic and neurosurgical applications, today announced results for the fourth quarter and fiscal year ended July 31, 2014. 

Fourth Quarter Summary:

  • Total sales were $18.0 million, an increase of 0.8% year-over-year.
  • OEM sales increased 2.0% and Ophthalmic sales increased 0.8% year-over-year.
  • Domestic sales increased 0.4% and International sales increased 2.3% year-over-year.
  • Disposable product sales increased 7.5% and capital equipment sales decreased 30.1%.
  • GAAP EPS was $0.06 compared to $0.06 in the fourth quarter last year.
  • Cash flow from operations increased 69% to $4.2 million, compared to $2.5 million last year.
  • EBITDA increased 4.2% to $2.8 million, compared to $2.7 million last year. 

Fiscal Year Summary:

  • Total sales were $64.8 million, up 3.1% year-over-year.
  • OEM sales increased 8.3% and Ophthalmic sales decreased 0.6% year-over-year.
  • Domestic sales increased 4.1% and International sales increased 0.3% year-over-year.
  • GAAP EPS was $0.12 versus $0.10 for the comparable period last year.
  • Non-GAAP EPS was $0.14 versus $0.16 in fiscal year 2013.
  • EBITDA increased 20% to $6.6 million, compared to $5.5 million in fiscal year 2013.

"Fourth quarter sales and cash flows reflect improving operating and financial performance across our businesses in both the U.S. and international markets," said David M. Hable, the Company's President and Chief Executive Officer. "Fiscal 2014 was marked by many positive milestones, including the performance of nearly 7,000 vitrectomy procedures with our innovative VersaVIT system, the launch of our second generation VersaVIT machine in June and significant progress toward our goal of launching new disposable products in both our ophthalmic and OEM businesses to drive sales and continue shifting our product mix toward categories with long-term, sustainable, demand trends."

Fourth Quarter Results

Fourth quarter of fiscal 2014 sales totaled $18.0 million, an increase of 0.8%, compared to sales of $17.9 million in the fourth quarter of fiscal 2013. Fourth quarter sales performance was driven primarily by a 2.0% increase in OEM sales and a 0.8% increase in Ophthalmic sales.

  • Total Domestic sales increased 0.4% to $13.4 million in the fourth quarter of fiscal 2014, driven by higher OEM sales, offset by lower other revenues, and, to a lesser extent, a modest decline in domestic ophthalmic sales compared to last year. International sales of $4.6 million this quarter increased 2.3% year-over-year primarily due to strong sales growth in emerging markets and a full fiscal quarter contribution from our acquisition of M.I.S.S. Ophthalmics compared to a partial quarter contribution in the prior year period.

  • Total Ophthalmic sales increased 0.8% to $9.5 million, compared to $9.4 million in the fourth quarter of fiscal 2013. Domestic Ophthalmic sales decreased 0.5% primarily due low single-digit declines in our base ophthalmic business offset, partially, by sales of VersaVit and accessories. International Ophthalmic sales increased 2.3% year-over-year primarily due to strong sales in emerging markets and contributions from our acquisition of M.I.S.S. Ophthalmics. 

  • Total OEM sales increased 2.0% to $8.3 million, compared to $8.2 million in the fourth quarter of fiscal 2013. OEM sales include sales to our marketing partners. The increase in OEM sales benefited primarily from strong sales of Codman forceps and growth in sales of Stryker tips and tubing compared to last year.

  • Capital equipment sales totaled $2.2 million in the fourth quarter of fiscal 2014 compared to $3.1 million in the fourth quarter of fiscal 2013, a decrease of 30.1% year-over-year, driven by the aforementioned decline in generator sales to our two major OEM customers. Disposable product sales totaled $15.5 million, an increase of 7.5% compared to sales of $14.4 million in the fourth quarter of fiscal 2013. 

Gross profit for the fourth quarter of fiscal 2014 totaled $10.0 million, or 55.5% of sales, compared to $9.7 million, or 54.2% of sales, in the fourth quarter of fiscal 2013. Year-over-year gross margin performance was driven by product mix shift to ophthalmic disposables offset by lower sales of generators to our OEM partners in the period.

Total operating expenses increased 5.0% year-over-year to $7.8 million, or 43.5% of sales, in the fourth quarter of fiscal 2014 from $7.5 million, or 41.8% of sales, in the comparable 2013 period. Research and development expenses increased 16.6% to $1.1 million, or 6.4% of sales, compared to 5.5% last year. Sales and marketing expenses increased 7.7% to $3.7 million, or 20.6% of sales, compared to 19.3% of sales last year. General and administrative expenses declined 6.6% to $2.7 million, or 15.1% of sales, compared to 16.3% of sales last year. The increase in total operating expenses compared to the prior year was driven by an increase in selling and marketing expenses largely due to investments in VersaVit commercialization and expenses related to the Company's exit of its King of Prussia facility, offset partially by a decrease in general and administrative expense. Fourth quarter of fiscal 2014 operating expenses were impacted by the medical device excise tax of $163,000, or 0.9% of sales, compared to $129,000, or 0.7% of sales, last year.

Reported operating income for the fourth quarter of fiscal 2014 declined 2.5% to $2.2 million, compared to $2.2 million last year. Reported net income declined 2.0% year-over-year to $1.4 million, or $0.06 per diluted share, from $1.4 million, or $0.06 per diluted share, for the same period of fiscal 2013.

Refer to the tables at the end of this release for a reconciliation of GAAP net income to EBITDA, GAAP operating income to adjusted operating income and GAAP diluted earnings per share to adjusted non-GAAP earnings per share and the "Use of Non-GAAP Financial Information" section below.

Fiscal Year Results and Balance Sheet

Total sales for fiscal year 2014 increased 3.1% to $64.8 million, compared to $62.8 million in the same period last year. Net income for fiscal year 2014 increased 19.7% to $3.1 million, or $0.12 per diluted share, compared to $2.6 million, or $0.10 per diluted share, in fiscal year 2013. Reported net income per diluted share in fiscal year 2013 includes approximately $0.06 resulting from an excess inventory write-down in the period.

As of July 31, 2014, the Company had approximately $15.4 million in cash on its balance sheet and no interest-bearing debt compared to $12.5 million in cash and no interest-bearing debt at the end of fiscal 2013.

Conference Call Information

Synergetics USA, Inc. will host a conference call on Tuesday, October 14, 2014 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to review the Company's results for the fiscal fourth quarter and fiscal year ended July 31, 2014. The toll free dial-in number to participate live on this call is (800) 588-4973, confirmation code 38212928. For callers outside the U.S., the number is (847) 230-5643. The conference call will also be available live via webcast at http://www.synergeticsusa.com. A 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. Our 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.

Use of Non-GAAP Financial Information

The Company measures its performance primarily through its operating profit. In addition to results reported in accordance with GAAP, the Company provides adjusted operating income and margin, EBITDA and adjusted diluted earnings per share. These adjusted amounts consist of GAAP amounts excluding the following adjustments to the extent occurring during the period: inventory write-downs and exit costs. Adjusted earnings per diluted share were calculated by dividing adjusted net income for diluted earnings per share by diluted weighted average shares outstanding. The Company believes that the presentation of adjusted operating income and margin, EBITDA and adjusted diluted earnings per share provides important supplemental information to management and investors seeking to understand the financial and business trends relating to our financial condition and results of operations.

These non-GAAP measures are considered by the Company's Board of Directors and management as a basis for measuring and evaluating the Company's overall operating performance and ability to service debt. They are presented to enhance an understanding of the Company's operating results and are not intended to represent cash flow or results of operations.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

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, 2014 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  
Consolidated Statements of Income and Comprehensive Income  
Three and Twelve Months Ended July 31, 2014 and 2013  
(Dollars in thousands, except share and per share data)  
   
    Three Months Ended
July 31, 2014
    Three Months Ended
July 31, 2013
    Twelve Months Ended
July 31, 2014
    Twelve Months Ended
July 31, 2013
 
Net sales   $ 18,008     $ 17,857     $ 64,769     $ 62,796  
Cost of sales     8,013       8,181       28,540       30,425  
Gross profit     9,995       9,676       36,229       32,371  
Operating expenses                                
Research and development     1,146       983       5,158       3,643  
Sales and marketing     3,704       3,438       14,360       13,805  
Medical device excise tax     163       129       486       289  
Exit costs     104       --       682       --  
General and administrative     2,722       2,914       10,962       10,913  
      7,839       7,464       31,648       28,650  
Operating income     2,156       2,212       4,581       3,721  
Other income (expenses)                                
Investment income     2       13       10       31  
Interest expense     (20 )     (21 )     (19 )     (28 )
Miscellaneous     (11 )     --       (11 )     (35 )
      (29 )     (8 )     (20 )     (32 )
Income from operations before provision for income taxes    

2,127
     

2,204
     
4,561
     
3,689
 
Provision for income taxes     717       765       1,498       1,130  
Net income   $ 1,410     $ 1,439     $ 3,063     $ 2,559  
Earnings per share:                                
Basic                                
  Net income   $ 0.06     $ 0.06     $ 0.12     $ 0.10  
Diluted                                
  Net income   $ 0.06     $ 0.06     $ 0.12     $ 0.10  
Basic weighted average common shares outstanding    
25,352,326
     
25,290,882
      25,323,622       25,243,010  
Diluted weighted average common shares outstanding    
25,400,341
     
25,367,558
      25,393,264       25,337,525  
Net income   $ 1,410     $ 1,439     $ 3,063     $ 2,559  
Foreign currency translation adjustment     (77 )     31       104       47  
Comprehensive income   $ 1,333     $ 1,470     $ 3,167     $ 2,606  
 
 
 
SYNERGETICS USA, INC. AND SUBSIDIARIES
Unaudited Table of Income from Continuing Operations and EBITDA
Three and Twelve Months Ended July 31, 2014 and 2013
(In thousands)
 

EBITDA Reconciliation
  Three Months Ended
July 31, 2014
  Three Months Ended
July 31, 2013
Income from Operations   $ 1,410   $ 1,439
Interest expense     20     21
Income taxes     717     765
Depreciation     309     267
Amortization     323     176
EBITDA   $ 2,779   $ 2,668
             
EBITDA Reconciliation     Twelve Months
Ended July 31, 2014
    Twelve Months
Ended July 31, 2013
Income from Operations   $ 3,063   $ 2,559
Interest expense     19     28
Income taxes     1,498     1,130
Depreciation     1,173     1,123
Amortization     876     680
EBITDA   $ 6,629   $ 5,520
   
   
   
SYNERGETICS USA, INC. AND SUBSIDIARIES  
Unaudited Table of Adjusted Operating Income, Operating Margin and Non-GAAP EPS  
Twelve Months Ended July 31, 2014 and 2013  
(Dollars in thousands, except per share information)  
   
    Three Months Ended     Twelve Months Ended  
    July 31, 2014     July 31, 2013     July 31, 2014     July 31, 2013  
Adjusted Operating Income                                
GAAP operating income   $ 2,156     $ 2,212     $ 4,581     $ 3,721  
  Exit costs     104       --       682       --  
  Inventory write-down     --       --       --       2,092  
  Adjusted operating income     2,260       2,212     $ 5,263     $ 5,813  
  Net sales     18,008       17,857     $ 64,769     $ 62,796  
  Adjusted operating margin     12.5 %     12.4 %     8.1 %     9.3 %
EBITDA   $ 2,779       2,668     $ 6,629     $ 5,520  
                                 
Non-GAAP EPS Impact  
  Inventory write-down   $ --     $ --     $ --     $ 2,092  
  Exit costs     104       --       682       --  
  Effective tax rate     33.7       34.7       32.8       30.6  
  Tax effected write-down   $ 69     $ --     $ 458     $ 1,452  
  Diluted weighted average common shares     25,400,341       25,367,558       25,393,264       25,337,525  
  Diluted earnings per share   $ 0.00     $ 0.00     $ 0.02     $ 0.06  
                                 
 
 
Synergetics USA, Inc. and Subsidiaries
Consolidated Balance Sheets
As of July 31, 2014 and 2013
(Dollars in thousands, except share data)
 
    2014     2013  
Assets                
Current Assets                
  Cash and cash equivalents   $ 15,443     $ 12,470  
  Accounts receivable, net of allowance for doubtful accounts of $722 and $495, respectively     14,641       14,425  
  Inventories     15,134       14,825  
  Income taxes refundable     --       254  
  Prepaid expenses     1,223       996  
  Deferred income taxes     2,042       1,827  
    Total current assets     48,483       44,797  
Property and Equipment, net     8,785       8,962  
Intangible and Other Assets                
  Goodwill     12,738       12,155  
  Other intangible assets, net     11,911       11,715  
  Deferred income taxes     1,219       3,557  
  Patents, net     1,472       1,411  
  Cash value of life insurance     107       96  
    Total assets   $ 84,715     $ 82,693  
Liabilities and Stockholders' Equity                
Current Liabilities                
  Accounts payable   $ 2,530     $ 3,237  
  Accrued expenses     2,845       3,486  
  Income taxes payable     386       --  
  Deferred revenue     1,288       1,288  
    Total current liabilities     7,049       8,011  
Long-Term Liabilities                
Deferred revenue     13,242       14,530  
    Total long-term liabilities     13,242       14,530  
    Total liabilities     20,291       22,541  
Commitments and Contingencies                
Stockholders' Equity                
  Common stock at July 31, 2014 and July 31, 2013, $0.001 par value, 50,000,000 shares authorized; 25,364,608 and 25,292,960 shares issued and outstanding, respectively     25       25  
  Additional paid-in capital     28,594       27,489  
  Retained earnings     36,160       33,097  
  Accumulated other comprehensive loss:                
  Foreign currency translation adjustment     (355 )     (459 )
    Total stockholders' equity     64,424       60,152  
    Total liabilities and stockholders' equity   $ 84,715     $ 82,693  
                     
 
 
Synergetics USA Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Twelve Months Ended July 31, 2014 and 2013
(Dollars in thousands)
 
    Twelve Months Ended July 31, 2014     Twelve Months Ended July 31, 2013  
Cash Flows from Operating Activities                
  Net income   $ 3,063     $ 2,559  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities                
    Depreciation     1,173       1,123  
    Amortization     876       680  
    Provision for doubtful accounts receivable     338       207  
    Stock-based compensation     1,008       931  
    Deferred income taxes     1,836       (49 )
    (Gain) loss on sale of equipment     (10 )     35  
Changes in assets and liabilities                
  (Increases) decreases in:                
    Accounts receivable     (406 )     (2,553 )
    Inventories     179       1,191  
    Prepaid expenses     (221 )     (130 )
    Income taxes refundable     254       (254 )
  Increase (decrease) in:                
    Accounts payable     (849 )     845  
    Accrued expenses     (667 )     603  
    Deferred revenue     (1,288 )     (1,288 )
    Income taxes payable     380       (235 )
      Net cash provided by operating activities     5,666       3,665  
Cash Flows from Investing Activities                
    Proceeds on the sale of equipment     18       55  
    Purchase of property and equipment     (922 )     (550 )
    Acquisition of patents and other intangibles     (258 )     (412 )
    Acquisitions, less cash acquired     (1,387 )     (2,848 )
    Increase in cash value of life insurance     (11 )     (3 )
      Net cash used in investing activities     (2,560 )     (3,758 )
Cash Flows from Financing Activities                
    Tax benefit associated with the exercise of non-qualified stock options     38       72  
    Proceeds from the issuance of common stock     59       65  
      Net cash provided by financing activities     97       137  
Foreign exchange rate effect on cash and cash equivalents     (230 )     (254 )
Net increase (decrease) in cash and cash equivalents     2,973       (210 )
Cash and cash equivalents                
    Beginning     12,470       12,680  
    Ending   $ 15,443     $ 12,470  
                 
Supplemental Disclosures of Cash Flow Information                
Cash paid for:                
    Interest   $ 19     $ 28  
    Income taxes (received) paid     (1,009 )     1,568  
Supplemental Schedule of Non-cash Investing and Financing Activity                
    Purchase of equipment included in accounts payable     17       120  
                     

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