SOURCE: Synergetics

Synergetics

March 06, 2014 16:05 ET

Synergetics Reports Second Quarter Fiscal Year 2014 Results

O'FALLON, MO--(Marketwired - Mar 6, 2014) -  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, loss from operations and net loss for the second quarter ended January 31, 2014.

Second Quarter Summary:

  • Total sales were $15.1 million, a year-over-year increase of 7.4%.
  • OEM sales increased 18.3% and Ophthalmic sales increased 0.6% year-over-year.
  • Domestic product sales increased 10.5% and International sales declined 0.8% year-over-year.
  • Disposable products sales increased 15.0% and capital equipment sales declined 29.7% year-over year.
  • GAAP EPS was a loss of $0.01 compared to a loss of $0.05 for the second quarter of last year.
  • Adjusted Non-GAAP EPS was $0.01 compared $0.00 for the second quarter of last year.

"Second quarter results reflect solid revenue growth compared to last year," stated Dave Hable, President and CEO of Synergetics USA, Inc. "Results from our OEM business were better than anticipated and our Ophthalmic business posted positive growth on both a year-over-year and sequential basis. In addition to modest improvements in the health of our base Ophthalmic business this quarter, Ophthalmic revenue growth benefitted from our continued progress in our commercialization of VersaVIT™, our innovative, portable vitrectomy machine, and from our recent acquisition of M.I.S.S. Ophthalmics. The long-term growth opportunity for Synergetics remains a compelling one, and we will continue to execute our strategy to drive improvements in our operating and financial performance going forward."

Second Quarter Results

Second quarter sales increased 7.4% to $15.1 million compared to $14.1 million in the second quarter of fiscal 2013. The increase in second quarter sales from last year was due primarily to growth in OEM sales.

  • Total Ophthalmic sales increased 0.6% to $8.7 million compared to $8.7 million in the second quarter of fiscal 2013. Domestic ophthalmic sales increased 2.4% in the second quarter of fiscal 2014, primarily due to increased sales of procedural kits (including kits associated with VersaVIT™), partially offset by decreased sales of base business capital equipment and disposables. International ophthalmic sales declined 1.4% in the second quarter of fiscal 2014, primarily due to negative currency exchange, partially offset by increased sales of procedural kits and sales from M.I.S.S. Ophthalmics.

  • Total OEM sales increased 18.3% to $6.1 million compared to $5.2 million in the second quarter of fiscal 2013. The increase in OEM sales benefited from strong volumes of disposable products sold to our two largest OEM partners, Codman & Shurtleff, Inc. and Stryker Corporation, partially offset by decreased electrosurgery generator sales to Codman. OEM sales also included deferred revenue of $322,000 recognized in the second quarter of both fiscal year periods.

  • Disposable product sales increased 15.0%, or $1.7 million, to $13.2 million in the second quarter of fiscal 2014 compared to the second quarter of fiscal 2013. Disposable sales accounted for approximately 87.2% of total sales in the second quarter of fiscal 2014.

  • Capital equipment sales totaled $1.6 million in the second quarter of fiscal 2014 compared to $2.3 million in the second quarter of fiscal 2013.

Gross profit for the second quarter of fiscal 2014 rose to $8.4 million, or 55.6% of sales, compared to $5.2 million, or 36.8% of sales, in the second quarter of fiscal 2013. Gross margin in the second quarter of fiscal year 2013 included a write-off of excess inventory and its associated labor and overhead expenses of approximately $2.1 million. Excluding the inventory write-off in the prior year period, the increase in gross profit margin in the second quarter of fiscal 2014 was driven primarily by higher absorption of labor and overhead costs compared to the prior year period.

Research and development expenses rose to $1.5 million, or 10.0% of net sales. The Company's R&D investment is driven by the opportunities to accelerate new products to meet the needs of our surgeon customers and address the demands of the market. Sales and marketing expenses increased to $3.6 million, or 24.0% of sales, this year, compared with $3.6 million, or 25.5% of net sales, for the same period last year. General and administrative expenses increased to $3.0 million, or 19.9% of net sales, for the second quarter of fiscal 2014, compared with $2.9 million, or 20.4% of net sales, for the same period last year. The increases in sales and marketing and G&A expenses were primarily due to the additional expenses related to our recent acquisition of M.I.S.S Ophthalmics. Total operating expenses in the second quarter of fiscal year 2014 included incremental expenses of approximately $514,000 related to the Company's exit activities at its King of Prussia facility. Total operating expenses also included $115,000 in the second quarter of fiscal 2014 related to a full quarter impact from the medical device excise tax compared to $45,000 in the prior year period, which included only a partial quarter impact. 

Operating loss for the second quarter of fiscal 2014 declined to $377,000 compared to $2.2 million in the second quarter of fiscal 2013. Net loss for the second quarter of fiscal 2014 declined to $225,000, or $0.01 per diluted share, compared to $1.4 million, or $0.05 per diluted share, in the second quarter of fiscal 2013. Excluding the incremental exit costs related to our King of Prussia facility closing, non-GAAP income for the second quarter of fiscal 2014 was $132,000, or $0.01 per diluted share. Excluding the $2.1 million write-off of excess inventory and its associated labor and overhead, non-GAAP loss for the second quarter of fiscal 2013 was $49,000, or $0.00 per diluted share.

Six Months Results and Balance Sheet

Total sales for the first six months of fiscal 2014 increased 6.8% to $30.6 million compared with $28.7 million in the same period last year. Net income was $709,000 for the first six months of fiscal 2014 compared to a net loss of $30,000 for the same period in fiscal 2013. Basic and diluted earnings per share for the first six months of fiscal 2014 was $0.03 as compared to basic and diluted earnings per share of $0.00 for the first six months of fiscal 2013.

As of January 31, 2014, the Company had approximately $11.2 million in cash and no interest-bearing debt on its balance sheet.

Conference Call Information

Synergetics USA, Inc. will host a conference call on Thursday, March 6, 2014 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). The toll free dial-in number to participate live on this call is (800) 588-4973, confirmation code 36518544. 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 vitreoretinal sales 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 Balance Sheets  
As of January 31, 2014 (Unaudited) and July 31, 2013  
(Dollars in thousands, except share data)  
   
    January 31,
2014
    July 31,
2013
 
             
Assets                
Current Assets                
  Cash and cash equivalents   $ 11,222     $ 12,470  
  Accounts receivable, net of allowance for doubtful accounts of $505 and $495, respectively     13,219       14,425  
  Inventories     16,720       14,825  
  Income taxes refundable     --       254  
  Prepaid expenses     1,399       996  
  Deferred income taxes     1,958       1,827  
      Total current assets     44,518       44,797  
Property and equipment, net     9,126       8,962  
Intangible and other assets                
  Goodwill     12,273       12,155  
  Other intangible assets, net     11,477       11,715  
  Deferred income taxes     3,461       3,557  
  Patents, net     1,438       1,411  
  Cash value of life insurance     96       96  
      Total assets   $ 82,389     $ 82,693  
Liabilities and stockholders' equity                
Current Liabilities                
  Accounts payable   $ 3,036     $ 3,237  
  Accrued expenses     2,482       3,486  
  Income taxes payable     30       --  
  Deferred revenue     1,288       1,288  
    Total current liabilities     6,836       8,011  
Long-Term Liabilities                
  Deferred revenue     13,886       14,530  
      Total long-term liabilities     13,886       14,530  
      Total liabilities     20,722       22,541  
Commitments and contingencies                
Stockholders' Equity                
  Common stock at January 31, 2014 and July 31, 2013, $0.001 par value, 50,000,000 shares authorized; 25,329,411 and 25,292,960 shares issued and outstanding, respectively     25       25  
  Additional paid-in capital     28,155       27,489  
  Retained earnings     33,806       33,097  
  Accumulated other comprehensive loss:                
    Foreign currency translation adjustment     (319 )     (459 )
      Total stockholders' equity     61,667       60,152  
      Total liabilities and stockholders' equity   $ 82,389     $ 82,693  
                       
                       
                       
Synergetics USA, Inc. and Subsidiaries  
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)  
Three and Six Months Ended January 31, 2014 and 2013  
(Dollars in thousands, except share and per share data)  
   
    Three Months Ended January 31,
2014
    Three Months Ended January 31, 2013     Six Months Ended January 31, 2014   Six Months Ended January 31, 2013  
                               
Net sales   $ 15,096     $ 14,055     $ 30,626   $ 28,675  
Cost of sales     6,698       8,884       13,304     15,031  
    Gross profit     8,398       5,171       17,322     13,644  
Operating expenses                              
  Research and development     1,513       827       2,710     1,688  
  Sales and marketing     3,630       3,580       7,205     6,843  
  Medical device excise tax     115       45       240     45  
  Exit costs     514       --       514     --  
  General and administrative     3,003       2,872       5,638     5,280  
      8,775       7,324       16,307     13,856  
    Operating (loss) income     (377 )     (2,153 )     1,015     (212 )
Other income (expenses)                              
  Investment income     3       6       6     13  
  Interest expense     --       (4 )     --     (4 )
  Miscellaneous     --       (20 )     --     (23 )
      3       (18 )     6     (14 )
    (Loss) Income from operations before (benefit) provision for income taxes     (374 )     (2,171 )     1,021     (226 )
(Benefit) Provision for income taxes     (149 )     (789 )     312     (196 )
    Net (loss) income   $ (225 )   $ (1,382 )   $ 709   $ (30 )
(Loss) Earnings per share:                              
  Basic (loss) earnings per share   $ (0.01 )   $ (0.05 )   $ 0.03   $ 0.00  
  Diluted (loss) earnings per share   $ (0.01 )   $ (0.05 )   $ 0.03   $ 0.00  
                                 
  Basic weighted average common shares outstanding    
25,309,641
     
25,230,142
     
25,301,830
   
25,195,449
 
  Diluted weighted average common shares outstanding    
25,309,641
     
25,230,142
     
25,386,679
   
25,195,449
 
                               
Net (loss) income   $ (225 )   $ (1,382 )   $ 709   $ (30 )
Foreign currency translation adjustment     (35 )     184       140     254  
Comprehensive (loss) income   $ (260 )   $ (1,198 )   $ 849   $ 224  
                               
                               
                               
Synergetics USA Inc. and Subsidiaries  
Condensed Consolidated Statements of Cash Flows (Unaudited)  
Six Months Ended January 31, 2014 and 2013  
(Dollars in thousands, except share data)  
   
    Six Months Ended January 31, 2014     Six Months Ended January 31, 2013  
                 
Cash Flows from Operating Activities                
  Net income (loss)   $ 709     $ (30 )
  Adjustments to reconcile net income (loss) to net cash used in operating activities                
    Depreciation     571       542  
    Amortization     366       317  
    Provision for doubtful accounts receivable     6       31  
    Stock-based compensation     605       456  
    Deferred income taxes     (35 )     (426 )
Changes in assets and liabilities                
  (Increase) decrease in:                
    Accounts receivable     1,164       781  
    Inventories     (1,854 )     591  
    Prepaid expenses     (254 )     (297 )
    Income taxes refundable     254       (1,161 )
  (Decrease) increase in:                
    Accounts payable     (213 )     (256 )
    Accrued expenses     (940 )     (384 )
    Deferred revenue     (644 )     (644 )
    Income taxes payable     (37 )     (191 )
      Net cash used in continuing operating activities   $ (302 )   $ (671 )
                 
Cash Flows from Investing Activities                
    Purchase of property and equipment     (735 )     (301 )
    Acquisition of patents and other intangibles     (139 )     (115 )
      Net cash used in continuing investing activities     (874 )     (416 )
                 
Cash Flows from Financing Activities                
    Proceeds from the issuance of common stock     36       88  
    Tax benefit associated with the exercise of non- qualified stock options     25       72  
      Net cash provided by financing activities     61       160  
                 
Foreign exchange rate effect on cash and cash equivalents     (133 )     (69 )
Net decrease in cash and cash equivalents     (1,248 )     (996 )
Cash and cash equivalents                
    Beginning     12,470       12,680  
    Ending   $ 11,222     $ 11,684  
                 
                 
                 
Synergetics USA Inc. and Subsidiaries  
Table of Adjusted Operating Income and Non-GAAP EPS Impact  
Three and Six Months Ended January 31, 2014 and 2013 (Unaudited)  
(Dollars in thousands, except per share information)  
   
    Three Months Ended     Six Months Ended  
    January 31, 2014     January 31,
2013
    January 31, 2014     January 31,
2013
 
                                 
Adjusted Operating Income                                
GAAP operating income (loss)   $ (377 )   $ (2,153 )   $ 1,015     $ (212 )
  Non-operating adjustments*     514       2,092       514       2,092  
  Adjusted operating income   $ 137     $ (61 )   $ 1,529     $ 1,880  
  Net sales   $ 15,096     $ 14,055     $ 30,626     $ 28,675  
  Adjusted operating margin     0.9 %     N/M       5.0 %     6.6 %
EBITDA   $ 117     $ (1,774 )   $ 1,958     $ 637  
                                 
Non-GAAP EPS Impact                                
  Non-operating adjustments, pre-tax*   $ 514     $ 2,092     $ 514     $ 2,092  
  Effective tax rate**     30.5 %     36.3 %     30.5 %     30.6 %
  Tax effected exit costs and inventory write-down   $ 357     $ 1,333     $ 357     $ 1,452  
  Diluted weighted average common shares     25,309,641       25,230,142       25,386,679       25,195,449  
  Diluted earnings per share   $ 0.01     $ 0.05     $ 0.01     $ 0.06  
                                 
N/M Not meaningful.
*Non-operating adjustments include an inventory write-down of approximately $2.1 million, pre-tax, in fiscal year 2013 and exit costs of approximately $514,000, pre-tax, related to the Company's closing of its King of Prussia facility.
**Effective tax rate for three months ended January 31, 2014 and for the six months ended January 31, 2013 was not indicative of a full year rate. Thus, the effective tax rates for the six months ended January 31, 2014 and the fiscal year ended July 31, 2013 were utilized, respectively.
 

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