SOURCE: Synergetics

Synergetics

June 10, 2013 16:05 ET

Synergetics Reports Third Quarter of Fiscal 2013 Results

O'FALLON, MO--(Marketwired - Jun 10, 2013) -  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 third quarter ended April 30, 2013. 

Details about the quarter include:

  • Total sales of $16.3 million, an increase of 11.6% year-over-year. Total sales increased 15.7% on a sequential basis.
  • OEM sales increased 24.1% and Ophthalmic sales increased 3.1% year-over-year.
  • Domestic sales increased 13.8% and International sales increased 5.3% year-over-year.
  • GAAP EPS of $0.05 versus $0.04 for the third quarter of fiscal 2012 and adjusted non-GAAP EPS of $0.05 versus $0.05 for the third quarter of fiscal 2012.
  • Cash flow from operations of $1.8 million.
  • Nine month fiscal 2013 sales increased 4.1% year-over-year to $44.9 million.

"We were pleased with our third quarter performance overall as we posted solid top-line growth driven by normalized ordering patterns from our OEM partners and improving sales contributions from our VersaVIT™ vitrectomy systems," said David M. Hable, the Company's President and Chief Executive Officer. "While still early in our commercialization of the VersaVIT™ system, we have made considerable progress since receiving FDA approval less than a year ago. We are encouraged by the continued strong market response and anticipate stronger ophthalmic sales growth in the future as utilization of the installed base increases."

Third Quarter Results

Third quarter of fiscal 2013 sales totaled $16.3 million, an increase of 11.6% compared to sales of $14.6 million in the third quarter of fiscal 2012. Third quarter sales performance was driven primarily by a 24.1% increase in OEM sales and by a 3.1% increase in Ophthalmic sales. Other revenues declined 1.4% year-over-year to $210,000. 

  • Total Domestic sales increased 13.8% to $12.3 million in the third quarter of fiscal 2013, driven primarily by higher OEM sales and by growth in Domestic Ophthalmic sales year-over-year. International sales of $3.9 million this quarter increased 5.3% year-over-year primarily due to increased sales of VersaVIT™ vitrectomy systems and procedural kits and decreased foreign currency losses, partially offset by decreased sales of base business capital equipment and disposables.

  • Total Ophthalmic sales increased 3.1% to $8.7 million, compared with $8.4 million in the third quarter of fiscal 2012. Domestic Ophthalmic sales increased 1.6% primarily due to increased sales of VersaVIT™ vitrectomy systems and procedural kits, partially offset by decreased sales of base business capital equipment and disposables. International Ophthalmic sales increased 5.1% year-over-year primarily due to increased sales of VersaVIT™ vitrectomy systems and procedural kits and decreased foreign currency losses, partially offset by sales of base business capital equipment and disposables. 

  • Total OEM sales increased 24.1% to $7.4 million, compared with $6.0 million in the third quarter of fiscal 2012. OEM sales include sales to our marketing partners. The increase in OEM sales benefited primarily from strong disposable forceps and electrosurgical generator sales to Codman and Stryker.

  • Disposable product sales totaled $13.0 million, an increase of 7.4% compared with sales of $12.1 million in the third quarter of fiscal 2012. Capital equipment sales totaled $2.9 million in the third quarter of fiscal 2013 compared with $2.2 million in the third quarter of fiscal 2012, an increase of 37.0% year-over-year. 

Gross profit for the third quarter of fiscal 2013 totaled $9.1 million, or 55.7% of net sales, compared with $7.8 million, or 53.7% of net sales, in the third quarter of fiscal 2012. Third quarter of fiscal 2012 gross margin included the impact of an inventory write-down of $367,000, or approximately 2.5% of net sales. Year-over-year gross margin performance was also negatively impacted by product mix shift in our ophthalmic product lines versus the prior year period.

Total operating expenses increased 14.2% year-over-year to $7.3 million, or 45.1% of net sales, in the third quarter of fiscal 2013 from $6.4 million, or 44.0% of net sales, in the comparable period. Research and development expenses increased 5.6% and comprised 6.0% of net sales compared to 6.3% last year. Sales and marketing expenses grew 22.8% and were 21.7% of net sales compared to 19.7% last year. General and administrative expenses rose 3.5%, accounting for 16.7% of net sales compared to 18.0% last year. The increase in G&A was largely due to additional incentive compensation, as well as other varied cost increases compared to the prior year period. Third quarter of fiscal 2013 operating expenses were impacted by the medical device excise tax of $115,000, or 0.7% of net sales, which the Company began paying in January 2013 and did not impact results in the prior year period.

Reported operating income for the third quarter of fiscal 2013 increased 22.5% to $1.7 million, compared with $1.4 million last year. Adjusted operating income for the third quarter of fiscal 2012, which excludes the impact of the aforementioned obsolete inventory write-down in the third quarter of fiscal 2012, increased to $1.8 million, representing an adjusted operating margin of 10.6% this quarter versus 12.2% for the third quarter of fiscal 2012. Operating income was negatively impacted by growth in operating expenses and by higher cost of goods sold compared to the third quarter of fiscal 2012.

Reported net income increased 14.3% year-over-year to $1.2 million, or $0.05 per diluted share, from $1.0 million, or $0.04 per diluted share, for the same period of fiscal 2012. Reported net income per diluted share in the third quarter of fiscal 2012 includes approximately $0.01 resulting from an obsolete inventory write-down in the period. Earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled $2.2 million in the third quarter of fiscal 2013, up 16.7% from EBITDA of $1.9 million in the prior year third quarter. 

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 EPS to adjusted non-GAAP EPS and the "Use of Non-GAAP Financial Information" section below.

Nine Months Results and Balance Sheet

Total sales for the first nine months of fiscal 2013 increased 4.1% to $44.9 million, compared with $43.2 million in the same period last year. Income from continuing operations for the first nine months of fiscal 2013 declined 72.2% to $1.1 million, or $0.04 per diluted share, compared to $4.0 million, or $0.16 per diluted share, for the first nine months of fiscal 2012. Net income for the first nine months of fiscal 2013 declined 69.3% to $1.1 million, or $0.04 per diluted share, versus $3.6 million, or $0.14 per diluted share, in the first nine months of fiscal 2012. Reported net income per diluted share in the first nine months of fiscal 2013 includes approximately $0.06 resulting from an excess inventory write-down in the period, as compared to $0.01 resulting from an obsolete inventory write-down in the first nine months of fiscal 2012. Excluding the impacts of the inventory write-downs, net income for the first nine months of fiscal 2013 declined 33.3% from $0.10 per diluted share, versus $0.15 per diluted share in the first nine months of fiscal 2012. These results are net of a loss from discontinued operations of approximately $382,000, or $0.02 per diluted share, related to the completion of the sale of assets from our plastic injection molding business in the nine month fiscal 2012 period.

As of April 30, 2013, the Company had approximately $13.1 million in cash on its balance sheet and no debt compared with $12.7 million in cash and no debt at the end of fiscal 2012.

Conference Call Information

Synergetics USA, Inc. will host a conference call on Monday, June 10, 2013, at 5:00 p.m. Eastern Time to discuss third quarter and nine month results, other recent developments and to review its growth strategy. The toll free dial-in number to participate live on this call is (800) 588-4973, confirmation code 34706255. For callers outside the U.S., the number is (847) 230-5643. The conference call will also be available live via webcast on the investor relations section of the Company's website, 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 distribution organizations and important strategic alliances with market leaders. The Company's product lines focus upon precision engineered, disposable and reusable devices, procedural kits and the delivery of various energy modalities for the performance of less invasive 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

In addition to results reported in accordance with GAAP, the Company provides adjusted operating income and margin, adjusted net income and adjusted earnings per diluted share. These adjusted amounts consist of GAAP amounts excluding the following adjustment to the extent occurring during the period: inventory write-downs and disposition charges. 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, adjusted net income 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.

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, 2012, 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  
Three and Nine Months Ended April 30, 2013, and 2012 (Unaudited)  
(Dollars in thousands, except share and per share data)  
   
    Three Months Ended
April 30,
2013
    Three Months Ended
April 30,
2012
    Nine Months Ended
April 30,
2013
    Nine Months Ended
April 30,
2012
 
Net sales   $ 16,264     $ 14,568     $ 44,939     $ 43,154  
Cost of sales     7,213       6,746       22,244       18,444  
Gross profit     9,051       7,822       22,695       24,710  
Operating expenses                                
Research and development     973       921       2,660       2,634  
Sales and marketing     3,523       2,868       10,367       8,851  
Medical device excise tax     115       --       160       --  
General and administrative     2,719       2,628       7,999       7,690  
      7,330       6,417       21,186       19,175  
Operating income     1,721       1,405       1,509       5,535  
Other income (expenses)                                
Investment income     5       9       18       32  
Interest expense     (2 )     (10 )     (6 )     (43 )
Miscellaneous     (12 )     (2 )     (35 )     (8 )
      (9 )     (3 )     (23 )     (19 )
Income from continuing operations before provision for income taxes    

1,712
     

1,402
     

1,486
     

5,516
 
Provision for income taxes     562       396       366       1,490  
Income from continuing operations    
1,150
     
1,006
     
1,120
     
4,026
 
Loss from discontinued operations, net of income tax benefit of $0, $0, $0 and $193, respectively    

--
     

--
     

--
     

(382
)
Net income   $ 1,150     $ 1,006     $ 1,120     $ 3,644  
Earnings per share:                                
Basic                                
  Income from continuing operations   $ 0.05     $ 0.04     $ 0.04     $ 0.16  
  Loss from discontinued operations     0.00       0.00       0.00       (0.02 )
  Net income   $ 0.05     $ 0.04     $ 0.04     $ 0.14  
Diluted                                
  Income from continuing operations   $ 0.05     $ 0.04     $ 0.04     $ 0.16  
  Loss from discontinued operations     0.00       0.00       0.00       (0.02 )
  Net income   $ 0.05     $ 0.04     $ 0.04     $ 0.14  
Basic weighted average common shares outstanding    
25,299,131
     
25,184,447
     
25,229,250
     
25,080,096
 
Diluted weighted average common shares outstanding    
25,362,923
     
25,363,620
     
25,329,711
     
25,249,504
 
Net income   $ 1,150     $ 1,006     $ 1,120     $ 3,644  
Foreign currency translation adjustment     (238 )     131       16       38  
Comprehensive income   $ 912     $ 1,137     $ 1,136     $ 3,682  
                                 
                                 
                                 
SYNERGETICS USA, INC. AND SUBSIDIARIES
Unaudited Table of Income from Continuing Operations and EBITDA
Three and Nine Months Ended April 30, 2013 and April 30, 2012 (Unaudited)
(In thousands)
 
EBITDA Reconciliation   Three Months Ended
April 30,
2013
  Three Months Ended
April 30,
2012
Income from Continuing Operations   $ 1,150   $ 1,006
Interest     2     10
Income taxes     562     396
Depreciation     314     325
Amortization     187     161
EBITDA   $ 2,215   $ 1,898
             
EBITDA Reconciliation   Nine Months Ended
April 30,
2013
  Nine Months Ended
April 30,
2012
Income from Continuing Operations   $ 1,120   $ 4,026
Interest     6     43
Income taxes     366     1,490
Depreciation     856     895
Amortization     504     485
EBITDA   $ 2,852   $ 6,939

EBITDA is not a financial measure recognized by U.S. generally accepted accounting principles ("GAAP"). EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization.

   
   
   
SYNERGETICS USA, INC. AND SUBSIDIARIES  
Unaudited Table of Adjusted Operating Income and Non-GAAP EPS  
Three and Nine Months Ended April 30, 2013 and April 30, 2012 (Unaudited)  
(Dollars in thousands, except per share information)  
   
    Three Months Ended     Nine Months Ended  
    April 30, 2013     April 30, 2012     April 30, 2013     April 30, 2012  
Adjusted Operating Income                                
GAAP operating income   $ 1,721     $ 1,405     $ 1,509     $ 5,535  
  Inventory write-down     0       367       2,092       367  
  Adjusted operating income   $ 1,721     $ 1,772     $ 3,601     $ 5,902  
  Net sales   $ 16,264     $ 14,568     $ 44,939     $ 43,154  
  Adjusted operating margin     10.6 %     12.2 %     8.0 %     13.7 %
EBITDA   $ 2,215     $ 1,898     $ 2,852     $ 6,939  
                                 
Non-GAAP EPS  
  Inventory write-down   $ --     $ 367     $ 2,092     $ 367  
  Effective tax rate     32.8 %     28.2 %     24.6       27.0  
  Tax effected write-down   $ --     $ 263     $ 1,577     $ 268  
  Diluted weighted average common shares     25,299,131       25,363,620       25,329,711       25,249,504  
  Diluted earnings per share   $ 0.00     $ 0.01     $ 0.06     $ 0.01  
                                 
                                 
                                 
Synergetics USA, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
As of April 30, 2013 (Unaudited) and July 31, 2012  
(Dollars in thousands, except share data)  
   
    April 30, 2013     July 31, 2012  
Assets                
Current Assets                
    Cash and cash equivalents   $ 13,099     $ 12,680  
    Accounts receivable, net of allowance for doubtful accounts of $417 and $319, respectively     12,252       11,796  
    Inventories     15,069       15,679  
    Income taxes refundable     862       --  
    Prepaid expenses     1,148       825  
    Deferred income taxes     1,797       1,247  
      Total current assets     44,227       42,227  
Property and equipment, net     8,780       9,239  
Intangible and other assets                
    Goodwill     10,660       10,660  
    Other intangible assets, net     10,890       11,277  
    Deferred income taxes     3,753       4,088  
    Patents, net     1,360       1,179  
    Cash value of life insurance     93       93  
      Total assets   $ 79,763     $ 78,763  
Liabilities and stockholders' equity                
Current Liabilities                
    Accounts payable   $ 2,462     $ 2,144  
    Accrued expenses     2,698       2,844  
    Income taxes payable     --       191  
    Deferred revenue     1,288       1,288  
      Total current liabilities     6,448       6,467  
Long-Term Liabilities                
    Deferred revenue     14,852       15,818  
      Total long-term liabilities     14,852       15,818  
      Total liabilities     21,300       22,285  
Commitments and contingencies                
Stockholders' Equity                
    Common stock at April 30, 2013 and July 31, 2012, $0.001 par value, 50,000,000 shares authorized; 25,291,165 and 25,160,069 shares issued and outstanding, respectively     25       25  
    Additional paid-in capital     27,272       26,421  
    Retained earnings     31,656       30,538  
    Accumulated other comprehensive loss: Foreign currency translation adjustment     (490 )     (506 )
      Total stockholders' equity     58,463       56,478  
      Total liabilities and stockholders' equity   $ 79,763     $ 78,763  
                 
                 
                 
Synergetics USA Inc. and Subsidiaries  
Condensed Consolidated Statements of Cash Flows  
Nine Months Ended April 30, 2013 and 2012 (Unaudited)  
(Dollars in thousands)  
   
    Nine Months Ended
April 30,
2013
    Nine Months Ended
April 30,
2012
 
Cash Flows from operating activities                
  Net income   $ 1,120     $ 3,644  
  Plus: Loss from discontinued operations - net of tax     --       382  
  Income from continuing operations     1,120       4,026  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities                
    Depreciation     856       895  
    Amortization     504       485  
    Provision for doubtful accounts receivable     91       41  
    Stock-based compensation     713       545  
    Deferred income taxes     (215 )     321  
Changes in assets and liabilities                
  (Increase) decrease in:                
    Accounts receivable     (420 )     492  
    Inventories     672       (2,843 )
    Prepaid expenses     (302 )     (177 )
    Income taxes refundable     (862 )     (378 )
  (Decrease) increase in:                
    Accounts payable     312       1,165  
    Accrued expenses     (154 )     (415 )
    Deferred revenue     (966 )     (1,173 )
    Income taxes payable     (191 )     (6,039 )
      Net cash provided by (used in) continuing operating activities     1,158       (3,055 )
Net cash provided by discontinued operations     --       59  
Net cash provided by (used in) operating activities     1,158       (2,996 )
                 
Cash Flows from investing activities                
    Purchase of property and equipment     (397 )     (1,586 )
    Acquisition of patents and other intangibles     (298 )     (201 )
      Net cash used in continuing investing activities     (695 )     (1,787 )
                 
Cash Flows from financing activities                
    Payment on debt incurred for acquisition of trademark     --       (313 )
    Principal payment on long-term debt     --       (740 )
    Tax benefit associated with the exercise of non-qualified stock options     72       24  
    Proceeds from the issuance of common stock     65       35  
      Net cash provided by (used in) financing activities     137       (994 )
Foreign exchange rate effect on cash and cash equivalents     (181 )     216  
Net increase (decrease) in cash and cash equivalents     419       (5,561 )
Cash and cash equivalents                
    Beginning     12,680       18,399  
    Ending   $ 13,099     $ 12,838  
                 

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