Sales up 12.0% to $13.5 Million
Net Income from Continuing Operations up 81.3% to $1.2 Million
Earnings Per Share from Continuing Operations Up 66.7% to $0.05
O�FALLON, MO –12/12/11 (CRWENEWSWIRE) — 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, gross margin, income from continuing operations and net income for the first quarter ended October 31, 2011.
The Company reported first quarter fiscal 2012 sales rose 12.0% to $13.5 million and net income from continuing operations increased 81.3% to $1.2 million, or $0.05 per diluted share, compared with the first quarter of fiscal 2011. Loss from discontinued operations for the first quarter of fiscal 2012 was $382,000, or $0.02 per diluted share. Net income increased 21.8% to $771,000, or $0.03 per diluted share, compared with the first quarter of fiscal 2011.
�Our record first quarter results benefited from the continued demand for Synergetics� ophthalmic and neurosurgical products across all major market segments,� stated Dave Hable, President and CEO of Synergetics USA, Inc. �Sales of ophthalmic products rose 10.0% to $8.8 million and OEM sales were up 26.4% to $4.5 million compared with the first quarter of last year. New product sales, including the VersaPACK� that was launched in fiscal 2011, continued to gain sales momentum. Our disposable product sales were also a major contributor to the quarter�s growth and accounted for 82% of total first quarter sales.�
First Quarter Results
First quarter sales increased 12.0% to $13.5 million compared $12.1 million in the first quarter of fiscal 2011. The increase in first quarter sales from last year was due primarily to growth in sales of ophthalmic disposable products and OEM sales.
Ophthalmic sales rose 10.0% to $8.8 million compared with $8.0 million the first quarter of fiscal 2011. The growth in ophthalmic sales benefited from higher volume of disposable products, including procedural kits, laser probes and cannulas to domestic and international customers.
Total OEM sales rose 26.4% to $4.5 million compared with $3.6 million in the first quarter of fiscal 2011. OEM sales beginning in fiscal 2012 includes sales to our marketing partners. The increase in OEM sales benefited primarily from increased shipments of disposable ultrasonic tips during the latest quarter. OEM sales also included deferred revenue of $398,000 recognized in the first quarter of fiscal 2012.
Disposable product sales grew 11.2%, or $1.1 million, to $11.1 million in the first quarter of fiscal 2012 compared with the first quarter of fiscal 2011. Disposable sales accounted for approximately 82% of total sales in the first quarter of fiscal 2012.
Capital equipment sales totaled $2.0 million in the first quarter of fiscal 2012 compared with $2.1 million in the first quarter of fiscal 2011.
Backorders totaled approximately $500,000 at the end of the first quarter of fiscal 2012.
�We experienced a temporary increase in backorders at the close of the first quarter as we rebalanced inventories as part of our lean manufacturing initiatives,� continued Mr. Hable. �We expect to reduce our backorders and improve customer fill orders on a more timely basis as we fully implement our lean initiatives across our production, inventory management and shipping processes. We also implemented a new ERP system during the quarter that will enhance our real-time information for inventory levels, shipments, sales information and production costs. Our goal is to provide our customers with world class products and services levels to match.�
Gross profit for the first quarter of fiscal 2012 rose to $7.9 million, or 58.6% of sales, compared with $7.0 million, or 58.2% of sales, in the first quarter of fiscal 2011. The growth in gross profit and gross profit margin benefited from higher sales, improved product mix and increased manufacturing efficiencies.
�We discontinued our plastic injection molding operations during the first quarter and transitioned this production to an outside vendor,� stated Mr. Hable. �We believe this change will allow us to focus on our core manufacturing operations and will result in improved gross profit margins associated with plastic injection molded products in the latter half of fiscal 2012.�
Research and development expenses rose 9.9% to $790,000 in the most recent quarter compared with $719,000 in the first quarter of fiscal 2011.
�We showcased our newest products, the VersaVIT� and UVE (Ultimate Vit Enhancer�) for use in the vitreoretinal operating rooms at the Annual Meeting of the American Academy of Ophthalmology in October,� continued Mr. Hable. �These products represent our latest R&D projects and extend our product line into the vitrectomy machine market that currently generates $150 million in annual sales. We plan to allocate approximately 5% to 7% of sales for R&D to fund key programs that will contribute to new product introductions and expansions of our ophthalmic and neurosurgical product lines.�
VersaVIT is Synergetics� first product for the vitrectomy machine market and represents a new concept in retinal surgery with its highly portable design. It is ideally suited for ambulatory surgery centers, as a traveling unit for satellite offices and potentially for in-office procedures. UVE is a high-speed vitrectomy enhancement system that is designed to boost significantly the cutting speed of the market�s leading vitrectomy machine. UVE is priced at a fraction of the cost of the latest generation of high-speed vitrectomy machines and utilizes existing surgical packs for the market leading vitrectomy machine, including Synergetics� VersaPACK�.
Sales and marketing expenses increased to $3.1 million, or 22.8% of sales, for the first quarter of fiscal 2012 compared with $3.0 million, or 25.0% of net sales, for the first quarter of fiscal 2011. The increase was primarily due to higher direct sales of ophthalmic products.
General and administrative expenses increased by approximately $286,000 to $2.5 million, or 18.8% of net sales, in the first quarter of fiscal 2012, compared with $2.3 million, or 18.7% of net sales, for the first quarter of fiscal 2011. The increase in general and administrative expenses as a percentage of net sales was primarily due to additional employees required to manage the implementation of our lean manufacturing and quality improvement initiatives.
Operating income for the first quarter of fiscal 2012 increased to $1.5 million compared with $1.0 million in the first quarter of fiscal 2011. The increase in operating income and operating margin benefited from higher sales, growth in margins, and improved leverage of manufacturing costs and administrative expenses. In addition, the increase in operating income highlights the leverage the Company achieved by utilizing its marketing partners to sell and distribute its neurosurgical products.
Income from continuing operations rose 81.3% to $1.2 million, or $0.05 per diluted share, compared with $636,000, or $0.03 per diluted share, for the first quarter of fiscal 2011. Loss from discontinued operations for the first quarter of fiscal 2012 was $382,000, or $0.02 per diluted share. Net income increased 21.8% to $771,000 in the first quarter of fiscal 2012 compared with $633,000 in the first quarter of the prior year. Net income per diluted share was $0.03 for the first quarter of fiscal 2012 and 2011, respectively. Basic weighted-average shares outstanding increased from 24,782,913 at October 31, 2010, to 24,971,034 at October 31, 2011.
The Company used its strong cash position to pay down debt during the first quarter of fiscal 2012. Total debt at October 31, 2011, was $898,000. The Company expects to pay off the remaining debt in the third quarter of fiscal 2012. Cash-on-hand at the close of the quarter was $13.7 million after a tax payment of $5.7 million paid during the first quarter primarily arising from the settlement payment from Alcon, which the Company received in the third quarter of fiscal 2010.
Conference Call Information
Synergetics USA, Inc. will host a conference call on Tuesday, December 13, 2011, at 10:30 a.m. Eastern Time. The toll free dial-in number to listen and participate live on this call is (800) 588-4973, confirmation code 31244011. 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. 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.
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, 2011, 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.
Source: Synergetics USA, Inc.
Contact:
Synergetics USA, Inc.
Pamela G. Boone, 636-939-5100
Chief Financial Officer
Synergetics USA, Inc. and Subsidiaries Condensed Consolidated Statements of Income Three Months Ended October 31, 2011, and 2010 (Dollars in thousands, except share and per share data) |
| | | | | |
| | | Three Months Ended October 31, 2011 | | Three Months Ended October 31, 2010 |
Net sales | | | $ | 13,505 | | | $ | 12,057 | |
Cost of sales | | | | 5,589 | | | | 5,030 | |
Gross profit | | | | 7,916 | | | | 7,027 | |
Operating expenses | | | | | |
Research and development | | | | 790 | | | | 719 | |
Sales and marketing | | | | 3,076 | | | | 3,023 | |
General and administrative | | | | 2,538 | | | | 2,252 | |
| | | | 6,404 | | | | 5,994 | |
Operating income | | | | 1,512 | | | | 1,033 | |
Other income (expenses) | | | | | |
Investment income | | | | 14 | | | | 32 | |
Interest expense | | | | (18 | ) | | | (80 | ) |
Miscellaneous | | | | (2 | ) | | | (7 | ) |
| | | | (6 | ) | | | (55 | ) |
Income from continuing operations before provision for income taxes | | | | 1,506 | | | | 978 | |
Provision for income taxes | | | | 353 | | | | 342 | |
Income from continuing operations | | | | 1,153 | | | | 636 | |
Loss from discontinued operations, net of income tax benefit of $193 in 2011 and $1 in 2010 | | | | 382 | | | | 3 | |
Net income | | | $ | 771 | | | $ | 633 | |
Earnings per share: | | | | | |
Basic | | | | | |
Income from Continuing Operations | | | $0.05 | | | $0.03 | |
Loss from Discontinued Operations | | | ($0.02 | ) | | $0.00 | |
Net Income | | | $0.03 | | | $0.03 | |
Diluted | | | | | |
Income from Continuing Operations | | | $0.05 | | | $0.03 | |
Loss from Discontinued Operations | | | ($0.02 | ) | | $0.00 | |
Net Income | | | $0.03 | | | $0.03 | |
Basic weighted average common shares outstanding | | | | 24,971,034 | | | | 24,782,913 | |
Diluted weighted average common shares outstanding | | | | 25,136,727 | | | | 24,862,420 | |
| | | | | | |
Synergetics USA, Inc. and Subsidiaries Condensed Consolidated Balance Sheets As of October 31, 2011 (Unaudited) and July 31, 2011 (Dollars in thousands, except share data) |
| | | | | | |
| | | October 31, 2011 | | | July 31, 2011 |
Assets | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | | | $ | 13,743 | | | $ | 18,399 |
Accounts receivable, net of allowance for doubtful accounts of $289 and $282, respectively | | | | 10,436 | | | | 11,148 |
Inventories | | | | 12,298 | | | | 12,082 |
Prepaid expenses | | | | 892 | | | | 961 |
Deferred income taxes | | | | 824 | | | | 792 |
Assets held for sale | | | | 406 | | | | 868 |
Total current assets | | | | 38,599 | | | | 44,250 |
Property and equipment, net | | | | 8,825 | | | | 8,561 |
Intangible and other assets | | | | | | |
Goodwill | | | | 10,661 | | | | 10,660 |
Other intangible assets, net | | | | 11,664 | | | | 11,792 |
Deferred income taxes | | | | 4,717 | | | | 4,915 |
Patents, net | | | | 1,123 | | | | 1,050 |
Cash value of life insurance | | | | 82 | | | | 82 |
Total assets | | | $ | 75,671 | | | $ | 81,310 |
Liabilities and stockholders� equity | | | | | | |
Current Liabilities | | | | | | |
Current maturities of long-term debt | | | $ | 898 | | | $ | 1,053 |
Accounts payable | | | | 1,906 | | | | 1,567 |
Accrued expenses | | | | 2,798 | | | | 3,193 |
Income taxes payable | | | | 351 | | | | 6,233 |
Deferred revenue | | | | 375 | | | | 540 |
Total current liabilities | | | | 6,328 | | | | 12,586 |
Long-Term Liabilities | | | | | | |
Deferred revenue | | | | 17,827 | | | | 18,060 |
Total long-term liabilities | | | | 17,827 | | | | 18,060 |
Total liabilities | | | | 24,155 | | | | 30,646 |
Commitments and contingencies | | | | | | |
Stockholders� Equity | | | | | | |
Common stock at October 31, 2011 and July 31, 2011, $0.001 par value, 50,000,000 shares authorized; 24,975,474 and 24,970,884 shares issued and outstanding, respectively | | | | 25 | | | | 25 |
Additional paid-in capital | | | | 25,708 | | | | 25,598 |
Retained earnings | | | | 25,723 | | | | 24,952 |
Accumulated other comprehensive income: | | | | | | |
Foreign currency translation adjustment | | | | 60 | | | | 89 |
Total stockholders� equity | | | | 51,516 | | | | 50,664 |
Total liabilities and stockholders� equity | | | $ | 75,671 | | | $ | 81,310 |
| | | | |
Synergetics USA Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows Three Months Ended October 31, 2011 and 2010 (Dollars in thousands, except share data) |
| | | | |
| | Three Months Ended October 31, 2011 | | Three Months Ended October 31, 2010 |
Cash Flows from Operating Activities | | | | |
Net income | | $ | 771 | | | $ | 633 | |
Plus: Loss from discontinued operations � net of tax | | | 382 | | | | 3 | |
Income from continuing operations | | | 1,153 | | | | 636 | |
Adjustments to reconcile net income to net cash provided by operating activities | | | | |
Depreciation | | | 290 | | | | 262 | |
Amortization | | | 162 | | | | 196 | |
Provision for doubtful accounts receivable | | | 22 | | | | 4 | |
Stock-based compensation | | | 98 | | | | 70 | |
Deferred income taxes | | | 166 | | | | (75 | ) |
Changes in assets and liabilities | | | | |
(Increase) decrease in: | | | | |
Accounts receivable | | | 677 | | | | 7 | |
Inventories | | | (231 | ) | | | (1,353 | ) |
Prepaid expenses | | | 59 | | | | 265 | |
(Decrease) increase in: | | | | |
Accounts payable | | | 369 | | | | 55 | |
Accrued expenses | | | (262 | ) | | | 63 | |
Deferred revenue | | | (398 | ) | | | – | |
Income taxes payable | | | (5,688 | ) | | | 243 | |
Net cash (used in) provided by continuing operating activities | | | (3,583 | ) | | | 373 | |
Net cash used in discontinued operations | | | (15 | ) | | | (153 | ) |
Net (used in) provided by operating activities | | | (3,598 | ) | | | 220 | |
Cash Flows from Investing Activities | | | | |
Purchase of property and equipment | | | (802 | ) | | | (226 | ) |
Acquisition of patents and other intangibles | | | (105 | ) | | | (50 | ) |
Net cash used in continuing investing activities | | | (907 | ) | | | (276 | ) |
Net cash used in discontinued operations | | | – | | | | (50 | ) |
Net cash used in investing activities | | | (907 | ) | | | (335 | ) |
Cash Flows from Financing Activities | | | | |
Principal payments on revenue bonds payable | | | – | | | | (29 | ) |
Principal payments on long-term debt | | | – | | | | – | |
Payment on debt incurred for acquisition of trademark | | | (155 | ) | | | (146 | ) |
Tax benefit associated with the exercise of non-qualified stock options | | | 8 | | | | 43 | |
Proceeds from the issuance of common stock | | | 5 | | | | 69 | |
Net cash used in financing activities | | | (142 | ) | | | (63 | ) |
Foreign exchange rate effect on cash and cash equivalents | | | (9 | ) | | | 28 | |
Net decrease in cash and cash equivalents | | | (4,656 | ) | | | (150 | ) |
Cash and cash equivalents | | | | |
Beginning | | | 18,399 | | | | 18,669 | |
Ending | | $ | 13,743 | | | $ | 18,519 | |
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