MONROVIA, Calif., Oct. 28 /PRNewswire-FirstCall/ -- STAAR Surgical Company , a leading developer, manufacturer and marketer of minimally invasive ophthalmic products, today reported continued strong progress during its third quarter ended September 26, 2008. The financial results for the period include the operating performance of STAAR Japan, which STAAR acquired at the beginning of fiscal year 2008.
"We continued to successfully execute on our plan to restore operating profitability and progressed substantially toward our goals during the third quarter," said Barry G. Caldwell, President and CEO of STAAR Surgical. "Again during the third quarter we achieved significant improvement in all of the key metrics we laid out earlier this year against which investors could measure our progress. As in the second quarter, each of our sales reporting entities, including the U.S., generated year-over-year revenue increases, and we are ahead of our sales plan in Japan. Even without the contribution from Japan, which was not part of our operations last year, sales grew 12%. In the U.S., ICL sales grew 24% despite significant downward pressure on refractive procedures during the quarter, and the decline in our cataract sales was reduced to six percent."
"We reduced operating cash burn by approximately 29% compared to the third quarter of last year and reduced U.S. operational spending by 20% as well," added Mr. Caldwell. "During the quarter our team identified future opportunities to reduce spending and build margins within our international operations. As a result, international operating costs were down 11% compared to the second quarter of this year. In addition, we remain confident in our ability to achieve our operating expense targets in Japan. Finally, our plan is to generate overall operating income in the current fourth quarter," Mr. Caldwell continued.
In addition, the Company earlier in the month completed all the clinical data work for the re-submission of its application with the FDA for the Visian Toric ICL, a toric implantable Collamer(R) lens designed to treat both nearsightedness and astigmatism. "We are pleased that the certified clinical trial module resulting from this effort confirmed the scientific validity and integrity of the data and the excellent clinical results of this product. Beyond that result, the comprehensive reexamination of both study data and our procedures as a sponsor of clinical studies has provided an opportunity to improve and enhance our ability to oversee clinical projects in the future," said Mr. Caldwell. "The task required the coordination and cooperation of several departments within the Company along with the third party audit firm. These efforts were led by John Santos, our acting V.P. of Clinical Affairs, who deserves special recognition for this successful completion."
Financial Highlights for the Third Quarter and Nine Months Ended September 26, 2008
Total product sales in the quarter were $18.1 million which is the highest level of sales for any third quarter achieved by the Company in its 26 years of operation. These sales represented a 33% increase over the $13.6 million reported for the third quarter of 2007. The increase in sales was led by strong international product sales, which grew 50% during the quarter and included $2.9 million in sales from STAAR Japan. Excluding Japan, total product sales grew 12%. Changes in currency accounted for $542,000 of the increase in sales for the quarter. Total U.S. sales for the third quarter were $4.8 million, up slightly over the same period last year. U.S. ICL sales were $1.3 million, up 24% over $1.1 million in the comparable period of 2007.
Total product sales for the first nine months of 2008 were $56.7 million, a 31% increase over the $43.5 million reported for the first nine months of 2007. The increase in sales was led by strong international product sales, which grew 48% and included $9.1 million in sales from STAAR Japan. Excluding Japan, total product sales grew 10%. The changes in currency accounted for $2.4 million of the $3.3 million increase in sales for the nine month period. Total U.S. sales for the first nine months of 2008 were $14.5 million, down four percent from $15.0 million in the same period last year. U.S. ICL sales were $3.8 million, up 24% over $3.1 million in the comparable period of 2007.
Gross profit margin for the third quarter was 57.7%, compared to 49.7% in the third quarter of 2007. Gross profit margin for the first nine months of 2008 was 52.4%, compared with 49% in the first nine months of 2007. The significant improvement in gross profit margin during the third quarter is due to increased sales of ICLs in the U.S., TICL sales internationally and cataract product sales in Japan, which yield higher average selling prices than in other countries. Each one of STAAR's reporting sales entities increased its gross margin percentage during the third quarter of 2008 compared to the same period of 2007. Gross margin, during the first nine months of 2008, was reduced by non-cash charges recorded when the inventory acquired in the STAAR Japan acquisition was stepped up in value in accordance with purchase accounting rules. The revalued inventory was sold within the first quarter.
General and administrative expenses for the quarter were $3.5 million, representing a 21% increase over the $2.9 million incurred in the third quarter of 2007. General and administrative expenses for the first nine months of 2008 were $11.4 million, representing a19% increase over the $9.9 million incurred in the first nine months of 2007. The increase resulted from incremental G&A costs of STAAR Japan and increased costs in Europe, partially offset by decreased costs in the U.S.
Marketing and selling expenses for the third quarter were $6.5 million, representing a 13% increase over the $5.8 million incurred in the third quarter of 2007. Marketing and selling expenses for the first nine months of 2008 were $20.6 million, representing a 20% increase over the $17.2 million incurred in the first nine months of 2007. Changes in currency accounted for $187,000 and $855,000 of the increase in marketing and selling expenses for the three and nine months ended September 26, 2008, respectively. Other components of the increase in expense included incremental costs of STAAR Japan, increased marketing and selling costs to drive continued sales growth internationally, and increased salaries of the new U.S. refractive sales organization. The increase was partially offset by a decrease in U.S. marketing and selling expenses due to decreased commissions and promotional activities.
Research and development expenses were $1.9 million, which represents an eight percent increase over the $1.7 million incurred in the third quarter of 2007. Research and development expenses for the first nine months of 2008 were $6.0 million, which represents a 20% increase over the $5.0 million incurred in the first nine months of 2007. The increase is due to the incremental costs of STAAR Japan, partially offset by cost reductions in the U.S.
For the quarter ended September 26, 2008, net loss was $2.3 million or $0.08 per share, compared with $3.8 million or $0.13 for the third quarter of 2007. The net loss for the quarter includes $1.6 million in non-cash expenses. For the nine months ended September 28, 2008, the net loss was $13.7 million or $0.47 per share, compared with $11.7 million or $0.42 for the nine months ended September 26, 2007. The net loss associated with STAAR Japan for the nine months of 2008 was $6.1 million, largely resulting from non-cash purchase accounting charges recorded during the first quarter. Excluding Japan, the net loss for the nine months was $7.6 million, or $0.26 per share, a 38% improvement over 2007. Non-cash expenses for the first nine months of 2008 were $8.2 million.
At September 26, 2008, cash and cash equivalents were $6.7 million, compared to $8.9 million at June 27, 2008. During the quarter the Company used $1.1 million of cash for operating activities compared with $3.4 million in the first quarter of 2008, $2.8 million in the second quarter of 2008 and $1.5 million in third quarter of 2007. Cash used in operating activities for the nine months ended September 26, 2008 was $7.2 million compared with the $8.5 million reported for the nine months ended September 28, 2007. Excluding Japan, for the nine months, cash used in operating activities has declined 50% from the amount used during the first nine months of 2007. STAAR Japan generated $31,000 in cash from operating activities in third quarter of 2008 and used $2.9 million in the first nine months of 2008. "We've carefully watched our spending and cash position and continue to have no plans to return to the market to raise additional capital to fund our current operations," stated Mr. Caldwell.
Conference Call
The Company will host a conference call and webcast on Tuesday, October 28, 2008 at 5:00 p.m. Eastern Time to discuss the Company's third quarter and current corporate developments. The dial-in number for the conference call is 800-240-5318 for domestic participants and 303-262-2054 for international participants.
A taped replay of the conference call will also be available beginning approximately one hour after the call's conclusion and will be available for seven days. This replay can be accessed by dialing 800-405-2236 for domestic callers and 303-590-3000 for international callers, both using passcode 11120703#. To access the live webcast of the call, go to STAAR Surgical's website at http://www.staar.com. An archived webcast will also be available at http://www.staar.com.
About STAAR Surgical
STAAR Surgical is a leader in the development, manufacture and marketing of minimally invasive ophthalmic products employing proprietary technologies. STAAR's products are used by ophthalmic surgeons and include the Visian ICL, a tiny, flexible lens implanted to correct refractive errors, as well as innovative products designed to improve patient outcomes for cataracts and glaucoma. Manufactured in Switzerland by STAAR, the ICL is approved by the FDA for use in treating myopia, has received CE Marking and is sold in more than 40 countries. Collamer(R) is the brand name for STAAR's proprietary collagen copolymer lens material. More information is available at http://www.staar.com.
Safe Harbor
All statements in this press release that are not statements of historical fact are forward-looking statements, including any projections of earnings, revenue, sales, cash or other financial items, any statements of the plans, strategies, and objectives of management for future operations or prospects for achieving such plans, strategies or objectives, prospects for achieving FDA approval of the Toric ICL, any statements regarding expectations for success of the ICL, TICL or other products in the U.S. or international markets, prospects for returning U.S. cataract product line to profitability, any statements regarding future performance, statements of belief and any statements of assumptions underlying any of the foregoing. These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include our limited capital resources and limited access to financing, the effect a prolonged global recession may have on sales of products, especially products such as ICL used in non- reimbursed elective procedures, the challenge of fully integrating STAAR Japan into our business and managing our other foreign subsidiaries, the need to realize product development goals to improve profitability of our U.S. IOL product line, our ability to address FDA concerns over the clinical study for the Toric ICL and to overcome negative publicity resulting from warning letters and other correspondence from the FDA Office of Compliance, the willingness of surgeons and patients to adopt a new product and procedure, the effect of a possible U.S. recession on elective procedures such as refractive surgery, and the potential effect of recent negative publicity about LASIK on the demand for refractive surgery in general in the U.S. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.
Use of Non-GAAP information
This news release presents selected items from the Company's Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows as reported in accordance with U.S. generally accepted accounting principles ("GAAP"), and also on a non-GAAP basis after excluding data reported by STAAR Japan.
The Company completed the acquisition of the remaining interests in STAAR Japan on December 29, 2007, the first day of its 2008 fiscal year. Prior to the acquisition, the Company reported its 50% ownership interest in STAAR Japan as an equity investment and did not incorporate STAAR Japan's financial data in the Company's financial statements. As a result, the Company's financial results in 2008 have been significantly affected by both non- recurring charges resulting from the accounting treatment of the transaction and by the consolidation of the results of STAAR Japan from the first quarter of 2008 forward. STAAR's management believes that it is important for investors to be able to identify the trends in its core business, including expense reduction, revenue enhancement and gross profit improvement, and that these trends can be discerned only by a comparison of 2007 financial data with non-GAAP 2008 data that excludes the newly added results from STAAR Japan. Since acquisition of the remaining interests in STAAR Japan, the Company's management has used this non-GAAP information internally to measure its progress compared to 2007 in achieving positive cash flow and returning to profitability. The Company's management currently believes that this information will enhance investors' overall understanding of its core performance when financial statements include comparisons to periods preceding the STAAR Japan acquisition. Going forward, the Company must achieve positive cash flow and profitability as a consolidated enterprise with STAAR Japan, and accordingly the Company cautions investors to consider both the GAAP financial statements as well as the non-GAAP financial information.
CONTACT: Investors, Douglas Sherk, +1-415-896-6820, or Dahlia Bailey,
+1-415-896-5860, or Media, Christopher Gale, +1-646-201-5431, all of EVC
Group, for STAAR Surgical Company
Web site: http://www.staar.com/
