MONROVIA, Calif., July 30 /PRNewswire-FirstCall/ -- STAAR Surgical Company , a leading developer, manufacturer and marketer of minimally invasive ophthalmic products, today reported continued progress during its second quarter ended June 27, 2008. The financial results for the period include the operating performance of STAAR Japan, which STAAR acquired at the beginning of fiscal year 2008.
“During the quarter, we began to show the growth potential of STAAR Surgical, while maintaining our recent fiscal discipline,” said Barry G. Caldwell, President and CEO of STAAR Surgical. “Earlier this year, we laid out the five key metrics against which investors could measure our progress during 2008 and we believe we are on track to achieve all five metrics. From a sales perspective, it was a very strong quarter. Each of our sales groups, including the U.S., generated year-over-year increases in sales, 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 16%. Both Switzerland and Germany (Domilens GmbH) established new all time records in revenue results. In the US, ICL sales grew 39% and the decline in our cataract sales slowed markedly. Overall, in the US, we generated a one percent increase in sales.”
“Last week, we achieved two significant milestones which are critical to our seven step strategy to return our domestic IOL business to profitability. The CMS designation of two additional new aspheric cataract lenses as New Technology Intraocular Lenses allows us to more effectively compete in the U.S. market while improving our average selling prices and gross margins. Having completed to date four steps of our domestic IOL strategy, we now have three steps remaining. Our goal is to successfully complete all by the first half of 2009.
“While sales were strong, we also continued our efforts to lower costs, reduce cash burn and improve profitability,” added Mr. Caldwell. “We reduced operating cash burn by approximately 35% compared to the second quarter of last year, and we continued to decrease operating expenses in the US. Our efforts to lower expenses in the US have good momentum. For the second half we have already identified areas for reduced spending and margin improvement within our international operations. The integration of STAAR Japan has gone very smoothly, and we are confident about our ability to achieve our operating expense goals in Japan, which will further reduce cash burn. We achieved our cash plan for the first half of the year and intend to further reduce cash burn in the second half of 2008. By remaining focused and disciplined the remainder of the year, we will move steadily toward becoming cash flow positive and achieving our objective of no further shareholder dilution,” Mr. Caldwell added.
Financial Highlights for the Second Quarter Ended June 28, 2008
Total product sales were $20.7 million which is the highest level of quarterly sales in the over 25 year history of the Company. These sales, compared with $14.9 million reported for the second quarter of 2007, represent a 38% increase. The increase in sales was led by strong international product sales, which grew 58% during the quarter and included $3.3 million in sales from STAAR Japan. Changes in currency accounted for $1.5 million of the increase in sales for the quarter. Total U.S. sales for the second quarter were $5.2 million, up one percent compared with $5.2 million in the same period last year. U.S. ICL sales were $1.4 million, up 39% as compared with $1.0 million in the comparable period of 2007.
Total product sales for the first six months of 2008 were $38.6 million, a 29% increase compared with the $29.8 million reported for the first six months of 2007. The increase in sales was led by strong international product sales, which grew 47% and included $6.1 million in sales from STAAR Japan. Changes in currency accounted for $2.7 million of the increase in sales for the six month period. Total U.S. sales for the first six months of 2008 were $9.7 million, down five percent compared with $10.3 million in the same period last year. U.S. ICL sales were $2.5 million, up 24% as compared with $2.0 million in the comparable period of 2007.
Gross profit margin was 55.8% compared with 48.5% in the second quarter of 2007. Gross profit margin for the first six months of 2008 was 49.9%, compared with 48.7% in the first six months of 2007. First quarter gross margin was reduced by non-cash purchasing accounting revaluations of inventory acquired in the STAAR Japan acquisition and sold in that quarter. The significant improvement in gross profit margin during the second quarter is due to increased sales of ICLs globally and Japan cataract product sales, which yield higher average selling prices than in other countries and in the second quarter had a normal cost basis rather than the stepped-up basis required by the purchase accounting rules in the first quarter. Each one of our five sales groups increased their gross margin percentages from the same period in 2007.
General and administrative expenses were $3.5 million, which represents a 12% increase over the second quarter of 2007 of $3.1 million. General and administrative expenses for the first six months of 2008 were $8 million, which represents a 19% increase over the first six months of 2007 of $6.7 million. The increase is due to incremental G&A costs of STAAR Japan and increased G&A costs in Europe resulting from increased headcount, partially offset by decreased costs in the US.
Marketing and selling expenses were $7.6 million, which represents a 24% increase over the second quarter of 2007 of $6.1 million. Marketing and selling expenses for the first six months of 2008 were $14.1 million, which represents a 23% increase over the first six months of 2007 which totaled $11.4 million. Changes in currency accounted for $0.4 million and $0.7 million of the increase in marketing and selling expenses for the three and six months ended June 27, 2008, respectively. Additionally, costs increased due to incremental costs of STAAR Japan, increased marketing and selling costs to drive continued sales growth internationally, and increased salaries of the new US refractive sales organization. The increase was partially offset by a decrease in US marketing and selling expenses due to decreased commissions and promotional activities.
Research and development expenses were $2.4 million, which represents a 44% increase compared to the second quarter of 2007. Research and development expenses for the first six months of 2008 were $4.1 million, which represents a 26% increase over the first six months of 2007 of $3.2 million. The increase is due to the incremental costs of STAAR Japan including the reclassification of costs from G&A to R&D, partially offset by cost reductions in the US.
For the quarter ended June 27, 2008, net loss was $2.5 million or $0.09 per share, compared with $4.4 million or $0.16 for Q2 2007. The net loss for the quarter includes $1.0 million in non-cash expenses. For the six months ended June 27, 2008, net loss was $11.5 million or $0.39 per share, compared with $7.9 million or $0.29 for the six months ended June 29, 2007. The net loss associated with STAAR Japan for the six months of 2008 was $5.9 million, largely resulting from non-cash purchase accounting charges recorded during the first quarter. Non-cash expenses for the first six months of 2008 were $6.6 million.
At June 27, 2008, cash and cash equivalents were $8.9 million, compared to $10.5 million at March 28, 2008. The change in cash and cash equivalents include a $1.2 million increase in accounts receivable and $1.0 million decrease in accounts payable from the prior quarter. During the quarter the Company used $2.8 million of cash for operating activities, compared to $3.4 million in Q1 2008 and $4.2 million in Q2 2007. Cash used in operating activities for the six months ended June 27, 2008 was $6.1 million, compared to $7.0 million reported for the six months ended June 29, 2007. STAAR Japan used $0.5 million and $3.0 million in cash for operating activities for the three and six months ended June 27, 2008. Cash used in investing activities was $2.2 million for the first six months of 2008 and related primarily to the acquisition of STAAR Japan. Cash provided by investing activities was $1.5 million for the first six months of 2008 and related primarily to borrowings on the Japan line of credit. Cash used for operating activities is expected to decline during the second half of 2008.
Conference Call
The Company will host a conference call and webcast on Wednesday, July 30, 2008 at 5:00 p.m. Eastern Time to discuss the Company’s second quarter and current corporate developments. The dial-in number for the conference call is 866-250-3615 for domestic participants and 303-262-2004 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 11113294#. 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, 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 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.
CONTACT: Investors, Douglas Sherk, +1-415-896-6820, or Dahlia Bailey,
415-896-5860, or Media, Steve DiMattia 646-201-5445, all of EVC Group, for
STAAR Surgical Company
Web site: http://www.staar.com/
