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8-K - 8-K - SYNERGETICS USA INC | c63471e8vk.htm |
Exhibit 99.1
SYNERGETICS USA, INC.
3845 Corporate Centre Drive
OFallon, Missouri 63368
(636) 939-5100
http://www.synergeticsusa.com
Pamela G. Boone, Chief Financial Officer
3845 Corporate Centre Drive
OFallon, Missouri 63368
(636) 939-5100
http://www.synergeticsusa.com
Pamela G. Boone, Chief Financial Officer
SYNERGETICS REPORTS GROWTH IN SALES AND RECORD NET
INCOME FROM OPERATIONS FOR SECOND QUARTER
INCOME FROM OPERATIONS FOR SECOND QUARTER
Net Income Up Over 50% to $1.3 Million
OFALLON, Mo. (March 9, 2011) Synergetics USA, Inc. (NASDAQ: SURG), a medical device
company that designs, manufactures, and markets innovative microsurgical instruments for ophthalmic
and neurosurgical applications, today announced growth in sales and net income for the second
quarter ended January 31, 2011. The Company reported second quarter 2011 sales rose 2.0% to $13.3
million and net income increased 50.5% to $1.3 million, or $0.05 per diluted share, compared with
the second quarter of fiscal 2010.
Synergetics earnings accelerated in the second quarter based on sales growth, higher margins and
improved sales mix compared with last year, as sales of disposable products exceeded 80% of net
sales, stated Dave Hable, President and CEO of Synergetics USA, Inc. We also reported record net
income from operations (exclusive of one-time events) of $1.4 million ($0.06 per diluted share in
our second fiscal quarter ended January 31, 2011 vs. $0.04 in our second fiscal quarter ended
January 31, 2010) due to higher sales and improved gross profit relative to 2010. Our sales of
disposable products were up 9.0% to $10.5 million. Sales to our OEM customers increased 38.1% from
last years second fiscal quarter to $2.6 million. However, we again faced a significant challenge
to overcome a $497,000 shortfall in sales arising from the sale of our Omni® product
line and a modest headwind associated with lower sales of capital equipment due to the overall
economic environment. We are very enthusiastic about the growth in our ophthalmic disposable
product sales since they represent future recurring sales opportunities.
Operating income rose 19.0% to $1.8 million (13.8% of net sales) and benefited from a 1.2
percentage point increase in our gross margin to 58.2%, increased sales of ophthalmic disposable
products and continued expense controls. Our lean manufacturing initiatives have been a solid
contributor to growing margins through direct labor cost savings and higher production yields. We
remain focused on improving our margins and are expanding our lean initiatives to new product
lines, enhancing our material requirements handling and implementing a new Enterprise Resource
Planning System in the first quarter of fiscal 2012.
We have also focused our resources on building future sales through targeted R&D programs and
pursuing new business development opportunities that have the potential of expanding our markets
for ophthalmic and neurosurgery products. We increased our funding for key R&D programs and expect
to introduce new products in the coming year that will increase the depth of our product lines. In
addition, we will be able to take full advantage of the reinstated R&D tax credit. We expect
continued growth in sales in the second half of fiscal 2011 due to the contributions from new
products and beginning shipments to Alcon, Inc., continued Mr. Hable.
Second Fiscal Quarter Results
Sales for the second quarter of fiscal 2011 rose 2.0% to $13.3 million, compared with $13.0 million
in the second fiscal quarter of 2010. The growth in second quarter sales was due primarily to a
$720,000 increase in OEM sales, partially offset by a $484,000 decrease in our neurosurgery sales
due to the transition of the
SURG Reports Growth in Sales and Record Net Income from Operations for Second Quarter
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March 9, 2011
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March 9, 2011
majority of our neurosurgery products to our marketing partners. In
addition, sales of capital equipment were down $900,000 compared with the second fiscal quarter of
last year due to soft economic conditions and the sale of the Omni® product line that
accounted for $497,000 in capital equipment sales in the second quarter of fiscal 2010. The Omni® product line was sold to Stryker Corporation (Stryker) in April
2010. As part of the agreement with Stryker, Synergetics continues to supply disposable ultrasonic
instrument tips and certain other consumable products used in conjunction with the
Sonopet/Omni® ultrasonic aspirator console and handpieces.
| Ophthalmic sales rose 0.5% to $7.8 million in the second quarter of fiscal 2011 due to increased demand for disposable products from domestic and international accounts (increased approximately $907,000), partially offset by a decline in capital equipment sales (decreased approximately $885,000). International sales rose 6.9% and benefited from increased demand for disposable equipment, while domestic sales were down 4.3% due to lower capital equipment sales. | ||
| Neurosurgical sales (including sales to our marketing partners) declined 14.7% to $2.8 million in the second quarter of fiscal 2011, compared with $3.3 million in the same period in 2010. The decline in neurosurgery sales was the result of the transition of the majority of our neurosurgery products to Codman & Shurtleff, Inc. (Codman) and Stryker under marketing partner agreements. | ||
| Total OEM sales rose 38.1% to $2.6 million, compared with $1.9 million in the second quarter of fiscal 2010. Sales to Codman rose 53.3% to $2.4 million and sales to Stryker jumped 198.1% to $2.0 million compared with the second fiscal quarter of last year. |
Our solid growth in earnings highlights the success of our strategy to transition certain product
lines from our direct sales force to key marketing partners, continued Mr. Hable. We have also
focused our direct sales team on disposable products that carry a higher margin and a recurring
revenue stream. The net result has been greater unit sales, improved manufacturing efficiencies
due to the growth in volume, and a reduction in our sales and marketing costs. We believe this
quarters 19.0% growth in operating income demonstrates the earnings potential of our new
distribution model.
Gross profit for the second quarter of fiscal 2011 rose 4.3% to $7.7 million, or 58.2% of sales,
compared with 57.0% for the same period in fiscal 2010. The increase in gross margin was due to
the impact of improved margins on our ophthalmology products and deferred revenue from our OEM
partners. These increases were partially offset by lower margins on sales to marketing partners,
the ramp up costs associated with the production of new products and the impact of winter weather.
Operating income for the second quarter of fiscal 2011 grew to $1.8 million, or 13.8% of net sales,
compared with $1.5 million, or 11.9% of net sales, in the second quarter of fiscal 2010. The
increase in operating income benefited from a 2.0% increase in sales, a 1.0% decrease in cost of
sales and a 10.2% decrease in sales and marketing expenses. Sales and marketing expenses were down
$311,000 to $2.7 million, or 20.6% of net sales, for the second quarter of 2011, compared with $3.0
million, or 23.4% of net sales, for the second quarter of 2010. The decrease in sales and marketing
expenses benefited from the transition of neurosurgical products to our marketing partners.
R&D expenses as a percentage of net sales rose to 7.4% in the second quarter of fiscal 2011 from
6.0% in the second quarter of fiscal 2010. The increase in R&D expenses was due to higher costs
associated with new product initiatives.
Second fiscal quarter 2011 net income increased to $1.3 million, compared with net income of
$877,000 in the second fiscal quarter 2010. Basic and diluted earnings per share for the second
quarter of fiscal 2011 increased to $0.05 from $0.04 in the second quarter of fiscal 2010.
We are very pleased with our earnings performance in the second quarter, continued Mr. Hable.
We remain optimistic about the outlook for Synergetics future and expect our sales and earnings
performance in the second half of this fiscal year to also exceed our results for the same period
last year.
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SURG Reports Growth in Sales and Record Net Income from Operations for Second Quarter
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Six Months Results
Total net sales for the first six months of fiscal 2011 were $25.4 million, up 0.8% compared with
$25.2 million in the same period of 2010. The growth in the first six months of fiscal 2011 sales
was due primarily to a $489,000 increase in ophthalmology sales and an $867,000 increase in OEM
sales, partially offset by a $1.1 million decrease in our neurosurgery sales due to the transition
of the majority of our neurosurgery products to our marketing partners. In addition, sales of
capital equipment were down $1.5 million compared with the first six months of fiscal 2010 due to
soft economic conditions and the sale of the Omni® product line that accounted for
$941,000 in capital equipment sales in the first six months of fiscal 2010.
Net income for the first six months of fiscal 2011 increased 37.6% to $2.0 million, or $0.08 per
diluted share, compared with $1.4 million, or $0.06 per diluted share, in the first six months of
fiscal 2010.
| Ophthalmic sales rose 3.2% to $15.8 million, compared with the first six months of fiscal 2010. | ||
| Neurosurgical sales (including sales to our marketing partners) declined 18.3% to $5.1 million in the first six months of fiscal 2011, compared with the same period in 2010. | ||
| Total OEM sales rose 24.2% to $4.4 million, compared with $3.6 million in the second quarter of fiscal 2010. |
Conference Call Information
Synergetics USA, Inc. will host a conference call on Thursday, March 10, 2011, at 10:30 a.m.
Eastern Time. The toll free dial-in number to listen and participate live on this call is (800)
447-0521, confirmation code 29114962. For callers outside the U.S., the number is (847) 413-3238.
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 Companys 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 microsurgical devices, capital equipment, accessories and disposables of the
highest quality in order to enable surgeons who perform microsurgery around the world to provide a
better quality of life for their patients.
Synergetics USA, Inc. (Synergetics USA or the Company) is a leading supplier of precision
microsurgical devices. The Companys primary focus is on the microsurgical disciplines of
ophthalmology and neurosurgery. Our distribution channels include a combination of direct and
independent sales organizations and important strategic alliances with market leaders. The
Companys product lines focus upon precision engineered, microsurgical, hand-held instruments and
the delivery of various energy modalities for the performance of less invasive microsurgery
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 Companys
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 Synergetics Annual Report on Form 10-K for the year ended July 31, 2010, as updated from time
to time in our filings with the Securities and Exchange Commission.
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SURG
Reports Growth in Sales and Record Net Income from Operations for Second Quarter
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SYNERGETICS USA, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Three and Six Months Ended January 31, 2011 and 2010
(Dollars in thousands, except share and per share data)
Consolidated Statements of Income
Three and Six Months Ended January 31, 2011 and 2010
(Dollars in thousands, except share and per share data)
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
January 31, 2011 | January 31, 2010 | January 31, 2011 | January 31, 2010 | |||||||||||||
Net sales |
$ | 13,278 | $ | 13,014 | $ | 25,354 | $ | 25,160 | ||||||||
Cost of sales |
5,544 | 5,599 | 10,598 | 10,818 | ||||||||||||
Gross profit |
7,734 | 7,415 | 14,756 | 14,342 | ||||||||||||
Operating expenses |
||||||||||||||||
Research and development |
986 | 775 | 1,705 | 1,434 | ||||||||||||
Sales and marketing |
2,734 | 3,045 | 5,757 | 6,304 | ||||||||||||
General and administrative |
2,176 | 2,051 | 4,427 | 4,081 | ||||||||||||
5,896 | 5,871 | 11,889 | 11,819 | |||||||||||||
Operating income |
1,838 | 1,544 | 2,867 | 2,523 | ||||||||||||
Other income (expenses) |
||||||||||||||||
Investment income |
28 | 1 | 60 | 2 | ||||||||||||
Interest expense |
(65 | ) | (131 | ) | (145 | ) | (300 | ) | ||||||||
Loss on sale of product line |
(99 | ) | (38 | ) | (99 | ) | (76 | ) | ||||||||
Miscellaneous |
(4 | ) | | (11 | ) | 28 | ||||||||||
(140 | ) | (168 | ) | (195 | ) | (346 | ) | |||||||||
Income before provision
for income taxes |
1,698 | 1,376 | 2,672 | 2,177 | ||||||||||||
Provision for income taxes |
378 | 499 | 719 | 758 | ||||||||||||
Net income |
$ | 1,320 | 877 | 1,953 | $ | 1,419 | ||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | 0.05 | $ | 0.04 | $ | 0.08 | $ | 0.06 | ||||||||
Diluted |
$ | 0.05 | $ | 0.04 | $ | 0.08 | $ | 0.06 | ||||||||
Basic weighted average common shares outstanding |
24,937,463 | 24,584,393 | 24,860,188 | 24,521,241 | ||||||||||||
Diluted weighted average common shares outstanding |
25,074,230 | 24,614,628 | 24,977,399 | 24,554,522 |
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SYNERGETICS USA, INC. AND SUBSIDIARIES
Unaudited Table of Income and EPS
Three and Six Months Ended January 31, 2011 and 2010
(Dollars in thousands, except per share information)
Unaudited Table of Income and EPS
Three and Six Months Ended January 31, 2011 and 2010
(Dollars in thousands, except per share information)
Three Months | Three Months | Six Months | ||||||||||||||
Ended January | Ended January | Six Months Ended | Ended January | |||||||||||||
31, 2011 | 31, 2010 | January 31, 2011 | 31, 2010 | |||||||||||||
Loss from product line sale |
$ | (99 | ) | $ | (38 | ) | $ | (99 | ) | $ | (76 | ) | ||||
Income before tax (exclusive of one-time charges) |
$ | 1,797 | $ | 1,414 | $ | 2,771 | $ | 2,253 | ||||||||
Income before provision for income taxes |
$ | 1,698 | $ | 1,376 | $ | 2,672 | $ | 2,177 | ||||||||
Effective Tax Rate |
22.3 | % | 36.3 | % | 26.9 | % | 34.8 | % | ||||||||
Net loss from product line sale |
$ | (77 | ) | $ | (24 | ) | $ | (72 | ) | $ | (50 | ) | ||||
Net Income from Operations (exclusive of
one-time charges) |
$ | 1,397 | $ | 901 | $ | 2,025 | $ | 1,469 | ||||||||
Total Net Income |
$ | 1,320 | $ | 877 | $ | 1,953 | $ | 1,419 | ||||||||
Diluted average weighted shares outstanding |
25,074,230 | 24,614,628 | 24,977,399 | 24,554,522 | ||||||||||||
Loss per share from product line sale |
$ | (0.003 | ) | $ | (0.001 | ) | $ | (0.003 | ) | $ | (0.002 | ) | ||||
Earnings per share from Operations |
$ | 0.056 | $ | 0.037 | $ | 0.081 | $ | 0.060 | ||||||||
Net Income per share |
$ | 0.053 | $ | 0.036 | $ | 0.078 | $ | 0.058 |
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SURG
Reports Growth in Sales and Record Net Income from Operations for Second Quarter
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SYNERGETICS USA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of January 31, 2011 (Unaudited) and July 31, 2010
(Dollars in thousands, except share data)
Condensed Consolidated Balance Sheets
As of January 31, 2011 (Unaudited) and July 31, 2010
(Dollars in thousands, except share data)
January 31, 2011 | July 31, 2010 | |||||||
Assets |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 17,919 | $ | 18,669 | ||||
Accounts receivable, net of allowance for
doubtful accounts of $267 and $282,
respectively |
8,948 | 9,056 | ||||||
Inventories |
13,940 | 11,891 | ||||||
Prepaid expenses |
955 | 792 | ||||||
Income taxes refundable |
422 | | ||||||
Deferred income taxes |
696 | 658 | ||||||
Total current assets |
42,880 | 41,066 | ||||||
Property and equipment, net |
8,608 | 8,044 | ||||||
Intangible and other assets |
||||||||
Goodwill |
10,690 | 10,690 | ||||||
Other intangible assets, net |
12,051 | 12,353 | ||||||
Patents, net |
969 | 870 | ||||||
Cash value of life insurance |
72 | 72 | ||||||
Total assets |
$ | 75,270 | $ | 73,095 | ||||
Liabilities and stockholders equity |
||||||||
Current Liabilities |
||||||||
Current maturities of long-term debt |
$ | 1,416 | $ | 1,398 | ||||
Current maturities of revenue bonds payable |
116 | 116 | ||||||
Accounts payable |
1,946 | 1,800 | ||||||
Accrued expenses |
2,277 | 2,624 | ||||||
Income taxes payable |
| 11 | ||||||
Deferred revenue |
400 | 400 | ||||||
Total current liabilities |
6,155 | 6,349 | ||||||
Long-Term Liabilities |
||||||||
Long-term debt, less current maturities |
627 | 939 | ||||||
Revenue bonds payable, less current maturities |
1,553 | 1,612 | ||||||
Deferred revenue |
18,935 | 18,630 | ||||||
Deferred income taxes |
1,379 | 1,339 | ||||||
Total long-term liabilities |
22,494 | 22,520 | ||||||
Total liabilities |
28,649 | 28,869 | ||||||
Commitments and contingencies |
||||||||
Stockholders Equity |
||||||||
Common stock at January 31, 2011 and July 31,
2010, $0.001 par value, 50,000,000 shares
authorized; 24,968,301 and 24,772,155 shares
issued and outstanding, respectively |
25 | 25 | ||||||
Additional paid-in capital |
25,315 | 24,905 | ||||||
Retained earnings |
21,272 | 19,319 | ||||||
Accumulated other comprehensive income (loss): |
||||||||
Foreign currency translation adjustment |
9 | (23 | ) | |||||
Total stockholders equity |
$ | 46,621 | $ | 44,226 | ||||
Total liabilities and stockholders equity |
$ | 75,270 | $ | 73,095 | ||||
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