O'FALLON, MO--(Marketwired - Jun 9, 2014) - Synergetics USA, Inc. (NASDAQ: SURG), a medical device company that designs, manufactures, and markets innovative surgical devices for ophthalmic and neurosurgical applications, today reported sales, gross profit, operating margin and net income for the third quarter ended April 30, 2014.

Third Quarter Summary:

  • Total sales were $16.1 million as compared to $16.3 million last year.
  • OEM sales were flat and Ophthalmic sales decreased 2.0% year-over-year.
  • Domestic product sales decreased 1.9% and International sales increased 2.8% year-over-year.
  • Disposable products sales increased 6.7% and capital equipment sales declined 33.9% year-over year.
  • GAAP EPS was $0.04 compared to $0.05 for the third quarter of last year.

"Our third quarter revenues were softer than expected due primarily to sharp declines in capital equipment sales which were partially offset by strong sales of disposables," stated Dave Hable, President and CEO of Synergetics USA, Inc. "Ophthalmic results were mixed in the quarter -- we did experience pockets of strength -- but not enough to offset the continued weakness in our base business. Results from our OEM business again benefitted from strong disposables sales, though weaker capital equipment sales and a difficult comparison challenged our ability to post positive growth compared to last year. Despite these challenges, the long-term growth opportunity for Synergetics remains compelling, and we see exciting opportunities to improve our growth rate and gain market share with our differentiated offerings of systems and disposables. We look forward to the launch of VersaVIT 2.0™ and the significant benefits it provides to our customers, and expect revenue contribution to ramp up meaningfully over time as we achieve broad market adoption. We will continue to execute our strategy to drive improvements in our operating and financial performance going forward."

Third Quarter Results

Third quarter sales decreased 0.8% to $16.1 million compared to $16.3 million in the third quarter of fiscal 2013. The decrease in third quarter sales from last year was due primarily to lower Domestic ophthalmic sales.

  • Total Ophthalmic sales decreased 2.0% to $8.5 million compared to $8.7 million in the third quarter of fiscal 2013. Domestic ophthalmic sales decreased 6.1% in the third quarter of fiscal 2014, primarily due to the decreased sales of ophthalmic base business capital equipment and disposables, partially offset by increased sales of procedural kits (including kits associated with VersaVIT™). International ophthalmic sales increased 3.1% in the third quarter of fiscal 2014, primarily due to increased sales from M.I.S.S. Ophthalmics Limited and positive contribution from foreign currency, partially offset by decreased sales of ophthalmic base business capital equipment and disposables.

  • Total OEM sales were flat in the third quarter of fiscal 2013. OEM sales benefited from higher volumes of disposable products sold to our two largest OEM partners, Codman & Shurtleff, Inc. and Stryker Corporation, offset by decreased electrosurgery generator sales to Codman. OEM sales also included deferred revenue of $322,000 recognized in the third quarter of both fiscal year periods.

  • Disposable product sales increased 6.7%, or $0.9 million, to $13.9 million in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. Disposable sales accounted for approximately 85.9% of total sales in the third quarter of fiscal 2014.

  • Capital equipment sales totaled $1.9 million in the third quarter of fiscal 2014 compared to $2.9 million in the third quarter of fiscal 2013.

Gross profit for the third quarter of fiscal 2014 decreased to $8.9 million, or 55.2% of sales, compared to $9.1 million, or 55.7% of sales, in the third quarter of fiscal 2013. Gross margin in the third quarter of fiscal year 2014 was negatively impacted by the mix of products including both the increase in our International sales and the increase in the percentage of our OEM sales.

Research and development expenses increased to $1.3 million, or 8.1% of net sales. The Company's R&D investment is driven by the opportunities to accelerate new products to meet the needs of our surgeon customers and address the demands of the market. Sales and marketing expenses decreased to $3.5 million, or 21.4% of sales, this year, compared with $3.5 million, or 21.7% of net sales, for the same period last year. General and administrative expenses decreased to $2.6 million, or 16.1% of net sales, for the third quarter of fiscal 2014, compared with $2.7 million, or 16.7% of net sales, for the same period last year. Total operating expenses in the third quarter of fiscal year 2014 included incremental expenses of approximately $64,000 related to the Company's exit activities at its King of Prussia facility. Total operating expenses also included $83,000 in the third quarter of fiscal 2014 related to the impact from the medical device excise tax, as compared to $115,000 in the prior year period. 

Operating income for the third quarter of fiscal 2014 decreased to $1.4 million compared to $1.7 million in the third quarter of fiscal 2013. Net income for the third quarter of fiscal 2014 decreased by $207,000 to $943,000, or $0.04 per diluted share, compared to $1.2 million, or $0.05 per diluted share, in the third quarter of fiscal 2013.

Nine Months Results and Balance Sheet

Total sales for the first nine months of fiscal 2014 increased 4.1% to $46.8 million compared with $44.9 million in the same period last year. Net income was $1.7 million for the first nine months of fiscal 2014 compared to net income of $1.1 million for the same period in fiscal 2013. Basic and diluted earnings per share for the first nine months of fiscal 2014 was $0.07 as compared to basic and diluted earnings per share of $0.04 for the first nine months of fiscal 2013.

As of April 30, 2014, the Company had approximately $12.8 million in cash and no interest-bearing debt on its balance sheet.

Conference Call Information

Synergetics USA, Inc. will host a conference call on Monday, June 9, 2014 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). The toll free dial-in number to participate live on this call is (800) 588-4973, confirmation code 37380959. 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. The Company's distribution channels include a combination of direct and independent vitreoretinal sales organizations, both domestically and internationally, and important strategic alliances with market leaders. The Company's product lines focus upon precision engineered, disposable and reusable devices, surgical equipment, procedural kits and the delivery of various energy modalities for the performance of 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, 2013, 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 Balance Sheets  
As of April 30, 2014 (Unaudited) and July 31, 2013  
(Dollars in thousands, except share data)  
   
   April 30, 2014     July 31, 2013  
Assets                
Current Assets                
  Cash and cash equivalents  $12,753     $ 12,470  
  Accounts receivable, net of allowance for doubtful accounts of $533 and $495, respectively    15,377       14,425  
  Inventories    15,711       14,825  
  Income taxes refundable    537       254  
  Prepaid expenses    1,601       996  
  Deferred income taxes    1,987       1,827  
     Total current assets    47,966       44,797  
Property and equipment, net    8,915       8,962  
Intangible and other assets                
  Goodwill    12,303       12,155  
  Other intangible assets, net    11,341       11,715  
  Deferred income taxes    1,754       3,557  
  Patents, net    1,468       1,411  
  Cash value of life insurance    96       96  
     Total assets  $83,843     $ 82,693  
Liabilities and stockholders' equity                
Current Liabilities                
  Accounts payable  $3,196     $ 3,237  
  Accrued expenses    2,942       3,486  
  Deferred revenue    1,288       1,288  
     Total current liabilities    7,426       8,011  
Long-Term Liabilities                
  Deferred revenue    13,564       14,530  
     Total long-term liabilities    13,564       14,530  
     Total liabilities    20,990       22,541  
Commitments and contingencies                
Stockholders' Equity                
  Common stock at April 30, 2014 and July 31, 2013, $0.001 par value, 50,000,000 shares authorized; 25,333,479 and 25,292,960 shares issued and outstanding, respectively    25       25  
  Additional paid-in capital    28,357       27,489  
  Retained earnings    34,749       33,097  
  Accumulated other comprehensive loss:                
  Foreign currency translation adjustment    (278)     (459 )
     Total stockholders' equity    62,853       60,152  
     Total liabilities and stockholders' equity  $83,843     $ 82,693  
   
   
   
Synergetics USA, Inc. and Subsidiaries  
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)  
Three and Nine Months Ended April 30, 2014 and 2013  
(Dollars in thousands, except share and per share data)  
   
   Three Months Ended April 30, 2014   Three Months Ended April 30, 2013    Nine Months Ended April 30, 2014   Nine Months Ended April 30, 2013  
Net sales  $16,135   $ 16,264    $46,761   $ 44,939  
Cost of sales    7,223     7,213      20,527     22,244  
     Gross profit    8,912     9,051      26,234     22,695  
Operating expenses                            
    Research and development    1,302     973      4,012     2,660  
    Sales and marketing    3,450     3,523      10,655     10,367  
    Medical device excise tax    83     115      323     160  
    Exit costs    64     --      578     --  
    General and administrative    2,602     2,719      8,240     7,999  
     7,501     7,330      23,808     21,186  
     Operating income    1,411     1,721      2,426     1,509  
Other income (expenses)                            
    Investment income    1     5      7     18  
    Interest expense    --     (2 )    --     (6 )
    Miscellaneous    --     (12 )    --     (35 )
     1     (9 )    7     (23 )
     Income from operations before provision for income taxes    1,412     1,712      2,433     1,486  
Provision for income taxes    469     562      781     366  
     Net income  $943   $ 1,150    $1,652   $ 1,120  
Earnings per share:                            
    Basic earnings per share  $0.04   $ 0.05    $0.07   $ 0.04  
    Diluted earnings per share  $0.04   $ 0.05    $0.07   $ 0.04  
                             
    Basic weighted average common shares outstanding    
25,331,925		    
25,299,131		      
25,311,641		    
25,229,250		  
    Diluted weighted average common shares outstanding    
25,392,782		    
25,362,923		      
25,388,493		    
25,329,711		  
                             
Net income  $943   $ 1,150    $1,652   $ 1,120  
Foreign currency translation adjustment    41     (238 )    181     16  
Comprehensive income  $984   $ 912    $1,833   $ 1,136  
   
   
   
Synergetics USA Inc. and Subsidiaries  
Condensed Consolidated Statements of Cash Flows (Unaudited)  
Nine Months Ended April 30, 2014 and 2013  
(Dollars in thousands, except share data)  
   
   Nine Months Ended April 30, 2014     Nine Months Ended April 30, 2013  
Cash Flows from Operating Activities                
  Net income  $1,652     $ 1,120  
  Adjustments to reconcile net income to net cash used in operating activities                
    Depreciation    864       856  
    Amortization    553       504  
    Provision for doubtful accounts receivable    66       91  
    Stock-based compensation    807       713  
    Deferred income taxes    1,643       (215 )
   Gain on sale    (9)        
Changes in assets and liabilities                
  (Increase) decrease in:                
    Accounts receivable    (861)     (420 )
    Inventories    (822)     672  
    Prepaid expenses    (581)     (302 )
    Income taxes refundable    (282)     (862 )
  (Decrease) increase in:                
    Accounts payable    (60)     312  
    Accrued expenses    (497)     (154 )
    Deferred revenue    (966)     (966 )
    Income taxes payable    (70)     (191 )
     Net cash provided by operating activities  $1,437     $ 1,158  
                 
Cash Flows from Investing Activities                
    Proceeds from sale    18       --  
    Purchase of property and equipment    (800)     (397 )
    Acquisition of patents and other intangibles    (229)     (298 )
     Net cash used in investing activities    (1,011)     (695 )
                 
Cash Flows from Financing Activities                
    Proceeds from the issuance of common stock    36       65  
    Tax benefit associated with the exercise of non- qualified stock options    25       72  
       Net cash provided by financing activities    61       137  
                 
Foreign exchange rate effect on cash and cash equivalents    (204)     (181 )
Net decrease in cash and cash equivalents    283       419  
Cash and cash equivalents                
    Beginning    12,470       12,680  
    Ending  $12,753     $ 13,099