Synergetics Reports Record Second Fiscal Quarter of 2012 ResultsSales up 13.6% Year-Over-Year to $15.1 Million
EBITDA up 42.4% Year-Over-Year to $3.1 Million
Income From Continuing Operations up 41.9% Year-over-Year to $1.9 Million
Earnings per Share From Continuing Operations up 40% to $0.07
O'FALLON, MO -- (Marketwire - March 12, 2012) - Synergetics USA, Inc. (NASDAQ: SURG), a medical device company that designs, manufactures, and markets innovative surgical devices for ophthalmic and neurosurgical applications, today announced results for the second quarter ended January 31, 2012.
Highlights of the quarter include:
- Total sales of $15.1 million, an increase of 13.6% year-over-year.
- Ophthalmic and OEM sales increased 13.7% and 23.0%, respectively, year-over-year.
- Gross margin increases to 59.5% and operating margin increases to 17.4%.
- EBITDA from continuing operations of $3.1 million, an increase of 42.4% year-over-year.
- Income from continuing operations of $1.9 million, or $0.07 per diluted share, up 41.9% and 40%, respectively, year-over-year.
"We were encouraged by the strong, double-digit top line performance across our Ophthalmic and OEM businesses and pleased to report growth in net income and earnings per share of at least 40%. Moreover, we achieved a number of second quarter financial records in revenues, operating margins, EBITDA and net earnings," stated David M. Hable, President and CEO of Synergetics USA, Inc. "We continue to make progress with the implementation of our lean enterprise initiatives and expect continued margin improvement and free cash flow generation. In sum, we are focused on driving growth going forward and expect to deliver continued strong results and we are on track for meeting our stated goals."
Second Quarter Results
Second quarter of fiscal 2012 sales totaled $15.1 million, an increase of 13.6% compared to sales of $13.3 million in the second quarter of fiscal 2011. The increase in second quarter sales from last year was due to double-digit growth in both ophthalmic disposable products and OEM sales through our marketing partners. This growth was tempered by a decline in our Other segment primarily due to residual direct neurosurgery sales in the second quarter of fiscal 2011.
- Domestic sales increased 15.4% to $10.9 million in the second quarter of fiscal 2012 driven by positive Ophthalmology volume as well as higher OEM sales in the period. International sales increased 9.1% to $4.1 million this quarter.
- Ophthalmic sales rose 13.7% to $8.9 million compared with $7.8 million the second quarter of fiscal 2011. The growth in Ophthalmology benefited from higher volume of disposable products, including cannula systems and procedural kits, including our new VersaPACK kit, to domestic and international customers. Domestic Ophthalmic sales rose 11.2% and International Ophthalmic sales increased 16.7% year-over-year.
- Total OEM sales rose 23.0% to $6.0 million compared with $4.9 million in the second quarter of fiscal 2011. OEM sales beginning in fiscal 2012 include sales to our marketing partners. The increase in OEM sales benefited primarily from additional volumes of disposable products to Stryker and shipments of generators and accessories to Codman in the period. OEM sales also included deferred revenue of $131,000 from Codman and $322,000 from Alcon recognized in the second quarter of fiscal 2012 versus $64,000 from Codman and $231,000 from Alcon in the prior year period.
- Disposable product sales totaled $11.9 million, an increase of 13.5% compared with sales of $10.5 million last year. Capital equipment sales totaled $2.7 million in the second quarter of fiscal 2012 compared with $2.5 million in the second quarter of fiscal 2011, an increase of 9.0% year-over-year.
Gross profit for the second quarter of fiscal 2012 totaled $9.0 million, or 59.5% of sales, compared with $7.7 million, or 58.2% of sales, in the second quarter of fiscal 2011.
Total operating expenses increased 7.8% year-over-year to $6.4 million, or 42.1% of sales in the second quarter from $5.9 million in the comparable period. Research and development expenses were 6.1% of sales compared to 7.4% last year. Sales and marketing expenses were 19.3% of sales compared to 20.6% last year and general and administrative expenses were 16.7% of sales compared to 16.4% last year.
Operating income for the second quarter of fiscal 2012 increased 42.7% to $2.6 million compared with $1.8 million last year, representing an operating margin of 17.4% this quarter versus 13.8% last year. Operating income performance was due to the strong gross margin improvement and moderate operating expense growth as the Company begins to realize cost savings from its ongoing lean manufacturing initiatives and as it benefitted from timing differences in research and development.
Income from continuing operations increased 41.9% year-over-year to $1.9 million, or $0.07 per diluted share, from $1.3 million, or $0.05 per diluted share for the same period of fiscal 2011.
Six Month Results
Total net sales for the first six months of fiscal 2012 increased 12.7% to $28.6 million compared with $25.4 million in the same period last year. Net income for the first six months of fiscal 2012 increased 35.1% to $2.6 million, or $0.10 per diluted share, versus $2.0 million, or $0.08 per diluted share, in the first six months of fiscal 2011. These results are net of a loss from discontinued operations of $382,000, or $0.02 per diluted share, related to the completion of the sale of assets from our plastic injection molding business in the period.
As of January 31, 2012, the Company had approximately $13.9 million in cash and $741,000 in interest-bearing debt compared with $18.4 million in cash and $1.1 million in debt at the end of fiscal 2011. The use of cash over this period was primarily due to the tax payment of $6.0 million related to the Alcon supply agreement and settlement proceeds paid during the first six months of fiscal 2012 in addition to the continued use of cash to retire debt obligations. The Company expects to pay off the remaining debt using cash flow from operations and its strong cash balance in the third quarter of fiscal 2012.
Marketing Partner Strategic Updates
Alcon Supply Agreement
Subsequent to the end of the second quarter of fiscal 2012, Alcon informed the Company that it had decided to cancel the orders and forecasts covering the two products to have been supplied under the supply agreement executed in April 2010. The Company plans on recognizing the remaining deferred revenue associated with the supply agreement ratably over the next fourteen years, which is the remaining life of the patents, and the associated agreement. Importantly, the supply agreement has not been cancelled and remains in effect with both parties responsible for ongoing performance obligations.
Mobius Therapeutics™ Agreement
Synergetics recently entered into an agreement with Mobius Therapeutics™, LLC to provide packaging for Mitosol®, a drug recently approved by the U.S. Food and Drug Administration to be used in glaucoma surgery.
Stryker Agreement
Synergetics and Stryker Corporation have negotiated an early extension of the supply agreement for disposable ultrasonic instrument tips and certain other consumable products used in conjunction with the ultrasonic aspirator console and handpieces through March 31, 2016. "We are very excited about extending the agreement with Stryker over the next five years and the increased sales opportunities we expect going forward. The early extension of this important agreement allows both companies to adequately plan for the volumes being generated," said David M. Hable. "The agreement extension highlights our excellent partnership with Stryker and the potential to expand sales through their extensive sales and marketing organization. In addition, we continue to pursue cooperative development projects that build on their market leading ultrasonic aspirator console."
Conference Call Information
Synergetics USA, Inc. will host a conference call on Tuesday, March 13, 2012, at 10:30 a.m. Eastern Time to discuss second quarter and six month results and other recent developments and to review its growth strategy. The toll free dial-in number to listen and participate live on this call is (800) 588-4973, confirmation code 31637755. 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.
Synergetics USA, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Three and Six Months Ended January 31, 2012, and 2011
(Dollars in thousands, except share and per share data)
Three Months Ended Six Months Ended
January 31, January 31, January 31, January 31,
2012 2011 2012 2011
------------ ------------ ------------ ------------
Net sales $ 15,080 $ 13,278 $ 28,585 $ 25,354
Cost of sales 6,108 5,548 11,696 10,605
------------ ------------ ------------ ------------
Gross profit 8,972 7,730 16,889 14,749
------------ ------------ ------------ ------------
Operating expenses
Research and
development 923 986 1,713 1,705
Sales and
marketing 2,906 2,734 5,983 5,757
General and
administrative 2,525 2,176 5,063 4,427
------------ ------------ ------------ ------------
6,354 5,896 12,759 11,889
------------ ------------ ------------ ------------
Operating income 2,618 1,834 4,130 2,860
------------ ------------ ------------ ------------
Other income
(expenses)
Investment income 9 28 23 60
Interest expense (15) (65) (33) (145)
Gain (loss) on
sale of product
line -- (99) -- (99)
Miscellaneous (4) (4) (6) (11)
------------ ------------ ------------ ------------
(10) (140) (16) (195)
------------ ------------ ------------ ------------
Income from
continuing
operations
before
provision for
income taxes 2,608 1,694 4,114 2,665
Provision for income
taxes 741 378 1,094 719
------------ ------------ ------------ ------------
Income from
continuing
operations 1,867 1,316 3,020 1,946
------------ ------------ ------------ ------------
(Income) loss from
discontinued
operations, net
of income tax
benefit
(provision) of
$193 and ($2),
respectively -- (4) 382 (7)
------------ ------------ ------------ ------------
Net income $ 1,867 $ 1,320 $ 2,638 $ 1,953
============ ============ ============ ============
Earnings per share:
Basic
Income from
Continuing
Operations $ 0.07 $ 0.05 $ 0.12 $ 0.08
Loss from
Discontinued
Operations $ 0.00 $ 0.00 $ (0.02) $ 0.00
------------ ------------ ------------ ------------
Net Income $ 0.07 $ 0.05 $ 0.10 $ 0.08
============ ============ ============ ============
Diluted
Income from
Continuing
Operations $ 0.07 $ 0.05 $ 0.12 $ 0.08
Loss from
Discontinued
Operations $ 0.00 $ 0.00 $ (0.02) $ 0.00
------------ ------------ ------------ ------------
Net Income $ 0.07 $ 0.05 $ 0.10 $ 0.08
============ ============ ============ ============
Basic weighted
average common
shares outstanding 25,085,296 24,937,463 25,028,165 24,860,188
Diluted weighted
average common
shares outstanding 25,280,449 25,074,230 25,200,831 24,977,399
SYNERGETICS USA, INC. AND SUBSIDIARIES
Unaudited Table of Net Income and EBITDA
Three and Six Months Ended January 31, 2012 and January 31, 2011
(Dollars in thousands, except per share information)
Three Months Ended Six Months Ended
January 31, January 31, January 31, January 31,
2012 2011 2012 2011
------------ ------------ ------------ ------------
EBITDA Reconciliation
GAAP net income from
continuing operations $ 1,867 $ 1,316 $ 3,020 $ 1,946
Interest expense, net 15 65 33 145
Provision for income
taxes 741 378 1,094 719
Depreciation expense 280 247 570 509
Amortization expense 162 147 324 343
------------ ------------ ------------ ------------
EBITDA $ 3,065 $ 2,153 $ 5,041 $ 3,662
============ ============ ============ ============
EBITDA, operating return on average equity and operating return on average assets are not financial measures recognized by U.S. generally accepted accounting principles ("GAAP"). EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. Operating return on equity is defined as income from continuing operations divided by average equity. Operating return on assets is defined as income from continuing operations plus interest expense divided by average assets.
Synergetics USA, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of January 31, 2012 (Unaudited) and July 31, 2011
(Dollars in thousands, except share data)
January 31, 2012 July 31, 2011
Assets
Current Assets
Cash and cash equivalents $ 13,930 $ 18,399
Accounts receivable, net of allowance
for doubtful accounts of $297 and
$282, respectively 10,516 11,148
Inventories 13,393 12,082
Income taxes refundable 31 ---
Prepaid expenses 1,199 961
Deferred income taxes 935 792
Assets held for sale --- 868
----------------- -----------------
Total current assets 40,004 44,250
Property and equipment, net 8,961 8,561
Intangible and other assets
Goodwill 10,661 10,660
Other intangible assets, net 11,535 11,792
Deferred income taxes 4,551 4,915
Patents, net 1,146 1,050
Cash value of life insurance 82 82
----------------- -----------------
Total assets $ 76,940 $ 81,310
================= =================
Liabilities and stockholders' equity
Current Liabilities
Current maturities of long-term debt $ 741 $ 1,053
Accounts payable 2,343 1,567
Accrued expenses 2,610 3,193
Income taxes payable --- 6,233
Deferred revenue 1,288 540
----------------- -----------------
Total current liabilities 6,982 12,586
================= =================
Long-Term Liabilities
Deferred revenue 16,461 18,060
----------------- -----------------
Total long-term liabilities 16,461 18,060
----------------- -----------------
Total liabilities 23,443 30,646
----------------- -----------------
Commitments and contingencies
Stockholders' Equity
Common stock at January 31, 2012 and
July 31, 2011, $0.001 par value,
50,000,000 shares authorized;
25,177,546 and 24,970,884 shares
issued and outstanding, respectively 25 25
Additional paid-in capital 25,886 25,598
Retained earnings 27,590 24,952
Accumulated other comprehensive
income:
Foreign currency translation
adjustment (4) 89
----------------- -----------------
Total stockholders' equity 53,497 50,664
----------------- -----------------
Total liabilities and stockholders'
equity $ 76,940 $ 81,310
================= =================
Synergetics USA Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended January 31, 2012 and 2011
(Dollars in thousands, except share data)
Six Months Ended Six Months Ended
January 31, 2012 January 31, 2011
Cash Flows from Operating Activities
Net income $ 2,638 $ 1,953
Plus: Loss from discontinued
operations - net of tax 382 (7)
================= =================
Income from continuing operations 3,020 1,946
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 570 509
Amortization 324 343
Provision for doubtful accounts
receivable --- (16)
Stock-based compensation 275 161
Deferred income taxes 221 2
Loss of sale of product line --- 99
Gain on sale of equipment --- 50
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable 617 64
Inventories (1,361) (1,907)
Prepaid expenses (258) (158)
Income taxes refundable (31) (422)
(Decrease) increase in:
Accounts payable 804 155
Accrued expenses (428) (406)
Deferred revenue (851) 305
Income taxes payable (6,039) (11)
----------------- -----------------
Net cash (used in) provided by
continuing operating activities (3,137) 714
----------------- -----------------
Net cash used in discontinued
operations 34 (32)
Net (used in) provided by operating
activities (3,103) 682
----------------- -----------------
Cash Flows from Investing Activities
Proceeds from sale of equipment --- 11
Purchase of property and equipment (983) (949)
Acquisition of patents and other
intangibles (162) (140)
----------------- -----------------
Net cash used in continuing
investing activities (1,145) (1,078)
----------------- -----------------
Net cash used in discontinued
operations -- (236)
Net cash used in investing
activities (1,145) (1,314)
----------------- -----------------
Cash Flows from Financing Activities
Principal payments on revenue
bonds payable --- (58)
Payment on debt incurred for
acquisition of trademark (313) (295)
Tax benefit associated with the
exercise of non- qualified stock
options 8 97
Proceeds from the issuance of
common stock 5 152
----------------- -----------------
Net cash used in financing
activities (300) (104)
----------------- -----------------
Foreign exchange rate effect on cash
and cash equivalents 79 (14)
----------------- -----------------
Net decrease in cash and cash
equivalents (4,469) (750)
Cash and cash equivalents
Beginning 18,399 18,669
----------------- -----------------
Ending
$ 13,930 $ 17,919
================= =================
SYNERGETICS USA, INC.
3845 Corporate Centre Drive
O'Fallon, Missouri 63368
(636) 939-5100
http://www.synergeticsusa.com
Pamela G. Boone
Chief Financial Officer
