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STAAR Surgical Implements Strategy to Transform Business, Moves to Strengthen Management

  • 2001-08-01
  • Press release

MONROVIA, Calif., Aug. 1 /PRNewswire/ -- STAAR Surgical (Nasdaq: STAA) today presented its business strategy to enable the company to become cash neutral on business operations by the end of the third quarter and both cash positive and profitable on business operations early in 2002. The plan is the result of a "root and branch" review promised by Chairman and CEO David Bailey to shareholders at STAAR's annual meeting held May 25th.

To implement the plan, resolve current inequities in the business and to position the Company for strong growth and profitability going forward STAAR expects to take an approximate $12 million in charges over the next several quarters.

Highlights of the plan are:

  • Returning the Company to its roots and heritage of developing and marketing unique, high margin visual implants underpinned by a solid I.P. portfolio.

  • Strengthen management in certain key positions with qualified candidates whose experience and knowledge will contribute to STAAR's goals and objectives going forward.

  • An immediate 25 percent reduction in the world-wide workforce.

  • Make operations more efficient by consolidating manufacturing and distribution, projected to return a significant savings on a go-forward basis.

  • Develop new partnerships and relationships that will further our market reach and enhance the Company growth and profitability.

  • Implement successful commercialization of the Company's newest approved products, Aquaflow(TM), which received FDA approval in the U.S. and the Implantable Contact Lens (ICL(TM)), which received a Medical Device License from Health Canada. The Company expects these products to account for approximately 40 percent of Group Sales within three years.

  • Strengthen research & development and marketing for the Company by doubling spending in these areas over the next three years so STAAR is better able to create and market new products necessary to ensure a strong and viable future for the Company.

  • Reduce the cost of manufacturing silicone Intraocular Lens (IOL(TM)) by 30 percent by first quarter 2002 to turn the product into a profitable cash generator for the Company.

  • Review events that lead up to the recent voluntary recalls prompted by the packaging of the three-piece Collamer(TM) lens and a material issue with the Silicone IOL and making the necessary changes to eliminate this cost of non-conformance.

The costs of implementing the new strategy are:

  • An estimated $2.5 million charge expected to be taken in the third quarter, 2001 for severance and the write down of certain production assets. By removing excess capacity and manpower the Company will generate significant go-forward projected savings. In addition, through the charge, the Company expects to reduce unit production costs for the Collamer IOL by at least 30 percent.

  • Subject to appropriate discussions with local workforces, in the fourth quarter, 2001 an estimated $1.0 million charge will be taken to close certain overseas operations, generating annual savings in excess of $1.0 million.

  • In the fourth quarter, the Company will take an estimated $2.8 million write-down to bring plant capacity and equipment for Silicone IOL business in line with current market conditions. This is anticipated to lower manufacturing unit cost for the Silicone IOL by at least 30 percent. Based on volumes within our plan, this will provide payback in 15 months.

Additional costs will be taken to correct inequities in the Company management found during its "root and branch" review:

  • In the second quarter an estimated $2.0 million charge for excess and obsolete inventory.

  • A $3.6 million charge will be taken in the second quarter, 2001 for failed products found during the Company's voluntary recall of the three-piece Collamer(TM) IOL and the Silicone IOL's.

Taken together these charges total an estimated $12 million.

David Bailey said of the charges, "It is unfortunate to have to take these charges only 15 months after the Company had taken a $17 million charge. However, it is a necessary cost in order to turn STAAR Surgical Company into a viable strong business able to provide shareholders a strong return for years to come."

Bailey stated that the strategy the Company is implementing enables STAAR to generate in 2002:

  • Compound annual growth of 17 to 20 percent,

  • Strong cash flow increases and rising profitability,

  • Significant margin improvements.

"We have thoroughly reviewed all aspects of the business," Bailey added. "Going forward, I think you will be pleased with the return this investment will provide shareholders. Our strategic review started on the premise that we needed to look at everything, leave no stone unturned, and take the strong and decisive actions required to resolve any issues we uncovered if we are to regain our position as a leader in visual implant technologies."

Bailey explained, "The new strategy will realize our initiatives to strengthen R & D, global marketing and deliver improved operational performance that will drive cash flow positive in the third quarter, prior to charges, and turn us profitable in 2002 as I promised shareholders at our May 25th annual meeting."

During the first half of 2001 STAAR experienced an annualized cash outflow of $6 million. In the second half of the year the Company expects to be cash neutral to cash positive by a few hundred thousand dollars. In 2002 the Company expect cash flow in excess of $5 million and 2003 cash flow positive in excess of $10 million.

The Company has shared its business strategy and the related changes with the bank, which is currently exploring alternative financing arrangements, which will be presented to the Company within the next 45 to 60 days.

"In reviewing the business we saw the need for an even more extensive overhaul of the operations than we first envisioned. The recent recalls were a legacy to the way things were done and especially disappointing. They were a tarnish on the STAAR name and left us with significant costs we had not anticipated. This is unsatisfactory, and I am today announcing a number of changes to the management team to address these issues.

"First I am delighted to welcome Richard D. Simmons, a graduate from Cambridge England who has a wide experience in operational areas of the Ophthalmic Device industry as Senior Vice President responsible for overseeing the Company's operations worldwide.

"Richard has worked closely with us on developing the business plan, and will take joint responsibility for driving its operational implementation worldwide. He will also take executive responsibility for driving 'Total Quality' throughout the company and its operations with the goal of 'fixing' the organization's weak points that have led to the recent recalls.

"To strengthen the quality team, today we appointed Ms. Lisa Marston as Global Director of Quality Systems. She will be supported by a stronger, refocused quality department. Marston, whose background is in quality systems for the device business, recently joined us and has already played a key role in successfully managing our voluntary Silicone recall earlier this year."

Bailey continued, "In addition, we are currently conducting a search for a strong industry candidate to supplement our Regulatory team. We will also be taking an active role to work closely with the ophthalmic industry regulatory specialists.

"We are strengthening our financial department, Bailey added, "Deborah Andrews, previously Vice President in Switzerland has been named Global Controller. Ms. Andrews is a CPA and has returned from secordment overseas.

"John Santos, the current CFO, who was instrumental in developing this new plan, will move to the role of Vice President Corporate Planning and Development, a special project role with responsibility for implementation of the plan. The Company will begin immediate recruitment of a new CFO with relevant industry experience."

The Company is scheduled to report its second quarter financial results on August 10th.

Founded in 1982, STAAR Surgical Company develops, manufactures and globally distributes medical devices for use in refractive, cataract and glaucoma surgery. The Company's five product lines include silicone and Collamer(TM) foldable intraocular lenses and the Sonic WAVE(TM) phacoemulsification system, all of which are used during cataract surgery, the ICL(TM) (implantable contact lens) which is a refractive lens for the treatment of near- and far-sightedness and the AquaFlow(TM) Collagen Glaucoma Drainage Device. Regulatory approvals vary from market to market with all products except the Toric ICL(TM) and the 3-piece Collamer(TM) IOL available in Europe and all except the ICL(TM) in the United States.

Certain statements in this press release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements involve risks and uncertainties that may cause the Company's actual results to be materially different.

For additional information, about STAAR Surgical, visit the Company's web site at or . You may wish to contact David Bailey, President, STAAR Surgical, or John Santos, Chief Financial Officer, STAAR Surgical, at (626) 303-7902. To contact Bill Roberts, President, CTC, Inc., or Wayne Buckhout, CTC Inc., please call (937) 434-2700.

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CONTACT: David Bailey, President, or John Santos, Chief Financial Officer, +1-626-303-7902, both of STAAR Surgical; or Bill Roberts, President, or Wayne Buckhout, +1-937-434-2700, both of CTC, Inc./